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Finance Act 2022

Type Public General Act

Publication 2022-02-24

Last updated 2025-04-01

State In force

Department Statute Law Database

Source legislation.gov.uk

articles Not indexed

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(6) The rules governing the practice and procedure (including fees) in respect of petitions under section 124A of the Insolvency Act 1986 or Article 104A of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)) apply to petitions under this section, subject to any necessary modifications.

Publication by HMRC of information about tax avoidance schemes

86

(1) If an authorised officer suspects that a proposal or arrangements are a relevant proposal or relevant arrangements the officer may arrange for the publication of any information (including documents) the officer considers appropriate for the purposes of—

(a) informing taxpayers about risks associated with, or concerns the officer has about, the proposal or arrangements, or

(b) protecting the public revenue.

(2) The information that may be published includes information (including documents) identifying or about any person—

(a) who is or has been, or who the officer suspects is or has been—

(i) a promoter in relation to the proposal or arrangements,

(ii) a connected person in relation to the proposal or arrangements or to a person within sub-paragraph (i), or

(iii) a member of a promotion structure any member of which has or has had, or is suspected by the officer of having or having had, a role in relation to making the proposal or arrangements available for implementation, or

(b) who has or has had, or who the officer suspects has or has had, any other role in relation to making the proposal or arrangements available for implementation.

(3) No information may be published under this section that identifies a person—

(a) who is not within subsection (2), or

(b) where there are reasonable grounds for believing that the person’s role in relation to the proposal or arrangements is limited to activities subject to legal professional privilege.

(4) Information may be published under this section in such manner as the officer considers appropriate, including by communicating it to particular persons.

(5) If an authorised officer intends to publish information under this section that identifies a person, an officer of Revenue and Customs must—

(a) notify the person, and

(b) give the person 30 days from that notification in which to make representations about whether or not the information should be published.

(6) Before arranging for the publication of information under this section identifying a person, an authorised officer must have regard to any representations received in accordance with subsection (5).

(7) An authorised officer must amend or withdraw information published under this section if the officer subsequently considers it to be incorrect or misleading in a significant respect.

(8) Nothing in this section authorises a disclosure of information if the disclosure would contravene the data protection legislation or would be prohibited by the investigatory powers legislation (but in determining whether a disclosure would do either of those things, the power conferred by this section is to be taken into account).

(9) In subsection (8)—

“the data protection legislation” has the same meaning as in the Data Protection Act 2018 (see section 3 of that Act);

“the investigatory powers legislation” means Parts 1 to 7 and Chapter 1 of Part 9 of the Investigatory Powers Act 2016.

(10) Nothing in this section limits the circumstances in which information may be disclosed under section 18(2) of the Commissioners for Revenue and Customs Act 2005 or under any other enactment or rule of law.

(11) For the purposes of this section, a person is a connected person in relation to a proposal or arrangements, or a person within subsection (2)(a)(i), if the person is—

(a) involved in the promotion of the proposal or arrangements;

(b) in the case of a proposal or arrangements that involve a trust, a settlor, trustee or beneficiary of the trust, or other person involved in the administration of the trust;

(d) a person who controls or has significant influence over (within the meaning of Part 2 of Schedule 34 to FA 2014) the person within subsection (2)(a)(i);

(e) an employee or shareholder of the person within subsection (2)(a)(i).

(12) In this section “authorised officer” means an officer of Revenue and Customs who is, or is a member of a class of officers who are, authorised by the Commissioners for the purposes of this section.

(13) Expressions used in Part 5 of FA 2014 have the same meaning in this section as in that Part, unless the contrary intention appears (and, in particular, see sections 234 and 235 of FA 2014 for the meanings of “relevant proposal”, “relevant arrangements” and “promoter” and Schedule 33A to that Act for the meaning of “promotion structure”).

Freezing orders: England and Wales

87

(1) Subsection (2) applies where —

(a) an application is made on behalf of HMRC to a court in England and Wales for a freezing order in relation to a relevant penalty (see section 90) before the penalty is determined, and

(b) the court considering the application is satisfied that HMRC have a good arguable case in relation to the penalty and—

(i) have commenced proceedings before the First-tier Tribunal in relation to it, or

(ii) intend to commence proceedings before the First-tier Tribunal in relation to it within the initial period.

(2) The court is to determine the application as if it were being made immediately after the First-tier Tribunal had determined the penalty on the basis sought, or to be sought, by HMRC.

(3) A freezing order granted by virtue of subsection (2) may not take effect unless HMRC commence proceedings before the First-tier Tribunal in relation to the penalty before the end of the initial period (whether before or after the making of the application for the order).

(4) In this section, a “freezing order” is an order granted in accordance with rule 25.1(1)(f) of the Civil Procedure Rules.

Warrants for diligence on the dependence: Scotland

88

(1) Subsection (2) applies where —

(a) an application is made on behalf of HMRC to a court in Scotland for a warrant for diligence on the dependence under Part 1A of the Debtors (Scotland) Act 1987 in relation to a relevant penalty (see section 90) before the penalty is determined, and

(b) the court considering the application is satisfied that HMRC have a good arguable case in relation to the penalty and—

(i) have commenced proceedings before the First-tier Tribunal in relation to it, or

(ii) intend to commence proceedings before the First-tier Tribunal in relation to it within the initial period.

(2) The court is to determine the application as if the relevant penalty were a contingent debt in terms of section 15C of the 1987 Act.

(3) Execution of diligence on the dependence under a warrant granted under Part 1A of the 1987 Act in relation to a relevant penalty is not competent unless HMRC commence proceedings before the First-tier Tribunal in relation to the penalty before the end of the initial period (whether before or after the making of the application for the warrant).

Freezing injunctions: Northern Ireland

89

(1) Subsection (2) applies where —

(a) an application is made on behalf of HMRC to a court in Northern Ireland for a freezing injunction in relation to a relevant penalty (see section 90) before the penalty is determined, and

(b) the court considering the application is satisfied that HMRC have a good arguable case in relation to the penalty and—

(i) have commenced proceedings before the First-tier Tribunal in relation to it, or

(ii) intend to commence proceedings before the First-tier Tribunal in relation to it within the initial period.

(2) The court is to determine the application as if it were being made immediately after the First-tier Tribunal had determined the penalty on the basis sought, or to be sought, by HMRC.

(3) A freezing injunction granted by virtue of subsection (2) may not take effect unless HMRC commence proceedings before the First-tier Tribunal in relation to the penalty before the end of the initial period (whether before or after the making of the application for the injunction).

(4) In this section, a “freezing injunction” is an injunction granted in accordance with Order 29 of the Rules of the Court of Judicature (NI) 1980 (S.R. (N.I.) 1980 No. 346) or Order 14 of the County Court Rules (Northern Ireland) 1981 (S.R. (N.I.) 1981 No. 225), which restrains a party from—

(a) removing from the jurisdiction assets located there, or

(b) dealing with any assets, whether located within the jurisdiction or not.

Sections 87, 88 and 89: interpretation etc

90

(1) This section applies for the purposes of sections 87, 88 and 89.

(2) “HMRC” means “Her Majesty’s Revenue and Customs”.

