Finance Act 2016

PART 2 — Consequential amendments

FA 1998

2

Schedule 18 to FA 1998 (company tax returns) is amended as follows.

3

In paragraph 25(3)—

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

• (b) omit paragraph (d) and the “or” preceding it.

4

In paragraph 42(4)—

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

• (b) omit paragraph (c) and the “or” preceding it.

CTA 2009

5

In section A1 of CTA 2009 (overview of the Corporation Tax Acts), in subsection (2)—

• (a) omit paragraph (h), and

• (b) after that paragraph insert—

(ha) Part 6A of that Act (hybrid and other mismatches),

.

CTA 2010

6

CTA 2010 is amended as follows.

7

In section 938N (group mismatch schemes: priority)—

• (a) omit paragraph (d), and

• (b) after that paragraph insert—

(da) Part 6A of that Act (hybrid and other mismatches);

.

8

In section 938V (tax mismatch schemes: priority)—

• (a) omit paragraph (c), and

• (b) after that paragraph insert—

(ca) Part 6A of TIOPA 2010 (hybrid and other mismatches);

.

TIOPA 2010

9

TIOPA 2010 is amended as follows.

10

In section 1 (overview of Act), in subsection (1)—

• (a) omit paragraph (c), and

• (b) after that paragraph insert—

(ca) Part 6A (hybrid and other mismatches),

.

11

In section 157 (direct participation), in subsection (1)—

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

• (b) after paragraph (c) insert

, and (d) in Part 6A, section 259NB(4).

12

In section 158 (indirect participation: defined by sections 159 to 162), in subsection (4)—

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

• (b) after paragraph (c) insert

, and (d) in Part 6A, section 259NB(4),

.

13

In section 159 (indirect participation: potential direct participant), in subsection (1)—

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

• (b) after paragraph (c) insert

, and (d) in Part 6A, section 259NB(4).

14

In section 160 (indirect participation: one of several major participants), in subsection (1)—

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

• (b) after paragraph (c) insert

, and (d) in Part 6A, section 259NB(4).

15

Omit Part 6 (tax arbitrage).

16

Omit Part 4 of Schedule 11 (tax arbitrage: index of defined expressions used in Part 6).

17

After that Part of that Schedule insert—

arrangement (in Part 6A)	section 259NF
CFC and CFC charge (in Part 6A)	section 259B(4)
the Commissioners (in Part 6A)	section 259NF
control group (in Part 6A)	section 259NB
deduction period (in Chapter 10 of Part 6A)	section 259JA(5)(a)
dual resident company (in Chapter 10 of Part 6A)	section 259JA(3)
dual territory double deduction amount (in Chapter 10 of Part 6A)	section 259JA(5)
dual territory double deduction (in Chapter 11 of Part 6A)	section 259KB
excessive PE deduction (in Chapter 6 of Part 6A)	section 259FA(8)
excessive PE deduction (in Chapter 11 of Part 6A)	section 259KB
financial instrument (in Part 6A)	section 259N
foreign CFC and foreign CFC charge (in Part 6A)	section 259B(4)
foreign deduction period (in Chapter 10 of Part 6A)	section 259JA(5)(b)
hybrid entity (in Part 6A)	section 259BE
hybrid entity deduction period (in Chapter 9 of Part 6A)	section 259IA(2)(a)
hybrid entity double deduction amount (in Chapter 9 of Part 6A)	section 259IA(4)
hybrid or otherwise impermissible deduction/non-inclusion mismatch (in Chapter 3 of Part 6A)	section 259CB
hybrid payee (in Chapter 7 of Part 6A)	section 259GA(3)
hybrid payee deduction/non-inclusion mismatch (in Chapter 7 of Part 6A)	section 259GB
hybrid payer (in Chapter 5 of Part 6A)	section 259EA(3)
hybrid payer deduction/non-inclusion mismatch (in Chapter 5 of Part 6A)	section 259EB
hybrid transfer arrangement (in Chapter 4 of Part 6A)	section 259DB
hybrid transfer deduction/non-inclusion mismatch (in Chapter 4 of Part 6A)	section 259DC
imported mismatch payment (in Chapter 11 of Part 6A)	section 259KA(2)
imported mismatch arrangement (in Chapter 11 of Part 6A)	section 259KA(2)
investor (in Part 6A)	section 259BE(4)
investor deduction period (in Chapter 9 of Part 6A)	section 259IA(2)(b)
investor jurisdiction (in Part 6A)	section 259BE(4)
mismatch payment (in Chapter 11 of Part 6A)	section 259KA(6)
multinational company (in Chapter 6 of Part 6A)	section 259FA(3)
multinational company (in Chapter 8 of Part 6A)	section 259HA(4)
multinational payee deduction/non-inclusion mismatch (in Chapter 8 of Part 6A)	section 259HB
ordinary income (in Part 6A)	sections 259BC and 259BD
over-arching arrangement (in Chapter 11 of Part 6A)	section 259KA(5)
P (in Chapter 11 of Part 6A)	section 259KA(3)
parent jurisdiction (in Chapter 6 of Part 6A)	section 259FA(3)(a)
parent jurisdiction (in Chapter 8 of Part 6A)	section 259HA(4)(a)
parent jurisdiction (in Chapter 10 of Part 6A)	section 259JA(4)(b)(ii)
payee (in Part 6A)	section 259BB(6)
payee jurisdiction (in Part 6A)	section 259BB(9)
payer (in Part 6A)	section 259BB(1)(a) or (2)
payment (in Part 6A)	section 259BB(1)
payment period (in Part 6A)	section 259BB(1)(b) or (2)
PE jurisdiction (in Chapter 8 of Part 6A)	section 259HA(4)(b)
PE jurisdiction (in Chapter 10 of Part 6A)	section 259JA(4)(a)
PE jurisdiction (in Chapter 11 of Part 6A)	section 259KB(3)(a)
permanent establishment (in Part 6A)	section 259BF
quasi-payment (in Part 6A)	section 259BB(2) to (5)
related (in Part 6A)	section 259NC
relevant deduction (in Part 6A)	section 259BB(1)(b) or (2)(a)
relevant investment fund (in Part 6A)	section 259NA
relevant mismatch (in Chapter 11 of Part 6A)	section 259KA(6)
relevant multinational company (in Chapter 10 of Part 6A)	section 259JA(4)
relevant PE period (in Chapter 6 of Part 6A)	section 259FA(4)
series of arrangements (in Chapter 11 of Part 6A)	section 259KA(5)
substitute payment (in Chapter 4 of Part 6A)	section 259DB(5)
tax (in Part 6A)	section 259B
taxable period (in Part 6A)	section 259NF
taxable profits (in Part 6A)	sections 259BC(2) and 259BD(5)
underlying instrument (in Chapter 4 of Part 6A)	section 259DB(3)
underlying return (in Chapter 4 of Part 6A)	section 259DB(5)(b)

