SCHEDULE 26 Restrictions on buying capital allowances
Section 71
Introductory
1 Chapter 16A of Part 2 of CAA 2001 (avoidance involving allowance buying) is amended as follows.
Restrictions where certain conditions met
2 (1) Section 212B (circumstances where Chapter 16A applies) is amended as follows.
(2) For subsection (1)(d) substitute—
(d) the qualifying change meets one of the limiting conditions.
(3) For subsection (4) substitute—
(4) Sections 212LA and 212M set out the limiting conditions and specify when those conditions are met.
3 After section 212L insert—
Limiting conditions
Limiting conditions
212LA (1) The qualifying change meets one of the limiting conditions if condition A, B, C or D is met.
(2) Condition A is that the amount of the relevant excess of allowances is £50 million or more.
(3) Condition B is that the amount of the relevant excess of allowances—
(a) is £2 million or more but less than £50 million, and
(b) is not insignificant as a proportion of the total amount or value of the benefits derived by any relevant person by virtue of the qualifying change or change arrangements.
(4) “Relevant person” means a person who, at the end of the relevant day, is—
(a) a principal company of C,
(b) a person carrying on the relevant activity in partnership, or
(c) a person who is connected to a person within paragraph (a) or (b) (within the meaning of section 1122 of CTA 2010).
(5) Condition C is that—
(a) the amount of the relevant excess of allowances is less than £2 million, and
(b) the qualifying change has an unallowable purpose.
See section 212M for the meaning of “unallowable purpose”.
(6) Condition D is that the main purpose, or one of the main purposes, of any arrangements is to procure that condition A or B or paragraph (a) of condition C is not met.
(7) In this section—
the amount of the relevant excess of allowances is the difference between RTWDV and BSV (see sections 212K and 212L);
“change arrangements” and “arrangements” have the same meaning as in section 212M.
4 In consequence of the amendments made by paragraphs 2 and 3, the heading to Chapter 16A becomes “ Restrictions on allowance buying ”.
Extension of restrictions to other qualifying activities
5 (1) Section 212B (circumstances where Chapter 16A applies) is amended as follows.
(2) In subsection (1)—
(a) in paragraph (a), for “a trade (“the relevant trade”)” substitute “ a qualifying activity (“the relevant activity”) ”, and
(b) in paragraph (c), for “trade” (in both places) substitute “ activity ”.
(3) In subsection (3) for “trade” substitute “ activity ”.
6 (1) Section 212C (when there is a a qualifying change in relation to C) is amended as follows.
(2) In subsection (4)—
(a) after “Condition C is that” insert “ the relevant activity is a trade (within the meaning of this Part) and ”, and
(b) for “trade”, where it appears after “the relevant” (in both places), substitute “ activity ”.
(3) In subsection (5) for “trade” (in both places) substitute “ activity ”.
7 (1) Section 212I (relevant percentage share) is amended as follows.
(2) In subsections (1) and (3) for “trade” substitute “ activity ”.
(3) In subsection (2) for “a trade” substitute “ an activity ”.
8 In section 212J(1) (relevant excess of allowances) for “trade” substitute “ activity ”.
9 In section 212K(2), (3), (4) and (5) (relevant tax written-down value) for “trade” substitute “ activity ”.
10 In section 212N(2), (3) and (4) (old and new accounting periods) for “trade” substitute “ activity ”.
11 (1) Section 212P (effect of excess on pools) is amended as follows.
(2) In subsection (3)—
(a) for “a trade (or part of a trade)” substitute “ a qualifying activity (or part of a qualifying activity) ”,
(b) for “the activities of that trade (or part of a trade)” substitute “ that activity (or that part of an activity) ”,
(c) after “its trade” insert “ or business ”,
(d) for “those activities” substitute “ that activity (or that part) ”, and
(e) after “separate trade” insert “ or business ”.
(3) In subsection (4)—
(a) after “section 37” insert “ , 62 or 66 ”,
(b) omit “trade”,
(c) for “earlier” substitute “ other ”, and
(d) after “period)” insert “ or section 259 or 260(3) of this Act (special leasing) ”.
12 (1) Section 212Q (when there are postponed capital allowances) is amended as follows.
(2) In subsection (3)—
(a) for “a trade (or part of a trade)” substitute “ a qualifying activity (or part of a qualifying activity) ”,
(b) for “the activities of that trade (or part of a trade)” substitute “ that activity (or that part of an activity) ”,
(c) after “its trade” insert “ or business ”,
(d) for “those activities” substitute “ that activity (or that part) ”, and
(e) after “separate trade” insert “ or business ”.
(3) In subsection (4)—
(a) after “section 37” insert “ , 62 or 66 ”, and
(b) after “CTA 2010” insert “ or section 259 or 260(3) of this Act ”.
Commencement
13 (1) The amendments made by this Schedule have effect in relation to a qualifying change if the relevant day (within the meaning of Chapter 16A of Part 2 of CAA 2001) is on or after 20 March 2013.
(2) But those amendments do not have effect if before that date—
(a) the arrangements made to bring about the qualifying change were entered into, or
(b) there was an agreement, or common understanding, between the parties to those arrangements as to the principal terms on which the qualifying change would be brought about.
Section 74
Income tax: carry forward of relief
1 Part 7 of ITA 2007 (community investment tax relief) is amended as follows.
2 In section 335 (form and amount of CITR) in subsection (3) for “this purpose” substitute “ the purposes of this section and section 335A ”.
3 After section 335 insert—
Carry forward of CITR
335A (1) This section applies if—
(a) the investor is entitled to a tax reduction for a relevant tax year under section 335 in respect of the investment, but
(b) the amount of the tax reduction is not fully deducted at Step 6 for that relevant tax year.
(2) The amount (“the excess amount”) not deducted is treated as follows.
(3) For each subsequent relevant tax year for which the investor—
(a) is entitled to a tax reduction under section 335 in respect of the investment, and
(b) makes a claim under this subsection,
the investor is also entitled to a tax reduction under this subsection which is given effect at Step 6.
(4) The amount of the tax reduction under subsection (3) for any relevant tax year is the excess amount so far as it has not been deducted at Step 6 for any earlier relevant tax year by virtue of that subsection.
(5) In this section “Step 6” means Step 6 of the calculation in section 23.
4 In section 357 (attribution of CITR) after subsection (4) insert—
(4A) In the case of CITR under section 335A, in subsection (4)(a) the reference to the year is to be read as a reference to the year mentioned in section 335A(1)(a).
5 (1) Section 361 (disposal of securities or shares during 5 year period) is amended as follows.
(2) For subsection (3) substitute—
(3) Subsections (3A) to (3H) apply if—
(a) the disposal is a qualifying disposal, and
(b) the investor has made a claim under section 335 in respect of the former investment for a tax year (“tax year X”).
(3A) Subsection (3B) applies if the total of the following CITR does not exceed A—
(a) any CITR attributable to the former investment in respect of tax year X given under section 335, and
(b) any CITR attributable to the former investment in respect of later tax years given under section 335A where tax year X is the tax year mentioned in section 335A(1)(a).
(3B) All CITR falling within subsection (3A)(a) or (b) must be withdrawn.
(3C) If the total of the CITR falling within subsection (3A)(a) or (b) exceeds A, that total must be reduced by A.
(3D) For the purposes of subsection (3C) CITR given in a later tax year must be reduced before CITR given in an earlier tax year.
(3E) For the purposes of subsections (3A) and (3C) “A” is an amount equal to 5% of the amount or value of the consideration (if any) which the investor receives for the former investment.
(3F) If—
(a) the total of the CITR falling within subsection (3A)(a) or (b)(“B”) is less than
(b) the amount (“C”) which is equal to 5% of the invested amount in respect of the former investment for tax year X,
“A” is to be reduced by multiplying it by the fraction—
B
C
(3G) If the amount of CITR attributable to the former investment in respect of a tax year has been reduced before the CITR is obtained, the amount referred to in subsection (3F) as B is to be treated for the purposes of that subsection as the amount it would have been without the reduction.
(3H) Subsection (3G) does not apply to a reduction by virtue of section 358 (attribution: bonus shares).
(3) Omit subsections (5) to (7).
6 The amendments made by paragraphs 1 to 5 above have effect in relation to investments made on or after 6 April 2013.
Corporation tax: carry forward of relief
7 Part 7 of CTA 2010 (community investment tax relief) is amended as follows.
8 (1) Section 220 (form and amount of CITR) is amended as follows.
(2) For subsection (3) substitute—
(3) The amount of that reduction for the relevant accounting period is 5% of the invested amount in respect of the investment for the period.
(3) In subsection (4) for “this purpose” substitute “ the purposes of this section and section 220A ”.
9 After section 220 insert—
Carry forward of CITR
220A (1) This section applies if—
(a) the investor is entitled to a reduction in its liability for corporation tax for a relevant accounting period under section 220 in respect of the investment, but
(b) the amount of the reduction is not fully deducted at Step 2 for that relevant accounting period.
(2) The amount (“the excess amount”) not deducted is treated as follows.
(3) For each subsequent relevant accounting period for which the investor—
(a) is entitled to a reduction in its liability for corporation tax under section 220 in respect of the investment, and
(b) makes a claim under this subsection,
the investor is also entitled to a reduction in its liability for corporation tax under this subsection.
(4) The amount of the reduction under subsection (3) for any relevant accounting period is the excess amount so far as it has not been deducted at Step 2 for any earlier relevant accounting period by virtue of that subsection.
(5) In this section “Step 2” means the second step in paragraph 8(1) of Schedule 18 to FA 1998 (calculation of tax payable).
10 In section 240 (attribution of CITR) after subsection (4) insert—
(4A) In the case of CITR under section 220A, in subsection (4)(a) the reference to the period is to be read as a reference to the period mentioned in section 220A(1)(a).
11 (1) Section 244 (disposal of securities or shares during 5 year period) is amended as follows.
(2) For subsection (3) substitute—
(3) Subsections (3A) to (3H) apply if—
(a) the disposal is a qualifying disposal, and
(b) the investor has made a claim under section 220 in respect of the former investment for an accounting period (“period X”).
(3A) Subsection (3B) applies if the total of the following CITR does not exceed A—
(a) any CITR attributable to the former investment in respect of period X given under section 220, and
(b) any CITR attributable to the former investment in respect of later accounting periods given under section 220A where period X is the accounting period mentioned in section 220A(1)(a).
(3B) All CITR falling within subsection (3A)(a) or (b) must be withdrawn.
(3C) If the total of the CITR falling within subsection (3A)(a) or (b) exceeds A, that total must be reduced by A.
(3D) For the purposes of subsection (3C) CITR given in a later accounting period must be reduced before CITR given in an earlier accounting period.
(3E) For the purposes of subsections (3A) and (3C) “A” is an amount equal to 5% of the amount or value of the consideration (if any) which the investor receives for the former investment.
(3F) If—
(a) the total of the CITR falling within subsection (3A)(a) or (b)(“B”) is less than
(b) the amount (“C”) which is equal to 5% of the invested amount in respect of the former investment for period X,
“A” is to be reduced by multiplying it by the fraction—
B
C
(3G) If the amount of CITR attributable to the former investment in respect of an accounting period has been reduced before the CITR is obtained, the amount referred to in subsection (3F) as B is to be treated for the purposes of that subsection as the amount it would have been without the reduction.
(3H) Subsection (3G) does not apply to a reduction by virtue of section 241 (attribution: bonus shares).
(3) Omit subsections (5) to (7).
12 The amendments made by paragraphs 7 to 11 above have effect in relation to investments made in accounting periods beginning on or after 1 April 2013.
Corporation tax: limit on State aid
13 (1) In Part 7 of CTA 2010 (community investment tax relief) after section 220A (as inserted by paragraph 9 above) insert—
Limit on State aid
220B (1) The reductions that may be made in the amount of the investor's liability for corporation tax under section 220 or 220A for an accounting period (“the current accounting period”) are limited as follows.
(2) The sum of the following amounts must not exceed [euro]200,000—
(a) so far as it represents aid granted to the investor, the total amount of reductions made in the amount of the investor's liability for corporation tax under section 220 or 220A—
(i) for the current accounting period, or
(ii) any earlier accounting period which ends during the relevant 3-year period, and
(b) the total of any de minimis aid granted to the investor during the relevant 3-year period which does not fall within paragraph (a).
(3) In subsection (2) “the relevant 3-year period” means the period of 3 years ending at the end of the current accounting period.
(4) Subsection (2) is to be read as if it were contained in Article 2 of Commission Regulation (EC) No. 1998/2006 (de minimis aid).
(2) The amendment made by this paragraph has effect for the purpose of limiting CITR in respect of investments made on or after 1 April 2013.
(3) CITR in respect of investments made before that date is to be ignored for the purposes of section 220B(2) of CTA 2010.
Section 75
Income tax
1 ITTOIA 2005 is amended as follows.
2 In section 61 (tenants occupying land for purposes of trade treated as incurring expenses) after subsection (5) insert—
(5A) No expense is to be determined under this section by reference to the taxed receipt if section 292(4B) or (4C) applies.
3 In section 292 (tenants under taxed leases treated as incurring expenses) after subsection (4) insert—
(4A) No expense is to be determined under this section by reference to the taxed receipt if subsection (4B) or (4C) applies.
(4B) This subsection applies if there would have been no taxed receipt but for the application of Rule 1 in section 303 in determining the effective duration of the lease.
(4C) This subsection applies if there would have been no taxed receipt but for the application of Rule 1 in section 243 of CTA 2009 in determining the effective duration of the lease for the purposes of Chapter 4 of Part 4 of that Act.
4 The amendments made by paragraphs 2 and 3 above have effect in relation to leases granted on or after 6 April 2013.
Corporation tax
5 CTA 2009 is amended as follows.
6 In section 63 (tenants occupying land for purposes of trade treated as incurring expenses) after subsection (5) insert—
(5A) No expense is to be determined under this section by reference to the taxed receipt if section 232(4B) or (4C) applies.
7 In section 232 (tenants under taxed leases treated as incurring expenses) after subsection (4) insert—
(4A) No expense is to be determined under this section by reference to the taxed receipt if subsection (4B) or (4C) applies.
(4B) This subsection applies if there would have been no taxed receipt but for the application of Rule 1 in section 243 in determining the effective duration of the lease.
(4C) This subsection applies if there would have been no taxed receipt but for the application of Rule 1 in section 303 of ITTOIA 2005 in determining the effective duration of the lease for the purposes of Chapter 4 of Part 3 of that Act.
8 The amendments made by paragraphs 6 and 7 above have effect in relation to leases granted on or after 1 April 2013.
Section 77
PART 1 Income tax
1 Before Part 11A of ITA 2007 insert—
PART 11ZA Manufactured payments
Overview of Part
614ZA This Part deals with the application of the Income Tax Acts to manufactured payment relationships and payments representative of dividends or interest.
Key definitions
614ZB (1) For the purposes of the Income Tax Acts a person has a manufactured payment relationship if conditions A to C are met.
(2) Condition A is that under any arrangements—
(a) an amount is payable by or to the person, or
(b) any other benefit is given by or to the person (including the release of the whole or part of any liability to pay an amount).
(3) Condition B is that the arrangements relate to the transfer of securities.
(4) Condition C is that the amount or value of the other benefit—
(a) is representative of a dividend or interest on the securities, or
(b) will fall to be treated as representative of such a dividend or interest when it is paid or given.
(5) In subsection (2) the reference to an amount being payable, or other benefit being given, by the person includes a reference to an amount being payable, or other benefit being given, by another person on behalf of the person in question.
(6) In this Part—
“manufactured payment”, in relation to a manufactured payment relationship, means an amount, or the value of a benefit, within subsection (2), and
“securities” means—
shares in a company, and
loan stock or any similar security (whether the security is of the government of the United Kingdom, any other government, any public or local authority in the United Kingdom or elsewhere, or any other company or body).
Treatment of payer of manufactured payment
614ZC (1) This section applies where a person has a manufactured payment relationship under which a manufactured payment is paid by or on behalf of the person.
(2) No deduction is allowed in respect of the manufactured payment in calculating any profits or other income of the person for income tax purposes (subject to subsection (3)).
(3) Subsection (2) does not apply in relation to the person so far as the manufactured payment is brought into account under Part 2 of ITTOIA 2005 in calculating the profits of a trade carried on by the person.
(4) But nothing in subsection (3) affects the question whether (apart from that provision) a deduction in calculating the profits of a trade carried on by the person is allowed.
Treatment of recipient of manufactured payment
614ZD (1) Subsection (2) applies if a person has a manufactured payment relationship under which a manufactured payment is payable to the person.
(2) For the purposes of the charge to income tax on the person's income, the Income Tax Acts apply to the person as if the manufactured payment were a dividend or interest on the securities (as the case may require).
(3) Subsection (2) is subject to subsections (4) to (6).
(4) Subsection (2) does not apply in relation to the person so far as the manufactured payment is brought into account under Part 2 of ITTOIA 2005 in calculating the profits of a trade carried on by the person.
(5) Subsection (2) does not apply in relation to the person for the purposes of determining entitlement to double taxation relief in respect of any dividend or interest.
(6) In a case in which the manufactured payment is treated as a dividend by virtue of subsection (2), the person is not entitled to a tax credit under Chapter 3 of Part 4 of ITTOIA 2005 (tax credits for certain recipients of distributions) in respect of the dividend.
(7) For the purposes of this section “double taxation relief” means any relief given under or as a result of Part 2 of TIOPA 2010.
PART 2 Corporation tax
2 Before Part 18 of CTA 2010 insert—
PART 17A Manufactured dividends
Overview of Part
814A This Part deals with the application of the Corporation Tax Acts to manufactured dividend relationships and payments representative of dividends.
Key definitions
814B (1) For the purposes of the Corporation Tax Acts a company has a manufactured dividend relationship if conditions A to C are met.
(2) Condition A is that under any arrangements—
(a) an amount is payable by or to the company, or
(b) any other benefit is given by or to the company (including the release of the whole or part of any liability to pay an amount).
(3) Condition B is that the arrangements relate to the transfer of shares in a company.
(4) Condition C is that the amount or value of the other benefit—
(a) is representative of a dividend on the shares, or
(b) will fall to be treated as representative of such a dividend when it is paid or given.
(5) In subsection (2) the reference to an amount being payable, or other benefit being given, by the company includes a reference to an amount being payable, or other benefit being given, by another person on behalf of the company.
(6) In this Part—
“manufactured dividend”, in relation to a manufactured dividend relationship, means an amount, or the value of a benefit, within subsection (2), and
“the real dividend” means the dividend mentioned in subsection (4)(a).
Treatment of payer of manufactured dividend
814C (1) This section applies where a company has a manufactured dividend relationship under which a manufactured dividend is paid by or on behalf of the company.
(2) No deduction in calculating income for corporation tax purposes is allowed in respect of the manufactured dividend (subject to subsections (3) to (7)).
(3) Subsection (2) does not apply in relation to the company so far as the manufactured dividend is brought into account under Part 3 of CTA 2009 in calculating the profits of a trade carried on by the company.
(4) Subsection (5) applies if—
(a) the manufactured dividend relates to investment business which the company has,
(b) the company received the real dividend in the accounting period, and
(c) the real dividend is taxed by virtue of section 548(5) (recipients of distributions from REITs).
(5) The manufactured dividend is to be treated as expenses of management of the company's investment business for the accounting period for the purposes of Chapter 2 of Part 16 of CTA 2009.
(6) Subsection (7) applies if—
(a) the manufactured dividend is referable to basic life assurance and general annuity business which the company has,
(b) the company received the real dividend in the accounting period, and
(c) the real dividend is taxed by virtue of section 548(5) (recipients of distributions from REITs).
(7) So far as the manufactured dividend is referable as mentioned in subsection (6)(a), the manufactured dividend is to be treated for the purposes of section 76 of FA 2012 as a deemed BLAGAB management expense for the accounting period.
(8) Nothing in subsection (3) affects the question whether (apart from that provision) a deduction in calculating the profits of a trade carried on by the company is allowed.
(9) The references in subsections (4) and (6) to the real dividend include references to a manufactured dividend which is treated as a real dividend by virtue of section 814D(2).
(10) For the purposes of subsections (6) and (7), the manufactured dividend is treated as referable to basic life assurance and general annuity business so far as the real dividend is received by the company and is so referable in accordance with Chapter 4 of Part 2 of FA 2012 (apportionment rules for I-E charge).
Treatment of recipient of manufactured dividend
814D (1) Subsection (2) applies if a company has a manufactured dividend relationship under which a manufactured dividend is payable to it.
(2) For the purposes of the charge to corporation tax on the income of the company, the Corporation Tax Acts apply to the company, and any company claiming title through or under the company, as if the manufactured dividend were a dividend on the shares.
(3) Subsection (2) is subject to subsections (4) to (8).
(4) Subsection (2) does not apply in relation to a company so far as the manufactured dividend is brought into account under Part 3 of CTA 2009 in calculating the profits of a trade carried on by the company.
(5) Subsection (2) does not apply in relation to a company for the purposes of determining entitlement to double taxation relief in respect of any dividend.
(6) Part 9A of CTA 2009 (company distributions), in its application in relation to a manufactured dividend as a result of subsection (2), has effect with the modification in subsection (7).
(7) The modification is that—
(a) references in that Part to the payer are to be treated as references to the company that pays the real dividend, and
(b) the definition of “the payer” in section 931T is to be treated as omitted.
(8) The company to which the manufactured dividend is payable is not entitled to a tax credit under section 1109 (tax credits for certain recipients of exempt qualifying distributions) in respect of the dividend.
(9) For the purposes of subsection (5) “double taxation relief” means any relief given under or as a result of Part 2 of TIOPA 2010.
(10) This section has effect regardless of section 358 of CTA 2009 (exclusion of credits on release of connected companies debts) or any other provision of Part 5 of that Act (loan relationships) which prevents a credit from being brought into account.
PART 3 Consequential etc amendments
Introductory
3 The following amendments are in consequence of, or otherwise connected with, the amendments made by Parts 1 and 2.
TCGA 1992
4 TCGA 1992 is amended as follows.
5 In section 263B (stock lending arrangements), for subsection (7) substitute—
(7) In this section “securities” has the meaning given by section 263AA.
6 Omit section 263D (gains accruing to persons paying manufactured dividends).
7 In section 263F (power to modify repo provisions: non-standard repo cases)—
(a) in subsection (1)—
(i) at the end of paragraph (c) insert “ or ”, and
(ii) omit paragraph (d) (and the word “or” at the end of it), and
(b) in subsection (2), omit “or 263D”.
8 In section 263G (power to modify repo provisions: redemption arrangements)—
(a) in subsection (1), omit paragraph (d) (but not the word “or” at the end of it), and
(b) in subsection (2), omit “or 263D”.
9 In section 263H (sections 263F and 263G: supplementary provisions), in subsection (3)(b) omit “or 263D”.
10 (1) Section 263I (powers about manufactured overseas dividend) is amended as follows.
(2) In subsection (1), for paragraphs (a) and (b) substitute—
(a) pays or receives an amount (a “manufactured overseas dividend”) which is representative of an overseas dividend on overseas securities where the payment or receipt is required to be made under an arrangement for the transfer of the securities, or
(b) is treated as doing so for any purposes of the Tax Acts.
(3) For subsection (6) substitute—
(6) In this section—
(a) “overseas securities” means shares, stock or other securities issued by—
(i) a government, local authority or other public authority of a territory outside the United Kingdom, or
(ii) another body of persons not resident in the United Kingdom,
(b) “overseas securities” includes shares in a company which is not resident in the United Kingdom,
(c) “overseas dividend” means any interest, dividend or other annual payment payable in respect of overseas securities, and
(d) “securities” includes loan stock or any similar security.
FA 2004
11 In Schedule 24 to FA 2004 (manufactured dividends), omit paragraph 3(1) and (3).
ITTOIA 2005
12 ITTOIA 2005 is amended as follows.
13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14 In section 397A (tax credit for distributions of non-UK resident companies)—
(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b) omit subsection (8).
15 Omit section 397B (tax credits under section 397A: manufactured overseas dividends).
ITA 2007
16 ITA 2007 is amended as follows.
17 In section 2 (overview of Act)—
(a) omit subsection (11), and
(b) before subsection (11A) insert—
(11ZA) Part 11ZA is about manufactured payments.
18 Omit the following provisions (which deal with manufactured payments and repos)—
(a) sections 565 to 595,
(b) section 596(1) to (4), and
(c) section 606(8).
19 In section 647 (makers of manufactured payments), for subsection (6) substitute—
(6) In this section “manufactured payments contract” means a contract under which—
(a) the seller is required to pay another person an amount which is representative of a periodical payment of interest on UK securities under an arrangement between them for the transfer of the securities, or
(b) the seller is required to pay another person an amount which is representative of an overseas dividend on overseas securities under an arrangement between them for the transfer of the securities.
(7) In this section—
(a) “overseas securities” means shares, stock or other securities issued by—
(i) a government, local authority or other public authority of a territory outside the United Kingdom, or
(ii) another non-UK resident body of persons,
and includes shares in a non-UK resident company,
(b) “overseas dividend” means any interest, dividend or other annual payment payable in respect of overseas securities, and
(c) “UK securities” means securities of—
(i) the government of the United Kingdom,
(ii) a local authority in the United Kingdom,
(iii) another public authority in the United Kingdom, or
(iv) a UK resident company or other UK resident body,
but does not include shares in a UK resident company.
20 In section 658 (powers to modify: supplementary), for subsection (5) substitute—
(5) Subsections (6) to (10) apply for the purposes of sections 656 and 657 and this section.
(6) “UK shares” means shares in a UK resident company.
(7) “UK securities” means securities of—
(a) the government of the United Kingdom,
(b) a local authority in the United Kingdom,
(c) another public authority in the United Kingdom, or
(d) a UK resident company or other UK resident body.
(8) But “UK securities” does not include UK shares.
(9) “Overseas securities” means shares, stock or other securities issued by—
(a) a government, local authority or other public authority of a territory outside the United Kingdom, or
(b) another non-UK resident body of persons.
(10) “Overseas securities” includes shares in a non-UK resident company.
21 In section 918(1) (manufactured dividends on UK shares: REITs), for paragraph (a) substitute—
(a) a person pays a manufactured payment as mentioned in section 614ZC(1) and the amount payable is representative of a dividend (a “manufactured dividend”), and
.
22 In section 919 (manufactured interest on UK securities)—
(a) for subsection (1) substitute—
(1) This section applies if—
(a) a person pays a manufactured payment as mentioned in section 614ZC(1),
(b) the amount payable is representative of interest on UK securities (“manufactured interest”), and
(c) the person —
(i) is UK resident, or
(ii) pays the manufactured interest in the course of a trade carried on in the United Kingdom through a branch or agency.
,
(b) in subsection (4), omit the words from “section 583” to “special cases)”, and
(c) after subsection (5) insert—
(6) In subsection (1) “UK securities” means securities of—
(a) the government of the United Kingdom,
(b) a local authority in the United Kingdom,
(c) another public authority in the United Kingdom, or
(d) a UK resident company or other UK resident body.
(7) But “UK securities” does not include shares in a UK resident company.
(8) In this section “securities” includes loan stock or any similar security.
23 Omit section 920 (foreign payers of manufactured interest: the reverse charge).
24 In section 921 (cases where interest on underlying securities paid gross), in subsection (3), for the words from “ “securities”” to the end substitute “ “manufactured interest” has the same meaning as in section 919. ”
25 Omit sections 922 to 925 (manufactured overseas dividends).
26 In section 925A(2) (creditor repos), for “to 925” substitute “ , 919 and 921 ”.
27 Omit section 925B (debtor repos).
28 In section 925C (actual payments ignored)—
(a) in the heading, omit “or 925B”,
(b) omit “or 925B(2)”, and
(c) for “to 925” substitute “ , 919 and 921 ”.
29 In section 926 (interpretation of Chapter 9 of Part 15), omit subsections (1) and (1A).
30 In Schedule 1 (minor and consequential amendments), omit paragraph 335(1) to (4) and (6) to (8).
31 In Schedule 2 (transitionals and savings), omit paragraphs 108 to 111 (and the headings “Part 12”, “Manufactured payments and repos” and “Tax credits: stock lending arrangements and repos” immediately preceding paragraph 108).
32 In Schedule 4 (index of defined expressions), omit the entries for— “ buying back securities, in the context of a repo (in Part 11) ”, “ company UK REIT (in Chapter 2 of Part 11) ”, “ gross amount (in Chapter 2 of Part 11) ”, “ group (in Chapter 2 of Part 11) ”, “ group UK REIT (in Chapter 2 of Part 11) ”, “ manufactured dividend (in Chapter 2 of Part 11) ”, “ manufactured dividend (in Chapter 3 of Part 11) ”, “ manufactured interest (in Chapter 2 of Part 11) ”, “ manufactured overseas dividend (in Chapter 2 of Part 11) ”, “ overseas dividend (in Part 11) ”, “ overseas dividend (in Chapter 9 of Part 15) ”, “ overseas securities (in Part 11) ”, “ overseas tax (in Chapter 2 of Part 11) ”, “ overseas tax (in Chapter 9 of Part 15) ”, “ overseas tax credit (in Chapter 2 of Part 11) ”, “ prescribed (in Chapter 2 of Part 11) ”, “ principal company (in Chapter 2 of Part 11) ”, “ principal company (in Chapter 9 of Part 15) ”, “ property rental business (in Chapter 2 of Part 11) ”, “ property rental business (in Chapter 9 of Part 15) ”, “ related agreements (in Part 11) ”, “ relevant withholding tax (in Chapter 2 of Part 11) ”, “ repo (in Part 11) ”, “ the rules about manufactured payments (in Chapter 4 of Part 11) ”, “ stock lending arrangement (in Part 11) ”, “ trade carried on through a branch or agency (in Chapter 2 of Part 11) ”, “ transfer (in Chapter 2 of Part 11) ”, “ UK securities (in Part 11) ”, and “ UK shares (in Part 11) ”.
FA 2008
33 (1) FA 2008 is amended as follows.
(2) In Schedule 12 (tax credit for certain foreign distributions), omit paragraphs 26, 27(2)(a) and (c) and (3), 28(2)(a) and (c) and (3), 29(2)(a), (c)(i) and (d) and (3) and 30.
(3) In Schedule 23 (manufactured payments: anti avoidance), omit paragraphs 1 to 4, 6, 7 and 9 to 11.
CTA 2009
34 CTA 2009 is amended as follows.
35 In section 539 (introduction to Chapter about manufactured interest), omit subsection (7).
36 In section 540(3) (manufactured interest treated as interest under loan relationship), omit “and to section 799 of CTA 2010”.
37 In section 550 (which makes provision about the effect of the sale of securities on a borrower)—
(a) in subsection (4), for “(6)” substitute “ (5C) ”,
(b) after subsection (5A) insert—
(5B) Nothing in subsection (3) entitles the borrower to double taxation relief in respect of any income payable in respect of overseas securities.
(5C) But nothing in subsection (3) affects the entitlement of the borrower to double taxation relief in respect of any overseas tax deducted from any amount representative of income payable in respect of overseas securities.
(5D) In subsection (5C) “overseas tax” means tax under the law of a territory outside the United Kingdom.
, and
(c) omit subsection (6).
38 In section 1221(1) (amounts treated as expenses of management), for paragraph (i) substitute—
(i) section 814C(5) of CTA 2010 (treatment of payer of manufactured dividend),
.
39 In section 1248 (expenses in connection with arrangements for securing a tax advantage)—
(a) omit subsection (3), and
(b) in subsection (5), omit the definition of “relevant tax relief”.
FA 2009
40 In Schedule 19 to FA 2009 (income tax credits for foreign distributions), omit paragraphs 4 and 13(b).
CTA 2010
41 CTA 2010 is amended as follows.
42 In section 1 (overview of Act), in subsection (4)—
(a) omit paragraph (d), and
(b) before paragraph (e) insert—
(da) manufactured dividends (see Part 17A),
.
43 Omit Part 17 (manufactured payments and repos).
44 (1) Section 1109(5) (provisions to which section 1109 is subject) is amended as follows.
(2) Omit paragraphs (a) to (c) (and the word “and” at the end of paragraph (c)).
(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
45 In Schedule 1 (minor and consequential amendments), omit paragraphs 259, 537, 538, 539(b) and (c), 635, 636 and 689(a) and (b)(i).
46 In Schedule 2 (transitionals and savings), omit Part 17 (manufactured payments and repos).
47 In Schedule 4 (index of defined expressions), omit the entries for—
creditor quasi-repo (in Chapter 5 of Part 17)
, “ creditor repo (in Chapter 5 of Part 17) ”, “ debtor quasi-repo (in Chapter 5 of Part 17) ”, “ debtor repo (in Chapter 5 of Part 17) ”, “ manufactured dividend (in Part 17) ”, “ manufactured overseas dividend (in Part 17) ”, “ overseas dividend (in Part 17) ”, “ overseas securities (in Part 17) ”, “ overseas tax (in Part 17) ”, “ prescribed (in Chapter 4 of Part 17) ”, “ stock lending arrangement (in Chapter 5 of Part 17) ”, and “ “UK shares (in Part 17)”. ”.
TIOPA 2010
48 (1) TIOPA 2010 is amended as follows.
(2) In section 85A(4) (schemes involving deemed foreign tax), omit paragraph (b) of the definition of “real foreign tax”.
(3) In Schedule 7 (miscellaneous relocations), omit paragraph 113.
(4) In Schedule 8 (minor and consequential amendments), omit paragraph 82.
FA 2011
49 In Schedule 13 to FA 2011 (profits of foreign permanent establishments), omit paragraphs 22 to 24.
FA 2012
50 (1) FA 2012 is amended as follows.
(2) Omit section 22 (treatment of the receipt of manufactured overseas dividends).
(3) In section 78(3) (amounts which are deemed BLAGAB management expense for accounting period), for “783(6), 785(4) or 791(6)” substitute “ 814C(7) ”.
(4) In Schedule 16 (minor and consequential amendments), omit paragraphs 220 to 223.
PART 4 Commencement
51 The amendments made by Parts 1 and 2 of this Schedule have effect in relation to any payment representative of a dividend or interest which is made on or after 1 January 2014.
52 The amendments made by Part 3 of this Schedule come into force on that date.
Section 79
PART 1 Amendments of Part 10 of CTA 2010
1 Part 10 of CTA 2010 (close companies) is amended as follows.
2 (1) In section 438 (overview), after subsection (2) insert—
(2A) Chapter 3A imposes a charge to tax in connection with other arrangements involving close companies and participators.
(2B) Chapter 3B makes provision about the treatment of certain repayments and return payments made in respect of loans, advances and other arrangements.
(2) The amendment made by this paragraph is treated as having come into force on 20 March 2013.
3 (1) In section 455 (charge to tax in case of loan to participator), for subsection (1) substitute—
(1) This section applies if a close company makes a loan or advances money to—
(a) a relevant person who is a participator in the company or an associate of such a participator,
(b) the trustees of a settlement one or more of the trustees or actual or potential beneficiaries of which is a participator in the company or an associate of such a participator, or
(c) a limited liability partnership or other partnership one or more of the partners in which is an individual who is—
(i) a participator in the company, or
(ii) an associate of an individual who is such a participator.
(2) The amendment made by this paragraph has effect in relation to a loan or advance made on or after 20 March 2013.
4 (1) In section 459(2) (application of other provisions where loan treated as made to participator), after “458” insert “ and 464C and 464D ”.
(2) The amendment made by this paragraph is treated as having come into force on 20 March 2013.
5 (1) After Chapter 3 insert—
CHAPTER 3A Charge to tax: other arrangements
Charge to tax: arrangements conferring benefit on participator
464A (1) This section applies if—
(a) a close company is at any time a party to tax avoidance arrangements, and
(b) as a result of those arrangements, a benefit is conferred (whether directly or indirectly) on an individual who is—
(i) a participator in the company, or
(ii) an associate of such a participator.
(2) But this section does not apply if, or to the extent that, the conferral of the benefit gives rise to—
(a) a charge to tax on the company under section 455, or
(b) a charge to income tax on the participator or associate.
(3) There is due from the company, as if it were an amount of corporation tax chargeable on the company for the accounting period in which the benefit is conferred on the participator or associate, an amount equal to 25% of the value of the benefit conferred.
(4) Tax due under this section in relation to a benefit conferred on a participator or associate is due and payable in accordance with section 59D of TMA 1970 on the day following the end of the period of 9 months from the end of the accounting period in which the benefit was conferred.
(5) If a company (C) controls another company (D), a participator in C is to be treated for the purposes of this section as being also a participator in D.
(6) For the purposes of this section, arrangements are “tax avoidance arrangements” if the main purpose, or one of the main purposes, of the arrangements is—
(a) to avoid or reduce, or obtain a relief or increased relief from, a charge to tax on the company under section 455, or
(b) to obtain a tax advantage for the participator or associate.
(7) In this section—
“arrangements” includes any arrangements, scheme or understanding of any kind, whether or not legally enforceable, involving a single transaction or two or more transactions, and
“tax advantage” has the meaning given in section 1139, reading references to tax in that section as references to income tax.
Relief in case of return payment to company
464B (1) Subsection (2) applies if a benefit has been conferred which gave rise to a charge to tax on the company under section 464A.
(2) Relief is to be given from that tax, or a proportionate part of it, if—
(a) a payment (“the return payment”) is made to the company in respect of the benefit, and
(b) no consideration is given for the return payment.
(3) Relief under this section is to be given on a claim, which must be made within 4 years from the end of the financial year in which the return payment is made to the company.
(4) Subsection (5) applies if the return payment is made on or after the day on which tax under section 464A becomes due and payable in relation to the benefit.
(5) Relief in respect of the return payment may not be given under this section at any time before the end of the period of 9 months from the end of the accounting period in which the return payment was made.
(6) Schedule 1A to TMA 1970 (claims and elections not included in return) applies to a claim for relief under this section unless—
(a) the claim is included (by amendment or otherwise) in the return for the period in which the benefit was conferred, and
(b) the relief may be given at the time the claim is made.
(2) The amendment made by this paragraph has effect in relation to arrangements to which a close company becomes a party on or after 20 March 2013.
6 (1) After Chapter 3A insert—
CHAPTER 3B Repayments and return payments
Treatment of certain repayments and return payments
464C (1) Where—
(a) within any period of 30 days—
(i) the qualifying amount of repayments made to a close company in respect of one or more chargeable payments made by the company to a person totals £5,000 or more, and
(ii) the available amount of the relevant chargeable payments made by the company to the person or an associate of the person totals £5,000 or more, and
(b) the relevant chargeable payments are made in an accounting period subsequent to that in which the chargeable payments mentioned in paragraph (a)(i) were made,
the qualifying amount of the repayments, so far as not exceeding the available amount of the relevant chargeable payments, is to be treated for the purposes of this Chapter as a repayment of the relevant chargeable payments.
(2) A chargeable payment is a relevant chargeable payment for the purposes of subsection (1) if (or to the extent that) it is not repaid within the period of 30 days mentioned in that subsection.
(3) Where—
(a) immediately before a repayment is made in respect of one or more chargeable payments made by a close company to a person, the total amount owed to the company by the person in respect of chargeable payments is £15,000 or more,
(b) at the time the repayment is made, arrangements had been made for one or more chargeable payments to be made to replace some or all of the amount repaid, and
(c) the available amount of the chargeable payments made by the company to the person or an associate of the person under the arrangements totals £5,000 or more,
the qualifying amount of the repayment, so far as not exceeding the available amount of the chargeable payments mentioned in paragraph (c), is to be treated for the purposes of this Chapter as a repayment of those chargeable payments.
(4) An amount contained in a chargeable payment is an available amount—
(a) for the purposes of subsection (1), to the extent that no repayment has been treated as made in respect of it by the previous operation of that subsection, and
(b) for the purposes of subsection (3), to the extent that no repayment has been treated as made in respect of it—
(i) by the operation of subsection (1), or
(ii) by the previous operation of subsection (3).
(5) An amount contained in a repayment is a qualifying amount to the extent that it has not been treated by the previous operation of this section as a repayment of a chargeable payment.
(6) This section does not apply in relation to a repayment which gives rise to a charge to income tax on the participator or associate by reference to whom the loan, advance or benefit was a chargeable payment.
(7) The Treasury may by order vary a sum specified in subsection (1) or (3).
(8) An order under subsection (7) may contain incidental, supplemental, consequential and transitional provision and savings.
Section 464C: supplementary
464D (1) All such assessments and adjustments of assessments are to be made as are necessary to give effect to section 464C(1) and (3).
(2) If a person who has made a tax return becomes aware that, after making it, anything in it has become incorrect because of the operation of section 464C(1) or (3), the person must give notice to an officer of Revenue and Customs specifying how the return needs to be amended.
(3) The notice must be given within 3 months beginning with the day on which the person became aware that anything in the return had become incorrect because of the operation of section 464C(1) or (3).
(4) In section 464C, “chargeable payment” means—
(a) a loan or advance made by a close company which gives rise to a charge to tax under section 455, or
(b) the conferral of a benefit on an individual in circumstances which give rise to a charge to tax under section 464A.
(5) In a case within subsection (4)(b)—
(a) the conferral of the benefit is to be treated for the purposes of section 464C as a loan made by the close company to the individual to the value of the benefit conferred, and
(b) any payment in respect of which (apart from section 464C) relief is due to the close company under section 464B is to be treated for the purposes of section 464C as a repayment of the loan.
(2) The amendment made by this paragraph has effect in relation to repayments and return payments made on or after 20 March 2013.
7 In section 465 (power to obtain information), after “Chapter 3” (in both places) insert “ or 3A ”.
PART 2 Other amendments
Taxes Management Act 1970
8 TMA 1970 is amended as follows.
9 In section 59E(11)(a) (provision as to when tax is due and payable)—
(a) after “455” insert “ or 464A ”, and
(b) after “loan” insert “ or benefit ”.
10 In section 59F(6)(a) (arrangements for paying tax on behalf of group members)—
(a) after “455” insert “ or 464A ”, and
(b) after “loan” insert “ or benefit ”.
11 (1) Section 109 (corporation tax on close company in connection with loans to participators etc) is amended as follows.
(2) In subsection (1)—
(a) after “459” insert “ and 464A and 464B ”, and
(b) for “by close companies” insert “ or benefits ”.
(3) For subsection (3) substitute—
(3) For the purposes of section 87A of this Act as applied by subsection (1) above—
(a) the date when tax under section 455 of CTA 2010 became due and payable is that determined in accordance with subsection (3) of that section, and
(b) the date when tax under section 464A of CTA 2010 became due and payable is that determined in accordance with subsection (4) of that section.
(4) After subsection (3A) insert—
(3B) If there is a payment which for the purposes of section 464B of CTA 2010 is a return payment in respect of a benefit conferred, interest under section 87A of this Act on so much of the tax under section 464A of CTA 2010 as is referable to the return payment is not payable in respect of any period after the date on which the return payment was made.
(5) In subsection (4), after “458” insert “ or 464B ”.
(6) In subsection (5), after “459” insert “ or 464A and 464B ”.
(7) In the heading, after “loans” insert “ or benefits ”.
12 The amendments made by paragraphs 9 to 11 are treated as having come into force on 20 March 2013.
Finance Act 1998
13 (1) Schedule 18 to FA 1998 (company tax returns, assessments and related matters) is amended as follows.
(2) In paragraph 1 (meaning of “tax”), after the entry relating to section 455 of CTA 2010 insert— “ section 464A of that Act (tax on other benefit conferred on participator), ”.
(3) In paragraph 8(1) (calculation of tax payable), in paragraph 1 of the third step—
(a) after “455” insert “ or 464A ”, and
(b) for “or advance made by close company” substitute “ , advance or benefit ”.
(4) In paragraph 18 (failure to deliver return: tax-related penalty), for sub-paragraph (4) substitute—
(4) In determining that amount no account is to be taken of—
(a) any relief under section 458 of the Corporation Tax Act 2010 (relief in respect of repayment, etc of loan) which is deferred under subsection (5) of that section, or
(b) any relief under section 464B of that Act (relief in respect of return payment) which is deferred under subsection (5) of that section.
(5) The amendments made by this paragraph are treated as having come into force on 20 March 2013.
Income Tax (Trading and Other Income) Act 2005
14 (1) In section 417 of ITTOIA 2005 (person liable for charge on release of loan or advance), for subsection (1) substitute—
(1) The person liable for any tax charged under this Chapter is—
(a) in the case of a loan or advance made to a partnership, any partner who is an individual, and
(b) in any other case, the person to whom the loan or advance was made.
(1A) If more than one person is liable in a case within subsection (1)(a), the liability is to be apportioned between them in a just and reasonable manner.
(2) The amendment made by this paragraph has effect in relation to loans or advances made on or after 20 March 2013.
SCHEDULE 31 Miscellaneous amendments relating to decommissioning
Section 89
PART 1 Abandonment guarantees and abandonment expenditure
Expenditure on abandonment guarantees
1 (1) In Part 2 of ITTOIA 2005 (trading income), Chapter 16A (oil activities) is amended as follows.
(2) In section 225N (expenditure on and under abandonment guarantees)—
(a) after subsection (1) insert—
(1A) Subsection (2) also applies if expenditure incurred by a participator in an oil field would be so allowable as a result of section 3(1)(hh) of that Act but for the fact that the oil field is a non-taxable oil field within the meaning of Part 3 of FA 1993 (see section 185 of that Act).
;
(b) in subsection (2), for “that expenditure is so allowable” substitute “ the expenditure mentioned in subsection (1) or (1A) is or would be so allowable ”.
(3) In section 225R (introduction to sections 225S and 225T)—
(a) in paragraph (a) of subsection (1), omit the words from “, or would apply” to “made”;
(b) in paragraph (b) of that subsection, after “Schedule” insert “ , or would fall to be so attributed if a claim under paragraph 2A(2) of that Schedule were made ”;
(c) after subsection (1) insert—
(1A) The condition in subsection (1)(b) is to be treated as met for the purposes of this section if it would be met but for the fact that the contributing participator is (or was) a participator in an oil field that is a non-taxable oil field within the meaning of Part 3 of FA 1993 (see section 185 of that Act).
;
(d) in subsection (2), before “attributed” insert “ or would be ”.
2 (1) In Part 8 of CTA 2010 (oil activities), Chapter 4 (calculation of profits) is amended as follows.
(2) In section 292 (expenditure on and under abandonment guarantees)—
(a) after subsection (1) insert—
(1A) Subsection (2) also applies if expenditure incurred by a participator in an oil field would be so allowable as a result of section 3(1)(hh) of that Act but for the fact that the oil field is a non-taxable oil field within the meaning of Part 3 of FA 1993 (see section 185 of that Act).
;
(b) in subsection (2), for “that expenditure is so allowable” substitute “ the expenditure mentioned in subsection (1) or (1A) is or would be so allowable ”.
(3) In section 296 (introduction to sections 297 and 298)—
(a) in paragraph (a) of subsection (1), omit the words from “, or would apply” to “made”;
(b) in paragraph (b) of that subsection, after “Schedule” insert “ , or would fall to be so attributed if a claim under paragraph 2A(2) of that Schedule were made ”;
(c) after subsection (1) insert—
(1A) The condition in subsection (1)(b) is to be treated as met for the purposes of this section if it would be met but for the fact that the contributing participator is (or was) a participator in an oil field that is a non-taxable oil field within the meaning of Part 3 of FA 1993 (see section 185 of that Act).
;
(d) in subsection (2), before “attributed” insert “ or would be ”.
Expenditure under abandonment guarantees
3 In Schedule 3 to OTA 1975 (petroleum revenue tax: miscellaneous provisions), in paragraph 8 (certain subsidised expenditure to be disregarded), after sub-paragraph (1) insert—
(1A) But sub-paragraph (1) above does not apply to any expenditure for which the relevant participator is liable that has been or is to be met directly or indirectly out of a payment made by the guarantor under an abandonment guarantee.
(1B) In sub-paragraph (1A) above—
“abandonment guarantee” has the same meaning as it has for the purposes of section 3 of this Act (see section 104 of the Finance Act 1991), and
“the guarantor” and “the relevant participator” have the same meaning as in section 104 of that Act.
4 In Schedule 5 to OTA 1975 (allowance of expenditure), in paragraph 2C(2), in the definition of “sum in default”, for the words from “less the aggregate of” to the end substitute “ less so much of that payment as has been made by the defaulter ”.
5 (1) Part 3 of FA 1991 (oil taxation) is amended as follows.
(2) Omit section 105 (restriction of expenditure relief by reference to payments under abandonment guarantees).
(3) Omit section 106 (relief for reimbursement expenditure under abandonment guarantees).
6 (1) In Part 2 of ITTOIA 2005 (trading income), Chapter 16A (oil activities) is amended as follows.
(2) In section 225N (expenditure on and under abandonment guarantees), omit subsections (3) and (4).
(3) Omit section 225O (relief for reimbursement expenditure under abandonment guarantees).
7 (1) In Part 8 of CTA 2010 (oil activities), Chapter 4 (calculation of profits) is amended as follows.
(2) In section 292 (expenditure on and under abandonment guarantees), omit subsections (3) and (4).
(3) Omit section 293 (relief for reimbursement expenditure under abandonment guarantees).
Reimbursement by defaulter in respect of abandonment expenditure
8 In Part 3 of FA 1991, omit section 108 (reimbursement by defaulter in respect of certain abandonment expenditure).
9 In Part 2 of ITTOIA 2005, omit section 225T (reimbursement by defaulter in respect of certain abandonment expenditure).
10 In Part 8 of CTA 2010, omit section 298 (reimbursement by defaulter in respect of certain abandonment expenditure).
Consequential amendments
11 (1) Section 104 of FA 1991 is amended as follows.
(2) In subsection (1), omit “and sections 105 and 106 below”.
(3) In subsection (2), omit “and section 106 (but not section 105) below”.
12 In FA 2008, omit section 105.
13 In Part 2 of ITTOIA 2005, Chapter 16A is amended as follows.
14 (1) Section 225N is amended as follows.
(2) Omit subsection (5).
(3) In subsection (6), in the definition of “abandonment guarantee”—
(a) for “section 105 of FA 1991” substitute “ section 3 of OTA 1975 ”, and
(b) for “that Act” substitute “ FA 1991 ”.
(4) The heading of that section becomes “ Expenditure on abandonment guarantees ”.
15 Omit sections 225P and 225Q.
16 In section 225R (introduction to sections 225S and 225T)—
(a) in subsection (1), for “Sections 225S and 225T apply” substitute “ Section 225S applies ”;
(b) the heading of section 225R becomes “ Introduction to section 225S ”.
17 In Part 8 of CTA 2010, Chapter 4 is amended as follows.
18 (1) Section 292 is amended as follows.
(2) Omit subsection (5).
(3) In subsection (6), in the definition of “abandonment guarantee”—
(a) for “section 105 of FA 1991” substitute “ section 3 of OTA 1975 ”, and
(b) for “that Act” substitute “ FA 1991 ”.
(4) The heading of that section becomes “ Expenditure on abandonment guarantees ”.
19 Omit sections 294 and 295.
20 In section 296 (introduction to sections 297 and 298)—
(a) in subsection (1), for “Sections 297 and 298 apply” substitute “ Section 297 applies ”;
(b) the heading of section 296 becomes “ Introduction to section 297 ”.
PART 2 Receipts arising from decommissioning
Calculation of profits chargeable to corporation tax and supplementary charge
21 In Chapter 4 of Part 8 of CTA 2010 (oil activities: calculation of profits), after section 298 insert—
Receipts arising from decommissioning
Receipts arising from decommissioning
298A (1) This section applies if—
(a) a company that is or has been carrying on a ring fence trade (“the defaulter”) has defaulted on a liability under—
(i) a relevant agreement, or
(ii) an abandonment programme,
to make a payment towards decommissioning expenditure,
(b) another company that is or has been carrying on a ring fence trade (“the contributing company”) pays an amount (“the relevant contribution”) in or towards meeting the whole or part of the default, and
(c) the amount of the relevant contribution is less than the sum of the amounts within subsection (2).
(2) The amounts within this subsection are—
(a) any payments made (directly or indirectly) to the contributing company by the guarantor under an abandonment guarantee as a result of the defaulter defaulting on the liability,
(b) any reimbursement payments, and
(c) any relief from tax which the contributing company obtains in respect of the relevant contribution.
(3) The difference between—
(a) the sum of the amounts within subsection (2), and
(b) the relevant contribution,
(“the relevant difference”) is to be treated as a receipt (in the nature of income) of the contributing company's ring fence trade for the relevant accounting period (see subsection (4)).
(4) “The relevant accounting period” means the accounting period that includes the day on which the Secretary of State certifies that the relevant abandonment programme has been satisfactorily completed (“the certification date”).
This is subject to subsections (5) and (6).
(5) If the contributing company has ceased to carry on the ring fence trade before the certification date, “the relevant accounting period” is the last accounting period of the trade.
(6) If the contributing company has ceased to be within the charge to corporation tax in respect of the ring fence trade before the certification date, “the relevant accounting period” is the accounting period during or at the end of which the contributing company ceased to be within the charge to corporation tax in respect of the trade.
(7) The relevant difference is to be determined—
(a) in a case where subsection (5) or (6) applies, at the end of the calendar year in which the certification date falls, and
(b) in any other case, at the end of the relevant accounting period.
(8) In a case where subsection (5) or (6) applies, any corporation tax chargeable for the relevant accounting period by virtue of this section is due and payable as if it were corporation tax for an accounting period beginning with the certification date.
(9) Any additional assessment to corporation tax required in order to take account of a receipt arising under this section may be made at any time not later than 4 years after the end of the calendar year in which the certification date falls.
(10) In this section—
“abandonment programme” means an abandonment programme approved under Part 4 of the Petroleum Act 1998 (including such a programme as revised),
“decommissioning expenditure” has the meaning given by section 330C,
“reimbursement payment” means any payment made to the contributing company by the defaulter in reimbursing the contributing company in respect of, or otherwise making good to the contributing company, the whole or any part of the relevant contribution,
“the relevant abandonment programme” means the abandonment programme in respect of which the decommissioning expenditure mentioned in subsection (1)(a) was incurred, and
“relevant agreement” has the meaning given by section 104(5)(a) of FA 1991.
Calculation of profits chargeable to income tax
22 In Chapter 16A of Part 2 of ITTOIA 2005 (trading income: oil activities), after section 225U insert—
Receipts arising from decommissioning
Receipts arising from decommissioning
225V (1) This section applies if—
(a) a person that is or has been carrying on a ring fence trade (“the defaulter”) has defaulted on a liability under—
(i) a relevant agreement, or
(ii) an abandonment programme,
to make a payment towards decommissioning expenditure,
(b) another person that is or has been carrying on a ring fence trade (“the contributing person”) pays an amount (“the relevant contribution”) in or towards meeting the whole or part of the default, and
(c) the amount of the relevant contribution is less than the sum of the amounts within subsection (2).
(2) The amounts within this subsection are—
(a) any payments made (directly or indirectly) to the contributing person by the guarantor under an abandonment guarantee as a result of the defaulter defaulting on the liability,
(b) any reimbursement payments, and
(c) any relief from tax which the contributing person obtains in respect of the relevant contribution.
(3) The difference between—
(a) the sum of the amounts within subsection (2), and
(b) the relevant contribution,
(“the relevant difference”) is to be treated as a receipt (in the nature of income) of the contributing person's ring fence trade for the relevant tax year (see subsection (4)).
(4) “The relevant tax year” means the tax year that includes the day on which the Secretary of State certifies that the relevant abandonment programme has been satisfactorily completed (“the certification date”).
This is subject to subsection (5).
(5) If the contributing person's ring fence trade is permanently discontinued before the certification date, “the relevant tax year” is the last tax year in which that trade is carried on.
(6) The relevant difference is to be determined—
(a) in a case where subsection (5) applies, at the end of the tax year in which the certification date falls, and
(b) in any other case, at the end of the relevant tax year.
(7) In a case where subsection (5) applies, any income tax chargeable for the relevant tax year by virtue of this section is due and payable for the tax year in which the certification date falls.
(8) Any additional assessment to income tax required in order to take account of a receipt arising under this section may be made at any time not later than 4 years after the end of the tax year in which the certification date falls.
(9) In this section—
“abandonment programme” means an abandonment programme approved under Part 4 of the Petroleum Act 1998 (including such a programme as revised),
“decommissioning expenditure” has the meaning given by section 330C of CTA 2010,
“reimbursement payment” means any payment made to the contributing person by the defaulter in reimbursing the contributing person in respect of, or otherwise making good to the contributing person, the whole or any part of the relevant contribution,
“the relevant abandonment programme” means the abandonment programme in respect of which the decommissioning expenditure mentioned in subsection (1)(a) was incurred, and
“relevant agreement” has the meaning given by section 104(5)(a) of FA 1991.
PART 3 Commencement
23 The amendments made by this Schedule have effect in relation to expenditure incurred on or after the day on which this Act is passed.
SCHEDULE 32 Restrictions on allowances for certain oil-related expenditure
Section 93
PART 1 Decommissioning expenditure
1 CAA 2001 is amended as follows.
2 After section 165 insert—
Restrictions on allowances: anti-avoidance
Decommissioning services supplied by connected person
165A (1) Allowances under this Part are restricted under section 165B(1) if—
(a) a person (“R”) who is carrying on, or has ceased to carry on, a ring fence trade enters into an arrangement,
(b) under the arrangement, a person (“S”) who is connected with R provides a service to R, and
(c) all or part of the consideration for the service is decommissioning expenditure.
(2) Subsection (1)(b) may be satisfied whether the service is provided to R directly or indirectly; and in particular it does not matter—
(a) whether R and S are parties to the same contract, or
(b) whether payments are made by R directly to S.
(3) Subsections (4) to (9) apply for the purposes of this section and sections 165B to 165E.
(4) References to providing a service include—
(a) letting a ship on charter or any other asset on hire, and
(b) providing goods which are to be used up in the course of providing a service.
(5) “Decommissioning expenditure” means expenditure in connection with decommissioning.
(6) “Decommissioning” means—
(a) demolishing plant or machinery,
(b) preserving plant or machinery pending its reuse or demolition,
(c) preparing plant or machinery for reuse, or
(d) arranging for the reuse of plant or machinery.
(7) It is immaterial for the purposes of subsection (6)(b) whether the plant or machinery is reused, is demolished or is partly reused and partly demolished.
(8) It is immaterial for the purposes of subsection (6)(c) and (d) whether the plant or machinery is in fact reused.
(9) References to R's expenditure under the arrangement are to so much of the consideration for the service as is decommissioning expenditure incurred by R.
Restriction on allowance available
165B (1) The amount, if any, by which R's expenditure under the arrangement exceeds D is to be left out of account in determining R's available qualifying expenditure.
(2) D is the cost to S of providing the service or, if R's expenditure under the arrangement relates to only part of the service, that part.
(3) Subsection (2) is subject to sections 165C and 165D, which provide for D to be calculated differently in certain circumstances.
(4) But if, under any arrangement, a particular service or part of a service is provided by more than one person who is connected with R (so that without this subsection there would be more than one amount for D in relation to that service or part), D is the lowest of those amounts.
Allowance in respect of certain services related to decommissioning
165C (1) This section applies to so much of R's expenditure under the arrangement as relates to the supply by S of a service if—
(a) the service is a planning or project management service, and
(b) the cost plus method is an appropriate method of applying the arm's length principle to the provision of it.
(2) D is the sum of—
(a) the cost to S of providing the service or, if R's expenditure under the arrangement relates to only part of the service, that part, and
(b) the appropriate percentage of that amount.
(3) The appropriate percentage is the smaller of—
(a) the appropriate mark up determined in accordance with the cost plus method, and
(b) 10%.
(4) Any expression which is used in this section and in the transfer pricing guidelines has the meaning given in those guidelines.
“The transfer pricing guidelines” has the meaning given by section 164(4) of TIOPA 2010.
Allowance where decommissioning undertaken for other participators in oil field
165D (1) This section applies where—
(a) S decommissions the plant or machinery,
(b) there are, in addition to R, one or more other participators in the relevant field, and
(c) the expenditure incurred in respect of the decommissioning is apportioned between the participators (including R) in accordance with their shares in the oil won from the relevant field or their shares in the equity of that field.
(2) D is the part of the expenditure referred to in subsection (1)(c) which is incurred by R.
(3) Where—
(a) plant or machinery is or has been used in connection with the winning of oil from more than one relevant field, and
(b) the expenditure incurred in respect of the decommissioning is apportioned between those fields in accordance with the contribution from each field to the total of the oil won using that plant or machinery,
subsections (1) and (2) apply to each such field as if subsection (1)(c) referred to the expenditure apportioned to that field.
(4) But subsections (2) and (3) do not apply (and section 165B(2) applies instead) if—
(a) the amount of consideration, or the method of determining the amount of consideration, to be received by S under the arrangement or arrangements, or
(b) the apportionment of the liability for that consideration (whether between the participators as mentioned in subsection (1)(c) or between the fields as mentioned in subsection (3)(b)),
has been agreed as, or as part of, an avoidance scheme.
(5) A scheme is an “avoidance scheme” if the main purpose, or one of the main purposes, of a party in entering into the scheme is to enable a person to obtain a tax advantage under this Part that would not otherwise be obtained.
(6) The reference in subsection (5) to obtaining a tax advantage that would not otherwise be obtained includes obtaining an allowance that is in any way more favourable to a person than the one that would otherwise be obtained.
(7) In this section—
“licensee”, “oil” and “oil field” have the same meaning as in Part 1 of OTA 1975,
“other participator” means a person, not connected with R, who is a licensee in respect of any licensed area wholly or partly included in the oil field in question, and
“relevant field” means an oil field—
in which plant or machinery is located, or
in connection with which the plant or machinery is being or has been used for the purposes of a ring fence trade.
Transaction to obtain tax advantage
165E (1) Allowances under this Part are restricted under subsection (5) if—
(a) a person (“R”) who is carrying on, or has ceased to carry on, a ring fence trade enters into a transaction with another person (“S”),
(b) S receives from R consideration for services provided in pursuance of the transaction,
(c) all or part of that consideration is decommissioning expenditure, and
(d) the transaction either has an avoidance purpose, or is part of, or occurs as a result of, a scheme or arrangement that has an avoidance purpose.
(2) Subsection (1)(d) may be satisfied—
(a) whether the scheme or arrangement was made before or after the transaction was entered into, and
(b) whether or not the scheme or arrangement is legally enforceable.
(3) A transaction, scheme or arrangement has an “avoidance purpose” if the main purpose, or one of the main purposes, of a party in—
(a) entering into the transaction, scheme or arrangement, or
(b) agreeing an amount of consideration, or a method of determining an amount of consideration, to be paid in pursuance of the transaction, scheme or arrangement,
is to enable a person to obtain a tax advantage under this Part that would not otherwise be obtained.
(4) The reference in subsection (3) to obtaining a tax advantage that would not otherwise be obtained includes obtaining an allowance that is in any way more favourable to a person than the one that would otherwise be obtained.
(5) All or part of R's expenditure under the transaction is to be left out of account in determining R's available qualifying expenditure.
(6) The amount of expenditure to be left out of account is—
(a) such amount as would or would in effect cancel out the tax advantage mentioned in subsection (3) (whether that advantage is obtained by R or another person and whether it relates to the transaction or something else), or
(b) if the amount found under paragraph (a) exceeds the whole of R's expenditure under the transaction, the whole of that expenditure.
3 In section 26(5), at the end insert “ and sections 165A to 165E (restrictions on allowances: anti-avoidance). ”
4 In section 57(3), after the reference to section 70DA insert— “ sections 165A to 165E (restrictions on allowances: anti-avoidance); ”.
5 In section 161C(3), for “and 164(4)” substitute “ , 164(4) and 165A to 165E ”.
6 In section 164(5A), at the end insert “ and sections 165A to 165E. ”
7 After section 165(3) insert—
(3A) Subsection (3) is subject to sections 165A to 165E.
8 The amendments made by this Part have effect in relation to expenditure incurred on decommissioning carried out on or after the day on which this Act is passed.
PART 2 Expenditure on site restoration
9 After section 416ZB of CAA 2001 (inserted by section 92) insert—
Site restoration services supplied by connected person
416ZC (1) Where—
(a) a person (“R”) who is carrying on, or has ceased to carry on, a ring fence trade enters into an arrangement,
(b) under the arrangement, a person (“S”) who is connected with R provides a service to R in connection with work on the restoration of a relevant site, and
(c) (in the absence of this section) all or part of the consideration for the service would be qualifying expenditure of R under section 416ZA,
the amount of the expenditure which is qualifying expenditure is restricted under section 416ZD(1).
(2) Subsection (1)(b) may be satisfied whether the service is provided to R directly or indirectly; and in particular it does not matter—
(a) whether R and S are parties to the same contract, or
(b) whether payments are made by R directly to S.
(3) Subsections (4) and (5) apply for the purposes of this section and sections 416ZD and 416ZE.
(4) “Relevant site” has the meaning given by section 416ZA(8).
(5) References to providing a service include—
(a) letting a ship on charter or any other asset on hire, and
(b) providing goods which are to be used up in the course of providing a service.
Restriction on allowance available
416ZD (1) In determining how much of the consideration for the service is qualifying expenditure, there is to be left out of account the amount (if any) by which that consideration exceeds D.
(2) D is the cost to S of providing the service or, if the qualifying expenditure relates to only part of the service, that part.
(3) Subsection (2) is subject to—
(a) subsection (4), and
(b) section 416ZE,
which provide for D to be calculated differently in certain circumstances.
(4) The following provisions apply in relation to an amount restricted under subsection (1) as they apply in relation to an amount restricted under section 165B(1)—
(a) section 165C;
(b) section 165E, subject to the modifications in subsection (5).
(5) The modifications are that—
(a) the references to Part 2 are to be read as references to this Part,
(b) in subsection (1)(c), the reference to decommissioning expenditure is to be read as a reference to qualifying expenditure under section 416ZA, and
(c) in subsection (5), the reference to R's available qualifying expenditure is to be read as a reference to R's qualifying expenditure on the restoration of the site.
(6) But if, under the arrangement, a particular service or part of a service is provided by more than one person who is connected with R (so that without this subsection there would be more than one amount for D in relation to that service or part), D is the lowest of those amounts.
Allowance where site restoration undertaken for other participators in oil field
416ZE (1) This section applies where—
(a) S carries out the restoration of a relevant site,
(b) there are, in addition to R, one or more other participators in the relevant field, and
(c) the expenditure incurred in carrying out the restoration is apportioned between the participators (including R) in accordance with their shares in the oil won from the relevant field or their shares in the equity of that field.
(2) D is the part of the expenditure referred to in subsection (1)(c) which is incurred by R.
(3) Where—
(a) a relevant site has been used in connection with the winning of oil from more than one relevant field, and
(b) the expenditure incurred in respect of the restoration is apportioned between those fields in accordance with the contribution from each field to the total of the oil won using that site,
subsections (1) and (2) apply to each such field as if subsection (1)(c) referred to the expenditure apportioned to that field.
(4) But subsections (2) and (3) do not apply (and section 416ZD(2) applies instead) if—
(a) the amount of consideration, or the method of determining the amount of consideration, to be received by S under the arrangement or arrangements, or
(b) the apportionment of the liability for that consideration (whether between the participators as mentioned in subsection (1)(c) or between the fields as mentioned in subsection (3)(b)),
has been agreed as, or as part of, an avoidance scheme.
(5) A scheme is an “avoidance scheme” if the main purpose, or one of the main purposes, of a party in entering into the scheme is to enable a person to obtain a tax advantage under this Part that would not otherwise be obtained.
(6) The reference in subsection (5) to obtaining a tax advantage that would not otherwise be obtained includes obtaining an allowance that is in any way more favourable to a person than the one that would otherwise be obtained.
(7) In relation to the restoration of a relevant site, “relevant field” means any of the following—
(a) the oil field in which the site is located;
(b) if the site is the site of a source to the working of which a ring fence trade relates (or related), an oil field from which oil is or has been won by means of working the source;
(c) if the site is land used in connection with working such a source, an oil field from which oil is or has been won by means of working the source.
(8) In this section—
“licensee”, “oil” and “oil field” have the same meaning as in Part 1 of OTA 1975, and
“other participator” means a person, not connected with R, who is a licensee in respect of any licensed area wholly or partly included in the oil field in question.
10 In section 395(3) of that Act (provisions limiting “qualifying expenditure”) for “Chapter 4 contains” substitute “ Chapters 4 and 5 contain ”.
11 The amendments made by this Part have effect in relation to expenditure incurred on restoration carried out on or after the day on which this Act is passed.
PART 3 Amendments of TIOPA 2010
12 Part 4 of TIOPA 2010 (transfer pricing) is amended as follows.
13 In section 147(6) (list of exceptions to the basic rule stated in that section), after paragraph (b) insert—
(ba) section 206A (modification of basic rule where allowances restricted for certain oil-related expenditure),
.
