SCHEDULE 15 Inheritance tax: increased nil-rate band
Section 93
1 IHTA 1984 is amended as follows.
2 (1) Section 8D (extra nil-rate band on death if interest in home goes to descendants etc) is amended as follows.
(2) In subsection (4), after “8G” insert “ (and see also section 8M) ”.
(3) In subsection (9), before the definition of “tax year” insert—
“consumer prices index” means the all items consumer prices index published by the Statistics Board,
.
3 (1) Section 8E (residence nil-rate amount: interest in home goes to descendants etc) is amended as follows.
(2) In subsection (6), after “(7)” insert “ and sections 8FC and 8M(2B) to (2E) ”.
(3) In subsection (7), for paragraphs (a) and (b) substitute—
(a) the person's residence nil-rate amount is equal to VT,
(b) where E is less than or equal to TT, an amount, equal to the difference between VT and the person's default allowance, is available for carry-forward, and
(c) where E is greater than TT, an amount, equal to the difference between VT and the person's adjusted allowance, is available for carry-forward.
(4) In subsection (8)—
(a) before the entry for section 8H insert— “ section 8FC (modifications of this section where there is entitlement to a downsizing addition), ”, and
(b) in the entry for section 8H, after “ “qualifying residential interest”” insert “, “ qualifying former residential interest ” and “residential property interest” ”.
4 In section 8F(4) (list of other relevant sections)—
(a) before the entry for section 8H insert— “ section 8FD (which applies instead of this section where there is entitlement to a downsizing addition), ”, and
(b) in the entry for section 8H, after “ “qualifying residential interest”” insert “, “ qualifying former residential interest ” and “residential property interest” ”.
5 After section 8F insert—
Downsizing addition: entitlement: low-value death interest in home
8FA (1) There is entitlement to a downsizing addition in calculating the person's residence nil-rate amount if each of conditions A to F is met (see subsection (8) for the amount of the addition).
(2) Condition A is that—
(a) the person's residence nil-rate amount is given by section 8E(2) or (4), or
(b) the person's estate immediately before the person's death includes a qualifying residential interest but none of the interest is closely inherited, and—
(i) where E is less than or equal to TT, so much of VT as is attributable to the person's qualifying residential interest is less than the person's default allowance, or
(ii) where E is greater than TT, so much of VT as is attributable to the person's qualifying residential interest is less than the person's adjusted allowance.
Section 8E(6) and (7) do not apply, and any entitlement to a downsizing addition is to be ignored, when deciding whether paragraph (a) of condition A is met.
(3) Condition B is that not all of VT is attributable to the person's qualifying residential interest.
(4) Condition C is that there is a qualifying former residential interest in relation to the person (see sections 8H(4A) to (4F) and 8HA).
(5) Condition D is that the value of the qualifying former residential interest exceeds so much of VT as is attributable to the person's qualifying residential interest.
Section 8FE(2) explains what is meant by the value of the qualifying former residential interest.
(6) Condition E is that at least some of the remainder is closely inherited, where “the remainder” means everything included in the person's estate immediately before the person's death other than the person's qualifying residential interest.
(7) Condition F is that a claim is made for the addition in accordance with section 8L(1) to (3).
(8) Where there is entitlement as a result of this section, the addition—
(a) is equal to the lost relievable amount (see section 8FE) if that amount is less than so much of VT as is attributable to so much of the remainder as is closely inherited, and
(b) otherwise is equal to so much of VT as is attributable to so much of the remainder as is closely inherited.
(9) Subsection (8) has effect subject to section 8M(2G) (reduction of downsizing addition in certain cases involving conditional exemption).
(10) See also—
section 8FC (effect of an addition: section 8E case),
section 8FD (effect of an addition: section 8F case),
section 8H (meaning of “qualifying residential interest”, “qualifying former residential interest” and “residential property interest”),
section 8J (meaning of “inherit”),
section 8K (meaning of “closely inherited”), and
section 8M (cases involving conditional exemption).
Downsizing addition: entitlement: no residential interest at death
8FB (1) There is also entitlement to a downsizing addition in calculating the person's residence nil-rate amount if each of conditions G to K is met (see subsection (7) for the amount of the addition).
(2) Condition G is that the person's estate immediately before the person's death (“the estate”) does not include a residential property interest.
(3) Condition H is that VT is greater than nil.
(4) Condition I is that there is a qualifying former residential interest in relation to the person (see sections 8H(4A) to (4F) and 8HA).
(5) Condition J is that at least some of the estate is closely inherited.
(6) Condition K is that a claim is made for the addition in accordance with section 8L(1) to (3).
(7) Where there is entitlement as a result of this section, the addition—
(a) is equal to the lost relievable amount (see section 8FE) if that amount is less than so much of VT as is attributable to so much of the estate as is closely inherited, and
(b) otherwise is equal to so much of VT as is attributable to so much of the estate as is closely inherited.
(8) Subsection (7) has effect subject to section 8M(2G) (reduction of downsizing addition in certain cases involving conditional exemption).
(9) See also—
section 8FD (effect of an addition: section 8F case),
section 8H (meaning of “qualifying residential interest”, “qualifying former residential interest” and “residential property interest”),
section 8J (meaning of “inherit”),
section 8K (meaning of “closely inherited”), and
section 8M (cases involving conditional exemption).
Downsizing addition: effect: section 8E case
8FC (1) Subsection (2) applies if—
(a) as a result of section 8FA, there is entitlement to a downsizing addition in calculating the person's residence nil-rate amount, and
(b) the person's residence nil-rate amount is given by section 8E.
(2) Section 8E has effect as if, in subsections (2) to (5) of that section, each reference to NV/100 were a reference to the total of—
(a) NV/100, and
(b) the downsizing addition.
Downsizing addition: effect: section 8F case
8FD (1) This section applies if—
(a) as a result of section 8FA or 8FB, there is entitlement to a downsizing addition in calculating the person's residence nil-rate amount, and
(b) apart from this section, the person's residence nil-rate amount is given by section 8F.
(2) Subsections (3) to (6) apply instead of section 8F.
(3) The person's residence nil-rate amount is equal to the downsizing addition.
(4) Where—
(a) E is less than or equal to TT, and the downsizing addition is equal to the person's default allowance, or
(b) E is greater than TT, and the downsizing addition is equal to the person's adjusted allowance,
no amount is available for carry-forward.
(5) Where—
(a) E is less than or equal to TT, and
(b) the downsizing addition is less than the person's default allowance,
an amount, equal to the difference between the downsizing addition and the person's default allowance, is available for carry-forward.
(6) Where—
(a) E is greater than TT, and
(b) the downsizing addition is less than the person's adjusted allowance,
an amount, equal to the difference between the downsizing addition and the person's adjusted allowance, is available for carry-forward.
Calculation of lost relievable amount
8FE (1) This section is about how to calculate the person's lost relievable amount for the purposes of sections 8FA(8) and 8FB(7).
(2) For the purposes of this section and section 8FA(5), the value of the person's qualifying former residential interest is the value of the interest at the time of completion of the disposal of the interest.
(3) In this section, the person's “former allowance” is the total of—
(a) the residential enhancement at the time of completion of the disposal of the qualifying former residential interest,
(b) any brought-forward allowance that the person would have had if the person had died at that time, having regard to the circumstances of the person at that time (see section 8G as applied by subsection (4)), and
(c) if the person's allowance on death includes an amount of brought-forward allowance which is greater than the amount of brought-forward allowance given by paragraph (b), the difference between those two amounts.
(4) For the purposes of calculating any brought-forward allowance that the person (“P”) would have had as mentioned in subsection (3)(b)—
(a) section 8G (brought-forward allowance) applies, but as if references to the residential enhancement at P's death were references to the residential enhancement at the time of completion of the disposal of the qualifying former residential interest, and
(b) assume that a claim for brought-forward allowance was made in relation to an amount available for carry-forward from a related person's death if, on P's death, a claim was in fact made in relation to the amount.
(5) For the purposes of subsection (3)(c), where the person's allowance on death is equal to the person's adjusted allowance, the amount of brought-forward allowance included in the person's allowance on death is calculated as follows.
Step 1 Express the person's brought-forward allowance as a percentage of the person's default allowance.
Step 2 Multiply—
E
−
TT
2
by the percentage given by step 1.
Step 3 Reduce the person's brought-forward allowance by the amount given by step 2.
The result is the amount of brought-forward allowance included in the person's allowance on death.
(6) If completion of the disposal of the qualifying former residential interest occurs before 6 April 2017—
(a) for the purposes of subsection (3)(a), the residential enhancement at the time of completion of the disposal is treated as being £100,000, and
(b) for the purposes of subsection (3)(b), the amount of brought-forward allowance that the person would have had at that time is treated as being nil.
(7) In this section, the person's “allowance on death” means—
(a) where E is less than or equal to TT, the person's default allowance, or
(b) where E is greater than TT, the person's adjusted allowance.
(8) For the purposes of this section, “completion” of the disposal of a residential property interest occurs at the time of the disposal or, if the disposal is under a contract which is completed by a conveyance, at the time when the interest is conveyed.
(9) Where, as a result of section 8FA, there is entitlement to a downsizing addition in calculating the person's residence nil-rate amount, take the following steps to calculate the person's lost relievable amount.
Step 1 Express the value of the person's qualifying former residential interest as a percentage of the person's former allowance, but take that percentage to be 100% if it would otherwise be higher.
Step 2 Express QRI as a percentage of the person's allowance on death, where QRI is so much of VT as is attributable to the person's qualifying residential interest, but take that percentage to be 100% if it would otherwise be higher.
Step 3 Subtract the percentage given by step 2 from the percentage given by step 1, but take the result to be 0% if it would otherwise be negative. The result is P%.
Step 4 The person's lost relievable amount is equal to P% of the person's allowance on death.
(10) Where, as a result of section 8FB, there is entitlement to a downsizing addition in calculating the person's residence nil-rate amount, take the following steps to calculate the person's lost relievable amount.
Step 1 Express the value of the person's qualifying former residential interest as a percentage of the person's former allowance, but take that percentage to be 100% if it would otherwise be higher.
Step 2 Calculate that percentage of the person's allowance on death. The result is the person's lost relievable amount.
6 In section 8G (meaning of “brought-forward allowance”), in subsection (3)(a), for “and 8F” substitute “ , 8F and 8FD ”.
7 (1) Section 8H (meaning of “qualifying residential interest”) is amended as follows.
(2) In the heading, at the end insert “, “ qualifying former residential interest ” and “residential property interest” ”.
(3) In subsection (1), for “and 8F” substitute “ to 8FE and section 8M ”.
(4) In subsection (2), for “In this section” substitute “ A ”.
(5) After subsection (4) insert—
(4A) Subsection (4B) or (4C) applies where—
(a) a person disposes of a residential property interest in a dwelling-house on or after 8 July 2015 (and before the person dies), and
(b) the person's personal representatives nominate—
(i) where there is only one such dwelling-house, that dwelling-house, or
(ii) where there are two or more such dwelling-houses, one (and only one) of those dwelling-houses.
(4B) Where—
(a) the person—
(i) disposes of a residential property interest in the nominated dwelling-house at a post-occupation time, or
(ii) disposes of two or more residential property interests in the nominated dwelling-house at the same post-occupation time or at post-occupation times on the same day, and
(b) the person does not otherwise dispose of residential property interests in the nominated dwelling-house at post-occupation times,
the interest disposed of is, or the interests disposed of are, a qualifying former residential interest in relation to the person.
(4C) Where—
(a) the person disposes of residential property interests in the nominated dwelling-house at post-occupation times on two or more days, and
(b) the person's personal representatives nominate one (and only one) of those days,
the interest or interests disposed of at post-occupation times on the nominated day is or are a qualifying former residential interest in relation to the person.
(4D) For the purposes of subsections (4A) to (4C)—
(a) a person is to be treated as not disposing of a residential property interest in a dwelling-house where the person disposes of an interest in the dwelling-house by way of gift and the interest is, in relation to the gift and the donor, property subject to a reservation within the meaning of section 102 of the Finance Act 1986 (gifts with reservation), and
(b) a person is to be treated as disposing of a residential property interest in a dwelling-house if the person is treated as making a potentially exempt transfer of the interest as a result of the operation of section 102(4) of that Act (property ceasing to be subject to a reservation).
(4E) Where—
(a) a transfer of value by a person is a conditionally exempt transfer of a residential property interest, and
(b) at the time of the person's death, no chargeable event has occurred with respect to that interest,
that interest may not be, or be included in, a qualifying former residential interest in relation to the person.
(4F) In subsections (4B) and (4C) “post-occupation time” means a time—
(a) on or after 8 July 2015,
(b) after the nominated dwelling-house first became the person's residence, and
(c) before the person dies.
(4G) For the purposes of subsections (4A) to (4C), if the disposal is under a contract which is completed by a conveyance, the disposal occurs at the time when the interest is conveyed.
8 After section 8H insert—
Qualifying former residential interest”: interests in possession
8HA (1) This section applies for the purposes of determining whether certain interests may be, or be included in, a qualifying former residential interest in relation to a person (see section 8H(4A) to (4C)).
(2) This section applies where—
(a) a person (“P”) is beneficially entitled to an interest in possession in settled property, and
(b) the settled property consists of, or includes, an interest in a dwelling-house.
(3) Subsection (4) applies where—
(a) the trustees of the settlement dispose of the interest in the dwelling-house to a person other than P,
(b) P's interest in possession in the settled property subsists immediately before the disposal, and
(c) P's interest in possession—
(i) falls within subsection (7) throughout the period beginning with P becoming beneficially entitled to it and ending with the disposal, or
(ii) falls within subsection (8).
(4) The disposal is to be treated as a disposal by P of the interest in the dwelling-house to which P is beneficially entitled as a result of the operation of section 49(1).
(5) Subsection (6) applies where—
(a) P disposes of the interest in possession in the settled property, or P's interest in possession in the settled property comes to an end in P's lifetime,
(b) the interest in the dwelling-house is, or is part of, the settled property immediately before the time when that happens, and
(c) P's interest in possession—
(i) falls within subsection (7) throughout the period beginning with P becoming beneficially entitled to it and ending with the time mentioned in paragraph (b), or
(ii) falls within subsection (8).
(6) The disposal, or (as the case may be) the coming to an end of P's interest in possession, is to be treated as a disposal by P of the interest in the dwelling-house to which P is beneficially entitled as a result of the operation of section 49(1).
(7) An interest in possession falls within this subsection if—
(a) P became beneficially entitled to it before 22 March 2006 and section 71A does not apply to the settled property; or
(b) P becomes beneficially entitled to it on or after 22 March 2006 and the interest is—
(i) an immediate post-death interest,
(ii) a disabled person's interest, or
(iii) a transitional serial interest.
(8) An interest in possession falls within this subsection if P becomes beneficially entitled to it on or after 22 March 2006 and it falls within section 5(1B).
9 In section 8J (meaning of “inherited”), in subsection (1), for “and 8F” substitute “ , 8F, 8FA, 8FB and 8M ”.
10 In section 8K (meaning of “closely inherited”), in subsection (1), for “and 8F” substitute “ , 8F, 8FA, 8FB and 8M ”.
11 In section 8L (claims for brought-forward allowance)—
(a) in the heading, at the end insert “ and downsizing addition ”, and
(b) in subsection (1), after “(see section 8G)” insert “ or for a downsizing addition for a person (see sections 8FA to 8FD) ”.
12 (1) Section 8M (residence nil-rate amount: cases involving conditional exemption) is amended as follows.
(2) For subsections (1) and (2) substitute—
(1) This section applies where—
(a) a person (“D”) dies on or after 6 April 2017,
(b) ignoring the application of this section, D's residence nil-rate amount is greater than nil, and
(c) some or all of the transfer of value under section 4 on D's death is a conditionally exempt transfer of property consisting of, or including, any of the following—
(i) some or all of a qualifying residential interest;
(ii) some or all of a residential property interest, at least some portion of which is closely inherited, and which is not, and is not included in, a qualifying residential interest;
(iii) one or more closely inherited assets that are not residential property interests.
(2) Subsections (2B) to (2E) apply for the purposes of sections 8E to 8FD if—
(a) ignoring the application of this section, D's residence nil-rate amount is given by section 8E, and
(b) some or all of the transfer of value under section 4 is a conditionally exempt transfer of property mentioned in subsection (1)(c)(i).
(2A) In subsections (2B) to (2E), but subject to subsection (3)(a), “the exempt percentage of the QRI” is given by—
X
QRI
×
100
where—
X is the attributable portion of the value transferred by the conditionally exempt transfer,
QRI is the attributable portion of the value transferred by the transfer of value under section 4, and
“the attributable portion” means the portion (which may be the whole) attributable to the qualifying residential interest.
(2B) If—
(a) the exempt percentage of the QRI is 100%, and
(b) D has no entitlement to a downsizing addition,
D's residence nil-rate amount and amount available for carry-forward are given by section 8F(2) and (3) (instead of section 8E).
(2C) If—
(a) the exempt percentage of the QRI is 100%, and
(b) D has an entitlement to a downsizing addition,
D's residence nil-rate amount and amount available for carry-forward are given by section 8FD(3) to (6) (instead of section 8E as modified by section 8FC(2)).
See also subsection (2G).
(2D) If—
(a) the exempt percentage of the QRI is less than 100%, and
(b) D has no entitlement to a downsizing addition,
D's residence nil-rate amount and amount available for carry-forward are given by section 8E but as if, in subsections (2) to (5) of that section, each reference to NV/100 were a reference to NV/100 multiplied by the percentage that is the difference between 100% and the exempt percentage of the QRI.
(2E) If—
(a) the exempt percentage of the QRI is less than 100%, and
(b) D has an entitlement to a downsizing addition,
D's residence nil-rate amount and amount available for carry-forward are given by section 8E as modified by section 8FC(2), but as if the reference to NV/100 in section 8FC(2)(a) were a reference to NV/100 multiplied by the percentage that is the difference between 100% and the exempt percentage of the QRI.
See also subsection (2G).
(2F) Subsection (2G) applies for the purposes of sections 8FA to 8FD if—
(a) some or all of the transfer of value under section 4 is a conditionally exempt transfer of property mentioned in subsection (1)(c)(ii) or (iii) (or both),
(b) D has an entitlement to a downsizing addition, and
(c) DA exceeds Y (see subsection (2H)).
(2G) Subject to subsection (3)(aa) and (ab), the amount of the downsizing addition is treated as reduced by whichever is the smaller of—
(a) the difference between DA and Y, and
(b) Z.
(2H) In subsections (2F) and (2G)—
DA is the amount of the downsizing addition to which D has an entitlement (ignoring the application of subsection (2G));
Y is so much (if any) of the value transferred by the transfer of value under section 4 as—
is not transferred by a conditionally exempt transfer, and
is attributable to—
the closely inherited portion (which may be the whole) of any residential property interests that are not, and are not included in, a qualifying residential interest, or
closely inherited assets that are not residential property interests;
Z is the total of—
the closely inherited conditionally exempt values of all residential property interests mentioned in subsection (1)(c)(ii), and
so much of the value transferred by the conditionally exempt transfer as is attributable to property mentioned in subsection (1)(c)(iii).
(2I) For the purposes of the definition of “Z”, “the closely inherited conditionally exempt value” of a residential property interest means—
(a) so much of the value transferred by the conditionally exempt transfer as is attributable to the interest, multiplied by
(b) the percentage of the interest which is closely inherited.
(3) In subsection (3), for the words before paragraph (b) substitute—
(3) For the purposes of calculating tax chargeable under section 32 or 32A by reference to a chargeable event related to property forming the subject-matter of the conditionally exempt transfer where D is the relevant person for the purposes of section 33—
(a) where subsections (2B) to (2E) apply and the chargeable event relates to property mentioned in subsection (1)(c)(i), in calculating the exempt percentage of the QRI, X is calculated as if the attributable portion of the value transferred by the conditionally exempt transfer had not included the portion (which may be the whole) of the qualifying residential interest on which the tax is chargeable,
(aa) where subsection (2G) applies and the chargeable event relates to property mentioned in subsection (1)(c)(ii), Z is calculated as if it had not included the portion (which may be the whole) of the closely inherited conditionally exempt value of the residential property interest on which the tax is chargeable,
(ab) where subsection (2G) applies and the chargeable event relates to an asset mentioned in subsection (1)(c)(iii) (“the taxable asset”), Z is calculated as if it had not included so much of the value transferred by the conditionally exempt transfer as is attributable to the taxable asset,
.
(4) In subsection (3)—
(a) at the beginning of paragraph (b) insert “ in the cases mentioned in paragraphs (a), (aa) and (ab), ”,
(b) at the end of paragraph (b) omit “and”,
(c) in paragraph (c), for “less” substitute “ reduced (but not below nil) by ”, and
(d) after paragraph (c) insert
, and
(d) where the chargeable event relates to property mentioned in subsection (1)(c)(i) and subsections (2B) to (2E) do not apply, section 33 has effect as if in subsection (1)(b)(ii) after “in accordance with” there were inserted “ section 8D(2) and (3) above and ”.
(5) In subsection (5), for “the qualifying residential interest which” substitute “ property which forms the subject-matter of the conditionally exempt transfer where the chargeable event ”.
(6) In subsection (6), for “the qualifying residential interest which” substitute “ property which forms the subject-matter of the conditionally exempt transfer and the chargeable event ”.
(7) In subsection (7), for “the qualifying residential interest” substitute “ property which forms the subject-matter of the conditionally exempt transfer ”.
Section 133
PART 1 Co-ownership authorised contractual schemes
1 In FA 2003, after section 102 insert—
Co-ownership authorised contractual schemes
102A (1) This section has effect for the purposes of this Part.
(2) This Part, with the exception of Schedule 7 (see subsection (10)), applies in relation to a co-ownership authorised contractual scheme as if—
(a) the scheme were a company, and
(b) the rights of the participants were shares in the company.
(3) An “umbrella COACS” means a co-ownership authorised contractual scheme—
(a) whose arrangements provide for separate pooling of the contributions of the participants and the profits or income out of which payments are made to them (“pooling arrangements”), and
(b) under which the participants are entitled to exchange rights in one pool for rights in another.
(4) A “sub-scheme”, in relation to an umbrella COACS, means such of the pooling arrangements as relate to a separate pool.
(5) Each of the sub-schemes of an umbrella COACS is regarded as a separate co-ownership authorised contractual scheme, and the umbrella COACS as a whole is not so regarded.
(6) In relation to a sub-scheme of an umbrella COACS—
(a) references to chargeable interests are references to such of the chargeable interests as under the pooling arrangements form part of the separate pool to which the sub-scheme relates, and
(b) references to the scheme documents are references to such parts of the documents as apply to the sub-scheme.
(7) References to a co-ownership authorised contractual scheme are treated as including a collective investment scheme which—
(a) is constituted under the law of an EEA State other than the United Kingdom by a contract,
(b) is managed by a body corporate incorporated under the law of an EEA State, and
(c) is authorised under the law of the EEA State mentioned in paragraph (a) in a way which makes it, under that law, the equivalent of a co-ownership authorised contractual scheme as defined in subsection (8),
provided that, apart from this section, no charge to tax is capable of arising to the scheme under this Part.
(8) Subject to any regulations under subsection (9)—
“co-ownership authorised contractual scheme” means a co-ownership scheme which is authorised for the purposes of FSMA 2000 by an authorisation order in force under section 261D(1) of that Act;
“co-ownership scheme” has the same meaning as in FSMA 2000 (see section 235A of that Act).
(9) The Treasury may by regulations provide that a scheme of a description specified in the regulations is to be treated as not being a co-ownership authorised contractual scheme for the purposes of this Part.
Any such regulations may contain such supplementary and transitional provisions as appear to the Treasury to be necessary or expedient.
(10) A co-ownership authorised contractual scheme is not to be treated as a company for the purposes of Schedule 7 (group relief, reconstruction relief or acquisition relief).
(11) In relation to a land transaction in respect of which a co-ownership authorised contractual scheme is treated as the purchaser by virtue of this section, references to the purchaser in the following provisions are to be read as references to the operator of the scheme—
(a) sections 76, 80, 81, 81A and 108(2) and Schedule 10 (provisions about land transaction returns and further returns, enquiries, assessments and related matters),
(b) section 85 (liability for tax), and
(c) section 90 (application to defer payment in case of contingent or unascertained consideration).
(12) In this section—
“collective investment scheme” has the meaning given by section 235 of FSMA 2000;
“FSMA 2000” means the Financial Services and Markets Act 2000;
“operator”—
in relation to a co-ownership authorised contractual scheme constituted under the law of the United Kingdom, has the meaning given by section 237(2) of FSMA 2000, and
in relation to a collective investment scheme treated as a co-ownership authorised contractual scheme by virtue of subsection (7) (equivalent EEA schemes), means the corporate body responsible for the management of the scheme (however described);
“participant” is to be read in accordance with section 235 of FSMA 2000.
PART 2 Seeding relief for property authorised investment funds and co-ownership authorised contractual schemes
2 FA 2003 is amended in accordance with this Part.
3 After section 65 insert—
PAIF seeding relief and COACS seeding relief
65A (1) Schedule 7A provides for relief from stamp duty land tax.
(2) In that Schedule—
(a) Part 1 makes provision for relief for property authorised investment funds (PAIF seeding relief), and
(b) Part 2 makes provision for relief for co-ownership authorised contractual schemes (COACS seeding relief).
(3) Any relief under that Schedule must be claimed in a land transaction return or an amendment of such a return, and must be accompanied by a notice to HMRC referring to the claim.
(4) In the case of a claim for PAIF seeding relief, the notice must confirm that the purchaser is—
(a) a property AIF as defined in paragraph 2(2) of Schedule 7A, or
(b) a company treated as a property AIF by virtue of paragraph 2(5) of Schedule 7A (equivalent EEA funds).
(5) In the case of a claim for COACS seeding relief, the notice must confirm that the purchaser is—
(a) a co-ownership authorised contractual scheme as defined in section 102A(8), or
(b) an entity treated as a co-ownership authorised contractual scheme by virtue of section 102A(7) (equivalent EEA schemes).
(6) The notice must be in such form, and contain such further information, as HMRC may require.
4 After Schedule 7 insert—
SCHEDULE 7A
Paif seeding relief and coacs seeding relief
Section 65A
PART 1 Property authorised investment funds
PAIF seeding relief
1 (1) A land transaction is exempt from charge if conditions A to D are met.
Relief under this paragraph is referred to in this Part of this Act as “PAIF seeding relief”.
(2) Condition A is that the purchaser is a property AIF (see paragraph 2).
(3) Condition B is that the main subject-matter of the transaction consists of a major interest in land.
(4) Condition C is that the only consideration for the transaction is the issue of units in the property AIF to a person who is the vendor.
(5) Condition D is that the effective date of the transaction is a day within the seeding period (see paragraph 3).
(6) This paragraph is subject to paragraph 4 (restrictions on availability of relief) and paragraphs 5 to 8 (withdrawal of relief).
Meaning of “property AIF”
2 (1) This paragraph has effect for the purposes of this Schedule.
(2) A “property AIF” is an open-ended investment company to which Part 4A of the AIF (Tax) Regulations applies.
(3) In sub-paragraph (2) “open-ended investment company” is to be read in accordance with regulation 7(1) and (2) of those Regulations (part of an umbrella company is regarded as an open-ended investment company).
(4) Regulation 7(3)(a) of those Regulations applies for the purposes of this Schedule as it applies for the purposes of those Regulations but as if references to investments and scheme property were a reference to chargeable interests.
(5) References to a property AIF are treated as including a collective investment scheme which—
(a) is a company incorporated under the law of an EEA State other than the United Kingdom, and
(b) is authorised under the law of that EEA State in a way which makes it, under that law, the equivalent of a property AIF as defined in sub-paragraph (2).
(6) In sub-paragraph (5) “collective investment scheme” has the meaning given by section 235 of FSMA 2000.
Meaning of “seeding period”
3 (1) In this Part of this Schedule, subject to sub-paragraph (2), the “seeding period” means—
(a) the period beginning with the first property seeding date and ending with the date of the first external investment into the property AIF, or
(b) if shorter, the period of 18 months beginning with the first property seeding date.
(2) The property AIF may elect to bring the seeding period to an end sooner than it would otherwise end under sub-paragraph (1).
Where an election is made, the seeding period is the period beginning with the first property seeding date and ending with the date specified in the election.
(3) An election under sub-paragraph (2) may be made—
(a) by being included in a notice accompanying a claim for PAIF seeding relief (see section 65A), or
(b) by separate notice in writing to HMRC.
(4) In sub-paragraphs (1) and (2), “the first property seeding date” means the earliest effective date of a transaction in respect of which conditions A to C in paragraph 1 are met.
(5) In this paragraph—
“external investment” means a non-land transaction in which the vendor is an external investor;
“external investor” means a person other than a person who has been a vendor in a transaction—
the effective date of which is on or before the date of the non-land transaction, and
in respect of which conditions A to C in paragraph 1 are met;
“non-land transaction” means a transaction by which the property AIF acquires assets which do not consist of or include a chargeable interest.
Restrictions on availability of relief
4 (1) This paragraph restricts the availability of PAIF seeding relief for a transaction in respect of which conditions A to D in paragraph 1 are met.
(2) PAIF seeding relief is not available unless, at the effective date of the transaction, the property AIF has arrangements in place requiring a person who is the vendor to notify the authorised corporate director of the property AIF of the following matters—
(a) the identity of the beneficial owner of the units in the property AIF received in consideration of the transaction, and
(b) any disposal of units in the property AIF on or after the effective date of that transaction by that owner (or, where that person is a company, by a group company) which is or could be a relevant disposal (see paragraph 7).
In paragraph (b) “group company” means a company which is a member of the same group of companies as the person mentioned in paragraph (a) for the purposes mentioned in paragraph 1(2) of Schedule 7 (group relief).
(3) PAIF seeding relief is not available if at the effective date of the transaction there are arrangements in existence by virtue of which, at that or some later time, a person who is the vendor makes or could make a disposal of units in the property AIF which is or could be a relevant disposal (see paragraph 7).
(4) PAIF seeding relief is not available if the transaction—
(a) is not effected for bona fide commercial reasons, or
(b) forms part of arrangements of which the main purpose, or one of the main purposes, is the avoidance of liability to tax.
“Tax” here means stamp duty, income tax, corporation tax, capital gains tax or tax under this Part.
Withdrawal of relief: ceasing to be property AIF
5 (1) Where PAIF seeding relief has been allowed in respect of a transaction (“the relevant transaction”), and the purchaser ceases to be a property AIF—
(a) at any time after the effective date of that transaction but within the seeding period,
(b) at any time in the control period (see paragraph 21), or
(c) in pursuance of, or in connection with, arrangements made before the end of the control period,
then, subject to sub-paragraph (2), the relief, or an appropriate proportion of it, is withdrawn, and tax is chargeable in accordance with this paragraph.
(2) Relief is withdrawn only if, at the time when the purchaser ceases to be a property AIF, the purchaser holds—
(a) the chargeable interest that was acquired by the purchaser under the relevant transaction, or
(b) a chargeable interest that is derived from that interest.
(3) The amount chargeable is the amount that would have been chargeable in respect of the relevant transaction but for PAIF seeding relief or, as the case may be, an appropriate proportion of the tax that would have been so chargeable.
(4) In sub-paragraphs (1) and (3) an “appropriate proportion” means an appropriate proportion having regard to the subject-matter of the relevant transaction and what is held by the purchaser at the time it ceases to be a property AIF.
Withdrawal of relief: portfolio test not met
6 (1) Where PAIF seeding relief has been allowed in respect of a transaction, and the portfolio test is not met immediately before the end of the seeding period, the relief is withdrawn and tax is chargeable in accordance with sub-paragraph (2).
See sub-paragraph (7) for the meaning of “portfolio test”.
(2) The amount chargeable is the amount that would have been chargeable in respect of the transaction but for PAIF seeding relief.
(3) Where PAIF seeding relief has been allowed in respect of a transaction (“the relevant transaction”), and the portfolio test is met immediately before the end of the seeding period, but is not met—
(a) at a time in the control period, or
(b) at a time after the end of the control period, where the failure is pursuant to or in connection with arrangements made before the end of that period,
then, subject to sub-paragraph (4), the relief, or an appropriate proportion of it, is withdrawn, and tax is chargeable in accordance with sub-paragraph (5).
(4) The requirement to meet the portfolio test at a time mentioned in sub-paragraph (3)(a) or (b) applies only to times when the property AIF holds—
(a) the chargeable interest that was acquired by the property AIF under the relevant transaction, or
(b) a chargeable interest that is derived from that interest.
(5) The amount chargeable is the amount that would have been chargeable in respect of the relevant transaction but for PAIF seeding relief or, as the case may be, an appropriate proportion of the tax that would have been so chargeable.
(6) In sub-paragraphs (3) and (5) an “appropriate proportion” means an appropriate proportion having regard to the subject-matter of the relevant transaction and what is held by the property AIF at the time when the portfolio test is not met.
(7) The portfolio test is a requirement that the property AIF meets—
(a) the non-residential portfolio test (see sub-paragraph (8)), or
(b) the residential portfolio test (see sub-paragraph (9)).
