Finance (No. 2) Act 2023

Attribution and surrender of amounts: joint ventures and significant minority shareholders U.K.

293 Non-chargeable amounts of joint venture to be attributed to participants U.K.

(1) Subsection (3) applies where the result of Step 4 in section 279(5) for a joint venture undertaking is greater than nil for a qualifying period.

(2) For the purposes of this Part “joint venture undertaking” means a generating undertaking—

(a) that is a qualifying joint venture, or

(b) that is a group whose principal member is a qualifying joint venture.

(3) The appropriate proportion of the non-chargeable amount in relation to the joint venture undertaking is to be added to the result of Step 4 in section 279(5) for each generating undertaking that is a participant in the qualifying joint venture (“the JV”) that comprises, or is the principal member of, the joint venture undertaking (and where Step 4 would not otherwise have been reached as a result of the second sentence of Step 3, ignore that sentence).

(4) Where the qualifying period of the joint venture undertaking corresponds to a qualifying period of a participant of the JV, the whole of the appropriate proportion of the non-chargeable amount is to be added to the result of Step 4 for the participant for that period.

Otherwise, the appropriate proportion is to be apportioned, on a fair and reasonable basis, between the qualifying periods of the participant in which the qualifying period of the joint venture undertaking falls.

(5) The non-chargeable amount for a qualifying period of the joint venture undertaking is so much of the result of Step 4 in section 279(5) for that period as is reduced as a result of Step 5 of that section.

(6) To determine the appropriate proportion of the participants in the JV for a qualifying period of the joint venture undertaking take the following steps—

• Step 1

  The generation receipts and allowable costs attributed to the joint venture undertaking for the period are to be allocated to the participants in the JV in proportion to the proportional interest each has in the JV at the time of the generation to which the receipts or costs relate.

• Step 2

  In respect of each participant, subtract those allocated allowable costs from those allocated generation receipts.

  If the result of this Step is less than nil for any of the participants, the appropriate proportion for that participant is nil.

• Step 3

  The appropriate proportion for any other participant is the amount given by dividing—

  (a)

  the result of Step 2 in respect of that participant, by

  (b)

  the result of Step 4 in section 279(5) for the joint venture undertaking—

  (i)

  ignoring any amounts added to the result of that Step in accordance with subsection (3), and

  (ii)

  where the result of Step 2 for one or more of the participants is less than nil, increased by the sum of those results (each expressed as a positive number).

(7) The proportional interest of a participant (“P”) in the JV at any time is—

(a) the percentage of the JV’s ordinary share capital held—

(i) where P is a generating undertaking which is a company, by P, or

(ii) where P is a generating undertaking which is a group, by members of P, or

(b) in a case where the JV does not have ordinary share capital, the percentage of the JV’s profits available for distribution to equity holders of the JV—

(i) where P is a generating undertaking which is a company, to which P is beneficially entitled, or

(ii) where P is a generating undertaking which is a group, to which members of P are beneficially entitled.

(8) Where the appropriate proportion of the non-chargeable amount is required to be added to the result of Step 4 in section 279(5) for a generating undertaking that is not “qualifying” (see section 279(3)) in the qualifying period in which it is to be added, that undertaking is to be treated as qualifying for that period.

294 Generation acquired and supplied by JV participants U.K.

(1) Subsection (3) applies to generation if —

(a) the generation is attributed to a joint venture undertaking, other than in accordance with this section or sections 295 to 297,

(b) it is supplied, directly or indirectly, to a generating undertaking (“Q”) that is a participant in the joint venture (“the JV”) that comprises, or is the principal member of, the joint venture undertaking, and

(c) it is subsequently the subject of a wholesale purchase of electricity from Q.

(2) Where the generation attributed to the joint venture undertaking is generation falling within section 282(3)(b) (generation expected to be generated which was not generated), reference in subsection (1) to supply or purchase is to any supply or purchase that was expected in consequence of that generation having occurred.

