Legislation – Finance (No. 2) Act 2023

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Introduction

Part 1
Income tax, corporation tax and capital gains tax

1 Income tax charge for tax year 2023-24

2 Main rates of income tax for tax year 2023-24

3 Default and savings rates of income tax for tax year 2023-24

4 Freezing starting rate limit for savings for tax year 2023-24

5 Charge and main rate for financial year 2024

6 Standard small profits rate and fraction for financial year 2024

7 Temporary full expensing etc for expenditure on plant or machinery

8 Annual investment allowance to remain at £1M beyond temporary period

9 First-year allowance for expenditure on electric vehicle charge points

10 Relief for research and development

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

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

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

14 Extension of the temporary increase in theatre tax credit etc

15 Seed enterprise investment scheme: increase of limits etc.

16 CSOP schemes: share value limit and share class

17 Enterprise management incentives: restricted shares and declarations

18 Lifetime allowance charge abolished

19 Certain lump sums to be taxed at marginal rate

20 Annual allowance increased

21 Money purchase annual allowance

22 Annual allowance: tapering

23 Modification of certain existing transitional protections

24 Collective money purchase arrangements

25 Relief relating to net pay arrangements

26 Payments under Jobs Growth Wales Plus

27 Power to clarify tax treatment of devolved social security benefits

28 Qualifying care relief: increase in individual’s limit

29 Estates in administration and trusts

30 Transfer of basic life assurance and general annuity business

31 Certain re-insurance sums not to count as deemed I-E receipts

32 Insurers in difficulties: write-down orders for corporation tax purposes

33 Insurers in difficulties: write-down orders in case of pension schemes

34 Corporate interest restriction

35 Investment vehicles

36 Share exchanges involving non-UK incorporated close companies

37 Records relating to transfer pricing

38 Double taxation relief: foreign nominal rates

39 Payments to farmers under the lump sum exit scheme etc

40 Contracts completed after ordinary notification period

41 Separated spouses and civil partners

42 Carried interest: election to pay tax as scheme profits arise

43 Relief on disposal of joint interests in land

Part 2
Alcohol Duty

Chapter 1 Charge to alcohol duty

Alcoholic products

44 Meaning of “alcoholic product”

45 Alcoholic strength

46 Categories of alcoholic products: regulations

Charge and rates

47 Alcohol duty: charge

48 Rates

49 Excise duty point and payment

Chapter 2 Draught relief

50 Qualifying draught products: reduced rates

51 Alcoholic products qualifying for draught relief

52 Repackaging qualifying draught products

53 Repackaging in contravention of section 52 (2)

Chapter 3 Small producer relief

Main provisions

54 Small producer relief: discounted rates

55 Small producer alcoholic products

56 Small production premises

57 “Alcohol production amount” etc

58 Exclusions

59 Duty discount for small producer alcoholic products

60 Assessments where incorrectly low rate of alcohol duty applied

Mergers and demergers

61 Mergers: general provisions

62 Modified “small production premises” test

63 Modified duty discount

64 Adjusted post-merger amount

65 Early termination of merger transition period

66 Subsequent mergers

67 Simultaneous mergers

68 Demergers

Interpretation of Chapter 3

69 “Producer”, “production premises”, “group premises” etc

70 Connected persons

71 Index of defined expressions: Chapter 3

Chapter 4 Other reliefs and exemptions

General

72 Exemption: production for personal consumption

73 Research and experiments

74 Spoilt alcoholic products

75 Alcoholic ingredients

Spirits

76 Imported medical articles

77 Flavourings

78 Authorised use for certain purposes

79 Imported goods not for human consumption

80 Restrictions on use of certain articles

Remission and repayment

81 Further provision about remission and repayment

Chapter 5 Regulated activities and approvals

82 Approval requirement: producers

83 Supplementary provision about approvals

84 Exemption: production for personal consumption

85 Exemption: research and experiments

86 Mixing alcoholic products

87 Post-duty point dilution of alcoholic products

88 Alcoholic products regulations

89 Penalties and forfeiture

Chapter 6 Denatured alcohol

90 Denatured alcohol

91 Licence to manufacture and deal wholesale in denatured alcohol

92 Regulations relating to denatured alcohol

93 Penalties and forfeiture

94 Defaults in respect of denatured alcohol: possession of excess alcoholic products

95 Defaults in respect of denatured alcohol: supply and use of denatured alcohol

96 Inspection of premises etc

97 Prohibition of use of denatured alcohol etc as beverage or medicine

