(1) Part 5 of FA 2014 (promoters of tax avoidance schemes) is amended as follows.
(2) After section 237 insert—
Duty to give conduct notice: defeat of promoted arrangements
237A (1) If an authorised officer becomes aware at any time (“the relevant time”) that a person ( “ P ”) who is carrying on a business as a promoter meets any of the conditions in subsections (11) to (13), the officer must determine whether or not P's meeting of that condition should be regarded as significant in view of the purposes of this Part.
But see also subsection (14).
(2) An authorised officer must make the determination set out in subsection (3) if the officer becomes aware at any time ( “ the section 237A(2) relevant time ”) that—
(a) a person meets a condition in subsection (11), (12) or (13), and
(b) at the section 237A(2) relevant time another person (“P”), who is carrying on a business as a promoter, meets that condition by virtue of Part 4 of Schedule 34A (meeting the section 237A conditions: bodies corporate and partnerships).
(3) The authorised officer must determine whether or not—
(a) the meeting of the condition by the person as mentioned in subsection (2)(a), and
(b) P's meeting of the condition as mentioned in subsection (2)(b),
should be regarded as significant in view of the purposes of this Part.
(4) Subsections (1) and (2) do not apply if a conduct notice or monitoring notice already has effect in relation to P.
(5) Subsection (1) does not apply if, at the relevant time, an authorised officer is under a duty to make a determination under section 237(5) in relation to P.
(6) Subsection (2) does not apply if, at the section 237A(2) relevant time, an authorised officer is under a duty to make a determination under section 237(5) in relation to P.
(7) But in a case where subsection (1) does not apply because of subsection (5), or subsection (2) does not apply because of subsection (6), subsection (5) of section 237 has effect as if—
(a) the references in paragraph (a) of that subsection to “subsection (1)”, and “subsection (1)(a)” included subsection (1) of this section, and
(b) in paragraph (b) of that subsection the reference to “subsection (1A)(a)” included a reference to subsection (2)(a) of this section and the reference to subsection (1A)(b) included a reference to subsection (2)(b) of this section.
(8) If the authorised officer determines under subsection (1) that P's meeting of the condition in question should be regarded as significant, the officer must give P a conduct notice, unless subsection (10) applies.
(9) If the authorised officer determines under subsection (3) that—
(a) the meeting of the condition by the person as mentioned in subsection (2)(a), and
(b) P's meeting of the condition as mentioned in subsection (2)(b),
should be regarded as significant in view of the purposes of this Part, the officer must give P a conduct notice, unless subsection (10) applies.
(10) This subsection applies if the authorised officer determines that, having regard to the extent of the impact that P's activities as a promoter are likely to have on the collection of tax, it is inappropriate to give P a conduct notice.
(11) The condition in this subsection is that in the period of 3 years ending with the relevant time at least 3 relevant defeats have occurred in relation to P.
(12) The condition in this subsection is that at least two relevant defeats have occurred in relation to P at times when a single defeat notice under section 241A(2) or (6) had effect in relation to P.
(13) The condition in this subsection is that at least one relevant defeat has occurred in relation to P at a time when a double defeat notice under section 241A(3) had effect in relation to P.
(14) A determination that the condition in subsection (12) or (13) is met cannot be made unless—
(a) the defeat notice in question still has effect when the determination is made, or
(b) the determination is made on or before the 90th day after the day on which the defeat notice in question ceased to have effect.
(15) Schedule 34A sets out the circumstances in which a “relevant defeat” occurs in relation to a person and includes provision limiting what can amount to a further relevant defeat in relation to a person (see paragraph 6).
Duty to give further conduct notice where provisional notice not complied with
237B (1) An authorised officer must give a conduct notice to a person (“P”) who is carrying on a business as a promoter if—
(a) a conduct notice given to P under section 237A(8)—
(i) has ceased to have effect otherwise than as a result of section 237D(2) or 241(3) or (4), and
(ii) was provisional immediately before it ceased to have effect,
(b) the officer determines that P had failed to comply with one or more conditions in the conduct notice,
(c) the conduct notice relied on a Case 3 relevant defeat,
(d) since the time when the conduct notice ceased to have effect, one or more relevant defeats falling within subsection (2) have occurred in relation to—
(i) P, and
(ii) any arrangements to which the Case 3 relevant defeat also relates, and
(e) had that relevant defeat or (as the case may be) those relevant defeats, occurred before the conduct notice ceased to have effect, an authorised officer would have been required to notify the person under section 237C(3) that the notice was no longer provisional.
(2) A relevant defeat falls within this subsection if it occurs by virtue of Case 1 or Case 2 in Schedule 34A.
(3) Subsection (1) does not apply if the authorised officer determines that, having regard to the extent of the impact that the person's activities as a promoter are likely to have on the collection of tax, it is inappropriate to give the person a conduct notice.
(4) Subsection (1) does not apply if a conduct notice or monitoring notice already has effect in relation to the person.
(5) For the purposes of this Part a conduct notice “relies on a Case 3 relevant defeat” if it could not have been given under the following condition.
The condition is that paragraph 9 of Schedule 34A had effect with the substitution of “ 100% of the tested arrangements ” for “75% of the tested arrangements”.
When a conduct notice given under section 237A(8) is “provisional”
237C (1) This section applies to a conduct notice which—
(a) is given to a person under section 237A(8), and
(b) relies on a Case 3 relevant defeat.
(2) The notice is “provisional” at all times when it has effect, unless an authorised officer notifies the person that the notice is no longer provisional.
(3) An authorised officer must notify the person that the notice is no longer provisional if subsection (4) or (5) applies.
(4) This subsection applies if—
(a) the condition in subsection (5)(a) is not met, and
(b) a full relevant defeat occurs in relation to P.
(5) This subsection applies if—
(a) two, or all three, of the relevant defeats by reference to which the conduct notice is given would not have been relevant defeats if paragraph 9 of Schedule 34A had effect with the substitution of “ 100% of the tested arrangements ” for “75% of the tested arrangements”, and
(b) the same number of full relevant defeats occur in relation to P.
(6) A “full relevant defeat” occurs in relation to P if—
(a) a relevant defeat occurs in relation to P otherwise than by virtue of Case 3 in paragraph 9 of Schedule 34A, or
(b) circumstances arise which would be a relevant defeat in relation to P by virtue of paragraph 9 of Schedule 34A if that paragraph had effect with the substitution of “ 100% of the tested arrangements ” for “75% of the tested arrangements”.
(7) In determining under subsection (6) whether a full relevant defeat has occurred in relation to P, assume that in paragraph 6 of Schedule 34A (provision limiting what can amount to a further relevant defeat in relation to a person) the first reference to a “relevant defeat” does not include a relevant defeat by virtue of Case 3 in paragraph 9 of Schedule 34A.
Judicial ruling upholding asserted tax advantage: effect on conduct notice which is provisional
237D (1) Subsection (2) applies if at any time—
(a) a conduct notice which relies on a Case 3 relevant defeat (see section 237B(5)) is provisional, and
(b) a court or tribunal upholds a corresponding tax advantage which has been asserted in connection with any of the related arrangements to which that relevant defeat relates (see paragraph 5(2) of Schedule 34A).
(2) The conduct notice ceases to have effect when that judicial ruling becomes final.
(3) An authorised officer must give the person to whom the conduct notice was given a written notice stating that the conduct notice has ceased to have effect.
(4) For the purposes of this section, a tax advantage is “asserted” in connection with any arrangements if a person makes a return, claim or election on the basis that the tax advantage arises from those arrangements.
In relation to the arrangements mentioned in paragraph (b) of subsection (1) “corresponding tax advantage” means a tax advantage corresponding to any tax advantage the counteraction of which contributed to the relevant defeat mentioned in that paragraph.
(5) For the purposes of this section a court or tribunal “upholds” a tax advantage if—
(a) the court or tribunal makes a ruling to the effect that no part of the tax advantage is to be counteracted, and
(b) that judicial ruling is final.
(6) For the purposes of this Part a judicial ruling is “final” if it is—
(a) a ruling of the Supreme Court, or
(b) a ruling of any other court or tribunal in circumstances where—
(i) no appeal may be made against the ruling,
(ii) if an appeal may be made against the ruling with permission, the time limit for applications has expired and either no application has been made or permission has been refused,
(iii) if such permission to appeal against the ruling has been granted or is not required, no appeal has been made within the time limit for appeals, or
(iv) if an appeal was made, it was abandoned or otherwise disposed of before it was determined by the court or tribunal to which it was addressed.
(7) In this section references to “counteraction” include anything referred to as a counteraction in any of Conditions A to F in paragraphs 11 to 16 of Schedule 34A.
(3) After section 241 insert—
Defeat notices
Defeat notices
241A (1) This section applies in relation to a person (“P”) only if P is carrying on a business as a promoter.
(2) An authorised officer, or an officer of Revenue and Customs with the approval of an authorised officer, may give P a notice if the officer concerned has become aware of one (and only one) relevant defeat which has occurred in relation to P in the period of 3 years ending with the day on which the notice is given.
(3) An authorised officer, or an officer of Revenue and Customs with the approval of an authorised officer, may give P a notice if the officer concerned has become aware of two (but not more than two) relevant defeats which have occurred in relation to P in the period of 3 years ending with the day on which the notice is given.
(4) A notice under this section must be given by the end of the 90 days beginning with the day on which the matters mentioned in subsection (2) or (as the case may be) (3) come to the attention of HMRC.
(5) Subsection (6) applies if—
(a) a single defeat notice which had been given to P (under subsection (2) or (6)) ceases to have effect as a result of section 241B(1), and
(b) in the period when the defeat notice had effect a relevant defeat (“the further relevant defeat”) occurred in relation to P.
(6) An authorised officer or an officer of Revenue and Customs with the approval of an authorised officer may give P a notice in respect of the further relevant defeat (regardless of whether or not it occurred in the period of 3 years ending with the day on which the notice is given).
(7) In this Part—
(a) “single defeat notice” means a notice under subsection (2) or (6);
(b) “double defeat notice” means a notice under subsection (3);
(c) “defeat notice” means a single defeat notice or a double defeat notice.
(8) A defeat notice must—
(a) set out the dates on which the look-forward period for the notice begins and ends;
(b) in the case of a single defeat notice, explain the effect of section 237A(12);
(c) in the case of a double defeat notice, explain the effect of section 237A(13).
(9) HMRC may specify what further information must be included in a defeat notice.
(10) “Look-forward period”—
(a) in relation to a defeat notice under subsection (2) or (3), means the period of 5 years beginning with the day after the day on which the notice is given;
(b) in relation to a defeat notice under subsection (6), means the period beginning with the day after the day on which the notice is given and ending at the end of the period of 5 years beginning with the day on which the further relevant defeat mentioned in subsection (6) occurred in relation to P.