(8) The “non-residential portfolio test” is met at any time if—
(a) the property AIF holds at least 10 seeded interests at that time,
(b) so much of the total chargeable consideration as is attributable to all the seeded interests held by the property AIF at that time (“the seeded portfolio”) is at least £100 million, and
(c) so much of the total chargeable consideration as is attributable to so many of those seeded interests as are interests in or over residential property (if any) does not exceed 10% of the seeded portfolio.
(9) The “residential portfolio test” is met at any time if—
(a) so much of the total chargeable consideration as is attributable to all the seeded interests held by the property AIF at that time is at least £100 million, and
(b) at least 100 of the seeded interests held by the property AIF at that time are interests in or over residential property.
(10) In sub-paragraphs (8) and (9)—
“seeded interest” means a chargeable interest acquired by the property AIF in a transaction for which PAIF seeding relief is allowed (whether or not relief is subsequently withdrawn to any extent) (a “seeding transaction”), and
“total chargeable consideration” means the total of the chargeable consideration for all seeding transactions.
(11) For the purposes of this paragraph, section 116(7) does not apply (modification of what counts as residential property).
Withdrawal of relief: units disposed of
7 (1) This paragraph applies where—
(a) a person (“V”) makes a relevant disposal of one or more units in a property AIF—
(i) at any time in the seeding period,
(ii) at any time in the control period, or
(iii) in pursuance of, or in connection with, arrangements made before the end of the control period, and
(b) there is, in relation to that disposal, a relevant seeding transaction (see sub-paragraph (6)).
(2) In respect of a transaction which is, in relation to the relevant disposal, a relevant seeding transaction—
(a) PAIF seeding relief is withdrawn to the extent set out in this paragraph, and
(b) tax is chargeable in accordance with this paragraph.
(3) V's disposal of units in a property AIF is a “relevant disposal” for the purposes of this paragraph if, in relation to the disposal, A exceeds B.
(4) In this paragraph—
“A” means—
where the value of V's investment in the property AIF immediately before the disposal is equal to or greater than the total of the chargeable consideration for all relevant seeding transactions, the total of the chargeable consideration for all relevant seeding transactions, or
where the value of V's investment in the property AIF immediately before the disposal is less than the total of the chargeable consideration for all relevant seeding transactions, the value of V's investment in the property AIF immediately before the disposal, and
“B” means the value of V's investment in the property AIF immediately after the disposal.
(5) The amount chargeable in respect of a relevant seeding transaction (“RST”) is—
C
CCRST
×
SDLT
where—
“C” means the difference between A and B;
“CCRST” means the total of the chargeable consideration for all relevant seeding transactions;
“SDLT” means the amount of tax that would have been chargeable in respect of RST but for PAIF seeding relief, ignoring any amount of tax that has been charged under this paragraph in respect of RST in relation to an earlier disposal of units by V.
(6) In this paragraph—
“group company” means (where V is a company) a company which is a member of the same group of companies as V for the purposes mentioned in paragraph 1(2) of Schedule 7 (group relief);
“relevant seeding transaction”, in relation to a disposal of units by V in a property AIF, means a seeding transaction—
the effective date of which is, or is before, the date of the disposal,
in which that property AIF is the purchaser, and
in which a vendor is—
V, or
(where V is a company) a company which is a group company at the time of the disposal;
“seeding transaction” means a transaction in respect of which PAIF seeding relief is allowed (whether or not relief is subsequently withdrawn to any extent);
“the value of V's investment in the property AIF” at a particular time means the market value of all units in the property AIF held at that time by—
V, and
(where V is a company) a company which—
is a group company at that time, and
before that time, has been a vendor in one or more seeding transactions in which the property AIF was the purchaser.
(7) For the purposes of this paragraph, the “market value” on a particular date of units in the property AIF is an amount equal to the buying price (that is, the lower price) published by the authorised corporate director on that date (or, if no such price is published on that date, on the latest date before).
Withdrawal of relief: dwelling occupied by non-qualifying individual
8 (1) This paragraph applies to a transaction (“the relevant transaction”) if—
(a) PAIF seeding relief has been allowed in respect of the transaction,
(b) the main subject-matter of the transaction consists of a chargeable interest in or over land which is or includes a dwelling, and
(c) a non-qualifying individual (see paragraph 9) is permitted to occupy the dwelling at any time on or after the effective date of the transaction.
The dwelling which a non-qualifying individual is permitted to occupy is referred to as “the disqualifying dwelling”.
(2) The relief, or an appropriate proportion of it, is withdrawn, and tax is chargeable in accordance with this paragraph.
This is subject to sub-paragraphs (3) and (4).
(3) Relief is withdrawn only if, at the time a non-qualifying individual is permitted to occupy the disqualifying dwelling, the property AIF holds a chargeable interest in or over that dwelling—
(a) that was acquired by the property AIF under the relevant transaction, or
(b) that is derived from an interest so acquired.
(4) Where a non-qualifying individual is first permitted to occupy the disqualifying dwelling at a time after the end of the control period, relief is withdrawn only if, at that time, the purchaser in the relevant transaction fails to meet the genuine diversity of ownership condition set out in regulation 9A of the AIF (Tax) Regulations.
For the purposes of this sub-paragraph, regulation 9A(2)(a) of those Regulations is to be read as if the words “throughout the accounting period” were omitted.
(5) The amount chargeable is the amount that would have been chargeable in respect of the relevant transaction but for PAIF seeding relief or, as the case may be, an appropriate proportion of the tax that would have been so chargeable.
(6) In sub-paragraphs (2) and (5), an “appropriate proportion” means an appropriate proportion having regard to the extent to which the subject-matter of the relevant transaction was an interest in or over land other than the disqualifying dwelling.
9 (1) In paragraph 8 “non-qualifying individual”, in relation to a land transaction and a property AIF, means any of the following—
(a) an individual who is a major participant in the property AIF;
(b) an individual who is connected with a major participant in the property AIF;
(c) an individual who is connected with the property AIF;
(d) a relevant settlor;
(e) the spouse or civil partner of an individual falling within paragraph (b), (c) or (d);
(f) a relative of an individual falling within paragraph (b), (c) or (d), or the spouse or civil partner of a relative of an individual falling within paragraph (b), (c) or (d);
(g) a relative of the spouse or civil partner of an individual falling within paragraph (b), (c) or (d);
(h) the spouse or civil partner of an individual falling within paragraph (g).
(2) An individual who participates in a property AIF is a “major participant” in it if the individual—
(a) is entitled to a share of at least 50% either of all the profits or income arising from the property AIF or of any profits or income arising from it that may be distributed to participants, or
(b) would in the event of the winding up of the property AIF be entitled to 50% or more of the assets of the property AIF that would then be available for distribution among the participants.
(3) The reference in sub-paragraph (2)(a) to profits or income arising from the property AIF is to profits or income arising from the acquisition, holding, management or disposal of the property subject to the property AIF.
(4) In this paragraph—
“relative” means brother, sister, ancestor or lineal descendant;
“relevant settlor”, in relation to a land transaction, means an individual who is a settlor in relation to a relevant settlement (as defined in sub-paragraph (5));
“settlement” has the same meaning as in Chapter 5 of Part 5 of ITTOIA 2005 (see section 620 of that Act).
(5) Where a person, in the capacity of trustee of a settlement, is connected with a person who is the purchaser under a land transaction, that settlement is a “relevant settlement” in relation to the transaction.
(6) In sub-paragraph (5) “trustee” is to be read in accordance with section 1123(3) of CTA 2010 (“connected” persons: supplementary).
(7) Section 1122 of CTA 2010 (connected persons) has effect for the purposes of this paragraph, but for those purposes, subsections (7) and (8) of that section (application of rules about connected persons to partnerships) are to be disregarded.
PART 2 Co-ownership authorised contractual schemes
COACS seeding relief
10 (1) A land transaction is exempt from charge if conditions A to D are met.
Relief under this paragraph is referred to in this Part of this Act as “COACS seeding relief”.
(2) Condition A is that the purchaser is a co-ownership authorised contractual scheme (see section 102A).
(3) Condition B is that the main subject-matter of the transaction consists of a major interest in land.
(4) Condition C is that the only consideration for the transaction is the issue of units in the co-ownership authorised contractual scheme to a person who is the vendor.
(5) Condition D is that the effective date of the transaction is a day within the seeding period (see paragraph 11).
(6) This paragraph is subject to paragraph 12 (restrictions on availability of relief) and paragraphs 13, 14, 16, 17 and 18 (withdrawal of relief).
Meaning of “seeding period”
11 (1) In this Part of this Schedule, subject to sub-paragraph (2), the “seeding period” means—
(a) the period beginning with the first property seeding date and ending with the date of the first external investment into the co-ownership authorised contractual scheme, or
(b) if shorter, the period of 18 months beginning with the first property seeding date.
(2) The co-ownership authorised contractual scheme may elect to bring the seeding period to an end sooner than it would otherwise end under sub-paragraph (1).
Where an election is made, the seeding period is the period beginning with the first property seeding date and ending with the date specified in the election.
(3) An election under sub-paragraph (2) may be made—
(a) by being included in a notice accompanying a claim for COACS seeding relief (see section 65A), or
(b) by separate notice in writing to HMRC.
(4) In sub-paragraphs (1) and (2), “the first property seeding date” means the earliest effective date of a transaction in respect of which conditions A to C in paragraph 10 are met.
(5) In this paragraph—
“external investment” means a non-land transaction in which the vendor is an external investor;
“external investor” means a person other than a person who has been a vendor in a transaction—
the effective date of which is on or before the date of the non-land transaction, and
in respect of which conditions A to C in paragraph 10 are met;
“non-land transaction” means a transaction by which the scheme acquires assets which do not consist of or include a chargeable interest.
Restrictions on availability of relief
12 (1) This paragraph restricts the availability of COACS seeding relief for a transaction in respect of which conditions A to D in paragraph 10 are met.
(2) COACS seeding relief is not available unless, at the effective date of the transaction, the arrangements constituting the co-ownership authorised contractual scheme require a person who is the vendor to notify the operator of the scheme of the following matters—
(a) the identity of the beneficial owner of the units in the scheme received in consideration of the transaction, and
(b) any disposal of units in the scheme on or after the effective date of that transaction by that owner (or, where that person is a company, by a group company) which is or could be a relevant disposal (see paragraph 17).
In paragraph (b) “group company” means a company which is a member of the same group of companies as the person mentioned in paragraph (a) for the purposes mentioned in paragraph 1(2) of Schedule 7 (group relief).
(3) COACS seeding relief is not available if at the effective date of the transaction there are arrangements in existence by virtue of which, at that or some later time, a person who is the vendor makes or could make a disposal of units in the co-ownership authorised contractual scheme which is or could be a relevant disposal (see paragraph 17).
(4) COACS seeding relief is not available if the transaction—
(a) is not effected for bona fide commercial reasons, or
(b) forms part of arrangements of which the main purpose, or one of the main purposes, is the avoidance of liability to tax.
“Tax” here means stamp duty, income tax, corporation tax, capital gains tax or tax under this Part.
Withdrawal of relief: ceasing to be co-ownership authorised contractual scheme
13 (1) Where COACS seeding relief has been allowed in respect of a transaction (“the relevant transaction”), and the purchaser ceases to be a co-ownership authorised contractual scheme—
(a) at any time after the effective date of that transaction but within the seeding period,
(b) at any time in the control period (see paragraph 21), or
(c) in pursuance of, or in connection with, arrangements made before the end of the control period,
then, subject to sub-paragraph (2), the relief, or an appropriate proportion of it, is withdrawn, and tax is chargeable in accordance with this paragraph.
(2) Relief is withdrawn only if, at the time when the purchaser ceases to be a co-ownership authorised contractual scheme, the purchaser holds—
(a) the chargeable interest that was acquired by the purchaser under the relevant transaction, or
(b) a chargeable interest that is derived from that interest.
(3) The amount chargeable is the amount that would have been chargeable in respect of the relevant transaction but for COACS seeding relief or, as the case may be, an appropriate proportion of the tax that would have been so chargeable.
(4) In sub-paragraphs (1) and (3) an “appropriate proportion” means an appropriate proportion having regard to the subject-matter of the relevant transaction and what is held by the purchaser at the time it ceases to be a co-ownership authorised contractual scheme.
Withdrawal of relief: genuine diversity of ownership condition not met
14 (1) Where COACS seeding relief has been allowed in respect of a transaction (“the relevant transaction”), and the genuine diversity of ownership condition (see paragraph 15) is not met—
(a) immediately before the end of the seeding period,
(b) at a time in the control period, or
(c) at a time after the end of the control period, where the failure is pursuant to or in connection with arrangements made before the end of that period,
then, subject to sub-paragraph (2), the relief, or an appropriate proportion of it, is withdrawn, and tax is chargeable in accordance with this paragraph.
(2) The requirement to meet the genuine diversity of ownership condition at a time mentioned in sub-paragraph (1) applies only to times when the co-ownership authorised contractual scheme holds—
(a) the chargeable interest that was acquired by the scheme under the relevant transaction, or
(b) a chargeable interest that is derived from that interest.
(3) The amount chargeable is the amount that would have been chargeable in respect of the relevant transaction but for COACS seeding relief or, as the case may be, an appropriate proportion of the tax that would have been so chargeable.
(4) In sub-paragraphs (1) and (3) an “appropriate proportion” means an appropriate proportion having regard to the subject-matter of the relevant transaction and what is held by the scheme at the time when the genuine diversity of ownership condition is not met.
(5) For the purposes of this paragraph, the operator of a co-ownership authorised contractual scheme may apply to HMRC in writing for clearance that the scheme meets the genuine diversity of ownership condition, and where an application is made, HMRC must notify the scheme of its decision within 28 days of the receipt of all the information that is needed to make the decision.
(6) Any such clearance has effect only for so long as the information on which HMRC relies in granting clearance is materially unchanged and the scheme is operated in accordance with it (including, in particular, continuing to operate in accordance with condition C of the genuine diversity of ownership condition).
Genuine diversity of ownership condition
15 (1) This paragraph has effect for the purposes of paragraphs 14 and 18(4).
(2) A co-ownership authorised contractual scheme meets the genuine diversity of ownership condition at any time when it meets conditions A to C.
(3) Condition A is that the scheme documents, which are available to investors and to HMRC, contain—
(a) a statement specifying the intended categories of investor,
(b) an undertaking that units in the scheme will be widely available, and
(c) an undertaking that units in the scheme will be marketed and made available in accordance with the requirements of sub-paragraph (6)(a).
(4) Condition B is that—
(a) the specification of the intended categories of investor does not have a limiting or deterrent effect, and
(b) any other terms or conditions governing participation in the scheme do not have a limiting or deterrent effect.
(5) In sub-paragraph (4) “limiting or deterrent effect” means an effect which—
(a) limits investors to a limited number of specific persons or specific groups of connected persons, or
(b) deters a reasonable investor falling within one of (what are specified as) the intended categories of investor from investing in the scheme.
(6) Condition C is that—
(a) units in the scheme are marketed and made available—
(i) sufficiently widely to reach the intended categories of investors, and
(ii) in a manner appropriate to attract those categories of investors, and
(b) a person who falls within one of the intended categories of investors can, upon request to the operator of the scheme, obtain information about the scheme and acquire units in it.
(7) A scheme is not regarded as failing to meet condition C at any time by reason of the scheme's having, at that time, no capacity to receive additional investments, unless—
(a) the capacity of the scheme to receive investments in it is fixed by the scheme documents (or otherwise), and
(b) a pre-determined number of specific persons or specific groups of connected persons make investments in the scheme which collectively exhaust all, or substantially all, of that capacity.
(8) A co-ownership authorised contractual scheme also meets the genuine diversity of ownership condition at any time when—
(a) there is a feeder fund in relation to the scheme (see paragraph 20), and
(b) conditions A to C are met in relation to the scheme after taking into account—
(i) the scheme documents relating to the feeder fund, and
(ii) the intended investors in the feeder fund.
(9) Section 1122 of CTA 2010 (connected persons) has effect for the purposes of this paragraph.
Withdrawal of relief: portfolio test not met
16 (1) Where COACS seeding relief has been allowed in respect of a transaction, and the portfolio test is not met immediately before the end of the seeding period, the relief is withdrawn and tax is chargeable in accordance with sub-paragraph (2).
See sub-paragraph (7) for the meaning of “portfolio test”.
(2) The amount chargeable is the amount that would have been chargeable in respect of the transaction but for COACS seeding relief.
(3) Where COACS seeding relief has been allowed in respect of a transaction (“the relevant transaction”), and the portfolio test is met immediately before the end of the seeding period, but is not met—
(a) at a time in the control period, or
(b) at a time after the end of the control period, where the failure is pursuant to or in connection with arrangements made before the end of that period,
then, subject to sub-paragraph (4), the relief, or an appropriate proportion of it, is withdrawn, and tax is chargeable in accordance with sub-paragraph (5).
(4) The requirement to meet the portfolio test at a time mentioned in sub-paragraph (3)(a) or (b) applies only to times when the co-ownership authorised contractual scheme holds—
(a) the chargeable interest that was acquired by the scheme under the relevant transaction, or
(b) a chargeable interest that is derived from that interest.
(5) The amount chargeable is the amount that would have been chargeable in respect of the relevant transaction but for COACS seeding relief or, as the case may be, an appropriate proportion of the tax that would have been so chargeable.
(6) In sub-paragraphs (3) and (5) an “appropriate proportion” means an appropriate proportion having regard to the subject-matter of the relevant transaction and what is held by the scheme at the time when the portfolio test is not met.
(7) The portfolio test is a requirement that the scheme meets—
(a) the non-residential portfolio test (see sub-paragraph (8)), or
(b) the residential portfolio test (see sub-paragraph (9)).
(8) The “non-residential portfolio test” is met at any time if—
(a) the scheme holds at least 10 seeded interests at that time,
(b) so much of the total chargeable consideration as is attributable to all the seeded interests held by the scheme at that time (“the seeded portfolio”) is at least £100 million, and
(c) so much of the total chargeable consideration as is attributable to so many of those seeded interests as are interests in or over residential property (if any) does not exceed 10% of the seeded portfolio.
(9) The “residential portfolio test” is met at any time if—
(a) so much of the total chargeable consideration as is attributable to all the seeded interests held by the scheme at that time is at least £100 million, and
(b) at least 100 of the seeded interests held by the scheme at that time are interests in or over residential property.
(10) In sub-paragraphs (8) and (9)—
“seeded interest” means a chargeable interest acquired by the scheme in a transaction for which COACS seeding relief is allowed (whether or not relief is subsequently withdrawn to any extent) (a “seeding transaction”), and
“total chargeable consideration” means the total of the chargeable consideration for all seeding transactions.
(11) For the purposes of this paragraph, section 116(7) does not apply (modification of what counts as residential property).
Withdrawal of relief: units disposed of
17 (1) This paragraph applies where—
(a) a person (“V”) makes a relevant disposal of one or more units in a co-ownership authorised contractual scheme—
(i) at any time in the seeding period,
(ii) at any time in the control period, or
(iii) in pursuance of, or in connection with, arrangements made before the end of the control period, and
(b) there is, in relation to that disposal, a relevant seeding transaction (see sub-paragraph (6)).
(2) In respect of a transaction which is, in relation to the relevant disposal, a relevant seeding transaction—
(a) COACS seeding relief is withdrawn to the extent set out in this paragraph, and
(b) tax is chargeable in accordance with this paragraph.
(3) V's disposal of units in a scheme is a “relevant disposal” for the purposes of this paragraph if, in relation to the disposal, A exceeds B.
(4) In this paragraph—
“A” means—
where the value of V's investment in the scheme immediately before the disposal is equal to or greater than the total of the chargeable consideration for all relevant seeding transactions, the total of the chargeable consideration for all relevant seeding transactions, or
where the value of V's investment in the scheme immediately before the disposal is less than the total of the chargeable consideration for all relevant seeding transactions, the value of V's investment in the scheme immediately before the disposal, and
“B” means the value of V's investment in the scheme immediately after the disposal.
(5) The amount chargeable in respect of a relevant seeding transaction (“RST”) is—
C
CCRST
×
SDLT
where—
“C” means the difference between A and B;
“CCRST” means the total of the chargeable consideration for all relevant seeding transactions;
“SDLT” means the amount of tax that would have been chargeable in respect of RST but for COACS seeding relief, ignoring any amount of tax that has been charged under this paragraph in respect of RST in relation to an earlier disposal of units by V.
(6) In this paragraph—
“group company” means (where V is a company) a company which is a member of the same group of companies as V for the purposes mentioned in paragraph 1(2) of Schedule 7 (group relief);
“relevant seeding transaction”, in relation to a disposal of units by V in a co-ownership authorised contractual scheme, means a seeding transaction—
the effective date of which is, or is before, the date of the disposal,
in which that scheme is the purchaser, and
in which a vendor is—
V, or
(where V is a company) a company which is a group company at the time of the disposal;
“seeding transaction” means a transaction in respect of which COACS seeding relief is allowed (whether or not relief is subsequently withdrawn to any extent);
“the value of V's investment in the scheme” at a particular time means the market value of all units in the co-ownership authorised contractual scheme held at that time by—
V, and
(where V is a company) a company which—
is a group company at that time, and
before that time, has been a vendor in one or more seeding transactions in which the scheme was the purchaser.
(7) For the purposes of this paragraph, the “market value” on a particular date of units in the scheme is an amount equal to the buying price (that is, the lower price) published by the operator on that date (or, if no such price is published on that date, on the latest date before).
Withdrawal of relief: dwelling occupied by non-qualifying individual
18 (1) This paragraph applies to a transaction (“the relevant transaction”) if—
(a) COACS seeding relief has been allowed in respect of the transaction,
(b) the main subject-matter of the transaction consists of a chargeable interest in or over land which is or includes a dwelling, and
(c) a non-qualifying individual (see paragraph 19) is permitted to occupy the dwelling at any time on or after the effective date of the transaction.
The dwelling which a non-qualifying individual is permitted to occupy is referred to as “the disqualifying dwelling”.
(2) The relief, or an appropriate proportion of it, is withdrawn, and tax is chargeable in accordance with this paragraph.
This is subject to sub-paragraphs (3) and (4).
(3) Relief is withdrawn only if, at the time a non-qualifying individual is permitted to occupy the disqualifying dwelling, the co-ownership authorised contractual scheme holds a chargeable interest in or over that dwelling—
(a) that was acquired by the scheme under the relevant transaction, or
(b) that is derived from an interest so acquired.
(4) Where a non-qualifying individual is first permitted to occupy the disqualifying dwelling at a time after the end of the control period, relief is withdrawn only if, at that time, the scheme fails to meet the genuine diversity of ownership condition (see paragraph 15).
(5) The amount chargeable is the amount that would have been chargeable in respect of the relevant transaction but for COACS seeding relief or, as the case may be, an appropriate proportion of the tax that would have been so chargeable.
(6) In sub-paragraphs (2) and (5), an “appropriate proportion” means an appropriate proportion having regard to the extent to which the subject-matter of the relevant transaction was an interest in or over land other than the disqualifying dwelling.
19 (1) In paragraph 18 “non-qualifying individual”, in relation to a land transaction and a co-ownership authorised contractual scheme, means any of the following—
(a) an individual who is a major participant in the scheme;
(b) an individual who is connected with a major participant in the scheme;
(c) an individual who is connected with the operator of the scheme (see section 102A) or the depositary of the scheme;
(d) a relevant settlor;
(e) the spouse or civil partner of an individual falling within paragraph (b), (c) or (d);
(f) a relative of an individual falling within paragraph (b), (c) or (d), or the spouse or civil partner of a relative of an individual falling within paragraph (b), (c) or (d);
(g) a relative of the spouse or civil partner of an individual falling within paragraph (b), (c) or (d);
(h) the spouse or civil partner of an individual falling within paragraph (g).
(2) An individual who participates in a scheme is a “major participant” in it if the individual—
(a) is entitled to a share of at least 50% either of all the profits or income arising from the scheme or of any profits or income arising from it that may be distributed to participants, or
(b) would in the event of the winding up of the scheme be entitled to 50% or more of the assets of the scheme that would then be available for distribution among the participants.
(3) The reference in sub-paragraph (2)(a) to profits or income arising from the scheme is to profits or income arising from the acquisition, holding, management or disposal of the property subject to the scheme.
(4) In this paragraph—
“depositary”, in relation to a co-ownership authorised contractual scheme, means the person to whom the property subject to the scheme is entrusted for safekeeping;
“relative” means brother, sister, ancestor or lineal descendant;
“relevant settlor”, in relation to a land transaction, means an individual who is a settlor in relation to a relevant settlement (as defined in sub-paragraph (5));
“settlement” has the same meaning as in Chapter 5 of Part 5 of ITTOIA 2005 (see section 620 of that Act).
(5) Where a person, in the capacity of trustee of a settlement, is connected with a person who is the purchaser under a land transaction, that settlement is a “relevant settlement” in relation to the transaction.
(6) In sub-paragraph (5) “trustee” is to be read in accordance with section 1123(3) of CTA 2010 (“connected” persons: supplementary).
(7) Section 1122 of CTA 2010 (connected persons) has effect for the purposes of this paragraph, but for those purposes, subsections (7) and (8) of that section (application of rules about connected persons to partnerships) are to be disregarded.
PART 3 Interpretation
“Feeder fund” and “units”
20 In this Schedule—
a “feeder fund” of a property AIF means a unit trust scheme—
one of the main objects of which is investment in the property AIF, and
which is managed by the same person as the property AIF;
a “feeder fund” of a co-ownership authorised contractual scheme means an open-ended investment company, an offshore fund or a unit trust scheme—
one of the main objects of which is investment in the co-ownership authorised contractual scheme, and
which is managed by the same person as the scheme;
“units in the property AIF” means—
units in the property AIF (and, where the property AIF is a part of an umbrella company as mentioned in regulation 7(1) and (2) of the AIF (Tax) Regulations, this means units in the separate pool to which that part of the umbrella company relates), and
units in a feeder fund of the property AIF;
“units in the co-ownership authorised contractual scheme” means—
units in the co-ownership authorised contractual scheme (and, where the co-ownership authorised contractual scheme is a sub-scheme of an umbrella COACS (see section 102A(3) and (4)), this means units in the separate pool to which that sub-scheme relates), and
units in a feeder fund of the scheme;
“units” means the rights or interests (however described) of the participants in the property AIF or the co-ownership authorised contractual scheme.
Interpretation of other terms
21 In this Schedule—
the “AIF (Tax) Regulations” means the Authorised Investment Funds (Tax) Regulations 2006 (S.I. 2006/964);
“arrangements” includes any scheme, agreement or understanding, whether or not legally enforceable;
“attributable” means attributable on a just and reasonable basis;
“authorised corporate director”, in relation to a property AIF, has the same meaning as in regulation 8 of the AIF (Tax) Regulations;
“COACS seeding relief” means relief under paragraph 10;
“control period” means the period of 3 years beginning with the day following the last day of the seeding period;
“co-ownership authorised contractual scheme” is to be construed in accordance with section 102A (see in particular subsections (2), (5), (7) and (8) of that section);
“CTA 2010” means the Corporation Tax Act 2010;
“FSMA 2000” means the Financial Services and Markets Act 2000;
the “genuine diversity of ownership condition”, in relation to a co-ownership authorised contractual scheme, has the meaning given by paragraph 15;
“ITTOIA 2005” means the Income Tax (Trading and Other Income) Act 2005;
“non-qualifying individual” has the meaning given by paragraph 9 (in relation to a property AIF) and paragraph 19 (in relation to a co-ownership authorised contractual scheme);
“offshore fund” has the meaning given by section 355 of the Taxation (International and Other Provisions) Act 2010;
“open-ended investment company” has the meaning given by section 236 of FSMA 2000;
“operator”, in relation to a co-ownership authorised contractual scheme, has the same meaning as in section 102A;
“PAIF seeding relief” means relief under paragraph 1;
“participant” is to be read in accordance with section 235 of FSMA 2000;
“portfolio test” has the meaning given by paragraph 6(7) (in relation to a property AIF) and paragraph 16(7) (in relation to a co-ownership authorised contractual scheme);
“property AIF” is to be construed in accordance with paragraph 2 (see in particular sub-paragraphs (2), (3) and (5) of that paragraph);
“relevant disposal” has the meaning given by paragraph 7(3) (in relation to a property AIF) and paragraph 17(3) (in relation to a co-ownership authorised contractual scheme);
“seeding period” has the meaning given by paragraph 3 (in relation to a property AIF) and paragraph 11 (in relation to a co-ownership authorised contractual scheme);
“unit trust scheme” has the meaning given by section 237(1) of FSMA 2000.
PART 3 Consequential amendments
5 FA 2003 is amended in accordance with this Part.
6 In section 75C (anti-avoidance: supplemental), in subsection (4), after “Schedule 6A” insert “ , 7A ”.
7 (1) Section 81 (further return where relief withdrawn) is amended as follows.
(2) In subsection (1)—
(a) omit “or” at the end of paragraph (b), and
(b) after paragraph (b) insert—
(ba) paragraph 5, 7 or 8 of Schedule 7A (PAIF seeding relief),
(bb) paragraph 13, 17 or 18 of Schedule 7A (COACS seeding relief), or
.
(3) In subsection (1A), after “transactions)” insert “ , or under paragraph 6 of Schedule 7A (PAIF seeding relief) or paragraph 14 or 16 of Schedule 7A (COACS seeding relief), ”.
(4) In subsection (1B), after paragraph (e) insert—
(f) in the case of relief under paragraph 6 of Schedule 7A (PAIF seeding relief: portfolio test)—
(i) where relief is withdrawn under paragraph 6(1), the last day of the seeding period (see paragraph 3 of that Schedule), or
(ii) where relief is withdrawn under paragraph 6(3), the first time mentioned in paragraph 6(3)(a) or (b) at which the portfolio test was not met;
(g) in the case of relief under paragraph 14 of Schedule 7A (COACS seeding relief: genuine diversity of ownership condition), the first time mentioned in paragraph 14(1) at which the genuine diversity of ownership condition was not met;
(h) in the case of relief under paragraph 16 of Schedule 7A (COACS seeding relief: portfolio test)—
(i) where relief is withdrawn under paragraph 16(1), the last day of the seeding period (see paragraph 11 of that Schedule), or
(ii) where relief is withdrawn under paragraph 16(3), the first time mentioned in paragraph 16(3)(a) or (b) at which the portfolio test was not met.
(5) In subsection (4), after paragraph (b) insert—
(ba) in relation to the withdrawal of PAIF seeding relief—
(i) the purchaser ceasing to be a property AIF as mentioned in paragraph 5 of Schedule 7A,
(ii) a person making a relevant disposal of units as mentioned in paragraph 7 of that Schedule, or
(iii) the grant of permission to a non-qualifying individual to occupy a dwelling as mentioned in paragraph 8 of that Schedule;
(bb) in relation to the withdrawal of COACS seeding relief—
(i) the purchaser ceasing to be a co-ownership authorised contractual scheme as mentioned in paragraph 13 of Schedule 7A,
(ii) a person making a relevant disposal of units as mentioned in paragraph 17 of that Schedule, or
(iii) the grant of permission to a non-qualifying individual to occupy a dwelling as mentioned in paragraph 18 of that Schedule;
.
8 In section 86 (payment of tax), in subsection (2)—
(a) omit “or” at the end of paragraph (b), and
(b) after paragraph (b) insert—
(ba) Part 1 of Schedule 7A (PAIF seeding relief),
(bb) Part 2 of Schedule 7A (COACS seeding relief), or
.
9 (1) Section 87 (interest on unpaid tax) is amended as follows.
(2) In subsection (3)—
(a) in paragraph (a)—
(i) omit “or” at the end of sub-paragraph (ii), and
(ii) after sub-paragraph (ii) insert—
(iia) paragraph 5, 7 or 8 of Schedule 7A (PAIF seeding relief),
(iib) paragraph 13, 17 or 18 of Schedule 7A (COACS seeding relief), or
;
(b) after paragraph (aza) insert—
(azb) in the case of an amount payable under paragraph 6(3) of Schedule 7A (PAIF seeding relief: portfolio test), the first time mentioned in paragraph 6(3)(a) or (b) at which the portfolio test was not met;
(azc) in the case of an amount payable under paragraph 14(1) of Schedule 7A (COACS seeding relief: genuine diversity of ownership condition) because the genuine diversity of ownership condition was not met at a time mentioned in paragraph 14(1)(b) or (c), the first time mentioned in paragraph 14(1)(b) or (c) at which that condition was not met;
(azd) in the case of an amount payable under paragraph 16(3) of Schedule 7A (COACS seeding relief: portfolio test), the first time mentioned in paragraph 16(3)(a) or (b) at which the portfolio test was not met;
.
(3) In subsection (4), for “means—” to the end substitute “ has the same meaning as in section 81(4). ”
10 In section 118 (market value)—
(a) the existing text becomes subsection (1), and
(b) after subsection (1) insert—
(2) This is subject to paragraphs 7(7) and 17(7) of Schedule 7A (which define “market value” for certain purposes of PAIF seeding relief and COACS seeding relief).