PART 3 — Commencement

18

Chapters 3 to 5 and 7 and 8 of Part 6A of TIOPA 2010 (counteraction of deduction/non-inclusion mismatches arising from payments and quasi-payments) have effect in relation to—

• (a) payments made on or after the commencement date, and

• (b) quasi-payments in relation to which the payment period begins on or after the commencement date.

19

Chapter 6 of Part 6A of TIOPA 2010 (counteraction of deduction/non-inclusion mismatches relating to intra-company transfers from permanent establishments) has effect in relation to excessive PE deductions in relation to which the relevant PE period begins on or after the commencement date.

20

Chapters 9 and 10 of Part 6A of TIOPA 2010 (counteraction of double deduction mismatches) have effect for accounting periods beginning on or after the commencement date.

21

Chapter 11 of Part 6A of TIOPA 2010 (imported mismatch payments) has effect in relation to imported mismatch payments that are—

• (a) payments made on or after the commencement date, or

• (b) quasi-payments in relation to which the payment period begins on or after the commencement date.

22

The following provisions of this Schedule have effect in relation to accounting periods beginning on or after the commencement date—

• (a) paragraphs 2 to 4, and

• (b) paragraphs 5(a), 7(a), 8(a), 10(a), 15 and 16.

23

For the purposes of paragraph 18 and 21, where a payment period begins before the commencement date and ends on or after that date (“the straddling period”)—

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

• (b) where it is necessary to apportion an amount for the straddling period to the two separate taxable periods, it is to be apportioned—

• (i) on a time basis according to the respective length of the separate taxable periods, or

• (ii) if that method would produce a result that is unjust or unreasonable, on a just and reasonable basis.

24

For the purposes of paragraphs 19, 20 and 22(b), where a company has an accounting period beginning before the commencement date and ending on or after that date (“the straddling period”)—

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

• (b) where it is necessary to apportion an amount for the straddling period to the two separate accounting periods, it is to be apportioned—

• (i) in accordance with section 1172 of CTA 2010 (time basis), or

• (ii) if that method would produce a result that is unjust or unreasonable, on a just and reasonable basis.

25

In this Part of this Schedule “the commencement date” means 1 January 2017.

SCHEDULE 11

1

TCGA 1992 is amended in accordance with this Schedule.

2

In section 14B(1) (meaning of “non-resident CGT disposal”), in paragraph (a) after “disposal of a UK residential property interest” insert “ (within the meaning given by Schedule B1) ”.

3

Omit section 14C (which introduces Schedule B1 and is superseded by the section 4BB inserted by section 83 of this Act).

4

In Schedule B1 (disposals of UK residential property interests), in paragraph 1—

• (a) in sub-paragraph (4) for “6 April 2015” substitute “ the relevant date ”;

• (b) after that sub-paragraph insert—

(4A) In sub-paragraph (4) “the relevant date” means— (a) for the purpose of determining whether a disposal is a non-resident CGT disposal, 6 April 2015; (b) for any other purpose, 31 March 1982.