14 After section 206 insert—
Modification of basic rule where allowances restricted for certain expenditure
206A (1) This section applies where—
(a) in a case to which section 165A(1) of CAA 2001 (restriction of allowances for decommissioning expenditure) applies, R's available qualifying expenditure is restricted under section 165B(2) or 165C of that Act, or
(b) in a case to which section 416ZC(1) of that Act (restriction of allowances for expenditure on site restoration) applies, R's qualifying expenditure is restricted under section 416ZD(2) or section 165C as applied by section 416ZD(4)(a) of that Act.
(2) In calculating for tax purposes S's profits and losses in relation to the service provided by S to R, the amount which S is required to bring into account is an amount equal to R's expenditure (restricted as mentioned in subsection (1)(a) or (b)).
(3) Section 147(3) and (5) do not apply to the extent that they are inconsistent with subsection (2).
(4) In this section “R” and “S” have the meaning given by section 165A or 416ZC of CAA 2001 (as the case may be).
15 In section 213 (effect of Part 4 on capital allowances), after subsection (2) insert—
(3) But a claim under section 174 may not be made if the claim would affect the operation of sections 165A to 165E or 416ZC to 416ZE of CAA 2001.
16 The amendments made by this Part have effect for accounting periods ending on or after the day on which this Act is passed.
SCHEDULE 33 Annual tax on enveloped dwellings: returns, enquiries, assessments and appeals
Section 162
PART 1 Returns
Contents of return
1 (1) The Commissioners for Her Majesty's Revenue and Customs may by regulations make provision about—
(a) the form and content of a return;
(b) the method of delivering a return.
(2) Regulations under sub-paragraph (1) may make different provision for different purposes.
(3) Every return must include a declaration by the person making it to the effect that the return is correct and complete to the best of the person's knowledge.
(4) A return is treated as containing any information provided by the person making the return for the purpose of completing the return.
2 In this Part of this Act—
(a) references to the delivery of an annual tax on enveloped dwellings return are to the delivery of a return that complies with all requirements imposed by or under any of sections 159 , 159A and 161 and paragraph 1;
(b) references to the delivery of a return of the adjusted chargeable amount are to the delivery of a return that complies with all requirements imposed by or under any of sections 160 and 161 and paragraph 1.
Amendment of return by chargeable person
3 (1) A person who has delivered a return may amend the return by notice to an officer of Revenue and Customs.
(2) The Commissioners for Her Majesty's Revenue and Customs may require that notices under this paragraph—
(a) are in a specified form, or
(b) contain specified information.
(3) An amendment under this paragraph must be made by the end of the next chargeable period after the chargeable period to which the return relates (but see the exception that follows).
(4) If a return is delivered on or after 1 January in the chargeable period next after that to which it relates, the latest time for amending the return under this paragraph is the end of the period of 3 months after the day on which the return is delivered.
Correction of return by HMRC
4 (1) An officer of Revenue and Customs may correct any obvious error or omission in a return.
(2) A correction under this paragraph—
(a) is made by notice to the chargeable person, and
(b) is regarded as effecting an amendment of the return.
(3) The reference in sub-paragraph (1) to an error includes, for instance, an arithmetical mistake or an error of principle.
(4) A correction under this paragraph must be made within the 9 months beginning with—
(a) the day on which the return was delivered, or
(b) if the correction is needed as a result of an amendment under paragraph 3, the day on which the amendment was made.
(5) A correction under this paragraph has no effect if the chargeable person—
(a) amends the return so as to reject the correction, or
(b) gives a notice rejecting the correction in the special period mentioned in sub-paragraph (6).
(6) A notice is given in the “special period” if it is given—
(a) after the end of the period within which the chargeable person may amend the return, but
(b) before the end of the 3 months beginning with the date of issue of the notice of correction.
(7) A notice under sub-paragraph (5)(b) must be given to HMRC.
PART 2 Duty to keep and preserve records
Duty to keep and preserve records
5 (1) A person who is required to deliver a return for a chargeable period must—
(a) keep any records that may be needed to enable the person to deliver a correct and complete return, and
(b) preserve those records in accordance with this paragraph.
(2) The records must be preserved until the end of the later of the relevant day and the date on which—
(a) an enquiry into the return is completed, or
(b) if there is no enquiry, an officer of Revenue and Customs no longer has power to enquire into the return.
(3) “The relevant day” means—
(a) the sixth anniversary of the last day of the chargeable period, or
(b) any earlier day that may be specified in writing by the Commissioners for Her Majesty's Revenue and Customs.
(4) Different days may be specified for different purposes under sub-paragraph (3)(b).
(5) The records required to be kept and preserved under this paragraph include—
(a) details of any relevant transaction (including any contract or conveyance and any supporting maps, plans or similar documents and records of relevant payments, receipts and financial arrangements);
(b) records of any valuation of the single-dwelling interest relevant to its value on any day in the chargeable period.
(6) The Commissioners for Her Majesty's Revenue and Customs may by regulations—
(a) provide that the records required to be kept under this paragraph do, or do not, include records specified in the regulations;
(b) specify supporting documents that are required to be kept under this paragraph.
(7) Regulations under this paragraph may make provision by reference to things specified in a notice published by the Commissioners for Her Majesty's Revenue and Customs in accordance with the regulations (and not withdrawn by a subsequent notice).
(8) “Supporting documents” includes accounts, books, deeds, contracts, vouchers and receipts.
Preservation of information etc
6 The duty under paragraph 5 to preserve records may be satisfied—
(a) by preserving them in any form and by any means, or
(b) by preserving the information contained in them in any form and by any means, subject to any conditions or exceptions specified in writing by the Commissioners for Her Majesty's Revenue and Customs.
Penalty for failure to keep and preserve records
7 (1) A person who fails to comply with paragraph 5 in relation to a chargeable period is liable to a penalty not exceeding £3,000, subject to the following exception.
(2) No penalty is incurred if an officer of Revenue and Customs is satisfied that any facts that it is reasonable to require should be proved to HMRC, and that would have been proved by the records, are proved by other documentary evidence provided to them.
PART 3 Enquiry into return
Notice of enquiry
8 (1) An officer of Revenue and Customs may enquire into a return if sub-paragraph (2) has been complied with.
(2) Notice of the intention to make an enquiry must be given—
(a) to the person by whom or on whose behalf the return was delivered (“the relevant person”);
(b) before the end of the period of 12 months after the relevant date.
(3) The relevant date is—
(a) the filing date, if the return was delivered on or before that date;
(b) the date on which the return was delivered, if the return was delivered after the filing date;
(c) the date on which the amendment was made, if the return is amended under paragraph 3 (amendment by person making the return).
(4) A return that has been the subject of one notice under this paragraph may not be the subject of another, except a notice given in consequence of an amendment (or another amendment) of the return under paragraph 3.
(5) A notice under this paragraph is referred to as a “notice of enquiry”.
Scope of enquiry
9 (1) An enquiry extends to anything contained in the return, or required to be contained in the return, that relates—
(a) to the question whether the relevant person is chargeable to tax with respect to the interest to which the return relates for the chargeable period concerned, or
(b) to the amount of tax chargeable on the relevant person with respect to that interest for that period.
(2) Sub-paragraph (3) applies if the notice of enquiry is given as a result of the amendment of a return under paragraph 3 (amendment by person making the return)—
(a) at a time when it is no longer possible to give a notice of enquiry under paragraph 8(3)(a) or (b), or
(b) after an enquiry into the return has been completed.
(3) The enquiry is limited to—
(a) matters to which the amendment relates, and
(b) matters affected by the amendment.
Amendment of self assessment during enquiry to prevent loss of tax
10 (1) If at a time when an enquiry is in progress into a return an officer of Revenue and Customs forms the opinion—
(a) that the amount stated in the self assessment contained in the return as the amount of tax payable is insufficient, and
(b) that unless the assessment is immediately amended there is likely to be a loss of tax to the Crown,
the officer may by notice in writing to the relevant person amend the assessment to make good the deficiency.
(2) If the enquiry is one that is limited by paragraph 9(2) and (3) to matters arising from an amendment of the return, sub-paragraph (1) above applies only so far as the deficiency is attributable to the amendment.
(3) For the purposes of this paragraph the period during which an enquiry is in progress is the whole of the period—
(a) beginning with the day on which the notice of enquiry is given, and
(b) ending with the day on which the enquiry is completed.
Referral of questions to tribunal during enquiry
11 (1) At any time when an enquiry is in progress into a return any question arising in connection with the subject-matter of the return may be referred to the tribunal for determination.
(2) Notice of the referral must be given to the tribunal jointly by the relevant person and an officer of Revenue and Customs.
(3) More than one notice of referral may be given under this paragraph in relation to an enquiry.
(4) For the purposes of this paragraph the period during which an enquiry is in progress is the whole of the period—
(a) beginning with the day on which the notice of enquiry is given, and
(b) ending with the day on which the enquiry is completed.
Withdrawal of notice of referral
12 An officer of Revenue and Customs or the relevant person may withdraw a notice of referral under paragraph 11.
Effect of referral on enquiry
13 (1) While proceedings on a referral under paragraph 11 are in progress in relation to an enquiry—
(a) no closure notice may be given in relation to the enquiry, and
(b) no application may be made for a direction to give a closure notice.
(2) Proceedings on a referral are “in progress” where—
(a) notice of referral has been given and has not been withdrawn, and
(b) the questions referred have not been finally determined.
(3) A question referred has been “finally determined” when—
(a) it has been determined by the tribunal, and
(b) there is no further possibility of the determination being varied or set aside (disregarding any power to grant permission to appeal out of time).
Effect of determination
14 (1) A determination under paragraph 11 is binding on the parties to the referral in the same way, and to the same extent, as a decision on a preliminary issue in an appeal.
(2) The officer of Revenue and Customs conducting the enquiry must take the determination into account—
(a) in reaching conclusions on the enquiry, and
(b) in the formulation of any amendments of the return that may be required to give effect to those conclusions.
(3) The question determined may not be reopened on an appeal, except to the extent that it could be reopened if it had been determined as a preliminary issue in that appeal.
Tribunal to which referrals are made
15 (1) Where the question to be referred under paragraph 11 is of the market value of any single-dwelling interest, the referral is to be made to—
(a) the Upper Tribunal, if the land is in England and Wales;
(b) the Lands Tribunal for Scotland, if the land is in Scotland;
(c) the Lands Tribunal for Northern Ireland, if the land is in Northern Ireland.
(2) In any other case a referral under paragraph 11 is to be made to—
(a) the First-tier Tribunal, or
(b) where determined by or under Tribunal Procedure Rules, the Upper Tribunal.
(3) References to “the tribunal” in paragraphs 11 and 13 are to be read accordingly.
Completion of enquiry
16 (1) An enquiry under paragraph 8 is completed when an officer of Revenue and Customs informs the relevant person by a notice (a “closure notice”) that the enquiry is complete and states the conclusions reached in the enquiry.
(2) A closure notice must either—
(a) state that in the officer's opinion no amendment of the return is required, or
(b) make the amendments of the return required to give effect to the officer's conclusions.
(3) A closure notice takes effect when it is issued.
Direction to complete enquiry
17 (1) The relevant person may apply to the tribunal for a direction that a closure notice is to be given within a specified period.
(2) The tribunal hearing the application must give a direction unless satisfied that HMRC have reasonable grounds for not giving a closure notice within that period.
(3) In this paragraph “the tribunal” means—
(a) the First-tier Tribunal, or
(b) where determined by or under Tribunal Procedure Rules, the Upper Tribunal.
PART 4 HMRC determination where no return delivered
Determination of tax chargeable if no return delivered
18 (1) This paragraph applies where condition A or condition B is met.
(2) Condition A is that—
(a) an officer of Revenue and Customs has reason to believe that a person (“P”) is chargeable to tax for a chargeable period in respect of a single-dwelling interest,
(b) P has not made an annual tax on enveloped dwellings return for the period in respect of the interest, and
(c) the relevant filing date has passed.
(3) Condition B is that—
(a) an officer of Revenue and Customs has reason to believe that additional tax is payable by a person (“P”) under section 163(2) for a chargeable period in respect of a single-dwelling interest,
(b) P has not made a return of the adjusted chargeable amount for the period in respect of the interest, and
(c) the relevant filing date has passed.
(4) “The relevant filing date” means the date by which the officer believes a return was required to be delivered.
(5) The officer may make a determination (an “HMRC determination”) to the best of the officer's information and belief of the amount of tax to which P is chargeable for the period concerned with respect to the interest.
(6) Notice of the determination must be given to P and must state the date on which it is issued.
(7) No HMRC determination may be made more than 4 years after the end of the chargeable period to which it relates.
Determination to have effect as a self assessment
19 (1) A determination under paragraph 18 has effect for enforcement purposes as if it were a self assessment made by P.
(2) In sub-paragraph (1) “for enforcement purposes” means for the purposes of section 165 and Schedule 12 to FA 2003 (collection and recovery of tax etc).
(3) Nothing in this paragraph affects any liability of a person to a penalty for failure to deliver a return.
Determination superseded by actual self assessment
20 (1) If after an HMRC determination has been made P delivers a return for the chargeable period with respect to the interest in question containing a self assessment, that self assessment supersedes the determination.
(2) Sub-paragraph (1) does not apply to a return delivered—
(a) more than 4 years after the power to make the determination first became exercisable, or
(b) more than 12 months after the date of the determination,
whichever is the later.
(3) Where—
(a) proceedings have been begun for the recovery of any tax charged by an HMRC determination, and
(b) before the proceedings are concluded the determination is superseded by a self assessment,
the proceedings may be continued as if they were proceedings for the recovery of so much of the tax charged by the self assessment as is due and payable and has not yet been paid.
(4) Where—
(a) action is being taken under Part 1 of Schedule 8 to the Finance (No. 2) Act 2015 (enforcement of deduction from accounts) for the recovery of an amount (“the original amount”) of tax charged by an HMRC determination, and
(b) before that action is concluded, the determination is superseded by a self-assessment,
that action may be continued as if it were action for the purposes of the recovery of so much of the tax charged by the self-assessment as is due and payable, has not yet been paid and does not exceed the original amount.
PART 5 HMRC assessments
Assessment where loss of tax discovered
21 (1) Sub-paragraph (2) applies if an officer of Revenue and Customs discovers that—
(a) an amount of tax that ought to have been assessed under this Part of this Act as tax chargeable on a person for a chargeable period with respect to a single-dwelling interest has not been assessed,
(b) an assessment of the tax chargeable on a person for a chargeable period in respect of a single-dwelling interest is or has become insufficient, or
(c) relief has been given that is or has become excessive.
(2) An officer of Revenue and Customs may make an assessment (a “discovery assessment”) in the amount or further amount that ought in the officer's opinion to be charged in order to make good to the Crown the loss of tax.
(3) The functions of an officer of Revenue and Customs under this paragraph are also exercisable by the Commissioners for Her Majesty's Revenue and Customs.
Assessment to recover excessive repayment of tax
22 (1) If an amount of tax has been, but ought not to have been, repaid to a person that amount may be assessed and recovered as if it were unpaid tax.
(2) If the repayment was made with interest, the amount assessed and recovered may include the amount of interest that ought not to have been paid.
References to “the taxpayer”
23 In paragraphs 24 to 27 “taxpayer” means—
(a) in relation to an assessment under paragraph 21, the chargeable person;
(b) in relation to an assessment under paragraph 22, the person mentioned in paragraph 22(1).
Conditions for making assessment where return has been delivered
24 (1) If the taxpayer has delivered a return in respect of the interest in question for the chargeable period in question, an assessment under paragraph 21 or 22 may only be made in the two cases specified in sub-paragraphs (2) and (3). See also the further restriction in sub-paragraph (7).
(2) The first case is where the situation mentioned in paragraph 21(1) or 22(1) was brought about carelessly or deliberately by—
(a) the taxpayer,
(b) a person acting on behalf of the taxpayer, or
(c) a person who was a partner of the taxpayer at the relevant time.
(3) The second case is where it could not reasonably have been expected that an officer of Revenue and Customs in possession of the information made available to HMRC before the relevant time would be aware at the relevant time of the situation mentioned in paragraph 21(1) or 22(1).
(4) In sub-paragraph (3) “the relevant time” means the time HMRC—
(a) ceased to be entitled to give a notice of enquiry into the return, or
(b) completed their enquiries into the return.
(5) For this purpose information is regarded as made available to HMRC if—
(a) it is contained in a return delivered by the taxpayer,
(b) it is contained in any documents produced or information provided to an officer of Revenue and Customs for the purposes of an enquiry into any such return,
(c) it is information the existence and relevance of which officers of Revenue and Customs could reasonably have been expected to infer from information made available as mentioned in paragraph (a) or (b), or
(d) it is information the existence and relevance of which was notified to an officer of Revenue and Customs by the taxpayer or a person acting on the taxpayer's behalf.
(6) In sub-paragraph (5)(c) and (d) “relevance” means relevance as regards the situation mentioned in paragraph 21(1) or 22(1).
(7) No assessment may be made under paragraph 21 or 22 if—
(a) the situation mentioned in paragraph 21(1) or 22(1) is attributable to a mistake in the return as to the basis on which the tax liability ought to have been calculated, and
(b) the return was in fact made on the basis prevailing, or in accordance with the practice generally prevailing, at the time it was made.
Time limit for assessments
25 (1) The general rule is that no assessment may be made more than 4 years after the end of the chargeable period to which the assessment relates.
(2) An assessment of a person to tax in a case involving a loss of tax brought about carelessly by the taxpayer or a related person may be made up to 6 years after the end of the chargeable period to which the assessment relates.
(3) An assessment to which this sub-paragraph applies may be made up to 20 years after the end of the chargeable period to which the assessment relates.
(4) Sub-paragraph (3) applies to an assessment of a person in any case involving a loss of tax—
(a) brought about deliberately by the taxpayer or a related person,
(b) attributable to a failure by the taxpayer to comply with obligations under section 159(1) or 160(1) (duty to make annual tax on enveloped dwellings return or return of adjusted chargeable amount), ...
(c) attributable to arrangements in respect of which the person has failed to comply with an obligation under section 309, 310 or 313 of FA 2004 (obligation of parties to tax avoidance schemes to provide information to HMRC).
, or
(d) attributable to arrangements which were expected to give rise to a tax advantage in respect of which the person was under an obligation to notify the Commissioners for Her Majesty's Revenue and Customs under section 253 of FA 2014 (duty to notify Commissioners of promoter reference number) but failed to do so.
(5) An assessment under paragraph 22 (assessment to recover excessive repayment of tax) is not out of time if it is made—
(a) while an enquiry is in progress into a relevant return, or
(b) within the period of one year beginning with the date on which the repayment in question was made.
(6) In sub-paragraph (5)—
“in progress” is to be read in accordance with paragraph 11(4);
“relevant return” means a return delivered by the taxpayer and relating to the chargeable period and the interest in question.
(7) If the taxpayer has died—
(a) any assessment on the personal representatives must be made within 4 years after the death, and
(b) an assessment is not to be made by virtue of sub-paragraph (2) in respect of a chargeable period that ended more than 6 years before the death.
(8) Any objection to the making of an assessment on the ground that the time limit for making it has expired can only be made on an appeal against the assessment.
(9) In this paragraph “related person”, in relation to the taxpayer, means—
(a) a person acting on the taxpayer's behalf, or
(b) a person who was the partner of the taxpayer at the relevant time.
Losses brought about carelessly or deliberately
26 (1) This paragraph applies for the purposes of paragraphs 24 and 25.
(2) A loss of tax is brought about carelessly by a person if the person fails to take reasonable care to avoid bringing about that loss.
(3) Sub-paragraph (4) applies where—
(a) information is provided to HMRC,
(b) the person who provided the information, or the person on whose behalf the information was provided, discovers some time later that the information was inaccurate, and
(c) that person fails to take reasonable steps to inform HMRC.
(4) Any loss of tax brought about by the inaccuracy is to be treated as having been brought about carelessly by that person.
(5) References to a loss of tax brought about deliberately by a person include a loss of tax brought about as a result of a deliberate inaccuracy in a document given to HMRC by or on behalf of that person.
Assessment procedure
27 (1) Notice of an assessment must be served on the taxpayer.
(2) The notice must state—
(a) the tax due,
(b) the date on which the notice is issued, and
(c) the time within which any appeal against the assessment must be made.
(3) After notice of the assessment has been served on the taxpayer, the assessment may not be altered except in accordance with the express provisions of this Part of this Act.
(4) Where an officer of Revenue and Customs has decided to make an assessment to tax, and has taken all other decisions needed for arriving at the amount of the assessment, the officer may entrust to some other officer of Revenue and Customs the responsibility for completing the assessing procedure, whether by means involving the use of a computer or otherwise, including responsibility for serving notice of the assessment.
PART 6 Relief in case of overpaid tax or excessive assessment
Relief in case of double assessment
28 (1) A person who believes that tax has been assessed on that person more than once in respect of the same matter may make a claim to the Commissioners for Her Majesty's Revenue and Customs for relief against any double charge.
(2) Schedule 11A to FA 2003 (claims not included in returns) applies in relation to a claim under sub-paragraph (1) as it applies to a claim such as is mentioned in paragraph 1 of that Schedule.
Claim for relief for overpaid tax etc
29 (1) This paragraph applies where—
(a) a person has paid an amount by way of tax but believes the tax was not chargeable, or
(b) a person has been assessed as chargeable to an amount of tax, or a determination has been made that a person is chargeable to an amount of tax but the person believes the tax is not chargeable.
(2) The person may make a claim to the Commissioners for Her Majesty's Revenue and Customs for the amount to be repaid or discharged.
(3) Where this paragraph applies, the Commissioners for Her Majesty's Revenue and Customs are not liable to give relief, except as provided in this Schedule or by or under any other provision of this Part of this Act.
(4) For the purposes of this paragraph and paragraphs 30 to 34, an amount paid by one person on behalf of another is treated as paid by the other person.
Cases in which Commissioners are not liable to give effect to a claim
30 (1) The Commissioners for Her Majesty's Revenue and Customs are not liable to give effect to a claim under paragraph 29 if or to the extent that the claim falls within a case described in this paragraph.
(2) Case A is where the amount of tax paid, or liable to be paid, is excessive because of—
(a) a mistake in a claim, or
(b) a mistake consisting of making, or failing to make, a claim.
(3) Case B is where the claimant is or will be able to seek relief by taking other steps under this Part of this Act.
(4) Case C is where the claimant—
(a) could have sought relief by taking such steps within a period that has now expired, and
(b) knew or ought reasonably to have known, before the end of that period, that such relief was available.
(5) Case D is where the claim is made on grounds that—
(a) have been put to a court or tribunal in the course of an appeal by the claimant relating to the amount paid or liable to be paid, or
(b) have been put to HMRC in the course of an appeal by the claimant relating to that amount that is treated as having been determined by a tribunal by virtue of paragraph 46 (settling of appeals by agreement).
(6) Case E is where the claimant knew, or ought reasonably to have known, of the grounds for the claim before the latest of the following—
(a) the date on which a relevant appeal in the course of which the ground could have been put forward was determined by a court or tribunal (or is treated as having been so determined);
(b) the date on which the claimant withdrew a relevant appeal to a court or tribunal;
(c) the end of the period in which the claimant was entitled to make a relevant appeal to a court or tribunal.
In this sub-paragraph “relevant appeal” means an appeal by the claimant relating to the amount paid or liable to be paid.
(7) Case F is where the amount in question was paid or is liable to be paid—
(a) in consequence of proceedings enforcing the payment of that amount brought against the claimant by HMRC, or
(b) in accordance with an agreement between the claimant and HMRC settling such proceedings.
(8) Case G is where—
(a) the amount paid, or liable to be paid, is excessive by reason of a mistake in calculating the claimant's liability to tax, and
(b) liability was calculated in accordance with the practice generally prevailing at the time.
(9) Case G does not apply where the amount paid, or liable to be paid, is tax which has been charged contrary to EU law.
(10) For the purposes of sub-paragraph (9), an amount of tax is charged contrary to EU law if, in the circumstances in question, the charge to tax is contrary to—
(a) the provisions relating to the free movement of goods, persons, services and capital in Titles II and IV of Part 3 of the Treaty on the Functioning of the European Union, or
(b) the provisions of any subsequent treaty replacing the provisions mentioned in paragraph (a).
Making a claim
31 (1) A claim under paragraph 29 must be made within the period of 4 years after the end of the chargeable period to which the payment by way of tax, or the assessment or determination, relates.
(2) A claim under paragraph 29 may not be made by being included in a return.
(3) Schedule 11A to FA 2003 (claims not included in returns) applies in relation to a claim under paragraph 29 as it applies to a claim such as is mentioned in paragraph 1 of that Schedule.
The claimant: partnerships
32 (1) This paragraph is about the application of paragraph 29 in a case where either—
(a) (in a case falling within sub-paragraph (1)(a) of that paragraph) the person paid the amount in question in the capacity of a responsible partner or representative partner, or
(b) (in a case falling within sub-paragraph (1)(b) of that paragraph) the assessment was made on, or the determination related to the liability of, the person in such a capacity.
(2) In such a case, only a relevant person who has been nominated to do so by all of the relevant persons may make a claim under paragraph 29 in respect of the amount in question.
(3) The relevant persons are all the persons who would have been liable as responsible partners to pay the amount in question had the payment been due or (in a case falling within sub-paragraph (1)(b)) had the assessment or determination been correctly made.
Assessment of claimant in connection with claim
33 (1) This paragraph applies where—
(a) a claim is made under paragraph 29 (relief for overpaid tax etc),
(b) the grounds for giving effect to the claim also provide grounds for a discovery assessment on the claimant in respect of single-dwelling interest, and
(c) such an assessment could be made but for a relevant restriction.
(2) In a case falling within paragraph 32(1)(a) or (b), the reference to the claimant in sub-paragraph (1)(b) of this paragraph includes any relevant person (as defined in paragraph 32(3)).
(3) The following are relevant restrictions—
(a) the restrictions in paragraph 24 (assessment where return has been delivered);
(b) the expiry of a time limit for making a discovery assessment.
(4) Where this paragraph applies—
(a) the relevant restrictions are to be disregarded, and
(b) the discovery assessment is not out of time if it is made before the final determination of the claim.
(5) A claim is not finally determined until it, or the amount to which it relates, can no longer be varied (whether on appeal or otherwise).
Contract settlements
34 (1) In paragraph 29(1)(a) the reference to an amount paid by a person by way of tax includes an amount paid by a person under a contract settlement in connection with tax believed to be due.
(2) Sub-paragraphs (3) to (6) apply if the person who paid the amount under the contract settlement (“the payer”) and the person from whom the tax was due (“the taxpayer”) are not the same person.
(3) In relation to a claim under paragraph 29 in respect of that amount—
(a) the references to the claimant in paragraph 30(5), (6) and (7) (Cases D, E and F) have effect as if they included the taxpayer,
(b) the reference to the claimant in paragraph 30(8) (case G) has effect as if it were a reference to the taxpayer,
(c) the reference to the claimant in paragraph 33(1)(b) has effect as if it were a reference to the taxpayer, and
(d) references to tax in Schedule 11A to FA 2003 (as it applies to a claim under paragraph 29) include the amount paid under the contract settlement.
(4) Sub-paragraph (5) applies where the grounds for giving effect to a claim by the payer in respect of the amount also provide grounds for a discovery assessment on the taxpayer in respect of any single-dwelling interest.
(5) The Commissioners for Her Majesty's Revenue and Customs may set any amount repayable to the payer as a result of the claim against any amount payable by the taxpayer as a result of the assessment.
(6) The obligations of the Commissioners for Her Majesty's Revenue and Customs and the taxpayer are discharged to the extent of any set-off under sub-paragraph (5).
(7) “Contract settlement” means an agreement made in connection with any person's liability to make a payment to the Commissioners for Her Majesty's Revenue and Customs under or by virtue of an enactment.
PART 7 Reviews and appeals
Right of appeal
35 (1) An appeal may be brought against—
(a) an amendment of a self assessment under paragraph 10 (amendment during enquiry to prevent loss of tax),
(b) a conclusion stated or amendment made by a closure notice (see paragraph 16),
(c) an HMRC determination under paragraph 18 (determination of tax chargeable if no return delivered),
(d) a discovery assessment (see paragraph 21), or
(e) an assessment under paragraph 22 (assessment to recover excessive repayment).
(2) If an appeal under sub-paragraph (1)(a) against an amendment of a self assessment is made while an enquiry is in progress none of the steps mentioned in paragraph 38(2)(a) to (c) may be taken in relation to the appeal until the enquiry is completed.
Notice of appeal
36 (1) Notice of an appeal under paragraph 35 must be given—
(a) in writing,
(b) within 30 days after the specified date,
(c) to HMRC.
(2) In sub-paragraph (1) “specified date” means—
(a) in relation to an appeal under paragraph 35(1)(a), the date on which the notice of amendment was issued;
(b) in relation to an appeal under paragraph 35(1)(b), the date on which the closure notice was issued;
(c) in relation to an appeal under paragraph 35(1)(c) the date on which the HMRC determination was issued;
(d) in relation to an appeal under paragraph 35(1)(d) or (e), the date on which the notice of assessment was issued.
(3) The notice of appeal must specify the grounds of appeal.
(4) Where a determination has been made under paragraph 18 as to the amount of tax to which a person is chargeable with respect to a single-dwelling interest, the only grounds on which an appeal lies under paragraph 35(1)(c) are—
(a) that the condition in section 94(2)(a) (nature and value of interest) is not met in relation to the interest in question on any day to which the determination relates,
(b) that the person, partnership or scheme that the determination identifies as meeting the ownership condition on one or more days does not meet that condition on any day in the chargeable period,
(c) if the tax is determined to be chargeable by virtue of section 94(5), that a person identified in the determination as one of the responsible partners is not a responsible partner in relation to any tax chargeable for the period in question, or
(d) if the tax is determined to be chargeable by virtue of section 94(6), that the person identified in the determination as the chargeable person in relation to the collective investment scheme concerned is not the chargeable person.
Late notice of appeal
37 (1) This paragraph applies in a case where—
(a) notice of appeal may be given to HMRC under this Schedule, but
(b) no notice is given before the relevant time limit.
(2) Notice may be given after the relevant time limit if—
(a) HMRC agree, or
(b) where HMRC do not agree, the tribunal gives permission.
(3) HMRC must agree to notice being given after the relevant time limit if the appellant has requested in writing that HMRC do so and HMRC are satisfied—
(a) that there was reasonable excuse for not giving the notice before the relevant time limit, and
(b) that the request has been made without unreasonable delay.
(4) If a request of the kind mentioned in sub-paragraph (3) is made, HMRC must notify the appellant whether or not HMRC agree to the request.
(5) In this paragraph “relevant time limit”, in relation to notice of appeal, means the time before which the notice must to be given (disregarding this paragraph).
Steps that may be taken following notice of appeal
38 (1) This paragraph applies if notice of appeal has been given to HMRC.
(2) In such a case—
(a) the appellant may notify HMRC that it requires them to review the matter in question (see paragraph 39),
(b) HMRC may notify the appellant of an offer to review the matter in question (see paragraph 40), or
(c) the appellant may notify the appeal to the tribunal.
(3) If the appellant notifies the appeal to the tribunal, the tribunal is to determine the matter in question.
(4) See paragraphs 43 and 44 for provision about the circumstances in which an appeal may be notified to the tribunal after a review has been required by the appellant or offered by HMRC.
(5) This paragraph does not prevent the matter in question from being dealt with in accordance with paragraph 46(1) and (2) (settling of appeals by agreement).
Right of appellant to require review
39 (1) If the appellant notifies HMRC that it requires them to review the matter in question, HMRC must—
(a) notify the appellant of HMRC's view of the matter in question within the relevant period, and
(b) review the matter in question in accordance with paragraph 41.
(2) Sub-paragraph (1) does not apply if—
(a) the appellant has already given a notification under this paragraph in relation to the matter in question,
(b) HMRC have given a notification under paragraph 40 in relation to the matter in question, or
(c) the appellant has notified the appeal to the tribunal.
(3) In this paragraph “the relevant period” means—
(a) the period of 30 days beginning with the day on which HMRC receive the notification from the appellant, or
(b) such longer period as is reasonable.
Offer of review by HMRC
40 (1) Sub-paragraphs (2) to (5) apply if HMRC notify the appellant of an offer to review the matter in question.
(2) The notification must include a statement of HMRC's view of the matter in question.
(3) If the appellant notifies HMRC within the acceptance period that it accepts the offer, HMRC must review the matter in question in accordance with paragraph 41.
(4) If the appellant does not accept the offer in accordance with sub-paragraph (3)—
(a) HMRC's view of the matter in question is treated as if it were contained in a settlement agreement (see paragraph 46(1)); but
(b) paragraph 46(3) (right to withdraw from agreement) does not apply in relation to that notional agreement.
(5) Sub-paragraph (4) does not apply to the matter in question if, or to the extent that, the appellant notifies the appeal to the tribunal.
(See paragraph 44 for the circumstances in which the appellant may do so after accepting HMRC's offer of a review).
(6) HMRC may not take the action mentioned in sub-paragraph (1) at any time if before that time—
(a) HMRC have given a notification under this paragraph in relation to the matter in question,
(b) the appellant has given a notification under paragraph 39 in relation to the matter in question, or
(c) the appellant has notified the appeal to the tribunal.
(7) In this paragraph “acceptance period” means the period of 30 days beginning with the date of the document by which HMRC notify the appellant of the offer to review the matter in question.
Nature of review
41 (1) This paragraph applies if HMRC are required by paragraph 39 or 40 to review the matter in question.
(2) The nature and extent of the review are to be such as appear appropriate to HMRC in the circumstances.
(3) For the purpose of sub-paragraph (2), HMRC must, in particular, have regard to steps taken before the beginning of the review—
(a) by HMRC in deciding the matter in question, and
(b) by any person in seeking to resolve disagreement about the matter in question.
(4) The review must take account of any representations made by the appellant at a stage which gives HMRC a reasonable opportunity to consider them.
(5) The review may conclude that HMRC's view of the matter in question is to be—
(a) upheld,
(b) varied, or
(c) cancelled.
(6) HMRC must notify the appellant of the conclusions of the review and their reasoning within—
(a) the period of 45 days beginning with the relevant day, or
(b) such other period as may be agreed.
(7) In sub-paragraph (6) “relevant day” means—
(a) in a case where the appellant required the review, the day when HMRC notified the appellant of HMRC's view of the matter in question,
(b) in a case where HMRC offered the review, the day when HMRC received notification of the appellant's acceptance of the offer.
(8) If HMRC do not give notice of the conclusions of the review within the period specified in sub-paragraph (6), the review is treated as having concluded that HMRC's view of the matter in question is upheld.
(9) If sub-paragraph (8) applies, HMRC must notify the appellant of the conclusions which the review is treated as having reached.
Effect of conclusions of review
42 (1) If HMRC give notice of the conclusions of a review (see paragraph 41)—
(a) the conclusions are to be treated as if they were contained in a settlement agreement (see paragraph 46(1)), but
(b) paragraph 46(3) (withdrawal from agreement) does not apply in relation to that notional agreement.
(2) Sub-paragraph (1) does not apply to the matter in question if, or to the extent that, the appellant notifies the appeal to the tribunal (see paragraphs 43 and 44).
Notifying appeal to tribunal after appellant has required review
43 (1) Where HMRC have notified an appellant under paragraph 39(1)(a) of their view of a matter to which an appeal under paragraph 35 relates, the appellant—
(a) may not notify the appeal to the tribunal before the beginning of the post-review period;
(b) may notify the appeal to the tribunal after the end of that period only if the tribunal gives permission.
(2) Except where sub-paragraph (3) applies, the post-review period is the period of 30 days beginning with the date of the document in which HMRC give notice of the conclusions of the review in accordance with paragraph 41(6).
(3) If the period specified in paragraph 41(6) ends without HMRC having given notice of the conclusions of the review, the post-review period is the period that—
(a) begins with the day following the last day of the period specified in paragraph 41(6), and
(b) ends 30 days after the date of the document in which HMRC give notice of the conclusions of the review in accordance with paragraph 41(9).
Notifying appeal to tribunal after HMRC have offered review
44 (1) Where HMRC have offered to review the matter to which a notice of an appeal under paragraph 35 relates, the right of the appellant at any time to notify the appeal to the tribunal depends on whether or not the appellant has accepted the offer at that time.
(2) If the appellant has accepted the offer, the appellant—
(a) may not notify the appeal to the tribunal before the beginning of the post-review period;
(b) may notify the appeal to the tribunal after the end of that period only if the tribunal gives permission.
(3) If the appellant has not accepted the offer, the appellant—
(a) may notify the appeal to the tribunal within the acceptance period;
(b) may notify the appeal to the tribunal after the end of that period only if the tribunal gives permission.
(4) In this paragraph—
“acceptance period” has the same meaning as in paragraph 40;
“post-review period” has the same meaning as in paragraph 43.
Interpretation of paragraphs 38 to 44
45 (1) In paragraphs 38 to 44—
(a) “matter in question” means the matter to which an appeal relates;
(b) a reference to a notification is to a notification in writing.
(2) In paragraphs 38 to 44, a reference to the appellant includes a person acting on behalf of the appellant except in relation to—
(a) notification of HMRC's view under paragraph 39(1)(a),
(b) notification by HMRC of an offer of review (and of their view of the matter) under paragraph 40,
(c) notification of the conclusions of a review under paragraph 41(6) or (9).
(3) But if a notification falling within any of the paragraphs of sub-paragraph (2) is given to the appellant, a copy of the notification may also be given to a person acting on behalf of the appellant.
Settling of appeals by agreement
46 (1) In relation to an appeal of which notice has been given under paragraph 36, “settlement agreement” means an agreement between the appellant and an officer of Revenue and Customs that is—
(a) entered into before the appeal is determined, and
(b) to the effect that the decision appealed against should be upheld without variation, varied in a particular manner or discharged or cancelled.
(2) Where a settlement agreement is entered into in relation to an appeal, the consequences are to be the same (for all purposes) as if, at the time the agreement was entered into, the tribunal had decided the appeal and had upheld the decision without variation, varied it in that manner or discharged or cancelled it, as the case may be.
(3) Sub-paragraph (2) does not apply if, within 30 days from the date when the settlement agreement was entered into, the appellant gives notice in writing to HMRC that it wishes to withdraw from the agreement.
(4) Where a settlement agreement is not in writing—
(a) sub-paragraph (2) does not apply unless the fact that an agreement was entered into, and the terms agreed, are confirmed by notice in writing given by HMRC to the appellant or by the appellant to the HMRC, and
(b) the references in sub-paragraphs (2) and (3) to the time when the agreement was entered into are to be read as references to the time when the notice of confirmation was given.
(5) Sub-paragraph (6) applies where notice of an appeal has been given under paragraph 36 and—
(a) the appellant notifies HMRC, orally or in writing, that the appellant does not wish to proceed with the appeal, and
(b) HMRC do not, within 30 days after that notification, give the appellant notice in writing indicating that they are unwilling that the appeal should be withdrawn.
(6) Sub-paragraphs (1) to (4) have effect as if, at the date of the appellant's notification, the appellant and an officer of Revenue and Customs had agreed (orally or in writing, as the case may be) that the decision under appeal should be upheld without variation.
(7) References in this paragraph to an agreement being entered into with an appellant, and to the giving of notice or notification by or to the appellant, include references to an agreement being entered into, or notice or notification being given by or to, a person acting on behalf of the appellant in relation to the appeal.
Appeal does not postpone recovery of tax
47 (1) Where there is an appeal under paragraph 35, the tax charged by the amendment or assessment in question remains due and payable as if there had been no appeal.
(2) Sub-paragraph (1) is subject to paragraphs 48 and 49.
Application for payment of tax to be postponed
48 (1) If the appellant has grounds for believing that the amendment or assessment overcharges the appellant to tax, or as a result of the conclusion stated in the closure notice the tax charged on the appellant is excessive, the appellant may—
(a) first apply by notice in writing to HMRC within 30 days of the specified date for a determination by them of the amount of tax the payment of which should be postponed pending the determination of the appeal, and
(b) if the appellant does not agree with a determination made by HMRC under paragraph (a), refer the application for postponement to the tribunal within 30 days from the date of the document notifying HMRC's determination.
(2) An application under sub-paragraph (1)(a) must state the amount believed to be overcharged to tax and the grounds for that belief.
(3) An application may be made more than 30 days after the specified date if there is a change in the circumstances of the case as a result of which the appellant has grounds for believing that it is overcharged to tax by the decision appealed against.
(4) If, after an application under sub-paragraph (1) has been determined, there is a change in the circumstances of the case as a result of which either party has grounds for believing that the amount determined has become either excessive or insufficient, that party may (if the parties cannot agree on a revised determination) apply to the tribunal for a revised determination of that amount.
(5) An application under sub-paragraph (4) may be made at any time before the determination of the appeal.
(6) An application under this paragraph is to be subject to the relevant provisions of Part 5 of the Taxes Management Act 1970 (see, in particular, section 48(2)(b) of that Act).
(7) The amount of tax of which payment is to be postponed pending the determination of the appeal is the amount (if any) by which it appears that there are reasonable grounds for believing that the appellant is overcharged.
(8) Where an application under this paragraph has been determined, section 163 has effect in relation to any tax of which payment is not postponed as if—
(a) the tax were payable in accordance with an assessment under paragraph 22 issued on the date on which the application was determined, and
(b) there was no appeal against that assessment.
(8A) Sub-paragraphs (8B) and (8C) apply where a person has been given an accelerated payment notice under Chapter 3 of Part 4 of FA 2014 and that notice has not been withdrawn.
(8B) Nothing in this paragraph enables the postponement of the payment of (as the case may be)—
(a) the understated tax to which the payment specified in the notice under section 220(2)(b) of that Act relates, or
(b) the disputed tax specified in the notice under section 221(2)(b) of that Act.
(8C) Accordingly, if the payment of an amount of tax within sub-paragraph (8B)(b) is postponed by virtue of this paragraph immediately before the accelerated payment notice is given, it ceases to be so postponed with effect from the time that notice is given, and the tax is due and payable—
(a) if no representations were made under section 222 of that Act in respect of the notice, on or before the last day of the period of 90 days beginning with the day the notice is given, and
(b) if representations were so made, on or before whichever is later of—
(i) the last day of the 90 day period mentioned in paragraph (a), and
(ii) the last day of the period of 30 days beginning with the day on which HMRC's determination in respect of those representations is notified under section 222 of that Act.
(9) In this paragraph “specified date” has the meaning given by paragraph 36.
Agreement to postpone payment of tax
49 (1) If the appellant and an officer of Revenue and Customs agree that payment of an amount of tax should be postponed pending the determination of the appeal, the consequences are to be the same (for all purposes) as if the tribunal had, at the time when the agreement was entered into, made a direction to the same effect as the agreement. This is without prejudice to the making of a further agreement or further direction.
(2) Where the agreement is not in writing—
(a) sub-paragraph (1) does not apply unless the fact that an agreement was entered into, and the terms agreed, are confirmed by notice in writing given by the officer of Revenue and Customs to the appellant or by the appellant to that officer, and
(b) the reference in sub-paragraph (1) to the time when the agreement was entered into is to be read as a reference to the time when notice of confirmation was given.
(3) References in this paragraph to an agreement being entered into with an appellant, and to the giving of notice to or by the appellant, include references to an agreement being entered into, or notice being given to or by, a person acting on behalf of the appellant in relation to the appeal.
(4) Sub-paragraphs (8A) to (8C) of paragraph 48 apply for the purposes of this paragraph as they apply for the purposes of paragraph 48.
Assessments and self assessments
50 (1) This paragraph applies where an appeal under paragraph 35(1) has been notified to the tribunal.
(2) If the tribunal decides that the appellant is overcharged by a self assessment or any other assessment, the assessment must be reduced accordingly.
(3) If the tribunal does not so decide, the assessment is to stand good.
(4) If it appears to the tribunal that the appellant is undercharged to tax by a self assessment or any other assessment, the assessment must be increased accordingly.
Tribunal determinations
51 The determination of the tribunal in relation to any proceedings under this Part of this Schedule is to be final and conclusive except as otherwise provided in—
(a) sections 9 to 14 of the Tribunals, Courts and Enforcement Act 2007, or
(b) this Part of this Act.
Payment of tax where appeal has been determined
52 (1) On the determination of an appeal under paragraph 35 any tax overpaid must be repaid.
(2) On the determination of an appeal under paragraph 35, section 163(payment of tax) has effect in relation to any relevant tax as if—
(a) the tax were payable in accordance with an assessment under paragraph 22 issued on the date on which HMRC issues to the appellant a notice of the total amount payable in accordance with the determination, and
(b) there had been no appeal against that assessment.
(3) The reference in sub-paragraph (2) to “relevant tax” is to any tax payable in accordance with the determination, so far as it is tax—
(a) the payment of which had been postponed, or
(b) which would not have been charged by the amendment or assessment if there had been no appeal.
Payment of tax where there is a further appeal
53 (1) Where a party to an appeal to the tribunal under paragraph 35 makes a further appeal, tax is to be payable or repayable in accordance with the determination of the tribunal or court (as the case may be), even though the further appeal is pending.
(2) But if the amount charged by the assessment is altered by the order or judgment of the Upper Tribunal or court, then—
(a) if too much tax has been paid, the amount overpaid must be refunded, with any interest allowed by the order or judgment, and
(b) if too little tax has been charged, the amount undercharged is due and payable at the end of the 30 days beginning with the date on which HMRC issue to the other party a notice of the total amount payable in accordance with the order or judgment.
(3) Sub-paragraph (4) applies where—
(a) an accelerated payment notice has been given to a party to the appeal under Chapter 3 of Part 4 of FA 2014 (and not withdrawn), and
(b) the assessment to which the appeal relates has effect, or partly has effect, to counteract the whole or part of the asserted advantage (within the meaning of section 219(3) of that Act) by reason of which the notice was given.
(4) If, on the application of HMRC, the relevant court or tribunal considers it necessary for the protection of the revenue, it may direct that sub-paragraph (1) does not apply so far as the tax relates to the counteraction of the whole or part of the asserted advantage, and—
(a) give permission to withhold all or part of any repayment, or
(b) require the provision of adequate security before repayment is made.
(5) “Relevant court or tribunal” means the tribunal or court from which permission or leave to appeal is sought.
References to “the tribunal”
54 (1) In this Part of this Schedule “the tribunal” means—
(a) the First-tier Tribunal, or
(b) where determined by or under Tribunal Procedure Rules, the Upper Tribunal.
(2) Sub-paragraph (1) does not apply so far as sub-paragraph (3) requires otherwise.
(3) Where the question in any dispute on any appeal under paragraph 35(1) is of the market value of any single-dwelling interest, that question is to be determined on a reference by—
(a) the Upper Tribunal, if the land is in England and Wales;
(b) the Lands Tribunal for Scotland, if the land is in Scotland;
(c) the Lands Tribunal for Northern Ireland, if the land is in Northern Ireland.
PART 8 Supplementary
Application of Schedule in cases involving joint liability to tax
55 (1) This paragraph applies where—
(a) section 97(2) applies and the other persons mentioned in section 97(1)(b) include a company, or
(b) section 97(4) applies and P is a company.
(2) Any obligation to deliver a return with respect to the single-dwelling interest for the chargeable period concerned is a joint obligation of the persons who are jointly and severally liable under subsection (2) or (as the case may be) (4) of section 97; and a single return is required.
Partnerships
56 In relation to a return delivered by the responsible partners for a partnership, anything required or authorised under section 159 or 160 or this Schedule to be done by the responsible partners is required or authorised to be done by all the responsible partners.
Meaning of “return”
57 In this Schedule “return”, except where the contrary is indicated, means an annual tax on enveloped dwellings return or a return of the adjusted chargeable amount.
Meaning of “filing date”
58 “Filing date”, in relation to a return, means the day by the end of which the return is required to be delivered.
SCHEDULE 34 Annual tax on enveloped dwellings: information and enforcement
Section 164
PART 1 Information and inspection powers
1 Schedule 36 to FA 2008 (information and inspection powers) is amended as follows.
2 In paragraph 12A (powers to inspect property for valuation etc), in sub-paragraph (3)—
(a) omit the “or” after paragraph (d), and
(b) after paragraph (e) insert
, or
(f) annual tax on enveloped dwellings.
3 After paragraph 21A insert—
Annual tax on enveloped dwellings: taxpayer notices following return
21B (1) Where a person has delivered, for a chargeable period with respect to a single-dwelling interest—
(a) an annual tax on enveloped dwellings return, or
(b) a return of the adjusted chargeable amount,
a taxpayer notice may not be given for the purpose of checking the person's annual tax on enveloped dwellings position as regards the matters dealt with in that return.
(2) Sub-paragraph (1) does not apply where, or to the extent that, any of conditions A to C is met.
(3) Condition A is that notice of enquiry has been given in respect of—
(a) the return, or
(b) a claim (or an amendment of a claim) made by the person in relation to the chargeable period,
and the enquiry has not been completed.
(4) In sub-paragraph (3) “notice of enquiry” means a notice under paragraph 8 of Schedule 33 to FA 2013 or paragraph 7 of Schedule 11A to FA 2003 (as applied by paragraphs 28(2) and 31(3) of Schedule 33 to FA 2013).
(5) Condition B is that, as regards the person, an officer of Revenue and Customs has reason to suspect that—
(a) an amount that ought to have been assessed to annual tax on enveloped dwellings for the chargeable period may not have been assessed,
(b) an assessment to annual tax on enveloped dwellings for the chargeable period may be or have become insufficient, or
(c) relief from annual tax on enveloped dwellings for the chargeable period may be or have become excessive.
(6) Condition C is that the notice is given for the purpose of obtaining any information or document that is also required for the purpose of checking that person's position as regards a tax other than annual tax on enveloped dwellings.
(7) In this Schedule references to a “single-dwelling interest” are to be read in accordance with section 108 of FA 2013.
4 In paragraph 37 (partnerships), after sub-paragraph (2A) insert—
(2B) Where, in respect of a single-dwelling interest (see paragraph 21B(7)) to which one or more companies are or were entitled as members of a partnership, any member of the partnership has—
(a) delivered an annual tax on enveloped dwellings return or a return of the adjusted chargeable amount under Part 3 of FA 2013, or
(b) made a claim under that Part of that Act,
paragraph 21B (restrictions where taxpayer has delivered return) has effect as if that return had been delivered, or that claim had been made, by each member of the partnership.
5 In paragraph 63(1) (meaning of “tax” in the Schedule), after paragraph (h) insert—
(ha) annual tax on enveloped dwellings,
.
PART 2 Penalties
Errors in returns
6 In Schedule 24 to FA 2007 (penalties for errors), in the Table in paragraph 1, after the entry relating to stamp duty reserve tax insert—
Annual tax on enveloped dwellings | Annual tax on enveloped dwellings return.
Annual tax on enveloped dwellings | Return of adjusted chargeable amount.
Failure to make returns
7 (1) In Schedule 55 to FA 2009 (penalty for failure to make returns etc), in the Table in paragraph 1, after item 11 insert—
11A | Annual tax on enveloped dwellings | Annual tax on enveloped dwellings return under section 159 of FA 2013
11B | Annual tax on enveloped dwellings | Return of adjusted chargeable amount under section 160 of FA 2013
.
(2) That Schedule, as amended by sub-paragraph (1), is taken to have come into force for the purposes of annual tax on enveloped dwellings on the date on which this Act is passed.
Failure to make payments on time
8 Paragraphs 9 to 12 contain amendments and modifications of Schedule 56 to FA 2009 (penalty for failure to make payments on time).
9 (1) The Table in paragraph 1 of that Schedule is amended as follows.
(2) After item 10 insert—
10A | Annual tax on enveloped dwellings | Amount payable under section 163(1) or (2) of FA 2013 (except an amount falling within item 23). | The date falling 30 days after the date specified in section 163(1) or (2) of FA 2013 as the date by which the amount must be paid
.
(3) After item 15 insert—
15A | Annual tax on enveloped dwellings | Amount shown in determination under paragraph 18 of Schedule 33 to FA 2013 | The date falling 30 days after the filing date for the return in question
.
(4) In item 17, in the second column, for “or 10” substitute “ , 10 or 10A ” and in the third column for “15” substitute “ 15A ”.
10 (1) Until paragraphs 2(13)(a) and 2(14)(a) of Schedule 11 to F(No. 3)A 2010 (which amend items 23 and 24) come into force, paragraph 1 of Schedule 56 to FA 2009 has effect as if—
(a) in item 23 the references in the second and third columns to items 1 to 6, 9 or 10 included item 10A, and
(b) in item 24 the reference in the second column to items 1 to 6, 9 or 10 included item 10A.
(2) With effect from the coming into force of paragraphs 2(13)(a) and 2(14)(a) of Schedule 11 to F(No. 3)A 2010, paragraph 1 of Schedule 56 to FA 2009 is amended as follows—
(a) in item 23, in the second and third columns, for “9, 10” substitute “ 9 to 10A ”;
(b) in item 24, in the second column, for “9, 10” substitute “ 9 to 10A ”.
11 Until paragraph 3 of Schedule 11 to F(No. 3)A 2010 comes into force, paragraph 2(c) has effect as if the reference in that paragraph to items 1 to 10 were to items 1 to 10A.
12 Schedule 56 to FA 2009, as amended by paragraph 9, is taken to have come into force for the purposes of annual tax on enveloped dwellings on the date on which this Act is passed.
SCHEDULE 35 Annual tax on enveloped dwellings: miscellaneous amendments and transitory provision
Section 168
PART 1 Miscellaneous amendments
Provisional collection of taxes
1 In section 1(1) of the Provisional Collection of Taxes Act 1968 (temporary statutory effect of House of Commons resolutions), after “stamp duty land tax,” insert “ annual tax on enveloped dwellings, ”.
Disclosure of tax avoidance schemes
2 In section 318(1) of FA 2004 (disclosure of tax avoidance schemes: interpretation), in the definition of “tax”—
(a) omit the “or” after paragraph (f), and
(b) after paragraph (g) insert
, or
(h) annual tax on enveloped dwellings.
Definitions relating to charities
3 In paragraph 7 of Schedule 6 to FA 2010 (definition of “charity”, “charitable company” and “charitable trust”)—
(a) omit the “and” after paragraph (g), and
(b) after paragraph (h) insert
, and
(i) annual tax on enveloped dwellings.
PART 2 Transitory provision: the first chargeable period
4 In relation to the chargeable period beginning on 1 April 2013, section 159(annual tax on enveloped dwellings return) has effect as if subsections (2) and (3) of that section provided as follows—
(2) A return under subsection (1) must be delivered by the end of 1 October 2013 if the days on which the person is within the charge with respect to the interest include 1 April 2013.
(3) If the days on which the person is within the charge with respect to the interest do not include 1 April 2013, the return must be delivered—
(a) by the end of 1 October 2013, or
(b) by the end of the period of 30 days beginning with the first day in the chargeable period on which the person is within the charge with respect to the interest,
whichever is the later.
5 In relation to the chargeable period beginning on 1 April 2013, section 163(payment of tax) has effect as if subsection (1) of that section provided as follows—
(1) Tax charged on a person under section 99 with respect to a single-dwelling interest must be paid—
(a) by the end of 31 October 2013, or
(b) if later, by the end of the filing date for the return.
SCHEDULE 36 Treatment of liabilities for inheritance tax purposes
Section 176
IHTA 1984
1 IHTA 1984 is amended as follows.
2 (1) Section 162 (liabilities) is amended as follows.
(2) In subsection (4), after “possible” insert “ and to the extent that it is not taken to reduce value in accordance with section 162B ”.
(3) In subsection (5), after “possible” insert “ and to the extent that it is not taken to reduce value in accordance with section 162B ”.
3 After section 162 insert—
Liabilities attributable to financing excluded property
162A (1) To the extent that a liability is attributable to financing (directly or indirectly)—
(a) the acquisition of any excluded property, or
(b) the maintenance, or an enhancement, of the value of any such property,
it may only be taken into account so far as permitted by subsections (2) to (4).
(2) Where the property mentioned in subsection (1) has been disposed of, in whole or in part, for full consideration in money or money's worth, the liability may be taken into account up to an amount equal to so much of that consideration as—
(a) is not excluded property, and
(b) has not been used—
(i) to finance (directly or indirectly) the acquisition of excluded property or the maintenance, or an enhancement, of the value of such property, or
(ii) to discharge (directly or indirectly) any other liability that, by virtue of this section, would not be taken into account.
(3) The liability may be taken into account up to an amount equal to the value of such of the property mentioned in subsection (1) as—
(a) has not been disposed of, and
(b) is no longer excluded property.
(4) To the extent that any remaining liability is greater than the value of such of the property mentioned in subsection (1) as—
(a) has not been disposed of, and
(b) is still excluded property,
it may be taken into account, but only so far as the remaining liability is not greater than that value for any of the reasons mentioned in subsection (7).
(5) Subsection (6) applies where—
(a) a liability or any part of a liability is attributable to financing (directly or indirectly)—
(i) the acquisition of property that was not excluded property, or
(ii) the maintenance, or an enhancement, of the value of such property, and
(b) the property or part of the property—
(i) has not been disposed of, and
(ii) has become excluded property.
(6) The liability or (as the case may be) the part may only be taken into account to the extent that it exceeds the value of the property, or the part of the property, that has become excluded property, but only so far as it does not exceed that value for any of the reasons mentioned in subsection (7).
(7) The reasons are—
(a) arrangements the main purpose, or one of the main purposes, of which is to secure a tax advantage,
(b) an increase in the amount of the liability (whether due to the accrual of interest or otherwise), or
(c) a disposal, in whole or in part, of the property.
(8) In this section—
“arrangements” includes any scheme, transaction or series of transactions, agreement or understanding, whether or not legally enforceable, and any associated operations;
“remaining liability” means the liability mentioned in subsection (1) so far as subsections (2) and (3) do not permit it to be taken into account;
“tax advantage” means—
the avoidance or reduction of a charge to tax, or
the avoidance of a possible determination in respect of tax.
Liabilities attributable to financing certain relievable property
162B (1) Subsection (2) applies if—
(a) the whole or part of any value transferred by a transfer of value is to be treated as reduced, under section 104, by virtue of it being attributable to the value of relevant business property, and
(b) the transferor has a liability which is attributable, in whole or in part, to financing (directly or indirectly)—
(i) the acquisition of that property, or
(ii) the maintenance, or an enhancement, of its value.
(2) The liability is, so far as possible, to be taken to reduce the value attributable to the value of the relevant business property, before it is treated as reduced under section 104, but only to the extent that the liability—
(a) is attributable as mentioned in subsection (1)(b), and
(b) does not reduce the value of the relevant business property by virtue of section 110(b).
(3) Subsection (4) applies if—
(a) the whole or part of any value transferred by a transfer of value is to be treated as reduced, under section 116, by virtue of it being attributable to the agricultural value of agricultural property, and
(b) the transferor has a liability which is attributable, in whole or in part, to financing (directly or indirectly)—
(i) the acquisition of that property, or
(ii) the maintenance, or an enhancement, of its agricultural value.
(4) To the extent that the liability is attributable as mentioned in subsection (3)(b), it is, so far as possible, to be taken to reduce the value attributable to the agricultural value of the agricultural property, before it is treated as reduced under section 116.
(5) Subsection (6) applies if—
(a) part of the value of a person's estate immediately before death is attributable to the value of land on which trees or underwood are growing,
(b) the value of the trees or underwood is to be left out of account, under section 125(2)(a), in determining the value transferred by the chargeable transfer made on the person's death, and
(c) the person has a liability which is attributable, in whole or in part, to financing (directly or indirectly)—
(i) the acquisition of the land or trees or underwood,
(ii) planting the trees or underwood, or
(iii) the maintenance, or an enhancement, of the value of the trees or underwood.
(6) To the extent that the liability is attributable as mentioned in subsection (5)(c), it is, so far as possible, to be taken to reduce the value of the trees or underwood, before their value is left out of account.
(7) Subject to subsection (8), to the extent that a liability is, in accordance with this section, taken to reduce value in determining the value transferred by a chargeable transfer, that liability is not then to be taken into account in determining the value transferred by any subsequent transfer of value by the same transferor.
(8) Subsection (7) does not prevent a liability from being taken into account by reason only that the liability has previously been taken into account in determining the amount on which tax is chargeable under section 64.
(9) For the purposes of subsections (1) to (4) and (7), references to a transfer of value or chargeable transfer include references to an occasion on which tax is chargeable under Chapter 3 of Part 3 (apart from section 79) and—
(a) references to the value transferred by a transfer of value or chargeable transfer include references to the amount on which tax is then chargeable, and
(b) references to the transferor include references to the trustees of the settlement concerned.
(10) In this section—
“agricultural property” and “agricultural value” have the same meaning as in Chapter 2 of Part 5;
“relevant business property” has the same meaning as in Chapter 1 of Part 5.
Sections 162A and 162B: supplementary provision
162C (1) This section applies for the purposes of determining the extent to which a liability is attributable as mentioned in section 162A(1) or (5) or 162B(1)(b), (3)(b) or (5)(c).
(2) Where a liability was discharged in part before the time in relation to which the question as to whether or how to take it into account arises—
(a) any part of the liability that, at the time of discharge, was not attributable as mentioned in subsection (1) is, so far as possible, to be taken to have been discharged first,
(b) any part of the liability that, at the time of discharge, was attributable as mentioned in section 162B(1)(b), (3)(b) or (5)(c) is, so far as possible, only to be taken to have been discharged after any part of the liability within paragraph (a) was discharged, and
(c) any part of the liability that, at the time of discharge, was attributable as mentioned in section 162A(1) or (5) is, so far as possible, only to be taken to have been discharged after any parts of the liability within paragraph (a) or (b) were discharged.
4 After section 175 (estate on death: liability to make future payments etc) insert—
Discharge of liabilities after death
175A (1) In determining the value of a person's estate immediately before death, a liability may be taken into account to the extent that—
(a) it is discharged on or after death, out of the estate or from excluded property owned by the person immediately before death, in money or money's worth, and
(b) it is not otherwise prevented, under any provision of this Act, from being taken into account.
(2) Where the whole or any part of a liability is not discharged in accordance with paragraph (a) of subsection (1), the liability or (as the case may be) the part may only be taken into account for the purpose mentioned in that subsection to the extent that—
(a) there is a real commercial reason for the liability or the part not being discharged,
(b) securing a tax advantage is not the main purpose, or one of the main purposes, of leaving the liability or part undischarged, and
(c) the liability or the part is not otherwise prevented, under any provision of this Act, from being taken into account.
(3) For the purposes of subsection (2)(a) there is a real commercial reason for a liability, or part of a liability, not being discharged where it is shown that—
(a) the liability is to a person dealing at arm's length, or
(b) if the liability were to a person dealing at arm's length, that person would not require the liability to be discharged.
(4) Where, by virtue of this section, a liability is not taken into account in determining the value of a person's estate immediately before death, the liability is also not to be taken into account in determining the extent to which the estate of any spouse or civil partner of the person is increased for the purposes of section 18.
(5) In subsection (2)(b) “tax advantage” means—
(a) a relief from tax or increased relief from tax,
(b) a repayment of tax or increased repayment of tax,
(c) the avoidance, reduction or delay of a charge to tax or an assessment to tax, or
(d) the avoidance of a possible assessment to tax or determination in respect of tax.
(6) In subsection (5) “tax” includes income tax and capital gains tax.
(7) Where the liability is discharged as mentioned in subsection (1)(a) only in part—
(a) any part of the liability that is attributable as mentioned in section 162A(1) or (5) is, so far possible, taken to be discharged first,
(b) any part of the liability that is attributable as mentioned in section 162B(1)(b), (3)(b) or (5)(c) is, so far as possible, taken to be discharged only after any part of the liability within paragraph (a) is discharged, and
(c) the liability so far as it is not attributable as mentioned in paragraph (a) or (b) is, so far as possible, taken to be discharged only after any parts of the liability within either of those paragraphs are discharged.
Commencement
5 (1) Subject to sub-paragraph (2), the amendments made by this Schedule have effect in relation to transfers of value made, or treated as made, on or after the day on which this Act is passed.
(2) Section 162B of IHTA 1984 (inserted by paragraph 3) only has effect in relation to liabilities incurred on or after 6 April 2013.
(3) For the purposes of sub-paragraph (2), where a liability is incurred under an agreement—
(a) if the agreement was varied so that the liability could be incurred under it, the liability is to be treated as having been incurred on the date of the variation, and
(b) in any other case, the liability is to be treated as having been incurred on the date the agreement was made.
Section 190
1 VERA 1994 is amended as follows.
2 (1) Section 19 (rebates) is amended as follows.
(2) In subsection (3), after paragraph (c) insert—
(ca) a qualifying application for a vehicle licence for the vehicle is made,
.
(3) After that subsection insert—
(3ZA) An application for a vehicle licence is a qualifying application for the purposes of subsection (3)(ca) if—
(a) paragraph 1ZA of Schedule 1 applies to the vehicle when the application is made, but
(b) that paragraph did not apply to the vehicle when the licence which is unexpired when the application is made was taken out.
3 (1) Section 22ZA (nil licences for vehicles for disabled persons: information) is amended as follows.
(2) In subsection (1)(b), at the beginning insert “ falls within subsection (1A) or ”.
(3) After subsection (1) insert—
(1A) Information falls within this subsection if it is—
(a) the name, date of birth or national insurance number of a person who is in receipt of a relevant payment, or would be in receipt of such a payment but for—
(i) regulations under section 86(1) of the Welfare Reform Act 2012 (treatment as in-patient in hospital or similar institution), or
(ii) corresponding provision having effect in relation to personal independence payment in Northern Ireland;
(b) in the case of a person who is or would be in receipt of personal independence payment attributable to entitlement to the mobility component, the rate of the payment to which the person is or would be entitled;
(c) in the case of a person who has ceased or will cease to receive a relevant payment, the date on which the person ceased or will cease to receive it and the reason for the person ceasing to receive it.
(1B) In subsection (1A) “relevant payment” means—
(a) personal independence payment attributable to entitlement to the mobility component, and
(b) armed forces independence payment.
(4) In subsections (2) and (4), and in the heading, omit “nil”.
(5) For subsection (5) substitute—
(5) In this section “relevant licence functions” means functions relating to applications for, and the issue of—
(a) vehicle licences in respect of vehicles to which paragraph 1ZA of Schedule 1 applies, and
(b) nil licences in respect of vehicles that are exempt vehicles under paragraph 19 of Schedule 2 or paragraph 7 of Schedule 4.
4 In section 62(1) (definitions), at the appropriate places insert—
“armed forces independence payment” means armed forces independence payment under a scheme established under section 1 of the Armed Forces (Pensions and Compensation) Act 2004,
, and
“personal independence payment” means personal independence payment under—
(a) the Welfare Reform Act 2012, or
(b) the corresponding provision having effect in Northern Ireland,
.
5 In Schedule 1 (annual rates of duty), in Part 1 after paragraph 1 insert—
1ZA (1) The annual rate of vehicle excise duty applicable to a vehicle to which this paragraph applies is 50 per cent of the rate which (but for this paragraph) would be applicable.
(2) This paragraph applies to a vehicle when it is being used, or kept for use, by or for the purposes of a disabled person who is in receipt of personal independence payment by virtue of entitlement to the mobility component at the standard rate if—
(a) the vehicle is registered under this Act in the name of the disabled person, and
(b) no other vehicle registered in his or her name under this Act is—
(i) a vehicle for which a vehicle licence taken out at a rate of duty reduced in accordance with sub-paragraph (1) is in force, or
(ii) an exempt vehicle under paragraph 19 of Schedule 2 or paragraph 7 of Schedule 4.
(3) This paragraph has effect as if a person were in receipt of personal independence payment by virtue of entitlement to the mobility component at the standard rate in any case where the person would be in receipt of that payment by virtue of that entitlement but for—
(a) regulations under section 86(1) of the Welfare Reform Act 2012 (treatment as in-patient in hospital or similar institution), or
(b) corresponding provision having effect in Northern Ireland.
(4) For the purposes of sub-paragraph (2), a vehicle is to be treated as registered under this Act in the name of a person in receipt of personal independence payment by virtue of entitlement to the mobility component at the standard rate if it is so registered in the name of—
(a) an appointee, or
(b) a person nominated for the purposes of this paragraph by the person or an appointee.
(5) In sub-paragraph (4) “appointee” means a person appointed pursuant to regulations made under (or having effect as if made under) the Social Security Administration Act 1992 or the Social Security Administration (Northern Ireland) Act 1992 to exercise any of the rights and powers of a person in receipt of personal independence payment.