11 In section 122 (index of defined expressions), at the appropriate place insert—
COACS seeding relief | Schedule 7A, paragraph 10(1)
co-ownership authorised contractual scheme | section 102A
operator (in relation to a co-ownership authorised contractual scheme) | section 102A
PAIF seeding relief | Schedule 7A, paragraph 1(1)
.
12 In Schedule 4A (SDLT: higher rate for certain transactions), in paragraph 2(6)—
(a) omit “and” at the end of paragraph (d),
(b) after paragraph (d) insert—
(da) Schedule 7A (PAIF seeding relief and COACS seeding relief), and
, and
(c) in paragraph (e), for “(d)” substitute “ (da) ”.
13 In Schedule 6B (transfers involving multiple dwellings), in paragraph 2(4)(b), after “Schedule 7” insert “ , Schedule 7A ”.
14 (1) In Schedule 17A (further provisions relating to leases), paragraph 11 (cases where assignment of lease treated as grant of lease) is amended as follows.
(2) In sub-paragraph (3), after paragraph (b) insert—
(ba) Part 1 or 2 of Schedule 7A (PAIF seeding relief and COACS seeding relief);
.
(3) In sub-paragraph (4), after “acquisition relief” insert “ , PAIF seeding relief, COACS seeding relief ”.
(4) In sub-paragraph (5), after paragraph (b) insert—
(ba) in relation to the withdrawal of PAIF seeding relief—
(i) the purchaser ceasing to be a property AIF as mentioned in paragraph 5 of Schedule 7A,
(ii) a person making a relevant disposal of units as mentioned in paragraph 7 of that Schedule, or
(iii) the grant of permission to a non-qualifying individual to occupy a dwelling as mentioned in paragraph 8 of that Schedule;
(bb) in relation to the withdrawal of COACS seeding relief—
(i) the purchaser ceasing to be a co-ownership authorised contractual scheme as mentioned in paragraph 13 of Schedule 7A,
(ii) a person making a relevant disposal of units as mentioned in paragraph 17 of that Schedule, or
(iii) the grant of permission to a non-qualifying individual to occupy a dwelling as mentioned in paragraph 18 of that Schedule;
.
(5) After sub-paragraph (5) insert—
(6) This paragraph also does not apply where the relief in question is PAIF seeding relief or COACS seeding relief and is withdrawn as a result of a requirement not being met at a time which is before the effective date of the assignment of the lease.
(7) For the purposes of sub-paragraph (6), the reference to a requirement not being met is a reference to—
(a) in relation to the withdrawal of PAIF seeding relief under paragraph 6 of Schedule 7A, the portfolio test not being met (see paragraph 6(7));
(b) in relation to the withdrawal of COACS seeding relief under paragraph 14 of Schedule 7A, the genuine diversity of ownership condition not being met (see paragraph 15);
(c) in relation to the withdrawal of COACS seeding relief under paragraph 16 of Schedule 7A, the portfolio test not being met (see paragraph 16(7)).
PART 4 Commencement
15 (1) The amendments made by Parts 2 and 3 of this Schedule have effect in relation to any land transaction of which the effective date is, or is after, the date on which this Act is passed.
(2) But those amendments do not have effect in relation to a transaction if—
(a) the transaction is effected in pursuance of a contract entered into and substantially performed before the date on which this Act is passed, or
(b) the transaction is effected in pursuance of a contract entered into before that date and is not excluded by sub-paragraph (3).
(3) A transaction effected in pursuance of a contract entered into before the date on which this Act is passed is excluded by this sub-paragraph if—
(a) there is any variation of the contract, or assignment of rights under the contract, on or after that date,
(b) the transaction is effected in consequence of the exercise on or after that date of any option, right of pre-emption or similar right, or
(c) on or after that date there is an assignment, subsale or other transaction relating to the whole or part of the subject-matter of the contract as a result of which a person other than the purchaser under the contract becomes entitled to call for a conveyance.
(4) In this paragraph—
“purchaser” has the same meaning as in Part 4 of FA 2003 (see section 43(4) of that Act);
“substantially performed”, in relation to a contract, has the same meaning as in that Part (see section 44(5) of that Act).
Section 153
PART 1 Aqua methanol
Introductory
1 HODA 1979 is amended as follows.
Definition
2 After section 2AB insert—
Aqua methanol
2AC In this Act “aqua methanol” means a liquid fuel which meets each of the following conditions—
(a) the amount of water it contains is not less than 4.7 per cent and not more than 5.3 per cent by volume,
(b) the amount of methanol it contains is not less than 96 per cent by volume of the remainder of the substance, and
(c) at a temperature of 15°C and under a pressure of 1013.25 millibars, it has a density of not less than 0.81 g/ml and not more than 0.82 g/ml.
3 In section 2A (power to amend definitions), in subsection (1), after paragraph (b) insert—
(ba) aqua methanol;
.
Charging of excise duty
4 After section 6AF insert—
Excise duty on aqua methanol
6AG (1) A duty of excise shall be charged on the setting aside for a chargeable use by any person, or (where it has not already been charged under this section) on the chargeable use by any person, of aqua methanol.
(2) In subsection (1) “chargeable use” means use—
(a) as fuel for any engine, motor or other machinery, or
(b) as an additive or extender in any substance so used.
(3) The rate of duty under this section is—
(a) in the case of a chargeable use within subsection (2)(a), £0.079 a litre;
(b) in the case of a chargeable use within subsection (2)(b), the rate prescribed by order made by the Treasury.
(4) In exercising their power under subsection (3)(b), the Treasury shall so far as practicable secure that aqua methanol set aside for use or used as an additive or extender in any substance is charged with duty at the same rate as the substance in which it is an additive or extender.
(5) The power of the Treasury to make an order under this section shall be exercisable by statutory instrument subject to annulment in pursuance of a resolution of the House of Commons.
(6) An order under this section—
(a) may make different provision for different cases, and
(b) may prescribe the rate of duty under subsection (3)(b) by reference to the rate of duty under this Act in respect of any other substance.
Application to aqua methanol of provisions relating to hydrocarbon oil
6AH (1) The Commissioners may by regulations provide for—
(a) references in this Act, or specified references in this Act, to hydrocarbon oil to be construed as including references to aqua methanol;
(b) references in this Act, or specified references in this Act, to duty on hydrocarbon oil to be construed as including references to duty under section 6AG above;
(c) aqua methanol to be treated for the purposes of such of the following provisions of this Act as may be specified as if it fell within a specified description of hydrocarbon oil.
(2) Where the effect of provision made under subsection (1) above is to extend any power to make regulations, provision made in exercise of the power as extended may be contained in the same statutory instrument as the provision extending the power.
(3) In this section “specified” means specified by regulations under this section.
(4) Regulations under this section may make different provision for different cases.
(5) Paragraph (b) of subsection (1) above shall not be taken as prejudicing the generality of paragraph (a) of that subsection.
5 In section 6A (fuel substitutes), in subsection (1)—
(a) omit the “or” after paragraph (d), and
(b) after paragraph (e) insert
, or
(f) aqua methanol.
Mixing of aqua methanol
6 (1) For the italic heading before section 20A substitute “ Mixing ”.
(2) After section 20AAB insert—
Prohibition on mixing of aqua methanol
20AAC (1) Aqua methanol on which duty under section 6AG(3)(a) of this Act has been charged must not be mixed with any relevant substance.
(2) In subsection (1) “relevant substance” means biodiesel, bioethanol, bioblend, bioethanol blend or hydrocarbon oil.
(3) A person commits an offence under this subsection if—
(a) the person intentionally uses aqua methanol in contravention of subsection (1) above, or
(b) the person supplies aqua methanol, intending that it will be used in contravention of subsection (1) above.
(4) A person guilty of an offence under subsection (3) above shall be liable—
(a) on summary conviction in England and Wales—
(i) to imprisonment for a term not exceeding 12 months (or 6 months, if the offence was committed before the commencement of section 154(1) of the Criminal Justice Act 2003), or
(ii) to a fine not exceeding £20,000 or (if greater) 3 times the value of the aqua methanol in question,
or both;
(b) on summary conviction in Scotland—
(i) to imprisonment for a term not exceeding 12 months, or
(ii) to a fine not exceeding the statutory maximum or (if greater) 3 times the value of the aqua methanol in question,
or both;
(c) on summary conviction in Northern Ireland—
(i) to imprisonment for a term not exceeding 6 months, or
(ii) to a fine not exceeding the statutory maximum or (if greater) 3 times the value of the aqua methanol in question,
or both;
(d) on conviction on indictment, to imprisonment for a term not exceeding 7 years or a fine, or both.
(5) Any aqua methanol, or any mixture containing aqua methanol, in respect of which an offence under subsection (3) above has been committed shall be liable to forfeiture.
Mixing of aqua methanol in contravention of prohibition: adjustment of duty
20AAD (1) A duty of excise shall be charged on a mixture which is produced by mixing aqua methanol on which duty under section 6AG(3)(a) of this Act has been charged with a relevant substance.
(2) In subsection (1) “relevant substance” means biodiesel, bioethanol, bioblend, bioethanol blend or hydrocarbon oil.
(3) The rate of duty on a mixture under subsection (1) shall be the rate of duty specified in section 6(1A)(c) (general rate for heavy oil).
(4) The person liable to pay duty charged under this section on production of a mixture is the person producing the mixture.
(5) Where it appears to the Commissioners—
(a) that a person (“P”) has produced a mixture on which duty is charged under this section, and
(b) that P is the person liable to pay the duty,
they may assess the amount of duty due from P to the best of their judgment and notify that amount to P or P's representative.
(6) An assessment under subsection (5) above shall be treated as if it were an assessment under section 12(1) of the Finance Act 1994.
(7) Where duty under a provision of this Act has been paid on an ingredient of a mixture, the duty charged under this section shall be reduced by the amount of any duty which the Commissioners are satisfied has been paid on the ingredient (but not to a negative amount).
(8) The Commissioners may exempt a person from liability to pay duty under this section in respect of production of a mixture of a kind described in subsection (1) if satisfied that—
(a) the liability was incurred accidentally, and
(b) in the circumstances the person should be exempted.
Powers to allow reliefs
.
Enforcement
7 (1) Section 22 (prohibition on use of petrol substitutes on which duty has not been paid) is amended as follows.
(2) After subsection (1AB) insert—
(1AC) Where any person—
(a) puts any aqua methanol to a chargeable use (within the meaning of section 6AG above), and
(b) knows or has reasonable cause to believe that there is duty charged under section 6AG above on that aqua methanol which has not been paid and is not lawfully deferred,
his putting the aqua methanol to that use shall attract a penalty under section 9 of the Finance Act 1994 (civil penalties), and any goods in respect of which a person contravenes this section shall be liable to forfeiture.
(3) In subsection (1A), for “or (1AB)” substitute “ , (1AB) or (1AC) ”.
(4) For the heading substitute “ Prohibition on use of fuel substitutes on which duty has not been paid ”.
Consequential amendments
8 In section 23C (warehousing), in subsection (4), after paragraph (d) insert—
(da) aqua methanol,
.
9 In section 27(1) (interpretation), before the definition of “aviation gasoline” insert—
“aqua methanol” has the meaning given by section 2AC above;
.
10 In section 16 of FA 1994 (appeals to a tribunal), in subsection (6)(c), before “section 23(1)” insert “ or (1AC) ”.
11 In paragraph 3 of Schedule 41 to FA 2008 (penalties for putting product to use that attracts higher duty), in the Table in sub-paragraph (1), at the appropriate place insert—
HODA 1979 section 20AAD(5) | Mixtures containing aqua methanol.
PART 2 Hydrocarbon oils: miscellaneous amendments
HODA 1979
12 In section 20AAA of HODA 1979 (mixing of rebated oil), in subsection (4)(a), for “section 6A(1A)(c)” substitute “ section 6(1A)(c) ”.
FA 1994
13 In section 16 of FA 1994 (appeals to a tribunal), in subsection (6)(c), after “section 22(1)” insert “ (1AA), (1AB) ”.
PART 3 Commencement
14 The amendments made by this Schedule come into force—
(a) so far as they confer a power to make regulations or an order, on the day on which this Act is passed, and
(b) for all other purposes, on 14 November 2016.
Section 159
PART 1 Contents of Schedule
1 In this Schedule—
(a) Part 2 provides for HMRC to give warning notices to persons who incur relevant defeats and includes—
(i) provision about the duration of warning periods under warning notices (see paragraph 3), and
(ii) definitions of “relevant defeat” and other key terms;
(b) Part 3 contains provisions about persons to whom a warning notice has been given, and in particular—
(i) imposes a duty to give information notices, and
(ii) allows the Commissioners to publish information about such persons in certain cases involving repeated relevant defeats;
(c) Part 4 contains provision about the restriction of reliefs;
(d) Part 5 imposes liability to penalties on persons who incur relevant defeats in relation to arrangements used in warning periods;
(e) Part 6 contains provisions about corporate groups, associated persons and partnerships;
(f) Part 7 contains definitions and other supplementary provisions.
PART 2 Entry into the regime and basic concepts
Duty to give warning notice
2 (1) This paragraph applies where a person incurs a relevant defeat in relation to any arrangements.
(2) HMRC must give the person a written notice (a “warning notice”).
(3) The notice must be given within the period of 90 days beginning with the day on which the relevant defeat is incurred.
(4) The notice must—
(a) set out when the warning period begins and ends (see paragraph 3),
(b) specify the relevant defeat to which the notice relates, and
(c) explain the effect of paragraphs 3 and 17 to 46.
(5) A warning notice given by virtue of paragraph 49 must also explain the effect of paragraph 51 (information in certain cases involving partnerships).
(6) In this Schedule “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).
(7) For the meaning of “relevant defeat” and provision about when a relevant defeat is incurred see paragraph 11.
Warning period
3 (1) If a person is given a warning notice with respect to a relevant defeat (and sub-paragraph (2) does not apply) the period of 5 years beginning with the day after the day on which the notice is given is a “warning period” in relation to that person.
(2) If a person incurs a relevant defeat in relation to arrangements during a period which is a warning period in relation to that person, the warning period is extended to the end of the 5 years beginning with the day after the day on which the relevant defeat occurs.
(3) In relation to a warning period which has been extended under this Schedule, references in this Schedule (including this paragraph) to the warning period are to be read as references to the warning period as extended.
Meaning of “tax”
4 (1) In this Schedule “tax” includes any of the following taxes—
(a) income tax,
(b) corporation tax, including any amount chargeable as if it were corporation tax or treated as if it were corporation tax,
(c) capital gains tax,
(d) petroleum revenue tax,
(e) diverted profits tax,
(f) apprenticeship levy,
(g) inheritance tax,
(h) stamp duty land tax,
(i) annual tax on enveloped dwellings,
(j) VAT and indirect taxes, and
(k) national insurance contributions.
(2) For the purposes of this Schedule “indirect tax” means any of the following—
insurance premium tax
general betting duty
pool betting duty
remote gaming duty
machine games duty
gaming duty
lottery duty
...
air passenger duty
hydrocarbon oils duty
tobacco products duty
duties on spirits, beer, wine, made-wine and cider
soft drinks industry levy
aggregates levy
landfill tax
plastic packaging tax
climate change levy
carbon border adjustment mechanism
customs duties.
Meaning of “tax advantage” in relation to VAT
5 (1) In this Schedule “tax advantage”, in relation to VAT, is to be read in accordance with sub-paragraphs (2) to (4).
(2) A taxable person obtains a tax advantage if—
(a) in any prescribed accounting period, the amount by which the output tax accounted for by the person exceeds the input tax deducted by the person is less than it would otherwise be,
(b) the person obtains a VAT credit when the person would not otherwise do so, or obtains a larger VAT credit or obtains a VAT credit earlier than would otherwise be the case,
(c) in a case where the person recovers input tax as a recipient of a supply before the supplier accounts for the output tax, the period between the time when the input tax is recovered and the time when the output tax is accounted for is greater than would otherwise be the case, or
(d) in any prescribed accounting period, the amount of the person's non-deductible tax is less than it would otherwise be.
(3) A person who is not a taxable person obtains a tax advantage if the person's non-refundable tax is less than it otherwise would be.
(4) In sub-paragraph (3) “non-refundable tax”, in relation to a person who is not a taxable person, means—
(a) VAT on the supply to the person of any goods or services,
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . and
(c) VAT paid or payable by the person on the importation of any goods ...,
but excluding (in each case) any VAT in respect of which the person is entitled to a refund from the Commissioners by virtue of any provision of VATA 1994.
Meaning of “non-deductible tax”
6 (1) In this Schedule “non-deductible tax”, in relation to a taxable person, means—
(a) input tax for which the person is not entitled to credit under section 25 of VATA 1994, and
(b) any VAT incurred by the person which is not input tax and in respect of which the person is not entitled to a refund from the Commissioners by virtue of any provision of VATA 1994.
(2) For the purposes of sub-paragraph (1)(b), the VAT “incurred” by a taxable person is—
(a) VAT on the supply to the person of any goods or services,
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . and
(c) VAT paid or payable by the person on the importation of any goods ....
“Tax advantage”: other taxes
7 In relation to taxes other than VAT, “tax advantage” includes—
(a) relief or increased relief from tax,
(b) repayment or increased repayment of tax,
(c) receipt, or advancement of a receipt, of a tax credit,
(d) avoidance or reduction of a charge to tax, an assessment of tax or a liability to pay tax,
(e) avoidance of a possible assessment to tax or liability to pay tax,
(f) deferral of a payment of tax or advancement of a repayment of tax, and
(g) avoidance of an obligation to deduct or account for tax.
“DOTAS arrangements”
8 (1) For the purposes of this Schedule arrangements are “DOTAS arrangements” at any time if they are notifiable arrangements at the time in question and 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.
(4) In this paragraph “notifiable arrangements” has the same meaning as in Part 7 of FA 2004.
“Disclosable Schedule 11A VAT arrangements”
8A (1) For the purposes of this Schedule arrangements are “disclosable VAT arrangements” at any time if at that time sub-paragraph (2) or (3) applies.
(2) This sub-paragraph applies if the arrangements are disclosable Schedule 11A VAT arrangements (see paragraph 9).
(3) This paragraph applies if—
(a) the arrangements are notifiable arrangements for the purposes of Schedule 17 to FA 2017,
(b) the main benefit, or one of the main benefits that might be expected to arise from the arrangements is the obtaining of a tax advantage in relation to VAT (within the meaning of paragraph 6 of that Schedule), and
(c) a person—
(i) has provided information about the arrangements under paragraph 12(1), 17(2) or 18(2) of that Schedule, or
(ii) has failed to comply with any of those provisions in relation to the arrangements.
(4) But for the purposes of this Schedule arrangements in respect of which HMRC have given notice under paragraph 23(6) of Schedule 17 (notice that promoters not under duty to notify client of reference number) are not to be regarded as “disclosable VAT arrangements”.
(5) For the purposes of sub-paragraph (3)(c) a person who would be required to provide information under paragraph 12(1) of Schedule 17 to FA 2017—
(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).
9 For the purposes of paragraph 8A 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).
“Disclosable indirect tax arrangements”
9A (1) For the purposes of this Schedule arrangements are “disclosable indirect tax arrangements” at any time if at that time—
(a) the arrangements are notifiable arrangements for the purposes of Schedule 17 to FA 2017,
(b) the main benefit, or one of the main benefits that might be expected to arise from the arrangements is the obtaining of a tax advantage in relation to an indirect tax other than VAT (within the meaning of paragraph 7 of that Schedule), and
(c) a person—
(i) has provided information about the arrangements under paragraph 12(1), 17(2) or 18(2) of that Schedule, or
(ii) has failed to comply with any of those provisions in relation to the arrangements.
(2) But for the purposes of this Schedule arrangements in respect of which HMRC have given notice under paragraph 23(6) of Schedule 17 to FA 2016 (notice that promoters not under duty to notify client of reference number) are not to be regarded as “disclosable indirect tax arrangements”.
(3) For the purposes of sub-paragraph (1)(c) a person who would be required to provide information under paragraph 12(1) of Schedule 17—
(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).
Paragraphs 8 to 9A: “failure to comply”
10 (1) A person “fails to comply” with any provision mentioned in paragraph 8(1) , 8A(2)(c), 9(a) or 9A(1)(c) 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.
(6) In this paragraph “the tribunal” means the First-tier tribunal or, where determined by or under Tribunal Procedure Rules, the Upper Tribunal.
“Relevant defeat”
11 (1) A person (“P”) incurs a “relevant defeat” in relation to arrangements if any of Conditions A to F is met in relation to P and the arrangements.
(2) The relevant defeat is incurred when the condition in question is first met.
Condition A
12 (1) Condition A is that—
(a) P has been given a notice under paragraph 12 of Schedule 43 to FA 2013 (general anti-abuse rule: notice of final decision), paragraph 8 or 9 of Schedule 43A to that Act (pooling and binding of arrangements: notice of final decision) or paragraph 8 of Schedule 43B to that Act (generic referrals: notice of final decision) stating that a tax advantage arising from the arrangements is to be counteracted,
(b) that tax advantage has been counteracted under section 209 of FA 2013, and
(c) the counteraction is final.
(2) For the purposes of this paragraph the counteraction of a tax advantage is “final” when the adjustments made to effect the counteraction, and any amounts arising as a result of those adjustments, can no longer be varied, on appeal or otherwise.
Condition B
13 (1) Condition B is that (in a case not falling within Condition A above) a follower notice has been given to P by reference to the arrangements (and not withdrawn) and—
(a) the necessary corrective action for the purposes of section 208 of FA 2014 has been taken in respect of the denied advantage, or
(b) the denied advantage has been counteracted otherwise than as mentioned in paragraph (a) and the counteraction of the denied advantage is final.
(2) In sub-paragraph (1) the reference to giving a follower notice to P includes a reference to giving a partnership follower notice in respect of a partnership return in relation to which P is a relevant partner (as defined in paragraph 2(5) of Schedule 31 to FA 2014).
(3) For the purposes of this paragraph it does not matter whether the denied advantage has been dealt with—
(a) wholly as mentioned in one or other of paragraphs (a) and (b) of sub-paragraph (1), or
(b) partly as mentioned in one and partly as mentioned in the other of those paragraphs.
(4) In this paragraph “the denied advantage” has the same meaning as in Chapter 2 of Part 4 of FA 2014 (see section 208(3) of and paragraph 4(3) of Schedule 31 to that Act).
(5) For the purposes of this paragraph the counteraction of a tax advantage is “final” when the adjustments made to effect the counteraction, and any amounts arising as a result of those adjustments, can no longer be varied, on appeal or otherwise.
(6) In this Schedule “follower notice” means a follower notice under Chapter 2 of Part 4 of FA 2014.
(7) For the purposes of this paragraph a partnership follower notice is given “in respect of” the partnership return mentioned in paragraph (a) or (b) of paragraph 2(2) of Schedule 31 to FA 2014.
Condition C
14 (1) Condition C is that (in a case not falling within Condition A or B)—
(a) the arrangements are DOTAS arrangements,
(b) P has relied on the arrangements (see sub-paragraph (2))—
(c) the arrangements have been counteracted, and
(d) the counteraction is final.
(2) For the purposes of sub-paragraph (1), P “relies on the arrangements” if—
(a) P makes a return, claim or election, or a partnership return is made, on the basis that a relevant tax advantage arises, or
(b) P fails to discharge a relevant obligation (“the disputed obligation”) and there is reason to believe that P's failure to discharge that obligation is connected with the arrangements.
(3) For the purposes of sub-paragraph (2) “relevant tax advantage” means a tax advantage which the arrangements might be expected to enable P to obtain.
(4) For the purposes of sub-paragraph (2) an obligation is a “relevant obligation” if the arrangements might be expected to have the result that the obligation does not arise.
(5) For the purposes of this paragraph the arrangements are “counteracted” if—
(a) adjustments, other than taxpayer emendations, are made in respect of P's tax position—
(i) on the basis that the whole or part of the relevant tax advantage mentioned in sub-paragraph (2)(a) does not arise, or
(ii) on the basis that the disputed obligation does (or did) arise, or
(b) an assessment to tax other than a self-assessment is made, or any other action is taken by HMRC, on the basis mentioned in paragraph (a)(i) or (ii) (otherwise than by way of an adjustment).
(6) For the purposes of this paragraph a counteraction is “final” when the assessment, adjustments or action in question, and any amounts arising from the assessment, adjustments or action, can no longer be varied, on appeal or otherwise.
(7) For the purposes of sub-paragraph (1) the time at which it falls to be determined whether or not the arrangements are DOTAS arrangements is when the counteraction becomes final.
(8) The following are “taxpayer emendations” for the purposes of sub-paragraph (5)—
(a) an adjustment made by P at a time when P had no reason to believe that HMRC had begun or were about to begin enquiries into P's affairs relating to the tax in question;
(b) an adjustment (by way of an assessment or otherwise) made by HMRC with respect to P's tax position as a result of a disclosure made by P which meets the conditions in sub-paragraph (9).
For the purposes of paragraph (a) a payment in respect of a liability to pay national insurance contributions is not an adjustment unless it is a payment in full.
(9) The conditions are that the disclosure—
(a) is a full and explicit disclosure of an inaccuracy in a return or other document or of a failure to comply with an obligation, and
(b) was made at a time when P had no reason to believe that HMRC were about to begin enquiries into P's affairs relating to the tax in question.
(10) For the purposes of this paragraph a contract settlement which HMRC enters into with P is treated as an assessment to tax (other than a self-assessment); and in relation to contract settlements references in sub-paragraph (5) to the basis an which any assessment or adjustments are made, or any other action is taken, are to be read with any necessary modifications.
Condition D
15 (1) Condition D is that—
(a) P is a taxable person;
(b) the arrangements are disclosable VAT arrangements to which P is a party,
(c) P has relied on the arrangements (see sub-paragraph (2));
(d) the arrangements have been counteracted, and
(e) the counteraction is final.
(2) For the purposes of sub-paragraph (1) P “relies on the arrangements” if—
(a) P makes a return or claim on the basis that a relevant tax advantage arises, or
(b) P fails to discharge a relevant obligation (“the disputed obligation”) and there is reason to believe that P's failure to discharge that obligation is connected with those arrangements.
(3) For the purposes of sub-paragraph (2) “relevant tax advantage” means a tax advantage which the arrangements might be expected to enable P to obtain.
(4) For the purposes of sub-paragraph (2) an obligation is a “relevant obligation” if the arrangements might be expected to have the result that the obligation does not arise.
(5) For the purposes of this paragraph the arrangements are “counteracted” if—
(a) adjustments, other than taxpayer emendations, are made in respect of P's tax position—
(i) on the basis that the whole or part of the relevant tax advantage mentioned in sub-paragraph (2)(a) does not arise, or
(ii) on the basis that the disputed obligation does (or did) arise, or
(b) an assessment to tax is made, or any other action is taken by HMRC, on the basis mentioned in paragraph (a)(i) or (ii) (otherwise than by way of an adjustment).
(6) For the purposes of this paragraph a counteraction is “final” when the assessment, adjustments or action in question, and any amounts arising from the assessment, adjustments or action, can no longer be varied, on appeal or otherwise.
(7) For the purposes of sub-paragraph (1) the time at which it falls to be determined whether or not the arrangements are disclosable VAT arrangements is when the counteraction becomes final.
(8) The following are “taxpayer emendations” for the purposes of sub-paragraph (5)—
(a) an adjustment made by P at a time when P had no reason to believe that HMRC had begun or were about to begin enquiries into P's affairs relating to VAT;
(b) an adjustment made by HMRC with respect to P's tax position (by way of an assessment or otherwise) as a result of a disclosure made by P which meets the conditions in sub-paragraph (9).
(9) The conditions are that the disclosure—
(a) is a full and explicit disclosure of an inaccuracy in a return or other document or of a failure to comply with an obligation, and
(b) was made at a time when P had no reason to believe that HMRC were about to begin enquiries into P's affairs relating to VAT.
Condition E
16 (1) Condition E is that the arrangements are disclosable VAT arrangements to which P is a party and—
(a) the arrangements relate to the position with respect to VAT of a person other than P (“S”) who has made supplies of goods or services to P,
(b) the arrangements might be expected to enable P 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 P from obtaining (or obtaining the whole of) the tax advantage in question, or
(b) adjustments, other than taxpayer emendations, are made in relation to S's VAT affairs on a basis such as is mentioned in paragraph (a).
(3) For the purposes of this paragraph a counteraction is “final” when the assessment, adjustments or action in question, and any amounts arising from the assessment, adjustments or action, can no longer be varied, on appeal or otherwise.
(4) For the purposes of sub-paragraph (1) the time when it falls to be determined whether or not the arrangements are disclosable VAT arrangements is when the counteraction becomes final.
(5) The following are “taxpayer emendations” for the purposes of sub-paragraph (2)—
(a) an adjustment made by S at a time when neither P nor S had reason to believe that HMRC had begun or were about to begin enquiries into the affairs of S or P relating to VAT;
(b) an adjustment (by way of an assessment or otherwise) made by HMRC with respect to S's tax position as a result of a disclosure made by S which meets the conditions in sub-paragraph (6).
(6) The conditions are that the disclosure—
(a) is a full and explicit disclosure of an inaccuracy in a return or other document or of a failure to comply with an obligation, and
(b) was made at a time when neither S nor P had reason to believe that HMRC were about to begin enquiries into the affairs of S or P relating to VAT.
Condition F
16A (1) Condition F is that—
(a) the arrangements are indirect tax arrangements,
(b) P has relied on the arrangements (see sub-paragraph (2),
(c) the arrangements have been counteracted, and
(d) the counteraction is final.
(2) For the purpose of sub-paragraph (1) P relies on the arrangements if—
(a) P makes a return, claim, declaration or application for approval on the basis that a relevant tax advantage arises, or
(b) P fails to discharge a relevant obligation (“the disputed obligation”) and there is reason to believe that P’s failure to discharge that obligation is connected with the arrangements.
(3) For the purposes of sub-paragraph (2) “relevant tax advantage” means a tax advantage which the arrangements might be expected to enable P to obtain.
(4) For the purposes of sub-paragraph (2) an obligation is a relevant obligation if the arrangements might be expected to have the result that the obligation does not arise.
(5) For the purposes of this paragraph the arrangements are “counteracted” if—
(a) adjustments, other than taxpayer emendations, are made in respect of P’s tax position —
(i) on the basis that the whole or part of the relevant tax advantage mentioned in sub-paragraph (2)(a) does not arise, or
(ii) on the basis that the disputed obligation does (or did) arise, or
(b) an assessment to tax is made, or any other action is taken by HMRC, on the basis mentioned in paragraph (a)(i) or (ii) (otherwise than by way of an adjustment).
(6) For the purposes of this paragraph a “counteraction” is final when the adjustments, assessment or action in question, and any amounts arising from the adjustments, assessment or action, can no longer be varied, on appeal or otherwise.
(7) For the purposes of sub-paragraph (1) the time at which it falls to be determined whether or not the arrangements are disclosable indirect tax arrangements is when the counteraction becomes final.
(8) The following are “taxpayer emendations” for the purposes of sub-paragraph (5)—
(a) an adjustment made by P at a time when P had no reason to believe that HMRC had begun or were about to begin enquiries into P’s affairs in relation to the tax in question;
(b) an adjustment made by HMRC with respect to P’s tax position (whether by way of an assessment or otherwise) as a result of a disclosure by P which meets the conditions in sub-paragraph (9).
(9) The conditions are that the disclosure—
(a) is a full and explicit disclosure of an inaccuracy in a return or other document or of a failure to comply with an obligation, and
(b) was made at a time when P had no reason to believe that HMRC were about to begin enquiries into P’s affairs in relation to the tax in question.
PART 3 Annual information notices and naming
Annual information notices
17 (1) A person (“P”) who has been given a warning notice under this Schedule must give HMRC a written notice (an “information notice”) in respect of each reporting period in the warning period (see sub-paragraph (11)).
(2) An information notice must be given not later than the 30th day after the end of the reporting period to which it relates.
(3) An information notice must state whether or not P—
(a) has in the reporting period delivered a return, or made a claim election, declaration or application for approval, on the basis that a relevant tax advantage arises, or has since the end of the reporting period delivered on that basis a return which P was required to deliver before the end of that period,
(b) has in the reporting period failed to take action which P would be required to take under or by virtue of an enactment relating to tax but for particular disclosable arrangements to which P is a party,
(c) has in the reporting period become a party to arrangements which—
(i) relate to the position with respect to VAT of another person (“S”) who has made supplies of goods or services to P, and
(ii) might be expected to enable P to obtain a relevant tax advantage (“the expected tax advantage”) in connection with those supplies of goods or services,
(d) has failed to deliver a return which P was required to deliver by a date falling in the reporting period.
(4) In this paragraph “relevant tax advantage” means a tax advantage which particular disclosable arrangements enable, or might be expected to enable, P to obtain.
