Legalize / United Kingdom / Public General Act

Finance Act 2014

Type Public General Act

Publication 2014-07-17

Last updated 2024-11-18

State In force

Department Statute Law Database

Source legislation.gov.uk

articles Not indexed

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(1) This section applies if corporation tax is chargeable on ring fence profits of a company for a financial year. (2) References in this Chapter to the “main rate of corporation tax”, so far as relating to those profits, are to be taken— (a) if corporation tax is to be charged on those profits at the main ring fence profits rate, as references to that rate; (b) if corporation tax is to be charged on those profits at the small ring fence profits rate, as references to that rate; (c) if corporation tax on those profits is to be reduced by reference to the marginal relief fraction within the meaning of Chapter 3A of Part 8 (see sections 279B and 279C), as including references to the marginal relief fraction (and with references to a rate being “fixed” or “proposed” read accordingly as references to the marginal relief fraction concerned being fixed or proposed).

(b) accordingly, in the heading for the section, for “small profits” substitute “ ring fence profits ”.

(5) In section 628 (company in liquidation: corporation tax rates), for “the rate of corporation tax” (in each place it occurs) substitute “ the main rate of corporation tax ”.

(6) In section 630 (company in administration: corporation tax rates), for “the rate of corporation tax” (in each place it occurs) substitute “ the main rate of corporation tax ”.

16

In section 1119 of CTA 2010 (Corporation Tax Acts definitions), at the appropriate places insert—

“main ring fence profits rate” has the meaning given by section 279A(4),

, and

“ “related 51% group company” is to be read in accordance with section 279F,

17

(1) Schedule 4 to CTA 2010 (index of defined expressions) is amended as follows.

(2) Insert the following entries at the appropriate places—

the main ring fence profits rate	section 279A(4) (as applied by section 1119)
the marginal relief fraction (in Chapter 3A of Part 8)	section 279B(3)
---	---
related 51% group company	section 279F (as applied by section 1119)
---	---
the small ring fence profits rate	section 279A(4)
---	---

(3) Omit the entries for—

“associated company (in Part 3)”;

“close investment holding company (in Part 3)”;

“the ring fence fraction (in Part 3)”;

“the small profits rate”;

“the standard fraction (in Part 3)”.

(4) In the entry for “augmented profits (in Part 3)”—

(a) in the first column for “Part 3” substitute “ Chapter 3A of Part 8 ”, and

(b) in the second column, for “32” substitute “ 279G ”.

(5) In the entry for “the lower limit (in Part 3)”—

(a) in the first column for “Part 3” substitute “ Chapter 3A of Part 8 ”, and

(b) in the second column for “24” substitute “ 279E ”.

(6) In the entry for “the upper limit (in Part 3)”—

(a) in the first column for “Part 3” substitute “ Chapter 3A of Part 8 ”, and

(b) in the second column for “24” substitute “ 279E ”.

Finance Act 2012

18

In section 102 of FA 2012 (policy holders' rate of tax on policyholders' share of I-E profit), omit subsection (5).

Finance Act 2013

19

In section 6 of FA 2013 (main rate for financial year 2015)—

(a) in subsection (1) for “the rate” substitute “ the main rate ”,

(b) in that subsection, omit “on profits of companies other than ring fence profits”, and

20

In Schedule 25 to that Act (charge on certain high value disposals by companies etc), omit paragraph 19.

PART 3 — Commencement and transitional provision

21

(1) The amendments made by paragraphs 8, 9 and 13 have effect in relation to accounting periods beginning on or after 1 April 2015.

(2) Accordingly—

(a) despite the repeal of Part 3 of CTA 2010 by paragraph 4 of this Schedule, sections 25 to 30 of that Act (interpretation of references to associated companies) continue to apply for the purposes of section 99 of CAA 2001, and sections 357CL and 357CM of CTA 2010, in relation to accounting periods beginning before but ending on or after 1 April 2015, and

(b) in relation to the application of sections 25 to 30 of CTA 2010 for those purposes, paragraph 22(2) of this Schedule is to be ignored.

22

(1) The other amendments made by this Schedule have effect for the financial year 2015 and subsequent financial years.

(2) In the case of an accounting period (a “straddling period”)—

(a) beginning before 1 April 2015, and

(b) ending on or after that date,

the repealed small profit provisions and the new ring fence small profit provisions apply as if the different parts of the straddling period falling in the different financial years were separate accounting periods.

(3) For this purpose—

“the repealed small profit provisions” means Part 3 of CTA 2010,

“the new ring fence small profit provisions” means sections 279A(3) and 279B to 279H”.

(4) For the purposes of sub-paragraph (2) all necessary apportionments are to be made between the two separate accounting periods.

SCHEDULE 2

PART 1 — Transitional provisions

Chargeable periods which straddle start date

1

(1) This paragraph applies in relation to a chargeable period which begins before the start date and ends on or after that date (“the first straddling period”).

For “the start date”, see section 10(3).

(2) The maximum allowance under section 51A of CAA 2001 for the first straddling period is the sum of each maximum allowance that would be found if—

(a) so much (if any) of the first straddling period as falls before 1 January 2013,

(b) so much of the first straddling period as falls on or after that date but before the start date, and

were each treated as separate chargeable periods.

(3) But this is subject to paragraphs 2 and 3.

First straddling period beginning before 1 January 2013

2

(1) This paragraph applies where the first straddling period begins before 1 January 2013.

(2) So far as concerns expenditure incurred before 1 January 2013, the maximum allowance under section 51A of CAA 2001 for the first straddling period is what would have been the maximum allowance for that period if neither the amendment made by section 7(1) of FA 2013 nor the amendment made by section 10(1) had been made.

(3) So far as concerns expenditure incurred before the start date, the maximum allowance under section 51A of CAA 2001 for the first straddling period is what would have been the maximum allowance for that period if neither the amendment made by section 10(1) nor the amendments made by Part 2 of this Schedule had been made.

First straddling period beginning on or after 1 January 2013

3

(1) This paragraph applies where no part of the first straddling period falls before 1 January 2013.

(2) So far as concerns expenditure incurred before the start date, the maximum allowance under section 51A of CAA 2001 for the first straddling period is what would have been the maximum allowance for that period if the amendment made by section 10(1) had not been made.

Chargeable periods which straddle 1 January 2016

4

(1) This paragraph applies in relation to a chargeable period (“the second straddling period”) which begins before 1 January 2016 and ends on or after that date.

(2) The maximum allowance under section 51A of CAA 2001 for the second straddling period is the sum of each maximum allowance that would be found if—

(a) the period beginning with the first day of the chargeable period and ending with 31 December 2015, and

(b) the period beginning with 1 January 2016 and ending with the last day of the chargeable period,

were treated as separate chargeable periods.

(3) But, so far as concerns expenditure incurred on or after 1 January 2016, the maximum allowance under section 51A of CAA 2001 for the second straddling period is the maximum allowance, calculated in accordance with sub-paragraph (2), for the period mentioned in paragraph (b) of that sub-paragraph.

Operation of annual investment allowance where restrictions apply

5

(1) Paragraphs 1 to 4 also apply for the purpose of determining the maximum allowance under section 51K of CAA 2001 (operation of annual investment allowance where restrictions apply) in a case where one or more chargeable periods in which the relevant AIA qualifying expenditure is incurred are chargeable periods within paragraph 1(1) or 4(1).

(2) There is to be taken into account for the purpose mentioned in sub-paragraph (1) only chargeable periods of one year or less (whether or not they are chargeable periods within paragraph 1(1) or 4(1)), and, if there is more than one such period, only that period which gives rise to the greatest maximum allowance.

(3) For the purposes of sub-paragraph (2) any chargeable period which—

(a) is longer than a year, and

(b) ends in the tax year 2013-14, 2014-15, 2015-16, 2016-17 or 2017-18,

is to be treated as being a chargeable period of one year ending at the same time as it actually ends.

(4) Nothing in this paragraph affects the operation of sections 51M and 51N of CAA 2001.

PART 2 — Amendments of FA 2013

6

(1) Section 7 of FA 2013 (temporary increase in annual investment allowance) is amended as follows.

(2) In subsection (1), for “of two years beginning with 1 January 2013” substitute “ beginning with 1 January 2013 and ending with the specified date ”.

(3) After subsection (1) insert—

(1A) The specified date is — (a) for the purposes of corporation tax, 31 March 2014, and (b) for the purposes of income tax, 5 April 2014.

(4) In subsection (2), omit “or 1 January 2015”.

7

(1) Schedule 1 to FA 2013 (annual investment allowance) is amended as follows.

(2) In paragraph 1 (chargeable periods which straddle 1 January 2013)—

(a) in sub-paragraph (1), after “that date” insert “ but not later than the specified date ”, and

(b) after sub-paragraph (1) insert—

(1A) The specified date” means— (a) for the purposes of corporation tax, 31 March 2014, and (b) for the purposes of income tax, 5 April 2014.

(3) Omit paragraph 4 (chargeable periods which straddle 1 January 2015).

(4) In paragraph 5 (operation of annual investment allowance where restrictions apply)—

(a) in sub-paragraph (1)—

(i) for “to 4” substitute “ to 3 ”, and

(ii) omit “or 4(1)”, and

(b) in sub-paragraph (2), omit “or 4(1)”,

SCHEDULE 3

1

ITEPA 2003 is amended as follows.

