Finance Act 2019

(879A) (1) This Chapter contains special rules about the debits to be brought into account by a company for tax purposes in respect of relevant assets. (2) In this Chapter “relevant asset” means— (a) goodwill in a business or part of a business, (b) an intangible fixed asset that consists of information which relates to customers or potential customers of a business or part of a business, (c) an intangible fixed asset that consists of a relationship (whether contractual or not) between a person carrying on a business and one or more customers of that business or part of that business, (d) an unregistered trade mark or other sign used in the course of a business or part of a business, or (e) a licence or other right in respect of an asset within any of paragraphs (a) to (d). (879B) (1) This section applies if a company acquires or creates a relevant asset on or after 1 April 2019. (2) The company is to be treated as having made an election under section 730 to write down the cost of the asset for tax purposes at a fixed rate. (3) In its application in relation to the asset, section 731 (writing down at fixed rate: calculation) has effect as if in subsection (1)(a) for “4%” there was substituted “ 6.5% ”. (4) The Treasury may by regulations amend subsection (3) so as to alter the percentage substituted for 4%. (879C) (1) This section applies in respect of a relevant asset of a company if it is a pre-FA 2019 relevant asset. (2) No debits in respect of the asset are to be brought into account by the company for tax purposes under Chapter 3 (debits in respect of intangible fixed assets) or Chapter 15 (adjustments on change of accounting policy). (3) Any debit in respect of the asset that is brought into account by the company for tax purposes under Chapter 4 (realisation of intangible fixed assets) is treated for the purposes of Chapter 6 as a non-trading debit. (4) Sections 879D to 879H set out the cases in which a relevant asset of a company is a pre-FA 2019 relevant asset for the purposes of this Chapter. (879D) For the purposes of this Chapter a relevant asset of a company is a pre-FA 2019 relevant asset if— (a) the company acquired or created the asset during the period beginning with 8 July 2015 and ending with 31 March 2019, and (b) the asset was a chargeable intangible asset in relation to the company at any time during the period beginning with 29 October 2018 and ending with 31 March 2019. (879E) (1) For the purposes of this Chapter a relevant asset of a company (“C”) is a pre-FA 2019 relevant asset if— (a) another company acquired or created the asset during the period beginning with 8 July 2015 and ending with 31 March 2019, (b) it was a chargeable intangible asset in relation to that other company at any time during the period beginning with 29 October 2018 and ending with 31 March 2019, and (c) C acquired the asset on or after 1 April 2019 otherwise than in case A or case B from a person who was a related party in relation to C. (2) Case A is where— (a) C acquired the asset from a company that was within the charge to corporation tax at the time of the acquisition, and (b) the asset was not a pre-FA 2019 relevant asset in the hands of that company immediately before the acquisition. (3) Case B is where C acquired the asset from a person (“the intermediary”) who acquired the asset on or after 1 April 2019 from a third person— (a) who was not at the time of the intermediary's acquisition a related party in relation— (i) to the intermediary, or (ii) if the intermediary was not a company, to a company in relation to which the intermediary was a related party, and (b) who is not, at the time of the acquisition by C, a related party in relation to C. (4) References in this section to one person being (or not being) a related party in relation to another person are to be read as including references to the participation condition being met (or, as the case may be not being met) as between those persons. (5) References in subsection (4) to a person include a firm in a case where, for section 1259 purposes, references in this section to a company are read as references to the firm. (6) In subsection (5) “section 1259 purposes” means the purposes of determining under section 1259 the amount of profits or losses to be allocated to a partner in a firm. (7) Section 148 of TIOPA 2010 (when the participation condition is met) applies for the purposes of subsection (4) as it applies for the purpose of section 147(1)(b) of TIOPA 2010. (879F) (1) For the purposes of this Chapter a relevant asset of a company (“C”) is a pre-FA 2019 relevant asset if— (a) the relevant asset was created on or after 29 October 2018, (b) C acquired the relevant asset on or after 1 April 2019 from a person (“the transferor”) who was a related party in relation to C at the time of the acquisition, (c) the value of the relevant asset derives in whole or in part from another asset (“the other asset”), and (d) the other asset meets the preserved status condition (see section 879G). (2) But if only part of the value of the relevant asset derives from the other asset— (a) the relevant asset is to be treated for the purposes of this Chapter as if it were two separate assets— (i) one representing the part of the value of the relevant asset that does so derive, and (ii) the other representing the part of the value of the relevant asset that does not so derive, and (b) subsection (1) applies only in relation to the separate asset representing the part of the value of the relevant asset that does so derive. (3) For the purposes of this section the cases in which the value of a relevant asset may be derived from another asset include any case where— (a) assets have been merged or divided, (b) assets have changed their nature, or (c) rights or interests in or over assets have been created or extinguished. (4) Section 879G supplements this section. (879G) (1) For the purposes of section 879F the other asset meets the preserved status condition if subsection (2) or (3) applies. (2) This subsection applies if the other asset— (a) was acquired or created by a company during the period beginning with 8 July 2015 and ending with 31 March 2019, and (b) was a chargeable intangible asset in the hands of that company at any time during the period beginning with 29 October 2018 and ending with 31 March 2019 when— (i) that company and C were related parties, or (ii) that company and the transferor were related parties. (3) This subsection applies if the other asset was a pre-FA 2019 relevant asset in the hands of a company at any time during the period beginning with 1 April 2019 and ending with the acquisition mentioned in section 879F(1)(b) when— (a) that company and C were related parties, or (b) that company and the transferor were related parties. (4) It does not matter for the purposes of section 879F(1)(a) who created the relevant asset. (5) Any apportionment necessary for the purposes of section 879F(2) must be made on a just and reasonable basis. (6) Section 879E(4) to (7) applies for the purposes of section 879F and this section. (7) Expressions used in this section have the same meaning as in section 879F. (879H) (1) For the purposes of this Chapter a relevant asset of a company is a pre-FA 2019 relevant asset if— (a) the company acquired the asset on or after 1 April 2019 directly or indirectly in consequence of, or otherwise in connection with, a disposal of a relevant asset by another person, and (b) the asset disposed of would have been a pre-FA 2019 relevant asset in the hands of the company had the person transferred it to the company at the time of the disposal. (2) For the purposes of this section it does not matter whether— (a) the asset disposed of is the same asset as the acquired asset, (b) the acquired asset is acquired at the time of the disposal, or (c) the acquired asset is acquired by merging assets or otherwise. (879I) (1) This section applies in respect of a relevant asset of a company if the company acquires the asset on or after 1 April 2019 otherwise than as part of the acquisition of a business. (2) This section also applies in respect of a relevant asset of a company if— (a) the company acquires the asset on or after 1 April 2019 as part of the acquisition of a business, and (b) the company does not acquire any qualifying IP assets as part of the acquisition of the business for use on a continuing basis in the course of the business. (3) No debits in respect of the asset are to be brought into account by the company for tax purposes under Chapter 3 (debits in respect of intangible fixed assets) or Chapter 15 (adjustments on change of accounting policy). (4) Any debit in respect of the asset that is brought into account by the company for tax purposes under Chapter 4 (realisation of intangible fixed assets) is treated for the purposes of Chapter 6 as a non-trading debit. (879J) (1) In section 879I “qualifying IP asset”, in relation to a company, means an intangible fixed asset that meets the following two conditions. (2) The first condition is that the asset is— (a) a patent, registered design, copyright or design right, plant breeders' right, or right under section 7 of the Plant Varieties Act 1997, (b) a right under the law of a country or territory outside the United Kingdom corresponding or similar to a right within paragraph (a), or (c) a licence or other right in respect of anything within paragraph (a) or (b). (3) The second condition is that in the hands of the company the asset— (a) is not to any extent excluded from this Part by Chapter 10, and (b) is not a pre-FA 2002 asset (see section 881). (4) The reference in subsection (2)(c) to a licence or other right does not include a licence or other right that permits the use of computer software but does not permit its manufacture, adaptation or supply. (5) The Treasury may by regulations amend the meaning of qualifying IP asset for the purposes of this Chapter. (879K) (1) This section applies in respect of a relevant asset of a company if— (a) the company acquires the asset on or after 1 April 2019 directly or indirectly from an individual or firm (“the transferor”), (b) the related party condition is met, and (c) the third party acquisition condition is not met. (2) The related party condition is met if— (a) in a case where the transferor is an individual, the transferor is a related party in relation to the company at the time of the acquisition; (b) in a case where the transferor is a firm, any