Legalize / United Kingdom / Public General Act

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

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(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.

(3) When making a determination in relation to a relevant interest in an enhanced class of the relevant company, only include profits or assets falling within that class that fall within sub-paragraph (2)(a) or (b).

(4) Sections 165 and 166 of CTA 2010 (calculation of proportion of assets and profits for distribution) and sections 169 to 178 of that Act (shares or securities with limited or temporary rights and options) apply for the purpose of determining the proportion of profits or assets available for distribution as if—

(a) any reference to company A were to the relevant person,

(b) any reference to company B were to the relevant company,

(c) the references to the relevant accounting period were to the accounting period of the relevant company within which the determination is made,

(d) references in section 165 to “total profits” were to the total profits included in the determination as a result of sub-paragraph (2) or (as the case may be) (3),

(e) references in section 166 to the “assets amount” only included assets of the relevant company included in the determination as a result of sub-paragraph (2) or (3),

(f) references in that section to the “liabilities amount” only included—

(i) where determining relevant interests in the relevant company, such of its liabilities as are, or would be if the relevant company were a QAHC, attributable (on a just and reasonable basis) to its QAHC ring fence business, and

(ii) where determining relevant interests in an enhanced class of the relevant company, such of those liabilities as are also attributable (on a just and reasonable basis) to that class,

(g) subsection (4) of section 165 were omitted,

(h) in section 169(1) for “182” there were substituted “178”,

(ha) in sections 170(3) and 172(3) (shares or securities with limited or temporary rights), for “less than” there were substituted “more than”,

(hb) in section 174 (option arrangements)—

(i) in subsection (1), in Step 4, for “lowest proportion” there were substituted “highest proportion”, and

(ii) in subsection (2), for “less than” there were substituted “more than”,

(hc) in sections 175(3), 176(3), 177(3) and 178(3) (cases in which more than one of sections 170, 172, and 174 apply), for “lowest proportion” there were substituted “highest proportion”,

(i) in section 170, subsection (6) were omitted,

(j) in sections 170(4) and 172(4), for “, 178 and 180” there were substituted “and 178”,

(k) in section 174(3), “and 180” were omitted, and

(l) in sections 173 and 174, references to the participating equity holders were—

(i) where determining relevant interests in the relevant company, to persons who have a relevant interest in the relevant company, or

(ii) where determining relevant interests in an enhanced class of the relevant company, to persons who have a relevant interest in that class.

(5) Where a person has a beneficial entitlement to profits that arises under investment management profit-sharing arrangements, use the maximum proportional entitlement that could arise over the life of the arrangements, instead of the actual proportion at any particular time.

(6) For the purposes of sub-paragraph (5) “investment management profit-sharing arrangements” means arrangements under which a person has a variable entitlement to a proportion of the profits of investments in connection with the provision of investment management services in relation to those investments.

(7) Where a person is entitled to a dividend which amounts to a fee for administrative services provided in connection with investment in the relevant company, that entitlement is treated as not amounting to a relevant interest.

Determining relevant interests: transparent entities

6

(1) The normal rule is that transparent entities do not have relevant interests in a company or in an enhanced class of a company (in their own right).

(2) But where a beneficial entitlement to profits or assets of a company, or of an enhanced class of the company, arises as a result of a person’s participation in a transparent qualifying fund—

(a) where the beneficial entitlement arises partly as described in paragraph 4(1)(b)(i), the entitlement arising as a result of that participation is to be treated as an entitlement of that person described in paragraph 4(1)(b)(ii) (entitlement partly through another person), and

(b) otherwise, is to be treated as an entitlement of the fund (rather than of that person).

And references to a person in this paragraph, and in paragraphs 3 to 5, are to be treated as including any such fund that is not a person.

(3) Where securities of a company held through a transparent qualifying fund confer voting power in that company, that voting power is to be treated as power of the fund.

(4) Sub-paragraphs (5) and (6) apply when making a determination in relation to the relevant interests in a company or in an enhanced class of a company of—

(a) a partner of a partnership, or

(b) a beneficiary of a trust under which the beneficiary is absolutely entitled to the property which is the subject of the trust and any profits arising from that property,

unless the partnership or trust constitutes a transparent qualifying fund.

