Legalize / United Kingdom / Public General Act

Finance Act 2021

Type Public General Act

Publication 2021-06-10

Last updated 2025-05-31

State In force

Department Statute Law Database

Source legislation.gov.uk

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(18A) (1) Corporation tax is charged at the standard small profits rate on a company's taxable total profits of an accounting period which are not ring fence profits if— (a) the company is UK resident in the accounting period, (b) it is not a close investment-holding company in the period, and (c) its augmented profits of the accounting period do not exceed the lower limit. (2) In this Act “the standard small profits rate” means a rate that— (a) is lower than the main rate, and (b) is set by Parliament for the financial year as the standard small profits rate. (3) In this Part “ring fence profits” has the same meaning as in Part 8 (see section 276). (4) In the case of a company with ring fence profits, see section 279A(3) (small ring fence profits rate chargeable on ring fence profits). (18B) (1) This section applies if— (a) a company is UK resident in an accounting period, (b) it is not a close investment-holding company in the period, (c) its augmented profits of the accounting period exceed the lower limit but do not exceed the upper limit, and (d) its augmented profits of the accounting period do not include any ring fence profits. (2) The corporation tax charged on the company's taxable total profits of the accounting period is reduced by an amount equal to— $$F × ( U − A ) × N A$where—F is the standard marginal relief fraction,U is the upper limit,A is the amount of the augmented profits, andN is the amount of the taxable total profits.$ (3) In this Act “the standard marginal relief fraction” means the fraction set by Parliament for the financial year as the standard marginal relief fraction for the purposes of this Part. (18C) In the case of a company with ring fence profits— (a) see section 279B (if the company's augmented profits of an accounting period consist exclusively of ring fence profits), and (b) see section 279C (if the company's augmented profits of an accounting period consist of both ring fence profits and other profits). (18D) (1) This section gives the meaning in this Part of “the lower limit” and “the upper limit” in relation to an accounting period of a company (“C”). (2) If C has no associated company in the accounting period— (a) the lower limit is £50,000, and (b) the upper limit is £250,000. (3) If C has one or more associated companies in the accounting period— (a) the lower limit is— $£ 50,000 ( 1 + N )$ (b) the upper limit is— $$£ 250,000 ( 1 + N )$where N is the number of those associated companies.$ (4) For an accounting period of less than 12 months the lower limit and the upper limit are proportionately reduced. (18E) (1) For the purposes of section 18D, a company is another company's associated company in an accounting period if it is an associated company (see subsection (4)) for any part of the accounting period. (2) The rule in subsection (1) applies to each of two or more associated companies even if they are associated companies for different parts of the accounting period. (3) But an associated company is ignored for the purposes of section 18D if— (a) it has not carried on a trade or business at any time in the accounting period, or (b) it was an associated company for part only of the accounting period and has not carried on a trade or business at any time in that part of the accounting period. (4) For the purposes of this Part, a company is an associated company of another at any time when— (a) one of the two has control of the other, or (b) both are under the control of the same person or persons. (5) In subsection (4) “control” has the same meaning as in Part 10 (see sections 450 and 451). (6) In this section— (a) subsection (3) is subject to section 18F, and (b) subsections (4) and (5) are subject to sections 18G to 18J. (18F) (1) Subsection (2) applies if a company carries on a business of making investments in an accounting period and throughout the period the company— (a) carries on no trade, (b) has one or more 51% subsidiaries, and (c) is a passive company. (2) The company is treated for the purposes of section 18E(3) as not carrying on a business at any time in the accounting period. (3) A company is a passive company throughout an accounting period only if the following requirements are met— (a) it has no assets in that period, other than shares in companies which are its 51% subsidiaries, (b) no income arises to it in that period other than dividends, (c) if income arises to it in that period in the form of dividends— (i) the redistribution condition is met (see subsection (4)), and (ii) the dividends are exempt distributions of a qualifying kind received by it (see subsection (5)), (d) no chargeable gains accrue to it in that period, (e) no expenses of management of the business mentioned in subsection (1) are referable to that period, and (f) no qualifying charitable donations are deductible from the company's total profits of that period. (4) The redistribution condition is that— (a) the company pays dividends to one or more of its shareholders in the accounting period, and (b) the total amount paid in the form of those dividends is at least equal to the amount of the income arising to the company in the form of dividends in that period. (5) For the purposes of this section a distribution is an “exempt distribution of a qualifying kind” if— (a) it is a distribution for the purposes of the Corporation Tax Acts because (and only because) it falls within paragraph A, B, G or H in section 1000(1), and (b) it is exempt for the purposes of Part 9A of CTA 2009 (company distributions). (6) If income arises to a company in an accounting period in the form of a dividend and the requirement in subsection (3)(c) is met in respect of the income— (a) neither the dividend nor any asset representing it is treated as an asset of the company in that accounting period for the purposes of subsection (3)(a), and (b) no right of the company to receive the dividend is treated as an asset of the company for the purposes of subsection (3)(a) in that period or any earlier accounting period. (18G) (1) This section applies if— (a) it is necessary to determine in accordance with section 18E(4) and (5) whether a company is an associated company of another company, and (b) the relationship between the two companies is not one of substantial commercial interdependence. (2) In the application of section 451 (meaning of “control”: rights to be attributed) for the purposes of the determination, any person to whom rights and duties fall to be attributed under subsections (4) and (5) of that section is to be treated, for the purposes of those subsections, as having no associates. (3) The Treasury may by regulations prescribe factors that are to be taken into account in determining whether a relationship between two companies amounts to substantial commercial interdependence for the purposes of this section. (18H) (1) In determining for the purposes of section 18E(4) whether a company is under the control of another, fixed-rate preference shares held by a company are ignored if the company holding them— (a) is not a close company, (b) takes no part in the management or conduct of the company which issued the shares, or in the management or conduct of its business, and (c) subscribed for the shares in the ordinary course of a business which includes the provision of finance. (2) In this section “fixed-rate preference shares” means shares which— (a) were issued wholly for new consideration, (b) do not carry any right either to conversion into shares or securities of any other description or to the acquisition of any additional shares or securities, and (c) do not carry any right to dividends other than dividends which— (i) are of a fixed amount or at a fixed rate per cent of the nominal value of the shares, and (ii) together with any sum paid on redemption, represent no more than a reasonable commercial return on the consideration for which the shares were issued. (3) In subsection (2)(a) “new consideration” has the meaning given by section 1115. (18I) (1) A company (“A”) is not under the control of another company (“B”) for the purposes of section 18E(4) if— (a) B is a loan creditor of A, (b) there is no other connection between A and B, and (c) either— (i) B is not a close company, or (ii) B's relationship to A as a loan creditor arose in the ordinary course of a business which B carries on. (2) Subsection (3) applies if— (a) two companies (“A” and “B”) are controlled by the same person who is a loan creditor of each of them, (b) there is no other connection between A and B, and (c) either— (i) the loan creditor is a company which is not a close company, or (ii) the loan creditor's relationship to each of A and B as a loan creditor arose in the ordinary course of a business which the loan creditor carries on. (3) In determining for the purposes of this Part whether A and B are associated with each other, rights which the loan creditor has as a loan creditor of A, or as a loan creditor of B, are ignored. (4) In subsection (2)(a) “control” has the same meaning as in section 18E(4). (5) In this section— (a) “connection” includes a connection in the past as well as a connection in the present, and (b) references to a connection between two companies include any dealings between them. (6) In this section references to a loan creditor of a company are to be read in accordance with section 453. (18J) (1) Subsection (2) applies if— (a) two companies (“A” and “B”) are controlled by the same person by virtue of rights or powers (or both) held in trust by that person, and (b) there is no other connection between A and B. (2) In determining for the purposes of this Part whether A and B are associated with each other, the rights and powers mentioned in subsection (1)(a) are ignored. (3) In subsection (1)— (a) “control” has the same meaning as in section 18E(4), (b) “connection” includes a connection in the past as well as a connection in the present, and (c) the reference to a connection between A and B includes any dealings between them. (18K) (1) This section applies if a company (“the issuing company”) appears to an officer of Revenue and Customs to be a close company. (2) The officer may, for the purposes of this Part, by notice require the issuing company to provide the officer with— (a) particulars of any bearer securities issued by the company, (b) the names and addresses of the persons to whom the securities were issued, and (c) details of the amounts issued to each person. (3) The officer may, for the purposes of this Part, by notice require— (a) any person to whom bearer securities were issued by the company, or (b) any person to or through whom bearer securities issued by the company were subsequently sold or transferred, to provide any further information that the officer reasonably requires with a view to enabling the officer to find out the names and addresses of the persons beneficially interested in the securities. (4) In this section— - “loan creditor” has the meaning given by section 453, and - “securities” includes— 1. shares, stocks, bonds, debentures and debenture stock, and 2. any promissory note or other instrument evidencing indebtedness to a loan creditor of the company. (18L) (1) For the purposes of this Part a company's “augmented profits” of an accounting period are— (a) the company's taxable total profits of that period, plus (b) any exempt distributions of a qualifying kind received by the company (“R”) that are not excluded. (2) For the purposes of this section a distribution is an “exempt distribution of a qualifying kind” if— (a) it is a distribution for the purposes of the Corporation Tax Acts because (and only because) it falls within paragraph A, B, G or H in section 1000(1), and (b) it is exempt for the purposes of Part 9A of CTA 2009 (company distributions). (3) For the purposes of this section a distribution which R receives from a company (“C”) is excluded if— (a) C is a 51% subsidiary of R or of a company of which R is a 51% subsidiary, or (b) C is a trading company or relevant holding company that is a quasi-subsidiary of R. (4) Section 18M— (a) makes further provision for determining whether a company is a 51% subsidiary of another for the purposes of subsection (3), and (b) defines expressions used in that subsection. (18M) (1) This section applies for the purposes of section 18L(3). (2) In addition to meeting the requirements of section 1154(2), a company (“A”) is a 51% subsidiary of another company (“B”) only at times when— (a) B would be beneficially entitled to more than 50% of any profits available for distribution to equity holders of A, and (b) B would be beneficially entitled to more than 50% of any assets of A available for distribution to its equity holders on a winding up. (3) In determining whether or not a company is a 51% subsidiary of another company (“C”), C is treated as not owning share capital if— (a) it owns the share capital indirectly, (b) the share capital is owned directly by a company (“D”), and (c) a profit on the sale of the shares would be a trading receipt for D. (4) A company is a “trading company” if its business consists wholly or mainly of carrying on one or more trades. (5) A company is a “relevant holding company” if its business consists wholly or mainly of holding shares in or securities of trading companies (as defined by subsection (4)) that are its 90% subsidiaries. (6) A company is a “quasi-subsidiary” of R if— (a) it is owned by a consortium of which R is a member, (b) it is not a 75% subsidiary of any company, and (c) no arrangements of any kind (whether in writing or not) exist as a result of which it could become a 75% subsidiary of any company. (7) A company is owned by a consortium if at least 75% of the company's ordinary share capital is beneficially owned by two or more companies each of which— (a) beneficially owns at least 5% of that capital, (b) would be beneficially entitled to at least 5% of any profits available for distribution to equity holders of the company, and (c) would be beneficially entitled to at least 5% of any asset of the company available for distribution to its equity holders on a winding up. (8) The companies meeting those conditions are called the members of the consortium. (9) Chapter 6 of Part 5 (equity holders and profits or assets available for distribution) applies for the purposes of this section as it applies for the purposes of section 151(4)(a) and (b). (18N) (1) For the purposes of this Part, a close company (“the candidate company”) is a close investment-holding company in an accounting period unless throughout the period it exists wholly or mainly for one or more of the permitted purposes set out in subsection (2). There is an exception to this rule in subsection (5). (2) The candidate company exists for a permitted purpose so far as it exists— (a) for the purpose of carrying on a trade or trades on a commercial basis, (b) for the purpose of making investments in land, or estates or interests in land, in cases where the land is, or is intended to be, let commercially (see subsection (3)), (c) for the purpose of holding shares in and securities of, or making loans to, one or more companies each of which— (i) is a qualifying company, or (ii) falls within subsection (4), (d) for the purpose of co-ordinating the administration of two or more qualifying companies, (e) for the purpose of the making of investments as mentioned in paragraph (b)— (i) by one or more qualifying companies, or (ii) by a company which has control of the candidate company, or (f) for the purpose of a trade or trades carried on on a commercial basis— (i) by one or more qualifying companies, or (ii) by a company which has control of the candidate company. (3) For the purposes of subsection (2)(b), any letting of land is taken to be commercial unless the land is let to— (a) a person connected with the candidate company (“a connected person”), or (b) a person who is— (i) the spouse or civil partner of a connected person, (ii) a relative of a connected person, or the spouse or civil partner of a relative of a connected person, (iii) a relative of the spouse or civil partner of a connected person, or (iv) the spouse or civil partner of a relative of the spouse or civil partner of the connected person. (4) A company falls within this subsection (see subsection (2)(c)(ii)) if— (a) it is under the control of the candidate company or of a company which has control of the candidate company, and (b) it exists wholly or mainly for the purpose of holding shares in or securities of, or of making loans to, one or more qualifying companies. (5) If a company is wound up and was not a close investment-holding company in the accounting period that ends (by virtue of section 12(2) of CTA 2009) immediately before the winding up starts, the company is not treated for the purposes of this Part as being a close investment-holding company in the subsequent accounting period. (6) In this section “qualifying company” means a company which— (a) is under the control of the candidate company or of a company which has control of the candidate company, and (b) exists wholly or mainly for either or both of the purposes mentioned in subsection (2)(a) or (b). (7) In this section— - “control” has the meaning given by section 450, and - “relative” means brother, sister, ancestor or lineal descendant.