6 (1) In Schedule 2 (exempt vehicles), paragraph 19 is amended as follows.
(2) In sub-paragraph (1), for paragraph (b) substitute—
(b) no other vehicle registered in his or her name under this Act is—
(i) a vehicle for which a vehicle licence taken out at a rate of vehicle excise duty reduced in accordance with paragraph 1ZA(1) of Schedule 1 is in force, or
(ii) an exempt vehicle under this paragraph or paragraph 7 of Schedule 4.
(3) In sub-paragraph (2), after paragraph (a) insert—
(aa) he or she is in receipt of personal independence payment by virtue of entitlement to the mobility component at the enhanced rate,
(ab) he or she is in receipt of armed forces independence payment,
.
(4) After sub-paragraph (2A) insert—
(2B) This paragraph has effect as if a person were in receipt of personal independence payment by virtue of entitlement to the mobility component at the enhanced rate in any case where the person would be in receipt of that payment by virtue of that entitlement but for—
(a) regulations under section 86(1) of the Welfare Reform Act 2012 (treatment as in-patient in hospital or similar institution), or
(b) corresponding provision having effect in Northern Ireland.
(5) In sub-paragraph (3), for “person in receipt of a disability living allowance by virtue of entitlement to the mobility component at the higher rate, or of a mobility supplement,” substitute “ disabled person who satisfies sub-paragraph (2) by virtue of paragraph (a), (aa), (ab) or (b) of that sub-paragraph ”.
(6) In sub-paragraph (4)(a), after “disability living allowance,” insert “ personal independence payment or armed forces independence payment, ”.
7 The amendments made by this Schedule are treated as having come into force on 8 April 2013.
Section 192
Introductory
1 VATA 1994 is amended as follows.
Valuation of supplies for private use
2 In Schedule 6 (valuation: special cases), before paragraph 1 insert—
PART 1 Valuation of supplies of fuel for private use
Option for valuation on flat-rate basis
A1 (1) This paragraph applies if, in a prescribed accounting period, supplies of goods by a taxable person (“P”) arise by virtue of paragraph 5(1) of Schedule 4 (but otherwise than for a consideration) where road fuel which is or has previously been supplied to or imported or manufactured by P in the course of P's business is provided for, or appropriated to, private use.
(2) For this purpose “road fuel is provided for, or appropriated to, private use” if—
(a) it is provided or to be provided by P—
(i) to an individual for private use in the individual's own car or a car allocated to the individual, and
(ii) by reason of the individual's employment,
(b) where P is an individual, it is appropriated or to be appropriated by P for private use in P's own car, or
(c) where P is a partnership, it is provided or to be provided to any of the individual partners for private use in that partner's own car.
(3) P may opt for all supplies of goods within sub-paragraph (1) made by P in the prescribed accounting period to be valued on the flat-rate basis.
(4) On the flat-rate basis, the value of all supplies made to any one individual in respect of any one car is that determined in accordance with an order under paragraph B1.
B1 (1) The Treasury must, by order, make provision about the valuation of supplies on the flat-rate basis.
(2) In particular, an order under this paragraph must—
(a) set out a table (“the base valuation table”) by reference to which the value of supplies is to be determined until such time as the base valuation table is replaced under paragraph (b),
(b) provide that at regular intervals—
(i) the amounts specified in the base valuation table are to be revalorised by the Commissioners in accordance with the order, and
(ii) a table (an “updated valuation table”) containing the revalorised amounts is to take effect (and replace any existing table) in accordance with the order, and
(c) require the Commissioners to publish any updated valuation table before it takes effect, together with a statement specifying the date from which it has effect.
(3) An order under this paragraph may provide for the base valuation table and any updated valuation table to be implemented or supplemented by either or both of the following—
(a) rules set out in the order which explain how the value is to be determined by reference to any table;
(b) notes set out in the order with respect to the interpretation or application of any table or any rules or notes.
(4) Rules or notes may make different provision for different circumstances or cases.
Interpretation
C1 (1) For the purposes of this Part of this Schedule—
(a) any reference to an individual's own car is to be construed as including any car of which for the time being the individual has the use, other than a car allocated to the individual,
(b) subject to sub-paragraph (2), a car is at any time to be taken to be allocated to an individual if at that time it is made available (without any transfer of the property in it) either to the individual or to any other person, and is so made available by reason of the individual's employment and for private use, and
(c) fuel provided by an employer to an employee and fuel provided to any person for private use in a car which, by virtue of paragraph (b), is for the time being taken to be allocated to the employee is to be taken to be provided to the employee by reason of the employee's employment.
(2) For the purposes of this Part of this Schedule, in any prescribed accounting period a car is not regarded as allocated to an individual by reason of the individual's employment if—
(a) in that period it was made available to, and actually used by, more than one of the employees of one or more employers and, in the case of each of them, it—
(i) was made available to that employee by reason of the employment, but
(ii) was not in that period ordinarily used by any one of them to the exclusion of the others,
(b) in the case of each of the employees, any private use of the car made by the employee in that period was merely incidental to the employee's other use of it in that period, and
(c) in that period it was not normally kept overnight on or in the vicinity of any residential premises where any of the employees was residing, except while being kept overnight on premises occupied by the person making the car available to them.
(3) In this Part of this Schedule—
“employment” includes any office, and related expressions are to be construed accordingly;
“car” means a motor car as defined by paragraph 1A(4) and (5);
“road fuel” means hydrocarbon oil as defined by the Hydrocarbon Oil Duties Act 1979 (see section 1(2) of that Act) on which duty has been or is required to be paid in accordance with that Act.
(4) The Treasury may, by order, amend the definition of “road fuel” in sub-paragraph (3).
PART 2 Other provisions
.
3 In paragraph 6 of that Schedule (valuation of supplies of goods by virtue of paragraph 5(1) of Schedule 4 etc), in sub-paragraph (1), after “except where” insert “ the person making the supply opts under paragraph A1(3) above for valuation on the flat-rate basis or ”.
4 Omit sections 56 and 57 (fuel for private use).
5 In section 97(4) (orders subject to affirmative procedure), in paragraph (f)—
(a) after “paragraph” insert “ B1, C1(4), ”, and
(b) after “1A(7)” insert “ , 2A(4) ”.
Supplies to employees etc at less than open market value
6 After paragraph 2 of Schedule 6 insert—
2A (1) This paragraph applies if—
(a) a taxable person (“P”) makes a supply of road fuel for a consideration,
(b) the recipient of the supply is—
(i) connected with P, or
(ii) an employee or partner of P or a person who is connected with such an employee or partner,
(c) the value of the supply would (in the absence of this paragraph) be less than its open market value, and
(d) the recipient of the supply is not entitled to credit for the whole of the input tax arising on the supply.
(2) The value of the supply is to be taken to be an amount equal to its open market value.
(3) For the purposes of this paragraph—
(a) “road fuel” means hydrocarbon oil as defined by the Hydrocarbon Oil Duties Act 1979 (see section 1(2) of that Act) on which duty has been or is required to be paid in accordance with that Act, and
(b) any question whether a person is connected with another is to be determined in accordance with section 1122 of the Corporation Tax Act 2010.
(4) The Treasury may, by order, amend the definition of “road fuel” in sub-paragraph (3)(a).
Commencement and transitional provision
7 (1) The amendments made by paragraphs 2 to 4 come into force in relation to prescribed accounting periods beginning on or after 1 February 2014.
(2) Subject to that, section 56 of VATA 1994 has effect on and after 11 December 2012 as if in subsection (2) of that section for the words after “it is supplied” there were substituted “ for consideration. ”
8 (1) The amendment made by paragraph 6 is to be treated as coming into force on 11 December 2012 and has effect in relation to—
(a) supplies of goods on or after the commencement day, and
(b) supplies of goods in the period beginning with 11 December 2012 and ending immediately before the commencement day, if and to the extent that the goods are not made available before the end of that period to the person to whom they are supplied.
(2) “The commencement day” means the day on which this Act is passed.
SCHEDULE 39 Stamp duty land tax: transactions entered into before completion of contract
Section 195
1 Part 4 of FA 2003 (stamp duty land tax) is amended as follows.
2 For section 45 (contract and conveyance: effect of transfer of rights) substitute—
Transactions entered into before completion of contract
45 Schedule 2A contains—
(a) provision about the application of section 44 (contract and conveyance) in certain cases where an assignment of rights, subsale or other transaction is entered into without the contract having been completed, and
(b) other provision about such cases.
3 After Schedule 2 insert—
SCHEDULE 2A
Transactions entered into before completion of contract
Pre-completion transactions
1 (1) This Schedule applies where—
(a) a person (“the original purchaser”) enters into a contract (“the original contract”) for the acquisition by that person of a chargeable interest under which the acquisition is to be completed by a conveyance, and
(b) there is a pre-completion transaction.
(2) A transaction is a “pre-completion transaction” for the purposes of sub-paragraph (1) if—
(a) as a result of the transaction a person other than the original purchaser (“the transferee”) becomes entitled to call for a conveyance to that person of the whole or part of the subject-matter of the original contract, and
(b) immediately before the transaction took place a person was entitled under the original contract to call for a conveyance of the whole or part of that subject-matter.
(3) A transaction that effects a person's acquisition of the whole or part of the subject-matter of the original contract is not a pre-completion transaction.
(4) The grant or assignment of an option is not a pre-completion transaction.
(5) The fact that a transaction has the effect of discharging the original contract does not prevent that transaction from being a pre-completion transaction.
(6) The reference in sub-paragraph (1)(a) to a contract does not include a contract that is an assignment of rights in relation to another contract.
(7) In this Schedule references to “part of the subject-matter of the original contract”—
(a) are to a chargeable interest that is the same as the chargeable interest referred to in sub-paragraph (1)(a) except that it relates to part only of the land concerned, and
(b) also include, so far as is appropriate, interests or rights appurtenant or pertaining to the chargeable interest.
(8) This Schedule does not apply where paragraph 12B of Schedule 17A (assignment of agreement for lease) applies.
Other key expressions
2 (1) A pre-completion transaction is an “assignment of rights” if the entitlement of the transferee referred to in paragraph 1(2)(a) is an entitlement to exercise rights under the original contract.
(2) A pre-completion transaction other than an assignment of rights is referred to in this Schedule as a “free-standing transfer”.
(3) In this Schedule “the transferor”, in relation to a pre-completion transaction, means a party to the pre-completion transaction who immediately before the pre-completion transaction took place was entitled to call for a conveyance of (what became) the subject-matter of the pre-completion transaction.
(4) References in this Schedule to the “subject-matter” of a pre-completion transaction—
(a) are to the chargeable interest the conveyance of which the transferee is entitled to call for as a result of the pre-completion transaction, and
(b) include, so far as appropriate, any interest or right appurtenant or pertaining to the chargeable interest.
Tax not charged on transferee by reason of the pre-completion transaction
3 The transferee is not regarded as entering into a land transaction by reason of the pre-completion transaction.
Assignments of rights: application of rules about completion and consideration
4 (1) This paragraph applies if the pre-completion transaction is an assignment of rights.
(2) If the subject-matter of the original contract is conveyed to the transferee, the conveyance is taken to effect the completion of the original contract (despite section 44(10)).
(3) Sub-paragraphs (4) to (6) apply if—
(a) the subject-matter of the original contract is conveyed to the transferee, or
(b) the original contract is substantially performed by the transferee.
(4) The transferee is taken to be the purchaser under the land transaction effected as mentioned in section 44(3), or treated as effected under section 44(4).
(5) For the purpose of determining the chargeable consideration for that land transaction, the land transaction is taken to give effect to a contract the consideration under which is—
(a) the consideration under the original contract, and
(b) the consideration for the assignment of rights.
Paragraph 1 of Schedule 4 has effect accordingly (but this sub-paragraph does not allow any amount of consideration given by a person to be counted twice in determining the chargeable consideration).
(6) In any case in which there is a relevant connection between parties as mentioned in paragraph 12(2) (minimum consideration rule), the chargeable consideration for the land transaction mentioned in sub-paragraph (4) of this paragraph is calculated (regardless of whether the consideration is taken to be the amount in paragraph (a), (b) or (c) of sub-paragraph 12(2)), as if in paragraph 1(1) of Schedule 4 the words, “or a person connected with him” were omitted.
(7) The original contract is said to be “substantially performed by the transferee” where a land transaction is treated under section 44(4) as effected by reason of—
(a) the transferee under the assignment of rights, or a person connected with the transferee, taking possession of the whole, or substantially the whole, of the subject-matter of the original contract, or
(b) a substantial amount of the consideration being paid or provided by the transferee or a person connected with the transferee, or
(c) consideration paid or provided by a person within paragraph (b) amounting, when taken together with consideration paid or provided by another person, to a substantial amount of the consideration.
(8) References in sub-paragraph (7) to possession and to the payment or provision of a substantial amount of the consideration are to be read in accordance with section 44(6) and (7).
(9) In sub-paragraph (5) “the consideration”—
(a) in relation to the land transaction, means (what is to be taken to be) the consideration for the acquisition of the subject-matter of the land transaction;
(b) in relation to the original contract, means the consideration for the acquisition of the subject-matter of that contract;
(c) in relation to the assignment of rights, means the consideration for the transferee's acquisition of the rights to which that contract relates.
Assignment of rights: transferor treated as making separate acquisition
5 (1) Where paragraph 4(4) to (6) applies (assignment of rights: original contract completed or substantially performed) this Part of this Act has effect as if—
(a) the effective date of the land transaction mentioned in paragraph 4(4) (“the transferee's land transaction”) were also the effective date of another land transaction (a “notional land transaction”), and
(b) the original purchaser were the purchaser under that notional land transaction.
The notional land transaction is referred to below as “associated with” the assignment of rights under which the original purchaser is the transferor.
(2) Where sub-paragraph (1) applies and the assignment of rights mentioned in paragraph 4(1) (“the implemented assignment of rights”) was preceded by one or more related assignments of rights, then for the purposes of this Part of this Act there is taken to be, for each assignment of rights (other than the first) in the chain formed by the implemented assignment of rights and those preceding assignments of rights, an additional land transaction in the case of which—
(a) the effective date is the effective date of the transferee's land transaction, and
(b) the purchaser is the transferor under that assignment of rights.
The additional land transaction is referred to below as “associated with” the assignment of rights.
(3) For the purpose of determining the chargeable consideration for the notional land transaction, Schedule 4 has effect as if paragraph 1(1) of that Schedule provided that the chargeable consideration is (except as otherwise expressly provided) the total of amounts A and B.
(4) For the purpose of determining the chargeable consideration for any additional land transaction, Schedule 4 has effect as if paragraph 1(1) of that Schedule provided that the chargeable consideration is (except as otherwise expressly provided) the total of amounts A, B and C.
(5) For the purposes of sub-paragraphs (3) and (4)—
A is the total amount of any consideration in money or money's worth given (whether directly or indirectly) by any of the following as consideration under the original contract—
the transferee under the assignment of rights with which the notional land transaction or (as the case requires) the additional land transaction is associated;
where that assignment of rights is one in a chain of successive transactions that are pre-completion transactions in relation to the original contract (all having at least part of their subject-matter in common), the transferee under any subsequent pre-completion transaction in that chain;
a person connected with a person falling within paragraph (a) or (b);
B is the total amount of any other consideration in money or money's worth given as consideration under the original contract (directly or indirectly) by—
the purchaser (under the notional land transaction or, as the case requires, the additional land transaction), or
a person connected with the purchaser;
C is the amount of any consideration in money or money's worth given for the preceding assignment of rights by—
the purchaser (under the additional land transaction), or
a person connected with the purchaser.
(6) In the definition of amount C, “the preceding assignment of rights” means the assignment of rights as a result of which the purchaser became entitled to call for a conveyance of (what became) the subject-matter of the assignment of rights associated with the additional land transaction.
(7) In sub-paragraph (2) “related assignment of rights” means a transaction that is an assignment of rights in relation to the original contract and has some subject-matter in common with the implemented assignment of rights.
Paragraph 5: effect of rescission etc following substantial performance
6 (1) This paragraph applies where paragraph 5(1) (transferor treated as making separate acquisition) applies by virtue of the substantial performance by the transferee of the original contract.
(2) If the original contract is (to any extent) subsequently rescinded or annulled, or is for any other reason not carried into effect, the tax paid by virtue of paragraph 5(1), and any tax paid by virtue of paragraph 5(2), must (to that extent) be repaid by HMRC.
(3) Repayment under sub-paragraph (2) must be claimed by amendment of the land transaction return made in respect of the notional or additional land transaction.
Assignment of rights relating to part only of subject-matter of original contract
7 Where the transferee under the assignment of rights referred to in paragraph 4(1) is entitled to call for the conveyance of part, but not the whole, of the subject-matter of the original contract—
(a) paragraph 4 applies as if the original contract, so far as relating to that part of its subject-matter, were a separate contract, and
(b) the references in paragraph 5 to the original contract are to be read accordingly.
Assignment of rights: references to “the vendor”
8 (1) This paragraph applies where—
(a) the pre-completion transaction is an assignment of rights, and
(b) either the subject-matter of the original contract is conveyed to the transferee or the original contract is substantially performed by the transferee.
(2) This paragraph does not apply if the original contract is itself a free-standing transfer. See paragraphs 10 and 11 for the treatment of such cases.
(3) In relation to a relevant land transaction, the general rule is that references in this Part of this Act to the vendor are to be read as references to the vendor under the original contract (but see sub-paragraphs (4) and (5)).
(4) In cases where the original contract was substantially performed before the transferee became entitled to call for a conveyance of the whole or part of the subject-matter of the original contract, references in this Part of this Act to the vendor are to be read as references to the person who was the purchaser under the original contract when it was substantially performed.
(5) In relation to a relevant land transaction, references to the vendor in the specified provisions (see sub-paragraph (6)) are to be read as including—
(a) the vendor under the original contract, and
(b) the transferor under any relevant assignment of rights.
(6) The specified provisions are—
(a) section 61(1)(a) (compliance with planning obligations: conditions for exemption);
(b) section 66(1) and (2) (transfers involving public bodies);
(c) paragraph 8(1)(a) of Schedule 4 (debt as consideration);
(d) paragraph 10(2)(c) of Schedule 4 (carrying out of works);
(e) paragraph 16 of Schedule 4 (indemnity given by vendor).
(7) The following are “relevant land transactions”—
(a) the land transaction effected by the conveyance mentioned in sub-paragraph (1)(b) or treated as effected by the substantial performance mentioned in that provision;
(b) the notional land transaction mentioned in paragraph 5(1)(b) and any additional land transaction under paragraph 5(2).
(8) In determining under section 108(1) whether or not a relevant land transaction such as is mentioned in sub-paragraph (7)(a) is linked to another transaction, it may be assumed that any of the following is the vendor under the relevant land transaction—
(a) the vendor (determined in accordance with sub-paragraph (3)), or
(b) the transferor under any relevant assignment of rights.
(9) The following are “relevant assignments of rights” in relation to a relevant land transaction—
(a) the assignment of rights mentioned in sub-paragraph (1)(a);
(b) any other transaction that is an assignment of rights in relation to the original contract and has some subject-matter in common with the assignment of rights mentioned in paragraph (a).
Free-standing transfers: consideration and substantial performance
9 (1) This paragraph applies where the pre-completion transaction is a free-standing transfer.
(2) If the transferee acquires the subject-matter of the free-standing transfer, the consideration for the transaction effecting that acquisition is taken to include the consideration given for the free-standing transfer (if that would not otherwise be the case).
(3) References in sub-paragraph (2) to an acquisition include an acquisition deemed to take place under section 44(4) (and the reference to the transaction effecting that acquisition is read accordingly).
(4) An action taken by the transferee (or an assignee of the transferee) that would, if taken by the original purchaser, constitute (for the purposes of section 44(5)) the taking of possession of the whole or substantially the whole of the subject-matter of the original contract is treated as effecting the substantial performance of the original contract.
(5) If a transaction that is a free-standing transfer in relation to a contract is also a free-standing transfer in relation to another contract (in particular, where there have been successive free-standing transfers), each of those contracts may be regarded as “the original contract” for the purposes of separate applications of sub-paragraph (4).
(6) In sub-paragraph (4)—
(a) the reference to the transferee includes a person connected with the transferee, and
(b) the reference to an assignee of the transferee includes a person connected with such a person.
(7) References in this paragraph to an assignee of the transferee are to a person who, as a result of a transaction that is an assignment of rights in relation to the free-standing transfer, is entitled to call for a conveyance of the whole or part of the subject-matter of the free-standing transfer.
Meaning of “the vendor”: cases involving free-standing transfers
10 (1) This paragraph applies where—
(a) a land transaction is effected, or treated as effected, by an acquisition falling within paragraph 9(2) (read with paragraph 9(3)), or
(b) paragraph 8(1) (meaning of “vendor” where the transferee is the assignee under an assignment of rights) would apply but for paragraph 8(2) (exclusion of cases where the original contract is itself a free-standing transfer).
(2) In this paragraph “the relevant land transaction” means the land transaction—
(a) mentioned in sub-paragraph (1)(a), or
(b) in a case falling within sub-paragraph (1)(b), effected by the conveyance to the transferee of the subject-matter of the original contract or the substantial performance by the transferee of the original contract.
(3) References in this paragraph to “the specified transaction” are to—
(a) the free-standing transfer mentioned in paragraph 9(2), or
(b) the original contract the subject-matter of which is conveyed to the transferee or which is substantially performed by the transferee.
(4) The general rule is that in relation to the relevant land transaction references in this Part of this Act to “the vendor” are to be read as references to the vendor or (as the case may be) transferor under the first appropriate transaction (but see sub-paragraph (5)).
(5) In relation to the relevant land transaction, references to the vendor in the specified provisions (see sub-paragraph (6)) are to be read as including—
(a) the vendor under the first appropriate transaction, and
(b) each person who is the transferor in the case of a relevant pre-completion transaction.
(6) The specified provisions are—
(a) section 61(1)(a) (compliance with planning obligations: conditions for exemption);
(b) section 66(1) and (2) (transfers involving public bodies);
(c) paragraph 8(1)(a) of Schedule 4 (debt as consideration);
(d) paragraph 10(2)(c) of Schedule 4 (carrying out of works);
(e) paragraph 16 of Schedule 4 (indemnity given by vendor).
(7) In determining under section 108(1) whether or not the relevant land transaction is linked to another transaction it may be assumed that any of the following is the vendor under the relevant land transaction—
(a) the vendor (determined under sub-paragraph (4)), or
(b) the transferor under any relevant pre-completion transaction.
(8) The following are “relevant pre-completion transactions” in relation to the relevant land transaction—
(a) the specified transaction;
(b) any other transaction that is a pre-completion transaction in relation to the original contract and has some subject-matter in common with the specified transaction.
Paragraph 10: “the first appropriate transaction” and “the original contract”
11 (1) Subject to the following provisions of this paragraph, “the first appropriate transaction” means the original contract.
(2) If the original contract is not performed at the same time as, and in connection with the performance of, the specified transaction, “the first appropriate transaction” means a transaction that is a pre-completion transaction in relation to the original contract and meets the following conditions.
(3) The conditions are that the pre-completion transaction—
(a) is performed at the time when the specified transaction is performed and (if it is not itself the specified transaction) is performed in connection with the performance of the specified transaction,
(b) is a transaction on which the entitlement of the transferee to call for the conveyance of the subject-matter of the specified transaction depends, and
(c) is not preceded by another pre-completion transaction meeting the conditions in paragraphs (a) and (b).
(4) For the purposes of this paragraph—
(a) a contract for a land transaction is taken to be “performed” when it is substantially performed or completed (whichever is earlier);
(b) a free-standing transfer other than a contract is taken to be “performed” when the transferee under that free-standing transfer (or an assignee of that transferee, as defined in paragraph 9(7)) acquires the subject-matter of that free-standing transfer.
(5) Where the specified transaction is a pre-completion transaction in relation to each of two or more contracts such as are mentioned in paragraph 1(1)(a) that together form a series of such contracts (each having some subject-matter in common with all the others), references in paragraph 10 and this paragraph to “the original contract” are to be read as references to the first contract in that series.
(6) In this paragraph “the specified transaction” has the meaning given by paragraph 10(3).
Minimum consideration rule
12 (1) This paragraph applies where either of the following provisions applies—
(a) paragraph 4(3) (assignment of rights: chargeable interest acquired or treated as acquired by transferee);
(b) paragraph 9(2) (free-standing transfers: chargeable interest acquired or treated as acquired by transferee).
(2) If there is a relevant connection between parties, then for the purposes of paragraph 1(1) of Schedule 4 the consideration given by the purchaser for the subject-matter of the land transaction referred to in paragraph 4(4) or 9(2) is taken to be—
(a) the amount that it would be apart from this sub-paragraph, or
(b) (if higher) the first minimum amount, or
(c) (if higher than both those amounts) the second minimum amount.
(3) There is a “relevant connection between parties” if—
(a) the persons who are the transferor and transferee in relation to the pre-completion transaction mentioned in paragraph 4(1) or 9(1) (“the implemented transaction”) are connected with each other, or are not acting at arm's length, or
(b) sub-paragraph (4) applies.
(4) This sub-paragraph applies if—
(a) the implemented transaction is one in a chain of successive transactions (all having at least part of their subject-matter in common) that are pre-completion transactions in relation to the original contract, and
(b) a person who is the transferor in relation to a pre-completion transaction that precedes the implemented transaction in the chain of transactions is connected with, or not acting at arm's length in relation to, the transferee under the implemented transaction.
(5) Where the implemented transaction is a pre-completion transaction in relation to—
(a) a contract for a land transaction that is not itself a free-standing transfer in relation to any other contract, and
(b) a contract, or two or more successive contracts, that are themselves free-standing transfers in relation to the contract mentioned in paragraph (a),
references in this paragraph to “the original contract” are to the contract mentioned in paragraph (a) (and do not include any contract mentioned in paragraph (b)).
The first minimum amount
13 (1) “The first minimum amount” means—
(a) if the chargeable interest acquired (or treated as acquired) under the land transaction referred to in paragraph 4(4) or 9(2) is the whole subject-matter of the original contract, the amount of any consideration (in money or money's worth) agreed to be given, under the terms of the original contract, for the acquisition of that subject-matter, or
(b) if paragraph (a) does not apply, so much of the amount mentioned in paragraph (a) as is referable, on a just and reasonable apportionment, to the chargeable interest mentioned in that paragraph.
This is subject to sub-paragraph (2).
(2) If conditions A to C are met, “the first minimum amount” means the amount of any consideration (in money or money's worth) agreed, under the terms of the transfer to the first T, to be given in respect of the subject-matter of that transaction (including any consideration relating to an obligation of the transferor under the transfer to the first T).
(3) The conditions mentioned in sub-paragraph (2) are as follows.
Condition A is that the pre-completion transaction referred to in paragraph 4(4) or 9(2) is one of a chain of successive transactions (all having at least part of their subject-matter in common) that are pre-completion transactions in relation to the original contract.
Condition B is that a person (“T”) is the transferor under a pre-completion transaction that forms part of that chain and T is connected with, or not acting at arm's length in relation to—
the transferee under that transaction, or
the transferee under a subsequent transaction in the chain.
Condition C is that having regard to all the circumstances it would not be reasonable to conclude that the obtaining of a tax advantage (for any person) was the main purpose, or one of main purposes, of T in entering into—
any pre-completion transaction in the chain, or
any arrangements of which such a transaction forms part.
(4) Where conditions A to C are met, “the first T” means—
(a) if condition B is met in relation to only one pre-completion transaction, T, or
(b) if condition B is met in relation to more than one pre-completion transaction in the chain, the transferor in relation to the first of the pre-completion transactions in relation to which condition B is met.
(5) In this paragraph “the transfer to the first T” means—
(a) the pre-completion transaction under which the first T is the transferee, or
(b) the original contract (if T is the original purchaser).
(6) In this paragraph—
(a) references to “the original contract” are to be read in accordance with paragraph 12(5) (and references to the original purchaser are to be read accordingly);
(b) “tax advantage” has the same meaning as in paragraph 18.
The second minimum amount
14 (1) In paragraph 12 “the second minimum amount” means the total of the net amounts of consideration given by the relevant parties.
(2) The net amount of consideration given by any relevant party is—
CP
−
CR
where—
CP is the total amount of consideration given by the party for the acquisition of the chargeable interest or as consideration for a pre-completion transaction;
CR is the total of any amounts of consideration given to the party by another relevant party (or other relevant parties) as consideration for the acquisition of the chargeable interest or as consideration for a pre-completion transaction.
If CR is greater than CP, the net amount of consideration given by the relevant party is taken to be zero.
(3) Except where sub-paragraph (4) applies, the relevant parties for the purposes of this paragraph are—
(a) the original purchaser, and
(b) the transferee.
(4) If the pre-completion transaction referred to in paragraph 4(4) or 9(2) (“the implemented transaction”) is one in a chain of successive transactions (having at least part of their subject-matter in common) that are pre-completion transactions in relation to the original contract, only the following are relevant parties—
(a) the persons who are the transferor and transferee in relation to the implemented transaction;
(b) a person who is the transferor in relation to preceding transaction, if that person is connected with, or not acting at arm's length in relation to, the transferee under the implemented transaction,
(c) the transferee under a pre-completion transaction, if the transferor is a relevant party (whether by virtue of this paragraph (c) or otherwise).
(5) For the purposes of sub-paragraph (2)—
(a) amounts given by a person connected with a relevant party are treated as given by the relevant party;
(b) amounts given to a person connected with a relevant party are treated as given to the relevant party.
References in this paragraph to a person connected with a relevant party do not include a person who is a relevant party.
(6) If the subject-matter of the implemented transaction is not the whole subject-matter of the original contract—
(a) the amounts that are taken for the purposes of sub-paragraph (2) to be given “for the acquisition of the chargeable interest” are to be determined on a just and reasonable basis, and
(b) only so much of the consideration for a preceding transaction as is referable, on a just and reasonable apportionment, to the subject-matter of the implemented transaction is taken into account under sub-paragraph (2).
(7) In this paragraph—
(a) references to “the original contract” are to be read in accordance with paragraph 12(5) (and references to “the original purchaser” are to be read accordingly);
(b) “preceding transaction” means a pre-completion transaction that precedes the implemented transaction in a chain of successive pre-completion transactions (all having at least part of their subject-matter in common).
Relief for transferor: assignment of rights
15 (1) This paragraph applies where—
(a) a person would, in the absence of this paragraph, be liable to pay tax in respect of a notional land transaction deemed to take place under paragraph 5(1) or an additional land transaction deemed to take place under paragraph 5(2), and
(b) the original contract had not been substantially performed when the assignment of rights mentioned in paragraph 4(1) was entered into.
(2) If the purchaser claims relief under this paragraph in respect of the notional land transaction or additional land transaction, no liability to tax arises in respect of that transaction.
(3) Sub-paragraph (2) does not apply if the land transaction mentioned in paragraph 4(4) is exempt from charge by virtue of any of sections 71A to 73 (which relate to alternative property finance).
(4) Relief under this section must be claimed in a land transaction return or an amendment of such a return.
Relief for original purchaser: qualifying subsales
16 (1) This paragraph applies if—
(a) the pre-completion transaction is a qualifying subsale,
(b) the original purchaser would, in the absence of this paragraph, be liable to pay tax in respect of a land transaction effected by the completion of the original contract or deemed to be effected by the substantial performance of the original contract,
(c) the performance of the qualifying subsale takes place at the same time as, and in connection with, the performance of the original contract, and
(d) relief is claimed in respect of the land transaction mentioned in paragraph (b).
(2) If the subject-matter of the qualifying subsale is the whole of the subject-matter of the original contract, no liability to tax arises in respect of the land transaction.
(3) If the subject-matter of the qualifying subsale is part (but not the whole) of the subject-matter of the original contract, the amount of the consideration for the land transaction is taken to be—
(a) the amount that it would be apart from this subsection, less
(b) so much of that amount as is referable to the subject-matter of the qualifying subsale.
(4) The amount mentioned in sub-paragraph (3)(a) may be reduced more than once under sub-paragraph (3) if there is more than one qualifying subsale.
(5) Sub-paragraphs (2) to (4) do not apply if—
(a) the original contract had been substantially performed when the qualifying subsale was entered into, or
(b) the transaction effected, or deemed to be effected, by the performance of the qualifying subsale is exempt from charge by virtue of any of sections 71A to 73.
(6) Relief under this section must be claimed in a land transaction return or an amendment of a land transaction return.
(7) For the purposes of this paragraph a contract for a land transaction is taken to be “performed” when it is substantially performed or completed (whichever is earlier).
(8) A pre-completion transaction is a “qualifying subsale” if it is a contract under which the original purchaser contracts to sell the whole or part of the subject-matter of the original contract to the transferee.
Application of paragraph 16 to successive subsales
17 If a transaction is a qualifying subsale in relation to more than one contract such as is mentioned in paragraph 1(1)(a), paragraph 16 is to be applied separately in relation to each such original contract for the purpose of determining what relief, if any, may be available with respect to the land transaction in question.
Tax avoidance arrangements
18 (1) Relief may not be claimed—
(a) under paragraph 15 if the assignment of rights referred to in sub-paragraph (1)(b) of that paragraph forms part of any tax avoidance arrangements, or
(b) under paragraph 16 if the qualifying subsale referred to in sub-paragraph (1)(c) of that paragraph forms part of any tax avoidance arrangements.
(2) Arrangements are “tax avoidance arrangements” if, having regard to all the circumstances, it would be reasonable to conclude that the obtaining of a tax advantage for the original purchaser or any other person was the main purpose, or one of the main purposes, of the original purchaser in entering into the arrangements.
(3) In this paragraph “tax advantage” means—
(a) a relief from tax or increased relief from tax,
(b) a repayment of tax or increased repayment of tax,
(c) the avoidance or reduction of a charge to tax, or
(d) the avoidance of a possible assessment to tax.
(4) In this paragraph “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).
(5) Nothing in paragraphs 12 to 14 (minimum consideration rule) or this paragraph affects the breadth of the application of sections 75A to 75C (anti-avoidance).
Exclusion of transactions from duty to make returns etc
19 (1) The Treasury may by regulations amend this Schedule, or any provision of this Part of this Act relating to the making of returns, so as to—
(a) exempt relevant purchasers of any specified description, or in specified circumstances, from the duty to deliver a land transaction return,
(b) provide for relief under paragraph 15 or 16 to be available without a claim in the case of any specified class of transactions, or
(c) provide that paragraph 5 does not apply in specified cases.
(2) In this paragraph “relevant purchaser” means a person who is the transferor under a pre-completion transaction.
Connected persons
20 Section 1122 of CTA 2010 (connected persons) applies for the purposes of this Schedule.
Interpretation of Schedule
21 (1) In this Schedule—
“assignment of rights” has the meaning given by paragraph 2(1);
“contract” includes any agreement;
“conveyance” includes any instrument;
“free-standing transfer” has the meaning given by paragraph 2(2);
“pre-completion transaction” (in relation to a contract such as is mentioned in paragraph 1(1)) has the meaning given by paragraph 1(2);
“qualifying subsale” has the meaning given by paragraph 16(8);
“the transferee”, in relation to a pre-completion transaction, has the meaning given by paragraph 1(2)(a);
“the transferor”, in relation to a pre-completion transaction, has the meaning given by paragraph 2(3).
(2) In this Schedule—
(a) references to “the original contract” are to be read in accordance with paragraph 1(1)(a);
(b) references to “the original purchaser” are to be read in accordance with paragraph 1(1)(a) and see also sub-paragraph (3);
(c) references to “part of the subject-matter of the original contract” are to be read in accordance with paragraph 1(7);
(d) references to the “subject-matter” of a pre-completion transaction are to be read in accordance with paragraph 2(4);
(e) references to substantial performance of the original contract “by the transferee” (in cases involving an assignment of rights) are to be read in accordance with paragraph 4(7).
(3) For any one contract for the acquisition of a chargeable interest there is only one original purchaser (disregarding cases involving joint purchasers).
4 In section 57A (sale and leaseback arrangements), in subsection (3)(c)—
(a) omit “section 45 (contract and conveyance: effect of transfer of rights) or”, and
(b) after the second occurrence of “transfer of rights)” insert “ or a pre-completion transaction within the meaning of Schedule 2A (transactions entered into before completion of contract) ”.
5 In section 77 (notifiable transactions), in subsection (1)—
(a) omit the “or” after paragraph (c), and
(b) after paragraph (d) insert,
or
(e) a notional or additional land transaction under paragraph 5 of Schedule 2A.
6 In section 79(2) (registration of land transactions etc)—
(a) omit paragraph (a)(i) and the “or” after it, and
(b) after paragraph (b) insert—
(ba) under paragraph 5 of Schedule 2A (transactions entered into before completion of contract),
.
7 In section 119 (meaning of “effective date” of a transaction), in subsection (2), at the appropriate place insert— “ paragraph 5 of Schedule 2A, ”.
8 In section 121 (index of defined expressions), in the entry for “vendor”, in the second column, for “sections 45(5A) and 45A(9)” substitute “ section 45A(9) and paragraphs 8, 10 and 11 of Schedule 2A ”.
9 In Schedule 6B (transfers involving multiple dwellings), in paragraph 7(6), in the definition of “relevant deeming provision”, after “45A” insert “ or paragraph 5(1) or (2) of Schedule 2A ”.
10 In paragraph 12B of Schedule 17A (assignment of agreement for lease), in sub-paragraph (1) for “section 45 (contract and conveyance: effect of transfer of rights)” substitute “ Schedule 2A (transactions entered into before completion of contract) ”.
11 The amendments made by this Schedule have effect in relation to transfers of rights (see section 45 of FA 2003) and pre-completion transactions (see paragraph 3) entered into on or after the day on which this Act is passed.
SCHEDULE 40 Stamp duty land tax: relief from 15% rate
Section 196
1 Part 4 of FA 2003 (stamp duty land tax) is amended as follows.
Amendments of FA 2003
2 (1) Schedule 4A (higher rate for certain transactions) is amended as follows.
(2) In paragraph 2(6) (treatment of certain transactions as two separate chargeable transactions) for “and 5” substitute “ , 5 to 5K and 6A to 6H ”.
(3) For paragraph 5 (property developers) and the cross-heading preceding it substitute—
Businesses of letting, trading in or redeveloping properties
5 (1) Paragraph 3 does not apply to a chargeable transaction so far as its subject-matter consists of a higher threshold interest that is acquired exclusively for one or more of the following purposes—
(a) exploitation as a source of rents or other receipts (other than excluded rents) in the course of a qualifying property rental business;
(b) development or redevelopment and resale in the course of a property development trade;
(c) resale in the course of a property development trade (in a case where the chargeable transaction is part of a qualifying exchange);
(d) resale (as stock of the business) in the course of a property trading business.
(2) A chargeable interest does not count as being acquired exclusively for one or more of those purposes if it is intended that a non-qualifying individual will be permitted to occupy the dwelling.
(3) In this paragraph—
“excluded rents” has the same meaning as in section 133 of the Finance Act 2013;
“property development trade” means a trade that—
consists of or includes buying and developing or redeveloping for resale residential or non-residential property, and
is run on a commercial basis and with a view to profit;
“part of a qualifying exchange” is to be construed in accordance with section 139(4) of the Finance Act 2013;
“property trading business” means a business that—
consists of or includes activities in the nature of a trade of buying and selling dwellings, and
is run on a commercial basis and with a view to profit;
“qualifying property rental business” has the same meaning as in section 133 of the Finance Act 2013.
(4) After paragraph 5 insert—
Meaning of “non-qualifying individual”
5A (1) In paragraph 5 “non-qualifying individual”, in relation to a chargeable transaction, means any of the following—
(a) the purchaser (other than a purchaser entering into the transaction as a member of a partnership);
(b) a purchaser who enters into the transaction as a member of a partnership and has a major share in the partnership,
(c) an individual (a “connected person”) who is connected with the purchaser;
(d) a relevant settlor;
(e) the spouse or civil partner of a connected person or of a relevant settlor;
(f) a relative of a connected person or of a relevant settlor, or the spouse or civil partner of a relative of a connected person or of a relevant settlor;
(g) a relative of the spouse or civil partner of a connected person or of a relevant settlor;
(h) the spouse or civil partner of a person falling within paragraph (g);
(i) an individual who is a major participant in a relevant collective investment scheme or is connected with a major participant in a relevant collective investment scheme.
(2) A member of a partnership has a “major share” in the partnership if the member is entitled to a 50% or greater share—
(a) in the income profits of the partnership, or
(b) in the partnership's assets.
(3) A collective investment scheme is a “relevant collective investment scheme” for the purposes of sub-paragraph (1)(i) if the purchaser under the chargeable transaction referred to in that sub-paragraph acquires the subject-matter of the transaction for the purposes of that scheme.
(4) An individual who participates in a collective investment scheme is a “major participant” in the scheme if the individual—
(a) is entitled to a share of at least 50% either of all the profits or income arising from the scheme or of any profits or income arising from the scheme that may be distributed to participants, or
(b) would in the event of the winding up of the scheme be entitled to 50% or more of the assets of the scheme that would then be available for distribution among the participants.
(5) The reference in sub-paragraph (4)(a) to profits or income arising from a collective investment scheme is to profits or income arising from the acquisition, holding, management or disposal of the property subject to the scheme.
(6) In this paragraph—
“participant”, in relation to a collective investment scheme, is to be read in accordance with section 235 of the Financial Services and Markets Act 2000;
“relative” means brother, sister, ancestor or lineal descendant;
“relevant settlor”, in relation to a chargeable transaction, means an individual who is a settlor in relation to a relevant settlement (as defined in sub-paragraph (7));
“settlement” has the same meaning as in Chapter 5 of Part 5 of ITTOIA 2005 (see section 620 of that Act).
(7) Where a person, in the capacity of trustee of a settlement, is connected with a person who is the purchaser under a chargeable transaction, that settlement is a “relevant settlement” in relation to the chargeable transaction.
(8) In sub-paragraph (7) “trustee” is to be read in accordance with section 1123(3) of CTA 2010 (“connected persons”: supplementary).
(9) In this paragraph “the purchaser”, in relation to a chargeable transaction, is to be read as a reference to any of the purchasers (if there are more than one).
(10) Section 1122 of the Corporation Tax Act 2010 (connected persons) has effect for the purposes of this paragraph, but for those purposes—
(a) subsections (7) and (8) of that section (application of rules about connected persons to partnerships) are to be disregarded, and
(b) subsections (2) to (7) of section 172 of the Finance Act 2013 apply as they apply for the purposes of Part 3 of that Act.
Trades involving making a dwelling available to the public
5B (1) Paragraph 3 does not apply to a chargeable transaction so far as its subject-matter consists of a higher threshold interest in relation to which the conditions in sub-paragraph (2) are met.
(2) The conditions are that—
(a) the higher threshold interest is acquired with the intention that it will be exploited as a source of income in the course of a qualifying trade, and
(b) reasonable commercial plans have been formulated to carry out that intention without delay (except so far as delay may be justified by commercial considerations or cannot be avoided).
(3) “Qualifying trade”, in relation to a higher threshold interest, means a trade that—
(a) is carried on on a commercial basis and with a view to profit, and
(b) involves, in its normal course, offering the public the opportunity to make use of, stay in or otherwise enjoy the dwelling as customers of the trade on at least 28 days in any calendar year.
(4) For the purposes of sub-paragraph (3), persons are not considered to have the opportunity to make use of, stay in or otherwise enjoy a dwelling unless the areas that they have the opportunity to make use of, stay in or otherwise enjoy include a significant part of the interior of the dwelling.
(5) The size (relative to the size of the whole dwelling), nature and function of any relevant area or areas in a dwelling are taken into account in determining whether they form a significant part of the interior of the dwelling.
Financial institutions acquiring dwellings in the course of lending
5C (1) Sub-paragraph (2) applies to a chargeable transaction if the purchaser is a financial institution carrying on a business that involves the lending of money.
(2) Paragraph 3 does not apply to the chargeable transaction so far as its subject-matter consists of a higher threshold interest that is acquired in the course of that business—
(a) for the purpose of resale in the course of the business and,
(b) in connection with those lending activities.
Dwellings for occupation by certain employees etc
5D (1) Paragraph 3 does not apply to a chargeable transaction so far as its subject-matter consists of a higher threshold interest in relation to which the conditions in sub-paragraph (2) are met. Those conditions can only be met if the purchaser, or a relevant group member, carries on or is to carry on a relievable trade.
(2) The conditions are that—
(a) the interest is acquired for the purpose of making the dwelling available to one or more qualifying employees or qualifying partners for use as living accommodation, and
(b) the dwelling is to be made available as mentioned in paragraph (a) for purposes that are solely or mainly purposes of the relievable trade.
(3) For the purposes of the relief under this paragraph it does not matter whether or not the individuals mentioned in sub-paragraph (2)(a) are identified at the time of the chargeable transaction.
(4) “Relievable trade” means a trade that is carried on on a commercial basis and with a view to profit.
(5) In this paragraph references to making a dwelling available to a qualifying employee or qualifying partner include making it available to persons who are to share the accommodation with a qualifying employee or qualifying partner as that individual's family.
(6) Where the purchaser is a company, “relevant group member” means a company which is a member of the same group of companies as the purchaser for the purposes mentioned in paragraph 1(2) of Schedule 7 (group relief).
More about the condition in paragraph 5D(2)(a)
5E (1) In a case where the person carrying on the relievable trade mentioned in paragraph 5D(1) carries it on in partnership with one or more other persons, “qualifying partner” means any individual who is a member of the partnership.
(2) “Qualifying employee” means an individual employed for the purposes of the qualifying trade.
(3) In a case falling within sub-paragraph (1), the condition in paragraph 5D(2)(a) is taken not to be met if the individuals, or a class of individuals, to whom it is proposed to make the dwelling available for use as living accommodation include, or are likely to include, a member of the partnership who is (or will at the relevant time be) entitled to a 10% or greater share—
(a) in the income profits of the partnership, or
(b) in any company beneficially entitled to the higher threshold interest mentioned in paragraph 5D(1), or
(c) in that higher threshold interest.
(4) In addition, the condition in paragraph 5D(2)(a) is taken not to be met if the individuals, or a class of individuals, to whom it is proposed to make the dwelling available for use as living accommodation include, or are likely to include, an individual employed for the purposes of the trade in question who is (or will at the relevant time be)—
(a) entitled to a 10% or greater share—
(i) in the income profits of the trade, or
(ii) in any company that is beneficially entitled to the higher threshold interest, or
(iii) in that higher threshold interest, or
(b) employed to provide excluded domestic services.
(5) The reference in sub-paragraph (4)(b) to an individual employed to provide excluded domestic services is to an individual the duties of whose employment include the provision of services in connection with the (actual or intended) occupation, by an individual to whom sub-paragraph (6) applies, of the dwelling mentioned in paragraph 5D(2)(a) (“the relevant dwelling”), or a linked dwelling.
(6) This sub-paragraph applies to any individual who is connected with a person who is or is to be beneficially entitled to the higher threshold interest.
(7) The following are “linked” dwellings for the purposes of sub-paragraph (5)—
(a) if the conditions in section 116(2) of the Finance Act 2013 are met in relation to the relevant dwelling and another dwelling, that other dwelling;
(b) a dwelling that is linked to the relevant dwelling, as described in section 117(1) of the Finance Act 2013.
(8) For the purposes of sub-paragraphs (3)(c) and (4)(a) persons who are entitled to a chargeable interest as beneficial joint tenants (or, in Scotland, as joint owners) are taken to be entitled to the chargeable interest as beneficial tenants in common (or, in Scotland, as owners in common) in equal shares.
(9) Section 147 of the Finance Act 2013 (meaning of “10% or greater share in a company”) applies for the purposes of this paragraph as for the purposes of section 146 of that Act.
(10) In this paragraph references to employment include the holding of an office.
Farmhouses
5F (1) Paragraph 3 does not apply to a chargeable transaction so far as its subject-matter consists of a higher threshold interest in or over a dwelling—
(a) that is, or is to be, a farmhouse, and
(b) in relation to which the conditions in sub-paragraph (3) are met.
(2) The reference in sub-paragraph (1) to a dwelling that “is or is to be a farmhouse” is to a dwelling that forms part of land that is to be occupied, or to continue to be occupied, for the purposes of a qualifying trade of farming.
(3) The conditions are that—
(a) the dwelling is to be occupied for the purposes of that trade by a qualifying farm worker,
(b) reasonable commercial plans have been formulated under which such occupation is either to continue from the effective date of the chargeable transaction or to begin without delay (except so far as delay may be justified by commercial considerations or cannot be avoided), and
(c) occupation of the farmhouse by a qualifying farm worker is then expected to continue as part of the normal way in which the trade is, or is to be, carried on.
(4) In sub-paragraph (3) “qualifying farm worker” means an individual who occupies the dwelling for the purposes of the trade mentioned in that sub-paragraph and has a substantial involvement—
(a) in the day-to-day work of the trade, or
(b) in the direction and control of the conduct of the trade.
(5) “Qualifying trade of farming” means a trade of farming that is carried on—
(a) on a commercial basis, and
(b) with a view to profit.
(6) A person occupying part of a dwelling is regarded as occupying the dwelling for the purposes of this paragraph.
(7) In this paragraph—
(a) “farming” has the same meaning as in the Corporation Tax Acts (see section 1125 of CTA 2010), except that in this paragraph “farming” includes market gardening;
(b) “market gardening” has the same meaning as in the Corporation Tax Acts (see section 1125(5) of CTA 2010).
Withdrawal of relief
5G (1) Sub-paragraph (2) applies where relief under paragraph 5 has been allowed in respect of a higher threshold interest forming the whole or part of the subject-matter of a chargeable transaction.
(2) The relief is withdrawn if at any time in the period of three years beginning with the effective date of the chargeable transaction (“the control period”) a requirement in sub-paragraph (3) is not met.
(3) The requirements are that—
(a) the higher threshold interest (if still held by the purchaser) is held exclusively for one or more of the purposes mentioned in paragraph 5(1),
(b) any chargeable interest derived from the higher threshold interest that may be held by the purchaser is held exclusively for one or more of those purposes, and
(c) (if the higher threshold interest or a chargeable interest derived from it is held by the purchaser) no non-qualifying individual is permitted to occupy the dwelling.
(4) The requirements in sub-paragraph (3)(a) and (b) do not apply in relation to times when, because of a change of circumstances that is unforeseen and beyond the purchaser's control, it is not reasonable to expect the purposes for which the higher threshold interest was acquired to be carried out.
(5) Sub-paragraph (6) applies if a higher threshold interest was acquired for a purpose mentioned in paragraph 5(1) but at some time in the control period the activity in question (for instance, exploitation of the interest as mentioned in paragraph 5(1)(a))—
(a) has not yet begun, or
(b) has ceased.
(6) For the purposes of sub-paragraph (3), the interest is taken to be held for the purpose in question only if reasonable steps are being taken to ensure that the purpose in question is carried out.
(7) In this paragraph “non-qualifying individual” (in relation to the chargeable transaction mentioned in sub-paragraph (1)) has the meaning given by paragraph 5A.
5H (1) This paragraph applies where relief under paragraph 5B (trades involving making a dwelling open to the public) has been allowed in respect of a higher threshold interest forming the whole or part of the subject-matter of a chargeable transaction.
(2) The relief is withdrawn if at any time in the period of three years beginning with the effective date of the chargeable transaction (“the control period”) a requirement in sub-paragraph (3) is not met.
(3) The requirements are that—
(a) the higher threshold interest (if still held by the purchaser), is being exploited as a source of income in the course of a qualifying trade, and
(b) any chargeable interest derived from that interest that may be held by the purchaser is being exploited as mentioned in paragraph (a).
(4) The requirements in sub-paragraph (3) do not apply in relation to times when, because of a change of circumstances that is unforeseen and beyond the purchaser's control, it is not reasonable to expect the chargeable interest concerned to be exploited in the manner specified.
(5) Sub-paragraph (6) applies if at some time in the control period the higher threshold interest, or a chargeable interest derived from it—
(a) has not begun to be exploited as mentioned in sub-paragraph (3), or
(b) has ceased to be so exploited.
(6) The requirements in sub-paragraph (3) are treated as being met if reasonable steps are being taken to ensure that the chargeable interest in question begins to be exploited as mentioned in that sub-paragraph, or that such exploitation of the interest is resumed.
5I (1) This paragraph applies where relief under paragraph 5C (financial institutions acquiring dwellings in the course of lending) has been allowed in respect of a higher threshold interest forming the whole or part of the subject-matter of a chargeable transaction.
(2) The relief is withdrawn if any requirement in sub-paragraph (3) is not met at any time in the period of three years beginning with the effective date of the chargeable transaction (“the control period”) (but see sub-paragraphs (4) and (5)).
(3) The requirements are that—
(a) the purchaser continues to be a financial institution carrying on a business that involves the lending of money, and
(b) the interest is held for the purpose of resale in the course of the business.
(4) The requirements in sub-paragraph (3) apply only to times in the control period when the purchaser holds—
(a) the higher threshold interest, or
(b) a chargeable interest that is derived from the higher threshold interest.
(5) The requirements in sub-paragraph (3) do not apply in relation to times when, because of a change of circumstances that is unforeseen and beyond the purchaser's control, it is not reasonable to expect those requirements to be met.
5J (1) This paragraph applies where relief under paragraph 5D (dwellings for occupation by certain employees etc) has been allowed in respect of a higher threshold interest forming the whole or part of the subject-matter of a chargeable transaction.
(2) The relief is withdrawn if any requirement in sub-paragraph (3) is not met at any time in the period of three years beginning with the effective date of the chargeable transaction (“the control period”) (but see sub-paragraphs (4) and (5)).
(3) The requirements are that—
(a) the purchaser, or a relevant group member (as defined in paragraph 5D(6)), carries on a trade on a commercial basis and with a view to profit,
(b) the dwelling is made available as mentioned in paragraph 5D(2)(a), and
(c) the dwelling is made so available for purposes that are solely or mainly purposes of the trade mentioned in paragraph (a) of this sub-paragraph.
(4) The requirements in sub-paragraph (3) apply only to times in the control period when the purchaser holds—
(a) the higher threshold interest, or
(b) a chargeable interest that is derived from the higher threshold interest.
(5) The requirements in sub-paragraph (3) do not apply in relation to times when, because of a change of circumstances that is unforeseen and beyond the purchaser's control, it is not reasonable to expect those requirements to be met.
(6) Sub-paragraph (7) applies if at some time in the control period the dwelling—
(a) has not begun to be made available as mentioned in sub-paragraph (3)(b) and (c), or
(b) has ceased to be so made available.
(7) The requirements in paragraphs (b) and (c) of sub-paragraph (3) are treated as being met if reasonable steps are being taken to ensure that the dwelling will begin to be, or will return to being, available as mentioned in those paragraphs.
5K (1) This paragraph applies where relief under paragraph 5F (farmhouses) has been allowed in respect of a higher threshold interest forming the whole or part of the subject-matter of a chargeable transaction.
(2) The relief is withdrawn if at any time in the period of three years beginning with the effective date of the chargeable transaction (“the control period”) the requirements in sub-paragraph (3) are not met (but see sub-paragraphs (4) and (5)).
(3) The requirements are that—
(a) the land mentioned in paragraph 5F(2) is occupied for the purposes of a qualifying trade of farming, and
(b) the dwelling is occupied for the purposes of that trade by a qualifying farm worker.
(4) The requirements in sub-paragraph (3) apply only to times in the control period when the purchaser holds—
(a) the higher threshold interest, or
(b) a chargeable interest that is derived from the higher threshold interest.
(5) The requirements in sub-paragraph (3) do not apply in relation to times when, because of a change of circumstances that is unforeseen and beyond the purchaser's control, it is not reasonable to expect those requirements to be met.
(6) Sub-paragraph (7) applies if at some time in the control period a requirement in sub-paragraph (3)—
(a) has not begun to be met, or
(b) has ceased to be met.
(7) The requirement is treated as being met if reasonable steps are being taken to ensure that the requirement begins to be met, or is again met.
(5) After paragraph 6 insert—
Modifications for cases involving alternative finance arrangements
6A (1) This paragraph applies where—
(a) section 71A (land sold to financial institution and leased to person), section 72 (land in Scotland sold to financial institution and leased to person) or section 73 (land sold to financial institution and re-sold to person) applies, and
(b) the major interest in land purchased under the first transaction consists of or includes a higher threshold interest.
(2) In this paragraph “the first transaction” means—
(a) where section 71A applies, the transaction mentioned in section 71A(1)(a);
(b) where section 72 applies, the transaction mentioned in section 72(1)(a);
(c) where section 73 applies, the transaction mentioned in section 73(1)(a)(i).
(3) The condition in paragraph 3(3) is treated as being met with respect to the first transaction only if that condition is met with respect to the second transaction.
(4) If the second transaction would qualify for relief under any of paragraphs 5(1), 5B(1), 5D(1) and 5F(1) (disregarding the exemptions in sections 71A(3), 72(3) and 73(3) and assuming, for this purpose, that the subject-matter of the second transaction is a higher threshold interest), the first transaction is taken to qualify for relief under the same provision (and accordingly paragraph 3 does not apply in relation to the first transaction).
(5) The first transaction does not qualify for relief under any of paragraphs 5(1), 5B(1), 5D(1) or 5F(1) except in accordance with sub-paragraph (4).
(6) In this paragraph “the second transaction” has the same meaning as in section 71A, 72 or 73 (as the case requires).
6B (1) This paragraph applies where section 72A (land in Scotland sold to financial institution and person in common) applies and the major interest in land purchased under the transaction mentioned in section 72A(1)(a) (“the first transaction”) consists of or includes a higher threshold interest.
(2) In determining whether or not the first transaction meets the condition in paragraph 3(3) it is to be assumed that the financial institution referred to in section 72A(1) is not one of the persons acquiring the major interest in land under that transaction.
(3) Paragraphs 5 to 5F have effect in relation to the first transaction as they would have effect if the financial institution were not a purchaser under that transaction.
Paragraphs 6A and 6B: application where transaction is split under paragraph 2(3)
6C (1) Where paragraph 6A or 6B (“the modifying paragraph”) applies and the first transaction (within the meaning of that paragraph) is treated under paragraph 2(3) as two separate chargeable transactions, references in the modifying paragraph to the first transaction include those separate transactions.
(2) If the subject-matter of the second transaction (within the meaning of paragraph 6A) includes a chargeable interest other than a higher threshold interest, that fact is ignored in determining for the purposes of paragraph 6A—
(a) whether that transaction meets the condition in paragraph 3(3), or
(b) whether it would qualify for relief under any of paragraphs 5(1), 5B(1), 5D(1) and 5F(1).
Alternative finance arrangements: withdrawal of relief
6D (1) This paragraph applies where relief under paragraph 5 (businesses of letting, trading in or redeveloping properties) has been allowed, in accordance with paragraph 6A(4) or 6B(3), with respect to the purchase of a major interest in land.
(2) The relief is withdrawn if at any time in the period of three years beginning with the effective date of the first transaction (“the control period”) a relevant requirement is not met.
(3) The relevant requirements are that—
(a) any relevant interest (see sub-paragraphs (5) and (6)) held by the relevant person is held by that person exclusively for one or more of the purposes mentioned in paragraph 5(1), and
(b) (if a relevant interest is held by the relevant person) no non-qualifying individual is permitted to occupy the dwelling.
(4) For the purposes of sub-paragraph (3)(a) and (b) it does not matter whether the relevant interest is held by the relevant person—
(a) jointly or (in Scotland) in common, or
(b) otherwise.
(5) In relation to relief allowed in accordance with sub-paragraph 6A(4), “relevant interest” means any of the following—
(a) the interest acquired under the second transaction (within the meaning of paragraph 6A);
(b) any interest transferred to the relevant person as a result of the exercise of the right mentioned in section 71A(1)(d) or 72(1)(c);
(c) any chargeable interest derived from an interest such as is mentioned in paragraph (a) or (b).
(6) In relation to relief allowed in accordance with paragraph 6B(3), “relevant interest” means any of the following—
(a) the interest purchased under the first transaction (within the meaning of paragraph 6B);
(b) any interest transferred to the relevant person as a result of the exercise of the right mentioned in section 72A(1)(c);
(c) any chargeable interest derived from an interest such as is mentioned in paragraph (a) or (b).
(7) In this paragraph—
“non-qualifying individual” (in relation to the chargeable transaction mentioned in sub-paragraph (1)) has the meaning given by paragraph 5A;
“the relevant person” means the person (other than the financial institution) who entered into the arrangements in question as mentioned in section 71A(1), 72(1), 72A(1) or 73(1).
6E (1) The requirement in paragraph 6D(3)(a) does not apply in relation to times when, because of a change of circumstances that is unforeseen and beyond the relevant person's control, it is not reasonable to expect the interest in question to be held for the purpose for which the relevant person acquired that person's initial interest.
(2) Sub-paragraph (3) applies if the relevant person's initial interest was acquired by the relevant person for a purpose mentioned in paragraph 5(1), but at some time in the control period the activity in question (for instance, exploitation as mentioned in paragraph 5(1)(a))—
(a) has not begun in the case of a relevant interest, or
(b) has ceased in the case of a relevant interest.
(3) For the purposes of paragraph 6D(3)(a) the relevant interest is taken to be held for the purpose in question only if reasonable steps are being taken to ensure that the purpose in question is carried out.
(4) In this paragraph—
(a) “the control period”, “relevant interest” and “the relevant person” have the same meaning as in paragraph 6D;
(b) references to the relevant person's “initial interest” are to the interest mentioned in sub-paragraph (5)(a) or (6)(a) of paragraph 6D (as the case requires).
6F (1) This paragraph applies where relief under paragraph 5B (trades involving making a dwelling open to the public) has been allowed, in accordance with paragraph 6A(4) or 6B(3), with respect to the purchase of a major interest in land.
(2) The relief is withdrawn if at any time in the period of three years beginning with the effective date of the first transaction (“the control period”) the requirement in sub-paragraph (3) is not met.
(3) The requirement is that the dwelling is being exploited as a source of income in the course of a qualifying trade.
(4) The requirement in sub-paragraph (3) does not apply in relation to times when, because of a change of circumstances that is unforeseen and beyond the relevant person's control, it is not reasonable to expect the interest in question to be exploited as mentioned in that sub-paragraph.
(5) Sub-paragraph (6) applies if at some time in the control period that person—
(a) has not begun to exploit the interest as a source of income in the course of a relevant trade, or
(b) has ceased so to exploit it.
(6) The requirement in sub-paragraph (3) is treated as being met if reasonable steps are being taken to ensure that the relevant interest begins to be exploited as mentioned in that sub-paragraph, or that such exploitation of the interest is resumed.
(7) In this paragraph—
(a) “the relevant person” means the person (other than the financial institution) who enters into the arrangements mentioned in section 71A(1), 72(1), 72A(1) or 73(1);
(b) references to a major interest in land include an undivided share in a major interest in land.
6G (1) This paragraph applies where relief under paragraph 5D (dwellings for occupation by certain employees etc) has been allowed, in accordance with paragraph 6A(4) or 6B(3), with respect to the purchase of a major interest in land.
(2) The relief is withdrawn if at any time in the control period when the relevant person holds a relevant interest (whether jointly, or in common, or otherwise) any requirement in sub-paragraph (4) is not met.
(3) In sub-paragraph (2) “the control period” means the three years beginning with the effective date of the first transaction.
(4) The requirements are that—
(a) the relevant person, or a relevant group member, carries on a qualifying trade,
(b) the dwelling is made available as mentioned in paragraph 5D(2)(a), and
(c) the dwelling is made so available for purposes that are solely or mainly purposes of the trade mentioned in sub-paragraph (a).
(5) The requirements in sub-paragraph (4) do not apply in relation to times when, because of a change of circumstances that is unforeseen and beyond the relevant person's control, it is not reasonable to expect those requirements to be met.
(6) Sub-paragraph (7) applies if at some time in the control period the relevant interest—
(a) has not begun to be made available as mentioned in sub-paragraph (4)(b) and (c), or
(b) has ceased to be so made available.
(7) The requirements in paragraphs (b) and (c) of sub-paragraph (4) are treated as being met if reasonable steps are being taken to ensure that the dwelling will begin to be, or will return to being, made available as mentioned in those paragraphs.
(8) Where the relevant person is a company, “relevant group member” means a company which is a member of the same group of companies as the relevant person for the purposes mentioned in paragraph 1(2) of Schedule 7.
(9) In this paragraph—
(a) “relevant interest” has the same meaning as in paragraph 6D;
(b) “the relevant person” means the person (other than the financial institution) who enters into the arrangements mentioned in section 71A(1), 72(1), 72A(1) or 73(1);
(c) references to a major interest in land include an undivided share in a major interest in land.
6H (1) This paragraph applies where relief under paragraph 5F (farmhouses) has been allowed, in accordance with paragraph 6A(4) or 6B(3), in relation to the purchase of a major interest in land.
(2) The relief is withdrawn if at any time in the control period when the relevant person holds a relevant interest (whether jointly, or in common, or otherwise) any requirement in sub-paragraph (4) is not met.
(3) In sub-paragraph (2) “the control period” means the three years beginning with the effective date of the first transaction.
(4) The requirements are that—
(a) the land mentioned in paragraph 5F(2) is occupied for the purposes of a qualifying trade of farming, and
(b) the dwelling is occupied for the purposes of that trade by a qualifying farm worker.
(5) The requirements in sub-paragraph (4) do not apply in relation to times when, because of a change of circumstances that is unforeseen and beyond the relevant person's control, it is not reasonable to expect those requirements to be met.
(6) Sub-paragraph (7) applies if at some time in the control period a requirement in sub-paragraph (4)—
(a) has not begun to be met, or
(b) has ceased to be met.
(7) The requirement is treated as being met if reasonable steps are being taken to ensure that the requirement begins to be met, or is again met.
(8) In this paragraph—
(a) “the relevant interest” has the same meaning as in paragraph 6D;
(b) “the relevant person” means the person (other than the financial institution) who enters into the arrangements mentioned in section 71A(1), 72(1), 72A(1) or 73(1);
(c) references to a major interest in land include an undivided share in a major interest in land.
(6) In paragraph 9 (interpretation), at the appropriate places insert—
“financial institution” has the same meaning as in sections 71A to 73B (see section 73BA);
“property development trade” has the meaning given by paragraph 5(3);
“property rental business” has the meaning given by section 133(4) of the Finance Act 2013;
“property trading business” has the meaning given by paragraph 5(3);
“qualifying farm worker” has the meaning given by paragraph 5F(4);
“qualifying trade” has the meaning given by paragraph 5B(3);
“qualifying trade of farming” has the meaning given by paragraph 5F(5);
.
Minor and consequential amendments
3 (1) Section 81 (further return where relief withdrawn) is amended as follows.
(2) After subsection (1) insert—
(1A) Where relief is withdrawn to any extent under any of paragraphs 5G to 5K of Schedule 4A (higher rate for certain transactions) the purchaser must deliver a further return before the end of the period of 30 days after the relevant date.
(1B) In subsection (1A) “the relevant date” means—
(a) in the case of relief under paragraph 5 of Schedule 4A (businesses of letting, trading in or redeveloping properties), the first day in the period mentioned in paragraph 5G(2) on which a requirement under paragraph 5G(3) was not met in the case of the chargeable interest in question;
(b) in the case of relief under paragraph 5B of that Schedule (trades involving making a dwelling available to the public), the first day in the period mentioned in paragraph 5H(2) on which a requirement under paragraph 5H(3) was not met in the case of the chargeable interest in question;
(c) in the case of relief under paragraph 5C of that Schedule (financial institutions acquiring dwellings in the course of lending), the first day in the period mentioned in paragraph 5I(2) on which a requirement under paragraph 5I(3) was not met in the case of the chargeable interest in question;
(d) in the case of relief under paragraph 5D of that Schedule (dwellings for occupation by certain employees etc), the first day in the period mentioned in paragraph 5J(2) on which a requirement under paragraph 5J(3) was not met in the case of the chargeable interest in question;
(e) in the case of relief under paragraph 5F of that Schedule (farmhouses), the first day in the period mentioned in paragraph 5K(2) on which a requirement under paragraph 5K(3) was not met in the case of the chargeable interest in question.
(3) In subsection (2A), for “Tax” substitute “ Where subsection (1) applies any tax ”.
(4) In subsection (3) for “this section” substitute “ subsection (1) ”.
(5) After subsection (4) insert—
(5) The provisions of Schedule 10 apply to a return under subsection (1A) as they apply to a return under section 76, but with the adaptation that references to the effective date of the transaction are to be read as references to the relevant date (as defined in subsection (1B)).
