SCHEDULE 28 Part 3: consequential amendments and repeals
Section 196
PART 1 Betting and Gaming Duties Act 1981
1 BGDA 1981 is amended as follows.
2 Omit sections 1 to 12 (general betting duty and pool betting duty).
3 In section 17 (bingo duty) for subsection (2A) substitute—
(2A) Bingo duty is not charged on the playing of a game of bingo which is not licensed bingo if every person playing the game participates by the use of—
(a) the internet,
(b) telephone,
(c) television,
(d) radio, or
(e) any other kind of electronic or other technology for facilitating communication.
4 Omit sections 26A to 26M (remote gaming duty).
5 In section 27 (offences by bodies corporate), omit “paragraph 13(1) or (3) or 14(1) of Schedule 1 or”.
6 In section 31 (protection of officers), for “general betting duty, bingo duty or remote gaming duty” substitute “ bingo duty ”.
7 Omit Schedule A1 (general betting duty and pool betting duty: double taxation relief).
8 Omit Schedule 1 (administration of general betting duty and pool betting duty).
9 Omit Schedule 4B (remote gaming duty: double taxation relief).
PART 2 Other amendments and repeals
Customs and Excise Management Act 1979
10 CEMA 1979 is amended as follows
11 (1) Section 1(1) (interpretation) is amended as follows.
(2) In the definition of “the revenue trade provisions of the customs and excise Acts”, after paragraph (f) insert—
(g) the provisions of Part 3 of the Finance Act 2014;
.
(3) In the definition of “revenue trader”—
(a) in paragraph (a)(ic), for “gaming within the meaning of the Betting and Gaming Duties Act 1981 (see section 33(1))” substitute “ any activity that constitutes betting or gaming for the purposes of Part 3 of the Finance Act 2014 (see sections 150, 183 and 188) ”,
(b) after paragraph (a)(id) insert—
(ie) the management or administration of any Chapter 1 stake fund, Chapter 2 stake fund or gaming prize fund within the meaning of Part 3 of the Finance Act 2014 (see sections 134, 143 and 154);
, and
(c) in paragraph (a)(ii) for “or (id)” substitute “ , (id) or (ie) ”.
12 After section 118BC insert—
Inspection powers: betting duties and remote gaming duty
118BCA (1) Subsection (2) applies to premises if an officer has reasonable cause to believe that—
(a) betting facilities are being provided, have been provided or are to be provided there,
(b) a totalisator is being operated, has been operated or is to be operated there, or
(c) any business in respect of which a person is or may become liable to remote gaming duty is being carried on, has been carried on or is to be carried on there.
(2) The officer may at any reasonable time enter and inspect the premises and inspect—
(a) accounts, records and other documents in the custody or control of a relevant person, and
(b) any relevant equipment.
(3) Subsection (1) does not permit an officer to enter or inspect a particular part of premises if—
(a) the officer has no reasonable cause to believe that paragraph (a), (b) or (as the case may be) (c) of that subsection is satisfied with respect to that particular part, and
(b) that part is used only as a dwelling.
(4) An officer may at any reasonable time (whether or not as part of an inspection under subsection (2)) require a relevant person or anyone acting on such a person's behalf—
(a) to open any relevant equipment, and
(b) to carry out any other operation that may be necessary to enable the officer to ascertain whether any general betting duty, pool betting duty or remote gaming duty is payable in respect of it and, if so, how much.
(5) A “relevant person” is a person—
(a) who by virtue of being a bookmaker, being treated by section 133 of the Finance Act 2014 as a bookmaker or providing facilities for making bets is liable to general betting duty,
(b) who by virtue of being a bookmaker is liable to pool betting duty,
(c) who by virtue of entering into arrangements for chargeable persons to participate in remote gaming is liable to remote gaming duty, or
(d) who is reasonably suspected by the officer of being, having been or being about to become liable as mentioned in paragraph (a), (b) or (c).
(6) “Relevant equipment” is equipment that is being, or that the officer reasonably suspects of having been or of being intended to be, used on the premises for or in connection with any activity that constitutes betting or gaming for the purposes of Part 3 of the Finance Act 2014 (see sections 150, 183 and 188).
(7) Expressions used in this section and Part 3 of the Finance Act 2014 have the same meanings in this section as in that Part.
13 (1) Section 118BD (inspection powers: supplementary provision) is amended as follows.
(2) In subsections (1) and (2), for “or 118BC,” substitute “ , 118BC or 118BCA, ”.
(3) In subsection (3), for “and 118BC” substitute “ , 118BC and 118BCA ”.
14 In section 118G(1) (offence of failing comply with requirements imposed under Part 9A), for “or 118BC(4)” substitute “ , 118BC(4) or 118BCA(4) ”.
Finance Act 1994
15 FA 1994 is amended as follows.
16 In section 12 (assessments to excise duty), in subsection (2)(c)—
(a) omit “1 or”, and
(b) after “2012” insert “ or Part 3 of the Finance Act 2014 ”.
17 Omit section 13A(2)(ga) (relevant decision: double taxation relief repayment).
18 (1) Paragraph 6 of Schedule 5 (decisions subject to review and appeal) is amended as follows.
(2) Omit sub-paragraph (1)(a).
(3) In sub-paragraph (2)—
(a) omit paragraph (a), and
(b) in paragraph (b), for “that Act” substitute “ the Betting and Gaming Duties Act 1981 ”.
(4) Omit sub-paragraph (3).
Value Added Tax Act 1994
19 (1) Section 23A (meaning of “relevant machine game”) of VATA 1994 is amended as follows.
(2) In subsection (2)(f), for “section 26A of the Betting and Gaming Duties Act 1981 (remote gaming duty: interpretation)” substitute “ section 154(1) of the Finance Act 2014 (meaning of remote gaming) ”.
(3) In subsection (3), in the definition of “real game of chance”, for “the Betting and Gaming Duties Act 1981” substitute “ Part 3 of the Finance Act 2014 (see section 188(1)(b)) ”.
Finance Act 1997
20 (1) Schedule 1 to FA 1997 (gaming duty: administration and enforcement) is amended as follows.
(2) In paragraph 12(4), for “the offences” substitute “ the offence ”.
(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Criminal Justice and Police Act 2001
21 Omit paragraph 27 of Schedule 1 to the Criminal Justice and Police Act 2001 (application of section 50 to power of seizure under paragraph 16(2) of Schedule 1 to BGDA 1981).
Gambling Act 2005
22 The Gambling Act 2005 is amended as follows.
23 In section 67 (remote operating licence), at the end insert—
(4) The power of the Commission to issue a remote operating licence to the holder of a licence suspended or revoked pursuant to a direction given under Schedule 27 to the Finance Act 2014 is subject to paragraph 7 of that Schedule (requirement for HMRC's consent).
24 In section 118 (suspension of operating licence), after subsection (3) insert—
(3A) The Commission must suspend an operating licence if directed to do so under paragraph 3 of Schedule 27 to the Finance Act 2014.
25 After that section insert—
Reinstatement
118A (1) If an operating licence has been suspended in accordance with section 118(3A), the Commission must reinstate the licence if directed to do so under paragraph 4 or 5 of Schedule 27 to the Finance Act 2014.
(2) Where the Commission reinstate an operating licence it—
(a) must specify the time when the reinstatement takes effect, and
(b) may make the reinstatement subject to conditions.
26 In section 119 (revocation of operating licence), after subsection (3) insert—
(3A) The Commission must revoke an operating licence if directed to do so under paragraph 6 of Schedule 27 to the Finance Act 2014.
Finance Act 2008
27 (1) The Table in paragraph 1 of Schedule 41 to FA 2008 (penalties: failure to notify and certain VAT and excise wrongdoing) is amended as follows.
(2) For the entries relating to general betting duty and pool betting duty substitute—
General betting duty | Obligation to register under section 164(2) of FA 2014 (registration of persons liable etc for general betting duty).
Pool betting duty | Obligation to register under section 164(2) of FA 2014 (registration of persons liable etc for pool betting duty).
(3) For the entry relating to remote gaming duty substitute—
Remote gaming duty | Obligation to register under section 164(2) of FA 2014 (registration of persons liable etc for remote gaming duty).
Finance Act 2012
31 (1) Schedule 24 to FA 2012 (machine games duty) is amended as follows.
(2) In paragraph 3(2), for “BGDA 1981” substitute “ Part 3 of FA 2014 ”.
(3) In paragraph 37(5), for “the offences” substitute “ the offence ”.
(4) In paragraph 38, for “remote gaming duty” substitute “ bingo duty ”.
SCHEDULE 29 Part 3: transitional and saving provisions
Section 197
Final accounting periods under BGDA 1981
1 (1) The final accounting period for the purposes of a person's liability to general betting duty, pool betting duty or remote gaming duty under BGDA 1981 ends with 30 November 2014 (whether or not it would otherwise have ended with that day).
(2) The Commissioners may by direction make transitional arrangements for the purposes of the final accounting period, and those arrangements may (in particular)—
(a) make provision about the date on which the period begins, and
(b) combine what would otherwise be more than one accounting period.
(3) A direction under this paragraph—
(a) may apply generally or only to a particular case or class of case, and
(b) must be published unless it applies only to a particular case.
Withdrawal of double taxation relief
2 (1) The final reconciliation period for the purposes of a person's entitlement to a credit under section 5E, 8ZA or 26IA of BGDA 1981 (double taxation relief) ends with 30 November 2014 (whether or not it would otherwise have ended with that day).
(2) The Commissioners are not required to entertain a claim for a repayment made under section 5E, 8ZA or 26IA of BGDA 1981 after 30 November 2015.
Post-commencement receipts etc from pre-commencement general or pool betting
3 (1) In this paragraph “new accounting period” means an accounting period beginning on or after 1 December 2014.
(2) Where a bet to which section 2(1) of BGDA 1981 (general bets with bookmaker in the United Kingdom) applies is made with a bookmaker before 1 December 2014, amounts in respect of the bet which fall due to the bookmaker in a new accounting period are to be included among the amounts aggregated at Step 1 in section 131 of this Act in calculating the bookmaker's ordinary profits in respect of general bets for that period.
(3) Where—
(a) a bet to which section 3(1) of BGDA 1981 (spread bets with bookmaker in the United Kingdom) applies is made with a bookmaker before 1 December 2014, and
(b) the bet is a financial spread bet for the purposes of section 3 of BGDA 1981,
amounts in respect of the bet which fall due to the bookmaker in a new accounting period are to be included among the amounts aggregated at Step 1 in section 131 of this Act in calculating the bookmaker's ordinary profits in respect of financial spread bets for that period.
(4) Where—
(a) a bet to which section 3(1) of BGDA 1981 (spread bets with bookmaker in the United Kingdom) applies is made with a bookmaker before 1 December 2014, and
(b) the bet is not a financial spread bet for the purposes of section 3 of BGDA 1981,
amounts in respect of the bet which fall due to the bookmaker in a new accounting period are to be included among the amounts aggregated at Step 1 in section 131 of this Act in calculating the bookmaker's ordinary profits in respect of non-financial spread bets for that period.
(5) Where a bet by way of pool betting to which section 4(1) of BGDA 1981 applies is made before 1 December 2014 by means of facilities provided by a person, amounts in respect of the bet which fall due to the person in a new accounting period are to be included among the amounts aggregated under section 137(a) of this Act in calculating the person's profits for that period in respect of ordinary Chapter 1 pool bets.
(6) Where a dutiable pool bet (as defined by section 7B of BGDA 1981) is made before 1 December 2014, amounts in respect of the bet which in accordance with section 7D of BGDA 1981 fall due—
(a) to the operator of the totalisator by means of which the bet is made, or
(b) to the promoter,
in a new accounting period are to be included among the amounts aggregated under section 146(a) of this Act in calculating that person's profits for that period in respect of ordinary Chapter 2 pool bets.
(7) Section 5(2), (4) and (5) of BGDA 1981 (amounts due: timing and calculation) apply for the purposes of sub-paragraphs (2) to (5).
Post-commencement winnings paid on pre-commencement general or pool betting
4 (1) In this paragraph “transitional accounting period” means an accounting period—
(a) beginning on or after 1 December 2014, and
(b) ending on or before 30 November 2018.
(2) Where a bet to which section 2(1) of BGDA 1981 (general bets with bookmaker in the United Kingdom) applies is made with a bookmaker before 1 December 2014, amounts paid by the bookmaker in a transitional accounting period by way of winnings to the person who made the bet are to be included among the amounts aggregated at Step 2 in section 131 of this Act in calculating the bookmaker's ordinary profits in respect of general bets for that period.
(3) Where—
(a) a bet to which section 3(1) of BGDA 1981 (spread bets with bookmaker in the United Kingdom) applies is made with a bookmaker before 1 December 2014, and
(b) the bet is a financial spread bet for the purposes of section 3 of BGDA 1981,
amounts paid by the bookmaker in a transitional accounting period by way of winnings to the person who made the bet are to be included among the amounts aggregated at Step 2 in section 131 of this Act in calculating the bookmaker's ordinary profits in respect of financial spread bets for that period.
(4) Where—
(a) a bet to which section 3(1) of BGDA 1981 (spread bets with bookmaker in the United Kingdom) applies is made with a bookmaker before 1 December 2014, and
(b) the bet is not a financial spread bet for the purposes of section 3 of BGDA 1981,
amounts paid by the bookmaker in a transitional accounting period by way of winnings to the person who made the bet are to be included among the amounts aggregated at Step 2 in section 131 of this Act in calculating the bookmaker's ordinary profits in respect of non-financial spread bets for that period.
(5) Where a bet by way of pool betting to which section 4(1) of BGDA 1981 applies is made before 1 December 2014 by means of facilities provided by a person (“the provider”), amounts paid by the provider in a transitional accounting period by way of winnings to the person who made the bet are to be included among the amounts aggregated under section 137(b) of this Act in calculating the provider's profits for that period in respect of ordinary Chapter 1 pool bets.
(6) Where a dutiable pool bet (as defined by section 7B of BGDA 1981) is made before 1 December 2014, amounts paid—
(a) by the operator of the totalisator by means of which the bet is made, or
(b) by the promoter,
in a transitional accounting period by way of winnings to the person who made the bet are to be included among the amounts aggregated under section 146(b) of this Act in calculating the profits of the operator, or (as the case may be) the promoter, for that period in respect of ordinary Chapter 2 pool bets.
(7) Section 5(6) of BGDA 1981 (meaning of “paid”) applies for the purposes of sub-paragraphs (2) to (5).
(8) Section 7F of BGDA 1981 (meaning of “paid”) applies for the purposes of sub-paragraph (6).
Post-commencement receipts & winnings etc in the case of pre-commencement remote gaming
5 (1) This paragraph applies where—
(a) a person (“the provider”) provides facilities for playing a game of chance,
(b) the playing of the game is remote gaming for the purposes of remote gaming duty charged by BGDA 1981,
(c) the provision of the facilities by the provider is not exempt by virtue of section 26H of BGDA 1981, and
(d) the game is begun to be played before 1 December 2014.
(2) In this paragraph—
“new accounting period” means any accounting period beginning on or after 1 December 2014;
“transitional accounting period” means an accounting period—
beginning on or after 1 December 2014, and
ending on or before 30 November 2018.
(3) Amounts due to the provider in a new accounting period in respect of entitlement to use the facilities to play the game are to be included among the amounts aggregated under section 157(1)(a) of this Act in calculating the provider's profits in respect of ordinary gaming.
(4) Amounts in respect of the game that—
(a) are within section 26E(1)(b) of BGDA 1981 as it applies in relation to the provider, and
(b) are staked, or fall due to be paid, in a new accounting period,
are also to be included among the amounts aggregated under section 157(1)(a) of this Act in calculating the provider's profits in respect of ordinary gaming.
(5) In the case of each prize in the game that is a prize—
(a) provided in a transitional accounting period by the provider, and
(b) won by a person using the facilities to play the game,
the value of the prize is to be included among the amounts aggregated under section 157(2) of this Act in calculating the provider's profits for the period in respect of ordinary gaming.
(6) Section 26F(2) to (7) of BGDA 1981 (provision and value of prizes) apply for the purposes of sub-paragraph (5).
Post-commencement relief for unrelieved pre-commencement losses
6 (1) In this paragraph “new accounting period” means an accounting period beginning on or after 1 December 2014.
(2) Where under section 5 or 5AA(3) of BGDA 1981 a person has a negative amount of net stake receipts for an accounting period ending on 30 November 2014 in respect of bets to which section 2(1) of BGDA 1981 applies, the amount may be carried forward in reduction of the person's profits on general bets for one or more new accounting periods.
(3) Where under section 5 or 5AA(3) of BGDA 1981 a person has a negative amount of net stake receipts for an accounting period ending on 30 November 2014 in respect of bets—
(a) to which section 3(1) of BGDA 1981 applies, and
(b) which are financial spread bets for the purposes of section 3 of BGDA 1981,
the amount may be carried forward in reduction of the person's profits on financial spread bets for one or more new accounting periods.
(4) Where under section 5 or 5AA(3) of BGDA 1981 a person has a negative amount of net stake receipts for an accounting period ending on 30 November 2014 in respect of bets—
(a) to which section 3(1) of BGDA 1981 applies, and
(b) which are not financial spread bets for the purposes of section 3 of BGDA 1981,
the amount may be carried forward in reduction of the person's profits on non-financial spread bets for one or more new accounting periods.
(5) Where under section 5 or 5AA(3) of BGDA 1981 a person has a negative amount of net stake receipts for an accounting period ending on 30 November 2014 in respect of bets by way of pool betting to which section 4(1) of BGDA 1981 applies, the amount may be carried forward in reduction of the person's profits on Chapter 1 pool bets for one or more new accounting periods.
(6) Where under section 7ZA(3) or 7A of BGDA 1981 a person has a negative amount of net pool betting receipts for an accounting period ending on 30 November 2014, the amount may be carried forward in reduction of the person's profits on Chapter 2 pool bets for one or more new accounting periods.
(7) Where the amount of a person's remote gaming profits (see section 26C(2) of BGDA 1981) for an accounting period ending on or before 30 November 2014 is a negative amount then that amount, so far as it has not been carried forward under section 26G of BGDA 1981 in reduction of the profits of one or more later accounting periods ending on or before 30 November 2014, may be carried forward in reduction of the person's profits on remote gaming (see section 155(4) of this Act) for one or more new accounting periods.
Post-commencement winnings on non-dutiable pre-commencement general or pool betting
7 (1) In this paragraph “transitional accounting period” means an accounting period—
(a) beginning on or after 1 December 2014, and
(b) ending on or before 30 November 2018.
(2) For the purposes of this paragraph, a bet is “non-dutiable” if—
(a) neither of sections 2(1) and 3(1) of BGDA 1981 applies to it,
(b) it is not a bet by way of pool betting on which general betting duty is charged under section 4(1) of BGDA 1981, and
(c) it is not a dutiable pool bet as defined by section 7B of BGDA 1981.
(3) Where—
(a) a non-dutiable bet is made with a bookmaker before 1 December 2014, and
(b) the bet is a general bet as defined by section 126 of this Act,
amounts paid by the bookmaker in a transitional accounting period by way of winnings to the person who made the bet may be included among the amounts aggregated at Step 2 in section 131 of this Act in calculating the bookmaker's ordinary profits in respect of general bets for that period.
(4) Where—
(a) a non-dutiable bet is made with a bookmaker before 1 December 2014, and
(b) the bet is a financial spread bet as defined by section 128 of this Act,
amounts paid by the bookmaker in a transitional accounting period by way of winnings to the person who made the bet may be included among the amounts aggregated at Step 2 in section 131 of this Act in calculating the bookmaker's ordinary profits in respect of financial spread bets for that period.
(5) Where—
(a) a non-dutiable bet is made with a bookmaker before 1 December 2014, and
(b) the bet is a non-financial spread bet as defined by section 128 of this Act,
amounts paid by the bookmaker in a transitional accounting period by way of winnings to the person who made the bet may be included among the amounts aggregated at Step 2 in section 131 of this Act in calculating the bookmaker's ordinary profits in respect of non-financial spread bets for that period.
(6) Where—
(a) a non-dutiable bet is made with a bookmaker before 1 December 2014, and
(b) the bet is a Chapter 1 pool bet as defined by section 134 of this Act,
amounts paid by the bookmaker in a transitional accounting period by way of winnings in respect of the bet may be included among the amounts aggregated under section 137(b) of this Act in calculating the bookmaker's profits for that period in respect of ordinary Chapter 1 pool bets.
(7) Where—
(a) a non-dutiable bet is made with a bookmaker before 1 December 2014, and
(b) the bet is a Chapter 2 pool bet as defined by section 143 of this Act,
amounts paid by or on behalf of the bookmaker in a transitional accounting period by way of winnings in respect of the bet may be included among the amounts aggregated under section 146(b) of this Act in calculating the bookmaker's profits for that period in respect of ordinary Chapter 2 pool bets.
(8) Section 140 of this Act (meaning of “winnings”) applies for the purposes of sub-paragraphs (3) to (6).
(9) Section 149 of this Act (meaning of “winnings”) applies for the purposes of sub-paragraph (7).
Post-commencement winnings on non-dutiable pre-commencement remote gaming
8 (1) In this paragraph “transitional accounting period” means an accounting period—
(a) beginning on or after 1 December 2014, and
(b) ending on or before 30 November 2018.
(2) Sub-paragraph (3) applies where—
(a) under arrangements between a chargeable person (as defined by section 155(2)) and another person (“the provider”), the chargeable person participates in playing a game of chance,
(b) the game is begun to be played before 1 December 2014,
(c) the chargeable person's participation in playing the game under the arrangements is remote gaming (as defined by section 154(1)) which is ordinary gaming (as defined by section 154(3)),
(d) remote gaming duty under section 26B of BGDA 1981 is not charged on the provision of any facilities—
(i) used by the chargeable person to play the game, and
(ii) provided by the provider, and
(e) the condition in paragraph (d) is not met only by virtue of section 26H of BGDA 1981 (exemptions).
(3) The value of any prize—
(a) provided by or on behalf of the provider in a transitional accounting period, and
(b) won by the chargeable person as a result of participating in playing the game under the arrangements,
may be included among the values aggregated under section 157(2) in calculating the provider's expenditure for the period on prizes in respect of ordinary gaming.
(4) Section 160 (provision and value of prizes) applies for the purposes of sub-paragraph (3).
Saving for amendments and repeals made by Schedule 28
9 (1) The amendments and repeals made by Schedule 28 do not affect—
(a) the operation on and after 1 December 2014 of any enactment amended or repealed by that Schedule, as the enactment stood immediately before that date, for the purposes of accounting periods for general betting duty, pool betting duty or remote gaming duty that end before that date, or for the purposes of entitlement to double taxation relief for such accounting periods,
(b) the operation on and after that date of any regulations or orders made, directions given or notices published under BGDA 1981 before that date so far as they relate to any of those duties (but see paragraph (c)),
(c) the exercise on and after that date of any power of the Commissioners or the Treasury under BGDA 1981 as saved by paragraph (a), including (in particular) any such power to make, amend, revoke, publish, revise or replace regulations, orders, directions or notices,
(d) the charges under sections 2(1), 3(1) and 4(1) of BGDA 1981 on bets made before that date,
(e) the charge under section 5AB of BGDA 1981 so far as relating to bets determined before that date,
(f) the charge under section 7 of BGDA 1981 so far as relating to net pool betting receipts for accounting periods ending before that date, or
(g) the charges under sections 17 and 26B of BGDA 1981 so far as relating to games of chance that began to be played before that date.