PART 2 — Amendments of Chapter 3A of Part 8 of CTA 2010

4

Chapter 3A of Part 8 of CTA 2010 (rates at which corporation tax is charged on ring fence profits) is amended as follows.

5

In section 279A (corporation tax rates on ring fence profits), in subsection (3), after paragraph (a) but before the “and” at the end of that paragraph insert—

(ab) it is not a close investment-holding company in the period,

6

In section 279B (company with only ring fence profits)—

(a) in subsection (1), after paragraph (a) insert—

(ab) it is not a close investment-holding company in the period,

(b) in subsection (2), in the definition of “R”, for “marginal” substitute “ ring fence marginal ”, and

7

(1) Section 279C (company with ring fence profits and other profits) is amended as follows.

(2) In subsection (1), after paragraph (a) insert—

(ab) it is not a close investment-holding company in the period,

(3) For subsection (2) substitute—

(2) The corporation tax charged on the company's taxable total profits of the accounting period is reduced by the total of— (a) the sum equal to the ring fence marginal relief fraction of the ring fence amount, and (b) the sum equal to the standard marginal relief fraction of the remaining amount.

8

After section 279D insert—

(279DA) (1) In section 279C “the remaining amount” means the amount given by the formula— $( UZ − AZ ) × NZ AZ$ (2) In this section— - UZ is the amount given by multiplying the upper limit by—$A Z A$ - AZ is the total amount of any profits other than ring fence profits that form part of the augmented profits of the accounting period, - NZ is the total amount of any profits other than ring fence profits that form part of the taxable total profits of the accounting period, and - A is the amount of the augmented profits of the accounting period.

9

(1) Section 279E (the lower limit and the upper limit) is amended as follows.

(2) In subsection (2)—

(a) in the opening words, for “If no company is a related 51% group company of A” substitute “ If A has no associated company ”,

(b) in paragraph (a), for “£300,000” substitute “ £50,000 ”, and

(3) In subsection (3)—

(a) in the opening words, for “If one or more companies are related 51% group companies of A” substitute “ If A has one or more associated companies ”,

(b) in paragraph (a), for “£300,000” substitute “ £50,000 ”, and

10

After section 279E insert—

(279EA) (1) The rules in Part 3A (see sections 18E to 18J) which apply for determining whether a company is another company's associated company in an accounting period for the purposes of section 18D apply for the purposes of section 279E. (2) Section 18K (power to obtain information) applies for the purposes of this Part as it applies for the purposes of Part 3A. (3) For the purposes of this Chapter— - “augmented profits” has the same meaning as in Part 3A (see sections 18L and 18M), and - “close investment-holding company” has the same meaning as in that Part (see section 18N).

11

Omit sections 279F to 279H (meaning of “related 51% group company” etc).

PART 3 — Consequential amendments

FA 1998

12

In Schedule 18 to FA 1998 (company tax returns, assessments and related matters), in paragraph 8(1) (calculation of tax payable), in the second step, for “Chapter 3A of Part 8 of the Corporation Tax Act 2010 (marginal relief for companies with small ring fence profits etc)” substitute “ Part 3A or Chapter 3A of Part 8 of the Corporation Tax Act 2010 (marginal relief for companies with small profits) ”.

Corporation Tax (Instalment Payments) Regulations 1998

13

(1) The Corporation Tax (Instalment Payments) Regulations 1998 (interpretation) are amended as follows.

(2) In regulation 2 (interpretation)—

(a) in paragraph (1), omit the entry for “related 51% group company”,

(b) in paragraph (2), for “section 279G” substitute “ sections 18L and 18M ”, and

(2A) The rules in Part 3A of CTA 2010 (see sections 18E to 18J) which apply for determining whether a company is another company's associated company in an accounting period for the purposes of section 18D of that Act apply for the purposes of these Regulations.

(3) In regulations 3 and 3A (large and very large companies), for “related 51% group” (in each place) substitute “ associated ”.

FA 2000

14

In Schedule 22 to FA 2000 (tonnage tax), in paragraph 57(6)(a) (exclusion of relief or set-off against tax liability), for “Chapter 3A of Part 8 of CTA 2010 (marginal relief for companies with small ring fence profits)” substitute “ Part 3A or Chapter 3A of Part 8 of the Corporation Tax Act 2010 (marginal relief for companies with small profits) ”.

CAA 2001

15

CAA 2001 is amended as follows.

16

(1) Section 99 (long-life assets: the monetary limit) is amended as follows.

(2) In subsection (4)—

(a) for “In the case of a company (“C”), if, in a chargeable period, one or more companies are related 51% group companies of C” substitute “ If, in a chargeable period, a company has one or more associated companies ”, and

(b) in the definition of “N”, for “number of related 51% group” substitute “ number of associated ”.

(3) After that subsection insert—

(4A) The rules in Part 3A of CTA 2010 (see sections 18E to 18J) which apply for determining whether a company is another company's associated company in an accounting period for the purposes of section 18D of that Act apply for the purposes of subsection (4).

17

In Part 2 of Schedule 1 (defined expressions), omit the entry for “related 51% group company”.

CTA 2010

18

CTA 2010 is amended as follows.

19

In section 1(2) (overview of Act)—

(a) for “Parts 4” substitute “ Parts 3A ”, and

(b) before paragraph (b) insert—

(a) relief for companies with small profits (other than ring-fence profits) (see Part 3A),

20

(1) Section 357BN (profits arising from the exploitation of patents etc: small claims treatment) is amended as follows.

(2) In subsection (7)—

(a) in paragraph (a), for “no company is a related 51% group company of the company” substitute “ the company has no associated company ”,

(b) in paragraph (b), for “one or more companies are related 51% group companies of the company” substitute “ the company has one or more associated companies ”, and

(3) After subsection (8) insert—

(9) The rules in Part 3A (see sections 18E to 18J) which apply for determining whether a company is another company's associated company in an accounting period for the purposes of section 18D apply for the purposes of this section.

21

(1) Section 357BNB (profits arising from the exploitation of patents etc: small claims figure election) is amended as follows.

(2) In subsection (6), for “no company is a related 51% group company of the company” substitute “ the company has no associated company ”.

(3) In subsection (7)—

(a) for “one or more companies are related 51% group companies of the company” substitute “ the company has one or more associated companies ”, and

(b) in the definition of “N”, for “those related 51% group” substitute “ those associated ”.

(4) After subsection (9) insert—

(10) The rules in Part 3A (see sections 18E to 18J) which apply for determining whether a company is another company's associated company in an accounting period for the purposes of section 18D apply for the purposes of this section.

22

In section 534 (REITs: profits), after subsection (2) insert—

(3) Profits which— (a) arise from the residual business of a UK company which is, or is a member of, a UK REIT, and (b) are charged to corporation tax, are to be charged at a rate determined without reference to sections 18A and 18B (companies with small profits).

23

In section 535 (REITs: gains), after subsection (5) insert—

(6) Gains which— (a) accrue to residual business of a company which is, or is a member of, a UK REIT, and (b) are charged to corporation tax, are to be charged at a rate determined without reference to sections 18A and 18B (companies with small profits).

24

In section 543 (REITs: financing-cost ratio), after subsection (4) insert—

(5) Accordingly, it is charged to corporation tax at the main rate of corporation tax.

25

In section 551 (REITs: distribution to holder of excessive rights), after subsection (5) insert—

(6) Accordingly, it is charged to corporation tax at the main rate of corporation tax.