2

In section 23 (taxable earnings: calculation of “chargeable overseas earnings”) after subsection (1) insert—

(1A) But none of an employee's general earnings from an employment for a tax year are to be “chargeable overseas earnings” if section 24A applies in relation to the employment for the tax year.

3

After section 24 insert—

(24A) (1) This section applies in relation to an employment (“the relevant employment”) for a tax year (“the relevant tax year”) if— (a) one or more of the paragraphs in subsection (5) applies, (b) conditions 1 to 4 are met, and (c) condition 5 is not met. (2) The consequences of this section applying are set out in sections 23(1A), 41C(4A), 41H(5) and 554Z9(1A). (3) But, for the purpose of determining if, and the extent to which, any provision of Part 11 (PAYE), or of PAYE regulations, applies in relation to any income, the application of any provision mentioned in subsection (2) in relation to the income is to be ignored. (4) In this section— (a) “the relevant employee” means the employee in respect of the relevant employment, (b) “the relevant employer” means the employer in respect of the relevant employment, and (c) “UK employment” means an employment the duties of which are not performed wholly outside the United Kingdom and “UK employer” is to be read accordingly, and the rules in section 24(5) (“associated” persons) apply for the purposes of this section. (5) The paragraphs referred to in subsection (1)(a) are— (a) general earnings from the relevant employment which are for the relevant tax year would, apart from section 23(1A) and step 3 in section 23(3), be “chargeable overseas earnings” under section 23(3); (b) employment income in respect of the relevant employment which is treated as accruing in the relevant tax year under section 41C(2) would, apart from sections 41C(4A), 41D and 41E, be “foreign” under section 41C(3); (c) employment income in respect of the relevant employment which is treated as accruing in the relevant tax year under section 41H(2) would, apart from sections 41H(5), 41I and 41L, be “chargeable foreign securities income” under section 41H(3); (d) section 554Z9(2) would, apart from section 554Z9(1A) and (4) and (5), apply to employment income in respect of the relevant employment which corresponds to the value of a relevant step, or a part of the value of a relevant step, which is “for” the relevant tax year as determined under section 554Z4. (6) Condition 1 is that the relevant employee holds a UK employment— (a) at a time in the relevant tax year when the relevant employee also holds the relevant employment, or (b) if the relevant tax year is a split year as respects the relevant employee, at a time in the UK part of the relevant tax year when the relevant employee also holds the relevant employment. (7) Condition 2 is that the UK employer is the same as, or is associated with, the relevant employer. (8) Condition 3 is that the UK employment and the relevant employment are related to each other. (9) Without prejudice to the generality of subsection (8), the UK employment and the relevant employment are to be assumed to be related to each other if one or more of the following paragraphs applies— (a) it is reasonable to suppose that— (i) the relevant employee would not hold one employment without holding the other employment, or (ii) the employments will cease at the same time or one employment will cease in consequence of the other employment ceasing; (b) the terms of one employment operate to any extent by reference to the other employment; (c) the performance of duties of one employment is (wholly or partly) dependent upon, or otherwise linked (directly or indirectly) to, the performance of duties of the other employment; (d) the duties of the employments are wholly or mainly of the same type (ignoring the fact that they may be performed (wholly or partly) in different locations); (e) the duties of the employments involve (wholly or partly) the provision of goods or services to the same customers or clients; (f) the relevant employee is— (i) a director (as defined in section 67) of the UK employer or the relevant employer who has a material interest (as defined in section 68) in the UK employer or the relevant employer, (ii) a senior employee of the UK employer or the relevant employer, or (iii) one of the employees of the UK employer or the relevant employer who receives the higher or highest levels of remuneration. (10) In subsection (9)(f) references to the UK employer or the relevant employer include references to— (a) any person with which the UK employer or the relevant employer (as the case may be) is associated, and (b) if the UK employer or the relevant employer (as the case may be) is a company, the following companies taken together as if they were one company— (i) the UK employer or the relevant employer (as the case may be), and (ii) all the companies with which the UK employer or the relevant employer (as the case may be) is associated. (11) The Treasury may by regulations amend this section so as to add to, reduce or modify the cases in which the UK employment and the relevant employment are to be assumed to be related to each other. (12) A statutory instrument containing regulations under subsection (11) may not be made unless a draft has been laid before, and approved by a resolution of, the House of Commons. (13) Condition 4 is that X% is less than Y%. (14) “X%” is given by the following formula— $C I × 100 %$ See section 24B for the definitions of “C” and “I”. (15) “Y%” is 65% of the additional rate for the relevant tax year. (16) The Treasury may by regulations amend this section so as to amend the definition of “Y%”. (17) Condition 5 is that— (a) were the duties of the relevant employment to be duties of the UK employment instead, all or substantially all of them could not lawfully be performed in the relevant territory (whether on the meeting of any condition or otherwise) by virtue of any regulatory requirements imposed by or under the law of that territory, and (b) were the UK duties of the UK employment to be duties of the relevant employment instead, all or substantially all of them could not lawfully be performed in the part of the United Kingdom in which they are performed (whether on the meeting of any condition or otherwise) by virtue of any regulatory requirements imposed by or under the law of that part of the United Kingdom. (18) In subsection (17)— - “the relevant territory” means the territory in which the duties of the relevant employment are performed, and - “UK duties” means duties performed in the United Kingdom. (24B) (1) This section applies for the purposes of section 24A(14). (2) “C” is the total amount of credit which would be allowed under section 18(2) of TIOPA 2010 (double taxation relief by way of credit) against income tax in respect of all the employment income falling within section 24A(5)(a) to (d) were none of that income to be, as relevant— (a) “chargeable overseas earnings”, (b) “foreign”, (c) “chargeable foreign securities income”, or (d) income to which section 554Z9(2) applies. (3) For this purpose, assume— (a) that all relief is claimed within the applicable time limit given by section 19 of TIOPA 2010, and (b) that all reasonable steps are taken to minimise any amounts of tax payable as mentioned in section 33 of that Act. (4) “I” is the total amount of all the employment income falling within section 24A(5)(a) to (d).

4

(1) Section 41C (taxable specific income from employment-related securities etc: foreign securities income) is amended as follows.

(2) After subsection (4) insert—

(4A) But subsection (4) does not apply to a tax year if section 24A applies in relation to the employment for the tax year.

(3) After subsection (8) insert—

(9) If subsection (4) does not apply to a tax year by virtue of subsection (4A), it is to be assumed for the purposes of section 41E that it is just and reasonable for none of the securities income treated as accruing in the tax year to be “foreign”.

5

In section 554Z9 (employment income provided through third parties: remittance basis) after subsection (1) insert—

(1A) But subsection (2) does not apply if section 24A applies in relation to A's employment with B for the relevant tax year.

6

In section 717 (orders and regulations) in subsection (4) after “under” insert “ section 24A(11) (assumptions about related employments), ”.

7

(1) Section 23(1A) of ITEPA 2003 (as inserted by paragraph 2) has effect in relation to general earnings which are general earnings from an employment for the tax year 2014-15 or any subsequent tax year.

(2) Section 41C(4A) of ITEPA 2003 (as inserted by paragraph 4(2)) has effect for cases where the tax year in question is the tax year 2014-15 or any subsequent tax year.

(3) Section 41H(5) of ITEPA 2003 (as inserted by Part 1 of Schedule 9 to this Act) has effect for cases where the tax year in question is the tax year 2014-15 or any subsequent tax year.

(4) Section 554Z9(1A) of ITEPA 2003 (as inserted by paragraph 5) has effect for cases where the relevant tax year (see section 554Z9(1)(a) of that Act) is the tax year 2014-15 or any subsequent tax year.