Chapter 7 Wholesaling of controlled alcoholic products

98 Definitions

99 Further provision relating to definitions

100 Approval to carry on controlled activity

101 The register of approved wholesalers

102 Regulations relating to approval, registration and controlled activities

103 Restriction on buying controlled alcoholic products wholesale

104 Offences

105 Penalties

106 Groups

107 Index of defined expressions: Chapter 7

Chapter 8 Supplementary

108 Reviews and appeals

109 Forfeiture: supplementary provision

110 Removal of goods: application of section 95 of CEMA 1979

111 Drawback

112 Duty stamps

Chapter 9 repeals, further amendments and transitional provisions

Repeals and further amendments

113 Repeals

114 Minor and consequential amendments

Transitional provision

115 Temporary provision: wine

116 Temporary provision: cider

Chapter 10 Final provisions

117 Interpretation of this Part

118 Regulations: supplementary and general

119 Regulations: procedure

120 Commencement

Part 3
Multinational top-up tax

Chapter 1 Introduction and charge

121 Introduction to multinational top-up tax

122 Chargeable persons

123 Charge to multinational top-up tax

124 How to calculate top-up amounts etc

125 Administration of multinational top-up tax

Chapter 2 Qualifying multinational groups and their members

Multinational groups

126 Meaning of “multinational group” and “ultimate parent”

127 Excluded entities

Responsible members

128 Responsible members

Qualifying multinational groups

129 Qualifying multinational groups

130 Change in composition of multinational group

131 Whether de-merged groups meet the revenue threshold

Chapter 3 Effective tax rate of members of a multinational group in a territory

132 Effective tax rate

Chapter 4 Calculation of adjusted profits of members of a multinational group

Adjusted profits of a member of a multinational group

133 Adjusted profits of a member of a multinational group

134 Underlying profits as determined for statements of ultimate parent

135 Underlying profits of permanent establishments

136 Underlying profits accounts

137 No amounts outside of profit and loss account to be included

137A Use of substituted values

Adjustments of underlying profits

138 Profits adjusted to be before tax

139 Profits adjusted to be profits before consolidation adjustments to eliminate intragroup transactions

140 Profits adjusted to be profits before certain purchase accounting adjustments

141 General exclusion of dividends

142 Excluded equity gain or loss

143 Included revaluation method gain or loss

144 Adjustments for asymmetric foreign currency income and losses

145 Exclusion of expenses for illegal payments, fines and penalties

146 Adjustment for changes in accounting policies and prior period errors

147 Accrued pension expense

147A Treatment of tax credits

148 Meaning of qualifying refundable tax credits

148A Transferable tax credits

148B Value of marketable transferable tax credits: originator

148C Value of marketable transferable tax credits: purchaser

149 Arm’s length requirement for certain transactions

150 Transactions between members of a multinational group: differences with accounting for tax

151 Adjustments for companies in distress

152 Adjustments where life assurance business carried on

153 Exclusion of certain insurance reserve movement expense

154 Exclusion of qualifying intra-group financing arrangement expenses

155 Qualifying tier one capital

156 Exclusion of international shipping profits

157 Core international shipping profits

158 Ancillary international shipping profits

Adjustments only applicable to permanent establishments

159 Permanent establishment income and expense attribution

160 Attribution of losses between permanent establishment and main entity

Elections to treat certain amounts differently

161 Election to use realisation principle

162 Election to reflect deductions for stock-based compensation

163 Election to spread certain capital gains over five years

164 Election to exclude intra-group transactions

165 Election to have excluded equity gains and losses included

166 Election in relation to hedging currency risk in ownership interests

Dealing with transparency and entities subject to qualifying dividend regime

167 Underlying profits of hybrids

168 Underlying profits of transparent … entities

169 Certain non tax resident entities to be treated as flow-through entities

170 Adjustments for ultimate parent that is a flow-through entity

171 Ultimate parent subject to qualifying dividend regime

172 Application of section 171 to members in the same territory as the ultimate parent

Chapter 5 Covered tax balance

Amount of covered taxes

173 Covered taxes

174 Amount of covered tax balance

175 Amounts excluded from qualifying current tax expense

176 Amounts to be reflected in qualifying current tax expense

Transferable tax credits

176A Meaning of “non-marketable transferable tax credits”