(5) If P has, in the reporting period concerned, made a return, claim election, declaration or application for approval on the basis mentioned in sub-paragraph (3)(a) or failed to take action as mentioned in sub-paragraph (3)(b) the information notice must—
(a) explain (on the assumptions made by P in so acting or failing to act) how the disclosable arrangements enable P to obtain the tax advantage, or (as the case may be) have the result that P is not required to take the action in question, and
(b) state (on the same assumptions) the amount of the relevant tax advantage mentioned in sub-paragraph (3)(a) or (as the case may be) the amount of any tax advantage which arises in connection with the absence of a requirement to take the action mentioned in sub-paragraph (3)(b).
(6) If P has, in the reporting period, become a party to arrangements such as are mentioned in sub-paragraph (3)(c), the information notice—
(a) must state whether or not it is P's view that the expected tax advantage arises to P, and
(b) if that is P's view, must explain how the arrangements enable P to obtain the tax advantage and state the amount of the tax advantage.
(7) If the time by which P must deliver a return falls within a reporting period and P fails to deliver the return by that time, HMRC may require P to give HMRC a written notice (a “supplementary information notice”) setting out any matters which P would have been required to set out in an information notice had P delivered the return in that reporting period.
(8) A requirement under sub-paragraph (7) must be made by a written notice which states the period within which P must comply with the notice.
(9) If P fails to comply with a requirement of (or imposed under) this paragraph HMRC may by written notice extend the warning period to the end of the period of 5 years beginning with—
(a) the day by which the information notice or supplementary information notice should have been given (see sub-paragraphs (2) and (8)) or, as the case requires,
(b) the day on which P gave the defective information notice or supplementary information notice to HMRC,
or, if earlier, the time when the warning period would have expired but for the extension.
(10) HMRC may permit information notices given by members of the same group of companies (as defined in paragraph 46(9)) to be combined.
(11) For the purposes of this paragraph—
(a) the first reporting period in any warning period begins with the first day of the warning period and ends with a day specified by HMRC (“the specified day”),
(b) the remainder of the warning period is divided into further reporting periods each of which begins immediately after the end of the preceding reporting period and is twelve months long or (if that would be shorter) ends at the end of the warning period.
(12) In this paragraph “disclosable arrangements” means any of the following—
(a) DOTAS arrangements,
(b) disclosable VAT arrangements, and
(c) disclosable indirect tax arrangements.
Naming
18 (1) The Commissioners may publish information about a person if the person—
(a) incurs a relevant defeat in relation to arrangements which the person has used in a warning period, and
(b) has been given at least two warning notices in respect of other defeats of arrangements which were used in the same warning period.
(2) Information published for the first time under sub-paragraph (1) must be published within the 12 months beginning with the day on which the most recent of the warning notices falling within that sub-paragraph has been given to the person.
(3) No information may be published (or continue to be published) after the end of the period of 12 months beginning with the day on which it is first published.
(4) The information that may be published is—
(a) the person's name (including any trading name, previous name or pseudonym),
(b) the person's address (or registered office),
(c) the nature of any business carried on by the person,
(d) information about the fiscal effect of the defeated arrangements (had they not been defeated), for instance information about total amounts of tax understated or total amounts by which claims, or statements of losses, have been adjusted,
(e) the amount of any penalty to which the person is liable under paragraph 30 in respect of the relevant defeat of any defeated arrangements,
(f) the periods in which or times when the defeated arrangements were used, and
(g) any other information the Commissioners may consider it appropriate to publish in order to make clear the person's identity.
(5) If the person mentioned in sub-paragraph (1) is a member of a group of companies (as defined in paragraph 46(9)), the information which may be published also includes—
(a) any trading name of the group, and
(b) information about other members of the group of the kind described in sub-paragraph (4)(a), (b) or (c).
(6) If the person mentioned in sub-paragraph (1) is a person carrying on a trade or business in partnership, the information which may be published also includes—
(a) any trading name of the partnership, and
(b) information about other members of the partnership of the kind described in sub-paragraph (4)(a) or (b).
(7) The information may be published in any manner the Commissioners may consider appropriate.
(8) Before publishing any information the Commissioners—
(a) must inform the person that they are considering doing so, and
(b) afford the person reasonable opportunity to make representations about whether or not it should be published.
(9) Arrangements are “defeated arrangements” for the purposes of sub-paragraph (4) if the person used them in the warning period mentioned in sub-paragraph (1) and a warning notice specifying the defeat of those arrangements has been given to the person before the information is published.
(10) If a person has been given a single warning notice in relation to two or more relevant defeats, the person is treated for the purposes of this paragraph as having been given a separate warning notice in relation to each of those relevant defeats.
(11) Nothing in this paragraph prevents the power under sub-paragraph (1) from being exercised on a subsequent occasion in relation to arrangements used by the person in a different warning period.
PART 4 Restriction of reliefs
Duty to give a restriction relief notice
19 (1) HMRC must give a person a written notice (a “restriction of relief notice”) if—
(a) the person incurs a relevant defeat in relation to arrangements which the person has used in a warning period,
(b) the person has been given at least two warning notices in respect of other relevant defeats of arrangements which were used in that same warning period, and
(c) the defeats mentioned in paragraphs (a) and (b) meet the conditions in sub-paragraph (2).
(2) The conditions are—
(a) that each of the relevant defeats is by virtue of Condition A, B or C,
(b) that each of the relevant defeats relates to the misuse of a relief (see sub-paragraph (5)), and
(c) in the case of each of the relevant defeats, either—
(i) that the relevant counteraction (see sub-paragraph (7)) was made on the basis that a particular avoidance-related rule applies in relation to a person's affairs, or
(ii) that the misused relief is a loss relief.
(3) In sub-paragraph (2)(c)—
(a) the “misused relief” means the relief mentioned in sub-paragraph (5), and
(b) “loss relief” means any relief under Part 4 of ITA 2007 or Part 4 or 5 of CTA 2010.
(4) A restriction of relief notice must—
(a) explain the effect of paragraphs 20, 21 and 22, and
(b) set out when the restricted period is to begin and end.
(5) For the purposes of this Part of this Schedule, a relevant defeat by virtue of Condition A, B or C “relates to the misuse of a relief” if—
(a) the tax advantage in question, or part of the tax advantage in question, is or results from (or would but for the counteraction be or result from) a relief or increased relief from tax, or
(b) it is reasonable to conclude that the making of a particular claim for relief, or the use of a particular relief, is a significant component of the arrangements in question.
(6) In sub-paragraph (5) “the tax advantage in question” means—
(a) in relation to a defeat by virtue of Condition A, the tax advantage mentioned in paragraph 12(1)(a),
(b) in relation to a defeat by virtue of Condition B, the denied advantage (as defined in paragraph 13(4)), or
(c) in relation to a defeat by virtue of Condition C—
(i) the tax advantage mentioned in paragraph 14(2)(a), or, as the case requires,
(ii) the absence of the relevant obligation (as defined in paragraph 14(4)).
(7) In this paragraph “the relevant counteraction”, in relation to a relevant defeat means—
(a) in the case of a defeat by virtue of Condition A, the counteraction referred to in paragraph 12(1)(c);
(b) in the case of a defeat by virtue of Condition B, the action referred to in paragraph 13(1);
(c) in the case of a defeat by virtue of Condition C, the counteraction referred to in paragraph 14(1)(d).
(8) If a person has been given a single warning notice in relation to two or more relevant defeats, the person is treated for the purposes of this paragraph as having been given a separate warning notice in relation to each of those relevant defeats.
Restriction of relief
20 (1) Sub-paragraphs (2) to (15) have effect in relation to a person to whom a relief restriction notice has been given.
(2) The person may not, in the restricted period, make any claim for relief.
(3) Sub-paragraph (2) does not have effect in relation to—
(a) a claim for relief under Schedule 8 to FA 2003 (stamp duty land tax: charities relief);
(b) a claim for relief under Chapter 3 of Part 8 of ITA 2007 (gifts of shares, securities and real property to charities etc);
(c) a claim for relief under Part 10 of ITA 2007 (special rules about charitable trusts etc);
(d) a claim for relief under double taxation arrangements;
(e) an election under section 426 of ITA 2007 (gift aid: election to treat gift as made in previous year).
(4) Claims under the following provisions in Part 4 of FA 2004 (registered pension schemes: tax reliefs etc) do not count as claims for relief for the purposes of this paragraph—
section 192(4) (increase of basic rate limit and higher rate limit);
section 193(4) (net pay arrangements: excess relief);
section 194(1) (relief on making of a claim).
(5) The person may not, in the restricted period, surrender group relief under Part 5 of CTA 2010.
(6) No deduction is to be made under section 83 of ITA 2007 (carry forward against subsequent trade profits) in calculating the person's net income for a relevant tax year.
(7) No deduction is to be made under section 118 of ITA 2007 (carry-forward property loss relief) in calculating the person's net income for a relevant tax year.
(8) The person is not entitled to relief under section 448 (annual payments: relief for individuals) or 449 (annual payments: relief for other persons) of ITA 2007 for any payment made in the restricted period.
(9) No deduction of expenses referable to a relevant accounting period is to be made under section 1219(1) of CTA 2009 (expenses of management of a company's investment business).
(10) No reduction is to be made under section 45(4) of CTA 2010 (carry-forward of trade loss relief) in calculating the profits for a relevant accounting period of a trade carried on by the person.
(11) In calculating the total amount of chargeable gains accruing to a person in a relevant tax year (or part of a relevant tax year), no losses are to be deducted under subsections (2) to (2B) of section 2 of TCGA 1992 (persons and gains chargeable to capital gains tax, and allowable losses).
(12) In calculating the total amount of ATED-related chargeable gains accruing to a person in a relevant tax year, no losses are to be deducted under subsection (3) of section 2B of TCGA 1992 (persons chargeable to capital gains tax on ATED-related gains).
(13) In calculating the total amount of chargeable NRCGT gains accruing to a person in a relevant tax year on relevant high value disposals, no losses are to be deducted under subsection (2) of section 14D of TCGA 1992 (persons chargeable to capital gains tax on NRCGT gains).
(14) If the person is a company, no deduction is to be made under section 62 of CTA 2010 (relief for losses made in UK property business) from the company's total profits of a relevant accounting period.
(15) No deduction is to be made under regulation 18 of the Unauthorised Unit Trusts (Tax) Regulations 2013 (S.I. 2013/2819) (relief for deemed payments by trustees of an exempt unauthorised unit trust) in calculating the person's net income for a relevant tax year.
(16) In this paragraph “relevant tax year” means any tax year the first day of which is in the restricted period.
(17) In this paragraph “relevant accounting period” means an accounting period the first day of which is in the restricted period.
(18) In this paragraph “double taxation arrangements” means arrangements which have effect under section 2(1) of TIOPA 2010 (double taxation relief by agreement with territories outside the UK).
The restricted period
21 (1) In paragraphs 19 and 20 (and this paragraph) “the restricted period” means the period of 3 years beginning with the day on which the relief restriction notice is given.
(2) If during the restricted period (or the restricted period as extended under this sub-paragraph) the person to whom a relief restriction notice has been given incurs a further relevant defeat meeting the conditions in sub-paragraph (4), HMRC must give the person a written notice (a “restricted period extension notice”).
(3) A restricted period extension notice extends the restricted period to the end of the period of 3 years beginning with the day on which the further relevant defeat occurs.
(4) The conditions mentioned in sub-paragraph (2) are that—
(a) the relevant defeat is incurred by virtue of Condition A, B or C in relation to arrangements which the person used in the warning period mentioned in paragraph 19(1)(a), and
(b) the warning notice given to the person in respect of the relevant defeat relates to the misuse of a relief.
(5) If the person to whom a relief restriction notice has been given incurs a relevant defeat which meets the conditions in sub-paragraph (4) after the restricted period has expired but before the end of a concurrent warning period, HMRC must give the person a restriction of relief notice.
(6) In sub-paragraph (5) “concurrent warning period” means a warning period which at some time ran concurrently with the restricted period.
Reasonable excuse
22 (1) If a person who has incurred a relevant defeat satisfies HMRC or, on an appeal under paragraph 24, the First-tier Tribunal or Upper Tribunal that the person had a reasonable excuse for the matters to which that relevant defeat relates, then—
(a) for the purposes of paragraph 19(1)(a) and 21(2) and (5), the person is treated as not having incurred that relevant defeat, and
(b) for the purposes of paragraph 19(1)(b) and (c) any warning notice given to the person which relates to that relevant defeat is treated as not having been given to the person.
(2) For the purposes of this paragraph, in the case of a person (“P”)—
(a) an insufficiency of funds is not a reasonable excuse unless attributable to events outside P's control,
(b) where P relies on another person to do anything, that is not a reasonable excuse unless P took reasonable care to avoid the relevant failure, and
(c) where P had reasonable excuse for the relevant failure but the excuse had ceased, P is to be treated as having continued to have the excuse if the failure is remedied without unreasonable delay after the excuse ceased.
(3) In determining for the purposes of this paragraph whether or not a person (“P”) had a reasonable excuse for any action, failure or inaccuracy, reliance on advice is to be taken automatically not to constitute a reasonable excuse if the advice is addressed to, or was given to, a person other than P or takes no account of P's individual circumstances.
(4) In this paragraph “relevant failure”, in relation to a relevant defeat, is to be interpreted in accordance with sub-paragraphs (2) to (7) of paragraph 43.
Mitigation of restriction of relief
23 (1) The Commissioners may mitigate the effects of paragraph 20 in relation to a person (“P”) so far as it appears to them that there are exceptional circumstances such that the operation of that paragraph would otherwise have an unduly serious impact with respect to the tax affairs of P or another person.
(2) For the purposes of sub-paragraph (1) the Commissioners may modify the effects of paragraph 20 in any way they think appropriate, including by allowing P access to the whole or part of a relief to which P would otherwise not be entitled as a result of paragraph 20.
Appeal
24 (1) A person may appeal against—
(a) a relief restriction notice, or
(b) a restricted period extension notice.
(2) An appeal under this paragraph must be made within the period of 30 days beginning with the day on which the notice is given.
(3) An appeal under this paragraph is to be treated in the same way as an appeal against an assessment to income tax (including by the application of any provision about bringing the appeal by notice to HMRC, about HMRC's review of the decision or about determination of the appeal by the First-tier Tribunal or Upper Tribunal).
(4) On an appeal the tribunal may—
(a) cancel HMRC's decision, or
(b) affirm that decision with or without any modifications in accordance with sub-paragraph (5).
(5) On an appeal the tribunal may rely on paragraph 23 (mitigation of restriction of relief)—
(a) to the same extent as HMRC (which may mean applying the same mitigation as HMRC to a different starting point), or
(b) to a different extent, but only if the tribunal thinks that HMRC's decision in respect of the application of paragraph 23 was flawed.
(6) In this paragraph “tribunal” means the First-tier Tribunal or Upper Tribunal (as appropriate by virtue of sub-paragraph (3)).
Meaning of “avoidance-related rule”
25 (1) In this Part of this Schedule “avoidance-related rule” means a rule in Category 1 or 2.
(2) A rule is in Category 1 if it refers (in whatever terms)—
(a) 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.
Meaning of “relief”
26 The following are “reliefs” for the purposes of this Part of this Schedule—
(a) any relief from tax (however described) which must be claimed, or which is not available without making an election,
(b) relief under section 1219 of CTA 2009 (expenses of management of a company's investment business),
(c) any relief (not falling within paragraph (a)) under Part 4 of ITA 2007 (loss relief) or Part 4 or 5 of CTA 2010 (loss relief and group relief), and
(d) any relief (not falling within paragraph (a) or (b)) under a provision listed in section 24 of ITA 2007 (reliefs deductible at Step 2 of the calculation of income tax liability).
“Claim” for relief
27 In this Part of this Schedule “claim for relief” includes any election or other similar action which is in substance a claim for relief.
VAT and indirect taxes
28 In this Part of this Schedule “tax” does not include VAT or any other indirect tax.
Power to amend
29 (1) The Treasury may by regulations—
(a) amend paragraph 20;
(b) amend paragraph 26.
(2) Regulations under sub-paragraph (1)(a) may, in particular, alter the application of paragraph 20 in relation to any relief, exclude any relief from its application or extend its application to further reliefs.
(3) Regulations under sub-paragraph (1)(b) may amend the meaning of “relief” in any way (including by extending or limiting the meaning).
(4) Regulations under this paragraph may—
(a) make supplementary, incidental and consequential provision;
(b) make transitional provision.
(5) Regulations under this paragraph are to be made by statutory instrument.
(6) A statutory instrument containing regulations under this paragraph may not be made unless a draft of the instrument has been laid before and approved by a resolution of the House of Commons.
PART 5 Penalty
Penalty
30 (1) A person is liable to pay a penalty if the person incurs a relevant defeat in relation to any arrangements which the person has used in a warning period.
(2) The penalty is 20% of the value of the counteracted advantage if neither sub-paragraph (3) nor sub-paragraph (4) applies.
(3) The penalty is 40% of the value of the counteracted advantage if before the relevant defeat is incurred the person has been given, or become liable to be given, one (but not more than one) relevant prior warning notice.
(4) The penalty is 60% of the value of the counteracted advantage if before the current defeat is incurred the person has been given, or become liable to be given, two or more relevant prior warning notices.
(5) In this paragraph “relevant prior warning notice” means a warning notice in relation to the defeat of arrangements which the person has used in the warning period mentioned in sub-paragraph (1).
(6) For the meaning of “the value of the counteracted advantage” see paragraphs 32 to 37.
Simultaneous defeats etc
31 (1) If a person incurs simultaneously two or more relevant defeats in relation to different arrangements, sub-paragraphs (2) to (4) of paragraph 30 have effect as if the relevant defeat with the lowest value was incurred last, the relevant defeat with the next lowest value immediately before it, and so on.
(2) For this purpose the “value” of a relevant defeat is taken to be equal to the value of the counteracted advantage.
(3) If a person has been given a single warning notice in relation to two or more relevant defeats, the person is treated for the purposes of paragraph 30 as having been given a separate warning notice in relation to each of those relevant defeats.
Value of the counteracted advantage: basic rule for taxes other than VAT
32 (1) In relation to a relevant defeat incurred by virtue of Condition A, B C or F, the “value of the counteracted advantage” is—
(a) in the case of a relevant defeat incurred by virtue of Condition A, the additional amount due or payable in respect of tax as a result of the counteraction mentioned in paragraph 12(1)(c);
(b) in the case of a relevant defeat incurred by virtue of Condition B, the additional amount due or payable in respect of tax as a result of the action mentioned in paragraph 13(1);
(c) in the case of a relevant defeat incurred by virtue of Condition C, the additional amount due or payable in respect of tax as a result of the counteraction mentioned in paragraph 14(1)(d) ;
(d) in the case of a relevant defeat incurred by virtue of Condition F, the additional amount due or payable in respect of tax as a result of the counteraction mentioned in paragraph 16A(1)(d).
(2) The reference in sub-paragraph (1) to the additional amount due and payable includes a reference to—
(a) an amount payable to HMRC having erroneously been paid by way of repayment of tax, and
(b) an amount which would be repayable by HMRC if the counteraction mentioned in paragraph (a) (c) or (d) of sub-paragraph (1) were not made or the action mentioned in paragraph (b) of that sub-paragraph were not taken (as the case may be).
(3) The following are ignored in calculating the value of the counteracted advantage—
(a) group relief, and
(b) any relief under section 458 of CTA 2010 (relief in respect of repayment etc of loan) which is deferred under subsection (5) of that section.
(4) This paragraph is subject to paragraphs 33 and 34.
Value of counteracted advantage: losses for purposes of direct tax
33 (1) This paragraph has effect in relation to relevant defeats incurred by virtue of Condition A, B or C.
(2) To the extent that the counteracted advantage (see paragraph 35) has the result that a loss is wrongly recorded for the purposes of direct tax and the loss has been wholly used to reduce the amount due or payable in respect of tax, the value of the counteracted advantage is determined in accordance with paragraph 32.
(3) To the extent that the counteracted 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 counteracted advantage is—
(a) the value under paragraph 32 of so much of the counteracted 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.
(4) Sub-paragraphs (2) and (3) apply both—
(a) to a case where no loss would have been recorded but for the counteracted advantage, and
(b) to a case where a loss of a different amount would have been recorded (but in that case sub-paragraphs (2) and (3) apply only to the difference between the amount recorded and the true amount).
(5) To the extent that a counteracted advantage creates or increases an aggregate loss recorded for a group of companies—
(a) the value of the counteracted advantage is calculated in accordance with this paragraph, and
(b) in applying paragraph 32 in accordance with sub-paragraphs (2) and (3), group relief may be taken into account (despite paragraph 32(3)).
(6) To the extent that the counteracted advantage results in a loss, the value of it is nil where, because of the nature of the loss or the person'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 counteracted advantage: deferred tax
34 (1) To the extent that the counteracted advantage (see paragraph 35) is a deferral of tax (other than VAT), 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 33 applies.
Meaning of “the counteracted advantage” in paragraphs 33 and 34
35 (1) In paragraphs 33 and 34 “the counteracted advantage” means—
(a) in relation to a relevant defeat incurred by virtue of Condition A, the tax advantage mentioned in paragraph 12(1)(b);
(b) in relation to a relevant defeat incurred by virtue of Condition B, the denied advantage in relation to which the action mentioned in paragraph 13(1) is taken;
(c) in relation to a relevant defeat incurred by virtue of Condition C, means any tax advantage in respect of which the counteraction mentioned in paragraph 14(1)(c) is made ;
(d) in relation to a relevant defeat incurred by virtue of Condition F, means any tax advantage in respect of which the counteraction mentioned in paragraph 16A(1)(c) is made.
(2) In sub-paragraph (1)(c) “counteraction” is to be interpreted in accordance with paragraph 14(5).
Value of the counteracted advantage: Conditions D and E
36 (1) In relation to a relevant defeat incurred by a person by virtue of Condition D or E, the “value of the counteracted advantage” is equal to the sum of any counteracted tax advantages determined under sub-paragraphs (3) to (6).
(2) In this paragraph “the counteraction” means the counteraction mentioned in paragraph 15(1) or 16(1) (as the case may be).
(3) If the amount of VAT due or payable by the person in respect of any prescribed accounting period (X) exceeds the amount (Y) that would have been so payable but for the counteraction, the amount by which X exceeds Y is a counteracted tax advantage.
(4) If the person obtains no VAT credit for a particular prescribed accounting period, the amount of any VAT credit which the person would have obtained for that period but for the counteraction is a counteracted tax advantage.
(5) If for a prescribed accounting period the person obtains a VAT credit of an amount (Y) which is less than the amount (X) of the VAT credit which the person would have obtained but for the counteraction, the amount by which X exceeds Y is a counteracted tax advantage.
(6) If the amount (X) of the person's non-deductible tax for any prescribed accounting period is greater than Y, where Y is what would be the amount of the person's non-deductible tax for that period but for the counteraction, then the amount by which X exceeds Y is a counteracted tax advantage, but only to the extent that amount is not represented by a corresponding amount which is the whole or part of a counteracted tax advantage by virtue of sub-paragraphs (3) to(5).
(7) In this paragraph “non-deductible tax”, in relation to the person who incurred the relevant defeat, means—
(a) input tax for which the person is not entitled to credit under section 25 of VATA 1994, and
(b) any VAT incurred by the person which is not input tax and in respect of which the person is not entitled to a refund from the Commissioners by virtue of any provision of VATA 1994.
(8) For the purposes of sub-paragraph (7)(b) the VAT “incurred” by a taxable person is—
(a) VAT on the supply to the person of any goods or services,
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(c) VAT on the importation of any goods ....
(9) References in sub-paragraph (3) to amounts due and payable by the person in respect of a prescribed accounting period include references to—
(a) amounts payable to HMRC having erroneously been paid by way of repayment of tax, and
(b) amounts which would be repayable by HMRC if the counteraction mentioned in sub-paragraph (3) were not made.
Value of counteracted advantage: delayed VAT
37 (1) Sub-paragraph (3) of paragraph 36 has effect as follows so far as the tax advantage which is counteracted as mentioned in that sub-paragraph is in the nature of a delay in relation to the person's obligations with respect to VAT.
(2) That sub-paragraph has effect as if for “the amount by which X exceeds Y is a counteracted tax advantage” there were substituted, “there is a counteracted tax advantage of—
(d) 25% of the amount of the delayed VAT for each year of the delay, or
(e) a percentage of the amount of the delayed VAT, for each separate period of delay of less than a year, equating to 25% per year,
or, if less, 100% of the amount of the delayed VAT
.
Assessment of penalty
38 (1) Where a person is liable for a penalty under paragraph 30, HMRC must assess the penalty.
(2) Where HMRC assess the penalty, HMRC must—
(a) notify the person who is liable for the penalty, and
(b) state in the notice a tax period in respect of which the penalty is assessed.
(3) A penalty under this paragraph must be paid before the end of the period of 30 days beginning with the day on which the person is notified of the penalty under sub-paragraph (2).
(4) An assessment—
(a) is to be treated for procedural purposes as if it were an assessment to tax,
(b) may be enforced as if it were an assessment to tax, and
(c) may be combined with an assessment to tax.
(5) An assessment of a penalty under this paragraph must be made before the end of the period of 12 months beginning with the date of the defeat mentioned in paragraph 30(1).
Alteration of assessment of penalty
39 (1) After notification of an assessment has been given to a person under paragraph 38(2), the assessment may not be altered except in accordance with this paragraph or on appeal.
(2) A supplementary assessment may be made in respect of a penalty if an earlier assessment operated by reference to an underestimate of the value of the counteracted advantage.
(3) An assessment may be revised as necessary if operated by reference to an overestimate of the value of the counteracted advantage.
Aggregate penalties
40 (1) The amount of a penalty for which a person is liable under paragraph 30 is to be reduced by the amount of any other penalty incurred by the person, or any surcharge for late payment of tax imposed on the person, if the amount of the penalty or surcharge is determined by reference to the same tax liability.
(2) In sub-paragraph (1) “any other penalty” does not include a penalty under section 212A of FA 2013 (GAAR penalty) or Part 4 of FA 2014 (penalty where corrective action not taken after follower notice etc).
(3) In the application of section 97A of TMA 1970 (multiple penalties) no account shall be taken of a penalty under paragraph 30.
Appeal against penalty
41 (1) A person may appeal against a decision of HMRC that a penalty is payable under paragraph 30.
(2) A person may appeal against a decision of HMRC as to the amount of a penalty payable by P under paragraph 30.
(3) An appeal under this paragraph must be made within the period of 30 days beginning with the day on which notification of the penalty is given under paragraph 38.
(4) An appeal under this paragraph is to be treated in the same way as an appeal against an assessment to the tax concerned (including by the application of any provision about bringing the appeal by notice to HMRC, about HMRC's review of the decision or about determination of the appeal by the First-tier Tribunal or Upper Tribunal).
(5) Sub-paragraph (4) does not apply—
(a) so as to require a person to pay a penalty before an appeal against the assessment of the penalty is determined, or
(b) in respect of any other matter expressly provided for by this Part of this Schedule.
(6) On an appeal under sub-paragraph (1) or (2) the tribunal may—
(a) affirm HMRC's decision, or
(b) substitute for HMRC's decision another decision that HMRC has power to make.
(7) In this paragraph “tribunal” means the First-tier Tribunal or Upper Tribunal (as appropriate by virtue of sub-paragraph (4)).
Penalties: reasonable excuse
42 (1) A person is not liable to a penalty under paragraph 30 in respect of a relevant defeat if the person satisfies HMRC or (on appeal) the First-tier Tribunal or Upper Tribunal that the person had a reasonable excuse for the relevant failure to which that relevant defeat relates (see paragraph 43).
(2) Sub-paragraph (3) applies if—
(a) a person has incurred a relevant defeat in respect of which the person is liable to a penalty under paragraph 30, and
(b) before incurring that defeat the person had been given, or become liable to be given, an excepted warning notice.
(3) The person is treated for the purposes of sub-paragraphs (2) to (4) of paragraph 30 (rate of penalty) as not having been given, and not having become liable to be given, the excepted notice (so far as it relates to the relevant defeat in respect of which the person had a reasonable excuse).
(4) A warning notice is “excepted” for the purposes of this paragraph if the person was not liable to a penalty in respect of the defeat specified in it because the person had a reasonable excuse for the relevant failure in question.
(5) For the purposes of this paragraph, in the case of a person (“P”)—
(a) an insufficiency of funds is not a reasonable excuse unless attributable to events outside P's control,
(b) where P relies on another person to do anything, that is not a reasonable excuse unless P took reasonable care to avoid the relevant failure, and
(c) where P had a reasonable excuse for the relevant failure but the excuse had ceased, P is to be treated as having continued to have the excuse if the failure is remedied without unreasonable delay after the excuse ceased.
(6) In determining for the purposes of this paragraph whether or not a person (“P”) had a reasonable excuse for any action, failure or inaccuracy, reliance on advice is to be taken automatically not to constitute a reasonable excuse if the advice is addressed to, or was given to, a person other than P or takes no account of P's individual circumstances.
Paragraph 42: meaning of “the relevant failure”
43 (1) In paragraph 42 “the relevant failure”, in relation to a relevant defeat, is to be interpreted in accordance with sub-paragraphs (2) to (7).
(2) In relation to a relevant defeat incurred by virtue of Condition A, “the relevant failure” means the failures or inaccuracies as a result of which the counteraction under section 209 of FA 2013 was necessary
(3) In relation to a relevant defeat incurred by virtue of Condition B, “the relevant failure” means the failures or inaccuracies in respect of which the action mentioned in paragraph 13(1) was taken.
(4) In relation to a relevant defeat incurred by virtue of Condition C, “the relevant failure” means the failures of inaccuracies as a result of which the adjustments, assessments, or other action mentioned in paragraph 14(5) are required.
(5) In relation to a relevant defeat incurred by virtue of Condition D, “the relevant failure” means the failures or inaccuracies as a result of which the adjustments, assessments or other action mentioned in paragraph 15(5) are required.
(6) In relation to a relevant defeat incurred by virtue of Condition E, “the relevant failure” means P's actions (and failures to act), so far as they are connected with matters in respect of which the counteraction mentioned in paragraph 16(1) is required.
(7) In sub-paragraph (6) “counteraction” is to be interpreted in accordance with paragraph 16(2).
(8) In relation to a relevant defeat incurred by virtue of Condition F, “the relevant failure” means the failures or inaccuracies as a result of which the adjustments, assessments, or other actions mentioned in paragraph 16A(5) are required.
Mitigation of penalties
44 (1) The Commissioners may in their discretion mitigate a penalty under paragraph 30, or stay or compound any proceedings for such a penalty.
(2) They may also, after judgment, further mitigate or entirely remit the penalty.
PART 6 Corporate groups, associated persons and partnerships
Representative member of a VAT group
45 (1) Where a body corporate (“R”) is the representative member of a group (and accordingly is treated for the purposes of this Schedule as mentioned in section 43(1) of VATA 1994), anything which has been done by or in relation to another body corporate (“B”) in B's capacity as representative member of that group is treated for the purposes of this Schedule as having been done by or in relation to R in R's capacity as representative member of the group.
Accordingly paragraph 3 (warning period) operates as if the successive representative members of a group were a single person.
(2) This Schedule has effect as if the representative member of a group, so far as acting in its capacity as such, were a different person from that body corporate so far as acting in any other capacity.
(3) In this paragraph the reference to a “group” is to be interpreted in accordance with sections 43A to 43D of VATA 1994.
Corporate groups
46 (1) Sub-paragraphs (2) and (3) apply if HMRC has a duty under paragraph 2 to give a warning notice to a company (“C”) which is a member of a group.
(2) That duty has effect as a duty to give a warning notice to each current group member (see sub-paragraph (8)).
(3) Any warning notice which has been given (or is treated as having been given) previously to any current group member is treated as having been given to each current group member (and any provision in this Schedule which refers to a “warning period” in relation to a person is to be interpreted accordingly).
(4) In relation to a company which incurs a relevant defeat, paragraph 19(1) (duty to give relief restriction notice) does not have effect unless the warning period mentioned in that sub-paragraph would be a warning period in relation to the company regardless of sub-paragraph (3).
(5) A company which incurs a relevant defeat is not liable to pay a penalty under paragraph 30 unless the warning period mentioned in sub-paragraph (1) of that paragraph would be a warning period in relation to the company regardless of sub-paragraph (3).
(6) HMRC may discharge any duty to give a warning notice to a current group member in accordance with sub-paragraph (2) by delivering the notice to C (and if it does so may combine one or more warning notices in a single notice).
(7) If a company ceases to be a member of a group, and—
(a) immediately before it ceases to be a member of the group, a warning period has effect in relation to the company, but
(b) no warning period would have effect in relation to the company at that time but for sub-paragraph (2) or (3),
that warning period ceases to have effect in relation to the company when it ceases to be a member of that group.
(8) In this paragraph “current group member” means a company which is a member of the group concerned at the time when the warning notice mentioned in sub-paragraph (1) is given.
(9) For the purposes of this paragraph two companies are members of the same group of companies if—
(a) one is a 75% subsidiary of the other, or
(b) both are 75% subsidiaries of a third company.
(10) In this paragraph “75% subsidiary” has the meaning given by section 1154 of CTA 2010.
(11) In this paragraph “company” has the same meaning as in the Corporation Tax Acts (see section 1121 of CTA 2010).
