Finance (No. 2) Act 2023

(663) (1) The applicable rate by reference to which a basic amount of estate income is grossed up for the purposes of sections 656 and 657 depends on the rate at which income tax was borne by the parts of the aggregate income of the estate from which section 679 treats the basic amount as having been paid. (2) If the same rate was borne by all of the income from which section 679 treats the basic amount as having been paid, the applicable rate is that rate. (3) If different rates were borne by different parts of the income from which section 679 treats the basic amount as having been paid, each of those rates is the applicable rate by reference to which the corresponding part of the basic amount is grossed up.

The applicable rate for grossing up for determining shares in an estate in the final tax year

2

• (1) Chapter 6 of Part 5 of ITTOIA 2005 (beneficiaries’ income from estates in administration) is amended as follows.

• (2) In section 668 (reduction in share of residuary income of estate)—

• (a) in subsection (1), in paragraph (b), for “(grossed up where subsection (5) applies)” substitute “grossed up, where the estate is a UK estate, by the applicable rate (see subsections (5A) to (5C))”;

• (b) for subsection (5) substitute—

(5A) The applicable rate by reference to which a sum within subsection (1)(b) is grossed up depends on the rate at which income tax was borne by the parts of the aggregate income of the estate from which section 679A treats the sum as having been paid. (5B) If the same rate was borne by all the income from which section 679A treats the sum as having been paid, the applicable rate is that rate. (5C) If different rates were borne by different parts of the income from which section 679A treats the sum as having been paid, each of those rates is the applicable rate by reference to which the corresponding part of the sum is grossed up.

• (3) After section 679 insert—

(679A) (1) The part of the aggregate income of the estate from which a sum within section 668(1)(b) is treated as paid is determined by applying assumptions A and B in that order. (2) Assumption A is that if there are different persons with an absolute interest in the residue of the estate, such apportionments of the aggregate income of the estate in respect of those interests are to be made as are just and reasonable for the different interests. (3) Assumption B is that sums are paid from the income to which a person’s share of the residuary estate relates in descending order, starting with the income bearing income tax at the highest rate and ending with the income bearing income tax at the lowest rate. (4) If some, but not all, of the aggregate income of the estate is income within section 680, assumption C is applied before assumptions A and B. (5) Assumption C is that the basic amount is paid from income that is not within section 680 before it is paid from income within that section. (6) Assumptions A and B then apply— (a) first to determine the part of the income not within that section from which the basic amount is paid, and (b) then to determine the part of the income within that section from which the basic amount is paid.

• (4) In section 680 (income treated as bearing income tax), in subsection (1)—

• (a) omit the “and” at the end of the entry for section 670;

• (b) at the end insert

, and - section 679A (income from which sums within section 668(1)(b) are treated as paid).

Income from stock dividends etc treated as bearing income tax at 0%

3

• (1) Chapter 6 of Part 5 of ITTOIA 2005 (beneficiaries' income from estates in administration) is amended as follows.

• (2) In section 670 (applicable rate for determining assumed income entitlement (UK estates)) omit subsection (4A).

• (3) In section 680 (income treated as bearing income tax)—

• (a) in subsection (2), after “within subsection” insert “(2A) or”;

• (b) after subsection (2) insert—

(2A) A sum that is part of the aggregate income of the estate because of falling within section 664(2)(c) (stock dividends) or (d) (release of loans to participator in close company: loans and advances to persons who die) is treated as bearing income tax at 0%.

Income treated as dividend income and savings income

4

• (1) Chapter 6 of Part 5 of ITTOIA 2005 (beneficiaries’ income from estates in administration) is amended as follows.

• (2) For section 680A (income treated as dividend income) substitute—

(680A) (1) This section applies to estate income that— (a) by virtue of section 663 (applicable rate for grossing up basic amounts of estate income) is treated as bearing income tax at the ordinary dividend rate, or (b) by virtue of that section and section 680(2A) (income treated as bearing income tax: dividends and loans to a participator in close company) is treated as bearing income tax at 0%. (2) The income is treated as being dividend income.

• (3) After that section insert—

(680B) (1) This section applies to estate income relating to a person’s interest in the residue of an estate so far as that interest relates to income that— (a) falls within section 664(2)(a) (income of personal representatives charged to UK income tax), and (b) is savings income (see section 18 of ITA 2007). (2) The income is treated as being savings income.

Order in which basic amounts are treated as paid from aggregate income

5

In section 679 of ITTOIA 2005 (income from which basic amounts are treated as paid)—

• (a) in subsection (3), for the words “in the following order” to the end of paragraph (c) substitute “in descending order, starting with the income bearing income tax at the highest rate and ending with the income bearing income tax at the lowest rate”;

• (b) in subsection (4), for “treated under section 680 as bearing income tax” substitute “within section 680”.

Chapter 2 — Corporation tax

The applicable rate for grossing up basic amounts of estate income

6

• (1) Chapter 3 of Part 10 of CTA 2009 (beneficiaries’ income from estates in administration) is amended as follows.

• (2) In section 941 (income charged: UK estates), in subsection (2) omit “for the relevant tax year”.

• (3) In section 942 (income charged: foreign estates), in subsection (3) omit “for the relevant tax year”.

• (4) For section 946 (applicable rate for grossing up basic amounts of estate income) substitute—

(946) (1) The applicable rate by reference to which a basic amount of estate income is grossed up for the purposes of sections 941 and 942 depends on the rate at which income tax was borne by the parts of the aggregate income of the estate from which section 962 treats the basic amount as having been paid. (2) If the same rate was borne by all of the income from which section 962 treats the basic amount as having been paid, the applicable rate is that rate. (3) If different rates were borne by different parts of the income from which section 962 treats the basic amount as having been paid, each of those rates is the applicable rate by reference to which the corresponding part of the basic amount is grossed up.

• (5) After section 961 insert—

(961A) In sections 960 and 961, “the relevant tax year” in relation to an amount of estate income, means the tax year in which the amount of estate income would be treated as arising if— (a) the references in this Chapter to accounting periods were references to tax years, and (b) section 950(3) (apportionment between accounting periods) were ignored.

The applicable rate for grossing up for determining shares in an estate in the final tax year

7

• (1) Chapter 3 of Part 10 of CTA 2009 (beneficiaries’ income from estates in administration) is amended as follows.

• (2) In section 951 (reduction in share of residuary income of estate)—

• (a) in subsection (1), in paragraph (b), for “(grossed up where subsection (5) applies)” substitute “grossed up, where the estate is a UK estate, by the applicable rate (see subsections (5A) to (5C));

• (b) for subsection (5) substitute—

(5A) The applicable rate by reference to which a sum within subsection (1)(b) is grossed up depends on the rate at which income tax was borne by the parts of the aggregate income of the estate from which section 962A treats the sum as having been paid. (5B) If the same rate was borne by all the income from which section 962A treats the sum as having been paid, the applicable rate is that rate. (5C) If different rates were borne by different parts of the income from which section 962A treats the sum as having been paid, each of those rates is the applicable rate by reference to which the corresponding part of the sum is grossed up.

• (3) After section 962 insert—

(962A) (1) The part of the aggregate income of the estate from which a sum within section 951(1)(b) is treated as paid is determined by applying assumptions A and B in that order. (2) Assumption A is that if there are different persons with an absolute interest in the residue of the estate, such apportionments of the aggregate income of the estate in respect of those interests are to be made as are just and reasonable for the different interests. (3) Assumption B is that sums are paid from the income to which a person’s share of the residuary estate relates in descending order, starting with the income bearing income tax at the highest rate and ending with the income bearing income tax at the lowest rate. (4) If some, but not all, of the aggregate income of the estate is income within section 963, assumption C is applied before assumptions A and B. (5) Assumption C is that the basic amount is paid from income that is not within section 963 before it is paid from income within that section. (6) Assumptions A and B then apply— (a) first to determine the part of the income not within that section from which the basic amount is paid, and (b) then to determine the part of the income within that section from which the basic amount is paid.

