Finance (No. 2) Act 2015

PART 1 — Principal rates etc

Tax lock

Income tax lock

1

• (1) For any tax year to which this section applies—

• (a) the basic rate of income tax shall not exceed 20%,

• (b) the higher rate of income tax shall not exceed 40%, and

• (c) the additional rate of income tax shall not exceed 45%.

• (2) This section applies to a tax year—

• (a) which begins after the day on which this Act is passed but before the date of the first parliamentary general election after that day, and

• (b) for which income tax is charged.

Banking companies: surcharge

2

• (1) The rate of value added tax for the time being in force under section 2 of VATA 1994 (standard rate) shall not exceed 20% during the VAT lock period.

• (2) The rate of value added tax for the time being in force under section 29A of VATA 1994 (reduced rate) shall not exceed 5% during the VAT lock period.

• (3) No supply specified in Schedule 7A to VATA 1994 (charge at reduced rate) at the beginning of the VAT lock period may be removed from it under section 29A(3) of that Act during that period.

• (4) No goods, services or supply specified in Schedule 8 to VATA 1994 (zero-rating) at the beginning of the VAT lock period may be removed from it under section 30(4) of that Act during that period.

• (5) In this section the “VAT lock period” means the period beginning with the day on which this Act is passed and ending immediately before the date of the first parliamentary general election after that day.

Personal allowance and basic rate limit for income tax

Personal allowance and national minimum wage

3

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Personal allowance and national minimum wage: Chancellor’s duties

4

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Personal allowance from 2016

5

In section 5(1) of FA 2015 (personal allowance from 2016)—

• (a) in paragraph (a) (personal allowance for 2016-17), for “ “£10,800”” substitute “ “£11,000” ”, and

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

Basic rate limit from 2016

6

In section 4(1) of FA 2015 (basic rate limit from 2016)—

• (a) in paragraph (a) (basic rate limit for 2016-17), for “ “£31,900”” substitute “ “£32,000” ”, and

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

Corporation tax

Rate of corporation tax for financial years 2017-2020

7

• (1) For the financial years 2017, 2018 and 2019 the main rate of corporation tax is 19%.

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

Capital allowances

Annual investment allowance

8

• (1) In section 51A of CAA 2001 (entitlement to annual investment allowance), for the amount specified in subsection (5) as the maximum allowance (which in the absence of this section would be £25,000 in relation to expenditure incurred on or after 1 January 2016) substitute “ £200,000 ”.

• (2) The amendment made by subsection (1) has effect in relation to expenditure incurred on or after 1 January 2016.

• (3) Subsection (2) is subject to paragraphs 4 and 5 of Schedule 2 to FA 2014 (which relate to cases involving chargeable periods which begin before 1 January 2016 and end on or after that day).

PART 2 — Inheritance tax

Rate bands

Increased nil-rate band where home inherited by descendants

9

• (1) IHTA 1984 is amended as follows.

• (2) In section 7(1) (rates at which inheritance tax charged on the value transferred by a chargeable transfer) after “Subject to subsections (2), (4) and (5) below and to” insert “ section 8D and ”.

• (3) In section 8A(2) (test for whether person has unused nil-rate band on death), in the definition of M (maximum amount transferable at 0%), after “were sufficient but” insert “ that the maximum amount chargeable at nil per cent. under section 8D(2) is equal to the person's residence nil-rate amount and ”.