4 After section 81 insert—
Alternative finance arrangements: return where relief withdrawn
81ZA (1) Where relief given in respect of a transaction entered into under alternative finance arrangements is withdrawn to any extent under any of paragraphs 6D, 6F, 6G or 6H of Schedule 4A (higher rate of tax: alternative finance arrangements)—
(a) the relevant person must deliver a return to HMRC before the end of the period of 30 days after the date of the disqualifying event;
(b) the return must contain a self-assessment of the additional tax chargeable as a result of the withdrawal of the relief;
(c) the tax so chargeable is calculated by reference to the rates in force at the effective date of the transaction in respect of which the relief was allowed.
(2) The provisions of Schedule 10 (returns, enquiries, assessments and other matters) apply to a return under this section as they apply to a return under section 76 (general requirement to make land transaction return), but with the following adaptations—
(a) references to the effective date of the transaction are to be read as references to the date of the disqualifying event;
(b) references to the purchaser are to be read as references to the relevant person so far as that is necessary as a result of subsection (1) of this section or section 85(3) (payment of additional tax by relevant person where relief withdrawn).
(3) In this section “the date of the disqualifying event” means the first day in the control period on which a relevant requirement was not met.
(4) In subsection (3) “relevant requirement” means—
(a) where the relief was given under paragraph 5 of Schedule 4A (businesses of letting, trading in or redeveloping properties), a requirement under paragraph 5G(3) of that Schedule;
(b) where the relief was given under paragraph 5B of that Schedule (trades involving making a dwelling available to the public), a requirement under paragraph 5H(3) of that Schedule;
(c) where the relief was given under paragraph 5C of that Schedule (financial institutions acquiring dwellings in the course of lending), a requirement under paragraph 5I(3) of that Schedule;
(d) where the relief was given under paragraph 5D of that Schedule (dwellings for occupation by certain employees etc), a requirement under paragraph 5J(3) of that Schedule;
(e) where the relief was given under paragraph 5F of that Schedule (farmhouses), a requirement under paragraph 5K(3) of that Schedule.
(5) In subsection (3) “the control period” has the same meaning as in paragraph 5G, 5H, 5I, 5J or 5K (as the case requires) of Schedule 4A.
(6) In this section—
“alternative finance arrangements” means any arrangements such as are mentioned in section 71A, 72, 72A or 73;
“the relevant person” means the person (other than the financial institution) who entered into the arrangements in question.
5 In section 85 (liability for tax), after subsection (2) insert—
(3) Where relief given in respect of a transaction entered into under alternative finance arrangements is withdrawn to any extent under any of paragraphs 6D, 6F, 6G and 6H of Schedule 4A (higher rate: alternative finance arrangements)—
(a) subsection (1) does not apply in relation to the additional tax payable as a result of the withdrawal of the relief, and
(b) the relevant person is liable to pay that additional tax.
(4) In subsection (3) “the relevant person” means the person (other than the financial institution) who entered into the arrangements in question.
6 In section 86 (payment of tax), after subsection (2) insert—
(2A) Tax payable as a result of a withdrawal of relief under any of paragraphs 6D, 6F, 6G and 6H of Schedule 4A (higher rate: alternative finance arrangements) must be paid not later than the filing date for the return relating to the withdrawal (see section 81ZA(1)).
7 In the table in section 122 (index of defined expressions), in second column of the entry for “settlement”, after “paragraph 1(1)” insert “ (except as otherwise expressly provided) ”.
Application of amendments
8 The amendments made by paragraphs 1 to 7 have effect in relation to transactions with an effective date on or after the day on which this Act is passed.
Transactions to which section 29 of the Scotland Act 2012 applies
9 (1) In relation to transactions in relation to which section 29 of the Scotland Act 2012 (disapplication of UK stamp duty land tax) has effect, FA 2003 as amended by this Schedule has effect subject to the following further amendments.
(2) In section 81ZA, in subsection (6), in the definition of “alternative finance arrangements”, omit “72, 72A”.
(3) In Schedule 4A—
(a) in paragraph 6A—
(i) in sub-paragraph (1)(a), omit “section 72 (land in Scotland sold to financial institution and leased to person)”,
(ii) omit sub-paragraph (2)(b),
(iii) in sub-paragraph (4), omit “, 72(3)”, and
(iv) in sub-paragraph (6), omit “, 72”,
(b) omit paragraph 6B,
(c) in paragraph 6C—
(i) in sub-paragraph (1), omit “or 6B (“the modifying paragraph”)” and for “in the modifying paragraph” substitute “ in paragraph 6A ”, and
(ii) accordingly, in the heading omit “and 6B”,
(d) in paragraph 6D—
(i) in sub-paragraph (1), omit “or 6B(3)”,
(ii) in sub-paragraph (3)(a), omit “and (6)”,
(iii) in sub-paragraph (5)(b), omit “or 72(1)(c)”,
(iv) omit sub-paragraph (6), and
(v) in sub-paragraph (7), in the definition of “relevant person”, omit “, 72(1), 72A(1)”,
(e) in paragraph 6E(4)(b), for “sub-paragraph (5)(a) or (6)(a) of paragraph 6D (as the case requires)” substitute “ paragraph 6D(5)(a) ”,
(f) in paragraph 6F—
(i) in sub-paragraph (1), omit “or 6B(3)”, and
(ii) in sub-paragraph (7)(a), omit “, 72(1), 72A(1)”,
(g) in paragraph 6G—
(i) in sub-paragraph (1), omit “or 6B(3)”, and
(ii) in sub-paragraph (9)(b), omit “72(1), 72A(1)”, and
(h) in paragraph 6H—
(i) in sub-paragraph (1), omit “or 6B(3), and
(ii) in sub-paragraph (8)(b), omit “72(1), 72A(1)”.
Section 197
Introduction
1 Part 4 of FA 2003 (stamp duty land tax) is amended as follows.
Leases that continue after a fixed term
2 (1) In Schedule 17A (further provisions about leases), paragraph 3 (leases that continue after a fixed term) is amended as follows.
(2) In sub-paragraph (3)—
(a) after “continuation of the lease” insert “ for a period (or further period) of one year ”, and
(b) in paragraph (a), for “that term” substitute “ that one year period ”.
(3) After that sub-paragraph insert—
(3A) But no tax or additional tax is payable in respect of a transaction as a result of the continuation of a lease for a period (or further period) of one year under sub-paragraph (2) if, during that one year period, the tenant under the lease is granted a new lease of the same or substantially the same premises in circumstances where paragraph 9A applies.
(4) After sub-paragraph (3A) insert—
(3B) Sub-paragraph (2) is subject to paragraph 3A.
(5) In sub-paragraph (4), for the words from “the day” to the end substitute “ the last day of the one year period for which the lease is continued or (as the case may be) further continued. ”
(6) After sub-paragraph (5) insert—
(6) Where—
(a) a lease would be treated as continuing for a period (or further period) of one year under sub-paragraph (2), but
(b) (ignoring that sub-paragraph) the lease actually terminates at a time during that period,
the lease is to be treated as continuing under sub-paragraph (2) only until that time; and the references in sub-paragraphs (3) and (4) to that one year period are accordingly to be read as references to so much of that year as ends with that time.
3 After that paragraph insert—
3A (1) This paragraph applies where—
(a) (ignoring this paragraph) paragraph 3 would apply to treat a lease (“the original lease”) as if it were a lease for a fixed term one year longer than the original term,
(b) during that one year period the tenant under that lease is granted a new lease of the same or substantially the same premises,
(c) the term of the new lease begins during that one year period, and
(d) paragraph 9A (backdated lease granted to tenant holding over) does not apply.
(2) Paragraph 3 does not apply to treat the lease as continuing after the original term.
(3) The term of the new lease is treated for the purposes of this Part as beginning immediately after the original term.
(4) Any rent which, in the absence of this paragraph, would be payable under the original lease in respect of that one year period is to be treated as payable under the new lease (and paragraph 1A of Schedule 5 does not apply to it).
(5) Where the fixed term of a lease has previously been extended (on one or more occasions) under paragraph 3, this paragraph applies as if references to the original term were references to the fixed term as previously so extended.
4 In section 87 (interest on unpaid tax), in subsection (3)—
(a) after paragraph (aa) insert—
(aaa) in the case of an amount payable under paragraph 3(3) of Schedule 17A (leases that continue after a fixed term) by reason of the continuation of a lease for a period (or further period) under paragraph 3(2) or (6) of that Schedule, the final day of the period (or further period),
and
(b) in paragraph (ab) omit “3(3) or” and “leases that continue after a fixed term and”.
5 In section 119 (meaning of “effective date” of a transaction), in subsection (2), at the appropriate place in the list insert— “ paragraph 3(4) of Schedule 17A (leases that continue after a fixed term), ”.
Agreement for lease and assignment of agreement for lease
6 (1) Schedule 17A is amended as follows.
(2) In paragraph 12A (agreement for lease), for sub-paragraph (3) substitute—
(3) Where a lease (“the actual lease”) is subsequently granted in pursuance of the agreement, the notional lease is to be treated for the purposes of this Part as if it were a lease granted—
(a) on the date the agreement was substantially performed,
(b) for a term which begins with that date and ends at the end of the term of the actual lease, and
(c) in consideration of the total rent payable over that term and any other consideration given for the notional lease or the actual lease.
(3A) Where sub-paragraph (3) applies the grant of the actual lease is disregarded for the purposes of this Part except section 81A (return or further return in consequence of later linked transaction).
(3B) For the purposes of section 81A—
(a) the grant of the notional lease and the grant of the actual lease are linked (whether or not they would be linked by virtue of section 108),
(b) the lessee under the actual lease (rather than the lessee under the notional lease) is liable for any tax or additional tax payable in respect of the notional lease as a result of sub-paragraph (3), and
(c) the reference in section 81A(1)(a) to “the purchaser under the earlier transaction” is to be read, in relation to the notional lease, as a reference to the lessee under the actual lease.
(3) In paragraph 19 (missives of let)—
(a) for sub-paragraph (2) substitute—
(2) Where in Scotland there is a lease constituted by concluded missives of let (“the first lease”) and at some later time a lease is executed (“the second lease”), the first lease is to be treated for the purposes of this Part as if it were a lease granted—
(a) on the date the missives of let were concluded,
(b) for a period which begins with that date and ends at the end of the period of the second lease, and
(c) in consideration of the total rent payable over that period and any other consideration given for the first lease or the second lease.
(2A) Where sub-paragraph (2) applies the grant of the second lease is disregarded for the purposes of this Part except section 81A (return or further return in consequence of later linked transaction).
(2B) For the purposes of section 81A—
(a) the grant of the first lease and the grant of the second lease are linked (whether or not they would be linked by virtue of section 108),
(b) the lessee under the second lease (rather than the lessee under the first lease) is liable for any tax or additional tax payable in respect of the first lease lease as a result of sub-paragraph (2), and
(c) the reference in section 81A(1)(a) to “the purchaser under the earlier transaction” is to be read, in relation to the first lease, as a reference to the lessee under the second lease.
,
(b) for sub-paragraph (4) substitute—
(4) Where sub-paragraph (3) applies and at some later time a lease (“the actual lease”) is executed, this Part applies as if the notional lease were a lease granted—
(a) on the date the agreement was substantially performed,
(b) for a period which begins with that date and ends at the end of the period of the actual lease, and
(c) in consideration of the total rent payable over that period and any other consideration given for the agreement or the actual lease.
(4A) Where sub-paragraph (4) applies the grant of the second lease is disregarded for the purposes of this Part except section 81A (return or further return in consequence of later linked transaction).”
(4B) For the purposes of section 81A—
(a) the grant of the notional lease and the grant of the actual lease are linked (whether or not they would be linked by virtue of section 108),
(b) the lessee under the actual lease (rather than the lessee under the notional lease) is liable for any tax or additional tax payable in respect of the notional lease as a result of sub-paragraph (4), and
(c) the reference in section 81A(1)(a) to “the purchaser under the earlier transaction” is to be read, in relation to the notional lease, as a reference to the lessee under the actual lease.
(4) Accordingly, in Schedule 25 to FA 2006, paragraphs 4 and 5 are omitted.
Abnormal rent increases
7 (1) In Schedule 17A, omit paragraphs 14 and 15 (abnormal increases in rent after fifth year).
(2) Accordingly, the following are also repealed—
(a) in Schedule 25 to FA 2006, paragraphs 7, 8 and 9(5), and
(b) in Schedule 3 to the Scotland Act 2012, paragraph 27(9).
Commencement
8 (1) The amendments made by paragraph 2(2), (3), (5) and (6) have effect in relation to any one year period for which a lease is continued, or further continued, which begins on or after the commencement day (including any period which would be one year but for paragraph 3(6) of Schedule 17A to FA 2003).
(2) The amendments made by paragraphs 2(4), 3 and 5 have effect if the one year period mentioned in paragraph 3A(1)(b) of Schedule 17A to FA 2003 begins on or after the commencement day.
(3) The amendments made by paragraph 4 have effect in relation to amounts payable in consequence of any period for which a lease is continued, or further continued, which begins on or after the commencement day.
(4) The amendments made by paragraph 6 have effect if the effective date of the actual lease or, as the case may be, second lease falls on or after the commencement day.
(5) The amendments made by paragraph 7 have effect in relation to any increase in rent that takes effect on or after the commencement day.
(6) “The commencement day” means the day on which this Act is passed.
SCHEDULE 42 Climate change levy: supplies subject to carbon price support rates etc
Section 200
PART 1 Earlier provision not to have effect
1 (1) On and after 26 March 2013, Schedule 6 to FA 2000 (climate change levy) has effect as if neither—
(a) Schedule 20 to FA 2011, nor
(b) Parts 1 and 2 of Schedule 32 to FA 2012,
had ever been enacted.
(2) Accordingly—
(a) in FA 2011, section 78 and Schedule 20 are omitted, and
(b) in FA 2012, Parts 1 and 2 of Schedule 32 are omitted.
(3) The amendments made by sub-paragraph (2) are treated as having come into force on 26 March 2013.
PART 2 New provision having effect from 1 April 2013
New provision
2 Schedule 6 to FA 2000 (climate change levy) is amended as follows.
3 In paragraph 4 (definition of “taxable supply”) in sub-paragraph (2)(b) after “24” insert “ , 24A, 24B, 24C, 42D ”.
4 In paragraph 5 (supplies of electricity) after sub-paragraph (2) insert—
(2A) Levy is chargeable on a supply of electricity if—
(a) the supply is made by an exempt unlicensed electricity supplier who is an auto-generator or who is of a description prescribed by regulations made by the Treasury,
(b) the electricity was produced in a generating station owned by the supplier using commodities which were the subject of a deemed supply under paragraph 24A or which would have been the subject of such a supply had the reference in paragraph 24A(1)(a) to Great Britain been a reference to the United Kingdom instead,
(c) the supply is not a deemed supply under paragraph 23(3), and
(d) the person to whom the supply is made is not an electricity utility.
5 In paragraph 6 (supplies of gas) in sub-paragraph (2A) after “24” insert “ , 24A, 24B, 24C, 42D ”.
6 (1) Paragraph 14 (exemption for supplies to electricity producers) is amended as follows.
(2) In sub-paragraphs (2)(b) and (3)(b) after “electricity” insert “ in a small generating station ”.
(3) After sub-paragraph (3) insert—
(3ZA) Sub-paragraph (1) does not exempt a supply where the person to whom the supply is made—
(a) uses the commodity supplied in producing electricity in a stand-by generator, and
(b) uses the electricity produced otherwise than in exemption-retaining ways.
(4) After sub-paragraph (3A) insert—
(3B) Paragraph 24A makes provision under which carbon price support rate commodities intended to be used in a generating station may be the subject of a deemed taxable supply (and, accordingly, this paragraph needs to be read subject to that paragraph).
(5) Omit sub-paragraphs (4) and (5).
7 In paragraph 15 (exemption for supplies to combined heat and power stations) after sub-paragraph (4) insert—
(4A) Paragraph 24B makes provision under which carbon price support rate commodities intended to be used in a combined heat and power station may be the subject of a deemed taxable supply (and, accordingly, this paragraph needs to be read subject to that paragraph).
8 (1) Paragraph 17 (exemption: self-supplies by electricity producers) is amended as follows.
(2) After sub-paragraph (1) insert—
(1A) The supply is exempt from levy if it is a supply of electricity produced in—
(a) a fully exempt combined heat and power station,
(b) a partly exempt combined heat and power station,
(c) a stand-by generator, or
(d) a small generating station.
(1B) Sub-paragraph (1A)(d) applies only if the producer is—
(a) an auto-generator, or
(b) an exempt unlicensed electricity supplier of a description prescribed by regulations made by the Treasury.
(3) In sub-paragraph (2) for the words from “If” to “unless—” substitute “ This paragraph does not exempt the supply if— ”.
(4) Omit sub-paragraphs (3) and (4).
9 In paragraph 21 (regulations to avoid double charges to levy) after sub-paragraph (2) insert—
(2A) In sub-paragraph (2)(b) “taxable supply” does not include a deemed supply under paragraph 24A, 24B, 24C or 42D.
10 In Part 2 after paragraph 24 insert—
Deemed taxable supply: commodities to be used in producing electricity
24A (1) Sub-paragraph (2) applies if—
(a) a quantity of a carbon price support rate commodity is brought onto, or arrives at, a site in Great Britain at which a generating station is situated,
(b) that quantity of the commodity is intended to be used for producing electricity in the station,
(c) the station is neither a fully exempt combined heat and power station nor a partly exempt combined heat and power station, and
(d) the station is neither a small generating station nor a stand-by generator.
(2) For the purposes of this Schedule the owner of the station is deemed to make a taxable supply to himself of that quantity of the commodity.
(3) In sub-paragraph (1)(a) the reference to a commodity being brought onto, or arriving at, a site covers (in particular) gas in a gaseous state arriving at the site through a pipe.
(4) For the purposes of sub-paragraph (1) it does not matter—
(a) if the quantity of the commodity is not the subject of an actual supply made to the owner of the station, or
(b) if the commodity's availability for use in the station is subject to any condition.
Deemed taxable supply: commodities to be used in combined heat and power station
24B (1) Sub-paragraph (2) applies if—
(a) a quantity of a carbon price support rate commodity is brought onto, or arrives at, the CHPQA site of a fully exempt combined heat and power station or a partly exempt combined heat and power station in Great Britain,
(b) that quantity of the commodity is intended to be used in the station for producing outputs of the station, and
(c) the station is not a small generating station.
(2) For the purposes of this Schedule the operator of the station is deemed to make a taxable supply to himself of that quantity of the commodity so far as that quantity is referable to the production of electricity.
(3) For the purposes of sub-paragraph (2) the extent to which a quantity of a commodity is referable to the production of electricity is to be determined in accordance with regulations under paragraph 24D(1).
(4) In sub-paragraph (1)(a) the reference to a commodity being brought onto, or arriving at, the CHPQA site of a station covers (in particular) gas in a gaseous state arriving at the CHPQA site through a pipe.
(5) In sub-paragraph (1)(b) “outputs” has the meaning given by paragraph 148(9).
(6) For the purposes of sub-paragraph (1) it does not matter—
(a) if the quantity of the commodity is not the subject of an actual supply made to the operator of the station, or
(b) if the commodity's availability for use in the station is subject to any condition.
(7) In this paragraph “CHPQA site”, in relation to a fully exempt combined heat and power station or a partly exempt combined heat and power station, means the site of the scheme in relation to which the station's CHPQA certificate was issued.
24C (1) This paragraph applies if—
(a) a determination (“the initial determination”) is made under regulations falling within paragraph 24B(3) that—
(i) none of a quantity of a carbon price support rate commodity is, or
(ii) a proportion of such a quantity is not,
referable to the production of electricity,
(b) as a result of the initial determination, the quantity or proportion of a quantity is determined not to be the subject of a deemed supply under paragraph 24B, and
(c) it is later determined that, contrary to the initial determination, the quantity or proportion of a quantity—
(i) was referable to the production of electricity, and
(ii) accordingly, should have been determined to be the subject of a deemed supply under paragraph 24B.
(2) For the purposes of this Schedule—
(a) the operator of the station in question is deemed to make a taxable supply to himself of the quantity or proportion of a quantity, and
(b) the amount payable by way of levy on the deemed supply is the amount which would have been payable in relation to the quantity or proportion of a quantity had it been determined to be the subject of a deemed supply as mentioned in sub-paragraph (1)(c)(ii).
Power to make regulations giving effect to paragraphs 24A to 24C etc
24D (1) The Commissioners may by regulations make provision for giving effect to paragraphs 24A to 24C and 42A to 42D.
(2) Regulations under sub-paragraph (1) may, in particular, include provision—
(a) for determining whether a deemed supply under paragraph 24A or 24B is made;
(b) for determining the quantity of any commodity which is the subject of such a deemed supply;
(c) for determining whether paragraph 42C(2) applies in relation to a deemed supply under paragraph 24A or 24B and, if it does, the reduction in the relevant carbon price support rate.
(3) Regulations under sub-paragraph (1) may include—
(a) provision in respect of calculations, measurements, data and procedures to be made or used;
(b) provision that, so far as framed by reference to any document, is framed by reference to that document as from time to time in force.
11 After paragraph 38 insert—
Deemed supplies under paragraph 24A, 24B, 24C or 42D
38A (1) A deemed supply under paragraph 24A or 24B is treated as taking place when the quantity of the commodity is brought onto, or arrives at, the site at which the station is situated or the CHPQA site of the station (as the case may be).
(2) A deemed supply under paragraph 24C or 42D is treated as taking place upon the later determination.
12 (1) Paragraph 39 (regulations as to time of supply) is amended as follows.
(2) In sub-paragraph (1)(c) after “24” insert “ , 24A, 24B, 24C, 42D ”.
(3) In sub-paragraph (3) after “supply)” insert “ and 38A ”.
13 In paragraph 42 (amount payable by way of levy) before sub-paragraph (2) insert—
(1B) Sub-paragraph (1) does not apply to a deemed supply under paragraph 24A or 24B.
14 After paragraph 42 insert—
42A (1) This paragraph applies to a deemed supply under paragraph 24A or 24B.
(2) The amount payable by way of levy on the deemed supply is the amount ascertained by applying the relevant carbon price support rate; and the levy payable on a fraction of a kilowatt hour, kilogram or gigajoule is that fraction of the levy payable on a kilowatt hour, kilogram or gigajoule.
(3) The carbon price support rates are as follows.
Carbon price support rate commodity | Carbon price support rate
Any gas in a gaseous state that is of a kind supplied by a gas utility | £0.00091 per kilowatt hour
Any petroleum gas, or other gaseous hydrocarbon, in a liquid state | £0.01460 per kilogram
Any commodity falling within paragraph 3(1)(d) to (f) | £0.44264 per gigajoule
(4) Sub-paragraph (2) needs to be read with paragraphs 42B and 42C.
42B (1) This paragraph applies for the purposes of paragraph 42A(2) if the commodity deemed to be supplied is a quantity of a commodity falling within paragraph 3(1)(d) to (f).
(2) The number of gigajoules in the quantity supplied is to be determined by reference to the total gross calorific value of that quantity.
(3) Sub-paragraph (4) applies if there is included in that quantity any coal slurry taken from a slurry pit situated at the site of a coal mine (including a disused coal mine).
(4) The gross calorific value of the coal slurry is to be left out of account in determining the total gross calorific value of that quantity.
42C (1) Sub-paragraph (2) applies for the purposes of paragraph 42A(2) if, in the calendar year in which the deemed supply is treated as taking place, carbon capture and storage technology is operated in relation to carbon dioxide generated by the station in question in producing electricity.
(2) In relation to the deemed supply, only C% of the relevant carbon price support rate is to be applied (instead of the full rate).
(3) “C%” is 100% minus the station's carbon capture percentage for the calendar year.
(4) The station's “carbon capture percentage” for the calendar year is the percentage of the station's generated carbon dioxide for that year which, through the operation of the carbon capture and storage technology, is—
(a) captured, and
(b) then disposed of by way of permanent storage.
(5) The station's “generated carbon dioxide” for the calendar year is the amount of carbon dioxide generated in the year by the station from the use of carbon price support rate commodities in producing electricity.
(6) In this paragraph “carbon capture and storage technology” and “carbon dioxide” have the meaning given by section 7(3) and (4) of the Energy Act 2010.
(7) Sub-paragraph (8) applies for the purposes of sub-paragraph (4) in relation to any carbon dioxide if—
(a) the carbon dioxide is captured but then leaks out and therefore is not disposed of by way of permanent storage, but
(b) the leak does not occur—
(i) on the land on which the station is situated,
(ii) on any other land under the control of the station's owner or a person connected with the station's owner, or
(iii) from any pipeline or other facility or installation which is operated by the station's owner or a person connected with the station's owner.
Section 1122 of the Corporation Tax Act 2010 (“connected” persons) applies for the purposes of paragraph (b).
(8) The carbon dioxide is to be treated as if it had been disposed of by way of permanent storage.
(9) If the percentage mentioned in sub-paragraph (4) is not a whole number, it is to be rounded to the nearest whole number (taking 0.5% as nearest to the next whole number).
42D (1) This paragraph applies if—
(a) an amount is determined to be payable by way of levy on a deemed supply of a quantity of a commodity under paragraph 24A or 24B, but
(b) it is later determined that that amount is too low.
(2) For the purposes of this Schedule—
(a) the person who made the deemed supply is deemed to make a further taxable supply to himself of the quantity of the commodity, and
(b) the amount payable by way of levy on that further deemed supply is—
(i) the total amount payable on the first deemed supply on the basis of the later determination mentioned in sub-paragraph (1)(b), less
(ii) the amount previously determined to be payable on the first deemed supply.
15 In paragraph 55 (notification of registrability) in sub-paragraph (1) after paragraph (a) insert—
(aa) expects to be deemed to make a taxable supply to himself under paragraph 24A or 24B, or
.
16 In paragraph 62 (tax credits) in sub-paragraph (1) after paragraph (b) insert—
(ba) a quantity of a carbon price support rate commodity is the subject of a deemed supply under paragraph 24A or 24B but afterwards the quantity—
(i) is not used as mentioned in paragraph 24A(1)(b) or 24B(1)(b) (as the case may be), and
(ii) is removed from the site at which the station is situated or from the CHPQA site of the station (as the case may be);
(bb) after—
(i) a determination is made under regulations falling within paragraph 24B(3) that a quantity, or a proportion of a quantity, of a carbon price support rate commodity is referable to the production of electricity, and
(ii) it is accordingly determined that the quantity or proportion of a quantity is the subject of a deemed supply under paragraph 24B,
it is determined that the quantity or proportion of a quantity was not referable to the production of electricity;
(bc) after an amount is determined to be payable by way of levy on a deemed supply under paragraph 24A or 24B, it is determined that that amount is too high;
.
17 In paragraph 146 (regulations) in sub-paragraph (3)—
(a) for “14(3),” substitute “ 5(2A), 14(2), ”, and
(b) after “16,” insert “ 17(1B), ”.
18 In paragraph 147 (definitions)—
(a) at the appropriate places, insert—
“carbon price support rate commodity” means any taxable commodity other than electricity;
,
“CHPQA certificate” has the same meaning as in the Climate Change Levy (Combined Heat and Power Stations) Exemption Certificate Regulations 2001 (S.I. 2001/486);
,
“exempt unlicensed electricity supplier” has the meaning given by paragraph 152A;
,
“Great Britain” includes the territorial waters of the United Kingdom so far as adjacent to Great Britain;
,
“small generating station” has the meaning given by paragraph 152B;
, and
“stand-by generator” means a generating station which—
(a) is used to provide an emergency electricity supply to a building in the event of a failure of the building's usual electricity supply, and
(b) is not used for any other purpose;
, and
(b) in the definition of “prescribed”—
(i) for “14(3),” substitute “ 5(2A), 14(2), ”, and
(ii) after “16(3)” insert “ , 17(1B) ”.
19 After paragraph 152 insert—
Meaning of “exempt unlicensed electricity supplier”
152A (1) In this Schedule “exempt unlicensed electricity supplier” means a person—
(a) to whom an exemption from section 4(1)(c) of the Electricity Act 1989 (persons supplying electricity to premises) has been granted by an order under section 5 of that Act, or
(b) to whom an exemption from Article 8(1)(c) of the Electricity Supply (Northern Ireland) Order 1992 has been granted by an order under Article 9 of that Order,
except where the person is acting otherwise than for purposes connected with the carrying on of activities authorised by the exemption.
(2) Sub-paragraph (1) applies subject to—
(a) any direction under paragraph 151(1), and
(b) any regulations under paragraph 151(2).
Meaning of “small generating station”
152B (1) In this Schedule “small generating station” means a generating station the capacity of which for producing electricity is no more than 2 megawatts.
(2) Sub-paragraph (3) applies if a relevant station (“station X”) is one of a number of relevant stations which—
(a) are situated in the United Kingdom, and
(b) are owned by P or persons connected with P.
(3) In applying sub-paragraph (1) in relation to station X, the reference to the capacity of a generating station is to be read as a reference to the capacity of station X and all the other relevant stations mentioned in sub-paragraph (2) taken together.
(4) In sub-paragraphs (2) and (3) “relevant station” means a generating station which is neither an exempt CHP station nor a stand-by generator.
(5) For the purposes of sub-paragraph (2)(b)—
(a) “P” is the person who owns station X, and
(b) section 1122 of the Corporation Tax Act 2010 (“connected” persons) applies.
(6) Sub-paragraph (7) applies if the scheme in relation to which the CHPQA certificate of an exempt CHP station (“station Y”) is issued covers other exempt CHP stations as well.
(7) In applying sub-paragraph (1) in relation to station Y, the reference to the capacity of a generating station is to be read as a reference to the capacity of station Y and all the other exempt CHP stations mentioned in sub-paragraph (6) taken together.
(8) In this paragraph “exempt CHP station” means a fully exempt combined heat and power station or a partly exempt combined heat and power station.
20 (1) Regulation 5 of the Climate Change Levy (Electricity and Gas) Regulations 2001 (S.I. 2001/1136) is amended as follows.
(2) In paragraph (1) for “paragraph 14(2) of the Act (exemption: certain supplies to electricity producers)” substitute “ paragraphs 5(2A), 14(2) and 17(1B) of the Act (which contain references to exempt unlicensed electricity suppliers) ”.
(3) In paragraph (2)(a) for “14(4)” substitute “ 152A(1) ”.
(4) The amendments made by this paragraph are to be treated as having been made by the Treasury under the powers to make regulations conferred by paragraphs 5(2A), 14(2) and 17(1B) of Schedule 6 to FA 2000.
Commencement
21 The amendments made by this Part of this Schedule are treated as having come into force on 26 March 2013.
22 (1) The amendments made by paragraph 6(2) and (3) above have effect for the purpose of determining if a supply of gas or electricity is exempt from levy where the gas or electricity is actually supplied on or after 1 April 2013.“Gas” means gas in a gaseous state that is of a kind supplied by a gas utility.
(2) Those amendments are to have effect for the purpose of determining if any other supply is exempt from levy where the supply is treated as taking place on or after 1 April 2013.
(3) The amendments made by paragraph 8 above have effect for the purpose of determining if a supply of electricity is exempt from levy where the electricity is caused to be consumed on or after 1 April 2013.
(4) The amendment made by paragraph 10 above has effect in relation to carbon price support rate commodities which are brought onto, or arrive at, sites on or after 1 April 2013.
PART 3 Carbon price support rates from 1 April 2014
23 (1) In paragraph 42A of Schedule 6 to FA 2000 (as inserted by paragraph 14 above) for sub-paragraph (3) substitute—
(3) The carbon price support rates are as follows.
Carbon price support rate commodity | Carbon price support rate
Any gas in a gaseous state that is of a kind supplied by a gas utility | £0.00175 per kilowatt hour
Any petroleum gas, or other gaseous hydrocarbon, in a liquid state | £0.02822 per kilogram
Any commodity falling within paragraph 3(1)(d) to (f) | £0.85489 per gigajoule
(2) The amendment made by this paragraph has effect in relation to supplies treated as taking place on or after 1 April 2014 but before 1 April 2015.
PART 4 Carbon price support rates from 1 April 2015
24 (1) In paragraph 42A of Schedule 6 to FA 2000 (as inserted by paragraph 14 above) for sub-paragraph (3) substitute—
(3) The carbon price support rates are as follows.
Carbon price support rate commodity | Carbon price support rate
Any gas in a gaseous state that is of a kind supplied by a gas utility | £0.00334 per kilowatt hour
Any petroleum gas, or other gaseous hydrocarbon, in a liquid state | £0.05307 per kilogram
Any commodity falling within paragraph 3(1)(d) to (f) | £1.62534 per gigajoule
(2) The amendment made by this paragraph has effect in relation to supplies treated as taking place on or after 1 April 2015.
SCHEDULE 43 General anti-abuse rule: procedural requirements
Section 209
The GAAR Advisory Panel
1 (1) In this Part “the GAAR Advisory Panel” means the panel of persons established by the Commissioners for the purposes of the general anti-abuse rule.
(2) In this Schedule “the Chair” means any member of the GAAR Advisory Panel appointed by the Commissioners to chair it.
Meaning of “tax appeal”
1A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Meaning of “designated HMRC officer”
2 In this Schedule a “designated HMRC officer” means an officer of Revenue and Customs who has been designated by the Commissioners for the purposes of the general anti-abuse rule.
Notice to taxpayer of proposed counteraction of tax advantage
3 (1) If a designated HMRC officer considers—
(a) that a tax advantage has arisen to a person (“the taxpayer”) from tax arrangements that are abusive, and
(b) that the advantage ought to be counteracted under section 209,
the officer must give the taxpayer a written notice to that effect.
(2) The notice must—
(a) specify the arrangements and the tax advantage,
(b) explain why the officer considers that a tax advantage has arisen to the taxpayer from tax arrangements that are abusive,
(c) set out the counteraction that the officer considers ought to be taken,
(d) inform the taxpayer of the period under paragraph 4 for making representations, and
(e) explain the effect of—
(i) paragraphs 5 and 6, and
(ii) sections 209(8) and (9) and 212A.
(3) The notice may set out steps that the taxpayer may take to avoid the proposed counteraction.
4 (1) If a notice is given to the taxpayer under paragraph 3, the taxpayer has 45 days beginning with the day on which the notice is given to send written representations in response to the notice to the designated HMRC officer.
(2) The designated officer may, on a written request made by the taxpayer, extend the period during which representations may be made.
Corrective action by taxpayer
4A (1) If the taxpayer takes the relevant corrective action before the beginning of the closed period mentioned in section 209(8), the matter is not to be referred to the GAAR Advisory Panel.
(2) For the purposes of this Schedule the “relevant corrective action” is taken if (and only if) the taxpayer takes the steps set out in sub-paragraphs (3) and (4).
(3) The first step is that—
(a) the taxpayer amends a return or claim to counteract the tax advantage specified in the notice under paragraph 3, or
(b) ... the taxpayer takes all necessary action to enter into an agreement with HMRC (in writing) for the purpose of relinquishing that advantage.
(4) The second step is that the taxpayer notifies HMRC—
(a) that the taxpayer has taken the first step, and
(b) of any additional amount which has or will become due and payable in respect of tax by reason of the first step being taken.
(5) Where the taxpayer takes the first step described in sub-paragraph (3)(b), HMRC may proceed as if the taxpayer had not taken the relevant corrective action if the taxpayer fails to enter into the written agreement.
(6) In determining the additional amount which has or will become due and payable in respect of tax for the purposes of sub-paragraph (4)(b), it is to be assumed that, where the taxpayer takes the necessary action as mentioned in sub-paragraph (3)(b), the agreement is then entered into.
(7) Where a tax enquiry is in progress, no enactment limiting the time during which amendments may be made to returns or claims operates to prevent the taxpayer taking the first step mentioned in sub-paragraph (3)(a) before the tax enquiry is closed ....
(8) No appeal may be brought, by virtue of a provision mentioned in sub-paragraph (9), against an amendment made by a closure notice in respect of a tax enquiry to the extent that the amendment takes into account an amendment made by the taxpayer to a return or claim in taking the first step mentioned in sub-paragraph (3)(a).
(9) The provisions are—
(a) section 31(1)(b) or (c) of TMA 1970,
(b) paragraph 9 of Schedule 1A to TMA 1970,
(c) paragraph 34(3) of Schedule 18 to FA 1998,
(d) paragraph 35(1)(b) of Schedule 10 to FA 2003, and
(e) paragraph 35(1)(b) of Schedule 33 to FA 2013.
Referral to GAAR Advisory Panel
4B Paragraphs 5 and 6 apply if the taxpayer does not take the relevant corrective action (see paragraph 4A) by the beginning of the closed period mentioned in section 209(8).
5 If no representations are made in accordance with paragraph 4, a designated HMRC officer must refer the matter to the GAAR Advisory Panel.
6 (1) If representations are made in accordance with paragraph 4, a designated HMRC officer must consider them.
(2) If, after considering them, the designated HMRC officer considers that the tax advantage ought to be counteracted under section 209, the officer must refer the matter to the GAAR Advisory Panel.
(3) The officer must, as soon as reasonably practicable after deciding whether or not the matter is to be referred to the GAAR Advisory Panel, give the taxpayer written notice of the decision.
7 If the matter is referred to the GAAR Advisory Panel, the designated HMRC officer must at the same time provide it with—
(a) a copy of the notice given to the taxpayer under paragraph 3,
(b) a copy of any representations made in accordance with paragraph 4 and any comments that the officer has on those representations, and
(c) a copy of the notice given to the taxpayer under paragraph 8.
8 If the matter is referred to the GAAR Advisory Panel, the designated HMRC officer must at the same time give the taxpayer a notice which—
(a) specifies that the matter is being referred,
(b) is accompanied by a copy of any comments provided to the GAAR Advisory Panel under paragraph 7(b), and
(c) informs the taxpayer of the period under paragraph 9 for making representations, and of the requirement under that paragraph to send any representations to the officer.
9 (1) The taxpayer has 21 days beginning with the day on which a notice is given under paragraph 8 to send the GAAR Advisory Panel written representations about—
(a) the notice given to the taxpayer under paragraph 3, or
(b) any comments provided under paragraph 7(b).
(2) The GAAR Advisory Panel may, on a written request made by the taxpayer, extend the period during which representations may be made.
(3) The taxpayer must send a copy of any representations to the designated HMRC officer at the same time as the representations are sent to the GAAR Advisory Panel.
(4) If no representations were made in accordance with paragraph 4, the designated HMRC officer—
(a) may provide the GAAR Advisory Panel with comments on any representations made under this paragraph, and
(b) if comments are provided, must at the same time send a copy of them to the taxpayer.
Decision of GAAR Advisory Panel and opinion notices
10 (1) If the matter is referred to the GAAR Advisory Panel, the Chair must arrange for a sub-panel consisting of 3 members of the GAAR Advisory Panel (one of whom may be the Chair) to consider it.
(2) The sub-panel may invite the taxpayer or the designated HMRC officer (or both) to supply the sub-panel with further information within a period specified in the invitation.
(3) Invitations must explain the effect of sub-paragraph (4) or (5) (as appropriate).
(4) If the taxpayer supplies information to the sub-panel under this paragraph, the taxpayer must at the same time send a copy of the information to the designated HMRC officer.
(5) If the designated HMRC officer supplies information to the sub-panel under this paragraph, the officer must at the same time send a copy of the information to the taxpayer.
11 (1) Where the matter is referred to the GAAR Advisory Panel, the sub-panel must produce—
(a) one opinion notice stating the joint opinion of all the members of the sub-panel, or
(b) two or three opinion notices which taken together state the opinions of all the members.
(2) The sub-panel must give a copy of the opinion notice or notices to—
(a) the designated HMRC officer, and
(b) the taxpayer.
(3) An opinion notice is a notice which states that in the opinion of the members of the sub-panel, or one or more of those members—
(a) the entering into and carrying out of the tax arrangements is a reasonable course of action in relation to the relevant tax provisions—
(i) having regard to all the circumstances (including the matters mentioned in subsections (2)(a) to (c) and (3) of section 207), and
(ii) taking account of subsections (4) to (6) of that section, or
(b) the entering into or carrying out of the tax arrangements is not a reasonable course of action in relation to the relevant tax provisions having regard to those circumstances and taking account of those subsections, or
(c) it is not possible, on the information available, to reach a view on that matter,
and the reasons for that opinion.
(4) For the purposes of the giving of an opinion under this paragraph, the arrangements are to be assumed to be tax arrangements.
(5) In this Part, a reference to any opinion of the GAAR Advisory Panel about any tax arrangements is a reference to the contents of any opinion notice about the arrangements.
Notice of final decision after considering opinion of GAAR Advisory Panel
12 (1) A designated HMRC officer who has received a notice or notices under paragraph 11 must, having considered any opinion of the GAAR Advisory Panel about the tax arrangements, give the taxpayer a written notice setting out whether the tax advantage arising from the arrangements is to be counteracted under the general anti-abuse rule.
(2) If the notice states that a tax advantage is to be counteracted, it must also set out—
(a) the adjustments required to give effect to the counteraction, and
(b) if relevant, any steps that the taxpayer is required to take to give effect to it.
Notices may be given on assumption that tax advantage does arise
13 (1) A designated HMRC officer may give a notice, or do anything else, under this Schedule where the officer considers that a tax advantage might have arisen ....
(2) Accordingly, any notice given by a designated HMRC officer under this Schedule may be expressed to be given on the assumption that the tax advantage does arise (without agreeing that it does).
HMRC officers
14 Anything that may or must be done by a given designated HMRC officer under this Schedule may be done instead by any other designated HMRC officer.
SCHEDULE 43A Procedural requirements: pooling notices and notices of binding
Pooling notices
1 (1) This paragraph applies where a person has been given a notice under paragraph 3 of Schedule 43 , or paragraph 5 of Schedule 43D, in relation to any tax arrangements (the “lead arrangements”) and the condition in sub-paragraph (2) is met.
(2) The condition is that the period of 45 days mentioned in paragraph 4(1) of Schedule 43 has expired but no notice under paragraph 12 of Schedule 43 or paragraph 8 of Schedule 43B has yet been given in respect of the matter.
(3) If a designated HMRC officer considers—
(a) that a tax advantage has arisen to a person (“R”) from tax arrangements (other than the lead arrangements) that are abusive,
(b) that those tax arrangements (“R's arrangements”) are equivalent to the lead arrangements, and
(c) that the advantage ought to be counteracted under section 209,
the officer may give R a notice (a “pooling notice”) to that effect.
(3A) For the purposes of this Schedule and Schedule 43B, all the tax arrangements in relation to which pooling notices have been served in respect of the same lead arrangements are to be regarded as being in a “pool” together.
(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6) The officer may not give R a pooling notice if R has been given in respect of R's arrangements a notice under paragraph 3 of Schedule 43.
Notice of proposal to bind arrangements to counteracted arrangements
2 (1) This paragraph applies where a counteraction notice has been given to a person in relation to any tax arrangements (the “counteracted arrangements”) ....
(2) If a designated HMRC officer considers—
(a) that a tax advantage has arisen to a person (“R”) from tax arrangements (other than the counteracted arrangements) that are abusive,
(b) that those tax arrangements (“R's arrangements”) are equivalent to the counteracted arrangements, and
(c) that the advantage ought to be counteracted under section 209,
the officer may give R a notice (a “notice of binding”) in relation to R's arrangements.
(3) The officer may not give R a notice of binding if R has been given in respect of R's arrangements a notice under—
(a) paragraph 1, or
(b) paragraph 3 of Schedule 43.
(4) In this paragraph “counteraction notice” means a notice such as is mentioned in sub-paragraph (2) of paragraph 12 of Schedule 43 or sub-paragraph (3) of paragraph 8 of Schedule 43B (notice of final decision to counteract).
3 (1) The decision of a designated HMRC officer whether or not to give R a pooling notice or notice of binding must be taken, and any notice must be given, as soon as is reasonably practicable after the officer becomes aware of the relevant facts.
(2) A pooling notice or notice of binding must—
(a) specify the tax arrangements in relation to which the notice is given and the tax advantage,
(b) explain why the officer considers R's arrangements to be equivalent to the lead arrangements or the counteracted arrangements (as the case may be),
(c) explain why the officer considers that a tax advantage has arisen to R from tax arrangements that are abusive,
(d) set out the counteraction that the officer considers ought to be taken, and
(e) explain the effect of—
(i) paragraphs 4 to 10,
(ii) subsection (9) of section 209, and
(iii) section 212A.
(3) A pooling notice or notice of binding may set out steps that R may (subject to subsection (9) of section 209) take to avoid the proposed counteraction.
Corrective action by a notified taxpayer
4 (1) If a person to whom a pooling notice or notice of binding has been given takes the relevant corrective action in relation to the tax arrangements and tax advantage specified in the notice before the beginning of the closed period mentioned in section 209(9), the person is to be treated for the purposes of paragraphs 6 to 9 and Schedule 43B (generic referral of tax arrangements) as not having been given the notice in question (and accordingly the tax arrangements in question are no longer in the pool).
(2) For the purposes of this Schedule the “relevant corrective action” is taken if (and only if) the person takes the steps set out in sub-paragraphs (3) and (4).
(3) The first step is that—
(a) the person amends a return or claim to counteract the tax advantage specified in the pooling notice or notice of binding, or
(b) ... the person takes all necessary action to enter into an agreement with HMRC (in writing) for the purpose of relinquishing that advantage.
(4) The second step is that the person notifies HMRC—
(a) that the first step has been taken, and
(b) of any additional amount which has or will become due and payable in respect of tax by reason of the first step being taken.
(5) Where a person takes the first step described in sub-paragraph (3)(b), HMRC may proceed as if the person had not taken the relevant corrective action if the person fails to enter into the written agreement.
(6) In determining the additional amount which has or will become due and payable in respect of tax for the purposes of sub-paragraph (4)(b), it is to be assumed that, where the person takes the necessary action as mentioned in sub-paragraph (3)(b), the agreement is then entered into.
(7) Where a tax enquiry is in progress, no enactment limiting the time during which amendments may be made to returns or claims operates to prevent the person taking the first step mentioned in sub-paragraph (3)(a) before the tax enquiry is closed.
(8) No appeal may be brought, by virtue of a provision mentioned in sub-paragraph (9), against an amendment made by a closure notice in respect of a tax enquiry to the extent that the amendment takes into account an amendment made by the taxpayer to a return or claim in taking the first step mentioned in sub-paragraph (3)(a).
(9) The provisions are—
(a) paragraph 35(1)(b) of Schedule 33,
(b) section 31(1)(b) or (c) of TMA 1970,
(c) paragraph 9 of Schedule 1A to TMA 1970,
(d) paragraph 34(3) of Schedule 18 to FA 1998, and
(e) paragraph 35(1)(b) of Schedule 10 to FA 2003.
Corrective action by lead taxpayer
5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Opinion notices and right to make representations
6 (1) Sub-paragraph (2) applies where—
(a) a pooling notice is given to a person in relation to any tax arrangements, and
(b) an opinion notice (or opinion notices) under paragraph 11(2) of Schedule 43 about another set of tax arrangements in the pool or the lead arrangements (“the referred arrangements”) is subsequently given to a designated HMRC officer.
(2) The officer must give the person a pooled arrangements opinion notice.
(3) No more than one pooled arrangements opinion notice may be given to a person in respect of the same tax arrangements.
(4) Where a designated HMRC officer gives a person a notice of binding, the officer must, at the same time, give the person a bound arrangements opinion notice.
7 (1) In relation to a person who is, or has been, given a pooling notice, “pooled arrangements opinion notice” means a written notice which—
(a) sets out a report prepared by HMRC of any opinion of the GAAR Advisory Panel about the referred arrangements,
(b) explains the person's right to make representations falling within sub-paragraph (3), and
(c) sets out the period in which those representations may be made.
(2) In relation to a person who is given a notice of binding “bound arrangements opinion notice” means a written notice which—
(a) sets out a report prepared by HMRC of any opinion of the GAAR Advisory Panel about the counteracted arrangements (see paragraph 2(1)),
(b) explains the person's right to make representations falling within sub-paragraph (3), and
(c) sets out the period in which those representations may be made.
(3) A person who is given a pooled arrangements opinion notice or a bound arrangements opinion notice has 30 days beginning with the day on which the notice is given to make representations in any of the following categories—
(a) representations that no tax advantage has arisen to the person from the arrangements to which the notice relates;
(b) representations as to why the arrangements to which the notice relates are or may be materially different from—
(i) the referred arrangements (in the case of a pooled arrangements opinion notice), or
(ii) the counteracted arrangements (in the case of a bound arrangements opinion notice).
(4) In sub-paragraph (3)(b) references to “arrangements” include any circumstances which would be relevant in accordance with section 207 to a determination of whether the tax arrangements in question are abusive.
Notice of final decision
8 (1) This paragraph applies where—
(a) further to a pooling notice given under paragraph 1(3), a set of tax arrangements is in a pool relating to any lead arrangements, and
(b) a designated HMRC officer has given a notice under paragraph 12 of Schedule 43 in relation to any other arrangements in the pool or the lead arrangements (the “referred arrangements”).
(2) The officer must, having considered any opinion of the GAAR Advisory Panel about the referred arrangements and any representations made under paragraph 7(3) in relation to the arrangements mentioned in sub-paragraph (1)(a), give the person a written notice setting out whether the tax advantage arising from those arrangements is to be counteracted under the general anti-abuse rule.
9 (1) This paragraph applies where—
(a) a person has been given a notice of binding under paragraph 2, and
(b) the period of 30 days for making representations under paragraph 7(3) has expired.
(2) A designated HMRC officer must, having considered any opinion of the GAAR Advisory Panel about the counteracted arrangements and any representations made under paragraph 7(3) in relation to the arrangements specified in the notice of binding, give the person a written notice setting out whether the tax advantage arising from the arrangements specified in the notice of binding is to be counteracted under the general anti-abuse rule.
10 If a notice under paragraph 8(2) or 9(2) states that a tax advantage is to be counteracted, it must also set out—
(a) the adjustments required to give effect to the counteraction, and
(b) if relevant, any steps the person concerned is required to take to give effect to it.
“Equivalent arrangements”
11 (1) ... Tax arrangements are “equivalent” to one another if they are substantially the same as one another having regard to—
(a) their substantive results,
(b) the means of achieving those results, and
(c) the characteristics on the basis of which it could reasonably be argued, in each case, that the arrangements are abusive tax arrangements under which a tax advantage has arisen to a person.
Notices may be given on assumption that tax advantage does arise
12 (1) A designated HMRC officer may give a notice, or do anything else, under this Schedule where the officer considers that a tax advantage might have arisen ....
(2) Accordingly, any notice given by a designated HMRC officer under this Schedule may be expressed to be given on the assumption that a tax advantage does arise (without conceding that it does).
HMRC officers
12A. Anything that may or must be done by a given designated HMRC officer under this Schedule may be done instead by any other designated HMRC officer.
Power to amend
13 (1) The Treasury may by regulations amend this Schedule (apart from this paragraph).
(2) Regulations under sub-paragraph (1) may include—
(a) any amendment of this Part that is appropriate in consequence of an amendment by virtue of sub-paragraph (1);
(b) transitional provision.
(3) Regulations under sub-paragraph (1) are to be made by statutory instrument.
(4) A statutory instrument containing regulations under sub-paragraph (1) is subject to annulment in pursuance of a resolution of the House of Commons.
SCHEDULE 43B Procedural requirements: generic referral of tax arrangements
Notice of proposal to make generic referral of tax arrangements
1 (1) Sub-paragraph (2) applies if—
(a) further to pooling notices given under paragraph 1(3) of Schedule 43A, two or more sets of tax arrangements are in a pool relating to any lead arrangements,
(b) the person to whom the notice mentioned in paragraph 1(1) of Schedule 43A was given takes the relevant corrective action (as defined in paragraph 4A of Schedule 43) before—
(i) the end of the period of 75 days beginning with the day on which that notice was given, or
(ii) such later time as that person and HMRC may agree, and
(c) no referral under paragraph 5 or 6 of Schedule 43 has been made in respect of any arrangements in the pool.
(2) A designated HMRC officer may determine that, in respect of each of the tax arrangements that are in the pool, there is to be given (to the person to whom the pooling notice in question was given) a written notice of a proposal to make a generic referral to the GAAR Advisory Panel in respect of the arrangements in the pool.
(3) Only one determination under sub-paragraph (2) may be made in relation to any one pool.
(4) The persons to whom those notices are given are “the notified taxpayers”.
(5) A notice given to a person (“T”) under sub-paragraph (2) must—
(a) specify the arrangements (the “specified arrangements”) and the tax advantage (the “specified advantage”) to which the notice relates,
(b) inform T of the period under paragraph 2 for making a proposal.
2 (1) T has 30 days beginning with the day on which the notice under paragraph 1 is given to propose to HMRC that it—
(a) should give T a notice under paragraph 3 of Schedule 43 or paragraph 5 of Schedule 43D (as the case may be) in respect of the arrangements to which the notice under paragraph 1 relates, and
(b) should not proceed with the proposal to make a generic referral to the GAAR Advisory Panel in respect of those arrangements.
(2) If a proposal is made in accordance with sub-paragraph (1) a designated HMRC officer must consider it.
Generic referral
3 (1) This paragraph applies where a designated HMRC officer has given notices to the notified taxpayers in accordance with paragraph 1(2).
(2) If none of the notified taxpayers has made a proposal under paragraph 2 by the end of the 30 day period mentioned in that paragraph, the officer must make a referral to the GAAR Advisory Panel in respect of the notified taxpayers and the arrangements which are specified arrangements in relation to them.
(3) If at least one of the notified taxpayers makes a proposal in accordance with paragraph 2, the designated HMRC officer must, after the end of that 30 day period, decide whether to—
(a) give a notice under paragraph 3 of Schedule 43 or paragraph 5 of Schedule 43D (as the case may be) in respect of one set of tax arrangements in the relevant pool in relation to which such a proposal has been made, or
(b) make a referral to the GAAR Advisory Panel in respect of the tax arrangements in the relevant pool.
(3A) If under sub-paragraph (3)(a) a notice is given under paragraph 3 of Schedule 43 or paragraph 5 of Schedule 43D in respect of one set of tax arrangements but ... the matter is not referred to the GAAR Advisory Panel, a designated officer must make a referral to the GAAR Advisory Panel in respect of the notified taxpayers and the arrangements which are specified arrangements in relation to them.
(4) A referral under this paragraph is a “generic referral”.
4 (1) If a generic referral is made to the GAAR Advisory Panel, the designated HMRC officer must at the same time provide it with—
(a) a general statement of the material characteristics of the specified arrangements, and
(b) a declaration that—
(i) the statement under paragraph (a) is applicable to all the specified arrangements, and
(ii) as far as HMRC is aware, nothing which is material to the GAAR Advisory Panel's consideration of the matter has been omitted.
(2) The general statement under sub-paragraph (1)(a) must—
(a) contain a factual description of the tax arrangements;
(b) set out HMRC's view as to whether the tax arrangements accord with established practice (when the arrangements were entered into);
(c) explain why it is the designated HMRC officer's view that a tax advantage of the nature described in the statement and arising from tax arrangements having the characteristics described in the statement would be a tax advantage arising from arrangements that are abusive;
(d) set out any matters the designated officer is aware of which may suggest that any view of HMRC or the designated HMRC officer expressed in the general statement is not correct;
(e) set out any other matters which the designated officer considers are required for the purposes of the exercise of the GAAR Advisory Panel's functions under paragraph 6.
5 If a generic referral is made the designated HMRC officer must at the same time give each of the notified taxpayers a notice which—
(a) specifies that a generic referral is being made, and
(b) is accompanied by a copy of the statement given to the GAAR Advisory Panel in accordance with paragraph 4(1)(a).
Decision of GAAR Advisory Panel and opinion notices
6 (1) If a generic referral is made to the GAAR Advisory Panel under paragraph 3, the Chair must arrange for a sub-panel consisting of 3 members of the GAAR Advisory Panel (one of whom may be the Chair) to consider it.
(2) The sub-panel must produce—
(a) one opinion notice stating the joint opinion of all the members of the sub-panel, or
(b) two or three opinion notices which taken together state the opinions of all the members.
(3) The sub-panel must give a copy of the opinion notice or notices to the designated HMRC officer.
(4) An opinion notice is a notice which states that in the opinion of the members of the sub-panel, or one or more of those members—
(a) the entering into and carrying out of tax arrangements such as are described in the general statement under paragraph 4(1)(a) is a reasonable course of action in relation to the relevant tax provisions,
(b) the entering into or carrying out of such tax arrangements is not a reasonable course of action in relation to the relevant tax provisions, or
(c) it is not possible, on the information available, to reach a view on that matter,
and the reasons for that opinion.
(5) In forming their opinions for the purposes of sub-paragraph (4) members of the sub-panel must—
(a) have regard to all the matters set out in the statement under paragraph 4(1)(a),
(b) assume (unless the contrary is stated in the statement under paragraph 4(1)(a)) that the tax arrangements do not form part of any other arrangements,
(c) have regard to the matters mentioned in paragraphs (a) to (c) of section 207(2), and
(d) take account of subsections (4) to (6) of section 207.
(6) For the purposes of the giving of an opinion under this paragraph, the arrangements are to be assumed to be tax arrangements.
(7) In this Part, a reference to any opinion of the GAAR Advisory Panel in respect of a generic referral of any tax arrangements is a reference to the contents of any opinion notice given in relation to a generic referral in respect of the arrangements.
Notice of right to make representations
7 (1) Where a designated HMRC officer is given an opinion notice (or opinion notices) under paragraph 6, the officer must give each of the notified taxpayers a copy of the opinion notice (or notices) and a written notice which—
(a) explains the notified taxpayer's right to make representations falling within sub-paragraph (2), and
(b) sets out the period in which those representations may be made.
(2) A notified taxpayer (“T”) who is given a notice under sub-paragraph (1) has 30 days beginning with the day on which the notice is given to make representations in any of the following categories—
(a) representations that no tax advantage has arisen from the specified arrangements;
(b) representations that T has already been given a notice under paragraph 6 of Schedule 43A in relation to the specified arrangements;
(c) representations that any matter set out in the statement under paragraph 4(1)(a) is materially inaccurate as regards the specified arrangements (having regard to all circumstances which would be relevant in accordance with section 207 to a determination of whether the tax arrangements in question are abusive).
Notice of final decision after considering opinion of GAAR Advisory Panel
8 (1) A designated HMRC officer who has received a copy of a notice or notices under paragraph 6(3) in respect of a generic referral must consider the case of each notified taxpayer in accordance with sub-paragraph (2).
(2) The officer must, having considered—
(a) any opinion of the GAAR Advisory Panel about the matters referred to it, and
(b) any representations made by the notified taxpayer under paragraph 7,
give to the notified taxpayer a written notice setting out whether the specified advantage is to be counteracted under the general anti-abuse rule.
(3) If the notice states that a tax advantage is to be counteracted, it must also set out—
(a) the adjustments required to give effect to the counteraction, and
(b) if relevant, any steps that the taxpayer is required to take to give effect to it.
Notices may be given on assumption that tax advantage does arise
9 (1) A designated HMRC officer may give a notice, or do anything else, under this Schedule where the officer considers that a tax advantage might have arisen ....
(2) Accordingly, any notice given by a designated HMRC officer under this Schedule may be expressed to be given on the assumption that a tax advantage does arise (without conceding that it does).
HMRC officers
9A. Anything that may or must be done by a given designated HMRC officer under this Schedule may be done instead by any other designated HMRC officer
Power to amend
10 (1) The Treasury may by regulations amend this Schedule (apart from this paragraph).
(2) Regulations under sub-paragraph (1) may include—
(a) any amendment of this Part that is appropriate in consequence of an amendment by virtue of sub-paragraph (1);
(b) transitional provision.
(3) Regulations under sub-paragraph (1) are to be made by statutory instrument.
(4) A statutory instrument containing regulations under sub-paragraph (1) is subject to annulment in pursuance of a resolution of the House of Commons.
SCHEDULE 43C Penalty under section 212A or 212B: supplementary provision
Value of the counteracted advantage: introduction
1 Paragraphs 2 to 4 set out how to calculate the “value of the counteracted advantage” for the purposes of sections 212A and 212B.
Value of the counteracted advantage: basic rule
2 (1) The “value of the counteracted tax advantage” is—
(a) for a penalty under section 212A, the additional amount due or payable in respect of tax as a result of the counteraction mentioned in subsection (1)(d) of that section, and
(b) for a penalty under section 212B, the additional amount due or payable in respect of tax (by the partner in question) as a result of the counteraction mentioned in subsection (1)(b) of that section.
(2) The reference in sub-paragraph (1) to the additional amount due and payable includes a reference to—
(a) an amount payable to HMRC having erroneously been paid by way of repayment of tax, and
(b) an amount which would be repayable by HMRC if the counteraction were not made.
(3) The following are ignored in calculating the value of the counteracted advantage—
(a) group relief, and
(b) any relief under section 458 of CTA 2010 (relief in respect of repayment etc of loan) which is deferred under subsection (5) of that section.
(4) For the purposes of this paragraph consequential adjustments under section 210 are regarded as part of the counteraction in question.
(5) If the counteraction affects a person's liability to two or more taxes, the taxes concerned are to be considered together for the purpose of determining the value of the counteracted advantage.
(6) This paragraph is subject to paragraphs 3 and 4.
Value of counteracted advantage: losses
3 (1) To the extent that the tax advantage ... resulted in the wrong recording of a loss for the purposes of direct tax and the loss has been wholly used to reduce the amount due or payable in respect of tax, the value of the counteracted advantage is determined in accordance with paragraph 2.
(2) To the extent that the tax advantage resulted in the wrong recording of a loss for purposes of direct tax and the loss has not been wholly used to reduce the amount due or payable in respect of tax, the value of the counteracted advantage is—
(a) the value under paragraph 2 of so much of the tax advantage as results (or would in the absence of the counteraction result) from the part (if any) of the loss which was used to reduce the amount due or payable in respect of tax, plus
(b) 10% of the part of the loss not so used.
(3) Sub-paragraphs (1) and (2) apply both—
(a) to a case where no loss would have been recorded but for the tax advantage, and
(b) to a case where a loss of a different amount would have been recorded (but in that case sub-paragraphs (1) and (2) apply only to the difference between the amount recorded and the true amount).
(4) To the extent that the tax advantage creates or increases (or would in the absence of the counteraction create or increase) an aggregate loss recorded for a group of companies—
(a) the value of the counteracted advantage is calculated in accordance with this paragraph, and
(b) in applying paragraph 2 in accordance with sub-paragraphs (1) and (2), group relief may be taken into account (despite paragraph 2(3)).
(5) To the extent that the tax advantage results (or would in the absence of the counteraction result) in a loss, the value of it is nil where, because of the nature of the loss or the person's circumstances, there was no reasonable prospect of the loss being used to support a claim to reduce a tax liability (of any person).
Value of counteracted advantage: deferred tax
4 (1) To the extent that the tax advantage mentioned in section 212A or 212B (as the case may be) is a deferral of tax, the value of the counteracted advantage is—
(a) 25% of the amount of the deferred tax for each year of the deferral, or
(b) a percentage of the amount of the deferred tax, for each separate period of deferral of less than a year, equating to 25% per year,
or, if less, 100% of the amount of the deferred tax.
(2) This paragraph does not apply to a case to the extent that paragraph 3 applies.
Assessment of penalty
5 (1) Where a person is liable for a penalty under section 212A or 212B (as the case may be), HMRC must assess the penalty.
(2) Where HMRC assess the penalty, HMRC must—
(a) notify—
(i) where the penalty is under section 212A, the person who is liable for it;
(ii) where the penalty is under section 212B, the person who is liable for it and the responsible partner.
(b) state in the notice a tax period in respect of which the penalty is assessed.
(3) A penalty under this paragraph must be paid before the end of the period of 30 days beginning with the day on which notification of the penalty is issued.
(4) An assessment—
(a) is to be treated for procedural purposes as if it were an assessment to tax,
(b) may be enforced as if it were an assessment to tax, and
(c) may be combined with an assessment to tax.
(5) An assessment of a penalty under this paragraph must be made before the end of the period of 12 months beginning with the date (or the latest of the dates) on which the counteraction mentioned in section 212A(1)(d) or section 212B(1)(b) (as the case may be) becomes final (within the meaning of section 210(8)).
Alteration of assessment of penalty
6 (1) After notification of an assessment has been given to a person under paragraph 5(2), the assessment may not be altered except in accordance with this paragraph or paragraph 7, or on appeal.
(2) A supplementary assessment may be made in respect of a penalty if an earlier assessment operated by reference to an underestimate of the value of the counteracted advantage.
(3) An assessment may be revised as necessary if it operated by reference to an overestimate of the value of the counteracted advantage.
Revision of assessment following consequential relieving adjustment
7 (1) Sub-paragraph (2) applies where a person—
(a) is notified under section 210(7) of a consequential adjustment relating to a counteraction under section 209, and
(b) an assessment to a penalty in respect of that counteraction of which the person has been notified under paragraph 5(2) does not take account of that consequential adjustment.
(2) HMRC must make any alterations of the assessment that appear to HMRC to be just and reasonable in connection with the consequential amendment.
(3) Alterations under this paragraph may be made despite any time limit imposed by or under an enactment.
Aggregate penalties
8 (1) Sub-paragraph (3) applies where—
(a) two or more penalties are incurred by the same person and fall to be determined by reference to an amount of tax to which that person is chargeable,
(b) one of those penalties is incurred under section 212A or 212B (as the case may be), and
(c) one or more of the other penalties are incurred under a relevant penalty provision.
(2) But sub-paragraph (3) does not apply if section 212(2) of FA 2014 (follower notices: aggregate penalties) applies in relation to the amount of tax in question.
(3) The aggregate of the amounts of the penalties mentioned in subsection (1)(b) and (c), so far as determined by reference to that amount of tax, must not exceed—
(a) the relevant percentage of that amount, or
(b) in a case where at least one of the penalties is under paragraph 5(2)(b) of, or sub-paragraph (3)(b), (4)(b) or (5)(b) of paragraph 6 of, Schedule 55 to FA 2009 , or sub-paragraph (3)(b) or (5)(b) of paragraph 3 or paragraph 20(4) of Schedule 25 to FA 2021, £300 (if greater).
(4) In the application of section 97A of TMA 1970 (multiple penalties) no account shall be taken of a penalty under section 212A or 212B.
(5) “Relevant penalty provision” means—
(a) Schedule 24 to FA 2007 (penalties for errors),
(b) Schedule 41 to FA 2008 (penalties: failure to notify etc),
(c) Schedule 55 to FA 2009 (penalties for failure to make returns etc), or
(d) Part 5 of Schedule 18 to FA 2016 (penalty under serial tax avoidance regime), or
(e) Schedule 25 to FA 2021 (penalties for deliberately withholding information).
(6) “The relevant percentage” means—
(a) 200% in a case where at least one of the penalties is determined by reference to the percentage in—
(i) paragraph 4(4)(c) of Schedule 24 to FA 2007,
(ii) paragraph 6(4)(a) of Schedule 41 to FA 2008, or
(iii) paragraph 6(3A)(c) of Schedule 55 to FA 2009, or
(iv) paragraph 3(4)(c) of Schedule 25 to FA 2021,
(b) 150% in a case where paragraph (a) does not apply and at least one of the penalties is determined by reference to the percentage in—
(i) paragraph 4(3)(c) of Schedule 24 to FA 2007,
(ii) paragraph 6(3)(a) of Schedule 41 to FA 2008, or
(iii) paragraph 6(3A)(b) of Schedule 55 to FA 2009, or
(iv) paragraph 3(4)(b) of Schedule 25 to FA 2021,
(c) 140% in a case where neither paragraph (a) nor paragraph (b) applies and at least one of the penalties is determined by reference to the percentage in—
(i) paragraph 4(4)(b) of Schedule 24 to FA 2007,
(ii) paragraph 6(4)(b) of Schedule 41 to FA 2008, or
(iii) paragraph 6(4A)(c) of Schedule 55 to FA 2009, or
(iv) paragraph 3(6)(c) of Schedule 25 to FA 2021,
(d) 105% in a case where at none of paragraphs (a), (b) and (c) applies and at least one of the penalties is determined by reference to the percentage in—
(i) paragraph 4(3)(b) of Schedule 24 to FA 2007,
(ii) paragraph 6(3)(b) of Schedule 41 to FA 2008, or
(iii) paragraph 6(4A)(b) of Schedule 55 to FA 2009, and or
(iv) paragraph 3(6)(b) of Schedule 25 to FA 2021, and
(e) in any other case, 100%.
Appeal against penalty
9 (1) A person may appeal against—
(a) the imposition of a penalty under section 212A or 212B, or
(b) the amount assessed under paragraph 5.
(1A) Where the penalty is under section 212B, an appeal against it must be brought by the responsible partner.