• (4) In section 963 (income treated as bearing income tax)—

• (a) omit the “and” at the end of the entry for section 952;

• (b) at the end insert

, and - section 962A (income from which sums within section 951(1)(b) are treated as paid).

Income from stock dividends etc treated as bearing income tax at 0%

8

• (1) Chapter 3 of Part 10 of CTA 2009 (beneficiaries’ income from estates in administration) is amended as follows.

• (2) In section 936 (meaning of “UK estate” and “foreign estate”), in subsections (4) and (5), after “section 963(3)” insert “, (3A)”.

• (3) In section 963 of CTA 2009 (income treated as bearing income tax)—

• (a) in subsection (2), after “within subsection (3)” insert “, (3A)”;

• (b) in subsection (3), omit paragraph (b) (and the “or” immediately before it);

• (c) after subsection (3) insert—

(3A) A sum that is part of the aggregate income of the estate because of falling within section 947(2)(c) (stock dividends) or (d) (release of loans to participator in close company: loans and advances to persons who die) is treated as bearing income tax at 0%.

Order in which basic amounts are treated as paid from aggregate income

9

In section 962 of CTA 2009 (income from which basic amounts are treated as paid)—

• (a) in subsection (3), for the words “in the following order” to the end of paragraph (b) substitute “in descending order, starting with the income bearing income tax at the highest rate and ending with the income bearing income tax at the lowest rate”;

• (b) in subsection (4), for “treated under section 963 as bearing income tax” substitute “within section 963”.

Part 2 — Low income trusts and estates

Chapter 1 — Income tax

Low income estates and trusts: tax liability of personal representatives and trustees

10

• (1) Chapter 3 of Part 2 of ITA 2007 (calculation of income tax liability) is amended as follows.

• (2) In section 23 (the calculation of income tax liability), at the end of Step 2 insert—

See also section 24B which provides that a taxpayer’s net income is taken to be £0 in certain cases.

• (3) After section 24A insert—

(24B) (1) Subsection (2) applies in relation to a taxpayer if— (a) they are the personal representative of a deceased person and, ignoring this section, their net income in that capacity at the end of Step 2 of the calculation in section 23 would be equal to or less than the de minimis estates amount, or (b) they are the trustee of a settlement (“the relevant settlement”) and, ignoring this section, their net income in that capacity at the end of that Step would be equal to or less than the de minimis trusts amount. (2) The taxpayer’s net income in their capacity as a personal representative of a deceased person or trustee of a settlement (as the case may be) at the end of Step 2 of the calculation in section 23 is taken to be £0. (3) The de minimis estates amount is £500. (4) The de minimis trusts amount is— (a) £500, or (b) in a case where subsection (5) applies, the higher of— (i) £100, and (ii) the settlor’s threshold amount. (5) This subsection applies where— (a) the settlor in relation to the relevant settlement is also the settlor in relation to one or more qualifying settlements, (b) ignoring this section, the trust rate income (within the meaning of Part 9) for the tax year of the trustees of the relevant settlement would be greater than £0, and (c) the relevant settlement is a settlement in respect of which each of the conditions mentioned in subsection (9) is met throughout the tax year. (6) The settlor’s threshold amount is the amount given by— $$£500QS+1$ where QS is the total number of qualifying settlements.$ (7) If there is more than one settlor in relation to the relevant settlement— (a) calculate the threshold amount of each of them, and (b) use the lowest of those threshold amounts for the purposes of subsection (4)(b)(ii). (8) A settlement is a “qualifying settlement” if— (a) it is not the relevant settlement, (b) it is in existence at a time during the tax year, (c) ignoring this section, the trust rate income (within the meaning of Part 9) for the tax year of the trustees of the settlement would be greater than £0, and (d) it is a settlement in respect of which each of the conditions mentioned in subsection (9) is met throughout the tax year. (9) The conditions are— (a) the property comprised in the settlement is not held for a pensions purpose within the meaning of paragraph 7(3) of Schedule 1C to TCGA 1992 (property comprised in settlements held for a pensions purpose); (b) no income arising under the settlement is treated as the income of the settlor as a result of section 624 of ITTOIA 2005 (income where settlor retains an interest); (c) the settlement is not a qualifying trust within the meaning of section 34 or 35 of FA 2005 (trusts for the benefit of disabled persons or relevant minors); (d) the settlement is not a heritage maintenance settlement within the meaning of Chapter 10 of Part 9 (heritage maintenance settlements) (see section 507(2) and (3)).

Low income estates: tax liability of beneficiaries

11

• (1) Chapter 6 of Part 5 of ITTOIA 2005 (beneficiaries’ income from estates in administration) is amended as follows.

• (2) In section 649 (charge to tax on estate income), after subsection (1) insert—

(1A) But income tax is not charged on estate income so far as that income consists of a basic amount which section 679 treats as having been paid from de minimis aggregate income. (1B) In subsection (1A), “de minimis aggregate income” means aggregate income of an estate which is treated as bearing income tax at 0% because of section 680(1A).

• (3) In section 656 (income charged: UK estates), in subsection (1), for “tax is charged under section 649” substitute “the charge to tax under section 649 is a charge”.

• (4) In section 657 (income charged: foreign estates), in subsection (1), for “tax is charged under section 649” substitute “the charge to tax under section 649 is a charge”.

• (5) In section 679 (income from which basic amounts are treated as paid)—

• (a) in subsection (3) (as amended by paragraph 5(a)), at the end insert “(subject to subsection (3A))”;

• (b) after that subsection insert—

(3A) For the purposes of assumption B, where those parts include— (a) income bearing income tax at 0% by virtue of section 680(1A), and (b) other income bearing income tax at 0%, payments are to be made from income within paragraph (a) after income within paragraph (b).

• (6) In section 679A (income from which sums within section 668(1)(b) are treated as paid) (inserted by paragraph 2(3))—

• (a) in subsection (3), at the end insert “(subject to subsection (3A))”;

• (b) after that subsection insert—

(3A) For the purposes of assumption B, where that income includes— (a) income bearing income tax at 0% by virtue of section 680(1A), and (b) other income bearing income tax at 0%, sums are to be paid from income within paragraph (a) after income within paragraph (b).

• (7) In section 680 (income treated as bearing income tax)—

• (a) after subsection (1) insert—

(1A) If, in the case of a UK estate, the aggregate income of the estate for a tax year is equal to or less than the de minimis estates amount (within the meaning of section 24B of ITA 2007), the aggregate income of the estate for that tax year is treated as bearing income tax at 0%.

;

• (b) for subsection (2) substitute—

(2) If— (a) subsection (1A) does not apply to treat the aggregate income of the estate for a tax year as bearing income tax at 0%, and (b) the aggregate income of the estate for that tax year includes a sum within subsection (2A) or (4), the sum is treated as bearing income tax at the rate specified for it in that subsection.

;

• (c) in subsection (5), after “sums within this section” insert “or from aggregate income treated as bearing income tax at 0% by virtue of subsection (1A)”.

Chapter 2 — Corporation tax

Low income estates: tax liability of beneficiaries

12

• (1) Chapter 3 of Part 10 of CTA 2009 (beneficiaries’ income from estates in administration) is amended as follows.

• (2) In section 934 (charge to tax on estate income), after subsection (1) insert—

(1A) But corporation tax is not charged on estate income so far as that income consists of a basic amount which section 962 treats as having been paid from de minimis aggregate income. (1B) In subsection (1A), “de minimis aggregate income” means aggregate income of an estate which is treated as bearing income tax at 0% because of section 963(1A).

