Finance Act 2013

Other provisions

39 Real estate investment trusts: UK REITs which invest in other UK REITs

Schedule 19 amends Part 12 of CTA 2010 (real estate investment trusts).

40 Corporation tax relief for employee share acquisitions etc

(1) Chapter 6 of Part 12 of CTA 2009 (relief for employee share acquisitions: relationship between relief under Part 12 and other reliefs) is amended as follows.

(2) For section 1038 substitute—

“1038 Exclusion of other deductions

(1) Subsection (2) applies if relief is or, apart from condition 2 in section 1009(1), would be available under this Part.

For this purpose, it does not matter if the amount of the relief is or would be calculated as nil.

(2) Except as provided for by this Part, for the purpose of calculating any company’s profits for corporation tax purposes for any accounting period, no deduction is allowed—

(a) in relation to the provision of the shares or to any matter connected with the provision of the shares, or

(b) so far as not covered by paragraph (a) in a case in which the shares are acquired pursuant to an option, in relation to the option or to any matter connected with the option.

(3) In a case in which section 1022 has applied, in subsection (2)(b) references to the option cover the new option and any relevant earlier qualifying option.

(4) For the purposes of subsection (2) it does not matter if the accounting period in question falls wholly before or after the time at which the shares are acquired.

(5) In a case in which the shares are acquired under an employee share scheme, the deductions disallowed by subsection (2) include (in particular) deductions for amounts paid or payable by the employing company in relation to the participation of the employee in the scheme.

(6) But subsection (2) does not disallow deductions for—

(a) expenses incurred in setting up the scheme,

(b) expenses incurred in meeting, or contributing to, the costs of administering the scheme,

(c) the costs of borrowing for the purposes of the scheme, or

(d) fees, commission, stamp duty, stamp duty reserve tax, and similar incidental expenses of acquiring the shares.

(7) “Employee share scheme” means a scheme or arrangement for enabling shares to be acquired because of persons’ employment.

(8) In a case in which relief is or, apart from condition 2 in section 1009(1), would be available under Chapter 5 by virtue of section 1030(2), subsection (2) does not disallow deductions in relation to the provision of the convertible securities.”

(3) After section 1038 insert—

“1038A Exclusion of deductions for share options: shares not acquired

(1) Subsection (2) applies if—

(a) a person obtains an option to acquire shares and the requirements of section 1015(1)(a) to (c) are met in relation to the obtaining of the option, or

(b) so far as not covered by paragraph (a), a person obtains an option to acquire shares and the obtaining of the option is connected with an option previously obtained in a case covered by paragraph (a) or this paragraph.

(2) For the purpose of calculating any company’s profits for corporation tax purposes for any accounting period, no deduction is allowed in relation to—

(a) the option, or

(b) any matter connected with the option,

unless the shares are acquired pursuant to the option.

(3) For the purposes of subsection (2) it does not matter if the accounting period in question falls wholly before or after the time at which the option is obtained.

(4) In a case in which the shares would be acquired under an employee share scheme, the deductions disallowed by subsection (2) include (in particular) deductions for amounts paid or payable by the employing company in relation to the participation of the employee in the scheme.

(5) But subsection (2) does not disallow deductions for—

(a) expenses incurred in setting up the scheme,

(b) expenses incurred in meeting, or contributing to, the costs of administering the scheme,

(c) the costs of borrowing for the purposes of the scheme, or

(d) fees, commission, stamp duty, stamp duty reserve tax, and similar incidental expenses of acquiring the shares.

(6) “Employee share scheme” means a scheme or arrangement for enabling shares to be acquired because of persons’ employment.

(7) Subsection (2) does not disallow deductions for—

(a) amounts on which the employee is subject to a charge under ITEPA 2003,

(b) amounts on which the employee would have been subject to a charge under ITEPA 2003 had the employee been a UK employee at all material times, or

(c) if the employee has died, amounts on which the employee would have been subject to a charge under ITEPA 2003 had the employee been alive.