5

After Schedule B1 insert—

SCHEDULE BA1 (1) (1) For the purposes of this Act, the disposal by a person (“P”) of an interest in non-UK land (whether made before or after this Schedule comes into force) is a “disposal of a non-UK residential property interest” if the first or second condition is met. (2) The first condition is that— (a) the land has at any time in the relevant ownership period consisted of or included a dwelling, or (b) the interest in non-UK land subsists for the benefit of land that has at any time in the relevant ownership period consisted of or included a dwelling. (3) The second condition is that the interest in non-UK land subsists under a contract for an off-plan purchase. (4) In sub-paragraph (2) “relevant ownership period” means the period— (a) beginning with the day on which P acquired the interest in non-UK land or 31 March 1982 (whichever is later), and (b) ending with the day before the day on which the disposal occurs. (5) If the interest in non-UK land disposed of by P as mentioned in sub-paragraph (1) results from interests in non-UK land which P has acquired at different times (“the acquired interests”), P is regarded for the purposes of sub-paragraph (4)(a) as having acquired the interest when P first acquired any of the acquired in-terests. (6) In this paragraph— - “contract for an off-plan purchase” means a contract for the acquisition of land consisting of, or including, a building or part of a building that is to be constructed or adapted for use as a dwelling; - “dwelling” is to be read in accordance with paragraph 4. (7) Paragraphs 6 and 20 of Schedule 4ZZC contain further provision about interests under contracts for off-plan purchases. (2) (1) In this Schedule “interest in non-UK land” means— (a) an estate, interest, right or power in or over land outside the United Kingdom, or (b) the benefit of an obligation, restriction or condition affecting the value of any such estate, interest, right or power, other than an excluded interest. (2) The following are excluded interests— (a) any security interest; (b) a licence to use or occupy land. (3) In sub-paragraph (2) “security interest” means an interest or right held for the purpose of securing the payment of money or the performance of any other obligation. (4) The Treasury may by regulations— (a) provide that any other description of interest or right in relation to land outside the United Kingdom is an excluded interest; (b) exclude from sub-paragraph (2) such interests or rights as may be prescribed in the regulations. (5) Regulations under sub-paragraph (4) may make incidental, consequential, supplementary or transitional provision or savings. (3) (1) Sub-paragraph (2) applies where— (a) a person (“P”) grants at any time an option binding P to sell an interest in non-UK land, and (b) a disposal by P of that interest in non-UK land at that time would be a disposal of a non-UK residential property interest by virtue of paragraph 1. (2) The grant of the option is regarded for the purposes of this Schedule as the disposal of an interest in the land in question (if it would not be so regarded apart from this paragraph). (3) Nothing in this paragraph affects the operation of section 144 in relation to the grant of the option (or otherwise). (4) Subsection (6) of section 144 (interpretation of references to “sale” etc) applies for the purposes of this paragraph as it applies for the purposes of that section. (4) (1) Paragraph 4 of Schedule B1 (meaning of “dwelling”), read with paragraphs 6 to 10 of that Schedule, applies for the purposes of this Schedule as it applies for the purposes of Schedule B1, but as if— (a) in paragraph 4, sub-paragraphs (5) and (6) were omitted, (b) in paragraphs 6 and 8— (i) any reference to an interest in UK land were to an interest in non-UK land within the meaning of this Schedule, and (ii) any reference to paragraph 1(4) of that Schedule were a reference to paragraph 1(4) of this Schedule, and (c) in paragraphs 7 to 9 any reference to planning permission or development consent were to any permission or consent corresponding to planning permission or development consent within the meaning of that Schedule. (2) In paragraph 5 of Schedule B1 (power to amend), the reference to paragraph 4 includes paragraph 4 as applied by this paragraph. (3) The Treasury may by regulations under this sub-paragraph make provision changing or clarifying the cases where a building outside the United Kingdom counts as a dwelling for the purposes of this Schedule (and sub-paragraph (1) has effect subject to any such regulations). (4) Provision made under sub-paragraph (3) may include provision corresponding to paragraph 4(5) of Schedule B1. (5) In this Schedule “land” includes a building.

SCHEDULE 12

1

TCGA 1992 is amended in accordance with this Schedule.

2

In section 57A(3) (gains and losses on relevant high value disposals: interaction with other provisions)—

• (a) the words from “Part 4” to the end become paragraph (a), and

• (b) after that paragraph insert

or, (b) Part 3 of Schedule 4ZZC applies (other disposals of residential property interests which are or involve relevant high value disposals).

3

After section 57B insert—

(57C) Schedule 4ZZC makes provision about the computation of— (a) residential property gains or losses, and (b) other gains or losses, on disposals of residential property interests which are not non-resident CGT disposals.

4

In Schedule B1 (disposals of UK residential property interests), in paragraph 1(7) after “Schedule 4ZZB” insert “ and paragraphs 6 and 20 of Schedule 4ZZC ”.