(2) An appeal under sub-paragraph (1)(a) may only be made on the grounds that the arrangements were not abusive or there was no tax advantage to be counteracted.
(3) An appeal under sub-paragraph (1)(b) may only be made on the grounds that the assessment was based on an overestimate of the value of the counteracted advantage (whether because the estimate was made by reference to adjustments which were not just and reasonable or for any other reason).
(4) An appeal under this paragraph must be made within the period of 30 days beginning with the day on which notification of the penalty is given under paragraph 5(2).
(5) An appeal under this paragraph is to be treated in the same way as an appeal against an assessment to the tax concerned (including by the application of any provision about bringing the appeal by notice to HMRC, about HMRC's review of the decision or about determination of the appeal by the First-tier Tribunal or Upper Tribunal).
(6) Sub-paragraph (5) does not apply—
(a) so as to require a person to pay a penalty before an appeal against the assessment of the penalty is determined, or
(b) in respect of any other matter expressly provided for by this Part.
(7) On an appeal against the penalty the tribunal may affirm or cancel HMRC's decision.
(8) On an appeal against the amount of the penalty the tribunal may—
(a) affirm HMRC's decision, or
(b) substitute for HMRC's decision another decision that HMRC has power to make.
(9) In this paragraph “tribunal” means the First-tier Tribunal or Upper Tribunal (as appropriate by virtue of sub-paragraph (5)).
Mitigation of penalties
10 (1) The Commissioners may in their discretion mitigate a penalty under section 212A or 212B, or stay or compound any proceedings for such a penalty.
(2) They may also, after judgment, further mitigate or entirely remit the penalty.
Interpretation
11 In this Schedule—
(a) a reference to an “assessment” to tax is to be interpreted, in relation to inheritance tax, as a reference to a determination;
(b) “direct tax” means—
(i) income tax,
(ii) capital gains tax,
(iii) corporation tax (including any amount chargeable as if it were corporation tax or treated as corporation tax),
(iv) petroleum revenue tax, and
(v) diverted profits tax;
(c) a reference to a loss includes a reference to a charge, expense, deficit and any other amount which may be available for, or relied on to claim, a deduction or relief;
(d) a reference to a repayment of tax includes a reference to allowing a credit against tax or to a payment of a corporation tax credit;
(e) “corporation tax credit” means—
(i) an R&D tax credit under Chapter 2 or 7 of Part 13 of CTA 2009,
(ii) an R&D expenditure credit under Chapter 1A of Part 13 of CTA 2009,
(iii) a land remediation tax credit or life assurance company tax credit under Chapter 3 or 4 respectively of Part 14 of CTA 2009,
(iv) a film tax credit under Chapter 3 of Part 15 of CTA 2009,
(v) a television tax credit under Chapter 3 of Part 15A of CTA 2009,
(vi) a video game tax credit under Chapter 3 of Part 15B of CTA 2009,
(vii) a theatre tax credit under section 1217K of CTA 2009,
(viii) an orchestra tax credit under Chapter 3 of Part 15D of CTA 2009, or
(ix) a first-year tax credit under Schedule A1 to CAA 2001;
(f) “tax period” means a tax year, accounting period or other period in respect of which tax is charged;
(g) a reference to giving a document to HMRC includes a reference to communicating information to HMRC in any form and by any method (whether by post, fax, email, telephone or otherwise),
(h) a reference to giving a document to HMRC includes a reference to making a statement or declaration in a document.
Section 209
PART 1 General
Introductory
1 (1) This Schedule makes provision about the operation of the general anti-abuse rule in relation to partnerships.
(2) This Schedule applies where—
(a) a return is made under section 12AA of TMA 1970 (a “section 12AA partnership return”), or
(b) a return is made in accordance with regulations under paragraph 10 of Schedule A1 to TMA 1970 (a “Schedule A1 partnership return”).
Meaning of “the responsible partner”
2 In this Schedule, “the responsible partner” means—
(a) in relation to the making of a section 12AA partnership return, the person who delivered the return or their successor (within the meaning of section 12AA(11) of TMA 1970);
(b) in relation to the making of a Schedule A1 partnership return, the nominated partner (within the meaning of paragraph 5 of Schedule A1 to TMA 1970).
Partnership return made on basis that tax advantage arises
3 (1) For the purposes of this Schedule, a partnership return is regarded as made on the basis that a particular tax advantage arises (or might arise) to a partner from particular arrangements if—
(a) it is made on the basis that an increase or reduction in one or more of the amounts mentioned in section 12AB(1) of TMA 1970 (amounts in the partnership statement in a partnership return) results (or might result) from those arrangements, and
(b) that increase or reduction results (or might result) in that tax advantage for the partner.
(2) In sub-paragraph (1) and in the following provisions of this Schedule “partnership return” means a section 12AA partnership return or a Schedule A1 partnership return.
PART 2 Protective GAAR notices
Power to give protective GAAR notice to responsible partner
4 (1) If an officer of Revenue and Customs considers, in relation to a partnership—
(a) that a partnership return has been made on the basis that a tax advantage arises (or might arise) to one or more partners from tax arrangements that are abusive, and
(b) that, on the assumption that the advantage does arise from tax arrangements that are abusive, it ought to be counteracted under section 209,
the officer may give a written notice to that effect (a “protective GAAR notice”) to the responsible partner.
(2) Subsections (2) to (9) of section 209AA apply in relation to a protective GAAR notice given under this paragraph as they apply in relation to a protective GAAR notice given under that section, subject to the modifications in sub-paragraphs (3) and (4).
(3) Section 209AA(3) is to be read as if—
(a) for “a return made by the person, and” there were substituted “ the partnership return ”, and
(b) paragraph (b) were omitted.
(4) Section 209AA(8) is to be read as if, for “212A”, there were substituted “ 212B ”.
PART 3 Notices of proposed counteraction
Power to give notice of proposed counteraction to responsible partner
5 (1) If a designated HMRC officer considers that, in relation to a partnership—
(a) a partnership return has been made on the basis that a tax advantage has arisen to one or more partners from tax arrangements that are abusive, and
(b) the tax advantage ought to be counteracted under section 209,
the officer may give the responsible partner a written notice under this paragraph.
(2) A partner who appears to a designated HMRC officer to fall within sub-paragraph (1)(a) is a “relevant partner” for the purposes of this Part of this Schedule.
(3) The notice must—
(a) specify each relevant partner, the arrangements and the tax advantage,
(b) explain why the officer considers that a tax advantage has arisen to each relevant partner from tax arrangements that are abusive,
(c) set out the counteraction that the officer considers ought to be taken,
(d) inform the responsible partner of the period for making representations under paragraph 4 of Schedule 43, and
(e) explain the effect of—
(i) paragraphs 5 and 6 of Schedule 43, and
(ii) sections 209(8) and 212B.
(4) The notice may set out steps that may be taken to avoid the proposed counteraction.
(5) If, after the notice has been given, it appears to a designated HMRC officer that the tax advantage has not in fact arisen to a partner specified in the notice, the officer must amend the notice accordingly.
(6) Where a designated HMRC officer so amends a notice—
(a) it is treated as having been given in the amended form, and
(b) the officer may take such other steps as the officer considers appropriate.
Effect of giving a notice under paragraph 5
6 Where an officer gives a notice under paragraph 5 in respect of a tax advantage, this Part of this Act has effect in relation to the tax advantage with the modifications in paragraph 7.
Modifications to Schedule 43
7 (1) Schedule 43 (procedural requirements) has effect with the following modifications.
(2) Schedule 43 is to be read as if paragraphs 1A and 3 were omitted.
(3) References to a notice given under paragraph 3 of Schedule 43 are to be read as if they were to a notice given under paragraph 5 of this Schedule.
(4) In paragraphs 4 and 6 to 12, references to the taxpayer are to be read as if they were to the responsible partner.
(5) Schedule 43 is to be read as if, for paragraphs 4A and 4B (and the headings before those paragraphs), there were substituted—
Corrective action taken by the responsible partner
4A (1) Where, in respect of a partnership—
(a) a designated HMRC officer gives a notice under paragraph 5 of Schedule 43D in respect of a tax advantage arising to one or more partners,
(b) the closed period mentioned in section 209(8) has not begun, and
(c) the responsible partner—
(i) amends a partnership return or claim to counteract the tax advantage, and
(ii) notifies HMRC of that fact,
the matter is not to be referred to the GAAR Advisory Panel.
(2) Where a tax enquiry is in progress, no enactment limiting the time during which amendments may be made to returns or claims operates to prevent the responsible partner taking the action mentioned in sub-paragraph (1)(c)(i) and (ii) before the enquiry is closed.
(3) No appeal may be brought, by virtue of a provision mentioned in sub-paragraph (4), against an amendment made by a closure notice in respect of a tax enquiry, to the extent that the amendment takes into account an amendment made by the responsible partner to a return or claim as mentioned in sub-paragraph (1)(c).
(4) The provisions are—
(a) section 31(1)(b) or (c) of TMA 1970,
(b) paragraph 9 of Schedule 1A to TMA 1970.
Corrective action by relevant partners
4B (1) Where, in respect of a partnership—
(a) a designated HMRC officer gives a notice under paragraph 5 of Schedule 43D in respect of a tax advantage arising to one or more partners,
(b) the closed period mentioned in section 209(8) has not begun, and
(c) a partner mentioned in paragraph (a) takes all necessary action to enter into an agreement with HMRC (in writing) for the purpose of relinquishing the tax advantage,
the partner is not to be treated as a relevant partner for the purposes of Part 3 of Schedule 43D.
(2) As soon as is practicable after the beginning of the closed period, the notice given under paragraph 5 of Schedule 43D must be amended by a designated HMRC officer so each partner to whom sub-paragraph (1) applies is no longer specified in it.
(3) Where a notice is amended in accordance with sub-paragraph (2), the notice is treated as having been given in the amended form.
(4) If a partner to whom sub-paragraph (1) applies fails to enter into the written agreement, HMRC may proceed as if that sub-paragraph had not applied in relation to the partner (and accordingly, as if the partner were a relevant partner).
Referral to GAAR Advisory Panel
4C Paragraph 5 and 6 apply if, immediately before the beginning of the closed period mentioned in section 209(8)—
(a) the responsible partner has not taken the action described in paragraph 4A(1)(c), and
(b) there is at least one relevant partner.
Notices may be given on assumption that tax advantage does arise
8 (1) A designated HMRC officer may give a notice, or do anything else, under this Part of this Schedule where the officer considers that a tax advantage might have arisen.
(2) Accordingly, any notice given by a designated HMRC officer under paragraph 5 may be expressed to be given on the assumption that the tax advantage does arise (without agreeing that it does).
HMRC officers
9 Anything that may or must be done by a given designated HMRC officer under this Part of this Schedule may be done instead by any other designated HMRC officer.
PART 4 Pooling notices and notices of binding
Power to give pooling notice or notice of binding to responsible partner
10 (1) If a designated HMRC officer—
(a) has the power to give to a person (“R”) a pooling notice under paragraph 1(3) or a notice of binding under paragraph 2(2) of Schedule 43A in respect of a tax advantage arising from tax arrangements (“R's arrangements”), and
(b) considers that a partnership return has been made on the basis that the tax advantage has arisen to R, or to R and one or more of R's partners, from R's arrangements,
the officer may give the pooling notice or notice of binding to the responsible partner under this paragraph.
(2) A partner (including R) who appears to a designated HMRC officer to fall within sub-paragraph (1)(b) is a “relevant partner” for the purposes of this Part of this Schedule.
(3) If, after the notice has been given, it appears to a designated HMRC officer that the tax advantage has not in fact arisen to a partner specified in the notice, the officer must amend the notice accordingly.
(4) Where a designated HMRC officer so amends the notice—
(a) it is treated as having been given in the amended form, and
(b) the officer may take such other steps as the officer considers appropriate.
(5) The officer may not give a pooling notice under this paragraph if a notice under paragraph 5 has been given in respect of R's arrangements.
(6) The officer may not give a notice of binding under this paragraph if, in respect of R's arrangements, one of the following notices has been given—
(a) a pooling notice under this paragraph, or
(b) a notice under paragraph 5.
Effect of giving notice under paragraph 10
11 Where a pooling notice or notice of binding is given to the responsible partner under paragraph 10, this Part of this Act has effect in relation to the tax advantage with the modifications in paragraphs 12 and 13.
Modifications to Schedule 43A
12 (1) Schedule 43A (procedural requirements: pooling notices and notices of binding) has effect with the following modifications.
(2) Paragraph 1 is to be read as if, in sub-paragraph (3A), after “lead arrangements” there were inserted “ (whether under this Schedule or Schedule 43D) ”.
(3) Paragraph 3 is to be read as if—
(a) in sub-paragraph (2)(a), after “specify” there were inserted “ each relevant partner, ”,
(b) in sub-paragraph (2)(c), for “R” there were substituted “ each relevant partner ”, and
(c) in sub-paragraph (3), for “R may” there were substituted “ may be taken ”.
(4) Schedule 43A is to be read as if, for paragraph 4 (and the heading before it), there were substituted—
Corrective action by responsible partner
4 (1) Where, in respect of a partnership—
(a) a designated HMRC officer gives a pooling notice or notice of binding under paragraph 10 of Schedule 43D in respect of a tax advantage arising to one or more partners,
(b) the closed period mentioned in section 209(9) has not begun, and
(c) the responsible partner—
(i) amends a partnership return or claim to counteract the tax advantage, and
(ii) notifies HMRC of that fact,
the responsible partner is treated for the purposes of paragraphs 6 to 9 and Schedule 43B as not having been given the notice in question.
(2) Where a tax enquiry is in progress, no enactment limiting the time during which amendments may be made to returns or claims operates to prevent the responsible partner taking the action mentioned in sub-paragraph (1) before the enquiry is closed.
(3) No appeal may be brought, by virtue of a provision mentioned in sub-paragraph (4), against an amendment made by a closure notice in respect of a tax enquiry, to the extent that the amendment takes into account an amendment made by the responsible partner to a return or claim as mentioned in sub-paragraph (1)(c).
(4) The provisions are—
(a) section 31(1)(b) or (c) of TMA 1970,
(b) paragraph 9 of Schedule 1A to TMA 1970.
Corrective action by relevant partners
4A (1) Where, in respect of a partnership—
(a) a designated HMRC officer gives a pooling notice or notice of binding under paragraph 10 of Schedule 43D in respect of a tax advantage arising to one or more partners,
(b) the closed period mentioned in section 209(9) has not begun, and
(c) a partner mentioned in paragraph (a) takes all necessary action to enter into an agreement with HMRC (in writing) for the purpose of relinquishing the tax advantage,
the partner is not to be treated as a relevant partner for the purposes of Part 4 of Schedule 43D.
(2) As soon as is practicable after the beginning of the closed period, the pooling notice or notice of binding must be amended by a designated HMRC officer so each partner to whom sub-paragraph (1) applies is no longer specified in it.
(3) Where a notice is amended in accordance with sub-paragraph (2), the notice is treated for the purposes of paragraphs 6 to 9 and Schedule 43B as having been given in the amended form.
(4) If a partner to whom sub-paragraph (1) applies fails to enter into the written agreement, HMRC may proceed as if that sub-paragraph had not applied in relation to the partner (and accordingly, as if the partner were a relevant partner).
(5) Paragraph 7(3)(a) is to be read as if “to the person” were omitted.
(6) Paragraph 8(1) is to be read as if for “paragraph 1(3)” there were substituted “ paragraph 10 of Schedule 43D. ”
(7) Paragraph 10(b) is to be read as if for “the person concerned” there were substituted “ the responsible partner ”.
(8) Paragraph 9(1)(a) is to be read as if for “paragraph 2” there were substituted “ paragraph 10 of Schedule 43D ”.
(9) Paragraph 11(c) is to be read as if “to a person” were omitted.
Modifications to Schedule 43B
13 (1) Schedule 43B to FA 2013 (procedural requirements: generic referral of tax arrangements) has effect with the modifications in sub-paragraph (2).
(2) Paragraph 1 is to be read as if—
(a) in sub-paragraph (1)(a), for “paragraph 1(3) of Schedule 43A” there were substituted “ paragraph 10 of Schedule 43D ”,
(b) for the words before sub-paragraph (b)(i), there were substituted “ the relevant corrective action has been taken before ”, and
(c) after sub-paragraph (5), there were inserted—
(6) For the purposes of sub-paragraph (1)(b) the “relevant corrective action” is taken if (and only if) in respect of the tax advantage arising out of the lead arrangements—
(a) the responsible partner has taken the action mentioned in paragraph 4A(1)(c) of Schedule 43, or
(b) each of the relevant partners in question have taken the action described in paragraph 4B(1)(c) of that Schedule.
Notices may be given on assumption that tax advantage does arise
14 (1) A designated HMRC officer may give a notice, or do anything else, under this Part of this Schedule where the officer considers that a tax advantage might have arisen.
(2) Accordingly, any notice given by a designated HMRC officer under paragraph 10 may be expressed to be given on the assumption that the tax advantage does arise (without agreeing that it does).
HMRC officers
15 Anything that may or must be done by a given designated HMRC officer under this Part of this Schedule may be done instead by any other designated HMRC officer.
Section 216
Inheritance Tax Act 1984
1 IHTA 1984 is amended as follows.
2 (1) Section 71A (trusts for bereaved minors) is amended as follows.
(2) For subsection (3)(c)(ii) substitute—
(ii) if any of the income arising from any of the settled property is applied for the benefit of a beneficiary, it is applied for the benefit of the bereaved minor.
(3) In subsection (4), before paragraph (a) insert—
(za) the trustees' having powers that enable them to apply otherwise than for the benefit of the bereaved minor amounts (whether consisting of income or capital, or both) not exceeding the annual limit,
.
(4) After subsection (4) insert—
(4A) For the purposes of this section and section 71B, the “annual limit” is whichever is the lower of the following amounts—
(a) £3,000, and
(b) 3% of the amount that is the maximum value of the settled property during the period in question.
(4B) For those purposes the annual limit applies in relation to each period of 12 months that begins on 6 April.
(4C) The Treasury may by order made by statutory instrument—
(a) specify circumstances in which subsection (4)(za) is, or is not, to apply in relation to a trust, and
(b) amend the definition of “the annual limit” in subsection (4A).
(4D) An order under subsection (4C) may—
(a) make different provision for different cases, and
(b) contain transitional and saving provision.
(4E) A statutory instrument containing an order under subsection (4C) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.
3 (1) Section 71B (charge to tax on property to which section 71A applies) is amended as follows.
(2) In subsection (1), after “(2)” insert “ , (2B) ”.
(3) After subsection (2) insert—
(2A) Subsection (2B) applies in a case in which—
(a) an amount is paid or applied otherwise than for the benefit of the bereaved minor, and
(b) the exemptions provided by subsection (2) of this section and subsections (3) and (4) of section 70 do not apply.
(2B) In such a case, tax is not charged under this section in respect of whichever is the lower of the following amounts—
(a) the amount paid or applied, and
(b) the annual limit.
4 (1) Section 71D (age 18-to-25 trusts) is amended as follows.
(2) For subsection (6)(c)(ii) substitute—
(ii) if any of the income arising from any of the settled property is applied for the benefit of a beneficiary, it is applied for the benefit of B.
(3) After that subsection insert—
(6A) Where the income arising from the settled property is held on trusts of the kind described in section 33 of the Trustee Act 1925 (protective trusts), paragraphs (b) and (c) of subsection (6) have effect as if for “living and under the age of 25,” there were substituted “under the age of 25 and the income arising from the settled property is held on trust for B,
.
(4) In subsection (7), before paragraph (a) insert—
(za) the trustees' having powers that enable them to apply otherwise than for the benefit of B amounts (whether consisting of income or capital, or both) not exceeding the annual limit,
.
(5) After that subsection insert—
(7A) For the purposes of this section and section 71E, the “annual limit” is whichever is the lower of the following amounts—
(a) £3,000, and
(b) 3% of the amount that is the maximum value of the settled property during the period in question.
(7B) For those purposes the annual limit applies in relation to each period of 12 months that begins on 6 April.
(7C) The Treasury may by order made by statutory instrument—
(a) specify circumstances in which subsection (7)(za) is, or is not, to apply in relation to a trust, and
(b) amend the definition of “the annual limit” in subsection (7A).
(7D) An order under subsection (7C) may—
(a) make different provision for different cases, and
(b) contain transitional and saving provision.
(7E) A statutory instrument containing an order under subsection (7C) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.
5 (1) Section 71E (charge to tax on property to which section 71D applies) is amended as follows.
(2) In subsection (1), for “(4)” substitute “ (4A) ”.
(3) After subsection (4) insert—
(4A) If an amount is paid or applied otherwise than for the benefit of B and the exemptions provided by subsections (2) to (4) do not apply, tax is not charged under this section in respect of whichever is the lower of the following amounts—
(a) the amount paid or applied, and
(b) the annual limit.
6 (1) Section 89 (trusts for disabled persons) is amended as follows.
(2) For subsection (1)(b) substitute—
(b) which secure that, if any of the settled property or income arising from it is applied during the disabled person's life for the benefit of a beneficiary, it is applied for the benefit of the disabled person.
(3) For subsection (3) substitute—
(3) The trusts on which the settled property is held are not to be treated as falling outside subsection (1) by reason only of—
(a) the trustees' having powers that enable them to apply otherwise than for the benefit of the disabled person amounts (whether consisting of income or capital, or both) not exceeding the annual limit,
(b) the trustees' having the powers conferred by section 32 of the Trustee Act 1925 (powers of advancement),
(c) the trustees' having those powers but free from, or subject to a less restrictive limitation than, the limitation imposed by proviso (a) of subsection (1) of that section,
(d) the trustees' having the powers conferred by section 33 of the Trustee Act (Northern Ireland) 1958 (corresponding provision for Northern Ireland),
(e) the trustees' having those powers but free from, or subject to a less restrictive limitation than, the limitation imposed by subsection (1)(a) of that section, or
(f) the trustees' having powers to the like effect as the powers mentioned in any of paragraphs (b) to (e).
(3A) For the purposes of this section, the “annual limit” is whichever is the lower of the following amounts—
(a) £3,000, and
(b) 3% of the amount that is the maximum value of the settled property during the period in question.
(3B) For those purposes the annual limit applies in relation to each period of 12 months that begins on 6 April.
(3C) The Treasury may by order made by statutory instrument—
(a) specify circumstances in which subsection (3)(a) is, or is not, to apply in relation to a trust, and
(b) amend the definition of “the annual limit” in subsection (3A).
(3D) An order under subsection (3C) may—
(a) make different provision for different cases, and
(b) contain transitional and saving provision.
(3E) A statutory instrument containing an order under subsection (3C) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.
(4) In subsection (4), for the words following “into settlement,” substitute “ was a disabled person ”.
(5) For subsections (5) and (6) substitute—
(4A) In this section “disabled person” has the meaning given by Schedule 1A to the Finance Act 2005.
7 (1) Section 89A (self-settlement by person with condition expected to lead to disability) is amended as follows.
(2) In subsection (1)(b), for the words following “A becoming” substitute “ a person falling within any paragraph of the definition of “disabled person” in paragraph 1 of Schedule 1A to the Finance Act 2005 ”.
(3) In subsection (2), after “settled property” insert “ or income arising from it ”.
(4) For subsections (5) and (6) substitute—
(5) For the purposes of subsection (1)(b), assume—
(a) that A will meet any conditions as to residence or presence that are required to establish entitlement to the allowance, payment or increased pension in question,
(b) that there will be no provision made by regulations under any of the following—
(i) sections 67(1) and (2), 72(8), 104(3) and 113(2) of SSCBA 1992,
(ii) sections 67(1) and (2), 72(8), 104(3) and 113(2) of SSCB(NI)A 1992, and
(iii) sections 85 and 86 of WRA 2012 and the corresponding provision having effect in Northern Ireland, and
(c) that A will not be prevented from receiving the allowance, payment or increased pension in question by any of the following—
(i) section 113(1) of SSCBA 1992,
(ii) section 113(1) of SSCB(NI)A 1992,
(iii) section 87 of WRA 2012 and the corresponding provision having effect in Northern Ireland,
(iv) articles 61 and 64 of the Personal Injuries (Civilians) Scheme 1983 (S.I. 1983/686),
(v) article 53 of the Naval, Military and Air Forces etc. (Disablement and Death) Service Pensions Order 2006 (S.I. 2006/606), and
(vi) article 42 of the Armed Forces and Reserve Forces (Compensation Scheme) Order 2011 (S.I. 2011/517).
(5) Before subsection (7) insert—
(6A) The trusts on which the settled property is held are not to be treated as falling outside subsection (2) by reason only of—
(a) the trustees' having powers that enable them to apply otherwise than for the benefit of the disabled person amounts (whether consisting of income or capital, or both) not exceeding the annual limit,
(b) the trustees' having the powers conferred by section 32 of the Trustee Act 1925 (powers of advancement),
(c) the trustees' having those powers but free from, or subject to a less restrictive limitation than, the limitation imposed by proviso (a) of subsection (1) of that section,
(d) the trustees' having the powers conferred by section 33 of the Trustee Act (Northern Ireland) 1958 (corresponding provision for Northern Ireland),
(e) the trustees' having those powers but free from, or subject to a less restrictive limitation than, the limitation imposed by subsection (1)(a) of that section, or
(f) the trustees' having powers to the like effect as the powers mentioned in any of paragraphs (b) to (e).
(6B) For the purposes of this section, the “annual limit” is whichever is the lower of the following amounts—
(a) £3,000, and
(b) 3% of the amount that is the maximum value of the settled property during the period in question.
(6C) For those purposes the annual limit applies in relation to each period of 12 months that begins on 6 April.
(6D) The Treasury may by order made by statutory instrument—
(a) specify circumstances in which subsection (6A)(a) is, or is not, to apply in relation to a trust, and
(b) amend the definition of “the annual limit” in subsection (6B).
(6E) An order under subsection (6D) may—
(a) make different provision for different cases, and
(b) contain transitional and saving provision.
(6F) A statutory instrument containing an order under subsection (6D) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.
(6) For subsection (8) substitute—
(8) In this section—
“SSCBA 1992” means the Social Security Contributions and Benefits Act 1992,
“SSCB(NI)A 1992” means the Social Security Contributions and Benefits (Northern Ireland) Act 1992, and
“WRA 2012” means the Welfare Reform Act 2012.
(7) In the heading, for the words following “person” substitute “ expected to fall within the definition of “disabled person” ”.
8 (1) Section 89B (meaning of “disabled person's interest”) is amended as follows.
(2) For subsection (2) substitute—
(2) In subsection (1)(c) “disabled person” has the meaning given by Schedule 1A to the Finance Act 2005.
(3) After that subsection insert—
(2A) Where the income arising from the settled property is held on trusts of the kind described in section 33 of the Trustee Act 1925 (protective trusts), subsection (1)(d)(v) has effect as if for “A's life” there were substituted “ the period during which the income from the property is held on trust for A ”.
9 (1) The amendments made by paragraphs 2 to 8 have effect in relation to property transferred into settlement on or after 8 April 2013.
(2) Nothing in paragraphs 6 to 8 is to be read as preventing property transferred into a relevant settlement on or after 8 April 2013 from being property to which section 89 or 89A of IHTA 1984 applies.
10 (1) In section 89B (meaning of “disabled person's interest”), in subsection (1)(c) after “2006” insert “ if the trusts on which the settled property is held secure that, if any of the settled property is applied during the disabled person's life for the benefit of a beneficiary, it is applied for the benefit of the disabled person ”.
(2) After that section insert—
Disabled person's interest: powers of advancement etc
89C (1) The trusts on which settled property is held are not to be treated for the purposes of section 89B(1)(c) or (d) (meaning of “disabled person's interest”: cases involving an interest in possession) as failing to secure that the settled property is applied for the benefit of a beneficiary by reason only of—
(a) the trustees' having powers that enable them to apply otherwise than for the benefit of the beneficiary amounts (whether consisting of income or capital, or both) not exceeding the annual limit,
(b) the trustees' having the powers conferred by section 32 of the Trustee Act 1925 (powers of advancement),
(c) the trustees' having those powers but free from, or subject to a less restrictive limitation than, the limitation imposed by proviso (a) of subsection (1) of that section,
(d) the trustees' having the powers conferred by section 33 of the Trustee Act (Northern Ireland) 1958 (corresponding provision for Northern Ireland),
(e) the trustees' having those powers but free from, or subject to a less restrictive limitation than, the limitation imposed by subsection (1)(a) of that section, or
(f) the trustees' having powers to the like effect as the powers mentioned in any of paragraphs (b) to (e).
(2) For the purposes of this section, the “annual limit” is whichever is the lower of the following amounts—
(a) £3,000, and
(b) 3% of the amount that is the maximum value of the settled property during the period in question.
(3) For those purposes the annual limit applies in relation to each period of 12 months that begins on 6 April.
(4) The Treasury may by order made by statutory instrument—
(a) specify circumstances in which subsection (1)(a) is, or is not, to apply in relation to a trust, and
(b) amend the definition of “the annual limit” in subsection (2).
(5) An order under subsection (4) may—
(a) make different provision for different cases, and
(b) contain transitional and saving provision.
(6) A statutory instrument containing an order under subsection (4) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.
(3) The amendments made by this paragraph have effect in relation to property transferred into settlement on or after the day on which this Act is passed.
(4) Nothing in this paragraph is to be read as preventing property transferred into a settlement to which sub-paragraph (5) applies from being settled property for the purposes of section 89B(1)(c) or (d) of IHTA 1984.
(5) This sub-paragraph applies to a settlement—
(a) created before the day on which this Act is passed the trusts of which have not been altered on or after that day, or
(b) arising on or after the day on which this Act is passed under the will of a testator, if—
(i) the will was executed before the day on which this Act is passed and its provisions, so far as relating to the settlement, have not been altered on or after that day, or
(ii) the will was executed or confirmed on or after the day on which this Act is passed and its provisions, so far as relating to the settlement, are in the same terms as those contained in a will executed by the same testator before that day.
Taxation of Chargeable Gains Act 1992
11 TCGA 1992 is amended as follows.
12 (1) Section 169D (exceptions to rules on gifts to settlor-interested settlements etc) is amended as follows.
(2) For subsection (3) substitute—
(3) The first condition is that, immediately after the making of the disposal, the settled property is held on trusts which secure that, during the lifetime of a disabled person—
(a) if any of the property is applied for the benefit of a beneficiary, it is applied for the disabled person's benefit, and
(b) either—
(i) the disabled person is entitled to all of the income (if there is any) arising from any of the property, or
(ii) if any such income is applied for the benefit of a beneficiary, it is applied for the disabled person's benefit.
(3) After subsection (4) insert—
(4A) Where the income arising from the settled property is held on trusts of the kind described in section 33 of the Trustee Act 1925 (protective trusts), subsection (3) has effect as if the reference to the lifetime of a disabled person were a reference to the period during which the income is held on trust for the disabled person.
(4B) The trusts on which the settled property is held are not to be treated as falling outside subsection (3) by reason only of—
(a) the trustees' having powers that enable them to apply in any tax year otherwise than for the benefit of the disabled person amounts (whether consisting of income or capital, or both) not exceeding the annual limit,
(b) the trustees' having the powers conferred by section 32 of the Trustee Act 1925 (powers of advancement),
(c) the trustees' having those powers but free from, or subject to a less restrictive limitation than, the limitation imposed by proviso (a) of subsection (1) of that section,
(d) the trustees' having the powers conferred by section 33 of the Trustee Act (Northern Ireland) 1958 (corresponding provision for Northern Ireland),
(e) the trustees' having those powers but free from, or subject to a less restrictive limitation than, the limitation imposed by subsection (1)(a) of that section, or
(f) the trustees' having powers to the like effect as the powers mentioned in any of paragraphs (b) to (e).
(4C) For the purposes of this section, the “annual limit” for a tax year is whichever is the lower of the following amounts—
(a) £3,000, and
(b) 3% of the amount that is the maximum value of the settled property during the tax year in question.
(4D) The Treasury may by order—
(a) specify circumstances in which subsection (4B)(a) is, or is not, to apply in relation to a trust, and
(b) amend the definition of “the annual limit” in subsection (4C).
(4E) An order under subsection (4D) may—
(a) make different provision for different cases, and
(b) contain transitional and saving provision.
(4F) A statutory instrument containing an order under subsection (4D) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.
(4) For subsections (7) to (9) substitute—
(7) In this section “disabled person” has the meaning given by Schedule 1A to the Finance Act 2005.
(5) Omit subsection (10).
(6) The amendments made by this paragraph have effect in relation to disposals to the trustees of a settlement on or after 8 April 2013.
(7) But if the settlement is a relevant settlement, nothing in this paragraph is to be read as preventing section 169D(2) of TCGA 1992 from applying in relation to the disposal.
13 (1) Paragraph 1 of Schedule 1 (application of exempt amount and reporting limits in cases involving settled property) is amended as follows.
(2) In sub-paragraph (1)—
(a) for “mentally disabled person or a person in receipt of attendance allowance or of a disability living allowance by virtue of entitlement to the care component at the highest or middle rate” substitute “ disabled person ”, and
(b) for paragraphs (a) and (b) substitute—
(a) if any of the property is applied for the benefit of a beneficiary, it is applied for the disabled person's benefit, and
(b) either—
(i) the disabled person is entitled to all of the income (if there is any) arising from any of the property, or
(ii) if any such income is applied for the benefit of a beneficiary, it is applied for the disabled person's benefit,
.
(3) After that sub-paragraph insert—
(1A) The trusts on which settled property is held are not to be treated as falling outside sub-paragraph (1) by reason only of—
(a) the trustees' having powers that enable them to apply in any tax year otherwise than for the benefit of the disabled person amounts (whether consisting of income or capital, or both) not exceeding the annual limit,
(b) the trustees' having the powers conferred by section 32 of the Trustee Act 1925 (powers of advancement),
(c) the trustees' having those powers but free from, or subject to a less restrictive limitation than, the limitation imposed by proviso (a) of subsection (1) of that section,
(d) the trustees' having the powers conferred by section 33 of the Trustee Act (Northern Ireland) 1958 (corresponding provision for Northern Ireland),
(e) the trustees' having those powers but free from, or subject to a less restrictive limitation than, the limitation imposed by subsection (1)(a) of that section, or
(f) the trustees' having powers to the like effect as the powers mentioned in any of paragraphs (b) to (e).
(1B) For the purposes of this paragraph, the “annual limit” for a tax year is whichever is the lower of the following amounts—
(a) £3,000, and
(b) 3% of the amount that is the maximum value of the settled property during the tax year in question.
(1C) The Treasury may by order—
(a) specify circumstances in which sub-paragraph (1A)(a) is, or is not, to apply in relation to a trust, and
(b) amend the definition of “the annual limit” in sub-paragraph (1B).
(1D) An order under sub-paragraph (1C) may—
(a) make different provision for different cases, and
(b) contain transitional and saving provision.
(1E) A statutory instrument containing an order under sub-paragraph (1C) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.
(4) In sub-paragraph (2), for the words from the beginning to “that sub-paragraph” substitute “ The reference in sub-paragraph (1) ”.
(5) In sub-paragraph (6), for the definitions of “mentally disabled person”, “attendance allowance” and “disability living allowance” substitute—
“disabled person” has the meaning given by Schedule 1A to the Finance Act 2005; and
.
(6) The amendments made by this paragraph have effect in relation to the tax year 2013-14 and subsequent tax years.
(7) But if the settlement is a relevant settlement, nothing in this paragraph is to be read as preventing sections 3(1) to (5C) and 3A of TCGA 1992 from applying in relation to the settlement as provided by paragraph 1(1) of Schedule 1 to that Act.
Finance Act 2005
14 FA 2005 is amended as follows.
15 (1) Section 34 (disabled persons) is amended as follows.
(2) In subsection (2), for paragraph (b) substitute—
(b) either—
(i) that the disabled person is entitled to all the income (if there is any) arising from any of the property, or
(ii) if any such income is applied for the benefit of a beneficiary, it is applied for the benefit of the disabled person.
(3) For subsection (3) substitute—
(3) The trusts on which property is held are not to be treated as failing to secure that the conditions in subsection (2) are met by reason only of—
(a) the trustees' having powers that enable them to apply in any tax year otherwise than for the benefit of the disabled person amounts (whether consisting of income or capital, or both) not exceeding the annual limit,
(b) the trustees' having the powers conferred by section 32 of the Trustee Act 1925 (powers of advancement),
(c) the trustees' having those powers but free from, or subject to a less restrictive limitation than, the limitation imposed by proviso (a) of subsection (1) of that section,
(d) the trustees' having the powers conferred by section 33 of the Trustee Act (Northern Ireland) 1958 (corresponding provision for Northern Ireland),
(e) the trustees' having those powers but free from, or subject to a less restrictive limitation than, the limitation imposed by subsection (1)(a) of that section, or
(f) the trustees' having powers to the like effect as the powers mentioned in any of paragraphs (b) to (e).
(3B) For the purposes of this section, the “annual limit” for a tax year is whichever is the lower of the following amounts—
(a) £3,000, and
(b) 3% of the amount that is the maximum value of the settled property during the tax year in question.
(3C) The Treasury may by order made by statutory instrument—
(a) specify circumstances in which subsection (3)(a) is, or is not, to apply in relation to a trust, and
(b) amend the definition of “the annual limit” in subsection (3B).
(3D) An order under subsection (3C) may—
(a) make different provision for different cases, and
(b) contain transitional and saving provision.
(3E) A statutory instrument containing an order under subsection (3C) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.
16 (1) Section 35 (relevant minors) is amended as follows.
(2) For subsection (3)(c)(ii) substitute—
(ii) if any such income is applied for the benefit of a beneficiary, it is applied for the benefit of the relevant minor.
(3) For subsection (4) substitute—
(4) Trusts to which subsection (2) applies are not to be treated as failing to secure that the conditions in subsection (3) are met by reason only of—
(a) the trustees' having powers that enable them to apply in any tax year otherwise than for the benefit of the relevant minor amounts (whether consisting of income or capital, or both) not exceeding the annual limit,
(b) the trustees' having the powers conferred by section 32 of the Trustee Act 1925 (powers of advancement),
(c) the trustees' having those powers but free from, or subject to a less restrictive limitation than, the limitation imposed by proviso (a) of subsection (1) of that section,
(d) the trustees' having the powers conferred by section 33 of the Trustee Act (Northern Ireland) 1958 (corresponding provision for Northern Ireland),
(e) the trustees' having those powers but free from, or subject to a less restrictive limitation than, the limitation imposed by subsection (1)(a) of that section, or
(f) the trustees' having powers to the like effect as the powers mentioned in any of paragraphs (b) to (e).
(4B) For the purposes of this section, the “annual limit” for a tax year is whichever is the lower of the following amounts—
(a) £3,000, and
(b) 3% of the amount that is the maximum value of the settled property during the tax year in question.
(4C) The Treasury may by order made by statutory instrument—
(a) specify circumstances in which subsection (4)(a) is, or is not, to apply in relation to a trust, and
(b) amend the definition of “the annual limit” in subsection (4B).
(4D) An order under subsection (4C) may—
(a) make different provision for different cases, and
(b) contain transitional and saving provision.
(4E) A statutory instrument containing an order under subsection (4C) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.
17 For section 38 substitute—
Meaning of “disabled person”
38 In this Chapter “disabled person” has the meaning given by Schedule 1A.
18 The amendments made by paragraphs 15 to 17 have effect for the tax year 2013-14 and subsequent tax years.
19 After Schedule 1 insert—
SCHEDULE 1A
Meaning of “disabled person”
Section 38
“Disabled person”
1 “Disabled person” means—
(a) a person who by reason of mental disorder within the meaning of the Mental Health Act 1983 is incapable of administering his or her property or managing his or her affairs,
(b) a person in receipt of attendance allowance,
(c) a person in receipt of a disability living allowance by virtue of entitlement to the care component at the highest or middle rate,
(d) a person in receipt of personal independence payment by virtue of entitlement to the daily living component,
(e) a person in receipt of an increased disablement pension,
(f) a person in receipt of constant attendance allowance, or
(g) a person in receipt of armed forces independence payment.
Attendance allowance
2 A person is to be treated as a disabled person under paragraph 1(b) if he or she satisfies HMRC that he or she would be entitled to receive attendance allowance but for—
(a) the conditions as to residence and presence prescribed under section 64(1) of SSCBA 1992 or section 64(1) of SSCB(NI)A 1992,
(b) provision made by regulations under section 67(1) or (2) of SSCBA 1992 or section 67(1) or (2) of SSCB(NI)A 1992 (non-satisfaction of conditions for attendance allowance where person is undergoing treatment for renal failure in hospital or is provided with certain accommodation), or
(c) section 113(1) of SSCBA 1992 or section 113(1) of SSCB(NI)A 1992 or provision made by regulations under section 113(2) of SSCBA 1992 or section 113(2) of SSCB(NI)A 1992 (general provisions as to disqualification and suspension).
Disability living allowance
3 A person is to be treated as a disabled person under paragraph 1(c) if he or she satisfies HMRC that he or she would be entitled to receive a disability living allowance by virtue of entitlement to the care component at the highest or middle rate but for—
(a) the conditions as to residence and presence prescribed under section 71(6) of SSCBA 1992 or section 71(6) of SSCB(NI)A 1992,
(b) provision made by regulations under section 72(8) of SSCBA 1992 or section 72(8) of SSCB(NI)A 1992 (no payment of disability allowance for persons for whom certain accommodation is provided), or
(c) section 113(1) of SSCBA 1992 or section 113(1) of SSCB(NI)A 1992 or provision made by regulations under section 113(2) of SSCBA 1992 or section 113(2) of SSCB(NI)A 1992 (general provisions as to disqualification and suspension).
Personal independence payment
4 A person is to be treated as a disabled person under paragraph 1(d) if he or she satisfies HMRC that he or she would be entitled to receive personal independence payment by virtue of entitlement to the daily living component but for—
(a) the conditions as to residence and presence prescribed under section 77(3) of WRA 2012 or the corresponding provision having effect in Northern Ireland,
(b) provision made by regulations under section 85 of WRA 2012 (exclusion of certain care home residents) or the corresponding provision having effect in Northern Ireland,
(c) provision made by regulations under section 86 of WRA 2012 (exclusion of certain hospital in-patients) or the corresponding provision having effect in Northern Ireland, or
(d) section 87 of WRA 2012 (exclusion of prisoners and detainees) or the corresponding provision having effect in Northern Ireland.
Increased disablement pension
5 A person is to be treated as a disabled person under paragraph 1(e) if he or she satisfies HMRC that he or she would be entitled to receive an increased disablement pension but for—
(a) conditions as to residence and presence that have effect in relation to increased disablement pension by virtue of regulations under section 104(3) of SSCBA 1992 or section 104(3) of SSCB(NI)A 1992 (application of attendance allowance provisions),
(b) provision made under section 67(1) or (2) of SSCBA 1992 or section 67(1) or (2) of SSCB(NI)A 1992 (non-satisfaction of conditions for attendance allowance where person is undergoing treatment for renal failure in hospital or is provided with certain accommodation) that has effect in relation to increased disablement pension by virtue of such regulations, or
(c) section 113(1) of SSCBA 1992 or section 113(1) of SSCB(NI)A 1992 or provision made by regulations under section 113(2) of SSCBA 1992 or section 113(2) of SSCB(NI)A 1992 (general provisions as to disqualification and suspension).
Constant attendance allowance
6 A person is to be treated as a disabled person under paragraph 1(f) if he or she satisfies HMRC that he or she would be entitled to receive constant attendance allowance but for—
(a) article 61 (residence outside United Kingdom) or article 64 (maintenance in hospital or institution) of the Personal Injuries (Civilians) Scheme 1983 (S.I. 1983/686), or
(b) article 53 (maintenance in hospital or institution) of the Naval, Military and Air Forces etc. (Disablement and Death) Service Pensions Order 2006 (S.I. 2006/606).
Armed forces independence payment
7 A person is to be treated as a disabled person under paragraph 1(g) if he or she satisfies HMRC that he or she would be entitled to receive armed forces independence payment but for article 42 of the Armed Forces and Reserve Forces (Compensation Scheme) Order 2011 (S.I. 2011/517) (cessation of payment on admission to Royal Hospital, Chelsea).
Interpretation
8 In this Schedule—
“armed forces independence payment” means armed forces independence payment under a scheme established under section 1 of the Armed Forces (Pensions and Compensation) Act 2004,
“attendance allowance” means an allowance under section 64 of SSCBA 1992 or section 64 of SSCB(NI)A 1992,
“constant attendance allowance” means an allowance under—
article 14 of the Personal Injuries (Civilians) Scheme 1983 (S.I. 1983/686), or
article 8 of the Naval, Military and Air Forces etc. (Disablement and Death) Service Pensions Order 2006 (S.I. 2006/606),
“disability living allowance” means a disability living allowance under section 71 of SSCBA 1992 or section 71 of SSCB(NI)A 1992,
“HMRC” means Her Majesty's Revenue and Customs,
“increased disablement pension” means an increase of disablement pension under—
section 104 of SSCBA 1992, or
section 104 of SSCB(NI)A 1992,
“personal independence payment” means personal independence payment under—
WRA 2012, or
the corresponding provision having effect in Northern Ireland,
“SSCBA 1992” means the Social Security Contributions and Benefits Act 1992,
“SSCB(NI)A 1992” means the Social Security Contributions and Benefits (Northern Ireland) Act 1992,
“WRA 2012” means the Welfare Reform Act 2012.
Interpretation: relevant settlement
20 (1) In this Schedule, “relevant settlement” means—
(a) a settlement created before 8 April 2013 the trusts of which have not been altered on or after that date, or
(b) a settlement arising on or after 8 April 2013 under the will of a testator, if—
(i) the will was executed before 8 April 2013 and its provisions, so far as relating to the settlement, have not been altered on or after that date, or
(ii) the will was executed or confirmed on or after 8 April 2013 and its provisions, so far as relating to the settlement, are in the same terms as those contained in a will executed by the same testator before that date.
(2) In this Schedule a reference to a will includes a reference to a codicil.
Section 218
PART 1 The rules
Introduction
1 (1) This Part of this Schedule sets out the rules for determining for the purposes of relevant tax whether individuals are resident or not resident in the UK.
(2) The rules are referred to collectively as “the statutory residence test”.
(3) The rules do not apply in determining for the purposes of relevant tax whether individuals are resident or not resident in England, Wales, Scotland or Northern Ireland specifically (rather than in the UK as a whole).
(4) “Relevant tax” means—
(a) income tax,
(b) capital gains tax, and
(c) (so far as the residence status of individuals is relevant to them) inheritance tax and corporation tax.
(5) Key concepts used in the rules are defined in Part 2 of this Schedule.
Interpretation of enactments
2 (1) In enactments relating to relevant tax, a reference to being resident (or not resident) in the UK is, in the case of individuals, a reference to being resident (or not resident) in the UK in accordance with the statutory residence test.
(2) Sub-paragraph (1) applies even if the reference relates to the tax liability of an actual or deemed person that is not an individual (for example, where the liability of another person depends on the residence status of an individual).
(3) An individual who, in accordance with the statutory residence test, is resident (or not resident) in the UK “for” a tax year is taken for the purposes of any enactment relating to relevant tax to be resident (or not resident) there at all times in that tax year.
(4) But see Part 3 of this Schedule (split year treatment) for cases where the effect of sub-paragraph (3) is relaxed in certain circumstances.
(5) This Schedule has effect subject to any express provision to the contrary in (or falling to be recognised and acknowledged in law by virtue of) any enactment.
The basic rule
3 An individual (“P”) is resident in the UK for a tax year (“year X”) if—
(a) the automatic residence test is met for that year, or
(b) the sufficient ties test is met for that year.
4 If neither of those tests is met for that year, P is not resident in the UK for that year.
The automatic residence test
5 The automatic residence test is met for year X if P meets—
(a) at least one of the automatic UK tests, and
(b) none of the automatic overseas tests.
The automatic UK tests
6 There are 4 automatic UK tests.
7 The first automatic UK test is that P spends at least 183 days in the UK in year X.
8 (1) The second automatic UK test is that—
(a) P has a home in the UK during all or part of year X,
(b) that home is one where P spends a sufficient amount of time in year X, and
(c) there is at least one period of 91 (consecutive) days in respect of which the following conditions are met—
(i) the 91-day period in question occurs while P has that home,
(ii) at least 30 days of that 91-day period fall within year X, and
(iii) throughout that 91-day period, condition A or condition B is met or a combination of those conditions is met.
(2) Condition A is that P has no home overseas.
(3) Condition B is that—
(a) P has one or more homes overseas, but
(b) each of those homes is a home where P spends no more than a permitted amount of time in year X.
(4) In relation to a home of P's in the UK, P “spends a sufficient amount of time” there in year X if there are at least 30 days in year X when P is present there on that day for at least some of the time (no matter how short a time).
(5) In relation to a home of P's overseas, P “spends no more than a permitted amount of time” there in year X if there are fewer than 30 days in year X when P is present there on that day for at least some of the time (no matter how short a time).
(6) In sub-paragraphs (4) and (5)—
(a) a reference to 30 days is to 30 days in aggregate, whether the days are consecutive or intermittent, and
(b) a reference to P being present at the home is to P being present there at a time when it is a home of P's (so presence there on any other occasion, for example to look round the property with a view to buying it, is to be disregarded).
(7) Sub-paragraph (1)(c) is satisfied so long as there is a period of 91 days in respect of which the conditions described there are met, even if those conditions are in fact met for longer than that.
(8) If P has more than one home in the UK—
(a) each of those homes must be looked at separately to see if the second automatic UK test is met, and
(b) the second automatic UK test is then met so long as it is met in relation to at least one of those homes.
9 (1) The third automatic UK test is that—
(a) P works sufficient hours in the UK, as assessed over a period of 365 days,
(b) during that period, there are no significant breaks from UK work,
(c) all or part of that period falls within year X,
(d) more than 75% of the total number of days in the 365-day period on which P does more than 3 hours' work are days on which P does more than 3 hours' work in the UK, and
(e) at least one day which falls in both that period and year X is a day on which P does more than 3 hours' work in the UK.
(2) Take the following steps to work out, for any given period of 365 days, whether P works “sufficient hours in the UK” as assessed over that period—
Step 1 Identify any days in the period on which P does more than 3 hours' work overseas, including ones on which P also does work in the UK on the same day. The days so identified are referred to as “disregarded days”.
Step 2 Add up (for all employments held and trades carried on by P) the total number of hours that P works in the UK during the period, but ignoring any hours that P works in the UK on disregarded days. The result is referred to as P's “net UK hours”.
Step 3 Subtract from 365—
the total number of disregarded days, and
any days that are allowed to be subtracted, in accordance with the rules in paragraph 28 of this Schedule, to take account of periods of leave and gaps between employments.
The result is referred to as the “reference period”.
Step 4 Divide the reference period by 7. If the answer is more than 1 and is not a whole number, round down to the nearest whole number. If the answer is less than 1, round up to 1.
Step 5 Divide P's net UK hours by the number resulting from step 4.
If the answer is 35 or more, P is considered to work “sufficient hours in the UK” as assessed over the 365-day period in question.
(3) This paragraph does not apply to P if—
(a) P has a relevant job on board a vehicle, aircraft or ship at any time in year X, and
(b) at least 6 of the trips that P makes in year X as part of that job are cross-border trips that either begin in the UK, end in the UK or begin and end in the UK.
10 (1) The fourth automatic UK test is that—
(a) P dies in year X,
(b) for each of the previous 3 tax years, P was resident in the UK by virtue of meeting the automatic residence test,
(c) even assuming P were not resident in the UK for year X, the tax year preceding year X would not be a split year as respects P (see Part 3 of this Schedule),
(d) when P died, either—
(i) P's home was in the UK, or
(ii) P had more than one home and at least one of them was in the UK, and
(e) if P had a home overseas during all or part of year X, P did not spend a sufficient amount of time there in year X.
(2) In relation to a home of P's overseas, P “spent a sufficient amount of time” there in year X if—
(a) there were at least 30 days in year X when P was present there on that day for at least some of the time (no matter how short a time), or
(b) P was present there for at least some of the time (no matter how short a time) on each day of year X up to and including the day on which P died.
(3) In sub-paragraph (2)—
(a) the reference to 30 days is to 30 days in aggregate, whether the days were consecutive or intermittent, and
(b) the reference to P being present at the home is to P being present there at a time when it was a home of P's.
(4) If P had more than one home overseas—
(a) each of those homes must be looked at separately to see if the requirement of sub-paragraph (1)(e) is met, and
(b) that requirement is then met so long as it is met in relation to each of them.
The automatic overseas tests
11 There are 5 automatic overseas tests.
12 The first automatic overseas test is that—
(a) P was resident in the UK for one or more of the 3 tax years preceding year X,
(b) the number of days in year X that P spends in the UK is less than 16, and
(c) P does not die in year X.
13 The second automatic overseas test is that—
(a) P was resident in the UK for none of the 3 tax years preceding year X, and
(b) the number of days that P spends in the UK in year X is less than 46.
14 (1) The third automatic overseas test is that—
(a) P works sufficient hours overseas, as assessed over year X,
(b) during year X, there are no significant breaks from overseas work,
(c) the number of days in year X on which P does more than 3 hours' work in the UK is less than 31, and
(d) the number of days in year X falling within sub-paragraph (2) is less than 91.
(2) A day falls within this sub-paragraph if—
(a) it is a day spent by P in the UK, but
(b) it is not a day that is treated under paragraph 23(4) as a day spent by P in the UK.
(3) Take the following steps to work out whether P works “sufficient hours overseas” as assessed over year X—
Step 1 Identify any days in year X on which P does more than 3 hours' work in the UK, including ones on which P also does work overseas on the same day. The days so identified are referred to as “disregarded days”.
Step 2 Add up (for all employments held and trades carried on by P) the total number of hours that P works overseas in year X, but ignoring any hours that P works overseas on disregarded days. The result is referred to as P's “net overseas hours”.
Step 3 Subtract from 365 (or 366 if year X includes 29 February)—
the total number of disregarded days, and
any days that are allowed to be subtracted, in accordance with the rules in paragraph 28 of this Schedule, to take account of periods of leave and gaps between employments.
The result is referred to as the “reference period”.
Step 4 Divide the reference period by 7. If the answer is more than 1 and is not a whole number, round down to the nearest whole number. If the answer is less than 1, round up to 1.
Step 5 Divide P's net overseas hours by the number resulting from step 4.
If the answer is 35 or more, P is considered to work “sufficient hours overseas” as assessed over year X.
(4) This paragraph does not apply to P if—
(a) P has a relevant job on board a vehicle, aircraft or ship at any time in year X, and
(b) at least 6 of the trips that P makes in year X as part of that job are cross-border trips that either begin in the UK, end in the UK or begin and end in the UK.
15 (1) The fourth automatic overseas test is that—
(a) P dies in year X,
(b) P was resident in the UK for neither of the 2 tax years preceding year X or, alternatively, P's case falls within sub-paragraph (2), and
(c) the number of days that P spends in the UK in year X is less than 46.
(2) P's case falls within this sub-paragraph if—
(a) P was not resident in the UK for the tax year preceding year X, and
(b) the tax year before that was a split year as respects P because the circumstances of the case fell within Case 1, Case 2 or Case 3 (see Part 3 of this Schedule).
16 (1) The fifth automatic overseas test is that—
(a) P dies in year X,
(b) P was resident in the UK for neither of the 2 tax years preceding year X because P met the third automatic overseas test for each of those years or, alternatively, P's case falls within sub-paragraph (2), and
(c) P would meet the third automatic overseas test for year X if paragraph 14 were read with the relevant modifications.
(2) P's case falls within this sub-paragraph if—
(a) P was not resident in the UK for the tax year preceding year X because P met the third automatic overseas test for that year, and
(b) the tax year before that was a split year as respects P because the circumstances of the case fell within Case 1 (see Part 3 of this Schedule).
(3) The relevant modifications of paragraph 14 are—
(a) in sub-paragraph (1)(a) and (b) and sub-paragraph (3), for “year X” read “the period from the start of year X up to and including the day before the day of P's death”, and
(b) in step 3 of sub-paragraph (3), for “365 (or 366 if year X includes 29 February)” read “the number of days in the period from the start of year X up to and including the day before the day of P's death”.
The sufficient ties test
17 (1) The sufficient ties test is met for year X if—
(a) P meets none of the automatic UK tests and none of the automatic overseas tests, but
(b) P has sufficient UK ties for that year.
(2) “UK ties” is defined in Part 2 of this Schedule.
(3) Whether P has “sufficient” UK ties for year X will depend on—
(a) whether P was resident in the UK for any of the previous 3 tax years, and
(b) the number of days that P spends in the UK in year X.
(4) The Tables in paragraphs 18 and 19 show how many ties are sufficient in each case.
Sufficient UK ties
18 The Table below shows how many UK ties are sufficient in a case where P was resident in the UK for one or more of the 3 tax years preceding year X—
Days spent by P in the UK in year X | Number of ties that are sufficient
More than 15 but not more than 45 | At least 4
More than 45 but not more than 90 | At least 3
More than 90 but not more than 120 | At least 2
More than 120 | At least 1
19 The Table below shows how many UK ties are sufficient in a case where P was resident in the UK for none of the 3 tax years preceding year X—
Days spent by P in the UK in year X | Number of ties that are sufficient
More than 45 but not more than 90 | All 4
More than 90 but not more than 120 | At least 3
More than 120 | At least 2
20 (1) If P dies in year X, paragraph 18 has effect as if the words “More than 15 but” were omitted from the first column of the Table.
(2) In addition to that modification, if the death occurs before 1 March in year X, paragraphs 18 and 19 have effect as if each number of days mentioned in the first column of the Table were reduced by the appropriate number.
(3) The appropriate number is found by multiplying the number of days, in each case, by—
A
12
where “A” is the number of whole months in year X after the month in which P dies.
(4) If, for any number of days, the appropriate number is not a whole number, the appropriate number is to be rounded up or down as follows—
(a) if the first figure after the decimal point is 5 or more, round the appropriate number up to the nearest whole number,
(b) otherwise, round it down to the nearest whole number.
PART 2 Key concepts
Introduction
21 This Part of this Schedule defines some key concepts for the purposes of this Schedule.
Days spent
22 (1) If P is present in the UK at the end of a day, that day counts as a day spent by P in the UK.
(2) But it does not do so in the following two cases.
(3) The first case is where—
(a) P only arrives in the UK as a passenger on that day,
(b) P leaves the UK the next day, and
(c) between arrival and departure, P does not engage in activities that are to a substantial extent unrelated to P's passage through the UK.
(4) The second case is where—
(a) P would not be present in the UK at the end of that day but for exceptional circumstances beyond P's control that prevent P from leaving the UK, and
(b) P intends to leave the UK as soon as those circumstances permit.
(5) Examples of circumstances that may be “exceptional” are—
(a) national or local emergencies such as war, civil unrest or natural disasters, and
(b) a sudden or life-threatening illness or injury.
(6) For a tax year—
(a) the maximum number of days to which sub-paragraph (2) may apply in reliance on sub-paragraph (4) is limited to 60, and
(b) accordingly, once the number of days within sub-paragraph (4) reaches 60 (counting forward from the start of the tax year), any subsequent days within that sub-paragraph, whether involving the same or different exceptional circumstances, will count as days spent by P in the UK.
23 (1) If P is not present in the UK at the end of a day, that day does not count as a day spent by P in the UK.
(2) This is subject to the deeming rule.
(3) The deeming rule applies if—
(a) P has at least 3 UK ties for a tax year,
(b) the number of days in that tax year when P is present in the UK at some point in the day but not at the end of the day (“qualifying days”) is more than 30, and
(c) P was resident in the UK for at least one of the 3 tax years preceding that tax year.
(4) The deeming rule is that, once the number of qualifying days in the tax year reaches 30 (counting forward from the start of the tax year), each subsequent qualifying day in the tax year is to be treated as a day spent by P in the UK.
(5) The deeming rule does not apply for the purposes of sub-paragraph (3)(a) (so, in deciding for those purposes whether P has a 90-day tie, qualifying days in excess of 30 are not to be treated as days spent by P in the UK).
Days spent “in” a period
24 Any reference to a number of days spent in the UK “in” a given period is a reference to the total number of days spent there (in aggregate) in that period, whether continuously or intermittently.
Home
25 (1) A person's home could be a building or part of a building or, for example, a vehicle, vessel or structure of any kind.
(2) Whether, for a given building, vehicle, vessel, structure or the like, there is a sufficient degree of permanence or stability about P's arrangements there for the place to count as P's home (or one of P's homes) will depend on all the circumstances of the case.
(3) But somewhere that P uses periodically as nothing more than a holiday home or temporary retreat (or something similar) does not count as a home of P's.
(4) A place may count as a home of P's whether or not P holds any estate or interest in it (and references to “having” a home are to be read accordingly).
(5) Somewhere that was P's home does not continue to count as such merely because P continues to hold an estate or interest in it after P has moved out (for example, if P is in the process of selling it or has let or sub-let it, having set up home elsewhere).
Work
26 (1) P is considered to be “working” (or doing “work”) at any time when P is doing something—
(a) in the performance of duties of an employment held by P, or
(b) in the course of a trade carried on by P (alone or in partnership).
(2) In deciding whether something is being done in the performance of duties of an employment, regard must be had to whether, if value were received by P for doing the thing, it would fall within the definition of employment income in section 7 of ITEPA 2003.
(3) In deciding whether something is being done in the course of a trade, regard must be had to whether, if expenses were incurred by P in doing the thing, the expenses could be deducted in calculating the profits of the trade for income tax purposes.
(4) Time spent travelling counts as time spent working—
(a) if the cost of the journey could, if it were incurred by P, be deducted in calculating P's earnings from that employment under section 337, 338, 340 or 342 of ITEPA 2003 or, as the case may be, in calculating the profits of the trade under ITTOIA 2005, or
(b) to the extent that P does something else during the journey that would itself count as work in accordance with this paragraph.
(5) Time spent undertaking training counts as time spent working if—
(a) in the case of an employment held by P, the training is provided or paid for by the employer and is undertaken to help P in performing duties of the employment, and
(b) in the case of a trade carried on by P, the cost of the training could be deducted in calculating the profits of the trade for income tax purposes.
(6) Sub-paragraphs (4) and (5) have effect without prejudice to the generality of sub-paragraphs (2) and (3).
(7) Assume for the purposes of sub-paragraphs (2) to (5) that P is someone who is chargeable to income tax under ITEPA 2003 or ITTOIA 2005.
(8) A voluntary post for which P has no contract of service does not count as an employment for the purposes of this Schedule.
Location of work
27 (1) Work is done where it is actually done, regardless of where the employment is held or the trade is carried on by P.
(2) But work done by way of or in the course of travelling to or from the UK by air or sea or via a tunnel under the sea is assumed to be done overseas even during the part of the journey in or over the UK.
(3) For these purposes, travelling to or from the UK is taken to—
(a) begin when P boards the aircraft, ship or train that is bound for a destination in the UK or (as the case may be) overseas, and
(b) end when P disembarks from that aircraft, ship or train.
(4) This paragraph is subject to express provisions in this Schedule about the location of work done by people with relevant jobs on board vehicles, aircraft or ships.
Rules for calculating the reference period
28 (1) This paragraph applies in calculating the “reference period” (which is a step taken in determining whether P works “sufficient hours in the UK” or “sufficient hours overseas” as assessed over a given period of days).
(2) The number of days in the given period may be reduced to take account of—
(a) reasonable amounts of annual leave or parenting leave taken by P during the period (for all employments held and trades carried on by P during the period, whether in the UK or overseas),
(b) absences from work at times during the period when P is on sick leave and cannot reasonably be expected to work as a result of the illness or injury in question, and
(c) non-working days embedded within a block of leave for which a reduction is made under paragraph (a) or (b).
(3) But no reduction may be made in respect of any day that is a “disregarded day” (see paragraphs 9(2) and 14(3) in Part 1 of this Schedule).
(4) For any particular employment or trade, “reasonable” amounts of annual leave or parenting leave are to be assessed having regard to (among other things)—
(a) the nature of the work, and
(b) the country or countries where P is working.
(5) Non-working days are “embedded within” a block of leave only if there are, as part of that block of leave—
(a) at least 3 consecutive days of leave taken before the non-working day or series of non-working days in question, and
(b) at least 3 consecutive days of leave taken after the non-working day or series of non-working days in question.
(6) A “non-working day” is any day of the week, month or year on which P—
(a) is not normally expected to work (according to P's contract of employment or usual pattern of work), and
(b) does not in fact work.
(7) In calculating the reductions to be made under sub-paragraph (2)—
(a) if it turns out, after applying sub-paragraph (3), that the reasonable amounts of annual leave or parenting leave or, as the case may be, the absences from work on sick leave do not add up (across the period) to a whole number of days, the number in that case is to be rounded down to the nearest whole number, but
(b) any such rounding is to be ignored for the purposes of sub-paragraph (2)(c).
(8) If—
(a) P changes employment during the given period,
(b) there is a gap between the two employments, and
(c) P does not work at all at any time between the two employments,
the number of days in the given period may be reduced by the number of days in that gap.
(9) But—
(a) if the gap lasts for more than 15 days, only 15 days may be subtracted, and
(b) if there is more than one change of employment during the period, the maximum number of days that may be subtracted under sub-paragraph (8) for all the gaps in total is 30.
Significant breaks from UK or overseas work
29 (1) There is a “significant break from UK work” if at least 31 days go by and not one of those days is—
(a) a day on which P does more than 3 hours' work in the UK, or
(b) a day on which P would have done more than 3 hours' work in the UK but for being on annual leave, sick leave or parenting leave.
(2) There is a “significant break from overseas work” if at least 31 days go by and not one of those days is—
(a) a day on which P does more than 3 hours' work overseas, or
(b) a day on which P would have done more than 3 hours' work overseas but for being on annual leave, sick leave or parenting leave.
Relevant jobs on board vehicles, aircraft or ships
30 (1) P has a “relevant” job on board a vehicle, aircraft or ship if condition A and condition B are met.
(2) Condition A is that P either—
(a) holds an employment, the duties of which consist of duties to be performed on board a vehicle, aircraft or ship while it is travelling, or
(b) carries on a trade, the activities of which consist of work to be done or services to be provided on board a vehicle, aircraft or ship while it is travelling.
(3) Condition B is that substantially all of the trips made in performing those duties or carrying on those activities are ones that involve crossing an international boundary at sea, in the air or on land (referred to as “cross-border trips”).
(4) Sub-paragraph (2)(b) is not satisfied unless, in order to do the work or provide the services, P has to be present (in person) on board the vehicle, aircraft or ship while it is travelling.
(5) Duties or activities of a purely incidental nature are to be ignored in deciding whether the duties of an employment or the activities of a trade consist of duties or activities of a kind described in sub-paragraph (2)(a) or (b).
UK ties
31 (1) What counts as a “UK tie” depends on whether P was resident in the UK for one or more of the 3 tax years preceding year X.
(2) If P was resident in the UK for one or more of those 3 tax years, each of the following types of tie counts as a UK tie—
(a) a family tie,
(b) an accommodation tie,
(c) a work tie,
(d) a 90-day tie, and
(e) a country tie.
(3) Otherwise, each of the following types of tie counts as a UK tie—
(a) a family tie,
(b) an accommodation tie,
(c) a work tie, and
(d) a 90-day tie.
(4) In order to have the requisite number of UK ties for year X, each tie of P's must be of a different type.
Family tie
32 (1) P has a family tie for year X if—
(a) in year X, a relevant relationship exists at any time between P and another person, and
(b) that other person is someone who is resident in the UK for year X.
(2) A relevant relationship exists at any time between P and another person if at the time—
(a) P and the other person are husband and wife or civil partners and, in either case, are not separated,
(b) P and the other person are living together as if they were a married couple or civil partners, or
(c) the other person is a child of P's and is under the age of 18.
(3) P does not have a family tie for year X by virtue of sub-paragraph (2)(c) if P sees the child in the UK on fewer than 61 days (in total) in—
(a) year X, or
(b) if the child turns 18 during year X, the part of year X before the day on which the child turns 18.
(4) A day counts as a day on which P sees the child if P sees the child in person for all or part of the day.
(5) “Separated” means separated—
(a) under an order of a court of competent jurisdiction,
(b) by deed of separation, or
(c) in circumstances where the separation is likely to be permanent.
33 (1) This paragraph applies in deciding for the purposes (only) of paragraph 32(1)(b) whether a person with whom P has a relevant relationship (a “family member”) is someone who is resident in the UK for year X.
(2) A family tie based on the fact that a family member has, by the same token, a relevant relationship with P is to be disregarded in deciding whether that family member is someone who is resident in the UK for year X.
