Finance (No. 3) Act 2010

1 (1) Part 5 of ITA 2007 (enterprise investment scheme) is amended as follows. U.K.

(2) In section 179 (meaning of “qualifying business activity”)—

(a) in subsection (2)(b)(i), omit “wholly or mainly in the United Kingdom”,

(b) omit subsection (3),

(c) in subsection (4)(b)(i) and (ii), omit “wholly or mainly in the United Kingdom”, and

(d) omit subsection (5).

(3) In section 180 (overview of Chapter 4), before paragraph (a) insert—

“(za) UK permanent establishment (see section 180A),

(zb) financial health (see section 180B),”.

(4) Before section 181 insert—

“180A The UK permanent establishment requirement

(1) The issuing company must meet the UK permanent establishment requirement throughout period B.

(2) The UK permanent establishment requirement is that the issuing company has a permanent establishment in the United Kingdom.

180B The financial health requirement

(1) The issuing company must meet the financial health requirement at the beginning of period B.

(2) The financial health requirement is that the issuing company is not in difficulty.

(3) The issuing company is “in difficulty” if it is reasonable to assume that it would be regarded as a firm in difficulty for the purposes of the Community Guidelines on State Aid for Rescuing and Restructuring Firms in Difficulty (2004/C 244/02).”

(5) After section 191 (and before the italic heading “Excluded activities”) insert—

“191A Meaning of “permanent establishment”

(1) This section applies for the purposes of this Part.

(2) A company has a “permanent establishment” in the United Kingdom if (and only if)—

(a) it has a fixed place of business there through which the business of the company is wholly or partly carried on, or

(b) an agent acting on behalf of the company has and habitually exercises there authority to enter into contracts on behalf of the company.

(3) For the purposes of this section “fixed place of business” includes (without prejudice to the generality of that expression)—

(a) a place of management,

(b) a branch,

(c) an office,

(d) a factory,

(e) a workshop,

(f) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources, and

(g) a building site or construction or installation project.

(4) If the condition in subsection (5) is met, a company is not regarded as having a permanent establishment in the United Kingdom by reason of the fact that—

(a) a fixed place of business is maintained there for the purpose of carrying on activities for the company, or

(b) an agent carries on activities there for and on behalf of the company.

(5) The condition is that, in relation to the business of the company as a whole, the activities carried on are only of a preparatory or auxiliary character.

(6) For this purpose “activities of a preparatory or auxiliary character” include (without prejudice to the generality of that expression)—

(a) the use of facilities for the purpose of storage, display or delivery of goods or merchandise belonging to the company,

(b) the maintenance of a stock of goods or merchandise belonging to the company for the purpose of storage, display or delivery,

(c) the maintenance of a stock of goods or merchandise belonging to the company for the purpose of processing by another person, and

(d) purchasing goods or merchandise, or collecting information, for the company.

(7) A company is not regarded as having a permanent establishment in the United Kingdom by reason of the fact that it carries on business there through an agent of independent status (including a broker or a general commission agent) acting in the ordinary course of the agent's business.

(8) A company is not regarded as having a permanent establishment in the United Kingdom by reason of the fact that it controls a company that—

(a) is resident there, or

(b) carries on business there (whether through a permanent establishment or otherwise).

(9) The Treasury may by regulations amend this section.”