(11) A defeat notice has effect throughout its look-forward period unless it ceases to have effect earlier in accordance with section 241B(1) or (4).
Judicial ruling upholding asserted tax advantage: effect on defeat notice
241B (1) If the relevant defeat to which a single defeat notice relates is overturned (see subsection (5)), the notice has no further effect on and after the day on which it is overturned.
(2) Subsection (3) applies if one (and only one) of the relevant defeats in respect of which a double defeat notice was given is overturned.
(3) The notice is to be treated for the purposes of this Part (including this section) as if it had always been a single defeat notice given (in respect of the other of the two relevant defeats) on the date on which the notice was in fact given.
The look-forward period for the notice is accordingly unchanged.
(4) If both the relevant defeats to which a double defeat notice relates are overturned (on the same date), that notice has no further effect on and after that date.
(5) A relevant defeat specified in a defeat notice is “overturned” if—
(a) the notice could not have specified that relevant defeat if paragraph 9 of Schedule 34A had effect with the substitution of “ 100% of the tested arrangements ” for “75% of the tested arrangements”, and
(b) at a time when the notice has effect a court or tribunal upholds a corresponding tax advantage which has been asserted in connection with any of the related arrangements to which the relevant defeat relates (see paragraph 5(2) of Schedule 34A).
Accordingly the relevant defeat is overturned on the day on which the judicial ruling mentioned in paragraph (b) becomes final.
(6) If a defeat notice ceases to have effect as a result of subsection (1) or (4) an authorised officer, or an officer of Revenue and Customs with the approval of an authorised officer, must notify the person to whom the notice was given that it has ceased to have effect.
(7) If subsection (3) has effect in relation to a defeat notice, an authorised officer, or an officer of Revenue and Customs with the approval of an authorised officer, must notify the person of the effect of that subsection.
(8) For the purposes of this section, a tax advantage is “asserted” in connection with any arrangements if a person makes a return, claim or election on the basis that the tax advantage arises from those arrangements.
(9) In relation to the arrangements mentioned in paragraph (b) of subsection (5) “corresponding tax advantage” means a tax advantage corresponding to any tax advantage the counteraction of which contributed to the relevant defeat mentioned in that paragraph.
(10) For the purposes of this section a court or tribunal “upholds” a tax advantage if—
(a) the court or tribunal makes a ruling to the effect that no part of the tax advantage is to be counteracted, and
(b) that judicial ruling is final.
(11) In this section references to “counteraction” include anything referred to as a counteraction in any of Conditions A to F in paragraphs 11 to 16 of Schedule 34A.
(4) In section 242 (monitoring notices: duty to apply to tribunal), after subsection (5) insert—
(6) At a time when a notice given under section 237A is provisional, no determination is to be made under subsection (1) in respect of the notice.
(7) If a promoter fails to comply with conditions in a conduct notice at a time when the conduct notice is provisional, nothing in subsection (6) prevents those failures from being taken into account under subsection (1) at any subsequent time when the conduct notice is not provisional.
(5) After Schedule 34 insert—
SCHEDULE 34A
Promoters of tax avoidance schemes: defeated arrangements
PART 1 Introduction
1 In this Schedule—
(a) Part 2 is about the meaning of “relevant defeat”;
(b) Part 3 contains provision about when a relevant defeat is treated as occurring in relation to a person;
(c) Part 4 contains provision about when a person is treated as meeting a condition in subsection (11), (12) or (13) of section 237A;
(d) Part 5 contains definitions and other supplementary provisions.
PART 2 Meaning of “relevant defeat”
“Related” arrangements
2 (1) For the purposes of this Part of this Act, separate arrangements which persons have entered into are “related” to one another if (and only if) they are substantially the same.
(2) Sub-paragraphs (3) to (6) set out cases in which arrangements are to be treated as being “substantially the same” (if they would not otherwise be so treated under sub-paragraph (1)).
(3) Arrangements to which the same reference number has been allocated under Part 7 of FA 2004 (disclosure of tax avoidance schemes) are treated as being substantially the same.
For this purpose arrangements in relation to which information relating to a reference number has been provided in compliance with section 312 of FA 2004 are treated as arrangements to which that reference number has been allocated under Part 7 of that Act.
(4) Arrangements to which the same reference number has been allocated under paragraph 9 of Schedule 11A to VATA 1994 (disclosure of avoidance schemes) are treated as being substantially the same.
(5) Any two or more sets of arrangements which are the subject of follower notices given by reference to the same judicial ruling are treated as being substantially the same.
(6) Where a notice of binding has been given in relation to any arrangements (“the bound arrangements”) on the basis that they are, for the purposes of Schedule 43A to FA 2013, equivalent arrangements in relation to another set of arrangements (the “lead arrangements”)—
(a) the bound arrangements and the lead arrangements are treated as being substantially the same, and
(b) the bound arrangements are treated as being substantially the same as any other arrangements which, as a result of this sub-paragraph, are treated as substantially the same as the lead arrangements.
“Promoted arrangements”
3 (1) For the purposes of this Schedule arrangements are “promoted arrangements” in relation to a person if—
(a) they are relevant arrangements or would be relevant arrangements under the condition stated in sub-paragraph (2), and
(b) the person is carrying on a business as a promoter and—
(i) the person is or has been a promoter in relation to the arrangements, or
(ii) that would be the case if the condition in sub-paragraph (2) were met.
(2) That condition is that the definition of “tax” in section 283 includes, and has always included, value added tax.
Relevant defeat of single arrangements
4 (1) A defeat of arrangements (entered into by any person) which are promoted arrangements in relation to a person (“the promoter”) is a “relevant defeat” in relation to the promoter if the condition in sub-paragraph (2) is met.
(2) The condition is that the arrangements are not related to any other arrangements which are promoted arrangements in relation to the promoter.
(3) For the meaning of “defeat” see paragraphs 10 to 16.
Relevant defeat of related arrangements
5 (1) This paragraph applies if arrangements (entered into by any person) (“Set A”)—
(a) are promoted arrangements in relation to a person (“P”), and
(b) are related to other arrangements which are promoted arrangements in relation to P.
(2) If Case 1, 2 or 3 applies (see paragraphs 7 to 9) a relevant defeat occurs in relation to P and each of the related arrangements.
(3) “The related arrangements” means Set A and the arrangements mentioned in sub-paragraph (1)(b).
Limit on number of separate relevant defeats in relation to the same, or related, arrangements
6 In relation to a person, if there has been a relevant defeat of arrangements (whether under paragraph 4 or 5) there cannot be a further relevant defeat of—
(a) those particular arrangements, or
(b) arrangements which are related to those arrangements.
Case 1: counteraction upheld by judicial ruling
7 (1) Case 1 applies if—
(a) any of Conditions A to E is met in relation to any of the related arrangements, and
(b) in the case of those arrangements the decision to make the relevant counteraction has been upheld by a judicial ruling (which is final).
(2) In sub-paragraph (1) “the relevant counteraction” means the counteraction mentioned in paragraph 11(d), 12(1)(b), 13(1)(d), 14(1)(d) or 15(1)(d) (as the case requires).
Case 2: judicial ruling that avoidance-related rule applies
8 Case 2 applies if Condition F is met in relation to any of the related arrangements.
Case 3: proportion-based relevant defeat
9 (1) Case 3 applies if—
(a) at least 75% of the tested arrangements have been defeated, and
(b) no final judicial ruling in relation to any of the related arrangements has upheld a corresponding tax advantage which has been asserted in connection with any of the related arrangements.
(2) In this paragraph “the tested arrangements” means so many of the related arrangements (as defined in paragraph 5(3)) as meet the condition in sub-paragraph (3) or (4).
(3) Particular arrangements meet this condition if a person has made a return, claim or election on the basis that a tax advantage results from those arrangements and—
(a) there has been an enquiry or investigation by HMRC into the return, claim or election, or
(b) HMRC assesses the person to tax on the basis that the tax advantage (or any part of it) does not arise, or
(c) a GAAR counteraction notice has been given in relation to the tax advantage or part of it and the arrangements.
(4) Particular arrangements meet this condition if HMRC takes other action on the basis that a tax advantage which might be expected to arise from those arrangements, or is asserted in connection with them, does not arise.
(5) For the purposes of this paragraph a tax advantage has been “asserted” in connection with particular arrangements if a person has made a return, claim or election on the basis that the tax advantage arises from those arrangements.
(6) In sub-paragraph (1)(b) “corresponding tax advantage” means a tax advantage corresponding to any tax advantage the counteraction of which is taken into account by HMRC for the purposes of sub-paragraph (1)(a).
(7) For the purposes of this paragraph a court or tribunal “upholds” a tax advantage if—
(a) the court or tribunal makes a ruling to the effect that no part of the tax advantage is to be counteracted, and
(b) that judicial ruling is final.
(8) In this paragraph references to “counteraction” include anything referred to as a counteraction in any of Conditions A to F in paragraphs 11 to 16.
(9) In this paragraph “GAAR counteraction notice” means—
(a) a notice such as is mentioned in sub-paragraph (2) of paragraph 12 of Schedule 43 to FA 2013 (notice of final decision to counteract),
(b) a notice under paragraph 8(2) or 9(2) of Schedule 43A to that Act (pooling or binding of arrangements) stating that the tax advantage is to be counteracted under the general anti-abuse rule, or
(c) a notice under paragraph 8(2) of Schedule 43B to that Act (generic referrals) stating that the tax advantage is to be counteracted under the general anti-abuse rule.
“Defeat” of arrangements
10 For the purposes of this Part of this Act a “defeat” of arrangements occurs if any of Conditions A to F (in paragraphs 11 to 16) is met in relation to the arrangements.
11 Condition A is that—
(a) a person has made a return, claim or election on the basis that a tax advantage arises from the arrangements,
(b) a notice given to the person under paragraph 12 of Schedule 43 to, paragraph 8(2) or 9(2) of Schedule 43A to or paragraph 8(2) of Schedule 43B to FA 2013 stated that the tax advantage was to be counteracted under the general anti-abuse rule,
(c) the tax advantage has been counteracted (in whole or in part) under the general anti-abuse rule, and
(d) the counteraction is final.
12 (1) Condition B is that a follower notice has been given to a person by reference to the arrangements (and not withdrawn) and—
(a) the person has complied with subsection (2) of section 208 of FA 2014 by taking the action specified in subsections (4) to (6) of that section in respect of the denied tax advantage (or part of it), or
(b) the denied tax advantage has been counteracted (in whole or in part) otherwise than as mentioned in paragraph (a) and the counteraction is final.
(2) In this paragraph “the denied tax advantage” is to be interpreted in accordance with section 208(3) of FA 2014.