(3) A family member falling within sub-paragraph (4) is to be treated as being not resident in the UK for year X if the number of days that he or she spends in the UK in the part of year X outside term-time is less than 21.
(4) A family member falls within this sub-paragraph if he or she—
(a) is a child of P's who is under the age of 18,
(b) is in full-time education in the UK at any time in year X, and
(c) is resident in the UK for year X but would not be so resident if the time spent in full-time education in the UK in that year were disregarded.
(5) In sub-paragraph (4)—
(a) references to full-time education in the UK are to full-time education at a university, college, school or other educational establishment in the UK, and
(b) the reference to the time spent in full-time education in the UK is to the time spent there during term-time.
(6) For the purposes of this paragraph, half-term breaks and other breaks when teaching is not provided during a term are considered to form part of “term-time”.
Accommodation tie
34 (1) P has an accommodation tie for year X if—
(a) P has a place to live in the UK,
(b) that place is available to P during year X for a continuous period of at least 91 days, and
(c) P spends at least one night at that place in that year.
(2) If there is a gap of fewer than 16 days between periods in year X when a particular place is available to P, that place is to be treated as continuing to be available to P during the gap.
(3) P is considered to have a “place to live” in the UK if—
(a) P's home or at least one of P's homes (if P has more than one) is in the UK, or
(b) P has a holiday home or temporary retreat (or something similar) in the UK, or
(c) accommodation is otherwise available to P where P can live when P is in the UK.
(4) Accommodation may be “available” to P even if P holds no estate or interest in it and even if P has no legal right to occupy it.
(5) If the accommodation is the home of a close relative of P's, sub-paragraph (1)(c) has effect as if for “at least one night” there were substituted “ a total of at least 16 nights ”.
(6) A “close relative” is—
(a) a parent or grandparent,
(b) a brother or sister,
(c) a child aged 18 or over, or
(d) a grandchild aged 18 or over,
in each case, including by half-blood or by marriage or civil partnership.
Work tie
35 (1) P has a work tie for year X if P works in the UK for at least 40 days (whether continuously or intermittently) in year X.
(2) For these purposes, P works in the UK for a day if P does more than 3 hours' work in the UK on that day.
36 (1) This paragraph applies for the purposes of paragraph 35.
(2) It applies in cases where P has a relevant job on board a vehicle, aircraft or ship.
(3) When making a cross-border trip as part of that job—
(a) if the trip begins in the UK, P is assumed to do more than 3 hours' work in the UK on the day on which it begins,
(b) if the trip ends in the UK, P is assumed to do fewer than 3 hours' work in the UK on the day on which it ends.
(4) Those assumptions apply regardless of how late in the day the trip begins or ends (even if it begins or ends just before midnight).
(5) For the purposes of sub-paragraph (3)(a), it does not matter whether the trip ends on that same day.
(6) A day that falls within both paragraph (a) and paragraph (b) of sub-paragraph (3) is to be treated as if it fell only within paragraph (a).
(7) In the case of a cross-border trip to or from the UK that is undertaken in stages—
(a) the day on which the trip begins or, as the case may be, ends is the day on which the stage of the trip that involves crossing the UK border begins or ends, and
(b) accordingly, any day on which a stage is undertaken by P solely within the UK must (if it lasts for more than 3 hours) be counted separately as a day on which P does more than 3 hours' work in the UK.
90-day tie
37 P has a 90-day tie for year X if P has spent more than 90 days in the UK in—
(a) the tax year preceding year X,
(b) the tax year preceding that tax year, or
(c) each of those tax years separately.
Country tie
38 (1) P has a country tie for year X if the country in which P meets the midnight test for the greatest number of days in year X is the UK.
(2) If—
(a) P meets the midnight test for the same number of days in year X in two or more countries, and
(b) that number is the greatest number of days for which P meets the midnight test in any country in year X,
P has a country tie for year X if one of those countries is the UK.
(3) P meets the “midnight test” in a country for a day if P is present in that country at the end of that day.
PART 3 Split year treatment
Introduction
39 This Part of this Schedule—
(a) explains when, as respects an individual, a tax year is a split year,
(b) defines the overseas part and the UK part of a split year, and
(c) amends certain enactments to provide for special charging rules in cases involving split years.
40 (1) The effect of a tax year being a split year is to relax the effect of paragraph 2(3) (which treats individuals who are UK resident “for” a tax year as being UK resident at all times in that year).
(2) When and how the effect of paragraph 2(3) is relaxed is defined in the special charging rules introduced by the amendments made by this Part.
(3) Subject to those special charging rules (and any other special charging rules for split years that may be introduced in the future), nothing in this Part alters an individual's residence status for a tax year or affects his or her liability to tax.
41 This Part—
(a) does not apply in determining the residence status of personal representatives, and
(b) applies to only a limited extent in determining the residence status of the trustees of a settlement (see section 475 of ITA 2007 and section 69 of TCGA 1992, as amended by this Part).
42 The existence of special charging rules for cases involving split years is not intended to affect any question as to whether an individual would fall to be regarded under double taxation arrangements as a resident of the UK.
Definition of a “split year”
43 (1) As respects an individual, a tax year is a “split year” if—
(a) the individual is resident in the UK for that year, and
(b) the circumstances of the case fall within—
(i) Case 1, Case 2 or Case 3 (cases involving actual or deemed departure from the UK), or
(ii) Case 4, Case 5, Case 6, Case 7 or Case 8 (cases involving actual or deemed arrival in the UK).
(2) The 8 Cases are described in paragraphs 44 to 51.
(3) In those paragraphs, the individual is referred to as “the taxpayer” and the tax year as “the relevant year”.
(4) In applying Part 2 of this Schedule to those paragraphs, for “P” read “the taxpayer”.
Case 1: starting full-time work overseas
44 (1) The circumstances of a case fall within Case 1 if they are as described in sub-paragraphs (2) to (4).
(2) The taxpayer was resident in the UK for the previous tax year (whether or not it was a split year).
(3) There is at least one period (consisting of one or more days) that—
(a) begins with a day that—
(i) falls within the relevant year, and
(ii) is a day on which the taxpayer does more than 3 hours' work overseas,
(b) ends with the last day of the relevant year, and
(c) satisfies the overseas work criteria.
(4) The taxpayer is not resident in the UK for the next tax year because the taxpayer meets the third automatic overseas test for that year (see paragraph 14).
(5) A period “satisfies the overseas work criteria” if—
(a) the taxpayer works sufficient hours overseas, as assessed over that period,
(b) during that period, there are no significant breaks from overseas work,
(c) the number of days in that period on which the taxpayer does more than 3 hours' work in the UK does not exceed the permitted limit, and
(d) the number of days in that period falling within sub-paragraph (6) does not exceed the permitted limit.
(6) A day falls within this sub-paragraph if—
(a) it is a day spent by the taxpayer in the UK, but
(b) it is not a day that is treated under paragraph 23(4) as a day spent by the taxpayer in the UK.
(7) To work out whether the taxpayer works “sufficient hours overseas” as assessed over a given period, apply paragraph 14(3) but with the following modifications—
(a) for “P” read “the taxpayer”,
(b) for “year X” read “the period under consideration”,
(c) for “365 (or 366 if year X includes 29 February)” read “the number of days in the period under consideration”, and
(d) in paragraph 28(9)(b), as it applies for the purposes of step 3, for “30” read “the permitted limit”.
(8) The permitted limit is—
(a) for sub-paragraphs (5)(c) and (7)(d), the number found by reducing 30 by the appropriate number, and
(b) for sub-paragraph (5)(d), the number found by reducing 90 by the appropriate number.
(9) The appropriate number is the result of—
A
×
B
12
where—
“A” is—
30, for sub-paragraphs (5)(c) and (7)(d), or
90, for sub-paragraph (5)(d), and
“B” is the number of whole months in the part of the relevant year before the day mentioned in sub-paragraph (3)(a).
Case 2: the partner of someone starting full-time work overseas
45 (1) The circumstances of a case fall within Case 2 if they are as described in sub-paragraphs (2) to (6).
(2) The taxpayer was resident in the UK for the previous tax year (whether or not it was a split year).
(3) The taxpayer has a partner whose circumstances fall within Case 1 for—
(a) the relevant year, or
(b) the previous tax year.
(4) On a day in the relevant year, the taxpayer moves overseas so the taxpayer and the partner can continue to live together while the partner is working overseas.
(5) In the part of the relevant year beginning with the deemed departure day—
(a) the taxpayer has no home in the UK at any time, or has homes in both the UK and overseas but spends the greater part of the time living in the overseas home, and
(b) the number of days that the taxpayer spends in the UK does not exceed the permitted limit.
(6) The taxpayer is not resident in the UK for the next tax year.
(7) If sub-paragraph (3)(a) applies, the “deemed departure day” is the later of—
(a) the day mentioned in sub-paragraph (4), and
(b) the first day of what is, for the partner, the overseas part of the relevant year as defined for Case 1 (see paragraph 53).
(8) If sub-paragraph (3)(b) applies, the “deemed departure day” is the day mentioned in sub-paragraph (4).
(9) The permitted limit is the number found by reducing 90 by the appropriate number.
(10) The appropriate number is the result of—
A
×
B
12
where—
“A” is 90, and
“B” is the number of whole months in the part of the relevant year before the deemed departure day.
Case 3: ceasing to have a home in the UK
46 (1) The circumstances of a case fall within Case 3 if they are as described in sub-paragraphs (2) to (6).
(2) The taxpayer was resident in the UK for the previous tax year (whether or not it was a split year).
(3) At the start of the relevant year the taxpayer had one or more homes in the UK but—
(a) there comes a day in the relevant year when P ceases to have any home in the UK, and
(b) from then on, P has no home in the UK for the rest of that year.
(4) In the part of the relevant year beginning with the day mentioned in sub-paragraph (3)(a), the taxpayer spends fewer than 16 days in the UK.
(5) The taxpayer is not resident in the UK for the next tax year.
(6) At the end of the period of 6 months beginning with the day mentioned in sub-paragraph (3)(a), the taxpayer has a sufficient link with a country overseas.
(7) The taxpayer has a “sufficient link” with a country overseas if and only if—
(a) the taxpayer is considered for tax purposes to be a resident of that country in accordance with its domestic laws, or
(b) the taxpayer has been present in that country (in person) at the end of each day of the 6-month period mentioned in sub-paragraph (6), or
(c) the taxpayer's only home is in that country or, if the taxpayer has more than one home, they are all in that country.
Case 4: starting to have a home in the UK only
47 (1) The circumstances of a case fall within Case 4 if they are as described in sub-paragraphs (2) to (4).
(2) The taxpayer was not resident in the UK for the previous tax year.
(3) At the start of the relevant year, the taxpayer did not meet the only home test, but there comes a day in the relevant year when that ceases to be the case and the taxpayer then continues to meet the only home test for the rest of that year.
(4) For the part of the relevant year before that day, the taxpayer does not have sufficient UK ties.
(5) The “only home test” is met if—
(a) the taxpayer has only one home and that home is in the UK, or
(b) the taxpayer has more than one home and all of them are in the UK.
(6) Paragraphs 17 to 20 (and Part 2 of this Schedule so far as it relates to those paragraphs) apply for the purposes of sub-paragraph (4) with the following adjustments—
(a) references in those paragraphs and that Part to year X are to be read as references to the part of the relevant year mentioned in sub-paragraph (4), and
(b) each number of days mentioned in the first column of the Table in paragraphs 18 and 19 is to be reduced by the appropriate number.
(7) The appropriate number is found by multiplying the number of days, in each case, by—
A
12
where “A” is the number of whole months in the part of the relevant year beginning with the day mentioned in sub-paragraph (3).
(8) Sub-paragraph (6)(a) does not apply to the references to year X in paragraphs 32(1)(b) and 33 of this Schedule (which relate to the residence status of family members) so those references must continue to be read as references to year X.
Case 5: starting full-time work in the UK
48 (1) The circumstances of a case fall within Case 5 if they are as described in sub-paragraphs (2) and (3).
(2) The taxpayer was not resident in the UK for the previous tax year.
(3) There is at least one period of 365 days in respect of which the following conditions are met—
(a) the period begins with a day that—
(i) falls within the relevant year, and
(ii) is a day on which the taxpayer does more than 3 hours' work in the UK,
(b) in the part of the relevant year before the period begins, the taxpayer does not have sufficient UK ties,
(c) the taxpayer works sufficient hours in the UK, as assessed over the period,
(d) during the period, there are no significant breaks from UK work, and
(e) at least 75% of the total number of days in the period on which the taxpayer does more than 3 hours' work are days on which the taxpayer does more than 3 hours' work in the UK.
(4) To work out whether the taxpayer works “sufficient hours in the UK” as assessed over a given period, apply paragraph 9(2) but for “P” read “the taxpayer”.
(5) Paragraphs 17 to 20 (and Part 2 of this Schedule so far as it relates to those paragraphs) apply for the purposes of sub-paragraph (3)(b) with the following adjustments—
(a) references in those paragraphs and that Part to year X are to be read as references to the part of the relevant year mentioned in sub-paragraph (3)(b), and
(b) each number of days mentioned in the first column of the Table in paragraphs 18 and 19 is to be reduced by the appropriate number.
(6) The appropriate number is found by multiplying the number of days, in each case, by—
A
12
where “A” is the number of whole months in the part of the relevant year beginning with the day on which the 365-day period in question begins.
(7) Sub-paragraph (5)(a) does not apply to the references to year X in paragraphs 32(1)(b) and 33 of this Schedule (which relate to the residence status of family members) so those references must continue to be read as references to year X.
Case 6: ceasing full-time work overseas
49 (1) The circumstances of a case fall within Case 6 if they are as described in sub-paragraphs (2) to (4).
(2) The taxpayer—
(a) was not resident in the UK for the previous tax year because the taxpayer met the third automatic overseas test for that year (see paragraph 14), but
(b) was resident in the UK for one or more of the 4 tax years immediately preceding that year.
(3) There is at least one period (consisting of one or more days) that—
(a) begins with the first day of the relevant year,
(b) ends with a day that—
(i) falls within the relevant year, and
(ii) is a day on which the taxpayer does more than 3 hours' work overseas, and
(c) satisfies the overseas work criteria.
(4) The taxpayer is resident in the UK for the next tax year (whether or not it is a split year).
(5) A period “satisfies the overseas work criteria” if—
(a) the taxpayer works sufficient hours overseas, as assessed over that period,
(b) during that period, there are no significant breaks from overseas work,
(c) the number of days in that period on which the taxpayer does more than 3 hours' work in the UK does not exceed the permitted limit, and
(d) the number of days in that period falling within sub-paragraph (6) does not exceed the permitted limit.
(6) A day falls within this sub-paragraph if—
(a) it is a day spent by the taxpayer in the UK, but
(b) it is not a day that is treated under paragraph 23(4) as a day spent by the taxpayer in the UK.
(7) To work out whether the taxpayer works “sufficient hours overseas” as assessed over a given period, apply paragraph 14(3) but with the following modifications—
(a) for “P” read “the taxpayer”,
(b) for “year X” read “the period under consideration”,
(c) for “365 (or 366 if year X includes 29 February)” read “the number of days in the period under consideration”, and
(d) in paragraph 28(9)(b), as it applies for the purposes of step 3, for “30” read “the permitted limit”.
(8) The permitted limit is—
(a) for sub-paragraphs (5)(c) and (7)(d), the number found by reducing 30 by the appropriate number, and
(b) for sub-paragraph (5)(d), the number found by reducing 90 by the appropriate number.
(9) The appropriate number is the result of—
A
×
B
12
where—
“A” is—
30, for sub-paragraphs (5)(c) and (7)(d), or
90, for sub-paragraph (5)(d), and
“B” is the number of whole months in the part of the relevant year after the 365-day period in question ends.
Case 7: the partner of someone ceasing full-time work overseas
50 (1) The circumstances of a case fall within Case 7 if they are as described in sub-paragraphs (2) to (6).
(2) The taxpayer was not resident in the UK for the previous tax year.
(3) The taxpayer has a partner whose circumstances fall within Case 6 for—
(a) the relevant year, or
(b) the previous tax year.
(4) On a day in the relevant year, the taxpayer moves to the UK so the taxpayer and the partner can continue to live together on the partner's return or relocation to the UK.
(5) In the part of the relevant year before the deemed arrival day—
(a) the taxpayer has no home in the UK at any time, or has homes in both the UK and overseas but spends the greater part of the time living in the overseas home, and
(b) the number of days that the taxpayer spends in the UK does not exceed the permitted limit.
(6) The taxpayer is resident in the UK for the next tax year (whether or not it is a split year).
(7) If sub-paragraph (3)(a) applies, the “deemed arrival day” is the later of—
(a) the day mentioned in sub-paragraph (4), and
(b) the first day of what is, for the partner, the UK part of the relevant year as defined for Case 6 (see paragraph 54).
(8) If sub-paragraph (3)(b) applies, the “deemed arrival day” is the day mentioned in sub-paragraph (4).
(9) The permitted limit is the number found by reducing 90 by the appropriate number.
(10) The appropriate number is the result of—
A
×
B
12
where—
“A” is 90, and
“B” is the number of whole months in the part of the relevant year beginning with the deemed arrival day.
Case 8: starting to have a home in the UK
51 (1) The circumstances of a case fall within Case 8 if they are as described in sub-paragraphs (2) to (5).
(2) The taxpayer was not resident in the UK for the previous tax year.
(3) At the start of the relevant year, the taxpayer had no home in the UK but—
(a) there comes a day when, for the first time in that year, the taxpayer does have a home in the UK, and
(b) from then on, the taxpayer continues to have a home in the UK for the rest of that year and for the whole of the next tax year.
(4) For the part of the relevant year before the day mentioned in sub-paragraph (3)(a), the taxpayer does not have sufficient UK ties.
(5) The taxpayer is resident in the UK for the next tax year and that tax year is not a split year as respects the taxpayer.
(6) Paragraphs 17 to 20 (and Part 2 of this Schedule so far as it relates to those paragraphs) apply for the purposes of sub-paragraph (4) with the following adjustments—
(a) references in those paragraphs and that Part to year X are to be read as references to the part of the relevant year mentioned in sub-paragraph (4), and
(b) each number of days mentioned in the first column of the Table in paragraphs 18 and 19 is to be reduced by the appropriate number.
(7) The appropriate number is found by multiplying the number of days, in each case, by—
A
12
where “A” is the number of whole months in the part of the relevant year beginning with the day mentioned in sub-paragraph (3)(a).
(8) Sub-paragraph (6)(a) does not apply to the references to year X in paragraphs 32(1)(b) and 33 of this Schedule (which relate to the residence status of family members) so those references must continue to be read as references to year X.
General rules for construing Cases 1 to 8
52 (1) This paragraph applies for the purposes of paragraphs 44 to 51.
(2) A reference to “the previous tax year” is to the tax year preceding the relevant year.
(3) A reference to “the next tax year” is to the tax year following the relevant year.
(4) “Partner”, in relation to the taxpayer, means—
(a) a husband or wife or civil partner, or
(b) if the taxpayer and another person are living together as if they were a married couple or civil partners, that other person, ...
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5) If calculation of the appropriate number results in a number of days that is not a whole number, the appropriate number is to be rounded up or down as follows—
(a) if the first figure after the decimal point is 5 or more, round the appropriate number up to the nearest whole number,
(b) otherwise, round it down to the nearest whole number.
The overseas part
53 (1) “The overseas part” of a split year is the part of that year defined below—
(a) for the Case in question, or
(b) if the taxpayer's circumstances fall within more than one Case, for the Case which has priority (see paragraphs 54 and 55).
(2) For Case 1, the overseas part is—
(a) if there is only one period falling within paragraph 44(3), the part beginning with the first day of that period, and
(b) if there is more than one such period, the part beginning with the first day of the longest of those periods.
(3) For Case 2, the overseas part is the part beginning with the deemed departure day as defined in paragraph 45(7) and (8).
(4) For Case 3, the overseas part is the part beginning with the day mentioned in paragraph 46(3)(a).
(5) For Case 4, the overseas part is the part before the day mentioned in paragraph 47(3).
(6) For Case 5, the overseas part is—
(a) if there is only one period falling within paragraph 48(3), the part before that period begins, and
(b) if there is more than one such period, the part before the first of those periods begins.
(7) For Case 6, the overseas part is—
(a) if there is only one period falling within paragraph 49(3), the part ending with the last day of that period, and
(b) if there is more than one such period, the part ending with the last day of the longest of those periods.
(8) For Case 7, the overseas part is the part before the deemed arrival day as defined in paragraph 50(7) and (8).
(9) For Case 8, the overseas part is the part before the day mentioned in paragraph 51(3)(a).
Priority between Cases 1 to 3
54 (1) This paragraph applies to determine which Case has priority where the taxpayer's circumstances for the relevant year fall within two or all of the following—
Case 1 (starting full-time work overseas);
Case 2 (the partner of someone starting full-time work overseas);
Case 3 (ceasing to have a home in the UK).
(2) Case 1 has priority over Case 2 and Case 3.
(3) Case 2 has priority over Case 3.
Priority between Cases 4 to 8
55 (1) This paragraph applies to determine which Case has priority where the taxpayer's circumstances for the relevant year fall within two or more of the following—
Case 4 (starting to have a home in the UK only);
Case 5 (starting full-time work in the UK);
Case 6 (ceasing full-time work overseas);
Case 7 (the partner of someone ceasing full-time work overseas);
Case 8 (starting to have a home in the UK).
(2) In this paragraph “the split year date” in relation to a Case means the final day of the part of the relevant year defined in paragraph 53(5) to (9) for that Case.
(3) If Case 6 applies—
(a) if Case 5 also applies and the split year date in relation to Case 5 is earlier than the split year date in relation to Case 6, Case 5 has priority;
(b) otherwise, Case 6 has priority.
(4) If Case 7 (but not Case 6) applies—
(a) if Case 5 also applies and the split year date in relation to Case 5 is earlier than the split year date in relation to Case 7, Case 5 has priority;
(b) otherwise, Case 7 has priority
(5) If two or all of Cases 4, 5 and 8 apply (but neither Case 6 nor Case 7), the Case which has priority is the one with the earliest split year date.
(6) But if, in a case to which sub-paragraph (5) applies, two or all of the Cases which apply share the same split year date and that date is the only, or earlier, split year date of the Cases which apply, the Cases with that split year date are to be treated as having priority.
The UK part
56 “The UK part” of a split year is the part of that year that is not the overseas part.
Special charging rules for employment income
57 ITEPA 2003 is amended as follows.
58 (1) In section 15 (earnings for year when employee UK resident), for subsection (1) substitute—
(1) This section applies to general earnings for a tax year for which the employee is UK resident except that, in the case of a split year, it does not apply to any part of those earnings that is excluded.
(1A) General earnings are “excluded” if they—
(a) are attributable to the overseas part of the split year, and
(b) are neither—
(i) general earnings in respect of duties performed in the United Kingdom, nor
(ii) general earnings from overseas Crown employment subject to United Kingdom tax.
(2) After subsection (3) insert—
(4) Any attribution required for the purposes of subsection (1A)(a) is to be done on a just and reasonable basis.
(5) The following provisions of Chapter 5 of this Part apply for the purposes of subsection (1A)(b) as for the purposes of section 27(2)—
(a) section 28 (which defines “general earnings from overseas Crown employment subject to United Kingdom tax”), and
(b) sections 38 to 41 (which contain rules for determining the place of performance of duties of employment).
(6) Subject to any provision made in an order under section 28(5) for the purposes of subsection (1A)(b), provisions made in an order under that section for the purposes of section 27(2) apply for the purposes of subsection (1A)(b) too.
59 In section 22 (chargeable overseas earnings for year when remittance basis applies and employee outside section 26), for subsection (7) substitute—
(7) Section 15(1) does not apply to general earnings within subsection (1).
60 (1) Section 23 (calculation of “chargeable overseas earnings”) is amended as follows.
(2) In subsection (3), for step 1 substitute—
Step 1 Identify—
(a) in the case of a tax year that is not a split year, the full amount of the overseas earnings for that year, and
(b) in the case of a split year, so much of the full amount of the overseas earnings for that year as is attributable to the UK part of the year.
(3) In that subsection, in step 2, for “those earnings” substitute “ the earnings identified under step 1 ”.
(4) After that subsection insert—
(4) Any attribution required for the purposes of step 1 or step 2 in subsection (3) is to be done on a just and reasonable basis.
61 (1) Section 24 (limit on chargeable overseas earnings where duties of associated employment performed in UK) is amended as follows.
(2) After subsection (2) insert—
(2A) If the tax year is a split year as respects the employee, subsection (2) has effect as if for “the aggregate earnings for that year from all the employments concerned” there were substituted “ so much of the aggregate earnings for that year from all the employments concerned as is attributable to the UK part of that year ”.
(3) After subsection (3) insert—
(3A) Any attribution required for the purposes of subsection (2A) is to be done on a just and reasonable basis.
62 (1) Section 26 (foreign earnings for year when remittance basis applies and employee meets section 26A requirement) is amended as follows.
(2) In subsection (1), for the words from “if the general earnings” to the end substitute
if the general earnings meet all of the following conditions—
(a) they are neither—
(i) general earnings in respect of duties performed in the United Kingdom, nor
(ii) general earnings from overseas Crown employment subject to United Kingdom tax, and
(b) if the tax year is a split year as respects the employee, they are attributable to the UK part of the year.
(3) After subsection (5) insert—
(5A) Any attribution required for the purposes of subsection (1)(b) is to be done on a just and reasonable basis.
(4) For subsection (6) substitute—
(6) Section 15(1) does not apply to general earnings within subsection (1).
63 In section 232 (giving effect to mileage allowance relief), after subsection (6) insert—
(6A) If the earnings from which a deduction allowed under this section is deductible include earnings that are “excluded” within the meaning of section 15(1A)—
(a) the amount of the deduction allowed is a proportion of the amount that would be allowed under this section if the tax year were not a split year, and
(b) that proportion is equal to the proportion that the part of the earnings that is not “excluded” bears to the total earnings.
64 (1) Section 329 (deduction from earnings not to exceed earnings) is amended as follows.
(2) After subsection (1) insert—
(1A) If the earnings from which a deduction allowed under this Part is deductible include earnings that are “excluded” within the meaning of section 15(1A)—
(a) the amount of the deduction allowed is a proportion of the amount that would be allowed under this Part if the tax year were not a split year, and
(b) that proportion is equal to the proportion that the part of the earnings that is not “excluded” bears to the total earnings.
(3) In subsection (2), after “those earnings” insert “ (or, in a case within subsection (1A), the part of those earnings that is not “excluded”) ”.
(4) In subsection (3), after “the earnings” insert “ (or, in a case within subsection (1A), the part of the earnings that is not “excluded”) ”.
65 (1) Section 394 (charge on employer-financed retirement benefits) is amended as follows.
(2) In subsection (4C), omit “or” at the end of paragraph (b) and after that paragraph insert—
(ba) an amount which would count as employment income of the employee or former employee under that Chapter but for the application of section 554Z5 (overlap with earlier relevant step), or
.
(3) In that subsection, for paragraph (c) substitute—
(c) an amount which would be within paragraph (a), (b) or (ba) apart from—
(i) the employee or former employee having been non-UK resident for any tax year, or
(ii) any tax year having been a split year as respects the employee or former employee.
66 (1) Section 421E (income relating to securities: exclusions about residence etc) is amended as follows.
(2) For subsection (1) substitute—
(1) Chapters 2, 3 and 4 do not apply in relation to employment-related securities if the acquisition occurs in a tax year that is not a split year as respects the employee and—
(a) the earnings from the employment for that tax year are not general earnings to which section 15, 22 or 26 applies (earnings for year when employee UK resident), or
(b) had there been any earnings from the employment for that tax year, they would not have been general earnings to which any of those sections applied.
(1A) Chapters 2, 3 and 4 do not apply in relation to employment-related securities if the acquisition occurs in the UK part of a tax year that is a split year as respects the employee and—
(a) the earnings from the employment attributable to that part of the year are not general earnings to which section 15, 22 or 26 applies, or
(b) had there been any earnings from the employment attributable to that part of the year, they would not have been general earnings to which any of those sections applied.
(1B) Chapters 2, 3 and 4 do not apply in relation to employment-related securities if the acquisition occurs in the overseas part of a tax year that is a split year as respects the employee.
(3) After subsection (2) insert—
(2A) But Chapters 3A to 3D do apply in relation to employment-related securities in relation to which they are disapplied by subsection (2) if—
(a) the acquisition takes place in the overseas part of a tax year that is a split year as respects the employee,
(b) the tax year is a split year because the circumstances of the case fall within Case 1, Case 2 or Case 3 as described in Part 3 of Schedule 45 to FA 2013 (split year treatment: cases involving actual or deemed departure from the United Kingdom), and
(c) had it not been a split year—
(i) the earnings from the employment for that tax year (or some of them) would have been general earnings to which section 15, 22 or 26 applied, or
(ii) if there had been any earnings from the employment for that tax year, they (or some of them) would have been general earnings to which any of those sections applied.
67 In section 474 (cases where Chapter 5 of Part 7 does not apply), for subsection (1) substitute—
(1) This Chapter (apart from sections 473 and 483) does not apply in relation to an employment-related securities option if the acquisition occurs in a tax year that is not a split year as respects the employee and—
(a) the earnings from the employment are not general earnings to which section 15, 22 or 26 applies (earnings for year when employee UK resident), or
(b) had there been any earnings from the employment, they would not have been general earnings to which any of those sections applied.
(1A) This Chapter (apart from sections 473 and 483) does not apply in relation to an employment-related securities option if the acquisition occurs in the UK part of a tax year that is a split year as respects the employee and—
(a) the earnings from the employment attributable to that part of the year are not general earnings to which section 15, 22 or 26 applies (earnings for year when employee UK resident), or
(b) had there been any earnings from the employment attributable to that part of the year, they would not have been general earnings to which any of those sections applied.
(1B) This Chapter (apart from sections 473 and 483) does not apply in relation to an employment-related securities option if the acquisition occurs in the overseas part of a tax year that is a split year as respects the employee.
68 (1) Section 554Z4 (residence issues) is amended as follows.
(2) For subsections (3) to (5) substitute—
(3) Subsection (4) applies if the value of the relevant step, or a part of it, is “for”—
(a) a tax year for which A is non-UK resident, or
(b) a tax year that is a split year as respects A.
(4) The value, or the part of it, is to be reduced—
(a) in a case within subsection (3)(a), by so much of the value, or the part of it, as is not in respect of UK duties, and
(b) in a case within subsection (3)(b), by so much of the value, or the part of it, as is both—
(i) attributable to the overseas part of the tax year, and
(ii) not in respect of UK duties.
(5) The extent to which—
(a) the value, or the part of it, is not in respect of UK duties, or
(b) so much of the value, or the part of it, as is attributable to the overseas part of the tax year is not in respect of UK duties,
is to be determined on a just and reasonable basis.
(3) After subsection (5) insert—
(5A) Any attribution required for the purposes of subsection (4)(b)(i) is to be done on a just and reasonable basis.
(5B) “UK duties” means duties performed in the United Kingdom.
69 In section 554Z6 (overlap with certain earnings), in subsection (1)(a), after “UK resident” insert “ (and, in the case of a tax year that is a split year as respects A, are not “excluded” by virtue of section 15(1A)(a) and (b)(i)) ”.
70 In section 554Z9 (remittance basis: A is ordinarily UK resident), in subsection (5)—
(a) in paragraph (b), after “that income” insert “ (or of so much of it as is attributable to the UK part of the relevant tax year, if it was a split year as respects A) ”, and
(b) in paragraph (c), after “tax year” insert “ (or the UK part of it) ”.
71 (1) Section 554Z10 (remittance basis: A is not ordinarily resident) is amended as follows.
(2) In subsection (1), for paragraph (a) substitute—
(a) the value of the relevant step, or a part of it, is “for” a tax year (“the relevant tax year”) as determined under section 554Z4,
.
(3) For subsection (2) substitute—
(2) The overseas portion of (as the case may be)—
(a) A's employment income by virtue of section 554Z2(1), or
(b) the relevant part of A's employment income by virtue of that section,
is “taxable specific income” in a tax year so far as the overseas portion is remitted to the United Kingdom in that year.
(4) After that subsection insert—
(2A) The overseas portion” of A's employment income by virtue of section 554Z2(1), or of the relevant part of that income, is so much of that income, or of the relevant part of it, as is not in respect of UK duties.
(2B) “UK duties” means duties performed in the United Kingdom.
(5) In subsection (3), for “this purpose” substitute “ the purposes of this section ”.
(6) For subsection (4) substitute—
(4) The extent to which—
(a) the employment income, or the relevant part of it, is not in respect of UK duties, or
(b) so much of the employment income, or of the relevant part of it, as is attributable to the UK part of the relevant tax year is not in respect of UK duties,
is to be determined on a just and reasonable basis.
Special charging rules for pension income
72 (1) Section 575 of ITEPA 2003 (foreign pensions: taxable pension income) is amended as follows.
(2) In subsection (1), after “subsections” insert “ (1A), ”.
(3) After that subsection insert—
(1A) If the person liable for the tax under this Part is an individual and the tax year is a split year as respects that individual, the taxable pension income for the tax year is the full amount of the pension income arising in the UK part of the year, subject to subsections (2) and (3) and section 576A.
(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PAYE income
73 (1) Section 690 of ITEPA 2003 (employee non-residents etc) is amended as follows.
(2) In subsection (1), omit “only”.
(3) After that subsection insert—
(1A) This section also applies in relation to an employee in a tax year if it appears to an officer of Revenue and Customs that—
(a) the tax year is likely to be a split year as respects the employee, and
(b) the employee works or will work in the United Kingdom and also works or is likely to work outside the United Kingdom.
Special charging rules for trading income
74 ITTOIA 2005 is amended as follows.
75 In section 6 (territorial scope of charge to tax), after subsection (2) insert—
(2A) If the tax year is a split year as respects a UK resident individual, this section has effect as if, for the overseas part of that year, the individual were non-UK resident.
76 (1) Section 17 (effect of becoming or ceasing to be UK resident) is amended as follows.
(2) For subsection (1) substitute—
(1) This section applies if—
(a) an individual carries on a trade otherwise than in partnership, and
(b) there is a change of residence.
(1A) For the purposes of this section there is a “change of residence” if—
(a) the individual becomes or ceases to be UK resident, or
(b) a tax year is, as respects the individual, a split year.
(1B) The change of residence occurs—
(a) in a case falling within subsection (1A)(a), at the start of the tax year for which the individual becomes or ceases to be UK resident, and
(b) in a case falling within subsection (1A)(b), at the start of whichever of the UK part or the overseas part of the tax year is the later part.
(3) In subsection (2), at the beginning insert “ If this section applies and the individual does not actually cease permanently to carry on the trade immediately before the change of residence occurs, ”.
77 In section 243 (post-cessation receipts: extent of charge to tax), after subsection (5) insert—
(6) If the tax year is a split year as respects a UK resident individual, this section has effect as if, for the overseas part of that year, the individual were non-UK resident.
78 In section 849 (calculation of firm's profits or losses), after subsection (3) insert—
(3A) For any tax year that is a split year as respects the partner, this section has effect as if the partner were non-UK resident in the overseas part of the year.
79 (1) Section 852 (carrying on by partner of notional trade) is amended as follows.
(2) For subsection (6) substitute—
(6) If there is a change of residence, the partner is treated as permanently ceasing to carry on one notional trade when that change of residence occurs and starting to carry on another immediately afterwards.
(3) After subsection (7) insert—
(8) Subsections (1A) and (1B) of section 17 apply for the purposes of subsection (6).
80 (1) Section 854 (carrying on by partner of notional business) is amended as follows.
(2) For subsection (5) substitute—
(5) If there is a change of residence, the partner is treated as permanently ceasing to carry on one notional business when that change of residence occurs and starting to carry on another immediately afterwards.
(3) After that subsection insert—
(5A) Subsections (1A) and (1B) of section 17 apply for the purposes of subsection (5).
Special charging rules for property income
81 In section 270 of ITTOIA 2005 (profits of property businesses: income charged), after subsection (2) insert—
(3) If, as respects an individual carrying on an overseas property business, the tax year is a split year—
(a) tax is charged under this Chapter on so much of the profits referred to in subsection (1) as arise in the UK part of the tax year, and
(b) the portion of the profits arising in the overseas part of the tax year is, accordingly, not chargeable to tax under this Chapter.
(4) In determining how much of the profits arise in the UK part of the tax year—
(a) determine first how much of the non-CAA profits arise in the UK part by apportioning the non-CAA profits between the UK part and the overseas part on a just and reasonable basis, and
(b) then adjust the portion of the non-CAA profits arising in the UK part by deducting any CAA allowances for the year and adding any CAA charges for the year.
(5) In subsection (4)—
“CAA allowances” means allowances treated under section 250 or 250A of CAA 2001 (capital allowances for overseas property businesses) as an expense of the business;
“CAA charges” means charges treated under either of those sections as a receipt of the business;
“non-CAA profits” means profits before account is taken of any CAA allowances or CAA charges.
Special charging rules for savings and investment income
82 Part 4 of ITTOIA 2005 (savings and investment income) is amended as follows.
83 In section 368 (territorial scope of charges in respect of savings and investment income), after subsection (2) insert—
(2A) If income arising to an individual who is UK resident arises in the overseas part of a split year, it is to be treated for the purposes of this section as arising to a non-UK resident.
84 In section 465 (person liable for tax on gains from life insurance etc: individuals), after subsection (1) insert—
(1A) But if the tax year is a split year as respects the individual, the individual is not liable for tax under this Chapter in respect of gains arising in the overseas part of that year (subject to section 465B).
85 In section 467 (person liable: UK resident trustees), in subsection (4), after paragraph (a) insert—
(aa) is UK resident but the gain arises in the overseas part of a tax year that is, as respects the person who created the trusts, a split year,
.
86 (1) Section 528 (reduction in amount charged under Chapter 9 of Part 4: non-UK resident policy holders) is amended as follows.
(2) The amendments made by sub-paragraphs (3) to (6) apply to section 528 as substituted by paragraph 3 of Schedule 8 to this Act, and have effect in relation to policies and contracts in relation to which that section as so substituted has effect.
(3) In subsection (1)(b), for the words from “on which” to the end substitute “ that are foreign days ”.
(4) After subsection (1) insert—
(1A) Foreign days” are—
(a) days falling within any tax year for which the individual is not UK resident, and
(b) days falling within the overseas part of any tax year that is a split year as respects the individual.
(5) In subsection (3), in the definition of “A”, for “days falling within subsection (1)(b)” substitute “ foreign days ”.
(6) In subsection (8), for “subsection (1)(b)” substitute “ subsection (1A)(a) and (b) ”.
(7) The amendments made by sub-paragraphs (8) to (10) apply to section 528 as in force immediately before the substitution mentioned in sub-paragraph (2) so far as that section as so in force continues to have effect after the substitution.
(8) In subsection (1), for the words from “the policy holder” to the end substitute “ there are one or more days in the policy period that are foreign days. ”
(9) After that subsection insert—
(1A) Foreign days” are—
(a) days on which the policy holder is not UK resident, and
(b) days falling within the overseas part of any tax year that is a split year as respects the policy holder (if the policy holder is an individual).
(10) In subsection (3), in the definition of “A”, for the words from “on which” to the end substitute “ in the policy period that are foreign days, and ”.
87 (1) Section 528A (reduction in amount charged on basis of non-UK residence of deceased person), as inserted by paragraph 3 of Schedule 8 to this Act, is amended as follows.
(2) In subsection (1)(b), for the words from “on which” to the end substitute “ that were foreign days ”.
(3) In subsection (2)—
(a) in paragraph (b), for the words from “on which” to the end substitute “ that were foreign days, and ”, and
(b) for paragraph (c), substitute—
(c) the deceased died—
(i) in a tax year for which the deceased was UK resident but not one that was a split year as respects the deceased, or
(ii) in the UK part of a tax year that was a split year as respects the deceased.
(4) After that subsection insert—
(2A) Foreign days” are—
(a) days falling within any tax year for which the deceased was not UK resident, and
(b) days falling within the overseas part of any tax year that was a split year as respects the deceased.
(5) In subsection (4), in the definition of “A”, for the words from “are days falling” to the end substitute “ were foreign days, and ”.
(6) In subsection (8), for “subsection (1)(b) or (2)(b)” substitute “ subsection (2A)(a) and (b) ”.
88 (1) Section 536 (top slicing relieved liability: one chargeable event) is amended as follows.
(2) The amendment made by sub-paragraph (3) applies to section 536 as amended by paragraph 5 of Schedule 8 to this Act, and has effect in accordance with paragraph 7 of that Schedule.
(3) For subsection (7) substitute—
(7) If in the case of the individual the gain is reduced under section 528—
(a) divide the number of foreign days in the material interest period (as determined in accordance with that section, including subsections (7) and (8)) by 365,
(b) if the result is not a whole number, round it down to the nearest whole number, and
(c) reduce N, for steps 1 and 3 in subsection (1), by the number found by applying paragraphs (a) and (b).
(4) The amendment made by sub-paragraph (5) applies to section 536 as in force immediately before it is amended by paragraph 5 of Schedule 8 to this Act, so far as that section as so in force continues to have effect after it is so amended.
(5) For subsection (7) substitute—
(7) If the gain is from such a policy—
(a) divide the number of foreign days in the policy period (as defined in section 528) by 365,
(b) if the result is not a whole number, round it down to the nearest whole number, and
(c) reduce N, for steps 1 and 3 in subsection (1), by the number found by applying paragraphs (a) and (b).
Special charging rules for miscellaneous income
89 In section 577 (territorial scope of charges in respect of miscellaneous income), after subsection (2) insert—
(2A) If income arising to an individual who is UK resident arises in the overseas part of a split year, it is to be treated for the purposes of this section as arising to a non-UK resident.
Special charging rules for relevant foreign income charged on remittance basis
90 In section 832 of ITTOIA 2005 (relevant foreign income charged on remittance basis), for subsection (2) substitute—
(2) For any tax year for which the individual is UK resident, income tax is charged on the full amount of so much (if any) of the relevant foreign income as is remitted to the United Kingdom—
(a) in that year, or
(b) in the UK part of that year, if that year is a split year as respects the individual.
91 (1) Chapter 2 of Part 13 of ITA 2007 (transfer of assets abroad) is amended as follows in consequence of the amendment made by the preceding paragraph.
(2) In section 726 (non-UK domiciled individuals to whom remittance basis applies), after subsection (4) insert—
(5) In the application of section 832 of ITTOIA 2005 to the foreign deemed income, subsection (2) of that section has effect with the omission of paragraph (b).
(3) In section 730 (non-UK domiciled individuals to whom remittance basis applies), after subsection (4) insert—
(5) In the application of section 832 of ITTOIA 2005 to the foreign deemed income, subsection (2) of that section has effect with the omission of paragraph (b).
(4) In section 735 (non-UK domiciled individuals to whom remittance basis applies), after subsection (4) insert—
(5) In the application of section 832 of ITTOIA 2005 to the foreign deemed income, subsection (2) of that section has effect with the omission of paragraph (b).
Special charging rules for capital gains
92 TCGA 1992 is amended as follows.
93 (1) Section 2 (persons and gains chargeable to capital gains tax, and allowable losses) is amended as follows.
(2) After subsection (1A) (inserted by Schedule 46 to this Act) insert—
(1B) If the year is a split year as respects an individual, the individual is not chargeable to capital gains tax in respect of any chargeable gains accruing to the individual in the overseas part of that year.
(1C) But subsection (1B)—
(a) does not apply to chargeable gains in respect of which the individual would have been chargeable to capital gains tax under section 10, had the individual been not resident in the UK for the year, and
(b) is without prejudice to section 10A.
(3) In subsection (2)—
(a) after “the year of assessment” insert “ or, where subsection (1B) applies, the UK part of that year ”, and
(b) in paragraph (a), after “that year of assessment” insert “ or that part (as the case may be) ”.
94 (1) Section 3A (reporting limits) is amended as follows.
(2) In subsection (1)—
(a) in paragraph (a), after “year of assessment” insert “ or, if that year is a split year as respects the individual, the UK part of that year ”, and
(b) in paragraph (b), after “in that year” insert “ or, as the case may be, that part of the year ”.
(3) In subsection (2), after “year of assessment” insert “ (or the UK part of such a year) ”.
95 (1) Section 12 (non-UK domiciled individuals to whom remittance basis applies) is amended as follows.
(2) After subsection (2) insert—
(2A) If that tax year is a split year as respects the individual, the chargeable gains are treated as accruing to the individual in the part of the year (the overseas part or the UK part) in which the foreign chargeable gains are so remitted.
(3) In subsection (3), after “that year” insert “ or, where applicable, that part of the year ”.
96 In section 13 (attribution of gains to members of non-resident companies), after subsection (3) insert—
(3A) Subsection (2) does not apply in the case of a participator who is an individual if—
(a) the tax year in which the chargeable gain accrues to the company is a split year as respects the participator, and
(b) the chargeable gain accrues to the company in the overseas part of that year.
97 In section 16 (computation of losses), after subsection (3) insert—
(3A) If the person is an individual and the year is a split year as respects that individual, subsection (3) also applies to a loss accruing to the individual in the overseas part of that year.
98 In section 16ZB (individual who has made election under section 16ZA: foreign chargeable gains remitted in tax year after tax year in which accrue), in subsection (1)(c), after “tax year” insert “ or a part of the applicable tax year ”.
99 (1) Section 16ZC (individual who has made election under section 16ZA and to whom remittance basis applies) is amended as follows.
(2) In subsection (3)—
(a) in paragraph (a), after “that year” insert “ or, if that year is a split year as respects the individual, in the UK part of that year ”, and
(b) in paragraph (b), after “that year” insert “ or they are so remitted in that year but it is a split year as respects the individual and they are so remitted in the overseas part of the year ”.
(3) In subsection (7), in the definition of “relevant allowable losses”, after “tax year” insert “ or a part of the tax year ”.
100 In section 86 (attribution of gains to settlors with interest in non-resident or dual resident settlements), in subsection (4)(a), after “the year” insert “ or if, as respects the settlor, the year is a split year, in the UK part of that year ”.
101 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trustees of a settlement
102 In section 69 of TCGA 1992 (trustees of settlements), after subsection (2D) insert—
(2DA) A trustee who is resident in the United Kingdom for a tax year is to be treated for the purposes of subsections (2A) and (2B) as if he or she were not resident in the United Kingdom for that year if—
(a) the trustee is an individual,
(b) the individual becomes or ceases to be a trustee of the settlement during the tax year,
(c) that year is a split year as respects the individual, and
(d) in that year, the only period when the individual is a trustee of the settlement falls wholly within the overseas part of the year.
(2DB) Subsection (2DA) is subject to subsection (2D) and, accordingly, an individual who is treated under subsection (2DA) as not resident is, in spite of that, to be regarded as resident whenever the individual acts as mentioned in subsection (2D).
103 In section 475 of ITA 2007 (residence of trustees), after subsection (6) insert—
(7) Subsection (8) applies if—
(a) an individual becomes or ceases to be a trustee of the settlement during a tax year,
(b) that year is a split year as respects the individual, and
(c) the only period in that year when the individual is a trustee of the settlement falls wholly within the overseas part of the year.
(8) The individual is to be treated for the purposes of subsections (4) and (5) as if he or she had been non-UK resident for the year (and hence for the period in that year when he or she was a trustee of the settlement).
(9) But subsection (8) is subject to subsection (6) and, accordingly, an individual who is treated under subsection (8) as having been non-UK resident is, in spite of that, to be treated as UK resident whenever the individual acts as mentioned in subsection (6).
Definitions in enactments relating to income tax and CGT
104 (1) Section 288 of TCGA 1992 (interpretation) is amended as follows.
(2) In subsection (1), insert the following definition in the appropriate place—
“split year”, as respects an individual, means a tax year that, as respects that individual, is a split year within the meaning of Part 3 of Schedule 45 to the Finance Act 2013 (statutory residence test: split year treatment);
.
(3) After subsection (1ZA) insert—
(1ZB) A reference in this Act to “the overseas part” or “the UK part” of a split year is to be read in accordance with Part 3 of Schedule 45 to the Finance Act 2013 (statutory residence test: split year treatment).
105 In Part 2 of Schedule 1 to ITEPA 2003 (index of defined expressions), insert the following entries in the appropriate places—
the overseas part | section 989 of ITA 2007
,
split year | section 989 of ITA 2007
, and
the UK part | section 989 of ITA 2007
.
106 In Part 2 of Schedule 4 to ITTOIA 2005 (index of defined expressions), insert the following entries in the appropriate places—
the overseas part | section 989 of ITA 2007
,
split year | section 989 of ITA 2007
, and
the UK part | section 989 of ITA 2007
.
107 In section 989 of ITA 2007 (definitions for purposes of Income Tax Acts), insert the following definitions in the appropriate places—
“the overseas part”, in relation to a split year, has the meaning given in Part 3 of Schedule 45 to FA 2013 (statutory residence test: split year treatment);
,
“split year”, in relation to an individual, means a tax year that, as respects that individual, is a split year within the meaning of Part 3 of Schedule 45 to FA 2013 (statutory residence test: split year treatment);
, and
“the UK part”, in relation to a split year, has the meaning given in Part 3 of Schedule 45 to FA 2013 (statutory residence test: split year treatment);
.
108 In Schedule 4 to that Act (index of defined expressions), insert the following entries in the appropriate places—
the overseas part | section 989
,
split year | section 989
, and
the UK part | section 989
.
PART 4 Anti-avoidance
Introduction
109 This Part of this Schedule—
(a) explains when an individual is to be regarded for the purposes of certain enactments as temporarily non-resident,
(b) defines the year of departure and the period of return for the purposes of those enactments,
(c) makes consequential amendments to certain enactments containing special rules for temporary non-residents, and
(d) inserts some more special rules for temporary non-residents in certain cases.
Meaning of temporarily non-resident
110 (1) An individual is to be regarded as “temporarily non-resident” if—
(a) the individual has sole UK residence for a residence period,
(b) immediately following that period (referred to as “period A”), one or more residence periods occur for which the individual does not have sole UK residence,
(c) at least 4 out of the 7 tax years immediately preceding the year of departure were either—
(i) a tax year for which the individual had sole UK residence, or
(ii) a split year that included a residence period for which the individual had sole UK residence, and
(d) the temporary period of non-residence is 5 years or less.
(2) Terms used in sub-paragraph (1) are defined below.
Residence periods
111 In relation to an individual, a “residence period” is—
(a) a tax year that, as respects the individual, is not a split year, or
(b) the overseas part or the UK part of a tax year that, as respects the individual, is a split year.
Sole UK residence
112 (1) An individual has “sole UK residence” for a residence period consisting of an entire tax year if—
(a) the individual is resident in the UK for that year, and
(b) there is no time in that year when the individual is Treaty non-resident.
(2) An individual has “sole UK residence” for a residence period consisting of part of a split year if—
(a) the residence period is the UK part of that year, and
(b) there is no time in that part of the year when the individual is Treaty non-resident.
(3) An individual is “Treaty non-resident” at any time if at the time the individual falls to be regarded as resident in a country outside the UK for the purposes of double taxation arrangements having effect at the time.
Temporary period of non-residence
113 In relation to an individual, “the temporary period of non-residence” is the period between—
(a) the end of period A, and
(b) the start of the next residence period after period A for which the individual has sole UK residence.
Year of departure
114 “The year of departure” is the tax year consisting of or including period A.
Period of return
115 “The period of return” is the first residence period after period A for which the individual has sole UK residence.
Consequential amendments: income tax
116 In ITEPA 2003, for section 576A substitute—
Temporary non-residents
576A (1) This section applies if a person is temporarily non-resident.
(2) Any relevant withdrawals within subsection (3) are to be treated for the purposes of section 575 as if they arose in the period of return.
(3) A relevant withdrawal is within this subsection if—
(a) it is paid to the person in the temporary period of non-residence, and
(b) ignoring this section, it is not chargeable to tax under this Part (or would not be if a DTR claim were made in respect of it).
(4) A “relevant withdrawal” is an amount paid under a relevant non-UK scheme that—
(a) is paid to the person in respect of a flexible drawdown arrangement relating to the person under the scheme, and
(b) would, if the scheme were a registered pension scheme, be “income withdrawal” or “dependants' income withdrawal” within the meaning of paragraphs 7 and 21 of Schedule 28 to FA 2004.
(5) If section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to the person for the year of return, any relevant withdrawal within subsection (3) that was remitted to the United Kingdom in the temporary period of non-residence is to be treated as remitted to the United Kingdom in the period of return.
(6) This section does not apply to a relevant withdrawal if—
(a) it is paid to or in respect of a relieved member of the scheme and is not referable to the member's UK tax-relieved fund under the scheme, or
(b) it is paid to or in respect of a transfer member of the scheme and is not referable to the member's relevant transfer fund under the scheme.
(7) Nothing in any double taxation relief arrangements is to be read as preventing the person from being chargeable to income tax in respect of any relevant withdrawal treated by virtue of this section as arising in the period of return (or as preventing a charge to that tax from arising as a result).
(8) Part 4 of Schedule 45 to FA 2013 (statutory residence test: anti-avoidance) explains—
(a) when a person is to be regarded as “temporarily non-resident”, and
(b) what “the temporary period of non-residence” and “the period of return” mean.
(9) In this section—
“double taxation relief arrangements” means arrangements that have effect under section 2(1) of TIOPA 2010;
“DTR claim” means a claim for relief under section 6 of that Act;
“flexible drawdown arrangement” means an arrangement to which section 165(3A) or 167(2A) of FA 2004 applies;
“remitted to the United Kingdom” has the same meaning as in Chapter A1 of Part 14 of ITA 2007;
“the year of return” means the tax year that consists of or includes the period of return.
(10) The following expressions have the meaning given in Schedule 34 to FA 2004—
“relevant non-UK scheme” (see paragraph 1(5));
“relieved member” (see paragraph 1(7));
“transfer member” (see paragraph 1(8));
“member's UK tax-relieved fund” (see paragraph 3(2));
“member's relevant transfer fund” (see paragraph 4(2)).
117 In ITEPA 2003, for section 579CA substitute—
Temporary non-residents
579CA (1) This section applies if a person is temporarily non-resident.
(2) Any relevant withdrawals within subsection (3) are to be treated for the purposes of section 579B as if they accrued in the period of return.
(3) A relevant withdrawal is within this subsection if—
(a) it is paid to the person in the temporary period of non-residence, and
(b) ignoring this section, it is not chargeable to tax under this Part (or would not be if a DTR claim were made in respect of it).
(4) A “relevant withdrawal” is any income withdrawal or dependants' income withdrawal paid to the person under a registered pension scheme in respect of a flexible drawdown arrangement relating to the person under the scheme.
(5) Nothing in any double taxation relief arrangements is to be read as preventing the person from being chargeable to income tax in respect of any relevant withdrawal treated by virtue of this section as accruing in the period of return (or as preventing a charge to that tax from arising as a result).
(6) Part 4 of Schedule 45 to FA 2013 (statutory residence test: anti-avoidance) explains—
(a) when a person is to be regarded as “temporarily non-resident”, and
(b) what “the temporary period of non-residence” and “the period of return” mean.
(7) In this section—
“double taxation relief arrangements” means arrangements that have effect under section 2(1) of TIOPA 2010;
“DTR claim” means a claim for relief under section 6 of that Act;
“flexible drawdown arrangement” means an arrangement to which section 165(3A) or 167(2A) of FA 2004 applies.
118 In ITTOIA 2005, for section 832A substitute—
Section 832: temporary non-residents
832A (1) This section applies if an individual is temporarily non-resident.
(2) Treat any of the individual's relevant foreign income within subsection (3) that is remitted to the United Kingdom in the temporary period of non-residence as remitted to the United Kingdom in the period of return.
(3) Relevant foreign income is within this subsection if—
(a) it is relevant foreign income for the UK part of the year of departure or an earlier tax year, and
(b) section 832 applies to it.
(4) Any apportionment required for the purposes of subsection (3)(a) is to be done on a just and reasonable basis.
(5) Nothing in any double taxation relief arrangements is to be read as preventing the individual from being chargeable to income tax in respect of any relevant foreign income treated by virtue of this section as remitted to the United Kingdom in the period of return (or as preventing a charge to that tax from arising as a result).
(6) Part 4 of Schedule 45 to FA 2013 (statutory residence test: anti-avoidance) explains—
(a) when an individual is to be regarded as “temporarily non-resident”, and
(b) what “the temporary period of non-residence” and “the period of return” mean.
(7) In this section, “double taxation relief arrangements” means arrangements that have effect under section 2(1) of TIOPA 2010.
Consequential amendments: capital gains tax
119 In TCGA 1992, for section 10A substitute—
Temporary non-residents
10A (1) This section applies if an individual (“the taxpayer”) is temporarily non-resident.
(2) The taxpayer is chargeable to capital gains tax as if gains and losses within subsection (3) were chargeable gains or, as the case may be, losses accruing to the taxpayer in the period of return.
(3) The gains and losses within this subsection are—
(a) chargeable gains and losses that accrued to the taxpayer in the temporary period of non-residence,
(b) chargeable gains that would be treated under section 13 as having accrued to the taxpayer in that period if the residence assumption were made,
(c) losses that would be allowable in the taxpayer's case under section 13(8) in that period if that assumption were made, and
(d) chargeable gains that would be treated under section 86 as having accrued to the taxpayer in a tax year falling wholly in that period if the taxpayer had been resident in the United Kingdom for that year.
(4) The residence assumption is—
(a) that the taxpayer had been resident in the United Kingdom for the tax year in which the gain or loss accrued to the company, or
(b) if that tax year was a split year as respects the taxpayer, that the gain or loss had accrued to the company in the UK part of it.
(5) But—
(a) a gain is not within subsection (3) if, ignoring this section, the taxpayer is chargeable to capital gains tax in respect of it (and could not cease to be so chargeable by making a claim under section 6 of TIOPA 2010), and
(b) a loss is not within subsection (3) if the test in paragraph (a) would be met if it were a gain.
(6) Subsection (2) is subject to sections 10AA and 86A.
(7) To determine the losses mentioned in subsection (3)(c)—
(a) calculate separately, for each tax year falling wholly or partly in the temporary period of non-residence, the portion of sum A that does not exceed sum B, and
(b) add up all those portions.
(8) For the purposes of subsection (7)—
“sum A” is the aggregate of the losses that were not available in accordance with section 13(8) for reducing gains accruing to the taxpayer by virtue of section 13 in the relevant tax year, but would have been available if the residence assumption had been made, and
“sum B” is the amount of the gains that did not accrue to the taxpayer by virtue of section 13 in that tax year but would have so accrued if that assumption had been made.
(9) If section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to the taxpayer for the year of return, any foreign chargeable gains falling within subsection (3) by virtue of paragraph (a) of that subsection that were remitted to the United Kingdom at any time in the temporary period of non-residence are to be treated as remitted to the United Kingdom in the period of return.
(10) Part 4 of Schedule 45 to the Finance Act 2013 (statutory residence test: anti-avoidance) explains—
(a) when an individual is to be regarded as “temporarily non-resident”, and
(b) what “the temporary period of non-residence” and “the period of return” mean.
(11) In this section—
“foreign chargeable gains” has the meaning given by section 12(4);
“remitted to the United Kingdom” has the same meaning as in Chapter A1 of Part 14 of ITA 2007;
“the year of return” means the tax year that consists of or includes the period of return.
Section 10A: supplementary
10AA (1) Section 10A(2) does not apply to a gain or loss accruing on the disposal by the taxpayer of an asset if—
(a) the asset was acquired by the taxpayer in the temporary period of non-residence,
(b) it was so acquired otherwise than by means of a relevant disposal that by virtue of section 58, 73 or 258(4) is treated as having been a disposal on which neither a gain nor a loss accrued,
(c) the asset is not an interest created by or arising under a settlement, and
(d) the amount or value of the consideration for the acquisition of the asset by the taxpayer does not fall, by reference to any relevant disposal, to be treated as reduced under section 23(4)(b) or (5)(b), 152(1)(b), 153(1)(b), 162(3)(b) or 247(2)(b) or (3)(b).
(2) “Relevant disposal” means a disposal of an asset acquired by the person making the disposal at a time when that person was resident in the United Kingdom and was not Treaty non-resident.
(3) Subsection (1) does not apply if—
(a) the gain is one that (ignoring section 10A) would fall to be treated by virtue of section 116(10) or (11), 134 or 154(2) or (4) as accruing on the disposal of the whole or part of another asset, and
(b) that other asset meets the requirements of paragraphs (a) to (d) of subsection (1), but the asset in respect of which the gain actually accrued or would actually accrue does not.
(4) Nothing in any double taxation relief arrangements is to be read as preventing the taxpayer from being chargeable to capital gains tax in respect of any chargeable gains treated under section 10A as accruing to the taxpayer in the period of return (or as preventing a charge to that tax from arising as a result).
(5) Nothing in any enactment imposing any limit on the time within which an assessment to capital gains tax may be made prevents any assessment for the year of departure from being made in the taxpayer's case at any time before the end of the second anniversary of the 31 January next following the year of return (as defined in section 10A).
120 For section 86A of TCGA 1992 substitute—
Attribution of gains to settlor in section 10A cases
86A (1) Subsection (3) applies if—
(a) chargeable gains of an amount equal to the amount referred to in section 86(1)(e) for a tax year (“year A”) are treated under section 10A as accruing to a settlor under section 86 in the period of return,
(b) there are amounts on which beneficiaries of the settlement are charged to tax under section 87 or 89(2) for one or more tax years, each of which is earlier than the year of return, and
(c) those amounts are in respect of matched capital payments received by the beneficiaries.
(2) A “matched” capital payment is a capital payment, all or part of which is matched under section 87A with the section 2(2) amount for year A.
(3) The amount of the chargeable gains mentioned in subsection (1)(a) for year A that are treated under section 10A as accruing to the settlor under section 86 in the period of return is to be reduced by the appropriate amount.
(4) The appropriate amount is—
(a) the sum of the amounts mentioned in subsection (1)(c) to the extent that the matched capital payments are matched under section 87A with the section 2(2) amount for year A, or
(b) if the property comprised in the settlement has at any time included property not originating from the settlor, so much (if any) of that sum as, on a just and reasonable apportionment, is properly referable to the settlor.
(5) If a reduction falls to be made under subsection (3) for the year of return, the deduction to be made in accordance with section 87(4)(b) for the settlement for that year must not be made until—
(a) all the reductions to be made under subsection (3) for that year for each settlor have been made, and
(b) those reductions are to be made starting with the year immediately preceding the year of return and working backwards.
(6) Subsection (7) applies if, with respect to year A, an amount remains to be treated under section 10A as accruing to any of the settlors in the period of return after having made the reductions under subsection (3) with respect to year A.
(7) The aggregate of the amounts remaining to be so treated (for all of the settlors) is to be applied in reducing so much of the section 2(2) amount for year A as has not already been matched with a capital payment under section 87A for any year prior to the year of return (but not so as to reduce the section 2(2) amount below zero).
(8) In this section—
(a) “the settlement” means the settlement in relation to which the settlor mentioned in subsection (1)(a) is a settlor,
(b) a reference to “the settlors” or “each settlor” is to the settlors or each settlor in relation to the settlement,
(c) “period of return” and “year of return” have the same meanings as in section 10A, and
(d) paragraph 8 of Schedule 5 applies in construing the reference to property originating from the settlor.
121 In section 96 (payment by and to companies), in subsection (9A), for the words from “which in his case” to the end substitute
for which he or she was not so resident if—
(a) section 10A applies to him or her, and
(b) the year falls within the temporary period of non-residence.
122 (1) Section 279B (deferred unascertainable consideration: supplementary provisions) is amended as follows.
(2) In subsection (7), for “year of return” substitute “ period of return ”.
(3) In subsection (8)(a) and (b), for “year” substitute “ period ”.
123 (1) Schedule 4C (transfers of value: attribution of gains to beneficiaries) is amended as follows.
(2) In paragraph 6(1)(b), for “year of return” substitute “ period of return ”.
(3) In paragraph 12(1)—
(a) for paragraph (a) substitute—
(a) by virtue of section 10A, an amount of chargeable gains within section 86(1)(e) that accrued in a tax year (“year A”) to the trustees of a settlement would be treated as accruing to a person (“the settlor”) in the period of return, and
, and
(b) in paragraph (b), for “the intervening year” substitute “ year A ”.
(4) In paragraph 12(2), for “year of return” substitute “ period of return ”.
(5) In paragraph 12A(1)—
(a) for “year of return” substitute “ period of return ”, and
(b) for “an intervening year” substitute “ the temporary period of non-residence ”.
New special rule: lump sum payments under pension schemes etc
124 ITEPA 2003 is amended as follows.
125 In Chapter 2 of Part 6 (employer-financed retirement benefits), after section 394 insert—
Temporary non-residents
394A (1) This section applies if an individual is temporarily non-resident.
(2) Any benefits within subsection (3) are to be treated for the purposes of section 394(1) as if they were received by the individual in the period of return.
(3) A benefit is within this subsection if—
(a) this Chapter applies to it,
(b) it is in the form of a lump sum,
(c) it is received by the individual in the temporary period of non-residence, and
(d) ignoring this section—
(i) no charge to tax arises by virtue of section 394(1) in respect of it, but
(ii) such a charge would arise if the existence of any double taxation relief arrangements were disregarded.
(4) Subsection (3)(d)(i) includes a case where the charge could be prevented by making a DTR claim, even if no claim is in fact made.
(5) Subsection (2) does not affect the operation of section 394(1A) (and, accordingly, “the relevant tax year” for the purposes of section 394(1A) remains the tax year in which the benefit is actually received).
(6) Nothing in any double taxation relief arrangements is to be read as preventing the individual from being chargeable to income tax in respect of any benefit treated by virtue of this section as received in the period of return (or as preventing a charge to that tax from arising as a result).
(7) Part 4 of Schedule 45 to FA 2013 (statutory residence test: anti-avoidance) explains—
(a) when an individual is to be regarded as “temporarily non-resident”, and
(b) what “the temporary period of non-residence” and “the period of return” mean.
(8) In this section—
“double taxation relief arrangements” means arrangements that have effect under section 2(1) of TIOPA 2010;
“DTR claim” means a claim for relief under section 6 of that Act.
126 In Chapter 2 of Part 7A (employment income provided through third parties: treatment of relevant step for income tax purposes), after section 554Z4 insert—
Temporary non-residents
554Z4A (1) This section applies if A is temporarily non-resident.
(2) Any relevant step within subsection (3) is to be treated for the purposes of section 554Z2 as if it were taken in the period of return.
(3) A relevant step is within this subsection if—
(a) it is the payment of a lump sum to a relevant person (see section 554C(2)),
(b) the lump sum is a relevant benefit provided under a relevant scheme,
(c) the step is taken in the temporary period of non-residence, and
(d) ignoring this section—
(i) no charge to tax arises by virtue of section 554Z2 by reason of the step, but
(ii) such a charge would arise if the existence of any double taxation relief arrangements were disregarded.
(4) Subsection (3)(d)(i) includes a case where the charge could be prevented by making a DTR claim, even if no claim is in fact made.
(5) Nothing in any double taxation relief arrangements is to be read as preventing A from being chargeable to income tax in respect of any relevant step treated by virtue of this section as taken in the period of return (or as preventing a charge to that tax from arising as a result).
(6) Part 4 of Schedule 45 to FA 2013 (statutory residence test: anti-avoidance) explains—
(a) when an individual is to be regarded as “temporarily non-resident”, and
(b) what “the temporary period of non-residence” and “the period of return” mean.
(7) In this section—
“double taxation relief arrangements” means arrangements that have effect under section 2(1) of TIOPA 2010;
“DTR claim” means a claim for relief under section 6 of that Act;
“relevant benefit” has the same meaning as in Chapter 2 of Part 6;
“relevant scheme” means an employer-financed retirement benefits scheme (within the meaning of that Chapter) or a superannuation fund to which section 615(3) of ICTA applies.
127 In that Chapter, after section 554Z11 insert—
Temporary non-residents
554Z11A (1) This section applies if A is temporarily non-resident.
(2) Any amount within subsection (3) is to be treated for the purposes of section 554Z9(2) or (as the case may be) 554Z10(2) as if it were remitted to the United Kingdom in the period of return.
(3) An amount is within this subsection if—
(a) it is all or part of a relevant benefit provided to a relevant person (see section 554C(2)) under a relevant scheme,
(b) it is provided in the form of the lump sum,
(c) it is remitted to the United Kingdom in the temporary period of non-residence, and
(d) ignoring this section—
(i) no charge to tax arises by virtue of section 554Z9(2) or 554Z10(2) in respect of it, but
(ii) such a charge would arise by virtue of one of those sections if the existence of any double taxation relief arrangements were disregarded.