• (3) In section 941 (income charged: UK estates), in subsection (1), for “tax is charged under section 934” substitute “the charge to tax under section 934 is a charge”.

• (4) In section 942 (income charged: foreign estates), in subsection (1), for “tax is charged under section 934” substitute “the charge to tax under section 934 is a charge”.

• (5) In section 962 (income from which basic amounts are treated as paid)—

• (a) in subsection (3) (as amended by paragraph 9(a)), at the end insert “(subject to subsection (3A))”;

• (b) after that subsection insert—

(3A) For the purposes of assumption B, where those parts include— (a) income bearing income tax at 0% by virtue of section 963(1A), and (b) other income bearing income tax at 0%, payments are to be made from income within paragraph (a) after income within paragraph (b).

• (6) In section 962A (income from which sums within section 951(1)(b) are treated as paid) (inserted by paragraph 7(3))—

• (a) in subsection (3), at the end insert “(subject to subsection (3A))”;

• (b) after that subsection insert—

(3A) For the purposes of assumption B, where that income includes— (a) income bearing income tax at 0% by virtue of section 963(1A), and (b) other income bearing income tax at 0%, sums are to be paid from income within paragraph (a) after income within paragraph (b).

• (7) In section 963 (income treated as bearing income tax)—

• (a) after subsection (1) insert—

(1A) If, in the case of a UK estate, the aggregate income of the estate for a tax year is equal to or less than the de minimis estates amount (within the meaning of section 24B of ITA 2007), the aggregate income of the estate for that tax year is treated as bearing income tax at 0%.

;

• (b) for subsection (2) substitute—

(2) If— (a) subsection (1A)does not apply to treat the aggregate income of the estate for a tax year as bearing income tax at 0%, and (b) the aggregate income of the estate for that tax year includes a sum within subsection (3), (3A) or (4), the sum is treated as bearing income tax at the rate specified for it in that subsection.

;

• (c) in subsection (5), after “sums within this section” insert “or from aggregate income treated as bearing income tax at 0% by virtue of subsection (1A)”.

Part 3 — Rate of tax charged on trustees’ first slice of trust rate income: income tax

13

• (1) ITA 2007 is amended as follows.

• (2) Omit Chapter 6 of Part 9 (trustees’ first slice of trust rate income).

• (3) In consequence of the amendment made by sub-paragraph (2)—

• (a) in section 2(9)(b) (overview of Act), for “4, 5 and 6” substitute “4 and 5”;

• (b) in section 11(2) (income charged at the default basic rate: non- individuals), for “6” substitute “5”;

• (c) in section 14(2) (income charged at the dividend ordinary rate: other persons), for “6” substitute “5”;

• (d) in section 15 (income charged at the trust rate and the dividend trust rate), for “6” substitute “5”;

• (e) in section 16(2) (savings and dividend income to be treated as highest part of total income) omit paragraph (a) (and the “and” after it);

• (f) in section 23 (the calculation of income tax liability), in Step 4, for “6” substitute “5”;

• (g) in section 462 (overview of Part 9) omit subsection (6);

• (h) in section 484 (trustees’ expenses to be set against trustees’ trust rate income) omit subsection (3);

• (i) in section 498 (types of income tax for the purposes of section 497) omit Type 4.

Part 4 — Commencement

14

• (1) The amendments made by this Schedule have effect as follows.

• (2) In Part 1—

• (a) the amendments made by Chapter 1 have effect in relation to the tax year 2023-24 and subsequent tax years;

• (b) the amendments made by Chapter 2 have effect in relation to accounting periods beginning on or after 1 April 2023.

• (3) In Part 2—

• (a) the amendments made by Chapter 1 have effect in relation to the tax year 2024-25 and subsequent tax years;

• (b) the amendments made by Chapter 2 have effect in relation to accounting periods beginning on or after 1 April 2024;

• (4) The amendments made by Part 3 have effect in relation to the tax year 2024-25 and subsequent tax years.

Schedule 3

Part 1 — Amendments to TIOPA 2010

Introduction

1

Part 10 of TIOPA 2010 (corporate interest restriction) is amended as follows.

Tax-interest expense amounts of a company: charities

2

In section 382 (the tax-interest expense amounts of a company), after subsection (1) insert—

(1A) But, in the case of a company which is a charity (as defined in paragraph 1 of Schedule 6 to FA 2010) at the end of the period of account, references in this Part to a “tax-interest expense amount” of the company do not include references to an amount which meets Condition A, B or C.

First period of account where new holding company

3

In section 395A (carry forward of interest allowance: new holding company), for subsection (3) substitute—

(3) For the purposes of this Chapter and Chapter 5— (a) so far as it would not otherwise be the case— (i) the first period of account of the new group is treated as beginning with the day on which the qualifying takeover occurs (the “takeover day”), and (ii) the last period of account of the old group is treated as ending on the day before the takeover day; (b) the interest allowance of the new group is determined as if periods of account of the old group which ended before the beginning of the first period of account of the new group were periods of account of the new group.

4

In section 400A (carry forward of excess debt cap: new holding company), in subsection (3)—

• (a) for “the group’s fixed ratio debt cap” substitute “the new group’s fixed ratio debt cap”;

• (b) for “ending immediately before the qualifying takeover” substitute “ending on the day before the takeover day (see section 395A(3))”.

Amounts not brought into account in determining a company’s tax-EBITDA

5

• (1) Section 407(1) (amounts not brought into account in determining a company’s tax-EBITDA) is amended as follows.

• (2) At the end of paragraph (a) insert “(or an amount which would, apart from section 388, be a tax-interest income amount);”.

• (3) After paragraph (g) insert—

(ga) a reduction under paragraph 37(3)(b) of Schedule 5 to FA 2019 (non-UK resident companies carrying on UK property businesses etc: unrelieved amounts);

.

“Relevant expense amount” and “relevant income amount”

6

• (1) Section 411 (“relevant expense amount” and “relevant income amount”) is amended as follows.

• (2) For subsection (1)(j) substitute—

(j) debits that are brought into account under Part 5 of CTA 2009 as a result of section 481 of that Act (relevant non-lending relationships), or would be so brought into account if the company in question were within the charge to corporation tax, other than— (i) exchange losses, or (ii) impairment losses;

.

• (3) For subsection (2)(h) substitute—

(h) credits that are brought into account under Part 5 of CTA 2009 as a result of section 481 of that Act (relevant non-lending relationships), or would be so brought into account if the company in question were within the charge to corporation tax, other than— (i) exchange gains, or (ii) the reversal of impairment losses;

.

7

In section 412 (interpretation of section 411), in subsection (7), omit the definition of “relevant non-lending relationship”.

Adjusted net group-interest expense: debits referable to times before UK property business etc carried on

8

• (1) Section 413 (adjusted net group-interest expense) is amended as follows.

• (2) In subsection (3) (upward adjustment), after paragraph (c) insert—

(ca) an amount in respect of a loan relationship that is brought into account by a member of the group, for a relevant accounting period in relation to the period of account, under section 330ZA CTA 2009 (debits referable to times before UK property business etc carried on) so far as that amount has not been included in the adjusted net group-interest expense of the group for any earlier period of account; (cb) an amount in respect of a relevant derivative contract that would be brought into account by a member of the group, for a relevant accounting period in relation to the period of account, under section 607ZA of CTA 2009, if an election under regulation 6A of the Disregard Regulations (as defined in section 421) had effect in relation to the contract, so far as the relevant amount has not been included in the adjusted net group-interest expense of the group for any earlier period of account; (cc) a relevant income amount in respect of a loan relationship or a relevant derivative contract to which a member of the group is a party that— (i) is recognised in the financial statements of the group for the period, (ii) is not brought into account by a member of the group, for a relevant accounting period in relation to the period of account, and (iii) is expected to be brought into account, or (in the case of a relevant derivative contract) would, if an election under regulation 6A of the Disregard Regulations had effect in relation to the contract, be expected to be brought into account, by a member of the group, for another accounting period, under section 330ZA or section 607ZA of CTA 2009;

.