(3) In this Schedule “follower notice” means a follower notice under Chapter 2 of Part 4 of FA 2014.
13 (1) Condition C is that—
(a) the arrangements are DOTAS arrangements,
(b) a person (“the taxpayer”) has made a return, claim or election on the basis that a relevant tax advantage arises,
(c) the relevant tax advantage has been counteracted, and
(d) the counteraction is final.
(2) For the purposes of sub-paragraph (1) “relevant tax advantage” means a tax advantage which the arrangements might be expected to enable the taxpayer to obtain.
(3) For the purposes of this paragraph the relevant tax advantage is “counteracted” if adjustments are made in respect of the taxpayer's tax position on the basis that the whole or part of that tax advantage does not arise.
14 (1) Condition D is that—
(a) the arrangements are disclosable VAT arrangements to which a taxable person is a party,
(b) the taxable person has made a return or claim on the basis that a relevant tax advantage arises,
(c) the relevant tax advantage has been counteracted, and
(d) the counteraction is final.
(2) For the purposes of sub-paragraph (1) “relevant tax advantage” means a tax advantage which the arrangements might be expected to enable the taxable person to obtain.
(3) For the purposes of this paragraph the relevant tax advantage is “counteracted” if adjustments are made in respect of the taxable person's tax position on the basis that the whole or part of that tax advantage does not arise.
15 (1) Condition E is that the arrangements are disclosable VAT arrangements to which a taxable person (“T”) is a party and—
(a) the arrangements relate to the position with respect to VAT of a person other than T (“S”) who has made supplies of goods or services to T,
(b) the arrangements might be expected to enable T to obtain a tax advantage in connection with those supplies of goods or services,
(c) the arrangements have been counteracted, and
(d) the counteraction is final.
(2) For the purposes of this paragraph the arrangements are “counteracted” if—
(a) HMRC assess S to tax or take any other action on a basis which prevents T from obtaining (or obtaining the whole of) the tax advantage in question, or
(b) adjustments are made on a basis such as is mentioned in paragraph (a).
16 (1) Condition F is that—
(a) a person has made a return, claim or election on the basis that a relevant tax advantage arises,
(b) the tax advantage, or part of the tax advantage would not arise if a particular avoidance-related rule (see paragraph 25) applies in relation to the person's tax affairs,
(c) it is held in a judicial ruling that the relevant avoidance-related rule applies in relation to the person's tax affairs, and
(d) the judicial ruling is final.
(2) For the purposes of sub-paragraph (1) “relevant tax advantage” means a tax advantage which the arrangements might be expected to enable the person to obtain.
PART 3 Relevant defeats: associated persons
Attribution of relevant defeats
17 (1) Sub-paragraph (2) applies if—
(a) there is (or has been) a person (“Q”),
(b) arrangements (“the defeated arrangements”) have been entered into,
(c) an event occurs such that either—
(i) there is a relevant defeat in relation to Q and the defeated arrangements, or
(ii) the condition in sub-paragraph (i) would be met if Q had not ceased to exist,
(d) at the time of that event a person (“P”) is carrying on a business as a promoter (or is carrying on what would be such a business under the condition in paragraph 3(2)), and
(e) Condition 1 or 2 is met in relation to Q and P.
(2) The event is treated for all purposes of this Part of this Act as a relevant defeat in relation to P and the defeated arrangements (whether or not it is also a relevant defeat in relation to Q, and regardless of whether or not P existed at any time when those arrangements were promoted arrangements in relation to Q).
(3) Condition 1 is that—
(a) P is not an individual,
(b) at a time when the defeated arrangements were promoted arrangements in relation to Q—
(i) P was a relevant body controlled by Q, or
(ii) Q was a relevant body controlled by P, and
(c) at the time of the event mentioned in sub-paragraph (1)(c)—
(i) Q is a relevant body controlled by P,
(ii) P is a relevant body controlled by Q, or
(iii) P and Q are relevant bodies controlled by a third person.
(4) Condition 2 is that—
(a) P and Q are relevant bodies,
(b) at a time when the defeated arrangements were promoted arrangements in relation to Q, a third person (“C”) controlled Q, and
(c) C controls P at the time of the event mentioned in sub-paragraph (1)(c).
(5) For the purposes of sub-paragraphs (3)(b) and (4)(b), the question whether arrangements are promoted arrangements in relation to Q at any time is to be determined on the assumption that the reference to “design” in paragraph (b) of section 235(3) (definition of “promoter” in relation to relevant arrangements) is omitted.
Deemed defeat notices
18 (1) This paragraph applies if—
(a) an authorised officer becomes aware at any time (“the relevant time”) that a relevant defeat has occurred in relation to a person ( “ P ”) who is carrying on a business as a promoter,
(b) there have occurred, more than 3 years before the relevant time—
(i) one third party defeat, or
(ii) two third party defeats, and
(c) conditions A1 and B1 (in a case within paragraph (b)(i)), or conditions A2 and B2 (in a case within paragraph (b)(ii)), are met.
(2) Where this paragraph applies by virtue of sub-paragraph (1)(b)(i), this Part of this Act has effect as if an authorised officer had (with due authority), at the time of the time of the third party defeat, given P a single defeat notice under section 241A(2) in respect of it.
(3) Where this paragraph applies by virtue of sub-paragraph (1)(b)(ii), this Part of this Act has effect as if an authorised officer had (with due authority), at the time of the second of the two third party defeats, given P a double defeat notice under section 241A(3) in respect of the two third party defeats.
(4) Section 241A(8) has no effect in relation to a notice treated as given as mentioned in sub-paragraph (2) or (3).
(5) Condition A1 is that—
(a) a conduct notice or a single or double defeat notice has been given to the other person (see sub-paragraph (9)) in respect of the third party defeat,
(b) at the time of the third party defeat an authorised officer would have had power by virtue of paragraph 17 to give P a defeat notice in respect of the third party defeat, had the officer been aware that it was a relevant defeat in relation to P, and
(c) so far as the authorised officer mentioned in sub-paragraph (1)(a) is aware, the conditions for giving P a defeat notice in respect of the third party defeat have never been met (ignoring this paragraph).
(6) Condition A2 is that—
(a) a conduct notice or a single or double defeat notice has been given to the other person (see sub-paragraph (9)) in respect of each, or both, of the third party defeats,
(b) at the time of the second third party defeat an authorised officer would have had power by virtue of paragraph 17 to give P a double defeat notice in respect of the third party defeats, had the officer been aware that either of the third party defeats was a relevant defeat in relation to P, and
(c) so far as the authorised officer mentioned in sub-paragraph (1)(a) is aware, the conditions for giving P a defeat notice in respect of those third party defeats (or either of them) have never been met (ignoring this paragraph).
(7) Condition B1 is that, had an authorised officer given P a defeat notice in respect of the third party defeat at the time of that relevant defeat, that defeat notice would still have effect at the relevant time (see sub-paragraph (1)).
(8) Condition B2 is that, had an authorised officer given P a defeat notice in respect of the two third party defeats at the time of the second of those relevant defeats, that defeat notice would still have effect at the relevant time.
(9) In this paragraph “third party defeat” means a relevant defeat which has occurred in relation to a person other than P.
Meaning of “relevant body” and “control”
19 (1) In this Part of this Schedule “relevant body” means—
(a) a body corporate, or
(b) a partnership.
(2) For the purposes of this Part of this Schedule a person controls a body corporate if the person has power to secure that the affairs of the body corporate are conducted in accordance with the person's wishes—
(a) by means of the holding of shares or the possession of voting power in relation to the body corporate or any other relevant body,
(b) as a result of any powers conferred by the articles of association or other document regulating the body corporate or any other relevant body, or
(c) by means of controlling a partnership.
(3) For the purposes of this Part of this Schedule a person controls a partnership if the person is a controlling member or the managing partner of the partnership.
(4) In this paragraph “controlling member” has the same meaning as in Schedule 36 (partnerships).
(5) In this paragraph “managing partner”, in relation to a partnership, means the member of the partnership who directs, or is on a day-to-day level in control of, the management of the business of the partnership.
PART 4 Meeting section 237A conditions: bodies corporate and partnerships
Treating persons under another's control as meeting section 237A condition
20 (1) A relevant body (“RB”) is treated as meeting a section 237A condition at the section 237A(2) relevant time if—
(a) that condition was met by a person (“C”) at a time when—
(i) C was carrying on a business as a promoter, or
(ii) RB was carrying on a business as a promoter and C controlled RB, and
(b) RB is controlled by C at the section 237A(2) relevant time.
(2) Sub-paragraph (1) does not apply if C is an individual.
(3) For the purposes of determining whether the requirements of sub-paragraph (1) are met by reason of meeting the requirement in sub-paragraph (1)(a)(i), it does not matter whether RB existed at the time when C met the section 237A condition.
Treating persons in control of others as meeting section 237A condition
21 (1) A person other than an individual is treated as meeting a section 237A condition at the section 237A(2) relevant time if—
(a) a relevant body (“A”) met the condition at a time when A was controlled by the person, and
(b) at the time mentioned in paragraph (a) A, or another relevant body (“B”) which was also at that time controlled by the person, carried on a business as a promoter.
(2) For the purposes of determining whether the requirements of sub-paragraph (1) are met it does not matter whether A or B (or neither) exists at the section 237A(2) relevant time.
Treating persons controlled by the same person as meeting section 237A condition
22 (1) A relevant body (“RB”) is treated as meeting a section 237A condition at the section 237A(2) relevant time if—
(a) another relevant body met that condition at a time (“time T”) when it was controlled by a person (“C”),
(b) at time T, there was a relevant body controlled by C which carried on a business as a promoter, and
(c) RB is controlled by C at the section 237A(2) relevant time.
(2) For the purposes of determining whether the requirements of sub-paragraph (1) are met it does not matter whether—
(a) RB existed at time T, or
(b) any relevant body (other than RB) by reason of which the requirements of sub-paragraph (1) are met exists at the section 237A(2) relevant time.
Interpretation
23 (1) In this Part of this Schedule—
“control” has the same meaning as in Part 3 of this Schedule;
“relevant body” has the same meaning as in Part 3 of this Schedule;
“section 237A(2) relevant time” means the time referred to in section 237A(2);
“section 237A condition” means any of the conditions in section 237A(11), (12) and (13).
(2) For the purposes of paragraphs 20(1)(a), 21(1)(a) and 22(1)(a), the condition in section 237A(11) (occurrence of 3 relevant defeats in the 3 years ending with the relevant time) is taken to have been met by a person at any time if at least 3 relevant defeats have occurred in relation to the person in the period of 3 years ending with that time.