Associated persons treated as incurring relevant defeats
47 (1) Sub-paragraph (2) applies if a person (“P”) incurs a relevant defeat in relation to any arrangements (otherwise than by virtue of this paragraph).
(2) Any person (“S”) who is associated with P at the relevant time is also treated for the purposes of paragraphs 2 (duty to give warning notice) and 3(2) (warning period) as having incurred that relevant defeat in relation to those arrangements (but see sub-paragraph (3)).
For the meaning of “associated” see paragraph 48.
(3) Sub-paragraph (2) does not apply if P and S are members of the same group of companies (as defined in paragraph 46(9)).
(4) In relation to a warning notice given to S by virtue of sub-paragraph (2), paragraph 2(4)(c) (certain information to be included in warning notice) is to be read as referring only to paragraphs 3, 17 and 18.
(5) A warning notice which is given to a person by virtue of sub-paragraph (2) is treated for the purposes of paragraphs 19(1) (duty to give relief restriction notice) and 30 (penalty) as not having been given to that person.
(6) In sub-paragraph (2) “the relevant time” means the time when P is given a warning notice in respect of the relevant defeat.
Meaning of “associated”
48 (1) For the purposes of paragraph 47 two persons are associated with one another if—
(a) one of them is a body corporate which is controlled by the other, or
(b) they are bodies corporate under common control.
(2) Two bodies corporate are under common control if both are controlled—
(a) by one person,
(b) by two or more, but fewer than six, individuals, or
(c) by any number of individuals carrying on business in partnership.
(3) For the purposes of this section a body corporate (“H”) is taken to control another body corporate (“B”) if—
(a) H is empowered by statute to control B's activities, or
(b) H is B's holding company within the meaning of section 1159 of and Schedule 6 to the Companies Act 2006.
(4) For the purposes of this section an individual or individuals are taken to control a body corporate (“B”) if the individual or individuals, were they a body corporate, would be B's holding company within the meaning of those provisions.
Partners treated as incurring relevant defeats
49 (1) Where paragraph 50 applies in relation to a partnership return, each relevant partner is treated for the purposes of this Schedule as having incurred the relevant defeat mentioned in paragraph 50(1)(b), (2) or (3)(b) (as the case may be).
(2) In this paragraph “relevant partner” means any person who was a partner in the partnership at any time during the relevant reporting period (but see sub-paragraph (3)).
(3) The “relevant partners” do not include—
(a) the person mentioned in sub-paragraph (1)(b), (2) or (3)(b) (as the case may be) of paragraph 50, or
(b) any other person who would, apart from this paragraph, incur a relevant defeat in connection with the subject matter of the partnership return mentioned in sub-paragraph (1).
(4) In this paragraph the “relevant reporting period” means the period in respect of which the partnership return mentioned in sub-paragraph (1), (2) or (3) of paragraph 50 was required.
Partnership returns to which this paragraph applies
50 (1) This paragraph applies in relation to a partnership return if—
(a) that return has been made on the basis that a tax advantage arises to a partner from any arrangements, and
(b) that person has incurred, in relation to that tax advantage and those arrangements, a relevant defeat by virtue of Condition A (final counteraction of tax advantage under general anti-abuse rule).
(2) Where a person has incurred a relevant defeat by virtue of sub-paragraph (2) of paragraph 13 (Condition B: case involving partnership follower notice) this paragraph applies in relation to the partnership return mentioned in that sub-paragraph.
(3) This paragraph applies in relation to a partnership return if—
(a) that return has been made on the basis that a tax advantage arises to a partner from any arrangements, and
(b) that person has incurred, in relation to that tax advantage and those arrangements, a relevant defeat by virtue of Condition C (return, claim or election made in reliance on DOTAS arrangements).
(4) The references in this paragraph to a relevant defeat do not include a relevant defeat incurred by virtue of paragraph 47(2).
Partnerships: information
51 (1) If paragraph 50 applies in relation to a partnership return, the appropriate partner must give HMRC a written notice (a “partnership information notice”) in respect of each sub-period in the information period.
(2) The “information period” is the period of 5 years beginning with the day after the day of the relevant defeat mentioned in paragraph 50.
(3) If, in the case of a partnership, a new information period (relating to another partnership return) begins during an existing information period, those periods are treated for the purposes of this paragraph as a single period (which includes all times that would otherwise fall within either period).
(4) An information period under this paragraph ends if the partnership ceases.
(5) A partnership information notice must be given not later than the 30th day after the end of the sub-period to which it relates.
(6) A partnership information notice must state—
(a) whether or not any relevant partnership return which was, or was required to be, delivered in the sub-period has been made on the basis that a relevant tax advantage arises, and
(b) whether or not there has been a failure to deliver a relevant partnership return in the sub-period.
(7) In this paragraph—
(a) “relevant partnership return” means a partnership return in respect of the partnership's trade, profession or business;
(b) “relevant tax advantage” means a tax advantage which particular DOTAS arrangements enable, or might be expected to enable, a person who is or has been a partner in the partnership to obtain.
(8) If a partnership information notice states that a relevant partnership return has been made on the basis mentioned in sub-paragraph (6)(a) the notice must—
(a) explain (on the assumptions made for the purposes of the return) how the DOTAS arrangements enable the tax advantage concerned to be obtained, and
(b) describe any variation in the amounts required to be stated in the return under section 12AB(1) of TMA 1970 which results from those arrangements.
(9) HMRC may require the appropriate partner to give HMRC a notice (a “supplementary information notice”) setting out further information in relation to a partnership information notice.
In relation to a partnership information notice “further information” means information which would have been required to be set out in the notice by virtue of sub-paragraph (6)(a) or (8) had there not been a failure to deliver a relevant partnership return.
(10) A requirement under sub-paragraph (9) must be made by a written notice and the notice must state the period within which the notice must be complied with.
(11) If a person fails to comply with a requirement of (or imposed under) this paragraph, HMRC may by written notice extend the information period concerned to the end of the period of 5 years beginning with—
(a) the day by which the partnership information notice or supplementary information notice was required to be given to HMRC or, as the case requires,
(b) the day on which the person gave the defective notice to HMRC,
or, if earlier, the time when the information period would have expired but for the extension.
(12) For the purposes of this paragraph—
(a) the first sub-period in an information period begins with the first day of the information period and ends with a day specified by HMRC,
(b) the remainder of the information period is divided into further sub-periods each of which begins immediately after the end of the preceding sub-period and is twelve months long or (if that would be shorter) ends at the end of the information period.
(13) In this paragraph “the appropriate partner” means the partner in the partnership who is for the time being nominated by HMRC for the purposes of this paragraph.
Partnerships: special provision about taxpayer emendations
52 (1) Sub-paragraph (2) applies if a partnership return is amended at any time under section 12ABA of TMA 1970 (amendment of partnership return by representative partner etc) on a basis that—
(a) results in an increase or decrease in, or
(b) otherwise affects the calculation of,
any amount stated under subsection (1)(b) of section 12AB of that Act (partnership statement) as a partner's share of any income, loss, consideration, tax or credit for any period.
(2) For the purposes of paragraph 14 (Condition C: counteraction of DOTAS arrangements), the partner is treated as having at that time amended—
(a) the partner's return under section 8 or 8A of TMA 1970, or
(b) the partner's company tax return,
so as to give effect to the amendments of the partnership return.
(3) Sub-paragraph (4) applies if a partnership return is amended at any time by HMRC as a result of a disclosure made by the representative partner or that person's successor on a basis that—
(a) results in an increase or decrease in, or
(b) otherwise affects the calculation of,
any amount stated under subsection (1)(b) of section 12AB of TMA 1970 (partnership statement) as the share of a particular partner (P) of any income, loss, consideration, tax or credit for any period.
(4) If the conditions in sub-paragraph (5) are met, P is treated for the purposes of paragraph 14 as having at that time amended—
(a) P's return under section 8 or 8A of TMA 1970, or
(b) P's company tax return,
so as to give effect to the amendments of the partnership return.
(5) The conditions are that the disclosure—
(a) is a full and explicit disclosure of an inaccuracy in the partnership return, and
(b) was made at a time when neither the person making the disclosure nor P had reason to believe that HMRC was about to begin enquiries into the partnership return.
Supplementary provision relating to partnerships
53 (1) In paragraphs 49 to 52 and this paragraph—
“partnership” is to be interpreted in accordance with section 12AA of TMA 1970 (and includes a limited liability partnership);
“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;
“successor”, in relation to a person who is the representative partner in the case of a partnership return, has the same meaning as in TMA 1970 (see section 118(1) of that Act).
(2) For the purposes of this Part of this Schedule a partnership is treated as the same partnership notwithstanding a change in membership if any person who was a member before the change remains a member after the change.
PART 7 Supplemental
Meaning of “adjustments”
54 (1) In this Schedule “adjustments” means any adjustments, whether by way of an assessment, the modification of an assessment or return, amendment or disallowance of a claim, a payment, 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).
(2) “Adjustments” also includes a payment in respect of a liability to pay national insurance contributions.
Time of “use” of defeated arrangements
55 (1) With reference to a particular relevant defeat incurred by a person in relation to arrangements, the person is treated as having “used” the arrangements on the dates set out in this paragraph.
(2) If the person incurs the relevant defeat by virtue of Condition A, the person is treated as having “used” the arrangements on the following dates—
(a) the filing date of any return made by the person on the basis that the tax advantage mentioned in paragraph 12(1)(a) arises from the arrangements;
(b) the date on which the person makes any claim or election on that basis;
(c) the date of any relevant failure by the person to comply with an obligation.
(3) For the purposes of sub-paragraph (2) a failure to comply with an obligation is a “relevant failure” if the whole or part of the tax advantage mentioned in paragraph 12(1)(b) arose as a result of, or in connection with, that failure.
(4) If the person incurs the relevant defeat by virtue of Condition B, the person is treated as having “used” the arrangements on the following dates—
(a) the filing date of any return made by the person on the basis that the asserted advantage (see section 204(3) of FA 2014) results from the arrangements,
(b) the date on which any claim is made by the person on that basis,
(c) the date of any failure by the person to comply with a relevant obligation.
In this sub-paragraph “relevant obligation” means an obligation which would not have fallen on the person (or might have been expected not to do so), had the denied advantage arisen (see section 208(3) of FA 2014).
(5) If the person incurs the relevant defeat by virtue of Condition C, the person is treated as having “used” the arrangements on the following dates—
(a) the filing date of any return made by the person on the basis mentioned in paragraph 14(2)(a);
(b) the date on which the person makes any claim or election on that basis;
(c) the date of any failure by the person to comply with a relevant obligation (as defined in paragraph 14(4)).
(6) If the person incurs the relevant defeat by virtue of Condition D, the person is treated as having “used” the arrangements on the following dates—
(a) the filing date of any return made by the person on the basis mentioned in paragraph 15(2)(a);
(b) the date on which the person makes any claim on that basis;
(c) the date of any failure by the person to comply with a relevant obligation (as defined in paragraph 15(4)).
(7) If the person incurs the relevant defeat by virtue of Condition E, the person is treated as having “used” the arrangements on the following dates—
(a) the filing date of any return made by S to which the counteraction mentioned in paragraph 16(1)(c) relates;
(b) the date on which S made any claim to which that counteraction relates;
(c) the date of any relevant failure by S to which that counteraction relates.
(8) In sub-paragraph (7) “relevant failure” means a failure to comply with an obligation relating to VAT.
(8A) If the person incurs the relevant defeat by virtue of Condition F, the person is treated as having “used” the arrangements on the following dates—
(a) the filing date of any return made by the person on the basis mentioned in paragraph 16A(2)(a);
(b) the date on which the person makes any claim, declaration or application for approval;
(c) the date of any failure by the person to comply with a relevant obligation (as defined in paragraph 16A(4)).
(9) In this paragraph “filing date”, in relation to a return, means the earlier of—
(a) the day on which the return is delivered, or
(b) the last day of the period within which the return must be delivered.
(10) References in this paragraph to the date on which a person fails to comply with an obligation are to the date on which the person is first in breach of the obligation.
Inheritance tax
56 (1) In the case of inheritance tax, each of the following is treated as a return for the purposes of this Schedule—
(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 (except where the context requires otherwise) “assessment”, in relation to inheritance tax, includes a determination.
National insurance contributions
57 (1) In this Schedule references to an assessment to tax include a NICs decision relating to a person's liability for relevant contributions.
(2) In this Schedule a reference to a provision of Part 7 of FA 2004 (disclosure of tax avoidance schemes) (a “DOTAS provision”) includes a reference to—
(a) that DOTAS provision as applied by regulations under section 132A of the Social Security Administration Act 1992 (disclosure of contributions avoidance arrangements);
(b) any provision of regulations under that section that corresponds to that DOTAS provision,
whenever the regulations are made.
(3) Regulations under section 132A of that Act may disapply, or modify the effect of, sub-paragraph (2).
(4) In this paragraph “NICs decision” means a decision under section 8 of the Social Security Contributions (Transfer of Functions, etc) Act 1999 or Article 7 of the Social Security Contributions (Transfer of Functions, etc) (Northern Ireland) Order 1999 (S.I. 1999/671).
General interpretation
58 (1) In this Schedule—
“arrangements” has the meaning given by paragraph 2(6);
“the Commissioners” means the Commissioners for Her Majesty's Revenue and Customs;
“contract settlement” means an agreement in connection with a person's liability to make a payment to the Commissioners under or by virtue of an enactment;
“disclosable indirect tax arrangements” is to be interpreted in accordance with paragraph 9A;
“disclosable Schedule 11A VAT arrangements is to be interpreted in accordance with paragraph 9;
“disclosable VAT arrangements” is to be interpreted in accordance with paragraph 8A;
“DOTAS arrangements” is to be interpreted in accordance with paragraph 8 (and see also paragraph 57(2));
“follower notice” has the meaning given by paragraph 13(6);
“HMRC” means Her Majesty's Revenue and Customs;
“indirect tax” has the meaning given by paragraph 4(2);
“national insurance contributions” means contributions under Part 1 of the Social Security Contributions and Benefits Act 1992 or Part 1 of the Social Security Contributions and Benefits (Northern Ireland) Act 1992;
“net income” has the meaning given by section 23 of ITA 2007 (see Step 2 of that section);
“partnership follower notice” has the meaning given by paragraph 2(2) of Schedule 31 to FA 2014;
“partnership return” means a return under section 12AA of TMA 1970;
“relevant contributions” means the following contributions under Part 1 of the Social Security Contributions and Benefits Act 1992 or Part 1 of the Social Security Contributions and Benefits (Northern Ireland) Act 1992—
Class 1 contributions;
Class 1A contributions;
Class 1B contributions;
Class 2 contributions which must be paid but in relation to which section 11A of the Act in question (application of certain provisions of the Income Tax Acts in relation to Class 2 contributions under section 11(2) of that Act) does not apply;
“relevant defeat” is to be interpreted in accordance with paragraph 11;
“tax” has the meaning given by paragraph 4(1);
“tax advantage” has the meaning given by paragraph 7;
“warning notice” has the meaning given by paragraph 2.
(2) In this Schedule an expression used in relation to VAT has the same meaning as in VATA 1994.
(3) In this Schedule (except where the context requires otherwise) references, however expressed, to a person's affairs in relation to tax include the person's position as regards deductions or repayments of, or of sums representing, tax that the person is required to make by or under an enactment.
(4) For the purposes of this Schedule a partnership return is regarded as made on the basis that a particular tax advantage arises to a person from particular arrangements if—
(a) it is made on the basis that an increase or reduction in one or more of the amounts mentioned in section 12AB(1) of TMA 1970 (amounts in the partnership statement in a partnership return) results from those arrangements, and
(b) that increase or reduction results in that tax advantage for the person.
Consequential amendments
59 In section 103ZA of TMA 1970 (disapplication of sections 100 to 103 in the case of certain penalties)—
(a) omit “or” at the end of paragraph (ga), and
(b) after paragraph (h) insert
or
(i) Part 5 of Schedule 18 to the Finance Act 2016 (serial tax avoidance).
60 In section 212 of FA 2014 (follower notices: aggregate penalties), in subsection (4)—
(a) omit “or” at the end of paragraph (b), and
(b) after paragraph (c) insert
, or
(d) Part 5 of Schedule 18 to FA 2016 (serial tax avoidance).
61 (1) The Social Security Contributions and Benefits Act 1992 is amended as follows.
(2) In section 11A (application of certain provisions of the Income Tax Acts in relation to Class 2 contributions under section 11(2)), in subsection (1), at the end of paragraph (e) insert—
(ea) the provisions of Schedule 18 to the Finance Act 2016 (serial tax avoidance);
.
(3) In section 16 (application of Income Tax Acts and destination of Class 4 contributions), in subsection (1), at the end of paragraph (d) insert
and
(e) the provisions of Schedule 18 to the Finance Act 2016 (serial tax avoidance),
.
62 In the Social Security Contributions and Benefits (Northern Ireland) Act 1992, in section 11A (application of certain provisions of the Income Tax Acts in relation to Class 2 contributions under section 11(2)), in subsection (1), at the end of paragraph (e) insert—
(ea) the provisions of Schedule 18 to the Finance Act 2016 (serial tax avoidance);
.
Commencement
63 Subject to paragraphs 64 and 65, paragraphs 1 to 62 of this Schedule have effect in relation to relevant defeats incurred after the day on which this Act is passed.
64 (1) A relevant defeat is to be disregarded for the purposes of this Schedule if it is incurred before 6 April 2017 in relation to arrangements which the person has entered into before the day on which this Act is passed.
(2) A relevant defeat incurred on or after 6 April 2017 is to be disregarded for the purposes of this Schedule if—
(a) the person entered into the arrangements concerned before the day on which this Act is passed, and
(b) before 6 April 2017—
(i) the person incurring the defeat fully discloses to HMRC the matters to which the relevant counteraction relates, or
(ii) that person gives HMRC notice of a firm intention to make a full disclosure of those matters and makes such a full disclosure within any time limit set by HMRC.
(3) In sub-paragraph (2) “the relevant counteraction” means—
(a) in a case within Condition A, the counteraction mentioned in paragraph 12(1)(c);
(b) in a case within Condition B, the action mentioned in paragraph 13(1);
(c) in a case within Condition C, the counteraction mentioned in paragraph 14(1)(c);
(d) in a case within Condition D, the counteraction mentioned in paragraph 15(1)(d);
(e) in a case within Condition E, the counteraction mentioned in paragraph 16(1)(c).
(4) In sub-paragraph (3)—
(a) in paragraph (c) “counteraction” is to be interpreted in accordance with paragraph 14(5);
(b) in paragraph (d) “counteraction” is to be interpreted in accordance with paragraph 15(5);
(c) in paragraph (e) “counteraction” is to be interpreted in accordance with paragraph 16(2).
(5) See paragraph 11(2) for provision about when a relevant defeat is incurred.
65 (1) A warning notice given to a person is to be disregarded for the purposes of—
(a) paragraph 18 (naming), and
(b) Part 4 of this Schedule (restriction of reliefs),
if the relevant defeat specified in the notice relates to arrangements which the person has entered into before the day on which this Act is passed.
(2) Where a person has entered into any arrangements before the day on which this Act is passed—
(a) a relevant defeat incurred by a person in relation to the arrangements, and
(b) any warning notice specifying such a relevant defeat,
is to be disregarded for the purposes of paragraph 30 (penalty).
SCHEDULE 19 Large businesses: tax strategies and sanctions
Section 161
PART 1 Interpretation
Purpose of Part 1
1 This Part defines terms for the purposes of this Schedule.
“Relevant body”
2 (1) “Relevant body” means a UK company or any other body corporate (wherever incorporated), but does not include a limited liability partnership.
(2) A relevant body is a “foreign” relevant body (or member of a group or sub-group) if it is incorporated outside the United Kingdom.
“UK company”
3 (1) “UK company” means a company which is (or is treated as if it is) formed and registered under the Companies Act 2006, unless it falls within sub-paragraph (2).
(2) The term “UK company” does not include a company which is—
(a) an open-ended investment company within the meaning of section 613 of CTA 2010, or
(b) an investment trust within the meaning of section 1158 of CTA 2010.
“UK permanent establishment”
4 (1) “UK permanent establishment” means a permanent establishment in the United Kingdom of a foreign relevant body.
(2) In sub-paragraph (1) “permanent establishment” has the same meaning as it has for the purposes of the Corporation Tax Acts (see section 1141 to 1144 of CTA 2010).
“Qualifying company”
5 (1) A UK company is a “qualifying company” in any financial year (subject to any regulations under sub-paragraph (5)) if sub-paragraph (2) or (3) applies to it.
(2) This sub-paragraph applies to the company if, at the end of the previous financial year—
(a) it satisfied the qualification test for a UK company, and
(b) was not a member of a UK group or a UK sub-group.
(3) This sub-paragraph applies to the company if, at the end of the previous financial year—
(a) it was a member of a foreign group,
(b) the group met the qualification test for a group, and
(c) it was not a member of a UK sub-group of that foreign group.
(4) The qualification test for a UK company is that the company satisfied either or both of the following conditions (by reference to the previous financial year)—
1. The company's turnover | More than £200 million
2. The company's balance sheet total | More than £2 billion.
(5) The Treasury may by regulations provide that a company of a description specified in the regulations is not a qualifying company for the purposes of this Schedule (or any such purpose specified in the regulations).
(6) For the purposes of this paragraph a UK permanent establishment of a foreign relevant body is to be treated as if it were—
(a) a UK company, and
(b) if the foreign relevant body is a member of a UK group or a UK sub-group, a member of that group or sub-group.
“Group” and related expressions
6 (1) “Group” means two or more relevant bodies which together constitute—
(a) an MNE Group (see paragraph 7), or
(b) a group other than an MNE group (see paragraph 8).
(2) “UK group” means a group whose head is a relevant body incorporated in the United Kingdom.
(3) “Foreign group” means a group whose head is a foreign relevant body.
(4) For the purposes of sub-paragraphs (2) and (3) it is immaterial where other members of the group are incorporated.
7 (1) “MNE Group” has the same meaning (subject to sub-paragraph (2) below) as in the OECD Model Legislation in the OECD Country-by-Country Reporting Implementation Package as contained in the OECD's Guidance on Transfer Pricing Documentation and Country-by-Country Reporting published in 2014.
(2) Paragraph (ii) (excluded MNE Group) of the Implementation Package is not part of the definition applied by sub-paragraph (1) above for the purposes of this Schedule.
(3) In sub-paragraph (1) “OECD” means the Organisation for Economic Co-operation and Development.
8 (1) A “group other than an MNE group” means a group consisting of two or more relevant bodies—
(a) each of which is a member of the group by virtue of sub-paragraph (3) or (4),
(b) at least two of which are UK companies,
which is not an MNE Group.
(2) For the purposes of the condition in sub-paragraph (1)(b) a UK permanent establishment of a foreign member of a group is to be treated as if it were a UK company and a member of the group.
(3) A relevant body is a member of a group if—
(a) another relevant body is its 51% subsidiary, or
(b) it is a 51% subsidiary of another relevant body.
(4) Two relevant bodies are members of the same group if—
(a) one is a 51% subsidiary of the other, or
(b) both are 51% subsidiaries of another relevant body.
(5) Chapter 3 of Part 24 of CTA 2010 (meaning of 51% subsidiary) applies for the purposes of this Schedule as it applies for the purposes of the Corporation Tax Acts (but with the modification in sub-paragraph (6)).
(6) It applies as if references to a body corporate were references to a relevant body.
9 A group is headed by whichever relevant body within the group is not a 51% subsidiary of another relevant body within the group (and “head”, in relation to the group, means that body).
“Qualifying group”
10 (1) A group is a “qualifying group” in any financial year if, at the end of the previous financial year—
(a) in the case of a group other than an MNE Group, the group satisfied the qualification test for such a group (subject to any regulations under sub-paragraph (6)), or
(b) in the case of an MNE Group—
(i) there was a mandatory reporting requirement in respect of the group under regulations made under section 122 of FA 2015 (country-by-country reporting), or
(ii) there would have been such a requirement if the head of the group were resident in the United Kingdom for tax purposes.
(2) The qualification test for a group other than an MNE Group is that the group satisfied either or both of the following conditions (by reference to the previous financial year)—
1. Group turnover | More than £200 million
2. Group balance sheet total | More than £2 billion.
(3) In sub-paragraph (2)—
(a) “group turnover” means the aggregate turnover of the UK companies that are members of the group at the end of the previous financial year, and
(b) “group balance sheet total”, means the aggregate balance sheet totals for all those UK companies.
(4) Where the financial year of a UK company within in the group does not end on the same day as the previous financial year of the head of the group, the figures from the company that are to be included in the aggregate figures are those for the company's financial year ending last before the end of the previous financial year of the head of the group.
(5) For the purposes of assessing the turnover or balance sheet total of the group, sub-paragraphs (3) and (4) apply as if a UK permanent establishment of a foreign member of the group were a UK company and a member of the group.
(6) The Treasury may by regulations provide—
(a) that a group other than an MNE Group which is of a specified description is not a qualifying group for the purposes, or any specified purpose, of this Schedule, or
(b) that a relevant body, or a UK permanent establishment, of a specified description is to be disregarded in determining whether the qualification test is satisfied by a group other than an MNE Group;
and in this sub-paragraph “specified” means specified in the regulations.
(7) In this paragraph “financial year”, in relation to a group, means a financial year of the head of the group.
“UK sub-group” and “head” (in relation to a UK sub-group)
11 (1) A “UK sub-group” consists of two or more relevant bodies that would be a UK group, but for the fact that they are members of a larger group headed by a relevant body incorporated outside the United Kingdom.
(2) A UK sub-group is headed by the company or other relevant body incorporated in the United Kingdom that is not a 51% subsidiary of another member of the UK sub-group (and “head”, in relation to the sub-group, means that company or body).
“UK partnership”, “qualifying partnership” and “representative partner”
12 (1) “UK partnership” means a body of any of the following descriptions which is carrying on a trade, business or profession with a view to profit—
(a) a partnership within the meaning of the Partnership Act 1890,
(b) a limited partnership registered under the Limited Partnerships Act 1907, or
(c) a limited liability partnership incorporated in the United Kingdom.
(2) A UK partnership is a “qualifying partnership” in a financial year, if it satisfied the qualification test for a UK partnership at the end of the previous financial year (subject to any regulations under sub-paragraph (4)).
(3) The qualification test for a UK partnership is that the partnership satisfied either or both of the following conditions (by reference to the previous financial year)—
1. The partnership's turnover | More than £200 million
2. The partnership's balance sheet total | More than £2 billion.
(4) The Treasury may by regulations provide that a UK partnership of a description specified in the regulations is not a qualifying partnership for the purposes of this Schedule (or any such purpose specified in the regulations).
(5) “Representative partner”, in relation to a UK partnership, means the partner who is required by a notice served under or by virtue of section 12AA(2) or (3) of TMA 1970 to make and deliver returns to an officer of HMRC.
“Financial year”
13 “Financial year”—
(a) in relation to a UK company, has the meaning given by the Companies Act 2006 (see section 390 of that Act),
(b) in relation to any other relevant body, means any period in respect of which a profit and loss account for the body's undertaking is required to be made up (whether by its constitution or by the law under which it is established), whether that period is a year or not,
(c) in relation to a UK partnership, means any period of account for which its representative partner has provided or is required to provide a partnership statement under a return issued under section 12AB TMA 1970.
“Turnover” and “balance sheet total”
14 (1) “Turnover”—
(a) in relation to a UK company, has the same meaning as in Part 15 of the Companies Act 2006 (see section 474 of that Act), and
(b) in relation to a UK partnership or a UK permanent establishment, has a corresponding meaning.
(2) “Balance sheet total”, in relation to a UK company, UK partnership or UK permanent establishment and a financial year, means the aggregate of the amounts shown as assets in its balance sheet at the end of the financial year.
“UK taxation”
15 (1) “UK taxation” means —
(a) income tax,
(b) corporation tax, including any amount assessable or chargeable as if it were corporation tax or treated as if it were corporation tax,
(c) value added tax,
(d) amounts for which the company is accountable under PAYE regulations,
(e) diverted profits tax,
(f) insurance premium tax,
(g) annual tax on enveloped dwellings,
(h) stamp duty land tax,
(i) stamp duty reserve tax,
(j) petroleum revenue tax;
(k) customs duties,
(l) excise duties,
(m) national insurance contributions.
(2) In relation to a tax strategy required to be published by Part 2, “UK taxation” refers to the taxes or duties mentioned above so far as relating to or affecting the bodies or body to which the required tax strategy relates.
PART 2 Publication of tax strategies
Qualifying UK groups: duty to publish a group tax strategy
16 (1) This paragraph applies in relation to a UK group which is a qualifying group in any financial year (“the current financial year”).
(2) The head of the group must ensure that a group tax strategy for the group, containing the information required by paragraph 17, is prepared and published on behalf of the group in accordance with this paragraph.
(3) The group tax strategy—
(a) must be published before the end of the current financial year, and
(b) if the group was a qualifying group in the previous financial year, must not be published more than 15 months after the day on which its previous group tax strategy was published.
(4) The group tax strategy—
(a) must be published on the internet by any of the UK companies that are members of the group so as to be accessible to the public free of charge (whether or not it is also published in any other way), and
(b) may be published as a separate document or as a self-contained part of a wider document.
(5) The head of the group must ensure that the group tax strategy published on the internet remains accessible to the public free of charge—
(a) if a group tax strategy for the group's next financial year is required by this paragraph to be published, until that tax strategy is published, or
(b) if paragraph (a) does not apply, for at least one year.
(6) For the purposes of this paragraph—
(a) a group tax strategy is published when it is first published on the internet as mentioned in paragraph (4)(a),
(b) the identity of the group is not to be regarded as altered by any change in its membership during the current financial year resulting from a relevant body—
(i) becoming a 51% subsidiary of a member of the group, or
(ii) ceasing to be a 51% subsidiary of another member of the group; and
(c) if the group becomes a UK sub-group of a foreign group during the current financial year, it is to be treated for the rest of that year as if it were still a UK group.
(7) In this paragraph and paragraph 17 “financial year”, in relation to a UK group, means a financial year of the head of the group.
Content of group tax strategy
17 (1) A group tax strategy required to be published on behalf of a UK group by paragraph 16 must set out—
(a) the approach of the group to risk management and governance arrangements in relation to UK taxation,
(b) the attitude of the group towards tax planning (so far as affecting UK taxation),
(c) the level of risk in relation to UK taxation that the group is prepared to accept, and
(d) the approach of the group towards its dealings with HMRC.
(2) The group tax strategy may—
(a) include other information relating to taxation (whether UK taxation or otherwise), and
(b) deal with a matter mentioned in sub-paragraph (1) by reference to the group as a whole or to individual members of the group (or to both).
(3) The information required by sub-paragraph (1) to be included in the group tax strategy does not include any information about activities of any member of the group that consists of the provision of tax advice or related professional services to persons who are not members of the group.
(4) The publication of information as the group tax strategy does not constitute publication of the strategy for the purposes of paragraph 16 unless the UK company publishing it makes clear (in a way that will be readily apparent to anyone accessing the information online) that the company regards its publication as complying with the duty under paragraph 16(2) in the current financial year.
(5) For the purposes of this paragraph a UK permanent establishment of a foreign member of the group is to be treated as if it were a member of the group.
(6) The Treasury may by regulations require the group tax strategy to include a country-by-country report.
(7) In this paragraph “country-by-country report” has the meaning given by the Taxes (Base Erosion and Profit Shifting) (Country-by-Country Reporting) Regulations 2016.
Penalty for non-compliance with paragraph 16
18 (1) This paragraph applies where paragraph 16 requires a group tax strategy to be published for a UK group in any financial year of the head of the UK group.
(2) The head of the group is liable to a penalty of £7,500 if—
(a) there is a failure to publish a group tax strategy for the group that complies with paragraph 16(2), or
(b) where a group tax strategy has been published, there is a failure to comply with paragraph 16(5).
(3) Subject to sub-paragraph (5) the head of the group is only liable to one penalty by virtue of sub-paragraph (2) in respect of a group tax strategy required for the financial year in question.
(4) Sub-paragraph (5) applies where—
(a) the head of the group is liable to a penalty under this paragraph in respect of a failure mentioned in sub-paragraph (2)(a), and
(b) no group tax strategy for the group that complies with paragraph 16(2) (disregarding paragraph 16(3)) is published within the period of 6 months after the last day on which the duty under paragraph 16(2) could have been complied with.
(5) At the end of that period, the head of the group—
(a) is liable to a further penalty of £7,500, and
(b) where the failure mentioned in sub-paragraph (4)(b) continues, is liable to a further penalty of £7,500 at the end of each subsequent month in which no such group tax strategy is published.
UK sub-groups: duty to publish a sub-group tax strategy
19 (1) This paragraph applies to a UK sub-group of a foreign group if in any financial year (“the current financial year”) the foreign group is a qualifying group.
(2) The head of the sub-group must ensure that a sub-group tax strategy for the sub-group, giving the information required by paragraph 20, is prepared and published in accordance with this paragraph.