• (4) After section 8C insert—

(8D) (1) Subsections (2) and (3) apply for the purpose of calculating the amount of the charge to tax under section 4 on a person's death if the person dies on or after 6 April 2017. (2) If the person's residence nil-rate amount is greater than nil, the portion of VT that does not exceed the person's residence nil-rate amount is charged at the rate of 0%. (3) References in section 7(1) to the value transferred by the chargeable transfer under section 4 on the person's death are to be read as references to the remainder (if any) of VT. (4) The person's residence nil-rate amount is calculated in accordance with sections 8E to 8G. (5) For the purposes of those sections and this section— (a) the “residential enhancement” is— (i) £100,000 for the tax year 2017-18, (ii) £125,000 for the tax year 2018-19, (iii) £150,000 for the tax year 2019-20, and (iv) £175,000 for the tax year 2020-21 and subsequent tax years, but this is subject to subsections (6) and (7), (b) the “taper threshold” is £2,000,000 for the tax year 2017-18 and subsequent tax years, but this is subject to subsections (6) and (7), (c) TT is the taper threshold at the person's death, (d) E is the value of the person's estate immediately before the person's death, (e) VT is the value transferred by the chargeable transfer under section 4 on the person's death, (f) the person's “default allowance” is the total of— (i) the residential enhancement at the person's death, and (ii) the person's brought-forward allowance (see section 8G), and (g) the person's “adjusted allowance” is— (i) the person's default allowance, less (ii) the amount given by— $E − T T 2$ but is nil if that amount is greater than the person's default allowance. (6) Subsection (7) applies if— (a) the consumer prices index for the month of September in any tax year (“the prior tax year”) is higher than it was for the previous September, and (b) the prior tax year is the tax year 2020-21 or a later tax year. (7) Unless Parliament otherwise determines, the amount of each of— (a) the residential enhancement for the tax year following the prior tax year, and (b) the taper threshold for that following tax year, is its amount for the prior tax year increased by the same percentage as the percentage increase in the index and, if the result is not a multiple of £1,000, rounded up to the nearest amount which is such a multiple. (8) The Treasury must before 6 April 2021 and each subsequent 6 April make an order specifying the amounts that in accordance with subsections (6) and (7) are the residential enhancement and taper threshold for the tax year beginning on that date; and any such order is to be made by statutory instrument. (9) In this section— - “tax year” means a year beginning on 6 April and ending on the following 5 April, and - “the tax year 2017-18” means the tax year beginning on 6 April 2017 (and any corresponding expression in which two years are similarly mentioned is to be read in the same way). (8E) (1) Subsections (2) to (7) apply if— (a) the person's estate immediately before the person's death includes a qualifying residential interest, and (b) N% of the interest is closely inherited, where N is a number— (i) greater than 0, and (ii) less than or equal to 100, and in those subsections “NV/100” means N% of so much (if any) of the value transferred by the transfer of value under section 4 as is attributable to the interest. (2) Where— (a) E is less than or equal to TT, and (b) NV/100 is less than the person's default allowance, the person's residence nil-rate amount is equal to NV/100 and an amount, equal to the difference between NV/100 and the person's default allowance, is available for carry-forward. (3) Where— (a) E is less than or equal to TT, and (b) NV/100 is greater than or equal to the person's default allowance, the person's residence nil-rate amount is equal to the person's default allowance (and no amount is available for carry-forward). (4) Where— (a) E is greater than TT, and (b) NV/100 is less than the person's adjusted allowance, the person's residence nil-rate amount is equal to NV/100 and an amount, equal to the difference between NV/100 and the person's adjusted allowance, is available for carry-forward. (5) Where— (a) E is greater than TT, and (b) NV/100 is greater than or equal to the person's adjusted allowance, the person's residence nil-rate amount is equal to the person's adjusted allowance (and no amount is available for carry-forward). (6) Subsections (2) to (5) have effect subject to subsection (7). (7) Where the person's residence nil-rate amount as calculated under subsections (2) to (5) without applying this subsection is greater than VT— (a) subsections (2) to (5) have effect as if each reference in them to NV/100 were a reference to VT, (b) each of subsections (3) and (5) has effect as if it provided that the person's residence nil-rate amount were equal to VT (rather than the person's default allowance or, as the case may be, the person's adjusted allowance). (8) See also— - section 8H (meaning of “qualifying residential interest”), - section 8J (meaning of “inherit”), - section 8K (meaning of “closely inherited”), and - section 8M (cases involving conditional exemption). (8F) (1) Subsections (2) and (3) apply if the person's estate immediately before the person's death— (a) does not include a qualifying residential interest, or (b) includes a qualifying residential interest but none of the interest is closely inherited. (2) The person's residence nil-rate amount is nil. (3) An amount— (a) equal to the person's default allowance, or (b) if E is greater than TT, equal to the person's adjusted allowance, is available for carry-forward. (4) See also— - section 8H (meaning of “qualifying residential interest”), - section 8J (meaning of “inherit”), - section 8K (meaning of “closely inherited”), and - section 8M (cases involving conditional exemption). (8G) (1) This section is about the amount of the brought-forward allowance (see section 8D(5)(f)) for a person (“P”) who dies on or after 6 April 2017. (2) In this section “related person” means a person other than P where— (a) the other person dies before P, and (b) immediately before the other person dies, P is the other person's spouse or civil partner. (3) P's brought-forward allowance is calculated as follows— (a) identify each amount available for carry-forward from the death of a related person (see sections 8E and 8F, and subsections (4) and (5)), (b) express each such amount as a percentage of the residential enhancement at the death of the related person concerned, (c) calculate the percentage that is the total of those percentages, and (d) the amount that is that total percentage of the residential enhancement at P's death is P's brought-forward allowance or, if that total percentage is greater than 100%, P's brought-forward allowance is the amount of the residential enhancement at P's death, but P's brought-forward allowance is nil if no claim for it is made under section 8L. (4) Where the death of a related person occurs before 6 April 2017— (a) an amount equal to £100,000 is treated for the purposes of subsection (3) as being the amount available for carry-forward from the related person's death, but this is subject to subsection (5), and (b) the residential enhancement at the related person's death is treated for those purposes as being £100,000. (5) If the value (“RPE”) of the related person's estate immediately before the related person's death is greater than £2,000,000, the amount treated under subsection (4)(a) as available for carry-forward is reduced (but not below nil) by— $R P E − £2,000,000 2$ (8H) (1) This section applies for the purposes of sections 8E and 8F. (2) In this section “residential property interest”, in relation to a person, means an interest in a dwelling-house which has been the person's residence at a time when the person's estate included that, or any other, interest in the dwelling-house. (3) Where a person's estate immediately before the person's death includes residential property interests in just one dwelling-house, the person's interests in that dwelling-house are a qualifying residential interest in relation to the person. (4) Where— (a) a person's estate immediately before the person's death includes residential property interests in each of two or more dwelling-houses, and (b) the person's personal representatives nominate one (and only one) of those dwelling-houses, the person's interests in the nominated dwelling-house are a qualifying residential interest in relation to the person. (5) A reference in this section to a dwelling-house— (a) includes any land occupied and enjoyed with it as its garden or grounds, but (b) does not include, in the case of any particular person, any trees or underwood in relation to which an election is made under section 125 as it applies in relation to that person's death. (6) If at any time when a person's estate includes an interest in a dwelling-house, the person— (a) resides in living accommodation which for the person is job-related, and (b) intends in due course to occupy the dwelling-house as the person's residence, this section applies as if the dwelling-house were at that time occupied by the person as a residence. (7) Section 222(8A) to (8D) of the 1992 Act (meaning of “job-related”), but not section 222(9) of that Act, apply for the purposes of subsection (6). (8J) (1) This section explains for the purposes of sections 8E and 8F whether a person (“B”) inherits, from a person who has died (“D”), property which forms part of D's estate immediately before D's death. (2) B inherits the property if there is a disposition of it (whether effected by will, under the law relating to intestacy or otherwise) to B. (3) Subsection (2) does not apply if— (a) the property becomes comprised in a settlement on D's death, or (b) immediately before D's death, the property was settled property in which D was beneficially entitled to an interest in possession. (4) Where the property becomes comprised in a settlement on D's death, B inherits the property if— (a) B becomes beneficially entitled on D's death to an interest in possession in the property, and that interest in possession is an immediate post-death interest or a disabled person's interest, or (b) the property becomes, on D's death, settled property— (i) to which section 71A or 71D applies, and (ii) held on trusts for the benefit of B. (5) Where, immediately