5

After Schedule 4ZZB insert—

SCHEDULE 4ZZC (1) (1) In this Schedule “RPI disposal” means a disposal of a residential property interest which is not a non-resident CGT disposal. (2) This Schedule applies for the purpose of determining, in relation to an RPI disposal— (a) whether a residential property gain or loss accrues on the disposal, and the amount of any such gain or loss, and (b) whether a gain or loss other than a residential property gain or loss accrues on the disposal, and the amount of any such gain or loss. (3) In this Schedule— (a) Part 2 contains the main rules for computing the gains and losses; (b) Part 3 contains the rules for computing the gains and losses in a case where the RPI disposal is, or involves, a relevant high value disposal (as defined in section 2C). (2) (1) For the purposes of this Schedule, a relevant high value disposal is “comprised in” an RPI disposal if— (a) the RPI disposal is treated for the purposes of section 2C and Schedule 4ZZA as two or more disposals, and (b) the relevant high value disposal is one of those. (2) In this Schedule— - “chargeable interest” has the same meaning as in Part 3 of the Finance Act 2013 (annual tax on enveloped dwellings) (see section 107 of that Act); - “dwelling” has the meaning given by — 1. paragraph 4 of Schedule B1, in relation to a disposal of a UK residential property interest; 2. paragraph 4 of Schedule BA1, in relation to a disposal of a non-UK residential property interest; - “subject-matter”, in relation to an interest in land (or a chargeable interest) means the land to which the interest relates. (3) (1) This Part of this Schedule applies where a person (“P”) makes an RPI disposal of (or of part of) an interest in land. (2) But this Part of this Schedule does not apply if the disposal is— (a) a relevant high value disposal, or (b) a disposal in which a relevant high value disposal is comprised. (3) In this Part of this Schedule “the disposed of interest” means— (a) the interest in land, or (b) if the disposal is of part of that interest, the part disposed of. (4) (1) The residential property gain or loss accruing on the disposal is computed as follows. - Step 1 Determine the amount of the gain or loss that accrues to P. - Step 2 The residential property gain or loss accruing on the disposal is an amount equal to the relevant fraction of that gain or loss (but see Step 3). - Step 3 If there has been mixed use of the subject matter of the disposed of interest on one or more days in the relevant ownership period, the residential property gain or loss accruing on the disposal is equal to the appropriate fraction of the amount given by Step 2. (2) In Step 2 “the relevant fraction” means— $$RD TD$where—“RD” is the number of days in the relevant ownership period on which the subject matter of the disposed of interest consists wholly or partly of a dwelling;“TD” is the total number of days in the relevant ownership period.$ (3) For the purposes of Step 3 there is “mixed use” of land on any day on which the land consists partly, but not exclusively, of one or more dwellings. (4) In Step 3 “the appropriate fraction” means the fraction that is, on a just and reasonable apportionment, attributable to the dwelling or dwellings. (5) In this paragraph the “relevant ownership period” means the period— (a) beginning with the day on which P acquired the disposed of interest or, if later, 31 March 1982, and (b) ending with the day before the day on which the disposal occurs. (5) The gain or loss accruing on the disposal which is not a residential property gain or loss is computed as follows. - Step 1 In a case where there is a gain under Step 1 of paragraph 4(1), determine the amount of that gain remaining after the deduction of the residential property gain determined under that paragraph.That remaining gain is the gain accruing on the disposal which is not a residential property gain. - Step 2 In a case where there is a loss under Step 1 of paragraph 4(1), determine the amount of that loss remaining after the deduction of the residential property loss determined under that paragraph.That remaining loss is the loss accruing on the disposal which is not a residential property loss. (6) (1) This paragraph applies where the disposal referred to in paragraph 3(1) is a disposal of a residential property interest only because of— (a) the second condition in paragraph 1 of Schedule B1, or (b) the second condition in paragraph 1 of Schedule BA1, (interest subsisting under a contract for the acquisition of land that consists of, or includes, a building that is to be constructed for use as a dwelling). (2) The land that is the subject of the contract concerned is treated for the purposes of this Part of this Schedule as consisting of (or, as the case requires, including) a dwelling throughout P's period of ownership of the disposed of interest. (7) (1) This Part of this Schedule applies where— (a) a person (other than an excluded person) (“P”) makes an RPI disposal of (or of part of) an interest in land, and (b) that disposal (“the disposal of land”) is a relevant high value disposal or a relevant high value disposal is comprised in it. (2) “Excluded person” has the meaning given by section 2B(2). (8) (1) This paragraph applies for the interpretation of this Part of this Schedule. (2) “The asset”, in relation to a relevant high value disposal, means the chargeable interest which (or a part of which) is the subject of that disposal. (3) “The disposed of interest”, in relation to a relevant high value disposal, means the asset or, if only part of the asset