PART 5 Supplementary
“Adjustments”
24 In this Schedule “adjustments” means any adjustments, whether by way of an assessment, the modification of an assessment or return, the amendment or disallowance of a claim, the entering into of a contract settlement or otherwise (and references to “making” adjustments accordingly include securing that adjustments are made by entering into a contract settlement).
Meaning of “avoidance-related rule”
25 (1) In this Schedule “avoidance-related rule” means a rule in Category 1 or 2.
(2) A rule is in Category 1 if—
(a) it refers (in whatever terms) to the purpose or main purpose or purposes of a transaction, arrangements or any other action or matter, and
(b) to whether or not the purpose in question is or involves the avoidance of tax or the obtaining of any advantage in relation to tax (however described).
(3) A rule is also in Category 1 if it refers (in whatever terms) to—
(a) expectations as to what are, or may be, the expected benefits of a transaction, arrangements or any other action or matter, and
(b) whether or not the avoidance of tax or the obtaining of any advantage in relation to tax (however described) is such a benefit.
For the purposes of paragraph (b) it does not matter whether the reference is (for instance) to the “sole or main benefit” or “one of the main benefits” or any other reference to a benefit.
(4) A rule falls within Category 2 if as a result of the rule a person may be treated differently for tax purposes depending on whether or not purposes referred to in the rule (for instance the purposes of an actual or contemplated action or enterprise) are (or are shown to be) commercial purposes.
(5) For example, a rule in the following form would fall within Category 1 and within Category 2—
Example rule
Section X does not apply to a company in respect of a transaction if the company shows that the transaction meets Condition A or B.
Condition A is that the transaction is effected—
(a) for genuine commercial reasons, or
(b) in the ordinary course of managing investments.
Condition B is that the avoidance of tax is not the main object or one of the main objects of the transaction.
“DOTAS arrangements”
26 (1) For the purposes of this Schedule arrangements are “DOTAS arrangements” at any time if at that time a person—
(a) has provided, information in relation to the arrangements under section 308(3), 309 or 310 of FA 2004, or
(b) has failed to comply with any of those provisions in relation to the arrangements.
(2) But for the purposes of this Schedule “DOTAS arrangements” does not include arrangements in respect of which HMRC has given notice under section 312(6) of FA 2004 (notice that promoters not under duty to notify client of reference number).
(3) For the purposes of sub-paragraph (1) a person who would be required to provide information under subsection (3) of section 308 of FA 2004—
(a) but for the fact that the arrangements implement a proposal in respect of which notice has been given under subsection (1) of that section, or
(b) but for subsection (4A), (4C) or (5) of that section,
is treated as providing the information at the end of the period referred to in subsection (3) of that section.
“Disclosable VAT arrangements”
27 For the purposes of this Schedule arrangements are “disclosable VAT arrangements” at any time if at that time—
(a) a person has complied with paragraph 6 of Schedule 11A to VATA 1994 in relation to the arrangements (duty to notify Commissioners),
(b) a person under a duty to comply with that paragraph in relation to the arrangements has failed to do so, or
(c) a reference number has been allocated to the scheme under paragraph 9 of that Schedule (voluntary notification of avoidance scheme which is not a designated scheme).
Paragraphs 26 and 27: supplementary
28 (1) A person “fails to comply” with any provision mentioned in paragraph 26(1)(a) or 27(b) if and only if any of the conditions in sub-paragraphs (2) to (4) is met.
(2) The condition in this sub-paragraph is that—
(a) the tribunal has determined that the person has failed to comply with the provision concerned,
(b) the appeal period has ended, and
(c) the determination has not been overturned on appeal.
(3) The condition in this sub-paragraph is that—
(a) the tribunal has determined for the purposes of section 118(2) of TMA 1970 that the person is to be deemed not to have failed to comply with the provision concerned as the person had a reasonable excuse for not doing the thing required to be done,
(b) the appeal period has ended, and
(c) the determination has not been overturned on appeal.
(4) The condition in this sub-paragraph is that the person admitted in writing to HMRC that the person has failed to comply with the provision concerned.
(5) In this paragraph “the appeal period” means—
(a) the period during which an appeal could be brought against the determination of the tribunal, or
(b) where an appeal mentioned in paragraph (a) has been brought, the period during which that appeal has not been finally determined, withdrawn or otherwise disposed of.
“Final” counteraction
29 For the purposes of this Schedule the counteraction of a tax advantage or of arrangements is “final” when the assessment or adjustments made to effect the counteraction, and any amounts arising as a result of the assessment or adjustments, can no longer be varied, on appeal or otherwise.
Inheritance tax, stamp duty reserve tax, VAT and petroleum revenue tax
30 (1) In this Schedule, in relation to inheritance tax, each of the following is treated as a return—
(a) an account delivered by a person under section 216 or 217 of IHTA 1984 (including an account delivered in accordance with regulations under section 256 of that Act);
(b) a statement or declaration which amends or is otherwise connected with such an account produced by the person who delivered the account;
(c) information or a document provided by a person in accordance with regulations under section 256 of that Act;
and such a return is treated as made by the person in question.
(2) In this Schedule references to an assessment to tax, in relation to inheritance tax, stamp duty reserve tax and petroleum revenue tax, include a determination.
(3) In this Schedule an expression used in relation to VAT has the same meaning as in VATA 1994.
Power to amend
31 (1) The Treasury may by regulations amend this Schedule (apart from this paragraph).
(2) An amendment by virtue of sub-paragraph (1) may, in particular, add, vary or remove conditions or categories (or otherwise vary the meaning of “ avoidance-related rule ”).
(3) Regulations under sub-paragraph (1) may include any amendment of this Part of this Act that is appropriate in consequence of an amendment made by virtue of sub-paragraph (1).
(6) In section 241 (duration of conduct notice), after subsection (4) insert—
(5) See also section 237D(2) (provisional conduct notice affected by judicial ruling).
(7) After section 281 insert—
VAT
281A (1) In the provisions mentioned in subsection (2)—
(a) “tax” includes value added tax, and
(b) “tax advantage” has the meaning given by section 234(3) and also includes a tax advantage as defined in paragraph 1 of Schedule 11A to VATA 1994.
(2) Those provisions are—
(a) section 237D;
(b) section 241B;
(c) Schedule 34A.
(3) Other references in this Part to “tax” are to be read as including value added tax so far as that is necessary for the purposes of sections 237A to 237D, 241A and 241B and Schedule 34A; but “tax” does not include value added tax in section 237A(10) or 237B(3).
(8) In section 282 (regulations), in subsection (3), after paragraph (b) insert—
(ba) paragraph 31 of Schedule 34A,
.
(9) In section 283(1) (interpretation of Part 5)—
(a) in the definition of “conduct notice”, after paragraph (a) insert—
(aa) section 237A(8),
(ab) section 237B(1),
;
(b) in the definition of “tax”, after “ “tax”” insert “ (except in provisions to which section 281A applies) ”;
(c) in the definition of “ “tax advantage””, after “234(3)” insert “ (but see also section 281A) ”;
(d) at the appropriate places insert—
“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;
“defeat”, in relation to arrangements, has the meaning given by paragraph 10 of Schedule 34A;
“defeat notice” has the meaning given by section 241A(7);
“double defeat notice” has the meaning given by section 241A(7);
“final”, in relation to a judicial ruling, is to be interpreted in accordance with section 237D(6);
“judicial ruling” means a ruling of a court or tribunal on one or more issues;
“look-forward period, in relation to a defeat notice, has the meaning given by section 241A(10);
“provisional”, in relation to a conduct notice given under section 237A(8), is to be interpreted in accordance with section 237C;
“relevant defeat”, in relation to a person, is to be interpreted in accordance with Schedule 34A;
“related”, in relation to arrangements, is to be interpreted in accordance with paragraph 2 of Schedule 34A;
“relies on a Case 3 relevant defeat” is to be interpreted in accordance section 237B(5);
“single defeat notice” has the meaning given by section 241A(7).
(10) Schedule 36 (promoters of tax avoidance schemes: partnerships) is amended in accordance with subsections (11) to (16).
(11) In Part 2, before paragraph 5 insert—
Defeat notices
4A A defeat notice that is given to a partnership must state that it is a partnership defeat notice.
.
(12) In paragraph 7(1)(b) after “a” insert “ defeat notice, ”.
(13) In paragraph 7(2) after “the” insert “ defeat notice, ”.
(14) After paragraph 7 insert—
Persons leaving partnership: defeat notices
7A (1) Sub-paragraphs (2) and (3) apply where—
(a) a person (“P”) who was a controlling member of a partnership at the time when a defeat notice (“the original notice”) was given to the partnership has ceased to be a member of the partnership,
(b) the defeat notice had effect in relation to the partnership at the time of that cessation, and
(c) P is carrying on a business as a promoter.
(2) An authorised officer may give P a defeat notice.
(3) If P is carrying on a business as a promoter in partnership with one or more other persons and is a controlling member of that partnership (“the new partnership”), an authorised officer may give a defeat notice to the new partnership.
(4) A defeat notice given under sub-paragraph (3) ceases to have effect if P ceases to be a member of the new partnership.
(5) A notice under sub-paragraph (2) or (3) may not be given after the original notice has ceased to have effect.
(6) A defeat notice given under sub-paragraph (2) or (3) is given in respect of the relevant defeat or relevant defeats to which the original notice relates.
(15) In paragraph 10—
(a) in sub-paragraph (1)(b) for “conduct notice or a” substitute “ , defeat notice, conduct notice or ”;
(b) in sub-paragraph (3), after “partner—” insert—
(za) a defeat notice (if the original notice is a defeat notice);
.
(c) in sub-paragraph (4), after “(“the new partnership”)—” insert—
(za) a defeat notice (if the original notice is a defeat notice);
(d) after sub-paragraph (5) insert—
(5A) A notice under sub-paragraph (3)(za) or (4)(za) may not be given after the end of the look-forward period of the original notice.
(16) After paragraph 11 insert—
11A The look-forward period for a notice under paragraph 7A(2) or (3) or 10(3)(za) or (4)(za)—
(a) begins on the day after the day on which the notice is given, and
(b) continues to the end of the look-forward period for the original notice (as defined in paragraph 7A(1)(a) or 10(2), as the case may be).
(17) Part 2 of Schedule 2 to the National Insurance Contributions Act 2015 (application of Part 5 of FA 2014 to national insurance contributions) is amended in accordance with subsections (18) and (19).
(18) After paragraph 30 insert—
Threshold conditions
30A (1) In paragraph 5 of Schedule 34 (non-compliance with Part 7 of FA 2004), in sub-paragraph (4)—
(a) paragraph (a) includes a reference to a decision having been made for corresponding NICs purposes that P is to be deemed not to have failed to comply with the provision concerned as P had a reasonable excuse for not doing the thing required to be done, and
(b) the reference in paragraph (c) to a determination is to be read accordingly.