individual who is a member of the transferor is a related party in relation to the company at that time. (3) The third party acquisition condition is met if— (a) in a case where the relevant asset is goodwill— (i) the transferor acquired all or part of the relevant business in one or more third party acquisitions as part of which the transferor acquired goodwill, and (ii) the relevant asset is acquired by the company as part of an acquisition of all the relevant business; (b) in a case where the relevant asset is not goodwill— (i) the transferor acquired the relevant asset in a third party acquisition, and (ii) the relevant asset is acquired by the company as part of an acquisition of all the relevant business. (4) No debits in respect of the asset are to be brought into account by the company for tax purposes under Chapter 3 (debits in respect of intangible fixed assets) or Chapter 15 (adjustments on change of accounting policy). (5) Any debit in respect of the asset that is brought into account by the company for tax purposes under Chapter 4 (realisation of intangible fixed assets) is treated for the purposes of Chapter 6 as a non-trading debit. (879L) (1) This section applies for the purposes of section 879K(3). (2) “Relevant business” means— (a) in a case where the relevant asset is within paragraph (e) of subsection (2) of section 879A, the business or (as the case may be) the part of the business mentioned in the paragraph of that subsection within which the licensed asset falls, and (b) in any other case, the business or (as the case may be) the part of the business mentioned in the paragraph of that subsection within which the relevant asset falls. (3) The transferor acquires something in a “third party acquisition” if— (a) the transferor acquires it from a company (“C”) and, at the time of that acquisition— (i) if the transferor is an individual, the transferor is not a related party in relation to C, or (ii) if the transferor is a firm, no individual who is a member of the transferor is a related party in relation to C, or (b) the transferor acquires it from a person (“P”) who is not a company and, at the time of that acquisition— (i) if the transferor is an individual, P is not connected with the transferor, or (ii) if the transferor is a firm, no individual who is a member of the transferor is connected with P. (4) But an acquisition is not a “third party acquisition” if— (a) its main purpose, or one of its main purposes, is for any person to obtain a tax advantage (within the meaning of section 1139 of CTA 2010), or (b) it occurs during the period beginning with 8 July 2015 and ending with 31 March 2019. (5) In this section “connected” has the same meaning as in Chapter 12 (see section 842). (879M) (1) Section 879O (the partial restrictions on debits) applies in respect of a relevant asset (“the asset concerned”) of a company if— (a) the company acquires the asset concerned on or after 1 April 2019 as part of the acquisition of a business, (b) the company also acquires qualifying IP assets as part of the acquisition of the business for use on a continuing basis in the course of the business, and (c) the amount in subsection (3) is less than 1. (2) But section 879O does not apply in respect of the asset concerned if either of the following sections applies in respect of it— (a) section 879C (restrictions on debits: pre-FA 2019 relevant assets); (b) section 879K (restrictions on debits: acquisition from individual or firm). (3) The amount is— $$A × N B$where—A is the expenditure incurred by the company for or in connection with the acquisition of the qualifying IP assets mentioned in subsection (1)(b),B is the expenditure incurred by the company for or in connection with the acquisition of the asset concerned and any other relevant assets acquired with the business, andN is 6.$ (4) The Treasury may by regulations amend the meaning of N. (5) In this section— - “expenditure” means expenditure that is— 1. capitalised for accounting purposes, or 2. recognised in determining the profit or loss of the company concerned without being capitalised for accounting purposes, - “qualifying IP asset” has the same meaning as in section 879I (see section 879J). (879N) (1) Section 879O (the partial restrictions on debits) also applies in respect of a relevant asset of a company if— (a) the company acquires the asset on or after 1 April 2019 directly or indirectly from an individual or firm (“the transferor”), (b) the related party condition is met, (c) the third party acquisition condition is met, and (d) the amount in subsection (6) is less than 1. (2) But section 879O does not apply in respect of the relevant asset if either of the following sections applies in respect of it— (a) section 879C (restrictions on debits: pre-FA 2019 relevant assets); (b) section 879I (restrictions on debits: no business or no qualifying IP assets acquired). (3) The related party condition is met if— (a) in a case where the transferor is an individual, the transferor is a related party in relation to the company at the time of the acquisition; (b) in a case where the transferor is a firm, any individual who is a member of the transferor is a related party in relation to the company at that time. (4) The third party acquisition condition is met if— (a) in a case where the relevant asset is goodwill— (i) the transferor acquired all or part of the relevant business in one or more third party acquisitions as part of which the transferor acquired goodwill, and (ii) the relevant asset is acquired by the company as part of an acquisition of all the relevant business; (b) in a case where the relevant asset is not goodwill— (i) the transferor acquired the relevant asset in a third party acquisition, and (ii) the relevant asset is acquired by the company as part of an acquisition of all the relevant business. (5) Section 879L (meaning of relevant business and third party acquisition) applies for the purposes of this section. (6) The amount is— $$A B$where—A is the relevant accounting value of third party acquisitions (see subsections (7) to (9)), andB is the expenditure incurred by the company for or in connection with the acquisition of the relevant asset that is—capitalised by the company for accounting purposes, orrecognised in determining the company's profit or loss without being capitalised for accounting purposes,subject to any adjustments under this Part or Part 4 of TIOPA 2010.$ (7) In a case in which the relevant asset is goodwill, the relevant accounting value of third party acquisitions is the notional accounting value of the goodwill mentioned in subsection (4)(a)(i) (“the previously acquired goodwill”). (8) In a case in which the relevant asset is not goodwill, the relevant accounting value of third party acquisitions is the notional accounting value of the relevant asset. (9) The “notional accounting value” of the previously acquired goodwill, or the relevant asset, is what its accounting value would have been in GAAP-compliant accounts drawn up by the transferor— (a) immediately before the relevant asset was acquired by the company, and (b) on the basis that the relevant business was a going concern. (879O) (1) Where this section applies in respect of a relevant asset of a company, the following restrictions have effect. (2) If a debit in respect of the relevant asset is to be brought into account by the company for tax purposes under a provision of Chapter 3 (debits in respect of intangible fixed assets) or Chapter 15 (adjustments on change of accounting policy), the amount of that debit is— $$D × RA$where—D is the amount of the debit that would be brought into account disregarding this section (and, accordingly, for the purposes of any calculation of the tax written-down value of the relevant asset needed to determine D, this section's effect in relation to any debits previously brought into account is to be disregarded), andRA is the relevant amount (see subsection (6)).$ (3) If, but for this section, a debit in respect of any of the relevant assets would be brought into account by the company for tax purposes under a provision of Chapter 4 (realisation of intangible fixed assets), the following two debits are to be brought into account under that provision instead— (a) a debit determined in accordance with subsection (4), and (b) a debit determined in accordance with subsection (5), which is to be treated for the purposes of Chapter 6 as a non-trading debit (“the non-trading debit”). (4) The amount of the debit determined in accordance with this subsection is— $$D × RA$where—D is the amount of the debit that would be brought into account under Chapter 4 disregarding this section (and, accordingly, for the purposes of any calculation of the tax written down value of the relevant asset needed to determine D, this section's effect in relation to any debits previously brought into account is to be disregarded), andRA is the relevant amount (see subsection (6)).$ (5) The amount of the non-trading debit is— $$D − TD$where—D is the amount of the debit that would be brought into account under Chapter 4 disregarding this section (but, for the purposes of any calculation of the tax written-down value of the relevant asset needed to determine D, this section's effect in relation to any debits previously brought into account is not to be disregarded), andTD is the amount of the debit determined in accordance with subsection (4).$ (6) In this section the “relevant amount” means— (a) in a case where this section applies in respect of the relevant asset by reason only of section 879M, the amount in subsection (3) of that section; (b) in a case where this section applies in respect of the relevant asset by reason only of section 879N, the amount in subsection (6) of that section; (c) in a case where this section applies in respect of the relevant asset by reason of both section 879M and 879N, the amount found by multiplying the amount in subsection (3) of section 879M by the amount in subsection (6) of section 879N. (879P) (1) A company that acquires a relevant asset in pursuance of an unconditional obligation under a contract is to be treated for the purposes of this Chapter as having acquired the asset on the date on which the company became subject to that obligation or (if later) the date on which that obligation became unconditional. (2) An obligation is unconditional if it may not be varied or extinguished by the exercise of a right (whether under contract or otherwise).