is the subject of the relevant high value disposal, that part of the asset. (4) A day is a “residential property chargeable day” in relation to a relevant high value disposal if— (a) it is a day on which the subject matter of the disposed of interest consists wholly or partly of a dwelling, but (b) it is not an ATED chargeable day (as defined in paragraph 3 of Schedule 4ZZA). (9) (1) The residential property gain or loss accruing on the disposal of land is computed as follows. - Step 1 Determine in accordance with paragraphs 10 to 15 the amount of the residential property gain or loss accruing on each relevant high value disposal. - Step 2 Add together the amounts of any gains or losses determined under Step 1 (treating any amount which is a loss as a negative amount). (2) If the result is a positive amount, that amount is the residential property gain on the disposal of land. (3) If the result is a negative amount, that amount (expressed as a positive number) is the residential property loss on the disposal of land. (10) (1) This paragraph applies to a relevant high value disposal where— (a) the disposal does not fall within any of Cases 1, 2 or 3 in paragraph 2 of Schedule 4ZZA, or (b) P has made an election under paragraph 5 of that Schedule in respect of the asset. (2) The residential property gain or loss accruing on the relevant high value disposal is computed as follows— - Step 1 Determine the amount of gain or loss which accrues to P. (For the purpose of determining the amount of that gain or loss, no account is taken of section 57C or this Schedule.) - Step 2 The residential property gain or loss accruing on the relevant high value disposal is equal to the special fraction of that gain or loss. (3) The “special fraction” is— $$SD TD$where—“SD” is the number of residential property chargeable days in the relevant ownership period;“TD” is the total number of days in the relevant ownership period.$ (4) “Relevant ownership period” means the period— (a) beginning with the day on which P acquired the disposed of interest or, if later, 31 March 1982, and (b) ending with the day before the day on which the relevant high value disposal occurs. (11) (1) This paragraph applies to a relevant high value disposal where— (a) the disposal falls within Case 1, 2 or 3 in paragraph 2 of Schedule 4ZZA, and (b) P has not made an election under paragraph 5 of that Schedule in respect of the asset. (2) The residential property gain or loss accruing on the relevant high value disposal is computed in accordance with paragraphs 12 to 15. (3) In those paragraphs “the relevant year” means— (a) where the relevant high value disposal falls within Case 1 in paragraph 2 of Schedule 4ZZA, 2013, (b) where it falls within Case 2 in that paragraph, 2015, and (c) where it falls within Case 3 in that paragraph, 2016. (12) (1) Take the following steps— - Step 1 Determine the amount equal to the special fraction of the notional pre-ATED gain or loss (as the case may be) (see paragraph 13). - Step 2 Determine the amount equal to the special fraction of the notional post-ATED gain or loss (as the case may be) (see paragraph 14). - Step 3 Add (treating any amount which is a loss as a negative amount)— 1. the amount of any gain or loss determined under Step 1, and 2. the amount of any gain or loss determined under Step 2. (2) If the result is a positive amount, that amount is the residential property gain on the relevant high value disposal. (3) If the result is a negative amount, that amount (expressed as a positive number) is the residential property loss on the relevant high value disposal. (13) (1) This paragraph applies for the purposes of Step 1 in paragraph 12. (2) “Notional pre-ATED gain or loss” means the gain or loss which would have accrued on 5 April of the relevant year had the disposed of interest been disposed of for a consideration equal to the market value of the interest on that date. (3) The “special fraction” is— $$SD TD$where—“SD” is the number of residential property chargeable days in the relevant ownership period;“TD” is the total number of days in the relevant ownership period.$ (4) The “relevant ownership period” is the period— (a) beginning with the day on which P acquired the disposed of interest or, if later, 31 March 1982, and (b) ending with 5 April of the relevant year. (14) (1) This paragraph applies for the purposes of Step 2 in paragraph 12. (2) “Notional post-ATED gain or loss” means the gain or loss which would have accrued on the relevant high value disposal had P acquired the disposed of interest on 5 April of the relevant year for a consideration equal to its market value on that date (and see paragraph 15). (3) The “special fraction” is— $$SD TD$where—“SD” is the number of residential property chargeable days in the relevant ownership period;“TD” is the total number of days in the relevant ownership period.