(5) Where—

(a) such a partner or a trustee of such a trust has a priority entitlement, over other partners or trustees, to profits or gains arising from the partnership or trust, and

(b) that priority entitlement arises as a result of contractual arrangements relating to the management of the investments of the partnership or trust,

those profits or gains are to be ignored in making any determination of any person’s relevant interest in a company or in an enhanced class of a company to the extent the entitlement is related to those arrangements.

(6) Where securities of a company held through such a partnership or trust confer voting power in that company, that power is to be treated as the power of the partners, or (as the case may be) the beneficiaries, divided between them in the same proportions as they would be entitled to profits arising from those securities.

(7) In this paragraph—

“securities” has the same meaning it has in paragraph 3;

an entity (“E”) is “transparent” if investments of E would be regarded, for the purposes of corporation tax on chargeable gains, as the investments of another entity (such as a member or partner of E or the beneficiary of a trust).

References to voting power

7

(1) References to “voting power” in paragraphs 3 to 6 are to be construed in accordance with this paragraph.

(2) The amount of voting power a person has in a company is to be determined by reference to the proportion of the voting power that person has in the case of a vote at a forum of the company’s members (for example, in the case of a company incorporated in the United Kingdom, at its annual general meeting) on a standard resolution.

(3) The reference in sub-paragraph (2) to a standard resolution is to a resolution in relation to which there are no rules specific to resolutions of that type which vary the voting power of members in relation to a resolution of that type as compared to other types of resolutions.

Category A investors

8

(1) The following are category A investors—

(a) a QAHC;

(b) a qualifying fund (see paragraph 9);

(d) an intermediate company (see paragraph 11);

(e) a public authority falling within sub-paragraph (2).

(2) Those public authorities are—

(a) any Minister of the Crown (within the meaning of the Ministers of the Crown Act 1975);

(b) any United Kingdom government department;

(d) any Northern Ireland department;

(e) the Welsh Ministers;

(f) any local authority or local authority association in the United Kingdom;

(g) the Education Authority of Northern Ireland;

(h) the Northern Ireland Housing Executive;

(i) any health service body (within the meaning given by section 985 of CTA 2010);

(j) any public authority who exercises public functions in connection with the coordination or provision of public transport for a region of the United Kingdom (for example, Transport for London or an executive for an integrated transport area, a combined authority area or a passenger transport area).

(3) The Treasury may by regulations provide that any other public authority specified, or falling within a description specified, in the regulations is also a category A investor.

Qualifying funds

9

(1) In this Schedule “qualifying fund” means a fund that meets the diversity of ownership condition.

(2) The diversity of ownership condition is met if—

(a) the fund is a collective investment scheme , or is an AIF that is not a collective investment scheme only by reason of it being a body corporate, and—

(i) the fund meets or, if the fund is part of multi-vehicle arrangements, the arrangements meet the conditions in regulation 75(2), (3) and (4)(a) of the Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001) (genuine diversity of ownership condition), or

(ii) the fund or those multi-vehicle arrangements would meet the condition in regulation 75(5) of those regulations, if regulation 75(4)(b) were omitted,

(b) the fund is not close (whether or not it is a collective investment scheme), or

(3) For the purpose of applying the conditions referred to in sub-paragraph (2)(a)(i) and (ii)—

(za) the Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001) have effect as if references to a fund included—

(i) multi-vehicle arrangements,

(ii) a collective investment scheme which is not an offshore fund, and

(iii) an AIF that is not a collective investment scheme only by reason of it being a body corporate (and which is not an offshore fund);

(a) the condition in regulation 75(2) of those Regulations is to be treated as met in relation to a fund or multi-vehicle arrangements marketed before 1 April 2022 if the fund or multi-vehicle arrangements has produced, and made available to HMRC, a statement prepared by the manager of the fund or multi-vehicle arrangements which—

(i) specifies the intended categories of investor when the fund or multi-vehicle arrangements was marketed,

(ii) confirms that, and describes how, the interests in the fund or multi-vehicle arrangements were made widely available, and

(iii) confirms that, and describes how, interests in the fund or multi-vehicle arrangements were marketed and made available in accordance with the requirements of regulation 75(4)(a) of those regulations (and that provision is to be read accordingly);

(b) the fact that (for any reason) the capacity of a fund or multi-vehicle arrangements to receive investments is limited does not prevent regulation 75(3) of those regulations (including as it applies for the purposes of regulation 75(5) of those regulations) from being met.