(3) Where this subsection applies to generation—

(a) the generation is to be attributed to Q (as well as to the joint venture undertaking),

(b) in determining the amount of generation receipts to be attributed to the joint venture undertaking under section 283 in respect of that generation, do not take account of the transaction described in subsection (1)(c),

(c) the generation attributed to Q as a result of paragraph (a) is to be attributed to Q for the qualifying period of Q in which the generation occurred,

(d) subject to paragraph (f), the generation attributed to Q as a result of paragraph (a) is to be treated for the purposes of this Part as if it had been attributed under section 282(1),

(e) in determining the amount of generation receipts to be attributed to Q under section 283 in respect of generation attributed as a result of paragraph (a), take account of the costs of the transaction under which the generation so attributed was acquired or was expected to be acquired, and

(f) in determining the exceptional generation receipts of Q for a qualifying period of Q under section 279(5), any generation attributed to Q for that period as a result of paragraph (a) is to be ignored for the purposes of Step 2 (which may result in the result of that Step being nil).

(4) But the amount generation that is to be attributed to Q in a qualifying period of Q under this section is not to exceed the amount of generation attributed to the joint venture undertaking in respect of that same period multiplied by the relevant proportion.

(5) The “relevant proportion” for the purposes of subsection (4) and section 295(3) is—

(a) the percentage of the JV’s ordinary share capital held—

(i) where Q is a generating undertaking which is a company, by Q, or

(ii) where Q is a generating undertaking which is a group, by members of Q, or

(b) in a case where the JV does not have ordinary share capital, the percentage of the JV’s profits available for distribution to equity holders of the JV—

(i) where Q is a generating undertaking which is a company, to which Q is beneficially entitled, or

(ii) where Q is a generating undertaking which is a group, to which members of Q are beneficially entitled.

295 Arrangements that reflect receipts (JV participants) U.K.

(1) Subsection (2) applies to generation if—

(a) the generation is attributed to a joint venture undertaking, other than in accordance with this section or sections 294, 296 or 297,

(b) a participant (“Q”) in the joint venture (“the JV”) that comprises, or is the principal member of, the joint venture undertaking is party to arrangements that result in amounts arising by reference to the generation,

(c) those amounts would, if the joint venture undertaking, or a member of it, were party to those arrangements, be taken into account in determining the generation receipts of the joint venture undertaking, and

(d) the generation—

(i) is not supplied (directly or indirectly) to Q, or

(ii) in the case of generation falling within section 282(3)(b) (generation expected to be generated which was not generated), was not expected to be supplied (directly or indirectly) to Q.

(2) Where this subsection applies to generation—

(a) the generation is to be attributed to Q (as well as to the joint venture undertaking),

(b) the generation attributed to Q as a result of paragraph (a) is to be attributed to Q for the qualifying period of Q in which the generation occurred,

(c) subject to paragraph (d), the generation attributed to Q as a result of paragraph (a) is to be treated for the purposes of this Part as if it had been attributed under section 282(1),

(d) in determining the exceptional generation receipts of Q for a qualifying period of Q under section 279(5)—

(e) any generation attributed to Q for that period as a result of paragraph (a) is to be ignored for the purposes of Step 2 (which may result in the result of that Step being nil).

(3) But amount of generation that is to be attributed to Q in a qualifying period of Q under this section is not to exceed the amount given by subtracting—

(a) the amount of generation attributed to Q in that period under section 294, from

(b) the amount of generation attributed to the joint venture undertaking in respect of that same period multiplied by the relevant proportion (see section 294(5)).

296 Generation acquired and supplied by significant minority shareholders U.K.

(1) Subsection (3) applies to generation if—

(a) a subsidiary member (“A”) of a generating undertaking that is a group (“U”) has a significant minority shareholder that is a company or group,

(b) the generation is generation by a relevant generating station operated by A or a relevant subsidiary of A (see section 290(6)),

(c) the generation is supplied, directly or indirectly, to a significant minority shareholder (“M”) in A that is a company or a group, and

(d) the generation is subsequently the subject of a wholesale purchase of electricity from M.

(2) Where the generation falls within section 282(3)(b) (generation expected to be generated which was not generated), reference in subsection (1) to supply or purchase is to any supply or purchase that was expected in consequence of that generation having occurred.