SCHEDULE 4

PART 1 — Amendments of CTA 2009

1

Before Part 16 of CTA 2009 insert—

(1217F) (1) This Part contains provision about tax relief for production companies in respect of their theatrical productions. (2) Sections 1217FA to 1217FC define “production company” and “theatrical production”. (3) Section 1217G sets out the conditions a production company must meet to qualify for relief in relation to its theatrical production. (4) Section 1217H provides for relief by way of additional deductions in respect of certain expenditure (and section 1217J is about the amount of the additional deduction). (5) This Part also contains provision— (a) for a company that claims relief to be treated as carrying on a separate trade relating to the theatrical production (see section 1217H(3)), and (b) about the calculation of the profits and losses of that trade (see sections 1217I to 1217IF). (6) Sections 1217K to 1217KC— (a) provide for relief by way of payments (called “theatre tax credits”) to be made on the company's surrender of certain losses of that trade, and (b) set out an upper limit on relief, in connection with State aid legislation. (7) Sections 1217LA and 1217LB are about certain cases involving tax avoidance arrangements or arrangements entered into otherwise than for genuine commercial reasons. (8) Sections 1217M to 1217MC contain provision about the use of losses of the separate trade (including provision about relief for terminal losses). (9) Sections 1217N and 1217NA are concerned with the provisional nature of relief given for periods preceding the period in which the company ceases to carry on the separate theatrical trade. (1217FA) (1) In this Part “theatrical production” means a dramatic production or a ballet (and any ballet is therefore a theatrical production, whether or not it is also a dramatic production). But see section 1217FB. (2) “Dramatic production” means a production of a play, opera, musical, or other dramatic piece (whether or not involving improvisation) in relation to which the following conditions are met— (a) the actors, singers, dancers or other performers are to give their performances wholly or mainly through the playing of roles, (b) each performance in the proposed run of performances is to be live, and (c) the presentation of live performances is the main object, or one of the main objects, of the company's activities in relation to the production. (3) “Dramatic piece” may also include, for example, a show that is to be performed by a circus. (4) For the purposes of this section a performance is “live” if it is to an audience before whom the performers are actually present. (1217FB) (1) A dramatic production or ballet is not regarded as a theatrical production if— (a) the main purpose, or one of the main purposes, for which it is made is to advertise or promote any goods or services, (b) the performances are to consist of or include a competition or contest, (c) a wild animal is to be used in any performance, (d) the production is of a sexual nature (see subsection (3)), or (e) the making of a relevant recording is the main object, or one of the main objects, of the company's activities in relation to the production. (2) For the purposes of subsection (1)(c) an animal is used in a performance if the animal performs, or is shown, in the course of the performance. (3) A production is of a sexual nature for the purposes of subsection (1)(d) if the performances are to include any content the nature of which is such that, ignoring financial gain, it would be reasonable to assume the content to be included solely or principally for the purpose of sexually stimulating any member of the audience (whether by verbal or other means). (4) “Relevant recording” means a recording of a performance— (a) as a film (or part of a film) for exhibition to the paying general public at the commercial cinema, or (b) for broadcast to the general public. (5) In this section— - “broadcast” means broadcast by any means (including television, radio or the internet); - “film” has the same meaning as in Part 15 (see section 1181); - “wild animal” means an animal of a kind which is not commonly domesticated in the British Islands (and in this definition “animal” has the meaning given by section 1(1) of the Animal Welfare Act 2006). (1217FC) (1) A company is the production company in relation to a theatrical production if the company (acting otherwise than in partnership)— (a) is responsible for producing, running and closing the theatrical production, (b) is actively engaged in decision-making during the production, running and closing phases, (c) makes an effective creative, technical and artistic contribution to the production, and (d) directly negotiates for, contracts for and pays for rights, goods and services in relation to the production. (2) No more than one company can be the production company in relation to a theatrical production. (3) If more than one company meets the conditions in subsection (1) in relation to a theatrical production, the company that is most directly engaged in the activities mentioned in subsection (1) is the production company. (4) If there is no company meeting the conditions in subsection (1), there is no production company in relation to the production. (1217G) (1) A company qualifies for relief in relation to a theatrical production if— (a) it is the production company in relation to the production, and (b) the commercial purpose condition (see section 1217GA) and the EEA expenditure condition (see section 1217GB) are met. (2) There is further provision relating to subsection (1) in section 1217LA (tax avoidance arrangements). (1217GA) (1) The “commercial purpose condition” is that at the beginning of the production phase the company intends that all, or a high proportion of, the live performances that it proposes to run will be— (a) to paying members of the general public, or (b) provided for educational purposes. (2) The reference in subsection (1) to “live performances” is to be read in accordance with section 1217FA(4). (3) A performance is not regarded as provided for educational purposes if the production company is, or is associated with, a person who— (a) has responsibility for the beneficiaries, or (b) is otherwise connected with the beneficiaries (for instance, by being their employer). (4) For the purposes of subsection (3), a production company is associated with a person (“P”) if— (a) P controls the production company, or (b) P is a company which is controlled by the production company or by a person who also controls the production company. (5) In this section— - “the beneficiaries” means persons for whose benefit the performance will or may be provided; - “control” has the same meaning as in Part 10 of CTA 2010 (see section 450 of that Act). (1217GB) (1) The “EEA expenditure condition” is that at least 25% of the core expenditure on the theatrical production incurred by the company is EEA expenditure. (2) In this Part “EEA expenditure” means expenditure on goods or services that are provided from within the European Economic Area. (3) Any apportionment of expenditure as between EEA and non-EEA expenditure for the purposes of this Part is to be made on a just and reasonable basis. (4) The Treasury may by regulations— (a) amend the percentage specified in subsection (1); (b) amend subsection (2). (5) See also sections 1217N and 1217NA (which are about the giving of relief provisionally on the basis that the EEA expenditure condition will be met). (1217GC) (1) In this Part “core expenditure”, in relation to a theatrical production, means expenditure on the activities involved in— (a) producing the production, and (b) closing the production. (2) The reference in subsection (1)(a) to “expenditure on the activities involved in producing the production”— (a) does not include expenditure on any matters not directly involved in producing the production (for instance, financing, marketing, legal services or storage); (b) does not include expenditure on the ordinary running of the production; but expenditure incurred on or after the date of the first performance of the production to the paying general public may fall within subsection (1)(a) (for instance, if it is incurred in connection with a substantial recasting or a substantial redesign of the set). (1217H) (1) A company which qualifies for relief in relation to a theatrical production may claim an additional deduction in relation to the production. (2) A claim under subsection (1) is made with respect to an accounting period. (See Schedule 18 to FA 1998, and in particular Part 9D, for provision about the procedure for making claims.) (3) Where a company has made a claim under subsection (1)— (a) the company's activities in relation to the theatrical production are treated for corporation tax purposes as a trade separate from any other activities of the company (including activities in relation to any other theatrical production), and (b) the company is entitled to make an additional deduction, in accordance with section 1217J, in calculating the profit or loss of the separate trade for the accounting period concerned. (4) The company is treated as beginning to carry on the separate trade— (a) when the production phase begins, or (b) if earlier, at the time of the first receipt by the company of any income from the theatrical production. (5) Where the company tax return in which a claim under subsection (1) is made is for an accounting period later than that in which the company begins to carry on the separate trade, the company must make any amendments of company tax returns for earlier periods that may be necessary. (6) Any amendment or assessment necessary to give effect to subsection (5) may be made despite any limitation on the time within which an amendment or assessment may normally be made. (7) If the company ceases at any time to meet the conditions in section 1217FC(1) (meaning of “production company”) in relation to the production, it is treated as ceasing to carry on the separate trade at that time. (1217I) Where a company is treated under section 1217H(3)(a) as carrying on a separate trade (“the separate theatrical trade”), the profits or losses of the trade are calculated for corporation tax purposes in accordance with sections 1217IA to 1217IF. (1217IA) (1) For the first period of account during which the separate theatrical trade is carried on, the following are brought into account— (a) as a debit, the costs of the theatrical production incurred (and represented in work done) to date; (b) as a credit, the proportion of the estimated total income from the production treated as earned at the end of that period. (2) For subsequent periods of account the following are brought into account— (a) as a debit, the difference between the amount (“C”) of the costs of the theatrical production incurred (and represented in work done) to date and the amount corresponding to C for the previous period, and (b) as a credit, the difference between the proportion (“PI”) of the estimated total income from the production treated as earned at the end of that period and the amount corresponding to PI for the previous period. (3) The proportion of the estimated total income treated as earned at the end of a period of account is— $$C T × I$where—C is the total to date of costs incurred (and represented in work done);T is the estimated total cost of the theatrical production;I is the estimated total income from the theatrical production.$ (1217IB) (1) References in this Part to income from a theatrical production are to any receipts by the company in connection with the making or exploitation of the production. (2) This includes— (a) receipts from the sale of tickets or of rights in the theatrical production; (b) royalties or other payments for use of aspects of the theatrical production (for example, characters or music); (c) payments for rights to produce merchandise; (d) receipts by the company by way of a profit share agreement. (3) Receipts that (apart from this subsection) would be regarded as being of a capital nature are treated as being of a revenue nature. (1217IC) (1) References in this Part to the costs of a theatrical production are to expenditure incurred by the company on— (a) the activities involved in developing, producing, running and closing the production, or (b) activities with a view to exploiting the production. (2) This is subject to any provision of the Corporation Tax Acts prohibiting the making of a deduction, or restricting the extent to which a deduction is allowed, in calculating the profits of a trade. (3) Expenditure which, apart from this subsection, would be regarded as being of a capital nature only because it is incurred on the creation of an asset (i.e. the theatrical production) is treated as being of a revenue nature. (1217ID) (1) For the purposes of this Part, the costs that have been incurred on a theatrical production at a given time— (a) are those costs of the production that are represented in the state of completion of the work in progress, but (b) do not include any amount that has not been paid unless it is the subject of an unconditional obligation to pay. (2) In accordance with subsection (1)(a)— (a) payments in advance of work to be done are ignored until the work has been carried out; (b) deferred payments are recognised to the extent that the goods or services in question are represented in the state of completion of the work in progress (but this is subject to subsection (1)(b)). (3) Where an obligation to pay an amount is linked to income being earned from the theatrical production, the obligation is not treated as having become unconditional unless an appropriate amount of income is or has been brought into account under section 1217IA. (4) In determining for the purposes of this Part the amount of costs incurred on a theatrical production at the end of a period of account, any amount that has not been paid 4 months after the end of that period is to be ignored. (1217IE) (1) This section applies if, before the company begins to carry on the separate theatrical trade, it incurs expenditure on activities falling within section 1217IC(1)(a). (2) The expenditure may be treated as expenditure of the separate theatrical trade and as if incurred immediately after the company begins to carry on that trade. (3) If expenditure so treated has previously been taken into account for other tax purposes, the company must amend any relevant company tax return accordingly. (4) Any amendment or assessment necessary to give effect to subsection (3) may be made despite any limitation on the time within which an amendment or assessment may normally be made. (1217IF) Estimates for the purposes of section 1217IA must be made as at the balance sheet date for each period of account, on a just and reasonable basis taking into consideration all relevant circumstances. (1217J) (1) The amount of an additional deduction to which a company is entitled as a result of a claim under section 1217H is calculated as follows. (2) For the first period of account during which the separate theatrical trade is carried on, the amount of the additional deduction is E, where— E is— 1. so much of the qualifying expenditure incurred to date as is EEA expenditure, or 2. if less, 80% of the total amount of qualifying expenditure incurred to date. (3) For any period of account after the first, the amount of the additional deduction is— $$E−P$where—E is—so much of the qualifying expenditure incurred to date as is EEA expenditure, orif less, 80% of the total amount of qualifying expenditure incurred to date, andP is the total amount of the additional deductions given for previous periods.