• (3) In subsection (4) (downward adjustment), after paragraph (c) insert—

(ca) a relevant expense amount, in respect of a loan relationship or a relevant derivative contract to which a member of the group is a party, that— (i) is recognised in the financial statements of the group for the period, (ii) is not brought into account by a member of the group, for a relevant accounting period in relation to the period of account, and (iii) is expected to be brought into account, or (in the case of a relevant derivative contract) would, if an election under regulation 6A of the Disregard Regulations had effect in relation to the contract, be expected to be brought into account, by a member of the group, for another accounting period, under section 330ZA or section 607ZA of CTA 2009;

.

• (4) At the end insert—

(7) Subsection (8) applies, unless the reporting company elects otherwise, in relation to a period of account of a worldwide group— (a) ending on or after 6 April 2020, and (b) beginning before 1 April 2023. (8) In relation to the period of account— (a) no amount within any of paragraphs (ca) to (cc) of subsection (3) is to be treated as an “upward adjustment”, and (b) no amount within paragraph (ca) of subsection (4) is to be treated as a “downward adjustment”.

Adjusted net group-interest expense: debits in respect of pre-trading expenditure

9

• (1) Section 413 (adjusted net group-interest expense) is amended as follows.

• (2) In subsection (3) (upward adjustment), after paragraph (cc) (inserted by paragraph 8 of this Schedule) insert—

(cd) an amount that is brought into account by a member of the group, for a relevant accounting period in relation to the period of account, under section 330(3) of CTA 2009 (debits in respect of pre-trading expenditure) in accordance with an election made under section 330(1)(b) of that Act, so far as that amount has not been included in the adjusted net group-interest expense of the group for any earlier period of account;

.

• (3) In subsection (4) (downward adjustment), after paragraph (ca) (inserted by paragraph 8 of this Schedule) insert—

(cb) an amount, in respect of a loan relationship to which a member of the group is a party, that— (i) is recognised in the financial statements of the group for the period, but (ii) is prevented from being brought into account in accordance with an election made under section 330(1)(b) of CTA 2009 (debits in respect of pre-trading expenditure);

.

Qualifying net group-interest expense: meaning of “equity notes”

10

In section 414 (qualifying net-group interest expense), in subsection (3), at the beginning of paragraph (c) insert “relevant”.

11

In section 415 (qualifying net group-interest expense: interpretation), for subsection (7) substitute—

(7) For the purposes of section 414(3)(c), a “relevant equity note” is a security that— (a) is an equity note within the meaning of section 1016 of CTA 2010, by reference to satisfying a test in subsection (2) of that section, and (b) would satisfy that test if the “permitted period” for the purposes of that section were the period of 100 years beginning with the date of the security’s issue.

Capitalised interest brought into account for tax purposes in accordance with GAAP

12

• (1) Section 423 (capitalised interest brought into account for tax purposes in accordance with GAAP) is amended as follows.

• (2) After subsection (2A) insert—

(2AA) Section 413 has effect, in the case of a GAAP-taxable asset within subsection (2AB), as if— (a) the definition of “upward adjustment” included so much of its carrying value as is attributable to a relevant expense amount (whether or not that amount is brought into account in the group’s financial statements for the relevant period of account); and (b) the definition of “downward adjustment” included so much of its carrying value as is attributable to a relevant income amount (whether or not that amount is brought into account in the group’s financial statements for the relevant period of account). (2AB) A GAAP-taxable asset is within this subsection if it is (or, under section 173 of TCGA 1992, is treated as being) appropriated, in a relevant accounting period in relation to a period of account, from trading stock to fixed assets.

• (3) In subsection (3), for “(2)(b) and (2A)” substitute “(2)(b), (2A) and (2AA)”.

Interest allowance (non-consolidated investment) election: “non-consolidated associate”

13

• (1) Section 429 (meaning of “non-consolidated associate”) is amended as follows.

• (2) In subsection (1), for “or C” substitute “, C or D”.

• (3) In subsection (2), in the words before paragraph (a), for “the entity” substitute “the ultimate parent’s interest in the entity”.

• (4) After subsection (4) insert—

(4A) Condition D is that— (a) the entity is— (i) a partnership, or (ii) a transparent entity (other than a partnership), and (b) the ultimate parent’s interest in the entity is accounted for in the financial statements of the group for the relevant period of account on the basis of fair value accounting.

• (5) For subsection (6) substitute—

(6) For the purposes of this section— (a) “entity” includes anything which may be treated as an entity for accounting purposes (regardless of whether it has a legal personality as a body corporate); (b) an entity is “transparent” if— (i) it is not chargeable to corporation tax or income tax as a person (ignoring any exemptions), or (ii) it is a collective investment vehicle which is “transparent for income tax purposes” for the purposes of paragraph 8 of Schedule 5AAA to TCGA 1992 (see paragraph 8(7) of that Schedule).

Public infrastructure

14

• (1) Section 435 (group elections modifying the operation of sections 433 and 434) is amended as follows.

• (2) In subsection (1), after “worldwide group” insert “, and have each made an election under section 433,”.

• (3) In subsection (2)—

• (a) before paragraph (a) insert—

(aa) must be made before the end of the earliest elected accounting period (see subsection (11));

;

• (b) in paragraph (a), after “election” insert “, which may not be before the first day of the earliest elected accounting period”.

• (4) In subsection (3), for “an election, revocation” substitute “a revocation”.

• (5) At the end insert—

(11) The “earliest elected accounting period” is the accounting period which— (a) is the first elected accounting period of an elected company, and (b) begins no later than the first elected accounting period of each other elected company. (12) For the purposes of subsection (11), the “first elected accounting period” of an elected company is the first of the company’s accounting periods in relation to which the election is to have effect. (13) If there is more than one earliest elected accounting period under subsection (11) and those periods (the “relevant periods”) do not all end on the same date, the “earliest elected accounting period” is the relevant period that ends no later than each of the other relevant periods.

15

• (1) Section 436 (meaning of “qualifying infrastructure activity”) is amended as follows.

• (2) In subsection (5), for paragraphs (a) and (b) substitute—

(a) the building or part is, or is to be, let on a short-term basis — (i) within a UK property business carried on by the company, or another member of the worldwide group of which it is a member at that time, and (ii) to persons who, at that time, are not related parties of the company or member.

• (3) After subsection (5) insert—

(5A) But a building, or part of a building, is not a public infrastructure asset in relation to a company at a particular time if, were the building or part to be disposed of at that time, profits arising from the disposal would be charged to corporation tax as profits of a trade.