(3) Where this subsection applies to generation—

(a) the generation is to be attributed to M (as well as to U),

(b) in determining the amount of generation receipts to be attributed to U under section 283 in respect of the generation, do not take account of the transaction described in subsection (1)(d),

(c) the generation attributed to M as a result of paragraph (a) is to be attributed to M for the qualifying period of M in which the generation occurred,

(d) subject to paragraph (f), the generation attributed to M as a result of paragraph (a) is to be treated for the purposes of this Part as if it had been attributed under section 282(1),

(e) in determining the amount of generation receipts to be attributed to M under section 283 in respect of generation attributed as a result of paragraph (a), take account of the costs of the transaction under which the generation so attributed was acquired or was expected to be acquired, and

(f) in determining the exceptional generation receipts of M for a qualifying period of M under section 279(5), any generation attributed to M for that period as a result of paragraph (a) is to be ignored for the purposes of Step 2 (which may result in the result of that Step being nil).

(4) Where the generation is generation by a relevant generating station operated in partnership and at least one of the partners is neither A nor a relevant subsidiary of A, only the qualifying proportion of that generation is to be attributed to M under subsection (3)(a).

(5) For the purposes of this section and section 297, “the qualifying proportion” is the proportion of generation that is equal to the proportion of the partnership’s profits represented by the sum of A’s share of the partnership’s profits and the shares of those profits of any relevant subsidiaries of A (and Part 17 of CTA 2009 applies for the purposes of this subsection as it applies for the purposes of corporation tax).

(6) But the generation that is to be attributed to M in a qualifying period of M is not to exceed the amount of generation that is attributable on a fair and reasonable basis to the activities of A and (where it has one or more relevant subsidiaries) its relevant subsidiaries in that same period multiplied by the relevant proportion.

(7) The “relevant proportion” for the purposes of subsection (6) and section 297(4)(b) is—

(a) the percentage of A’s ordinary share capital held—

(i) where M is a generating undertaking which is a company, by M, or

(ii) where M is a generating undertaking which is a group, by members of M, or

(b) in a case where A does not have ordinary share capital, the percentage of A’s profits available for distribution to equity holders of A—

(i) where M is a generating undertaking which is a company, to which M is beneficially entitled, or

(ii) where M is a generating undertaking which is a group, to which members of M are beneficially entitled.

(8) Where M is not a generating undertaking, M is to be treated as a generating undertaking for the purposes of this Part.

297 Arrangements that reflect receipts (significant minority shareholders) U.K.

(1) Subsection (2) applies to generation if—

(a) a subsidiary member (“A”) of a generating undertaking that is a group (“U”) has a significant minority shareholder that is a company or group,

(b) the generation is generation by a relevant generating station operated by A or a relevant subsidiary of A (see section 290(6)),

(c) a significant minority shareholder (“M”) in A that is a company or a group is party to arrangements that result in amounts arising by reference to the generation,

(d) those amounts would be taken into account in determining the generation receipts of U if A or a relevant subsidiary of A (whichever operates the station) were party to the arrangements, and

(e) the generation—

(i) is not supplied (directly or indirectly) to M, or

(ii) in the case of generation falling within section 282(3)(b) (generation expected to be generated which was not generated), was not expected to be supplied (directly or indirectly) to M.

(2) Where this subsection applies to generation—

(a) the generation is to be attributed to M (as well as to U),

(b) the generation attributed to M as a result of paragraph (a) is to be attributed to M for the qualifying period of M in which the generation occurred,

(c) subject to paragraph (d), the generation attributed to M as a result of paragraph (a) is to be treated for the purposes of this Part as if it had been attributed under section 282(1),

(d) in determining the exceptional generation receipts of M for a qualifying period of M under section 279(5), any generation attributed to M for that period as a result of paragraph (a) is to be ignored for the purposes of Step 2 (which may result in the result of that Step being nil).

(3) Where the generation is generation by a relevant generating station operated in partnership and at least one of the partners is neither A nor a relevant subsidiary of A, only the qualifying proportion of that generation (see section 294(4)) is to be attributed to M under subsection (2)(a).

(4) But the amount of generation that is to be attributed to M in a qualifying period of M is not to exceed the amount given by subtracting—

(a) the amount of generation attributed to M in that period under section 296, from

(b) the amount of generation that is attributable on a fair and reasonable basis to the activities of A and (where it has one or more relevant subsidiaries) its relevant subsidiaries multiplied by the relevant proportion (see section 296(7)).