$ (4) The Treasury may by regulations amend the percentage specified in subsection (2) or (3). (1217JA) (1) In this Part “qualifying expenditure”, in relation to a theatrical production, means core expenditure (see section 1217GC) on the theatrical production that— (a) falls to be taken into account under sections 1217IA to 1217IF in calculating the profit or loss of the separate theatrical trade for tax purposes, and (b) is not excluded by subsection (2). (2) The following expenditure is excluded— (a) expenditure in respect of which the company is entitled to an R&D expenditure credit under Chapter 6A of Part 3; (b) expenditure in respect of which the company has obtained relief under Part 13 (additional relief for expenditure on research and development). (1217K) (1) A company which— (a) is treated under section 1217H(3) as carrying on a separate trade during the whole or part of an accounting period, and (b) has a surrenderable loss in that period, may claim a theatre tax credit for that accounting period. (2) Section 1217KA sets out how to calculate the amount of any surrenderable loss that the company has in the accounting period. (3) A company making a claim may surrender the whole or part of its surrenderable loss in the accounting period. (4) The amount of the theatre tax credit to which a company making a claim is entitled for the accounting period is— (a) 25% of the amount of the loss surrendered if the theatrical production is a touring production, or (b) 20% of the amount of the loss surrendered if the theatrical production is not a touring production. (5) The company's available loss for the accounting period (see section 1217KA(2)) is reduced by the amount surrendered. (6) A theatrical production is a “touring production” only if the company intends at the beginning of the production phase— (a) that it will present performances of the production in 6 or more separate premises, or (b) that it will present performances of the production in at least two separate premises and that the number of performances will be at least 14. (7) See Schedule 18 to FA 1998 (in particular, Part 9D) for provision about the procedure for making claims under subsection (1). (1217KA) (1) The company's surrenderable loss in the accounting period is— (a) the company's available loss for the period in the separate theatrical trade (see subsections (2) and (3)), or (b) if less, the available qualifying expenditure for the period (see subsections (4) and (5)). (2) The company's available loss for an accounting period is— $$L +RUL$where—L is the amount of the company's loss for the period in the separate theatrical trade, andRUL is the amount of any relevant unused loss of the company (see subsection (3)).$ (3) The “relevant unused loss” of a company is so much of any available loss of the company for the previous accounting period as has not been— (a) surrendered under section 1217K, or (b) carried forward under section 45 of CTA 2010 and set against profits of the separate theatrical trade. (4) For the first period of account during which the separate theatrical trade is carried on, the available qualifying expenditure is the amount that is E for that period for the purposes of section 1217J(2). (5) For any period of account after the first, the available qualifying expenditure is— $$E−S$where—E is the amount that is E for that period for the purposes of section 1217J(3), andS is the total amount previously surrendered under section 1217K.$ (6) If a period of account of the separate theatrical trade does not coincide with an accounting period, any necessary apportionments are to be made by reference to the number of days in the periods concerned. (1217KB) (1) If a company— (a) is entitled to a theatre tax credit for an accounting period, and (b) makes a claim, the Commissioners for Her Majesty's Revenue and Customs (“the Commissioners”) must pay the amount of the credit to the company. (2) An amount payable in respect of— (a) a theatre tax credit, or (b) interest on a theatre tax credit under section 826 of ICTA, may be applied in discharging any liability of the company to pay corporation tax. To the extent that it is so applied the Commissioners' liability under subsection (1) is discharged. (3) If the company's company tax return for the accounting period is enquired into by the Commissioners, no payment in respect of a theatre tax credit for that period need be made before the Commissioners' enquiries are completed (see paragraph 32 of Schedule 18 to FA 1998). In those circumstances the Commissioners may make a payment on a provisional basis of such amount as they consider appropriate. (4) No payment need be made in respect of a theatre tax credit for an accounting period before the company has paid to the Commissioners any amount that it is required to pay for payment periods ending in that accounting period— (a) under PAYE regulations, (b) under section 966 of ITA 2007 (visiting performers), or (c) in respect of Class 1 national insurance contributions under Part 1 of the Social Security Contributions and Benefits Act 1992 or Part 1 of the Social Security Contributions and Benefits (Northern Ireland) Act 1992. (5) A payment in respect of a theatre tax credit is not income of the company for any tax purpose. (1217KC) (1) The total amount of any theatre tax credits payable under section 1217KB in the case of any undertaking is not to exceed 50 million euros per year. (2) In this section “undertaking” has the same meaning as in the General Block Exemption Regulation. (3) In this section “the General Block Exemption Regulation” means any regulation that— (a) is for the time being in force under Article 1 of Council Regulation (EC) No 994/98, and (b) makes, in relation to aid in favour of culture and heritage conservation, the declaration provided for by that Article. (1217LA) (1) A company does not qualify for relief in relation to a theatrical production if there are any tax avoidance arrangements relating to the production. (2) Arrangements are “tax avoidance arrangements” if their main purpose, or one of their main purposes, is the obtaining of a tax advantage. (3) In this section— - “arrangements” includes any scheme, agreement or understanding, whether or not legally enforceable; - “tax advantage” has the meaning given by section 1139 of CTA 2010. (1217LB) (1) A transaction is to be ignored for the purpose of determining a relief mentioned in subsection (2) so far as the transaction is attributable to arrangements (other than tax avoidance arrangements) entered into otherwise than for genuine commercial reasons. (2) The reliefs mentioned in subsection (1) are— (a) any additional deduction which a company may make under this Part, and (b) any theatre tax credit to be given to a company. (3) In this section “arrangements” and “tax avoidance arrangements” have the same meaning as in section 1217LA. (1217M) (1) Sections 1217MA to 1217MC apply to a company that is treated under section 1217H(3) as carrying on a separate trade in relation to a theatrical production. (2) In those sections— - “the completion period” means the accounting period in which the company ceases to carry on the separate theatrical trade; - “loss relief” includes any means by which a loss might be used to reduce the amount in respect of which a company, or any other person, is chargeable to tax. (1217MA) (1) Subsection (2) applies if a loss is made by the company in the separate theatrical trade in an accounting period preceding the completion period. (2) The loss is not available for loss relief, except to the extent that the loss may be carried forward under section 45 of CTA 2010 to be set against profits of the separate theatrical trade in a subsequent period. (1217MB) (1) Subsection (2) applies if a loss made in the separate theatrical trade is carried forward under section 45 of CTA 2010 to the completion period. (2) So much (if any) of the loss as is not attributable to relief under section 1217H (see subsection (4)) may be treated for the purposes of loss relief as if it were a loss made in the completion period. (3) If a loss is made in the separate theatrical trade in the completion period, the amount of the loss that may be— (a) deducted from total profits of the same or an earlier period under section 37 of CTA 2010, or (b) surrendered as group relief under Part 5 of that Act, is restricted to the amount (if any) that is not attributable to relief under section 1217H. (4) The amount of a loss in any period that is attributable to relief under section 1217H is found by— (a) calculating what the amount of the loss would have been if there had been no additional deduction under that section in that or any earlier period, and (b) deducting that amount from the total amount of the loss. (5) This section does not apply to loss surrendered, or treated as carried forward, under section 1217MC (terminal losses). (1217MC) (1) This section applies if— (a) the company ceases to carry on the separate theatrical trade, and (b) if the company had not ceased to carry on the separate theatrical trade, it could have carried forward an amount under section 45 of CTA 2010 to be set against profits of that trade in a later period (“the terminal loss”). Below in this section the company is referred to as “company A” and the separate theatrical trade is referred to as “trade 1”. (2) If company A— (a) is treated under section 1217H(3) as carrying on a separate theatrical trade in relation to another theatrical production (“trade 2”), and (b) is carrying on trade 2 when it ceases to carry on trade 1, company A may (on making a claim) elect to transfer the terminal loss (or a part of it) to trade 2. (3) If company A makes an election under subsection (2), the terminal loss (or part of the loss) is treated as if it were a loss brought forward under section 45 of CTA 2010 to be set against the profits of trade 2 of the first accounting period beginning after the cessation and so on. (4) Subsection (5) applies if— (a) another company (“company B”) is treated under section 1217H(3) as carrying on a separate theatrical trade (“company B's trade”) in relation to another theatrical production, (b) company B is carrying on that trade when company A ceases to carry on trade 1, and (c) company B is in the same group as company A for the purposes of Part 5 of CTA 2010 (group relief). (5) Company A may surrender the loss (or part of it) to company B. (6) On the making of a claim by company B the amount surrendered is treated as if it were a loss brought forward by company B under section 45 of CTA 2010 to be set against the profits of company B's trade of the first accounting period beginning after the cessation and so on. (7) The Treasury may by regulations make administrative provision in relation to the surrender of a loss under subsection (5) and the resulting claim under subsection (6). (8) “Administrative provision” means provision corresponding, subject to such adaptations or other modifications as appear to the Treasury to be appropriate, to that made by Part 8 of Schedule 18 to FA 1998 (company tax returns: claims for group relief). (1217N) (1) In relation to a company that has made a claim under section 1217H in relation to a theatrical production, “interim accounting period” means any accounting period that— (a) is one in which the company carries on the separate theatrical trade, and (b) precedes the accounting period in which it ceases to do so. (2) A company is not entitled to relief under any of the relieving provisions for an interim accounting period unless— (a) its company tax return for the period states the amount of planned core expenditure on the theatrical production that is EEA expenditure, and (b) that amount is such as to indicate that the EEA expenditure condition (see section 1217GB) will be met in relation to the production. If those requirements are met, the company is provisionally treated in relation to that period as if the EEA expenditure condition were met. (3) In this section “the relieving provisions” means— (a) section 1217H (additional deduction), (b) section 1217K (theatre tax credits), and (c) section 1217MC (terminal losses). (1217NA) (1) If a statement is made under section 1217N(2) but it subsequently appears that the EEA expenditure condition will not be met on the company's ceasing to carry on the separate theatrical trade, the company— (a) is not entitled to relief under any of the relieving provisions for any period for which its entitlement depended on such a statement, and (b) must amend its company tax return for any such period accordingly. (2) When a company which has made a claim under section 1217H ceases to carry on the separate theatrical trade, the company's company tax return for the period in which that cessation occurs must— (a) state that the company has ceased to carry on the separate theatrical trade, and (b) be accompanied by a final statement of the amount of the core expenditure on the theatrical production that is EEA expenditure. (3) If that statement shows that the EEA expenditure condition is not met— (a) the company is not entitled to relief under any of the relieving provisions for any period, (b) the company is treated for corporation tax purposes as if section 1217H(3)(a) (treatment as a separate trade) did not apply in relation to the theatrical production for any period, and (c) accordingly, sections 1217MA and 1217MB (provisions about use of losses) do not apply in relation to the theatrical production for any period. (4) Where subsection (3) applies, the company must amend its company tax return for any period in which (or in any part of which) it was treated as carrying on a separate trade relating to the theatrical production. (5) Any amendment or assessment necessary to give effect to this section may be made despite any limitation on the time within which an amendment or assessment may normally be made. (6) In this section “the relieving provisions” has the same meaning as in section 1217N. (1217O) The Treasury may by regulations amend section 1217GC (core expenditure) or 1217IC (costs of production) for the purpose of providing that activities of a specified description are, or are not, to be regarded as activities involved in developing or (as the case may be) producing, running or closing— (a) a theatrical production, or (b) a theatrical production of a specified description. (1217OA) In this Part “company tax return” has the same meaning as in Schedule 18 to FA 1998 (see paragraph 3(1) of that Schedule). (1217OB) In this Part— - “commercial purpose condition” has the meaning given by section 1217GA; - “company tax return” has the meaning given by section 1217OA; - “core expenditure” has the meaning given by section 1217GC; - “costs”, in relation to a theatrical production, has the meaning given by section 1217IC; - “EEA expenditure” has the meaning given by section 1217GB; - “EEA expenditure condition” has the meaning given by section 1217GB; - references to “income from a theatrical production” are to be read in accordance with section 1217IB; - “production company” has the meaning given by section 1217FC; - “qualifying expenditure” has the meaning given by section 1217JA; - references to the “separate theatrical trade” are to be read in accordance with section 1217I; - “theatrical production” has the meaning given by section 1217FA (read with section 1217FB).

