Finance Act 2022

International matters

24 Cross-border group relief

(1) CTA 2010 is amended as follows.

(2) In section 107 (restriction on losses etc surrenderable by non-UK resident)—

(a) omit subsections (1A), (6A), (6B), (10) and (11);

(b) in subsection (2) omit “In any other case,”;

(c) in subsection (7) omit “or (6B)”.

(3) In Part 5 (group relief), omit Chapter 3 (surrenders made by non-UK resident company resident or trading in the EEA).

(4) In section 188BI (restriction on surrender of losses made when non-UK resident)—

(a) omit subsections (2), (8), (9), (13) and (14);

(b) in subsection (3) omit “In any other case,”;

(c) in subsection (10) omit “or (9)”.

(5) In Schedule 4—

(a) Part 1 makes amendments consequential on this section, and

(b) Part 2 makes provision as to commencement.

25 Tonnage tax

(1) Schedule 22 to FA 2000 (tonnage tax) is amended as follows.

(2) In paragraph 10 (when election may be made)—

(a) in sub-paragraph (2), at the end insert “, subject to sub-paragraph (3A)”,

(b) in sub-paragraph (3), at the end insert “, subject to sub-paragraph (3A)”, and

(c) after sub-paragraph (3) insert—

“(3A) An election under sub-paragraph (2) or (3) may be made after the end of the period specified in that sub-paragraph with the consent of an officer of Revenue and Customs.

(3B) An officer of Revenue and Customs may not give consent for the purposes of sub-paragraph (3A) unless satisfied that—

(a) there was a reasonable excuse for the failure to make the election before the end of the period specified in sub-paragraph (2) or (3) (as appropriate), and

(b) after the end of that period, the consent was requested without delay or there is a reasonable excuse for any further delay.”

(3) In paragraph 13 (period for which election is in force)—

(a) in sub-paragraph (1), for “ten years” substitute “the relevant number of years”,

(b) in that sub-paragraph, omit the final sentence, and

(c) after that sub-paragraph insert—

“(1A) “The relevant number of years” means—

(a) in relation to a tonnage tax election made before 1 April 2022, ten years;

(b) in relation to a tonnage tax election made on or after 1 April 2022, eight years.

(1B) Sub-paragraph (1) is subject to the following exceptions.”

(4) In paragraph 15 (renewal election), for sub-paragraph (1) substitute—

“(1) A further tonnage tax election (a “renewal election”) may be made in respect of a single company or group if—

(a) at the time it is made, a tonnage tax election is in force in respect of the company or group, or

(b) it is a bridging renewal election (see paragraph 15ZA).”

(5) After paragraph 15 insert—

“Bridging renewal election

15ZA (1) A renewal election in respect of a single company or a group is a bridging renewal election if—

(a) the last tonnage tax election in force in respect of the company or group (“the previous election”) expired (rather than ceasing to be in force for another reason),

(b) in the period beginning with the expiry of the previous election and ending with the time from which the renewal election would have effect, nothing has happened which, if a tonnage tax election had been force in respect of the company or group, would have caused it to cease to be in force, and

(c) the renewal election is made with the consent of an officer of Revenue and Customs.

(2) An officer of Revenue and Customs may not give consent for the purposes of this paragraph unless satisfied that—

(a) the consent was requested without delay after the company or (as appropriate) a company in the group first became aware that the previous election had expired, and

(b) the conduct of the company or group in connection with tonnage tax has not at any time involved conduct the main purpose (or one of the main purposes) of which was the avoidance of tax.

(3) Where a bridging renewal election is made, the previous election is to be treated as having remained in force until the time when the bridging renewal election takes effect.”

(6) In paragraph 19(3) (qualifying ships), omit paragraph (c).

(7) Omit paragraphs 22A to 22F (flagging) (and the italic headings before each of those paragraphs).