176B Value of non-marketable transferable tax credits: originator

176C Value of non-marketable transferable tax credits: purchaser

Tax equity partnerships

176D Tax credits etc allocated under tax equity partnerships

176E Flow-through tax benefits: proportional amortisation method

176F Flow-through tax benefits: subtraction method

176G Clawback of earlier qualifying flow-through tax benefits

Allocation of covered taxes

177 Permanent establishments

178 Reallocation of tax expense

179 Controlled foreign company tax regimes

180 Blended CFC regimes

180A Section 180: further provision

181 Distributions from other members of a group

181A Cross-border allocation of current tax under cross-crediting regime

Cross-border allocation of deferred tax expense

181B Cross-border allocation of deferred tax assets and liabilities

Dealing with deferred tax assets etc

182 Total deferred tax adjustment amount

183 Qualifying foreign tax credits (substitute loss carry forward assets)

183A Alternative to section 183 where carry forward of credits not permitted

184 Recaptured deferred tax liabilities

185 Inclusion of existing deferred tax assets and liabilities on entry into regime

186 Deferred tax assets recorded at less than minimum rate

187 Election for losses to be treated as special loss deferred tax assets

188 Further provision about elections under section 187

Eligible distribution tax systems: deemed taxes

189 Deemed distribution tax election

190 Deemed distribution tax amount

191 Reduction of recapture amount

192 Recalculation where member leaves the group

Chapter 6 Calculation of top-up amounts

193 Calculation of top-up amounts

194 Total top-up amount for a territory

195 Substance based income exclusion

196 Eligible payroll costs

197 Eligible tangible asset amount

197A Operating leases

198 Eligible payroll costs and eligible tangible asset amount: permanent establishments

198ZA Eligible payroll costs: flow-through entities

198ZB Eligible tangible asset amount: flow-through entities

198ZC Eligible payroll costs and eligible tangible asset amount: flow-through ultimate parent

198A Power to make provision about treatment of payroll costs and assets

199 Election to treat certain top-up amounts as nil

Chapter 7 Allocating top-up amounts to responsible members

200 Top-up amounts multiplied by inclusion ratio

201 Inclusion ratio

Chapter 8 Further adjustments

Covered taxes less than nil

202 Covered taxes balance less than nil when members in a territory have a profit

203 Additional top-up amounts where covered taxes less than expected

204 Allocation of collective additional amount under section 203 to members

205 Election to carry forward and reduce collective additional amount

Additional top-up amounts on recalculations

206 Additional top-up amounts where recalculations required

207 Allocation of collective additional amounts under section 206 to members

Restructuring of groups

208 Member joining or leaving multinational group

209 When transfer of controlling interest treated as acquisition of assets and liabilities

210 Transfer of assets or liabilities from a member of a multinational group

211 Transfer of assets or liabilities to a member of a multinational group

212 Meaning of “qualifying reorganisation”

Elections in relation to investment entities

213 Investment entity tax transparency election

214 Taxable distribution method election

215 Undistributed income amount

Other adjustments

216 Election where assets and liabilities adjusted to fair value for tax purposes

217 Post filing adjustments of covered taxes

218 Effect of rate changes to deferred tax expense

219 Adjustment where covered taxes not paid

Chapter 9 Special provision for investment entities, joint venture groups and minority-owned members

