Finance (No. 2) Act 2023

• “SAMLA 2018” means the Sanctions and Anti-Money Laundering Act 2018;

• “a withheld amount” means an amount that HMRC would, apart from this section, be required or permitted to pay to a person.

Communications data

352

• (1) Section 12(2) of the Investigatory Powers Act 2016 (restriction of powers to obtain communications data) does not apply to a power falling within subsection (2).

• (2) A power falls within this subsection if it is conferred (whether before, on or after the passing of this Act) by or under—

• (a) any Finance Act of any year (including this Act and any other numbered Finance Act);

• (b) the Taxes Acts (within the meaning of TMA 1970);

• (c) the customs and excise Acts (within the meaning of CEMA 1979);

• (d) any enactment relating to value added tax;

• (e) any enactment, not falling within paragraphs (a) to (d), that relates to tax.

• (3) But subsection (1) does not apply in relation to the exercise of such a power by a public authority in the course of a criminal investigation by the authority.

• (4) In section 12 of the Investigatory Powers Act 2016, after subsection (2) insert—

(2A) Subsection (2) is subject to section 352(1) of the Finance (No. 2) Act 2023 (no restriction on tax related powers).

• (5) In Schedule 36 to FA 2008 (information and inspection powers), in paragraph 19, omit sub-paragraphs (4) and (5).

• (6) In consequence of the repeal made by subsection (5), omit paragraph 10 of Schedule 2 to the Investigatory Powers Act 2016.

• (7) The modification and amendments made by subsections (1) to (6) are to be treated as having always had effect.

• (8) Subsections (9) and (10) apply where—

• (a) before the day on which this Act is passed, a public authority imposed a requirement on a person under a power falling within subsection (2), and

• (b) as a result of section 12(2) of the Investigatory Powers Act 2016 the public authority did not, ignoring this section, have the power to impose it.

• (9) The requirement is to be treated as having been imposed on the day on which this Act is passed (and accordingly the period in which it must be complied with is to be treated as starting on that day) unless—

• (a) the requirement was withdrawn by the public authority before that day, or

• (b) the person complied with the requirement before that day.

• (10) Where, before the day on which this Act is passed, the public authority imposed a penalty on the person for contravening the requirement—

• (a) the penalty is of no effect, and

• (b) if already paid, the authority is liable to repay it.

Final

Interpretation

353

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

ALDA 1979	Alcoholic Liquor Duties Act 1979
CAA 2001	Capital Allowances Act 2001
CEMA 1979	Customs and Excise Management Act 1979
CTA 2009	Corporation Tax Act 2009
CTA 2010	Corporation Tax Act 2010
FA followed by a year	Finance Act of that year
F(No.2)A followed by a year	Finance (No.2) Act of that year
HODA 1979	Hydrocarbon Oil Duties Act 1979
ICTA	Income and Corporation Taxes Act 1988
ITA 2007	Income Tax Act 2007
ITEPA 2003	Income Tax (Earnings and Pensions) Act 2003
ITTOIA 2005	Income Tax (Trading and Other Income) Act 2005
TCGA 1992	Taxation of Chargeable Gains Act 1992
TCTA 2018	Taxation (Cross-border Trade) Act 2018
TIOPA 2010	Taxation (International and Other Provisions) Act 2010
TMA 1970	Taxes Management Act 1970
TPDA 1979	Tobacco Products Duty Act 1979
VATA 1994	Value Added Tax Act 1994
VERA 1994	Vehicle Excise and Registration Act 1994

Short title

354

This Act may be cited as the Finance (No. 2) Act 2023.

Schedule 1

Part 1 — Claim notifications

Requirement to make claim notifications in relation to certain R&D claims

1

• (1) Chapter 6A of Part 3 of CTA 2009 (trade profits: R&D expenditure credits) is amended as follows.

• (2) In section 104A (R&D expenditure credits), after subsection (5) insert—

(5A) This section is subject to section 104AA.

• (3) After that section insert—

(104AA) (1) A company may not make a claim under section 104A(1) (an “RDEC claim”) after the end of the claim notification period unless— (a) the company has made an R&D claim during the period of three years ending with the last day of the claim notification period, (b) the company makes a claim notification in respect of the RDEC claim within the claim notification period, or (c) the accounting period in respect of which the RDEC claim is made falls within the same period of account as another accounting period in respect of which the company has made an R&D claim or a claim notification. (2) For the purposes of subsection (1)(a) ignore any R&D claim for an accounting period beginning before 1 April 2023 that is included in the company’s company tax return only by virtue of an amendment made on or after that date (see paragraph 83B(2) of Schedule 18 to FA 1998).