before D's death, the property was settled property in which D was beneficially entitled to an interest in possession, B inherits the property if B becomes beneficially entitled to it on D's death. (6) Where the property forms part of D's estate immediately before D's death as a result of the operation of section 102(3) of the Finance Act 1986 (gifts with reservation) in relation to a disposal of the property made by D by way of gift, B inherits the property if B is the person to whom the disposal was made. (8K) (1) In relation to the death of a person (“D”), something is “closely inherited” for the purposes of sections 8E and 8F if it is inherited for those purposes (see section 8J) by— (a) a lineal descendant of D, (b) a person who, at the time of D's death, is the spouse or civil partner of a lineal descendant of D, or (c) a person who— (i) at the time of the death of a lineal descendant of D who died no later than D, was the spouse or civil partner of the lineal descendant, and (ii) has not, in the period beginning with the lineal descendant's death and ending with D's death, become anyone's spouse or civil partner. (2) The rules in subsections (3) to (8) apply for the interpretation of subsection (1). (3) A person who is at any time a step-child of another person is to be treated, at that and all subsequent times, as if the person was that other person's child. (4) Any rule of law, so far as it requires an adopted person to be treated as not being the child of a natural parent of the person, is to be disregarded (but this is without prejudice to any rule of law requiring an adopted person to be treated as the child of an adopter of the person). (5) A person who is at any time fostered by a foster parent is to be treated, at that and all subsequent times, as if the person was the foster parent's child. (6) Where— (a) an individual (“G”) is appointed (or is treated by law as having been appointed) under section 5 of the Children Act 1989, or under corresponding law having effect in Scotland or Northern Ireland or any country or territory outside the United Kingdom, as guardian (however styled) of another person, and (b) the appointment takes effect at a time when the other person (“C”) is under the age of 18 years, C is to be treated, at all times after the appointment takes effect, as if C was G's child. (7) Where— (a) an individual (“SG”) is appointed as a special guardian (however styled) of another person (“C”) by an order of a court— (i) that is a special guardianship order as defined by section 14A of the Children Act 1989, or (ii) that is a corresponding order under legislation having effect in Scotland or Northern Ireland or any country or territory outside the United Kingdom, and (b) the appointment takes effect at a time when C is under the age of 18 years, C is to be treated, at all times after the appointment takes effect, as if C was SG's child. (8) In particular, where under any of subsections (3) to (7) one person is to be treated at any time as the child of another person, that first person's lineal descendants (even if born before that time) are accordingly to be treated at that time (and all subsequent times) as lineal descendants of that other person. (9) In subsection (4) “adopted person” means— (a) an adopted person within the meaning of Chapter 4 of Part 1 of the Adoption and Children Act 2002, or (b) a person who would be an adopted person within the meaning of that Chapter if, in section 66(1)(e) of that Act and section 38(1)(e) of the Adoption Act 1976, the reference to the law of England and Wales were a reference to the law of any part of the United Kingdom. (10) In subsection (5) “foster parent” means— (a) someone who is approved as a local authority foster parent in accordance with regulations made by virtue of paragraph 12F of Schedule 2 to the Children Act 1989, (b) a foster parent with whom the person is placed by a voluntary organisation under section 59(1)(a) that Act, (c) someone who looks after the person in circumstances in which the person is a privately fostered child as defined by section 66 of that Act, or (d) someone who, under legislation having effect in Scotland or Northern Ireland or any country or territory outside the United Kingdom, is a foster parent (however styled) corresponding to a foster parent within paragraph (a) or (b). (8L) (1) A claim for brought-forward allowance for a person (see section 8G) may be made— (a) by the person's personal representatives within the permitted period, or (b) (if no claim is so made) by any other person liable to the tax chargeable on the person's death within such later period as an officer of Revenue and Customs may in the particular case allow. (2) In subsection (1)(a) “the permitted period” means— (a) the period of 2 years from the end of the month in which the person dies or (if it ends later) the period of 3 months beginning with the date on which the personal representatives first act as such, or (b) such longer period as an officer of Revenue and Customs may in the particular case allow. (3) A claim under subsection (1) made within either of the periods mentioned in subsection (2)(a) may be withdrawn no later than one month after the end of the period concerned. (4) Subsection (5) applies if— (a) no claim under this section has been made for brought-forward allowance for a person (“P”), (b) the amount of the charge to tax under section 4 on the death of another person (“A”) would be different if a claim under subsection (1) had been made for brought-forward allowance for P, and (c) the amount of the charge to tax under section 4 on the death of P, and the amount of the charge to tax under section 4 on the death of any person who is neither P nor A, would not have been different if a claim under subsection (1) had been made for brought-forward allowance for P. (5) A claim for brought-forward allowance for P may be made— (a) by A's personal representatives within the allowed period, or (b) (if no claim is so made) by any other person liable to the tax chargeable on A's death within such later period as an officer of Revenue and Customs may in the particular case allow. (6) In subsection (5)(a) “the allowed period” means— (a) the period of 2 years from the end of the month in which A dies or (if it ends later) the period of 3 months beginning with the date on which the personal representatives first act as such, or (b) such longer period as an officer of Revenue and Customs may in the particular case allow. (7) A claim under subsection (5) made within either of the periods mentioned in subsection (6)(a) may be withdrawn no later than one month after the end of the period concerned. (8M) (1) This section applies where— (a) the estate of a person (“D”) immediately before D's death includes a qualifying residential interest, (b) D dies on or after 6 April 2017, and (c) some or all of the transfer of value under section 4 on D's death is a conditionally exempt transfer of property consisting of, or including, some or all of the qualifying residential interest. (2) For the purposes of sections 8E and 8F, but subject to subsection (3), the exempt percentage of the qualifying residential interest is treated as being not closely inherited; and for this purpose “the exempt percentage” is given by— $$X Q R I × 100$where—X is the attributable portion of the value transferred by the conditionally exempt transfer,QRI is the attributable portion of the value transferred by the transfer under section 4, and“the attributable portion” means the portion (which may be the whole) attributable to the qualifying residential interest.$ (3) For the purposes of calculating tax chargeable under section 32 or 32A by reference to a chargeable event related to the qualifying residential interest where D is the relevant person for the purposes of section 33— (a) in subsection (2), X is calculated as if the property forming the subject-matter of the conditionally exempt transfer had not included the property on which the tax is chargeable, (b) section 33 has effect as if for subsection (1)(b)(ii) there were substituted— (ii) if the relevant person is dead, the rate or rates that would have applied to that amount in accordance with section 8D(2) and (3) above and the appropriate provision of section 7 above if— (a) that amount had been added to the value transferred on the relevant person's death, and (b) the unrelieved portion of that amount had formed the highest part of that value. (c) for the purposes of that substituted section 33(1)(b)(ii) “ the unrelieved portion ” of the amount on which tax is chargeable is that amount itself less the amount (if any) by which— (i) D's residence nil-rate amount for the purposes of the particular calculation under section 33, exceeds (ii) D's residence nil-rate amount for the purposes of the charge to tax under section 4 on D's death. (4) The following provisions of this section apply if immediately before D's death there is a person (“P”) who is D's spouse or civil partner. (5) For the purposes of calculating tax chargeable under section 32 or 32A by reference to a chargeable event related to the qualifying residential interest which occurs after P's death, the amount that would otherwise be D's residence nil-rate amount for those purposes is reduced by the amount (if any) by which P's residence nil-rate amount, or the residence nil-rate amount of any person who dies after P but before the chargeable event occurs, was increased by reason of an amount being available for carry-forward from D's death. (6) Where tax is chargeable under section 32 or 32A by reference to a chargeable event related to the qualifying residential interest which occurs before P's death, section 8G(3) has effect for the purpose of calculating P's brought-forward allowance as if— (a) before the “and” at the end of paragraph (c) there were inserted— (ca) reduce that total (but not below nil) by deducting from it the recapture percentage, (b) in paragraph (d), before “total”, in both places, there were inserted “reduced”, and (c) the reference to the recapture percentage were to the percentage given by— $$T A R E E × 100$where—REE is the residential enhancement at the time of the chargeable event, andTA is the amount on which tax is chargeable under section 32 or 32A.$ (7) If subsection (6) has applied by reason of a previous event or events related to the qualifying residential interest, the reference in subsection (6)(c) to the fraction— $T A R E E$