(8) In paragraph 43A(1)(a) (requirement to prove compliance with safety etc standards), for “any relevant register (see paragraph 22B(6A))” substitute “the United Kingdom”.

(9) In paragraph 49(2)(b) (relevant shipping income: distributions of overseas shipping companies), omit “, Gibraltar or a member State” in both places.

(10) In paragraph 147 (index of defined expressions)—

(a) at the appropriate place insert—

“bridging renewal election

paragraph 15ZA”;

(b) omit the entry for “relevant register”.

(11) The amendments made by this section come into force on 1 April 2022.

(12) The amendment made by subsection (9) has effect for accounting periods beginning on or after 1 April 2022.

26 Amendments of section 259GB of TIOPA 2010

(1) Section 259GB of TIOPA 2010 (hybrid payee deduction/non-inclusion mismatches and their extent) is amended as follows.

(2) In subsection (4A)—

(a) in the words before paragraph (a), after “partnership” insert “or a relevant transparent entity”;

(b) in paragraph (a), after “partnership” insert “, or a member of the entity,”;

(c) in paragraph (b)—

(i) in sub-paragraph (i), after “partnership” insert “or entity”;

(ii) in sub-paragraph (ii), after “partner”, in each place it occurs, insert “or member”.

(3) After that subsection insert—

“(4AA) Subsection (4AB) applies in relation to a payment or quasi-payment if—

(a) one or more of the payees is a partnership or a relevant transparent entity,

(b) there is a territory under the law of which an amount of ordinary income would arise, or would potentially arise, to a hybrid entity as a result of the circumstances giving rise to the relevant deduction if the entity were a person resident in that territory for the purposes of a tax charged under the law of that territory, and

(c) that hybrid entity is not (ignoring subsection (4AB)(b)) a payee.

(4AB) Where this subsection applies—

(a) if any such hybrid entity is not either a partnership or a relevant transparent entity, subsection (4A) does not apply, or

(b) otherwise, every such hybrid entity is to be treated as a payee for the purposes of determining, for the purposes of subsection (1)(b), if an excess arises by reason of one or more payees being hybrid entities.”

(4) In subsection (4B), for “subsection (4A)” substitute “subsections (4A) to (4AB) and (4C)”.

(5) After that subsection insert—

“(4C) An entity is a “relevant transparent entity” if—

(a) the entity is not a partnership,

(b) the entity is legally constituted in a territory outside the United Kingdom,

(c) all of the entity’s income or profits for the purposes of a tax charged under the law of that territory are treated (or would be if there were any) for the purposes of that tax as the income or profits of its members, and

(d) any such tax that is, or that would be, charged on such a member that is resident for tax purposes in that territory is not charged at a nil rate.

(4D) For the purposes of subsection (4C), a person is a “member” of an entity if the person is entitled to a proportion of the profits of the entity as a result of—

(a) where the entity has share capital, holding shares forming part of that capital, or

(b) where the entity does not have share capital, an entitlement similar to that which would be enjoyed if the entity had share capital and the person held shares forming part of that capital.”

(6) Section 259GB of TIOPA 2010 has effect, and is to be deemed always to have had effect, with the amendments made by this section.

(7) But that section has effect —

(a) in relation to payments made before the day on which this Act is passed, or

(b) in relation to quasi-payments in relation to which the payment period had begun before that date,

with the modifications set out in subsection (8).

(8) Those modifications are that subsections (4AA) and (4AB) of TIOPA 2010 (as inserted by subsection (3)) have effect as if—

(a) any reference in those subsections to a hybrid entity did not include a partnership (within the meaning given by section 259NE(4) of TIOPA 2010),

(b) in paragraph (a) of subsection (4AA), “a partnership or” were omitted, and

(c) in paragraph (a) of subsection (4AB)—

(i) “either a partnership or” were omitted, and

(ii) after “apply” there were inserted “in relation to any payee that is a relevant transparent entity”.