$ (4) The “relevant ownership period” is the period beginning with 6 April of the relevant year and ending with the day before the day on which the relevant high value disposal occurs. (15) (1) This paragraph applies for the purposes of computing the notional post-ATED gain or loss for the purposes of Step 2 in paragraph 12. (2) In determining whether the asset which is the subject of the relevant high value disposal is a wasting asset (as defined for the purposes of Chapter 2 of Part 2), ignore the assumption that the asset was acquired on 5 April of the relevant year. (3) Sections 41 (restriction of losses by reference to capital allowances and renewals allowances) and 47 (wasting assets subject to capital allowances) apply in relation to any capital allowance or renewals allowance made in respect of the expenditure actually incurred by P in acquiring or providing the asset as if that allowance were made in respect of the expenditure treated as incurred by P on 5 April of the relevant year. (16) (1) The gain or loss on the disposal of land which is neither ATED-related nor a residential property gain or loss (“the balancing gain or loss”) is computed as follows. - Step 1 Determine in accordance with paragraphs 17 and 18 the amount of the gain or loss accruing on each relevant high value disposal which is neither ATED-related nor a residential property gain or loss.This is the “balancing” gain or loss for each disposal. - Step 2 Add together the amounts of any balancing gains or losses determined under Step 1 (treating any amount which is a loss as a negative amount). (2) If the result is a positive amount, that amount is the balancing gain on the disposal of land. (3) If the result is a negative amount, that amount (expressed as a positive number) is the balancing loss on the disposal of land. (17) (1) In the case of a relevant high value disposal to which paragraph 10 applies, the amount of the balancing gain or loss is determined as follows. (2) Determine the number of balancing days in the relevant ownership period. (3) “Balancing day” means a day which is neither— (a) a residential property chargeable day, nor (b) an ATED chargeable day (as defined in paragraph 3 of Schedule 4ZZA). (4) The balancing gain or loss on the disposal is equal to the balancing fraction of the amount of the gain or (as the case may be) loss determined under Step 1 of paragraph 10(2). (5) The “balancing fraction” is— $$BD TD$where—“BD” is the number of balancing days in the relevant ownership period;“TD” is the total number of days in the relevant ownership period.$ (6) In this paragraph “relevant ownership period” has the same meaning as in paragraph 10. (18) (1) The amount of the balancing gain or loss on a relevant high value disposal to which paragraph 11 applies is found by adding— (a) the amount of the balancing gain or loss belonging to the notional pre-ATED gain or loss, and (b) the amount of the balancing gain or loss belonging to the notional post-ATED gain or loss, (treating any amount which is a loss as a negative amount). (2) If the result is a positive amount, that amount is the balancing gain on the relevant high value disposal. (3) If the result is a negative amount, that amount (expressed as a positive number) is the balancing loss on the relevant high value disposal. (4) The balancing gain or loss belonging to the notional pre-ATED gain or loss is equal to the balancing fraction of the notional pre-ATED gain or loss. (5) The balancing gain or loss belonging to the notional post-ATED gain or loss is equal to the balancing fraction of the notional post-ATED gain or loss. (6) The balancing fraction is— $$BD TD$where—“BD” is the number of balancing days in the appropriate ownership period;“TD” is the total number of days in the appropriate ownership period.$ (7) “Balancing day” means a day which is neither— (a) a residential property chargeable day, nor (b) an ATED chargeable day (as defined in paragraph 3 of Schedule 4ZZA). (8) The appropriate ownership period is— (a) for the purpose of computing the balancing gain or loss belonging to the notional pre-ATED gain or loss, the relevant ownership period mentioned in paragraph 13(4); (b) for the purpose of computing the balancing gain or loss belonging to the notional post-ATED gain or loss, the relevant ownership period mentioned in paragraph 14(4). (9) In this paragraph— - “notional pre-ATED gain or loss” means the same as in paragraph 13(2); - “notional post-ATED gain or loss” means the same as in paragraph 14(2). (19) (1) This paragraph applies where the disposals comprised in the disposal of land include a disposal (the “non-ATED related disposal”) which is not a relevant high value disposal. (2) This Part of this Schedule (apart from this paragraph) applies in relation to the non-ATED related disposal as if it were a relevant high value disposal. (3) Sub-paragraph (4) applies if there has, at any time in the relevant ownership period, been mixed use of the subject matter of the disposed of interest. (4) The amount of any residential property gain or loss on the non-ATED related disposal computed under this Part of this Schedule is taken to be the appropriate fraction of the amount that it would otherwise be. (5) In sub-paragraph (4) “the appropriate fraction” means the fraction that is, on a just and reasonable apportionment, attributable to the dwelling or dwellings. (6) In this paragraph the “relevant ownership period” means— (a) where paragraph 10 applies, the relevant ownership period as defined in paragraph 10(4), or (b) where paragraph 11 applies, the relevant ownership period as defined in paragraphs 13(4) and 14(4). (20) (1) This paragraph applies where the RPI disposal made by P is a disposal of a residential property interest only because of— (a) the second condition in paragraph 1 of Schedule B1, or (b) the second condition in paragraph 1 of Schedule BA1, (interest subsisting under a contract for the acquisition of land that consists of, or includes, a building that is to be constructed for use as a dwelling). (2) The land that is the subject of the contract concerned is treated for the purposes of this Part of this Schedule as consisting of (or, as the case requires, including) a dwelling throughout P's period of ownership of the interest in land.