7

• (1) The amendments made by this Schedule have effect in relation to accounting periods beginning on or after 1 April 2019.

• (2) For the purposes of sub-paragraph (1), an accounting period beginning before, and ending on or after, 1 April 2019 is to be treated as if so much of the accounting period as falls before that date, and so much of the accounting period as falls on or after that date, were separate accounting periods.

SCHEDULE 10

Restrictions on deductions from profits

1

CTA 2010 is amended as follows.

2

In section 188DD (group relief for carried-forward losses: claimant company's relevant maximum for overlapping period) omit subsection (4).

3

In section 188ED (group relief for carried-forward losses: claimant company's relevant maximum for overlapping period)—

• (a) omit subsection (4), and

• (b) in subsection (5) for “(4)” substitute “ (3) ”.

4

In section 269ZB (restriction on deductions from trading profits) in subsection (8) for paragraph (b) substitute—

(b) any amount specified for the period under section 269ZC(5)(a) (non-trading profits deductions allowance).

5

In section 269ZC (restriction on deductions from non-trading profits) in subsection (6) for paragraph (b) substitute—

(b) any amount specified for the period under section 269ZB(7)(a) (trading profits deductions allowance).

6

• (1) Section 269ZD (restriction on deductions from total profits) is amended as follows.

• (2) In subsection (2)—

• (a) in paragraph (b)—

• (i) at the end of sub-paragraph (i) insert “ and ”, and

• (ii) omit sub-paragraph (iii) and the “and” immediately before it, and

• (b) in the second sentence omit “and section 269ZE”.

• (3) In subsection (4)(a) after “period” insert “ (see section 269ZFA) ”.

• (4) Omit subsection (5).

• (5) For subsection (7) substitute—

(7) Subsection (2) does not apply in relation to a company for an accounting period where the amount given by paragraph (1) of step 1 in section 269ZF(3) is not greater than nil.

7

Omit section 269ZE (restriction on deductions from total profits: insurance companies).

8

After section 269ZF insert—

(269ZFA) (1) A company's “relevant profits” for an accounting period are— (a) the company's qualifying profits for the accounting period, less (b) the company's deductions allowance for the accounting period (see section 269ZD(6)). (2) A company's “qualifying profits” for an accounting period are— (a) the amount given by paragraph (1) of step 1 in section 269ZF(3) in determining the company's qualifying trading profits and qualifying non-trading profits for the accounting period, less (b) the amount given by paragraph (1) of step 2 in section 269ZF(3) in determining those profits for the accounting period.

9

After section 269ZFA (as inserted by paragraph 8) insert—

(269ZFB) (1) This section has effect for determining the taxable total profits of a company for an accounting period if the company— (a) is an insurance company, and (b) carries on basic life assurance and general annuity business in the period. (2) A reference in section 269ZD(7) and section 269ZFA(2) to the amount given by a paragraph of a step in section 269ZF(3) is to be read as a reference to the amount that would be so given if— (a) section 269ZF(4)(a) did not require income referable to a company's basic life assurance and general annuity business to be ignored unless it falls within, and is dealt with under, Part 9A of CTA 2009 by reason of an election under section 931R of that Act, and (b) section 269ZF(4)(d) required only the policyholders' share of any I-E profit (as determined in accordance with section 103 of FA 2012) to be ignored. (3) In this section— - “basic life assurance and general annuity business” has the meaning given by section 57 of FA 2012, and - “insurance company” has the meaning given by section 65 of that Act.

10

In section 269ZJ (exclusion of shock losses from restrictions) omit subsection (4).

11

In section 269ZQ (power to amend) in subsection (2)(b) for “124E” substitute “ 124C ”.

12

In section 269ZV (group allowance allocation statement: requirements and effects) after subsection (5) insert—

(5A) In its application in relation to a listed company that is the ultimate parent (see section 269ZZB(3)) of each other company in the group, subsection (5) has effect as if after “the group” in paragraph (b) of the definition of DAP there was inserted “and was not a member of any other group

.

13

In section 269CC (restrictions on deductions by banking companies: management expenses etc) in subsection (7) (how to determine “relevant maximum”) in Step 1 for “269ZD(5)” substitute “ 269ZFA ”.

14

In section 269CN (restrictions on deductions by banking companies: definitions) in the definition of “relevant profits” for “269ZD(5)” substitute “ 269ZFA ”.

15

In section 304(7) (certain deductions in respect of losses made in a ring fence trade to be ignored for the purposes of the restriction on deductions from trading profits) in paragraph (b) for “total” substitute “ trade ”.

16

FA 2012 is amended as follows.

17

In section 124 (carry forward of pre-1 April 2017 BLAGAB trade losses against subsequent profits) in subsection (5) omit “(but see also section 124D)”.

18

In section 124A (carry forward of post-1 April 2017 BLAGAB trade losses against subsequent profits) in subsection (5) omit “(but see also section 124D)”.

19

In section 124C (further carry forward against subsequent profits of post-1 April 2017 loss not fully used) in subsection (6) omit “(but see also section 124D)”.

20

Omit sections 124D and 124E (restriction on deductions from BLAGAB trade profits).

Terminal losses: straddling periods

21

For section 45G of CTA 2010 substitute—

(45G) (1) This section applies if— (a) a company ceases to carry on a trade in an accounting period (“the terminal period”), and (b) a previous accounting period of the company (“the straddling period”) falls partly within the period of 3 years ending with the end of the terminal period. (2) The sum of any deductions under section 45F from the profits of the trade of the straddling period is not to exceed an amount equal to the overlapping proportion of those profits (calculated before making those deductions). (3) The sum of— (a) any deductions under section 45F from the profits of the trade of the straddling period, and (b) any deductions under that section from the total profits of the straddling period in respect of losses made in the trade, must not exceed an amount equal to the overlapping proportion of the total profits of the straddling period (calculated before making those deductions). (4) The overlapping proportion is the same as the proportion that the part of the straddling period falling within the period of 3 years mentioned in subsection (1)(b) bears to the whole of the straddling period.

Group relief for carried-forward losses

22

CTA 2010 is amended as follows.

23

In section 188BG(3) (types of loss that may not be surrendered by a Solvency 2 insurance company)—

• (a) omit “or” at the end of paragraph (b), and

• (b) after paragraph (c) insert

or (d) a BLAGAB trade loss carried forward to the surrender period under section 124A(2) or 124C(3) of FA 2012,

.

24

• (1) Section 188DD (claimant company's relevant maximum for overlapping period in case of claim under section 188CB) is amended as follows.

• (2) In subsection (3)—

• (a) for “relevant” (in both places) substitute “ qualifying ”, and

• (b) for “section 269ZD(5)” (in both places) substitute “ subsection (3A) ”.

• (3) After subsection (3) insert—

(3A) The claimant company's “qualifying profits” for the claim period are— (a) the amount given by paragraph (1) of step 1 in section 269ZF(3) in determining the company's qualifying trading profits and qualifying non-trading profits for the period, less (b) the amount given by paragraph (1) of step 2 in section 269ZF(3) in determining those profits for the period.

25

• (1) Section 188ED (claimant company's relevant maximum for overlapping period in case of claim under section 188CC) is amended as follows.

• (2) In subsection (3)—

• (a) for “relevant” (in both places) substitute “ qualifying ”, and

• (b) for “section 269ZD(5)” (in both places) substitute “ subsection (3A) ”.

• (3) After subsection (3) insert—

(3A) The claimant company's “qualifying profits” for the claim period are— (a) the amount given by paragraph (1) of step 1 in section 269ZF(3) in determining the company's qualifying trading profits and qualifying non-trading profits for the period, less (b) the amount given by paragraph (1) of step 2 in section 269ZF(3) in determining those profits for the period.

Transferred trades

26

CTA 2010 is amended as follows.

27

In section 357JI (Northern Ireland losses: transfers of trade without a change of ownership) in subsection (2) for the words from the beginning to “that section” substitute “ Sections 943A to 944C (which modify the application of Chapter 2 of Part 4) have effect as if the references in those sections ”.

28

In section 676 (disallowance of trading loss on change in ownership of company: company reconstructions)—

• (a) in subsection (2) for the words from “section 944(3)” to “successor company)” substitute “ Chapter 1 of Part 22 ”,

• (b) in subsection (4)(a) after “45” insert “ , 45A, 45B, 303B, 303C or 303D ”, and

• (c) in subsection (4)(b) for “944(3)” substitute “ Chapter 1 of Part 22 ”.

29

In section 676AF (restriction on use of carried-forward post-1 April 2017 trade losses)—

• (a) the existing provision becomes subsection (1), and

• (b) after that subsection insert—

(2) A loss made by another company (“the predecessor company”) in an accounting period beginning before the change in ownership may not be deducted from affected profits of an accounting period ending after the change in ownership under any of the provisions mentioned in paragraphs (a) to (c) of subsection (1) (as applied by virtue of Chapter 1 of Part 22 (transfers of trades)).

30

In section 676BC (disallowance of relief for trade losses)—

• (a) in subsection (1) omit “by the company”,

• (b) in subsection (4), in the words before paragraph (a), after “made” insert “ by the company ”, and

• (c) after subsection (4) insert—

(5) A loss made by another company (“the predecessor company”) in an accounting period beginning before the change in ownership may not be deducted as a result of section 45A, 45F or 303C (as applied by Chapter 1 of Part 22 (transfers of trades)) from so much of the total profits of an accounting period of the company ending after the change in ownership as represents the relevant gain.

Deduction buying

31

• (1) In section 730C of CTA 2010 (disallowance of deductible amounts: relevant claims)—

• (a) in subsection (2) omit paragraph (aa), and

• (b) in subsection (3A) for “paragraphs (a) to (e)” substitute “ paragraph (a) or (b) ”.

• (2) In Schedule 4 to F(No.2)A 2017 (relief for carried-forward losses) omit paragraph 172.