(3) The sub-group tax strategy—
(a) must be published before the end of the current financial year, and
(b) if the group of which the sub-group is part was a qualifying group in the previous financial year, must not be published more than 15 months after the day on which its sub-group tax strategy for that year was published;
(4) The sub-group tax strategy—
(a) must be published on the internet by any of the UK companies that are members of the foreign group so as to be accessible to the public free of charge (whether or not it is also published in any other way), and
(b) may be published as a separate document or as a self-contained part of a wider document.
(5) The head of the sub-group must ensure that the sub-group tax strategy published on the internet remains accessible to the public free of charge—
(a) if a sub-group tax strategy for the sub-group's next financial year is required by this paragraph to be published, until that tax strategy is published, or
(b) if paragraph (a) does not apply, for at least one year.
(6) For the purposes of this paragraph—
(a) a sub-group tax strategy is published when it is first published on the internet as mentioned in sub-paragraph (4)(a),
(b) the identity of the sub-group is not affected by any change in its membership in the current financial year resulting from a relevant body becoming or ceasing to be a 51% subsidiary of a member of the sub-group, and
(c) if the sub-group becomes a UK sub-group of another foreign group during the current financial year, for the rest of that year it is to be treated as if it were still a UK sub-group of the original foreign group (but only a UK company within the sub-group may publish a sub-group tax strategy for the sub-group after that change).
(7) In this paragraph “financial year”, in relation to a UK sub-group, means a financial year of the head of the group of which it is a sub-group.
Content of a sub-group tax strategy
20 (1) Paragraph 17 applies in relation to a sub-group tax strategy required to be published on behalf of a UK sub-group by paragraph 19 as it applies to a group tax strategy required to be published by a qualifying UK group.
(2) In the application of paragraph 17 to a sub-group tax strategy, references to the group or members of the group are to be read as references to the UK sub-group or members of the UK sub-group.
(3) In the application of paragraph 17 as modified by this paragraph to a sub-group tax strategy, a UK permanent establishment of a foreign member of the UK sub-group is to be treated as if it were a member of the sub-group.
Penalty for non-compliance with requirements of paragraph 19
21 (1) This paragraph applies where paragraph 19 requires a sub-group tax strategy to be published for a UK sub-group in any financial year of the head of the sub-group.
(2) The head of the sub-group is liable to a penalty of £7,500 if—
(a) there is a failure to publish a sub-group tax strategy for the sub-group that complies with paragraph 19(2), or
(b) where a sub-group tax strategy has been published, there is a failure to comply with paragraph 19(5).
(3) Subject to sub-paragraph (5), the head of the sub-group is only liable to one penalty by virtue of sub-paragraph (2) in respect of a sub-group tax strategy required for the financial year in question.
(4) Sub-paragraph (5) applies where—
(a) the head of the sub-group is liable to a penalty under this paragraph in respect of a failure mentioned in sub-paragraph (2)(a), and
(b) no sub-group tax strategy for the sub-group that complies with paragraph 19(2) (disregarding paragraph 19(3)) is published within the period of 6 months after the last day on which the duty under paragraph 19(2) could have been complied with.
(5) At the end of that period, the head of the sub-group is liable—
(a) to a further penalty of £7,500, and
(b) where the failure mentioned in sub-paragraph (4)(b) continues, to a further penalty of £7,500 at the end of each subsequent month in which no such sub-group tax strategy is published.
Qualifying companies: duty to publish a company tax strategy
22 (1) This paragraph applies in relation to a UK company which in any financial year (“the current financial year”) is a qualifying company.
(2) The company must prepare and publish a company tax strategy, containing the information required by paragraph 23, in accordance with this paragraph.
(3) The duty under sub-paragraph (2) applies even if the company becomes a member of a UK group or a UK sub-group during the current financial year.
(4) The company tax strategy—
(a) must be published by the company before the end of the current financial year, and
(b) if the company was a qualifying company in the previous financial year, must not be published more than 15 months after the day on which its company tax strategy was published in the previous financial year.
(5) The company tax strategy—
(a) must be published on the internet so as to be accessible to the public free of charge (whether or not published in any other way), and
(b) may be published as a separate document or a self- contained part of a wider document.
(6) The company must ensure that the company tax strategy published on the internet remains accessible to the public free of charge—
(a) if a company tax strategy for the next financial year is required by this paragraph to be published, until that tax strategy is published, or
(b) if paragraph (a) does not apply, for at least one year.
(7) For the purposes of this paragraph a company tax strategy is published when it is first published as mentioned in sub-paragraph (5)(a).
(8) A UK permanent establishment which in any financial year is by virtue of paragraph 5(6) to be treated as a qualifying company is to be treated for the purposes of this paragraph and paragraphs 23 and 24 as if it were a UK company which in that financial year is a qualifying company.
Content of a company tax strategy
23 (1) The company tax strategy must set out—
(a) the company's approach to risk management and governance arrangements in relation to UK taxation,
(b) the company's attitude towards tax planning (so far as affecting UK taxation),
(c) the level of risk in relation to UK taxation that the company is prepared to accept,
(d) the company's approach towards its dealings with HMRC.
(2) The company tax strategy may include other information relating to taxation (whether UK taxation or otherwise).
(3) The information required by sub-paragraph (1) to be included in a company tax strategy does not include any information about activities of the company that consist of the provision of tax advice or related professional services to other persons.
(4) The publication of information as a company tax strategy does not constitute publication of the strategy for the purposes of paragraph 22 unless the company makes clear (in a way that will be readily apparent to anyone accessing the information online) that the company regards its publication as complying with the duty under paragraph 22(2) in the current financial year.
Penalty for non-compliance with paragraph 22
24 (1) This paragraph applies where paragraph 22 requires a company tax strategy to be published for a UK company in any financial year.
(2) The company is liable to a penalty of £7,500 if—
(a) there is a failure to publish a company tax strategy for the company that complies with paragraph 22(2), or
(b) where a company tax strategy has been published, there is a failure to comply with paragraph 22(6).
(3) Subject to sub-paragraph (5), the company is only liable to one penalty by virtue of sub-paragraph (2) in respect of a company tax strategy required for the financial year in question.
(4) Sub-paragraph (5) applies where—
(a) a penalty is imposed under this paragraph in respect of a failure mentioned in sub-paragraph (2)(a), and
(b) no company tax strategy that complies with paragraph 22(2) (disregarding paragraph 22(4)) is published within the period of 6 months after the last day on which the duty under paragraph 22(2) could have been complied with.
(5) At the end of that period, the company is liable—
(a) to a further penalty of £7,500, and
(b) where the failure mentioned in sub-paragraph (4)(b) continues, to a further penalty of £7,500 at the end of each subsequent month in which no such company tax strategy is published.
Qualifying partnerships: duty to publish a partnership tax strategy
25 (1) Paragraphs 22 to 24 apply in relation to a UK partnership which is (in any financial year of the partnership) a qualifying partnership as they apply to a UK company which is (in any financial year of the company) a qualifying company.
(2) Those paragraphs have effect in their application to a qualifying partnership—
(a) with the omission of paragraph 22(3) and (8),
(b) as if for “company tax strategy” (in each place) there were substituted “ partnership tax strategy ”, and
(c) as if for “company” and “company's” (in each place) there were substituted respectively “ partnership ” and “partnership's”.
Penalties under this Part: general provisions
26 (1) Paragraphs 27 to 33 apply in relation to the liability of any person to a penalty under this Part and, accordingly, in those paragraphs—
“failure”, in relation to a liability for a penalty, means a failure which could give rise to that liability,
“liability to a penalty” means a liability under paragraph 18, 21 or 24 (including paragraph 24 as applied to a qualifying UK partnership), and
“penalty” means a penalty under any of those paragraphs.
(2) In those paragraphs “tribunal” means the First-tier Tribunal or, where determined by or under the Tribunal Procedure Rules, the Upper Tribunal.
Failure to comply with a time limit
27 A failure to do anything required by this Part to be done within a limited period of time goes not give rise to liability to a penalty if it is done within such further time (if any) as an officer of Revenue and Customs may have allowed.
Reasonable excuse
28 (1) Liability to a penalty for a failure does not arise if the person who would otherwise be liable to that penalty satisfies HMRC or (on an appeal notified to the tribunal) the tribunal that the person had a reasonable excuse for that 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) where the person relies on another person to do anything, that cannot be a reasonable excuse—
(i) unless the first person took reasonable care to avoid the failure, or
(ii) if the first person is a UK group or UK sub-group, where the person relied on is another member of the group or sub-group,
(c) where the person had a reasonable excuse 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.
Assessment of penalties
29 (1) Where a person becomes liable to a penalty—
(a) HMRC may assess the penalty, and
(b) if they do so, HMRC must notify the person of the assessment.
(2) An assessment of a penalty may not be made—
(a) more than 6 months after the failure first comes to the attention of an officer of Revenue and Customs, or
(b) more than 6 years after the end of the financial year in which the tax strategy to which the failure relates was (or was originally) required to be published.
Appeal
30 (1) A person may appeal against a decision of HMRC that a penalty is payable by that person.
(2) Notice of an appeal must be given—
(a) in writing,
(b) before the end of the period of 30 days beginning with the date on which the notification under paragraph 29(1)(b) was issued,
(3) Notice of an appeal must state the grounds of appeal.
(4) On an appeal that is notified to the tribunal, the tribunal may confirm or cancel the decision.
(5) Subject to this paragraph and paragraph 31, the provisions of Part 5 of TMA 1970 relating to appeals have effect in relation to appeals under this Schedule as they have effect in relation to an appeal against an assessment to income tax.
Enforcement
31 (1) A penalty must be paid—
(a) before the end of the period of 30 days beginning with the date on which the notification under paragraph 29(1)(b) was issued, or
(b) if a notice of appeal is given, before the end of 30 days beginning with the day on which the appeal is determined or withdrawn.
(2) A penalty may be enforced as if it were corporation tax charged in an assessment and due and payable.
Power to change amount of penalties
32 (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 any sums for the time being specified in paragraph 18, 21 or 24 such other sum as appear to them to be justified by the change.
(2) In sub-paragraph (1) “relevant date” means—
(a) the date on which this Act is passed, and
(b) each date on which the power conferred by that sub-paragraph has been exercised.
(3) Regulations under this paragraph do not apply to a failure that occurs in respect of a financial year (of the body or partnership responsible for the failure) that begins before the date on which they come into force.
Application of provisions of TMA 1970
33 Subject to the provisions of this Part, the following provisions of TMA 1970 apply for the purposes of this Part as they apply for the purposes of the Taxes Acts—
(a) section 108 (responsibility of company officers),
(b) section 114 (want of form), and
(c) section 115 (delivery and service of documents).
Meaning of “tax strategy”
34 In this Part “tax strategy” means—
(a) a group tax strategy (see paragraphs 16 to 18),
(b) a sub-group tax strategy (see paragraphs 19 to 21),
(c) a company tax strategy (see paragraphs 22 to 24), or
(d) a partnership tax strategy (see paragraph 25).
PART 3 Sanctions for persistently unco-operative large businesses
Large groups falling within Part 3
35 A UK group falls within this Part of this Schedule (“this Part”) if—
(a) the group has persistently engaged in unco-operative behaviour (see paragraphs 36 to 38),
(b) some or all of the unco-operative behaviour has caused there to be, or contributed to there being, two or more significant tax issues in respect of the group or members of the group which are unresolved (see paragraph 39), and
(c) there is a reasonable likelihood of further instances of the group engaging in unco-operative behaviour in a manner which causes there to be, or contributes to there being, significant tax issues in respect of the group or members of the group.
36 (1) A UK group has “engaged in unco-operative behaviour” if—
(a) a member of the group has satisfied either or both of the conditions listed in sub-paragraph (2), or
(b) two or more of the members of the group, taken together, have satisfied either or both of those conditions.
(2) Those conditions are—
(a) the behaviour condition (see paragraph 37);
(b) the arrangements condition (see paragraph 38).
(3) A UK group has engaged in unco-operative behaviour “persistently” if—
(a) a member of the group has done so persistently, or
(b) two or more members of the group, taken together, have done so persistently.
(4) References in this Part to doing something “persistently” include doing it on a sufficient number of occasions for it to be clear that it represents a pattern of behaviour.
37 (1) A member of a UK group has, or two or more members of a UK group (taken together) have, “satisfied the behaviour condition” if it has, or they have, behaved in a manner which has delayed or otherwise hindered HMRC in the exercise of their functions in connection with determining the liability to UK taxation of the group or a member of the group.
(2) Factors which may indicate that a member of a UK group has behaved as described in sub-paragraph (1) include—
(a) the extent to which HMRC have used statutory powers to obtain information relating to the UK group or members of the group;
(b) the reasons why those powers have been used;
(c) the number and seriousness of inaccuracies in, and omissions from, documents given to HMRC by or on behalf of the UK group or members of the group;
(d) the extent to which, in dealings with HMRC, members of the group (or people acting on their behalf) have relied on interpretations of legislation relating to UK taxation which, at the time, are speculative.
(3) An interpretation of legislation relating to UK taxation is “speculative” if it is likely that a court or tribunal would disagree with it.
38 (1) A member of a UK group has “satisfied the arrangements condition” if it is a party to a tax avoidance scheme.
(2) “Tax avoidance scheme” means—
(a) arrangements in respect of which a notice of final decision has been given under—
(i) paragraph 12 of Schedule 43 to FA 2013,
(ii) paragraph 5 or 6 of Schedule 43A to FA 2013, or
(iii) paragraph 9 of Schedule 43B to FA 2013,
stating that a tax advantage arising from the arrangements is to be counteracted;
(b) arrangements which are notifiable arrangements for the purposes of Part 7 of FA 2004 (disclosure of tax avoidance schemes), other than arrangements in relation to which HMRC have given notice under section 312(6) of FA 2004 (notice that promoters not under duty to provide clients with prescribed information);
(c) a scheme which is a notifiable scheme for the purposes of Schedule 11A to VATA 1994 (disclosure of avoidance schemes).
39 (1) There is a significant tax issue in respect of a UK group or a member of a UK group where—
(a) there is a disagreement between HMRC and a member of the group about an issue affecting the amount of the liability of the group or a member of the group to UK taxation,
(b) the issue has been, or could be, referred to a court or tribunal to determine, and
(c) as regards the amount of the liability, the difference between HMRC's view and the view of the member is, or is likely to be, not less than £2 million.
(2) The reference in sub-paragraph (1)(a) to circumstances in which there is a disagreement include circumstances in which there is a reasonable likelihood of a disagreement.
(3) The Treasury may by regulations substitute a higher amount for the amount for the time being specified in sub-paragraph (1)(c).
40 The references in paragraphs 36 to 39 to things done by a member of a UK group (“the group in question”)—
(a) include acts and omissions of a relevant body that is not a member of the group in question if they took place at a time when the relevant body was a member of a group headed by the body that is the head of the group in question;
(b) do not include acts or omissions of a relevant body that is a member of the group in question if they took place at a time when the relevant body was not a member of a group headed by the body that is the head of the group in question.
Warning notices
41 (1) A designated HMRC officer may give the head of a UK group a notice under this paragraph (a “warning notice”) if the officer considers that the group is a qualifying group that falls within this Part.
(2) The notice must set out the reasons why the officer considers that the group falls within this Part.
(3) The notice—
(a) may be withdrawn by a designated HMRC officer at any time by giving a further notice to the head of the group, and
(b) expires (if not previously withdrawn) at the end of the period of 15 months beginning with the day on which it was given.
(4) Once a warning notice has been given —
(a) it is immaterial for the purposes of this Part whether the group remains a qualifying group,
(b) the identity of the group is not to be regarded as altered by any change in its membership resulting from a relevant body—
(i) becoming a 51% subsidiary of a member of the group, or
(ii) ceasing to be a 51% subsidiary of another member of the group; and
(c) if the group becomes a UK sub-group of a foreign group it is to be treated as if it were still a UK group.
(5) Sub-paragraph (4) applies while the group is subject to—
(a) the warning notice, or
(b) any other notice under this Part issued as a result of the group having been given the warning notice.
Special measures notices
42 (1) This paragraph applies to a UK group if—
(a) the head of the group has been given a warning notice in relation to the group that has not been withdrawn,
(b) the period of 12 months beginning with the day on which the warning notice was given has elapsed, and
(c) the period of 15 months beginning with that day has not elapsed.
(2) If a designated HMRC officer considers that the group falls within this Part, the officer may give the head of the group a notice under this paragraph (a “special measures notice”).
(3) When considering whether the group falls within this Part, the officer may take into account any relevant behaviour, whether or not it is mentioned in the warning notice.
(4) When deciding whether to give a special measures notice, the designated HMRC officer must consider any representations made by a member of the group before the end of the period of 12 months beginning with the day on which the warning notice was given.
(5) The special measures notice must set out the reasons why the officer considers that the group falls within this Part.
(6) Paragraph 45 deals with other circumstances in which a UK group may be given a special measures notice.
43 (1) A special measures notice—
(a) may be withdrawn by a designated HMRC officer at any time by giving a further notice to the head of the UK group, and
(b) expires, if not previously withdrawn, at the end of the period of 27 months beginning with the relevant day.
(2) “The relevant day” means the later of—
(a) the day on which the special measures notice was given, and
(b) the day on which it was last confirmed under paragraph 44.
44 (1) This paragraph applies to a UK group if—
(a) the head of the group has been given a special measures notice in relation to the group which has not been withdrawn,
(b) the period of 24 months beginning with the relevant day has elapsed, and
(c) the period of 27 months beginning with that day has not elapsed.
(2) If a designated HMRC officer considers that the group falls within this Part, the officer may give the head of the group a notice under this paragraph (a “confirmation notice”) confirming the special measures notice given in relation to the group.
(3) When considering whether the group falls within this Part, the officer may take into account any relevant behaviour, whether or not it is mentioned in the special measures notice which is to be confirmed, in any previous confirmation notice or in the warning notice.
(4) “The relevant day” has the same meaning as in paragraph 43(2).
(5) The confirmation notice must set out the reasons why the officer considers that the group falls within this Part.
(6) When deciding whether to give a confirmation notice, a designated HMRC officer must consider any representations made by a member of the group before the end of the period of 24 months beginning with the relevant day.
(7) A confirmation notice—
(a) may be withdrawn by a designated HMRC officer at any time by giving a further notice to the head of the group, and
(b) expires, if not previously withdrawn, at the end of the period of 27 months beginning with the day on which it is given.
45 (1) This paragraph applies in relation to a UK group where—
(a) the head of the group has been given a warning notice or a special measures notice in relation to the group, and
(b) that notice has expired.
(2) A designated HMRC officer may give the head of a UK group a special measures notice if—
(a) it appears to the officer that—
(i) during the period of 6 months beginning with the day on which the notice mentioned in sub-paragraph (1)(a) expired (“the expiry day”), the group has engaged in unco-operative behaviour (see paragraphs 36 to 38), and
(ii) there is a reasonable likelihood that, if it had engaged in the behaviour before the notice expired, a designated HMRC officer would have considered that the group fell within this Part (so that a special measures notice or confirmation notice could have been given to the head of the group),
(b) during the period of 7 months beginning with the expiry day, a designated HMRC officer has notified the head of the group that the power under this paragraph may be exercised in relation to the group, and
(c) the period of 9 months beginning with that day has not elapsed.
(3) When deciding whether to give a special measures notice under this paragraph, the officer must consider any representations made by a member of the group before the end of the period of 8 months beginning with the expiry day.
Circumstances in which warning and special measures notices are treated as having been given
46 (1) Sub-paragraphs (2) and (3) apply where—
(a) a relevant body (“B1”) is given a warning notice, and
(b) before the notice ceases to have effect, B1 becomes a member of a group headed by another relevant body ( “ H1 ”).
(2) H1 is to be treated as having been given a warning notice on the day on which the warning notice was given to B1.
(3) A warning notice treated as given under sub-paragraph (2) is valid whether or not, on the day mentioned in that sub-paragraph, H1 was the head of a qualifying UK group that fell within this Part.
(4) Sub-paragraphs (5) to (7) apply where—
(a) a relevant body (“B2”) is given a special measures notice, and
(b) before the notice ceases to have effect, B2 becomes a member of a group headed by another relevant body ( “ H2 ”).
(5) H2 is to be treated as having been given a special measures notice on the day on which the special measures notice was given to B2.
(6) A special measures notice treated as given under sub-paragraph (5) is valid whether or not, on the day mentioned in that sub-paragraph, H2 was the head of a qualifying UK group that fell within this Part.
(7) Paragraph 47(1) does not by virtue of sub-paragraphs (5) and (6) of this paragraph apply to an inaccuracy in a document given to HMRC by or on behalf of a person—
(a) at a time when the person was a member of a group headed by H2, but
(b) before the day B2 becomes a member of H2.
(8) Sub-paragraphs (9) and (10) apply where—
(a) a relevant body (“B3”) is given a confirmation notice, and
(b) before the notice ceases to have effect, B3 becomes a member of a group headed by another relevant body ( “ H3 ”).
(9) H3 is to be treated as having been given a confirmation notice on the day on which the confirmation notice was given to B3.
(10) A confirmation notice treated as given under sub-paragraph (9) is valid whether or not, on the day mentioned in that sub-paragraph, H3 was the head of a qualifying UK group that fell within this Part.
(11) The Treasury may by regulations make provision for warning notices, special measures notices and confirmation notices to be treated as having been given to relevant bodies in other circumstances described in the regulations.
(12) Regulations under this paragraph may, in particular—
(a) make provision about the validity of notices treated as given by virtue of the regulations;
(b) make provision about the effect of paragraph 47(1) in cases involving such notices.
Sanctions: liability for penalties for errors in documents given to HMRC
47 (1) For the purposes of Schedule 24 to FA 2007 (penalties for errors), an inaccuracy in a document given to HMRC by or on behalf of a person is to be treated as being due to failure by the person to take reasonable care if—
(a) the document was given to HMRC at a time when the person was a member of a group subject to a special measures notice, and
(b) the inaccuracy—
(i) relates to a tax avoidance scheme (as defined in paragraph 38) entered into by the person at a time when the person was a member of a group subject to a special measures notice, or
(ii) is, entirely or partly, attributable to an interpretation of legislation relating to UK taxation which, at the time the document was given to HMRC, was speculative.
(2) A group is “subject to a special measures notice” if a special measures notice—
(a) has been given to the head of the group in relation to the group, and
(b) is in force.
(3) An interpretation of legislation relating to UK taxation is “speculative” if it is likely that a court or tribunal would disagree with it.
(4) Sub-paragraph (1) does not apply to an inaccuracy if—
(a) it is deliberate on the part of the person or someone acting on the person's behalf,
(b) it is in fact due to a failure by the person or someone acting on the person's behalf to take reasonable care, or
(c) it is treated as due to such a failure by virtue of another enactment.
48 In Schedule 24 to FA 2007 (penalties for errors), at the end of paragraph 3 (meaning of “careless” etc) insert—
(3) Paragraph 47 of Schedule 19 to FA 2016 (special measures for persistently unco-operative large businesses) provides for certain inaccuracies to be treated, for the purposes of this Schedule, as being due to a failure by P to take reasonable care.
Sanctions: Commissioners publishing information
49 (1) If a group is subject to a confirmed special measures notice, the Commissioners for Her Majesty's Revenue and Customs (“the Commissioners”) may publish the following information—
(a) the name of the group, including any previous name;
(b) the address or registered office of the head of the group;
(c) any other information that the Commissioners consider it appropriate to publish in order to identify the group;
(d) the fact that the group is subject to a confirmed special measures notice.
(2) A group is “subject to a confirmed special measures notice” if sub-paragraph (3) or (4) is satisfied.
(3) This sub-paragraph is satisfied if—
(a) a special measures notice has been given to the head of the group and confirmed under paragraph 44, and
(b) the special measures notice is in force.
(4) This sub-paragraph is satisfied if—
(a) a special measures notice has been given to the head of the group and confirmed under paragraph 44,
(b) that notice has ceased to have effect,
(c) a further special measures notice has been given to the head of the group under paragraph 45 in the period of 9 months beginning with the day on which the special measures notice mentioned in paragraph (a) ceased to have effect, and
(d) that notice is in force.
(5) Before publishing the information, the Commissioners must—
(a) inform the head of the group that they are considering doing so, and
(b) allow the head of the group a reasonable opportunity to make representations about whether the information should be published.
(6) If, after information about a group is published under this paragraph, the group ceases to be subject to a confirmed special measures notice, the Commissioners must publish a notice stating that the group is no longer subject to a confirmed special measures notice.
(7) A notice under sub-paragraph (6) must be published before the end of the period of 30 days beginning with the day on which the special measures notice is withdrawn or has expired.
(8) The Commissioners may publish information and notices under this paragraph in any manner they consider appropriate.
Application of Part 3 to large UK sub-groups
50 (1) A UK sub-group of a foreign group falls within this Part if—
(a) the sub-group has persistently engaged in unco-operative behaviour (see paragraphs 36 to 38),
(b) some or all of the unco-operative behaviour has caused there to be, or contributed to there being, two or more significant tax issues in respect of the sub-group or members of the sub-group which are unresolved (see paragraph 39), and
(c) there is a reasonable likelihood of further instances of the sub-group engaging in unco-operative behaviour in a manner which causes there to be, or contributes to there being, significant tax issues in respect of the sub-group or members of the sub-group.
(2) Paragraphs 36 to 40 apply in relation to a UK sub-group as they apply in relation to a UK group.
(3) Paragraphs 41 to 45 apply in relation to the head of a UK sub-group of a foreign group that is a qualifying group at the material time as they apply in relation to the head of a UK group.
(4) In the application of paragraph 41 in the case of a UK sub-group, sub-paragraph (4) has effect in relation to a UK sub-group as if for paragraphs (b) and (c) there were substituted—
(b) the identity of the sub-group is not to be regarded as altered by any change in its membership resulting from a relevant body—
(i) becoming a 51% subsidiary of a member of the sub-group, or
(ii) ceasing to be a 51% subsidiary of another member of the sub- group; and
(c) if the sub-group becomes a UK sub-group of another foreign group, it is to be treated as if it were still a UK sub-group of the original foreign group.
(5) As applied by this paragraph, paragraphs 36 to 45 have effect as if references to a UK group (including in references to the head of a UK group or members of a UK group) were references to a UK sub-group.
(6) In paragraphs 40, 41, 46, 47 and 49, references to a group (including in references to the head of a group or members of a group) include a UK sub-group.
(7) In paragraph 46, references to the head of a UK group include the head of a UK sub-group.
Application of Part 3 to large companies
51 (1) A UK company falls within this Part if—
(a) the company has persistently engaged in unco-operative behaviour (see paragraphs 36 to 38),
(b) some or all of the unco-operative behaviour has caused there to be, or contributed to there being, two or more significant tax issues in respect of the company which are unresolved (see paragraph 39), and
(c) there is a reasonable likelihood of further instances of the company engaging in unco-operative behaviour in a manner which causes there to be, or contributes to there being, significant tax issues in respect of the company.
(2) Paragraphs 36 to 39 apply in relation to a company as they apply in relation to a UK group.
(3) Paragraphs 41 to 45 apply in relation to a company as they apply in relation to the head of a UK group.
(4) As applied by this paragraph, paragraphs 36 to 39 and 41 to 45 have effect as if references to a UK group, the head of a UK group or a member of a UK group were references to a company.
(5) Paragraph 47 applies in relation to a company as it applies in relation to a member of a group.
(6) Paragraph 49 applies in relation to a company as it applies in relation to a group.
(7) As applied by this paragraph, paragraphs 47 and 49 have effect as if references to a group, the head of a group or a member of a group were references to a company.
Application of Part 3 to large partnerships
52 (1) A UK partnership falls within this Part if—
(a) the partnership has persistently engaged in unco-operative behaviour (see paragraphs 36 to 38),
(b) some or all of the unco-operative behaviour has caused there to be, or contributed to there being, two or more significant tax issues in respect of the partnership which are unresolved (see paragraph 39), and
(c) there is a reasonable likelihood of further instances of the partnership engaging in unco-operative behaviour in a manner which causes there to be, or contributes to there being, significant tax issues in respect of the partnership.
(2) Paragraphs 36 to 39 of this Schedule apply in relation to a UK partnership as they apply in relation to a UK group.
(3) Paragraphs 41 to 45 of this Schedule apply in relation to the representative partner of a UK partnership as they apply in relation to the head of a UK group.
(4) As applied by this paragraph, paragraphs 36 to 39 and 41 to 45 have effect as if—
(a) references to a UK group were references to a UK partnership;
(b) references to the head of a UK group were references to the representative partner of a UK partnership;
(c) references to a member of a UK group were references to a partner of a UK partnership, acting in the person's capacity as such.
(5) The Treasury may by regulations make provision for warning notices, special measures notices and confirmation notices to be treated as having been given to the representative partner of a UK partnership in circumstances described in the regulations.
(6) Paragraph 46(12) applies to regulations under this paragraph.
(7) Paragraph 47 applies in relation to an inaccuracy in a document given to HMRC by a partner of a UK partnership, acting in the person's capacity as such, as if—
(a) references to a group were references to a partnership;
(b) references to the head of a group were references to the representative partner of a partnership;
(c) references to a member of a group were references to a partner of a partnership.
(8) Paragraph 47 applies in relation to an inaccuracy in any other document given to HMRC on behalf of a UK partnership as if—
(a) references to a person included a UK partnership;
(b) references to a group, or a member of a group, were references to a UK partnership;
(c) references to the head of a group were references to the representative partner of a UK partnership.
(9) Paragraph 49 applies in relation to a UK partnership as it applies in relation to a group.
(10) As applied by this paragraph, paragraph 49 has effect as if—
(a) references to a group were references to a UK partnership;
(b) references to the head of a group were references to the representative partner of a UK partnership.
Meaning of “designated HMRC officer”
53 In this Part “designated HMRC officer” means an officer of Revenue and Customs who has been designated by the Commissioners for Her Majesty's Revenue and Customs for the purposes of this Part.
PART 4 Supplementary
Amendment of power under section 122 of FA 2015
54 The power to make regulations under section 122(6)(c) of FA 2015 (country- by-country reporting: incidental etc provision that may be included in regulations) includes power to amend paragraph 7 above.
Regulations
55 (1) Regulations under this Schedule are to be made by statutory instrument.
(2) A statutory instrument containing regulations under this Schedule is subject to annulment in pursuance of a resolution of the House of Commons.
Terms defined for purposes of more than one paragraph of this Schedule
Term | Paragraph
balance sheet total | paragraph 14(2)
confirmation notice (in Part 3) | paragraph 44
designated HMRC officer (in Part 3) | paragraph 53
engaged in unco-operative behaviour (in Part 3) | paragraph 36
failure (in paragraphs 27 to 33) | paragraph 26(1)
financial year (in relation to a UK group) (in paragraphs 16 and 17) | paragraph 16(7)
foreign (in relation to a relevant body) | paragraph 2(2)
foreign (in relation to a group) | paragraph 6(3)
group | paragraph 6(1)
group other than an MNE Group | paragraph 8
head (in relation to a group) | paragraph 9
head (in relation to a UK sub-group) | paragraph 11(2)
“liability to a penalty” (in paragraphs 27 to 33) | paragraph 26(1)
MNE Group | paragraph 7(1)
member (in relation to a group) | paragraph 8(2) and (3)
penalty (in paragraphs 27 to 33) | paragraph 26(1)
qualifying company | paragraph 5
qualifying group | paragraph 10
qualifying UK partnership | paragraph 12(2)
relevant body | paragraph 2(1)
representative partner | paragraph 12(5)
satisfied the arrangements condition (in Part 3) | paragraph 38
satisfied the behaviour condition (in Part 3) | paragraph 37
special measures notice | paragraphs 42 and 45
tax strategy (in Part 2) | paragraph 34
tribunal (in paragraphs 27 to 33) | paragraph 26(2)
turnover | paragraph 14(1)
UK company | paragraph 3
UK group | paragraph 6(2)
UK partnership | paragraph 12(1)
UK permanent establishment | paragraph 4(1)
UK sub-group | paragraph 11(1)
UK taxation | paragraph 15
warning notice | paragraph 41.
SCHEDULE 20 Penalties for enablers of offshore tax evasion or non-compliance
Section 162
PART 1 Liability for penalty
Liability for penalty
1 (1) A penalty is payable by a person (P) who has enabled another person (Q) to carry out offshore tax evasion or non-compliance, where conditions A and B are met.
(2) For the purposes of this Schedule—
(a) Q carries out “offshore tax evasion or non-compliance” by—
(i) committing a relevant offence, or
(ii) engaging in conduct that makes Q liable (if the applicable conditions are met) to a relevant civil penalty,
where the tax at stake is income tax, capital gains tax or inheritance tax, and
(b) P “has enabled” Q to carry out offshore tax evasion or non-compliance if P has encouraged, assisted or otherwise facilitated conduct by Q that constitutes offshore tax evasion or non-compliance.
(3) The relevant offences are-
(a) an offence of cheating the public revenue involving offshore activity, or
(b) an offence under section 106A of TMA 1970 (fraudulent evasion of income tax) involving offshore activity,
(c) an offence under section 106B, 106C or 106D of TMA 1970 (offences relating to certain failures to comply with section 7 or 8 by a taxpayer chargeable to income tax or capital gains tax on or by reference to offshore income, assets or liabilities).