(3) A relevant penalty is a penalty that is to be determined by the First-tier Tribunal under—

(a) section 98C of TMA 1970 (disclosure of tax avoidance schemes);

(b) Schedule 35 to FA 2014 (promoters of tax avoidance schemes: penalties);

(c) Schedule 36 to FA 2008 (information and inspection powers) as it has effect in relation to Schedule 16 to F(No.2)A 2017 (penalties for enablers of defeated tax avoidance) (see Part 9 of Schedule 16 to F(No.2)A 2017);

(d) Schedule 17 to F(No.2)A 2017 (disclosure of tax avoidance schemes: VAT and other indirect taxes).

(4) The “initial period” is the period of 72 hours beginning with the time at which the application mentioned in section 87, 88 or 89, as the case may be, is determined.

(5) In calculating the period of 72 hours in subsection (4), disregard the whole of any day that is—

(a) a Saturday,

(b) a Sunday,

(d) Good Friday, or

(e) a bank holiday under the Banking and Financial Dealings Act 1971 in the part of the United Kingdom in which the application mentioned in section 87, 88 or 89, as the case may be, is made.

Penalties for facilitating avoidance schemes involving non-resident promoters

91

(1) Schedule 13 makes provision for and about penalties for facilitating avoidance schemes involving non-resident promoters.

(2) In consequence of that Schedule, in Schedule 13 to FA 2020 (joint and several liability of company directors etc), in paragraph 5(6), after paragraph (e) insert—

(f) Schedule 13 to FA 2022 (penalties for facilitating avoidance schemes involving non-resident promoters).

Electronic sales suppression penalties

92

Schedule 14 makes provision for and in connection with—

(a) penalties for persons who engage in activities involving tools used, or capable of being used, to suppress electronic sales records, and

(b) powers for Her Majesty’s Revenue and Customs to gather information in relation to such persons and such tools.

Tobacco products: tracing and security

93

(1) TPDA 1979 is amended in accordance with subsections (2) to (4).

(2) After section 8J insert—

(8JA) (1) The Commissioners may by regulations— (a) establish, and make provision about the operation of, a traceability system for tobacco products; (b) require security features to be applied to tobacco products. (2) For the purposes of subsection (1)— (a) a traceability system for tobacco products means a system under which the movements of tobacco products are recorded; (b) security features applied to tobacco products are features that a unit pack, or the packaging containing more than one unit pack, of tobacco products must carry for the purpose of enabling the identification of the products and the verification of their authenticity. (3) Tracing and security regulations may (among other things)— (a) require a unit pack, or the packaging containing more than one unit pack, of tobacco products to be marked with a unique code; (b) confer functions on the Commissioners or other persons (including functions involving the exercise of a discretion); (c) make provision by reference to things set out (whether by the Commissioners or other persons) in a notice given in accordance with the regulations; (d) specify technical standards (including by making provision under paragraph (c)); (e) make provision about the processing of data (including provision about the recording, transmission, storing and accessing of data); (f) impose, or enable the imposition of, restrictions or requirements on persons of a specified description; (g) provide for the imposition of sanctions for failure to comply with such restrictions or requirements (see section 8JB); (h) provide for appeals from, and reviews of, decisions taken under the regulations. (4) Regulations under subsection (3)(f) may, in particular— (a) specify, or provide for the specification of, equipment or other material for use in connection with a restriction or requirement imposed by or under the regulations; (b) require persons of a specified description to provide such equipment or material to other persons of a specified description for specified purposes; (c) make provision about the way in which such equipment or material is to be provided, including how any costs are to be met by persons providing or receiving it. (5) Tracing and security regulations may— (a) make provision generally in relation to tobacco products or only in relation to specified descriptions of tobacco products; (b) make different provision for different areas; (c) make provision by supplementing or otherwise amending relevant existing law; (d) revoke relevant existing law. (6) The power to make regulations under this section is exercisable only where the Commissioners consider that doing so would facilitate the administration, collection or enforcement of the duty charged under section 2. (7) In this section and sections 8JB and 8JC— - “relevant existing law” means— Chapter 2 of Part 1 of the Finance Act 1994 (customs and excise: appeals and penalties); the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009 (S.I. 2009/273); the Standardised Packaging of Tobacco Products Regulations 2015 (S.I. 2015/829); Commission Delegated Regulation (EU) 2018/573 of 15 December 2017 on key elements of data storage contracts to be concluded as part of a traceability system for tobacco products; Commission Implementing Regulation (EU) 2018/574 of 15 December 2017 on technical standards for the establishment and operation of a traceability system for tobacco products; Commission Implementing Decision (EU) 2018/576 of 15 December 2017 on technical standards for security features applied to tobacco products; the Tobacco Products (Traceability and Security Features) Regulations 2019 (S.I. 2019/594); - “specified” means specified by or under tracing and security regulations; - “traceability system for tobacco products” has the meaning given in subsection (2)(a); - “tracing and security regulations” means regulations under subsection (1); - “unit pack” means the smallest individual packaging in which a tobacco product is, or is intended to be, presented for sale to a consumer (but not including any transparent wrapper). (8JB) (1) This section applies to tracing and security regulations that make provision for sanctions under section 8JA (3)(g). (2) The regulations may provide for the following kinds of sanction— (a) the imposition of monetary penalties of such amounts, not exceeding £10,000, as are determined in accordance with the regulations; (b) for tobacco products involved in a contravention of applicable law to be liable to forfeiture under the customs and excise Acts; (c) the application by the Commissioners of measures to restrict or prohibit a person’s participation, or continued participation, in any part of a traceability system for tobacco products (including measures to deactivate, or require the deactivation of, any code issued to the person for the purposes of such a system or to prevent such a code from being issued or reissued). (3) Provision under subsection (2)(a) may (among other things)— (a) provide for a penalty to be payable on the giving of a notice (“a penalty notice”) by such persons as are authorised by or under the regulations; (b) specify matters to which such persons may or must have regard when determining whether to give a penalty notice; (c) provide for the action to be taken if a monetary penalty is not paid in accordance with a penalty notice. (4) For the purposes of subsection (2)(b), tobacco products are “involved in a contravention of applicable law” if— (a) the products do not comply with a requirement imposed under tracing and security regulations or under relevant existing law, or (b) the products are found together with other products falling within paragraph (a). (8JC) (1) The Commissioners (or anyone acting on their behalf) may, for a purpose within subsection (3), disclose information to— (a) a person on whom functions have been conferred by or under tracing and security regulations or relevant existing law; (b) an authorised officer of such a person. (2) A person mentioned in subsection (1)(a) or (b) may, for a purpose within subsection (3), disclose information to the Commissioners (or anyone acting on their behalf). (3) A purpose is within this subsection if it is connected with— (a) a function conferred by or under tracing and security regulations or relevant existing law, or (b) the enforcement of a restriction or requirement imposed by or under tracing and security regulations or relevant existing law. (4) A person who receives information as a result of subsection (1) may not— (a) use the information for a purpose other than a purpose within subsection (3), or (b) further disclose the information, except with the consent of the Commissioners (which may be general or specific). (5) If— (a) a person discloses information in contravention of subsection (4)(b), and (b) the information relates to a person whose identity is specified in, or can be deduced from, the disclosure, section 19 of the Commissioners for Revenue and Customs Act 2005 (offence of wrongful disclosure) applies in relation to that disclosure as it applies in relation to a disclosure of information in contravention of section 20(9) of that Act. (6) Nothing in this section authorises the making of a disclosure which would— (a) contravene the data protection legislation, or (b) be prohibited by the investigatory powers legislation. In determining whether a disclosure would do either of those things, the powers conferred by this section are to be taken into account. (7) In subsection (6)— - “the data protection legislation” has the same meaning as in the Data Protection Act 2018 (see section 3 of that Act); - “the investigatory powers legislation” means Parts 1 to 7 and Chapter 1 of Part 9 of the Investigatory Powers Act 2016. (8) Nothing in this section limits the circumstances in which information may be disclosed under section 18(2) of the Commissioners for Revenue and Customs Act 2005 or under any other enactment or rule of law. (9) References in this section to an authorised officer of any person are to any person who has been designated by the principal as a person to and by whom information may be disclosed by virtue of this section.