(2) Sub-paragraph (1)—
(a) has effect subject to the preceding provisions of this Schedule, and
(b) does not prejudice the generality of section 16(1) of the Interpretation Act 1978.
SCHEDULE 30 Section 208 or 208A penalty: value of the denied advantage
Section 209
Introduction
1 This Schedule applies for the purposes of calculating penalties under section 209.
Value of denied advantage: normal rule
2 (1) The value of the denied advantage is the additional amount due or payable in respect of tax as a result of counteracting the denied advantage.
(2) The reference in sub-paragraph (1) to the additional amount due or 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 denied advantage were not counteracted.
(3) The following are ignored in calculating the value of the denied 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) This paragraph is subject to paragraphs 3 and 4.
Value of denied advantage: losses
3 (1) To the extent that the denied advantage has the result that a loss is wrongly recorded for 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 denied advantage is determined in accordance with paragraph 2.
(2) To the extent that the denied advantage has the result that a loss is wrongly recorded 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 denied advantage is—
(a) the value under paragraph 2 of so much of the denied advantage as results from the part (if any) of the loss which is 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 denied 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 a denied advantage creates or increases an aggregate loss recorded for a group of companies—
(a) the value of the denied 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 denied advantage results in a loss, the value of it is nil where, because of the nature of the loss or P's circumstances, there is no reasonable prospect of the loss being used to support a claim to reduce a tax liability (of any person).
Value of denied advantage: deferred tax
4 (1) To the extent that the denied advantage is a deferral of tax, the value of that 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.
Section 215
Introduction
1 This Schedule makes special provision about the application of Chapter 2 to partners and partnerships.
Interpretation
2 (1) This paragraph applies for the purposes of this Schedule.
(2) “Partnership follower notice” means a follower notice given by reason of—
(a) a tax enquiry being in progress into a partnership return, or
(b) an appeal having been made in relation to an amendment of a partnership return or against a conclusion stated by a closure notice in relation to a tax enquiry into a partnership return.
(3) “Partnership return” means a return in pursuance of a notice under section 12AA(2) or (3) of TMA 1970.
(4) “The representative partner”, in relation to a partnership return, means the person who was required by a notice served under or for the purposes of section 12AA(2) or (3) of TMA 1970 to deliver the return.
(5) “Relevant partner”, in relation to a partnership return, means a person who was a partner in the partnership to which the return relates at any time during the period in respect of which the return was required.
(6) References to a “successor”, in relation to the representative partner are to be construed in accordance with section 12AA(11) of TMA 1970.
Giving of follower notices in relation to partnership returns
3 (1) If the representative partner in relation to a partnership return is no longer available, then, for the purposes of section 204 the return, or an appeal in respect of the return, is to be regarded as made by the person who is for the time being the successor of that partner (if that would not otherwise be the case).
(2) Where, at any time after a partnership follower notice is given to P, P is no longer available, any reference in this Chapter (other than section 204 and this sub-paragraph) to P is to be read as a reference to the person who is, for the time being, the successor of the representative partner.
(3) For the purposes of Condition B in section 204 a partnership return, or appeal in respect of a partnership return, is made on the basis that a particular tax advantage results from particular tax 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 from those tax arrangements, and
(b) that increase or reduction results in that tax advantage for one or more of the relevant partners.
(4) For the purposes of Condition D in section 204—
(a) a notice given to a person in the person's capacity as the representative partner of a partnership, or a successor of that partner, and a notice given to that person otherwise than in that capacity are not to be treated as given to the same person, and
(b) all notices given to the representative partner and successors of that partner, in that capacity, are to be treated as given to the same person.
(5) In this paragraph references to a person being “no longer available” have the same meaning as in section 12AA(11) of TMA 1970.
Penalty if corrective action not taken in response to partnership follower notice
4 (1) Section 208 applies, in relation to a partnership follower notice, in accordance with this paragraph.
(2) Subsection (2) applies as if the reference to P were to each relevant partner.
(3) References to the denied advantage are to be read as references to the increase or reduction in an amount in the partnership statement mentioned in paragraph 3(3) which is denied by the application of the principles laid down or the reasoning given in the judicial ruling identified in the partnership follower notice under section 206(a) or, if only part of any increase or reduction is so denied, that part.
(4) In subsection (6)(b) the words from “and (where different)” to the end are to be ignored, and accordingly subsection (7) does not apply.
Additional penalty for unreasonable tax appeal
4A Section 208A(3) applies, in relation to a partnership follower notice, as if the first reference to P were to each relevant partner.
Calculation of penalty etc
5 (1) This paragraph applies in relation to a partnership follower notice.
(2) Section 209 applies subject to the following modifications—
(a) the total amount of the penalties under section 208(2) for which the relevant partners are liable is 12% of the value of the denied advantage,
(aa) the total amount of the penalties under section 208A(3) for which the relevant partners are liable is 8% of the value of the denied advantage,
(b) the amount of the penalty under section 208(2) or 208A(3) (as modified by this paragraph) for which each relevant partner is liable is that partner's appropriate share of that total amount, and
(c) the value of the denied advantage for the purposes of calculating the total amount of the penalties is—
(i) in the case of a notice given under section 204(2)(a), the net amount of the amendments required to be made to the partnership return to counteract the denied advantage, and
(ii) in the case of a notice given under section 204(2)(b), the net amount of the amendments that have been made to the partnership return to counteract the denied advantage,
(and, accordingly, Schedule 30 does not apply).
(3) For the purposes of sub-paragraph (2), a relevant partner's appropriate share is—
(a) the same share as the share in which any profits or loss for the period to which the return relates would be apportioned to that partner in accordance with the firm's profit-sharing arrangements, or
(b) if HMRC do not have sufficient information from P to establish that share, such share as is determined for the purposes of this paragraph by an officer of HMRC.
(4) Where—
(a) the relevant partners are liable to pay a penalty under section 208(2) (as modified by this paragraph),
(b) the penalties have not yet been assessed, and
(c) P has co-operated with HMRC,
section 210(1) does not apply, but HMRC may reduce the total amount of the penalties determined in accordance with sub-paragraph (2)(a) to reflect the quality of that co-operation.
(5) Nothing in sub-paragraph (4) permits HMRC to reduce the total amount of the penalties under section 208(2) (as modified by this paragraph) to less than 4% of the value of the denied advantage (as determined in accordance with sub-paragraph (2)(c)).
(6) For the purposes of section 212, a penalty imposed on a relevant partner by virtue of paragraph 4(2) or 4A is to be treated as if it were determined by reference to such additional amount of tax as is due and payable by the relevant partner as a result of the counteraction of the denied advantage.
(7) The right of appeal under section 214 extends to—
(a) a decision that penalties under section 208(2) are payable by the relevant partners by virtue of this paragraph, and
(b) a decision as to the total amount of those penalties payable by those partners,
but not to a decision as to the appropriate share of, or the amount of a penalty payable by, a relevant partner.
(8) Section 214(3) applies to an appeal by virtue of sub-paragraph (7)(a) as it applies to an appeal under section 214(1).
(9) Section 214(8) applies to an appeal by virtue of sub-paragraph (7)(a), and section 214(9) to an appeal by virtue of sub-paragraph (7)(b).
(9A) The right of appeal under section 214A extends to—
(a) a decision that penalties under section 208A(3) are payable by the relevant partners by virtue of this paragraph, and
(b) a decision as to the total amount of those penalties payable by those partners,
but not to a decision as to the appropriate share of, or the amount of a penalty payable by, a relevant partner.
(9B) Section 214A(3) applies to an appeal by virtue of sub-paragraph (9A)(a) as it applies to an appeal under section 214A(1).
(9C) Section 214A(5) applies to an appeal by virtue of sub-paragraph (9A)(a), and section 214A(6) to an appeal by virtue of sub-paragraph (9A)(b).
(10) An appeal by virtue of sub-paragraph (7) may be brought only by the representative partner or, if that partner is no longer available, the person who is for the time being the successor of that partner.
(11) The Treasury may by order made by statutory instrument vary the rates for the time being specified in sub-paragraphs (2)(a) and (aa) and (5).
(12) Any statutory instrument containing an order under sub-paragraph (10) is subject to annulment in pursuance of a resolution of the House of Commons.
Section 228
Interpretation
1 (1) This paragraph applies for the purposes of this Schedule.
(2) “Partnership return” means a return in pursuance of a notice under section 12AA(2) or (3) of TMA 1970.
(3) “The representative partner”, in relation to a partnership return, means the person who was required by a notice served under or for the purposes of section 12AA(2) or (3) of TMA 1970 to deliver the return.
(4) “Relevant partner”, in relation to a partnership return, means a person who was a partner in the partnership to which the return relates at any time during the period in respect of which the return was required.
(5) References to a “successor”, in relation to the representative partner, are to be construed in accordance with section 12AA(11) of TMA 1970.
Restriction on circumstances when accelerated payment notices can be given
2 (1) This paragraph applies where—
(a) a tax enquiry is in progress in relation to a partnership return, or
(b) an appeal has been made in relation to an amendment of such a return or against a conclusion stated by a closure notice in relation to a tax enquiry into such a return.
(2) No accelerated payment notice may be given to the representative partner of the partnership, or a successor of that partner, by reason of that enquiry or appeal.
(3) But this Schedule makes provision for partner payment notices and accelerated partner payments in such cases.
Circumstances in which partner payment notices may be given
3 (1) Where a partnership return has been made in respect of a partnership, HMRC may give a notice (a “partner payment notice”) to each relevant partner of the partnership if Conditions A to C are met.
(2) Condition A is that—
(a) a tax enquiry is in progress in relation to the partnership return, or
(b) an appeal has been made in relation to an amendment of the return or against a conclusion stated by a closure notice in relation to a tax enquiry into the return.
(3) Condition B is that the return or, as the case may be, appeal is made on the basis that a particular tax advantage (“the asserted advantage”) results from particular arrangements (“the chosen arrangements”).
(4) Paragraph 3(3) of Schedule 31 applies for the purposes of sub-paragraph (3) as it applies for the purposes of Condition B in section 204(3).
(5) Condition C is that one or more of the following requirements are met—
(a) HMRC has given (or, at the same time as giving the partner payment notice, gives) the representative partner, or a successor of that partner, a follower notice under Chapter 2—
(i) in relation to the same return or, as the case may be, appeal, and
(ii) by reason of the same tax advantage and the chosen arrangements;
(b) the chosen arrangements are DOTAS arrangements (within the meaning of section 219(5) and (6));
(c) the relevant partner in question has been given a GAAR counteraction notice in respect of any tax advantage resulting from the asserted advantage or part of it and the chosen arrangements (or is given such a notice at the same time as the partner payment notice) in a case where the stated opinion of at least two of the members of the sub-panel of the GAAR Advisory Panel which considered the matter under paragraph 10 of Schedule 43 to FA 2013 was as set out in paragraph 11(3)(b) of that Schedule (entering into tax arrangements not reasonable course of action etc).
(d) the relevant partner in question has been given a notice under paragraph 8(2) or 9(2) of Schedule 43A to FA 2013 (notice of final decision after considering Panel's opinion about referred or counteracted arrangements) in respect of any tax advantage resulting from the asserted advantage or part of it and the chosen arrangements (or is given such a notice at the same time as the partner payment notice) in a case where the stated opinion of at least two of the members of the sub-panel of the GAAR Advisory Panel about the other arrangements (see sub-paragraph (7)) was as set out in paragraph 11(3)(b) of Schedule 43 to FA 2013;
(e) the relevant partner in question has been given a notice under paragraph 8(2) of Schedule 43B to FA 2013 (GAAR: generic referral of arrangements) in respect of any tax advantage resulting from the asserted advantage or part of it and the chosen arrangements (or is given such a notice at the same time as the partner payment notice) in a case where the stated opinion of at least two of the members of the sub-panel of the GAAR Advisory Panel which considered the generic referral in respect of those arrangements was as set out in paragraph 6(4)(b) of that Schedule.
(6) “GAAR counteraction notice” has the meaning given by section 219(7).
(7) “Other arrangements” means—
(a) in relation to a notice under paragraph 8(2) of Schedule 43A to FA 2013, the referred arrangements (as defined in that paragraph);
(b) in relation to a notice under paragraph 9(2) of that Schedule, the counteracted arrangements (as defined in paragraph 2 of that Schedule).
Content of partner payment notices
4 (1) The partner payment notice given to a relevant partner must—
(a) specify the paragraph or paragraphs of paragraph 3(5) by virtue of which the notice is given,
(b) specify the payment (if any) required to be made under paragraph 6, ...
(c) explain the effect of paragraphs 5 and 6, and of the amendments made by sections 224 and 225 (so far as relating to the relevant tax in relation to which the partner payment notice is given), and
(d) if the denied advantage consists of or includes an asserted surrenderable amount, specify that amount and any action which is required to be taken in respect of it under paragraph 6A.
(2) The payment required to be made under paragraph 6 is an amount equal to the amount which a designated HMRC officer determines, to the best of the officer's information and belief, as the understated partner tax (and disregarding any dispute which has been referred to a tribunal under section 12ABZB(3) of TMA 1970 but not yet determined).
(3) “The understated partner tax” means the additional amount that would become due and payable by the relevant partner in respect of tax if—
(a) in the case of a notice given by virtue of paragraph 3(5)(a) (case where a partnership follower notice is given)—
(i) it were assumed that the explanation given in the follower notice in question under section 206(b) is correct, and
(ii) what the officer may determine to the best of the officer's information and belief as the denied advantage is counteracted to the extent that it is reflected in a return or claim of the relevant partner;
(b) in the case of a notice given by virtue of paragraph 3(5)(b) (cases where the DOTAS arrangements are met), such adjustments were made as are required to counteract so much of what the designated HMRC officer so determines as the denied advantage as is reflected in a return or claim of the relevant partner;
(c) in the case of a notice given by virtue of paragraph 3(5)(c) (cases involving counteraction under the general anti-abuse rule), such of the adjustments set out in the GAAR counteraction notice are made as have effect to counteract so much of the denied advantage as is reflected in a return or claim of the relevant partner.
(4) “The denied advantage”—
(a) in the case of the notice given by virtue of paragraph 3(5)(a), has the meaning given by paragraph 4(3) of Schedule 31,
(b) in the case of a notice given by virtue of paragraph 3(5)(b), means so much of the asserted advantage as is not a tax advantage which results from the chosen arrangements or otherwise, and
(c) in the case of a notice given by virtue of paragraph 3(5)(c), means so much of the asserted advantage as would be counteracted by making the adjustments set out in the GAAR counteraction notice.
(4A) Asserted surrenderable amount” means so much of a surrenderable loss which the relevant partner asserts to have as a designated HMRC officer determines, to the best of that officer's information and belief, to be an amount—
(a) which would not be a surrenderable loss of that partner if the position were as stated in paragraphs (a), (b) or (c) of sub-paragraph (3), and
(b) which is not the subject of a claim by the relevant partner to relief from corporation tax which is reflected in the amount of the understated partner tax of that partner (and hence in the payment required to be made under paragraph 6).
(4B) “Surrenderable loss” means a loss or other amount within section 99(1) of CTA 2010 (or part of such a loss or other amount).
(5) If a notice is given by reason of two or all of the requirements of paragraph 3(5) being met, any payment specified under sub-paragraph (1)(b) or amount specified under sub-paragraph (1)(d) is to be determined as if the notice were given by virtue of such one of them as is stated in the notice as being used for this purpose.
Representations about a partner payment notice
5 (1) This paragraph applies where a partner payment notice has been given to a relevant partner under paragraph 3 (and not withdrawn).
(2) The relevant partner has 90 days beginning with the day that notice is given to send written representations to HMRC—
(a) objecting to the notice on the grounds that Condition A, B or C in that paragraph was not met, ...
(b) objecting to the amount specified in the notice under paragraph 4(1)(b), or
(c) objecting to the amount specified in the notice under paragraph 4(1)(d).
(3) HMRC must consider any representations made in accordance with sub-paragraph (2).
(4) Having considered the representations, HMRC must—
(a) if representations were made under sub-paragraph (2)(a), determine whether—
(i) to confirm the partner payment notice (with or without amendment), or
(ii) to withdraw the partner payment notice, ...
(b) if representations were made under sub-paragraph (2)(b) (and the notice is not withdrawn under paragraph (a)), determine whether a different amount (or no amount) ought to have been specified as the understated partner tax, and then—
(i) confirm the amount specified in the notice, ...
(ii) amend the notice to specify a different amount, or
(iii) remove from the notice the provision made under paragraph 4(1)(b),, and
(c) if representations were made under sub-paragraph (2)(c) (and the notice is not withdrawn under paragraph (a)), determine whether a different amount (or no amount) ought to have been specified under paragraph 4(1)(d), and then—
(i) confirm the amount specified in the notice,
(ii) amend the notice to specify a different amount, or
(iii) remove from the notice the provision made under paragraph 4(1)(d),
and notify P accordingly.
Effect of partner payment notice
6 (1) This paragraph applies where—
(a) a partner payment notice has been given to a relevant partner (and not withdrawn), and
(b) an amount is stated in the notice in accordance with paragraph 4(1)(b).
(2) The relevant partner must make a payment (“the accelerated partner payment”) to HMRC of that amount.
(3) The accelerated partner payment is to be treated as a payment on account of the understated partner tax (see paragraph 4).
(4) The accelerated partner payment must be made before the end of the payment period.
(5) “The payment period” means—
(a) if the relevant partner made no representations under paragraph 5, the period of 90 days beginning with the day on which the partner payment notice is given;
(b) if the relevant partner made such representations, whichever of the following ends later—
(i) the 90 day period mentioned in paragraph (a);
(ii) the period of 30 days beginning with the day on which the relevant partner is notified under paragraph 5 of HMRC's determination.
(6) If the relevant partner pays any part of the understated partner tax before the accelerated partner payment in respect of it, the accelerated partner payment is treated to that extent as having been paid at the same time.
(7) Subsections (8) and (9) of section 223 apply in relation to a payment under this paragraph as they apply to a payment under that section.
6A (1) This paragraph applies where—
(a) an accelerated payment notice is given (and not withdrawn), and
(b) an amount is specified in the notice in accordance with paragraph 4(1)(d).
(2) The relevant partner may not at any time when the notice has effect consent to any claim for group relief in respect of the amount so specified.
(3) Subject to sub-paragraph (2), paragraph 75 (other than sub-paragraphs (7) and (8)) of Schedule 18 to FA 1998 (reduction in amount available for surrender) has effect at any time when the notice has effect as if that specified amount ceased to be an amount available for surrender at the time the notice was given to the relevant partner.
(4) For the purposes of sub-paragraph (3), paragraph 75 of that Schedule has effect as if, in sub-paragraph (2) of that paragraph for “within 30 days” there were substituted “ before the end of the payment period (within the meaning of paragraph 6(5) of Schedule 32 to the Finance Act 2014) ”.
(5) The time limits otherwise applicable to amendment of a company tax return do not prevent an amendment being made in accordance with paragraph 75(6) of Schedule 18 to FA 1998 where the relevant partner withdraws consent by virtue of sub-paragraph (3).
Penalty for failure to comply with partner payment notice
7 Section 226 (penalty for failure to make accelerated payment on time) applies to accelerated partner payments as if—
(a) references in that section to the accelerated payment were to the accelerated partner payment,
(b) references to P were to the relevant partner, ...
(ba) the reference in section 226(8) to an amendment to an accelerated payment notice made under section 227(7A) were to an amendment to a partner payment notice made under that section as applied by paragraph 8 of this Schedule, and
(c) “the payment period” had the meaning given by paragraph 6(5).
Withdrawal, suspension or modification of partner payment notices
8 (1) Section 227 (withdrawal, modification or suspension of accelerated payment notice) applies in relation to a relevant partner, a partner payment notice, Condition C in paragraph 3 and an accelerated partner payment as it applies in relation to P, an accelerated payment notice, Condition C in section 219 and an accelerated payment.
(2) Accordingly, for this purpose—
(za) section 227(2)(d), (12A) and (16) has effect as if the references to section 220(2)(d) or 221(2)(d) were to paragraph 4(1)(d) of this Schedule,
(a) section 227(6)(b) and (7)(a) has effect as if the references to section 220(6) were to paragraph 4(5) of this Schedule, ...
(aa) section 227(7A) has effect as if the reference to a section 12AA partnership return to which the accelerated payment notice relates were a reference to the section 12AA partnership return in relation to which the partner payment notice is given;
(b) the provisions listed in section 227(9) are to be read as including paragraph 6(5) of this Schedule, ...
(c) section 227(12A) has effect as if the reference to section 225A(3) were to paragraph 6A(3) of this Schedule and
(d) section 227(13A) has effect as if the reference to section 223(2) were to paragraph 6(2) of this Schedule and the reference to section 223(5) were to paragraph 6(5) of this Schedule.
Section 233
Taxes Management Act 1970
1 In section 9B of TMA 1970 (amendment of return by relevant person during enquiry), in subsection (1), after “taxpayer)” insert “ , or in accordance with Chapter 2 of Part 4 of the Finance Act 2014 (amendment of return after follower notice), ”.
2 In section 103ZA of that Act (disapplication of sections 100 to 103 (penalty provisions) in the case of certain penalties)—
(a) omit “or” at the end of paragraph (f), and
(b) at the end of paragraph (g) insert
, or
(h) Part 4 of the Finance Act 2014 (follower notices and accelerated payments).
Finance Act 2007
3 In paragraph 12 of Schedule 24 to FA 2007 (penalties for errors: interaction with other penalties), after sub-paragraph (2) insert—
(2A) In sub-paragraph (2) “any other penalty” does not include a penalty under Part 4 of FA 2014 (penalty where corrective action not taken after follower notice etc).
Finance Act 2008
4 In paragraph 15 of Schedule 41 to FA 2008 (penalties: failure to notify: interaction with other penalties), after sub-paragraph (1) insert—
(1A) In sub-paragraph (1) “any other penalty” does not include a penalty under Part 4 of FA 2014 (penalty where corrective action not taken after follower notice etc).
Finance Act 2009
5 In paragraph 17 of Schedule 55 to FA 2009 (penalty for failure to make returns etc: interaction with other penalties), after sub-paragraph (2)(b) insert
, or
(c) a penalty under Part 4 of FA 2014 (penalty where corrective action not taken after follower notice etc).
Section 235
Cases in which a person is a member of a promotion structure.
1 A person (“A”) is a member of a promotion structure if A falls within—
(a) the case described in paragraph 2 (multiple entity promoter),
(b) the case described in paragraph 3 (acting for a non-resident promoter),
(c) the case described in paragraph 4 (control of another promoter), or
(d) the case described in paragraph 5 (transfer of promotion business).
Multiple entity promoter
2 (1) A falls within this case if—
(a) A and one or more other persons carry out activities between them that if carried out by a single person would cause that person to be a promoter within the meaning of section 235(2) or (3), and
(b) each of the persons carrying out those activities is closely related to at least one other of those persons.