Commencement

32

• (1) The amendments made by this Schedule have effect in relation to accounting periods beginning on or after the relevant date (see subparagraph (3)).

• (2) For the purposes of the amendments made by this Schedule, where a company has an accounting period beginning before the relevant date and ending on or after that date (“the straddling period”)—

• (a) so much of the straddling period as falls before the relevant date, and so much of that period as falls on or after that date, are to be treated as separate accounting periods, and

• (b) where it is necessary to apportion an amount for the straddling period to the two separate accounting period, it is to be apportioned—

• (i) in accordance with section 1172 of CTA 2010 (time basis), or

• (ii) if that method would produce a result that is unjust or unreasonable, on a just and reasonable basis.

• (3) The “relevant date” is—

• (a) 1 April 2017, in relation to the amendments made by paragraphs 24 and 25 of this Schedule,

• (b) 6 July 2018, in relation to the amendments made by paragraphs 1 to 11, 13 and 14 and 16 to 20 of this Schedule, and

• (c) 1 April 2019, in relation to the other amendments made by this Schedule.

SCHEDULE 11

Introductory

1

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

Tax-interest amounts: amounts capitalised in intangible fixed assets

2

In Chapter 3 (tax-interest amounts), after section 391 insert—

(391A) In determining for the purposes of this Part whether an amount is a tax-interest expense amount or tax-interest income amount, section 906(1) of CTA 2009 (priority of intangible fixed asset rules) does not apply in respect of any matter which may be brought into account in accordance with Part 5 or 7 of that Act.

Carry forward of interest allowance: new holding company

3

After section 395 insert—

(395A) (1) This section applies if— (a) a company (“C”) ceases to be the ultimate parent of a worldwide group (“the old group”) because of a qualifying takeover, and (b) another company (“N”) becomes the ultimate parent of a worldwide group ( “ the new group ”) as a result of the takeover. (2) For this purpose there is a qualifying takeover if there is a change in the ownership of C which is disregarded for the purposes of Chapters 2 to 6 of Part 14 of CTA 2010 as a result of section 724A of that Act where— (a) C is the other company referred to as C in that section, and (b) N is the new company referred to as N in that section. (3) For the purposes of this Chapter, 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.

Carry forward of excess debt cap: new holding company

4

After section 400 insert—

(400A) (1) This section applies if— (a) a company (“C”) ceases to be the ultimate parent of a worldwide group (“the old group”) because of a qualifying takeover, and (b) another company (“N”) becomes the ultimate parent of a worldwide group ( “ the new group ”) as a result of the takeover. (2) For this purpose there is a qualifying takeover if there is a change in the ownership of C which is disregarded for the purposes of Chapters 2 to 6 of Part 14 of CTA 2010 as a result of section 724A of that Act where— (a) C is the other company referred to as C in that section, and (b) N is the new company referred to as N in that section. (3) In determining in accordance with section 400 the group's fixed ratio debt cap or group ratio debt cap for its first period of account, its excess debt cap generated in the immediately preceding period of account is taken to be that of the old group for the period of account of the old group ending immediately before the qualifying takeover.

Adjusted net group-interest expense: capitalised interest

5

Section 410 (net group-interest expense), after subsection (5) insert—

(5A) If, on the assumption that subsections (3) and (5) applied to relevant assets, an amount would, in accordance with subsection (3) or (5), have been treated as included in A or B in subsection (1)— (a) as an amount attributable to the capitalised expense, or (b) as an amount attributable to the capitalised income, none of that amount is to be included in A or B in that subsection.

6

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

• (2) In subsection (3)—

• (a) in paragraph (a), for “an asset or liability” substitute “ a non-financial asset or non-financial liability ”, and

• (b) in paragraph (b), after “an amount that” insert “ , in the case of a non-financial asset, ”.

• (3) In subsection (4)—

• (a) in paragraph (a), for “an asset or liability” substitute “ a non-financial asset or non-financial liability ”, and

• (b) in paragraph (b), after “an amount that” insert “ , in the case of a non-financial asset, ”.

• (4) For subsection (5) substitute—

(5) For the purposes of subsections (3)(a) and (b) and (4)(a) and (b)— (a) an asset is a “non-financial asset” if it is not a financial asset for accounting purposes or it is a share in a company, (b) a liability is a “non-financial liability” if it is not a financial liability for accounting purposes or it is in respect of a share issued by a company, and (c) references to amounts brought into account in determining the carrying value of a non-financial asset or non-financial liability do not include amounts so brought into account as a result of writing off any part of an amount which was itself so brought into account; and in paragraphs (a) and (b) “share” has the meaning given by section 476(1) of CTA 2009.

7

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

• (2) After subsection (2) insert—

(2A) Section 413 has effect, in the case of a GAAP-taxable asset that is a relevant asset, as if— (a) the definition of “upward adjustment” included so much of its carrying value written down in the group's financial statements for the relevant period of account as is attributable to a relevant expense amount brought into account in the group's financial statements in determining its carrying value, and (b) the definition of “downward adjustment” included so much of the reduction of its carrying value written down in the group's financial statements for the relevant period of account as is attributable to a relevant income amount brought into account in the group's financial statements in determining its carrying value. (2B) For the purposes of subsection (2A) it does not matter whether the relevant expense or income amount is brought into account in determining the asset's carrying value in the group's financial statements for the relevant period of account or an earlier period.

• (3) In subsection (3), for “But subsection (2)(b) of this section is of no effect where” substitute “ But subsections (2)(b) and (2A) of this section are of no effect so far as ”.

• (4) In subsection (4), at the end insert “ (and, for the purposes of this subsection, an asset is a GAAP-taxable asset even if an election under section 730 of CTA 2009 is, or could be, made in respect of it) ”.

Adjusted net group-interest expense: impairment debts and credits and connected companies

8

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

• (2) In subsection (3)(d)(i)—

• (a) for “or 323A” substitute “ , 323A, 358 or 359 ”, and

• (b) omit “(cases where credits not required to be brought into account)”.

• (3) In subsection (4)(d)(i)—

• (a) after “section 323A” insert “ or 354 ”, and

• (b) omit “(cases where credits not required to be brought into account)”.

Interest allowance (alternative calculation) election: unpaid employees' remuneration

9

After section 424 insert—

(424A) (1) Where an interest allowance (alternative calculation) election has effect in relation to a period of account of a worldwide group, this Chapter applies in relation to the period subject to this section. (2) The definition of “the group's profit before tax” in section 416(2) has effect as if references to amounts that are recognised in the financial statements of the group for the period, as items of profit or loss, excluded amounts so recognised in respect of employees' remuneration that are not paid before the end of the period of 9 months immediately following the end of the period of account. (3) If— (a) an amount is, as a result of subsection (2), excluded from the financial statements of the group for the period of account, and (b) the amount is paid in a later period of account of the group in relation to which an interest allowance (alternative calculation) election has effect, the definition of “the group's profit before tax” in section 416(2) has effect as if references to amounts that are recognised in the financial statements of the group for the later period of account, as items of profit or loss, included the amount that is paid in that later period. (4) Section 1289 of CTA 2009 (unpaid remuneration: supplementary) applies for the purposes of this section as it applies for the purposes of section 1288 of that Act.

Interest allowance (alternative calculation) election: changes in accounting policy

10

• (1) Section 426 (changes in accounting policy in cases where interest allowance (alternative calculation) election has effect) is amended as follows.

• (2) In subsection (3)—

• (a) after “means” insert “ the following provisions as modified by subsection (4) ”, and

• (b) after paragraph (a) insert—

(ab) sections 261 and 262 of that Act (property profits);

.

• (3) For subsection (4) substitute—

(4) The provisions mentioned in subsection (3)— (a) are to have effect for the purposes of this section as if their application were limited to cases where there is a change of accounting policy and as if any election had been made under the provisions, and (b) are to have effect subject to any modifications necessary for the purposes of this section.

Interest allowance (non-consolidated investment) election

11

In section 427 (group interest and group-EBITDA), after subsection (5) insert—

(5A) Any increase to be made as a result of subsection (4) or (5) is to be made as part of a single calculation required by section 413(1) or 414(1) (so that the amount produced by that calculation is subject to section 413(2) or 414(2)).

Public infrastructure

12

In section 433 (meaning of “qualifying infrastructure company”), in subsection (5), after paragraph (c) insert—

(ca) assets held for the purposes of a pension scheme under which benefits are provided to, or in respect of, persons employed for the purpose of the carrying on of qualifying infrastructure activities by the company or another associated qualifying infrastructure company, (cb) assets in respect of deferred tax so far as attributable to qualifying infrastructure activities carried on by the company or another associated qualifying infrastructure company,

.

13

In section 439 (exemption in respect of certain pre-13 May 2016 loan relationships), in subsection (3), after paragraph (b) insert—

, but ignoring amounts that represent the reimbursement of expenses incurred by C or the other company.