• (4) In section 104Y (interpretation), in subsection (1)—

• (a) before the entry for “large company” insert—

• “claim notification” (see section 1142A),
• “claim notification period” (see section 1142A),

;

• (b) after the entry for “research and development” insert—

• “R&D claim” (see section 1142B),

.

2

• (1) Part 13 of CTA 2009 (additional relief for expenditure on R&D) is amended as follows.

• (2) In section 1044 (additional deduction in calculating profits of trade), in subsection (9), after “subject to” insert

— (a) section 1045A (requirement to make a claim notification); (b)

.

• (3) Before section 1046 (relief only available where company is going concern) but after the preceding italic heading insert—

(1045A) (1) A company may not make a claim under section 1044(6) (an “additional deduction claim”) after the end of the claim notification period unless— (a) the company has made an R&D claim during the period of three years ending with the last day of the claim notification period, (b) the company makes a claim notification in respect of the additional deduction claim within the claim notification period, or (c) the accounting period in respect of which the additional deduction claim is made falls within the same period of account as another accounting period in respect of which the company has made an R&D claim or a claim notification. (2) For the purposes of subsection (1)(a) ignore any R&D claim for an accounting period beginning before 1 April 2023 that is included in the company’s company tax return only by virtue of an amendment made on or after that date (see paragraph 83B(2) of Schedule 18 to FA 1998).

.

• (4) In section 1054 (entitlement to and payment of tax credit), in subsection (5), after “subject to” insert

— (a) section 1054A (requirement to make a claim notification); (b)

.

• (5) After that section insert—

(1054A) (1) A company may not make a claim under section 1054(2) (an “R&D tax credit claim”) after the end of the claim notification period unless— (a) the company has made an R&D claim during the period of three years ending with the last day of the claim notification period, (b) the company makes a claim notification in respect of the R&D tax credit claim within the claim notification period, or (c) the accounting period in respect of which the R&D tax credit claim is made falls within the same period of account as another accounting period in respect of which the company has made an R&D claim or a claim notification. (2) For the purposes of subsection (1)(a) ignore any R&D claim for an accounting period beginning before 1 April 2023 that is included in the company’s company tax return only by virtue of an amendment made on or after that date (see paragraph 83B(2) of Schedule 18 to FA 1998).

• (6) After section 1142 (“qualifying body”) insert—

(1142A) (1) For the purposes of this Part— - “claim notification” means, in relation to an R&D claim, a notification made by the company to an officer of His Majesty’s Revenue and Customs in accordance with regulations under subsection (2); - “claim notification period” means, in relation to an R&D claim, the period— beginning with the first day of the period of account which is the same as the accounting period in respect of which the claim is made, or within which that accounting period falls, and ending with the last day of the period of six months beginning with the first day after that period of account. (2) The Commissioners for His Majesty’s Revenue and Customs may by regulations specify, in relation to a claim notification— (a) information to be provided with the notification; (b) the form and manner in which the notification is to be made. (1142B) For the purposes of this Part an “R&D claim” means a claim under— (a) section 104A (R&D expenditure credits), (b) section 1044 (relief for SMEs: additional deduction), or (c) section 1054 (entitlement to R&D tax credit).

Part 2 — R&D expenditure on data and cloud computing

Relief for R&D expenditure on data and cloud computing

3

• (1) Chapter 9 of Part 13 of CTA 2009 (additional relief for expenditure on R&D: supplementary) is amended as follows.

• (2) In the italic heading before section 1125 (“software or consumable items”), after “Software” insert “, data licences, cloud computing services”.

• (3) In that section—

• (a) in the heading, after “Software” insert “, data licences, cloud computing services”;

• (b) in subsection (1)—

• (i) in the words before paragraph (a), for “or consumable items means expenditure on” substitute “, data licences, cloud computing services or consumable items means an amount paid by the company in respect of”;

• (ii) omit the “or” at the end of that paragraph;

• (iii) after that paragraph insert—

(aa) data licences, (ab) cloud computing services, or

;

• (c) after subsection (1) insert—

(1A) For the purposes of subsection (1)(aa) a data licence is a licence to access and use a collection of digital data. (1B) For the purposes of subsection (1)(ab) cloud computing services include the provision of access to, and maintenance of, remote— (a) data storage and hardware facilities; (b) operating systems and software platforms.