(2) A person (“D”) is closely related to another person (“E”) if—
(a) D is able to secure that E acts in accordance with D's wishes (or vice versa),
(b) E typically acts in accordance with D's wishes,
(c) it is reasonable to expect that E will act in accordance with D's wishes,
(d) a third person is able to secure that D and E act in accordance with the third person's wishes,
(e) D and E typically act in accordance with a third person's wishes,
(f) it is reasonable to expect that D and E will act in accordance with a third person's wishes, or
(g) the 50% investment condition is met in relation to D and E.
(3) The 50% investment condition is met in relation to D and E if—
(a) D has a 50% investment in E (or vice versa), or
(b) a third person has a 50% investment in each of D and E.
(4) Subsections (3) to (9) of section 259ND of TIOPA 2010 apply for the purposes of determining whether a person has a “50% investment” in another person, and references in those subsections to X% are to be read as references to 50%.
Acting for a non-resident promoter
3 (1) A falls within this case if A acts under the instruction or guidance of a person (“O”) who carries on a business as a promoter and who is resident outside the United Kingdom, and—
(a) A does any of the things mentioned in sub-paragraph (2) under that instruction or guidance, or
(b) A receives remuneration (of any kind) from O in connection with the business carried on by O.
(2) The things referred to in sub-paragraph (1)(a) are—
(a) being a promoter;
(b) facilitating any activity by virtue of which a person would be a promoter (for example, by facilitating the organisation of relevant arrangements or by facilitating the making of a relevant proposal available for implementation).
(3) For the purposes of sub-paragraph (1)(b), reference to A receiving remuneration from O includes—
(a) A receiving any payment or benefit as a consequence of instructions given by O (whether or not O is the source of that payment or benefit);
(b) A receiving any payment or benefit as a consequence of any arrangements that O made or participated in the making of, or that are referable to the business carried on by O (which may include relevant arrangements, or arrangements implementing a relevant proposal, promoted by O or which are otherwise referable to that business).
(4) For the purposes of this paragraph a person is a promoter if the person meets the description of a promoter in section 235(2) or (3) (whether or not the person carries on a business).
Control of another promoter
4 (1) A falls within this case if—
(a) A is an individual who controls, or has significant influence over, a body corporate or a partnership (“B”) that carries on a business as a promoter, and
(b) A meets the personal condition or the corporate condition.
(2) The personal condition is that, at any time after A first controlled or had significant influence over B—
(a) A was subject to a disqualification order or disqualification undertaking under the Company Directors Disqualification Act 1986 or the Company Directors Disqualification (Northern Ireland) Order 2002 (S.I. 2002/3150 (N.I. 4)),
(b) A was bankrupt, or A's estate had been sequestrated under the Bankruptcy (Scotland) Act 2016,
(c) A was the subject of an individual voluntary arrangement under Part 8 of the Insolvency Act 1986,
(d) A's estate was subject to a protected trust deed (see section 163 of the Bankruptcy (Scotland) Act 2016),
(e) A was subject to a bankruptcy restrictions order or an interim bankruptcy restrictions order,
(f) A was subject to a debt relief order, or
(g) A was subject to a debt relief restrictions order or interim debt relief restrictions order.
(3) The corporate condition is that at any time A controlled, or had significant influence over, a person (other than B) that carried on business as a promotor that was—
(a) a body corporate or a partnership that was dissolved or became insolvent,
(b) a body corporate that became dormant,
(c) a company formed and registered under the Companies Act 2006 (see section 1 of that Act) that made an application under section 1003 of that Act to strike the company's name off the register, or
(d) a company formed and registered under that Act in respect of which the registrar (within the meaning of that Act) has published a notice under section 1000(3) or 1001(1) of that Act, if two months have passed since the publication of that notice.
(4) For the purposes of this paragraph, the circumstances in which a body corporate or partnership becomes insolvent include—
(a) if a company voluntary arrangement takes effect under Part 1 of the Insolvency Act 1986,
(b) if an administration application (within the meaning of Schedule B1 to that Act) is made or a receiver or manager, or an administrative receiver, is appointed,
(c) on the commencement of a creditor's voluntary winding up (within the meaning of Part 4 of that Act) or a winding up by the court under Chapter 6 of that Part,
(d) if a compromise or arrangement takes effect under Part 26 of the Companies Act 2006,
(e) if a bank insolvency order takes effect under Part 2 of the Banking Act 2009,
(f) if a bank administration order takes effect under Part 3 of that Act, or
(g) on the occurrence of any corresponding circumstances which have effect under or as a result of the law of Scotland or Northern Ireland or a country or territory outside the United Kingdom.
(5) For the purposes of this paragraph, a body corporate is dormant if—
(a) in the case of a body corporate incorporated in the United Kingdom, it is dormant within the meaning given by section 1169 of the Companies Act 2006, or
(b) in any other case, it would be dormant within the meaning of that section if the body corporate were incorporated in the United Kingdom.
(6) Sub-paragraphs (5) to (11) of paragraph 13A of Schedule 34 (meaning of “control” and “significant influence”) apply to this paragraph as they apply to Part 2 of that Schedule.
(7) In this paragraph—
“bankruptcy restrictions order” or “interim bankruptcy restrictions order” means such an order (or as the case may be, undertaking) under—
Schedule 4A to the Insolvency Act 1986,
Schedule 2A to the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)), or
Part 13 of the Bankruptcy (Scotland) Act 2016 (asp 21);
“debt relief order” means such an order under—
Part 7A of the Insolvency Act 1986, or
Part 7A of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19));
“debt relief restrictions order” or “interim debt relief restrictions order” means such an order (or as the case may be, undertaking) under—
Schedule 4ZB to the Insolvency Act 1986, or
Schedule 2ZB to the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)).
Transfer of promotion business
5 (1) A falls within this case if—
(a) there has been a relevant transfer to A, or
(b) there has been a relevant transfer to a body corporate or partnership that A controls, or has significant influence over.
(2) For the purposes of sub-paragraph (1) “relevant transfer” means a transfer of—
(a) the whole of the business of a person carrying on business as a promoter;
(b) any part of such a business that relates to the promotion of relevant arrangements or relevant proposals;
(c) property, rights or liabilities of such a business that are connected with the promotion of relevant arrangements or relevant proposals.
(3) In sub-paragraph (2) “transfer” means any transfer in substance (whether or not the transfer is formal or for consideration, and whether or not the transfer is direct).
(4) Sub-paragraphs (5) to (11) of paragraph 13A of Schedule 34 (meaning of “control” and “significant influence”) apply to this paragraph as they apply to Part 2 of that Schedule.
SCHEDULE 34 Promoters of tax avoidance schemes: threshold conditions
Section 237
PART 1 Meeting the threshold conditions: general
Meaning of “threshold condition”
1 Each of the conditions described in paragraphs 2 to 12 is a “threshold condition”.
Deliberate tax defaulters
2 A person meets this condition if the Commissioners publish information about the person in reliance on section 94 of FA 2009 (publishing details of deliberate tax defaulters).
Breach of the Banking Code of Practice
3 A person meets this condition if the person is named in a report under section 285 as a result of the Commissioners determining that the person breached the Code of Practice on Taxation for Banks by reason of promoting arrangements which the person cannot have reasonably believed achieved a tax result which was intended by Parliament.
Tax advisers
4 A person meets this condition if the person is given a notification of a penalty under paragraph 26 of Schedule 38 to FA 2012 (tax advisers: sanctionable conduct) and either—
(a) the time period during which a notice of appeal may be given in relation to the penalty has expired, or
(b) an appeal against the penalty has been made and the tribunal has confirmed the decision that a penalty is payable under that paragraph (whether or not the amount of the penalty is varied).
Non-compliance with avoidance disclosure requirements
5 (A1) A person meets this condition if the person fails to comply with any of the following provisions of—
(a) Part 7 of FA 2004 (disclosure of tax avoidance schemes);
(b) Schedule 17 to F(No. 2)A 2017 (disclosure of tax avoidance schemes: VAT and other indirect taxes).
(1) The provisions of Part 7 of FA 2004 are—
(a) section 308(1) and (3) (duty of promoter in relation to notifiable proposals and notifiable arrangements);
(b) section 309(1) (duty of person dealing with promoter outside the United Kingdom);
(c) section 310 (duty of parties to notifiable arrangements not involving promoter);
(ca) section 310C (duty of promoter to provide updated information);
(cb) section 312(2) (duty of promoter to notify client of reference number);
(d) section 313ZA (duty of promoter to provide details of clients).
(e) section 316A (duty to provide additional information).
(1A) The provisions of Schedule 17 to F(No.2)A 2017 are—
(a) paragraph 11(1) (duty of promoter in relation to notifiable proposals);
(b) paragraph 21(3) (duty of promoter to provide updated information);
(c) paragraph 23(2) (duty of promoter to notify client of reference number);
(d) paragraph 27(3) (duty of promoter to provide details of clients);
(e) paragraph 33 (duty to provide additional information).
(2) For the purposes of sub-paragraphs (1) and (1A), a person (“P”) fails to comply with a provision mentioned in any of those sub-paragraphs if and only if any of conditions A to C are met.
(3) Condition A is met if—
(a) an authorised officer has determined that P has failed to comply with the provision concerned,
(b) the appeal period has ended, and
(c) the determination has not been overturned on appeal.
(4) Condition B is met if—
(a) on appeal, the tribunal has determined for the purposes of section 315D(1) of FA 2004 or paragraph 48 of Schedule 17 to F(No.2)A 2017 that P is to be deemed not to have failed to comply with the provision concerned as P had a reasonable excuse for not doing the thing required to be done,
(b) the appeal period has ended, and
(c) the determination has not been overturned on appeal.
(5) Condition C is met if P has admitted in writing to HMRC that P has failed to comply with the provision concerned.
(6) For the purposes of this paragraph—
“appeal period” means—
the period during which an appeal could be brought against the determination of an authorised officer or the tribunal, as applicable, or
where an appeal mentioned in paragraph (a) has been brought, the period during which that appeal has not been finally determined, withdrawn or otherwise disposed of;
“authorised officer” means an officer of Revenue and Customs who is, or is a member of a class of officers who are, authorised by HMRC for the purposes of the provision concerned.
Criminal offences
6 (1) A person meets this condition if the person is charged with a relevant offence.
(2) The fact that a person has been charged with an offence is disregarded for the purposes of this paragraph if—
(a) the person has been acquitted of the offence, or
(b) the charge has been dismissed or the proceedings have been discontinued.
(3) An acquittal is not taken into account for the purposes of sub-paragraph (2) if an appeal has been brought against the acquittal and has not yet been disposed of.
(4) “Relevant offence” means any of the following—
(a) an offence at common law of cheating in relation to the public revenue;
(b) in Scotland, an offence at common law of—
(i) fraud;
(ii) uttering;
(c) an offence under section 17(1) of the Theft Act 1968 or section 17 of the Theft Act (Northern Ireland) 1969 (c. 16 (N.I.)) (false accounting);
(d) an offence under section 106A of TMA 1970 (fraudulent evasion of income tax);
(e) an offence under section 107 of TMA 1970 (false statements: Scotland);
(f) an offence under any of the following provisions of CEMA 1979—
(i) section 50(2) (improper importation of goods with intent to defraud or evade duty);
(ii) section 167 (untrue declarations etc);
(iii) section 168 (counterfeiting documents etc);
(iv) section 170 (fraudulent evasion of duty);
(v) section 170B (taking steps for the fraudulent evasion of duty);
(g) an offence under any of the following provisions of VATA 1994—
(i) section 72(1) (being knowingly concerned in the evasion of VAT);
(ii) section 72(3) (false statement etc);
(iii) section 72(8) (conduct involving commission of other offence under section 72);
(h) an offence under section 1 of the Fraud Act 2006 (fraud);
(i) an offence under any of the following provisions of CRCA 2005—
(i) section 30 (impersonating a Commissioner or officer of Revenue and Customs);
(ii) section 31 (obstruction of officer of Revenue and Customs etc);
(iii) section 32 (assault of officer of Revenue and Customs);
(j) an offence under regulation 86(1) of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017;
(k) an offence under section 49(1) of the Criminal Justice and Licensing (Scotland) Act 2010 (asp 13) (possession of articles for use in fraud).
Opinion notice of GAAR Advisory Panel
7 (1) A person meets this condition if one or more of sub-paragraphs (2) to (4) apply in respect of the person.
(2) This sub-paragraph applies in respect of a person if —
(a) arrangements in relation to which the person is a promoter —
(i) have been referred to the GAAR Advisory Panel under Schedule 43 to FA 2013 (referrals of single schemes),
(ii) are in a pool in respect of which a referral has been made to that Panel under Schedule 43B to that Act (generic referrals), or
(iii) have been referred to that Panel under paragraph 26 of Schedule 16 to F(No. 2)A 2017 (referrals in relation to penalties for enablers of defeated tax avoidance),
(b) one or more opinion notices are given in respect of the referral under (as the case may be)—
(i) paragraph 11(3)(b) of Schedule 43 to FA 2013,
(ii) paragraph 6(4)(b) of Schedule 43B to that Act, or
(iii) paragraph 34(3)(b) of Schedule 16 to F(No. 2)A 2017,
(opinion of sub-panel of GAAR Advisory Panel that arrangements are not reasonable), and
(c) the notice, or the notices taken together, either—
(i) state the joint opinion of all the members of the sub-panel arranged under ... that Schedule, or
(ii) state the opinion of two or more members of that sub-panel.
(3) This sub-paragraph applies in respect of a person (“P”) if—
(a) another person has been given, in respect of arrangements in relation to which P is a promoter (“the promoted arrangements”)—
(i) a pooled arrangements opinion notice, under paragraph 6(2) of Schedule 43A to FA 2013, or
(ii) a bound arrangements opinion notice under paragraph 6(4) of that Schedule,
(b) the notice in question sets out a report prepared by HMRC of an opinion of the GAAR Advisory Panel in relation to the promoted arrangements that is contained in one or more opinion notices given under paragraph 11(3)(b) of Schedule 43 to FA 2013 or paragraph 6(4)(b) of Schedule 43B to FA 2013, and
(c) the opinion notice, or the opinion notices taken together, either—
(i) state the joint opinion of all the members of the sub-panel arranged under Schedule 43 or 43B, as the case may be, or
(ii) state the opinion of two or more members of the sub-panel.
(4) This sub-paragraph applies in respect of a person if—
(a) arrangements in relation to which the person is a promoter (“the promoted arrangements”) are equivalent within the meaning of paragraph 24(3) of Schedule 16 to F(No. 2)A 2017 to arrangements that have been referred to the GAAR Advisory Panel under paragraph 26 of that Schedule,
(b) one or more opinion notices are given under paragraph 34(3)(b) of Schedule 16 to F(No.2)A 2017 that apply to the promoted arrangements for the purposes of Part 7 of that Schedule, and
(c) the notice, or the notices taken together, either—
(i) state the joint opinion of all the members of the sub-panel arranged under that Schedule, or
(ii) state the opinion of two or more members of that sub-panel.
Disciplinary action against a member of a trade or profession
8 (1) A person who carries on a trade or profession that is regulated by a professional body meets this condition if all of the following conditions are met—
(a) the person is found guilty of misconduct of a prescribed kind,
(b) action of a prescribed kind is taken against the person in relation to that misconduct, and
(c) a penalty of a prescribed kind is imposed on the person as a result of that misconduct.
(2) Misconduct may only be prescribed for the purposes of sub-paragraph (1)(a) if it is misconduct other than misconduct in matters (such as the payment of fees) that relate solely or mainly to the person's relationship with the professional body.
(3) A “professional body” means—
(a) the Institute of Chartered Accountants in England and Wales;
(b) the Institute of Chartered Accountants of Scotland;
(c) the General Council of the Bar;
(d) the Faculty of Advocates;
(e) the General Council of the Bar of Northern Ireland;
(f) the Law Society;
(g) the Law Society of Scotland;
(h) the Law Society of Northern Ireland;
(i) the Association of Accounting Technicians;
(j) the Association of Chartered Certified Accountants;
(k) the Association of Taxation Technicians;
(l) any other prescribed body with functions relating to the regulation of a trade or profession.
Disciplinary action by a regulatory authority
9 (1) A person meets this condition if a regulatory authority imposes a relevant sanction on the person.
(2) A “relevant sanction” is a sanction which is—
(a) imposed in relation to misconduct other than misconduct in matters (such as the payment of fees) that relate solely or mainly to the person's relationship with the regulatory authority, and
(b) prescribed.
(3) The following are regulatory authorities for the purposes of this paragraph—
(a) the Financial Conduct Authority;
(b) the Financial Services Authority;
(c) any other authority that may be prescribed.
(4) Only authorities that have functions relating to the regulation of financial institutions may be prescribed under sub-paragraph (3)(c).
Exercise of information powers
10 (1) A person meets this condition if the person fails to comply with a requirement imposed by a notice or order given under any of the following provisions—
(a) section 308A, 310A, 313ZB, 313A and 313B of FA 2004;
(b) paragraphs 1, 2, 5 and 5A of Schedule 36 to FA 2008;
(c) paragraphs 16, 19, 28, 29 and 30 of Schedule 17 to F(No.2)A 2017.
(2) For the purposes of section 237, the failure to comply is taken to occur when the period within which the person is required to comply with the notice or order expires (without the person having complied with it).
Restrictive contractual terms
11 (1) A person (“P”) meets this condition if P enters into an agreement with another person (“C”) which relates to a relevant proposal or relevant arrangements in relation to which P is a promoter, on terms which—
(a) impose a contractual obligation on C which falls within sub-paragraph (2) or (3), or
(b) impose on C both obligations within sub-paragraph (4) and obligations within sub-paragraph (5).
(2) A contractual obligation falls within this sub-paragraph if it prevents or restricts the disclosure by C to HMRC of information relating to the proposals or arrangements, whether or not by referring to a wider class of persons.
(3) A contractual obligation falls within this sub-paragraph if it requires C to impose on any tax adviser to whom C discloses information relating to the proposals or arrangements a contractual obligation which prevents or restricts the disclosure of that information to HMRC by the adviser.
(4) A contractual obligation falls within this sub-paragraph if it requires C to—
(a) meet (in whole or in part) the costs of, or contribute to a fund to be used to meet the costs of, any proceedings relating to arrangements in relation to which P is a promoter (whether or not implemented by C), or
(b) take out an insurance policy which insures against the risk of having to meet the costs connected with proceedings relating to arrangements which C has implemented and in relation to which P is a promoter.
(5) A contractual obligation falls within this paragraph if it requires C to obtain the consent of P before—
(a) entering into any agreement with HMRC regarding arrangements which C has implemented and in relation to which P is a promoter, or
(b) withdrawing or discontinuing any appeal against any decision regarding such arrangements.
(6) In sub-paragraph (5)(b), the reference to withdrawing or discontinuing an appeal includes any action or inaction which results in an appeal being discontinued.
(7) In this paragraph—
“proceedings” includes any sort of proceedings for resolving disputes (and not just proceedings in court), whether commenced or contemplated;
“tax adviser” means a person appointed to give advice about the tax affairs of another person (whether appointed directly by that person or by another tax adviser of that person).
Stop notices
12 A person meets this condition if the person is subject to a stop notice and fails to comply with—
(a) section 236B(1) (promotion of arrangements or proposal of a description specified in a stop notice),
(b) section 236C(1) (duty to make return to HMRC), or
(c) any obligations of the person under Schedule 36 to FA 2008 as it has effect as a result of section 272A (information and inspection powers).
PART 2 Meeting the threshold conditions: bodies corporate and partnerships
Interpretation
13A (1) This paragraph contains definitions for the purposes of this Part of this Schedule.
(2) Each of the following is a “relevant body”—
(a) a body corporate, and
(b) a partnership.
(3) “Relevant time” means the time referred to in section 237(1A) (duty to give conduct notice to person treated as meeting threshold condition).
(4) “Relevant threshold condition” means a threshold condition specified in any of the following paragraphs of this Schedule—
(a) paragraph 2 (deliberate tax defaulters);
(b) paragraph 4 (dishonest tax agents);
(c) paragraph 6 (criminal offences);
(d) paragraph 7 (opinion notice of GAAR advisory panel);
(e) paragraph 8 (disciplinary action against a member of a trade or profession);
(f) paragraph 9 (disciplinary action by regulatory authority);
(g) paragraph 10 (failure to comply with information notice).
(5) A person controls a body corporate if the person has power to secure that the affairs of the body corporate are conducted in accordance with the person's wishes—
(a) by means of the holding of shares or the possession of voting power in relation to the body corporate or any other relevant body,
(b) as a result of any powers conferred by the articles of association or other document regulating the body corporate or any other relevant body, or
(c) by means of controlling a partnership.
(6) Two or more persons together control a body corporate if together they have the power to secure that the affairs of the body corporate are conducted in accordance with their wishes in any way specified in sub-paragraph (5)(a) to (c).
(7) A person controls a partnership if the person is a member of the partnership and—
(a) has the right to a share of more than half the assets, or more than half the income, of the partnership, or
(b) directs, or is on a day-to-day level in control of, the management of the business of the partnership.
(8) Two or more persons together control a partnership if they are members of the partnership and together they—
(a) have the right to a share of more than half the assets, or of more than half the income, of the partnership, or
(b) direct, or are on a day-to-day level in control of, the management of the business of the partnership.
(9) Paragraph 19(2) to (5) of Schedule 36 (connected persons etc) applies to a person referred to in sub-paragraph (7) or (8) as if references to “P” were to that person.
(10) A person has significant influence over a body corporate or partnership if the person—
(a) does not control the body corporate or partnership, but
(b) is able to, or actually does, exercise significant influence over it (whether or not as the result of a legal entitlement).
(11) Two or more persons together have significant influence over a body corporate or partnership if together those persons—
(a) do not control the body corporate or partnership, but
(b) are able to, or actually do, exercise significant influence over it (whether or not as the result of a legal entitlement).
(12) References to a person being a promoter are to the person carrying on business as a promoter.
Relevant bodies controlled etc by other persons treated as meeting a threshold condition
13B (1) A relevant body is treated as meeting a threshold condition at the relevant time if any of Conditions A to C is met.
(2) Condition A is that—
(a) a person met the threshold condition at a time when the person was a promoter, and
(b) the person controls or has significant influence over the relevant body at the relevant time.
(3) Condition B is that—
(a) a person met the threshold condition at a time when the person controlled or had significant influence over the relevant body,
(b) the relevant body was a promoter at that time, and
(c) the person controls or has significant influence over the relevant body at the relevant time.
(4) Condition C is that—
(a) two or more persons together controlled or had significant influence over the relevant body at a time when one of those persons met the threshold condition,
(b) the relevant body was a promoter at that time, and
(c) those persons together control or have significant influence over the relevant body at the relevant time.
(5) Where the person referred to in sub-paragraph (2)(a) or (3)(a) or (4)(a) as meeting a threshold condition is an individual who does not fall within the case described in paragraph 4 or 5 of Schedule 33A, sub-paragraph (1) only applies if the threshold condition is a relevant threshold condition.
(6) For the purposes of sub-paragraph (2) it does not matter whether the relevant body existed at the time referred to in sub-paragraph (2)(a).
Persons who control etc a relevant body treated as meeting a threshold condition
13C (1) If at a time when a person controlled or had significant influence over a relevant body—
(a) the relevant body met a threshold condition, and
(b) the relevant body, or another relevant body which the person controlled or had significant influence over, was a promoter,
the person is treated as meeting the threshold condition at the relevant time.
(2) It does not matter whether any relevant body referred to sub-paragraph (1) exists at the relevant time.