SCHEDULE 13

1

TCGA 1992 is amended as follows.

2

In section 169H(7) (introduction), for “Section 169S contains” substitute “ Sections 169S and 169SA contain ”.

3

In section 169S (interpretation of Chapter), subsection (4A) is treated as never having had effect, and is omitted accordingly.

4

After section 169S insert—

(169SA) Schedule 7ZA gives the meaning in this Chapter of “trading company” and “trading group”.

5

After Schedule 7 insert—

SCHEDULE 7ZA (1) (1) This paragraph gives the meaning of “trading company” and “trading group” where used in the following provisions of Chapter 3 of Part 5 (entrepreneurs' relief)— (a) in section 169I (material disposal of business assets)— (i) paragraphs (a) and (b) of subsection (6) (which apply for the purposes of conditions A and B in that section), and (ii) sub-paragraphs (i) and (ii) of subsection (7A)(c) (which apply for the purposes of conditions C and D in that section), and (b) section 169J(4) (disposal of trust business assets). (2) “Trading company” and “trading group” have the same meaning as in section 165 (see section 165A), but as modified by Part 2 of this Schedule. (3) “Trading activities” (see section 165A(4) and (9)) is to be read in accordance with Part 3 of this Schedule. (2) In provisions of Chapter 3 of Part 5 not mentioned in paragraph 1(1), “trading company” and “trading group” have the same meaning as in section 165 (see section 165A), except that subsections (7) and (12) of section 165A are to be disregarded. (3) In relation to a disposal of assets consisting of (or of interests in) shares in or securities of a company (“company A”), activities of a joint venture company are to be attributed to a company under subsections (7) and (12) of section 165A only if P— (a) passes the shareholding test in relation to the joint venture company (see paragraphs 5 to 8), and (b) passes the voting rights test in relation to the joint venture company (see paragraphs 9 to 12). (4) (1) For the purposes of this Part, a company is an “investing company” in relation to P and a joint venture company if it meets conditions 1 and 2. (2) Condition 1 is that— (a) the company is company A (see paragraph 3), or (b) P directly owns some portion of the ordinary share capital of the company. (3) Condition 2 is that the company owns some portion of the ordinary share capital of the joint venture company (whether it is owned directly, indirectly, or partly directly and partly indirectly). (4) In sub-paragraph (3) the reference to a company owning share capital indirectly is to be read in accordance with section 1155 of CTA 2010. (5) P passes the shareholding test in relation to a joint venture company if, throughout the relevant period, the sum of the percentages given by paragraphs (a) and (b) is at least 5%— (a) the percentage of the ordinary share capital of the joint venture company that is owned directly by P, and (b) P's indirect shareholding percentage (see paragraph 6). (6) P's “indirect shareholding percentage” is found by— (a) calculating the percentage of the ordinary share capital of the joint venture company that is owned indirectly by P through a particular investing company (see paragraph 7), and (b) where there are two or more investing companies, adding those percentages together. (7) The percentage of the ordinary share capital of a joint venture company that is owned indirectly by P through a particular investing company (“company IC”) at a particular time is given by— $$R × S × 100$where—R is the fraction of company IC's ordinary share capital that is owned by P at that time, andS is the fraction of the joint venture company's ordinary share capital that is owned by company IC at that time (whether it is owned directly, indirectly, or partly directly and partly indirectly) (see paragraph 8).$ (8) (1) The fraction of the joint venture company's ordinary share capital that is owned indirectly by company IC is calculated— (a) by applying sections 1156 and 1157 of CTA 2010, as read with section 1155 of that Act, and (b) on the assumptions specified in sub-paragraph (2). (2) The assumptions are— (a) where company IC directly owns more than 50% of the ordinary share capital of a company, company IC is taken to own the whole of the ordinary share capital of that company; (b) where a company other than company IC (“company B”) directly owns more than 50% of the ordinary share capital of another company (“company C”) which is a member of a group of companies of which company IC is a member, company B is taken to own the whole of the ordinary share capital of company C. (9) P passes the voting rights test in relation to a joint venture company if, throughout the relevant period, the sum of the percentages given by paragraphs (a) and (b) is at least 5%— (a) the percentage of the voting rights that P holds directly in the joint venture company, and (b) P's indirect voting rights percentage (see paragraph 10). (10) P's “indirect voting rights percentage” is found by— (a) calculating the percentage of the voting rights in the joint venture company that P holds indirectly through a particular investing company (see paragraph 11), and (b) where there are two or more investing companies, adding those percentages together. (11) The percentage of the voting rights in a joint venture company that P holds indirectly through a particular investing company (“company IC”) at a particular time is given by— $$T × U × 100$where—T is the fraction of the voting rights in company IC that is held by P at that time, andU is the fraction of the voting rights in the joint venture company that is held by company IC at that time (whether the voting rights are held directly, indirectly, or partly directly and partly indirectly) (see paragraph 12).$ (12) (1) The fraction of the voting rights in the joint venture company that is held indirectly by company IC is calculated— (a) by applying sections 1156 and 1157 of CTA 2010, as read with section 1155 of that Act, as if references in those sections to owning the ordinary share capital of a company were references to holding voting rights in a company, and (b) on the assumptions specified in sub-paragraph (2). (2) The assumptions are— (a) where company IC directly holds more than 50% of the voting rights in a company, company IC is taken to hold all the voting rights in that company; (b) where a company other than company IC (“company B”) directly holds more than 50% of the voting rights in another company (“company C”) which is a member of a group of companies of which company IC is a member, company B is taken to hold all the voting rights in company C. (13) (1) In relation to a disposal of assets consisting of (or of interests in) shares in or securities of a company (“company A”), activities carried on by a company as a member of a partnership are to be treated as not being trading activities of the company (see section 165A(4) and (9)) if P fails either or both of the following— (a) the profits and assets test in relation to the partnership (see paragraphs 15 to 20); (b) the voting rights test in relation to the partnership (see paragraphs 21 to 23). (2) In relation to such a disposal, activities carried on by a company as a member of a partnership are also to be treated as not being trading activities of the company if the company is not a member of the partnership throughout the relevant period. (14) (1) This paragraph applies for the purposes of this Part. (2) A company is a “direct interest company” in relation to P if— (a) it is company A (see paragraph 13(1)), or (b) P directly owns some portion of the ordinary share capital of the company. (3) A company is a “relevant corporate partner” in relation to P and a partnership if— (a) a direct interest company in relation to P (“company DIC”) owns some portion of the ordinary share capital of the company (whether it is owned directly, indirectly or partly directly and partly indirectly), (b) the company is a member of a group of companies of which company DIC is a member, and (c) the company is a member of the partnership. (4) In sub-paragraph (3) the reference to a company owning share capital indirectly is to be read in accordance with section 1155 of CTA 2010. (15) P passes the profits and assets test in relation to a partnership if, throughout the relevant period, the sum of the percentages given by paragraphs (a), (b) and (c) is at least 5%— (a) the percentage which is P's direct interest in the assets of the partnership, (b) the percentage which is P's share of the partnership through direct interest companies that are members of the partnership (see paragraph 16), and (c) the percentage which is P's share of the partnership through direct interest companies and relevant corporate partners in the partnership (see paragraph 18). (16) P's “share of the partnership through direct interest companies that are members of the partnership” is found by— (a) calculating the percentage which is P's indirect share of the partnership through each direct interest company that is a member of the partnership (see paragraph 17), and (b) where there are two or more direct interest companies that are members of the partnership, adding those percentages together. (17) The percentage which is P's indirect share of the partnership through a particular direct interest company that is a member of the partnership (“company DICP”) at a particular time is given by— $$R × V × 100$where—R is the fraction of company DICP's ordinary share capital that is owned by P at that time, andV is the lower of—the fraction of the profits of the partnership in which company DICP has an interest at that time, andthe fraction of the assets of the partnership in which company DICP has an interest at that time.