(4) Sub-paragraph (3)(b) does not apply if—

(a) the limited capacity of the fund or multi-vehicle arrangements to receive investments is fixed by the documents of the fund or multi-vehicle arrangements (or otherwise), and

(b) a pre-determined number of specific persons, or specific groups of connected persons (within the meaning of section 1122 of CTA 2010 (“connected” persons)), make investments in the fund or multi-vehicle arrangements that collectively exhausts all, or substantially all, of that capacity.

(5) To determine if a fund is close—

(a) in the case of a company that has share capital, determine whether it is a close company in accordance with the rules in Chapter 2 of Part 10 of CTA 2010 but—

(i) any person who would be regarded as a participator (for the purposes of that Part) only as a result of being a creditor of the fund in respect of a normal commercial loan (within the meaning it has in paragraph 3) is not to be regarded as a participator,

(ii) any interest a participator has as a creditor of the fund in respect of a normal commercial loan is not to be regarded as an interest of that participator,

(iii) as if paragraph (a) of section 450(3) of that Act were omitted,

(iv) paragraphs 5(5) and 6(5) and (6) of this Schedule apply for the purposes of determining the rights of participators in the fund as they apply for the purposes of determining relevant interests in a QAHC, and

(v) subject to the modifications set out in paragraph 46(2)(a) to (e) of Schedule 5AAA to TCGA 1992 (meaning of close company etc), or

(b) in the case of any other fund, make that same determination—

(i) as if the fund were a company that has share capital, and

(ii) as if the rights of the participants in the fund were shares in a company.

(6) In making a determination under sub-paragraph (5)(b), neither a manager of a fund nor a general partner in a limited partnership that is a collective investment scheme , or is an AIF that is not a collective investment scheme only by reason of it being a body corporate, is to be regarded as having control of that fund or scheme unless that manager or partner would be treated as having control of it as result of satisfying a condition in section 450(3)(b) to (d) of CTA 2010 (whether alone or with other persons).

(7) A fund is 70% controlled by category A investors if a category A investor, or more than one category A investor between them, directly or indirectly possesses—

(a) 70% or more of the voting power in the fund,

(b) so much of the fund as would, on the assumption that the whole of the income of the fund were distributed among persons with interests in the fund, entitle that investor or those investors to receive 70% or more of the amount so distributed, and

(c) such rights as would entitle that investor or those investors, in the event of the winding up of the fund or in any other circumstances, to receive 70% or more of the assets of the fund which would then be available for distribution among persons with interests in it.

(8) For the purposes of sub-paragraph (7)—

(a) a category A investor indirectly possesses something if the investor possesses it through a body corporate or a series of bodies corporate;

(b) the interests of the participants in a category A investor that is a collective investment scheme that is transparent (within the meaning given by paragraph 6(7)) are to be treated as interests of the investor (instead of its participants) if that investor meets the diversity of ownership condition as a result of sub-paragraph (2)(a);

(c) in determining, for the purposes of sub-paragraph (7)(b) or (c), proportions of income or assets persons with an interest in the fund would be entitled to, ignore any interest any person has as a creditor of the fund in respect of a normal commercial loan (within the meaning it has in paragraph 3);

(d) paragraphs 5(5) and 6(5) and (6) apply for the purposes of determining the interests of persons in a fund as they apply for the purposes of determining relevant interests in a QAHC.

(9) For the purposes of sub-paragraphs (5)(a)(i) and (ii) (as they apply by virtue of sub-paragraph (5)(b)) and (8)(c), references to a creditor of a fund are to be treated, in the case of a fund that is a partnership, as not including any creditor who is a partner of that fund.