26

In section 564 (REITs: breach of condition as to distribution of profits), after subsection (3) insert—

(4) Accordingly, it is charged to corporation tax at the main rate of corporation tax.

27

In section 614 (open-ended investment companies: applicable corporation tax rate), at the end insert “ (and sections 18A and 18B (relief for companies with small profits) do not apply) ”.

28

In section 618 (authorised unit trusts: applicable corporation tax rate), at the end insert “ (and sections 18A and 18B (relief for companies with small profits) do not apply) ”.

29

For section 627 substitute—

(627) (1) This section applies if corporation tax chargeable on any profits of a company for a financial year— (a) is to be charged at the main ring fence profits rate, (b) is to be charged at the standard small profits rate or the small ring profits rate, or (c) is to be reduced by reference to the standard marginal relief fraction or the ring fence marginal relief fraction (within the meaning of Part 3A or Chapter 3A of Part 8). (2) References in this Chapter to the main rate of corporation tax are to be taken, so far as relating to profits charged at any of the rates mentioned in subsection (1)(a) or (b), as references to the rate or rates concerned. (3) References in this Chapter to the main rate of corporation tax are, if corporation tax is reduced as mentioned in subsection (1)(c), to be taken as including references to the fraction or fractions concerned (and with references to a rate being “fixed” or “proposed” read accordingly as references to the fraction or fractions concerned being fixed or proposed).

30

In section 1119 (Corporation Tax Acts definitions), omit the definition of “related 51% group company”.

31

In Schedule 4 (index of defined expressions)—

(a) insert the following entries at the appropriate places—

close investment-holding company (in Part 3A or Chapter 3A of Part 8)	section 18N (including as applied by section 279EA)
the standard marginal relief fraction	section 18B
---	---
the standard small profits rate	section 18A
---	---

(b) in the entry for “augmented profits”—

(i) in the first column, before “Chapter 3A” insert “ Part 3A or ”, and

(ii) in the second column, for “section 279G” substitute “ sections 18L and 18M (including as applied by section 279EA) ”,

(i) in the first column, before “Chapter 3A” insert “ Part 3A or ”, and

(ii) in the second column, after “section” insert “ 18D or ”,

(d) in the entry for “the marginal relief fraction”, in the first column, for “marginal” substitute “ ring fence marginal ” (and, accordingly, move the entry to the appropriate place),

(e) omit the entry for “related 51% group company”,

(f) for the entries for “ring fence profits” (in Parts 3 and 8) substitute—

ring fence profits (in Part 3A or 8)	section 276 (including as applied by section 18A)

, and

(g) in the entry for “the upper limit”—

(i) in the first column, before “Chapter 3A” insert “ Part 3A or ”, and

(ii) in the second column, after “section” insert “ 18D or ”.

FA 2012

32

In section 102 of FA 2012 (policyholders' rate of tax on policyholders' share of I - E profit), at the end insert—

(5) The policyholders' share of the I - E profit for an insurance company's accounting period is to be left out of account in determining for the purposes of Part 3A of CTA 2010 (companies with small profits)— (a) the augmented profits of the company for the accounting period, and (b) the taxable total profits of the company for the accounting period.

PART 4 — Commencement etc

Commencement

33

The amendments made by paragraphs 13, 16, 17, 20 and 21 have effect in relation to accounting periods beginning on or after 1 April 2023.

34

(1) The other amendments made by this Schedule have effect for the financial year 2023 and subsequent financial years.

(2) In the case of an accounting period (a “straddling period”) beginning before 1 April 2023 and ending on or after date, those other amendments have effect as if the different parts of the straddling period falling in the different financial years were separate accounting periods.

(3) For this purpose all necessary apportionments are to be made between the two separate accounting periods.

Power to make further consequential amendments

35

(1) The Treasury may by regulations make such provision as they consider appropriate in consequence of the provision made by this Schedule.

(2) The regulations—

(a) may amend any provision of the Corporation Tax Acts or any other enactment, and

(b) may contain incidental, supplemental, consequential or transitional provision.

SCHEDULE 2

PART 1 — Income tax

Relief for trade losses made in tax year 2020-21

1

(1) A person who has made a loss in a trade in the tax year 2020-21 may make a claim for relief under this paragraph if—

(a) some or all of the loss (“the section 64 amount”) is an amount in respect of which the person is entitled to make a claim under section 64 of ITA 2007 (trade loss relief against general income) or would be so entitled were there sufficient income from which to deduct it, and

(b) condition A or B is met.

(2) Condition A is that the person makes a claim under section 64 of ITA 2007 for relief in respect of the section 64 amount for either or both of the tax years 2019-20 and 2020-21.

(3) Condition B is that the person's total income for the tax years 2019-20 and 2020-21—

(a) is nil, or

(b) does not include any income from which a deduction could be made in pursuance of a claim under section 64 of ITA 2007 in respect of the section 64 amount.

(4) The amount of the loss that may be relieved under this paragraph (“the deductible amount”) is—

(a) if condition A is met, so much of the section 64 amount as cannot be relieved pursuant to the claim under section 64 of ITA 2007;

(b) if condition B is met, the whole of the section 64 amount.

But see sub-paragraph (9) (limit on total deductions under this paragraph).

(5) A claim for relief under this paragraph is for the deductible amount to be deducted (in accordance with whichever is applicable of sub-paragraphs (7) and (8)) in calculating the person's net income for one or more of the tax years 2017-18, 2018-19 and 2019-20 at Step 2 of the calculation in section 23 of ITA 2007 (which applies as if this paragraph were a provision listed in section 24 of that Act).

(6) A deduction is to be made only from the profits of the trade (and accordingly subsection (2) of section 25 of ITA 2007 has effect as if this sub-paragraph were included in subsection (3) of that section).

(7) This sub-paragraph explains how the deductions are to be made in a case where the person makes a claim under section 64 of ITA 2007 for relief in respect of the section 64 amount for the tax year 2019-20.

Step 1 Deduct the deductible amount from the profits of the trade for the tax year 2018-19.

Step 2 Deduct from the profits of the trade for the tax year 2017-18 so much of the deductible amount as has not been deducted under Step 1.

(8) This sub-paragraph explains how the deductions are to be made in any other case.

Step 1 Deduct the deductible amount from the profits of the trade for the tax year 2019-20.

Step 2 Deduct from the profits of the trade for the tax year 2018-19 so much of the deductible amount as has not been deducted under Step 1.

Step 3 Deduct from the profits of the trade for the tax year 2017-18 so much of the deductible amount as has not been deducted under Step 1 or 2.

(9) The total amount that may be deducted in accordance with sub-paragraph (7), or in accordance with Steps 2 and 3 in sub-paragraph (8), is limited to £2,000,000.

(10) A claim for relief under this paragraph must be made on or before the first anniversary of the normal self-assessment filing date for the tax year 2020-21.

Relief for trade losses made in tax year 2021-22

2

(1) A person who has made a loss in a trade in the tax year 2021-22 may make a claim for relief under this paragraph if—

(a) some or all of the loss (“the section 64 amount”) is an amount in respect of which the person is entitled to make a claim under section 64 of ITA 2007 (trade loss relief against general income) or would be so entitled were there sufficient income from which to deduct it, and

(b) condition A or B is met.