(2) In this paragraph “corresponding NICs purposes” means the purposes of any provision of regulations under section 132A of SSAA 1992.
Relevant defeats
30B (1) Schedule 34A (promoters of tax avoidance schemes: defeated arrangements) has effect with the following modifications.
(2) References to an assessment (or an assessment to tax) include a NICs decision relating to a person's liability for relevant contributions.
(3) References to adjustments include a payment in respect of a liability to pay relevant contributions (and the definition of “adjustments” in paragraph 24 accordingly has effect as if such payments were included in it).
(4) In paragraph 9(3) the reference to an enquiry into a return includes a relevant contributions dispute (as defined in paragraph 6 of this Schedule).
(5) In paragraph 28(3)—
(a) paragraph (a) includes a reference to a decision having been made for corresponding NICs purposes 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, and
(b) the reference in paragraph (c) to a determination is to be read accordingly.
“Corresponding NICs purposes” means the purposes of any provision of regulations under section 132A of SSAA 1992.
(19) In paragraph 31 (interpretation)—
(a) before paragraph (a) insert—
(za) NICs decision” means a decision under section 8 of SSC(TF)A 1999 or Article 7 of the Social Security Contributions (Transfer of Functions, etc) (Northern Ireland) Order 1999 (SI 1999/671);
(b) in paragraph (b), for “are to sections of” substitute “ or Schedules are to sections of, or Schedules to ”.
(20) For the purposes of sections 237A and 241A of FA 2014, a defeat (by virtue of any of Conditions A to F in Schedule 34A to that Act) of arrangements is treated as not having occurred if—
(a) there has been a final judicial ruling on or before the day on which this Act is passed as a result of which the counteraction referred to in paragraph 11(d), 12(1)(b), 13(1)(d), 14(1)(d) or 15(1)(d) (as the case may be) is final for the purposes of Schedule 34A of that Act, or
(b) (in the case of a defeat by virtue of Condition F in Schedule 34A) the judicial ruling mentioned in paragraph 16(1)(d) of that Schedule becomes final on or before the day on which this Act is passed.
(21) Subsection (20) does not apply in relation to a person (who is carrying on a business as a promoter) if at any time after 17 July 2014 that person or an associated person takes action as a result of which the person taking the action—
(a) becomes a promoter in relation to the arrangements, or arrangements related to those arrangements, or
(b) would have become a promoter in relation to arrangements mentioned in paragraph (a) had the person not already been a promoter in relation to those arrangements.
(22) For the purposes of sections 237A and 241A of FA 2014, a defeat of arrangements is treated as not having occurred if it would (ignoring this sub-paragraph) have occurred—
(a) on or before the first anniversary of the day on which this Act is passed, and
(b) by virtue of any of Conditions A to E in Schedule 34A to FA 2014, but otherwise than as a result of a final judicial ruling.
(23) For the purposes of subsection (21) a person (“Q”) is an “associated person” in relation to another person (“P”) at any time when any of the following conditions is met—
(a) P is a relevant body which is controlled by Q;
(b) Q is a relevant body, P is not an individual and Q is controlled by P;
(c) P and Q are relevant bodies and a third person controls P and Q.
(24) In subsection (23) “relevant body” and “control” are to be interpreted in accordance with paragraph 19 of Schedule 34A to FA 2014.
(25) In subsections (20) to (22) expressions used in Part 5 of FA 2014 (as amended by this section) have the same meaning as in that Part.
161 Large businesses: tax strategies and sanctions for persistently unco-operative behaviour
(1) Schedule 19 contains provisions relating to—
(a) the publication of tax strategies by bodies which are or are part of a large business,
(b) the imposition of sanctions for such bodies where there has been persistent unco-operative behaviour.
(2) That Schedule, so far as relating to the publication of a tax strategy for a financial year of a relevant body or other entity, has effect only where the financial year begins on or after the day on which this Act is passed.
(3) An officer of HMRC may not give a warning notice under Part 3 of that Schedule to a relevant body or other entity before the beginning of its first financial year beginning on or after the day on which this Act is passed.
(4) In this section and Schedule 19 “HMRC” means Her Majesty's Revenue and Customs.
162 Penalties for enablers of offshore tax evasion or non-compliance
(1) Schedule 20 makes provision for penalties for persons who enable offshore tax evasion or non-compliance by other persons.
(2) Subsection (1) and that Schedule come into force on such day as the Treasury may appoint by regulations made by statutory instrument.
(3) Regulations under this section may—
(a) commence a provision generally or only for specified purposes,
(b) appoint different days for different purposes, and
(c) make supplemental, incidental and transitional provision in connection with the coming into force of any provision of the Schedule.
163 Penalties in connection with offshore matters and offshore transfers
(1) Schedule 21 contains provisions amending—
(a) Schedule 24 to FA 2007 (penalties for errors in tax returns etc),
(b) Schedule 41 to FA 2008 (penalties for failure to notify etc), and
(c) Schedule 55 to FA 2009 (penalties for failure to make return etc).
(2) That Schedule comes into force on such day as the Treasury may by regulations made by statutory instrument appoint.
(3) Regulations under this section may—
(a) commence a provision generally or only for specified purposes,
(b) appoint different days for different provisions or for different purposes, and
(c) make supplemental, incidental and transitional provision.
(1) Section 94 of FA 2009 (publishing details of deliberate tax defaulters) is amended as follows.
(2) After subsection (4), insert—
(4A) Subsection (4B) applies where a person who is a body corporate or a partnership has incurred—
(a) a penalty under paragraph 1 of Schedule 24 to FA 2007 in respect of a deliberate inaccuracy which involves an offshore matter or an offshore transfer (within the meaning of paragraph 4A of that Schedule), or
(b) a penalty under paragraph 1 of Schedule 41 to FA 2008 in respect of a deliberate failure which involves an offshore matter or an offshore transfer (within the meaning of paragraph 6A of that Schedule).
(4B) The Commissioners may publish the information mentioned in subsection (4) in respect of any individual who—
(a) controls the body corporate or the partnership (within the meaning of section 1124 of CTA 2010), and
(b) has obtained a tax advantage as a result of the inaccuracy or failure.
(4C) Subsection (4D) applies where one or more trustees of a settlement have incurred—
(a) a penalty under paragraph 1 of Schedule 24 to FA 2007 in respect of a deliberate inaccuracy which involves an offshore matter or an offshore transfer (within the meaning of paragraph 4A of that Schedule), or
(b) a penalty under paragraph 1 of Schedule 41 to FA 2008 in respect of a deliberate failure which involves an offshore matter or an offshore transfer (within the meaning of paragraph 6A of that Schedule).
(4D) The Commissioners may publish the information mentioned in subsection (4) in respect of any trustee who is an individual and who has obtained a tax advantage as a result of the inaccuracy or failure.
(3) In subsection (6), after “information” insert “ about a person under subsection (1), ”.
(4) After subsection (6), insert—
(6A) Before publishing any information about an individual under subsection (4B) or (4D), the Commissioners—
(a) must inform the individual that they are considering doing so, and
(b) afford the individual reasonable opportunity to make representations about whether it should be published.
(5) In subsection (10)—
(a) omit the word “or” at the end of paragraph (a), and after that paragraph insert—
(aa) paragraph 10A of that Schedule to the full extent permitted following an unprompted disclosure,
;
(b) after paragraph (b) insert
, or
(c) paragraph 13A of that Schedule to the full extent permitted following an unprompted disclosure.
(6) For subsection (16) substitute—
(16) In this section—
“the Commissioners” means the Commissioners for Her Majesty's Revenue and Customs;
“tax advantage” has the meaning given by section 208 of FA 2013.
(7) The amendments made by this section come into force on such day as the Treasury may by regulations made by statutory instrument appoint.
165 Asset-based penalties for offshore inaccuracies and failures
(1) Schedule 22 contains provision imposing asset-based penalties on certain taxpayers who have been charged a penalty for deliberate offshore inaccuracies and failures.
(2) That Schedule comes into force on such day as the Treasury may by regulations made by statutory instrument appoint.
(3) Regulations under subsection (2) may—
(a) commence a provision generally or only for specified purposes,
(b) appoint different days for different provisions or for different purposes, and
(c) make supplemental, incidental and transitional provision.
166 Offences relating to offshore income, assets and activities
(1) After section 106A of TMA 1970 insert—
Offshore income, assets and activities
Offence of failing to give notice of being chargeable to tax
106B (1) A person who is required by section 7 to give notice of being chargeable to income tax or capital gains tax (or both) for a year of assessment and who has not given that notice by the end of the notification period commits an offence if—
(a) the tax in question is chargeable (wholly or in part) on or by reference to offshore income, assets or activities, and
(b) the total amount of income tax and capital gains tax that is chargeable for the year of assessment on or by reference to offshore income, assets or activities exceeds the threshold amount.
(2) It is a defence for a person accused of an offence under this section to prove that the person had a reasonable excuse for failing to give the notice required by section 7.
(3) In this section “the notification period” has the same meaning as in section 7 (see subsection (1C) of that section).
Offence of failing to deliver return
106C (1) A person who is required by a notice under section 8 to make and deliver a return for a year of assessment commits an offence if—
(a) the return is not delivered by the end of the withdrawal period,
(b) an accurate return would have disclosed liability to income tax or capital gains tax (or both) that is chargeable for the year of assessment on or by reference to offshore income, assets or activities, and
(c) the total amount of income tax and capital gains tax that is chargeable for the year of assessment on or by reference to offshore income, assets or activities exceeds the threshold amount.
(2) It is a defence for a person accused of an offence under this section to prove that the person had a reasonable excuse for failing to deliver the return.
(3) In this section “the withdrawal period” has the same meaning as in section 8B (see subsection (6) of that section).
Offence of making inaccurate return
106D (1) A person who is required by a notice under section 8 to make and deliver a return for a year of assessment commits an offence if, at the end of the amendment period—
(a) the return contains an inaccuracy the correction of which would result in an increase in the amount of income tax or capital gains tax (or both) that is chargeable for the year of assessment on or by reference to offshore income, assets or activities, and
(b) the amount of that increase exceeds the threshold amount.
(2) It is a defence for a person accused of an offence under this section to prove that the person took reasonable care to ensure that the return was accurate.
(3) In this section “the amendment period” means the period for amending the return under section 9ZA.
Exclusions from offences under sections 106B to 106D
106E (1) A person is not guilty of an offence under section 106B, 106C or 106D if the capacity in which the person is required to give the notice or make and deliver the return is—
(a) as a relevant trustee of a settlement, or
(b) as the executor or administrator of a deceased person.