(3) In section 9 (regulations), in subsection (1A) after “section” insert “8JA,”.

(4) In section 10 (interpretation), in subsection (3), after ““the Commissioners”” insert—

“the customs and excise Acts”

(5) In Schedule 41 to FA 2008 (penalties for certain VAT and excise wrongdoing etc), in paragraph 15 (interaction with other penalties and late payment surcharges), after sub-paragraph (2) insert—

(2A) If P has incurred a penalty under regulations under section 8JA (1) of TPDA 1979 (tracing and security regulations) in respect of conduct for which P is liable to a penalty under paragraph 4(1), the amount of the penalty under paragraph 4(1) is to be reduced by the amount of the penalty under those regulations.

Free zones and freeports

Short title

94

Schedule 15 makes provision about the treatment of goods in free zones for the purposes of value added tax.

Freeport tax site reliefs: provision about regulations

95

Schedule 16 makes provision about powers to vary the circumstances in which certain reliefs are available in relation to freeports.

Uncertain tax treatment

Large businesses: notification of uncertain tax treatment

96

Schedule 17 makes provision requiring bodies to notify Her Majesty’s Revenue and Customs if amounts included in a tax return have an uncertain tax treatment.

Discovery assesments etc

Discovery assessments for unassessed income tax or capital gains tax

97

(1) In section 29 of TMA 1970 (assessment where loss of tax discovered), in subsection (1), for paragraph (a) substitute—

(a) that an amount of income tax or capital gains tax ought to have been assessed but has not been assessed,

(2) In the Registered Pension Schemes (Accounting and Assessment) Regulations 2005 (S.I. 2005/3454), omit regulation 9 (which modifies section 29(1)(a) of TMA 1970).

(3) The amendments made by this section—

(a) have effect in relation to the tax year 2021-22 and subsequent tax years, and

(b) also have effect in relation to the tax year 2020-21 and earlier tax years but only if the discovery assessment is a relevant protected assessment (see subsections (4) to (6)).

(4) A discovery assessment is a relevant protected assessment if it is in respect of an amount of tax chargeable under—

(a) Chapter 8 of Part 10 of ITEPA 2003 (high income child benefit charge),

(b) section 424 of ITA 2007 (gift aid: charge to tax),

(d) section 208, 209, 214, 227 or 244A of FA 2004 (pensions), including where the section is applied by that Schedule.

(5) But a discovery assessment is not a relevant protected assessment if it is subject to an appeal notice of which was given to HMRC on or before 30 June 2021 where—

(a) an issue in the appeal is that the assessment is invalid as a result of its not relating to the discovery of income which ought to have been assessed to income tax but which had not been so assessed, and

(b) the issue was raised on or before 30 June 2021 (whether by the appellant or in a decision given by the tribunal).

(6) In addition, a discovery assessment is not a relevant protected assessment if—

(a) it is subject to an appeal notice of which was given to HMRC on or before 30 June 2021,

(b) the appeal is subject to a temporary pause which occurred before 27 October 2021, and

(c) it is reasonable to conclude that the temporary pausing of the appeal occurred (wholly or partly) on the basis that an issue of a kind mentioned in subsection (5)(a) is, or might be, relevant to the determination of the appeal.

(7) For the purposes of this section the cases where notice of an appeal was given to HMRC on or before 30 June 2021 include a case where—

(a) notice of an appeal is given after that date as a result of section 49 of TMA 1970, but

(b) a request in writing was made to HMRC on or before that date seeking HMRC’s agreement to the notice being given after the relevant time limit (within the meaning of that section).

(8) For the purposes of this section an appeal is subject to a temporary pause which occurred before 27 October 2021 if—

(a) the appeal has been stayed by the tribunal before that date,

(b) the parties to the appeal have agreed before that date to stay the appeal, or

(c) HMRC have notified the appellant (“A”) before that date that they are suspending work on the appeal pending the determination of another appeal the details of which have been notified to A.

(9) In this section—

“discovery assessment” means an assessment under section 29(1)(a) of TMA 1970, and

“HMRC” means Her Majesty’s Revenue and Customs, and

“notified” means notified in writing.

Notification of liability to income tax and capital gains tax

98

(1) Section 7 of TMA 1970 (notice of liability to income tax and capital gains tax) is amended in accordance with subsections (2) and (3).

(2) In subsection (2A), in the words after paragraph (b)—

(a) after “chargeable to” insert “an amount of”;

(b) omit “on any income or gain”.

(3) In subsection (3), in paragraph (c), for “a high income child benefit charge” substitute “an amount of tax under any provision listed in relation to the person in section 30 of ITA 2007 (additional tax)”.

(4) In Schedule 16 to FA 2020 (taxation of coronavirus support payments), in paragraph 12(4) (notification of liability: modifications to section 7 of TMA 1970), for “after “child benefit charge”” substitute “at the end”.

(5) The amendments made by this section have effect in relation to the tax year 2021-22 and subsequent tax years.

Calculation of income tax liability for certain charges relating to pensions

99

(1) In section 30(1) of ITA 2007 (Step 7: additional tax)—

(a) in the entry for section 208(2)(a), for “section 208(2)(a)” substitute “section 208”,

(b) in the entry for section 209(3)(a), for “section 209(3)(a)” substitute “section 209”, and

section 244A of FA 2004 (pension schemes: the overseas transfer charge),

(2) The amendments made by this section have effect in relation to the tax year 2021-22 and subsequent tax years.

Temporary powers in disaster or emergency

Power to make temporary modifications of taxation of employment income

100

(1) The Treasury may by regulations modify Part 3, 4 or 5 of ITEPA 2003 so as to provide that a liability to income tax that would otherwise arise does not arise.

(2) Regulations under this section—

(a) may be made only if the Treasury considers that the modifications contained in the regulations are necessary or desirable for the purpose of addressing circumstances arising as a result of a disaster or emergency;

(b) must provide for the modifications to cease to have effect at the end of such period as is specified (and different periods may be specified in relation to different modifications).

(3) Regulations under this section—

(a) must specify the disaster or emergency in respect of which they are made;

(b) may only specify a disaster or emergency which the Treasury considers to be of national significance.

(4) The period specified under subsection (2)(b) in relation to a modification—

(a) must be no longer than the Treasury considers necessary for the purpose mentioned in subsection (2)(a);

(b) must in any event end before the last day of the tax year following the tax year in which the modification first takes effect.

(5) The expiry of a modification contained in regulations under this section in relation to a disaster or emergency is not to be taken as preventing the making of provision to the same or similar effect in further regulations under this section in relation to that (or another) disaster or emergency.

(6) Regulations under this section may—

(a) make different provision for different cases;

(b) make retrospective provision;

(d) make consequential provision (which may include provision modifying any provision of the Income Tax Acts).

(7) In this section, “specified” means specified in the regulations.