Real Estate Investment Trusts

14

• (1) Section 452 (Real Estate Investment Trusts) is amended as follows.

• (2) In subsection (4), at the end insert “ (and, accordingly, the profits mentioned in section 534(1) or (2) of CTA 2010 are not calculated for the purposes of this Part in accordance with section 599 of that Act) ”.

• (3) After subsection (4) insert—

(4A) An amount charged on the residual business company as a result of section 543 of CTA 2010 (excessive property financing costs) is treated for the purposes of this Part as if it met condition A, B, C or D for the purposes of section 385 (tax-interest income amounts).

• (4) For subsection (5) substitute—

(5) The allocated disallowance for the property rental business company (if any) for the accounting period— (a) is to be taken into account in calculating the profits of the property rental business for the purposes of section 530 of CTA 2010 (condition as to distribution of profits), but (b) must be limited to such amount as secures that neither subsection (3)(b) nor subsection (5) of that section (distribution of profits not required if would result in unlawful distribution) applies.

Interest restriction returns

15

In—

• (a) paragraph 1(4)(a) of Schedule 7A (period for appointing a group's reporting company), and

• (b) paragraph 2(4)(a) of that Schedule (period for revoking appointment),

for “six months” substitute “ 12 months ”.

16

In paragraph 7(5) of Schedule 7A (meaning of “the filing date”)—

• (a) for paragraph (b) substitute—

(b) if an appointment of a reporting company under paragraph 4 or 5 has effect in relation to the period of account, the end of the period of 3 months beginning with the day on which the appointment was made,”, and

• (b) after that paragraph insert—

whichever is the later

17

• (1) In paragraph 7 of Schedule 7A (submission of interest restriction returns), after sub-paragraph (5) insert—

(5A) For an extension of the filing date in the case of a takeover, see paragraph 7A.

• (2) After that paragraph insert—

(7A) (1) This paragraph applies if— (a) a period of account (“the affected period”) of a worldwide group (“the old group”) ends solely as a result of the ultimate parent of the old group becoming a member of a different worldwide group, and (b) the time at which that happens is within 12 months of the beginning of the affected period. (2) For the purposes of this Part of this Act the filing date in relation to the affected period of the old group is whichever is the later of— (a) the date given by paragraph 7(5), and (b) the end of the period of 24 months beginning with the affected period.

18

In paragraph 20 of Schedule 7A (required contents of interest restriction return: full returns and abbreviated returns), after sub-paragraph (5) insert—

(5A) In addition to the matters required to be included in an interest restriction return in accordance with sub-paragraph (3) or (5), the return must include such other specified information as may reasonably be required for the purposes of this Part of this Act. (5B) In sub-paragraph (5A) “specified” means specified in a notice published by Her Majesty's Revenue and Customs (and different information may be specified for different purposes).

Consequential amendments

19

In section 411 (definitions of “relevant expense amount” and “relevant income amount”), omit subsection (4).

20

In section 494(1) (other interpretation), after “interest restriction return” insert—

“pension scheme” has the meaning given by section 150(1) of FA 2004;

.

21

In Part 7 of Schedule 11 (index of defined expressions used in Part 10 of TIOPA 2010), at the appropriate place insert—

pension scheme (in Part 10)	section 494(1)

Commencement

22

• (1) The amendments made by paragraphs 2, 5 to 11 and 14(2) and (4) have effect in relation to periods of account of worldwide groups that begin on or after 1 January 2019.

• (2) In this paragraph “period of account” and “worldwide group” have the same meaning as in Part 10 of TIOPA 2010.

23

The amendments made by paragraphs 3 and 4 have effect in relation to any change in ownership taking place on or after 29 October 2018.

24

Part 10 of TIOPA 2010 has effect, and is to be deemed always to have had effect, with the amendments made by paragraphs 12, 13, 14(3) and 19 to 21.

25

The amendment made by paragraph 17 has effect where the affected period ends on or after 29 October 2018.

26

The amendment made by paragraph 18 has effect in relation to any interest restriction return submitted on or after 1 April 2019.

Transitional provision in case of interest allowance (alternative calculation) elections

27

• (1) This paragraph applies if—

• (a) an interest allowance (alternative calculation) election has been made before 7 November 2018 with effect in relation to any period of account of a worldwide group ending before that date, and

• (b) the election would, but for this paragraph, have been irrevocable as a result of paragraph 16(3)(b) of Schedule 7A to TIOPA 2010.

• (2) If the appointment of a reporting company has effect in relation to the first period of account of the group beginning on or after 7 November 2018, the reporting company may revoke the election so that it ceases to have effect in relation to that period of account and subsequent periods of account of the group.

• (3) The revocation—

• (a) must be made before the end of the period of 3 months beginning with the day on which this Act is passed, and

• (b) must be made by notice in writing given to an officer of Revenue and Customs (and, accordingly, paragraph 12(2) of Schedule 7A to TIOPA 2010 does not apply to the revocation).

• (4) Expressions used in this paragraph have the same meaning as in Part 10 of TIOPA 2010.

SCHEDULE 12

Loan relationships with qualifying link

1

After section 352A of CTA 2009 insert—

(352B) (1) This section applies if— (a) section 349 applies in respect of a loan relationship of a company for an accounting period (application of amortised cost basis to connected companies relationships), (b) the company is a party to another loan relationship (“the external loan relationship”) in respect of which that section does not apply for the period, (c) the external loan relationship is a debtor relationship dealt with in its accounts on the basis of fair value accounting, and (d) the external loan relationship has a qualifying link with one or more other loan relationships of the company. (2) For this purpose the external loan relationship has “a qualifying link” with one or more other loan relationships of the company if— (a) each of those other loan relationships of the company is a loan relationship in respect of which section 349 applies for the accounting period, and (b) taking those other loan relationships together, the money received by the company under the external loan relationship is wholly or mainly used to lend money under those other loan relationships. (3) The credits and debits which are to be brought into account for the purposes of this Part in respect of the external loan relationship for the period are to be determined on an amortised cost basis of accounting. (4) If a company has a hedging relationship between— (a) a relevant contract (“the hedging instrument”), and (b) the liability representing the external loan relationship, it is to be assumed in applying the amortised cost basis of accounting for the purposes of subsection (3) that the hedging instrument has where possible been designated for accounting purposes as a fair value hedge of that loan relationship.

2

In section 465B of CTA 2009 (meaning of “tax-adjusted carrying value”), in subsection (9), after paragraph (k) insert—

(ka) section 352B (eliminating tax mismatch for loan relationships with qualifying link),

.

Commencement and transitional provisions

3

• (1) The amendments made by this Schedule have effect for accounting periods beginning on or after 1 January 2019.

• (2) An accounting period beginning before and ending on or after 1 January 2019 is to be treated for the purposes of any provision made by this Schedule as if so much of the period as falls before that date, and so much of the period as falls on or after that date, were separate accounting periods.

4

• (1) This paragraph applies in relation to an accounting period of a company beginning on 1 January 2019 (“the 2019 period”) to bring in credits or debits in respect of a loan relationship which is the external loan relationship for the purposes of section 352B of CTA 2009 so far as they would not otherwise be brought into account.

• (2) If there is a difference between—

• (a) the tax-adjusted carrying value of the liability representing the external loan relationship at the end of the accounting period of the company ending on 31 December 2018, and

• (b) the tax-adjusted carrying value of that liability at the beginning of the 2019 period,

a credit or debit (as the case may be) of an amount equal to the difference must be brought into account for the purposes of Part 5 of CTA 2009 for the 2019 period in the same way as a credit or debit which is brought into account in determining the company's profit or loss for that period in accordance with generally accepted accounting practice.

• (3) Section 465B of CTA 2009 (meaning of “tax-adjusted carrying value”) applies for the purposes of this paragraph as it applies for the purposes of Part 5 of that Act.

Power to amend section 352B of CTA 2009

5

• (1) The Treasury may by regulations amend section 352B of CTA 2009.

• (2) The power conferred by this paragraph may not be exercised after 31 December 2019.

• (3) The regulations may contain incidental, supplementary, consequential and transitional provision and savings.

• (4) The consequential provision that may be made by the regulations includes provision amending any provision made by or under any Act.

• (5) The regulations may contain retrospective provision.

SCHEDULE 13

Chargeable periods which straddle 1 January 2019

1

• (1) This paragraph applies in relation to a chargeable period which begins before 1 January 2019 and ends on or after that date (“the first straddling period”).

• (2) The maximum allowance under section 51A of CAA 2001 for the first straddling period is the sum of the maximum allowances that would be found if the following were treated as separate chargeable periods—

• (a) so much of the first straddling period as falls before 1 January 2019;

• (b) so much of the first straddling period as falls on or after that date.

• (3) But, so far as concerns expenditure incurred before 1 January 2019, the maximum allowance under section 51A of CAA 2001 for the first straddling period is what would be the maximum allowance if the modification made by section 32(1) were not made.