(5) Where M is not a generating undertaking, M is to be treated as a generating undertaking for the purposes of this Part.

298 Surrender of shortfalls U.K.

(1) This section applies where in an overlap period for two related generating undertakings—

(a) one of those undertakings (“A”) has a shortfall amount for the overlap period, and

(b) the other undertaking (“B”) has exceptional generation receipts for the overlap period.

(2) To determine if an undertaking has a shortfall amount or exceptional generation receipts for an overlap period, carry out all of the steps in section 279(5) as if the period were a qualifying period, including steps that would normally be ignored because a result of nil or less has already been found.

(3) If the result of Step 5 is less than nil, that result (expressed as a positive number) is a shortfall amount.

(4) Where this section applies, an amount of the shortfall amount of A may be surrendered to B.

(5) Section 299 sets out how much of the shortfall amount may be surrendered by A to B.

(6) Two generating undertakings are related generating undertakings if—

(a) one is—

(i) a joint venture undertaking, or

(ii) a generating undertaking that is a group that has at least one subsidiary member who has at least one significant minority shareholder, and

(b) the other is a relevant shareholder in the other.

(7) A generating undertaking (“C”) is a relevant shareholder in another generating undertaking (“D”) if—

(a) where D is a joint venture undertaking, C is a participant in the joint venture that comprises, or is the principal member of, the joint venture undertaking, or

(b) where D is a generating undertaking that is a group that has at least one subsidiary member who has at least one significant minority shareholder, C is a significant minority shareholder in a subsidiary member of D.

(8) In this section “overlap period” in relation to two generating undertakings means—

(a) where a qualifying period of one of the generating undertakings wholly corresponds with a qualifying period of the other, such a period, and

(b) where a qualifying period of one generating undertaking does not wholly correspond with a qualifying period of the other, a period—

(i) that commences at the same time as a qualifying period of one of them, and

(ii) that ends with the earlier of the end of that qualifying period or the end of the last qualifying period of the other undertaking to commence on or before that qualifying period.

299 Amount that may be surrendered and use of that amount U.K.

(1) Subject to subsection (7), the maximum amount of a shortfall amount that may be surrendered by a generating undertaking (“A”) to another (“B”) where A is a relevant shareholder in B, is the lesser of the amounts given by subsections (2) and (3).

(2) The amount given by this subsection is the amount of the shortfall amount of A that is, on a fair and reasonable basis, referable to A’s interest in the generation attributed to B in the overlap period.

(3) The amount given by this subsection is the amount of the exceptional generation receipts of B for the shortfall period that is, on a fair and reasonable basis, referable to A’s interest in the generation attributed to B in the overlap period.

(4) Subject to subsection (7), the maximum amount of a shortfall amount that may be surrendered by a generating undertaking (“C”) to another (“D”) where D is a relevant shareholder in C is the lesser of the amounts given by subsections (5) and (6).

(5) The amount given by this subsection is the amount of the shortfall amount of C that is, on a fair and reasonable basis, referable to D’s interest in the generation attributed to C in the overlap period.

(6) The amount given by this subsection is the amount of the exceptional generation receipts of D for the shortfall period that is, on a fair and reasonable basis, referable to D’s interest in the generation attributed to C in the overlap period.

(7) A generating undertaking may only surrender an amount of a shortfall amount relating to an overlap period if the result of Step 5 in section 279(5) for the undertaking for the qualifying period in which the overlap period falls would not exceed nil if—

(a) all of the steps in section 279(5) for that qualifying period were carried out, including steps that would normally be ignored because a result of nil or less has already been found,

(b) the amount surrendered were added to the result of Step 5, and

(c) all other amounts surrendered for overlap periods falling with that period were added to the result of that Step.

(8) Where an amount of a shortfall amount has been surrendered to a generating undertaking, that amount is to reduce the result of Step 5 in section 279(5), but not below nil, for the qualifying period in which the overlap period to which the shortfall amount relates falls.

(9) A surrender of an amount of a shortfall amount is effective only if—

(a) the generating undertaking which is surrendering the amount has consented to surrender that amount to the other generating undertaking, and

(b) the other generating undertaking has made a claim to that amount (see section 305).