Emissions certificates for vehicles

Vehicle CO2 emissions certificates

101

Schedule 18 makes provision about certificates in relation to the CO₂ emissions of vehicles for the purposes of—

(a) section 268C(1) of CAA 2001 (meaning of “qualifying emissions certificate”),

(b) Chapter 6 of Part 3 of ITEPA 2003 (taxable benefits: cars etc), and

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Increase in membership of the Office of Tax Simplification

102

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Final

Interpretation

103

In this Act the following abbreviations are references to the following Acts—

CAA 2001	Capital Allowances Act 2001
CRCA 2005	Commissioners for Revenue and Customs Act 2005
CTA 2009	Corporation Tax Act 2009
CTA 2010	Corporation Tax Act 2010
FA followed by a year	Finance Act of that year
F(No.2)A followed by a year	Finance (No.2) Act of that year
FISMA 2000	Financial Services and Markets Act 2000
HODA 1979	Hydrocarbon Oil Duties Act 1979
ITA 2007	Income Tax Act 2007
ITEPA 2003	Income Tax (Earnings and Pensions) Act 2003
ITTOIA 2005	Income Tax (Trading and Other Income) Act 2005
TCGA 1992	Taxation of Chargeable Gains Act 1992
TCTA 2018	Taxation (Cross-border Trade) Act 2018
TIOPA 2010	Taxation (International and Other Provisions) Act 2010
TMA 1970	Taxes Management Act 1970
TPDA 1979	Tobacco Products Duty Act 1979
VATA 1994	Value Added Tax Act 1994
VERA 1994	Vehicle Excise and Registration Act 1994

Short title

104

This Act may be cited as the Finance Act 2022.

SCHEDULE 1

PART 1 — Main amendments of ITTOIA 2005

1

Part 2 of ITTOIA 2005 (trading income) is amended as follows.

Chapter 2 (income taxed as trade profits)

2

(1) Section 7 (income charged) is amended as follows.

(2) In subsection (1), at the end insert “(including amounts treated as profits of the tax year under section 23E(1))”.

(3) Omit subsections (2) and (3).

3

After section 7 insert—

(7A) (1) This section and sections 7B to 7D apply if a period of account of a person carrying on a trade (“the trader”) does not coincide with a tax year. (2) Any of the following steps may be taken if they are necessary in order to arrive at the profits or losses of the trade of the tax year— (a) apportioning the profits or losses of a period of account to the parts of that period falling in different tax years, and (b) adding the profits or losses of a period of account (or part of a period) to profits or losses of other periods of account (or parts). (3) The steps must be taken by reference to the number of days in the periods concerned. (4) But the trader may use a different way of measuring the length of the periods concerned if— (a) it is reasonable to do so, and (b) the way of measuring the length of periods is used consistently for the purposes of the trade. (5) Sections 7B and 7C contain rules for the purpose of avoiding the need to apportion profits or losses under this section (and section 7D makes provision for the trader to elect for those rules not to apply). (6) This section and sections 7B to 7D apply to professions and vocations as they apply to trades. (7B) (1) This section applies if, in a tax year (“the relevant tax year”), the trader— (a) starts to carry on the trade after 31 March, and (b) does not permanently cease to carry on the trade. (2) For the purposes of this Chapter— (a) the profits or losses of the trade of the relevant tax year are treated as nil, and (b) the actual profits or losses of the trade of the relevant tax year are treated as arising in the following tax year. (7C) (1) This section applies if, in a tax year (“the relevant tax year”), the trader— (a) does not start to carry on the trade or does so before 1 April, (b) does not permanently cease to carry on the trade, and (c) has an accounting date that is 31 March or 1, 2, 3 or 4 April. (2) For the purposes of this Chapter— (a) the profits or losses of the trade of the period beginning immediately after the accounting date and ending with 5 April in the relevant tax year are treated as nil, and (b) the actual profits or losses of the trade of that period are treated as arising in the following tax year. (3) In this section, “accounting date” in relation to a tax year means— (a) the date in the tax year to which accounts are drawn up, or (b) if there are two or more such dates, the latest of them. (7D) (1) The trader may make an election under this section in relation to the trade. (2) If an election under this section has effect for a tax year, neither of sections 7B and 7C apply in relation to the trade for that tax year. (3) An election under this section— (a) must be made on or before the first anniversary of the normal self-assessment filing date for the first tax year for which it is to have effect, and (b) has effect for that tax year and the four tax years following that tax year (subject to subsection (4)). (4) If the trader permanently ceases to carry on the trade before the end of the last of the tax years mentioned in subsection (3)(b), the election has effect for each tax year up to and including the tax year immediately before the tax year in which the trader permanently ceases to carry on the trade.

Chapter 3A (trade profits: cash basis)

4

In section 31A (conditions to be met for profits to be calculated on cash basis), in subsection (5)(a), omit “the basis period for”.

5

(1) Section 31B (relevant maximum for purposes of section 31A) is amended as follows.

(2) In subsection (6), for “where the basis period for a tax year is less than 12 months” substitute “where the trade, profession or vocation is carried on for only part of a tax year”.

(3) In subsection (7), in the definition of “universal credit claimant”, omit “the basis period for”.

6

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7

(1) Section 31E (calculation of profits on cash basis) is amended as follows.

(2) In subsection (2), in each of Steps 1 and 2, omit “the basis period for”.

(3) At the end insert—

(4) In determining the profits of a trade on the cash basis, section 7A (2) applies as if the profits or losses of a period of account were determined in accordance with subsection (2) of this section (and for these purposes, references in subsection (2) of this section to a tax year are to be read as references to a period of account).

Chapter 15 (basis periods)

8

Omit Chapter 15 (basis periods).

PART 2 — Other amendments of ITTOIA 2005

9

ITTOIA 2005 is amended as follows.

Part 2 (trading income)

10

(1) Section 17 (effect of becoming or ceasing to be a UK resident) is amended as follows.

(2) In subsection (1), for “otherwise than in partnership” substitute “(alone or in partnership)”.

(3) Omit subsection (5).

11

In section 47 (business gifts: exceptions), in subsection (3)(b), for “basis period” substitute “tax year”.

12

In section 133 (meaning of “relevant period” for purposes of Chapter 9), in paragraph (b) omit “the basis period for”.

13

(1) Section 154A (certain non-UK residents with interest on 3.5% War Loan 1952 Or After) is amended as follows.

(2) In subsection (3)—

(a) in Step 1, omit “the basis period for”;

(b) in each of Steps 3, 4 and 5, for “basis period” substitute “tax year”.

(3) In subsection (4)—

(a) for “basis period”, in each place those words occur, substitute “tax year”;

(b) for “that period” substitute “that tax year”.

(4) In subsection (5), for “basis period” substitute “tax year”.

14

(1) Section 225ZD (compensation for compulsory slaughter of animals: effect of claim for spreading profits) is amended as follows.

(2) In subsection (1), in each of Steps 2 and 3, for “whose basis period”, in each place those words occur, substitute “which”.

(3) Omit subsection (2).

15

In section 240B (“entering the cash basis”), in paragraph (b), omit “the basis period for”.

16

In section 240C (unrelieved qualifying expenditure: Parts 2, 7 and 8 of CAA 2001), in subsection (1)(b)—

(a) omit “the basis period for”;

(b) for “with that basis period” substitute “in that tax year”.

17

In section 240D (assets not fully paid for), in subsection (1)(b), omit “the basis period for”.