(10) In this paragraph—

“fund” means a collective investment scheme or an AIF;

“manager”, in relation to a fund, means—any person who is the manager of the property that is the subject of or held by the fund, orany other person who has, or is expected to have, day-to-day control of that property;

“multi-vehicle arrangements” means arrangements comprising two or more funds under which an investor in one of those funds would reasonably regard that investment as an investment in the arrangements as a whole rather than exclusively in any particular fund.

Relevant qualifying investors

10

The following persons are relevant qualifying investors—

(a) a person acting in the course of a long-term insurance business (that is, the activity of effecting or carrying out contracts of long-term insurance within the meaning of the Financial Services and Markets (Regulated Activities) Order 2001 (S.I. 2001/544)) who—

(i) is authorised under FISMA 2000 to carry on such business, or

(ii) has an equivalent authorisation under the law of a territory outside the United Kingdom to carry on such business;

(b) a person who cannot be liable for corporation tax or income tax (as relevant) on the ground of sovereign immunity;

(d) a person who is resident in a territory outside the United Kingdom in accordance with the law of that territory relating to taxation and is the equivalent of a UK REIT;

(e) a company that is a collective investment vehicle for the purposes of Schedule 5AAA to TCGA 1992 as a result of any of paragraphs (d), (e) or (f) of paragraph 1(1) of that Schedule (non-UK resident company meeting property income condition);

(f) the trustee or manager of a pension scheme (within the meaning given by section 150(1) of FA 2004) other than an investment-regulated pension scheme (within the meaning given by paragraphs 1 and 2 of Schedule 29A to that Act);

(g) a charity, unless—

(i) the main source of donations to that charity is—

(a) individuals involved in the management of the company in respect of which the charity would otherwise be a relevant qualifying investor, and

(b) persons connected (within the meaning of section 1122 of CTA 2010 (“connected” persons)) with such individuals, or

(ii) the charity is controlled (within the meaning of section 450 of that Act) by such individuals or persons.

Intermediate company

11

(1) For the purposes of this Part of this Schedule, a company is an “intermediate company” if—

(a) it meets the activity condition in paragraph 13(1), and

(b) it is wholly or almost wholly owned by another category A investor, other than a QAHC, or by other category A investors who are not QAHCs.

(2) For the purposes of sub-paragraph (1), a company is wholly or almost wholly owned by a category A investor, or by category A investors, if that investor has, or those investors between them have, a 99% investment in the company.

(3) Whether a category A investor has, or category A investors between them have, a 99% investment in a company is determined by applying paragraph 9 of Schedule 1A to TCGA 1992 (meaning of “25% investment”) as if—

(a) in sub-paragraph (1) of that paragraph—

(i) for the words before paragraph (a) there were substituted “A category A investor or category A investors together (“P”) has or have a 99% investment in a company (“C”) if all of the following conditions are met—”;

(ii) paragraph (a) were omitted;

(iii) in each of paragraphs (b), (c) and (d), for “25%” there were substituted “99%”;

(iv) for the “or” at the end of paragraph (c) there were substituted “and”;

(b) in sub-paragraph (7), “or indirect” were omitted in both places it occurs;

(d) any reference to a person, other than the references in sub-paragraph (11) of that paragraph, included a qualifying fund that is transparent (within the meaning given by paragraph 6(7)), and any interests of its participants that are held through the fund were interests of the fund itself;

(e) paragraph 10 of that Schedule were omitted.

Requirement of QAHC to monitor compliance with ownership condition

12

A QAHC must take reasonable steps to monitor whether the ownership condition is met in relation to it.

Activity condition and investment strategy condition

13

(1) The activity condition is met if—

(a) the main activity of the company is the carrying on of an investment business, and

(b) the other activities of the company (if any)—

(i) are ancillary to the carrying on of that business, and

(ii) are not carried on to any substantial extent.

(2) The investment strategy condition is met if the company’s investment strategy does not involve—

(a) the acquisition of equity securities that are listed or traded on a recognised stock exchange or any other public market or exchange otherwise than for the purpose of facilitating a change in control of the issuer of those securities with the result that its securities are no longer so listed or traded, or

(b) other interests that derive their value from such securities.