16

After section 438 insert—

(438A) (1) This section applies where— (a) a company (“C”), at a time in the period mentioned in subsection (1) of section 438— (i) is a member of the worldwide group of which the qualifying infrastructure company mentioned in that subsection is a member, but (ii) is not a UK group company; and (b) C is a creditor in relation to an amount which— (i) is a relevant loan relationship debit (as defined in section 383) for the debtor company, or (ii) would be a relevant loan relationship debit if the debtor company were UK resident. (2) For the purposes of section 438, C is treated in relation to the amount mentioned in subsection (1)(b) (the “relevant loan amount”) as a qualifying infrastructure company if— (a) throughout the period mentioned in section 438(1), C— (i) meets the public infrastructure income test for the accounting period (see subsections (2) to (4) of section 433) and subsection (3) of this section), and (ii) meets the public infrastructure assets test for the accounting period (see subsections (5) to (10) of that section and subsection (4) of this section), (but does not satisfy the conditions in subsection (1)(c) and (d) of section 433); (b) the loan to which the relevant loan amount relates (the “relevant loan”) is fully funded by another loan (the “corresponding loan”) made to C for that purpose and on substantially the same terms as the relevant loan; and (c) amounts arising to C in respect of the corresponding loan would, if section 438(2) applied to C, qualify as “exempt amounts” within the meaning of that subsection. (3) For the purposes of subsection (2)(a)(i), C is also treated as meeting the public infrastructure income test for an accounting period if all, or all but an insignificant proportion, of its income for the period derives from— (a) anything listed in any of paragraphs (a) to (c) of section 433(2), (b) shares in, or debt issued by, a company that meets the test in section 433(2) for that period, (c) shares in or debt issued by a company that is treated as meeting the public infrastructure income test for that period by reason of this subsection. (4) For the purposes of subsection (2)(a)(ii), C is also treated as meeting the public infrastructure assets test for an accounting period if all, or all but an insignificant proportion, of the total value of the company's assets recognised in an appropriate balance sheet on each day in that period derives from— (a) anything listed in any of paragraphs (a) to (e) of section 433(5), (b) shares in, or debt issued by, a company that meets the test in section 433(5) for that period, (c) shares in or debt issued by a company that is treated as meeting the public infrastructure assets test for that period by reason of this subsection. (5) For the purposes of determining whether amounts arising to C would qualify as exempt amounts under section 438(2) (for the purposes of subsection (2)(c) of this section), the recourse of a creditor is treated as being limited to relevant infrastructure matters if, in the event that C fails to perform its obligations in question, the recourse of the creditor is limited to— (a) anything listed in paragraphs (a) to (c) of section 438(4), (b) shares in or debt issued by a company whose income and assets consist wholly of income and assets within those paragraphs, (c) shares in or debt issued by a company whose income and assets consist wholly of income and assets within paragraphs (a) or (b) of this subsection, or (d) shares in or debt issued by a company whose income and assets consists wholly of income and assets within paragraphs (a) to (c) of this subsection, and so on. (6) For the purposes of subsection (5), in determining whether a company’s income and assets consists wholly of income and assets of a particular description, any source of income or any asset is ignored if, having regard to all the circumstances, it is reasonable to regard as insignificant the amount of income arising from the source, or (as the case may be) the value of the asset recognised, in the accounting period.

Partnerships and other transparent entities

17

In section 447 (partnerships and other transparent entities), for subsection (6) substitute—

(6) For the purposes of this section an entity is “transparent” if— (a) it is not chargeable to corporation tax or income tax as a person (ignoring any exemptions), or (b) it is a collective investment vehicle which is “transparent for income tax purposes” for the purposes of paragraph 8 of Schedule 5AAA to TCGA 1992 (see paragraph 8(7) of that Schedule).

Investments held by investment managers

18

• (1) Section 454A (investments held by investment managers) is amended as follows.

• (2) In subsection (1)(a), for “is a member of a worldwide group” substitute “would, apart from this section, be a member of a worldwide group”.

• (3) After subsection (1) insert—

(1A) Except in a case within subsection (2), for the purposes of this Part— (a) the group does not include S (or its subsidiaries), and (b) accordingly, none of those entities is regarded as a consolidated subsidiary of any member of the group.

• (4) In subsection (2), for “For the purposes of this Part” substitute “Where S is a partnership or another transparent entity, for the purposes of this Part”.

Determining the worldwide group: “non-consolidated subsidiary” and “consolidated subsidiary”

19

• (1) Section 475 (meaning of “non-consolidated subsidiary” and “consolidated subsidiary”) is amended as follows.

• (2) In subsection (1)(b), omit “or on the basis that X were an asset held for sale or held for distribution to owners”.

• (3) For subsection (3) substitute—

(3) In this section “subsidiary” has the meaning given by international accounting standards.

Appointment of a reporting company by Revenue and Customs

20

In paragraph 4 of Schedule 7A (appointment of a reporting company by Revenue and Customs), in sub-paragraph (5)(a) for “36 months” substitute “4 years”.

Revised interest restriction return

21

• (1) Paragraph 8 of Schedule 7A (revised interest restriction return) is amended as follows.

• (2) For sub-paragraph (4) substitute—

(4) Where any of the figures contained in the previous interest restriction return have become incorrect (whether or not as a result of a member of the group amending, or being treated as amending, its company tax return), the reporting company must submit a revised interest restriction return (for the purpose of correcting those figures) to an officer of Revenue and Customs.

• (3) For sub-paragraph (5) substitute—

(5) A revised interest restriction return submitted under sub-paragraph (4) is of no effect unless it is received by an officer of Revenue and Customs before the end of— (a) the period of 3 months beginning with the relevant day, or (b) in a case where sub-paragraph (5B) applies, such longer period as an officer of Revenue and Customs may allow. (5A) For the purposes of sub-paragraph (5), the “relevant day” is— (a) where the figures contained in the previous interest restriction return have become incorrect as the result of a member of the group amending, or being treated as amending, an amount stated in its company tax return, the first day on which that amount can no longer be altered (within the meaning of paragraph 88(3) to (5) of Schedule 18 to FA 1998); (b) in any other case, the day on which the figures contained in the previous interest restriction return were found to have become incorrect. (5B) This sub-paragraph applies where an officer of Revenue and Customs considers that, as a result of an enquiry into a company tax return of another member of the group, the reporting company may subsequently be required to submit another revised interest restriction return under sub-paragraph (4). (5C) A revised interest restriction return submitted under sub-paragraph (4) may differ from the previous return only so far as the differences are in consequence of the correction referred to in that sub-paragraph.

22

• (1) Paragraph 29 of Schedule 7A (penalty for failure to deliver a return) is amended as follows.

• (2) In sub-paragraph (1)—

• (a) in paragraph (a), after “paragraph 7” insert “, or a revised interest restriction return under paragraph 8(4),”;

• (b) in paragraph (b), omit “(see sub-paragraph (5) of that paragraph)”.

• (3) After sub-paragraph (1), insert—

(1A) In subsection (1)(b), the reference to the “filing date” in relation to a period of account is— (a) in relation to an interest restriction return under paragraph 7, a reference to the filing date for the purposes of that paragraph (see paragraph 7(5) and (5A)); (b) in relation to a revised interest restriction return under paragraph 8(4), a reference to the end of the period within which the return may have effect (see paragraph 8(5)).

Enquiry into interest restriction return

23

In paragraph 41 of Schedule 7A (normal time limits for opening enquiry), in sub-paragraph (2)—

• (a) omit paragraph (b) (but not the “and” at the end), and

• (b) in paragraph (c), after “receives the” insert “return or”.

Determinations by officers of Revenue and Customs

24

• (1) Paragraph 56 of Schedule 7A (power of Revenue and Customs to make determinations where no return filed etc) is amended as follows.

• (2) For sub-paragraph (1)(b) (but not the “and” at the end) substitute—

(b) the filing date in relation to the relevant period of account has passed (see paragraph 7(5)),

.

• (3) In sub-paragraph (1)(c)—

• (a) omit “A,”;

• (b) for “or C” substitute “, C or D”.

• (4) Omit sub-paragraphs (2) and (3).

• (5) After sub-paragraph (5) insert—

(5A) Condition D is that— (a) the appointment of a reporting company has effect in relation to the relevant period of account, (b) the reporting company is required to submit a revised interest restriction return for the period under paragraph 8(4), and (c) the time limit in paragraph 8(5) for the submission of the revised return has passed without the revised return being received by an officer of Revenue and Customs.

• (6) In sub-paragraph (9)—

• (a) after “made” insert

— (a) in a case where Condition D is met, after the end of the period of 12 months beginning with the expiry of the time limit mentioned in paragraph 8(5), and (b) in any other case,

;

• (b) for “the determination date” substitute “the filing date referred to in sub-paragraph (1)(b)”.