(2) Condition A is that the person makes a claim under section 64 of ITA 2007 for relief in respect of the section 64 amount for either or both of the tax years 2020-21 and 2021-22.

(3) Condition B is that the person's total income for the tax years 2020-21 and 2021-22—

(a) is nil, or

(b) does not include any income from which a deduction could be made in pursuance of a claim under section 64 of ITA 2007 in respect of the section 64 amount.

(4) The amount of the loss that may be relieved under this paragraph (“the deductible amount”) is—

(a) if condition A is met, so much of the section 64 amount as cannot be relieved pursuant to the claim under section 64 of ITA 2007;

(b) if condition B is met, the whole of the section 64 amount.

But see sub-paragraph (9) (limit on total deductions under this paragraph).

(5) A claim for relief under this paragraph is for the deductible amount to be deducted (in accordance with whichever is applicable of sub-paragraphs (7) and (8)) in calculating the person's net income for one or more of the tax years 2018-19, 2019-20 and 2020-21 at Step 2 of the calculation in section 23 of ITA 2007 (which applies as if this paragraph were a provision listed in section 24 of that Act).

(6) A deduction is to be made only from the profits of the trade (and accordingly subsection (2) of section 25 of ITA 2007 has effect as if this sub-paragraph were included in subsection (3) of that section).

(7) This sub-paragraph explains how the deductions are to be made in a case where the person makes a claim under section 64 of ITA 2007 for relief in respect of the section 64 amount for the tax year 2020-21.

Step 1 Deduct the deductible amount from the profits of the trade for the tax year 2019-20.

Step 2 Deduct from the profits of the trade for the tax year 2018-19 so much of the deductible amount as has not been deducted under Step 1.

(8) This sub-paragraph explains how the deductions are to be made in any other case.

Step 1 Deduct the deductible amount from the profits of the trade for the tax year 2020-21.

Step 2 Deduct from the profits of the trade for the tax year 2019-20 so much of the deductible amount as has not been deducted under Step 1.

Step 3 Deduct from the profits of the trade for the tax year 2018-19 so much of the deductible amount as has not been deducted under Step 1 or 2.

(9) The total amount that may be deducted in accordance with sub-paragraph (7), or in accordance with Steps 2 and 3 in sub-paragraph (8), is limited to £2,000,000.

(10) A claim for relief under this paragraph must be made on or before the first anniversary of the normal self-assessment filing date for the tax year 2021-22.

Further provision about relief under paragraph 1 or 2

3

(1) The following sections of ITA 2007 apply in relation to relief under paragraph 1 or 2 as they apply in relation to relief under section 64 of that Act—

(a) sections 66 to 70 (restrictions on relief under section 64),

(b) sections 74ZA to 74D (general restrictions on relief),

(d) sections 75 to 79 (restrictions on relief under section 64 and early trade losses relief in relation to capital allowances), and

(e) section 80 (restrictions on those reliefs in relation to ring fence income).

(2) Paragraphs 1 and 2 apply to professions and vocations as they apply to trades.

(3) Paragraphs 1 and 2 are subject to paragraph 2 of Schedule 1B to TMA 1970 (claims to loss relief involving 2 or more years).

(4) Sections 61 to 63 of ITA 2007 (meaning of “making a loss in a tax year” etc and prohibition against double counting) have effect as if paragraphs 1 and 2 were included in Chapter 2 of Part 4 of that Act.

(5) The reference in paragraph 3(1) of Schedule 2 to the Social Security Contributions and Benefits Act 1992 and Social Security Contributions and Benefits (Northern Ireland) Act 1992 (levy of Class 4 contributions with income tax) to section 64 of ITA 2007 includes paragraphs 1 and 2.

PART 2 — Corporation tax

Relief for trade losses incurred in accounting periods ending in financial year 2020 or 2021

4

(1) Sections 37(3)(b) and 38(1) and (3) of CTA 2010 (relief for trade losses against profits of same or earlier accounting period) have effect in relation to any loss to which this paragraph applies as if references to 12 months were references to 3 years (but subject as follows).

(2) This paragraph applies to any loss incurred by a company in a trade in a relevant accounting period.

(3) In this paragraph “relevant accounting period” means an accounting period that ends in the period beginning with 1 April 2020 and ending with 31 March 2022.

(4) Sub-paragraph (5) applies where—

(a) a loss incurred by a company in a relevant accounting period (“the relevant loss”) is, to any extent, relievable under section 37 of CTA 2010 by virtue of this paragraph, and

(b) some but not all of the relevant loss is also relievable under that section by virtue of section 40 of that Act (ring fence trades: extension of periods for which relief may be given).

(5) A claim for relief under section 37 of CTA 2010 by virtue of this paragraph in respect of the relevant loss is treated, so far as possible, as being made in respect of the part of the loss that is not relievable as mentioned in sub-paragraph (4)(b).

(6) Section 42 of CTA 2010 (ring fence trades: further extension of period of relief) has effect as if—

(a) in subsection (1)(b), the reference to section 39 or 40 of that Act included a reference to this paragraph;

(b) in subsection (8), in the definition of “3 year relief period”, the reference to section 39 or 40 of that Act included a reference to this paragraph.

Cap on claims by company that is not a member of a 2020 group or 2021 group

5

(1) A 2020 claim may be made by a company that is not a member of a 2020 group only if the total amount of relief given as a result of the claim, when added to the total amount of relief given as a result of any other 2020 claims already made by the company, is under £2,000,000.

(2) A 2021 claim may be made by a company that is not a member of a 2021 group only if the total amount of relief given as a result of the claim, when added to the total amount of relief given as a result of any other 2021 claims already made by the company, is under £2,000,000.

Non-de minimis claims to be made after end of financial year

6

(1) A non-de minimis 2020 claim may not be made by a company (whether or not it is a member of a 2020 group) at any time before 31 March 2021.

(2) A non-de minimis 2021 claim may not be made by a company (whether or not it is a member of a 2021 group) at any time before 31 March 2022.

Non-de minimis claims to be made in company tax return

7

(1) A non-de minimis claim must be made in the company tax return (whether as originally made or by amendment) for the accounting period in which the loss in respect of which the claim is made is incurred.

(2) The company tax return for any earlier accounting period affected by the claim is treated as amended accordingly.

Meaning of “de minimis claim” etc

8

(1) For the purposes of this Part of this Schedule, a 2020 claim is a “de minimis 2020 claim” if—

(a) the total amount of relief given as a result of the claim, when added to the total amount of relief given as a result of any other 2020 claims already made by the company, is under £200,000, and

(b) the condition in paragraph (a) would still be met on the assumptions in sub-paragraph (3).

(2) For the purposes of this Part of this Schedule, a 2021 claim is a “de minimis 2021 claim” if—

(a) the total amount of relief given as a result of the claim, when added to the total amount of relief given as a result of any other 2021 claims already made by the company, is under £200,000, and

(b) the condition in paragraph (a) would still be met on the assumptions in sub-paragraph (3).