(4) Subsection (3)(d)(i) includes a case where the charge could be prevented by making a DTR claim, even if no claim is in fact made.
(5) Nothing in any double taxation relief arrangements is to be read as preventing A from being chargeable to income tax in respect of any income treated by virtue of this section as remitted to the United Kingdom in the period of return (or as preventing a charge to that tax from arising as a result).
(6) Part 4 of Schedule 45 to FA 2013 (statutory residence test: anti-avoidance) explains—
(a) when an individual is to be regarded as “temporarily non-resident”, and
(b) what “the temporary period of non-residence” and “the period of return” mean.
(7) In this section—
“double taxation relief arrangements” means arrangements that have effect under section 2(1) of TIOPA 2010;
“DTR claim” means a claim for relief under section 6 of that Act;
“relevant benefit” has the same meaning as in Chapter 2 of Part 6;
“relevant scheme” means an employer-financed retirement benefits scheme (within the meaning of that Chapter) or a superannuation fund to which section 615(3) of ICTA applies;
“remitted to the United Kingdom” has the same meaning as in Chapter A1 of Part 14 of ITA 2007.
128 In that Chapter, in section 554Z12 (relevant step taken after A's death etc), after subsection (8) insert—
(9) Section 554Z4A and section 554Z11A apply for the purposes of subsection (4) as for the purposes of section 554Z2 and section 554Z9(2) or 554Z10(2) respectively (reading references in sections 554Z4A and 554Z11A to “A” as references to “the relevant person”).
(10) But those sections do not apply for the purposes of subsection (4) if the relevant person's temporary period of non-residence began before A died.
129 In Chapter 3 of Part 9 (United Kingdom pensions: general rules), after section 572 insert—
Temporary non-residents
572A (1) This section applies if an individual is temporarily non-resident.
(2) Any pension within subsection (3) is to be treated for the purposes of section 571 as if it accrued in the period of return.
(3) A pension is within this subsection if—
(a) section 569 applies to it,
(b) it is in the form of a lump sum,
(c) it accrued in the temporary period of non-residence, and
(d) ignoring this section—
(i) it is not chargeable to tax under this Chapter, but
(ii) it would be so chargeable if the existence of any double taxation relief arrangements were disregarded.
(4) Subsection (3)(d)(i) includes a case where the charge could be prevented by making a DTR claim, even if no claim is in fact made.
(5) Nothing in any double taxation relief arrangements is to be read as preventing the individual from being chargeable to income tax in respect of any pension treated by virtue of this section as accruing in the period of return (or as preventing a charge to that tax from arising as a result).
(6) Part 4 of Schedule 45 to FA 2013 (statutory residence test: anti-avoidance) explains—
(a) when an individual is to be regarded as “temporarily non-resident”, and
(b) what “the temporary period of non-residence” and “the period of return” mean.
(7) In this section—
“double taxation relief arrangements” means arrangements that have effect under section 2(1) of TIOPA 2010;
“DTR claim” means a claim for relief under section 6 of that Act.
130 (1) In Chapter 1 of Part 11 (pay as you earn: introduction), section 683 is amended as follows.
(2) After subsection (3) insert—
(3ZA) PAYE employment income” for a tax year does not include any taxable specific income treated as paid or received in that tax year by section 394A or 554Z4A (temporary non-residents).
(3) For subsection (3B) substitute—
(3B) PAYE pension income” for a tax year does not include any taxable pension income that is treated as accruing in that tax year by section 572A or 579CA (temporary non-residents).
New special rule: distributions to participators in close companies etc
131 Part 4 of ITTOIA 2005 (savings and investment income) is amended as follows.
132 In Chapter 1 (introduction), after section 368 insert—
Interpretation of special rules for temporary non-residents
368A (1) This section concerns provisions of this Part that are expressed to apply if an individual is “temporarily non-resident” (“TNR provisions”).
(2) Part 4 of Schedule 45 to FA 2013 (statutory residence test: anti-avoidance) explains for the purposes of TNR provisions—
(a) when an individual is to be regarded as “temporarily non-resident”, and
(b) what the following terms mean—
(i) “the temporary period of non-residence”,
(ii) “the year of departure”, and
(iii) “the period of return”.
(3) A reference in TNR provisions to “the year of return” is to the tax year consisting of or including the period of return.
(4) Nothing in any double taxation relief arrangements is to be read as preventing the individual from being chargeable to income tax by virtue of any TNR provisions (or as preventing a charge to that tax from arising as a result).
(5) In this section and in TNR provisions, “double taxation relief arrangements” means arrangements that have effect under section 2(1) of TIOPA 2010.
133 In Chapter 3 (dividends etc from UK resident companies and tax credits etc in respect of certain distributions), after section 401B insert—
Anti-avoidance
Temporary non-residents
401C (1) This section applies if—
(a) an individual is temporarily non-resident,
(b) a relevant distribution is made or treated as made to the individual in the temporary period of non-residence,
(c) the tax year in which it is made or treated as made (“the distribution year”) is a tax year for which the individual is UK resident, and
(d) the amount of income tax charged on the distribution under this Chapter is less than it would have been if the existence of double taxation relief arrangements were disregarded.
(2) Subsections (3) and (4) have effect in cases where the distribution year is not the year of return.
(3) The total income (see Step 1 of the calculation in section 23 of ITA 2007) on which the individual is charged to income tax for the year of return is to be increased by an amount equal to the amount on which tax would be charged under this Chapter in respect of the distribution disregarding any double taxation relief arrangements.
(4) But the notional UK tax on that distribution is to be allowed as a credit against the individual's liability to income tax for the year of return under Step 6 of the calculation in section 23.
(5) If the distribution year is the year of return, the tax charged under this Chapter in respect of the relevant distribution is to be charged and assessed without regard to the existence of double taxation relief arrangements.
(6) For the purposes of this section, a dividend or other distribution is a “relevant distribution” if—
(a) it is a dividend or other distribution of a close company, and
(b) it is made or treated as made to the individual because the individual was at a relevant time—
(i) a material participator in the company, or
(ii) an associate of a material participator in the company.
(7) But a dividend or other distribution within subsection (6) in the form of a cash dividend is not a “relevant distribution” to the extent that the dividend is paid in respect of post-departure trade profits.
(8) “Post-departure trade profits” are—
(a) trade profits of the close company arising in an accounting period that begins after the start of the temporary period of non-residence, and
(b) so much of any trade profits of the close company arising in an accounting period that straddles the start of that temporary period as is attributable (on a just and reasonable basis) to a time after the start of that temporary period.
(9) The extent to which a dividend is paid in respect of post-departure trade profits is to be determined on a just and reasonable basis.
(10) The “notional UK tax” on the relevant distribution is so much of the income tax paid by the individual for the distribution year as is attributable on a just and reasonable basis to the relevant distribution.
(11) If section 393 applies, references in this section to a distribution being made to the individual are to a cash dividend being paid over to the individual.
(12) In this section—
“associate” and “participator” have the same meanings as in Part 10 of CTA 2010 (see sections 448 and 454);
“material participator” means a participator who has a material interest in the company, as defined in section 457 of that Act;
“relevant time” means—
any time in the year of departure or, if the year of departure is a split year as respects the individual, the UK part of that year, or
any time in one or more of the 3 tax years preceding that year;
“trade profits of the close company” means the profits of any trade carried on by the close company, as calculated in accordance with Part 3 of CTA 2009 (trading income).
134 In Chapter 4 (dividends from non-UK resident companies), after section 408 insert—
Anti-avoidance
Temporary non-residents
408A (1) This section applies if an individual is temporarily non-resident.
(2) Dividends within subsection (3) are to be treated for the purposes of this Chapter as if they were received by the individual, or as if the individual became entitled to them, in the period of return.
(3) A dividend is within this subsection if—
(a) the individual receives or becomes entitled to it in the temporary period of non-residence,
(b) it is a dividend of a company that would be a close company if the company were UK resident,
(c) the individual receives or becomes entitled to it by virtue of being at a relevant time—
(i) a material participator in the company, or
(ii) an associate of a material participator in the company, and
(d) ignoring this section, the individual—
(i) is not liable for tax under this Chapter in respect of the dividend, but
(ii) would have been so liable if the individual had received the dividend, or become entitled to it, in the period of return.
(4) For the purposes of subsection (3)—
(a) “associate” and “participator” have the same meanings as in Part 10 of CTA 2010 (see sections 448 and 454),
(b) a “material participator” is a participator who has a material interest in the company, as defined in section 457 of that Act,
(c) “relevant time” means—
(i) any time in the year of departure or, if the year of departure is a split year as respects the individual, the UK part of that year, or
(ii) any time in one or more of the 3 tax years preceding that year, and
(d) paragraph (d)(i) includes a case where the individual could be relieved of liability on the making of a claim under section 6 of TIOPA 2010 (double taxation relief), even if no claim is in fact made.
(5) If section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to the individual for the year of return, any dividend within subsection (3) that was remitted to the United Kingdom in the temporary period of non-residence is to be treated as remitted to the United Kingdom in the period of return.
(6) This section does not apply to a dividend within subsection (3) to the extent that it is paid in respect of post-departure trade profits.
(7) “Post-departure trade profits” are—
(a) trade profits of the company arising in an accounting period that begins after the start of the temporary period of non-residence, and
(b) so much of any trade profits of the company arising in an accounting period that straddles the start of that temporary period as is attributable (on a just and reasonable basis) to a time after the start of that temporary period.
(8) The extent to which a dividend is paid in respect of post-departure trade profits is to be determined on a just and reasonable basis.
(9) If section 406 or 407 applies, references in this section to a dividend being received by the individual are to a cash dividend being paid over to the individual or (as the case may be) a dividend being treated as paid to the individual.
(10) In this section—
“remitted to the United Kingdom” has the meaning given in Chapter A1 of Part 14 of ITA 2007;
“trade profits of the company” means the profits of any trade carried on by the company, as they would be calculated in accordance with Part 3 of CTA 2009 (trading income) if the company were UK resident.
135 In Chapter 5 (stock dividends from UK resident companies), after section 413 insert—
Temporary non-residents
413A (1) This section applies if—
(a) an individual is temporarily non-resident,
(b) relevant stock dividend income is treated under this Chapter as arising to the individual in the temporary period of non-residence,
(c) the tax year in which it is treated as arising (“the arising year”) is a tax year for which the individual is UK resident, and
(d) the amount of income tax charged on the relevant stock dividend income under this Chapter is less than it would have been if the existence of double taxation relief arrangements were disregarded.
(2) Subsections (3) and (4) have effect in cases where the arising year is not the year of return.
(3) The total income (see Step 1 of the calculation in section 23 of ITA 2007) on which the individual is charged to income tax for the year of return is to be increased by an amount equal to the amount on which tax would be charged under this Chapter in respect of the relevant stock dividend income disregarding any double taxation relief arrangements.
(4) But the notional UK tax on that relevant stock dividend income is to be allowed as a credit against the individual's liability to income tax for the year of return under Step 6 of the calculation in section 23.
(5) If the arising year is the year of return, the tax charged under this Chapter in respect of the relevant stock dividend income is to be charged and assessed without regard to the existence of double taxation relief arrangements.
(6) Stock dividend income is “relevant stock dividend income” if—
(a) the UK resident company that issues the share capital or bonus share capital is a close company, and
(b) the individual is beneficially entitled to that share capital or bonus share capital by virtue of being at a relevant time—
(i) a material participator in the company, or
(ii) an associate of a material participator in the company.
(7) But stock dividend income within subsection (6) is not “relevant stock dividend income” to the extent that the share capital or bonus share capital is issued in respect of post-departure trade profits.
(8) “Post-departure trade profits” are—
(a) trade profits of the close company arising in an accounting period that begins after the start of the temporary period of non-residence, and
(b) so much of any trade profits of the close company arising in an accounting period that straddles the start of that temporary period as is attributable (on a just and reasonable basis) to a time after the start of that temporary period.
(9) The extent to which share capital or bonus share capital is issued in respect of post-departure trade profits is to be determined on a just and reasonable basis.
(10) The “notional UK tax” on the relevant stock dividend income is so much of the income tax paid by the individual for the arising year as is attributable on a just and reasonable basis to that income.
(11) In this section—
“associate” and “participator” have the same meanings as in Part 10 of CTA 2010 (see sections 448 and 454);
“material participator” means a participator who has a material interest in the company, as defined in section 457 of that Act;
“relevant time” means—
any time in the year of departure or, if the year of departure is a split year as respects the individual, the UK part of that year, or
any time in one or more of the 3 tax years preceding that year;
“trade profits of the close company” means the profits of any trade carried on by the close company, as calculated in accordance with Part 3 of CTA 2009 (trading income).
136 In Chapter 6 (release of loan to participator in close company), after section 420 insert—
Temporary non-residents
420A (1) This section applies if an individual is temporarily non-resident.
(2) Debts within subsection (3) are to be treated for the purposes of this Chapter as if they had been released or written off in the period of return.
(3) A debt is within this subsection if—
(a) it is the debt, or a part of the debt, in respect of a loan or advance made by a company to the individual,
(b) it is released or written off in the temporary period of non-residence, and
(c) ignoring this section, the individual—
(i) is not liable for tax under this Chapter in respect of the release or write-off, but
(ii) would have been so liable, had the release or write-off taken place in the period of return.
(4) Subsection (3)(c)(i) includes a case where the individual could be relieved of liability on the making of a claim under section 6 of TIOPA 2010 (double taxation relief), even if no claim is in fact made.
137 In Chapter 8 of Part 5 of that Act (income not otherwise charged), after section 689 insert—
Temporary non-residents
689A (1) This section applies if an individual is temporarily non-resident.
(2) Distributions within subsection (3) are to be treated for the purposes of this Chapter as if they had been received by the individual, or as if the individual had become entitled to them, in the period of return.
(3) A distribution is within this subsection if—
(a) the individual receives or becomes entitled to it in the temporary period of non-residence,
(b) it is a distribution of a company that is a close company or that would be a close company if the company were UK resident,
(c) the individual receives or becomes entitled to the distribution by virtue of being at a relevant time—
(i) a material participator in the company, or
(ii) an associate of a material participator in the company, and
(d) ignoring this section, the individual—
(i) is not liable for tax under this Chapter in respect of the distribution, but
(ii) would have been so liable if the individual had received the distribution, or become entitled to it, in the period of return.
(4) For the purposes of subsection (3)—
(a) “associate” and “participator” have the same meanings as in Part 10 of CTA 2010 (see sections 448 and 454),
(b) a “material participator” is a participator who has a material interest in the company, as defined in section 457 of that Act,
(c) “relevant time” means—
(i) any time in the year of departure or, if the year of departure is a split year as respects the individual, the UK part of that year, or
(ii) any time in one or more of the 3 tax years preceding that year, and
(d) paragraph (d)(i) includes a case where the individual could be relieved of liability on the making of a claim under section 6 of TIOPA 2010 (double taxation relief), even if no claim is in fact made.
(5) If section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to the individual for the year of return, any distribution within subsection (3) that is relevant foreign income and is remitted to the United Kingdom in the temporary period of non-residence is to be treated as remitted to the United Kingdom in the period of return.
(6) In this section, “remitted to the United Kingdom” has the meaning given in Chapter A1 of Part 14 of ITA 2007.
138 In Chapter 1 of Part 14 of ITA 2007 (limits on liability to income tax of non-UK residents), after section 812 insert—
Temporary non-residents
812A (1) This section applies if—
(a) an individual is temporarily non-resident,
(b) the individual's liability to income tax for a tax year is limited under section 811,
(c) that tax year (“the non-resident year”) falls within the temporary period of non-residence, and
(d) the individual's income for that tax year includes relevant investment income.
(2) The total income (see Step 1 of the calculation in section 23) on which the individual is charged to income tax for the year of return is to be increased by an amount equal to the amount of that relevant investment income.
(3) But the notional UK tax on that relevant investment income is to be allowed as a credit against the individual's liability to income tax for the year of return under Step 6 of the calculation in section 23.
(4) Income is “relevant investment income” if—
(a) it is chargeable under Chapter 3 or 5 of Part 4 of ITTOIA 2005 (dividends etc from UK resident companies and stock dividends from UK resident companies),
(b) the distributing company is a close company, and
(c) the income arises or is treated as arising to the individual because the individual was at a relevant time—
(i) a material participator in that company, or
(ii) an associate of a material participator in the company.
(5) But income within subsection (4) in the form of a cash or stock dividend is not “relevant investment income” to the extent that the dividend is paid, or the share capital is issued, in respect of post-departure trade profits.
(6) “Post-departure trade profits” are—
(a) trade profits of the distributing company arising in an accounting period that begins after the start of the temporary period of non-residence, and
(b) so much of any trade profits of the distributing company arising in an accounting period that straddles the start of that temporary period as is attributable (on a just and reasonable basis) to a time after the start of that temporary period.
(7) The “notional UK tax” on relevant investment income is—
(a) the total of any sums in respect of that income that were included within amount A in determining the limit under section 811, less
(b) any credit for foreign tax paid in respect of that income that was allowed under Chapter 2 of Part 2 of TIOPA 2010 against the individual's liability to income tax for the non-resident year.
(8) The following matters are to be determined on a just and reasonable basis—
(a) the extent to which a dividend is paid, or share capital is issued, in respect of post-departure trade profits, and
(b) the extent to which a sum included within amount A is a sum in respect of relevant investment income.
(9) Nothing in any double taxation arrangements is to be read as preventing the individual from being chargeable to income tax by virtue of this section (or as preventing a charge to that tax from arising as a result).
(10) Part 4 of Schedule 45 to FA 2013 (statutory residence test: anti-avoidance) explains—
(a) when an individual is to be regarded as “temporarily non-resident”, and
(b) what “the temporary period of non-residence”, “the year of departure” and “the period of return” mean.
(11) In this section—
“associate” and “participator” have the same meanings as in Part 10 of CTA 2010 (see sections 448 and 454);
“the distributing company” means the UK resident company mentioned in section 383(1) or, as the case may be, 410(1) of ITTOIA 2005;
“material participator” means a participator who has a material interest in the company, as defined in section 457 of CTA 2010;
“relevant time” means—
any time in the year of departure or, if the year of departure is a split year as respects the individual, the UK part of that year, or
any time in one or more of the 3 tax years preceding that year;
“trade profits of the distributing company” means the profits of any trade carried on by the distributing company, as calculated in accordance with Part 3 of CTA 2009 (trading income);
“year of return” means the tax year consisting of or including the period of return.
New special rule: chargeable event gains
139 Chapter 9 of Part 4 of ITTOIA 2005 (gains from contracts for life insurance etc) is amended as follows.
140 After section 465A insert—
Temporary non-residents
465B (1) This section applies if an individual is temporarily non-resident.
(2) The individual is liable for tax under this Chapter for the year of return in respect of any gain that meets the conditions in subsection (3).
(3) The conditions are—
(a) the gain arose in the temporary period of non-residence,
(b) it arose from a policy issued in respect of an insurance made, or from a contract made, before the start of that period,
(c) the chargeable event giving rise to it was neither a death nor a chargeable event treated as occurring under section 525(2),
(d) no-one is liable under section 466 or 467 in respect of the gain,
(e) no-one is liable by virtue of section 468 for either the year of return or an earlier tax year as a result of the gain, and
(f) the individual would have been liable under section 465 in respect of the gain, applying the assumptions in subsection (4).
(4) The assumptions are—
(a) the individual was UK resident for the tax year in which the gain arose, and
(b) that tax year was not a split year as respects the individual.
(5) If the individual is liable by virtue of subsection (2) in respect of a gain—
(a) the amount of the gain in respect of which he or she is liable is the amount on which tax would have been charged under this Chapter applying the assumptions in subsection (4), but
(b) in determining that amount, section 528 must be applied ignoring those assumptions.
(6) That amount is treated as income of the individual for the year of return.
(7) If the gain arises from a policy or contract treated under section 473A as a single policy or contract, the date, for the purposes of subsection (3)(b), on which the insurance or contract is made is the date on which the first insurance is made in respect of which the connected policies were issued or, as the case may be, the date on which the first of the connected contracts is made.
(8) This section does not apply to a gain if—
(a) in relation to the policy or contract from which the gain arises, a terminal event occurs in the temporary period of non-residence or in the period of return,
(b) the chargeable event giving rise to the gain occurred before that terminal event,
(c) the chargeable event giving rise to the gain is one that is treated as occurring under section 509(1) as a result of the application of section 498(1)(a),
(d) section 498(1)(a) applies other than by virtue of section 500, and
(e) a person (whether or not the individual) is liable for tax under this Chapter (including by virtue of this section) in respect of any gain resulting from the terminal event.
(9) Nothing in any double taxation relief arrangements is to be read as preventing the individual from being liable for tax under this Chapter in respect of any gain in respect of which the individual is liable for tax by virtue of subsection (2) (or as preventing a charge to tax on that gain from arising under this Chapter).
(10) Part 4 of Schedule 45 to FA 2013 (statutory residence test: anti-avoidance) explains—
(a) when an individual is to be regarded as “temporarily non-resident”, and
(b) what “the temporary period of non-residence” and “the period of return” mean.
(11) In this section—
terminal event” means an event mentioned in section 499(3);
“year of return” means the tax year that consists of or includes the period of return.
141 In section 468 (non-UK resident trustees and foreign institutions), after subsection (6) insert—
(7) This section does not apply if someone is liable under section 465B in respect of the gain.
142 In section 514 (chargeable events where transaction-related calculations show gains), after subsection (4) insert—
(4A) Subsection (3)(b) includes a case where a person would be liable to tax on the gain under section 465B for the tax year in which the transaction occurs (because the transaction occurs in the year of return, as defined in that section).
143 In section 541 (calculation of deficiencies), in subsection (4)(b), after “that section” insert “ or formed part of the total income of that individual by virtue of section 465B for the tax year mentioned in section 539(1) ”.
144 In section 552 of ICTA (information: duties of insurers), in subsection (13), for “section 541A” substitute “ section 465B or 541A ”.
PART 5 Miscellaneous
Interpretation
145 In this Schedule—
“corporation tax” includes any amount assessable or chargeable as if it were corporation tax;
“country” includes a state or territory;
“cross-border trip” is defined in paragraph 30;
“double taxation arrangements” means arrangements that have effect under section 2(1) of TIOPA 2010;
“employment”—
has the meaning given in section 4 of ITEPA 2003, and
includes an office within the meaning of section 5(3) of that Act;
“enactment” means an enactment whenever passed (including this Act) and includes—
an Act of the Scottish Parliament,
a Measure or Act of the National Assembly for Wales,
any Northern Ireland legislation as defined by section 24(5) of the Interpretation Act 1978, and
any Orders in Council, orders, rules, regulations, schemes warrants, byelaws and other instruments made under an enactment (including anything mentioned in paragraphs (a) to (c) of this definition);
“home” is to be construed in accordance with paragraph 25;
“individual” means an individual acting in any capacity (including as trustee or personal representative);
“overseas” means anywhere outside the UK;
“parenting leave” means maternity leave, paternity leave, adoption leave, parental leave , parental bereavement leave or neonatal care leave (whether statutory or otherwise);
“relevant job on board a vehicle, aircraft or ship” is defined in paragraph 30;
“ship” includes any kind of vessel (including a hovercraft);
“significant break from overseas work” is defined in paragraph 29;
“significant break from UK work” is defined in paragraph 29;
“split year”, as respects an individual, means a tax year that is, as respects that individual, a split year within the meaning of Part 3 of this Schedule;
“trade” also includes—
a profession or vocation,
anything that is treated as a trade for income tax purposes, and
the commercial occupation of woodlands (within the meaning of section 11(2) of ITTOIA 2005);
“work” is defined in paragraph 26;
“UK” means the United Kingdom, including the territorial sea of the United Kingdom;
“UK tie” is defined in paragraph 31;
“whole month” means the whole of January, the whole of February and so on, except that the period from the start of a tax year to the end of April is to count as a whole month.
146 In relation to an individual who carries on a trade—
(a) a reference in this Schedule to annual leave or parenting leave is to reasonable amounts of time off from work for the same purposes as the purposes for which annual leave or parenting leave is taken, and
(b) what are “reasonable amounts” is to be assessed having regard to the annual leave or parenting leave to which an employee might reasonably expect to be entitled if doing similar work.
147 A reference in this Schedule to a number of days being less than a specified number includes a case where the number of days is zero.
Consequential amendments
148 (1) TCGA 1992 is amended as follows.
(2) Omit section 9.
(3) In section 288 (interpretation)—
(a) in subsection (1), insert the following definition at the appropriate place—
“resident” means resident in accordance with the statutory residence test in Part 1 of Schedule 45 to the Finance Act 2013;
, and
(b) in the Table in subsection (8), omit the entry for the expressions “resident” and “ordinarily resident”.
149 In section 27 of ITEPA 2003 (UK-based earnings for year when employee not UK resident), in subsection (1), for “in which” substitute “ for which ”.
150 In section 465 of ITTOIA 2005 (gains from contracts for life insurance etc: liability of individuals), in subsection (1), for “in the tax year” substitute “ for the tax year ”.
151 (1) Chapter 4 of Part 2 of FA 2005 (trusts with vulnerable beneficiary) is amended as follows.
(2) In section 28 (vulnerable person's liability: VQTI), for subsection (4) substitute—
(4) Where the vulnerable person is non-UK resident for the tax year, his or her income tax liability for the purposes of determining TLV1 and TLV2 is to be computed in accordance with the Income Tax Acts on the assumption that—
(a) he or she is UK resident for the tax year,
(b) that year is not, as respects him or her, a split year within the meaning of Part 3 of Schedule 45 to FA 2013, and
(c) he or she is domiciled in the United Kingdom throughout that year.
(3) In section 30 (qualifying trusts gains: special capital gains tax treatment)—
(a) in subsection (2)(a) and (b), for “during” substitute “ for ”, and
(b) omit subsection (5).
(4) In section 31 (UK resident vulnerable persons: amount of relief), in subsection (1), for “during” substitute “ for ”.
(5) In section 32 (non-UK resident vulnerable persons: amount of relief), in subsection (1), for “during” substitute “ for ”.
(6) In section 41—
(a) in subsection (1), insert the following definitions in the appropriate places—
“non-UK resident” means not resident in the United Kingdom in accordance with the statutory residence test in Part 1 of Schedule 45 to FA 2013,
, and
“UK resident” means resident in the United Kingdom in accordance with the statutory residence test in Part 1 of Schedule 45 to FA 2013.
, and
(b) omit subsection (2).
152 (1) ITA 2007 is amended as follows.
(2) In section 809B (claim for remittance basis to apply), in subsection (1)(a), for “in that year” substitute “ for that year ”.
(3) In section 809D (application of remittance basis without claim where unremitted foreign income and gains under £2,000), in subsection (1)(a), for “in that year” substitute “ for that year ”.
(4) In section 809E (application of remittance basis without claim: other cases), in subsection (1)(a), for “in that year” substitute “ for that year ”.
(5) In section 810 (limits on liability to income tax of non-UK residents: overview of Chapter), after subsection (3) insert—
(4) In relation to an individual—
(a) a reference in this Chapter to a non-UK resident's liability to income tax is a reference to the liability of someone who is non-UK resident for the tax year for which the liability arises, and
(b) accordingly, enactments under which income arising to a UK resident in the overseas part of a split year is treated as arising to a non-UK resident are of no relevance to this Chapter.
(6) Omit sections 829 to 832.
Commencement
153 (1) Parts 1 and 2 of this Schedule have effect for determining whether individuals are resident or not resident in the UK for the tax year 2013-14 or any subsequent tax year.
(2) Part 3 of this Schedule has effect in calculating an individual's liability to income tax or capital gains tax for the tax year 2013-14 or any subsequent tax year.
(3) Part 4 of this Schedule has effect if the year of departure (as defined in that Part) is the tax year 2013-14 or a subsequent tax year.
Transitional and saving provision
154 (1) This paragraph applies if—
(a) year X or, in Part 3 of this Schedule, the relevant year is the tax year 2013-14, 2014-15, 2015-16, 2016-17 or 2017-18, and
(b) it is necessary to determine under this Schedule whether an individual was resident or not resident in the UK for a tax year before the tax year 2013-14 (a “pre-commencement tax year”).
(2) The question under this Schedule is to be determined in accordance with the rules in force for determining an individual's residence for that pre-commencement tax year (and not in accordance with the statutory residence test).
(3) But an individual may by notice in writing to Her Majesty's Revenue and Customs elect, as respects one or more pre-commencement tax years, for the question under this Schedule to be determined instead in accordance with the statutory residence test.
(4) A notice under sub-paragraph (3)—
(a) must be given no later than the first anniversary of the end of year X or, in a Part 3 case, the relevant year, and
(b) is irrevocable.
(5) Unless, in relation to a pre-commencement tax year, an election is made under sub-paragraph (3) as respects that year—
(a) paragraph 10(b) of this Schedule has effect in relation to that year as if the words “by virtue of meeting the automatic residence test” were omitted,
(b) paragraph 16 of this Schedule has effect in relation to that year as if—
(i) in sub-paragraph (1)(b), the words “because P met the third automatic overseas test for each of those years” were omitted, and
(ii) in sub-paragraph (2)(a), the words “because P met the third automatic overseas test for that year” were omitted, and
(c) paragraph 49 of this Schedule has effect in relation to that year as if in sub-paragraph (2)(a) for the words from “because” to the end there were substituted “ in circumstances where the taxpayer was working overseas full-time for the whole of that year. ”
155 (1) This paragraph applies if—
(a) year X or, for Part 3 of this Schedule, the tax year for which an individual's liability to tax is being calculated is the tax year 2013-14 or a subsequent tax year, and
(b) it is necessary to determine under a provision of this Schedule, or a provision inserted by Part 3 of this Schedule, whether a tax year before the tax year 2013-14 (a “pre-commencement tax year”) was a split year as respects the individual.
(2) The provision is to have effect as if—
(a) the reference to a split year were to a tax year to which the relevant ESC applied, and
(b) any reference to the UK part or the overseas part of such a year were to the part corresponding as far as possible, in accordance with the terms of the relevant ESC, to the UK part or the overseas part of a split year.
(3) Where the provision also refers to cases involving actual or deemed departure from the UK, the reference is to be read and given effect so far as possible in accordance with the terms of the relevant ESC.
(4) “The relevant ESC” means whichever of the extra-statutory concessions to which effect is given by Part 3 of this Schedule is relevant in the individual's case.
156 (1) Sub-paragraph (2) applies in determining whether the test in paragraph 50(3) is met where the relevant year is the tax year 2013-14.
(2) The circumstances of a partner of the taxpayer are to be treated as falling within Case 6 for the previous tax year if the partner was eligible for split year treatment in relation to that tax year under the relevant ESC on the grounds that he or she returned to the United Kingdom after a period working overseas full-time.
(3) Where the circumstances of a partner are treated as falling within Case 6 under sub-paragraph (2), the reference in paragraph 50(7)(b) to the UK part of the relevant year as defined for Case 6 is a reference to the part corresponding, so far as possible, in accordance with the terms of the relevant ESC, to the UK part of that year.
(4) “The relevant ESC” means whichever of the extra-statutory concessions to which effect is given by Part 3 of this Schedule is relevant in the partner's case.
157 (1) This paragraph applies in determining whether the test in paragraph 110(1)(c) is met in relation to a tax year before the tax year 2013-14 (a “pre-commencement tax year”).
(2) Paragraph 110(1) is to have effect as if for paragraph (c) there were substituted—
(c) at least 4 out of the 7 tax years immediately preceding the year of departure was a tax year meeting the following conditions—
(i) the individual was resident in the UK for that year, and
(ii) there was no time in that year when the individual was Treaty non-resident (see paragraph 112(3)).
(3) Whether an individual was resident in the UK for a pre-commencement tax year is to be determined in accordance with the rules in force for determining an individual's residence for that pre-commencement tax year (and not in accordance with the statutory residence test).
158 (1) The existing temporary non-resident provisions, as in force immediately before the day on which this Act is passed, continue to have effect on and after that day in any case where the year of departure (as defined in Part 4 of this Schedule) is a tax year before the tax year 2013-14.
(2) Where those provisions continue to have effect by virtue of sub-paragraph (1)—
(a) the question of whether a person is or is not resident in the UK for the tax year 2013-14 or a subsequent tax year is to be determined for the purposes of those provisions in accordance with Part 1 of this Schedule, but
(b) the effect of Part 3 is to be ignored.
(3) The existing temporary non-resident provisions are—
(a) section 10A of TCGA 1992 (chargeable gains),
(b) section 576A of ITEPA 2003 (income withdrawals under certain foreign pensions),
(c) section 579CA of that Act (income withdrawals under registered pension schemes), and
(d) section 832A of ITTOIA (relevant foreign income charged on remittance basis).
159 Section 13 of FA 2012 (Champions League final 2013) is to be read and given effect, on and after the day on which this Act is passed, as if section 218 and this Schedule had not been enacted.
Section 219
PART 1 Income tax and capital gains tax: remittance basis of taxation
Remittance basis restricted to non-doms
1 Chapter A1 of Part 14 of ITA 2007 (remittance basis) is amended as follows.
2 In section 809A (overview of Chapter), omit “or are not ordinarily UK resident”.
3 In section 809B (claim for remittance basis to apply)—
(a) in subsection (1)(b), omit “or is not ordinarily UK resident in that year”, and
(b) omit subsection (2).
4 In section 809D (application of remittance basis without claim where unremitted foreign income and gains under £2,000)—
(a) in subsection (1)(b), omit “or is not ordinarily UK resident in that year”, and
(b) in subsection (1A), omit “the individual is not domiciled in the United Kingdom in that year and”.
5 In section 809E (application of remittance basis without claim: other cases), in subsection (1)(b), omit “or is not ordinarily UK resident in that year”.
Treatment of relevant foreign earnings
6 ITEPA 2003 is amended as follows.
7 (1) In section 22 (chargeable overseas earnings for year when remittance basis applies and employee ordinarily UK resident), in subsection (1), for paragraph (b) substitute—
(b) the employee does not meet the requirement of section 26A for that year.
(2) Accordingly—
(a) in the heading of that section, for “ordinarily UK resident” substitute “ outside section 26 ”, and
(b) in the italicised heading before that section, for “UK ordinarily resident employees” substitute “ employees outside section 26 ”.
8 In section 23 (calculation of “chargeable overseas earnings”), in subsection (2), for paragraph (aa) substitute—
(aa) the employee does not meet the requirement of section 26A for that year,
.
9 (1) In section 26 (foreign earnings for year when remittance basis applies and employee not ordinarily UK resident), in subsection (1), for “is not ordinarily UK resident in” substitute “ meets the requirement of section 26A for ”.
(2) Accordingly—
(a) in the heading of that section, for “not ordinarily UK resident” substitute “ meets section 26A requirement ”, and
(b) in the italicised heading before that section, for “not UK ordinarily resident” substitute “ who meet section 26A requirement ”.
10 After that section insert—
Section 26: requirement for 3-year period of non-residence
26A (1) An employee meets the requirement of this section for a tax year if the employee was—
(a) non-UK resident for the previous 3 tax years, or
(b) UK resident for the previous tax year but non-UK resident for the 3 tax years before that, or
(c) UK resident for the previous 2 tax years but non-UK resident for the 3 tax years before that, or
(d) non-UK resident for the previous tax year, UK resident for the tax year before that and non-UK resident for the 3 tax years before that.
(2) The residence status of the employee before the 3 years of non-UK residence is not relevant for these purposes.
11 (1) Section 41C (foreign securities income) is amended as follows.
(2) In subsection (4), for paragraph (b) substitute—
(b) the individual does not meet the requirement of section 26A for the year (reading references there to the employee as references to the individual),
.
(3) In subsection (6), for paragraph (b) substitute—
(b) the individual meets the requirement of section 26A for the year (reading references there to the employee as references to the individual), and
.
12 In section 271 (limited exemption of removal benefits and expenses: general), in subsection (2)—
(a) in paragraph (a), for “ordinarily UK resident” substitute “ outside section 26 ”, and
(b) in paragraph (b), for “not ordinarily UK resident” substitute “ meets section 26A requirement ”.
13 (1) In section 554Z9 (remittance basis: A is ordinarily UK resident), in subsection (1), for paragraph (c) substitute—
(c) A does not meet the requirement of section 26A for the relevant tax year (reading references there to the employee as references to A),
.
(2) Accordingly, in the heading of that section, for “A is ordinarily UK resident” substitute “ A does not meet section 26A requirement ”.
14 (1) In section 554Z10 (remittance basis: A is not ordinarily resident), in subsection (1), for paragraph (c) substitute—
(c) A meets the requirement of section 26A for the relevant tax year (reading references there to the employee as references to A).
(2) Accordingly, in the heading of that section, for “A is not ordinarily resident” substitute “ A meets section 26A requirement ”.
15 (1) Section 690 (employee non-resident etc) is amended as follows.
(2) In subsection (1), for paragraph (a) substitute—
(a) is either non-UK resident for the tax year or is UK resident but meets the requirement of section 26A for the tax year, and
.
(3) In subsection (2A), for “but not ordinarily resident in a tax year” substitute “ for a tax year but not domiciled in the United Kingdom in that tax year ”.
Consequential amendments
16 In section 266A of ICTA (life assurance premiums paid by employer), in subsection (8)—
(a) in paragraph (a), for “employee resident and ordinarily resident, but not domiciled, in UK” substitute “ remittance basis applies and employee outside section 26 ”, and
(b) in paragraph (b), for “employee resident, but not ordinarily resident, in UK” substitute “ remittance basis applies and employee meets section 26A requirement ”.
17 In section 12 of TCGA 1992 (non-UK domiciled individuals to whom remittance basis applies), for subsection (1) substitute—
(1) This section applies to foreign chargeable gains accruing to an individual in a tax year (“the foreign chargeable gains”) if section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to the individual for that year.
18 In section 87B of that Act (section 87: remittance basis), in subsection (1)—
(a) insert “ and ” at the end of paragraph (a),
(b) omit “and” at the end of paragraph (b), and
(c) omit paragraph (c).
19 In section 726 of ITA 2007 (non-UK domiciled individuals to whom remittance basis applies), for subsection (1) substitute—
(1) This section applies in relation to income treated under section 721 as arising to an individual in a tax year (“the deemed income”) if section 809B, 809D or 809E (remittance basis) applies to the individual for that year.
20 In section 730 of that Act (non-UK domiciled individuals to whom remittance basis applies), for subsection (1) substitute—
(1) This section applies in relation to income treated under section 728 as arising to an individual in a tax year (“the deemed income”) if section 809B, 809D or 809E (remittance basis) applies to the individual for that year.
21 In section 735 of that Act (non-UK domiciled individuals to whom remittance basis applies), for subsection (1) substitute—
(1) This section applies in relation to income treated under section 732 as arising to an individual in a tax year (“the deemed income”) if section 809B, 809D or 809E (remittance basis) applies to the individual for that year.
22 In section 809F of that Act (effect on what is chargeable), in subsection (4), for “If the individual is not domiciled in the United Kingdom in that year, the” substitute “ The ”.
23 In section 809YD of that Act (chargeable gains accruing on sales of exempt property), in subsection (3), omit “and P is not domiciled in the United Kingdom in that year”.
24 In section 809Z7 of that Act (meaning of “foreign income and gains” etc)—
(a) in subsection (2)(d), omit “if the individual is not domiciled in the United Kingdom in that year,”, and
(b) in subsection (3)(a), for “is ordinarily UK resident in” substitute “ does not meet the requirement of section 26A of ITEPA 2003 for ”.
Commencement
25 The amendments made by this Part of this Schedule have effect in relation to an individual's foreign income and gains for the tax year 2013-14 or any subsequent tax year.
Savings
26 (1) This paragraph applies to an individual who—
(a) was resident in the United Kingdom for the tax year 2012-13, but
(b) was not ordinarily resident there at the end of the tax year 2012-13.
(2) Enactments relating to income tax or capital gains tax have effect, in relation to any eligible foreign income and gains of the individual, as if the amendments made by this Part of this Schedule had not been made.
(3) “Eligible foreign income and gains” means—
(a) if the individual was resident in the United Kingdom for the tax year 2010-11 and the tax year 2011-12, foreign income and gains for the tax year 2013-14,
(b) if the individual was not resident in the United Kingdom for the tax year 2010-11 but was resident in the United Kingdom for the tax year 2011-12, foreign income and gains for the tax year 2013-14 and the tax year 2014-15, and
(c) if the individual was not resident in the United Kingdom for the tax year 2011-12, foreign income and gains for the tax year 2013-14, the tax year 2014-15 and the tax year 2015-16.
(4) Where, by virtue of this paragraph, it is necessary to determine whether an individual is (or is not) ordinarily resident in the United Kingdom at a time on or after 6 April 2013, the question is to be determined as it would have been in the absence of this Schedule.
Interpretation
27 References in this Part of this Schedule to an individual's “foreign income and gains” for a tax year are to be read in accordance with section 809Z7 of ITA 2007 (interpretation of remittance basis rules).
PART 2 Income tax: arising basis of taxation
ICTA
28 In section 614 of ICTA (exemptions and reliefs in respect of income from investments etc of certain pension schemes)—
(a) in subsection (4), for “not domiciled, ordinarily resident or resident” substitute “ not domiciled and not resident ”, and
(b) in subsection (5), for “not domiciled, ordinarily resident or resident” substitute “ not domiciled and not resident ”.
ITEPA 2003
29 ITEPA 2003 is amended as follows.
30 In section 56 (application of Income Tax Acts in relation to deemed employment), in subsection (5)—
(a) for paragraph (a) substitute—
(a) the worker being resident or domiciled outside the United Kingdom or meeting the requirement of section 26A,
, and
(b) in paragraph (b), omit “or ordinarily resident”.
31 In section 61G (application of Income Tax Acts in relation to deemed employment), in subsection (5)—
(a) for paragraph (a) substitute—
(a) the worker being resident or domiciled outside the United Kingdom or meeting the requirement of section 26A,
, and
(b) in paragraph (b), omit “or ordinarily resident”.
32 In section 328 (the income from which deductions may be made), in subsection (5), omit the entry for Chapter 6 of Part 5 and the word “and” immediately preceding it.
33 In section 341 (travel at start or finish of overseas employment), in subsection (3), for “resident and ordinarily resident in the United Kingdom” substitute “ UK resident ”.
34 In section 342 (travel between employments where duties performed abroad), in subsection (6), for “resident and ordinarily resident in the United Kingdom” substitute “ UK resident ”.
35 In section 370 (travel costs where duties performed abroad: employee's travel), in subsection (6), omit “in which the employee is ordinarily UK resident”.
36 In section 376 (foreign accommodation and subsistence costs and expenses (overseas employments)), in subsection (1)(b), for “resident and ordinarily resident in the United Kingdom” substitute “ UK resident ”.
37 (1) Section 378 (deductions from seafarers' earnings: eligibility) is amended as follows.
(2) In subsection (1), for “relevant taxable earnings or EEA-resident earnings” substitute “ relevant general earnings ”.
(3) For subsection (5) substitute—
(5) Relevant general earnings” means—
(a) taxable earnings under section 15, 22 or 26, or
(b) general earnings—
(i) to which section 27 applies, and
(ii) which are for a period in which the employee is liable under the law of an EEA State (other than the United Kingdom) to tax in that State by reason of domicile or residence.
(4) Omit subsection (6).
38 (1) Section 413 (exception in certain cases of foreign service) is amended as follows.
(2) In subsection (2), after “subsection” (in the second place it occurs) insert “ (2A), ”.
(3) After that subsection insert—
(2A) This subsection applies to service in or after the tax year 2013-14—
(a) to the extent that it consists of duties performed outside the United Kingdom in respect of which earnings would not be relevant earnings, or
(b) if a deduction equal to the whole amount of the earnings from the employment was or would have been allowable under Chapter 6 of Part 5 (deductions from seafarers' earnings).
(4) In subsection (3), after “2003-04” insert “ but before the tax year 2013-14 ”.
(5) After that subsection insert—
(3ZA) In subsection (2A)(a) “relevant earnings” means earnings for a tax year that are earnings to which section 15 applies and to which that section would apply even if the employee made a claim under section 809B of ITA 2007 (claim for remittance basis) for that year.
39 (1) In section 681A (foreign benefits of consular employees), for subsection (4) substitute—
(4) Condition C is that—
(a) the officer or employee is a permanent employee of that state, or
(b) the officer or employee was non-UK resident for each of the 2 tax years preceding the tax year in which the officer or employee became a consular officer or employee in the United Kingdom of that state.
(2) The amendment made by this paragraph does not apply to a person who became a consular officer or employee in the United Kingdom before 6 April 2013.
40 (1) In Schedule 2 (approved share incentive plans), in paragraph 8(2), omit paragraph (b) and the “and” immediately before it.
(2) The amendments made by this paragraph do not apply to plans that have been approved before the day on which this Act is passed.
41 (1) In Schedule 3 (approved SAYE option schemes), in paragraph 6(2)—
(a) insert “ and ” at the end of paragraph (c), and
(b) omit paragraph (ca), including the “and” at the end of it.
(2) The amendments made by this paragraph do not apply to schemes that have been approved before the day on which this Act is passed.
42 In Schedule 5 (enterprise management incentives), in paragraph 27(3)(b), omit “and ordinarily resident”.
ITTOIA 2005
43 ITTOIA 2005 is amended as follows.
44 In section 154A (certain non-UK residents with interest on 3½% War Loan 1952 Or After), in subsection (1)(a), omit “ordinarily”.
45 In section 459 (transfer of assets abroad), in subsection (2), for “an individual ordinarily UK resident” substitute “ a UK resident individual ”.
46 In section 468 (non-UK resident trustees and foreign institutions), for subsection (2) substitute—
(2) Chapter 2 of Part 13 of ITA 2007 (which prevents avoidance of tax where a UK resident individual benefits from a transfer of assets) applies with the modifications specified in subsection (3) or (4).
47 In section 569 (anti-avoidance: transfer of assets abroad), in subsection (2), for “an individual ordinarily UK resident” substitute “ a UK resident individual ”.
48 (1) In section 636 (calculation of undistributed income), in subsection (2)(b), for “, resident and ordinarily resident” substitute “ and resident ”.
(2) The amendment made by this paragraph does not apply in calculating income arising under a settlement in tax years ending before 6 April 2013.
49 In section 648 (income arising under a settlement), in subsection (1)(b), for “, resident and ordinarily resident” substitute “ and resident ”.
50 In section 651 (meaning of “UK estate” and “foreign estate”), in subsection (3), omit “or not ordinarily UK resident”.
51 In section 664 (the aggregate income of the estate), in subsection (2)(b)(i), omit “who was ordinarily UK resident”.
52 (1) Section 715 (interest from FOTRA securities held on trust) is amended as follows.
(2) In subsection (1)(b), for “person not ordinarily UK resident” substitute “ non-UK resident person ”.
(3) In subsection (2)—
(a) for “person not ordinarily UK resident” substitute “ non-UK resident person ”, and
(b) for “is ordinarily UK resident at the time when” substitute “ is UK resident for the tax year in which ”.
(4) In relation to a FOTRA security issued before 6 April 2013, the amendments made by this paragraph apply only if the security was acquired by the trust on or after that date.
53 (1) In section 771 (relevant foreign income of consular officers and employees), for subsection (4) substitute—
(4) Condition C is that—
(a) the officer or employee is a permanent employee of that state, or
(b) the officer or employee was non-UK resident for each of the 2 tax years preceding the tax year in which the officer or employee became a consular officer or employee in the United Kingdom of that state.
(2) The amendment made by this paragraph does not apply to a person who became a consular officer or employee in the United Kingdom before 6 April 2013.
ITA 2007
54 ITA 2007 is amended as follows.
55 In section 465 (overview of Chapter 2 and interpretation), in subsection (4), omit “and ordinary residence”.
56 (1) Section 475 (residence of trustees) is amended as follows.
(2) For subsection (1) substitute—
(1) This section applies for income tax purposes and explains how to work out, in relation to the trustees of a settlement, whether or not the single person mentioned in section 474(1) is UK resident.
(3) In subsection (2), for “both UK resident and ordinarily UK resident” substitute “ UK resident ”.
(4) In subsection (3), for “both non-UK resident and not ordinarily UK resident” substitute “ non-UK resident ”.
57 (1) Section 476 (how to work out whether settlor meets condition C) is amended as follows.
(2) In subsection (2)(b), omit “, ordinarily UK resident”.
(3) In subsection (3)(b), omit “, ordinarily UK resident”.
(4) The amendment made by sub-paragraph (2) does not apply if the person died before 6 April 2013.
(5) The amendment made by sub-paragraph (3) does not apply if the settlement was made before 6 April 2013.
58 In section 643 (non-residents), in subsection (1), omit “and is not ordinarily UK resident during that year”.
59 In section 718 (meaning of “person abroad” etc), in subsection (2)(b), for “neither UK resident nor ordinarily UK resident” substitute “ non-UK resident ”.
60 In section 720 (charge to tax on income treated as arising under section 721), in subsection (1), omit “ordinarily”.
61 (1) Section 721 (individuals with power to enjoy income as a result of relevant transactions) is amended as follows.
(2) In subsection (1), for “conditions A and B” substitute “ conditions A to C ”.
(3) After subsection (3) insert—
(3A) Condition C is that the individual is UK resident for the tax year.
(4) In subsection (5), for paragraph (b) substitute—
(b) whether the individual is UK resident for the tax year in which the relevant transfer is made (if different from the tax year mentioned in subsection (1)), or
.
62 In section 727 (charge to tax on income treated as arising under section 728), in subsection (1), omit “ordinarily”.
63 (1) Section 728 (individuals receiving capital sums as a result of relevant transactions) is amended as follows.
(2) In subsection (1)—
(a) in paragraph (a), omit the “and” at the end of sub-paragraph (iii), and
(b) at the end of paragraph (b) insert
, and
(c) the individual is UK resident for the tax year.
(3) In subsection (3), for paragraph (b) substitute—
(b) whether the individual is UK resident for the tax year in which the relevant transfer abroad is made (if different from the tax year mentioned in subsection (1)), or
.
64 In section 732 (non-transferors receiving benefit as a result of relevant transactions), in subsection (1)(b), for “ordinarily UK resident receives a benefit” substitute “ UK resident for a tax year receives a benefit in that tax year ”.
65 (1) In section 749 (restrictions on particulars to be provided by relevant lawyers), in subsection (2), omit “ordinarily”.
(2) The amendment made by this paragraph applies only if the transfer is made or, in the case of an associated operation, the transfer is made and the associated operation is effected on or after 6 April 2013.
66 In section 812 (case where limit on liability of non-UK residents is not to apply), in subsection (1)(a), omit “ordinarily”.
67 (1) In section 834 (residence of personal representatives), in subsection (3), omit “, ordinarily UK resident”.
(2) The amendment made by this paragraph does not apply if D died before 6 April 2013.
68 (1) In section 858 (declarations of non-UK residence: individuals)—
(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b) in subsection (4), omit “ordinarily”.
(2) The amendments made by this paragraph apply to the making of declarations on or after 6 April 2014, and any declarations made before that date continue to have effect in respect of interest paid on or after that date as if those amendments had not been made.
69 (1) In section 859 (declarations of non-UK residence: Scottish partnerships)—
(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b) in subsection (4), omit “ordinarily”.
(2) The amendments made by this paragraph apply to the making of declarations on or after 6 April 2014, and any declarations made before that date continue to have effect in respect of interest paid on or after that date as if those amendments had not been made.
70 (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2) The amendment made by this paragraph applies only if the deceased died on or after 6 April 2014.
71 (1) Section 861 (declarations of non-UK residence: settlements) is amended as follows.
(2) In subsection (3)(b)(i) and (iii), omit “ordinarily”.
(3) In subsection (4)—
(a) in paragraphs (b) and (d), omit “ordinarily”, ...
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4) The amendments made by this paragraph apply to the making of declarations on or after 6 April 2014, and any declarations made before that date continue to have effect in respect of interest paid on or after that date as if those amendments had not been made.
Commencement
72 (1) The amendments made by this Part of this Schedule have effect for the purposes of a person's liability to income tax for the tax year 2013-14 or any subsequent tax year.
(2) Sub-paragraph (1) is without prejudice to any provision in this Part of the Schedule about the application of a particular amendment.
Savings
73 (1) This paragraph applies to an individual who—
(a) was resident in the United Kingdom for the tax year 2012-13, but
(b) was not ordinarily resident there at the end of the tax year 2012-13.
(2) The provisions listed in sub-paragraph (3) have effect, in relation to such an individual and a qualifying tax year, as if the amendments made to or with respect to those provisions by this Part of this Schedule had not been made.
(3) The provisions are—
(a) section 413 of ITEPA 2003 (exception for payments and benefits on termination of employment etc in certain cases involving foreign service),
(b) section 414 of that Act (reduction in other cases of foreign service), and
(c) Chapter 2 of Part 13 of ITA 2007 (transfer of assets abroad).
(4) But, in the case of provisions within paragraph (a) or (b) of sub-paragraph (3), this paragraph applies only if service in the employment in question began before the start of the tax year 2013-14.
(5) The meaning of “qualifying tax year” depends on the individual's residence status—
(a) if the individual was resident in the United Kingdom for the tax year 2010-11 and the tax year 2011-12, “qualifying tax year” means the tax year 2013-14,
(b) if the individual was not resident in the United Kingdom for the tax year 2010-11 but was resident in the United Kingdom for the tax year 2011-12, “qualifying tax year” means each of the tax year 2013-14 and the tax year 2014-15, and
(c) if the individual was not resident in the United Kingdom for the tax year 2011-12, “qualifying tax year” means each of the tax year 2013-14, the tax year 2014-15 and the tax year 2015-16.
(6) Where, by virtue of this paragraph, it is necessary to determine whether an individual is (or is not) ordinarily resident in the United Kingdom at a time on or after 6 April 2013, the question is to be determined as it would have been in the absence of this Schedule.
PART 3 Capital gains tax: accruals basis of taxation
TCGA 1992
74 TCGA 1992 is amended as follows.
75 (1) Section 2 (persons and gains chargeable to capital gains tax, and allowable losses) is amended as follows.
(2) In subsection (1), for the words from “during any part” to the end substitute “ if the residence condition is met ”.
(3) After that subsection insert—
(1A) The residence condition is—
(a) in the case of an individual, that the individual is resident in the United Kingdom for the year in question,
(b) in the case of personal representatives of a deceased person, that the single and continuing body mentioned in section 62(3) is resident in the United Kingdom,
(c) in the case of the trustees of a settlement, that the single person mentioned in section 69(1) is resident in the United Kingdom during any part of the year in question, and
(d) in any other case, that the person is resident in the United Kingdom when the gain accrues.
76 In section 10 (non-resident with United Kingdom branch or agency), in subsection (1), for “in which he is not resident and not ordinarily resident in the United Kingdom but” substitute “ if the residence condition is not met (see section 2(1A)) but the person ”.
77 (1) Section 13 (attribution of gains to members of non-resident companies) is amended as follows.
(2) In subsection (2), omit “or ordinarily resident”.
(3) In subsection (10), for “neither resident nor ordinarily resident” substitute “ not resident ”.
(4) In subsection (13)(b), omit “or ordinarily resident”.
78 In section 16 (computation of losses), in subsection (3), for “during no part of which he is resident or ordinarily resident in the United Kingdom” substitute “ where the residence condition is not met (see section 2(1A)) ”.
79 In section 62 (death: general provisions), in subsection (3), omit “, ordinary residence,”.
80 In section 65 (liability for tax of trustees or personal representatives), in subsection (3)(b), for “become neither resident nor ordinarily resident” substitute “ cease to be resident ”.
81 In section 67 (provisions applicable where section 79 of the Finance Act 1980 has applied), in subsection (6)(a), in paragraph (b) of the substituted subsection (1), for “ becomes neither resident nor ordinarily resident ” substitute “ ceases to be resident ”.
82 (1) Section 69 (trustees of settlements) is amended as follows.
(2) In subsection (2), omit “and ordinarily resident”.
(3) In subsection (2B)(c), omit “, ordinarily resident”.
(4) In subsection (2E), for the words from “and ordinarily resident” to the end substitute “ in the United Kingdom, then for the purposes of this Act it is treated as being not resident in the United Kingdom ”.
83 In section 76 (disposal of interests in settled property), in subsection (1B)(a), for “neither resident nor ordinarily resident” substitute “ not resident ”.
84 In section 80 (trustees ceasing to be resident in UK), in subsection (1), for “neither resident nor ordinarily resident” substitute “ not resident ”.
85 (1) Section 81 (death of trustee: special rules) is amended as follows.
(2) In subsection (1)(b), omit “and ordinarily resident”.
(3) In subsection (3)(b), omit “and ordinarily resident”.
(4) In subsection (4)(b), omit “and ordinarily resident”.
(5) In subsection (5)(a), omit “and ordinarily resident”.
86 In section 82 (past trustees: liability for tax), in subsection (3)(b), for “become neither resident nor ordinarily resident” substitute “ cease to be resident ”.
87 In section 83 (trustees ceasing to be liable to UK tax), in subsection (1), omit “and ordinarily resident”.
88 (1) Section 83A (trustees both resident and non-resident in a year of assessment) is amended as follows.
(2) In subsection (3)(a), omit “and ordinarily resident”.
(3) In subsection (4)—
(a) in paragraph (a), for “neither resident nor ordinarily resident” substitute “ not resident ”, and
(b) in paragraph (b), omit “and ordinarily resident”.
89 In section 84 (acquisition by dual resident trustees), in subsection (1)(b), omit “and ordinarily resident”.
90 In section 85 (disposal of interests in non-resident settlements), in subsection (1), for “neither resident nor ordinarily resident” substitute “ not resident ”.
91 (1) Section 86 (attribution of gains to settlors with interest in non-resident or dual resident settlements) is amended as follows.
(2) In subsection (1)(c), for the words from “either resident” to the end substitute “ resident in the United Kingdom for the year ”.
(3) For subsection (2) substitute—
(2) The condition as to residence is that—
(a) there is no time in the year when the trustees are resident in the United Kingdom, or
(b) there is such a time but, whenever the trustees are resident in the United Kingdom during the year, they fall to be regarded for the purposes of any double taxation relief arrangements as resident in a territory outside the United Kingdom.
(4) In subsection (3), omit “and ordinarily resident”.
92 (1) Section 87 (non-UK resident settlements: attribution of gains to beneficiaries) is amended as follows.
(2) In subsection (1), for the words from “the trustees” to the end substitute “ there is no time in that year when the trustees are resident in the United Kingdom ”.
(3) In subsection (4)(a), omit “and ordinarily resident”.
93 In section 88(1) (gains of dual resident settlements)—
(a) in paragraph (a), omit “and ordinarily resident”, and
(b) in paragraph (b), omit “and ordinary residence”.
94 (1) Section 96 (payments by and to companies) is amended as follows.
(2) In subsection (3), omit “or ordinarily resident”.
(3) In subsection (4), in each of paragraphs (a) and (b), omit “or ordinarily resident”.
(4) In subsection (5)(b), omit “or ordinary residence”.
95 In section 97 (supplementary provisions), in subsection (1)(a), for “neither resident nor ordinarily resident” substitute “ not resident ”.
96 In section 99 (application of Act to unit trust schemes), in subsection (1)(c), omit “and ordinarily resident”.
97 In section 106A(5A) (identification of securities: capital gains tax)—
(a) in paragraph (a), for “neither resident nor ordinarily resident” substitute “ not resident ”, and
(b) in paragraph (b), omit “or ordinarily resident”.
98 (1) Section 159 (non-residents: roll-over relief) is amended as follows.
(2) In subsection (2)(b), omit “or ordinarily resident”.
(3) In subsection (5), in the definition of “dual resident”, omit “or ordinarily resident”.
99 (1) Section 166 (gifts to non-residents) is amended as follows.
(2) In subsection (1), for “neither resident nor ordinarily resident” substitute “ not resident ”.
(3) In subsection (2)(a), omit “or ordinarily resident”.
100 (1) Section 167 (gifts to foreign-controlled companies) is amended as follows.
(2) In subsection (2)(a), for “neither resident nor ordinarily resident” substitute “ not resident ”.
(3) In subsection (3), for the words from “or ordinarily resident” to “nor ordinarily resident” substitute “ in the United Kingdom is to be regarded as not resident ”.
101 (1) Section 168 (emigration of donee) is amended as follows.
(2) In subsection (1)(b), for “becomes neither resident nor ordinarily resident” substitute “ ceases to be resident ”.
(3) In subsection (4), for “becoming neither resident nor ordinarily resident” substitute “ ceasing to be resident ”.
(4) In subsection (5)—
(a) in paragraph (a), for “becoming neither resident nor ordinarily resident” substitute “ ceasing to be resident ”, and
(b) in paragraph (b), omit “or ordinarily resident”.
102 In section 169 (gifts into dual resident trusts), in subsection (3)(a), omit “and ordinarily resident”.
103 In section 199 (exploration or exploitation assets: deemed disposals), in subsection (2), for “who is not resident and not ordinarily resident in the United Kingdom” substitute “ in respect of whom the residence condition (see section 2(1A)) is not met ”.
104 (1) Section 261 (section 260 relief: gifts to non-residents) is amended as follows.
(2) In subsection (1), for “neither resident nor ordinarily resident” substitute “ not resident ”.
(3) In subsection (2)(a), omit “or ordinarily resident”.
105 In Schedule 1 (application of exempt amount and reporting limits in cases involving settled property), in paragraph 2(7)(a), omit “and ordinarily resident”.
106 (1) Schedule 4A (disposal of interest in settled property: deemed disposal of underlying assets) is amended as follows.
(2) In paragraph 5(1) and (2), omit “and ordinarily resident”.
(3) In paragraph 6(1)—
(a) for “in the relevant” substitute “ as respects the relevant ”, and
(b) for the words from “either” to the end substitute “ met the residence condition set out in section 2(1A) ”.
(4) If any of the previous 5 years of assessment mentioned in paragraph 6(1) of Schedule 4A ends before 6 April 2013, the test in that paragraph is to be applied, as respects any such year ending before that date, as if that paragraph had not been amended by sub-paragraph (3).
107 (1) Schedule 4C (transfers of value: attribution of gains to beneficiaries) is amended as follows.
(2) In paragraph 1A(3), for the words from “the beneficiary” to the end substitute “ , as respects that year, the beneficiary meets the residence condition set out in section 2(1A) ”.
(3) In paragraph 4—
(a) in sub-paragraph (1), omit “and ordinarily resident”, and
(b) in sub-paragraph (2), omit “and ordinarily resident”.
(4) In paragraph 5(1)—
(a) in paragraph (a), omit “and ordinarily resident”, and
(b) in paragraph (b), omit “and ordinary residence”.
(5) In paragraph 9(3)(a)(i), omit “and ordinarily resident”.
(6) In paragraph 10(1), omit “and ordinarily resident”.
108 (1) Schedule 5 (attribution of gains to settlors with interest in non-resident or dual resident settlement) is amended as follows.
(2) In paragraph 2A(4)—
(a) in paragraph (a), for “become on or after 17th March 1998 neither resident nor ordinarily resident” substitute “ cease on or after 17 March 1998 to be resident ”, and
(b) in paragraph (b), omit “and ordinarily resident”.
(3) In paragraph 9(4)—
(a) in paragraph (a), for “become on or after 19th March 1991 neither resident nor ordinarily resident” substitute “ cease on or after 19 March 1991 to be resident ”, and
(b) in paragraph (b), omit “and ordinarily resident”.
(4) The amendments made by this paragraph apply to changes in the residence status of trustees on or after 6 April 2013.
109 (1) Schedule 5A (settlements with foreign element: information) is amended as follows.
(2) In paragraph 2(1)—
(a) in paragraph (c), for “neither resident nor ordinarily resident” substitute “ not resident ”, and
(b) in paragraph (d), omit “and ordinarily resident”.
(3) In paragraph 3—
(a) in sub-paragraph (1)—
(i) in paragraph (a), for “neither resident nor ordinarily resident” substitute “ not resident ”, and
(ii) in paragraph (b), omit “and ordinarily resident”, and
(b) in sub-paragraph (3), for “either resident or ordinarily resident” substitute “ resident ”.
(4) In paragraph 4—
(a) in sub-paragraph (1)—
(i) in paragraph (a), for “neither resident nor ordinarily resident” substitute “ not resident ”, and
(ii) in paragraph (b), omit “and ordinarily resident”, and
(b) in sub-paragraph (3), for “either resident or ordinarily resident” substitute “ resident ”.
(5) In paragraph 5(1)—
(a) in paragraph (a), for the words from “become” to “ordinarily resident” substitute “ cease at any time (the relevant time) on or after the commencement day to be resident ”, and
(b) in paragraph (b), omit “and ordinarily resident”.
(6) The amendments made by this paragraph apply as follows—
(a) the amendments made by sub-paragraph (2) apply in relation to transfers of property made on or after 6 April 2013,
(b) the amendments made by sub-paragraphs (3) and (4) apply in relation to settlements created on or after that date, and
(c) the amendments made by sub-paragraph (5) apply to changes in the residence status of trustees on or after that date.
110 (1) Schedule 5B (enterprise investment scheme: re-investment) is amended as follows.
(2) In paragraph 1—
(a) in sub-paragraph (1)(d), omit “or ordinarily resident”, and
(b) in sub-paragraph (4)(a), omit “or ordinarily resident”.
(3) In paragraph 3(3)(b), omit “or ordinarily resident”.
(4) In paragraph 19(1), in the definition of “non-resident”, for “neither resident nor ordinarily resident” substitute “ not resident ”.
(5) The amendments made by this paragraph apply in cases where the accrual time is on or after 6 April 2013 (even if the qualifying investment was made before that date).
111 In Schedule 7C (reliefs for transfers to approved share plans), in paragraph 8, for paragraph (a) substitute—
(a) the claimant would be chargeable to capital gains tax under section 2(1) (persons and gains chargeable to capital gains tax) in respect of the gain, or
.
Commencement
112 (1) The amendments made by this Part of this Schedule have effect in relation to a person's liability to capital gains tax for the tax year 2013-14 or any subsequent tax year.
(2) Sub-paragraph (1) is without prejudice to any provision in this Part of this Schedule about the application of a particular amendment.
PART 4 Other amendments
FA 1916
113 In FA 1916, omit section 63 (exemption from taxation of municipal securities issued in America).
F(No.2)A 1931
114 (1) In section 22 of F(No.2)A 1931 (provisions in cases where Treasury has power to borrow money), in subsection (1)(a) and (b), omit “ordinarily”.
(2) Nothing in sub-paragraph (1) limits the power conferred by section 60(1) of FA 1940.
(3) Subject to sub-paragraph (5), the amendment made by sub-paragraph (1) does not affect a pre-commencement security (nor the availability of the relevant exemption).
(4) Sub-paragraph (5) applies to a person who becomes the beneficial owner of a pre-commencement security (or an interest in such a security) on or after 6 April 2013.
(5) If obtaining the relevant exemption is conditional on being not ordinarily resident in the United Kingdom, any enactment conferring the exemption is to have effect (in relation to a person to whom this sub-paragraph applies) as if obtaining the exemption were conditional instead on being not resident in the United Kingdom.
(6) In this paragraph—
“pre-commencement security” means a FOTRA security (as defined in section 713 of ITTOIA 2005) issued before the day on which this Act is passed;
“the relevant exemption”, in relation to a pre-commencement security, means the exemption for which provision is made in the exemption condition (as defined in that section).
TMA 1970
115 TMA 1970 is amended as follows.
116 (1) In section 98 (special returns etc), in subsection (4E)(d), omit “ordinarily”.
(2) The amendment made by this paragraph takes effect on the coming into force of regulations made under section 17(3) of F(No.2)A 2005 (authorised investment funds) by virtue of the amendment made by paragraph 136.
117 In Schedule 1A (claims etc not included in returns), in paragraph 2(6), omit “or not ordinarily resident”.
IHTA 1984
118 (1) Section 157 of IHTA 1984 (non-residents' bank accounts) is amended as follows.
(2) For subsection (2) substitute—
(2) This section applies to a person who is not domiciled and not resident in the United Kingdom immediately before his death.
(3) In subsection (3), for “, resident or ordinarily resident” substitute “ or resident ”.
(4) In subsection (4)—
(a) in paragraph (a), omit “or ordinarily resident”, and
(b) in paragraph (b), omit “or ordinarily resident” and “and ordinarily resident”.
(5) The amendments made by this paragraph do not apply if the person dies before 6 April 2013.