PART 2 — Consequential amendments

ICTA

2

(1) Section 826 of the Income and Corporation Taxes Act 1988 (interest on tax overpaid) is amended as follows.

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

(fc) a payment of theatre tax credit falls to be made to a company; or

(3) In subsection (3C), for “or video game tax credit” substitute “ , video game tax credit or theatre tax credit ”.

(4) In subsection (8A)—

(a) in paragraph (a) for “or (f)” substitute “ (f), (fa), (fb) or (fc) ”, and

(b) in paragraph (b)(ii), after “video game tax credit” insert “ or theatre tax credit ”.

(5) In subsection (8BA), after “video game tax credit” (in both places) insert “ or theatre tax credit ”.

FA 1998

3

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

4

In paragraph 10 (other claims and elections to be included in return), in sub-paragraph (4)—

(a) before “claims” insert “ certain ”;

(b) for “or 15B” substitute “ , 15B or 15C ”.

5

(1) Paragraph 52 (recovery of excessive overpayments etc) is amended as follows.

(2) In sub-paragraph (2), after paragraph (bf) insert—

(bg) theatre tax credit under Part 15C of that Act,

(3) In sub-paragraph (5)—

(a) after paragraph (ah) insert—

(ai) an amount of theatre tax credit paid to a company for an accounting period,

;

(b) in the words after paragraph (b), after “(ah)” insert “ , (ai) ”.

6

(1) Part 9D (certain claims for tax relief) is amended as follows.

(2) In paragraph 83S (introduction), after paragraph (c) insert—

(d) an additional deduction under Part 15C of CTA 2009, (e) a theatre tax credit under that Part of that Act.

(3) The heading of that Part becomes “ Claims for tax relief under Part 15, 15A, 15B or 15C of the Corporation Tax Act 2009 ”.

CAA 2001

7

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

FA 2007

8

In Schedule 24 to FA 2007 (penalties for errors), in paragraph 28(fa) (meaning of “corporation tax credit”), omit the “or” at the end of sub-paragraph (ivb) and after that sub-paragraph insert—

(ivc) a theatre tax credit under section 1217K of that Act, or

CTA 2009

9

In section 104BA of CTA 2009 (R&D expenditure credits: restrictions on claiming other tax reliefs), after subsection (3) insert—

(4) For provision prohibiting an R&D expenditure credit being given under this Chapter and relief being given under section 1217H or 1217K (theatrical productions: additional deduction or theatre tax credit), see section 1217JA(2).

10

In Part 8 of CTA 2009 (intangible fixed assets), in Chapter 10 (excluded assets), before section 809 insert—

(808C) (1) This Part does not apply to an intangible fixed asset held by a theatrical production company so far as the asset represents expenditure on a theatrical production that is treated under Part 15C as expenditure of a separate trade (see particularly sections 1217H and 1217IE). (2) In this section— - “theatrical production” has the same meaning as in Part 15C (see section 1217FA); - “theatrical production company” means a company which, for the purposes of that Part, is the production company in relation to a theatrical production (see section 1217FC).

11

In section 1040ZA of CTA 2009 (additional relief for expenditure on research and development), after subsection (3) insert—

(4) For provision prohibiting relief being given under this Part and under section 1217H or 1217K (theatrical productions: additional deduction or theatre tax credit), see section 1217JA(2).

12

In section 1310 of CTA 2009 (orders and regulations), in subsection (4), after paragraph (ej) insert—

(ek) section 1217GB(4) (EEA expenditure condition), (el) section 1217J(4) (amount of additional deduction), (em) section 1217O (activities involved in developing, producing, running or closing a production),

13

In Schedule 4 to CTA 2009 (index of defined expressions) at the appropriate place insert—

commercial purpose condition (in Part 15C)	section 1217OB

;

company tax return (in Part 15C)	section 1217OA

;

core expenditure (in Part 15C)	section 1217GC

;

costs of a theatrical production (in Part 15C)	section 1217IC

;

EEA expenditure (in Part 15C)	section 1217GB

;

EEA expenditure condition (in Part 15C)	section 1217OB

;

income from a theatrical production (in Part 15C)	section 1217IB

;

production company (in Part 15C)	section 1217FC

;

qualifying expenditure (in Part 15C)	section 1217JA

;

the separate theatrical trade (in Part 15C)	section 1217OB

;

theatrical production (in Part 15C)	section 1217FA

FA 2009

14

In Schedule 54A to FA 2009 (which is prospectively inserted by F(No. 3)A 2010 and contains provision about the recovery of certain amounts of interest paid by HMRC), in paragraph 2—

(a) in sub-paragraph (2), omit the “or” at the end of paragraph (f) and after paragraph (g) insert

, or (h) a payment of theatre tax credit under section 1217K of CTA 2009 for an accounting period.

;

(b) in sub-paragraph (4), for “(e)” substitute “ (h) ”.

CTA 2010

15

(1) Section 357CG of CTA 2010 (profits arising from the exploitation of patents etc: adjustments in calculating profits of trade) is amended as follows.

(2) In subsection (3), omit the “and” at the end of paragraph (c) and after paragraph (d) insert

, and (e) the amount of any additional deduction for the accounting period obtained by the company under Part 15C of CTA 2009 in respect of qualifying expenditure on a theatrical production.