Relevant bodies controlled etc by the same person treated as meeting a threshold condition
13D (1) If—
(a) a person controlled or had significant influence over a relevant body at a time when it met a threshold condition, and
(b) at that time that body, or another relevant body which the person controlled or had significant influence over, was a promoter,
any relevant body which the person controls or has significant influence over at the relevant time is treated as meeting the threshold condition at the relevant time.
(2) If—
(a) two or more persons together controlled or had significant influence over a relevant body at a time when it met a threshold condition, and
(b) at that time that body, or another relevant body which those persons together controlled or had significant influence over, was a promoter,
any relevant body which those persons together control or have significant influence over at the relevant time is treated as meeting the threshold condition at the relevant time.
(3) It does not matter whether—
(a) a relevant body referred to in sub-paragraph (1)(a) or (b) or (2)(a) or (b) exists at the relevant time, or
(b) a relevant body existing at the relevant time existed at the time referred to in sub-paragraph (1)(a) or (2)(a).
PART 3 Power to amend
14 (1) The Treasury may by regulations amend this Schedule.
(2) An amendment made by virtue of sub-paragraph (1) may, in particular—
(a) vary or remove any of the conditions set out in paragraphs 2 to 12;
(b) add new conditions;
(c) vary any of the circumstances described in paragraphs 13B to 13D in which a person is treated as meeting a threshold condition (including by amending paragraph 13A);
(d) add new circumstances in which a person will be so treated.
(3) Regulations under sub-paragraph (1) may include any amendment of this Part of this Act that is appropriate in consequence of an amendment made by virtue of sub-paragraph (1).
SCHEDULE 34A Promoters of tax avoidance schemes: defeated arrangements
PART 1 Introduction
1 In this Schedule—
(a) Part 2 is about the meaning of “relevant defeat”;
(b) Part 3 contains provision about when a relevant defeat is treated as occurring in relation to a person;
(c) Part 4 contains provision about when a person is treated as meeting a condition in subsection (11), (12) or (13) of section 237A;
(d) Part 5 contains definitions and other supplementary provisions.
PART 2 Meaning of “relevant defeat”
“Related” arrangements
2 (1) For the purposes of this Part of this Act, separate arrangements which persons have entered into are “related” to one another if (and only if) they are substantially the same.
(2) Sub-paragraphs (3) to (6) set out cases in which arrangements are to be treated as being “substantially the same” (if they would not otherwise be so treated under sub-paragraph (1)).
(3) Arrangements to which the same reference number has been allocated under Part 7 of FA 2004 (disclosure of tax avoidance schemes) are treated as being substantially the same.
For this purpose arrangements in relation to which information relating to a reference number has been provided in compliance with section 312 of FA 2004 are treated as arrangements to which that reference number has been allocated under Part 7 of that Act.
(4) Arrangements to which the same reference number has been allocated under paragraph 9 of Schedule 11A to VATA 1994 (disclosure of avoidance schemes) or paragraph 22 of Schedule 17 to FA 2017 (disclosure of avoidance schemes: VAT and other indirect taxes) are treated as being substantially the same.
(5) Any two or more sets of arrangements which are the subject of follower notices given by reference to the same judicial ruling are treated as being substantially the same.
(6) Where a notice of binding has been given in relation to any arrangements (“the bound arrangements”) on the basis that they are, for the purposes of Schedule 43A to FA 2013, equivalent arrangements in relation to another set of arrangements (the “lead arrangements”)—
(a) the bound arrangements and the lead arrangements are treated as being substantially the same, and
(b) the bound arrangements are treated as being substantially the same as any other arrangements which, as a result of this sub-paragraph, are treated as substantially the same as the lead arrangements.
“Promoted arrangements”
3 (1) For the purposes of this Schedule arrangements are “promoted arrangements” in relation to a person if—
(a) they are relevant arrangements or would be relevant arrangements under the condition stated in sub-paragraph (2), and
(b) the person is carrying on a business as a promoter and—
(i) the person is or has been a promoter in relation to the arrangements, or
(ii) that would be the case if the condition in sub-paragraph (2) were met.
(2) That condition is that the definition of “tax” in section 283 includes, and has always included, value added tax.
Relevant defeat of single arrangements
4 (1) A defeat of arrangements (entered into by any person) which are promoted arrangements in relation to a person (“the promoter”) is a “relevant defeat” in relation to the promoter if the condition in sub-paragraph (2) is met.
(2) The condition is that the arrangements are not related to any other arrangements which are promoted arrangements in relation to the promoter.
(3) For the meaning of “defeat” see paragraphs 10 to 16.
Relevant defeat of related arrangements
5 (1) This paragraph applies if arrangements (entered into by any person) (“Set A”)—
(a) are promoted arrangements in relation to a person (“P”), and
(b) are related to other arrangements which are promoted arrangements in relation to P.
(2) If Case 1, 2 or 3 applies (see paragraphs 7 to 9) a relevant defeat occurs in relation to P and each of the related arrangements.
(3) “The related arrangements” means Set A and the arrangements mentioned in sub-paragraph (1)(b).
Limit on number of separate relevant defeats in relation to the same, or related, arrangements
6 In relation to a person, if there has been a relevant defeat of arrangements (whether under paragraph 4 or 5) there cannot be a further relevant defeat of—
(a) those particular arrangements, or
(b) arrangements which are related to those arrangements.
Case 1: counteraction upheld by judicial ruling
7 (1) Case 1 applies if—
(a) any of Conditions A to E is met in relation to any of the related arrangements, and
(b) in the case of those arrangements the decision to make the relevant counteraction has been upheld by a judicial ruling (which is final).
(2) In sub-paragraph (1) “the relevant counteraction” means the counteraction mentioned in paragraph 11(d), 12(1)(b), 13(1)(d), 14(1)(d) or 15(1)(d) (as the case requires).
Case 2: judicial ruling that avoidance-related rule applies
8 Case 2 applies if Condition F is met in relation to any of the related arrangements.
Case 3: proportion-based relevant defeat
9 (1) Case 3 applies if—
(a) at least 75% of the tested arrangements have been defeated, and
(b) no final judicial ruling in relation to any of the related arrangements has upheld a corresponding tax advantage which has been asserted in connection with any of the related arrangements.
(2) In this paragraph “the tested arrangements” means so many of the related arrangements (as defined in paragraph 5(3)) as meet the condition in sub-paragraph (3) or (4).
(3) Particular arrangements meet this condition if a person has made a return, claim or election on the basis that a tax advantage results from those arrangements and—
(a) there has been an enquiry or investigation by HMRC into the return, claim or election, or
(b) HMRC assesses the person to tax on the basis that the tax advantage (or any part of it) does not arise, or
(c) a GAAR counteraction notice has been given in relation to the tax advantage or part of it and the arrangements.
(4) Particular arrangements meet this condition if HMRC takes other action on the basis that a tax advantage which might be expected to arise from those arrangements, or is asserted in connection with them, does not arise.
(5) For the purposes of this paragraph a tax advantage has been “asserted” in connection with particular arrangements if a person has made a return, claim or election on the basis that the tax advantage arises from those arrangements.
(6) In sub-paragraph (1)(b) “corresponding tax advantage” means a tax advantage corresponding to any tax advantage the counteraction of which is taken into account by HMRC for the purposes of sub-paragraph (1)(a).
(7) For the purposes of this paragraph a court or tribunal “upholds” a tax advantage if—
(a) the court or tribunal makes a ruling to the effect that no part of the tax advantage is to be counteracted, and
(b) that judicial ruling is final.
(8) In this paragraph references to “counteraction” include anything referred to as a counteraction in any of Conditions A to F in paragraphs 11 to 16.
(9) In this paragraph “GAAR counteraction notice” means—
(a) a notice such as is mentioned in sub-paragraph (2) of paragraph 12 of Schedule 43 to FA 2013 (notice of final decision to counteract),
(b) a notice under paragraph 8(2) or 9(2) of Schedule 43A to that Act (pooling or binding of arrangements) stating that the tax advantage is to be counteracted under the general anti-abuse rule, or
(c) a notice under paragraph 8(2) of Schedule 43B to that Act (generic referrals) stating that the tax advantage is to be counteracted under the general anti-abuse rule.
“Defeat” of arrangements
10 For the purposes of this Part of this Act a “defeat” of arrangements occurs if any of Conditions A to F (in paragraphs 11 to 16) is met in relation to the arrangements.
11 Condition A is that—
(a) a person has made a return, claim or election on the basis that a tax advantage arises from the arrangements,
(b) a notice given to the person under paragraph 12 of Schedule 43 to, paragraph 8(2) or 9(2) of Schedule 43A to or paragraph 8(2) of Schedule 43B to FA 2013 stated that the tax advantage was to be counteracted under the general anti-abuse rule,
(c) the tax advantage has been counteracted (in whole or in part) under the general anti-abuse rule, and
(d) the counteraction is final.
12 (1) Condition B is that a follower notice has been given to a person by reference to the arrangements (and not withdrawn) and—
(a) the person has complied with subsection (2) of section 208 of FA 2014 by taking the action specified in subsections (4) to (6) of that section in respect of the denied tax advantage (or part of it), or
(b) the denied tax advantage has been counteracted (in whole or in part) otherwise than as mentioned in paragraph (a) and the counteraction is final.
(2) In this paragraph “the denied tax advantage” is to be interpreted in accordance with section 208(3) of FA 2014.
(3) In this Schedule “follower notice” means a follower notice under Chapter 2 of Part 4 of FA 2014.
13 (1) Condition C is that—
(a) the arrangements are DOTAS arrangements,
(b) a person (“the taxpayer”) has made a return, claim or election on the basis that a relevant tax advantage arises,
(c) the relevant tax advantage has been counteracted, and
(d) the counteraction is final.
(2) For the purposes of sub-paragraph (1) “relevant tax advantage” means a tax advantage which the arrangements might be expected to enable the taxpayer to obtain.
(3) For the purposes of this paragraph the relevant tax advantage is “counteracted” if adjustments are made in respect of the taxpayer's tax position on the basis that the whole or part of that tax advantage does not arise.
14 (1) Condition D is that—
(a) the arrangements are disclosable VAT or other indirect tax arrangements to which a ... person is a party,
(b) the ... person has made a return or claim on the basis that a relevant tax advantage arises,
(c) the relevant tax advantage has been counteracted, and
(d) the counteraction is final.
(2) For the purposes of sub-paragraph (1) “relevant tax advantage” means a tax advantage which the arrangements might be expected to enable the ... person to obtain.
(3) For the purposes of this paragraph the relevant tax advantage is “counteracted” if adjustments are made in respect of the ... person's tax position on the basis that the whole or part of that tax advantage does not arise.
15 (1) Condition E is that the arrangements are disclosable VAT arrangements to which a taxable person (“T”) is a party and—
(a) the arrangements relate to the position with respect to VAT of a person other than T (“S”) who has made supplies of goods or services to T,
(b) the arrangements might be expected to enable T to obtain a tax advantage in connection with those supplies of goods or services,
(c) the arrangements have been counteracted, and
(d) the counteraction is final.
(2) For the purposes of this paragraph the arrangements are “counteracted” if—
(a) HMRC assess S to tax or take any other action on a basis which prevents T from obtaining (or obtaining the whole of) the tax advantage in question, or
(b) adjustments are made on a basis such as is mentioned in paragraph (a).
16 (1) Condition F is that—
(a) a person has made a return, claim or election on the basis that a relevant tax advantage arises,
(b) the tax advantage, or part of the tax advantage would not arise if a particular avoidance-related rule (see paragraph 25) applies in relation to the person's tax affairs,
(c) it is held in a judicial ruling that the relevant avoidance-related rule applies in relation to the person's tax affairs, and
(d) the judicial ruling is final.
(2) For the purposes of sub-paragraph (1) “relevant tax advantage” means a tax advantage which the arrangements might be expected to enable the person to obtain.
PART 3 Relevant defeats: associated persons
Attribution of relevant defeats
17 (1) Sub-paragraph (2) applies if—
(a) there is (or has been) a person (“Q”),
(b) arrangements (“the defeated arrangements”) have been entered into,
(c) an event occurs such that either—
(i) there is a relevant defeat in relation to Q and the defeated arrangements, or
(ii) the condition in sub-paragraph (i) would be met if Q had not ceased to exist,
(d) at the time of that event a person (“P”) is carrying on a business as a promoter (or is carrying on what would be such a business under the condition in paragraph 3(2)), and
(e) Condition 1 or 2 is met in relation to Q and P.
(2) The event is treated for all purposes of this Part of this Act as a relevant defeat in relation to P and the defeated arrangements (whether or not it is also a relevant defeat in relation to Q, and regardless of whether or not P existed at any time when those arrangements were promoted arrangements in relation to Q).
(3) Condition 1 is that—
(a) P is not an individual,
(b) at a time when the defeated arrangements were promoted arrangements in relation to Q—
(i) P was a relevant body controlled by Q, or
(ii) Q was a relevant body controlled by P, and
(c) at the time of the event mentioned in sub-paragraph (1)(c)—
(i) Q is a relevant body controlled by P,
(ii) P is a relevant body controlled by Q, or
(iii) P and Q are relevant bodies controlled by a third person.
(4) Condition 2 is that—
(a) P and Q are relevant bodies,
(b) at a time when the defeated arrangements were promoted arrangements in relation to Q, a third person (“C”) controlled Q, and
(c) C controls P at the time of the event mentioned in sub-paragraph (1)(c).
(5) For the purposes of sub-paragraphs (3)(b) and (4)(b), the question whether arrangements are promoted arrangements in relation to Q at any time is to be determined on the assumption that the reference to “design” in paragraph (b) of section 235(3) (definition of “promoter” in relation to relevant arrangements) is omitted.
Deemed defeat notices
18 (1) This paragraph applies if—
(a) an authorised officer becomes aware at any time (“the relevant time”) that a relevant defeat has occurred in relation to a person ( “ P ”) who is carrying on a business as a promoter,
(b) there have occurred, more than 3 years before the relevant time—
(i) one third party defeat, or
(ii) two third party defeats, and
(c) conditions A1 and B1 (in a case within paragraph (b)(i)), or conditions A2 and B2 (in a case within paragraph (b)(ii)), are met.
(2) Where this paragraph applies by virtue of sub-paragraph (1)(b)(i), this Part of this Act has effect as if an authorised officer had (with due authority), at the time of the time of the third party defeat, given P a single defeat notice under section 241A(2) in respect of it.
(3) Where this paragraph applies by virtue of sub-paragraph (1)(b)(ii), this Part of this Act has effect as if an authorised officer had (with due authority), at the time of the second of the two third party defeats, given P a double defeat notice under section 241A(3) in respect of the two third party defeats.
(4) Section 241A(8) has no effect in relation to a notice treated as given as mentioned in sub-paragraph (2) or (3).
(5) Condition A1 is that—
(a) a conduct notice or a single or double defeat notice has been given to the other person (see sub-paragraph (9)) in respect of the third party defeat,
(b) at the time of the third party defeat an authorised officer would have had power by virtue of paragraph 17 to give P a defeat notice in respect of the third party defeat, had the officer been aware that it was a relevant defeat in relation to P, and
(c) so far as the authorised officer mentioned in sub-paragraph (1)(a) is aware, the conditions for giving P a defeat notice in respect of the third party defeat have never been met (ignoring this paragraph).
(6) Condition A2 is that—
(a) a conduct notice or a single or double defeat notice has been given to the other person (see sub-paragraph (9)) in respect of each, or both, of the third party defeats,
(b) at the time of the second third party defeat an authorised officer would have had power by virtue of paragraph 17 to give P a double defeat notice in respect of the third party defeats, had the officer been aware that either of the third party defeats was a relevant defeat in relation to P, and
(c) so far as the authorised officer mentioned in sub-paragraph (1)(a) is aware, the conditions for giving P a defeat notice in respect of those third party defeats (or either of them) have never been met (ignoring this paragraph).
(7) Condition B1 is that, had an authorised officer given P a defeat notice in respect of the third party defeat at the time of that relevant defeat, that defeat notice would still have effect at the relevant time (see sub-paragraph (1)).
(8) Condition B2 is that, had an authorised officer given P a defeat notice in respect of the two third party defeats at the time of the second of those relevant defeats, that defeat notice would still have effect at the relevant time.
(9) In this paragraph “third party defeat” means a relevant defeat which has occurred in relation to a person other than P.
Meaning of “relevant body” and “control”
19 (1) In this Part of this Schedule “relevant body” means—
(a) a body corporate, or
(b) a partnership.
(2) For the purposes of this Part of this Schedule a person controls a body corporate if the person has power to secure that the affairs of the body corporate are conducted in accordance with the person's wishes—
(a) by means of the holding of shares or the possession of voting power in relation to the body corporate or any other relevant body,
(b) as a result of any powers conferred by the articles of association or other document regulating the body corporate or any other relevant body, or
(c) by means of controlling a partnership.
(3) For the purposes of this Part of this Schedule a person controls a partnership if the person is a controlling member or the managing partner of the partnership.
(4) In this paragraph “controlling member” has the same meaning as in Schedule 36 (partnerships).
(5) In this paragraph “managing partner”, in relation to a partnership, means the member of the partnership who directs, or is on a day-to-day level in control of, the management of the business of the partnership.
PART 4 Meeting section 237A conditions: bodies corporate and partnerships
Relevant bodies controlled etc by other persons treated as meeting section 237A condition
20 (1) A relevant body is treated as meeting a section 237A condition at the section 237A(2) relevant time if any of Conditions A to C is met.
(2) Condition A is that—
(a) a person met the section 237A condition at a time when the person was a promoter, and
(b) the person controls or has significant influence over the relevant body at the section 237A(2) relevant time.
(3) Condition B is that—
(a) a person met the section 237A condition at a time when the person controlled or had significant influence over the relevant body,
(b) the relevant body was a promoter at that time, and
(c) the person controls or has significant influence over the relevant body at the section 237A(2) relevant time.
(4) Condition C is that—
(a) two or more persons together controlled or had significant influence over the relevant body at a time when one of those persons met the section 237A condition,
(b) the relevant body was a promoter at that time, and
(c) those persons together control or have significant influence over the relevant body at the section 237A(2) relevant time.
(5) Sub-paragraph (1) does not apply where the person referred to in sub-paragraph (2)(a), (3)(a), or (4)(a) as meeting a section 237A condition is an individual.
(6) For the purposes of sub-paragraph (2) it does not matter whether the relevant body existed at the time referred to in sub-paragraph (2)(a).
Persons who control etc a relevant body treated as meeting a section 237A condition
21 (1) If at a time when a person controlled or had significant influence over a relevant body—
(a) the relevant body met a section 237A condition, and
(b) the relevant body, or another relevant body which the person controlled or had significant influence over, was a promoter,
the person is treated as meeting the section 237A condition at the section 237A(2) relevant time.
(2) It does not matter whether any relevant body referred to sub-paragraph (1) exists at the section 237A(2) relevant time.
Relevant bodies controlled etc by the same person treated as meeting a section 237A condition
22 (1) If—
(a) a person controlled or had significant influence over a relevant body at a time when it met a section 237A condition, and
(b) at that time that body, or another relevant body which the person controlled or had significant influence over, was a promoter,
any relevant body which the person controls or has significant influence over at the section 237A(2) relevant time is treated as meeting the section 237A condition at the section 237A(2) relevant time.
(2) If—
(a) two or more persons together controlled or had significant influence over a relevant body at a time when it met a section 237A condition, and
(b) at that time that body, or another relevant body which those persons together controlled or had significant influence over, was a promoter,
any relevant body which those persons together control or have significant influence over at the section 237A(2) relevant time is treated as meeting the section 237A condition at the section 237A(2) relevant time.
(3) It does not matter whether—
(a) a relevant body referred to in sub-paragraph (1)(a) or (b) or (2)(a) or (b) exists at the section 237A(2) relevant time, or
(b) a relevant body existing at the section 237A(2) relevant time existed at the time referred to in sub-paragraph (1)(a) or (2)(a).
Interpretation
23 (1) In this Part of this Schedule—
“control” and “significant influence” have the same meanings as in Part 4 of Schedule 34 (see paragraph 13A(5) to (11));
references to a person being a promoter are to the person carrying on business as a promoter;
“relevant body” has the same meaning as in Part 3 of this Schedule;
“section 237A(2) relevant time” means the time referred to in section 237A(2);
“section 237A condition” means any of the conditions in section 237A(11), (12) and (13).
(2) For the purposes of paragraphs 20 to 22, the condition in section 237A(11) (occurrence of 3 relevant defeats in the 3 years ending with the relevant time) is taken to have been met by a person at any time if at least 3 relevant defeats have occurred in relation to the person in the period of 3 years ending with that time.
PART 5 Supplementary
“Adjustments”
24 In this Schedule “adjustments” means any adjustments, whether by way of an assessment, the modification of an assessment or return, the amendment or disallowance of a claim, the entering into of a contract settlement or otherwise (and references to “making” adjustments accordingly include securing that adjustments are made by entering into a contract settlement).
Meaning of “avoidance-related rule”
25 (1) In this Schedule “avoidance-related rule” means a rule in Category 1 or 2.
(2) A rule is in Category 1 if—
(a) it refers (in whatever terms) to the purpose or main purpose or purposes of a transaction, arrangements or any other action or matter, and
(b) to whether or not the purpose in question is or involves the avoidance of tax or the obtaining of any advantage in relation to tax (however described).
(3) A rule is also in Category 1 if it refers (in whatever terms) to—
(a) expectations as to what are, or may be, the expected benefits of a transaction, arrangements or any other action or matter, and
(b) whether or not the avoidance of tax or the obtaining of any advantage in relation to tax (however described) is such a benefit.
For the purposes of paragraph (b) it does not matter whether the reference is (for instance) to the “sole or main benefit” or “one of the main benefits” or any other reference to a benefit.
(4) A rule falls within Category 2 if as a result of the rule a person may be treated differently for tax purposes depending on whether or not purposes referred to in the rule (for instance the purposes of an actual or contemplated action or enterprise) are (or are shown to be) commercial purposes.
(5) For example, a rule in the following form would fall within Category 1 and within Category 2—
Example rule
Section X does not apply to a company in respect of a transaction if the company shows that the transaction meets Condition A or B.
Condition A is that the transaction is effected—
(a) for genuine commercial reasons, or
(b) in the ordinary course of managing investments.
Condition B is that the avoidance of tax is not the main object or one of the main objects of the transaction.
“DOTAS arrangements”
26 (1) For the purposes of this Schedule arrangements are “DOTAS arrangements” at any time if at that time a person—
(a) has provided, information in relation to the arrangements under section 308(3), 309 or 310 of FA 2004, or
(b) has failed to comply with any of those provisions in relation to the arrangements.
(2) But for the purposes of this Schedule “DOTAS arrangements” does not include arrangements in respect of which HMRC has given notice under section 312(6) of FA 2004 (notice that promoters not under duty to notify client of reference number).
(3) For the purposes of sub-paragraph (1) a person who would be required to provide information under subsection (3) of section 308 of FA 2004—
(a) but for the fact that the arrangements implement a proposal in respect of which notice has been given under subsection (1) of that section, or
(b) but for subsection (4A), (4C) or (5) of that section,
is treated as providing the information at the end of the period referred to in subsection (3) of that section.