(3) The assumptions are—

(a) that the company makes all claims available to it (if any) for allowances under CAA 2001, or any other provision of the Corporation Tax Acts, that would result in an increase in the amount of the loss in respect of which the claim in question is made;

(b) that the company does not surrender any amount under Part 5 of CTA 2010 (group relief);

(c) that the claim in question is for all of the relief available to the company under section 37 of CTA 2010 by virtue of paragraph 4 in relation to the loss in respect of which the claim is made.

(4) In this Part of this Schedule—

(a) “non-de minimis 2020 claim” means a 2020 claim that is not a de minimis 2020 claim;

(b) “non-de minimis 2021 claim” means a 2021 claim that is not a de minimis 2021 claim;

(d) “non-de minimis claim” means a non-de minimis 2020 claim or a non-de minimis 2021 claim.

Cap on non-de minimis claims by company that is a member of a 2020 group or 2021 group

9

(1) A non-de minimis 2020 claim may be made by a company that is a member of a 2020 group only if the total amount of relief given as a result of each of the following claims is, in aggregate, less than £2,000,000—

(a) the claim in question;

(b) any other 2020 claims made by the company (including any de minimis claims);

(2) A non-de minimis 2021 claim may be made by a company that is a member of a 2021 group only if the total amount of relief given as a result of each of the following claims is, in aggregate, less than £2,000,000—

(a) the claim in question;

(b) any other 2021 claims made by the company (including any de minimis claims);

Non-de minimis claims by group company to conform with statement

10

(1) A non-de minimis 2020 claim may be made by a company that is a member of a 2020 group only if—

(a) a 2020 loss carry-back allocation statement has been submitted on behalf of the group in accordance with regulations under paragraph 11, and

(b) the claim is for an amount specified in that statement in accordance with those regulations.

(2) A non-de minimis 2021 claim may be made by a company that is a member of a 2021 group only if—

(a) a 2021 loss carry-back allocation statement has been submitted on behalf of the group in accordance with regulations under paragraph 11, and

(b) the claim is for an amount specified in that statement in accordance with those regulations.

Loss carry-back allocation statements

11

(1) The Commissioners must by regulations make provision—

(a) requiring a statement (“a 2020 loss carry-back allocation statement”) to be submitted to HMRC on behalf of a 2020 group for the purpose of determining the non-de minimis 2020 claims that may be made by members of the group in compliance with paragraphs 9 and 10;

(b) requiring a statement (“a 2021 loss carry-back allocation statement”) to be submitted to HMRC on behalf of a 2021 group for the purpose of determining the non-de minimis 2021 claims that may be made by members of the group in compliance with paragraphs 9 and 10.

(2) The regulations may, in particular, include provision about—

(a) the nomination by members of a 2020 group or 2021 group of a member of the group to submit a loss carry-back allocation statement on behalf of the group;

(b) the contents of a loss carry-back allocation statement;

(d) when and how a loss carry-back allocation statement may or must be amended on behalf of a 2020 group or 2021 group;

(e) when and how a loss carry-back allocation statement may be amended by an officer of HMRC;

(f) the amendment of company tax returns in consequence of a loss carry-back allocation statement (including provision altering time limits that would otherwise apply);

(g) the recovery of overpaid relief (including provision allowing an assessment to tax to be made).

(3) The reference in sub-paragraph (2)(g) to overpaid relief is to an amount paid to a company by HMRC where—

(a) the payment is a repayment of tax made in consequence of a 2020 claim or 2021 claim,

(b) the loss carry-back allocation statement is amended in accordance with regulations under this paragraph, and

(c) as a result of the amendment, the claim no longer meets the condition in paragraph 10(1)(b) or (as the case may be) paragraph 10(2)(b) (claim to conform with loss carry-back allocation statement).

(4) In this paragraph—

“HMRC” means Her Majesty's Revenue and Customs;

“a loss carry-back allocation statement” means a 2020 loss carry-back allocation statement or a 2021 loss carry-back allocation statement.

Anti-avoidance

12

(1) A company may not make a 2020 claim if—

(a) at any time in the period beginning with 1 April 2020 and ending with 31 March 2021 the company is a member of a group,

(b) the company ceases to be a member of that group at any time in that period, and

(c) the main purpose, or one of the main purposes, of the company's ceasing to be a member of the group is to increase the total amount of relief given as a result of a 2020 claim.

(2) A company may not make a 2021 claim if—

(a) at any time in the period beginning with 1 April 2021 and ending with 31 March 2022 the company is a member of a group,

(b) the company ceases to be a member of that group at any time in that period, and

(c) the main purpose, or one of the main purposes, of the company's ceasing to be a member of the group is to increase the total amount of relief given as a result of a 2021 claim.

(3) In this paragraph “group” has the meaning given by section 269ZZB of CTA 2010 (meaning “group” in Part 7ZA of CTA 2010).

Interpretation

13

(1) In this Part of this Schedule—

“2020 claim” means a claim for relief under section 37 of CTA 2010 by virtue of paragraph 4 that is made in respect of a loss incurred in an accounting period that ends in the period beginning with 1 April 2020 and ending with 31 March 2021;

“2021 claim” means a claim for relief under section 37 of CTA 2010 by virtue of paragraph 4 that is made in respect of a loss incurred in an accounting period that ends in the period beginning with 1 April 2021 and ending with 31 March 2022;

“2020 group” means two or more companies which, at the end of 31 March 2021, are a group within the meaning given by section 269ZZB of CTA 2010 (meaning of “group”);

“2021 group” means two or more companies which, at the end of 31 March 2022 are a group within the meaning given by section 269ZZB of CTA 2010 (meaning of “group”);

“a 2020 loss carry-back allocation statement” has the meaning given by paragraph 11(1)(a);

“a 2021 loss carry-back allocation statement” has the meaning given by paragraph 11(1)(b);

“the Commissioners” means the Commissioners for Her Majesty's Revenue and Customs;

“de minimis claim” and related expressions have the meanings given by paragraph 8.

(2) A reference in this Part of this Schedule to the total amount of relief given as a result of a 2020 claim or 2021 claim—

(a) is to the amount of the deduction or (as the case may be) the total of the deductions made under section 37(3) of CTA 2010 as a result of the claim, but

(b) does not include a deduction that would have been made under that provision as a result of the claim if sections 37 and 38 of that Act applied disregarding the modifications made by paragraph 4.

Power to modify

14

(1) The Commissioners may by regulations amend or otherwise modify the following provisions of this Part of this Schedule—

(a) paragraph 6 (non-de minimis claims to be made after financial year);

(b) paragraph 7 (non-de minimis claims to be made in tax return);

(2) Regulations under this paragraph may include supplementary, incidental, consequential or transitional provision (including provision amending or otherwise modifying a provision of this Part of this Schedule not mentioned in sub-paragraph (1)).

(3) Regulations under this paragraph are of no effect in relation to a 2020 claim or 2021 claim made before the regulations come into force.

(4) No regulations under this paragraph may be made after 31 March 2023.

SCHEDULE 3

Introductory

1

Chapter 2 of Part 13 of CTA 2009 (relief for cost of research and development incurred by small and medium-sized enterprises) is amended as follows.