FA 2004
119 Part 4 of FA 2004 (pension schemes etc) is amended as follows.
120 In section 185G (disposal by person holding directly), in subsection (3)(a), omit “, ordinarily resident”.
121 In section 205 (short service refund lump sum charge), in subsection (3), omit “, ordinarily resident”.
122 In section 205A (serious ill-health lump sum charge), in subsection (3), omit “, ordinarily resident”.
123 In section 206 (special lump sum death benefits charge), in subsection (3), omit “, ordinarily resident”.
124 In section 207 (authorised surplus payments charge), in subsection (3), omit “, ordinarily resident”.
125 In section 208 (unauthorised payments charge), in subsection (4), omit “, ordinarily resident”.
126 In section 209 (unauthorised payments surcharge), in subsection (5), omit “, ordinarily resident”.
127 In section 217 (persons liable to lifetime allowance charge), in subsection (5), omit “, ordinarily resident”.
128 In section 237A (liability of individual to annual allowance charge), in subsection (2), omit “, ordinarily resident”.
129 In section 237B (liability of scheme administrator), in subsection (8), omit “, ordinarily resident”.
130 In section 239 (scheme sanction charge), in subsection (4), omit “, ordinarily resident”.
131 In section 242 (de-registration charge), in subsection (3), omit “, ordinarily resident”.
132 The amendments of Part 4 of FA 2004 made by this Part of this Schedule have effect in relation to the tax year 2013-14 and any subsequent tax year.
FA 2005
133 (1) In section 30 of FA 2005 (qualifying trust gains: special capital gains tax treatment), in subsection (1), for paragraph (c) substitute—
(c) the trustees are resident in the United Kingdom during any part of the tax year, and
.
(2) The amendment made by this paragraph has effect in relation to the tax year 2013-14 and any subsequent tax year.
F(No.2)A 2005
134 F(No.2)A 2005 is amended as follows.
135 (1) In section 7 (charge to income tax on lump sum), in subsection (3), omit “, ordinarily resident”.
(2) The amendment made by this paragraph has effect in relation to the tax year 2013-14 and any subsequent tax year.
136 In section 18 (section 17(3): specific powers), in subsection (1)(f) and (g), omit “ordinarily”.
CTA 2009
137 CTA 2009 is amended as follows.
138 (1) In section 900 (which relates to roll-over relief for disposals of pre-FA 2002 assets), in subsection (2), omit “or ordinarily UK resident”.
(2) The amendment made by this paragraph applies in relation to gains accruing or treated as accruing on or after 6 April 2013.
139 (1) In section 936 (meaning of “UK estate” and “foreign estate”), in subsection (3), omit “or not ordinarily UK resident”.
(2) The amendment made by this paragraph applies if the tax year in question begins on or after 6 April 2013.
140 (1) In section 947 (aggregate income of the estate), in subsection (2)(b)(i), omit “who was ordinarily UK resident”.
(2) The amendment made by this paragraph applies if the tax year in question begins on or after 6 April 2013.
141 (1) In section 1009 (conditions relating to employee's income tax position), in subsection (5)(a), omit “and ordinarily UK resident”.
(2) The amendment made by this paragraph applies in relation to shares acquired on or after 6 April 2013.
142 (1) In section 1017 (condition relating to employee's income tax position), in subsection (4)(a), omit “and ordinarily UK resident”.
(2) The amendment made by this paragraph applies in relation to options obtained on or after 6 April 2013.
143 (1) In section 1025 (additional relief available if shares acquired are restricted shares), in subsection (5)(a), omit “and ordinarily UK resident”.
(2) The amendment made by this paragraph applies in relation to restricted shares acquired on or after 6 April 2013.
144 (1) In section 1032 (meaning of “chargeable event”), in subsection (5)(a), omit “and ordinarily UK resident”.
(2) The amendment made by this paragraph applies in relation to convertible shares acquired on or after 6 April 2013.
CTA 2010
145 (1) Section 1034 of CTA 2010 (purchase by unquoted trading company of own shares: requirements as to residence) is amended as follows.
(2) In subsections (1) and (2), omit “and ordinarily resident”.
(3) In subsection (3), omit “and ordinary residence” in both places.
(4) Omit subsection (4).
(5) The amendments made by this paragraph do not apply in relation to a purchase by an unquoted trading company of its own shares if the purchase takes place before 6 April 2013.
TIOPA 2010
146 In section 363A of TIOPA 2010 (residence of offshore funds which are undertakings for collective investment in transferable securities), in subsection (3), for “neither resident nor ordinarily resident” substitute “ not resident ”.
Constitutional Reform and Governance Act 2010
147 (1) In section 41 of the Constitutional Reform and Governance Act 2010 (tax status of MPs and members of the House of Lords), in subsection (2), omit “, ordinarily resident”.
(2) The amendment made by this paragraph has effect for the purposes of a member's liability to income tax or capital gains tax for the tax year 2013-14 or any subsequent tax year.
Section 220
Relevant finance leases etc
1 Part 9A of TIOPA 2010 (controlled foreign companies) is amended as follows.
2 Chapter 5 (the CFC charge gateway: non-trading finance profits) is amended as follows.
3 In section 371ED (arrangements in lieu of dividends) in subsection (1) omit “(other than a relevant finance lease)”.
4 (1) Section 371EE (leases to UK resident companies etc) is amended as follows.
(2) In subsection (2)(b)(i) for “which is the subject of the lease” substitute “ (“the relevant asset”) which is the subject of the lease or making (directly or indirectly) an arrangement which would fall within subsection (3) ”.
(3) After subsection (2) insert—
(3) An arrangement would fall within this subsection if—
(a) the arrangement would meet one or both of the following requirements—
(i) it would not be a relevant finance lease;
(ii) it would not involve the CFC, and
(b) under the arrangement the other company would (directly or indirectly) purchase rights to use the relevant asset.
5 Chapter 22 (supplementary provision) is amended as follows.
6 In section 371VA (definitions) for the definition of “relevant finance lease” substitute—
“relevant finance lease” is to be read in accordance with section 371VIA,
.
7 (1) Section 371VG (finance profits) is amended as follows.
(2) In subsection (1) for paragraph (b) substitute—
(b) which are included in the CFC's assumed total profits for the accounting period in question and which—
(i) arise from a relevant finance lease, but
(ii) are not trading profits.
(3) In subsection (4)(b) omit “an arrangement which would be”.
8 (1) Section 371VH (interests in companies) is amended as follows.
(2) In subsection (9) omit the second sentence.
(3) After subsection (10) insert—
(10A) For the purposes of subsection (9), if for any relevant period accounts for a loan creditor are not prepared in accordance with international accounting standards or UK generally accepted accounting practice, any question relating to generally accepted accounting practice is to be determined in relation to the loan creditor for that period by reference to generally accepted accounting practice in relation to accounts prepared in accordance with international accounting standards.
9 After section 371VI insert—
Relevant finance leases
371VIA (1) In this Part “relevant finance lease” means an arrangement falling within subsection (2) or (3).
(An arrangement which is a loan relationship of any company does not fall within either of those subsections.)
(2) An arrangement falls within this subsection if—
(a) it provides for an asset to be leased or otherwise made available by a person (“the lessor”) to another person, and
(b) in accordance with generally accepted accounting practice, it falls (or would fall) to be treated in the accounts of the lessor, or of a person connected with the lessor, as a finance lease or a loan.
(3) A hire-purchase, conditional sale or other arrangement relating to an asset falls within this subsection if it does not fall within subsection (2) but is of a similar character to an arrangement which would fall within that subsection.
(4) If for any relevant period accounts for a person are not prepared in accordance with international accounting standards or UK generally accepted accounting practice, any question relating to generally accepted accounting practice is to be determined for the purposes of this section in relation to that person for that period by reference to generally accepted accounting practice in relation to accounts prepared in accordance with international accounting standards.
(5) In this section “accounts”, in relation to a company, includes accounts relating to two or more companies of which that company is one.
Limit on double taxation relief in cases involving qualifying loan relationships of CFCs
10 Part 2 of TIOPA 2010 (double taxation relief) is amended as follows.
11 Chapter 2 (double taxation relief by way of credit) is amended as follows.
12 In section 42 (limit on credit against corporation tax) after subsection (4) insert—
(5) See also section 49A which contains an additional limit on credit allowed in certain cases involving CFCs.
13 After section 49 insert—
Limit on credit in cases involving qualifying loan relationships of CFCs
49A (1) This section applies if—
(a) a claim is made under Chapter 9 of Part 9A (controlled foreign companies: exemptions for profits from qualifying loan relationships) in relation to an accounting period (“the relevant period”) of a CFC (“the creditor CFC”),
(b) in the relevant period, the creditor CFC has a qualifying loan relationship in relation to which another CFC is the ultimate debtor by virtue of section 371IG(4) or (5), and
(c) a UK resident company (“the relevant UK company”) has loan relationship credits which arise in the relevant period from—
(i) loan B (see section 371IG(3)(b)), or
(ii) loans out of which loan B is wholly or partly funded (directly or indirectly).
(2) So far as any credit allowed under section 18(2) to the relevant UK company is referable to loan relationship credits falling within subsection (1)(c) which arise in an accounting period of the relevant UK company, the credit must not exceed—
R
×
S
where—
R has the same meaning as in section 42(2), and
S is—
the relevant UK company's share of the relevant profit amount (see subsection (4)), or
if only X% of the total amount of the loan relationship credits falling within subsection (1)(c) arises in the accounting period, X% of the relevant UK company's share of the relevant profit amount.
(If the amount given by the formula above is nil, no credit is allowed.)
(3) The limit on credit contained in subsection (2) is in addition to the limit given by section 42(2).
(4) Take the following steps to determine the relevant profit amount and the relevant UK company's share of that amount.
Step 1 Determine the total amount of the loan relationship credits which arise in the relevant period from loan B to the person who made loan B.
Step 2 Deduct from the amount determined at step 1 above the credits from the creditor CFC's qualifying loan relationship determined at step 1 in section 371IF for the relevant period. The result is the relevant profit amount.
Step 3 On a just and reasonable basis, apportion the relevant profit amount amongst all the persons falling within subsection (5) (although the amount apportioned to a person may be nil). The relevant UK company's share of the relevant profit amount is the amount apportioned to it (and is nil if no amount is apportioned to it).
(5) The following persons (apart from the creditor CFC) fall within this subsection—
(a) the person who made loan B, and
(b) any person who has made or received a loan out of which loan B is wholly or partly funded (directly or indirectly).
(6) In this section—
(a) references to loan B do not include any part of loan B—
(i) which loan A (see section 371IG(3)(a)) is not made and used to fund, or
(ii) in relation to which the requirement of section 371IG(3)(c) is not met,
(b) “loan relationship credit” means, in relation to a person, a credit which the person has under Part 5 of CTA 2009 or would have were the person a UK resident company within the charge to corporation tax, and
(c) “loan” has the same meaning as it has in Chapter 9 of Part 9A.
14 (1) In Chapter 3 (miscellaneous provisions), section 112 (deduction from income for foreign tax (instead of credit against UK tax)) is amended as follows.
(2) After subsection (3) insert—
(3A) Subsection (3B) applies if—
(a) the requirements of section 49A(1)(a) to (c) are met,
(b) amounts have been paid in respect of non-UK tax on loan relationship credits falling within section 49A(1)(c) which arise in an accounting period of the relevant UK company, and
(c) apart from subsection (3B), Z would exceed
R
×
S
where—
Z is—
the total amount of any reductions under subsection (1) for amounts paid in respect of that non-UK tax, less
the total amount of any increases under subsection (3) for payments made by reference to that non-UK tax, and
R and S have the same meaning as in section 49A(2).
R and S have the same meaning as in section 49A(2).
(3B) The total amount of the reductions under subsection (1) is to be reduced so that Z equals
R
×
S
(3) In subsection (6), for “subsection (1)” substitute “ this section ”.
Miscellaneous
15 In Part 6 of TIOPA 2010 (tax arbitrage), in section 236 (deduction schemes involving hybrid entities) for subsection (4) substitute—
(4) Condition B is not met just because the party's profits or gains are subject to a charge under the law of a territory outside the United Kingdom (by whatever name known) which is similar to the CFC charge (see Part 9A).
16 Part 9A of TIOPA 2010 (controlled foreign companies) is amended as follows.
17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18 Chapter 9 (exemptions for profits from qualifying loan relationships) is amended as follows.
19 In section 371IB (loans funded out of qualifying resources) after subsection (9) insert—
(9A) Subsection (9) does not apply if the debt incurred by the member of the CFC group as mentioned in subsection (8) represents the principal on a loan made to the member to which subsection (9B) or (9D) applies.
(9B) This subsection applies to a loan if the member repays it within 48 hours of the loan being made.
(9C) But subsection (9B) does not apply to a loan if the repayment of the loan within the 48 hours occurs under, or is connected (directly or indirectly) with, an arrangement the main purpose, or one of the main purposes, of which is to ensure that subsection (9) does not apply because of—
(a) the loan, or
(b) any other debt which a member of the CFC group incurs (or is expected to incur) in the United Kingdom.
(9D) This subsection applies to a loan if—
(a) there is an issue of shares which meets the requirements of subsection (7)(c)(i) to (iii),
(b) the loan was made before the issue of shares but with the expectation that it would be repaid by the member out of funds deriving (directly or indirectly) from the issue of shares,
(c) the loan is repaid by the member out of such funds within the period of 6 months beginning with the day on which the loan was made, and
(d) the loan—
(i) was made by a person who was not a member of the CFC group, and
(ii) was not made (wholly or partly nor directly or indirectly) out of funds or other assets provided by a member of the CFC group.
20 (1) Section 371IE (matched interest) is amended as follows.
(2) In subsection (1)(d)(ii) after “include” insert “ some or all of ”.
(3) After subsection (7) insert—
(7A) In subsection (6) the reference to the leftover profits is to those profits so far as they would be included in the relevant finance profits (see section 314A(1)(d)).
Commencement and transitional provision
21 The amendments made by this Schedule are treated as having come into force on 1 January 2013.
22 (1) Section 371CE of TIOPA 2010 (as amended by paragraph 17 above) applies for accounting periods of CFCs beginning before 20 March 2013 with the modifications set out in this paragraph. References below to subsections are to subsections of section 371CE.
Accounting periods ending before 20 March 2013
(2) For accounting periods ending before 20 March 2013, subsection (4) applies as if paragraph (b) were omitted.
Accounting periods ending on or after 20 March 2013
(3) The following sub-paragraphs apply for accounting periods ending on or after 20 March 2013.
(4) A notice may be given under subsection (2)(b) even though the requirement of subsection (2)(a) is not met.
(5) If a notice is given under subsection (2)(b) in a case where the requirement of subsection (2)(a) is not met, the CFC's trading finance profits are to be apportioned on a just and reasonable basis between—
(a) the part of the accounting period falling before 20 March 2013 (“period A”), and
(b) the remaining part of the accounting period (“period B”).
(6) So far as the CFC's trading finance profits are apportioned to period A, they are to be treated as non-trading finance profits if the CFC is a group treasury company in period A (and subsection (3) applies to them accordingly).
(7) For the purpose of determining if the CFC is a group treasury company in period A, subsection (4) applies—
(a) as if references to the accounting period were to period A, and
(b) as if paragraph (b) were omitted.
(8) So far as the CFC's trading finance profits are apportioned to period B, they are to be treated as non-trading finance profits if the CFC is a group treasury company in period B (and subsection (3) applies to them accordingly).
(9) For the purpose of determining if the CFC is a group treasury company in period B, subsection (4) applies as if references to the accounting period were to period B.
SCHEDULE 48 Proceeds of crime: powers of officers of Revenue and Customs
Section 224
Proceeds of Crime Act 2002
1 The Proceeds of Crime Act 2002 is amended in accordance with paragraphs 2 to 20.
2 (1) Section 289 (searches) is amended as follows.
(2) In subsections (1), (1A)(a) and (2), for “a customs officer” substitute “ an officer of Revenue and Customs ”.
(3) In subsections (1C) and (1D), for “customs officer” substitute “ officer of Revenue and Customs ”.
(4) After subsection (5)(b) insert—
(ba) are exercisable by an officer of Revenue and Customs only so far as the officer is exercising a function relating to a matter other than an excluded matter,
.
(5) After subsection (5) insert—
(5A) The reference in subsection (5)(ba) to an excluded matter is to a matter specified in section 54(4)(b) of, or in any of paragraphs 3, 5, 7, 10, 12 and 14 to 30 of Schedule 1 to, the Commissioners for Revenue and Customs Act 2005.
3 In section 290 (prior approval for search)—
(a) in subsection (4)(a), for “a customs officer, a customs officer” substitute “ an officer of Revenue and Customs, such an officer ”, and
(b) in subsection (6), for “customs officer” substitute “ officer of Revenue and Customs ”.
4 In section 291(2) (report on exercise of powers), for “customs officer” substitute “ officer of Revenue and Customs ”.
5 In section 292 (code of practice)—
(a) in subsection (1), for “customs officers” substitute “ officers of Revenue and Customs ”, and
(b) in subsection (6), for “a customs officer” substitute “ an officer of Revenue and Customs ”.
6 (1) Section 294 (seizure of cash) is amended as follows.
(2) In subsections (1) and (2), for “A customs officer” substitute “ An officer of Revenue and Customs ”.
(3) After subsection (2) insert—
(2A) The powers conferred by this section are exercisable by an officer of Revenue and Customs only so far as the officer is exercising a function relating to a matter other than an excluded matter.
(2B) But the powers may be exercised by the officer in reliance on a suspicion that relates to an excluded matter.
(2C) The reference in subsection (2A) to an excluded matter is to a matter specified in section 54(4)(b) of, or in any of paragraphs 3, 5, 7, 10, 12 and 14 to 30 of Schedule 1 to, the Commissioners for Revenue and Customs Act 2005.
7 In section 295(1) (detention of seized cash), for “customs officer” substitute “ officer of Revenue and Customs ”.
8 In section 296(2) (interest on cash), for “customs officer” substitute “ officer of Revenue and Customs ”.
9 In section 297(4) (release of detained cash), for “A customs officer” substitute “ An officer of Revenue and Customs ”.
10 In section 302(6) (compensation), for “a customs officer” substitute “ an officer of Revenue and Customs ”.
11 In section 351(5) (person making application to vary or discharge order)—
(a) for “a customs officer” substitute “ an officer of Revenue and Customs ”, and
(b) for “customs officer” substitute “ officer of Revenue and Customs ”.
12 (1) Section 352 (search and seizure warrants) is amended as follows.
(2) In subsection (5)—
(a) omit paragraph (a), and
(b) in paragraph (c), at the end insert “ , a confiscation investigation or a money laundering investigation ”.
(3) In subsection (7), omit “(a) or”.
13 (1) Section 353 (requirements where production order not available) is amended as follows.
(2) In subsection (10)—
(a) omit paragraph (a), and
(b) in paragraph (c), at the end insert “ , a confiscation investigation or a money laundering investigation ”.
(3) In subsection (11), omit “(a) or”.
14 (1) Section 369 (customer information orders: supplementary provisions) is amended as follows.
(2) In subsection (5)—
(a) for “a customs officer” substitute “ an officer of Revenue and Customs ”, and
(b) for “customs officer” substitute “ officer of Revenue and Customs ”.
(3) In subsection (7), for “a customs officer” substitute “ an officer of Revenue and Customs ”.
15 In section 375(4) (account monitoring orders: supplementary provisions)—
(a) for “a customs officer” substitute “ an officer of Revenue and Customs ”, and
(b) for “customs officer” substitute “ officer of Revenue and Customs ”.
16 After section 375B insert—
Officers of Revenue and Customs
Restriction on exercise of certain powers conferred on officers of Revenue and Customs
375C (1) This section applies to the powers conferred on an officer of Revenue and Customs which are exercisable in connection with—
(a) a production order made or to be made in relation to a confiscation investigation or a money laundering investigation,
(b) a search and seizure warrant issued or to be issued in relation to a confiscation investigation or a money laundering investigation,
(c) a customer information order, and
(d) an account monitoring order.
(2) The powers are exercisable by the officer only so far as the officer is exercising a function relating to a matter other than an excluded matter.
(3) The reference in subsection (2) to an excluded matter is to a matter specified in section 54(4)(b) of, or in any of paragraphs 3, 5, 7, 10, 12 and 14 to 30 of Schedule 1 to, the Commissioners for Revenue and Customs Act 2005.
17 In section 377(1) (persons subject to code of practice), for paragraph (e) substitute—
(e) officers of Revenue and Customs;
18 In section 378 (officers)—
(a) in subsection (1), for paragraph (d) substitute—
(d) an officer of Revenue and Customs;
,
(b) in subsections (2)(c) and (6)(b), for “a customs officer” substitute “ an officer of Revenue and Customs ”, and
(c) in subsection (4), for paragraph (c) substitute—
(c) an officer of Revenue and Customs;
19 After section 408B insert—
Officers of Revenue and Customs
Restriction on exercise of certain powers conferred on officers of Revenue and Customs
408C (1) This section applies to the powers conferred on an officer of Revenue and Customs which are exercisable in connection with—
(a) a production order made or to be made in relation to a confiscation investigation or a money laundering investigation,
(b) a search warrant issued or to be issued in relation to a confiscation investigation or a money laundering investigation,
(c) a customer information order, and
(d) an account monitoring order.
(2) The powers are exercisable by the officer only so far as the officer is exercising a function relating to a matter other than an excluded matter.
(3) The reference in subsection (2) to an excluded matter is to a matter specified in section 54(4)(b) of, or in any of paragraphs 3, 5, 7, 10, 12 and 14 to 30 of Schedule 1 to, the Commissioners for Revenue and Customs Act 2005.
20 In section 412 (interpretation), in the entry relating to the meaning of references to a “constable”, for “a customs and excise officer” substitute “ an officer of Revenue and Customs ”.
Commissioners for Revenue and Customs Act 2005
21 In Schedule 2 to the Commissioners for Revenue and Customs Act 2005 (restrictions on functions of Commissioner and officers), omit—
(a) paragraphs 13 and 13A, and
(b) the italic heading immediately preceding those paragraphs.
Relationship of provisions of 2005 Act with provisions of 2002 Act
22 Nothing in section 6 or 7 of the Commissioners for Revenue and Customs Act 2005 (initial functions) restricts the functions in connection with which officers of Revenue and Customs may exercise a power under—
(a) Chapter 3 of Part 5 of the Proceeds of Crime Act 2002 (as amended by this Schedule), or
(b) Chapters 2 and 3 of Part 8 of that Act (as so amended).
Consequential amendments
23 In section 80(1) and (3) of the Serious Crime Act 2007 (amendment of sections 352(5) and 353(10) of the Proceeds of Crime Act 2002), omit paragraph (a) and the word “and” at the end of that paragraph.
24 In Schedule 7 to the Policing and Crime Act 2009 (minor and consequential amendments), omit paragraph 116.
SCHEDULE 49 Corporation tax: deferral of payment of exit charge
Section 229
Amendments of TMA 1970
1 TMA 1970 is amended in accordance with paragraphs 2 to 6.
2 After section 59F insert—
Exit charge payment plans
59FA (1) Schedule 3ZB contains provisions about exit charge payment plans in accordance with which companies may defer payment of certain corporation tax.
(2) Parts 1 and 2 of the Schedule each make provision about the circumstances in which an exit charge payment plan may be entered into, and about determining the amount of corporation tax that may be deferred—
(a) see Part 1 in relation to a company which ceases to be resident in the United Kingdom, and
(b) see Part 2 in relation to a company which is not resident in the United Kingdom but which carries on, or has carried on, a trade in the United Kingdom through a permanent establishment there.
(3) Part 3 of the Schedule contains provision about—
(a) entering into an exit charge payment plan,
(b) the effect of such a plan,
(c) the content of such a plan, and
(d) the methods in accordance with which tax deferred under such a plan may be paid.
3 Immediately before section 59G insert— “ Managed payment plans ”.
4 (1) Section 109B (provision for securing payment by company of outstanding tax) is amended as follows.
(2) In subsection (1), at the end insert “ , subject to subsection (5A). ”
(3) In subsection (4)(b), at the end insert “ (which may include a proposal to enter into an exit charge payment plan in accordance with Schedule 3ZB). ”
(4) After subsection (5) insert—
(5A) Condition D does not apply to the extent that payment of the tax is to be secured by the company entering into an exit charge payment plan in accordance with Schedule 3ZB.
5 (1) Section 109E (liability of other persons for unpaid tax) is amended as follows.
(2) After subsection (1) insert—
(1A) The reference in subsection (1)(b) to the time when tax becomes payable is a reference to—
(a) in a case where an exit charge payment plan has been entered into in accordance with Schedule 3ZB in respect of the tax, the time when the tax becomes payable under the plan, and
(b) in any other case, the time when the tax becomes payable in accordance with section 59D or 59E.
(3) In subsection (2), for “the time when the amount of the tax is finally determined” substitute “ the relevant time ”.
(4) After subsection (2) insert—
(2A) In subsection (2) the “relevant time” means—
(a) in a case where an exit charge payment plan has been entered into in accordance with Schedule 3ZB in respect of the tax, the later of—
(i) the first day after the period of 12 months beginning immediately after the migration accounting period (as defined in Part 1 or 2 of Schedule 3ZB, as the case may be), and
(ii) the date on which the tax is payable under the plan, and
(b) in any other case, the time when the amount of the tax is finally determined.
6 After Schedule 3ZA insert—
SCHEDULE 3ZB
Exit charge payment plans
PART 1 company ceasing to be resident in UK
Circumstances in which exit charge payment plan may be entered into
1 (1) This Part of this Schedule and Part 3 of this Schedule apply where an eligible company—
(a) ceases to be resident in the United Kingdom,
(b) on ceasing to be so resident, becomes resident in another EEA state, and
(c) is liable to pay qualifying corporation tax in respect of the migration accounting period.
(2) The company may defer payment of some or all of the qualifying corporation tax if it enters into an exit charge payment plan in respect of it in accordance with this Schedule.
(3) The company may enter into an exit charge payment plan only if conditions A to C are met.
(4) Condition A is that before the end of the period of 9 months beginning immediately after the migration accounting period—
(a) an application to enter into the exit charge payment plan is made to Her Majesty's Revenue and Customs, and
(b) the application contains details of all the matters which are required by Part 3 of this Schedule to be specified in the plan.
(5) Condition B is that on ceasing to be resident in the United Kingdom, the company carries on a business in an EEA state.
(6) Condition C is that, on becoming resident in the other EEA state, the company is not treated as resident in a territory outside the European Economic Area for the purposes of any double taxation arrangements.
(7) In this paragraph—
“double taxation arrangements” means arrangements which are made by two or more territories with a view to affording relief from double taxation and which have effect at the time when the company ceases to be resident in the United Kingdom;
“eligible company” means a company that has a right to freedom of establishment protected by Article 49 of the Treaty on the functioning of the European Union or established by Article 31 of the Agreement on the European Economic Area.
(8) In this Part of this Schedule—
(a) references to the migration accounting period are to—
(i) in a case where an accounting period comes to an end on the company ceasing to be resident in the United Kingdom, that accounting period, and
(ii) in a case not falling within sub-paragraph (i), the accounting period during which the company ceases to be resident in the United Kingdom,
(b) references to a Part 1 company are to a company in relation to which this Part of this Schedule applies, and
(c) references to Part 3 of this Schedule are to Part 3 of this Schedule as it applies to a Part 1 company.
Qualifying corporation tax
2 (1) The company is liable to pay qualifying corporation tax in respect of the migration accounting period if CT1 is greater than CT2 where—
CT1 is the corporation tax which the company is liable to pay for the accounting period, and
CT2 is the corporation tax which the company would be liable to pay for the accounting period if any income, profits, gains, losses or debits arising only by virtue of the exit charge provisions were ignored,
(CT2 will be zero if the company would not be liable to pay any corporation tax for the period).
(2) The amount of qualifying corporation tax which the company is liable to pay is the difference between CT1 and CT2.
(3) “Exit charge provisions” means—
(a) section 185 of the 1992 Act,
(b) section 187(4) of that Act, where that subsection applies by virtue of section 187(4)(c),
(c) section 162 of CTA 2009, where that section applies by virtue of section 41(2)(b) of that Act,
(d) section 333 of that Act,
(e) section 609 of that Act,
(f) section 859 of that Act, where that section applies by virtue of section 859(2)(a), and
(g) section 862 of that Act, where that section applies by virtue of section 862(1)(c).
(4) References in this Part of this Schedule and Part 3 of this Schedule to qualifying corporation tax are to be read in accordance with this paragraph.
Interpretation: exit charge assets and liabilities
3 (1) This paragraph applies for the purposes of this Part of this Schedule and Part 3 of this Schedule.
(2) “Exit charge assets” and “exit charge liabilities” means assets or liabilities (as the case may be) in respect of which income, profits or gains arise in the migration accounting period by virtue of the exit charge provisions, and in particular—
(a) “TCGA or trading stock exit charge assets” means those exit charge assets, other than pre-FA 2002 intangible fixed assets, in respect of which income, profits or gains arise by virtue of the exit charge provision mentioned in paragraph 2(3)(a), (b) or (c),
(b) “financial exit charge assets or liabilities” means those exit charge assets or liabilities in respect of which income, profits or gains arise by virtue of the exit charge provision mentioned in paragraph 2(3)(d) or (e),
(c) “intangible exit charge assets” means—
(i) those exit charge assets in respect of which income, profits or gains arise by virtue of the exit charge provision mentioned in paragraph 2(3)(f) or (g), and
(ii) those exit charge assets which are pre-FA 2002 intangible fixed assets in respect of which income, profits or gains arise by virtue of the exit charge provision mentioned in paragraph 2(3)(a) or (b).
(3) In sub-paragraph (2)—
(a) “exit charge provisions” has the meaning given in paragraph 2(3);
(b) “pre-FA 2002 intangible fixed asset” means an intangible fixed asset which is a pre-FA 2002 asset (as defined in section 881 of CTA 2009).
PART 2 Non-UK resident companies with UK permanent establishments
Circumstances in which exit charge payment plan may be entered into
4 (1) This Part of this Schedule and Part 3 of this Schedule apply where—
(a) at any time during an accounting period (“the migration accounting period”) an eligible company which is not resident in the United Kingdom carries on a trade in the United Kingdom through a permanent establishment there,
(b) one or more PE qualifying events occurs in respect of any assets or liabilities of the company as mentioned in sub-paragraph (4), and
(c) the company is liable to pay qualifying corporation tax in respect of the migration accounting period.
(2) The company may defer payment of some or all of the qualifying corporation tax if it enters into an exit charge payment plan in respect of it in accordance with this Schedule.
(3) The company may enter into an exit charge payment plan only if before the end of the period of 9 months beginning immediately after the migration accounting period—
(a) an application to enter into the exit charge payment plan is made to Her Majesty's Revenue and Customs, and
(b) the application contains details of all the matters which are required by Part 3 of this Schedule to be specified in the plan.
(4) For the purposes of this Part of this Schedule, a “PE qualifying event” occurs in respect of an asset or liability of a company if—
(a) an event occurs which triggers—
(i) a deemed disposal and reacquisition of the asset or liability under the exit charge provision mentioned in paragraph 5(3)(a), (c), (d) or (e), or
(ii) a valuation of the asset under the exit charge provision mentioned in paragraph 5(3)(b),
(b) the event—
(i) occurs during the migration accounting period, or
(ii) causes the migration accounting period to come to an end, and
(c) at the time of the event, the company is not treated as resident in a territory outside the European Economic Area for the purposes of any double taxation arrangements.
(5) In this Part of this Schedule, references to a PE qualifying asset or liability are to an asset or liability in respect of which a PE qualifying event occurs.
(6) In this paragraph “double taxation arrangements” and “eligible company” have the meanings given in paragraph 1(7).
(7) In this Part of this Schedule—
(a) references to the migration accounting period are to be read in accordance with this paragraph;
(b) references to a Part 2 company are to a company in relation to which this Part of this Schedule applies,
(c) references to Part 3 of this Schedule are to Part 3 of this Schedule as it applies to a Part 2 company, and
(d) “permanent establishment”, in relation to a company, is to be read in accordance with Chapter 2 of Part 24 of CTA 2010.
Qualifying corporation tax
5 (1) The company is liable to pay qualifying corporation tax in respect of the migration accounting period if CT1 is greater than CT2 where—
CT1 is the corporation tax which the company is liable to pay for the accounting period, and
CT2 is the corporation tax which the company would be liable to pay for the accounting period if any income, profits, gains, losses or debits arising as a result of any PE qualifying events, and arising only by virtue of the exit charge provisions, were ignored,
(CT2 will be zero if the company would not be liable to pay any corporation tax for the period).
(2) The amount of qualifying corporation tax which the company is liable to pay is the difference between CT1 and CT2.
(3) Exit charge provisions means—
(a) section 25 of the 1992 Act,
(b) section 162 of CTA 2009, where that section applies by virtue of section 41(2)(b) of that Act,
(c) section 334 of that Act,
(d) section 610 of that Act, and
(e) section 859 of that Act, where that section applies by virtue of section 859(2)(b).
(4) References in this Part of this Schedule and Part 3 of this Schedule to qualifying corporation tax are to be read in accordance with this paragraph.
Interpretation: exit charge assets and liabilities
6 (1) This paragraph applies for the purposes of this Part of this Schedule and Part 3 of this Schedule.
(2) “Exit charge assets” and “exit charge liabilities” means any PE qualifying assets or liabilities (as the case may be) in respect of which income, profits or gains arise in the migration accounting period by virtue of the exit charge provisions, and in particular—
(a) “TCGA or trading stock exit charge assets” means those exit charge assets, other than pre-FA 2002 intangible fixed assets, in respect of which income, profits or gains arise by virtue of the exit charge provision mentioned in paragraph 5(3)(a) or (b);
(b) “financial exit charge assets or liabilities” means those exit charge assets or liabilities in respect of which income, profits or gains arise by virtue of the exit charge provision mentioned in paragraph 5(3)(c) or (d);
(c) “intangible exit charge assets” means—
(i) those exit charge assets in respect of which income, profits or gains arise by virtue of the exit charge provision mentioned in paragraph 5(3)(e), and
(ii) those exit charge assets which are pre-FA 2002 intangible fixed assets in respect of which income, profits or gains arise by virtue of the exit charge provision mentioned in paragraph 5(3)(a).
(3) In sub-paragraph (2)—
(a) “exit charge provisions” has the meaning given in paragraph 5(3);
(b) “pre-FA 2002 intangible fixed asset” means an intangible fixed asset which is a pre-FA 2002 asset (as defined in section 881 of CTA 2009).
PART 3 Entering into an exit charge payment plan
Introduction
7 (1) As to when this Part of this Schedule applies, see—
(a) Part 1 of this Schedule (companies ceasing to be resident in the United Kingdom), and
(b) Part 2 of this Schedule (companies with permanent establishments in the United Kingdom).
(2) In this Part of this Schedule, as it applies to a company in relation to which Part 1 of this Schedule applies, terms and expressions which are used in this Part and in that Part have the same meanings in this Part as in that Part.
(3) In this Part of this Schedule, as it applies to a company in relation to which Part 2 of this Schedule applies, terms and expressions which are used in this Part and in that Part have the same meanings in this Part as in that Part.
Entering into an exit charge payment plan
8 (1) A Part 1 company or a Part 2 company enters into an exit charge payment plan in respect of qualifying corporation tax in accordance with this Schedule if—
(a) the company agrees to pay, and an officer of Revenue and Customs agrees to accept payment of, the tax in accordance with the standard instalment method (see paragraph 13) or the realisation method (see paragraphs 14 to 17) or a combination of the two methods,
(b) the company agrees to pay interest on the tax in accordance with paragraph 9(3), and
(c) the plan meets the requirements set out in paragraphs 10 to 12 as to the matters that must be specified in it.
(2) The exit charge payment plan may, in the circumstances mentioned in sub-paragraph (3), contain appropriate provision regarding security for Her Majesty's Revenue and Customs in respect of the deferred payment of the tax.
(3) Those circumstances are where an officer of Her Majesty's Revenue and Customs considers that agreeing to accept payment of qualifying corporation tax in accordance with the plan would present a serious risk as to collection of the tax in the absence of provision regarding security in respect of that tax.
(4) An exit charge payment plan is void if any information furnished by the company in connection with the plan does not fully and accurately disclose all facts and considerations material to the decision of the officer of Revenue and Customs to accept payment of qualifying corporation tax in accordance with the plan.
Effect of exit charge payment plan
9 (1) This paragraph applies where an exit charge payment plan is entered into by a company in respect of qualifying corporation tax in accordance with this Schedule.
(2) As regards when the tax is payable—
(a) the plan does not prevent the tax becoming due and payable under section 59D or 59E, but
(b) the Commissioners for Her Majesty's Revenue and Customs—
(i) may not seek payment of the tax otherwise than in accordance with the plan;
(ii) may make repayments in respect of any amount of the tax paid, or any amount paid on account of the tax, before the plan is entered into.
(3) As regards interest—
(a) the tax carries interest in accordance with Part 9 as if the plan had not been entered into, and
(b) each time a payment is made under the plan, it is to be paid together with any interest payable on it.
(4) As regards penalties, the company will be liable to penalties for late payment of the tax only if it fails to make payments in accordance with the plan (see item 6ZA of the Table at the end of paragraph 1 of Schedule 56 to the Finance Act 2009).
(5) Qualifying corporation tax payable in accordance with an exit charge payment plan which is for the time being unpaid may be paid at any time before it becomes payable under the plan together with interest payable on it to the date of payment.
Content of exit charge payment plan
10 (1) An exit charge payment plan entered into by a Part 1 company must specify—
(a) the date on which the company ceased to be resident in the United Kingdom, and
(b) the EEA state in which the company has become resident.
(2) An exit charge payment plan entered into by a Part 2 company must specify—
(a) the EEA state in which the company is resident, and
(b) if the company has ceased to carry on a trade in the United Kingdom through a permanent establishment there, the date on which it ceased to do so.
(3) In either case an exit charge payment plan entered into by a company must also specify—
(a) the amount of qualifying corporation tax which, in the company's opinion, is payable by it in respect of the migration accounting period,
(b) the amount of that qualifying corporation tax which the company wishes to defer paying under the exit charge payment plan (“ECPP tax”), and
(c) whether the ECPP tax is to be paid in accordance with—
(i) the standard instalment method (see paragraph 13),
(ii) the realisation method (see paragraphs 14 to 17), or
(iii) a combination of the two methods.
(4) If the ECPP tax is to be paid in accordance with a combination of the two methods, the exit charge payment plan must also specify—
(a) in the case of each of the company's exit charge assets or liabilities (see paragraphs 3(2) or 6(2), as the case may be), the method in accordance with which the amount of ECPP tax attributable to the asset or liability (see sub-paragraph (6)) is to be paid, and
(b) the amount of the ECPP tax specified under sub-paragraph (3)(b) that is to be paid in accordance with each method.
(5) But an exit charge payment plan may specify that any ECPP tax is to be paid in accordance with the standard instalment method only if—
(a) in the case of a plan entered into by a Part 1 company, the company's ceasing to be resident in the United Kingdom is not part of arrangements the main purpose of which, or one of the main purposes of which, is to defer the payment of any qualifying corporation tax payable by it;
(b) in the case of a plan entered into by a Part 2 company, none of the PE qualifying events occurring during the migration accounting period, or bringing that period to an end, is part of arrangements the main purpose of which, or one of the main purposes of which, is to defer the payment of any qualifying corporation tax payable by it.
(6) The amount of ECPP tax attributable to each exit charge asset or liability is—
A
B
×
T
where—
“A” is the income, profits or gains arising in respect of the asset or liability in the migration accounting period by virtue of the relevant exit charge provision only,
“B” is the total income, profits or gains arising in respect of all the exit charge assets and liabilities in the migration accounting period by virtue of the exit charge provisions only, and
“T” is the ECPP tax.
Content: realisation method
11 (1) This paragraph applies if, under an exit charge payment plan, the amount of ECPP tax attributable to any exit charge asset or liability is to be paid in accordance with the realisation method.
(2) The plan must specify—
(a) each such asset or liability (so far as not already specified under paragraph 10(4)(a)), and
(b) the amount of ECPP tax attributable to the asset or liability, calculated in accordance with paragraph 10(6).
(3) The plan must also include requirements as to the ongoing provision of information by the company to Her Majesty's Revenue and Customs in relation to the asset or liability.
Content: additional information relating to assets and liabilities
12 (1) This paragraph applies if, under an exit charge payment plan, the amount of ECPP tax attributable to an exit charge asset or liability is to be paid in accordance with the realisation method.
(2) The plan must specify any additional information required by this paragraph in relation to the asset or liability.
(3) Sub-paragraph (4) applies in the case of a financial exit charge asset or liability if, immediately after the migration accounting period, the remaining term of the loan relationship or derivative contract in question is less than 10 years.
(4) The plan must specify, in relation to the asset or liability, how many years of the term of the loan relationship or derivative contract remain (rounded up to the nearest whole year).
(5) Sub-paragraph (6) applies in the case of an intangible exit charge asset if, immediately after the migration accounting period, the remaining useful life of the asset for accountancy purposes is less than 10 years.
(6) The plan must specify, in relation to the asset, how many years of the useful life of the asset remain (rounded up to the nearest whole year).
The standard instalment method
13 (1) This paragraph applies if, under an exit charge payment plan, some or all of the ECPP tax is to be paid in accordance with the standard instalment method.
(2) The amount of the ECPP tax that is to be paid in accordance with the standard instalment method is payable in 6 instalments of equal amounts as follows—
(a) the first instalment is due on the first day after the period of 9 months beginning immediately after the migration accounting period, and
(b) the other 5 instalments are due one on each of the first 5 anniversaries of that day.
(3) But if a relevant event occurs, the outstanding balance of the ECPP tax that is payable in accordance with the standard instalment method is payable on the date on which the next instalment of that tax would otherwise have been due under the plan.
(4) A “relevant event” means—
(a) the company becoming insolvent or entering into administration,
(b) the appointment of a liquidator,
(c) any event under the law of an EEA state outside the United Kingdom corresponding to an event specified in paragraph (a) or (b), or
(d) the company ceasing to be resident in an EEA state and, on so ceasing, not becoming resident in any other EEA state.
The realisation method: TCGA or trading stock exit charge assets
14 (1) This paragraph applies if—
(a) under an exit charge payment plan, the amount of ECPP tax attributable to an exit charge asset is to be paid in accordance with the realisation method, and
(b) the asset is a TCGA or trading stock exit charge asset (see paragraph 3(2)(a) or 6(2)(a), as the case may be).
(2) The amount of ECPP tax attributable to the asset under paragraph 10(6) is payable in relation to whichever is the first to occur of the following events—
(a) the disposal of that asset at any time after—
(i) the company ceases to be resident in the United Kingdom (in the case of a Part 1 company), or
(ii) the occurrence of the PE qualifying event in respect of the asset (in the case of a Part 2 company),
(b) the tenth anniversary of the end of the migration accounting period, or
(c) a relevant event (as defined in paragraph 13(4)).
(3) The date on which the amount is payable is—
(a) in a case falling within sub-paragraph (2)(a) or (b), the date of the event referred to, and
(b) in a case falling within sub-paragraph (2)(c), the relevant date or, if that date has already passed, the next anniversary of that date.
(4) In sub-paragraph (3)(b), “relevant date” means the first day after the period of 9 months beginning immediately after the migration accounting period.
(5) Section 21(2) of the 1992 Act (part disposals of assets) applies for the purposes of sub-paragraph (2)(a) as it applies for the purposes of that Act.
(6) Where part of an asset is disposed of at any time after the event mentioned in sub-paragraph (2)(a), the amount of ECPP tax attributable to the asset under paragraph 10(6) is to be apportioned on a just and reasonable basis for the purpose of applying this paragraph to the part of the asset disposed of and the part which remains undisposed of.
The realisation method: other exit charge assets and liabilities
15 (1) This paragraph applies if—
(a) under an exit charge payment plan, the ECPP tax attributable to an exit charge asset or liability is to be paid in accordance with the realisation method, and
(b) the asset or liability is—
(i) a financial exit charge asset or liability, or
(ii) an intangible exit charge asset,
(see paragraph 3(2)(b) and (c) or 6(2)(b) and (c), as the case may be).
(2) The amount of ECPP tax attributable to any such asset or liability under paragraph 10(6) is payable in a number of annual instalments of equal amounts.
(3) The number of annual instalments is—
(a) in a case where a number of years is specified in the plan in relation to the asset or liability by virtue of paragraph 12(4) or (6), that number, and
(b) otherwise, 10.
(4) The instalments are due as follows—
(a) the first instalment is due on the first day after the period of 9 months beginning immediately after the migration accounting period, and
(b) the other instalments are due one on each of the subsequent anniversaries of that day (until they are all paid).
(5) But see paragraphs 16 and 17 for circumstances in which all or part of the outstanding balance of the amount of ECPP tax attributable to the asset or liability under paragraph 10(6) (“the outstanding balance in respect of the asset or liability”) becomes payable.
Outstanding balance becoming payable in full
16 (1) This paragraph applies where the amount of ECPP tax attributable to an asset or liability under paragraph 10(6) is payable in instalments in accordance with paragraph 15.
(2) All of the outstanding balance in respect of the asset or liability (as defined in paragraph 15(5)) is payable in accordance with sub-paragraph (3) if—
(a) a trigger event occurs in relation to the asset or liability (see sub-paragraph (4)), or
(b) a relevant event occurs (as defined in paragraph 13(4)),
before the last instalment is payable in accordance with paragraph 15.
(3) The outstanding balance is payable—
(a) in a case falling within sub-paragraph (2)(a), on the date of the trigger event, and
(b) in a case falling within sub-paragraph (2)(b), on the date on which the next instalment would otherwise have been due under the plan.
(4) For the purposes of this paragraph, a trigger event occurs in relation to an asset or liability if—
(a) in the case of a financial exit charge asset or liability, the company ceases to be party to the loan relationship or derivative contract in question, or
(b) in the case of an intangible fixed asset, the asset is disposed of.
Outstanding balance becoming payable in part
17 (1) This paragraph applies where—
(a) the amount of ECPP tax attributable to an asset or liability under paragraph 10(6) is payable in instalments in accordance with paragraph 15, and
(b) a partial trigger event occurs in relation to the asset or liability (see sub-paragraph (4)) before the last instalment is payable.
(2) On the occurrence of that event, part of the outstanding balance in respect of the asset or liability (as defined in paragraph 15(5)) is payable.
(3) The part payable under sub-paragraph (2) is so much of the outstanding balance in respect of the asset or liability as is attributable to the transaction mentioned in sub-paragraph (4)(a) or (b).
(4) For the purposes of sub-paragraph (2), a partial trigger event occurs in relation to an asset or liability if—
(a) in the case of a financial exit charge asset or liability—
(i) there is a disposal of rights or liabilities under the loan relationship or derivative contract in question which amounts to a related transaction (as defined in section 304 or 596 of CTA 2009 as the case may be), but
(ii) the transaction does not result in the company ceasing to be party to the relationship or contract, and
(b) in the case of an intangible exit charge asset, there is a transaction which—
(i) results in a reduction in the accounting value of the asset, but
(ii) does not result in the asset ceasing to be recognised in the company's balance sheet.
(5) Where part of the outstanding balance in respect of an asset or liability is paid in accordance with sub-paragraphs (2) and (3), the remaining instalments due under paragraph 15 in respect of the asset or liability continue to be payable so far as they relate to the remaining asset or liability (subject to paragraph 16 and this paragraph).
(6) In sub-paragraph (5), the “remaining asset or liability” means—
(a) in a case within sub-paragraph (4)(a), the loan relationship or derivative contract as it exists following the related transaction,
(b) in a case within sub-paragraph (4)(b), the asset as it continues to be recognised on the balance sheet following the transaction mentioned in that sub-paragraph.
(7) For the purposes of sub-paragraphs (3) and (5)—
(a) the outstanding balance in respect of the asset or liability, and
(b) the remaining instalments due under paragraph 15 in respect of the asset or liability,
are to be apportioned on a just and reasonable basis between the transaction mentioned in sub-paragraph (4)(a) or (b) and the remaining asset or liability.
(8) In relation to an intangible exit charge asset that has no balance sheet value (or no longer has a balance sheet value), sub-paragraph (4)(b) applies as if, immediately before the transaction, it did have a balance sheet value.
Amendments of FA 2009
7 In Schedule 56 to FA 2009 (penalty for failure to make payments on time), in the Table at the end of paragraph 1, after entry 6 insert—
6ZA | Corporation tax | Amount payable under an exit charge payment plan entered into in accordance with Schedule 3ZB to TMA 1970 | The later of— the first day after the period of 12 months beginning immediately after the migration accounting period (as defined in Part 1 or 2 of Schedule 3ZB to TMA 1970, as the case may be), and the date on which the amount is payable under the plan.
Commencement
8 (1) The amendments made by this Schedule are treated as having come into force on 11 December 2012 in relation to an accounting period if the relevant day, in relation to that period, falls on or after 11 December 2012.
(2) In sub-paragraph (1) “the relevant day”, in relation to an accounting period, means the first day after the period of 9 months beginning immediately after the accounting period.
(3) But if the relevant day falls between 11 December 2012 and 31 March 2013 (inclusive), paragraphs 1(4) and 4(3) of Schedule 3ZB to TMA 1970 (inserted by this Schedule) have effect as if, in each case, for “before the end of the period of 9 months beginning immediately after the migration accounting period” there were substituted “ on or before 31 March 2013 ”.
SCHEDULE 50 Penalties: late filing, late payment and errors
Section 230
Amendments to Schedule 24 to FA 2007: penalties for errors
1 (1) In Schedule 24 to FA 2007 (penalties for errors), paragraph 13 (procedure: assessment) is amended as follows.
(2) In sub-paragraph (1)(c), after “assessed” insert “ (subject to sub-paragraph (1ZB)) ”.
(3) After sub-paragraph (1) insert—
(1ZA) Sub-paragraph (1ZB) applies where—
(a) a person is at any time liable for two or more penalties relating to PAYE returns, or for two or more penalties relating to CIS returns, and
(b) the penalties (“the relevant penalties”) are assessed in respect of more than one tax period (“the relevant tax periods”).
(1ZB) A notice under sub-paragraph (1) in respect of any of the relevant penalties may, instead of stating the tax period in respect of which the penalty is assessed, state the tax year or the part of a tax year to which the penalty relates.
(1ZC) For that purpose, a relevant penalty relates to the tax year or the part of a tax year in which the relevant tax periods fall.
(1ZD) For the purposes of sub-paragraph (1ZA)—
“a PAYE return” means a return for the purposes of PAYE regulations;
“a CIS return” means a return for the purposes of regulations under section 70(1)(a) of FA 2004 in connection with deductions on account of tax under the Construction Industry Scheme.
Amendments to Schedule 55 to FA 2009: penalty for failure to make returns
2 Schedule 55 (penalty for failure to make returns etc) to FA 2009 is amended in accordance with paragraphs 3 to 9.
3 In paragraph 1 (returns etc in respect of which penalties are to be paid under that Schedule)—
(a) in the definition of “penalty date” in sub-paragraph (4), after “document” insert “ falling within any of items 1 to 3 and 5 to 13 in the Table ”;
(b) after sub-paragraph (4) insert—
(4A) The Treasury may by order make such amendments to item 4 in the Table as they think fit in consequence of any amendment, revocation or re-enactment of the regulations mentioned in that item.
4 In the Table at the end of paragraph 1, in item 4 (annual return of payments for purposes of PAYE regulations etc), for the words in the third column substitute—
Return under any of the following provisions of the Income Tax (PAYE) Regulations 2003 (S.I. 2003/2682)— regulation 67B (real time returns) regulation 67D (exceptions to regulation 67B)
.
5 In paragraph 2 (amount of penalty: occasional returns and returns for periods of 6 months or more), for “1 to 5” substitute “ 1 to 3, 5 ”.
6 After paragraph 6A insert—
Amount of penalty: real time information for PAYE
6B Paragraphs 6C and 6D apply in the case of a return falling within item 4 in the Table.
6C (1) If P fails during a tax month to make a return on or before the filing date, P is liable to a penalty under this paragraph in respect of that month.
(2) But this is subject to sub-paragraphs (3) and (4).
(3) P is not liable to a penalty under this paragraph in respect of a tax month as a result of any failure to make a return on or before the filing date which occurs during the initial period.
(4) P is not liable to a penalty under this paragraph in respect of a tax month falling in a tax year if the month is the first tax month in that tax year during which P fails to make a return on or before the filing date (disregarding for this purpose any failure which occurs during the initial period).
(5) In sub-paragraphs (3) and (4) “the initial period” means the period which—
(a) begins with the day in the first tax year on which P is first required to make a return, and
(b) is of such duration as is specified in regulations made by the Commissioners,
and for this purpose “the first tax year” means the first tax year in which P is required to make returns.
(6) P may be liable under this paragraph to no more than one penalty in respect of each tax month.
(7) The penalty under this paragraph is to be calculated in accordance with regulations made by the Commissioners.
(8) Regulations under sub-paragraph (7) may provide for a penalty under this paragraph in respect of a tax month to be calculated by reference to either or both of the following matters—
(a) the number of persons employed by P, or treated as employed by P for the purposes of PAYE regulations;
(b) the number of previous penalties incurred by P under this paragraph in the same tax year.
(9) The Commissioners may by regulations disapply sub-paragraph (3) or (4) in such circumstances as are specified in the regulations.
(10) If P has elected under PAYE regulations to be treated as different employers in relation to different groups of employees, this paragraph applies to P as if—
(a) in respect of each group P were a different person, and
(b) each group constituted all of P's employees.
(11) Regulations made by the Commissioners under this paragraph may—
(a) make different provision for different cases, and
(b) include incidental, consequential and supplementary provision.
6D (1) P may be liable to one or more penalties under this paragraph in respect of extended failures.
(2) In this paragraph an “extended failure” means a failure to make a return on or before the filing date which continues after the end of the period of 3 months beginning with the day after the filing date.
(3) P is liable to a penalty or penalties under this paragraph if (and only if)—
(a) HMRC decide at any time that such a penalty or penalties should be payable in accordance with sub-paragraph (4) or (6), and
(b) HMRC give notice to P specifying the date from which the penalty, or each penalty, is payable.
(4) HMRC may decide under sub-paragraph (3)(a) that a separate penalty should be payable in respect of each unpenalised extended failure in the tax year to date.
(5) In that case the amount of the penalty in respect of each failure is 5% of any liability to make payments which would have been shown in the return in question.
(6) HMRC may decide under sub-paragraph (3)(a) that a single penalty should be payable in respect of all the unpenalised extended failures in the tax year to date.
(7) In that case the amount of the penalty in respect of those failures is 5% of the sum of the liabilities to make payments which would have been shown in each of the returns in question.
(8) For the purposes of this paragraph, an extended failure is unpenalised if a penalty has not already been imposed in respect of it under this paragraph (whether in accordance with sub-paragraph (4) or (6)).
(9) The date specified in the notice under sub-paragraph (3)(b) in relation to a penalty—
(a) may be earlier than the date on which the notice is given, but
(b) may not be earlier than the end of the period mentioned in sub-paragraph (2) in relation to the relevant extended failure.
(10) In sub-paragraph (9)(b) “the relevant extended failure” means—
(a) the extended failure in respect of which the penalty is payable, or
(b) if the penalty is payable in respect of more than one extended failure (in accordance with sub-paragraph (6)), the extended failure with the latest filing date.
7 In paragraph 18 (assessment), for sub-paragraph (5) substitute—
(5) Sub-paragraph (6) applies if—
(a) an assessment in respect of a penalty is based on a liability to tax that would have been shown in a return, and
(b) that liability is found by HMRC to be excessive.
(6) HMRC may by notice to P amend the assessment so that it is based upon the correct amount.
(7) An amendment under sub-paragraph (6)—
(a) does not affect when the penalty must be paid;
(b) may be made after the last day on which the assessment in question could have been made under paragraph 19.
8 (1) Paragraph 19 (assessment) is amended as follows.
(2) In sub-paragraph (2) after “Date A is” insert
—
(a) in the case of an assessment of a penalty under paragraph 6C, the last day of the period of 2 years beginning with the end of the tax month in respect of which the penalty is payable,
(b) in the case of an assessment of a penalty under paragraph 6D, the last day of the period of 2 years beginning with the filing date for the relevant extended failure (as defined in paragraph 6D(10)), and
(c) in any other case,
.
(3) In sub-paragraph (3)(a), after “return” insert “ or returns (as the case may be in relation to penalties under section 6C or 6D) ”.
9 (1) Paragraph 27 (interpretation) is amended as follows.
(2) After sub-paragraph (2) insert—
(2A) The Commissioners” means the Commissioners for Her Majesty's Revenue and Customs.
(3) After sub-paragraph (3) insert—
(3A) Tax month” means the period beginning with the 6th day of a month and ending with the 5th day of the following month.
Amendments to Schedule 56 to FA 2009: penalty for failure to make payments on time
10 Schedule 56 (penalty for failure to make payments on time) to FA 2009 is amended in accordance with paragraphs 11 to 14.
11 In paragraph 1 (penalty for failure to pay tax), in sub-paragraph (4), for the words from “the date on which” to the end substitute “ the day after the date specified in or for the purposes of column 4 of the Table in relation to that amount. ”
12 (1) Paragraph 6 (amount of penalty: PAYE and CIS amounts) is amended as follows.
(2) For sub-paragraph (1) substitute—
(1) P is liable to a penalty under this paragraph, in relation to each tax, each time that P makes a default in relation to a tax year.
(3) In sub-paragraph (2)—
(a) in the opening words, after “default” insert “ in relation to a tax year ”;
(b) in paragraph (a), at the end insert “ of tax payable in relation to the tax year ”;
(c) in paragraph (b), at the end insert “ payable in relation to the tax year ”;
(d) in paragraph (c), at the end insert “ payable in relation to the tax year ”;
(e) in paragraph (d), at the end insert “ and due for the tax year ”.
(4) For sub-paragraphs (3) to (7) substitute—
(3) But where a failure to make one of those payments (or to pay an amount comprising two or more of those payments) would, apart from this sub-paragraph, constitute the first default in relation to a tax year, that failure does not count as a default in relation to that year for the purposes of a penalty under this paragraph.
(4) The amount of the penalty for a default made in relation to a tax year is determined by reference to—
(a) the amount of the tax comprised in the default, and
(b) the number of previous defaults that P has made in relation to the same tax year.
(5) If the default is P's 1st, 2nd or 3rd default in relation to the tax year, P is liable, at the time of the default, to a penalty of 1% of the amount of tax comprised in the default.
(6) If the default is P's 4th, 5th or 6th default in relation to the tax year, P is liable, at the time of the default, to a penalty of 2% of the amount of tax comprised in the default.
(7) If the default is P's 7th, 8th or 9th default in relation to the tax year, P is liable, at the time of the default, to a penalty of 3% of the amount of tax comprised in the default.
(7A) If the default is P's 10th or subsequent default in relation to the tax year, P is liable, at the time of the default, to a penalty of 4% of the amount of tax comprised in the default.
(5) In sub-paragraph (8), for paragraph (b) substitute—
(b) a previous default counts for the purposes of sub-paragraphs (5) to (7A) even if it is remedied before the time of the default giving rise to the penalty.
(6) After sub-paragraph (8) insert—
(8A) Regulations made by the Commissioners for Her Majesty's Revenue and Customs may specify—
(a) circumstances in which, for the purposes of sub-paragraph (2), a payment of less than the full amount may be treated as a payment in full;
(b) circumstances in which sub-paragraph (3) is not to apply.
(8B) Regulations under sub-paragraph (8A) may—
(a) make different provision for different cases, and
(b) include incidental, consequential and supplementary provision.
13 After paragraph 9 insert—
Interaction with other penalties and late payment surcharges
9A In the application of the following provisions, no account shall be taken of a penalty under this Schedule—
(a) section 97A of TMA 1970 (multiple penalties),
(b) paragraph 12(2) of Schedule 24 to FA 2007 (interaction with other penalties), and
(c) paragraph 15(1) of Schedule 41 to FA 2008 (interaction with other penalties).
14 (1) Paragraph 11 (assessment of penalty) is amended as follows.
(2) For sub-paragraph (4A) substitute—
(4A) If an assessment in respect of a penalty is based on an amount of tax due or payable that is found by HMRC to be excessive, HMRC may by notice to P amend the assessment so that it is based upon the correct amount.
(4B) An amendment made under sub-paragraph (4A)—
(a) does not affect when the penalty must be paid;
(b) may be made after the last day on which the assessment in question could have been made under paragraph 12.
(3) Omit sub-paragraph (5).
Consequential amendment
15 In consequence of paragraph 7, paragraph 10 of Schedule 10 to the Finance (No. 3) Act 2010 is repealed.
Commencement
16 (1) The amendments made by paragraph 1 have effect in relation to any assessment of a penalty under Schedule 24 to FA 2007 made on or after the day on which this Act is passed.
(2) The amendments made by paragraphs 2 to 9 and 15 have effect for the tax year 2014-15 and subsequent tax years in relation to failures to make returns with a filing date (as defined in paragraph 1(4) of Schedule 55 to FA 2009) on or after 6 April 2014.
(3) The amendments made by paragraphs 10 to 14 have effect for defaults made in relation to the tax year 2014-15 and subsequent tax years (see paragraph 6(2) of Sch.56 to FA 2009 (as amended by paragraph 12(3) of this Schedule) as to when a default is made in relation to a tax year).
Section 233
TMA 1970
1 TMA 1970 is amended in accordance with paragraphs 2 to 5.
2 (1) Section 7 (notice of liability to income tax and capital gains tax) is amended as follows.
(2) In subsection (1)—
(a) for paragraph (b) substitute—
(b) falls within subsection (1A) or (1B),
, and
(b) for “six months from the end of that year” substitute “ the notification period ”.
(3) After subsection (1) insert—
(1A) A person falls within this subsection if the person has not received a notice under section 8 requiring a return for the year of assessment of the person's total income and chargeable gains.
(1B) A person falls within this subsection if the person—
(a) has received a notice under section 8 requiring a return for the year of assessment of the person's total income and chargeable gains, and
(b) has received a notice under section 8B withdrawing the notice under section 8.
(1C) In subsection (1) “the notification period” means—
(a) in the case of a person who falls within subsection (1A), the period of 6 months from the end of the year of assessment, or
(b) in the case of a person who falls within subsection (1B)—
(i) the period of 6 months from the end of the year of assessment, or
(ii) the period of 30 days beginning with the day after the day on which the notice under section 8 was withdrawn,
whichever ends later.
(4) In subsection (2), for the words from “shall have effect” to the end substitute “ and subsections (1A) to (1C) have effect as if references to a notice under section 8 were references to a notice under section 8A. ”
3 After section 8A insert—
Withdrawal by HMRC of notice under section 8 or 8A
8B (1) This section applies to a person who is given a notice under section 8 or 8A.
(2) Before the end of the withdrawal period, the person may request HMRC to withdraw the notice.
(3) But no request may be made if—
(a) the person has made a return under section 8 or 8A in pursuance of the notice under that section, or
(b) the person has been served with notice of a determination under section 28C by virtue of the notice under section 8 or 8A having been given to the person.
(4) If, on receiving a request, HMRC decide to withdraw the notice under section 8 or 8A they must do so by giving the person a notice under this section.
(5) A notice under this section must specify the date on which the notice under section 8 or 8A is withdrawn.
(6) For the purposes of subsection (2) “the withdrawal period” means—
(a) the period of 2 years beginning with the end of the year of assessment to which the notice under section 8 or 8A relates, or
(b) in exceptional circumstances, such extended period as HMRC may agree with the person.
(7) Withdrawal of a notice given to a person under section 8 or 8A in relation to a year of assessment does not prevent HMRC from giving the person a further notice under that section in relation to that year.
(8) See paragraph 17A of Schedule 55 to FA 2009 as to the cancellation of liability to a penalty under any paragraph of that Schedule by including provision in a notice under this section.
4 After section 12AA insert—
Withdrawal by HMRC of notice under section 12AA
12AAA (1) This section applies to a partner who is required by a notice under section 12AA to deliver a return.
(2) Before the end of the withdrawal period, the partner may request HMRC to withdraw the notice.
(3) But no request may be made if the partner has delivered a return under section 12AA in pursuance of the notice.
(4) If, on receiving a request, HMRC decide to withdraw the notice under section 12AA they must do so by giving the partner a notice under this section.
(5) A notice under this section must specify the date on which the notice under section 12AA is withdrawn.
(6) For the purposes of subsection (2) “the withdrawal period” means—
(a) in the case of a partnership which includes one or more companies, the period of 2 years beginning with the end of the period in respect of which the return under section 12AA was required by the notice under that section,
(b) in the case of any other partnership, the period of 2 years beginning with the end of the year of assessment to which the notice under section 12AA relates, or
(c) in the case of any partnership, such extended period as HMRC may agree with the partner in exceptional circumstances.
(7) Withdrawal of a notice under section 12AA in relation to the period in respect of which the return under that section was required or year of assessment (as the case may be) does not prevent HMRC from serving a further notice under section 12AA requiring a partner to deliver a return in relation to that period or year.
(8) References in subsections (2) to (6) to the partner include references to a successor of the partner (see section 12AA(11)).
(9) See paragraph 17B of Schedule 55 to FA 2009 as to the cancellation of liability to a penalty under any paragraph of that Schedule by including provision in a notice under this section.
5 In section 59B (payment of income and capital gains tax), after subsection (4) insert—
(4ZA) In a case in which the notice required by section 7 was given following the receipt of a notice under section 8B, subsections (3) and (4) apply as if—
(a) the reference to the notice required by section 7 were a reference to the original notice required by that section, and
(b) the references to notice under section 8 or 8A were references to the original notice under that section.
(4ZB) In subsection (4ZA) the references to original notices are to notices given before the notice under section 8B.
FA 2008
6 (1) Paragraph 7 of Schedule 41 to FA 2008 (potential lost revenue in respect of failure to comply with relevant obligation) is amended as follows.
(2) After sub-paragraph (1) insert—
(1A) In the case of an obligation under section 7 of TMA 1970 which arises by virtue of subsection (1B) of that section, the potential lost revenue is so much of any income tax or capital gains tax to which P is liable in respect of the tax year in question as is, by reason of the failure to comply with the obligation—
(a) where the period specified in subsection (1C)(b)(ii) of that section applies and ends after the relevant date, unpaid at the end of that period, or
(b) in any other case, unpaid on the relevant date.
(1B) For the purposes of sub-paragraph (1A) the relevant date is—
(a) 31 January following the tax year, or
(b) if, after that date, HMRC refund a payment on account in respect of the tax year to P, the day after the refund is issued.
(3) In sub-paragraph (2), after “and a tax year” insert “ (not falling within sub-paragraph (1A)) ”.
FA 2009
7 (1) Paragraph 3 of Schedule 53 to FA 2009 (late payment interest start date: amendments and discovery assessments etc) is amended as follows.
(2) In sub-paragraph (3)—
(a) for “as required” substitute “ in accordance with a requirement ”, and
(b) after “tax)” insert “ that arose by virtue of subsection (1A) of that section ”.
(3) After that sub-paragraph insert—
(3A) In the case of a person (“P”) who failed to give notice in accordance with a requirement under section 7 of TMA 1970 that arose by virtue of subsection (1B) of that section, the reference in sub-paragraph (1)(c) to an assessment which ought to have been made by P is a reference to the assessment which P would have been required to make if no notice relating to the year of assessment concerned had been withdrawn under section 8B of that Act.
8 In Schedule 55 to that Act (penalty for failure to make returns etc), after paragraph 17 insert—
Cancellation of penalty
17A (1) This paragraph applies where—
(a) P is liable for a penalty under any paragraph of this Schedule in relation to a failure to make a return falling within item 1 or 2 in the Table, and
(b) P makes a request under section 8B of TMA 1970 for HMRC to withdraw a notice under section 8 or 8A of that Act.
(2) The notice under section 8B of TMA 1970 may include provision under this paragraph cancelling liability to the penalty from the date specified in the notice.
17B (1) This paragraph applies where—
(a) P is liable for a penalty under any paragraph of this Schedule in relation to a failure to make a return falling within item 3 in the Table, and
(b) a request is made under section 12AAA of TMA 1970 for HMRC to withdraw a notice under section 12AA of that Act.
(2) The notice under section 12AAA of TMA 1970 may include provision under this paragraph cancelling liability to the penalty from the date specified in the notice.
Commencement
9 (1) The amendments made by this Schedule have effect—
(a) in relation to a return under section 12AA of TMA 1970 for a partnership which includes one or more companies, in respect of a return for a relevant period beginning on or after 6 April 2012, and
(b) in relation to a return under that section for any other partnership, or a return under section 8 or 8A of that Act, in respect of a return for a year of assessment beginning on or after 6 April 2012.
(2) In sub-paragraph (1)(a), “relevant period” means a period in respect of which a return is required.