• (4) In section 1126 (software or consumable items: attributable expenditure)—

• (a) in the heading, after “Software” insert “, data licences, cloud computing services”;

• (b) in subsections (1), (2), (3), (4), (5) and (6), in each place it appears, after “software” insert “, data licences, cloud computing services”.

• (5) After section 1126 insert—

(1126ZA) (1) Expenditure on data licences or cloud computing services is not to be treated as attributable to relevant research and development if, in connection with the grant of a licence or the provision of a service, a relevant person obtains— (a) a right to sell data in respect of which the licence is granted or the service is provided (as the case may be); (b) a right to publish, share or otherwise communicate data in respect of which the licence is granted or the service is provided (as the case may be) to a third party, other than for the purposes of communications reasonably necessary for, or incidental to, the purposes of the relevant research and development. (2) Expenditure on data licences or cloud computing services is not to be treated as attributable to relevant research and development so far as it is attributable to a qualifying indirect activity. (3) In this section— - “qualifying indirect activity” means an activity mentioned in paragraph 31 of the Guidelines on the Meaning of Research and Development for Tax Purposes issued on 7 March 2023 and as amended from time to time; - “relevant person” has the meaning given in section 1126A(10).

• (6) In section 1126A (attributable expenditure: special rules), in the heading, after “special rules” insert “for consumable items”.

• (7) In section 1126B (attributable expenditure: further provision)—

• (a) in subsection (1)—

• (i) after “expenditure on” insert “data licences, cloud computing services or”;

• (ii) after “1126” insert “, 1126ZA”;

• (b) in subsection (2)—

• (i) in paragraph (a), after “expenditure on” insert “data licences, cloud computing services or”;

• (ii) in paragraph (b), after “in which” insert “data licences, cloud computing services or”;

• (c) in subsection (4), after paragraph (a) insert—

(aa) section 1126ZA;

.

Relief for R&D expenditure on data and cloud computing: consequential amendments

4

CTA 2009 is amended as follows.

5

In Chapter 6A of Part 3 (trade profits: R&D expenditure credits)—

• (a) in section 104D (expenditure on sub-contracted R&D undertaken in-house), in subsection (3)(b), after “software” insert “, data licences, cloud computing services”;

• (b) in section 104G (subsidised qualifying expenditure on in-house direct R&D), in subsection (3)(b), after “software” insert “, data licences, cloud computing services”;

• (c) in section 104J (qualifying expenditure on in-house direct R&D), in subsection (2)(b), after “software” insert “, data licences, cloud computing services”;

• (d) in section 104Y (interpretation), in subsection (2), in the description of sections 1125 to 1126B, after “software” insert “, data licences, cloud computing services”.

6

In Part 13 (additional relief for expenditure on R&D)—

• (a) in Chapter 2 (relief for SMEs: cost of R&D incurred by SME), in section 1052 (qualifying expenditure on in-house direct R&D), in subsection (2)(b), after “software” insert “, data licences, cloud computing services”;

• (b) in Chapter 9 (supplementary), in section 1134 (qualifying element of sub-contractor payment: connected persons), in subsection (3)(c), after “software” insert “, data licences, cloud computing services”.

7

In Schedule 2 (transitionals and savings), in Part 15 (research and development)—

• (a) in the italic heading before paragraph 122, after “software” insert “, data licences, cloud computing services”;

• (b) in paragraph 122(2), after “software” insert “, data licences, cloud computing services”.

8

In Schedule 4 (index of defined expressions), in both places it occurs, after “software” insert “, data licences, cloud computing services”.

9

In section 357BLB of CTA 2010 (qualifying expenditure on relevant R&D undertaken in-house)—

• (a) in subsection (2), in paragraph (b), after “software” insert “, data licences, cloud computing services”;

• (b) in subsection (7)—

• (i) in paragraph (c), after “software” insert “, data licences, cloud computing services”;

• (ii) in paragraph (d), after “software” insert “, data licences, cloud computing services”.

Part 3 — Amendments to Schedule 18 to FA 1998

Introduction

10

Schedule 18 to FA 1998 (company tax returns, assessments and related matters) is amended as follows.

Power of HMRC to collect overpaid R&D tax relief or expenditure credit

11

In paragraph 52 (recovery of excessive repayments etc)—

• (a) in sub-paragraph (2) omit paragraphs (bza) and (ba);

• (b) for sub-paragraph (2A) substitute—

(2A) The provisions of paragraphs 41 and 45 to 48 relating to discovery assessments apply to an amount paid to a company by way of— (a) first-year tax credit under Schedule A1 to the Capital Allowances Act; (b) R&D expenditure credit under Chapter 6A of Part 3 of the Corporation Tax Act 2009; (c) R&D tax credit under Chapter 2 or 7 of Part 13 of that Act, but only to the extent that the company was not, or is no longer, entitled to the credit.