(3) In subsection (6)—

(a) in the definition of “qualifying expenditure”, omit the “and” at the end of paragraph (a) and after paragraph (b) insert

, and (c) in relation to a company that is the production company (as defined in section 1217FC of that Act) in relation to a theatrical production, has the same meaning as in Part 15C of that Act,

;

(b) omit the “and” at the end of the definition of “television production company” and after that definition insert—

“theatrical production” has the same meaning as in Part 15C of CTA 2009 (see section 1217FA of that Act), and

PART 3 — Commencement

16

(1) Any power to make regulations conferred on the Treasury by virtue of this Schedule comes into force on the day on which this Act is passed.

(2) So far as not already brought into force by sub-paragraph (1), the amendments made by this Schedule come into force in accordance with provision contained in an order made by the Treasury.

(3) An order under sub-paragraph (2) may make different provision for different purposes.

17

(1) The amendments made by this Schedule have effect in relation to accounting periods beginning on or after 1 September 2014.

(2) Sub-paragraph (3) applies where a company has an accounting period beginning before 1 September 2014 and ending on or after that date (“the straddling period”).

(3) For the purposes of Part 15C of CTA 2009—

(a) so much of the straddling period as falls before 1 September 2014, and so much of that period as falls on or after that date, are treated as separate accounting periods, and

(b) any amounts brought into account for the purposes of calculating for corporation tax purposes the profits of a trade for the straddling period are apportioned to the two separate accounting periods on such basis as is just and reasonable.

SCHEDULE 5

Temporary extension of period by which commencement lump sum may precede pension

1

In Schedule 29 to FA 2004 (authorised lump sums under registered pension schemes) after paragraph 1 (conditions for a lump sum to be a pension commencement lump sum) insert—

(1A) (1) Paragraph 1(1)(c) is to be omitted when deciding whether a lump sum to which this paragraph applies is a pension commencement lump sum. (2) This paragraph applies to a lump sum if— (a) the sum is paid in respect of a money purchase arrangement, (b) the sum is paid before the member becomes entitled to the sum, (c) either— (i) the sum is paid on or after 19 September 2013 but before 6 April 2015, or (ii) the sum is paid before 19 September 2013, a contract for a lifetime annuity is entered into to provide the pension in connection with which the sum is paid, and on or after 19 March 2014 the contract is cancelled, and (d) the member becomes entitled to the sum before 6 October 2015. (3) Where— (a) a lump sum to which this paragraph applies is a pension commencement lump sum but would not be a pension commencement lump sum if sub-paragraph (1) were omitted, and (b) the lump sum is paid to the member in connection with a pension under the scheme to which it is expected that the member will become entitled (“the expected pension”), no lump sum paid to the member out of the expected-pension fund is a pension commencement lump sum; and here “the expected-pension fund” means the sums and assets that from time to time represent the sums and assets that, when the lump sum mentioned in paragraph (a) was paid, were held for the purpose of providing the expected pension. (4) For the purposes of sub-paragraph (2), if the circumstances are as described in sub-paragraph (2)(c)(ii), the member is treated as not having become entitled to the arranged pension as a result of the cancelled contract having been entered into; and here “the arranged pension” means the pension that would have been provided by that contract had it not been cancelled.

Temporary relaxation to allow transfer of pension rights after lump sum paid

2

(1) In Schedule 29 to FA 2004 after paragraph 1A insert—

(1B) (1) When deciding whether a lump sum to which this paragraph applies is a pension commencement lump sum— (a) paragraph 1(1)(aa) and (c) and (3) are to be omitted, (b) paragraph 1(4) is to be treated as referring to the actual pension (see sub-paragraph (2)(h) of this paragraph), and (c) paragraph 2(2) is to be treated as referring to the arrangement under which the member was expected to become entitled to the expected pension (see sub-paragraph (2)(b) of this paragraph). (2) This paragraph applies to a lump sum if— (a) the sum is paid in respect of a money purchase arrangement, (b) the sum is paid to the member in connection with a pension under a registered pension scheme to which it is expected that the member will become entitled (“the expected pension”), (c) the expected pension is income withdrawal, a lifetime annuity or a scheme pension, (d) the sum is paid before the member becomes entitled to the expected pension, (e) either— (i) the sum is paid on or after 19 September 2013 but before 6 April 2015, or (ii) the sum is paid before 19 September 2013, a contract for a lifetime annuity is entered into to provide the expected pension, and on or after 19 March 2014 the contract is cancelled, (f) the sum is not repaid at any time before 6 October 2015, (g) before the member becomes entitled to the expected pension, there is a recognised transfer of the sums and assets that immediately before the transfer represent the sums and assets that when the sum was paid were held for the purpose of providing the expected pension, (h) the member becomes entitled before 6 October 2015 to a pension under the scheme to which the recognised transfer is made ( “ the actual pension ”), (i) the actual pension is income withdrawal, a lifetime annuity or a scheme pension, or some combination of them, and (j) all of the sums and assets that represent the sums and assets transferred by the recognised transfer are used to provide the actual pension. (3) If a lump sum to which this paragraph applies is a pension commencement lump sum, any lump sum paid— (a) to the member, (b) by the scheme to which the recognised transfer mentioned in sub-paragraph (2)(g) is made or by any other registered pension scheme (including the scheme from which the transfer was made), and (c) in connection with the member's becoming entitled to the actual pension, is not a pension commencement lump sum. (4) For the purposes of sub-paragraph (2), if the circumstances are as described in sub-paragraph (2)(e)(ii), the member is treated as not having become entitled to the expected pension as a result of the cancelled contract having been entered into.

(2) In section 166(2) of FA 2004 (time at which a person becomes entitled to a lump sum)—

(a) before paragraph (a) insert—

(za) in the case of a pension commencement lump sum to which paragraph 1B of Schedule 29 applies (certain sums paid before 6 April 2015), immediately before the person becomes entitled to the actual pension (see paragraph 1B(2)(h) of that Schedule),

, and

(b) in paragraph (a) for “of a” substitute “ of any other ”.

Temporary relaxation to allow lump sum to be repaid to pension scheme that paid it

3

In Chapter 3 of Part 4 of FA 2004 (payments by registered pension schemes) after section 185I insert—

(185J) (1) For the purposes of this Part— (a) a lump sum to which this section applies is treated as never having been paid, and (b) the payment by which it is repaid is treated as not being a payment. (2) This section applies to a lump sum if— (a) the sum is paid by a registered pension scheme to a member of the scheme in respect of a money purchase arrangement, (b) the sum is paid to the member in connection with a pension under the scheme to which it is expected that the member will become entitled (“the expected pension”), (c) the expected pension is income withdrawal, a lifetime annuity or a scheme pension, (d) the sum is paid before the member becomes entitled to the expected pension, (e) either— (i) the sum is paid on or after 19 September 2013 but before 6 April 2015, or (ii) the sum is paid before 19 September 2013, a contract for a lifetime annuity is entered into to provide the expected pension, and on or after 19 March 2014 the contract is cancelled, (f) before the member becomes entitled to the expected pension, the member repays the sum to the pension scheme that paid it, and (g) the repayment is made before 6 October 2015. (3) For the purposes of subsection (2), if the circumstances are as described in subsection (2)(e)(ii), the member is treated as not having become entitled to the expected pension as a result of the cancelled contract having been entered into.

Calculation of “applicable amount” in certain cases

4

In paragraph 3 of Schedule 29 to FA 2004 (pension commencement lump sums: applicable amount) after sub-paragraph (8) insert—

(8A) Sub-paragraphs (1) to (8) have effect subject to the following— (a) if— (i) paragraph 1A or 1B applies to the lump sum, (ii) the lump sum is paid more than 6 months before the day on which the member becomes entitled to it, (iii) a contract for a lifetime annuity is entered into to provide the pension in connection with which the lump sum is paid, and (iv) on or after 19 March 2014 the contract is cancelled, the applicable amount is one third of the annuity purchase price that would have been given by sub-paragraphs (4) to (5) in the case of that annuity had the contract not been cancelled, and (b) if— (i) paragraph 1A or 1B applies to the lump sum, (ii) the lump sum is paid more than 6 months before the day on which the member becomes entitled to it, and (iii) paragraph (a) does not apply, the applicable amount is one third of the sums, plus one third of the then market value of the assets, held at the time the lump sum is paid for the purpose of providing the pension at that time expected to be the pension in connection with which the lump sum is paid. (8B) For the purposes of sub-paragraph (8A)(a)(ii), the member is treated as not having become entitled to a pension as a result of the cancelled contract having been entered into.

Expected pension commencement lump sums treated as trivial commutation lump sums

5

(1) In section 166(1) of FA 2004, in the lump sum rule, omit the “or” after paragraph (f), and after paragraph (g) insert

, or (h) a transitional 2013/14 lump sum.