(9) A taxpayer may, in consequence of the amendments made by this section, make reasonable adjustments to claims, returns and elections made before the day on which this Act is passed.

(10) Any such adjustments must be made on or before 31 December 2022 but, subject to that, the time limits otherwise applicable to amending or withdrawing the claim, return or election in question do not prevent an adjustment being made under subsection (9).

27 Application of section 124 of TIOPA 2010 in relation to diverted profits tax

(1) In Part 3 of FA 2015 (diverted profits tax) before section 115 (but after the heading “Final provisions”) insert—

“114A Application of section 124 of TIOPA 2010 in relation to diverted profits tax

A solution or mutual agreement mentioned in subsection (1)(b) of section 124 of TIOPA 2010 (giving effect to solutions to cases and mutual agreements resolving cases) may include provision related to diverted profits tax (and, accordingly, the duty in subsection (2) of that section includes a duty to make any such adjustment as is appropriate in relation to diverted profits tax).”

(2) In section 124 of TIOPA 2010 (giving effect to solutions to cases and mutual agreements resolving cases), after subsection (4) insert—

“(5) See section 114A of FA 2015 for provision applying this section in relation to diverted profits tax.”

(3) The amendments made by this section apply in relation to solutions arrived at, or mutual agreements made, by the Commissioners on or after 27 October 2021.

28 Diverted profits tax: closure notices etc

(1) Part 3 of FA 2015 (diverted profits tax) is amended as follows.

(2) In section 101A (amendment of CT return during review period: section 80 or 81 case)—

(a) in subsection (2) (amendment during first 12 months of review period)—

(i) omit “the first 12 months of”, and

(ii) after “review period” insert “except the last 30 days of that period”;

(b) after subsection (2) insert—

“(3) Paragraph 31(3) of Schedule 18 to FA 1998 (amendment not to take effect during enquiry) does not apply in relation to an amendment made under subsection (2).”

(3) In section 101B (amendment of CT return during review period: section 86 case)—

(a) in subsection (2) (amendment during first 12 months of review period)—

(i) omit “the first 12 months of”, and

(ii) after “review period” insert “except the last 30 days of that period”;

(b) after subsection (2) insert—

“(3) Paragraph 31(3) of Schedule 18 to FA 1998 (amendment not to take effect during enquiry) does not apply in relation to an amendment made under subsection (2).”

(4) After section 101B insert—

“101C Closure notices: rules during review period

(1) This section applies where—

(a) a charging notice is issued to a company for an accounting period, and

(b) the review period for that charging notice has not ended.

(2) In relation to a relevant enquiry—

(a) a final closure notice may not be given under paragraph 32 of Schedule 18 to FA 1998, and

(b) a partial closure notice may not be given under that paragraph in relation to any matter which is, or could be, relevant to the charging notice mentioned in subsection (1)(a).

(3) Accordingly, a relevant tribunal direction has no effect until the review period has ended.

(4) In subsection (2), “relevant enquiry” means—

(a) an enquiry into the company tax return for the accounting period mentioned in subsection (1)(a);

(b) where the charging notice mentioned in subsection (1)(a) is issued to a company (“the foreign company”) for an accounting period by reason of section 86 applying in relation to it for that accounting period, an enquiry into any company tax return for the avoided PE (within the meaning of section 86) that may be amended by virtue of section 101B(2) so as to reduce the taxable diverted profits arising to the foreign company in that accounting period.

(5) In subsection (3) “relevant tribunal direction” means a direction given—

(a) under paragraph 33 of Schedule 18 to FA 1998,

(b) in relation to a closure notice that may not be given by virtue of subsection (2), and

(c) during the review period mentioned in subsection (1)(b).”

(5) This section is treated as having come into force on 27 October 2021; and the new section 101C of FA 2015 inserted by subsection (4) has effect in relation to any relevant tribunal direction which is given on or after that date unless the application for the direction was made before 27 September 2021.