Rate bands for tax years 2018-19, 2019-20 and 2020-21

10

Section 8 of IHTA 1984 (indexation) does not have effect by virtue of any difference between—

• (a) the consumer prices index for the month of September in 2017, 2018 or 2019, and

• (b) that index for the previous September.

Settlements

Calculation of rate of inheritance tax on settled property

11

Schedule 1 contains provision about calculating the rate at which inheritance tax is charged under Chapter 3 of Part 3 of IHTA 1984.

Exemption from ten-yearly charge for heritage property

12

• (1) Section 79 of IHTA 1984 (exemption from ten-yearly charge) is amended as follows.

• (2) In subsection (3)—

• (a) for “then, if” substitute “ subsection (3A) below applies if ”,

• (b) in paragraph (a), for “has, on a claim made for the purpose, been” substitute “ is, on a claim made for the purpose, ”,

• (c) after that paragraph insert—

(aa) that claim is made during the period beginning with the date of a ten-year anniversary of the settlement (“the relevant ten-year anniversary”) and ending— (i) two years after that date, or (ii) on such later date as the Board may allow,

,

• (d) in paragraph (b)—

• (i) for “that section has been given” substitute “ section 31 is given ”, and

• (ii) for “have been given” substitute “ are given ”, and

• (e) omit the words from “section 64” to the end.

• (3) After that subsection insert—

(3A) Tax is not chargeable under section 64 above in relation to the property by reference to the relevant ten-year anniversary concerned or any subsequent ten-year anniversaries; but on the first occurrence of an event which, if there had been a conditionally exempt transfer of the property immediately before that relevant ten-year anniversary, would be a chargeable event with respect to the property— (a) there is a charge to tax under this subsection, and (b) on any ten-year anniversary falling after that event, tax is chargeable under section 64 above in relation to the property.

• (4) In subsection (4), for the words from “subsection (3)” to “mentioned” substitute “ subsection (3A) above in respect of property if, after the occasion mentioned in subsection (3) above and before the occurrence mentioned in subsection (3A) ”.

• (5) In subsections (5), (5A), (6), (8)(a) and (9A)(a) for “subsection (3)” substitute “ subsection (3A) ”.

• (6) In subsection (7A), in paragraph (c), for the words from “day” to “section” substitute “ relevant ten-year anniversary ”.

• (7) In subsection (8)—

• (a) in paragraph (a), for the words from “on the first” to the end substitute “ by reference to the relevant ten-year anniversary of the settlement ”, and

• (b) in paragraph (c), omit “, and the claim was made and the undertaking was given,”.

• (8) Accordingly, in that Act—

• (a) in section 207 (liability: conditional exemption), in subsection (3), for “section 79(3)” substitute “ section 79(3A) ”,

• (b) in section 233 (interest on unpaid tax), in subsection (1)(c), for “79(3)” substitute “ 79(3A) ”,

• (c) in section 237 (imposition of charge), in subsection (3B)(a), for “or 79(3)” substitute “ or 79(3A) ”, and

• (d) in Schedule 4 (maintenance funds for historic buildings), in paragraph 3(2)(c), for “or 79(3)” substitute “ or 79(3A) ”.

• (9) The amendments made by this section have effect in relation to occasions on which tax would (ignoring the effect of the amendments) fall to be charged under section 64 of IHTA 1984 on or after the day on which this Act is passed.

Settlements with initial interest in possession

13

• (1) In section 80 of IHTA 1984 (initial interest of settlor or spouse or civil partner), for “an interest in possession”, in each place it appears, substitute “ a qualifying interest in possession ”.

• (2) The amendments made by this section come into force on the day after the day on which this Act is passed subject to the saving provision in subsections (3) to (7).

• (3) Subsections (4) to (7) apply where—

• (a) the occasion first referred to in subsection (1) of section 80 of IHTA 1984 occurred before 22 March 2006,

• (b) on that occasion the settlor, or the settlor's spouse or civil partner, became beneficially entitled to an interest in possession in property which, as a result of that subsection, was treated as not becoming comprised in a settlement for the purposes of Chapter 3 of Part 3 of IHTA 1984 on that occasion, and

• (c) at all times in the relevant period that property, or some particular part of it, has been property in which the settlor, or the settlor's spouse or civil partner, has been beneficially entitled to an interest in possession,

and in subsections (4) to (7) “the protected property” means that property or, as the case may be, that particular part of it.

• (4) The amendments made by subsection (1) do not have effect in relation to any particular part of the protected property for so long as the subsisting interest in possession continues to subsist in that part (but see subsections (5) and (6) for what happens afterwards).

• (5) As from immediately before the time when the subsisting interest in possession comes to an end so far as subsisting in any particular part of the protected property (whether or not it also comes to an end at the same time so far as subsisting in some or all of the rest of the protected property), section 80(1) of IHTA 1984 has effect in relation to that part as if the second appearance of “an interest in possession” were “a qualifying interest in possession”.

• (6) If (ignoring this subsection), subsection (5) would have the consequence that a particular part of the protected property is treated as becoming comprised in a separate settlement at a time earlier than the time at which the subsisting interest in possession comes to an end so far as subsisting in that part, that part is to be treated as becoming comprised in a separate settlement at that later time.

• (7) In this section—

• (a) “the relevant period” means the period beginning with the occasion first mentioned in section 80(1) of IHTA 1984 and ending with the day on which this Act is passed,

• (b) “qualifying interest in possession” has the same meaning as in section 80(1) of IHTA 1984,

• (c) “subsisting interest in possession”, in relation to a part of the protected property, means the interest in possession which subsisted in that part immediately before the end of the relevant period, and

• (d) the reference in subsection (3)(c) to the spouse or civil partner of a settlor includes a reference to the widow or widower or surviving civil partner of the settlor.

Distributions etc from property settled by will

14

• (1) In section 144 of IHTA 1984 (distributions etc from property settled by will), in subsection (1)(b), after “section” insert “ 65(4), ”.

• (2) The amendment made by this section has effect in cases where the testator's death occurs on or after 10 December 2014.

Interest

Inheritance tax: interest

15

• (1) In section 107 of FA 1986 (changes in financial institutions: interest)—

• (a) in subsection (4), for the words from “section 234(4)” to “above)” substitute “ paragraph 7(8) of Schedule 53 to the Finance Act 2009 (late payment interest: inheritance tax payable by instalments) ”;

• (b) in subsection (5), for the words from “amend” to “section 234(3)(c)” substitute “ set out one or more descriptions of company for the purposes of paragraph 7(7) of Schedule 53 to the Finance Act 2009 ”.

• (2) In Schedule 53 to FA 2009 (special provision: late payment interest start date)—

• (a) in paragraph 7 (inheritance tax payable by instalments) for sub-paragraph (7) substitute—

(7) A company falls within this sub-paragraph if— (a) its business is carried on in the United Kingdom and is— (i) wholly that of a market maker, or (ii) that of a discount house, or (b) it is of a description set out in regulations under section 107(5) of FA 1986.

;

• (b) in paragraph 9 (certain other amounts of inheritance tax), for “date of the testator's death” substitute “ end of the month in which the testator died ”.

• (3) The amendments made by this section come into force on such day or days as the Treasury may by regulations made by statutory instrument appoint.

• (4) Regulations under subsection (3) may—

• (a) appoint different days for different purposes;

• (b) make transitional or saving provision.

PART 3 — Banking

Bank levy

Bank levy rates for 2016 to 2021

16

Schedule 2 contains provision for a reduction in bank levy rates in 2016 and further reductions each year from 2017 to 2021.