18

In section 240E (effect of election where predecessor and successor are connected persons), in subsection (1)(c), omit “the basis period for”.

19

In section 246 (basic meaning of “post-cessation receipt”), in subsection (3)—

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

(b) omit paragraph (c) and the “and” before it.

Part 5 (miscellaneous income)

20

In section 613 (films and sound recordings: application of trading income rules to non-trade businesses), omit paragraph (a) and the “and” at the end of that paragraph.

Part 6A (income charged under ITTOIA 2005: trading and property allowances)

21

(1) Section 783AI (partial relief: alternative calculation of trade profits) is amended as follows.

(2) In subsection (2), omit Step 3.

(3) Omit subsection (4).

Part 7 (rent-a-room and qualifying care relief)

22

(1) Section 786 (meaning of “rent-a-room receipts”) is amended as follows.

(2) In subsection (1)(b), for “subsections (3) and (4)” substitute “subsection (4)”.

(3) Omit subsection (3).

(4) In subsection (4), in the words before paragraph (a), omit “Otherwise”.

23

(1) Section 805 (meaning of “qualifying care receipts”) is amended as follows.

(2) In subsection (1)(b), for “subsections (2) and (3)” substitute “subsection (3)”.

(3) Omit subsection (2).

(4) In subsection (3), omit “Otherwise”.

24

Omit section 828 (overlap profit).

Part 9 (partnerships)

25

Omit sections 852 to 856 (firms with trading income).

26

In section 857 (partners to whom the remittance basis applies), in subsection (2), for “856” substitute “851”.

27

In section 860 (adjustment income), in subsection (7), for “856” substitute “851”.

Part 10 (general provisions)

28

In section 867 (business entertainment and gifts: non-trades and non-property businesses), in subsection (5), omit “(but as if the reference to a basis period were to a tax year)”.

Schedule (abbreviations and defined expressions)

29

Part 2 of Schedule 4 (index of defined expressions) is amended as follows—

(a) omit the entry for “accounting date”;

(b) omit the entry for “overlap period”;

PART 3 — Amendments of other Acts

Taxes Management Act 1970

30

TMA 1970 is amended as follows.

31

In section 8 (personal return), in subsection (1C), omit “or its basis period”.

32

In Schedule A1 (as inserted by section 60(3) of F(No.2)A 2017), in paragraph 8 (end of period statement)—

(a) for sub-paragraph (2) substitute—

(2) “Relevant period” means a tax year.

;

(b) omit sub-paragraph (6)(b).

Capital Allowances Act 2001

33

CAA 2001 is amended as follows.

34

(1) Section 59 (unrelieved qualifying expenditure) is amended as follows.

(2) In subsection (4), for “with the basis period for the previous tax year” substitute “in the previous tax year (or, if there is more than one such period, the latest of them)”.

(3) In subsection (8)(b)—

(a) omit “the basis period for”;

(b) for “with that basis period” substitute “in that tax year (or, if there is more than one such period, the latest of them)”.

35

In section 419A (unrelieved qualifying expenditure: entry to cash basis), in subsection (1), for “with the basis period for the tax year”, in both places, substitute “in the tax year (or, if there is more than one such period, the latest of them)”.

36

In section 461A (unrelieved qualifying expenditure: entry to cash basis), in subsection (1), for “with the basis period for the previous tax year” substitute “in the previous tax year (or, if there is more than one such period, the latest of them)”.

37

In section 475A (unrelieved qualifying expenditure: entry to cash basis), in subsection (1), for “with the basis period for the previous tax year” substitute “in the previous tax year (or, if there is more than one such period, the latest of them)”.

Income Tax Act 2007

38

ITA 2007 is amended as follows.

39

In section 24A (limit on Step 2 deductions), omit subsection (7)(c).

40

In section 60 (overview of Chapter), in subsection (3), omit paragraph (b) and the “and” before it.

41

Omit sections 61 and 62 (losses of a tax year of persons carrying on trades etc).

42

(1) Section 66 (restriction on relief unless trade is commercial) is amended as follows.

(2) In subsection (2), omit “the basis period for”.

(3) In subsection (5), for “basis period”, in each place, substitute “tax year”.

43

(1) Section 70 (determining losses in previous tax years) is amended as follows.

(2) Omit subsection (2).

(3) In subsection (3), in the words before paragraph (a), for “This loss” substitute “The loss”.

(4) In subsection (4), in the words after paragraph (b)—

(a) for “203(2)”, in both places, substitute “7A(2)”;

(b) omit “to basis periods are read as references to tax years and references”.

(5) In subsection (5), for “203(3) or (4)” substitute “7A(3) or (4)”.

44

In section 74 (restrictions on relief unless trade is commercial etc), in subsection (2)—

(a) in the words before paragraph (a), omit “the basis period for”;

(b) in paragraph (b), for “basis period” substitute “tax year”.

45

(1) Section 74C (meaning of “non-active capacity” for purposes of section 74A etc) is amended as follows.

(2) For subsection (3) substitute—

(3) For this purpose “the relevant period” means— (a) where the individual first started to carry on the trade less than six months before the end of the tax year, the period of six months beginning with the date on which the individual first started to carry on the trade; (b) where the individual permanently ceased to carry on the trade less than six months after the start of the tax year, the period of six months ending with the date on which the individual permanently ceased to carry on the trade; (c) in any other case, the tax year.

(3) Omit subsection (4).

46

(1) Section 75 (trade leasing allowances given to individuals) is amended as follows.

(2) In subsection (5)—

(a) omit “the basis period for”;

(b) omit “(“the loss-making basis period”)”.

(3) In subsection (6), in each of paragraphs (a) and (b), for “loss-making basis period” substitute “tax year”.

47

In section 83 (carry forward against subsequent trade profits), in subsection (6)(f), for “sections 17(3) and 852(7)” substitute “section 17(3)”.

48

(1) Section 90 (losses that are “terminal losses”) is amended as follows.

(2) In subsection (4)—

(a) for “203(3) and (4)” substitute “7A(3) and (4)”;

(b) for “203(2)” substitute “7A(2)”.

(3) Omit subsection (5).

49

(1) Section 103B (meaning of “non-active partner” etc) is amended as follows.

(2) For subsection (3) substitute—

(3) For this purpose “the relevant period” means— (a) where the individual first started to carry on the trade less than six months before the end of the tax year, the period of six months beginning with the date on which the individual first started to carry on the trade; (b) where the individual permanently ceased to carry on the trade less than six months after the start of the tax year, the period of six months ending with the date on which the individual permanently ceased to carry on the trade; (c) in any other case, the tax year.

(3) Omit subsection (4).

50

In section 104 (restriction on reliefs for limited partners), in subsection (4), in the words after paragraph (b), omit “the basis period for”.

51

In section 107 (restriction on reliefs for members of LLPs), in subsection (5), in the words after paragraph (b), omit “the basis period for”.

52

In section 110 (restriction on reliefs for non-active partners in early tax years), in subsection (4), in the words after paragraph (b), omit “the basis period for”.

53

In section 113 (unrelieved losses brought forward), in subsection (7), omit paragraph (b) and the “and” before it.

54

(1) Section 525 (meaning of “charitable trade”) is amended as follows.

(2) In subsection (1), in the words before paragraph (a), omit “the basis period for”.

(3) Omit subsection (5).

55

In section 528 (condition as to trading and miscellaneous incoming resources), in subsection (2)(a), omit “the basis period for”.