Consequential claims to company tax returns

25

In paragraph 72 of Schedule 7A (consequential claims to company tax returns), in sub-paragraph (1)(a) omit “56 or”.

Part 2 — Other amendments

Penalties for errors: CIR alterations to be ignored in calculating potential lost revenue

26

• (1) Paragraph 5 of Schedule 24 to FA 2007 (penalties for errors: calculating potential lost revenue) is amended as follows.

• (2) In sub-paragraph (4), before paragraph (a) insert—

(za) any CIR alteration, other than a permitted reduction, in respect of the tax period to which the document relates,

.

• (3) At the end insert—

(5) For the purposes of sub-paragraph (4)(za)— (a) a “CIR alteration” means an alteration made to an amount disallowed, or reactivated, under Part 10 of the Taxation (International and Other Provisions) Act 2010 as a result of the submission of a revised interest restriction return under paragraph 8(4) of Schedule 7A to that Act; (b) a CIR alteration is a “permitted reduction” if it has the effect of— (i) reducing the allocated disallowance of a company by no more than the relevant proportion, or (ii) increasing the allocated reactivation of a company by no more than the relevant proportion. (c) the “relevant proportion” is— (i) for the purposes of paragraph (b)(i), the proportion by which the total disallowed amount of the worldwide group for the period is reduced, as a result of the submission of the revised interest restriction return; (ii) for the purposes of paragraph (b)(ii) the proportion by which the interest reactivation cap of the worldwide group is increased, as a result of the submission of the revised interest restriction return. (6) In sub-paragraph (5), the following terms have the same meaning as in Part 10 of the Taxation (International and Other Provisions) Act 2010— - “allocated disallowance” (see paragraph 22(2) of Schedule 7A to that Act); - “allocated reactivation” (see paragraph 25(2) of that Schedule); - “total disallowed amount of the worldwide group” and “interest reactivation cap of the worldwide group” (see section 373 of that Act).

Disapplication of carry forward rule for deficits

27

• (1) Section 457 of CTA 2009 (basic rule for deficits: carry forward to accounting periods after deficit period) is amended as follows.

• (2) In subsection (1), after “section 458” insert “(subject to subsection (2A))”.

• (3) After subsection (2) insert—

(2A) If the company is a charity at the end of the deficit period, the deficit may not be carried forward and set off against non-trading profits (as described in subsection (1)) for an accounting period (and, accordingly, the deficit may not be surrendered as group relief under Part 5 of CTA 2010 for the purposes of subsection (2)(a)).

Defined expressions used in Part 10 of TIOPA 2010: “insurance company”

28

• (1) In section 494 of TIOPA 2010 (other interpretation), at the end insert—

(3) The definition of “insurance company” in section 65 of FA 2012 (which is applicable to this Part as a result of section 141(2) of that Act) has effect for the purposes of this Part as if, in subsection (2)(a), the reference to Part 4A of the Financial Services and Markets Act 2000 included a reference to the law of a territory outside the United Kingdom which is similar to or corresponds to that Part.

• (2) In Part 7 of Schedule 11 to that Act (index of defined expressions), in the entry relating to an insurance company, in the second column, for “section 141 of FA 2012” substitute “section 494(3)”.

Determining the worldwide group: consequential amendment

29

In Part 1 of Schedule 8 to FA 2018 (corporate interest restriction: amendments of Part 10 of TIOPA 2010), omit paragraph 13.

Part 3 — Parts 1 and 2: commencement and transitional provision

30

Except as provided in paragraphs 31 to 35, the amendments made by Parts 1 and 2 of this Schedule have effect for periods of account of worldwide groups that begin on or after 1 April 2023.

31

The amendments made by paragraph 5(1) and (3) have effect for periods of account of worldwide groups ending on or after 6 April 2020.

32

• (1) The amendments made by paragraph 8 have effect for periods of account of worldwide groups ending on or after 6 April 2020.

• (2) Sub-paragraph (3) applies if—

• (a) in accordance with Schedule 7A to TIOPA 2010, a reporting company has submitted an interest restriction return for a period of account of a worldwide group ending—

• (i) on or after 6 April 2020, but

• (ii) before the day on which this Act is passed; and

• (b) any of the figures in the interest restriction return have become incorrect as a result of the amendments made by paragraph 8 (including as a result of an election made under section 413(7) of TIOPA 2010).

• (3) A revised interest restriction return submitted under paragraph 8 of Schedule 7A to TIOPA 2010 has effect (so far as that would not otherwise be the case) if it is received before the end of the period of 3 months beginning with the day on which this Act is passed.

33

The amendments made by paragraph 9 have effect for periods of account of worldwide groups in relation to which an election under section 330 of CTA 2009 is made, in respect of a relevant accounting period, on or after the day on which this Act is passed.

34

The amendments made by paragraphs 2, 14 to 16, and 27, have effect for accounting periods that begin on or after 1 April 2023.

35

The amendment made by paragraph 20 has effect in relation to appointments of reporting companies made, and the amendments made by paragraph 24(1), (2), (3)(a), (4) and (6)(b) have effect in relation to determinations made, on or after the day on which this Act is passed.

36

References in this Part of this Schedule to periods of account of worldwide groups have the same meaning as in Part 10 of TIOPA 2010 (see section 480 of that Act).

Part 4 — Tax treatment of financing costs and income

37

This Part of this Schedule applies if—

• (a) a company (“C”) was, for the purposes of Part 7 of TIOPA 2010, a member of a worldwide group in a period of account of the group beginning before 1 April 2017,

• (b) the reporting body has, in relation to that period of account, submitted—

• (i) a statement of disallowances under section 278 or 279 of TIOPA 2010, and

• (ii) a statement of allocated exemptions under section 290 or 291 of that Act,

• (c) after the submission of the statement mentioned in sub-paragraph (b), the total disallowed amount of the worldwide group for that period of account is reduced (as a result of an enquiry into C’s company tax for a relevant accounting period or otherwise),

• (d) as a result of the reduction in the total disallowed amount, the sum of the amounts specified in the statement of allocated exemptions under section 292(4)(b) of TIOPA 2010 exceeds the limit specified in section 292(6) of that Act,

• (e) on or after 15 March 2023, the reporting body submits a revised statement of disallowances under section 279 of TIOPA 2010, and

• (f) the revised statement of disallowances is treated, under regulation 13 of the 2009 Regulations, as if it had been received by HMRC by the time specified in section 279(2) of TIOPA 2010.

38

• (1) Part 7 of TIOPA 2010 has effect in relation to the worldwide group as if the revised statement of disallowances had not been submitted unless—

• (a) on or after 15 March 2023, the reporting body also submits a revised statement of allocated exemptions under section 291 of TIOPA 2010, and

• (b) the revised statement of allocated exemptions is treated, under regulation 28 of the 2009 Regulations or under sub-paragraph (2), as if it had been received by HMRC by the time specified in section 291(2) of TIOPA 2010.

• (2) Where the revised statement of allocated exemptions mentioned in sub-paragraph (1)(a) is received by HMRC before the end of the period of 30 days beginning with the day on which this Act comes into force, it is treated for the purposes of this Part (and of the application of Part 7 of TIOPA 2010 for the purposes of this Part) as if it had been received by HMRC by the time specified in section 291(2) of TIOPA 2010.

• (3) If the revised statement of disallowances referred to in paragraph 37(e) specifies that no financing expense amounts for the relevant period of account are to be disallowed, the requirement in section 280(4) of TIOPA 2010 does not apply in relation to the statement.