Banking companies

Banking companies: surcharge

17

Schedule 3 contains provision for, and in connection with, a surcharge on banking companies.

Banking companies: expenses relating to compensation

18

• (1) In CTA 2009, after section 133 insert—

(133A) (1) In calculating the profits of a trade carried on by a company (“company A”) no deduction is allowed for expenses incurred by the company if and so far as— (a) the expenses are in respect of amounts of relevant compensation (see subsection (3)), and (b) the disclosure condition is met in relation to the expenses (see section 133C). (2) Subsection (1) does not apply to expenses which are excluded by section 133D. (3) In relation to company A, “relevant compensation” means compensation which is paid or payable— (a) to or for the benefit of a customer of company A in respect of relevant conduct (see subsection (6)) of company A, or (b) to or for the benefit of a customer of a qualifying company in respect of relevant conduct of that qualifying company (but see subsection (4)). (4) Compensation paid or payable as mentioned in subsection (3)(b) is not relevant compensation so far as it is paid or payable under arrangements entered into between company A and the qualifying company on arm's length terms. (5) “Qualifying company”, in relation to company A, means a company which is associated with company A (see section 133L) at the time when the expenses in question are recognised for accounting purposes. (6) For the purposes of this section conduct of a company is “relevant conduct” if the conduct occurs— (a) on or after 29 April 1988, and (b) at a time when the company is a banking company (see section 133E). (7) For the purposes of subsection (1) it does not matter whether the compensation is paid, or to be paid, by company A or another person. (8) In this section— - “compensation”, “payment” and references to compensation “paid or payable” in respect of relevant conduct of a company, are to be read in accordance with section 133K; - “conduct” includes any act or omission; - “customer” has the meaning given by section 133J. (133B) (1) This section applies where a company incurs in an accounting period expenses which would, but for section 133A, be deductible in calculating the profits of a trade carried on by that company. (2) An amount equal to 10% of the relevant sum is to be brought into account as a receipt in calculating the profits of the trade. (3) The amount is treated as arising at the end of the accounting period. (4) In this section “the relevant sum” means the total amount of the expenses which as a result of section 133A are not deductible in calculating the profits of the trade for the accounting period. (133C) (1) In relation to expenses incurred by a company (“company A”) in respect of amounts of relevant compensation, the “disclosure condition” is met if— (a) a relevant document indicates that the company— (i) is or has been, or (ii) will become, liable to pay compensation in respect of a particular matter and the relevant compensation can reasonably be regarded as relating to that matter, or (b) a relevant document refers to disciplinary action taken or to be taken by a regulator in respect of a particular matter and the relevant compensation can reasonably be regarded as relating to that matter. (2) A disclosure in a relevant document is to be disregarded for the purposes of paragraph (a) of subsection (1) if the disclosure is concerned with liability to pay compensation to or for the benefit of one (and only one) customer of the company concerned in respect of a single error in the conduct of the company concerned. (3) In subsection (2) “the company concerned” means company A or a company which is associated with company A (see section 133L). (4) For the purposes of subsection (1)(a) it does not matter whether the indication is express or implicit (or how it is expressed or conveyed) provided that it is reasonably clear from the relevant document that the company is or has been, or will become, liable to pay compensation in respect of the matter concerned. (5) In this section “a relevant document” means— (a) relevant accounts, (b) a relevant statutory report, or (c) a relevant listing disclosure. (6) For the purposes of this section the following are “relevant accounts” in relation to expenses incurred by company A— (a) company A's statutory accounts for a relevant period, and (b) relevant consolidated accounts for a relevant period. (7) For the purposes of this section, any of the following is a “relevant statutory report” in relation to company A if the report in question is prepared for a relevant period— (a) any published report prepared by the directors of the company for the purposes of any provision of the legislation under which company A is registered or, as the case may be, established; (b) any published consolidated report prepared for such purposes, if the company is included in the consolidation. (8) In this section “relevant listing disclosure” means a disclosure required— (a) by rules under section 73A of FISMA 2000, or (b) by virtue of a requirement imposed by or under a corresponding provision of the law of a territory outside the United Kingdom, if the disclosure is made in the period of 5 years ending at the end of the period of account in which the expenses are recognised for accounting purposes. (9) In this section “relevant period”, in relation to expenses incurred by company A, means— (a) the period of account in which the expenses are recognised for accounting purposes, or (b) any period which begins not more than 5 years before, and ends not later than, the end of that period. (10) In this section, in relation to a company— - “relevant compensation” has the meaning given by section 133A(3); - “statutory accounts” means accounts prepared for the purposes of any provision of the legislation under which the company is registered or, as the case may be, established; - “relevant consolidated accounts” means consolidated accounts prepared for any such purposes, if the company is included in the consolidation. (133D) (1) Expenses in respect of relevant compensation are excluded by this section if the compensation is in respect of— (a) an administrative error, (b) the failure of a computer or electronic system, or (c) loss or damage which is wholly or mainly attributable to an unconnected third party. (2) In subsection (1) “third party” means a person who is neither the company mentioned in section 133A(1) nor (if different) the company in respect of whose conduct the compensation is paid or payable (see section 133A(3)(b)). (3) For the purposes of this section a third party (“TP”) is an “unconnected third party” unless— (a) TP was, at the time of the relevant actions, connected with the company mentioned in section 133A(1) or (if different) the company in respect of whose conduct the compensation is paid or payable, or (b) in taking one or more of the relevant actions, TP was acting under arrangements with the company mentioned in paragraph (a) or (as the case may be) either of the companies mentioned in paragraph (a). (4) In this section “the relevant actions” means the actions as a result of which the loss or damage is wholly or mainly attributable to TP (and references to actions or the taking of actions include failures to act). (5) Section 1122 of CTA 2010 (meaning of “connected persons”) applies for the purposes of this section, but subject to the following modification. (6) Section 1122 has effect as if after subsection (8) there were inserted— (9) A person (“A”) is connected with any person who is an employee of A or by whom A is employed. (10) For the purposes of this section any director or other officer of a company is to be treated as employed by that company. (133E) (1) For the purposes of section 133A, a company is a “banking company”— (a) at a time when it meets conditions A to D, (b) at a time when it meets condition A and is a member of a partnership which meets conditions B to D, or (c) if it is a building society. In subsections (2) to (6), “the relevant entity” means the company or partnership. (2) Condition A is that the company is not an excluded company (see section 133F). (3) Condition B— (a) in relation to any time on or after 1 December 2001, is that the relevant entity is an authorised person for the purposes of FISMA 2000 (see section 31 of that Act); (b) in relation to any time before that date, is that the relevant entity— (i) was at that time an authorised person under Chapter 3 of Part 1 of the Financial Services Act 1986 (persons authorised to carry on investment business), (ii) was authorised under the Banking Act 1987, or (iii) was entitled by virtue of the Banking Co-ordination (Second Council Directive) Regulations 1992 (S.I. 1992/3218) to accept deposits (within the meaning of the Banking Act 1987) in the United Kingdom. (4) Condition C is that— (a) the relevant entity's activities include the relevant regulated activity described in the provision mentioned in section 133G(1)(a), or (b) the relevant entity is an investment bank (see section 133H) whose activities consist wholly or mainly of any of the relevant regulated activities described in the provisions mentioned in section 133G(1)(b) to (f). (5) Condition D is that the relevant entity carries on that relevant regulated activity, or those relevant regulated activities, wholly or mainly in the course of trade. (6) Where the relevant entity carries on activities outside the United Kingdom, Condition B is met— (a) in relation to any time on or after 1 December 2001, if the relevant entity would be required