$ (18) P's “share of the partnership through direct interest companies and relevant corporate partners in the partnership” is found by— (a) calculating the percentage which is P's indirect share of the partnership through each direct interest company and each relevant corporate partner in the partnership (see paragraph 19), and (b) where there are two or more direct interest companies or two or more relevant corporate partners, or both, adding those percentages together. (19) The percentage which is P's indirect share of the partnership through a particular direct interest company (“company DIC”) and a particular relevant corporate partner in the partnership (“company CP”) at a particular time is given by— $$R × V × W × 100$where—R is the fraction of company DIC's ordinary share capital that is owned by P at that time,V is the lower of—the fraction of the profits of the partnership in which company CP has an interest at that time, andthe fraction of the assets of the partnership in which company CP has an interest at that time, andW is the fraction of company CP's ordinary share capital that is owned by company DIC at that time (whether it is owned directly, indirectly, or partly directly and partly indirectly) (see paragraph 20).$ (20) (1) The fraction of a company's ordinary share capital that is owned indirectly by company DIC is calculated— (a) by applying sections 1156 and 1157 of CTA 2010, as read with section 1155 of that Act, and (b) on the assumptions specified in sub-paragraph (2). (2) The assumptions are— (a) where company DIC directly owns more than 50% of the ordinary share capital of a company, company DIC is taken to own the whole of the ordinary share capital of that company; (b) where a company other than company DIC (“company B”) directly owns more than 50% of the ordinary share capital of another company (“company C”) which is a member of a group of companies of which company DIC is a member, company B is taken to own the whole of the ordinary share capital of company C. (21) (1) P passes the voting rights test in relation to a partnership if, throughout the relevant period, the sum of P's direct voting rights percentage and P's indirect voting rights percentage is at least 5%. (2) P's “direct voting rights percentage” is found by— (a) taking the percentage of the voting rights that P holds directly in each direct interest company that is a member of the partnership, and (b) where P directly holds voting rights in two or more direct interest companies that are members of the partnership, adding those percentages together. (3) P's “indirect voting rights percentage” is found by— (a) calculating the percentage which is P's indirect holding of voting rights in each relevant corporate partner in the partnership through each direct interest company (see paragraph 22), and (b) where there are two or more relevant corporate partners or two or more direct interest companies, or both, adding those percentages together. (22) The percentage which is P's indirect holding of voting rights in a particular relevant corporate partner in the partnership (“company CP”) through a particular direct interest company (“company DIC”) at a particular time is given by— $$T × X × 100$where—T is the fraction of the voting rights in company DIC that is held by P at that time, andX is the fraction of the voting rights in company CP that is held by company DIC at that time (whether the voting rights are held directly, indirectly, or partly directly and partly indirectly) (see paragraph 23).$ (23) (1) The fraction of the voting rights in a company that is held indirectly by company DIC is calculated— (a) by applying sections 1156 and 1157 of CTA 2010, as read with section 1155 of that Act, as if references in those sections to owning the ordinary share capital of a company were references to holding voting rights in a company, and (b) on the assumptions specified in sub-paragraph (2). (2) The assumptions are— (a) where company DIC directly holds more than 50% of the voting rights in a company, company DIC is taken to hold all the voting rights in that company; (b) where a company other than company DIC (“company B”) directly holds more than 50% of the voting rights in another company (“company C”) which is a member of a group of companies of which company DIC is a member, company B is taken to hold all the voting rights in company C. (24) (1) In the case of a material disposal of business assets, “P” means the individual making the disposal. (2) In the case of a disposal of trust business assets— (a) “P” means any relevant beneficiary, but (b) in any reference to P passing or failing the tests mentioned in paragraphs 3 and 13(1), P is to be read as being a single body consisting of all the relevant beneficiaries (so that, for the purposes of determining if those tests are met, percentages are to be calculated in respect of each relevant beneficiary and then aggregated). (3) The following are “relevant beneficiaries”— (a) the qualifying beneficiary in relation to the disposal (see section 169J(3)), and (b) any other beneficiary who is, in relation to the disposal, a beneficiary mentioned in section 169O(1). (25) “The relevant period” means— (a) for the purposes of conditions A and C in section 169I, the period of 1 year ending with the date of the disposal, (b) for the purposes of conditions B and D in section 169I, the period of 1 year ending with the date mentioned in subsection (7)(a) or (b) or (7O)(a) or (b) of that section, and (c) for the purposes of section 169J(4), a period of 1 year ending not earlier than 3 years before the date of the disposal. (26) (1) Terms used in this Schedule which are defined in subsection (14) of section 165A have the same meaning as they have in that subsection. (2) References to a person holding voting rights include references to a person who has the ability to control the exercise of voting rights by another person. (3) For the purposes of Part 3 of this Schedule, the assets of— (a) a Scottish partnership, or (b) a partnership under the law of any other country or territory under which assets of a partnership are regarded as held by or on behalf of the partnership as such, are to be treated as held by the members of the partnership in the proportions in which they are entitled to share in the capital profits of the partnership. References in Part 3 to a person's interest in the assets of a partnership are to be construed accordingly.

6

• (1) The amendments made by this Schedule (except paragraph 3) have effect in relation to disposals made on or after 18 March 2015, but only for the purposes of determining what is a trading company or trading group at times on or after that date.

• (2) In conditions B and D in section 169I of TCGA 1992 (material disposal of business assets)—

• (a) a reference to a company ceasing to be a trading company does not include a case where, as a result of the coming into force of the amendments made by this Schedule, a company which was a trading company immediately before 18 March 2015 is treated as ceasing on that day to be a trading company, and

• (b) a reference to a company ceasing to be a member of a trading group does not include a case where, as a result of the coming into force of the amendments made by this Schedule, a company which was a member of a trading group immediately before 18 March 2015 is treated as ceasing on that day to be a member of a trading group.

• (3) Sub-paragraph (2) is without prejudice to the operation of section 43(4) of FA 2015.

SCHEDULE 14

1

• (1) In the heading to Part 5 of TGCA 1992, after “ASSETS” insert “, ENTREPRENEURS' RELIEF AND INVESTORS' RELIEF”.

• (2) In the heading to Chapter 1 of that Part, before “GENERAL PROVISIONS” insert “ TRANSFER OF BUSINESS ASSETS: ”

2

In Part 5 of TCGA 1992, after section 169V insert—