Investment entities

220 Top-up amount of investment entity

221 Substance based income exclusion for investment entity

222 Investment entity effective tax rate

223 Adjustments

224 Additional top-up amounts of investment entities

225 Attribution of top-up amounts and additional top-up amounts to responsible member

Joint venture group

226 Joint venture group

227 Application of Part to joint venture groups

Minority owned members

228 Minority owned members

Application to multi-parent groups

229 Multi-parent groups

Chapter 9A Untaxed amounts

Introduction

229A Meaning of potentially undertaxed

229B Untaxed amounts

Allocation of untaxed amounts

229C Allocation of untaxed amount to members

229D Amount allocated to the United Kingdom

229E Allocation to qualifying members

229F Election to make one member of a group liable for untaxed amounts

How to determine number of employees and tangible fixed assets values

229G Number of employees

229H Value of tangible fixed assets

Joint ventures

229I Joint ventures

References to responsible members

229J References to responsible members

Chapter 10 Definitions etc

Introduction

230 Meaning of terms and concepts used in this Part

Meaning of “entity” etc

231 Meaning of entity

232 Permanent establishments treated as entities

232A Partnerships

233 Treatment of protected cell companies

234 Governmental, international and non-profit entities

235 Pension funds and pension services entities

236 Investment funds and investment entities

237 Intermediate and partially-owned parent members

238 Tax transparency of entities

Provision relating to location of entities

239 Location of entities

240 Location of flow-through entities and permanent establishments

241 Pillar Two territories

Ownership of entities

242 Ownership interests and controlling interests

243 Calculating percentage ownership interests of a specific entity or individual

244 Calculating percentage ownership interests of a class

245 Calculating percentage ownership interests: excluded entities

246 Calculating percentage direct and indirect ownership interests

247 Timing of transfers of interests

248 Exclusion of indirect interests held through ultimate parent

Financial statements and accounting period

249 Consolidated financial statements

250 Acceptable accounting standards

251 Accounting periods

251A Meaning of country-by-country report

Miscellaneous

252 Application to sovereign wealth funds

253 Disqualified and qualified refundable imputation taxes

254 Use of currency

255 Pillar Two rules

256 Qualifying domestic top-up tax

256A Qualifying domestic top-up tax treated as not accruing where contested etc

257 Qualifying undertaxed profits tax

258 Meaning of “connected”

259 Other definitions

Chapter 11 General and miscellaneous provision

260 Transitional provision and safe harbours

261 Index of defined expressions

262 Power to amend to ensure consistency with Pillar Two

263 Regulations

264 Multinational top-up tax to apply from 31 December 2023

Part 4
Domestic top-up tax

Chapter 1 Introduction

265 Introduction to domestic top-up tax

266 Qualifying entities

267 DTT excluded entities

267A Securitisation companies in a group treated as not consolidated

268 Permanent establishments

268A Partnerships

Chapter 2 Charge to domestic top-up tax

269 Chargeable persons

270 Amount charged

271 Election to make one member of a group liable for amounts charged

Chapter 3 Application of multinational top-up tax provisions

272 Determining top-up amounts of entity that is a member of a group

272A Treatment of covered bond vehicles

273 Determining top-up amounts of entity that is not a member of a group

273A References to Pillar Two rules

273B Effect of becoming subject to Pillar Two rules

273C Dividends from protected cell companies

274 Application of section 262

275 Application of Schedule 14

276 Application of transitional provision

277 Index of defined expressions

278 Domestic top-up tax to apply from 31 December 2023

Part 5
Electricity generator levy

279 Charge on exceptional generation receipts

280 Key concepts (generating undertaking etc)

281 Benchmark amount

282 Attribution of generation

283 Generation receipts

284 Allowable costs

285 Exceptional generation fuel costs

286 Exceptional revenue sharing costs

287 Groups

288 Lead member of a group and its qualifying periods

289 Liability of members of groups

290 Election for members with significant minority shareholding to pay levy

291 Qualifying partnerships

292 Qualifying joint ventures

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

294 Generation acquired and supplied by JV participants

295 Arrangements that reflect receipts (JV participants)

296 Generation acquired and supplied by significant minority shareholders

297 Arrangements that reflect receipts (significant minority shareholders)

298 Surrender of shortfalls

299 Amount that may be surrendered and use of that amount

300 Election to treat certain companies as transparent

301 Effect of company being transparent

302 General application of corporation tax administration

303 Company tax returns

304 Requirement to provide information about payments

305 Claims to shortfall amounts

306 Application of Part 5A of TMA 1970 and Instalment Payments Regulations

307 Application of Part 5 of CTA 2010 for the purposes of determining interests

308 Anti-avoidance

309 Information sharing

310 Interaction of electricity generator levy with corporation tax

311 Regulations under this Part

311A Meaning of “qualifying new generating plant”