(3) A company (“C”) may make an election under this sub-paragraph that all relevant equity securities held by C are to be treated as if they were not equity securities listed or traded on a recognised stock exchange or any other public market or exchange for the purposes of—

(a) the investment strategy condition as it applies to C, and

(b) that condition as it applies to any other company with a relevant interest in C.

(4) Equity securities are “relevant” if—

(a) they are listed or traded on a recognised stock exchange or any other public market or exchange,

(b) they are held directly by C,

(c) they were not acquired at a time when the election had effect from a company that is a member of the same group as C, other than a company that was a QAHC at the time of the acquisition, and

(d) where C has previously been and ceased being a QAHC, they were acquired after the most recent occasion on which C became a QAHC.

(5) An election under sub-paragraph (3)—

(a) must be notified to HMRC,

(b) has effect only while the company is a QAHC,

(d) may not otherwise be revoked.

(6) Where an election under sub-paragraph (3) has effect, any dividend or other distribution received by C in respect of relevant equity securities that would otherwise be exempt for the purposes of section 931A(1) of CTA 2009 (charge to tax on distributions received) is to be treated as not exempt for the purposes of that section.

(7) Where—

(a) C disposes of relevant equity securities (“the dispossessed securities”), and

(b) within the period of thirty days after the disposal, C acquires securities (“the acquired securities”) of the same class,

any dividend or other distribution received by a person in respect of holding the acquired securities in the period (“the dispossession period”) commencing with the disposal by C of the dispossessed securities and ending with the acquisition by C of the acquired securities is to be treated as having been received by C for Corporation Tax purposes.

(8) But the amount of any dividend or other distribution treated as received by C as a result of sub-paragraph (7) is limited to the amount of the dividend or other distribution C would have received had C held the dispossessed securities throughout the dispossession period.

(9) Equity securities are not to be treated as being of the same class unless they are so treated by the practice of the recognised stock exchange, other public market or exchange they are listed or traded on.

PART 2 — Becoming a QAHC

Entry notification

14

(1) This paragraph makes provision about the making of a notification to HMRC by a company that intends to be a QAHC (an “entry notification”).

(2) An entry notification must—

(a) state the name and (where it has one) the Unique Taxpayer Reference of the company,

(b) specify the date on which it is intended that the company should become a QAHC, and

(i) that on that date, the company will meet all of the conditions in paragraph 2(1), or

(ii) that on that date the company will meet all of those conditions except for the ownership condition, but it intends to rely on paragraph 16(4) (ownership condition treated as met for first two years of entry into QAHC regime).

(3) The date specified may be no earlier than the later of—

(a) the day after the day on which the entry notification is made to HMRC, and

(b) 1 April 2022.

(4) Where an entry notification is made by a company that, at the time of making it, is resident in a territory outside the United Kingdom, the notification must also—

(a) state the territory in which the company is currently resident,

(b) state any registration number the company has in that territory,

(5) Where a company makes the declaration mentioned in sub-paragraph (2)(c)(ii) in an entry notification, the notification must also include a declaration that the company reasonably expects the ownership condition to be met within 2 years of becoming a QAHC.

(6) An entry notification comes into force in relation to the company at the beginning of the date specified in accordance with sub-paragraph (2)(b) and continues in force until an exit notification under paragraph 25 comes into force.

(7) Where a company has ceased to be a QAHC, a new entry notification must be made for it to become a QAHC again, other than as a result of paragraph 27(2) (retrospective curing of non-deliberate breach of the activity condition).

Entry into regime

15

(1) A company becomes a QAHC at the beginning of the first day on which all of the relevant conditions are met.

(2) The “relevant conditions” are—

(a) where the company has made an entry notification that includes the declaration mentioned in paragraph 14(2)(c)(i), the conditions in paragraph 2(1), or

(b) where the company has made an entry notification that includes the declaration mentioned in paragraph 14(2)(c)(ii), all of those conditions apart from the ownership condition.