(8) “UK employee” is to be read in accordance with section 1017(4).”

(4) For the purposes of the following subsections—

• “pre-20 March 2013 relevant accounting period” means an accounting period which begins before 20 March 2013 but ends on or after that date, and

• “relevant accounting period” means an accounting period which ends on or after 20 March 2013.

(5) The amendment made by subsection (2) above has effect for the purpose of disallowing deductions for relevant accounting periods.

For this purpose, it does not matter if the acquisition of shares which gives rise, or would give rise, to the relief under Part 12 of CTA 2009 occurs before a company’s first relevant accounting period.

(6) But the amendment made by subsection (2) above has no effect for the purpose of disallowing a deduction for a pre-20 March 2013 relevant accounting period where the acquisition of shares which gives rise, or would give rise, to the relief under Part 12 of CTA 2009 occurs before 20 March 2013.

(7) The amendment made by subsection (3) above has effect for the purpose of disallowing deductions for relevant accounting periods.

For this purpose, it does not matter if the option is obtained before a company’s first relevant accounting period.

(8) But the amendment made by subsection (3) above has no effect for the purpose of disallowing a deduction for a pre-20 March 2013 relevant accounting period where—

(a) the option is obtained before 20 March 2013, and

(b) before that date, an event (for example, the lapse or cancellation of the option) occurs in consequence of which the shares cannot be acquired pursuant to the option.

41 Derivative contracts: property total return swaps etc

(1) Chapter 7 of Part 7 of CTA 2009 (chargeable gains arising in relation to derivative contracts) is amended as follows.

(2) In section 643 (contracts relating to land or certain tangible movable property)—

(a) in subsection (1), for “and C” substitute “, C and D”, and

(b) after subsection (4) insert—

“(4A) Condition D is that no two or more of the parties to the derivative contract are connected persons.”

(3) In section 650 (property based total return swaps)—

(a) in subsection (1), for “to F” substitute “to H”, and

(b) after subsection (7) insert—

“(8) Condition G is that no two or more of the parties to the derivative contract are connected persons.

(9) Condition H is that the securing of a tax advantage is neither the main purpose, nor one of the main purposes, for which the company is a party to the derivative contract.

“Tax advantage” has the meaning given by section 1139 of CTA 2010.”

(4) In section 659 (meaning of “relevant credits” and “relevant debits”), after subsection (4) insert—

“(4A) But if the derivative contract has effect such that the return arising from the contract, so far as calculated by reference to that index, is calculated by reference to a percentage (“the capped percentage”) which is closer to zero than the full percentage change in that index over that period (or which is zero even though there has been a change in that index), for the purposes of subsection (4) R% is the capped percentage.”

(5) The amendments made by this section have effect in relation to accounting periods beginning on or after 5 December 2012.

(6) But, for the purposes of subsection (5), an accounting period beginning before, and ending on or after, 5 December 2012 is to be treated 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.

42 Corporation tax: tax mismatch schemes

Schedule 20 contains provision about tax mismatch schemes.

43 Tier two capital

(1) CTA 2010 is amended as follows.

(2) In section 162 (meaning of “normal commercial loan”), after subsection (1) insert—

“(1A) For those purposes, “normal commercial loan” also includes any loan which is not a normal commercial loan by virtue of subsection (1) but is such a loan by virtue of section 164A(1) (loan forming part of tier two capital).”

(3) After section 164 insert—

“164A Loan forming part of tier two capital

(1) A loan is a normal commercial loan by virtue of this subsection if it—

(a) was made to a bank or a parent undertaking of a bank, and

(b) forms part of the tier two capital resources of the bank or parent undertaking.

(2) Subsection (1) does not apply in the case of any loan if there are arrangements the main purpose, or one of the main purposes, of which is to obtain a tax advantage for any person as a result of the application of that subsection in respect of that loan.