312 Minor definitions relating to electricity market

313 Definitions in this Part

Part 6
Other taxes

314 Transactions funded with the assistance of a public subsidy

315 Deposit schemes

316 Dumping, subsidisation and safeguarding remedies

317 Rulings as to method of valuation of goods

318 Discharging goods from free-circulation procedure subject to guarantee

319 Excepted machines etc

320 Rates of tobacco products duty

321 Flavour concentrates

322 New bands and rates

323 Northern Ireland rates

324 Rates of vehicle excise duty

325 Reform of HGV road user levy

326 End of exempt period for HGV road user levy

327 Rates of landfill tax

328 Rates of climate change levy

329 Rate of plastic packaging tax

330 Aggregates levy: exemptions and exploitation

Part 7
Miscellaneous and final

331 Designation of sites

332 Sunset date for reliefs

333 Right to repayment of income tax to be inalienable

334 Late payment interest on value added tax

335 Penalties for failure to pay value added tax

336 VAT credits: repayment interest due where evidence not provided

337 Insurance premium tax: power to make regulations about notifications

338 Penalties for failure to make payments of plastic packaging tax on time

339 Approval of aerodromes

340 Approved aerodromes: minor and consequential amendments

341 Temporary approvals etc

342 Licensing authorities: requirements to give or obtain tax information

343 Section 342: consequential amendments

344 Definition of “charity” restricted to UK charities

345 Definition of “community amateur sports club” restricted to UK clubs

346 Exemptions from tax

347 Abolition of the Office of Tax Simplification

348 Pension benefits and inheritance tax

349 International arrangements for exchanging information

350 Payment of unclaimed money in court into the Consolidated Fund

351 Financial sanctions regulations: prohibition on certain payments by HMRC

352 Communications data

353 Interpretation

354 Short title

SCHEDULES

Schedule 1 Relief for research and development

Schedule 2 Estates in administration and trusts

Schedule 3 Corporate interest restriction etc.

Schedule 4 Investment vehicles

Schedule 5 Records relating to transfer pricing

Schedule 6 Categories of alcoholic products: interpretation

Schedule 7 Rates of alcohol duty

Schedule 8 Qualifying draught products: reduced rates

Schedule 9 Small producer alcoholic products: duty discount

Schedule 10 Penalties for contraventions of alcohol wholesaling provisions

Schedule 11 Alcohol duty: reviews and appeals

Schedule 12 Alcohol duty: duty stamps

Schedule 13 Alcohol duty: minor and consequential amendments

Schedule 14 Administration of multinational top-up tax

Schedule 15 Multinational top-up tax: elections

Schedule 16 Multinational top-up tax: transitional provision

Schedule 16A Multinational top-up tax: safe harbours

Schedule 17 Index of expressions defined or explained in Parts 3 and 4

Schedule 18 Administration of domestic top-up tax

Schedule 19 Dumping, subsidisation and safeguarding remedies

Schedule 20 Bilateral safeguarding remedies

Schedule 21 Soft drinks industry levy: flavour concentrates

Schedule 22 Reforms of HGV road user levy

Schedule 23 Freeports and investment zones: consequential amendments

Schedule 24 Homes for Ukraine Sponsorship Scheme: exemptions from tax

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Part 1Income tax, corporation tax and capital gains tax

Corporation tax charge and rates

5Charge and main rate for financial year 2024

(1)

Corporation tax is charged for the financial year 2024.

(2)

The main rate of corporation tax for that year is 25%.

6Standard small profits rate and fraction for financial year 2024

(1)

For the purposes of Part 3A of CTA 2010, for the financial year 2024—

(a)

the standard small profits rate is 19%, and

(b)

the standard marginal relief fraction is 3/200ths.