(4) The relevant civil penalties are—
(a) a penalty under paragraph 1 of Schedule 24 to FA 2007 (errors in taxpayer's document) involving an offshore matter or an offshore transfer (within the meaning of that Schedule),
(b) a penalty under paragraph 1 of Schedule 41 to FA 2008 (failure to notify etc) in relation to a failure to comply with section 7(1) of TMA 1970 involving offshore activity,
(c) a penalty under paragraph 6 of Schedule 55 to FA 2009 (failure to make return for 12 months) involving offshore activity,
(d) a penalty under paragraph 1 of Schedule 21 to FA 2015 (penalties in connection with relevant offshore asset moves).
(e) a penalty under paragraph 3 of Schedule 25 to FA 2021 (penalties for deliberately withholding information) involving offshore activity.
(5) Condition A is that P knew when P's actions were carried out that they enabled, or were likely to enable, Q to carry out offshore tax evasion or non-compliance.
(6) Condition B is that—
(a) in the case of offshore tax evasion or non-compliance consisting of the commission of a relevant offence, Q has been convicted of the offence and the conviction is final, or
(b) in the case of offshore tax evasion or non-compliance consisting of conduct that makes Q liable to a relevant penalty—
(i) Q has been found to be liable to such a penalty, assessed and notified, and the penalty is final, or
(ii) a contract has been made between the Commissioners for Her Majesty's Revenue and Customs and Q under which the Commissioners undertake not to assess the penalty or (if it has been assessed) not to take proceedings to recover it.
(7) For the purposes of sub-paragraph (6)(a)—
(a) “convicted of the offence” means convicted of the full offence (and not for example of an attempt), and
(b) a conviction becomes final when the time allowed for bringing an appeal against it expires or, if later, when any appeal against conviction has been determined.
(8) For the purposes of sub-paragraph (6)(b)(i) a penalty becomes final when the time allowed for any appeal or further appeal relating to it expires or, if later, any appeal or final appeal relating to it is determined.
(9) It is immaterial for the purposes of condition B that—
(a) any offence of which Q was convicted, or
(b) any penalty for which Q was found to be liable,
relates also to other tax evasion or non-compliance by Q.
(10) In this Schedule “other tax evasion or non-compliance by Q” means conduct by Q that—
(a) constitutes an offence of cheating the public revenue or an offence of fraudulent evasion of tax, or
(b) makes Q liable to a penalty under any provision of the Taxes Acts,
but does not constitute offshore tax evasion or non-compliance.
(11) Nothing in condition B affects the law of evidence as to the relevance if any of a conviction, assessment of a penalty or contract mentioned in sub-paragraph (6) for the purpose of proving that condition A is met in relation to P.
(12) In this Schedule “conduct” includes a failure to act.
Meaning of “involving offshore activity” and related expressions
2 (1) This paragraph has effect for the purposes of this Schedule.
(2) Conduct involves offshore activity if it involves—
(a) an offshore matter,
(b) an offshore transfer, or
(c) a relevant offshore asset move.
(3) Conduct involves an offshore matter if it results in a potential loss of revenue that is charged on or by reference to—
(a) income arising from a source in a territory outside the United Kingdom,
(b) assets situated or held in a territory outside the United Kingdom,
(c) activities carried on wholly or mainly in a territory outside the United Kingdom, or
(d) anything having effect as if it were income, assets or activities of the kind described above.
(4) Where the tax at stake is inheritance tax, assets are treated for the purposes of sub-paragraph (3) as situated or held in a territory outside the United Kingdom if they are so held or situated immediately after the transfer of value by reason of which inheritance tax becomes chargeable.
(5) Conduct involves an offshore transfer if—
(a) it does not involve an offshore matter,
(b) it is deliberate (whether or not concealed) and results in a potential loss of revenue,
(c) the condition set out in paragraph 4AA of Schedule 24 to FA 2007 is satisfied.
(6) Conduct involves a relevant offshore asset move if at a time when Q is the beneficial owner of an asset (“the qualifying time”)—
(a) the asset ceases to be situated or held in a specified territory and becomes situated or held in a non-specified territory,
(b) the person who holds the asset ceases to be resident in a specified territory and becomes resident in a non-specified territory, or
(c) there is a change in the arrangements for the ownership of the asset,
and Q remains the beneficial owner of the asset, or any part of it, immediately after the qualifying time.
(7) Paragraphs 4(2) to (4) of Schedule 21 to FA 2015 apply for the purposes of sub-paragraph (6) above as they apply for purposes of paragraph 4 of that Schedule.
(8) In sub-paragraph (6) above, “specified territory” has the same meaning as in paragraph 4(5) of Schedule 21 to FA 2015.
Amount of penalty
3 (1) The penalty payable under paragraph 1 is (except in a case mentioned in sub-paragraph (2)) the higher of—
(a) 100% of the potential lost revenue, or
(b) £3,000.
(2) In a case where P has enabled Q to engage in conduct which makes Q liable to a penalty under paragraph 1 of Schedule 21 to FA 2015, the penalty payable under paragraph 1 is the higher of—
(a) 50% of the potential lost revenue in respect of the original tax non-compliance, and
(b) £3,000.
(3) In sub-paragraph (2)(a) “the original tax non-compliance” means the conduct that incurred the original penalty and “the potential lost revenue” (in respect of that non-compliance) is—
(a) the potential lost revenue under Schedule 24 to FA 2007,
(b) the potential lost revenue under Schedule 41 to FA 2008, or
(c) the liability to tax which would have been shown on the return (within the meaning of Schedule 55 to FA 2009), or
(d) the liability to tax which would have been shown on the return (within the meaning of Schedule 25 to FA 2021),
according to whether the original penalty was incurred under paragraph 1 of Schedule 24, paragraph 1 of Schedule 41 or paragraph 6 of Schedule 55 , paragraph 6 of Schedule 55 or paragraph 3 of Schedule 25.
Potential lost revenue: enabling Q to commit relevant offence
4 (1) The potential lost revenue in a case where P is liable to a penalty under paragraph 1 for enabling Q to commit a relevant offence is the same amount as the potential lost revenue applicable for the purposes of the corresponding relevant civil penalty (determined in accordance with the relevant sub-paragraph of paragraph 5).
(2) Where Q's offending conduct is—
(a) an offence of cheating the public revenue involving offshore activity, or
(b) an offence under section 106A of TMA 1970 involving offshore activity,
the corresponding relevant civil penalty is the penalty which Q is liable for as a result of that offending conduct.
(3) Where Q's offending conduct is an offence under section 106B, 106C or 106D of TMA 1970, the corresponding relevant civil penalty is—
(a) for an offence under section 106B of TMA 1970, a penalty under paragraph 1 of Schedule 41 to FA 2008,
(b) for an offence under section 106C of TMA 1970, a penalty under paragraph 6 of Schedule 55 to FA 2009 or paragraph 3 of Schedule 25 to FA 2021, and
(c) for an offence under section 106D of TMA 1970, a penalty under paragraph 1 of Schedule 24 to FA 2007.
(4) In determining any amount of potential lost revenue for the purposes of this paragraph, the fact Q has been prosecuted for the offending conduct is to be disregarded.
Potential lost revenue: enabling Q to engage in conduct incurring relevant civil penalty
5 (1) The potential lost revenue in a case where P is liable to a penalty under paragraph 1 for enabling Q to engage in conduct that makes Q liable (if the applicable conditions are met) to a relevant civil penalty is to be determined as follows.
(2) In the case of a penalty under paragraph 1 of Schedule 24 to FA 2007 involving an offshore matter or an offshore transfer, the potential lost revenue is the amount that under that Schedule is the potential lost revenue in respect of Q's conduct.
(3) In the case of a penalty under paragraph 1 of Schedule 41 to FA 2008 in relation to a failure to comply with section 7(1) of TMA 1970 involving offshore activity, the potential lost revenue is the amount that under that Schedule is the potential lost revenue in respect of Q's conduct.
(4) In the case of a penalty under paragraph 6 of Schedule 55 to FA 2009 involving offshore activity, the potential lost revenue is the liability to tax which would have been shown in the return in question (within the meaning of that Schedule).
(5) In the case of a penalty under paragraph 3 of Schedule 25 to FA 2021 involving offshore activity, the potential lost revenue is the liability to tax which would have been shown in the return in question (within the meaning of that Schedule).
Treatment of potential lost revenue attributable to both offshore tax evasion or non-compliance and other tax evasion or non-compliance
6 (1) This paragraph applies where any amount of potential lost revenue in a case falling within paragraph 4 or 5 is attributable not only to Q's offshore tax evasion or non-compliance but also to any other tax evasion or non-compliance by Q.
(2) In that case the potential lost revenue in respect of Q's offshore tax evasion or non-compliance is to be taken for the purposes of assessing the penalty to which P is liable as being or (as the case may be) including such share as is just and reasonable of the amount mentioned in sub-paragraph (1).
Reduction of penalty for disclosure etc by P
7 (1) If P (who would otherwise be liable to a penalty under paragraph 1)—
(a) makes a disclosure to HMRC of—
(i) a matter relating to an inaccuracy in a document, a supply of false information or a failure to disclose an under-assessment,
(ii) P's enabling of actions by Q that constituted (or might constitute) a relevant offence or that made (or might make) Q liable to a relevant penalty, or
(iii) any other matter HMRC regard as assisting them in relation to the assessment of P's liability to a penalty under paragraph 1, or
(b) assists HMRC in any investigation leading to Q being charged with a relevant offence or found liable to a relevant penalty,
HMRC must reduce the penalty to one that reflects the quality of the disclosure or assistance.
(2) But the penalty may not be reduced—
(a) in the case of unprompted disclosure or assistance, below whichever is the higher of—
(i) 10% of the potential lost revenue, or
(ii) £1,000, or
(b) in the case of prompted disclosure or assistance, below whichever is the higher of—
(i) 30% of the potential lost revenue, or
(ii) £3,000.
8 (1) This paragraph applies for the purposes of paragraph 7.
(2) P discloses a matter by—
(a) telling HMRC about it,
(b) giving HMRC reasonable help in relation to the matter (for example by quantifying an inaccuracy in a document, an inaccuracy attributable to the supply of false information or withholding of information or an under-assessment), and
(c) allowing HMRC access to records for any reasonable purpose connected with resolving the matter (for example for the purpose of ensuring that an inaccuracy in a document, an inaccuracy attributable to the supply of false information or withholding of information or an under-assessment is fully corrected).
(3) P assists HMRC in relation to an investigation leading to Q being charged with a relevant offence or found liable to a relevant penalty by—
(a) assisting or encouraging Q to disclose all relevant facts to HMRC,
(b) allowing HMRC access to records, or
(c) any other conduct which HMRC considers assisted them in investigating or assessing Q's liability to such a penalty.
(4) Disclosure or assistance by P—
(a) is “unprompted” if made at a time when P has no reason to believe that HMRC have discovered or are about to discover Q's offshore tax evasion or non-compliance (including any inaccuracy in a document, supply of false information or withholding of information, or under-assessment), and
(b) otherwise is “prompted”.
(5) In relation to disclosure or assistance, “quality” includes timing, nature and extent.
9 (1) If they think it right because of special circumstances, HMRC may reduce a penalty under paragraph 1.
(2) In sub-paragraph 1 “special circumstances” does not include—
(a) ability to pay, or
(b) the fact that a potential loss of revenue from one taxpayer is balanced by a potential overpayment by another.
(3) In sub-paragraph (1) the reference to reducing a penalty includes a reference to—
(a) staying a penalty, or
(b) agreeing a compromise in relation to proceedings for a penalty.
Procedure for assessing penalty, etc
10 (1) Where a person is found liable for a penalty under paragraph 1 HMRC must—
(a) assess the penalty,
(b) notify the person, and
(c) state in the notice the period in respect of which the penalty is assessed.
(2) A penalty must be paid before the end of the period of 30 days beginning with the day on which notification of the penalty is issued.
(3) An assessment of a penalty—
(a) is to be treated for procedural purposes in the same way as an assessment to tax (except in respect of a matter expressly provided for by this Schedule), and
(b) may be enforced as if it were an assessment to tax.
(4) A supplementary assessment may be made in respect of a penalty if an earlier assessment operated by reference to an underestimate of the liability to tax that would have been shown in a return.
(5) Sub-paragraph (6) applies if—
(a) an assessment in respect of a penalty is based on a liability to tax that would have been shown on a return, and
(b) that liability is found by HMRC to have been excessive.
(6) HMRC may amend the assessment so that it is based upon the correct amount.
(7) But an amendment under sub-paragraph (6)—
(a) does not affect when the penalty must be paid, and
(b) may be made after the last day on which the assessment in question could have been made under paragraph 11.
11 An assessment of a person as liable to a penalty under paragraph 1 may not take place more than 2 years after the fulfilment of the conditions mentioned in paragraph 1(1) (in relation to that person) first came to the attention of an officer of Revenue and Customs.
Appeals
12 A person may appeal against—
(a) a decision of HMRC that a penalty under paragraph 1 is payable by that person, or
(b) a decision of HMRC as to the amount of a penalty under paragraph 1 payable by the person.
13 (1) An appeal under paragraph 12 is to be treated in the same way as an appeal against an assessment to the tax at stake (including by the application of any provision about bringing the appeal by notice to HMRC, about HMRC review of the decision or about determination of the appeal by the First-tier Tribunal or Upper Tribunal).
(2) Sub-paragraph (1) does not apply—
(a) so as to require the person bringing the appeal to pay a penalty before an appeal against the assessment of the penalty is determined,
(b) in respect of any other matter expressly provided for by this Schedule.
14 (1) On an appeal under paragraph 12(a) that is notified to the tribunal, the tribunal may affirm or cancel HMRC's decision.
(2) On an appeal under paragraph 12(b) that is notified to the tribunal, the tribunal may—
(a) affirm HMRC's decision, or
(b) substitute for that decision another decision that HMRC had power to make.
(3) If the tribunal substitutes its own decision for HMRC's, the tribunal may rely on paragraph 7 or 9 (or both)—
(a) to the same extent as HMRC (which may mean applying the same percentage reduction as HMRC to a different starting point),
(b) to a different extent, but only if the tribunal thinks that HMRC's decision in respect of the application of that paragraph was flawed.
(4) In sub-paragraph (3)(b) “flawed” means flawed when considered in the light of the principles applicable in proceedings for judicial review.
(5) In this paragraph “tribunal” means the First-tier Tribunal or Upper Tribunal (as appropriate by virtue of paragraph 13(1).
Double jeopardy
15 A person is not liable to a penalty under paragraph 1 in respect of conduct for which the person—
(a) has been convicted of an offence, or
(b) has been assessed to a penalty under any provision other than paragraph 1.
Application of provisions of TMA 1970
16 Subject to the provisions of this Part of this Schedule, the following provisions of TMA 1970 apply for the purposes of this Part of this Schedule as they apply for the purposes of the Taxes Acts—
(a) section 108 (responsibility of company officers),
(b) section 114 (want of form), and
(c) section 115 (delivery and service of documents).
Interpretation of Part 1
17 (1) This paragraph applies for the purposes of this Schedule.
(2) References to an assessment to tax, in relation to inheritance tax, are to a determination.
PART 2 Application of Schedule 36 to FA 2008: information powers
General application of information and inspection powers to suspected enablers
18 (1) Schedule 36 to FA 2008 (information and inspection powers) applies for the purpose of checking a relevant person's position as regards liability for a penalty under paragraph 1 as it applies for checking a person's tax position, subject to the modifications in paragraphs 19 to 21.
(2) In this Part of this Schedule “relevant person” means a person an officer of Revenue and Customs has reason to suspect has or may have enabled offshore tax evasion or non-compliance by another person so as to be liable to a penalty under paragraph 1.
General modifications
19 In its application for the purpose mentioned in paragraph 18(1) Schedule 36 to FA 2008 has effect as if—
(a) any provisions which can have no application for that purpose, or are specifically excluded by paragraph 20, were omitted,
(b) references to “the taxpayer” were references to the relevant person whose position as regards liability for a penalty under paragraph 1 is to be checked, and references to “a taxpayer” were references to a relevant person,
(c) references to a person's “tax position” are to the relevant person's position as regards liability for a penalty under paragraph 1,
(d) references to prejudice to the assessment or collection of tax included a reference to prejudice to the investigation of the relevant person's position as regards liability for a penalty under paragraph 1,
(e) references to information relating to the conduct of a pending appeal relating to tax were references to information relating to the conduct of a pending appeal relating to an assessment of liability for a penalty under paragraph 1.
Specific modifications
20 The following provisions are excluded from the application of Schedule 36 to FA 2008 for the purpose mentioned in paragraph 18(1)—
(a) paragraph 24 (exception for auditors),
(b) paragraph 25 (exception for tax advisers),
(c) paragraphs 26 and 27 (provisions supplementary to paragraphs 24 and 25),
(d) paragraphs 50 and 51 (tax-related penalty).
21 In the application of Schedule 36 to FA 2008 for the purpose mentioned in paragraph 18(1), paragraph 10A (power to inspect business premises of involved third parties) has effect as if the reference in sub-paragraph (1) to the position of any person or class of persons as regards a relevant tax were a reference to the position of a relevant person as regards liability for a penalty under paragraph 1.
PART 3 Publishing details of persons found liable to penalties
Naming etc of persons assessed to penalty or penalties under paragraph 1
22 (1) The Commissioners for Her Majesty's Revenue and Customs (“the Commissioners”) may publish information about a person if—
(a) in consequence of an investigation the person has been found to have incurred one or more penalties under paragraph 1 (and has been assessed or is the subject of a contract settlement), and
(b) the potential lost revenue in relation to the penalty (or the aggregate of the potential lost revenue in relation to each of the penalties) exceeds £25,000.
(2) The Commissioners may also publish information about a person if the person has been found to have incurred 5 or more penalties under paragraph 1 in any 5 year period.
(3) The information that may be published is—
(a) the person's name (including any trading name, previous name or pseudonym),
(b) the person's address (or registered office),
(c) the nature of any business carried on by the person,
(d) the amount of the penalty or penalties in question,
(e) the periods or times to which the actions giving rise to the penalty or penalties relate,
(f) any other information that the Commissioners consider it appropriate to publish in order to make clear the person's identity.
(4) The information may be published in any manner that the Commissioners consider appropriate.
(5) Before publishing any information the Commissioners must—
(a) inform the person that they are considering doing so, and
(b) afford the person the opportunity to make representations about whether it should be published.
(6) No information may be published before the day on which the penalty becomes final or, where more than one penalty is involved, the latest day on which any of the penalties becomes final.
(7) No information may be published for the first time after the end of the period of one year beginning with that day.
(8) No information may be published if the amount of the penalty—
(a) is reduced under paragraph 7 to—
(i) 10% of the potential lost revenue (in a case of unprompted disclosure or assistance), or
(ii) 30% of potential lost revenue (in a case of prompted disclosure or assistance),
(b) would have been reduced to 10% or 30% of potential lost revenue but for the imposition of the minimum penalty,
(c) is reduced under paragraph 9 to nil or stayed.
(9) For the purposes of this paragraph a penalty becomes final—
(a) if it has been assessed, when the time for any appeal or further appeal relating to it expires or, if later, any appeal or final appeal relating to it is finally determined, and
(b) if a contract settlement has been made, at the time when the contract is made.
(10) In this paragraph “contract settlement”, in relation to a penalty, means a contract between the Commissioners and the person under which the Commissioners undertake not to assess the penalty or (if it has been assessed) not to take proceedings to recover it.
23 (1) The Treasury may by regulations amend paragraph 22(1) to vary the amount for the time being specified in paragraph (b).
(2) Regulations under this paragraph are to be made by statutory instrument.
(3) A statutory instrument under this paragraph is subject to annulment in pursuance of a resolution of the House of Commons.
SCHEDULE 21 Penalties relating to offshore matters and offshore transfers
Section 163
Amendments to Schedule 24 to the Finance Act 2007 (c. 11)
1 Schedule 24 to FA 2007 (penalties for errors) is amended as follows.
2 (1) Paragraph 9 (reductions for disclosure) is amended as follows.
(2) For sub-paragraph (A1) substitute—
(A1) Paragraph 10 provides for reductions in penalties—
(a) under paragraph 1 where a person discloses an inaccuracy that involves a domestic matter,
(b) under paragraph 1A where a person discloses a supply of false information or withholding of information, and
(c) under paragraph 2 where a person discloses a failure to disclose an under-assessment.
(A2) Paragraph 10A provides for reductions in penalties under paragraph 1 where a person discloses an inaccuracy that involves an offshore matter or an offshore transfer.
(A3) Sub-paragraph (1) applies where a person discloses—
(a) an inaccuracy that involves a domestic matter,
(b) a careless inaccuracy that involves an offshore matter,
(c) a supply of false information or withholding of information, or
(d) a failure to disclose an under-assessment.
(3) In sub-paragraph (1), in the words before paragraph (a), for the words from “an inaccuracy” to “under-assessment” substitute “ the matter ”.
(4) After sub-paragraph (1) insert—
(1A) Sub-paragraph (1B) applies where a person discloses—
(a) a deliberate inaccuracy (whether concealed or not) that involves an offshore matter, or
(b) an inaccuracy that involves an offshore transfer.
(1B) A person discloses the inaccuracy by—
(a) telling HMRC about it,
(b) giving HMRC reasonable help in quantifying the inaccuracy,
(c) allowing HMRC access to records for the purpose of ensuring that the inaccuracy is fully corrected, and
(d) providing HMRC with additional information.
(1C) The Treasury must make regulations setting out what is meant by “additional information” for the purposes of sub-paragraph (1B)(d).
(1D) Regulations under sub-paragraph (1C) are to be made by statutory instrument.
(1E) An instrument containing regulations under sub-paragraph (1C) is subject to annulment in pursuance of a resolution of the House of Commons.
(5) At the end insert—
(4) Paragraph 4A(4) to (5) applies to determine whether an inaccuracy involves an offshore matter, an offshore transfer or a domestic matter for the purposes of this paragraph.
3 In paragraph 10 (amount of reduction for disclosure), for the Table in sub-paragraph (2) substitute—
Standard % | Minimum % for prompted disclosure | Minimum % for unprompted disclosure
30% | 15% | 0%
70% | 35% | 20%
100% | 50% | 30%
4 After paragraph 10 insert—
10A (1) If a person who would otherwise be liable to a penalty of a percentage shown in column 1 of the Table (a “standard percentage”) has made a disclosure, HMRC must reduce the standard percentage to one that reflects the quality of the disclosure.
(2) But the standard percentage may not be reduced to a percentage that is below the minimum shown for it—
(a) in the case of a prompted disclosure, in column 2 of the Table, and
(b) in the case of an unprompted disclosure, in column 3 of the Table.
Standard % | Minimum % for prompted disclosure | Minimum % for unprompted disclosure
30% | 15% | 0%
37.5% | 18.75% | 0%
45% | 22.5% | 0%
60% | 30% | 0%
70% | 45% | 30%
87.5% | 53.75% | 35%
100% | 60% | 40%
105% | 62.5% | 40%
125% | 72.5% | 50%
140% | 80% | 50%
150% | 85% | 55%
200% | 110% | 70%
Amendments to Schedule 41 to the Finance Act 2008 (c. 9)
5 Schedule 41 to FA 2008 (penalties: failure to notify etc) is amended as follows.
6 (1) Paragraph 12 (reductions for disclosure) is amended as follows.
(2) For sub-paragraph (1) substitute—
(1) Paragraph 13 provides for reductions in penalties—
(a) under paragraph 1 where P discloses a relevant failure that involves a domestic matter, and
(b) under paragraphs 2 to 4 where P discloses a relevant act or failure.
(1A) Paragraph 13A provides for reductions in penalties under paragraph 1 where P discloses a relevant failure that involves an offshore matter or an offshore transfer.
(1B) Sub-paragraph (2) applies where P discloses—
(a) a relevant failure that involves a domestic matter,
(b) a non-deliberate relevant failure that involves an offshore matter, or
(c) a relevant act or failure giving rise to a penalty under any of paragraphs 2 to 4.
(3) In sub-paragraph (2), for “a” substitute “ the ”.
(4) After sub-paragraph (2) insert—
(2A) Sub-paragraph (2B) applies where P discloses—
(a) a deliberate relevant failure (whether concealed or not) that involves an offshore matter, or
(b) a relevant failure that involves an offshore transfer.
(2B) P discloses the failure by—
(a) telling HMRC about it,
(b) giving HMRC reasonable help in quantifying the tax unpaid by reason of it,
(c) allowing HMRC access to records for the purpose of checking how much tax is so unpaid, and
(d) providing HMRC with additional information.
(2C) The Treasury must make regulations setting out what is meant by “additional information” for the purposes of sub-paragraph (2B)(d).
(2D) Regulations under sub-paragraph (2C) are to be made by statutory instrument.
(2E) An instrument containing regulations under sub-paragraph (2C) is subject to annulment in pursuance of a resolution of the House of Commons.
(5) At the end insert—
(5) Paragraph 6A(4) to (5) applies to determine whether a failure involves an offshore matter, an offshore transfer or a domestic matter for the purposes of this paragraph.
(6) In this paragraph “relevant failure” means a failure to comply with a relevant obligation.
7 In paragraph 13 (amount of reduction for disclosure), for the Table in sub-paragraph (3) substitute—
Standard % | Minimum % for prompted disclosure | Minimum % for unprompted disclosure
30% | case A: 10% case B: 20% | case A: 0% case B: 10%
70% | 35% | 20%
100% | 50% | 30%
8 After paragraph 13 insert—
13A (1) If a person who would otherwise be liable to a penalty of a percentage shown in column 1 of the Table (a “standard percentage”) has made a disclosure, HMRC must reduce the standard percentage to one that reflects the quality of the disclosure.
(2) But the standard percentage may not be reduced to a percentage that is below the minimum shown for it—
(a) for a prompted disclosure, in column 2 of the Table, and
(b) for an unprompted disclosure, in column 3 of the Table.
(3) Where the Table shows a different minimum for case A and case B—
(a) the case A minimum applies if HMRC becomes aware of the failure less than 12 months after the time when the tax first becomes unpaid by reason of the failure;
(b) otherwise, the case B minimum applies.
Standard % | Minimum % for prompted disclosure | Minimum % for unprompted disclosure
30% | case A: 10% case B: 20% | case A: 0% case B: 10%
37.5% | case A: 12.5% case B: 25% | case A: 0% case B: 12.5%
45% | case A: 15% case B: 30% | case A: 0% case B:15%
60% | case A: 20% case B: 40% | case A: 0% case B: 20%
70% | 45% | 30%
87.5% | 53.75% | 35%
100% | 60% | 40%
105% | 62.5% | 40%
125% | 72.5% | 50%
140% | 80% | 50%
150% | 85% | 55%
200% | 110% | 70%
Amendments to Schedule 55 to the Finance Act 2009 (c.10)
9 Schedule 55 to FA 2009 (penalty for failure to make returns etc) is amended as follows
10 (1) Paragraph 14 (reductions for disclosure) is amended as follows.
(2) At the beginning insert—
(A1) In this paragraph, “relevant information” means information which has been withheld by a failure to make a return.
(3) In sub-paragraph (1)—
(a) after “6(3) or (4)” insert “ where P discloses relevant information that involves a domestic matter ”;
(b) for the words from “information which” to the end substitute “ relevant information ”.
(4) After sub-paragraph (1) insert—
(1A) Paragraph 15A provides for reductions in the penalty under paragraph 6(3) or (4) where P discloses relevant information that involves an offshore matter or an offshore transfer.
(1B) Sub-paragraph (2) applies where—
(a) P is liable to a penalty under paragraph 6(3) or (4) and P discloses relevant information that involves a domestic matter, or
(b) P is liable to a penalty under any of the other provisions mentioned in sub-paragraph (1) and P discloses relevant information.
(5) After sub-paragraph (2) insert—
(2A) Sub-paragraph (2B) applies where P is liable to a penalty under paragraph 6(3) or (4) and P discloses relevant information that involves an offshore matter or an offshore transfer.
(2B) P discloses relevant information by—
(a) telling HMRC about it,
(b) giving HMRC reasonable help in quantifying any tax unpaid by reason of its having been withheld,
(c) allowing HMRC access to records for the purpose of checking how much tax is so unpaid, and
(d) providing HMRC with additional information.
(2C) The Treasury must make regulations setting out what is meant by “additional information” for the purposes of sub-paragraph (2B)(d).
(2D) Regulations under sub-paragraph (2C) are to be made by statutory instrument.
(2E) An instrument containing regulations under sub-paragraph (2C) is subject to annulment in pursuance of a resolution of the House of Commons.
(6) At the end insert—
(5) Paragraph 6A(4) to (5) applies to determine whether relevant information involves an offshore matter, an offshore transfer or a domestic matter for the purposes of this paragraph.
11 In paragraph 15 (amount of reduction for disclosure), for the Table in sub-paragraph (2) substitute—
Standard % | Minimum % for prompted disclosure | Minimum % for unprompted disclosure
70% | 35% | 20%
100% | 50% | 30%
12 After paragraph 15 insert—
15A (1) If a person who would otherwise be liable to a penalty of a percentage shown in column 1 of the Table (a “standard percentage”) has made a disclosure, HMRC must reduce the standard percentage to one that reflects the quality of the disclosure.
(2) But the standard percentage may not be reduced to a percentage that is below the minimum shown for it—
(a) in the case of a prompted disclosure, in column 2 of the Table, and
(b) in the case of an unprompted disclosure, in column 3 of the Table.
Standard % | Minimum % for prompted disclosure | Minimum % for unprompted disclosure
70% | 45% | 30%
87.5% | 53.75% | 35%
100% | 60% | 40%
105% | 62.5% | 40%
125% | 72.5% | 50%
140% | 80% | 50%
150% | 85% | 55%
200% | 110% | 70%
(3) But HMRC must not under this paragraph reduce a penalty below £300.
SCHEDULE 22 Asset-based penalty for offshore inaccuracies and failures
Section 165
PART 1 Liability for penalty
Circumstances in which asset-based penalty is payable
1 (1) An asset-based penalty is payable by a person (P) where—
(a) one or more standard offshore tax penalties have been imposed on P in relation to a tax year (see paragraphs 2 and 3), and
(b) the potential lost revenue threshold is met in relation to that tax year (see paragraph 4).
(2) But this is subject to paragraph 6 (restriction on imposition of multiple asset-based penalties in relation to the same asset).
Meaning of standard offshore tax penalty
2 (1) A standard offshore tax penalty is a penalty that falls within sub-paragraph (2), (3) (4) or (4A) , (4A) or (4B).
(2) A penalty falls within this sub-paragraph if—
(a) it is imposed under paragraph 1 of Schedule 24 to FA 2007 (inaccuracy in taxpayer's document),
(b) the inaccuracy for which the penalty is imposed involves an offshore matter or an offshore transfer,
(c) it is imposed for deliberate action (whether concealed or not), and
(d) the tax at stake is (or includes) capital gains tax, inheritance tax or asset-based income tax.
(3) A penalty falls within this sub-paragraph if—
(a) it is imposed under paragraph 1 of Schedule 41 to FA 2008 (penalty for failure to notify),
(b) the failure for which the penalty is imposed involves an offshore matter or an offshore transfer,
(c) it is imposed for a deliberate failure (whether concealed or not), and
(d) the tax at stake is (or includes) capital gains tax or asset-based income tax.
(4) A penalty falls within this sub-paragraph if—
(a) it is imposed under paragraph 6 of Schedule 55 to FA 2009 (penalty for failure to make return more than 12 months after filing date),
(b) it is imposed for the withholding of information involving an offshore matter or an offshore transfer,
(c) it is imposed for a deliberate withholding of information (whether concealed or not), and
(d) the tax at stake is (or includes) capital gains tax, inheritance tax or asset-based income tax.
(4A) A penalty falls within this paragraph sub-paragraph if—
(a) it is imposed on a person under paragraph 1 of Schedule 18 to FA 2017 (requirement to correct relevant offshore tax non-compliance),
(b) the person was aware at any time during the RTC period that at the end of the 2016-17 tax year P had relevant offshore tax non-compliance to correct, and
(c) the tax at stake is (or includes) capital gains tax, inheritance tax or asset-based income tax.
(4B) A penalty falls within this sub-paragraph if—
(a) it is imposed under paragraph 3 of Schedule 25 to FA 2021 (penalties for deliberately withholding information),
(b) it is imposed for the withholding of information involving an offshore matter or an offshore transfer, and
(c) the tax at stake is (or includes) capital gains tax or asset-based income tax.
(5) In a case where the inaccuracy, failure or withholding of information for which a penalty is imposed involves both an offshore matter or an offshore transfer and a domestic matter, the standard offshore tax penalty is only that part of the penalty that involves the offshore matter or offshore transfer.
(5A) Sub-paragraph (5) does not apply to a penalty imposed under paragraph 1 of Schedule 18 to FA 2017.
(6) In a case where the tax at stake in relation to a penalty includes a tax other than capital gains tax, inheritance tax or asset-based income tax, the standard offshore tax penalty is only that part of the penalty which relates to capital gains tax, inheritance tax or asset-based income tax.