56

In section 544 (section 543: supplementary), omit subsection (4).

57

In section 681AD (relevant income tax relief: deduction not to exceed commercial rent), in subsection (2)(a)(ii), omit “the basis period of”.

58

In section 681CC (tax deduction not to exceed commercial rent), in subsection (2)(a)(ii), omit “the basis period of”.

59

(1) Section 795 (meaning of “post-1 December 2004 loss”) is amended as follows.

(2) In subsection (1), in each of paragraphs (a) and (b), omit “the basis period for”.

(3) In subsection (2)(b), omit “the basis period for”.

(4) Omit subsection (4).

Taxation (International and Other Provisions) Act 2010

60

In TIOPA 2010, omit sections 22 to 24 (credit for foreign tax on overlap profit if credit for that tax already allowed).

PART 4 — Commencement

61

(1) Subject to sub-paragraph (3), the amendments made by Parts 1 to 3 of this Schedule have effect for the tax year 2024-25 and subsequent tax years.

(2) The amendments of section 70 of ITA 2007 (which applies for determining losses in previous tax years for certain purposes), made by paragraph 43 of this Schedule, have effect where the “tax year before the current tax year” mentioned in that section is the tax year 2024-25 or a subsequent tax year.

(3) In addition to the commencement provision made by sub-paragraph (1), sections 7B to 7D of ITTOIA 2005, inserted by paragraph 3 of this Schedule, have effect in relation to a person who—

(a) starts to carry on a trade, profession or vocation in the tax year 2023-24, and

(b) does not permanently cease to carry on the trade, profession or vocation in that tax year.

(And see Part 5 of this Schedule for further transitional provision in relation to such persons.)

PART 5 — Transitional provision: new trades etc

Application of this Part of this Schedule

62

(1) This Part of this Schedule applies in relation to a person (“the trader”) who—

(a) starts to carry on a trade (alone or in partnership) in the tax year 2023-24, and

(b) does not permanently cease to carry on the trade in that tax year.

(2) This Part of this Schedule applies to professions and vocations as it applies to trades.

Basis period for the tax year 2023-24

63

(1) Chapter 15 of Part 2 of ITTOIA 2005 (basis periods) applies as if sections 208 to 210 of that Act (rules where first accounting date shortly before end of tax year) were disregarded.

(2) Accordingly, the basis period for the tax year 2023-24, determined in accordance with section 199 of ITTOIA 2005, ends with 5 April 2024.

PART 6 — Transitional provision: continuing trades etc

Application of this Part of this Schedule

64

(1) This Part of this Schedule applies in relation to a person (“the trader”) who—

(a) carries on a trade (alone or in partnership) in the tax year 2023-24,

(b) does not start to carry on the trade in that tax year, and

(2) This Part of this Schedule applies to professions and vocations as it applies to trades.

Basis period for tax year 2023-24

65

(1) Chapter 15 of Part 2 of ITTOIA 2005 (basis periods) applies as if—

(a) the basis period for the tax year 2023-24 were, instead of the period determined in accordance with that Chapter, the period—

(i) beginning immediately after the end of the basis period for the tax year 2022-23 (determined in accordance with that Chapter as it applies in relation to that tax year), and

(ii) ending with 5 April 2024;

(b) section 220 of that Act were disregarded.

(2) In this Part of this Schedule, the “standard part” of the basis period for the tax year 2023-24 is the period of 12 months beginning with the start of that basis period (determined in accordance with sub-paragraph (1)(a)(i)).

(3) If the standard part of the basis period for the tax year 2023-24 ends before 31 March 2024 (or where an election under paragraph 67(3) has effect), there is a “transition part” of that basis period which—

(a) begins immediately after the end of the standard part, and

(b) ends with the date given by sub-paragraph (4).

(4) The date given by this sub-paragraph is—

(a) if the date (or the latest of the dates) to which accounts are drawn up in that tax year is 31 March or 1, 2, 3 or 4 April 2024, that date;

(b) in any other case (or where an election under paragraph 67(3) has effect), 5 April 2024.

Relevant maximum for purposes of cash basis election

66

(1) Sub-paragraph (2) applies if the basis period for the tax year 2023-24 (determined in accordance with paragraph 65(1)(a)), is longer than 12 months.

(2) For the purposes of section 31B of ITTOIA 2005 (relevant maximum for purposes of cash basis election), the amounts specified in subsections (3), (4) and (5) of that section, and the VAT threshold (within the meaning given by subsection (7) of that section), are proportionately increased.

Late accounting date rules

67

(1) This paragraph applies if—

(a) the standard part of the basis period for the tax year 2023-24, or

(b) any transition part of that basis period,

ends with 31 March or 1, 2, 3 or 4 April 2024 (“the late accounting date”).

(2) For the purposes of Chapter 2 of Part 2 of ITTOIA 2005—

(a) treat the profits or losses of the period beginning immediately after the late accounting date and ending with 5 April, as nil, and

(b) treat the actual profits or losses of that period as arising in the tax year 2024-25.

(3) The trader may, on or before the first anniversary of the normal self-assessment filing date for the tax year 2023-24, elect for sub-paragraph (2) not to apply.

(4) If an election under sub-paragraph (3) has effect—

(a) there is a transition part of the basis period for the tax year 2023-24 (whether or not there would otherwise be such a part), and

(b) that transition part ends on 5 April 2024 (instead of the date on which it would otherwise end).

Deductions for overlap profit allowed under this Part of this Schedule

68

References in this Part of this Schedule to a “deduction for overlap profit allowed under this Part of this Schedule” are to—

(a) any deduction for overlap profit that would be allowed under section 205 of ITTOIA 2005 (deduction for overlap profit in final tax year), were the trader to have permanently ceased to carry on the trade on 5 April 2024, or

(b) any deduction for overlap profit allowed under section 220 of that Act (deduction for overlap profit on change of accounting date) for a tax year before the tax year 2023-24 but not made for that earlier tax year (or any amount of such a deduction not made).

Trade profits if there is no transition part of the basis period for the tax year 2023-24

69

(1) Sub-paragraph (2) applies if there is no transition part of the basis period for the tax year 2023-24 (because the standard part ends on or after 31 March 2024 and there is no election under paragraph 67(3)).

(2) In calculating the profits of the tax year 2023-24 for the purposes of Chapter 2 of Part 2 of ITTOIA 2005, make any deduction for overlap profit allowed under this Part of this Schedule (see paragraph 68).

Trade profits if there is a transition part of the basis period for the tax year 2023-24

70

(1) Sub-paragraph (2) applies if there is a transition part of the basis period for the tax year 2023-24 (see paragraphs 65(3) and 67(4)(a)).

(2) In calculating the profits of the tax year 2023-24 for the purposes of Chapter 2 of Part 2 of ITTOIA 2005, take the following Steps.

Step 1Determine the amount of the profits of the tax year 2023-24 attributable to the standard part of the basis period for that tax year.To do this, apply Chapter 2 of Part 2 of ITTOIA 2005 as if references in that Act to the basis period for the tax year 2023-24 were to the standard part of the basis period for that tax year.

Step 2Determine the amount of the profits of the tax year 2023-24 attributable to the transition part of the basis period for that tax year.To do this, apply Chapter 2 of Part 2 of ITTOIA 2005 as if references in that Act to the basis period for the tax year 2023-24 were to the transition part of the basis period for that tax year.