• (4) If the revised statement of allocated exemptions referred to in sub-paragraph (1)(a) specifies that no financing income amounts for the relevant period of account are to be exempted, the requirement in section 292(4) of TIOPA 2010 does not apply in relation to the statement.

39

For the purposes of this Part (and of the application of Part 7 of TIOPA 2010 for the purposes of this Part) references to the “reporting body” include references to C unless—

• (a) the ultimate parent of the worldwide group notifies HMRC that another company is the reporting body for those purposes,

• (b) the other company is—

• (i) for the purposes of paragraph 37, a company to which Chapter 3 of Part 7 of TIOPA 2010 applies, or

• (ii) for the purposes of paragraph 38(1), a company to which Chapter 4 of Part 7 of TIOPA 2010 applies, and

• (c) the notice is given before the end of the period within which the revised statement of disallowances mentioned in paragraph 37(f) would be treated, under regulation 13 of the 2009 Regulations, as if it had been received by HMRC by the time specified in section 279(2) of TIOPA 2010.

40

• (1) References in this Part to any provision of Part 7 of TIOPA 2010, or of the 2009 Regulations, are references to that provision as it continues to have effect in relation to—

• (a) periods of account of the worldwide group ending before 1 April 2017, and

• (b) where financial statements of the worldwide group are drawn up in respect of a period that begins before, and ends on or after, 1 April 2017, the period—

• (i) beginning at the time the straddling period of account (as defined in paragraph 26(3)(b) of Schedule 5 to F(No.2)A 2017) begins, and

• (ii) ending with 31 March 2017.

• (2) In this Part, the “2009 Regulations” means the Corporation Tax (Financing Costs and Income) Regulations 2009 (S.I. 2009/3173).

• (3) Terms used in this Part and in Part 7 of TIOPA 2010 have the same meaning as in that Part of that Act.

Schedule 4

Part 1 — UK property rich collective investment vehicles etc

Genuine diversity of ownership

1

• (1) Schedule 5AAA to TCGA 1992 is amended as follows.

• (2) In paragraph 7 (appropriate connection)—

• (a) in sub-paragraph (5)—

• (i) in paragraph (a), for “it meets” substitute “the vehicle meets or, if the vehicle is part of multi-vehicle arrangements, the arrangements meet”;

• (ii) in paragraph (b), for “it meets” substitute “the vehicle meets, or those multi-vehicle arrangements meet,”;

• (iii) omit the words after paragraph (b);

• (b) after that sub-paragraph insert—

(5A) For the purposes of sub-paragraph (5), those Regulations have effect as if references to a fund included— (a) multi-vehicle arrangements, and (b) a collective investment vehicle which is not an offshore fund.

;

• (c) after sub-paragraph (7) insert—

(8) In this Schedule “multi-vehicle arrangements” means arrangements comprising two or more vehicles under which an investor in one of those vehicles would reasonably regard that investment as an investment in the arrangements as a whole rather than exclusively in any particular vehicle.

• (3) In paragraph 13 (qualifying conditions)—

• (a) in sub-paragraph (3)—

• (i) in paragraph (a), for “it meets” substitute “the scheme meets or, if the scheme is part of multi-vehicle arrangements, the arrangements meet”;

• (ii) in paragraph (b), for “it meets” substitute “the scheme meets, or those multi-vehicle arrangements meet,”;

• (iii) omit the words after paragraph (b);

• (b) after that sub-paragraph insert—

(3A) For the purposes of sub-paragraph (3), those Regulations have effect as if references to a fund included— (a) multi-vehicle arrangements, and (b) a collective investment scheme which is not an offshore fund.

• (4) In paragraph 46 (meaning of qualifying investor etc)—

• (a) in sub-paragraph (4)—

• (i) in paragraph (a), for “it meets” substitute “the vehicle meets or, if the vehicle is part of multi-vehicle arrangements, the arrangements meet”;

• (ii) in paragraph (b), for “it meets” substitute “the vehicle meets, or those multi-vehicle arrangements meet,”;

• (iii) omit the words after paragraph (b);

• (b) after that sub-paragraph insert—

(4A) For the purposes of sub-paragraph (4), those Regulations have effect as if references to a fund included— (a) multi-vehicle arrangements, and (b) a collective investment vehicle which is not an offshore fund.

• (5) In paragraph 46A (application of diversity of ownership condition), after sub-paragraph (3) insert—

(4) Where the collective investment vehicle is part of multi-vehicle arrangements, sub-paragraphs (2) and (3) apply as if references to the vehicle included the multi-vehicle arrangements.

• (6) In paragraph 47 (other definitions), in sub-paragraph (1) at the appropriate place insert—

• “multi-vehicle arrangements” has the meaning given by paragraph 7(8);

.

• (7) In paragraph 51 (genuine diversity of ownership condition in case of funds existing before 6 April 2020), after sub-paragraph (2) insert—

(3) Where the collective investment vehicle is part of multi-vehicle arrangements, sub-paragraph (2) applies as if references to the vehicle included the multi-vehicle arrangements.

Part 2 — Real estate investment trusts

Amendment of CTA 2010

2

CTA 2010 is amended in accordance with paragraphs 3 to 5.

REITs involving single commercial property

3

• (1) In section 527 (being a UK REIT in relation to an accounting period)—

• (a) in subsection (2)(b), after “met” insert “or in relation to which condition C is met”;

• (b) in subsection (3)(b) after “met” insert “or in relation to which condition C is met”.

• (2) In section 529 (conditions as to property rental business)—

• (a) after subsection (2) insert—

(2A) Condition C is that the property rental business involves at least 1 property— (a) the value of which is equal to, or exceeds, £20 million at the relevant time, and (b) which is designed, fitted or equipped for the purpose of being rented, and is rented or available for rent, as a commercial unit. (2B) For the purposes of subsection (2A) the “relevant time” means— (a) where the group or company is a UK REIT and its property rental business previously met conditions A and B, the first day on which at least one of those conditions ceased to be met, or (b) otherwise, entry.

;

• (b) in subsection (3), for “and B” substitute “to C”;

• (c) in subsection (4), in the words before paragraph (a), for “and B” substitute “to C”.

• (3) In section 561—

• (a) in subsection (3) for “conditions A and B in section 529 (property rental business)” substitute “the property rental business condition”;

• (b) after that subsection insert—

(3A) For the purposes of this section, and sections 563 and 575, the “property rental business condition” is met if either conditions A and B or condition C in section 529 (property rental business) are met.

• (4) In section 563 (breach of conditions as to property rental business)—

• (a) in the heading, for “conditions as to property rental business” substitute “property rental business condition”;

• (b) in subsection (1), for “condition A or B in section 529 (property rental business)” substitute “the property rental business condition (see section 561(3A))”.

• (5) In section 575 (breach of conditions as to property rental business)—

• (a) in subsection (1), for “condition A or B in section 529 (property rental business)” substitute “the property rental business condition (see section 561(3A))”;

• (b) in subsection (2)—

• (i) omit the “or” after paragraph (a);

• (ii) at the end of paragraph (b) insert

, or (c) more than twice in relation to Condition C in that section.

;

• (c) in subsection (4), in Rule 2, for “condition A or B in section 529” substitute “the property rental business condition”.

3-year development rule

4

• (1) Section 556 (disposal of assets) is amended as follows.

• (2) In subsection (3), in paragraph (b)—

• (a) omit “fair”, and

• (b) omit the words from “(determined” to the end.

• (3) After that subsection insert—

(3ZA) For the purposes of subsection (3)(b) the value of a property is to be treated as its fair value (determined in accordance with international accounting standards) at whichever of the following times that value is the greatest— (a) on entry; (b) when the property was acquired; (c) the beginning of the accounting period in which the development commenced.

• (4) In subsection (3A), in paragraph (b)—

• (a) omit “fair”, and

• (b) omit the words from “(determined” to the end.