(7) “Asset-based income tax” means income tax that is charged under any of the provisions mentioned in column 1 of the table in paragraph 13(2).
Tax year to which standard offshore tax penalty relates
3 (1) Where a standard offshore tax penalty is imposed under paragraph 1 of Schedule 24 to FA 2007, the tax year to which that penalty relates is—
(a) if the tax at stake as a result of the inaccuracy is income tax or capital gains tax, the tax year to which the document containing the inaccuracy relates;
(b) if the tax at stake as a result of the inaccuracy is inheritance tax, the year, beginning on 6 April and ending on the following 5 April, in which the liability to tax first arose.
(2) Where a standard offshore tax penalty is imposed under paragraph 1 of Schedule 41 to FA 2008 for a failure to comply with an obligation specified in the table in that paragraph, the tax year to which that penalty relates is the tax year to which the obligation relates.
(3) Where a standard offshore tax penalty is imposed under paragraph 6 of Schedule 55 to FA 2009 for a failure to make a return or deliver a document specified in the table of paragraph 1 of that Schedule, the tax year to which that penalty relates is—
(a) if the tax at stake is income tax or capital gains tax, the tax year to which the return or document relates;
(b) if the tax at stake is inheritance tax, the year, beginning on 6 April and ending on the following 5 April, in which the liability to tax first arose.
(4) Where a standard offshore penalty is imposed under paragraph 1 of Schedule 18 to FA 2017, the tax year to which that penalty relates is—
(a) if the tax at stake in relation to the uncorrected relevant offshore tax non-compliance is income tax or capital gains tax, the tax year or years to which the failure or inaccuracy constituting the relevant offshore tax non-compliance in question relates;
(b) if the tax at stake in relation to the uncorrected relevant offshore tax non-compliance is inheritance tax, the year, beginning on 6 April and ending on the following 5 April, in which the liability to tax first arose.
(4A) Where a standard offshore tax penalty is imposed under paragraph 3 of Schedule 25 to FA 2021 for a failure to make a return or deliver a document listed in the table in paragraph 1 of that Schedule, the tax year to which that penalty relates is, if the tax at stake is income tax or capital gains tax, the tax year to which the return or document relates.
(5) In sub-paragraph (4) references to uncorrected relevant offshore tax non-compliance are to the relevant offshore tax non-compliance in respect of which the standard offshore penalty is imposed.
Potential lost revenue threshold
4 (1) The potential lost revenue threshold is reached where the offshore PLR in relation to a tax year exceeds £25,000.
(2) The Treasury may by regulations change the figure for the time being specified in sub-paragraph (1).
(3) Regulations under sub-paragraph (2) are to be made by statutory instrument.
(4) A statutory instrument containing regulations under sub-paragraph (2) is subject to annulment in pursuance of a resolution of the House of Commons.
(5) Regulations under sub-paragraph (2)—
(a) may make different provision for different purposes;
(b) may contain supplemental, incidental, consequential, transitional and transitory provision.
Offshore PLR
5 (1) The offshore PLR, in relation to a tax year, is the total of—
(a) the potential lost revenue (in the case of a standard offshore tax penalty imposed under Schedule 24 to FA 2007 or Schedule 41 to FA 2008 or Schedule 18 to FA 2017), and
(b) the liability to tax (in the case of a standard offshore tax penalty imposed under Schedule 55 to FA 2009 or Schedule 25 to FA 2021),
by reference to which all of the standard offshore tax penalties imposed on P in relation to the tax year are assessed.
(2) Sub-paragraphs (3) to (5) apply where—
(a) a penalty is imposed on P under paragraph 1 of Schedule 24 to FA 2007, paragraph 1 of Schedule 41 to FA 2008 or paragraph 6 of Schedule 55 to FA 2009 , paragraph 6 of Schedule 55 to FA 2009 or paragraph 3 of Schedule 25 to FA 2021, and
(b) the potential lost revenue or liability to tax by reference to which the penalty is assessed relates to a standard offshore tax penalty and one or more other penalties.
In this paragraph, such a penalty is referred to as a “combined penalty”.
(3) Only the potential lost revenue or liability to tax relating to the standard offshore tax penalty is to be taken into account in calculating the offshore PLR.
(4) Where the calculation of the potential lost revenue or liability to tax by reference to which a combined penalty is assessed depends on the order in which income or gains are treated as having been taxed, for the purposes of calculating the offshore PLR—
(a) income and gains relating to domestic matters are to be taken to have been taxed before income and gains relating to offshore matters and offshore transfers;
(b) income and gains relating to taxes that are not capital gains tax, inheritance tax or asset-based income tax are to be taken to have been taxed before income and gains relating to capital gains tax, inheritance tax and asset-based income tax.
(5) In a case where it cannot be determined—
(a) whether income or gains relate to an offshore matter or offshore transfer or to a domestic matter, or
(b) whether income or gains relate to capital gains tax, asset-based income tax or inheritance tax or not,
for the purposes of calculating the offshore PLR, the potential lost revenue or liability to tax relating to the standard offshore tax penalty is to be taken to be such share of the total potential lost revenue or liability to tax by reference to which the combined penalty was calculated as is just and reasonable.
(6) Sub-paragraph (7) applies where—
(a) a standard offshore tax penalty or a combined penalty is imposed on P, and
(b) there are two or more taxes at stake, including capital gains tax and asset-based income tax.
(7) Where the calculation of the potential lost revenue or liability to tax by reference to which the penalty is assessed depends on the order in which income or gains are treated as having been taxed, for the purposes of calculating the offshore PLR, income and gains relating to asset-based income tax are to be taken to have been taxed before income and gains relating to capital gains tax.
Restriction on imposition of multiple asset-based penalties in relation to the same asset
6 (1) Sub-paragraphs (2) and (3) apply where—
(a) a standard offshore tax penalty (other than one imposed under paragraph 1 of Schedule 18 to FA 2017) has been imposed on P, and
(b) the potential lost revenue threshold is met,
in relation to more than one tax year falling within the same investigation period.
(2) Only one asset-based penalty is payable by P in the investigation period in relation to any given asset.
(3) The asset-based penalty is to be charged by reference to the tax year in the investigation period with the highest offshore PLR.
(4) An “investigation period” is—
(a) the period starting with the day on which this Schedule comes into force and ending with the last day of the last tax year before P was notified of an asset-based penalty in respect of an asset, and
(b) subsequent periods beginning with the day after the previous period ended and ending with the last day of the last tax year before P is notified of a subsequent asset-based penalty in respect of the asset,
and different investigation periods may apply in relation to different assets.
6A Where—
(a) a penalty has been imposed on a person under paragraph 1 of Schedule 18 to FA 2017, and
(b) the potential loss of revenue threshold has been met,
only one asset-based penalty is payable by the person in relation to any given asset.
PART 2 Amount of penalty
Standard amount of asset-based penalty
7 (1) The standard amount of the asset-based penalty is the lower of—
(a) 10% of the value of the asset, and
(b) offshore PLR x 10.
(2) See also—
(a) paragraphs 8 and 9, which provide for reductions in the standard amount, and
(b) Part 3, which makes provision about the identification and valuation of the asset.
Reductions for disclosure and co-operation
8 (1) HMRC must reduce the standard amount of the asset-based penalty where P does all of the following things—
(a) makes a disclosure of the inaccuracy or failure relating to the standard offshore tax penalty;
(b) provides HMRC with a reasonable valuation of the asset;
(c) provides HMRC with information or access to records that HMRC requires from P for the purposes of valuing the asset.
(2) A reduction under sub-paragraph (1) must reflect the quality of the disclosure, valuation and information provided (and for these purposes “quality” includes timing, nature and extent).
(3) The Treasury must make regulations setting out the maximum amount of the penalty reduction under sub-paragraph (1).
(4) The maximum amount may differ according to whether the case involves only unprompted disclosures or involves prompted disclosures.
(5) A case involves only unprompted disclosures where—
(a) in a case where the asset-based penalty relates to only one standard offshore tax penalty, that standard offshore tax penalty was reduced on the basis of an unprompted disclosure, or
(b) in a case where the asset-based penalty relates to more than one standard offshore tax penalty, all of those standard offshore tax penalties were reduced on the basis of unprompted disclosures.
(6) A case involves prompted disclosures where any of the standard offshore tax penalties to which the asset-based penalty relates was reduced on the basis of a prompted disclosure.
(7) Regulations under sub-paragraph (3) are to be made by statutory instrument.
(8) A statutory instrument containing regulations under sub-paragraph (3) is subject to annulment in pursuance of a resolution of the House of Commons.
(9) Regulations under sub-paragraph (3)—
(a) may make different provision for different purposes;
(b) may contain supplemental, incidental, consequential, transitional and transitory provision.
Special reduction
9 (1) If HMRC think it right because of special circumstances, they may reduce the standard amount of the asset-based penalty.
(2) In sub-paragraph (1) “special circumstances” does not include—
(a) ability to pay, or
(b) the fact that a potential loss of revenue from one taxpayer is balanced by a potential over-payment by another.
(3) In sub-paragraph (1) the reference to reducing a penalty includes a reference to—
(a) staying a penalty, and
(b) agreeing a compromise in relation to proceedings for a penalty.
PART 3 Identification and valuation of assets
Introduction
10 (1) This Part makes provision about the identification and valuation of the asset for the purposes of calculating the amount of the asset-based penalty.
(2) An asset-based penalty may relate to more than one asset.
(3) The identification and valuation of the asset is to be determined—
(a) under paragraph 11 where the principal tax at stake is capital gains tax,
(b) under paragraph 12 where the principal tax at stake is inheritance tax, and
(c) under paragraph 13 where the principal tax at stake is asset-based income tax.
See also paragraph 14 (jointly held assets).
(4) The principal tax at stake—
(a) in a case where the standard offshore tax penalty (or penalties) relates to only one type of tax, is the tax to which that standard offshore tax penalty (or penalties) relates;
(b) in a case where the standard offshore tax penalty (or penalties) relate to more than one type of tax, is the tax which gives rise to the highest offshore PLR value.
(5) The offshore PLR value, in relation to a type of tax, is the potential lost revenue or liability to tax by reference to which the part of the penalty relating to that type of tax was assessed.
(6) The rules in paragraph 5(2) to (7) apply for the purposes of calculating the offshore PLR value, in relation to a type of tax, as they apply for the purposes of calculating the offshore PLR.
Capital gains tax
11 (1) This paragraph applies where the principal tax at stake is capital gains tax.
(2) The asset is the asset that is the subject of the disposal (or deemed disposal) on or by reference to which the capital gains tax to which the standard offshore penalty relates is charged.
(3) For the purposes of calculating the amount of the asset-based penalty, the value of the asset is to be taken to be the consideration for the disposal of the asset that would be used in the computation of the gain under TCGA 1992 (other than in a case where sub-paragraph (4) applies).
(4) In a case where the disposal on or by reference to which the capital gains tax is charged is a part disposal of an asset, the asset-based penalty is to be calculated by reference to the full market value of the asset immediately before the part disposal took place.
(5) Terms used in this paragraph have the same meaning as in TCGA 1992.
Inheritance tax
12 (1) This paragraph applies where the principal tax at stake is inheritance tax.
(2) The asset is the property the disposition of which gave rise to the transfer of value by reason of which the inheritance tax to which the standard offshore penalty relates became chargeable.
(3) For the purposes of calculating the amount of the asset-based penalty, the value of the property is to be the value of the property used by HMRC in assessing the liability to inheritance tax.
(4) Terms used in this paragraph have the same meaning as in IHTA 1984.
Asset-based income tax
13 (1) This paragraph applies where the principal tax at stake is asset-based income tax.
(2) Where the standard offshore tax penalty relates to income tax charged under a provision shown in column 1 of the Table, the asset is the asset mentioned in column 2 of the Table.
Provision under which income tax is charged | Asset
Chapters 3, 7 and 10 of Part 3 of ITTOIA 2005 (property businesses) | The estate, interest or right in or over the land that generates the income for the business (see sections 264 to 266 of ITTOIA 2005)
Chapter 8 of Part 3 of ITTOIA 2005 (rent receivable in connection with a s.12(4) concern) | The estate, interest or right in or over the land that generates the rent receivable in connection with a UK section 12(4) concern (see sections 335 and 336 of ITTOIA 2005)
Chapters 2 and 2A of Part 4 of ITTOIA 2005 (interest and disguised interest) | The asset that generates the interest
Chapters 3 to 5 of Part 4 of ITTOIA 2005 (dividends etc) | The shares or other securities in relation to which the dividend or distribution is paid
Chapter 7 of Part 4 of ITTOIA 2005 (purchased life annuity payments) | The annuity that gives rise to the payments
Chapter 8 of Part 4 of ITTOIA 2005 (profits from deeply discounted securities) | The deeply discounted securities that are disposed of (see sections 427 to 430 of ITTOIA 2005)
Chapter 9 of Part 4 of ITTOIA 2005 (gains from contracts for life insurance etc) | The policy or contract from which the gain is treated as arising
Chapter 11 of Part 4 of ITTOIA 2005 (transactions in deposits) | The deposit right which is disposed of (see sections 551 and 552 of ITTOIA 2005)
Chapter 2 of Part 5 of ITTOIA 2005 (receipts from intellectual property) | The intellectual property, know-how or patent rights which generate the income (see sections 579, 583 and 587 of ITTOIA 2005)
Chapter 4 of Part 5 of ITTOIA 2005 (certain telecommunication rights: non-trading income) | The relevant telecommunication right from which the income derives (see section 614 of ITTOIA 2005)
Chapter 5 of Part 5 of ITTOIA 2005 (settlements: amounts treated as income of settlor) | The settlement which gives rise to the income or capital sums treated as income of a settlor
(2A) In relation to cases where the standard offshore penalty is a penalty falling within paragraph 2(4A), each reference to provisions of ITTOIA 2005 in column 1 of the Table in sub-paragraph (2) includes a reference—
(a) to the corresponding provisions of the legislation in force immediately before those provisions of ITTOIA 2005 came into force (and to any previous text of those corresponding provisions), and
(b) to any other provision that had the same purpose as, or a similar purpose to, any of those corresponding provisions (or any earlier text mentioned in paragraph (a)), if and so far as that other provision was in force—
(i) on or after 6 April 1997, but
(ii) before the corresponding provisions (or the earlier text mentioned in paragraph (a)) came into force.
(3) For the purposes of calculating the amount of the asset-based penalty, the asset is to be valued as follows.
(4) In a case where the charge to income tax was triggered by a disposal of the asset, the value of the asset is to be taken as its market value on the date of disposal (and in the case of a part disposal, the value of the asset is to be taken as its full market value immediately before the part disposal took place).
(5) In any other case—
(a) where P still owns the asset on the last day of the tax year to which the standard offshore tax penalty relates, the value of the asset is to be taken as its market value on that day;
(b) where P disposed of the asset during the course of the tax year to which the standard offshore tax penalty relates, the value of the asset is to be taken as its market value on the date of disposal;
(c) where P disposed of part of the asset during the course of the tax year to which the standard offshore tax penalty relates, the value of the asset is to be taken as the market value of the part disposed on the date (or dates) of disposal plus the market value of the part still owned by the person on the last day of that tax year.
(6) But if the value of the asset, as determined in accordance with sub-paragraphs (4) and (5), does not appear to HMRC to be a fair and reasonable value, then HMRC may value the asset for the purposes of this Schedule in any other way which appears to them to be fair and reasonable.
(7) For the purposes of sub-paragraph (5)—
(a) P owns an asset if P is liable to asset-based income tax in relation to that asset;
(b) references to a disposal (and related expressions) have the same meaning as in TCGA 1992.
(8) In this paragraph “market value” has the same meaning as in TCGA 1992 (see section 272 of that Act).
(9) Other terms used in this paragraph have the same meaning as in ITTOIA 2005.
Jointly held assets
14 (1) This paragraph applies where an asset-based penalty is chargeable in relation to an asset that is jointly held by P and another person (A).
(2) The value of the asset is to be taken to be the value of P's share of the asset.
(3) In a case where P and A—
(a) are married to, or are civil partners of, each other, and
(b) live together,
the asset is to be taken to be jointly owned by P and A in equal shares, unless it appears to HMRC that this is not the case.
PART 4 Procedure
Assessment
15 (1) Where a person (P) becomes liable for an asset-based penalty under paragraph 1, HMRC must—
(a) assess the penalty,
(b) notify P, and
(c) state in the notice—
(i) the tax year to which the penalty relates, and
(ii) the investigation period within which that tax year falls (see paragraph 6).
(2) A penalty under paragraph 1 must be paid before the end of the period of 30 days beginning with the day on which notification of the penalty is issued.
(3) An assessment—
(a) is to be treated for procedural purposes in the same way as an assessment to tax (except in respect of a matter expressly provided for by this Schedule),
(b) may be enforced as if it were an assessment to tax, and
(c) may be combined with an assessment to tax.
(4) An assessment of an asset-based penalty under paragraph 1 must be made within the period allowed for making an assessment of the standard offshore tax penalty to which the asset-based penalty relates (and where an asset-based penalty relates to more than one standard offshore tax penalty, the assessment must be made within the latest of those periods).
(5) In this Part of this Schedule references to an assessment to tax, in relation to inheritance tax, are to a determination.
Appeal
16 (1) P may appeal against a decision of HMRC that a penalty is payable by P.
(2) P may appeal against a decision of HMRC as to the amount of a penalty payable by P.
17 (1) An appeal is to be treated in the same way as an appeal against an assessment to the tax concerned (including by the application of any provision about bringing the appeal by notice to HMRC, about HMRC review of the decision or about determination of the appeal by the First-tier Tribunal or the Upper Tribunal).
(2) Sub-paragraph (1) does not apply—
(a) so as to require P to pay a penalty before an appeal against the assessment of the penalty is determined, or
(b) in respect of any other matter expressly provided for by this Schedule.
18 (1) On an appeal under paragraph 16(1), the tribunal may affirm or cancel HMRC's decision.
(2) On an appeal under paragraph 16(2), the tribunal may—
(a) affirm HMRC's decision, or
(b) substitute for HMRC's decision another decision that HMRC had power to make.
(3) If the tribunal substitutes its decision for HMRC's, the tribunal may rely on paragraph 9—
(a) to the same extent as HMRC (which may mean applying the same percentage reduction as HMRC to a different starting point), or
(b) to a different extent, but only if the tribunal thinks that HMRC's decision in respect of the application of paragraph 9 was flawed.
(4) In sub-paragraph (3), “flawed” means flawed when considered in the light of the principles applied in proceedings for judicial review.
(5) In this paragraph “tribunal” means the First-tier Tribunal or the Upper Tribunal (as appropriate by virtue of paragraph 17(1)).
PART 5 General
Interpretation
19 (1) In this Schedule—
“asset” has the same meaning as in TCGA 1992 (but also includes currency in sterling);
“asset-based income tax” has the meaning given in paragraph 2(7);
“HMRC” means Her Majesty's Revenue and Customs;
“investigation period” has the meaning given in paragraph 6(4);
“offshore PLR” has the meaning given in paragraph 5;
“standard amount of the asset-based penalty” has the meaning given in paragraph 7;
“standard offshore tax penalty” has the meaning given in paragraph 2.
(2) Terms used in relation to a penalty imposed under Schedule 24 to FA 2007, Schedule 41 to FA 2008 Schedule 55 to FA 2009 or Part 1 of Schedule 18 to FA 2017 , Part 1 of Schedule 18 to F(No.2)A 2017 or Schedule 25 to FA 2021 have the same meaning as in the Schedule under which the penalty was imposed.
(3) References in this Schedule to capital gains tax do not include capital gains tax payable by companies in respect of chargeable gains accruing to them to the extent that those gains are NRCGT gains in respect of which the companies are chargeable to capital gains tax under section 14D or 188D of TCGA 1992 (see section 1(2A)(b) of that Act).
Consequential amendments etc
20 (1) In section 103ZA to TMA 1970 (disapplication of sections 100 to 103 in case of certain penalties), omit the “or” at the end of paragraph (h), and at the end insert
, or
(j) Schedule 22 to the Finance Act 2016 (asset-based penalty)
.
(2) In section 107A of that Act (relevant trustees)—
(a) in subsection (2)(a), after “Schedule 55 to the Finance Act 2009” insert “ or Schedule 22 to the Finance Act 2016 ”;
(b) after subsection (3)(a) insert—
(aa) in relation to a penalty under Schedule 22 to the Finance Act 2016, or to interest under section 101 of the Finance Act 2009 on such a penalty, the time when the relevant act or omission occurred;
;
(c) in the words after paragraph (c), after “paragraph” insert “ (aa) and ”.
(3) In Schedule 24 to FA 2007 (penalties for errors), in paragraph 12 (interaction with other penalties etc), in sub-paragraph (2A) at the end insert “ or Schedule 22 to FA 2016 (asset-based penalty) ”.
(4) In Schedule 41 to FA 2008 (penalties for failure to notify), in paragraph 15 (interaction with other penalties etc), in sub-paragraph (1A) at the end insert “ or Schedule 22 to FA 2016 (asset-based penalty). ”
(5) In Schedule 55 to FA 2009 (penalty for failure to make return etc), in paragraph 17 (interaction with other penalties etc), in sub-paragraph (2), at the end insert
, or
(d) a penalty under Schedule 22 to FA 2016 (asset-based penalty).
21 Section 97A of TMA 1970 (two or more tax-geared penalties in respect of same tax) does not apply in relation to an asset-based penalty imposed under this Schedule.
Section 167
1 TMA 1970 is amended in accordance with paragraphs 2 to 8 of this Schedule.
2 In section 7 (notice of liability to income tax and capital gains tax), after subsection (2) insert—
(2A) A person who—
(a) falls within subsection (1A) or (1B), and
(b) is notified of a simple assessment for the year of assessment,
is not required to give notice under subsection (1) for that year unless the person is chargeable to income tax or capital gains tax for the year of assessment on any income or gain that is not included in the assessment.
3 After section 28G (determination of amount notionally chargeable where no NRCGT return delivered) insert—
Simple assessments by HMRC: personal assessments
28H (1) HMRC may make a simple assessment for a year of assessment in respect of a person (other than a person to whom section 28I applies) if, when the assessment is made, the person is not excluded by subsection (2) in relation to that year.
(2) Subsection (1) does not apply to a person at any time in relation to that year of assessment if—
(a) the person has delivered a return under section 8 for that year, or
(b) the person is at that time subject to a requirement to make and deliver such a return by virtue of a notice under section 8.
but nothing in this subsection prevents HMRC from giving the person notice of a simple assessment at the same time as a notice withdrawing a notice under section 8.
(3) A simple assessment is—
(a) an assessment of the amounts in which the person is chargeable to income tax and capital gains tax for the year of assessment to which it relates, and
(b) an assessment of the amount payable by the person by way of income tax for that year, that is to say, the difference between the amount in which the person is assessed to income tax under paragraph (a) and the aggregate amount of any income tax deducted at source;
but nothing in this subsection enables an assessment to show as repayable any income tax which any provision of the Income Tax Acts provides is not repayable.
(4) The amounts in which a person is chargeable to income tax and capital gains are net amounts, taking into account any relief or allowance that is applicable.
(5) A simple assessment must be based on information relating to the person that is held by HMRC (whether or not supplied by the person to whom the assessment relates).
(6) The notice of a simple assessment required to be sent to the person by section 30A(3) must (among other things)—
(a) include particulars of the income and gains, and any relief or allowance, taken into account in the assessment, and
(b) state any amount payable by the person by virtue of section 59BA (with particulars of how it may be paid and the date by which it is payable).
(7) The tax to be assessed on a person by a simple assessment does not include any tax which—
(a) is chargeable on the scheme administrator of a registered pension scheme under Part 4 of Finance Act 2004,
(b) is chargeable on the sub-scheme administrator of a sub-scheme under Part 4 of the Finance Act 2004 as modified by the Registered Pension Schemes (Splitting of Schemes) Regulations 2006, or
(c) is chargeable on the person who is (or persons who are) the responsible person in relation to an employer-financed retirement benefits scheme under section 394(2) of ITEPA 2003.
(8) Nothing in this section prevents HMRC issuing more than one simple assessment to the same person in respect of the same year of assessment (whether or not any earlier simple assessment for that year is withdrawn).
(9) In this section references to a simple assessment are to an assessment under this section.
Simple assessments by HMRC: trustees
28I (1) HMRC may make a simple assessment for a year of assessment in respect of a settlement if, when the assessment is made, the relevant trustees of the settlement are not excluded by subsection (2) in relation to that year.
(2) Subsection (1) does not apply at any time in relation to that year of assessment if—
(a) a return under section 8A has been delivered for that year by the relevant trustees or any of them, or
(b) there is at that time a subsisting requirement to make and deliver such a return by virtue of a notice under section 8A;
but nothing in this subsection prevents HMRC from giving notice of a simple assessment at the same time as a notice withdrawing a notice under section 8A.
(3) A simple assessment is—
(a) an assessment of the amounts in which the relevant trustees are chargeable to income tax and capital gains tax for the year of assessment to which it relates, and
(b) an assessment of the amount payable by them by way of income tax for that year, that is to say, the difference between the amount in which they are assessed to income tax under paragraph (a) and the aggregate amount of any income tax deducted at source;
but nothing in this subsection enables an assessment to show as repayable any income tax which any provision of the Income Tax Acts provides is not repayable.
(4) The amounts in which the relevant trustees are chargeable to income tax and capital gains are net amounts, taking into account any relief or allowance that is applicable.
(5) A simple assessment must be based only on information relating to the settlement that is held by HMRC (whether or not supplied by the relevant trustees).
(6) The notice of a simple assessment required by section 30A(3) may be given to any one or more of the relevant trustees.
(7) That notice must (among other things)—
(a) include particulars of the income and gains, and any relief or allowance, taken into account in the assessment, and
(b) state any amount payable by the relevant trustees by virtue of section 59BA (with particulars of how it may be paid and the date by which it is payable).
(8) The tax to be assessed by a simple assessment does not include any tax which—
(a) is chargeable on the scheme administrator of a registered pension scheme under Part 4 of Finance Act 2004,
(b) is chargeable on the sub-scheme administrator of a sub-scheme under Part 4 of the Finance Act 2004 as modified by the Registered Pension Schemes (Splitting of Schemes) Regulations 2006, or
(c) is chargeable on the person who is (or persons who are) the responsible person in relation to an employer-financed retirement benefits scheme under section 394(2) of ITEPA 2003.
(9) Nothing in this section prevents HMRC issuing more than one simple assessment in respect of the same settlement and the same year of assessment (whether or not any earlier simple assessment for that year is withdrawn).
(10) In this section references to a “simple assessment” are to an assessment under this section.
(11) In this Act references to the person to whom a simple assessment relates are, in relation to one made under this section, to the relevant trustees of the settlement to which it relates.
Power to withdraw a simple assessment
28J (1) HMRC may withdraw a simple assessment by notice to the person to which it relates.
(2) An assessment that has been withdrawn ceases to have effect (and is to be taken as never having had any effect).
4 In section 31 (appeals: right to appeal), before subsection (4) insert—
(3A) In the case of a simple assessment, the right to appeal under subsection (1)(d) does not apply unless and until the person concerned has—
(a) raised a query about the assessment under section 31AA, and
(b) been given a final response to that query.
5 (1) Section 31A (appeals: notice of appeal) is amended as follows.
(2) In subsection (4), after “this Act” insert “ (other than an appeal against a simple assessment) ”.
(3) After subsection (4) insert—
(4A) In relation to an appeal under section 31(1)(d) against a simple assessment—
(a) the specified date is the date on which the person concerned is given notice under section 31AA of the final response to the query the person is required by section 31(3A) to make, and
(b) the relevant officer of the Board is the officer by whom the notice of assessment was given.
6 After section 31A (notice of appeal) insert—
Taxpayer's right to query simple assessment
31AA (1) This section applies where a person has been given notice of a simple assessment.
(2) The person may query the simple assessment by notifying HMRC of—
(a) a belief that the assessment is or may be incorrect, and
(b) the reasons for that belief.
(3) The person may exercise the power to query the simple assessment at any time within—
(a) the period of 60 days after the date on which the notice of assessment was issued, or
(b) such longer period as HMRC may allow.
(4) If the simple assessment is queried, HMRC must—
(a) consider the query and the matters raised by it, and
(b) give a final response to the query.
(5) The person may at any time withdraw a query (which terminates HMRC's duties under subsection (4)).
(6) If it appears to HMRC that—
(a) they need time to consider the matters raised by the query, or
(b) further information (whether from the person or anyone else) is required,
HMRC may postpone the simple assessment in whole or part (according to how much of it is being queried by the person).
(7) If the simple assessment is postponed in whole or part, HMRC must notify the person in writing—
(a) whether the assessment is postponed in whole or part, and
(b) if it is postponed in part, of the amount that remains payable under the assessment.
(8) While the simple assessment is postponed the person is under no obligation to pay—
(a) the payable amount specified in the notice of assessment (if the whole assessment is postponed), or
(b) the postponed part of the payable amount so specified (if the assessment is postponed in part).
(9) After considering the query the final response must be to—
(a) confirm the simple assessment,
(b) give the person an amended simple assessment (which supersedes the original assessment), or
(c) withdraw the simple assessment (without replacing it).
(10) HMRC must notify the person in writing of their final response.
(11) This section does not apply to an amended simple assessment given as a final response to the query.
(12) Nothing in this section affects—
(a) a person's right to request an explanation from HMRC of a simple assessment or the information on which it is based, or
(b) HMRC's power to give a person such explanation or information as they consider appropriate,
whether as part of the querying process under this section or otherwise.
(13) In subsection (12) “person” means a person who has been given notice of a simple assessment
.
7 (1) Section 59B (payment of income tax and capital gains tax) is amended as follows.
(2) In the heading, at end insert “ : assessments other than simple assessments ”.
(3) In subsection (6), after “9” insert “ , 28H or 28I ”.
8 After section 59B insert—
Payment of income tax and capital gains tax: simple assessments
59BA (1) This section applies where a person has been given a simple assessment in relation to a year of assessment.
(2) Subject to subsection (3), the difference between—
(a) the amount of income tax and capital gains tax for that year contained in the simple assessment, and
(b) the aggregate of any payments on account made by the person in respect of that year (whether under section 59A or 59AA or otherwise) and any income tax which in respect of that year has been deducted at source,
is payable by that person as mentioned in subsection (4) or (5).
(3) Nothing in subsection (2) is to be read as requiring the repayment of any income tax which any provision of the Income Tax Acts provides is not repayable.
(4) In a case where the person is given notice of the simple assessment after the 31st October next after the year of assessment, the difference is payable at the end of the period of 3 months after the day on which that notice was given.
(5) In any other case the difference is payable on or before the 31st January next after the end of the year of assessment.
(6) Section 59B(7) (which explains references to income tax deducted at source) applies for the purposes of this section.
(7) PAYE regulations may provide that, for the purpose of determining the amount of the difference mentioned in subsection (2), any necessary adjustments in respect of matters prescribed in the regulations shall be made to the amount of tax deducted at source under PAYE regulations.
SCHEDULE 24 Tax advantages constituting the grant of state aid
Section 180(2) and (5)
PART 1 Tax advantages to which section 180(2)applies
Enhanced capital allowances
Tax advantage | Provision under which tax advantage is given
Business premises renovation allowances | Part 3A of CAA 2001
Zero-emission goods vehicle allowances | Section 45DA, 45DB and 212T of CAA 2001
Expenditure on plant and machinery for use in designated assisted areas (enhanced capital allowances for enterprise zones) | Sections 45K to 45N and 212U of CAA 2001
Creative tax reliefs
Tax advantage | Provision under which tax advantage is given
Film tax relief | Part 15 of CTA 2009
Television tax reliefs | Part 15A of CTA 2009
Video games tax relief | Part 15B of CTA 2009
Theatre relief | Part 15C of CTA 2009
Orchestra tax relief | Part 15D of CTA 2009
Museums and galleries exhibition tax relief | Part 15E of CTA 2009
Research and development reliefs
Tax advantage | Provision under which tax advantage is given
Relief for SMEs: cost of research and development incurred by SME | Chapter 2 of Part 13 of CTA 2009
Vaccine research relief | Chapter 7 of Part 13 of CTA 2009
Enterprise management incentives exemptions and reliefs
Tax advantage | Provision under which tax advantage is given
Exemptions and reliefs in connection with share options | Chapter 9 of Part 7 of ITEPA 2003
PART 2 Tax advantages to which section 180(5) applies
Tax advantage | Provision under which tax advantage is given to beneficiary | Person liable to receive request under section 180(5)
Reduced rate of climate change levy payable in respect of a reduced rate supply (for supplies covered by climate change agreement) | Paragraphs 42 and 44 of Schedule 6 to FA 2000 | The person to whom the reduced rate taxable supply is supplied
Relief granted to investors in a company under the enterprise investment scheme | Part 5 of ITA 2007 | The company whose shares are acquired by investors
Relief granted to investors in a social enterprise | Part 5B of ITA 2007 | The social enterprise
Relief granted to investors in a venture capital trust under the venture capital trust scheme | Part 6 of ITA 2007 | The venture capital trust