(3) For the purposes of this section—

(a) “bank” has the meaning given by section 1120,

(b) “tax advantage” has the meaning given by section 1139,

(c) “parent undertaking” is to be read in accordance with section 420 of FISMA 2000, and

(d) the reference to tier two capital resources is to be read in accordance with the PRA Handbook made by the Prudential Regulation Authority (as that Handbook has effect from time to time).

(4) In relation to any time before 1 April 2013, the reference in subsection (3)(d) to the PRA Handbook is to be read as a reference to the Handbook of Rules and Guidance made by the Financial Services Authority (as that Handbook had effect at the time in question).”

(4) In section 1029(1) (overview), after paragraph (c) insert—

“(ca) section 1032A (payment in respect of tier two capital),”.

(5) After section 1032 insert—

“Tier two capital

1032A Payment in respect of tier two capital

(1) A payment made in respect of tier two securities is not a distribution for the purposes of the Corporation Tax Acts.

(2) Subsection (1) does not apply in the case of any tier two securities if there are arrangements the main purpose, or one of the main purposes, of which is to obtain a tax advantage for any person as a result of the application of that subsection in respect of those securities.

(3) For the purposes of this section—

(a) “tier two securities” means securities (other than shares) issued by a bank or a parent undertaking of a bank that form part of the tier two capital resources of the bank or parent undertaking,

(b) “bank” has the meaning given by section 1120,

(c) “tax advantage” has the meaning given by section 1139,

(d) “parent undertaking” is to be read in accordance with section 420 of FISMA 2000, and

(e) the reference to tier two capital resources is to be read in accordance with the PRA Handbook made by the Prudential Regulation Authority (as that Handbook has effect from time to time).

(4) In relation to any time before 1 April 2013, the reference in subsection (3)(e) to the PRA Handbook is to be read as a reference to the Handbook of Rules and Guidance made by the Financial Services Authority (as that Handbook had effect at the time in question).”

(6) The amendments made by this section are treated as having come into force on 26 October 2012.

44 Financing costs and income: group treasury companies

(1) In section 316 of TIOPA 2010 (group treasury companies) for subsections (2) to (8) substitute—

“(2) A company is a group treasury company in the relevant period if—

(a) it is a member of the worldwide group,

(b) it undertakes treasury activities for the worldwide group in the relevant period (whether or not it also undertakes other activities),

(c) at least 90% of the relevant income of the company for the relevant period is group treasury revenue, and

(d) it makes an election in respect of the relevant period for the purposes of this section.

(3) Subsection (4) applies if throughout the relevant period—

(a) all or substantially all of the activities undertaken by a group treasury company consist of treasury activities undertaken by it for the worldwide group, and

(b) all or substantially all of the assets and liabilities of the company relate to such activities.

(4) Where this subsection applies, the relevant amount, and all other amounts that are relevant amounts in respect of the group treasury company and the relevant period, are treated as not being a financing expense amount or a financing income amount of the group treasury company.

(5) If subsection (4) does not apply, those relevant amounts are treated as not being a financing expense amount or a financing income amount of the group treasury company only to the extent that they relate to treasury activities undertaken by the company for the worldwide group.

(6) For the purposes of subsection (5) the extent to which amounts relate to the matters mentioned is to be determined on a just and reasonable basis.

(7) An election under this section must be made within 3 years after the end of the relevant period.”

(2) The amendment made by this section has effect in relation to periods of account of the worldwide group beginning on or after 11 December 2012.

45 Condition for company to be an “investment trust”

(1) In section 1158(2) of CTA 2010 (condition A for a company to be an “investment trust”), for “the business of the company consists of” substitute “all, or substantially all, of the business of the company is”.

(2) The amendment made by this section has effect in relation to accounting periods beginning on or after 1 January 2012.

46 Community amateur sports clubs

Schedule 21 contains provision about community amateur sports clubs.