(2) In Schedule 29 to FA 2004, after paragraph 11 insert—

(11A) (1) A lump sum is a transitional 2013/14 lump sum for the purposes of this Part if— (a) the sum (“the earlier sum”) is paid to the member in connection with a pension under a registered pension scheme to which it is expected that the member will become entitled (“the expected pension”), (b) the earlier sum is paid before the member becomes entitled to the expected pension, (c) either— (i) the earlier sum is paid on or after 19 September 2013 but before 27 March 2014, or (ii) the earlier sum is paid before 19 September 2013, a contract for a lifetime annuity is entered into to provide the expected pension, and on or after 19 March 2014 the contract is cancelled, (d) all of the sums and assets for the time being representing the sums and assets that when the earlier sum was paid were held for the purpose of providing the expected pension are, before the member becomes entitled to the expected pension, used in paying a further lump sum to the member ( “ the further sum ”), (e) the further sum is paid on or after 6 July 2014 but before 6 April 2015, and (f) the further sum is a trivial commutation lump sum (see sub-paragraph (2)). (2) Sub-paragraph (4) applies when deciding under paragraph 7 whether the further sum is a trivial commutation lump sum in a case where the earlier sum is paid before the nominated date (see paragraph 7(3) for the meaning of “the nominated date”). (3) If the earlier sum is a transitional 2013/14 lump sum, and the earlier sum and the further sum are not the only lump sums paid under registered pension schemes to the member, sub-paragraph (4) applies when deciding under paragraph 7 whether any other lump sum paid under a registered pension scheme to the member is a trivial commutation lump sum. (4) If this sub-paragraph applies, the payment of the earlier sum is to be treated for the purposes of paragraph 8(1)(b) as a benefit crystallisation event— (a) which occurs when the earlier sum is paid, and (b) on which the amount crystallised is the amount of the earlier sum. (5) If the earlier sum is a transitional 2013/14 lump sum, and only the sums and assets mentioned in sub-paragraph (1)(d) are used in paying the further sum, section 636B of ITEPA 2003 applies in relation to the further sum with the omission of its subsection (3). (6) If the earlier sum is a transitional 2013/14 lump sum, and the sums and assets mentioned in sub-paragraph (1)(d) are used together with other sums and assets in paying the further sum— (a) section 636B of ITEPA 2003 applies in relation to the further sum as if instead of the further sum there were two separate trivial commutation lump sums as follows— (i) one (“the first part of the further sum”) consisting of so much of the further sum as is attributable to the sums and assets mentioned in sub-paragraph (1)(d), and (ii) another consisting of the remainder of the further sum, (b) the first part of the further sum is to be treated for the purposes of section 636B of ITEPA 2003 as having been paid immediately before the remainder of the further sum, (c) section 636B of ITEPA 2003 applies in relation to the first part of the further sum with the omission of its subsection (3), and (d) for the purposes of applying section 636B(3) of ITEPA 2003 in relation to the remainder of the further sum, the rights to which the first part of the further sum relates are to be treated as rights that are not uncrystallised rights immediately before the remainder of the further sum is paid. (7) For the purposes of sub-paragraph (1), if the circumstances are as described in sub-paragraph (1)(c)(ii), the member is treated as not having become entitled to the expected pension as a result of the cancelled contract having been entered into.

(3) In section 636A of ITEPA 2003 (income tax exemption for certain lump sums)—

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

(ca) a transitional 2013/14 lump sum,

, and

(b) in subsection (6) (definitions) omit the “and”, and after “ “short service refund lump sum”,” insert

and "transitional 2013/14 lump sum",

(4) In section 280(2) of FA 2004 (index of expressions) at the appropriate place insert—

transitional 2013/14 lump sum	paragraph 11A of Schedule 29

Small pot lump sums

6

(1) In the Registered Pension Schemes (Authorised Payments) Regulations 2009 (S.I. 2009/1171) after regulation 3 insert—

(3A) (1) This regulation applies to a lump sum if— (a) the sum (“the earlier sum”) is paid under a registered pension scheme to a member of the scheme, (b) the earlier sum is paid to the member in connection with a pension under a registered pension scheme to which it is expected that the member will become entitled (“the expected pension”), (c) the earlier sum is paid before the member becomes entitled to the expected pension, (d) either— (i) the earlier sum is paid on or after 19 September 2013 but before 27 March 2014, or (ii) the earlier sum is paid before 19 September 2013, a contract for a lifetime annuity is entered into to provide the expected pension, and on or after 19 March 2014 the contract is cancelled, (e) all of the sums and assets for the time being representing the sums and assets that when the earlier sum was paid were held for the purpose of providing the expected pension are, before the member becomes entitled to the expected pension, used in paying a further lump sum to the member ( “ the further sum ”), (f) the further sum is paid on or after 6 July 2014 but before 6 April 2015, and (g) either— (i) the payment of the further sum is a payment described in regulation 11, 11A or 12, or (ii) the further sum is a trivial commutation lump sum within paragraph 7A of Schedule 29 and the earlier sum is the pension commencement lump sum in connection with which the further sum is paid. (2) If this regulation applies to the earlier sum, and the payment of the further sum is a payment described in regulation 11, 11A or 12— (a) the payment of the earlier sum is a payment of a prescribed description for the purposes of section 164(1)(f), and (b) section 636A of ITEPA 2003 (exemption from income tax for certain lump sums) applies in relation to the earlier sum as if the earlier sum were a pension commencement lump sum. (3) When deciding for the purposes of this regulation whether the further sum is a trivial commutation lump sum within paragraph 7A of Schedule 29, sub-paragraph (2)(c) of that paragraph is to be omitted. (4) If this regulation applies to the earlier sum, and only the sums and assets mentioned in paragraph (1)(e) are used in paying the further sum, section 636B of ITEPA 2003 applies in relation to the further sum with the omission of its subsection (3). (5) If this regulation applies to the earlier sum, and the sums and assets mentioned in paragraph (1)(e) are used together with other sums and assets in paying the further sum— (a) section 636B of ITEPA 2003 applies in relation to the further sum as if instead of the further sum there were two separate trivial commutation lump sums as follows— (i) one (“the first part of the further sum”) consisting of so much of the further sum as is attributable to the sums and assets mentioned in paragraph (1)(e), and (ii) another consisting of the remainder of the further sum, (b) the first part of the further sum is to be treated for the purposes of section 636B of ITEPA 2003 as having been paid immediately before the remainder of the further sum, (c) section 636B of ITEPA 2003 applies in relation to the first part of the further sum with the omission of its subsection (3), and (d) for the purposes of applying section 636B(3) of ITEPA 2003 in relation to the remainder of the further sum, the rights to which the first part of the further sum relates are to be treated as rights that are not uncrystallised rights immediately before the remainder of the further sum is paid. (6) For the purposes of paragraph (1), if the circumstances are as described in paragraph (1)(d)(ii), the member is treated as not having become entitled to the expected pension as a result of the cancelled contract having been entered into.

(2) The amendment made by sub-paragraph (1) is to be treated as having been made by the Commissioners for Her Majesty's Revenue and Customs under the powers to make regulations conferred by section 164(1)(f) and (2) of FA 2004.

Preservation of protected pension age following certain transfers of pension rights

7

(1) In paragraph 22 of Schedule 36 to FA 2004 (protection of rights to take benefit before normal minimum pension age) after sub-paragraph (6) insert—

(6A) A transfer is also a block transfer if— (a) it involves the transfer in a single transaction of all the sums and assets held for the purposes of, or representing accrued rights under, the arrangements under the pension scheme from which the transfer is made which relate to the member, (b) the transfer takes place— (i) on or after 19 March 2014, and (ii) before 6 April 2015, and (c) the date mentioned in sub-paragraph (7)(a) is before 6 October 2015.

(2) In paragraph 23(6) of Schedule 36 to FA 2004 (meaning of “block transfer”) after “22(6)” insert “ and (6A), but for this purpose paragraph 22(6A)(c) is to be read as if its reference to paragraph 22(7)(a) were a reference to sub-paragraph (7) of this paragraph ”.

Operation of enhanced protection of pre-6 April 2006 rights to take lump sums

8

In paragraph 29 of Schedule 36 to FA 2004 (modifications of paragraph 3 of Schedule 29 to FA 2004 for cases where there is enhanced protection) after sub-paragraph (3) insert—

(4) Paragraph 3 applies as if in sub-paragraph (8A)(a) for “is one third of” there were substituted “is— $$VULSR VUR × ( LS + CAPP )$where VULSR, VUR and LS have the same meaning as in sub-paragraph (1), and CAPP is”.$ (5) Paragraph 3 applies as if in sub-paragraph (8A)(b) for “is one third of the sums, plus one third of” there were substituted “is— $$VULSR VUR × ( LS + EP )$where VULSR, VUR and LS have the same meaning as in sub-paragraph (1), and EP is the total of the sums, and”.$

Protected lump sum entitlement following certain transfers of pension rights

9

In paragraph 31(8) of Schedule 36 to FA 2004 (“block transfer” has meaning given by paragraph 22(6) of Schedule 36 to FA 2004)—

(a) after “22(6)” insert “ and (6A) ”, and

(b) at the end insert “ , and reading paragraph 22(6A)(c) as if its reference to paragraph 22(7)(a) were a reference to sub-paragraph (3) of this paragraph. ”

10

(1) In paragraph 34(2) of Schedule 36 to FA 2004 (modifications required by paragraph 31 in cases involving protected entitlements to lump sums) the sub-paragraphs treated as substituted in paragraph 2 of Schedule 29 to FA 2004 are amended as follows.

(2) In the substituted sub-paragraph (7A), in the definition of AC, for “(7AA) and (7B))” substitute “ (7AA) to (7B)) ”.

(3) After the substituted sub-paragraph (7AA) insert—

(7AB) Where paragraph 1A applies to the lump sum, AC is the total of— (a) the sums held, at the time the lump sum is paid, for the purpose of providing the pension at that time expected to be the pension in connection with which the lump sum is paid, and (b) the market value at that time of the assets held at that time for that purpose. (7AC) Where paragraph 1B applies to the lump sum, AC is the total of— (a) the sums held, at the time the lump sum is paid, for the purpose of providing the expected pension (see paragraph 1B(2)(b)), and (b) the market value at that time of the assets held at that time for that purpose.