Time limits for R&D claims

12

For paragraph 83E (time limit for claims) substitute—

(83E) (1) Except where sub-paragraph (3) applies, a claim to which this Part of this Schedule applies may be made, amended or withdrawn at any time up to the last day of the period of— (a) two years beginning with the last day of the period of account, in a case where the period of account to which the claim relates is not longer than 18 months, or (b) 42 months beginning with the first day of the period of account, in any other case. (2) Sub-paragraph (3) applies where— (a) a company makes a claim for R&D tax relief under Part 13 of the Corporation Tax Act 2009, (b) the company is not entitled to the relief, and (c) an officer of Revenue and Customs exercises the power under paragraph 34(2)(b) or (2A) to make an amendment by removing the claim from the company tax return in which it is made. (3) The company may make, amend or withdraw a claim for R&D expenditure credit under Chapter 6A of Part 3 of the Corporation Tax Act 2009 in respect of eligible expenditure at any time up to whichever is the last of the following dates— (a) 30 days after notice of the amendment mentioned in sub-paragraph (2)(c) is issued; (b) if an appeal is brought against that amendment, 30 days after the date on which the appeal is finally determined. (4) In this paragraph “eligible expenditure” means expenditure— (a) to which the claim mentioned in sub-paragraph (2)(a) relates, and (b) in respect of which the company is entitled to R&D expenditure credit. (5) A claim to which this Part of this Schedule applies may be made, amended or withdrawn after the end of the period mentioned in sub-paragraph (1) or (3) (as the case may be) if an officer of Revenue and Customs allows it.

Requirement to provide additional information in relation to R&D claims

13

In Part 9A (company tax returns etc: claims for R&D expenditure credits or R&D tax relief), after paragraph 83E (substituted by paragraph 12) insert—

(83EA) (1) A claim to which this Part of this Schedule applies is invalid unless the claimant company has provided information to an officer of Revenue and Customs in accordance with regulations under sub-paragraph (2) not later than the date on which the claim is made or amended by the company in accordance with paragraph 83E. (2) The Commissioners for Revenue and Customs may by regulations specify, in relation to a claim to which this Part of this Schedule applies— (a) information to be provided by the claimant company; (b) the form and manner in which the information is to be provided.

Power of HMRC to remove R&D claims made in error from return

14

In Part 9A (claims for R&D expenditure credits or R&D tax relief), after paragraph 83EA (inserted by paragraph 13) insert—

(83EB) (1) This paragraph applies, in relation to a claim to which this Part of this Schedule applies (the “original claim”), where an officer of Revenue and Customs— (a) reasonably believes that a claimant company has failed to comply with a requirement relating to the making of the claim (and accordingly that the claim has been made in error), and (b) exercises the power under paragraph 16(1) to make a correction by removing the claim from the company tax return in which it is made. (2) Sub-paragraphs (4) and (5) of paragraph 16 do not apply in relation to the correction (and accordingly the claimant company may not reject the correction). (3) The claimant company may, within 90 days beginning with the date of the notice issued under paragraph 16(3), send written representations to an officer of Revenue and Customs objecting to the notice on the grounds that a matter stated in the notice was incorrect. (4) An officer of Revenue and Customs must consider any representations made under sub-paragraph (3). (5) Having considered the representations, the officer must determine whether to— (a) confirm the notice, or (b) withdraw the notice, and must notify the claimant company accordingly. (6) Nothing in sub-paragraph (2) prevents the claimant company from amending its company tax return to make a new claim to which this Part of this Schedule would apply in respect of the expenditure to which the original claim related (but see sub-paragraph (7)). (7) Where, in relation to the original claim— (a) a claim notification (within the meaning of section 1142A of the Corporation Tax Act 2009) was required to be made, and (b) no claim notification was made, the company may not make a new claim to which this Part of this Schedule would apply in respect of the expenditure to which the original claim related.

Part 4 — Miscellaneous amendments

Amendment of CTA 2009

15

CTA 2009 is amended as follows.

R&D tax relief: circumstances in which enterprises are treated as SMEs

16

• (1) In section 1119—

• (a) in subsection (1), at the end insert “(and see sections 1120A and 1120B)”;

• (b) in subsection (2), for “section 1120” substitute “sections 1120 to 1120B”.