Step 3Deduct from the amount given by Step 2 the amount of any deduction for overlap profit allowed under this Part of this Schedule (see paragraph 68).

Step 4Calculate the sum of the amounts given by Steps 1 and 3.If the amount given by either or both of—Step 3, andthis Step,is nil, or less than nil, the profits of the tax year 2023-24 for the purposes of Chapter 2 of Part 2 of ITTOIA 2005 is the amount given by this Step (and see paragraph 71 for the treatment of a loss, or an increased loss, for the tax year 2023-24 arising from this Step).Otherwise, proceed to Steps 5 and 6.

Step 5For the purposes of Step 6, and paragraphs 72 to 75, the amount of the trader’s “transition profits” for the tax year 2023-24 is the lesser of—the amount given by Step 3, andthe amount given by Step 4.

Step 6The amount of the profits of the tax year 2023-24 for the purposes of Chapter 2 of Part 2 of ITTOIA 2005 is—if the amount given by Step 1 is nil, or less than nil, such amount of the transition profits for the tax year 2023-24 as is treated (in accordance with paragraphs 72 and 73) as arising in that tax year;if the amount given by Step 1 is more than nil, the sum of that amount and such amount of the transition profits for the tax year 2023-24 as is treated (in accordance with paragraphs 72 and 73) as arising in that tax year.

Treatment of losses arising from deduction for overlap profit

71

(1) This paragraph applies if, by virtue of a deduction for overlap profit allowed and made under this Part of this Schedule (see paragraphs 68 and 69(2) and Step 3 of the calculation in paragraph 70(2))—

(a) the trader makes a loss for the tax year 2023-24 where the trader would (but for the deduction) have made a profit, or

(b) the trader makes a loss for the tax year 2023-24 that is greater than it would have been had the deduction not been made.

(2) Sections 89 to 91 of ITA 2007 (terminal trade loss relief) apply in relation to the trader as if—

(a) the trader had permanently ceased to carry on the trade on 5 April 2024, and

(b) the amount of the loss mentioned in sub-paragraph (1)(a), or the amount by which the loss mentioned in sub-paragraph (1)(b) is increased as a result of the deduction being made, were a terminal loss made in the trade in the final tax year.

(3) Nothing in this paragraph is to be taken to affect the further application of sections 89 to 91 of ITA 2007 in relation to the trade.

Spreading of transition profits

72

(1) This paragraph applies if the trader has transition profits for the tax year 2023-24 (see Step 5 of the calculation in paragraph 70(2)).

(2) The amount of the transition profits is spread over five tax years as follows.

(3) In each of the four tax years beginning with the tax year 2023-24, an amount equal to 20% of the amount of the transition profits is treated as arising and chargeable to income tax under Chapter 2 of Part 2 of ITTOIA 2005.

(4) In the fifth tax year, the balance of the amount of the transition profits is treated as arising and chargeable to income tax under Chapter 2 of Part 2 of ITTOIA 2005.

(5) Sub-paragraph (6) applies if, before the whole of the amount of the transition profits has been charged to income tax, the trader permanently ceases to carry on the trade.

(6) The balance of the amount of the transition profits is treated as arising, and chargeable to income tax under Chapter 2 of Part 2 of ITTOIA 2005, for the tax year in which the trader permanently ceases to carry on the trade.

Election to accelerate charge

73

(1) If the trader is liable to a charge to income tax for a tax year on an amount of the transition profits for the tax year 2023-24 (see Step 5 of the calculation in paragraph 70(2) and paragraph 72), the trader may elect for an additional amount of those profits to be treated as arising in the tax year.

(2) The election must be made on or before the first anniversary of the normal self-assessment filing date for the tax year to which it relates.

(3) The election must specify the amount of the transition profits to be treated as arising in the tax year (which may be any amount of those profits not previously charged to tax).

(4) If an election is made, paragraph 72 applies in relation to any subsequent tax year as if the amount of the transition profits (as reduced by any previous application of this paragraph) were reduced by the amount given by the following formula—

$$A×5T$where—A is the additional amount of the transition profits treated as arising in the tax year for which the election is made;T is the number of tax years remaining after that tax year in the period of five tax years referred to in paragraph 72.$

Transition profits ignored in averaging of profits of farmers and creative artists

74

No amount of the transition profits for the tax year 2023-24 treated as arising and chargeable to income tax in a tax year (see Step 5 of the calculation in paragraph 70(2) and paragraphs 72 and 73) is to be taken into account in determining “the relevant profits” for the purposes of Chapter 16 of Part 2 of ITTOIA 2005 (averaging profits of farmers and creative artists).

Calculation of income tax liability on amount of transition profits

75

(1) This paragraph applies for determining the trader’s liability to income tax for a tax year in which an amount of the transition profits for the tax year 2023-24 is chargeable to income tax under Chapter 2 of Part 2 of ITTOIA 2005 (see Step 5 of the calculation in paragraph 70(2) and paragraphs 72 and 73).

(2) To find the trader’s liability to income tax for the tax year, section 23 of ITA 2007 applies as if—

(a) the amount of the transition profits chargeable to income tax were a separate component of total income (“the transition component”),

(b) the transition component were relieved in accordance with Step 2,

(c) the amount of the transition component left after Step 2 were left out of the calculation of net income (and subsequent Steps), and

(d) for the purposes of Steps 5 to 7, the amount (if any) given by sub-paragraph (3) were treated as an amount of tax calculated at Step 4.

(3) The amount given by this sub-paragraph is the difference between—

(a) the total amount of tax that would be calculated at Step 5 if Steps 1 to 4 were applied in accordance with sub-paragraph (2)(a) to (c) (ignoring sub-paragraph (2)(d)), and

(b) the total amount of tax that would be calculated at Step 5 if Steps 1 to 4 were applied in accordance with sub-paragraph (2)(a) and (b) (ignoring sub-paragraph (2)(c) and (d)).

(4) The Steps mentioned in sub-paragraphs (2) and (3) are Steps of the calculation in section 23 of ITA 2007.

Other modifications

76

(1) For the purposes of this Part of this Schedule, the following provisions apply subject to the following modifications.

(2) Section 24A of ITA 2007 (limit on deductions at Step 2 of the calculation in section 23) applies as if, in subsection (7)(c), the reference to a deduction allowed under section 205 or 220 of ITTOIA 2005 includes a deduction made under paragraph 69(2), or Step 3 of the calculation in paragraph 70(2), of this Schedule.

(3) Section 24 of TIOPA 2010 (claw-back of relief under section 22(2)) applies as if, in subsections (1)(b) and (3), references to an amount deducted under section 205 or 220 of ITTOIA 2005 included an amount deducted under paragraph 69(2), or Step 3 of the calculation in paragraph 70(2), of this Schedule.

PART 7 — Transitional provision: notional businesses

Application of this Part of this Schedule

77

This Part of this Schedule applies in relation to a partner in a firm who—

(a) is treated, in accordance with sections 854 to 855A of ITTOIA 2005, as carrying on a notional business in the tax year 2023-24, and

(b) is not treated as having started or permanently ceased to carry on the notional business in that tax year.

Basis period for tax year 2023-24

78

The basis period for the partner’s notional business for the tax year 2023-24 is the same as the basis period for the partner’s notional trade for that tax year given by paragraph 65(1)(a) of this Schedule.