“Disclosable VAT or other indirect tax arrangements”
26A (1) For the purposes of this Schedule arrangements are “disclosable VAT or other indirect tax arrangements” at any time if at that time—
(a) the arrangements are disclosable Schedule 11A arrangements, or
(b) sub-paragraph (2) applies.
(2) This sub-paragraph applies if a person—
(a) has provided information in relation to the arrangements under paragraph 12(1), 17(2) or 18(2) of Schedule 17 to FA 2017, or
(b) has failed to comply with any of those provisions in relation to the arrangements.
(3) But for the purposes of this Schedule arrangements in respect of which HMRC have given notice under paragraph 23(6) of that Schedule (notice that promoters not under duty to notify client of reference number) are not to be regarded as disclosable VAT or other indirect tax arrangements.
(4) For the purposes of sub-paragraph (2) a person who would be required to provide information under paragraph 12(1) of that Schedule—
(a) but for the fact that the arrangements implement a proposal in respect of which notice has been given under paragraph 11(1) of that Schedule, or
(b) but for paragraph 13, 14 or 15 of that Schedule,
is treated as providing the information at the end of the period referred to in paragraph 12(1).
“Disclosable Schedule 11A VAT arrangements”
27 For the purposes of paragraph 26A arrangements are “disclosable Schedule 11A VAT arrangements” at any time if at that time—
(a) a person has complied with paragraph 6 of Schedule 11A to VATA 1994 in relation to the arrangements (duty to notify Commissioners),
(b) a person under a duty to comply with that paragraph in relation to the arrangements has failed to do so, or
(c) a reference number has been allocated to the scheme under paragraph 9 of that Schedule (voluntary notification of avoidance scheme which is not a designated scheme).
Paragraphs 26 to 27: supplementary
28 (1) A person “fails to comply” with any provision mentioned in paragraph 26(1)(a), 26A(2)(a) or 27(b) if and only if any of the conditions in sub-paragraphs (2) to (4) is met.
(2) The condition in this sub-paragraph is that—
(a) the tribunal has determined that the person has failed to comply with the provision concerned,
(b) the appeal period has ended, and
(c) the determination has not been overturned on appeal.
(3) The condition in this sub-paragraph is that—
(a) the tribunal has determined for the purposes of section 118(2) of TMA 1970 that the person is to be deemed not to have failed to comply with the provision concerned as the person had a reasonable excuse for not doing the thing required to be done,
(b) the appeal period has ended, and
(c) the determination has not been overturned on appeal.
(4) The condition in this sub-paragraph is that the person admitted in writing to HMRC that the person has failed to comply with the provision concerned.
(5) In this paragraph “the appeal period” means—
(a) the period during which an appeal could be brought against the determination of the tribunal, or
(b) where an appeal mentioned in paragraph (a) has been brought, the period during which that appeal has not been finally determined, withdrawn or otherwise disposed of.
“Final” counteraction
29 For the purposes of this Schedule the counteraction of a tax advantage or of arrangements is “final” when the assessment or adjustments made to effect the counteraction, and any amounts arising as a result of the assessment or adjustments, can no longer be varied, on appeal or otherwise.
Inheritance tax, stamp duty reserve tax, VAT and petroleum revenue tax
30 (1) In this Schedule, in relation to inheritance tax, each of the following is treated as a return—
(a) an account delivered by a person under section 216 or 217 of IHTA 1984 (including an account delivered in accordance with regulations under section 256 of that Act);
(b) a statement or declaration which amends or is otherwise connected with such an account produced by the person who delivered the account;
(c) information or a document provided by a person in accordance with regulations under section 256 of that Act;
and such a return is treated as made by the person in question.
(2) In this Schedule references to an assessment to tax, in relation to inheritance tax, stamp duty reserve tax and petroleum revenue tax, include a determination.
(3) In this Schedule an expression used in relation to VAT has the same meaning as in VATA 1994.
Power to amend
31 (1) The Treasury may by regulations amend this Schedule (apart from this paragraph).
(2) An amendment by virtue of sub-paragraph (1) may, in particular, add, vary or remove conditions or categories (or otherwise vary the meaning of “ avoidance-related rule ”).
(3) Regulations under sub-paragraph (1) may include any amendment of this Part of this Act that is appropriate in consequence of an amendment made by virtue of sub-paragraph (1).
SCHEDULE 35 Promoters of tax avoidance schemes: penalties
Section 274
Introduction
1 In this Schedule a reference to an “information duty” is to a duty arising under any of the following provisions to provide information or produce a document—
(za) section 236C(1) (duty to make return to HMRC);
(a) section 255 (duty to provide information or produce document);
(b) section 257 (ongoing duty to provide information);
(c) section 258 (duty of person dealing with non-resident promoter);
(d) section 259 (monitored promoter: duty to provide information about clients);
(e) section 260 (intermediaries: duty to provide information about clients);
(f) section 261 (duty to provide information about clients following enquiry);
(g) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(h) section 263 (information about monitored promoter's address).
(i) paragraph 1, 2, 5 or 5A of Schedule 36 of FA 2008 (information and inspection powers) as it has effect as a result of section 272A.
Penalties for failure to comply
2 (1) A person who
(a) fails to comply with a duty imposed by or under this Part mentioned in column 1 of the Table is liable to a penalty not exceeding the amount shown in relation to that duty in column 2 of the Table, or-
(b) deliberately obstructs an officer of Revenue and Customs in the course of an inspection under paragraph 10 of Schedule 36 to FA 2008, as it has effect as a result of section 272A, that has been approved by the tribunal is liable to a penalty not exceeding the relevant amount (see sub-paragraph (3A)).
Table
Column 1 | Column 2
Provision or duty | Maximum penalty (£)
Section 236B(1) (promotion of arrangements or proposal of a description specified in a stop notice) | the relevant amount (see subparagraphs (2A) and (2B))
Section 236B(3)(a), (4)(a) or (5)(a) (requirement to notify persons who are subject to a stop notice) | £10,000
Section 236B(3)(b), (4)(b) or (5)(b) (requirement to notify HMRC of persons who are subject to a stop notice) | £25,000
Section 236C(1) (duty to make return to HMRC) | £5,000
Section 236J(1) (requirement to notify clients and intermediaries of stop notice) | £5,000
Section 249(1) (duty to notify clients of monitoring notice) | 5,000
Section 249(3) (duty to publicise monitoring notice) | 1,000,000
Section 249(10) (duty to include information on correspondence etc) | 1,000,000
Section 251 (duty of promoter to notify clients and intermediaries of reference number) | 5,000
Section 252 (duty of those notified to notify others of promoter's number) | 5,000
Section 253 (duty to notify HMRC of reference number) | the relevant amount (see sub-paragraph (3))
Section 255 (duty to provide information or produce document) | 1,000,000
Section 257 (ongoing duty to provide information or produce document) | 1,000,000
Section 258 (duty of person dealing with non-resident promoter) | 1,000,000
Section 259 (monitored promoter: duty to provide information about clients) | 5,000
Section 260 (intermediaries: duty to provide information about clients) | 5,000
Section 261 (duty to provide information about clients following an enquiry) | 10,000
. . . | . . .
Section 263 (duty to provide information about address) | 5,000
Section 265 (duty to provide information to promoter) | 5,000
Duty to comply with a notice given under paragraph 1 of Schedule 36 to FA 2008 as it has effect as a result of section 272A | the relevant amount (see sub-paragraph (3A))
Duty to comply with a notice given under paragraph 2, 5 or 5A of Schedule 36 to FA 2008 as it has effect as a result of section 272A | the relevant amount (see sub-paragraph (3B))
(1A) In relation to a failure to comply with section 236C(1) the maximum penalty specified in column 2 of the Table is a maximum penalty which may be imposed—
(a) in respect of each failure to provide the required information or statement (see section 236C(6)) about a relevant client (within the meaning given by that section), and
(b) for each day on which a complete return is not provided after the end of the period within which it must be provided (see section 236C(7)).
(2) In relation to a failure to comply with section 236B(3), (4) or (5), 236J(1), 249(1), 251, 252, 259 or 260 the maximum penalty specified in column 2 of the Table is a maximum penalty which may be imposed in respect of each person to whom the failure relates.
(2A) In relation to a failure to comply with section 236B(1), the “relevant amount” is the sum of—
(a) £100,000 in respect of one or more failures relating to a particular stop notice, and
(b) £5,000 for each person to whom arrangements of a description specified in that stop notice, or a proposal for such arrangements, were promoted (within the meaning it has in that section).
(2B) Where a person fails to comply with section 236B(1) at a time when the person, or another person who the person controls or has significant influence over, is subject to a monitoring notice, sub-paragraph (2A) applies as if—
(a) in paragraph (a), for “£100,000” there were substituted “ £250,000 ”, and
(b) in paragraph (b), for “£5,000” there were substituted “ £10,000 ”.
(2C) If the maximum penalty that would apply as a result of sub-paragraph (2B) in a particular case appears inappropriately low after taking account of the considerations in sub-paragraph (4), sub-paragraph (2B)(a) applies as if for “£250,000” there were substituted “ £1,000,000 ”.
(3) In relation to a failure to comply with section 253, the “relevant amount” is—
(a) £5,000, unless paragraph (b) or (c) applies;
(b) £7,500, where a person has previously failed to comply with section 253 on one (and only one) occasion during the period of 36 months ending with the date on which the current failure occurred;
(c) £10,000, where a person has previously failed to comply with section 253 on two or more occasions during the period mentioned in paragraph (b).
(3A) Where a person fails to comply with a notice given under paragraph 1 of Schedule 36 to FA 2008 (as it has effect as a result of section 272A) or deliberately obstructs an officer of Revenue and Customs in the course of an inspection under paragraph 10 of that Schedule (as it has effect as a result of that section) that has been approved by the tribunal, the “relevant amount” is—
(a) in the case of a failure by a person who was subject to a monitoring notice at the time of the failure, or who had control of or had significant influence over such a person, £1,000,000, and
(b) in any other case, £5,000.
(3B) In relation to a failure to comply with a notice given under paragraph 2, 5 or 5A of that Schedule as it has effect as a result of section 272A, the “relevant amount” is the amount for the time being specified in paragraph 39(2) of that Schedule.
(4) The amount of a penalty imposed under sub-paragraph (1) is to be arrived at after taking account of all relevant considerations, including the desirability of setting it at a level which appears appropriate for deterring the person, or other persons, from similar failures to comply on future occasions having regard (in particular)—
(a) in the case of a penalty imposed for a failure relating to any arrangements or proposal promoted by a person, to the amount of fees received, or likely to have been received, by the person in connection with the those arrangements or that proposal;
(b) in such a case, to the amount of any tax advantage gained, or sought to be gained, ... in relation to the ... arrangements or the arrangements implementing the ... proposal (including, where the person liable to the penalty is the promoter of those arrangements or that proposal, any advantage that was gained or sought to be gained by the persons to whom the arrangements or proposal were promoted).
(5) The references in sub-paragraph (4) to arrangements or a proposal being “promoted” are to be construed in accordance with section 236A(7).
(6) Sub-paragraphs (5) to (11) of paragraph 13A of Schedule 34 (meaning of “control” and “significant influence”) apply to this paragraph as they apply to Part 2 of that Schedule.
Daily default penalties for failure to comply
3 (1) If the failure to comply with an information duty , other than a duty arising under section 236C(1), continues after a penalty is imposed under paragraph 2(1), the person is liable to a further penalty or penalties not exceeding the relevant sum for each day on which the failure continues after the day on which the penalty under paragraph 2(1) was imposed.
(2) In sub-paragraph (1) “the relevant sum” means—
(a) £10,000, in a case where the maximum penalty which could have been imposed for the failure was £1,000,000;
(b) £600, in cases not falling within paragraph (a).
Penalties for inaccurate information and documents
4 (1) If—
(a) in complying with an information duty or a requirement to provide evidence under section 236D(2)(d) or 236F(3)(c), a person provides inaccurate information or produces a document that contains an inaccuracy, and
(b) condition A, B or C is met,
the person is liable to a penalty not exceeding the relevant sum.
(2) Condition A is that the inaccuracy is careless or deliberate.
(3) An inaccuracy is careless if it is due to a failure by the person to take reasonable care.
(4) For the purpose of determining whether or not a person who is a monitored promoter took reasonable care, reliance on legal advice is to be disregarded if either—
(a) the advice was not based on a full and accurate description of the facts, or
(b) the conclusions in the advice that the person relied on were unreasonable.
(5) For the purpose of determining whether or not a person who complies with a duty under section 258 took reasonable care, reliance on legal advice is to be disregarded if the advice was given or procured by the monitored promoter mentioned in subsection (1) of that section.
(6) Condition B is that the person knows of the inaccuracy at the time the information is provided or the document produced but does not inform HMRC at that time.
(7) Condition C is that the person—
(a) discovers the inaccuracy some time later, and
(b) fails to take reasonable steps to inform HMRC.
(8) The “relevant sum” means—
(a) £1,000,000, where the information is provided or document produced in compliance with a duty under section 255, 257 or 258 , or under Schedule 36 to FA 2008 as it has effect as a result of section 272A in a case where the person required to provide the information or produce the document was at the time subject to a monitoring notice;
(b) £10,000, where the information is provided in compliance with a duty under section 261;
(c) £5,000, where the information is provided or document produced in compliance with a duty under section 236C(1), 236D(2)(d), 236F(3)(c), 259, 260, ... or 263 or under Schedule 36 to FA 2008 as it has effect as a result of section 272A in a case not falling within paragraph (a).
(9) If the information or document contains more than one inaccuracy, one penalty is payable under this paragraph whatever the number of inaccuracies.
Power to change amount of penalties
5 (1) If it appears to the Treasury that there has been a change in the value of money since the last relevant date, they may by regulations substitute for the sums for the time being specified in paragraph 2, 3 or 4 such other sums as appear to them to be justified by the change.
(2) Regulations under sub-paragraph (1) may include any amendment of paragraph 10(b) that is appropriate in consequence of an amendment made by virtue of sub-paragraph (1).
(3) The “relevant date”, in relation to a specified sum, means—
(a) the date on which this Act is passed, and
(b) each date on which the power conferred by sub-paragraph (1) has been exercised in relation to that sum.
Concealing, destroying etc documents following imposition of a duty to provide information
6 (1) A person must not conceal, destroy or otherwise dispose of, or arrange for the concealment, destruction or disposal of, a document which is subject to a duty under section 255 or 257 or under Schedule 36 of FA 2008 as it has effect as a result of section 272A.
(2) Sub-paragraph (1) does not apply if the person acts after the document has been produced to an officer of Revenue and Customs in accordance with the duty, unless the officer has notified the person in writing that the document must continue to be available for inspection (and has not withdrawn the notification).
(3) Sub-paragraph (1) does not apply, in a case to which section 268(1) applies, if the person acts after the expiry of the period of 6 months beginning with the day on which a copy of the document was produced in accordance with that section unless, before the expiry of that period, an officer of Revenue and Customs makes a request for the original document under section 268(2)(b).
(4) A person who conceals, destroys or otherwise disposes of, or arranges for the concealment, destruction or disposal of, a document in breach of sub-paragraph (1), is taken to have failed to comply with the duty to produce the document under the provision concerned (but see sub-paragraph (5)).
(5) If a person conceals, destroys or otherwise disposes of, or arranges for the concealment, destruction or disposal of, a document which is subject to a duty under more than one of the provisions mentioned in sub-paragraph (1) then—
(a) in a case where a duty under section 255 applies, the person will be taken to have failed to comply only with that provision, or
(b) in a case where a duty under section 255 does not apply, the person will be taken to have failed to comply only with section 257.
Concealing, destroying etc documents following informal notification
7 (1) A person must not conceal, destroy or otherwise dispose of, or arrange for the concealment, destruction or disposal of, a document if an officer of Revenue and Customs has informed the person in writing that the person is, or is likely, to be given a notice under section 255 or 257, or under Schedule 36 of FA 2008 as it has effect as a result of section 272A, the effect of which will, or is likely to, require the production of the document.
(2) Sub-paragraph (1) does not apply if the person acts—
(a) at least 6 months after the person was, or was last, informed as described in sub-paragraph (1), or
(b) after the person becomes subject to a duty under section 255 or 257, or under Schedule 36 of FA 2008 as it has effect as a result of section 272A, which requires the document to be produced.
(3) A person who conceals, destroys or otherwise disposes of, or arranges for the concealment, destruction or disposal of, a document in breach of sub-paragraph (1), is taken to have failed to comply with the duty to produce the document under the provision concerned (but see sub-paragraph (4)).
(4) If a person conceals, destroys or otherwise disposes of, or arranges for the concealment, destruction or disposal of, a document which is subject to a duty under more than one of the provisions mentioned in sub-paragraph (1) then—
(a) in a case where a duty under section 255 applies, the person will be taken to have failed to comply only with that provision, or
(b) in a case where a duty under section 255 does not apply, the person will be taken to have failed to comply only with section 257.
Failure to comply with time limit
8 A failure to do anything required to be done within a limited period of time does not give rise to liability to a penalty under this Schedule if the person did it within such further time, if any, as an officer of Revenue and Customs or the tribunal may have allowed.
Reasonable excuse
9 (1) Liability to a penalty under this Schedule does not arise if there is a reasonable excuse for the failure.
(2) For the purposes of this paragraph—
(a) an insufficiency of funds is not a reasonable excuse unless attributable to events outside the person's control,
(b) if the person relies on any other person to do anything, that is not a reasonable excuse unless the first person took reasonable care to avoid the failure,
(c) if the person had a reasonable excuse for the failure but the excuse has ceased, the person is to be treated as having continued to have the excuse if the failure is remedied without unreasonable delay after the excuse ceased,
(d) reliance on legal advice is to be taken automatically not to constitute a reasonable excuse where the person is a monitored promoter if either—
(i) the advice was not based on a full and accurate description of the facts, or
(ii) the conclusions in the advice that the person relied on were unreasonable, and
(e) reliance on legal advice is to be taken automatically not to constitute a reasonable excuse in the case of a penalty for failure to comply with section 258, if the advice was given or procured by the monitored promoter mentioned in subsection (1) of that section.
Assessment of penalty and appeals
10 Part 10 of TMA 1970 (penalties, etc) has effect as if—
(a) the reference in section 100(1) to the Taxes Acts were read as a reference to the Taxes Acts and this Schedule,
(b) in subsection (2) of section 100, there were inserted a reference to a penalty under this Schedule, other than
(i) a penalty under paragraph 3 of this Schedule in respect of which the relevant sum is £600.
(ii) a penalty in respect of a failure to comply with section 236B(1) unless an officer of Revenue and Customs authorised for the purposes of section 100 of TMA 1970 considers that paragraph 2(2C) of this Schedule applies in relation to that failure;
(iii) a penalty in respect of a failure to comply with section 236B(3), (4) or (3), 236C(1) or 236J(1);
(iv) a penalty in respect of a failure to comply with a notice given under paragraph 1 of Schedule 36 to FA 2008 as it has effect as a result of section 272A unless paragraph 2(3A)(a) of this Schedule applies in relation to that failure;
(v) a penalty in respect of a failure to comply with a notice given under paragraph 2, 5 or 5A of Schedule 36 to FA 2008 as it has effect as a result of section 272A.
Interest on penalties
11 (1) A penalty under this Schedule is to carry interest in accordance with section 101 of FA 2009.
(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Double jeopardy
12 A person is not liable to a penalty under this Schedule in respect of anything in respect of which the person has been convicted of an offence.
Overlapping penalties
13 A person is not liable to a penalty under—
(a) Schedule 24 to the FA 2007 (penalties for errors),
(b) Part 7 of FA 2004, or
(c) any other provision which is prescribed,
by reason of any failure to include in any return or account a reference number required by section 253.
SCHEDULE 36 Promoters of tax avoidance schemes: partnerships
Section 281
PART 1 Partnerships as persons
“Person” includes a partnership
1 (1) Persons carrying on a business in partnership—
(a) are regarded as a person for the purposes of this Part of this Act;
(b) are referred to in this Part as a “partnership”.
(2) But in this Part of this Act “partnership” does not include a body of persons forming a legal person that is distinct from themselves (and paragraphs 2 to 21 may accordingly be disregarded in applying this Part of this Act to such a body of persons).
(3) In the references in this Part to carrying on a business in partnership, “partnership” has the same meaning as in the Partnership Act 1890.
Continuity of partnerships
2 A partnership is regarded for the purposes of this Part of this Act as continuing to be the same partnership (and the same person) regardless of a change in membership, provided that a person who was a member before the change remains a member after the change.
Meeting of conditions
3 (1) Accordingly, for the purposes of this Part of this Act a partnership is taken—
(a) to have done any act that bound the members, and
(b) to have failed to comply with any obligation of the firm which the members failed to comply with;
but see sub-paragraph (3).
(2) In sub-paragraph (1), “the members” means those who were the members of the partnership or (in the case of a limited partnership) the general partners of the partnership at the time when the act was done or the failure to comply occurred.
(3) Where a member of a partnership (“M”) has done, or failed to do, an act at any time (“the earlier time”), the partnership is not treated at any later time as having done, or failed to do, that act unless—
(a) M, or
(b) another person who was a member of the partnership at the earlier time,
is a member of the partnership at the later time.
(4) In this paragraph “firm” has the same meaning as in the Partnership Act 1890.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART 2 Conduct notices and monitoring notices
Defeat notices
4A A defeat notice that is given to a partnership must state that it is a partnership defeat notice.
Conduct notices
5 (1) A conduct notice that is given to a partnership must state that it is a partnership conduct notice.
(2) In accordance with paragraphs 1 and 2, where the person to whom a conduct notice is given is a partnership, section 238 authorises the imposition of conditions relating to—
(a) the persons who are members of the partnership when the conduct notice is given, and
(b) any person who becomes a member of the partnership after the conduct notice is given.
Monitoring notices
6 A monitoring notice that is given to a partnership must state that it is a partnership monitoring notice.
Person continuing to carry on partnership business as a sole trader
7 (1) This paragraph applies where—
(a) a person or persons have ceased to be members of a partnership,
(b) immediately before the cessation, a defeat notice, conduct notice or monitoring notice had effect in relation to the partnership, and
(c) immediately after the cessation, a person who was a member of the partnership immediately before the cessation is carrying on the business of the partnership, but not in partnership.
(2) Where this paragraph applies, the defeat notice, conduct notice or monitoring notice continues (despite paragraphs 1 and 2) to have effect in relation to the person mentioned in sub-paragraph (1)(c) (but, in relation to times when the business is not being carried on in partnership, the notice is not regarded for the purposes of this Part of this Act as a notice that has been given to a partnership.)
Persons leaving partnership: defeat notices
7A (1) Sub-paragraphs (2) and (3) apply where—
(a) a person (“P”) who was a controlling member of a partnership at the time when a defeat notice (“the original notice”) was given to the partnership has ceased to be a member of the partnership,
(b) the defeat notice had effect in relation to the partnership at the time of that cessation, and
(c) P is carrying on a business as a promoter.
(2) An authorised officer may give P a defeat notice.
(3) If P is carrying on a business as a promoter in partnership with one or more other persons and is a controlling member of that partnership (“the new partnership”), an authorised officer may give a defeat notice to the new partnership.
(4) A defeat notice given under sub-paragraph (3) ceases to have effect if P ceases to be a member of the new partnership.