Chargeable periods which straddle 1 April 2023

2

• (1) This paragraph applies in relation to a chargeable period (“the second straddling period”) which begins before 1 April 2023 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 the maximum allowances that would be found if the following were treated as separate chargeable periods—

• (a) so much of the second straddling period as falls before 1 April 2023;

• (b) so much of the second straddling period as falls on or after that date.

• (3) But, so far as concerns expenditure incurred on or after 1 April 2023, 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

3

• (1) Paragraphs 1 and 2 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 2(1).

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

• (3) Sub-paragraph (4) applies to a chargeable period if—

• (a) it is longer than one year, and

• (b) any part of the chargeable period is within the period beginning with 1 January 2019 and ending with 31 March 2023.

• (4) For the purposes of sub-paragraph (2) the chargeable period (the “relevant period”) is to be divided into two periods, as follows—

• (a) a chargeable period of one year ending when the relevant period ends, and

• (b) a chargeable period consisting of so much of the relevant period as is not within paragraph (a).

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

SCHEDULE 14

PART 1 — Finance leases: amendments as a result of changes to accounting standards

1

• (1) Part 2 of CAA 2001 (plant and machinery allowances) is amended as follows.

• (2) In section 67 (plant or machinery treated as owned by person entitled to benefit of contract, etc), in subsection (2B), for the words from “falls (or would fall)” to the end substitute

— (a) falls (or would fall) to be treated by that person in accordance with generally accepted accounting practice as a finance lease, or (b) if that person is a lessee under a right-of-use lease, would fall to be treated in that person's accounts as a finance lease were that person required under generally accepted accounting practice to determine whether the lease falls to be so treated.

• (3) In section 70E (disposal events and disposal values), in subsection (2D)(a), after “finance charges” insert “ , or interest expenses, ”.

• (4) In section 70YA (changes in accountancy classification of long funding leases)—

• (a) in subsection (1)(b), for “or an operating lease” substitute “ , an operating lease or a right-of-use lease ”,

• (b) in subsection (4)—

• (i) for “or an operating lease” substitute “ , an operating lease or a right-of-use lease ”, and

• (ii) for “and (6)” substitute “ to (6A) ”,

• (c) in subsection (5)—

• (i) omit the “and” at the end of paragraph (a), and

• (ii) after paragraph (b) insert

and (c) the change of classification is not a relevant change of classification.

,

• (d) in subsection (6)—

• (i) omit the “and” at the end of paragraph (a), and

• (ii) after paragraph (b) insert

and (c) the change of classification is not a relevant change of classification.

,

• (e) after subsection (6) insert—

(6A) Case 3 is where— (a) immediately before the relevant time, the lease is a right-of-use lease which is a long funding finance lease, and (b) at the relevant time, the lease becomes one which— (i) is not a right-of use lease, and (ii) falls (or would fall) to be treated in the relevant accounts in accordance with generally accepted accounting practice as not being a finance lease.

, and

• (f) after subsection (10) insert—

(11) In this section— - “relevant change of classification” means a change of accountancy classification as a result of the person adopting a different accounting standard or a change to an accounting standard, and - “accounting standard” means any accounting standard issued or recognised by— 1. the Accounting Standards Board (or successor body), or 2. the International Accounting Standards Board (or successor body).

• (5) In section 70YI (general definitions), in subsection (1)—

• (a) for the definition of “long funding finance lease” substitute—

“ “long funding finance lease” means— (a) in relation to any person, a long funding lease that meets the finance lease test by virtue of section 70N(1)(a), or (b) in relation to a lessee, a right-of-use lease which is a long funding lease— (i) that meets the lease payments test in section 70O or the useful economic life test in section 70P, but (ii) is not a lease that, before a relevant change of classification, was a long funding operating lease;

, and

• (b) at the appropriate places insert—

“relevant change of classification” has the meaning given by section 70YA(11);

;

“right-of-use lease”, in relation to a lessee, means a lease in respect of which, under generally accepted accounting practice— (a) a right-of-use asset falls (or would fall) at the commencement date of the lease to be recognised for accounting purposes in the accounts of the lessee, or (b) a right-of-use asset would fall to be so recognised but for the lessee granting a sublease of the leased asset, and, in determining whether a lease falls within paragraph (a) or (b) at any time in an accounting period, it is to be assumed that the accounting policy applied in drawing up the lessee's accounts for the period also applied at the commencement date of the lease;

.

• (6) In section 228J (anti-avoidance: plant or machinery subject to further operating lease), in subsection (7)—

• (a) for paragraph (a) substitute—

(a) the lease— (i) falls, under generally accepted accounting practice, to be treated in that person's accounts as a finance lease or loan, or (ii) if that person is a lessee under a right-of-use lease, would fall to be treated in that person's accounts as a finance lease were that person required under generally accepted accounting practice to determine whether the lease falls to be so treated,

, and

• (b) in paragraph (b), for the words from “fall” to the end substitute

— (i) fall, under generally accepted accounting practice, to be treated as a finance lease or loan, or (ii) if that person is a lessee under a right-of-use lease, would fall to be treated in that person's accounts as a finance lease were that person required under generally accepted accounting practice to determine whether the arrangements fall to be so treated.

2

• (1) ITTOIA 2005 is amended as follows.

• (2) In section 148G (lessee under long funding finance lease: limit on deductions), in subsection (2), after “finance charges” insert “ , or interest expenses, ”.

• (3) After that section insert—

(148GA) (1) This section applies if— (a) for the whole or part of any period of account, a person carrying on a trade, profession or vocation is the lessee of any plant or machinery under a right-of-use lease that is a long funding finance lease, (b) there is a change in the amounts payable under the lease, and (c) as a result of the change and in accordance with generally accepted accounting practice— (i) a remeasurement of the lease liability is shown in the person's accounts for the period of account, or (ii) a deduction is shown in those accounts other than as an interest expense under the lease or an amount of depreciation, or an impairment, in respect of the right-of-use asset arising from the lease. (2) In calculating the profits of the person's trade, vocation or profession for the period of account, the amount deducted in respect of amounts payable under the lease (after taking account of any limitation as a result of section 148G) is to be increased or decreased so as to take account of the remeasurement or deduction mentioned in subsection (1)(c). (3) No adjustment is to be made under subsection (2) if the remeasurement or deduction results in the person being treated by section 70D of CAA 2001 (long funding finance lease: additional expenditure: allowances for lessee) as having incurred further capital expenditure on the provision of the plant or machinery.

3

In section 809BZN of ITA 2007 (finance arrangements: exceptions), after subsection (9) insert—

(9A) A finance arrangement code does not apply if the arrangement is a right-of-use lease— (a) under which the relevant person is a lessee, and (b) which, were that person required under generally accepted accounting practice to determine whether the lease falls to be treated in the accounts of that person as a finance lease or loan, would not fall to be so treated. (9B) In subsection (9A) “right-of-use lease” has the same meaning as in Part 2 of CAA 2001 (see section 70YI(1) of that Act).

4

• (1) CTA 2010 is amended as follows.

• (2) In section 288 (sale and lease-back)—

• (a) in subsection (5), for sub-paragraph (a) substitute—

(a) falls, in accordance with generally accepted accounting practice, to be treated in the accounts of the lessee— (i) as a finance charge, or (ii) as an interest expense where any such expenditure would fall to be treated in those accounts as a finance charge if the lessee were required under generally accepted accounting practice to determine whether that expenditure should be so treated, (aa) if the lease is a right-of-use lease which is a long funding finance lease, falls, in accordance with generally accepted accounting practice, to be treated in the accounts of the lessee as an interest expense, or

, and

• (b) in subsection (9), for the definition of “long funding operating lease” substitute—

“long funding finance lease”, “long funding operating lease” and “right-of-use lease” have the meanings given in Part 2 of CAA 2001 (see section 70YI(1) of that Act),

.

• (3) In section 331 (meaning of “financing costs” etc)—

• (a) in subsection (3), after paragraph (d) insert—

(da) if the company is the lessee under a right-of-use lease which is a long funding finance lease, any costs falling, in accordance with generally accepted accounting practice, to be treated in the accounts of the company as interest expenses,

,

• (b) in subsection (4)(a), after “finance charge” insert “ , or an interest expense, ”,

• (c) for subsection (6) substitute—

(6) In this section “finance lease” means a lease which— (a) under generally accepted accounting practice— (i) falls (or would fall) to be treated, in the accounts of the lessee or a person connected with the lessee, as a finance lease or loan, or (ii) is comprised in arrangements which fall (or would fall) to be so treated, or (b) if the lease is a right-of-use lease— (i) would fall to be treated in those accounts as a finance lease, or (ii) is comprised in arrangements which would fall to be so treated, were the lessee or person connected with the lessee required under generally accepted accounting practice to determine whether the lease falls, or arrangements fall, to be so treated.