Deductions for overlap profit allowed under this Part of this Schedule

79

(1) In calculating the profits of the notional business of the tax year 2023-24 for the purposes of Part 3, 4 or 5 of ITTOIA 2005—

(a) ignore section 220 of that Act,

(b) make any deduction for overlap profit that would be allowed under section 205 of that Act (deduction for overlap profit in final tax year), were the partner treated as having permanently ceased to carry on the notional business on 5 April 2024, and

(c) make any deduction for overlap profit allowed under section 220 of that Act (deduction for overlap profit on change of accounting date) for a tax year before the tax year 2023-24 but not made for that earlier tax year (or any amount of such a deduction not made).

Deducted overlap profits in excess of other profits of tax year 2023-24

80

(1) Sub-paragraph (2) applies where—

(a) a deduction is to be made under paragraph 79, and

(b) the amount to be deducted (or the sum of the amounts to be deducted) exceeds the amount which would otherwise be the amount of the profits of the notional business of the tax year 2023-24.

(2) The amount of the excess is to be deducted in calculating the partner’s income for the tax year 2023-24.

SCHEDULE 2

PART 1 — Introduction and conditions for being a QAHC

Introduction

1

(1) This Part of this Schedule (after this paragraph) sets out the conditions that must be met for a company to be a qualifying asset holding company (a “QAHC”).

(2) Parts 2 and 3 of this Schedule—

(a) set out how a company becomes, and ceases to be, a QAHC, and

(b) set out some of the consequences of becoming or ceasing to be a QAHC (for example, the effect on a company’s accounting periods).

(3) Part 4 makes provision about groups of companies that include QAHCs.

(4) Part 5 makes provision about the application of provisions about close companies, exchange gains and basis of accounting to QAHCs.

(5) Part 6 makes provision about the application of transfer pricing rules and corporate interest restriction rules to QAHCs.

(6) Part 7 makes provision about the treatment of certain amounts payable by a QAHC.

(7) Part 8 makes provision in relation to an overseas property business of a QAHC.

(8) Part 9 makes provision about the taxation of disposals by QAHCs of overseas land and certain shares.

(9) Part 10 provides for an exemption from stamp duty and stamp duty reserve tax on the repurchase by an QAHC of its own shares or loan capital.

(10) Part 11 amends ITA 2007 to provide for an exemption from the duty to deduct under section 874 of that Act (withholding tax).

(11) Part 12 makes supplementary provision (including provision about the meaning of terms used in this Schedule).

Conditions for being a qualifying asset holding company

2

(1) A company is a qualifying asset holding company if—

(a) it is UK resident,

(b) it meets the ownership condition set out in paragraph 3,

(d) it meets the investment strategy condition set out in that paragraph,

(e) it is neither a securitisation company nor a UK REIT,

(f) no equity securities of the company are listed or traded on a recognised stock exchange or any other public market or exchange, and

(g) an entry notification is in force in relation to the company (see paragraph 14).

(2) But see—

(a) paragraph 16, which allows a company to treated as meeting the ownership condition in its first two years of being a QAHC, and

(b) paragraph 29, which contains provision about when a company that was a QAHC ceases to be a QAHC (and see also paragraphs 27(3) to (5) and 28 which make provision about cure periods and wind-down periods).

Ownership condition

3

(1) The ownership condition is met in relation to a company if—

(a) the sum of relevant interests in it held by persons who are not category A investors does not exceed 30%, and

(b) where the company has issued securities that entitle their holders to a greater proportion of profits or assets of a particular class (“an enhanced class”) than to other profits or assets of the company, the sum of relevant interests in that class of profits or assets held by persons who are not category A investors does not exceed 30%.

(2) A person has a relevant interest in a company if, as a result of a direct or indirect interest the person has in the company, the person—

(a) is beneficially entitled to a proportion of the profits available for distribution to equity holders of the company,

(b) is beneficially entitled to a proportion of the assets of the company for distribution to its equity holders on a winding up, or

and the amount of that relevant interest, for the purposes of the calculation in sub-paragraph (1)(a), is the greatest of such of those proportions as arise as a result of that interest.

(3) A person has a relevant interest in an enhanced class of a company if, as a result of a direct or indirect interest the person has in the company, the person—

(a) is beneficially entitled to a proportion of the profits that fall within that class that are available for distribution to equity holders of the company, or

(b) is beneficially entitled to a proportion of the assets of the company that fall within that class for distribution to its equity holders on a winding up,

and the amount of that relevant interest, for the purposes of the calculation in sub-paragraph (1)(b), is the greatest of such of those proportions as arise as a result of that interest.

(4) Paragraphs 4 to 7 set out how to determine the amounts of relevant interests.

(5) Those amounts are to be expressed as percentages, but there is no need to adjust any of those amounts if the application of the rules in those paragraphs has the result that the total amount of relevant interests in a company or an enhanced class of a company is more than 100% (as may sometimes be the case).

(5A) See also paragraph 59, which makes provision for parties to alternative finance arrangements who are equivalent to equity holders to be treated as such.

(6) In this paragraph—

“securities” means—ordinary shares within the meaning of section 160 of CTA 2010 (meaning of ordinary shares for the purposes of section 158(1)(a) of that Act), andloans, other than normal commercial loans;

“normal commercial loan” is to be construed in accordance with section 162 of that Act (meaning of normal commercial loan for the purposes of sections 158(1)(b) and 159(4)(b) of that Act).

Only direct and certain indirect interests to constitute “relevant interests”

4

(1) An interest of a person (“T”) only constitutes a relevant interest in a company, or in an enhanced class of that company, if as a result of that interest T is—

(a) beneficially entitled to profits or assets directly,

(b) beneficially entitled to profits or assets—

(i) partly directly or through a company (“C”), other than a QAHC, that is beneficially entitled to those profits or assets directly and is connected to T, and

(ii) partly through another person that is not a QAHC or through other persons that are not QAHCs, or

(2) But where T has an interest falling within sub-paragraph (1)(b) partly as a result of an entitlement through C, in determining the amount of that interest for the purposes of paragraph 3(2) or (3), ignore any amount attributable to the entitlement through C.

(2A) For the purposes of sub-paragraph (1)(b)(i), a beneficial entitlement of T or C held solely through one or more QAHCs is to be treated as held by that person directly.

(3) For the purposes of sub-paragraph (1)(b)(ii), where—

(a) T is connected to a person (“U”), other than C, who is not a category A investor,

(b) U has an indirect beneficial entitlement to profits or assets of the company through another person that is not a QAHC, or through other persons that are not QAHCs, and

(c) that entitlement would not otherwise be included in the determination of relevant interests in the company, or in an enhanced class of the company for the purposes of paragraph 3(2) or (3),

that entitlement is to be treated as an entitlement of T.

(4) In this paragraph, “connected”, in relation to two persons being connected with one another, is to be read in accordance with sections 1122 and 1123 of CTA 2010, but for the purposes of this paragraph section 1122(7) has effect as if any reference to a partnership did not include a partnership that is a qualifying fund.

Determining relevant interests

5

(1) This paragraph applies for the purpose of determining, at any time, the proportion of profits or assets available for distribution that a person (“the relevant person”) with a relevant interest in a company (“the relevant company”), or with a relevant interest in an enhanced class of the relevant company, is beneficially entitled to.

(2) When making a determination in relation to a relevant interest in the relevant company, only include—

(a) profits that are, or would be if the relevant company were a QAHC, profits of its QAHC ring fence business (see paragraph 20), and

(b) assets that are, or would be, used wholly or partially for the purposes of that business.

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