(5) A notice under sub-paragraph (2) or (3) may not be given after the original notice has ceased to have effect.
(6) A defeat notice given under sub-paragraph (2) or (3) is given in respect of the relevant defeat or relevant defeats to which the original notice relates.
Persons leaving a partnership: conduct notices
8 (1) Sub-paragraphs (2) and (3) apply where—
(a) a person (“P”) who was a controlling member of a partnership at the time when a conduct notice (“the original notice”) was given to the partnership has ceased to be a member of the partnership,
(b) the conduct notice had effect in relation to the partnership at the time of that cessation, and
(c) P is carrying on a business as a promoter.
(2) An authorised officer may give P a conduct notice.
(3) If P is carrying on a business as a promoter in partnership with one or more other persons and is a controlling member of that partnership (“the new partnership”), an authorised officer may give a conduct notice to the new partnership.
(4) A conduct notice given under sub-paragraph (3) ceases to have effect if P ceases to be a member of the new partnership.
(5) A notice under sub-paragraph (2) or (3) may not be given after the termination date of the original notice (under section 241(2)(a) or (b)).
Persons leaving a partnership: monitoring notices
9 (1) Sub-paragraphs (2) and (3) apply where—
(a) a person (“P”) who was a controlling member of a partnership at the time when a monitoring notice was given to the partnership has ceased to be a member of the partnership,
(b) the monitoring notice had effect in relation to the partnership at the time of that cessation, and
(c) P is carrying on a business as a promoter.
(2) An authorised officer may give P a monitoring notice.
(3) If P is carrying on a business as a promoter in partnership with one or more other persons, and is a controlling member of that partnership (“the new partnership”), an authorised officer may give a monitoring notice to the new partnership.
(4) A monitoring notice given under sub-paragraph (3) ceases to have effect if P ceases to be a member of the new partnership.
Division of partnership business
10 (1) This paragraph applies if—
(a) a person (“a departing partner”) who has been carrying on a business in partnership ceases to carry on the business in partnership,
(b) a , defeat notice, conduct notice or monitoring notice had effect in relation to the partnership immediately before the departing partner ceased to carry on the business in partnership, and
(c) the departing partner is continuing to carry on part (but not the whole) of the business (“the transferred part”).
(2) The notice mentioned in sub-paragraph (1)(b) is referred to in this paragraph as “the original notice”.
(3) An authorised officer may give the departing partner—
(za) a defeat notice (if the original notice is a defeat notice);
(a) a conduct notice (if the original notice is a conduct notice);
(b) a monitoring notice (if the original notice is a monitoring notice).
(4) If the departing partner is itself carrying on the transferred part of the business in partnership, the authorised officer may give that partnership (“the new partnership”)—
(za) a defeat notice (if the original notice is a defeat notice);
(a) a conduct notice (if the original notice is a conduct notice);
(b) a monitoring notice (if the original notice is a monitoring notice).
(5) A notice given under sub-paragraph (4) ceases to have effect if the departing partner ceases to be a member of the new partnership.
(5A) A notice under sub-paragraph (3)(za) or (4)(za) may not be given after the end of the look-forward period of the original notice.
(6) A notice under sub-paragraph (3)(a) or (4)(a) may not be given after the termination date of the original notice (under section 241(2)(a) or (b)).
(7) It does not matter whether one, some or all of the persons who were carrying on the business in partnership are departing partners by virtue of sub-paragraph (1).
Notices under paragraphs 8 to 10: general
11 (1) In this Part of this Act—
“replacement conduct notice” means a notice under paragraph 8(2) or (3) or 10(3)(a) or (4)(a);
“replacement monitoring notice” means a notice given under paragraph 9(2) or (3) or 10(3)(b) or (4)(b).
(2) In this Part of this Act, “the original monitoring notice” means—
(a) in relation to a replacement monitoring notice given under paragraph 9(2), the monitoring notice mentioned in paragraph 9(1), and
(b) in relation to a replacement monitoring notice given under paragraph 10(3)(b) or (4)(b), the monitoring notice mentioned in paragraph 10(2),
and that original monitoring notice is also the “original monitoring notice” in relation to any monitoring notice that (under paragraph 9(2) or (3) or 10(3)(b) or (4)(b)) replaces a replacement monitoring notice.
11A The look-forward period for a notice under paragraph 7A(2) or (3) or 10(3)(za) or (4)(za)—
(a) begins on the day after the day on which the notice is given, and
(b) continues to the end of the look-forward period for the original notice (as defined in paragraph 7A(1)(a) or 10(2), as the case may be).
12 A notice under paragraph 8(2) or (3) or 10(3)(a) or (4)(a)—
(a) has no effect after the termination date of the original notice;
(b) must state that that date is its termination date.
13 An authorised officer may not give a replacement conduct notice or replacement monitoring notice to a person if a conduct notice or monitoring notice previously given to the person still has effect in relation to the person.
Publication under section 248
14 Where the monitored promoter referred to in section 248(2) is a partnership, paragraphs (a), (b) and (d) of that subsection are to be read as referring to details of the partnership (for instance, the name under which the business of the partnership is carried on), not to details of particular partners.
PART 3 Responsibility of partners
Responsibility of partners
15 (1) A notice given to a partnership under this Part of this Act has effect, at any time, in relation to the persons who are members of the partnership at that time (“the responsible partners”).
(2) Sub-paragraph (1) does not affect any liability of a person who has ceased to be a member of a partnership in respect of things that the responsible partners did or failed to do before that person ceased to be a member of the partnership.
(3) Anything required to be done by the responsible partners under or by virtue of a provision of this Part of this Act is required to be done by all the responsible partners (but see paragraph 18).
(4) In relation to any right (such as a right of appeal) conferred by this Part of this Act references to a person have the meaning that is appropriate in consequence of sub-paragraphs (1) to (3).
Joint and several liability of responsible partners
16 (1) Where the responsible partners are liable to a penalty under this Part of this Act, or to interest on such a penalty, their liability is joint and several.
(2) No amount may be recovered under sub-paragraph (1) from a person who did not become a responsible partner until after the relevant time.
(3) “The relevant time” means—
(a) in relation to so much of the penalty as is payable in respect of any day, or to interest on so much of a penalty as is so payable, the beginning of that day;
(b) in relation to any other penalty, or interest on such a penalty, the time when the act or omission occurred that caused the penalty to become payable.
Service of notices
17 (1) Any notice given to a partnership by an officer of Revenue and Customs under this Part of this Act must be served either—
(a) on all the persons who are members of the partnership when the notice is given, or
(b) on a representative partner.
(2) “Representative partner” means—
(a) a nominated partner, or
(b) if no partner has been nominated under paragraph 18(2), a partner designated by an authorised officer as a representative partner.
(3) A designation under sub-paragraph (2), or the revocation of such a designation, has effect only when notice of the designation, or revocation, has been given to the partnership by an authorised officer.
Nominated partners
18 (1) Anything required to be done by the responsible partners under this Part of this Act may instead be done by any nominated partner.
(2) “Nominated partner” means a partner nominated by a majority of the partners to act as the representative of the partnership for the purposes of this Part of this Act.
(3) A nomination under sub-paragraph (2), or the revocation of such a nomination, has effect only after notice of the nomination, or revocation, has been given to an authorised officer.
PART 4 Interpretation
Meaning of “controlling member”
19 (1) For the purposes of this Schedule a person (“P”) is a “controlling member” of a partnership at any time when the person has a right to a share of more than half the assets, or of more than half the income, of the partnership.
(2) For that purpose there are to be attributed to P any interests or rights of—
(a) any individual who is connected with P (if P is an individual), and
(b) any body corporate that P controls.
(3) An individual is “connected” with P if the individual is—
(a) P's spouse or civil partner;
(b) a relative of P;
(c) the spouse or civil partner of a relative of P;
(d) a relative of P's spouse or civil partner, or
(e) the spouse or civil partner of a relative of P's spouse or civil partner.
(4) In sub-paragraph (3) “relative” means brother, sister, ancestor or lineal descendant.
(5) P controls a body corporate (“B”) if P has power to secure—
(a) by means of the holding of shares or the possession of voting power in relation to B or any other body corporate, or
(b) as a result of any powers conferred by the articles of association or other document regulating that or any other body corporate,
that the affairs of B are conducted in accordance with P's wishes.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Power to amend definitions
21 (1) The Treasury may by regulations amend paragraph 19 ....
(2) Regulations under sub-paragraph (1) may include any amendment of this Schedule that is necessary in consequence of any amendment made by virtue of sub-paragraph (1).
SCHEDULE 37 Companies owned by employee-ownership trusts
Section 290
PART 1 Capital gains tax relief
Relief on disposals to employee-ownership trusts
1 In Part 7 of TCGA 1992 (other property, businesses, investments etc), after section 236G insert—
Employee-ownership trusts
Disposals to employee-ownership trusts
236H (1) This section applies where—
(a) a person other than a company (“P”) disposes of any ordinary share capital of a company (“C”) to the trustees of a settlement,
(b) the relief requirements are met, and
(c) P makes a claim under this section.
(2) Section 17(1) (disposals and acquisitions treated as made at market value) does not apply to the disposal.
(3) The disposal, and the acquisition by the trustees, are to be treated for the purposes of this Act as being made for such consideration as to secure that neither a gain nor a loss accrues on the disposal.
(4) “The relief requirements” are—
(a) that C meets the trading requirement (see section 236I) at the time of the disposal and continues to meet that requirement for the remainder of the tax year in which that time falls,
(b) that the settlement meets the all-employee benefit requirement at the time of the disposal and continues to meet that requirement for the remainder of the tax year in which that time falls (see sections 236J to 236L and subsection (5) of this section),
(c) that the settlement does not meet the controlling interest requirement (see section 236M) immediately before the beginning of the tax year in which the disposal occurs, but—
(i) it meets that requirement at the end of that tax year, and
(ii) if it met the requirement at an earlier time in that tax year (whether before or after the time of the disposal) it continued to meet it throughout the remainder of that tax year,
(d) that the limited participation requirement is met (see section 236N), and
(e) that this section does not apply in relation to any related disposal by P or a person connected with P which occurs in an earlier tax year.
(5) For the purposes of subsection (4)(b)—
(a) unless the settlement met the all-employee benefit requirement by virtue of section 236L (cases in which all-employee benefit requirement treated as met) at the time of the disposal, that section does not apply for the purposes of determining whether the settlement continues to meet that requirement after the disposal, and
(b) if, at the time of the disposal, the settlement met that requirement by virtue of section 236L and later continues to meet it otherwise than by virtue of that section, it may not again meet the requirement by virtue of that section.
(6) A disposal in an earlier tax year is “related” to the disposal in question if—
(a) both disposals are of ordinary share capital of the same company, or
(b) the disposal in the earlier tax year is of ordinary share capital of a company which is, or at the time of that disposal was, a member of the same group as the company whose ordinary share capital is the subject of the disposal in question.
(7) A claim under this section must include—
(a) information to identify the settlement,
(b) C's name and the address of its registered office, and
(c) the date of the disposal and the number of shares disposed of.
(8) Section 236O makes provision about events which prevent a claim being made under this section and circumstances in which a claim is revoked.
Trading requirement
236I (1) C meets the trading requirement if C is—
(a) a trading company which is not a member of a group, or
(b) the principal company of a trading group.
(2) “Trading company” means a company carrying on trading activities whose activities do not include to a substantial extent activities other than trading activities.
(3) “Trading group” means a group—
(a) one or more of whose members carry on trading group activities, and
(b) the activities of whose members, taken together, do not include to a substantial extent activities other than trading group activities.
(4) In this section—
“trading activities” means activities carried on by the company in the course of, or for the purposes of, a trade being carried on by it;
“trading group activities” means activities carried on by a member of the group in the course of, or for the purposes of, a trade being carried on by any member of the group.
(5) For the purposes of determining whether C is a trading company or the principal company of a trading group—
(a) the activities of the members of a group are to be treated as one business (with the result that activities are disregarded to the extent that they are intra-group activities), and
(b) a business carried on by a company in partnership with one or more other persons is to be treated as not being a trading activity or a trading group activity.
All-employee benefit requirement
236J (1) A settlement meets the all-employee benefit requirement if the trusts of the settlement—
(a) do not permit any of the settled property to be applied, at any time, otherwise than for the benefit of all the eligible employees on the same terms,
(b) do not permit the trustees at any time to apply any of the settled property—
(i) by creating a trust, or
(ii) by transferring property to the trustees of any settlement other than by an authorised transfer,
(c) do not permit the trustees at any time to make loans to beneficiaries of the trusts, and
(d) do not permit the trustees or any other person at any time to amend the trusts in a way such that the amended trusts would not comply with one or more of paragraphs (a) to (c).
(2) Section 236K makes provision about the requirement in subsection (1)(a).
(3) “Eligible employee” means—
(a) if C meets the trading requirement by virtue of section 236I(1)(a), any individual who is employed by, or is an office-holder of, C, and
(b) if C meets the trading requirement by virtue of section 236I(1)(b), any individual who is employed by, or is an office-holder of, a relevant group company,
but does not include an excluded participator.
(4) But where—
(a) C has ceased to meet the trading requirement or the trustees have ceased to hold any shares in C (or both), and
(b) a person was an eligible employee at any time during the period of two years ending immediately before that event (or, where both have occurred, the earlier of them),
that person continues to be an “eligible employee”.
(5) “Excluded participator” means—
(a) a person who is a participator in C, or, where C meets the trading requirement by virtue of section 236I(1)(b), in any relevant group company,
(b) any other person who is a participator in any close company that has made a disposition whereby property became comprised in the same settlement, being a disposition which but for section 13 or 13A of the Inheritance Tax Act 1984 (dispositions by close companies for benefit of employees or to employee-ownership trusts) would have been a transfer of value for the purposes of inheritance tax,
(c) any other person who has been a participator in any company mentioned in paragraph (a) or (b) at any time on or after the look-back date, or
(d) any person who is connected with any person within paragraph (a), (b) or (c).
(6) The participators in a company who are referred to in subsection (5) do not include any participator who—
(a) is not beneficially entitled to, or to rights entitling the participator to acquire, 5% or more of, or of any class of the shares comprised in, the company's share capital, and
(b) on a winding-up of the company would not be entitled to 5% or more of its assets.
(7) In this section—
“authorised transfer” means a transfer of property consisting of or including any ordinary share capital of a company (“the transferred company”) where—
the transferred company meets the trading requirement, and
the transfer is made to the trustees of a settlement which—
meets the controlling interest requirement with respect to the transferred company immediately after the transfer, and
meets the all-employee benefit requirement with respect to the transferred company (ignoring section 236L),
and for this purpose references to “C” in sections 236I, 236M and 236T and this section are to be read as references to the transferred company,
“close company” and “participator” have the same meaning as in Part 4 of the Inheritance Tax Act 1984 (see section 102 of that Act), and references to a participator in a company are, in the case of a company which is not a close company, to be construed as references to a person who would be a participator in the company if it were a close company,
“the look-back date” means the first day of the period of 10 years ending with whichever is later of—
10 December 2013, and
the day on which any property first became comprised in the settlement, and
“relevant group company” means C or any other company which is a member of the group of which C is the principal company.
(8) In this section references to the settled property include references to any income arising from it.
(9) See section 236L for cases where the all-employee benefit requirement is treated as met.
Further provision about the equality requirement
236K (1) The requirement in section 236J(1)(a) (“the equality requirement”) is not infringed by the trusts by reason only that they—
(a) permit the settled property to be applied, where an eligible employee has died, as if a surviving spouse, civil partner or dependant of the deceased person were the eligible employee (and continued to be employed) for a period of 12 months, or such shorter period as the trusts may provide, starting with the time of death,
(b) prevent the settled property being applied for the benefit of persons who have not been eligible employees for a continuous period of 12 months or such shorter period as the trusts may provide,
(c) permit the trustees to comply with a written request from a person that the trustees do not apply any of the settled property for the benefit of that person, or
(d) prevent the settled property being applied for the benefit of all persons who are eligible employees by reason only that they are office-holders.
(2) The equality requirement is not infringed by the trusts by reason only that, in addition to requiring the settled property to be applied for the benefit of all the eligible employees on the same terms, they also permit the settled property to be applied for charitable purposes.
(3) Subject to subsections (1) and (2), the equality requirement is infringed by the trusts if they permit the settled property to be applied by reference to factors other than those mentioned in subsection (4).
(4) The equality requirement is not infringed by the trusts by reason only that they permit the settled property to be applied for the benefit of all the eligible employees by reference to—
(a) an eligible employee's remuneration,
(b) an eligible employee's length of service, or
(c) hours worked by an eligible employee;
but this is subject to subsections (5) and (6).
(5) The equality requirement is infringed by the trusts if they permit any of the settled property to be applied on terms such that some (but not all) eligible employees receive no benefits (other than by virtue of subsection (1)(b), (c) and (d)).
(6) If any of the settled property is applied by reference to more than one of the factors mentioned in subsection (4), the equality requirement is infringed unless—
(a) each factor gives rise to a separate entitlement related to the level of remuneration, length of service or (as the case may be) hours worked, and
(b) the total entitlement is the sum of those separate entitlements.
(7) “Eligible employee” has the same meaning as in section 236J.
(8) In this section, references to the settled property include references to any income arising from it.
Cases in which all-employee benefit requirement treated as met
236L (1) A settlement which would not otherwise meet the all-employee benefit requirement at any time is treated as meeting that requirement at that time if—
(a) the settlement was created before 10 December 2013,
(b) on that date—
(i) section 86 of the Inheritance Tax Act 1984 (trusts for the benefit of employees) applied to the settled property,
(ii) the trustees held a significant interest in C, and
(iii) the settlement did not meet the all-employee benefit requirement (ignoring this section), and
(c) the trustees of the settlement do not, during the period of 12 months ending with the time in question, do any of the following—
(i) apply any of the settled property otherwise than for the benefit of all eligible employees on the same terms,
(ii) apply any of the settled property by creating a trust,
(iii) apply any of the settled property by transferring property to the trustees of any settlement other than by an authorised transfer, or
(iv) make loans to beneficiaries of the trusts of the settlement.
(2) The trustees held a significant interest in C on 10 December 2013 if on that date—
(a) they—
(i) held 10% or more of the ordinary share capital of C, and
(ii) had powers of voting on all questions affecting C as a whole which, if exercised, would have yielded 10% or more of the votes capable of being exercised on them,
(b) they were entitled to 10% or more of the profits available for distribution to the equity holders of C,
(c) they would have been entitled, on a winding up of C, to 10% or more of the assets of C available for distribution to equity holders, and
(d) there were no provisions in any agreement or instrument affecting C's constitution or management or its shares or securities whereby the condition in paragraph (a), (b) or (c) could cease to be satisfied without the consent of the trustees.
See section 236T for further provision relating to the holding of a significant interest.
(3) Subsections (3) to (8) of section 236J apply for the purposes of this section.
(4) The requirement in subsection (1)(c)(i) (“the behaviour requirement”) is not infringed by reason only that the trustees of the settlement—
(a) apply any of the settled property, where an eligible employee has died, as if a surviving spouse, civil partner or dependant of the deceased person were the eligible employee (and continued to be employed) for a period of 12 months, or such shorter period as the trustees may determine, starting with the time of death,
(b) only apply the settled property for the benefit of persons who have been eligible employees for a continuous period of 12 months or such shorter period as the trustees may determine,
(c) comply with a written request from a person that the trustees do not apply any of the settled property for the benefit of that person, or
(d) have complied with the terms of the trusts of the settlement which prevent the settled property being applied for the benefit of some or all of the persons who are eligible employees by reason only that they are office-holders.
(5) The behaviour requirement is not infringed by reason only that, in addition to applying any of the settled property for the benefit of all the eligible employees on the same terms, the trustees also apply any of it for charitable purposes.
(6) Subject to subsections (4) and (5), the behaviour requirement is infringed by the trustees if they apply the settled property by reference to factors other than those mentioned in subsection (7).
(7) The behaviour requirement is not infringed by the trustees applying the settled property for the benefit of all the eligible employees by reference to—
(a) an eligible employee's remuneration,
(b) an eligible employee's length of service, or
(c) hours worked by an eligible employee;
but this is subject to subsections (8) and (9).
(8) The behaviour requirement is infringed if any of the settled property is applied by the trustees on terms such that some (but not all) eligible employees receive no benefits (other than as mentioned in subsection (4)(b), (c) and (d)).
(9) If the trustees apply any of the settled property by reference to more than one of the factors mentioned in subsection (7), the behaviour requirement is infringed unless—
(a) each factor gives rise to a separate entitlement related to the level of remuneration, length of service or (as the case may be) hours worked, and
(b) the total entitlement is the sum of those separate entitlements.
Controlling interest requirement
236M (1) A settlement meets the controlling interest requirement if—
(a) the trustees—
(i) hold more than 50% of the ordinary share capital of C, and
(ii) have powers of voting on all questions affecting C as a whole which, if exercised, would yield a majority of the votes capable of being exercised on them,
(b) the trustees are entitled to more than 50% of the profits available for distribution to the equity holders of C,
(c) the trustees would be entitled, on a winding up of C, to more than 50% of the assets of C available for distribution to equity holders, and
(d) there are no provisions in any agreement or instrument affecting C's constitution or management or its shares or securities whereby the condition in paragraph (a), (b) or (c) can cease to be satisfied without the consent of the trustees.
(2) See section 236T for further provision relating to the controlling interest requirement.
Limited participation requirement
236N (1) The limited participation requirement is met if Conditions A and B are met.
(2) Condition A is that there was no time in the period of 12 months ending immediately after the disposal mentioned in section 236H(1) when—
(a) P was a participator in C, and
(b) the participator fraction exceeded 2/5.
(3) Condition B is that the participator fraction does not exceed 2/5 at any time in the period beginning with that disposal and ending at the end of the tax year in which it occurs.
(4) But a time which falls in a period during which the participator fraction exceeded 2/5 is to be disregarded for the purposes of subsection (2)(b) and (3) if—
(a) that period lasts no more than 6 months, and
(b) the fraction exceeded 2/5 during that period by reason of events outside the reasonable control of the trustees.
(5) “The participator fraction” means—
NP
NE
where—
NP is the sum of—
the number of persons who at the time in question are both—
participators in C, and
employees of, or office-holders in, C, and
the number of other persons who at that time are both—
employees of, or office-holders in, C or, if C is the principal company of a trading group, any member of the group, and
connected with persons within paragraph (a);
NE is the number of persons who at that time are employees of C or, if C is the principal company of a trading group, any member of the group.
(6) The participators in C who are referred to in subsections (2) and (5) do not include any participator who—
(a) is not beneficially entitled to, or to rights entitling the participator to acquire, 5% or more of, or of any class of the shares comprised in, C's share capital, and
(b) on a winding-up of C would not be entitled to 5% or more of its assets.
(7) In this section—
(a) “participator” has the meaning given by section 454 of CTA 2010, and
(b) references to a participator in a company are, in the case of a company which is not a close company (within the meaning of Chapter 2 of Part 10 of that Act), to be construed as references to a person who would be a participator in the company if it were a close company.
No section 236H relief if disqualifying event in next tax year
236O (1) This section applies where—
(a) a disposal is made in circumstances where paragraphs (a) and (b) of section 236H(1) are satisfied, and
(b) one or more disqualifying events occur in relation to the disposal in the tax year following the tax year in which the disposal occurs.