Ownership condition treated as met for initial period

16

(1) Sub-paragraph (4) applies in relation to a company that has made an entry notification that includes the declaration mentioned in paragraph 14(2)(c)(ii).

(2) Sub-paragraph (4) also applies in relation to a company if—

(a) the company meets the ownership condition on becoming a QAHC,

(b) within the first 2 years of its becoming a QAHC, it ceases to meet that condition, and

(c) as soon as reasonably practicable after ceasing to meet that condition the QAHC has notified HMRC of its intention to rely on that sub-paragraph.

(3) A notification under sub-paragraph (2)(c) must—

(a) include a declaration by the QAHC that it reasonably expects the ownership condition to be met before the end of the period of 2 years beginning with the day on which the QAHC became a QAHC;

(b) set out details of the steps (if any) the QAHC has taken, or expects to take, in order to secure the meeting of the ownership condition before the end of that period.

(4) Where this sub-paragraph applies in relation to a company—

(a) the ownership condition is treated as being met in relation to that company for the period of 2 years, or such longer period as HMRC may in writing agree to, beginning with the day on which the company became a QAHC, and

(b) any breach of that condition that occurred before this sub-paragraph applied is treated has having not occurred.

(5) But if, at any time during that period, it becomes apparent to the QAHC that there is no reasonable expectation of the ownership condition being met by the end of that period—

(a) the QAHC must notify HMRC of that fact as soon as reasonably practicable, and

(b) sub-paragraph (4) ceases to apply from the time when it became so apparent.

Corporation tax consequences of becoming a QAHC

17

(1) For the purposes of corporation tax, when a company becomes a QAHC—

(a) a new accounting period begins at the beginning of the day on which it becomes a QAHC, and

(b) accordingly, its previous accounting period ends at the end of the day before it became a QAHC.

(2) The following are to be treated, for the purposes of corporation tax, as sold by a company immediately before becoming a QAHC and reacquired immediately after so becoming—

(a) any overseas land it holds;

(b) any loan relationship or derivative contract the company is party to for the purposes of an overseas property business of the company, to the extent (apportioned on a just and reasonable basis)—

(i) the relationship or contract is attributable to those purposes, and

(ii) profits arising from that relationship or contract will be exempt from corporation tax as a result of paragraph 52(4);

(3) The sale and reacquisition deemed under sub-paragraph (2) is to be treated as being for a consideration equal to the market value of the assets.

(4) Where—

(a) a company (“C”) becomes a QAHC,

(b) C holds a substantial shareholding in another company (see Schedule 7AC to TCGA 1992) as a result of holding qualifying shares,

(d) at the time of the deemed sale, the shares had been held by C for less than 12 months,

(e) C continues to hold those shares until they have been held for a period of 12 months (whether or not C remains a QAHC at the end of that period), and

(f) if C were to dispose of them immediately after the end of that period, any gain on that disposal would not be a chargeable gain as a result of an exemption under Part 1 of Schedule 7AC to TCGA 1992 (exemptions for disposals by companies with substantial shareholding),

any gain accruing to C on the deemed sale of the shares is not a chargeable gain.

(5) But for the purposes of sub-paragraph (4)(f), Schedule 7AC to TCGA 1992 has effect as if—

(a) paragraph 9 of that Schedule (aggregation of holdings of group companies) were omitted, and

(b) in paragraph 19(1), the references to the time of the disposal were instead to the end of the 12 month period referred to in sub-paragraph (4)(e).

(6) Paragraph 11 of Schedule 7AC to TCGA 1992 (effect of deemed disposal and reacquisition) has effect as if any reference to a “deemed disposal and reacquisition” did not include a deemed sale and reacquisition under sub-paragraph (2) of this paragraph.

Application of paragraph 17(2) to formerly non-resident companies

18

Paragraph 17(2) does not apply to assets held by a company that was previously resident in a territory outside the United Kingdom and became UK resident within the 30 days before it became a QAHC if those assets were held immediately before it became UK resident.

Adjustment of gains to avoid double charge

19

Where—

(a) a chargeable gain (the “relevant gain”) accrues to a company on a deemed sale of qualifying shares as a result of paragraph 17(2), and

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