Reporting obligations

11

(1) In the Registered Pension Schemes (Provision of Information) Regulations 2006 (S.I. 2006/567) after regulation 18 insert—

(19) (1) Regulations 3 to 18 have effect subject to the following provisions of this regulation. (2) Paragraphs (3) to (8) apply if— (a) a lump sum is paid by a registered pension scheme (“the paying scheme”) to a member of the scheme, (b) paragraph 1B of Schedule 29 applies to the lump sum, and (c) the member's becoming entitled to the actual pension mentioned in paragraph 1B(2)(h) of Schedule 29 has the effect that— (i) the member also becomes entitled to the lump sum, and (ii) the member's becoming entitled to the lump sum is a benefit crystallisation event. (3) For the purposes of— (a) reportable event 6, (b) regulation 3 so far as applying by virtue of that event, and (c) obligations under regulation 14(1), the benefit crystallisation event mentioned in paragraph (2)(c)(ii) is treated as occurring— (i) in respect of the scheme to which the transfer mentioned in paragraph 1B(2)(g) of Schedule 29 was made (“the receiving scheme”) and not in respect of the paying scheme, and (ii) when the member becomes entitled to the actual pension or, if later, on 5 August 2014. (4) For the purposes of regulations 15(2)(a) and 17(5)(a)(i) and (7)(a)(i), that benefit crystallisation event is treated as occurring in respect of the receiving scheme and not in respect of the paying scheme. (5) For the purposes of— (a) reportable event 7 (but not its definition of “the entitlement amount”), (b) reportable event 8, and (c) regulation 3 so far as applying by virtue of either of those events, the lump sum is treated as having been paid— (i) by the receiving scheme and not by the paying scheme, and (ii) when the member becomes entitled to the actual pension or, if later, on 5 August 2014. (6) For the purposes of reportable event 7 “the entitlement amount” is the total of— (a) the sums held, at the time the lump sum is actually paid, for the purpose of providing the expected pension mentioned in paragraph 1B(2)(b) of Schedule 29, and (b) the market value at that time of the assets held at that time for that purpose. (7) The scheme administrator of the paying scheme is to provide the scheme administrator of the receiving scheme with the following information— (a) the date the lump sum was paid, (b) the amount of the lump sum, (c) the total of— (i) the sums held, at the time lump sum is paid, for the purpose of providing the expected pension mentioned in paragraph 1B(2)(b) of Schedule 29, and (ii) the market value at that time of the assets held at that time for that purpose, and (d) a statement that no further pension commencement lump sum may be paid in connection with that expected pension. (8) The scheme administrator of the paying scheme is to comply with its obligations under paragraph (7) before— (a) the end of 30 days beginning with the date of the transfer mentioned in paragraph 1B(2)(g) of Schedule 29, or (b) if later, the end of 3 September 2014. (20) (1) Regulations 3 to 18 have effect subject to the following provisions of this regulation. (2) Paragraph (3) applies if— (a) a lump sum is paid by a registered pension scheme (“the paying scheme”) to a member of the scheme, (b) paragraph 1B of Schedule 29 does not apply to the lump sum, but the conditions in paragraph 1B(2)(a) to (g) are met in the case of the lump sum, and (c) as at the end of 5 October 2015 it is the case that the lump sum is to be taken as having been an unauthorised member payment. (3) For the purposes of reportable event 1, and regulation 3 so far as applying by virtue of that event, the lump sum is treated as having been paid— (a) by the receiving scheme and not by the paying scheme, and (b) on 6 October 2015.

(2) The amendment made by sub-paragraph (1) is to be treated as having been made by the Commissioners for Her Majesty's Revenue and Customs under such of the powers cited in the instrument containing the Regulations as are applicable.

Scheme sanction charges

12

(1) In section 239(3) of FA 2004 (cases where person other than scheme administrator is liable for a scheme sanction charge)—

(a) after “But” insert

— (a)

, and

(b) at the end insert

, and (b) in the case of a payment of a lump sum to a member where the conditions in paragraphs 1(1)(b) and (d) and 1B(2)(a) to (g) of Schedule 29 are met, the person liable to the scheme sanction charge so far as relating to any part of the lump sum within the permitted maximum is the scheme administrator of the registered pension scheme to which the transfer mentioned in paragraph 1B(2)(g) of Schedule 29 is made.

(2) In section 239 of FA 2004 (scheme sanction charges) after subsection (3) insert—

(3A) For the purposes of subsection (3)(b) “the permitted maximum”, in the case of a lump sum paid to an individual, is the amount that in accordance with paragraph 2 of Schedule 29 would be the permitted maximum for that lump sum if the individual became entitled at the time the lump sum is paid to the pension at that time expected to be the pension in connection with which the lump sum is paid.

(3) In section 268 of FA 2004 (discharge of liability to scheme sanction charges etc) after subsection (7) insert—

(7A) Subsection (7) applies with the omission of its paragraph (a) if the scheme chargeable payment is a payment of a lump sum where the conditions in paragraph 1B(2)(a) to (g) of Schedule 29 are met.

(4) In the Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572) in article 18 (which provides for paragraph 1(1)(b) of Schedule 29 to FA 2004 to be omitted in certain cases) at the end insert “ , and section 239 has effect in the case of a lump sum paid to that individual as if its subsection (3)(b) did not include a reference to paragraph 1(1)(b) of Schedule 29 ”.

(5) The amendment made by sub-paragraph (4) is to be treated as made by the Treasury under the powers to make orders conferred by section 283(2) of FA 2004.

Power to make further adjustments

13

In section 166 of FA 2004 (payments by registered pension schemes: the lump sum rule) after subsection (4) insert—

(5) The Commissioners for Her Majesty's Revenue and Customs may by regulations amend Part 1 of Schedule 29, or Part 3 of Schedule 36, in connection with cases involving a lump sum within subsection (6). (6) A lump sum is within this subsection if— (a) the sum is paid on or after 19 September 2013 and before 6 April 2015, or (b) the sum is paid before 19 September 2013, a contract for a lifetime annuity is entered into to provide the pension in connection with which the sum is paid, and on or after 19 March 2014 the contract is cancelled. (7) The provision that may be made under subsection (5) includes provision altering the effect of amendments made by the Finance Act 2014.

14

In section 282(1) and (2) of FA 2004 (making of regulations and orders) for “Board of Inland Revenue” substitute “ Commissioners for Her Majesty's Revenue and Customs ”.

Commencement

15

The amendments made by paragraphs 1 to 5, 6(1), 7 to 10, 11(1) and 12(1) to (4) of this Schedule are to be treated as having come into force on 19 March 2014.

SCHEDULE 6

PART 1 — “Individual protection 2014”

The protection

1

(1) Sub-paragraphs (2) to (2B) apply on and after 6 April 2014 in the case of an individual—

(a) who, on 5 April 2014, has one or more relevant arrangements (see sub-paragraph (4)),

(b) whose relevant amount is greater than £1,250,000 (see sub-paragraph (5)), and

if notice of intention to rely on it is given to an officer of Revenue and Customs before 6 April 2017.

(2) Chapter 15A of Part 9 of ITEPA 2003 (pension income: lump sums under registered pension schemes) has effect in relation to the individual as if the amount specified in section 637P of that Act (individual’s lump sum allowance) were the lower of—

(a) 25% of the individual’s relevant amount, and

(b) £375,000.

(2A) Chapter 15A of Part 9 of ITEPA 2003 (pension income: lump sums under registered pension schemes) has effect in relation to the individual as if the amount specified in section 637R of that Act (individual’s lump sum and death benefit allowance) were the lower of—

(a) if one or more lump sum and death benefit allowance enhancement factors operate in relation to the individual for the purposes of paragraph 20H of Schedule 36 to FA 2004, the individual’s enhanced lump sum and death benefit allowance (as determined under that paragraph of that Schedule), and

(b) otherwise, the lower of—

(i) the individual’s relevant amount, and

(ii) £1,500,000.

(2B) For the purposes of paragraph 20H of Schedule 36 to FA 2004, the individual’s “protected lump sum and death benefit allowance” is the lower of—

(a) the individual’s relevant amount, and

(b) £1,500,000.

(3) But sub-paragraphs (2) to (2B) do not apply at any time when any of the following provisions applies in the case of the individual—

(a) paragraph 12 of Schedule 36 to FA 2004 (enhanced protection);

(b) paragraph 14 of Schedule 18 to FA 2011 (fixed protection 2012);

(4) “Relevant arrangement”, in relation to an individual, means an arrangement relating to the individual under—

(a) a registered pension scheme of which the individual is a member, or

(b) a relieved non-UK pension scheme of which the individual is a relieved member.

(5) An individual's “relevant amount” is the sum of amounts A, B, C and D (see paragraphs 2 to 5).

(6) Sub-paragraphs (7) and (8) apply if rights of an individual under a relevant arrangement become subject to a pension debit where the transfer day falls on or after 6 April 2014.

(7) For the purpose of applying sub-paragraph (2) in the case of the individual on and after the transfer day, the individual's relevant amount is reduced (or further reduced) by the following amount—

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