Finance (No. 2) Act 2023

296 Generation acquired and supplied by significant minority shareholders

(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.