Finance (No. 2) Act 2023

Other reliefs relating to businesses U.K.

10 Relief for research and development U.K.

Schedule 1 makes provision in relation to the corporation tax relief contained in Chapter 6A of Part 3 of CTA 2009 (trade profits: R&D expenditure credits) and Part 13 of CTA 2009 (additional relief for expenditure on research and development)—

(a) conferring relief in respect of expenditure on data and cloud computing services,

(b) about the administration and management of claims for relief,

(c) about the circumstances in which an enterprise counts as a small or medium-sized enterprise and in which accounts are to be treated as prepared on a going concern basis, and

(d) limiting relief for expenditure incurred on payments to expenditure incurred on payments made before the making of a claim for the relief.

11 Treatment of profits from patents etc: small profits rate of corporation tax U.K.

(1) In section 357A of CTA 2010 (election for special treatment of profits from patents etc), in subsection (3)—

(a) in the formula, in both places it occurs, for “MR” substitute “AR”;

(b) for the definition of “MR” substitute—

• ““AR” means, in relation to a company—

  (a)

  in a case where corporation tax is charged at the standard small profits rate on the company’s taxable total profits of the accounting period mentioned in subsection (1) which are not ring fence profits, that rate, or

  (b)

  in any other case, the main rate of corporation tax.”

(2) The amendments made by subsection (1) have effect in relation to accounting periods beginning on or after 1 April 2023.

12 Energy (oil and gas) profits levy: de-carbonisation allowance U.K.

(1) The Energy (Oil and Gas) Profits Levy Act 2022 is amended as follows.

(2) In section 2 (additional expenditure treated as incurred for purposes of section 1), for subsection (3) substitute—

“(3) For the purposes of section 1 the company is to be treated as if, in addition to the investment expenditure (“the IE”) incurred by it in the accounting period, it had incurred in that period—

(a) expenditure of an amount equal to 80% of the amount of the IE, in a case where the expenditure is capital expenditure on the de-carbonisation of its upstream petroleum production, and

(b) expenditure of an amount equal to 29% of the amount of the IE, in any other case.”

(3) In that section, after subsection (4) insert—

“(4A) For the purposes of this section, where a company incurs expenditure part of which is capital expenditure on the de-carbonisation of its upstream petroleum production and part of which is not, the expenditure is to be apportioned on a just and reasonable basis.”

(4) After that section insert—

“2A Section 2: meaning of expenditure on “de-carbonisation of upstream petroleum production”

(1) Expenditure incurred by a company is expenditure on the “de-carbonisation of its upstream petroleum production” for the purposes of section 2 if—

(a) the expenditure is incurred in qualifying circumstances, and

(b) the main purpose, or one of the main purposes, in incurring the expenditure is to reduce greenhouse gas emissions in the carrying on by the company of its ring fence trade.

(2) For this purpose expenditure is incurred in qualifying circumstances if—

(a) it is incurred on the provision of an alternative energy asset which is to be used for the purpose of generating or storing power for use by the company in its upstream petroleum facilities,

(b) it is incurred on the modification of an asset so that it becomes an alternative energy asset which is to be used for that purpose,

(c) it is incurred on the provision of an asset (such as a cable or substation) where the asset is to be used to make a connection to the electric grid or to an alternative energy asset so that (in either case) the company can use the power generated in its upstream petroleum facilities,

(d) it is incurred for the purpose of reducing or eliminating flaring or venting,

(e) it is incurred for the purpose of capturing greenhouse gas emissions, or

(f) it is incurred for the purpose of monitoring or measuring greenhouse gas emissions (including with a view to detecting leaks of greenhouse gas emissions from the company’s upstream petroleum facilities).

(3) For the purposes of this section an asset is an alternative energy asset if the asset generates or stores power (wholly or mainly) from sources of energy other than fossil fuels.

(4) For the purposes of this section references to a company’s upstream petroleum facilities are to any facility used by the company for the purposes of its oil extraction activities.