(2) The Treasury may by regulations provide that a person is not guilty of an offence under section 106B, 106C or 106D if—
(a) conditions specified in the regulations are met, or
(b) circumstances so specified exist.
(3) The conditions may (in particular) include conditions in relation to the income, assets or activities on or by reference to which the tax in question is chargeable.
Offences under sections 106B to 106D: supplementary provision
106F (1) Where a period of time is extended under subsection (2) of section 118 by HMRC, the tribunal or an officer (but not where a period is otherwise extended under that subsection), any reference in section 106B, 106C or 106D to the end of the period is to be read as a reference to the end of the period as so extended.
(2) The Treasury may by regulations specify the amount (which must not be less than £25,000) that is to be the threshold amount for the purposes of sections 106B to 106D.
(3) The Treasury may by regulations make provision as to the calculation for the purposes of sections 106B to 106D of—
(a) the amount of tax that is chargeable on or by reference to offshore income, assets or activities, and
(b) the increase in the amount of tax that is so chargeable as a result of correcting an inaccuracy.
(4) In sections 106B to 106D and this section “offshore income, assets or activities” means—
(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, or
(c) activities carried on wholly or mainly in a territory outside the United Kingdom.
(5) In subsection (4), “assets” has the meaning given in section 21(1) of the 1992 Act, but also includes sterling.
Penalties for offences under sections 106B to 106D
106G (1) A person guilty of an offence under section 106B, 106C or 106D is liable on summary conviction—
(a) in England and Wales, to a fine or to imprisonment for a term not exceeding 51 weeks or to both, and
(b) in Scotland or Northern Ireland, to a fine not exceeding level 5 on the standard scale or to imprisonment for a term not exceeding 6 months or to both.
(2) In relation to an offence committed before the coming into force of section 281(5) of the Criminal Justice Act 2003, the reference in subsection (1)(a) to 51 weeks is to be read as a reference to 6 months.
Regulations under sections 106E and 106F
106H (1) This section makes provision about regulations under sections 106E and 106F.
(2) If the regulations contain a reference to a document or any provision of a document and it appears to the Treasury that it is necessary or expedient for the reference to be construed as a reference to that document or that provision as amended from time to time, the regulations may make express provision to that effect.
(3) The regulations—
(a) may make different provision for different cases, and
(b) may include incidental, supplemental, consequential and transitional provision and savings.
(4) The regulations are to be made by statutory instrument.
(5) An instrument containing the regulations is subject to annulment in pursuance of a resolution of the House of Commons.
(2) The amendment made by this section comes into force on such day as the Treasury may by regulations made by statutory instrument appoint.
(3) The regulations—
(a) may appoint different days for different purposes, and
(b) may include incidental, supplemental, consequential and transitional provision and savings.
(4) The amendment made by this section does not have effect in relation to—
(a) a failure to give a notice required by section 7 of TMA 1970,
(b) a failure to make and deliver a return required by section 8 of TMA 1970, or
(c) a return required by section 8 that contains an inaccuracy,
if the notice or return relates to a tax year before that in which the amendment comes into force.
(1) Schedule 23 contains provisions about simple assessments by HMRC.
(2) Paragraphs 1 to 8 of that Schedule have effect in relation to the 2016-17 tax year and subsequent years.
(3) Paragraph 9 of that Schedule comes into force on such day as the Treasury may appoint by regulations made by statutory instrument.
(4) Regulations under subsection (3) may—
(a) commence paragraph 9 generally or only for specified purposes, and
(b) appoint different days for different purposes.
(1) TMA 1970 is amended as follows.
(2) In section 34 (ordinary time limit of 4 years for assessments), after subsection (2) insert—
(3) In this section “assessment” does not include a self-assessment.
(3) After that section insert—
Ordinary time limit for self-assessments
34A (1) Subject to subsections (2) and (3), a self assessment contained in a return under section 8 or 8A may be made and delivered at any time not more than 4 years after the end of the year of assessment to which it relates.
(2) Nothing in subsection (1) prevents—
(a) a person who has received a notice under section 8 or 8A within that period of 4 years from delivering a return including a self-assessment within the period of 3 months beginning with the date of the notice,
(b) a person in respect of whom a determination under section 28C has been made from making a self-assessment in accordance with that section within the period allowed by subsection (5)(a) or (b) of that section.
(3) Subsection (1) has effect subject to the following provisions of this Act and to any other provisions of the Taxes Acts allowing a longer period in any particular class of case.
(4) This section has effect in relation to self-assessments for a year of assessment earlier than 2012-13 as if—
(a) in subsection (1) for the words from “not more” to the end there were substituted “ on or before 5 April 2017 ”, and
(b) in subsection (2)(a) for the words “within that period of 4 years” there were substituted “ on or before 5 April 2017. ”
169 HMRC power to withdraw notice to file a tax return
(1) Section 8B of TMA 1970 (withdrawal of notice under section 8 or 8A) is amended as follows.
(2) In subsection (2) for the words from “the person” to the end substitute “ HMRC may withdraw the notice (whether at the request of the person or otherwise) ”.
(3) In subsection (3) for “no request may be made” substitute “ the notice may not be withdrawn ”.
(4) In subsection (4) omit “, on receiving a request,”.
(5) In subsection (6)(b) for “agree with the person” substitute “ determine ”.
(6) In paragraph 17A of Schedule 55 to the Finance Act 2009 (penalty for failure to make returns etc), in sub-paragraph (1)(b) for the words from the beginning to “withdraw” substitute “ HMRC decide to give P a notice under section 8B withdrawing ”.
(7) The amendments made by this section have effect in relation to any notice under section 8 or 8A of TMA 1970 given in relation to the 2014-15 tax year or any subsequent year (and it is immaterial whether the notice was given before or after the passing of this Act).
170 Rate of interest applicable to judgment debts etc: Scotland
(1) This section applies if—
(a) a sum is payable to or by the Commissioners under a decree or extract issued in any court proceedings relating to a taxation matter (a “tax-related judgment debt”), and
(b) interest in relation to the tax-related judgment debt is included in or payable under the decree or extract.
(2) In a case where the rate of interest in relation to the tax-related judgment debt is stated in the decree or extract, the rate stated in relation to that debt may not exceed (and may not be capable of exceeding)—
(a) in the case of a sum payable to the Commissioners, the late payment interest rate, and
(b) in the case of a sum payable by the Commissioners, the special repayment rate.
(3) In a case where the rate of interest in relation to the tax-related judgment debt is not stated in the decree or extract but provided for by an enactment or rule of court (whenever passed or made), that enactment or rule is to have effect in relation to the debt as if for the rate for which it provides there were substituted—
(a) in the case of a sum payable to the Commissioners, the late payment interest rate, and
(b) in the case of a sum payable by the Commissioners, the special repayment rate.
(4) This section has effect in relation to interest for periods beginning on or after the day on which this Act is passed, regardless of—
(a) the date of the decree or extract in question, and
(b) whether interest begins to run on or after the day on which this Act is passed, or began to run before that date.
(5) In this section—
“the Commissioners” means the Commissioners for Her Majesty's Revenue and Customs;
“enactment” includes an Act of the Scottish Parliament or an instrument made under such an Act;
“late payment interest rate” means the rate provided for in regulations made by the Treasury under section 103(1) of FA 2009;
“special repayment rate” has the same meaning as in section 52 of F(No.2)A 2015 (and subsections (7) to (10) of that section apply for the purposes of this section as they apply for the purposes of that section);
“taxation matter” means anything the collection and management of which is the responsibility of the Commissioners (or was the responsibility of the Commissioners of Inland Revenue or Commissioners of Customs and Excise);
“working day” means any day other than a non-business day as defined in section 92 of the Bills of Exchange Act 1882.
(6) This section extends to Scotland only.
171 Rate of interest applicable to judgment debts etc: Northern Ireland
(1) This section applies if a sum payable to or by the Commissioners under a judgment or order given or made in any court proceedings relating to a taxation matter (a “tax-related judgment debt”) carries interest.
(2) In a case where the rate of interest is specified in the judgment (in the case of the High Court) or directed by the judge (in the case of a county court), the rate specified or directed in relation to that debt may not exceed (and may not be capable of exceeding)—
(a) in the case of a sum payable to the Commissioners, the late payment interest rate, and
(b) in the case of a sum payable by the Commissioners, the special repayment rate.
(3) In a case where the rate of interest in relation to the tax-related judgment debt is not specified in the judgment or directed by the judge but provided for by an enactment or rule of court (whenever passed or made), that enactment or rule is to have effect in relation to the debt as if for the rate for which it provides there were substituted—
(a) in the case of a sum payable to the Commissioners, the late payment interest rate, and
(b) in the case of a sum payable by the Commissioners, the special repayment rate.
(4) This section has effect in relation to interest for periods beginning on or after the day on which this Act is passed, regardless of—
(a) the date of the judgment or order in question, and
(b) whether interest begins to run on or after the day on which this Act is passed, or began to run before that date.
(5) In this section—
“the Commissioners” means the Commissioners for Her Majesty's Revenue and Customs;
“enactment” includes Northern Ireland legislation or an instrument made under such legislation;
“late payment interest rate” means the rate provided for in regulations made by the Treasury under section 103(1) of FA 2009;
“special repayment rate” has the same meaning as in section 52 of F(No.2) A 2015 (and subsections (7) to (10) of that section apply for the purposes of this section as they apply for the purposes of that section);
“taxation matter” means anything the collection and management of which is the responsibility of the Commissioners (or was the responsibility of the Commissioners of Inland Revenue or Commissioners of Customs and Excise);
“working day” means any day other than a non-business day as defined in section 92 of the Bills of Exchange Act 1882.
(6) This section extends to Northern Ireland only.
172 Rate of interest applicable to judgment debts etc: England and Wales
(1) In section 52 of F(No. 2)A 2015 (rates of interest applicable to judgment debts etc in taxation matters: England and Wales), in subsection (15), in the definition of “taxation matter” omit “, other than national insurance contributions,”.
(2) This section has effect in relation to interest for periods beginning on or after the day on which this Act is passed, regardless of—
(a) the date of the judgment or order in question, and
(b) whether interest begins to run on or after the day on which this Act is passed, or began to run before that date.
(3) This section extends to England and Wales only.
173 Gift aid: power to impose penalties on charities and intermediaries
(1) At the end of section 428 of ITA 2007 insert—
(5) The regulations may also make provision—
(a) for the imposition of a penalty of a specified amount (which must not exceed £3000) for a failure to comply with a specified requirement imposed by the regulations,
(b) for the assessment and recovery of the penalty (which may include provision about the reduction of the penalty in specified circumstances), and
(c) conferring a right of appeal against a decision that a penalty is payable.
(2) The amendment made by this section comes into force on such day as the Treasury may by regulations made by statutory instrument appoint.