, and

• (d) in subsection (9)—

• (i) omit the “and” at the end of the definition of “exchange gains” and “exchange losses”, and

• (ii) after that definition insert—

• “lease” means any arrangements which provide for an asset to be leased or otherwise made available by a person to another person (“the lessee”), and
• “long funding finance lease”, “long funding operating lease” and “right-of-use lease” have the meanings given in Part 2 of CAA 2001 (see section 70YI(1) of that Act).

• (4) In section 377 (lessee under long funding finance lease: limit on deductions), in subsection (3), after “as finance charges” insert “ , or interest expenses, ”.

• (5) After that section insert—

(377A) (1) This section applies if— (a) for the whole or part of any period of account, a company is the lessee of any plant or machinery under a right-of-use lease that is a long funding finance lease, (b) there is a change in the amounts payable under the lease, and (c) as a result of the change and in accordance with generally accepted accounting practice— (i) a remeasurement of the lease liability is shown in the person's accounts for the period of account, or (ii) a deduction is shown in those accounts other than as an interest expense under the lease or an amount of depreciation, or an impairment, in respect of the right-of-use asset arising from the lease. (2) In calculating the company's profits for the period of account, the amount deducted in respect of amounts payable under the lease (after taking account of any limitation as a result of section 377) is to be increased or decreased so as to take account of the remeasurement or deduction mentioned in subsection (1)(c). (3) No adjustment is to be made under subsection (2) if the remeasurement or deduction results in the company being treated by section 70D of CAA 2001 (long funding finance lease: additional expenditure: allowances for lessee) as having incurred further capital expenditure on the provision of the plant or machinery.

• (6) In section 381 (interpretation of Chapter 2 of Part 9), in subsection (2), for the definition of “long funding finance lease” substitute—

“long funding finance lease” means— (a) in relation to any person, a long funding lease that meets the finance lease test as a result of section 70N(1)(a) of that Act, or (b) in relation to a lessee, a right-of-use lease (see section 70YI(1) of that Act) which is a long funding lease— (i) that meets the lease payments test in section 70O of that Act or the useful economic life test in section 70P of that Act, but (ii) is not a lease that, before a relevant change of classification (see section 70YA(11) of that Act), was a long funding operating lease;

.

• (7) In section 437 (interpretation of the sales of lessors Chapters)—

• (a) for subsection (4) substitute—

(4) “Finance lease” means— (a) in relation to any person, a lease that, in accordance with generally accepted accounting practice, falls (or would fall) to be treated in the accounts of that person as a finance lease or loan, or (b) in relation to a lessee under a right-of-use lease, a lease that would fall to be treated in the accounts of the lessee as a finance lease if the lessee were required under generally accepted accounting practice to determine whether the lease falls to be so treated.

, and

• (b) in subsection (6), for “and “long funding operating lease”” substitute “, “long funding operating lease” and “right-of-use lease””.

• (8) In section 544 (meaning of “property profits” and “property financing costs”), after subsection (5) insert—

(5A) In subsection (5) “finance lease” means— (a) in relation to any person, a lease that, in accordance with generally accepted accounting practice, falls (or would fall) to be treated in the accounts of that person as a finance lease or loan, or (b) in relation to a lessee under a right-of-use lease, a lease that would fall to be treated in the accounts of the lessee as a finance lease if the lessee were required under generally accepted accounting practice to determine whether the lease falls to be so treated. (5B) In subsection (5A)(b) “right-of-use lease” has the meaning given in Part 2 of CAA 2001 (see section 70YI(1) of that Act).

• (9) In section 771 (finance arrangements: exceptions), after subsection (9) insert—

(9A) A finance arrangement code does not apply if the arrangement is a right-of-use lease— (a) under which the relevant person is a lessee, and (b) which, were that person required under generally accepted accounting practice to determine whether the lease falls to be treated in the accounts of that person as a finance lease or loan, would not fall to be so treated. (9B) In subsection (9A) “right-of-use lease” has the meaning given in Part 2 of CAA 2001 (see section 70YI(1) of that Act).

5

In section 494 of TIOPA 2010 (corporate interest restriction: other interpretation), in subsection (1)—

• (a) for the definition of “finance lease” substitute—

“finance lease”, in relation to a company or a worldwide group, a lease which— (a) in accordance with generally accepted accounting practice, falls (or would fall) to be treated, in the accounts of the company or the financial statements of the group, as a finance lease or loan, or (b) is a right-of-use lease that would fall to be treated in those accounts or financial statements as a finance lease if the company or group were required to determine for accounting purposes whether the lease falls to be so treated;

, and

• (b) insert at the appropriate place—

“right-of-use lease” means a lease in respect of which, under generally accepted accounting practice— (a) a right-of-use asset falls (or would fall) at the commencement of the lease to be recognised for accounting purposes in the accounts of the lessee, or (b) a right-of-use asset would fall to be so recognised but for the lessee granting a sublease of the leased asset, and, in determining whether a lease falls within paragraph (a) or (b) at any time in an accounting period, it is to be assumed that the accounting policy applied in drawing up the lessee's accounts for the period also applied at the commencement of the lease;

.

Commencement

6

• (1) The amendments made by this Part of this Schedule have effect in relation to periods of account beginning on or after 1 January 2019.

• (2) But, for the purposes of Chapter 7 of Part 10 of TIOPA 2010 (corporate interest restriction: group-interest and group-EBITDA), the amendments made by paragraph 5 have effect in relation to periods of account of a worldwide group (within the meaning given by section 480 of that Act) beginning on or after 1 January 2019.

PART 2 — Long funding leases

Amendments to Part 2 of CAA 2001

7

Part 2 of CAA 2001 (plant and machinery allowances) is amended as follows.

Meaning of “short lease”

8

• (1) In section 70I (“short lease”)—

• (a) in subsections (2) and (9)(d), for “5” substitute “ 7 ”, and

• (b) omit subsections (3) to (8).

• (2) In section 70YF (the “term” of a lease)—

• (a) in subsection (5)(b), for “5” substitute “ 7 ”,

• (b) in subsection (6), for “5” substitute “ 7 ”, and

• (c) omit subsection (7).

• (3) In section 220 (allocation of expenditure to a chargeable period), in subsection (4)(c), for “5” substitute “ 7 ”.

The lease payments test: interest rate implicit in lease

9

• (1) Section 70O (the lease payments test) is amended as follows.

• (2) In subsection (4), for paragraph (b) substitute—

(b) if a rate cannot be determined in accordance with paragraph (a), the interest rate implicit in the lease is taken to be 1% above LIBOR.

• (3) After that subsection insert—

(5) For this purpose— (a) LIBOR means the London interbank offered rate at the relevant time for deposits for a term of 12 months in the applicable currency, (b) the relevant time is the inception of the lease, and (c) the applicable currency is the currency in which payments under the lease are payable.

Commencement

10

The amendments made by this Part of this Schedule have effect in relation to leases entered into on or after 1 January 2019.

PART 3 — Changes to accounting standards and tax adjustments

Repeal of section 53 of FA 2011

11

• (1) In FA 2011, omit section 53 (leases and changes to accounting standards).

• (2) The amendment made by this paragraph has effect in relation to periods of account beginning on or after 1 January 2019.

• (3) But, for the purposes of Chapter 7 of Part 10 of TIOPA 2010 (corporate interest restriction: group-interest and group-EBITDA), the amendment made by this paragraph has effect in relation to periods of account of a worldwide group (within the meaning given by section 480 of that Act) beginning on or after 1 January 2019.

Transitional provisions following repeal of section 53 of FA 2011: introductory

12

• (1) This paragraph and paragraphs 13 to 17 modify the effect of the change of basis provisions in relation to periods of account of a lessee beginning on or after 1 January 2019 if the lease is one—

• (a) in respect of which, under generally accepted accounting practice, a right-of-use asset falls (or would fall) to be recognised for accounting purposes in the accounts of the lessee for any period of account (whether beginning before or on or after that date), and

• (b) which would not fall to be treated in those accounts as a finance lease if the lessee were required under generally accepted accounting practice to determine whether the lease would fall to be treated in those accounts as a finance lease.

• (2) In this Part of this Schedule, “the change of basis provisions” means—

• (a) Chapter 17 of Part 2 and Chapter 7 of Part 3 of ITTOIA 2005 (adjustment income), and

• (b) Chapter 14 of Part 3 and sections 261 and 262 of CTA 2009 (adjustment on change of basis).

Cases where asset first recognised for period of account beginning on or after 1 January 2019

13

• (1) This paragraph applies if the first period of account for which the right-of-use asset falls (or would fall) to be recognised for accounting purposes in the accounts of the lessee begins on or after 1 January 2019 (referred to in the following provisions of this paragraph as “the first period of account”).