to be an authorised person for the purposes of FISMA 2000 (see section 31 of that Act) in order to carry on any of those activities in the United Kingdom at that time; (b) in relation to any time before that date, if in order to carry on those activities in the United Kingdom at that time the relevant entity— (i) would have been required to be an authorised person under Chapter 3 of Part 1 of the Financial Services Act 1986 (persons authorised to carry on investment business), or (ii) would have been required either to be authorised under the Banking Act 1987 or to be entitled by virtue of the Banking Co-ordination (Second Council Directive) Regulations 1992 (S.I. 1992/3218) to accept deposits (within the meaning of the Banking Act 1987) in the United Kingdom. (7) In this section “partnership” includes— (a) a limited liability partnership, and (b) an entity established under the law of a territory outside the United Kingdom of a similar character to a partnership, and “member”, in relation to a partnership, is to be read accordingly. (8) For the meaning of “relevant regulated activity”, see section 133G. (133F) (1) This section gives the meaning of “excluded company” for the purposes of section 133E. (2) A company is an “excluded company” at any time (in an accounting period) when the company is— (a) an insurance company or an insurance special purpose vehicle; (b) a company which is a member of a group and does not carry on any relevant regulated activities otherwise than on behalf of an insurance company or an insurance special purpose vehicle which is a member of the group; (c) a company which does not carry on any relevant regulated activities otherwise than as the manager of a pension scheme; (d) an investment trust; (e) a company which does not carry on any relevant regulated activities other than asset management activities; (f) an exempt commodities firm; (g) a company which does not carry on any relevant regulated activities otherwise than for the purpose of trading in commodities or commodity derivatives; (h) a company which does not carry on any relevant regulated activities otherwise than for the purpose of dealing in contracts for differences— (i) as principal with persons all or all but an insignificant proportion of whom are retail clients, or (ii) with any other person to enable the company or that other person to deal in contracts for differences as principal with persons all or all but an insignificant proportion of whom are retail clients; (i) a friendly society; (j) a society registered as a credit union under the Co-operative and Community Benefit Societies Act 2014 or the Credit Unions (Northern Ireland) Order 1985 (S.I. 1985/1205 (N.I. 12)); (k) a building society. (3) In this section “asset management activities” means activities which consist (or, if they were carried on in the United Kingdom, would consist) of any or all of the following— (a) acting as the operator of a collective investment scheme (see subsection (5)), (b) managing investments on a discretionary basis for clients none of which is a linked entity (see subsection (6)), and (c) acting as an authorised corporate director. (4) In subsection (2)(f) “exempt commodities firm” means— (a) in relation to a time on or after 1 January 2014, an exempt IFPRU commodities firm, as defined by the FCA Handbook at that time, (b) in relation to a time on or after 1 April 2013 but before 1 January 2014, an exempt BIPRU commodities firm, as defined by the PRA Handbook at that time, (c) in relation to a time on or after 1 January 2007 but before 1 April 2013, an exempt BIPRU commodities firm, as defined by the Handbook of the Financial Services Authority at that time, and (d) in relation to a time before 1 January 2007, an exempt BIPRU commodities firm as defined by the Handbook of the Financial Services Authority as in force on 1 January 2007. (5) In subsection (3)(a) “operator of a collective investment scheme”— (a) in relation to times on and after 25 February 2001, has the same meaning as in Part 17 of FISMA 2000 (see sections 235 and 237 of that Act); (b) in relation to times before that date, has the same meaning as in the Financial Services Act 1986. (6) In subsection (3)(b) “linked entity”, in relation to a company (“C”), means— (a) a member of the same group as C; (b) a company in which a company which is a member of the same group as C has a major interest, or (c) a partnership the members of which include an entity— (i) which is a member of the same group as C, and (ii) whose share of the profits or losses of a trade carried on by the partnership for an accounting period of the partnership any part of which falls within the accounting period mentioned in the opening words of subsection (2) is at least a 40% share (see Part 17 for provisions about shares of partnership profits and losses). (7) In this section— - “authorised corporate director”— 1. in relation to any time on or after 1 April 2013, has the meaning given by the FCA Handbook at that time; 2. in relation to any time before 1 April 2013, has the meaning given by the FCA Handbook as in force on 1 April 2013; - “contract for differences” has the meaning given by section 582; - “the FCA Handbook” means the Handbook made by the Financial Conduct Authority under FISMA 2000; - “friendly society” means a registered friendly society or an incorporated friendly society; - “group” has the same meaning as in Part 7A of CTA 2010 (see section 269BD of that Act); - “incorporated friendly society” means a society incorporated under the Friendly Societies Act 1992; - “insurance company” has the meaning given by section 133I; - “insurance special purpose vehicle” has the meaning given by section 139 of FA 2012; - “major interest” has the same meaning as in Part 5 (see section 473); - “partnership” has the same meaning as in section 133E; - “the PRA Handbook”, means the Handbook made by the Prudential Regulation Authority under FISMA 2000; - “registered friendly society” has the same meaning as in the Friendly Societies Act 1992 (and includes any society that as a result of section 96(2) of the Friendly Societies Act 1992 is treated as a registered friendly society); - “relevant regulated activity” has the meaning given by section 133G; - “retail client”— 1. in relation to any time on or after 1 April 2013, has the meaning given by the FCA Handbook at that time; 2. in relation to any time before 1 April 2013, has the meaning given by the FCA Handbook as in force on 1 April 2013. (133G) (1) In sections 133E and 133F “relevant regulated activity” means an activity which is a regulated activity for the purposes of FISMA 2000 by virtue of any of the following provisions of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544)— (a) article 5 (accepting deposits); (b) article 14 (dealing in investments as principal); (c) article 21 (dealing in investments as agent); (d) article 25 (arranging deals in investments); (e) article 40 (safeguarding and administering investments); (f) article 61 (regulated mortgage contracts). (2) In determining whether an activity carried on at any time before 1 December 2001 was at that time a relevant regulated activity, it is to be assumed that FISMA 2000 and the order mentioned in subsection (1) were in force in the form in which they had effect on 1 December 2001. (133H) (1) This section gives the meaning of “investment bank” for the purposes of section 133E; and in this section “the relevant entity” has the same meaning as in subsections (2) to (6) of that section. (2) At any time on or after 1 January 2014, the relevant entity is an investment bank if— (a) it is both an IFPRU 730k firm and a full scope IFPRU investment firm, or (b) it is designated by the Prudential Regulation Authority under article 3 of the Financial Services and Markets Act 2000 (PRA-regulated Activities) Order 2013 (S.I. 2013/556) (dealing in investments as principal: designation by PRA). (3) At any time on or after 1 January 2007 but before 1 January 2014, the relevant entity was an investment bank if it was both a BIPRU 730k firm and a full scope BIPRU investment firm. (4) At any time before 1 January 2007, the relevant entity was an investment bank if it would have been both a BIPRU 730k firm and a full scope BIPRU investment firm if the Handbook of the Financial Services Authority in force on 1 January 2007 had been in force at that earlier time. (5) In subsections (2) to (4)— - “IFPRU 730k firm” and “full scope IFPRU investment firm” have the meaning given by the FCA Handbook at the time in question; - “BIPRU 730k firm” and “full scope BIPRU investment firm”— 1. in relation to any time on or after 1 April 2013 have the meaning given by the PRA Handbook at that time; 2. in relation to any time on or after 1 January 2007 but before 1 April 2013, have the meaning given by the Handbook of the Financial Services Authority at that time; 3. in relation to any time before 1 January 2007, have the meaning given by the Handbook of the Financial Services Authority as in force on 1 January 2007. (6) If the relevant entity would at any time be an investment bank under subsection (2)(a), (3) or (4) by virtue of activities carried on in the United Kingdom but for the fact that its registered office (or, if it does not have a registered office, its head office) is not in the United Kingdom, the relevant entity is to be treated for the purposes of section 133E as being an investment bank. (7) In this section— - “the FCA Handbook” means the Handbook made by the Financial Conduct Authority under FISMA 2000; - “the PRA Handbook” means the Handbook made by the Prudential