(2) A “disqualifying event” occurs in relation to the disposal if and when—
(a) C ceases to meet the trading requirement,
(b) the settlement ceases to meet the all-employee benefit requirement,
(c) the settlement ceases to meet the controlling interest requirement,
(d) the participator fraction exceeds 2/5, or
(e) the trustees act in a way which the trusts, as required by the all-employee benefit requirement, do not permit.
(3) No claim for relief under section 236H may be made in respect of the disposal on or after the day on which the disqualifying event (or, if more than one, the first of them) occurs.
(4) Any claim for relief under section 236H made in respect of the disposal before that day is revoked, and the chargeable gains and allowable losses of any person for any chargeable period are to be calculated as if that claim had never been made.
(5) Such adjustments must be made in relation to any person, whether by the making of assessments or otherwise, as are required to give effect to subsection (4) (regardless of any limitation on the time within which any adjustment may be made).
(6) Section 236H(5) (restrictions on application of section 236L) applies for the purposes of subsection (2)(b).
(7) Section 236N(4) applies for the purposes of subsection (2)(d) as it applies in relation to section 236N(2)(b) and (3).
Events which trigger deemed disposal and reacquisition by trustees
236P (1) Where the trustees of a settlement acquire any ordinary share capital in a tax year in circumstances where section 236H applies, subsection (3) applies on the first occasion, after the end of the tax year following the tax year in which the acquisition occurs, when a disqualifying event occurs in relation to the acquisition.
(2) A “disqualifying event” occurs in relation to the acquisition if and when—
(a) C ceases to meet the trading requirement,
(b) the settlement ceases to meet the all-employee benefit requirement,
(c) the settlement ceases to meet the controlling interest requirement,
(d) the participator fraction exceeds 2/5, or
(e) the trustees act in a way which the trusts, as required by the all-employee benefit requirement, do not permit.
(3) The trustees are treated as having, immediately before the disqualifying event—
(a) disposed of any ordinary share capital of C held by the trustees which comprises shares acquired in circumstances where section 236H applied (and not subsequently disposed of and reacquired), and
(b) immediately reacquired that ordinary share capital,
at its market value at that time.
(4) For the purposes of subsection (2)(b)—
(a) unless the settlement met the all-employee benefit requirement at the time of the acquisition by virtue of section 236L, that section does not apply for the purposes of determining whether the settlement continues to meet that requirement after the acquisition, and
(b) if, at the time of the acquisition, the settlement met that requirement by virtue of section 236L and later continues to meet it otherwise than by virtue of that section, it may not again meet the requirement by virtue of that section.
(5) Section 236N(4) applies for the purposes of subsection (2)(d) as it applies in relation to section 236N(2)(b) and (3).
Relief for deemed disposals under section 71
236Q (1) This section applies where—
(a) a deemed disposal arises under section 71(1) by reason of the trustees of a settlement (“the acquiring settlement”) becoming absolutely entitled to settled property as against the trustee of that settled property (“the transferring trustee”),
(b) that settled property consists of ordinary share capital of a company,
(c) the relief requirements in section 236H(4)(a) to (d) are met, and
(d) the transferring trustee makes a claim under this section.
(2) Section 17(1) (disposals and acquisitions treated as made at market value) does not apply to the disposal.
(3) The deemed disposal and acquisition by the transferring trustee under section 71(1) are to be treated for the purposes of this Act as being made for such consideration as to secure that neither a gain nor a loss accrues on the disposal.
(4) For the purposes of section 236P the trustees of the acquiring settlement are treated as acquiring the ordinary share capital from the transferring trustee, at the time of the deemed disposal, in circumstances where section 236H applies.
(5) In applying sections 236H(4), 236I to 236P and 236T for the purposes of this section—
(a) references in those provisions to the settlement are to be read as references to the acquiring settlement, and
(b) references in those provisions to C are to be read as references to the company mentioned in subsection (1)(b).
(6) A claim under this section must include—
(a) information to identify the acquiring settlement,
(b) the name of the company mentioned in subsection (1)(b) and the address of its registered office, and
(c) the date of the deemed disposal and the number of shares deemed to have been disposed of.
(7) Section 236R makes provision about events which prevent a claim being made under this section and circumstances in which a claim is revoked.
No section 236Q relief if disqualifying event in next tax year
236R (1) This section applies where—
(a) a deemed disposal arises in circumstances where paragraphs (a) to (c) of section 236Q(1) are satisfied, and
(b) one or more disqualifying events occur in relation to the disposal in the tax year following the tax year in which the deemed disposal arises.
(2) No claim for relief under section 236Q may be made in respect of the deemed disposal on or after the day on which the disqualifying event (or, if more than one, the first of them) occurs.
(3) Any claim for relief under section 236Q made in respect of the deemed disposal before that day is revoked, and the chargeable gains and allowable losses of any person for any chargeable period are to be calculated as if that claim had never been made.
(4) Such adjustments must be made in relation to any person, whether by the making of assessments or otherwise, as are required to give effect to subsection (3) (regardless of any limitation on the time within which any adjustment may be made).
(5) “Disqualifying event” is to be construed in accordance with subsections (2), (6) and (7) of section 236O except that—
(a) references in those subsections to the disposal are to be read as references to the deemed disposal, and
(b) in applying sections 236I to 236P and 236T for this purpose—
(i) references in those provisions to the settlement are to be read as references to the acquiring settlement (within the meaning of section 236Q(1)), and
(ii) references in those provisions to C are to be read as references to the company mentioned in section 236Q(1)(b).
Identification of shares where section 236H or 236Q applies
236S (1) This section applies where the trustees of a settlement hold—
(a) shares which were—
(i) acquired in circumstances where section 236H applied, or
(ii) the subject of a deemed acquisition under section 71(1) in circumstances where section 236Q applied,
and not subsequently disposed of and reacquired (“EOT exempt shares”), and
(b) other shares which, but for section 104(4A), would be shares of the same class as those shares.
(2) If the trustees dispose of some, but not all, of the shares so held, they may determine what proportion of the shares disposed of are EOT exempt shares (up to the number of such shares held).
(3) For the purposes of this section shares in a company are not to be treated as being of the same class unless they are so treated by the practice of a recognised stock exchange or would be so treated if dealt with on a recognised stock exchange.
(4) Nothing in subsection (2) applies in relation to a disposal by virtue of section 236P(3).
Further provision about significant and controlling interests
236T (1) This section applies for the purposes of—
(a) section 236L(2) (trustees hold a significant interest in C), and
(b) section 236M (controlling interest requirement).
(2) Chapter 6 of Part 5 of CTA 2010 (group relief: equity holders and profits or assets available for distribution) applies as it applies for the purposes of the provisions mentioned in section 157(1) of that Act.
(3) The trustees are to be treated, for the purposes of section 236L(2)(b) or 236M(1)(b), as entitled to dividends on shares even if the trustees are required, or permitted, by the trusts of the settlement to waive their entitlement to those dividends.
(4) In determining whether section 236L(2)(d) or 236M(1)(d) applies, ignore any provision of—
(a) a mortgage or charge (or, in Scotland, a charge or security) granted by the trustees to a third party to secure any debt, or
(b) an agreement in respect of a loan made to the trustees by a third party,
which confers any entitlement on the third party in the event of a default by the trustees in performing their obligations in relation to that debt or loan.
(5) In this section—
“third party” means a person other than—
C or a member of a group of which C is the principal company,
a person who is, or has at any time in the preceding 12 months been, a participator in C or in a member of such a group, or
a person connected with a person within paragraph (b);
“close company” and “participator” have the same meaning as in Part 4 of the Inheritance Tax Act 1984 (see section 102 of that Act), and a reference to a participator in a company is, in the case of a company which is not a close company, to be construed as a reference to a person who would be a participator in the company if it were a close company.
Interpretation of sections 236H to 236U
236U (1) In sections 236H to 236T and this section—
“company” has the meaning given by section 170(9);
“ordinary share capital” has the meaning given by section 1119 of CTA 2010;
“trade” means any trade which is conducted on a commercial basis and with a view to the realisation of profits.
(2) In those sections—
(a) references to a group, to membership of a group or to the principal company of a group, are to be construed in accordance with section 170, and
(b) references to a group are to be construed with any necessary modifications where applied to a company incorporated under the law of a country or territory outside the United Kingdom.
(3) In determining whether a person is connected with another for the purposes of those sections, section 286 applies as if subsection (8) of that section also mentioned uncle, aunt, nephew and niece.
Commencement and transitional provision
2 Subject to paragraph 3, the amendment made by paragraph 1 has effect in relation to disposals made on or after 6 April 2014.
3 In relation to disposals made on or after 6 April 2014 but before 26 June 2014, TCGA 1992 has effect as if—
(a) in section 236H—
(i) in subsection (4)(b), for the words from “at the time of the disposal” to the end there were substituted “ (see sections 236J to 236L) ”,
(ii) subsection (4)(c)(ii) (and the “and” before it) were omitted, and
(iii) subsections (5) and (8) were omitted,
(b) in section 236N—
(i) in subsection (1), for “Conditions A and B are” there were substituted “ Condition A is ”, and
(ii) subsection (3) were omitted,
(c) section 236O were omitted,
(d) in section 236P—
(i) in subsection (1) the words “, after the end of the tax year following the tax year in which the acquisition occurs, when” were omitted,
(ii) for subsection (2) there were substituted—
(2) A “disqualifying event” occurs in relation to the acquisition if and when—
(a) at any time after that tax year—
(i) C ceases to meet the trading requirement, or
(ii) the settlement ceases to meet the controlling interest requirement, or
(b) at any time after the acquisition—
(i) the settlement ceases to meet the all-employee benefit requirement,
(ii) the participator fraction exceeds 2/5, or
(iii) the trustees act in a way which the trusts, as required by the all-employee benefit requirement, do not permit.
, and
(iii) in subsection (3) for “before” there were substituted “ after ”,
(e) section 236Q(7) were omitted, and
(f) section 236R were omitted.
4 (1) For the purposes of determining if the requirement of section 236L(1)(c) of TCGA 1992 (requirement as to conduct of trustees for 12 months) is met, anything done by the trustees before 10 December 2013 is to be disregarded.
(2) But sub-paragraph (1) does not apply in relation to section 236L of TCGA 1992 as applied by section 312E(3) of ITEPA 2003 (rules determining whether payment is a qualifying bonus payment for the purposes of Chapter 10A of Part 4 of ITEPA 2003).
PART 2 Employment income exemption
5 In Part 4 of ITEPA 2003 (employment income: exemptions), after Chapter 10 insert—
CHAPTER 10A Exemptions: bonus payments by certain employers
Limited exemption for qualifying bonus payments
312A (1) This section applies in relation to qualifying bonus payments made, in a tax year (“the tax year”), by an employer which is a company to an employee or former employee of the employer.
(2) No liability to income tax arises in respect of the qualifying bonus payments if, or to the extent that, the total chargeable amount in respect of those payments does not exceed £3,600 (“the exempt amount”).
(3) If qualifying bonus payments are made to the same person by two or more employers in the tax year, subsection (2) applies separately in relation to the total payments made by each employer, unless subsection (4) applies.
(4) If two or more employers are members of the same group at the time each of them first makes a qualifying bonus payment to the employee or former employee in the tax year, subsection (2) applies as if the reference to the qualifying bonus payments were to all the qualifying bonus payments made by those employers to the employee or former employee in that tax year.
(5) If, in a tax year—
(a) an employer makes a payment when it is a member of a group, and
(b) later in that tax year the employer ceases to be a member of that group,
the employer is treated for the purposes of this section as remaining a member of that group for the remainder of the tax year (without prejudice to it also being a member of any other group).
(6) In applying subsection (2)—
(a) the exempt amount is set against payments in the order in which they are made, and
(b) if two or more payments are made on the same day, which together take the total payments made in the tax year over the exempt amount, subsection (7) applies to determine the amount of each of those payments which is exempt.
(7) In a case within subsection (6)(b), the amount of a payment which is exempt is given by the formula—
P
SP
×
REA
where—
P is the amount of the payment,
SP is the sum of that payment and the other payments made on the same day, and
REA is so much of the exempt amount as remains after taking account of any qualifying bonus payments previously made in the tax year.
(8) Where subsection (2) applies separately to different payments by virtue of subsection (3), subsections (6) and (7) also apply to those payments separately.
(9) The Treasury may by order increase or reduce the sum of money specified in subsection (2).
(10) A statutory instrument containing an order under this section which reduces the sum of money specified may not be made unless a draft of it has been laid before and approved by a resolution of the House of Commons.
(11) In this section “chargeable amount”, in respect of a qualifying bonus payment, means the amount of employment income which would be charged to tax in respect of that qualifying bonus payment, apart from this section.
“Qualifying bonus payments”
312B (1) A payment made by an employer (“E”) to an employee or former employee is a qualifying bonus payment if—
(a) it does not consist of regular salary or wages,
(b) it is awarded under a scheme which meets the participation requirement and the equality requirement (see section 312C),
(c) E meets the trading requirement (see section 312D) throughout the qualifying period,
(d) E meets the indirect employee-ownership requirement (see section 312E) throughout the qualifying period,
(e) E meets the office-holder requirement (see section 312F) at the time the payment is made and on at least the requisite number of days in the qualifying period (whether or not those days are consecutive),
(f) E is not a service company (see section 312G),
(g) the payment is not excluded (see section 312H), and
(h) where it is a payment to a former employee, it is made in the period of 12 months beginning with the day the employment ceased.
(2) In this section “the qualifying period”, in relation to a payment, means the period of 12 months ending with the day on which the payment is made.
(3) But in a case where E meets the indirect employee-ownership requirement on the day on which the payment is made—
(a) if the controlling interest requirement was first met during that 12 month period, the qualifying period does not include any time before it was met, and
(b) if the all-employee benefit requirement was first met during that 12 month period, the qualifying period does not include any time before that requirement was met.
(4) In this section “the requisite number of days” means—
(a) if the qualifying period is 12 months, the number of days in that period reduced by 90, and
(b) if the qualifying period is a shorter period by virtue of subsection (3), the number of days in that period reduced by the corresponding fraction of 90 days.
Section 312B: the participation and equality requirements
312C (1) For the purposes of section 312B—
(a) the participation requirement is that all persons in relevant employment when the award is determined must be eligible to participate in that and any other award under the scheme, and
(b) the equality requirement is that every employee who participates in an award under the scheme must do so on the same terms.
(2) A person is in “relevant employment” if—
(a) where E is a member of a group, the person is employed by any company which is a member of the group, and
(b) in any other case, the person is employed by E.
(3) The participation requirement is not infringed by reason of a person in relevant employment being excluded from participating in an award because, at the time the award is determined, the person has less than the minimum period of continuous service in relevant employment required by E.
But the minimum period required by E for this purpose must not exceed 12 months.
(4) The participation requirement is not infringed—
(a) by reason of a person being excluded from participating in an award where—
(i) disciplinary proceedings have been taken against the person by E which have resulted in a finding of gross misconduct against the person, and
(ii) that finding was made in the period of 12 months immediately before the time the award is determined,
(b) by reason of a person's eligibility to participate in an award being conditional, in a case where the person is at the time of the award subject to disciplinary proceedings taken by E, upon those proceedings being concluded and no finding of gross misconduct being made against that person, or
(c) by a person being treated as never having been eligible to participate in an award where, after the award was made but before the payment is made—
(i) a finding of gross misconduct is made against that person in disciplinary proceedings taken by E after the award was made, or
(ii) that person is summarily dismissed from the employment.
(5) The equality requirement is infringed if the amount of an award to an employee under the scheme is determined by reference to factors other than those mentioned in subsection (6).
(6) The equality requirement is not infringed by reason of the amount of an award under the scheme to employees participating in the award being determined by reference to—
(a) an employee's remuneration,
(b) an employee's length of service, or
(c) hours worked by an employee;
but this is subject to subsections (7) and (8).
(7) The equality requirement is infringed if an award is made on terms such that some (but not all) of the employees participating in the award receive nothing.
(8) If the amount of an award is determined by reference to more than one of the factors mentioned in subsection (6), the equality requirement is infringed unless—
(a) each factor gives rise to a separate entitlement related to the level of remuneration, length of service or (as the case may be) hours worked, and
(b) the total entitlement is the sum of those separate entitlements.
(9) Subject to subsection (6), the equality requirement is infringed if any feature of the scheme has, or is likely to have, the effect of conferring benefits wholly or mainly on those participating in the award who are—
(a) directors or former directors, or
(b) employees receiving the higher or highest levels of remuneration, or
(c) employees who—
(i) are employed in a particular part of the business carried on by E or, if E is a member of a group, the group, or
(ii) carry on particular kinds of activities.
(10) In subsections (1)(b), (5), (6), (7) and (9) references to an employee include a former employee, so, when applying those subsections in relation to a former employee, any reference to remuneration, length of service, hours worked, being employed in a particular part of a business or carrying on particular activities is to be read as relating to that former employment.
Section 312B: the trading requirement
312D (1) For the purposes of section 312B, a company meets the trading requirement if—
(a) it is a trading company which is not a member of a group, or
(b) it is a member of a trading group.
(2) “Trading company” means a company carrying on trading activities whose activities do not include to a substantial extent activities other than trading activities.
(3) “Trading group” means a group—
(a) one or more of whose members carry on trading group activities, and
(b) the activities of whose members, taken together, do not include to a substantial extent activities other than trading group activities.
(4) In this section—
“trading activities” means activities carried on by the company in the course of, or for the purposes of, a trade being carried on by it;
“trading group activities” means activities carried on by a member of the group in the course of, or for the purposes of, a trade being carried on by any member of the group.
(5) For the purposes of determining whether a company is a trading company or a member of a trading group—
(a) the activities of the members of a group are to be treated as one business (with the result that activities are disregarded to the extent that they are intra-group activities), and
(b) a business carried on by a company in partnership with one or more other persons is to be treated as not being a trading activity.
Section 312B: the indirect employee-ownership requirement
312E (1) For the purposes of section 312B, a company meets the indirect employee-ownership requirement if—
(a) a settlement meets the controlling interest requirement in respect of—
(i) the company, or
(ii) if the company is a member of a trading group, but not the principal company, that principal company, and
(b) the settlement meets the all-employee benefit requirement.
(2) For this purpose—
(a) section 236M of TCGA 1992 applies to determine if a settlement meets the controlling interest requirement in respect of the company mentioned in subsection (1)(a)(i) or (ii) (as the case may be), and
(b) sections 236J and 236K of that Act apply to determine if the settlement meets the all-employee benefit requirement (but see subsection (3)).
(3) If a settlement would not otherwise meet the all-employee benefit requirement at any time during the qualifying period, section 236L of TCGA 1992 applies for the purposes of subsection (1)(b), unless the all-employee benefit requirement has (ignoring that section) previously been met at any time in the period—
(a) beginning with 10 December 2013, and
(b) ending immediately before that time.
(4) For the purposes of subsections (2) and (3)—
(a) in sections 236I to 236M of TCGA 1992 references to C are to be read as references to the company in respect of which the settlement is required to meet the controlling interest requirement (see subsection (1)(a)), and
(b) section 236L of that Act applies as if the reference in subsection (1)(c) of that section to the period of 12 months ending with the time in question were a reference to the period of 12 months ending with the date the payment is made (even if the qualifying period is a period of less than 12 months by virtue of section 312B(3)).
Section 312B: the office-holder requirement
312F (1) For the purposes of section 312B, a company meets the officer-holder requirement if the appropriate fraction does not exceed 2/5.
(2) “The appropriate fraction” means—
ND
NE
where—
ND is the number of persons who are one or both of the following—
a director or other office-holder of the company;
an employee of the company connected with a person within paragraph (a);
NE is the number of persons who are employees (or office-holders) of the company.
“Service company”
312G (1) For the purposes of section 312B, “service company” means—
(a) a managed service company within the meaning of section 61B, or
(b) a company (“SC”) in respect of which Conditions A and B are met.
(2) Condition A is that the business carried on by SC consists substantially of the provision of the services of persons employed by it.
(3) Condition B is that the majority of those services are provided to persons—
(a) to whom subsection (4) applies, but
(b) who are not members of the same group as the company which makes the payment.
(4) This subsection applies to—
(a) a person who controls or has controlled, or two or more persons who together control or have controlled, SC or any company of which SC is a 51% subsidiary at the time the payment is made,
(b) a person who, or two or more persons who together, at any time before the time the payment is made—
(i) employed all or a majority of the employees of SC, or
(ii) employed all or a majority of the employees of SC and other companies which are members of the same group as SC at the time the payment is made (taken together), and
(c) any company which is a 51% subsidiary of, controlled by or connected or associated with, any person within paragraph (a) or (b).
(5) For the purposes of subsection (4)—
(a) a partnership is to be treated as a single person, and
(b) where a partner (alone or together with others) has control of a company, the partnership is to be treated as having (in the same way) control of that company.
(6) The following provisions apply for the purposes of this section—
(a) section 449 of CTA 2010 (“associated company”);
(b) section 995 of ITA 2007 (meaning of “control”);
(c) section 286 of TCGA 1992 (connected persons: interpretation).
Excluded payments
312H (1) For the purposes of section 312B, a payment is “excluded” if the employee is a party to arrangements (whether made before or after the beginning of the employee's employment) under which—
(a) the employee gives up the right to receive an amount of general earnings or specific employment income in return for the provision of the payment, or
(b) the employee and employer agree that the employee is to receive the payment rather than receive some other description of employment income.
(2) In this section references to an employee include a former employee.
Interpretation of Chapter 10A
312I (1) In this Chapter—
“company” has the meaning given by section 170(9) of TCGA 1992;
“trade” means any trade which is conducted on a commercial basis and with a view to the realisation of profits.
(2) In this Chapter—
(a) references to a group, to membership of a group, to the principal company of a group or to being members of the same group, are to be construed in accordance with section 170 of TCGA 1992, and
(b) references to a group are to be construed with any necessary modifications where applied to a company incorporated under the law of a country or territory outside the United Kingdom.
(3) For the purposes of this Chapter, a payment is treated as made when it would be treated as received for the purposes of Chapter 4 of Part 2 if it were not a qualifying bonus payment (see section 18).
(4) In this Chapter references to a payment to an employee or former employee include a payment to the personal representatives of an employee or former employee who has died if the payment is made within the period of 12 months beginning with the date of death.
6 In section 717 (orders and regulations made by Treasury etc), in subsection (4) (instruments not subject to negative resolution procedure), after “to which” insert “ section 312A(10) (reduction of tax-exempt amount in respect of certain bonus payments) or ”.
7 In Part 2 of Schedule 1 (index of defined expressions), at the appropriate places insert—
company (in Chapter 10A of Part 4) | section 312I
;
trade (in Chapter 10A of Part 4) | section 312I
.
8 The amendment made by paragraph 5 has effect in relation to payments received on or after 1 October 2014.
PART 3 Inheritance tax relief
9 IHTA 1984 is amended as follows.
10 (1) After section 13 insert—
Dispositions by close companies to employee-ownership trusts
13A (1) A disposition of property made to trustees by a close company (“C”) whereby the property is to be held on trusts of the description specified in section 86(1) is not a transfer of value if—
(a) C meets the trading requirement,
(b) the trusts are of a settlement which meets the all-employee benefit requirement, and
(c) the settlement does not meet the controlling interest requirement immediately before the beginning of the tax year in which the disposition of property occurs but does meet it at the end of that year.