174 Proceedings under customs and excise Acts: prosecuting authority
(1) Part 11 of CEMA 1979 (arrest of persons, forfeiture and legal proceedings) is amended as set out in subsections (2) and (3).
(2) In section 146A(7) (definition of prosecuting authority)—
(a) in the opening words, for “prosecution” substitute “ prosecuting ”;
(b) in paragraph (b), omit “the Commissioners or”;
(c) in paragraph (c), for “the Commissioners” substitute “ the Director of Public Prosecutions for Northern Ireland ”.
(3) In section 150(1) (joint and several liability), for the words from “the Director” to “Ireland)” substitute “ prosecuting authority (within the meaning of section 146A) ”.
(4) In consequence of subsection (3), in Schedule 4 to the Commissioners for Revenue and Customs Act 2005, omit paragraph 25.
(5) The amendments made by this section apply in relation to proceedings commenced on or after the day on which this Act is passed.
175 Detention and seizure under CEMA 1979: notice requirements etc
(1) CEMA 1979 is amended as follows.
(2) Schedule 2A (detention of things as liable to forfeiture) is amended as set out in subsections (3) and (4).
(3) In paragraph 3(2) (exceptions to requirement of notice of detention)—
(a) omit the “or” at the end of paragraph (b), and after that paragraph insert—
(ba) a person who has (or appears to have) possession or control of the thing being detained,
;
(b) in paragraph (c), after “on” insert “ or from ”;
(c) at the end insert
, or
(d) in the case of any thing detained on or from a vehicle, the driver of the vehicle.
(4) In paragraph 4(2) (unauthorised removal or disposal of things detained: definition of “responsible person”), for paragraphs (a) and (b) substitute—
(a) the person whose offence or suspected offence occasioned the detention,
(b) the owner or any of the owners of the thing detained or any servant or agent of such an owner,
(c) a person who has (or appears to have) possession or control of the thing being detained,
(d) in the case of any thing detained on a ship or aircraft, the master or commander,
(e) in the case of any thing detained on a vehicle, the driver of the vehicle, or
(f) a person whom the person who detains the thing reasonably believes to be a person within any of paragraphs (a) to (e).
(5) In Schedule 3 (seizure and forfeiture), in paragraph 1(2) (exceptions to requirement of notice of seizure)—
(a) after paragraph (b) insert—
(ba) a person who has (or appears to have) possession or control of the thing being seized; or
;
(b) in paragraph (c), for “in” substitute “ on or from ”;
(c) at the end insert
; or
(d) in the case of any thing seized on or from a vehicle, the driver of the vehicle.
(6) The amendments made by this section have effect in relation to things detained or seized on or after the day on which this Act is passed.
176 Data-gathering powers: providers of payment or intermediary services
(1) In Part 2 of Schedule 23 to FA 2011 (data-gathering powers: relevant data-holders), after paragraph 13A insert—
Providers of electronic stored-value payment services
13B (1) A person who provides electronic stored-value payment services is a relevant data-holder.
(2) In this paragraph “electronic stored-value payment services” means services by means of which monetary value is stored electronically for the purpose of payments being made in respect of transactions to which the provider of those services is not a party.
Business intermediaries
13C (1) A person who—
(a) provides services to enable or facilitate transactions between suppliers and their customers or clients (other than services provided solely to enable payments to be made), and
(b) receives information about such transactions in the course of doing so,
is a relevant data-holder.
(2) In this paragraph “suppliers” means persons supplying goods or services in the course of business.
(3) For the purposes of this paragraph, information about transactions includes information that is capable of indicating the likely quantity or value of transactions.
(2) This section applies in relation to relevant data with a bearing on any period (whether before, on or after the day on which this Act is passed).
177 Data-gathering powers: daily penalties for extended default
(1) Part 4 of Schedule 23 to FA 2011 (data-gathering powers: penalties) is amended as follows.
(2) In paragraph 38 (increased daily default penalty)—
(a) in sub-paragraphs (1)(c) and (2), for “imposed” substitute “ assessable ”;
(b) for sub-paragraphs (3) and (4) substitute—
(3) If the tribunal decides that an increased daily penalty should be assessable—
(a) the tribunal must determine the day from which the increased daily penalty is to apply and the maximum amount of that penalty (“the new maximum amount”);
(b) from that day, paragraph 31 has effect in the data-holder's case as if “the new maximum amount” were substituted for “£60”.
(4) The new maximum amount may not be more than £1,000.
;
(c) in sub-paragraph (5), for “the amount” substitute “ the new maximum amount ”.
(3) In paragraph 39—
(a) in sub-paragraph (1), for “a data-holder becomes liable to a penalty” substitute “ the tribunal makes a determination ”;
(b) in sub-paragraph (2), for “the day from which the increased penalty is to apply” substitute “ new maximum amount and the day from which it applies ”;
(c) omit sub-paragraph (3).
(4) In paragraph 40 (enforcement of penalties), in sub-paragraph (2)(a) omit “or 39”.
(5) At the end of paragraph 36 (right to appeal against penalty), the existing text of which becomes sub-paragraph (1), insert—
(2) But sub-paragraph (1)(b) does not give a right of appeal against the amount of an increased daily penalty payable by virtue of paragraph 38.
178 Extension of provisions about set-off to Scotland
(1) Sections 130 and 131 of FA 2008 (which deal with the availability of set-off in England and Wales and Northern Ireland) extend also to Scotland.
(2) Accordingly, those sections are amended as follows.
(3) In section 130—
(a) omit subsection (10), and
(b) in the heading omit “: England and Wales and Northern Ireland”.
(4) In section 131—
(a) in subsection (5), in paragraph (a), after “winding up order” insert “ or award of sequestration ”,
(b) in that subsection, omit the “or” at the end of paragraph (d) and after paragraph (e) insert
, or
(f) that person's estate becomes vested in any other person as that person's trustee under a trust deed (within the meaning of the Bankruptcy (Scotland) Act 1985).
, and
(c) omit subsection (9).
(1) After section 8J of TPDA 1979 insert—
Raw tobacco: definitions
8K (1) The following definitions apply for the purposes of sections 8L to 8U.
(2) “Raw tobacco” means the leaves or any other part of a plant of the genus Nicotiana but does not include—
(a) any part of a living plant, or
(b) a tobacco product.
(3) “Controlled activity” means any activity involving raw tobacco.
Raw tobacco: requirement for approval
8L (1) A person may not carry on a controlled activity otherwise than in accordance with an approval given by the Commissioners under this section.
(2) The Commissioners may approve a person to carry on a controlled activity only if satisfied that—
(a) the person is a fit and proper person to carry on the activity, and
(b) the activity will not be carried on for the purpose of, or with a view to, the fraudulent evasion of the duty of excise charged on tobacco products under section 2(1).
(3) An approval may—
(a) specify the period of approval, and
(b) be subject to conditions or restrictions.
(4) The Commissioners may at any time for reasonable cause revoke or vary the terms of an approval.
Regulations about approval etc.
8M The Commissioners may, by or under regulations, make provision—
(a) regulating the approval of persons under section 8L,
(b) about the form, manner and content of an application for approval,
(c) specifying conditions or restrictions to which an approval is subject,
(d) regulating the variation or revocation of an approval, or of any condition or restriction to which an approval is subject, and
(e) about the surrender or transfer of an approval.
Exemptions from requirement for approval
8N (1) The Commissioners may by regulations provide that section 8L(1) does not apply in relation to a person (an “exempt person”) who—
(a) carries on any controlled activity, or a controlled activity of a specified description, and
(b) meets the conditions (if any) specified by or under the regulations.
(2) The regulations may require an exempt person to comply with specified requirements or restrictions relating to the carrying on of a controlled activity.
(3) The regulations may, in particular—
(a) specify the maximum quantity of raw tobacco that may be involved in a controlled activity carried on by an exempt person;
(b) require an exempt person to keep records relating to the activity.
Raw tobacco: penalties
8O (1) A person who contravenes section 8L(1) is liable to a penalty of an amount equal to the amount of duty that would be charged on the relevant quantity of smoking tobacco.
(2) A person who contravenes a requirement or restriction imposed by regulations under section 8N is liable to a penalty of—
(a) £250, or
(b) if less, an amount equal to the amount of duty that would be charged on the relevant quantity of smoking tobacco.
(3) The relevant quantity of smoking tobacco is equal to the quantity by weight of the raw tobacco in respect of which the controlled activity contravening section 8L(1) or (as the case may be) regulations under section 8N has been carried on.
(4) In this section a reference to “smoking tobacco” is a reference to tobacco products within section 1(1)(d) (“other smoking tobacco”).
Penalties under section 8O: special reduction
8P (1) If the Commissioners think it right because of special circumstances, they may reduce a penalty under section 8O.
(2) In subsection (1) “special circumstances” does not include ability to pay.
(3) In subsection (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.
Penalties under section 8O: assessment of penalty
8Q (1) Where a person becomes liable for a penalty under section 8O—
(a) the Commissioners may assess the penalty, and
(b) if they do so, they must notify the person liable.
(2) A notice under subsection (1)(b) must state the contravention in respect of which the penalty is assessed.
(3) A penalty payable under section 8O must be paid before the end of the period of 30 days beginning with the day on which the notification of the penalty is issued.
(4) An assessment is to be treated as an amount of duty due from the person liable for the penalty and may be recovered accordingly.
(5) An assessment may not be made later than one year after evidence of facts sufficient in the opinion of the Commissioners to indicate the contravention comes to their knowledge.
(6) Two or more contraventions may be treated by the Commissioners as a single contravention for the purposes of assessing a penalty payable under section 8O.
Penalties under section 8O: reasonable excuse
8R (1) A person is not liable to a penalty under section 8O in respect of a contravention if—
(a) the contravention is not deliberate, and
(b) the person satisfies the Commissioners that there is a reasonable excuse for the contravention.
(2) For the purposes of subsection (1)(b)—
(a) where the person relies on another person to do anything, that is not a reasonable excuse unless the first person took reasonable care to avoid the contravention;
(b) where the person had a reasonable excuse for the relevant act or failure but the excuse has ceased, the person is to be treated as having continued to have the excuse if the contravention is remedied without unreasonable delay after the excuse has ceased.
Penalties under section 8O: double jeopardy
8S A person is not liable to a penalty under section 8O in respect of a contravention in respect of which the person has been convicted of an offence.
Forfeiture of raw tobacco
8T Where a person carries on a controlled activity in relation to raw tobacco in contravention of section 8L(1) or a requirement or restriction imposed by regulations under section 8N, the raw tobacco is liable to forfeiture.