Regulation Authority under FISMA 2000. (133I) (1) For the purposes of section 133F a person who carries on the activity of effecting or carrying out contracts of insurance is an “insurance company” if— (a) the person has permission under Part 4A of FISMA 2000 to carry on that activity, (b) the person is of the kind mentioned in paragraph 5(d) or (da) of Schedule 3 to FISMA 2000 (EEA passport rights) and carries on that activity in the United Kingdom through a permanent establishment there, or (c) the person qualifies for authorisation under Schedule 4 to FISMA 2000 (Treaty rights) and carries on that activity in the United Kingdom through a permanent establishment there. (2) In relation to times in the period beginning with 1 December 2001 and ending with 31 March 2013, the reference in subsection (1)(a) to Part 4A of FISMA 2000 is to be read as a reference to Part 4 of that Act (3) In relation to times before 1 December 2001, this section has effect as if the following were substituted for subsection (1)— (1) For the purposes of section 133F a person who carries on the activity of effecting or carrying out contracts of insurance is an “insurance company” if the person is— (a) authorised under section 3 or 4 of the Insurance Companies Act 1982, or (b) an EC company within the meaning of the Insurance Companies Act 1982 which, by virtue of paragraph 1 or 8 of Schedule 2F to that Act, was able to carry on direct insurance business through a branch in the United Kingdom or provide insurance in the United Kingdom. (133J) (1) For the purposes of sections 133A and 133C, a person (“P”) is a “customer” in relation to a company (“company A”) if— (a) P uses, has used or may have contemplated using a financial service provided by company A, or (b) has relevant rights or interests in relation to a financial service provided by company A. (2) In subsection (1) “financial service” means a service provided— (a) in carrying on regulated activities, (b) in communicating, or approving the communication by others of, invitations or inducements to engage in investment activity, or (c) in providing relevant ancillary services (if company A is an investment firm or credit institution). (3) P has a “relevant right or interest” in relation to any service if P has a right or interest— (a) which is derived from, or is otherwise attributable to, the use of the service by another person, or (b) which may be adversely affected by the use of the service by persons acting on P's behalf or in a fiduciary capacity in relation to P. (4) If company A is providing a service as a trustee, the persons who are, have been, or may have been, beneficiaries of the trust are to be treated as persons who use, have used, or may have contemplated using, the service. (5) A person who deals with company A in the course of company A providing a service is to be treated as using the service. (6) In this section— - “credit institution” has the meaning given by section 1H(8) of FISMA 2000; - “engage in investment activity” has the meaning given in section 21 of FISMA 2000; - “investment firm” has the same meaning as in FISMA 2000 (see section 424A of that Act); - “regulated activities” has the same meaning as in FISMA 2000 (see section 22 of that Act); - “relevant ancillary services” means has the meaning given by section 1H(8) of FISMA 2000. (133K) (1) In sections 133A to 133D references to compensation which is paid or payable “in respect of” relevant conduct include compensation which is paid (or to be paid)— (a) in connection with a claim by the customer for compensation in respect of the conduct, or (b) in circumstances where there is reason to suspect that company A may (or might in the absence of the payment) be or become liable to pay compensation in respect of relevant conduct— (i) to the customer, or (ii) in one or more of a class of cases which includes the customer's case. (2) In sections 133A to 133D and this section “compensation” includes any form of redress, whether monetary or non-monetary, and accordingly includes interest. References in those sections to “payment” are to be interpreted accordingly. (3) In subsection (1)— - “claim” includes any claim or request, however made; - “customer” has the meaning given by section 133J; - “relevant conduct” is to be interpreted in accordance with section 133A(6). (133L) (1) For the purposes of sections 133A and 133C a company (“company B”) is associated with another company (“company A”) at a time (“the relevant time”) if any of the following 5 conditions is met. (2) The first condition is that the financial results of company A and company B, for a period that includes the relevant time, meet the consolidation condition. (3) The second condition is that there is a connection between company A and company B for the accounting period of company A in which the relevant time falls. (4) The third condition is that, at the relevant time, company A has a major interest in company B or company B has a major interest in company A. (5) The fourth condition is that— (a) the financial results of company A and a third company, for a period that includes the relevant time, meet the consolidation condition (see subsection (7)), and (b) at the relevant time the third company has a major interest in company B. (6) The fifth condition is that— (a) there is a connection (see subsection (9)) between company A and a third company for the accounting period of company A in which the relevant time falls, and (b) at the relevant time the third company has a major interest in company B. (7) In this section, the financial results of any two companies for any period meet the “consolidation condition” if— (a) they are required to be comprised in group accounts, (b) they would be required to be comprised in group accounts but for the application of an exemption, or (c) they are in fact comprised in such accounts. (8) In subsection (7), “group accounts” means accounts prepared under— (a) section 399 of the Companies Act 2006, or (b) any corresponding provision of the law of a territory outside the United Kingdom. (9) Sections 466 to 471 (companies connected for accounting period) apply for the purposes of this section. (10) In this section “major interest” has the same meaning as in Part 5 (see section 473). (133M) (1) If a firm carries on a trade and any partner in the firm (“the corporate partner”) is within the charge to corporation tax, this section applies in determining the profits of the trade, in relation to the corporate partner, in accordance with section 1259(3) or (4). (2) No deduction is allowed for expenses incurred by the firm if and so far as section 133A would prevent the expenses from being deductible if the firm were, and at all relevant times had been, a company. (3) In its application for the purposes of subsection (2), section 133A is to be read subject to subsections (4) to (6). (4) Section 133A(3)(b) is to be disregarded. (5) Conduct of the firm is “relevant conduct” if the conduct occurs— (a) on or after 29 April 1988, and (b) at a time when— (i) the corporate partner is for the purposes of section 133A a banking company, and (ii) the firm does not fall within any of paragraphs (a) to (h) of section 133F(2) (reading references in those paragraphs to companies as including references to firms). (6) The disclosure condition in section 133C may be met by a relevant document relating to the liability of the corporate partner (as well as by a relevant document relating to the liability of the firm). (7) Where in any accounting period of the firm (as defined by section 1261) the firm incurs expenses which but for section 133A (as read with subsections (2) to (6)) would be deductible in calculating the profits of the trade, the profits of the firm's trade are to be determined as if the references in section 133B to a company were a reference to the firm. (133N) (1) The Treasury may by regulations make such amendments of sections 133A to 133L as they consider appropriate in consequence of— (a) any change made to, or replacement of, the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544) or the Financial Services and Markets Act 2000 (PRA-regulated Activities) Order 2013 (S.I. 2013/556) (or any replacement); (b) any change made to, or replacement of, the FCA Handbook or the PRA Handbook (or any replacement); (c) any regulatory requirement, or change to any regulatory requirement, imposed by EU legislation, or by or under any Act (whenever adopted, enacted or made). (2) The Treasury may by regulations— (a) amend sections 133A(1) and 133C for the purpose of varying the class of expenses to which section 133A(1) applies; (b) amend section 133D for the purpose of adding cases to those for the time being listed in subsection (1) of that section; (c) amend section 133D for any other purpose; (d) amend any of sections 133E to 133I; (e) amend section 133M. (3) Regulations under this section may include transitional provision. (4) A statutory instrument containing only regulations under subsection (1) or (2)(b) is subject to annulment in pursuance of a resolution of the House of Commons. (5) Any other statutory instrument containing regulations under this section may not be made unless a draft of the instrument has been laid before and approved by a resolution of the House of Commons. (6) In this section— - “the FCA Handbook” means the Handbook made by the Financial Conduct Authority under FISMA 2000 (as that Handbook has effect from time to time); - “the PRA Handbook” means the Handbook made by the Prudential Regulation Authority under FISMA 2000 (as that Handbook has effect from time to time).