(2) Sections 236I, 236J, 236K, 236M and 236T (but not 236L) of the 1992 Act apply to determine whether—
(a) C meets the trading requirement;
(b) the settlement meets the all-employee benefit requirement;
(c) the settlement meets the controlling interest requirement;
with references in those sections to “C” being read accordingly.
(3) In this section—
“close company” has the same meaning as in Part 4 of this Act;
“tax year” means a year beginning on 6 April and ending on the following 5 April.
(2) The amendment made by this paragraph has effect in relation to dispositions of property made on or after 6 April 2014.
11 (1) After section 28 insert—
Employee-ownership trusts
28A (1) A transfer of value made by an individual who is beneficially entitled to shares in a company (“C”) is an exempt transfer to the extent that the value transferred is attributable to shares in or securities of C which become comprised in a settlement if—
(a) C meets the trading requirement,
(b) the settlement meets the all-employee benefit requirement, and
(c) the settlement does not meet the controlling interest requirement immediately before the beginning of the tax year in which the transfer of value is made but does meet it at the end of that year.
(2) Sections 236I, 236J, 236K, 236M and 236T (but not 236L) of the 1992 Act apply to determine whether—
(a) C meets the trading requirement;
(b) the settlement meets the all-employee benefit requirement;
(c) the settlement meets the controlling interest requirement;
with references in those sections to “C” being read accordingly.
(3) In this section “tax year” means a year beginning on 6 April and ending on the following 5 April.
(2) The amendment made by this paragraph has effect in relation to transfers of value made on or after 6 April 2014.
12 (1) In section 29A (abatement of exemption where claim settled out of beneficiary's own resources), in subsection (6)—
(a) for “to 28” substitute “ to 28A ”, and
(b) for “or 28” substitute “ , 28 or 28A ”.
(2) The amendment made by this paragraph has effect in relation to transfers of value made on or after 6 April 2014.
13 (1) Section 72 (property leaving employee trusts and newspaper trusts) is amended as follows.
(2) In subsection (2), after “Subject to subsections” insert “ (3A), ”.
(3) After subsection (3) insert—
(3A) Where settled property ceases to be property to which this section applies because paragraph (d) of section 86(3) no longer applies, tax is not chargeable under this section by virtue of subsection (2)(a) if the only reason that paragraph no longer applies is that one or both of the trading requirement and the controlling interest requirement mentioned in that paragraph are no longer met with respect to the company so mentioned.
(4) The amendments made by this paragraph are treated as having come into force on 6 April 2014.
14 (1) After section 75 insert—
Property becoming subject to employee-ownership trust
75A (1) Tax is not charged under section 65 in respect of shares in or securities of a company (“C”) which cease to be relevant property on becoming held on trusts of the description specified in section 86(1) if the conditions in subsection (2) are satisfied.
(2) The conditions referred to in subsection (1) are—
(a) that C meets the trading requirement,
(b) that the trusts are of a settlement which meets the all-employee benefit requirement, and
(c) that the settlement does not meet the controlling interest requirement immediately before the beginning of the tax year in which the shares or securities cease to be relevant property but does meet it at the end of that year.
(3) Sections 236I, 236J, 236K, 236M and 236T (but not 236L) of the 1992 Act apply to determine whether—
(a) C meets the trading requirement;
(b) the settlement meets the all-employee benefit requirement;
(c) the settlement meets the controlling interest requirement;
with references in those sections to “C” being read accordingly.
(4) In this section “tax year” means a year beginning on 6 April and ending on the following 5 April.
(2) The amendment made by this paragraph is treated as having come into force on 6 April 2014.
15 (1) Section 86 (trusts for benefit of employees) is amended as follows.
(2) In subsection (3), after paragraph (c) insert
, or
(d) the settled property consists of or includes ordinary share capital of a company which meets the trading requirement and the trusts on which the settled property is held are those of a settlement which—
(i) meets the controlling interest requirement with respect to the company, and
(ii) meets the all-employee benefit requirement with respect to the company.
(3) After that subsection insert—
(3A) For the purpose of determining whether subsection (3)(d) is satisfied in relation to settled property which consists of or includes ordinary share capital of a company—
(a) section 236I of the 1992 Act applies to determine whether the company meets the trading requirement (with references to “C” being read as references to that company),
(b) sections 236J, 236K, 236M and 236T (but not 236L) of the 1992 Act apply to determine whether the settlement meets the all-employee benefit requirement and the controlling interest requirement (with references in those sections to “C” being read as references to that company), and
(c) “ordinary share capital” has the meaning given by section 1119 of the Corporation Tax Act 2010.
(4) The amendments made by this paragraph are treated as having come into force on 6 April 2014.
16 (1) In section 144 (distribution etc from property settled by will), in subsection (1)(b), after “section 75” insert “ , 75A ”.
(2) The amendment made by this section is treated as having come into force on 6 April 2014.
PART 4 Miscellaneous amendments
Finance Act 1986
17 (1) In section 102 of FA 1986 (gifts with reservation), in subsection (5) omit the “and” after paragraph (h) and after paragraph (i) insert
; and
(j) section 28A (employee-ownership trusts).
(2) The amendment made by this paragraph has effect in relation to disposals made on or after 6 April 2014.
Taxation of Chargeable Gains Act 1992
18 (1) In section 104 of TCGA 1992 (share pooling: general interpretative provisions), after subsection (4) insert—
(4A) For the purposes of this Chapter, securities of a company which are held by the trustees of a settlement, having been last acquired or deemed to be acquired by them in circumstances where section 236H or 236Q applied, shall (notwithstanding that they would otherwise fall to be treated as of the same class) be treated as of a different class from any other securities of the company acquired by those trustees.
(2) The amendment made by this paragraph has effect in relation to any disposal on or after 6 April 2014 of any securities (whenever acquired).
Income Tax (Earnings and Pensions) Act 2003
19 (1) Paragraph 27 of Schedule 2 to ITEPA 2003 (share incentive plans: requirement as to listing etc) is amended as follows.
(2) In sub-paragraph (1), omit the “or” at the end of paragraph (b) and after that paragraph insert—
(ba) shares in a company which is subject to an employee-ownership trust, or
.
(3) After sub-paragraph (2) insert—
(3) But a company is not a close company for the purposes of sub-paragraph (2) if it is subject to an employee-ownership trust.
(4) A company (“C”) is “subject to an employee-ownership trust” if—
(a) C meets the trading requirement set out in section 312D,
(b) C meets the indirect employee-ownership requirement,
(c) neither C, nor any other company which is a member of the same group of companies as C, is a service company, and
(d) C is not under the control of another company (ignoring for this purpose another company acting in its capacity as the trustee of the settlement by virtue of which C meets the indirect employee-ownership requirement).
(5) Section 312E (the indirect employee-ownership requirement) applies for the purposes of sub-paragraph (4), subject to the following modifications—
(a) subsection (3) of that section has effect as if—
(i) the words “during the qualifying period” were omitted, and
(ii) in paragraph (a) for “10 December 2013” there were substituted “ 1 October 2014 ”, and
(b) subsection (4) has effect as if for paragraph (b) there were substituted—
(b) section 236L of that Act applies as if the reference in subsection (1)(c) of that section to the period of 12 months ending with the time in question were a reference to any time on or after 1 October 2014.
(6) Section 312G (meaning of “service company”) applies for the purposes of sub-paragraph (4)(c), subject to the following modifications—
(a) in subsection (3)(b), the reference to the company which makes the payment is to be read as a reference to C,
(b) in subsection (4)(a), the reference to the time the payment is made is to be read as a reference to any time, and
(c) in subsection (4)(b), the reference to any time before the time the payment is made is to be read as a reference to any time.
(4) The amendments made by this paragraph come into force on 1 October 2014.
20 (1) Paragraph 19 of Schedule 3 to ITEPA 2003 (SAYE option schemes: requirements as to listing) is amended as follows.
(2) In sub-paragraph (1), omit the “or” at the end of paragraph (b) and after that paragraph insert—
(ba) shares in a company which is subject to an employee-ownership trust (within the meaning of paragraph 27(4) to (6) of Schedule 2), or
.
(3) After sub-paragraph (2) insert—
(3) But a company is not a close company for the purposes of sub-paragraph (2) if it is subject to an employee-ownership trust (within the meaning of paragraph 27(4) to (6) of Schedule 2).
(4) The amendments made by this paragraph come into force on 1 October 2014.
21 (1) In paragraph 17 of Schedule 4 to ITEPA 2003 (CSOP schemes: requirements as to eligible shares), in sub-paragraph (1), omit the “or” after paragraph (a) and after paragraph (b) insert
, or
(ba) shares in a company which is subject to an employee-ownership trust (within the meaning of paragraph 27(4) to (6) of Schedule 2).
(2) The amendment made by this paragraph come into force on 1 October 2014.
22 (1) In paragraph 9 of Schedule 5 to ITEPA 2003 (enterprise management incentives: the independence requirement), after sub-paragraph (4) insert—
(5) But the independence requirement is treated as met if the company is subject to an employee-ownership trust (within the meaning of paragraph 27(4) to (6) of Schedule 2).
(2) The amendment made by this paragraph comes into force in accordance with provision contained in an order made by the Treasury.
(3) Section 1014(4) of ITA 2007 (orders etc subject to annulment) does not apply in relation to an order under sub-paragraph (2).
Corporation Tax Act 2009
23 (1) In section 1292 of CTA 2009 (employee benefit contributions: provision of qualifying benefits), after subsection (6A) insert—
(6B) For those purposes qualifying benefits are also provided, where a payment of money is made to a person, if and to the extent that the payment is exempt from income tax by virtue of section 312A of ITEPA 2003.
(2) The amendment made by this paragraph has effect in relation to payments made on or after 1 October 2014.
SCHEDULE 38 Scottish basic, higher and additional rates of income tax
Section 296
PART 1 Amendments of ITA 2007
1 ITA 2007 is amended as follows.
2 In section 6 (the basic rate, higher rate and additional rate)—
(a) omit subsections (2A) to (2C), and
(b) in subsection (3), after “see—” insert—
(za) section 6A (Scottish basic, higher and additional rates),
.
3 After section 6 insert—
The Scottish basic, higher and additional rates
6A (1) The Scottish basic rate, the Scottish higher rate and the Scottish additional rate for a tax year are calculated as follows.
Step 1 Take the basic rate, higher rate or additional rate.
Step 2 Deduct 10 percentage points.
Step 3 Add the Scottish rate (if any) set by the Scottish Parliament for that year.
(2) For provision about the setting of the Scottish rate, see Chapter 2 of Part 4A of the Scotland Act 1998.
4 In section 10 (income charged at the basic, higher and additional rates: individuals)—
(a) omit subsections (3B) and (3C), and
(b) in subsection (4), at the appropriate place, insert—
section 11A (income charged at the Scottish basic, higher and additional rates),
.
5 After section 11 insert—
Income charged at the Scottish basic, higher and additional rates
11A (1) Income tax is charged at the Scottish basic rate on the income of a Scottish taxpayer which—
(a) is non-savings income, and
(b) would otherwise be charged at the basic rate.
(2) Income tax is charged at the Scottish higher rate on the income of a Scottish taxpayer which—
(a) is non-savings income, and
(b) would otherwise be charged at the higher rate.
(3) Income tax is charged at the Scottish additional rate on the income of a Scottish taxpayer which—
(a) is non-savings income, and
(b) would otherwise be charged at the additional rate.
(4) For the purposes of this section, “non-savings income” means income which is not savings income.
(5) This section is subject to—
section 13 (income charged at the dividend ordinary, upper and additional rates: individuals), and
any provisions of the Income Tax Acts (apart from section 10) which provide for income of an individual to be charged at different rates of income tax in some circumstances.
(6) Section 16 has effect for determining the extent to which the non-savings income of a Scottish taxpayer would otherwise be charged at the basic, higher or additional rate.
6 In section 13 (income charged at the dividend ordinary, upper and additional rates)—
(a) in subsection (1)(b), after “the basic rate,” insert “ or the Scottish basic rate, ”,
(b) in subsection (2)(b), after “the higher rate,” insert “ or the Scottish higher rate, ”,
(c) in subsection (2A)(b), after “the additional rate,” insert “ or the Scottish additional rate, ”,
(d) in subsection (3), after “section 10” insert “ or 11A ”, and
(e) in subsection (4), after “the basic, higher or additional rate” insert “ or the Scottish basic, higher or additional rate ”.
7 In section 16 (savings and dividend income to be treated as highest part of total income), in subsection (1), for paragraph (za) substitute—
(za) the rate at which income tax would be charged on the non-savings income of a Scottish taxpayer apart from section 11A,
.
8 In section 809H (charge on nominated income of long-term UK resident), for subsection (3A) substitute—
(3A) If the individual is a Scottish taxpayer for the relevant tax year, the individual is to be treated for the purpose of calculating income tax charged by virtue of subsection (2) as if the individual were not a Scottish taxpayer for that year.
9 In section 828B (conditions to be met for exemption where individual resident but not domiciled in the UK), in subsection (5), after “the basic rate” insert “ , the Scottish basic rate ”.
10 In section 989 (definitions for the purposes of the Income Tax Acts)—
(a) in the definitions of “additional rate”, “basic rate” and “higher rate”, omit “or (2B)”, and
(b) at the appropriate place, insert—
“Scottish additional rate” means the rate of income tax of that name calculated in accordance with section 6A,
,
“Scottish basic rate” means the rate of income tax of that name calculated in accordance with section 6A,
,
“Scottish higher rate” means the rate of income tax of that name calculated in accordance with section 6A,
,
“Scottish taxpayer” has the same meaning as in Chapter 2 of Part 4A of the Scotland Act 1998
.
11 In Schedule 4 (index of defined expressions), at the appropriate place, insert—
Scottish additional rate | section 6A (as applied by section 989)”
Scottish basic rate | section 6A (as applied by section 989)
Scottish higher rate | section 6A (as applied by section 989)
Scottish taxpayer | section 989
12 The amendments made by this Part have effect in relation to the tax year appointed by the Treasury under section 25(5) of the Scotland Act 2012 and subsequent tax years.
PART 2 Consequential amendments
13 In section 1 of the Provisional Collection of Taxes Act 1968 (temporary statutory effect of resolutions of House of Commons), omit subsection (3A).
14 (1) In section 7 of TMA 1970 (notice of liability to income tax and capital gains tax), in subsection (6), after “the basic rate,” insert “ the Scottish basic rate, ”.
(2) The amendment made by sub-paragraph (1) has effect in relation to the tax year appointed by the Treasury under section 25(5) of the Scotland Act 2012 and subsequent tax years.
15 (1) TCGA 1992 is amended as follows.
(2) In section 4 (rates of capital gains tax), in subsections (4) and (5), after “the higher rate” insert “ , the Scottish higher rate ”.
(3) In section 4A (section 4: special cases), in subsection (5), after “at the higher rate” insert “ , the Scottish higher rate ”.
(4) The amendments made by this paragraph have effect in relation to the tax year appointed by the Treasury under section 25(5) of the Scotland Act 2012 and subsequent tax years.
16 (1) The Scotland Act 1998 is amended as follows.
(2) In section 80C (power to set Scottish rate for Scottish taxpayers), for subsection (2) substitute—
(2) See section 6A of the Income Tax Act 2007 for provision about the calculation of those rates and section 11A of that Act for provision about the income charged at those rates.
(3) Section 80G (supplemental powers to modify enactments) is amended in accordance with sub-paragraphs (4) to (8).
(4) For subsection (1) substitute—
(1) The Treasury may by order modify section 11A of the Income Tax Act 2007 (income charged at the Scottish basic, higher and additional rates) for the purpose of altering—
(a) the definition of the income which is charged to income tax at the rates provided for under the section, or
(b) the application of the section in relation to a particular class of income which is so charged.
(1A) The Treasury may by order modify any enactment not contained in Chapter 2 of Part 2 of the Income Tax Act 2007 (rates at which income tax is charged) so that it makes provision, in relation to a Scottish taxpayer, by reference to the Scottish basic rate, the Scottish higher rate or the Scottish additional rate, instead of the basic rate, the higher rate or the additional rate.
(1B) If the Treasury consider it necessary or expedient to do so, they may by order provide that—
(a) the Scottish rate set by the Parliament for a tax year, or
(b) the fact that the Scottish rate has not been so set for a tax year,
does not require any change in the amounts repayable or deductible under PAYE regulations between the beginning of that year and such later date as may be specified in the order.
(5) In subsection (2), for the words from “with—” to the end substitute “ with an order under subsection (1), (1A) or (1B) ”.
(6) Omit subsection (3).
(7) After subsection (4) insert—
(5) The power under subsection (1) does not include power to provide that any income which is—
(a) savings income, or
(b) dividend income which would otherwise be charged to income tax at a rate provided for under section 13 of the Income Tax Act 2007,
is income which is charged to income tax at a rate provided for under section 11A of that Act.
(8) In section 110 (Scottish taxpayers for social security purposes), in subsection (2)—
(a) for “basic rate” substitute “ Scottish basic rate, Scottish higher rate or Scottish additional rate (within the meaning of the Income Tax Acts) ”, and
(b) omit the words from “(instead of” to the end.
(9) Schedule 7 (procedure for subordinate legislation) is amended in accordance with sub-paragraphs (10) and (11).
(10) In paragraph 1(2)—
(a) omit the entry for section 79, and
(b) at the appropriate place insert—
Section 80G(1), (1A) or (2) | Type E
Section 80G(1B) | Type K
.
(11) At the end of paragraph 1, omit the Note relating to the entry for section 79.
(12) Sub-paragraph (8) comes into force on such day as the Secretary of State may by order made by statutory instrument appoint.
(13) Sub-paragraphs (10)(a) and (11) come into force on such day as the Treasury may by order appoint.
17 In consequence of the amendments made by this Schedule, in the Scotland Act 2012 omit—
(a) section 26 (income tax for Scottish taxpayers),
(b) paragraph 1(2)(a) and (b) of Schedule 2 (amendments to section 110(2) of the Scotland Act 1998), and
(c) paragraph 1(4) of that Schedule (amendments to Schedule 7 to the Scotland Act 1998 relating to section 80G of that Act).
SCHEDULE 39 Taxation of co-operative societies etc
Section 298
Taxation of Chargeable Gains Act 1992 (c. 12)
1 In section 217D of TCGA 1992 (disposal of assets on union, amalgamation or transfer of engagements), in subsection (3), after paragraph (a) insert—
(aa) a society registered as a credit union under the Credit Unions (Northern Ireland) Order 1985 (S.I. 1985/1205 (N.I. 12)),
.
Co-operative and Community Benefit Societies Act 2014 (c. 14)
2 Schedule 4 to the Co-operative and Community Benefit Societies Act 2014 (consequential amendments) is amended as follows.
3 In paragraph 47 (which amends section 140E of TCGA 1992)—
(a) in sub-paragraph (2), after “Co-operative and Community Benefit Societies Act 2014” insert “ or a society registered or treated as registered under the Industrial and Provident Societies Act (Northern Ireland) 1969 ”, and
(b) in sub-paragraph (3), after “Co-operative and Community Benefit Societies Act 2014” insert “ , a society registered or treated as registered under the Industrial and Provident Societies Act (Northern Ireland) 1969 ”.
4 In paragraph 48 (which amends section 140F of TCGA 1992) after “Co-operative and Community Benefit Societies Act 2014” insert “ or a society registered or treated as registered under the Industrial and Provident Societies Act (Northern Ireland) 1969 ”.
5 In paragraph 49 (which amends section 140G of TCGA 1992) after “Co-operative and Community Benefit Societies Act 2014” insert “ or a society registered or treated as registered under the Industrial and Provident Societies Act (Northern Ireland) 1969 ”.
6 In paragraph 50 (which amends section 170 of TCGA 1992)—
(a) in sub-paragraph (2), for “within the meaning of the Co-operative and Community Benefits Societies Act 2014” substitute “ (see section 1119 of that Act) ”, and
(b) in sub-paragraph (3), for “within the meaning of the Co-operative and Community Benefits Societies Act 2014” substitute “ (see section 1119 of CTA 2010) ”.
7 In paragraph 53 (which amends Schedule 7AC of TCGA 1992) for “within the meaning of the Co-operative and Community Benefits Societies Act 2014” substitute “ (see section 1119 of that Act) ”.
8 In paragraph 82 (which amends paragraph 28 of Schedule 2 to ITEPA 2003), in the sub-paragraph (5) substituted by sub-paragraph (3)—
(a) omit the “or” following paragraph (b), and
(b) at the end of paragraph (c) insert
, or
(d) an SCE formed in accordance with Council Regulation (EC) No 1435/2003 on the Statute for a European Cooperative Society.
9 In paragraph 94 (which amends section 379 of ITTOIA 2005), in the definition of “registered society” inserted by sub-paragraph (4)—
(a) omit the “or” following paragraph (a), and
(b) after paragraph (b) insert—
(c) a society registered as a credit union under the Credit Unions (Northern Ireland) Order 1985 (S.I. 1985/1205 (N.I. 12)), or
(d) an SCE formed in accordance with Council Regulation (EC) No 1435/2003 on the Statute for a European Cooperative Society,
.
10 In paragraph 105 (which amends section 151 of ITA 2007), in the definition of “registered society” inserted by sub-paragraph (3)—
(a) omit the “or” following paragraph (a), and
(b) at the end of paragraph (b) insert
or
(c) an SCE formed in accordance with Council Regulation (EC) No 1435/2003 on the Statute for a European Cooperative Society,
.
11 In paragraph 110 (which amends section 887 of ITA 2007), in the subsection (5) substituted by sub-paragraph (5)—
(a) omit the “or” following paragraph (a), and
(b) after paragraph (b) insert—
(c) a society registered as a credit union under the Credit Unions (Northern Ireland) Order 1985 (S.I. 1985/1205 (N.I. 12)), or
(d) an SCE formed in accordance with Council Regulation (EC) No 1435/2003 on the Statute for a European Cooperative Society.
12 In paragraph 158 (which amends section 90 of CTA 2010), in the definition of “registered society” inserted by sub-paragraph (3)—
(a) omit the “or” following paragraph (a), and
(b) at the end of paragraph (b) insert
or
(c) an SCE formed in accordance with Council Regulation (EC) No 1435/2003 on the Statute for a European Cooperative Society,
.
13 In paragraph 168 (which amends section 1119 of CTA 2010), in the definition of “registered society” inserted by sub-paragraph (3), for paragraph (c) and the “or” before it substitute—
(c) a society registered as a credit union under the Credit Unions (Northern Ireland) Order 1985 (S.I. 1985/1205 (N.I. 12)), or
(d) an SCE formed in accordance with Council Regulation (EC) No 1435/2003 on the Statute for a European Cooperative Society,
.
14 In paragraph 171 (which amends section 118 of TIOPA 2010)—
(a) in sub-paragraph (2), after “Co-operative and Community Benefit Societies Act 2014” insert “ or a society registered or treated as registered under the Industrial and Provident Societies Act (Northern Ireland) 1969 ”, and
(b) in sub-paragraph (3), after “Co-operative and Community Benefit Societies Act 2014” insert “ , a society registered or treated as registered under the Industrial and Provident Societies Act (Northern Ireland) 1969 ”.
Commencement
15 The amendments made by this Schedule come into force on 1 August 2014.