• (5) After that subsection insert—

(3AA) For the purposes of subsection (3A)(b) the value of a property is to be treated as its fair value (determined in accordance with international accounting standards) at whichever of the following times that value is the greatest— (a) on entry; (b) when the property was acquired; (c) the beginning of the accounting period in which the development commenced.

• (6) The amendments made by this paragraph have effect in relation to disposals of assets made on or after 1 April 2023.

Genuine diversity of ownership

5

• (1) Section 528ZB of CTA 2010 is amended as follows.

• (2) In subsection (2)—

• (a) in the words before paragraph (a), for “it meets” substitute “the scheme meets or, if the scheme is part of multi-vehicle arrangements, the arrangements meet”;

• (b) omit the words after paragraph (b).

• (3) After that subsection insert—

(2A) For the purposes of subsection (2), those Regulations have effect as if references to a fund included— (a) multi-vehicle arrangements, and (b) a collective investment scheme which is not an offshore fund.

• (4) In subsection (3), for “the vehicle” substitute “the scheme”.

• (5) In subsection (4), for “vehicle”, in both places it occurs, substitute “scheme”.

• (6) After subsection (5) insert—

(6) Where the collective investment scheme is part of multi-vehicle arrangements, subsections (3) to (5) apply as if references to “the scheme” included the multi-vehicle arrangements. (7) In this section “multi-vehicle arrangements” means arrangements comprising two or more schemes under which an investor in one of those schemes would reasonably regard that investment as an investment in the arrangements as a whole rather than exclusively in any particular scheme.

Amendment of the Real Estate Investment Trusts (Assessment and Recovery of Tax) Regulations 2006

6

• (1) The Real Estate Investment Trusts (Assessment and Recovery of Tax) Regulations 2006 (S.I. 2006/2867) are amended as follows.

• (2) After regulation 7 insert—

(7A) (1) This regulation applies to the payment of a relevant distribution by a company if— (a) the company reasonably believes that the recipient is a partnership whose partners include a person or body— (i) to which paragraph (2) or (3) of regulation 7 applies, or (ii) to which paragraph (4) of that regulation applies where the partner’s share of the partnership profits are to be applied for the purposes of the fund, scheme, account or plan in respect of which that partner has duties, (b) the company has a reasonable belief as to the share of partnership profits that each partner is entitled to, (c) the company reasonably believes that arrangements exist that will result in each partner’s share of the partnership profits reflecting whether or not tax was deducted in relation to that partner (as a result of regulation 3(2) and this regulation), and (d) the company elects to make the payment in accordance with paragraph (2) (by making it in accordance with that paragraph). (2) The relevant proportion of the relevant distribution is to be paid without deduction of income tax. (3) The relevant proportion is equal to the sum of the shares of the partnership profits (expressed as proportions) to which each partner who falls within paragraph (1)(a)(i) or (ii) is entitled. (4) But— (a) paragraph (2) is subject to the qualification in paragraph (7) of regulation 7, and (b) if the company’s belief as to any of the matters referred to in paragraph (1) is incorrect, these Regulations apply to the payment as if it were never one to which this regulation applied. (5) Upon discovering that a payment that was made in accordance with paragraph (2) should not have been made in accordance with that paragraph (as a result of paragraph (4) or otherwise), the company who made it must deliver an amended return in accordance with regulation 11. (6) Where this paragraph applies to the payment of a relevant distribution, the company making it must (in addition to its duty under regulation 6(1)) furnish the partnership with a statement in writing in respect of each partner that is not a partner who falls within paragraph (1)(a)(i) or (ii) showing the amount of tax deducted in relation to each such partner. (7) The duty imposed by paragraph (6) is enforceable at the suit or instance of the partnership.

• (3) In regulation 3(2) (deduction of tax), after “regulation 7” insert “or 7A”.

Part 3 — Qualifying asset holding companies

Amendment of Schedule 2 to FA 2022

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Schedule 2 to FA 2022 (qualifying asset holding companies) is amended as follows.

Securitisation companies unable to be QAHCs

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• (1) In paragraph 2(1) (conditions for being a QAHC), in paragraph (e) for “not” substitute “neither a securitisation company nor”.

• (2) In paragraph 58(1) (interpretation), at the appropriate place insert—

• “securitisation company” means a company whose profits are brought into account, for corporation tax purposes, in accordance with regulation 14 of the Taxation of Securitisation Companies Regulations 2006 (S.I. 2006/3296);

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• (3) The amendments made by this paragraph are treated as having come into force on 15 March 2023.

• (4) Those amendments are not to have effect in relation to a securitisation company that was a QAHC immediately before that date for so long as it continuously remains a QAHC.

Beneficial entitlement held only through QAHCs

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• (1) In paragraph 4 (only direct and certain indirect interests to constitute “relevant interests”), after sub-paragraph (2) insert—

(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.

• (2) The amendment made by this paragraph is treated as having come into force on 20 July 2022.

• (3) But the amendment is not to have effect in relation to a QAHC that became a QAHC before that date if the effect of the amendment would, by itself, cause the QAHC to cease to meet the ownership condition on that date, ignoring—

• (a) any provision of Schedule 2 to FA 2022 that would, in some circumstances, treat the ownership condition as met or a breach of the condition as having not occurred, and

• (b) any prior breach of that condition.

Determining relevant interests

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In paragraph 5(4) (determining relevant interests), after paragraph (h) insert—

(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”,

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Dealing with bodies corporate without share capital

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• (1) In paragraph 9 (qualifying funds)—

• (a) in sub-paragraph (2)(a), in the words before sub-paragraph (i), after “scheme” insert “, or is an AIF that is not a collective investment scheme only by reason of it being a body corporate,”;

• (b) in sub-paragraph (5)—

• (i) in paragraph (a), after “company”, in the first place it occurs, insert “that has share capital”;

• (ii) in paragraph (b)(i), after “company” insert “that has share capital”;

• (c) in sub-paragraph (6), after “collective investment scheme” insert “, or is an AIF that is not a collective investment scheme only by reason of it being a body corporate,”.

• (2) Schedule 2 to FA 2022 has effect, and is to be deemed always to have had effect, with the amendment made by this paragraph.

Genuine diversity of ownership

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• (1) Paragraph 9 is amended as follows.

• (2) In sub-paragraph (2)(a)—

• (a) in sub-paragraph (i), for “it meets” substitute “the fund meets or, if the fund is part of multi-vehicle arrangements, the arrangements meet”;

• (b) in sub-paragraph (ii), for “it” substitute “the fund or those multi-vehicle arrangements”.

• (3) In sub-paragraph (3)—

• (a) before paragraph (a) insert—

(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);

;

• (b) in paragraph (a), in the words before sub-paragraph (i)—

• (i) for “the Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001)” substitute “those Regulations”;

• (ii) after “a fund” insert “or multi-vehicle arrangements”;

• (iii) after “the fund”, in both places it occurs, insert “or multi-vehicle arrangements”;

• (c) in that paragraph—

• (i) in sub-paragraphs (i) and (ii), after “fund” insert “or multi-vehicle arrangements”;

• (ii) in sub-paragraph (ii), after “fund” insert “or multi-vehicle arrangements”;

• (iii) in sub-paragraph (iii), for “vehicle” substitute “fund or multi-vehicle arrangements”;

• (d) in paragraph (b), after “fund” insert “or multi-vehicle arrangements”.

• (4) In sub-paragraph (4) after “fund”, in each place it occurs, insert “or multi-vehicle arrangements”.

• (5) In sub-paragraph (10), at the end insert—

• “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;

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Investment strategy condition

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• (1) In paragraph 13 (activity and investment strategy conditions), after sub-paragraph (2) insert—

(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, (c) is revoked on the company ceasing to be a QAHC, and (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.