Cap on amount of tax credit

2

(1) Section 1058 (amount of tax credit) is amended as follows.

(2) In subsection (1)—

(a) in the words before paragraph (a), after “period is” insert “ the lesser of ”;

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

and (aa) the amount given by subsection (1A).

(3) After subsection (1), insert—

(1A) The amount given by this subsection is the sum of— (a) £20,000, and (b) the amount produced by multiplying by three (“the multiplier”) the company's relevant expenditure on workers for payment periods ending in the accounting period (see section 1058A). (1B) If the accounting period is less than 12 months, the amount specified in subsection (1A)(a) is proportionately reduced. (1C) Subsection (1)(aa) does not apply if section 1058D (exceptions to tax credit cap) applies in relation to the company for the accounting period.

(4) For subsection (2) substitute—

(2) The Treasury may by regulations— (a) replace the percentage for the time being specified in subsection (1)(a) with a different percentage; (b) replace the amount for the time being specified in subsection (1A)(a) with a different amount; (c) replace the multiplier for the time being specified in subsection (1A)(b) with a different multiplier.

3

After section 1058 insert—

(1058A) (1) For the purposes of section 1058, the amount of a company's relevant expenditure on workers for a payment period is the sum of— (a) the total amount of the company's PAYE and NIC liabilities for the payment period (see section 1058B) less any amount deducted in accordance with section 1058C (avoiding double counting of PAYE and NIC liabilities), (b) if the company is connected with another company and has incurred qualifying expenditure on externally provided workers (see section 1127), the relevant portion of any staffing costs for the payment period incurred by the connected company in providing any of those workers for the company (see subsection (2)), and (c) if the company is connected with another company and has incurred qualifying expenditure on contracted out research and development (see section 1053), any staffing costs for the payment period incurred by the connected company in undertaking any of that contracted out research and development on behalf of the company (see subsection (3)). (2) The relevant portion of any staffing costs for a payment period incurred by a connected company in providing externally provided workers for a company is the sum of the amounts to be determined in the case of each of those workers as follows— - Step 1 Calculate the amount of expenditure that— 1. has been incurred by the connected company in providing the externally provided worker for the company, 2. has been incurred on staffing costs (see section 1123), and 3. forms part of the total amount of the connected company's PAYE and NIC liabilities for the payment period. - Step 2 Calculate the percentage (“the appropriate percentage”) given by—$R T × 100$where—R is the amount of the company's qualifying expenditure on the externally provided worker that has been taken into account in calculating the amount of the company's qualifying Chapter 2 expenditure (see section 1051) for the payment period, andT is the total amount of the company's qualifying expenditure on the externally provided worker (see section 1127) for the payment period. - Step 3 The amount to be determined in the case of the externally provided worker is the appropriate percentage of the amount given by step 1. (3) The staffing costs for a payment period incurred by a connected company in undertaking contracted out research and development on behalf of a company is the amount of expenditure that— (a) has been incurred by the connected company in undertaking relevant research and development on behalf of the company, (b) has been incurred on staffing costs (see section 1123), and (c) forms part of the total amount of the connected company's PAYE and NIC liabilities for the payment period. (4) If, for the purposes of step 1(c) of subsection (2) or paragraph (c) of subsection (3), it is necessary to calculate the amount of a connected company's PAYE and NIC liabilities for a payment period that falls within (but is shorter than) the connected company's payment period, the total amount for the connected company's payment period is proportionately reduced. (1058B) (1) For the purposes of section 1058A, the total amount of a company's PAYE and NIC liabilities for a payment period is the sum of— (a) amount A, and (b) amount B. (2) Amount A is the amount of income tax for which the company is required to account to an officer of Revenue and Customs for the payment period under PAYE regulations. (3) In calculating amount A disregard any deduction the company is authorised to make in respect of— (a) child tax credit; (b) working tax credit. (4) Amount B is the amount of Class 1 national insurance contributions for which the company is required to account to an officer of Revenue and Customs for the payment period. (5) In calculating amount B disregard any deduction the company is authorised to make in respect of— (a) statutory maternity pay; (b) statutory adoption pay; (c) statutory paternity pay; (d) statutory shared parental pay; (e) statutory parental bereavement pay; (f) child tax credit; (g) working tax credit. (1058C) When determining for the purposes of section 1058 a company's relevant expenditure on workers for a payment period (see section 1058A), deduct the following from the total amount of the company's PAYE and NIC liabilities for the payment period— (a) the relevant portion of any staffing costs for the payment period incurred by the company in providing externally provided workers for a connected company (within the meaning given by section 1058A(2)); (b) any staffing costs for the payment period incurred by the company in undertaking contracted out research and development on behalf of a connected company (within the meaning given by section 1058A(3)). (1058D) (1) This section applies (and accordingly, section 1058(1)(aa) does not apply) in relation to a company for an accounting period if the company meets conditions A and B. (2) A company meets condition A for an accounting period if, during the period, the company is engaged in— (a) taking, or preparing to take, steps in order that relevant intellectual property will be created by it, (b) creating relevant intellectual property, or (c) performing a significant amount of management activity in relation to relevant intellectual property it holds. (3) For the purposes of subsection (2)— (a) a company is only engaged in an activity mentioned in paragraph (a), (b) or (c) of subsection (2) if the activity is wholly or mainly undertaken by employees of the company; (b) intellectual property is “relevant” intellectual property in relation to a company if the whole or the greater part (in terms of value) of it is created by the company; (c) intellectual property is created by a company if it is created in circumstances in which the right to exploit it vests in the company (whether alone or jointly with others). (4) For the purposes of this section— - “intellectual property” means— 1. any patent, trade mark, registered design, copyright, design right or plant breeder's right, 2. any rights under the law of a country or territory outside the United Kingdom which correspond or are similar to those falling within paragraph (a), or 3. any information or technique not protected by a right within paragraph (a) or (b) but having industrial, commercial or other economic value; - “management activity”, in relation to intellectual property, means formulating plans and making decisions in relation to the development or exploitation of the intellectual property. (5) A company meets condition B for an accounting period if the amount given by subsection (6) (if any) does not exceed 15% of the company's qualifying Chapter 2 expenditure (see section 1051) for the period. (6) The amount given by this subsection is the sum of the following incurred by the company in the period— (a) qualifying expenditure on externally provided workers (see section 1127), where the company, the staff provider and (if different) the staff controller (or staff controllers)— (i) are all connected (see section 1129), or (ii) have jointly elected (under section 1130) that section 1129 is to apply to them as if they were all connected; (b) qualifying expenditure on contracted out research and development (see section 1053) where the company and the sub-contractor— (i) are connected (see section 1134), or (ii) have jointly elected (under section 1135) that section 1134 is to apply to them as if they were connected. (7) The Treasury may by regulations replace the percentage for the time being specified in subsection (5) with a different percentage.

Commencement

4

The amendments made by this Schedule have effect in relation to accounting periods beginning on or after 1 April 2021.