• (2) In section 1120 (qualifications to section 1119)—

• (a) after subsection (6) insert—

(6A) This section is subject to sections 1120A and 1120B.

;

• (b) in subsection (7), in the words before paragraph (a), after “section” insert “and in sections 1120A and 1120B”.

• (3) After that section insert—

(1120A) (1) This section applies, in relation to an accounting period, where the following conditions are met. (2) The first condition is that, for the duration of the accounting period, an enterprise (“E”) is related to a partner enterprise or linked enterprise (“F”). (3) The second condition is that, at the start of the accounting period, both E and F are small or medium-sized enterprises. (4) The third condition is that, at the end of the accounting period, E is not a small or medium-sized enterprise by reason only that F has, during the accounting period, exceeded the employee limit or either of the financial limits. (5) Both E and F are to be treated as if they were small or medium-sized enterprises for the accounting period. (1120B) (1) This section applies, in relation to an accounting period, where the following conditions are met. (2) The first condition is that, at the start of the accounting period, an enterprise (“E”) was not a small or medium-sized enterprise by reason only that a partner enterprise or linked enterprise to which E was related exceeded the employee limit or either of the financial limits. (3) The second condition is that, during the accounting period, control of E was acquired by a company that, at the time of the acquisition, was a small or medium-sized enterprise. (4) E is to be treated as if it were a small or medium-sized enterprise for the accounting period. (5) In subsection (3) “control” has the same meaning as in section 1124 of CTA 2010.

Accounts treated as prepared on going concern basis

17

• (1) In section 104T (R&D expenditure credits: “going concern”), after subsection (4) insert—

(4A) For the purposes of this section, where a company (“A”) is a member of the same group as another company (“B”) and A’s latest published accounts were not prepared on a going concern basis by reason only of a relevant group transfer, the accounts are to be treated as if they were prepared on a going concern basis. (4B) For the purposes of this section a “relevant group transfer” is a transfer within the accounting period to which the latest published accounts relate by A of its trade and research and development to another member of the group mentioned in subsection (4A).

• (2) In section 1046 (R&D relief for SMEs: relief only available where company is going concern), after subsection (2C) insert—

(2D) For the purposes of this section, where a company (“A”) is a member of the same group as another company (“B”) and A’s latest published accounts were not prepared on a going concern basis by reason only of a relevant group transfer, the accounts are to be treated as if they were prepared on a going concern basis. (2E) For the purposes of this section— (a) a “relevant group transfer” is a transfer, within the accounting period to which the latest published accounts relate, by A of its trade and research and development to another member of the group mentioned in subsection (2D); (b) A and B are members of the same group if they are members of the same group of companies for the purposes of Part 5 of CTA 2010 (group relief).

• (3) In section 1057 (R&D relief for SMEs: tax credit only available where company is a going concern), after subsection (4C) insert—

(4D) For the purposes of this section, where a company (“A”) is a member of the same group as another company (“B”) and A’s latest published accounts were not prepared on a going concern basis by reason only of a relevant group transfer, the accounts are to be treated as if they were prepared on a going concern basis. (4E) For the purposes of this section— (a) a “relevant group transfer” is a transfer, within the accounting period to which the latest published accounts relate, by A of its trade and research and development to another member of the group mentioned in subsection (4D); (b) A and B are members of the same group if they are members of the same group of companies for the purposes of Part 5 of CTA 2010 (group relief).

Meaning of expenditure incurred on payments

18

• (1) In section 104Y (R&D expenditure credits: interpretation), at the end insert—

(4) References in this Chapter to expenditure incurred on payments (however expressed) are references to expenditure incurred on payments made before the making of a claim under this Chapter in relation to that expenditure.

• (2) Before section 1140 insert—

(1139A) (1) References in this Part to expenditure incurred on payments (however expressed) are references to expenditure incurred on payments made before the making of a claim under this Part in relation to that expenditure.

Part 5 — Commencement

19

The amendment made by paragraph 13 of this Schedule has effect in relation to claims made on or after 1 August 2023.

20

The amendments made by the remaining provisions of this Schedule have effect in relation to accounting periods beginning on or after 1 April 2023.

Schedule 2

Part 1 — Estates in administration

Chapter 1 — Income tax

The applicable rate for grossing up basic amounts of estate income

1

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

• (2) In section 656 (income charged: UK estates), in subsection (2) omit “for that year”.

• (3) In section 657 (income charged: foreign estates), in subsection (3) omit “for that year”.

• (4) For section 663 (the applicable rate for grossing up basic amounts of estate income) substitute—

(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—