• (2) The amendment made by this section has effect in relation to accounting periods beginning on or after the commencement date.

• (3) “The commencement date” means—

• (a) except for the purposes of section 133M of CTA 2009, 8 July 2015;

• (b) for the purposes of that section, 15 July 2015.

• (4) Subsection (5) applies where a company has an accounting period beginning before the commencement date and ending on or after that date (“the straddling period”).

• (5) For the purposes of sections 133A to 133N of CTA 2009—

• (a) so much of the straddling accounting period as falls before the commencement date and so much of that period as falls on or after that date, are treated as separate accounting periods, and

• (b) any amounts brought into account for the purposes of calculating for corporation tax purposes the profits of a trade for the straddling accounting period are apportioned to the two separate accounting periods on such basis as is just and reasonable.

Banks established under Savings Bank (Scotland) Act 1819: loss allowance

19

• (1) In Part 7A of CTA 2010 (banking companies), in section 269CN (definitions), in the definition of “building society”, at the end insert “ except that it also includes a bank established under the Savings Bank (Scotland) Act 1819 ”.

• (2) The amendment made by this section is treated as having come into force on 1 April 2015.

Definitions relating to banks

20

• (1) Schedule 19 to FA 2011 (the bank levy) is amended in accordance with subsections (2) to (7).

• (2) In paragraph 12—

• (a) in sub-paragraph (8)(a)(iv)—

• (i) after “relevant” insert “ regulated ”;

• (ii) for “a BIPRU 730k firm and a full scope BIPRU investment firm,” substitute “ an IFPRU 730k firm and a full scope IFPRU investment firm, ”;

• (b) in sub-paragraph (8)(b)(iv)—

• (i) after “relevant” insert “ regulated ”;

• (ii) for “a BIPRU 730k firm and a full scope BIPRU investment firm” substitute “ an IFPRU 730k firm and a full scope IFPRU investment firm ”.

• (3) In paragraph 70—

• (a) in sub-paragraph (1), at the appropriate places insert—

“the FCA Handbook” means the Handbook made by the Financial Conduct Authority under FISMA 2000 (as that Handbook has effect from time to time);”; “ “investment bank” means an entity which— (a) is both an IFPRU 730k firm and a full scope IFPRU investment firm, or (b) is designated by the Prudential Regulation Authority under article 3 of the Financial Services and Markets Act 2000 (PRA-regulated Activities) Order 2013 (S.I. 2013/556) (dealing in investments as principal: designation by PRA);

;

• (b) in sub-paragraph (2), in the list of terms, omit the entries relating to “BIPRU 730k firm”, “exempt BIPRU commodities firm” and “full scope BIPRU investment firm”;

• (c) after sub-paragraph (2) insert—

(2A) In this Schedule the following terms have the meaning given in the FCA Handbook— - “exempt IFPRU commodities firm”; - “full scope IFPRU investment firm”; - “IFPRU 730k firm”.

;

• (d) in sub-paragraph (3), for “a BIPRU 730k firm and a full scope BIPRU investment firm” substitute “ an IFPRU 730k firm and a full scope IFPRU investment firm ”.

• (4) In paragraph 72(3)(a), for “both a BIPRU 730k firm and a full scope BIPRU investment firm,” substitute “ an investment bank, ”.

• (5) In paragraph 73(1), for paragraph (f) substitute—

(f) an exempt IFPRU commodities firm,

.

• (6) In paragraph 78(1)(c)(ii), for “both a BIPRU 730k firm and a full scope BIPRU investment firm,” substitute “ an investment bank, ”.

• (7) In paragraph 80(1)(c)(ii) for “both a BIPRU 730k firm and a full scope BIPRU investment firm,” substitute “ an investment bank, ”.

• (8) The amendments made by subsections (1) to (7) are treated as having come into force on 1 January 2014.

• (9) Part 7A of CTA 2010 (banking companies) has effect, and is to be deemed always to have had effect, with the amendments set out in subsections (10) to (12).

• (10) In section 269B (meaning of “banking company”)—

• (a) for subsection (5) substitute—

(5) Condition D is that, at any time in the accounting period— (a) the relevant entity's activities include the relevant regulated activity described in the provision mentioned in section 269BB(a), or (b) the relevant entity is an investment bank (see subsection (6A)) whose activities consist wholly or mainly of any of the relevant regulated activities described in the provisions mentioned in section 269BB(b) to (f).

;

• (b) after subsection (6) insert—