SCHEDULE 4

Cap on amount of tax credit

1

In Chapter 9 of Part 8B of CTA 2010 (research and development expenditure), section 357PD (amount of tax credit under section 1054 of CTA 2009) is amended in accordance with paragraphs 2 to 5.

2

For subsection (2) substitute—

(2) The amount of the R&D tax credit to which the company is entitled for the accounting period is, where the company has a Northern Ireland Chapter 2 surrenderable loss but does not have a mainstream Chapter 2 surrenderable loss, the lesser of— (a) the amount of the Northern Ireland Chapter 2 surrenderable loss multiplied by the relevant percentage, and (b) the amount given by section 1058(1A) of CTA 2009. (2A) Subsection (2)(b) does not apply if section 1058D of CTA 2009 (exceptions to tax credit cap) applies in relation to the company for the accounting period.

3

For subsection (3) substitute—

(3) The amount of the R&D tax credit to which the company is entitled for the accounting period is, where the company has a mainstream Chapter 2 surrenderable loss but does not have a Northern Ireland Chapter 2 surrenderable loss, the lesser of— (a) the amount of the mainstream Chapter 2 surrenderable loss multiplied by the percentage specified in section 1058(1)(a) of CTA 2009, and (b) the amount given by section 1058(1A) of CTA 2009. (3A) Subsection (3)(b) does not apply if section 1058D of CTA 2009 (exceptions to tax credit cap) applies in relation to the company for the accounting period.

4

In subsection (4), for the words from “sum of” to the end, substitute

lesser of— (a) the sum of— (i) the amount of the Northern Ireland Chapter 2 surrenderable loss multiplied by the relevant percentage, and (ii) the amount of the mainstream Chapter 2 surrenderable loss multiplied by the percentage specified in section 1058(1)(a) of CTA 2009, and (b) the amount given by section 1058(1A) of CTA 2009.

5

After subsection (4) insert—

(4A) Subsection (4)(b) does not apply if section 1058D of CTA 2009 (exceptions to tax credit cap) applies in relation to the company for the accounting period.

Commencement

6

Section 5(4) to (6) of CT(NI)A 2015 (commencement) has effect as if references to Part 8B of CTA 2010 were to that Part as amended by this Schedule.

SCHEDULE 5

PART 1 — Amendments of Part 4 of FA 2004

1

Part 4 of FA 2004 is amended in accordance with paragraphs 2 to 23.

2

(1) Section 152 (meaning of “arrangement”) is amended as follows.

(2) In subsection (2), after “cash balance benefits” insert “ , collective money purchase benefits ”.

(3) After subsection (3) insert—

(3A) For the purposes of this Part a money purchase arrangement is a “collective money purchase arrangement” at any time if, at that time, all the benefits that may be provided to or in respect of the member under the arrangement are collective money purchase benefits.

(4) After subsection (4) insert—

(4A) The reference in subsection (4) to an amount available for the provision of benefits to or in respect of the member includes, in relation to a collective money purchase arrangement, an amount available for the provision of benefits to or in respect of members collectively.

(5) In subsection (5)—

(a) the words after “means benefits” become paragraph (a);

(b) at the end of that paragraph insert “ , and ”;

(b) that are not collective money purchase benefits.

(6) After that subsection insert—

(5A) In this Part “collective money purchase benefits” means benefits that are collective money purchase benefits within the meaning of Part 1 or 2 of the Pension Schemes Act 2021.

(7) In subsection (8), for the words from “two or three” to the end substitute “ two, three or four of the varieties specified in subsection (10) ”.

(8) In subsection (9)—

(a) for “those varieties of benefits” substitute “ the varieties of benefits specified in subsection (10) ”;

(b) for “two or three” (in both places those words occur) substitute “ two, three or four ”.

(9) After that subsection insert—

(10) The varieties of benefits mentioned in subsections (8) and (9) are— (a) cash balance benefits, (b) collective money purchase benefits, (c) money purchase benefits that are neither cash balance benefits nor collective money purchase benefits, and (d) defined benefits.

3

(1) In section 165 (pension rules), subsection (1) is amended as follows.

(2) In pension rule 3, after “defined benefits arrangement” insert “ or a collective money purchase arrangement ”.

(3) In pension rule 4, after “money purchase arrangement” insert “ that is not a collective money purchase arrangement ”.

4

(1) In section 167 (pension death benefit rules), subsection (1) is amended as follows.

(2) In pension death benefit rule 2, after “defined benefits arrangement” insert “ or a collective money purchase arrangement ”.

(3) In pension death benefit rule 3, after “money purchase arrangement” insert “ that is not a collective money purchase arrangement ”.

5

(1) Section 172C (allocation of unallocated employer contributions) is amended as follows.

(2) In subsection (2)—

(a) in paragraph (a), after “cash balance arrangement” insert “ or a collective money purchase arrangement ”;

(b) in paragraph (b), for “other than cash balance benefits” substitute “ that are not cash balance benefits or collective money purchase benefits ”.

6

(1) Section 182 (unauthorised borrowing: money purchase arrangements) is amended as follows.

(2) In the heading, at the end insert “ other than collective money purchase arrangements ”.

(3) In subsection (1), after “money purchase arrangement” insert “ that is not a collective money purchase arrangement ”.

(4) In subsection (8), after “defined benefits” insert “ or collective money purchase benefits ”.

7

(1) Section 183 (effect of unauthorised borrowing: money purchase arrangements) is amended as follows.

(2) In the heading, at the end insert “ other than collective money purchase arrangements ”.

8

(1) Section 184 (unauthorised borrowing: other arrangements) is amended as follows.

(2) In subsection (1), for “arrangement which is not a money purchase arrangement” substitute “ relevant arrangement ”.

(3) After subsection (1) insert—

(1A) In this section “relevant arrangement” means an arrangement that— (a) is not a money purchase arrangement, or (b) is a collective money purchase arrangement.

(4) In subsection (2), in the definition of APB, for “arrangements which are not money purchase arrangements” substitute “ relevant arrangements ”.

(5) In subsection (3), in paragraphs (a) and (b), for “not money purchase arrangements” substitute “ relevant arrangements ”.

9

(1) Section 212 (valuation of uncrystallised rights for purposes of section 210) is amended as follows.

(2) In subsection (3)—

(a) in paragraph (b), for “other than a cash balance arrangement” substitute “ that is neither a cash balance arrangement nor a collective money purchase arrangement ”;

(b) in paragraph (c), after “defined benefits arrangement” insert “ or a collective money purchase arrangement ”.

(3) For subsections (7) to (10) substitute—

(7) If this subsection applies, the value of the member's uncrystallised rights under the arrangement on the date (“the hybrid value”) is to be calculated by taking the following steps— - Step 1 In relation to each relevant variety of benefits, calculate (in accordance with the preceding provisions of this section) the value of the member's uncrystallised rights on the date, assuming that benefits of that variety are provided under the arrangement. - Step 2 The hybrid value is the higher or highest of the amounts determined under step 1.” (8) For the purposes of this section a variety of benefits is “relevant” in relation to a hybrid arrangement if, in any circumstances, benefits of that variety may be provided under the arrangement. (9) In this section “variety of benefits” means a variety of benefits specified in section 152(10).

10

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