• (2) Any adjustment income or adjustment expense, or any receipt or expense, treated by any of the change of basis provisions as arising in consequence of a change of accounting policy that results in the right-of-use asset being first recognised for accounting purposes is to be treated as arising over a period (“the spreading period”) determined in accordance with the following steps—

• Step 1 Find for each lease the amount by which the credits exceed the debits (or vice-versa). For this purpose, the credits and the debits are the amounts which, under generally accepted accounting practice—are taken to equity as adjustments in the accounts of the lessee for the first period of account, andare in consequence of the change of accounting policy that results in the right-of-use asset being first recognised for accounting purposes in those accounts.

• Step 2 Calculate for each lease the percentage (“the relevant percentage”) that—the amount found under Step 1 for the lease bears tothe total of all amounts found under Step 1 (treating such amounts as positive amounts).

• Step 3 Find for each lease the period which results from applying the relevant percentage to the term of the lease that remains unexpired as at the date on which the first period of account begins. For this purpose, the term of a lease is to be determined in accordance with generally accepted accounting practice as it applies for the first period of account.

• Step 4 Calculate the sum of all periods found under Step 3.

• Step 5 The spreading period is the period equal to the sum calculated under Step 4 beginning with the day on which the first period of account begins.

• (3) An amount to be treated as arising in any period falling wholly or partly in the spreading period is to be determined in proportion to the number of days of the period falling within the spreading period.

• (4) This paragraph is subject to paragraphs 15 and 16 (transfers of leases and cessation of activities).

Cases where asset first recognised for an earlier period of account

14

• (1) This paragraph applies if the first period of account for which the right-of-use asset falls (or would fall) to be recognised for accounting purposes in the accounts of the lessee begins before 1 January 2019.

• (2) The change of basis provisions and this Part of this Schedule have effect—

• (a) as if there were a change of accounting policy with respect of the accounts of the lessee for the first period of account beginning on or after 1 January 2019, and

• (b) as if that period of account were the first period of account for which the right-of-use asset falls (or would fall) to be recognised for accounting purposes in the accounts of the lessee.

Certain cases where there is a transfer of a lease

15

• (1) This paragraph applies if—

• (a) before the whole of an amount has been treated by paragraph 13 as arising to the lessee, there is a transfer of a lease or part of a lease from the lessee to another person,

• (b) the transferee is connected to the lessee,

• (c) immediately after the transfer, the transferee carries on activities the profits of which are chargeable to income tax or corporation tax, and

• (d) the transfer is not one where it is reasonable to suppose that the transfer is, or arrangements of which the transfer is part are, designed to avoid tax.

• (2) The amount is to continue to be dealt with in accordance with paragraph 13 but is to be treated as arising to the transferee over so much of the spreading period as falls on or after the date on which the transfer takes place.

• (3) If, following the transfer, it is necessary to apportion between more than one person an amount treated by paragraph 13 or this paragraph as arising, the apportionment is to be made on a just and reasonable basis.

• (4) In this paragraph—

• “connected” is to be read in accordance with sections 993 and 994 of ITA 2007 and sections 1122 and 1123 of CTA 2010, and

• “the spreading period” has the same meaning as in paragraph 13.

Cases where lessee permanently ceases to carry on activities

16

• (1) Sub-paragraph (2) applies if—

• (a) before the whole of an amount has been treated by paragraph 13 as arising, the lessee permanently ceases to carry on activities the profits of which are chargeable to income tax or corporation tax, and

• (b) the whole of the amount so far as not treated by paragraph 13 as arising is not treated by paragraph 15(2) as arising to a transferee.

• (2) The amount so far as not otherwise treated as arising—

• (a) is to be treated as arising to the lessee, and

• (b) is to be brought into account in calculating the profits of the lessee,

immediately before the cessation.

Application of paragraphs 12 to 16 to lease portfolios

17

• (1) This paragraph applies if a lessee, in accordance with generally accepted accounting practice, prepares accounts by reference to a portfolio of leases having similar characteristics rather than by reference to the individual leases.

• (2) Paragraphs 12 to 14 and 16 apply to the portfolio (subject to any necessary modifications) in the same way as they apply to a lease.

• (3) If there is a transfer of the portfolio (or an individual lease within the portfolio), paragraph 15 applies to the transfer (subject to any necessary modifications) in the same way as it applies to the transfer of a lease.

Corporate interest restriction: changes of accounting policy

18

• (1) In section 426 of TIOPA 2010 (changes of accounting policy), in subsection (3), after paragraph (e) insert—

(f) paragraphs 12 to 17 of Schedule 14 to FA 2019 (transitional provision following the repeal of section 53 of FA 2011) so far as they have effect in relation to adjustments under Chapter 14 of Part 3 of CTA 2009 or sections 261 and 262 of that Act.

• (2) The amendment made by this paragraph has effect in relation to periods of account of a worldwide group (within the meaning given by section 480 of TIOPA 2010) beginning on or after 1 January 2019.

Corporate interest restriction: treatment of certain adjustments

19

• (1) Sub-paragraph (2) applies if—

• (a) an amount is brought into account for corporation tax purposes for a period of account beginning on or after 1 January 2019 as a receipt or expense treated by any of the change of accounting policy provisions as arising to a company which is a lessee,

• (b) the receipt or expense is treated as arising to the company in consequence of a change of accounting policy relating to a lease in respect of which the company is the lessee,

• (c) under the old accounting policy, the lease fell to be treated as a finance lease in the accounts of the company, and

• (d) under the new accounting policy, the lease would fall to be treated as a right-of-use lease in those accounts but for—

• (i) the short term of the lease, or

• (ii) the low value of the leased asset.

• (2) For the purposes of Part 10 of TIOPA 2010 (corporate interest restriction)—

• (a) if the amount is brought into account as an expense, “tax-interest expense amount” (see section 382 of that Act) does not include that amount;

• (b) if the amount is brought into account as a receipt, “tax-interest income amount” (see section 385 of that Act) does not include that amount.

• (3) This paragraph has effect in relation to adjustments to which the financial statements of a worldwide group are treated by section 426 of TIOPA 2010 (changes in accounting policy) as subject in the same way as it has effect in relation to adjustments made under the change of accounting policy provisions by a company and accordingly—

• (a) if the amount is brought into account as an expense, “relevant expense amount” (see section 411(1) of that Act) does not include that amount;

• (b) if the amount is brought into account as a receipt, “relevant income amount” (see section 411(2) of that Act) does not include that amount.

• (4) In this paragraph—

• “the change of accounting policy provisions” means Chapter 14 of Part 3 and sections 261 and 262 of CTA 2009 (adjustment on change of basis), and

• “right-of-use lease” has the meaning given by section 494 of TIOPA 2010 (other interpretation).

SCHEDULE 15

PART 1 — Election to transfer tax history

Entitlement to make a TTH election

1

This Schedule applies if, on or after 1 November 2018, the OGA gives consent for a company (the “seller”) to sell an interest in a UK oil licence to another company (the “purchaser”).

2

• (1) On or after the licence transfer date, the seller and purchaser may jointly make a TTH election in respect of an interest (“the TTH asset”) in a transferred oil field (the “TTH oil field”).

• (2) A “TTH election” is an election for—

• (a) an amount of the seller's ring fence profits (the “total TTH amount”) to be treated, in accordance with the provisions of this Schedule, as if it were an amount of the purchaser's profits (instead of the seller's profits), and

• (b) a corresponding amount of the seller's adjusted ring fence profits to be so treated for the purpose of Chapter 6 of Part 8 of CTA 2010 (supplementary charge).

PART 2 — The total TTH amount

The total TTH amount

3

• (1) The total TTH amount may comprise—

• (a) an amount representing the seller's eligible ring fence profits for the reference accounting period, and

• (b) amounts representing the seller's eligible ring fence profits for so many of the preceding accounting periods ending on or after 17 April 2002 as the seller and purchaser may determine.

• (2) Sub-paragraph (1) is subject to—

• (a) paragraph 4 (limits on total TTH amount),

• (b) paragraph 11 (consecutive accounting periods), and

• (c) paragraph 12 (the transferred profits amount for an accounting period).

• (3) See—

• (a) paragraph 13 for the meaning of “eligible ring fence profits”, and

• (b) paragraph 102 for the meaning of “reference accounting period” in relation to the seller.

Limits on total TTH amount

4

The total TTH amount must not exceed the lower of—

• (a) the uplifted decommissioning costs estimate in relation to the TTH asset, and

• (b) the total amount of the seller's eligible ring fence profits for the period—

• (i) beginning with 17 April 2002, and

• (ii) ending at the end of the reference accounting period.

The “uplifted decommissioning costs estimate”

5

To determine the “uplifted decommissioning costs estimate” in relation to the TTH asset—

• (a) determine the transferred proportion of the net cost amount (see paragraphs 6 and 7),

• (b) allocate the relevant proportion of the amount determined under paragraph (a) to the TTH asset (see paragraph 8),

• (c) adjust the allocated amount in accordance with paragraph 9, and