(5) In this section—

• “the electric grid” means—

  (a)

  in Great Britain, anything which is a transmission system, or a distribution system connected to a transmission system, for the purposes of Part 1 of the Electricity Act 1989, or

  (b)

  in Northern Ireland, anything which is a transmission system, or a distribution system connected to a transmission system, for the purposes of Part 2 of the Electricity (Northern Ireland) Order 1992,

• “emissions” has the same meaning as it has in the Climate Change Act 2008 (see section 97),

• “fossil fuel” has the meaning given by section 32M of the Electricity Act 1989, and

• “greenhouse gas” has the same meaning as it has in the Climate Change Act 2008 (see section 92).”

(5) In section 3 (section 2: meaning of “operating expenditure”), for subsection (5) substitute—

“(5) In this section “tariff receipts” has the meaning given by section 291A of CTA 2010.”

(6) In section 18(1) (interpretation)—

(a) after the definition of “energy (oil and gas) profits levy” insert—

• ““facility” means a platform, an oil well, a platform well, an oil well head or upstream petroleum infrastructure,”, and

(b) omit the “and” before the definition of “ring fence trade” and after that definition insert—

• ““upstream petroleum infrastructure” means any upstream petroleum pipeline, oil processing facility or gas processing facility (as those expressions are defined by section 90 of the Energy Act 2011 but as if that section also applied (with the appropriate modifications) to Northern Ireland).”

(7) The amendments made by subsections (2) to (4) have effect in relation to expenditure incurred on or after 1 January 2023 and the amendments made by subsections (5) and (6) have effect in relation to expenditure incurred on or after 26 May 2022.

13 Museums and galleries exhibition tax relief: extension of sunset date U.K.

In section 1218ZCG(1)(c) of CTA 2009 (date before which qualifying expenditure must be incurred), for “2024” substitute “2026”.

14 Extension of the temporary increase in theatre tax credit etc U.K.

(1) In each of the following provisions of FA 2022—

(a) section 17(2) (temporary increase in amount of theatre tax credit),

(b) section 19(2) (corresponding provision for orchestra tax credit), and

(c) section 21(2) (corresponding provision for museums and galleries exhibition tax credit),

for “2023” substitute “2025”.

(2) In each of the following provisions of that Act (which provide for an increase in the amount of those credits for a further year but at a lower rate than that provided for by sections 17(2), 19(2) and 21(2))—

(a) section 17(3),

(b) section 19(3), and

(c) section 21(3),

for “2023” substitute “2025” and for “2024” substitute “2026”.

(3) In each of the following provisions of that Act (which deal with straddling periods for those credits)—

(a) section 17(4),

(b) section 19(4), and

(c) section 21(4),

for “2023” substitute “2025” and for “2024” substitute “2026”.

15 Seed enterprise investment scheme: increase of limits etc. U.K.

(1) Part 5A of ITA 2007 (seed enterprise investment scheme) is amended in accordance with subsections (2) to (5).

(2) In section 257AB (form and amount of SEIS relief), in subsection (2)(b), for “£100,000” substitute “£200,000”.

(3) In section 257DI (the gross assets requirement)—

(a) in subsection (1), for “£200,000” substitute “£350,000”;

(b) in subsection (2), for “£200,000” substitute “£350,000”.

(4) In section 257DL (the amount raised through the SEIS), in each of the following provisions, for “£150,000” substitute “£250,000”—

(a) subsection (1);

(b) subsection (4)(a);

(c) subsection (4)(b);

(d) in subsection (6), the definition of “A”.

(5) In section 257HF (meaning of “new qualifying trade”)—

(a) in subsection (1)(a), for “two” substitute “three”;

(b) in subsection (2), for the definition of “two year pre-investment period” substitute—

• ““three year pre-investment period” means the period of 3 years ending immediately before the day on which the relevant shares are issued.”

(6) In Schedule 5BB to TCGA 1992 (seed enterprise investment scheme: re-investment), in paragraph 2—

(a) in sub-paragraph (1), for “£100,000” substitute “£200,000”;

(b) in sub-paragraph (2), in the formula, for “£100,000” substitute “£200,000”.

(7) The amendments made by this section have effect in relation to shares issued on or after 6 April 2023.