Raw tobacco: application of Customs and Excise Management Act 1979
8U The Commissioners may by regulations provide that specified provisions of the Customs and Excise Management Act 1979 apply (with or without modification)—
(a) in relation to persons who carry on controlled activities as they apply in relation to revenue traders whose trade or business relates to tobacco products, and
(b) in relation to raw tobacco as they apply in relation to tobacco products.
(2) In section 9 of TPDA 1979 (regulations)—
(a) in subsection (1), after “statutory instrument and” insert “ , subject to subsection (1A), ”, and
(b) after subsection (1) insert—
(1A) A statutory instrument containing regulations under section 8M, 8N or 8U is subject to annulment in pursuance of a resolution of the House of Commons.
(3) In section 13A(2) of FA 1994 (customs and excise reviews and appeals: “relevant decisions”), after paragraph (g) insert—
(gb) any decision by HMRC that a person is liable to a penalty, or as to the amount of the person's liability, under section 8O of the Tobacco Products Duty Act 1979;
.
(4) In Schedule 5 to FA 1994 (decisions subject to review and appeal) after paragraph 5 insert—
5A Any decision—
(a) to refuse an approval under section 8L of the Tobacco Products Duty Act 1979 (raw tobacco: approval to carry on a controlled activity);
(b) to impose a condition or restriction on, or to revoke or vary the terms of, an approval under that section.
(5) The amendments made by this section come into force on such day as the Commissioners for Her Majesty's Revenue and Customs may by regulations made by statutory instrument appoint.
(6) Regulations under subsection (5) may appoint different days for different purposes.
180 Powers to obtain information about certain tax advantages
(1) The powers conferred by this section are only exercisable for the purpose of complying (or enabling another person to comply) with relevant EU obligations.
(2) The Commissioners may determine that claims made for a tax advantage of a description listed in Part 1 of Schedule 24 must include (or be accompanied by) such information, presented in such form, as the determination may specify.
(3) For the purposes of subsection (2) “information” includes—
(a) information about the claimant (or the claimant's activities),
(b) information about the subject-matter of the claim, and
(c) other information which relates to the grant of state aid through the provision of the tax advantage in question.
(4) A determination under subsection (2)—
(a) may make different provision for different descriptions of tax advantages or for different cases or circumstances, and
(b) may be revoked or amended by another determination.
(5) Subsection (6) applies where it appears to the Commissioners that a tax advantage of a description listed in Part 2 of Schedule 24—
(a) has been given, or
(b) may be given in the future.
(6) The Commissioners may give the relevant person a notice requiring the person—
(a) to supply the Commissioners with the information specified in the request, and
(b) if the notice so provides, to present it in the form specified in the request.
(7) The relevant person must comply with those requirements within the period specified in the notice.
(8) In subsections (6) and (7) “the relevant person”, in relation to a tax advantage of any description, means the person mentioned in the third column of the entry for that tax advantage in Part 2 of Schedule 24.
(9) For the purposes of subsection (6) “information” includes—
(a) information about—
(i) the person to whom the request is given (or their activities),
(ii) any other person who is the beneficiary of the tax advantage,
(b) information about the tax advantage (including the circumstances in which it was obtained), and
(c) any other information which relates to the grant of state aid through the provision of the tax advantage in question.
(10) A determination under subsection (2) may not apply to claims made before 1 July 2016.
(11) A notice under subsection (6) may relate to any information required by the Commissioners for the purpose mentioned in subsection (1) (including information which relates to matters arising before this Act is passed).
(1) The Commissioners may publish any state aid information for the purpose of securing compliance with any relevant EU obligation which requires the publication of that information.
(2) That power includes power to disclose state aid information to another person for the purpose of securing its publication.
(3) In this section “state aid information” means information which relates to the grant of state aid through the provision of a tax advantage and includes (but is not limited to) any information mentioned in section 180(3) or (9).
(4) This section applies to any state aid information (including information which relates to a tax advantage given before the passing of this Act).
(1) In sections 180 and 181—
“the Commissioners” means the Commissioners for Her Majesty's Revenue and Customs;
“relevant EU obligations” means—
obligations under the General Block Exemption Regulation that relate to the grant of state aid through the provision of a tax advantage, or
any corresponding post-withdrawal obligations that apply to the grant of a notified state aid through the provision of a tax advantage.
(2) The “General Block Exemption Regulation” is Commission Regulation (EU) No 651/2014 declaring certain categories of aid to be compatible with the internal market in application of Articles 107 and 108 of the Treaty establishing the European Union (which relate to state aids granted by Member States) as it has effect by virtue of the Protocol on Ireland/Northern Ireland in the EU withdrawal agreement.
“Post-withdrawal obligations” means obligations that arise or continue by virtue of the EU withdrawal agreement (including the Protocol on Ireland/Northern Ireland).
(3) The Treasury may by regulations made by statutory instrument amend Part 1 or Part 2 of Schedule 24 by adding, omitting or varying an entry for any description of tax advantage.
(4) Regulations under subsection (3) may include incidental or supplemental provision.
(5) A statutory instrument containing regulations under subsection (3) is subject to annulment in pursuance of a resolution of the House of Commons.
(6) The powers under sections 180 and 181 are in addition to any other powers of the Commissioners to acquire, disclose or publish information.
(1) In this section “qualifying transformer vehicle” means a transformer vehicle which meets conditions which are specified in regulations made by the Treasury.
(2) The Treasury may by regulations make provision about the treatment for the purposes of any enactment relating to taxation of—
(a) qualifying transformer vehicles;
(b) investors in qualifying transformer vehicles;
(c) transactions involving qualifying transformer vehicles.
(3) Regulations under subsection (2) may, in particular, disapply, apply (with or without modification) or modify the application of any enactment.
(4) Without limiting the generality of subsection (2), regulations under that subsection may in particular include—
(a) provision for profits or other amounts to be calculated with any adjustments, or on any basis, set out in the regulations;
(b) provision conferring, altering or removing an exemption or relief;
(c) provision about the treatment of arrangements the purpose, or one of the main purposes, of which is to secure a tax advantage;
(d) provision about collection and enforcement (including the withholding of tax);
(e) in relation to qualifying transformer vehicles, requirements with regard to the provision of information to investors;
(f) in relation to qualifying transformer vehicles or investors in qualifying transformer vehicles, requirements with regard to—
(i) the provision of information to Her Majesty's Revenue and Customs,
(ii) the preparation of accounts,
(iii) the keeping of records, or
(iv) other administrative matters.
(5) Regulations under this section—
(a) may provide for Her Majesty's Revenue and Customs to exercise a discretion in dealing with any matter;
(b) may make provision by reference to rules, guidance or other documents issued by any person (as they have effect from time to time).
(6) Regulations under this section may—
(a) make different provision for different cases or different purposes (including different provision in relation to different descriptions of qualifying transformer vehicle or, as the case may be, transformer vehicle);
(b) contain incidental, supplementary, consequential and transitional provision and savings.
(7) Regulations under this section are to be made by statutory instrument.
(8) A statutory instrument containing regulations under subsection (1) is subject to annulment in pursuance of a resolution of the House of Commons.
(9) But the first set of regulations under subsection (1) may not be made unless a draft has been laid before, and approved by a resolution of, the House of Commons.
(10) A statutory instrument containing regulations under subsection (2) may not be made unless a draft has been laid before, and approved by a resolution of, the House of Commons.
(11) In this section—
“enactment” includes subordinate legislation (as defined in section 21 of the Interpretation Act 1978);
“investors” in relation to a qualifying transformer vehicle means holders of investments issued by the qualifying transformer vehicle; and for this purpose “investment” includes any asset, right or interest;
“tax advantage” has the meaning given by section 1139 of CTA 2010;
“transformer vehicle” has the same meaning as in section 284A of the Financial Services and Markets Act 2000.
In this Act—
“ALDA 1979” means the Alcoholic Liquor Duties Act 1979;
“CAA 2001” means the Capital Allowances Act 2001;
“CEMA 1979” means the Customs and Excise Management Act 1979;
“CTA 2009” means the Corporation Tax Act 2009;
“CTA 2010” means the Corporation Tax Act 2010;
“FA”, followed by a year, means the Finance Act of that year;
“F(No.2)A, followed by a year means the Finance (No.2) Act of that year;
“F(No.3)A, followed by a year, means the Finance (No.3) Act of that year;
“HODA 1979” means the Hydrocarbon Oil Duties Act 1979;
“ICTA” means the Income and Corporation Taxes Act 1988;
“IHTA 1984” means the Inheritance Tax Act 1984;
“ITA 2007” means the Income Tax Act 2007;
“ITEPA 2003” means the Income Tax (Earnings and Pensions) Act 2003;
“ITTOIA 2005” means the Income Tax (Trading and Other Income) Act 2005;
“OTA 1975” means the Oil Taxation Act 1975;
“TCGA 1992” means the Taxation of Chargeable Gains Act 1992;
“TIOPA 2010” means the Taxation (International and Other Provisions) Act 2010;
“TMA 1970” means the Taxes Management Act 1970;
“TPDA 1979” means the Tobacco Products Duty Act 1979;
“VATA 1994” means the Value Added Tax Act 1994;
“VERA 1994” means the Vehicle Excise and Registration Act 1994.
Section 5
Main repeals
1 (1) In ITTOIA 2005 omit sections 397 to 398, 400, 414 and 421 (distributions: tax credits, and tax treated as paid).
(2) In CTA 2010 omit section 1109 (tax credits for certain distributions).
Further amendments in ITTOIA 2005
2 ITTOIA 2005 is further amended as follows.
3 In the heading of Chapter 3 of Part 4, for “credits etc” substitute “ treated as paid ”.
4 In section 382(2) (other contents of Chapter 3 of Part 4)—
(a) omit “tax credits,”, and
(b) for “397” substitute “ 399 ”.
5 Omit section 384(3) (which refers to section 398).
6 Omit section 393(5) (determining entitlement to tax credit).
7 In section 394 (which deems a distribution to be made)—
(a) omit subsection (5) (determining entitlement to tax credit), and
(b) in subsection (6), for “But for” substitute “ For ”.
8 In section 395(3) (interpretation of section 395(2)) omit the words from “after” to the end.
9 For section 396A(2)(b) (alternative receipt treated as qualifying distribution for the purposes of sections 397 and 399 and for the purposes of section 1100 of CTA 2010) substitute—
(b) for the purposes of sections 1100 to 1103 of CTA 2010 (statements and returns of details of distributions) it is treated as a distribution that—
(i) is so made, and
(ii) is one to which section 1100 of CTA 2010 applies.
10 In the italic heading before section 397, omit “Tax credits and”.
11 (1) Section 399 (qualifying distribution received by person not entitled to tax credits) is amended as follows.
(2) For subsection (1) substitute—
(1) This section applies if—
(a) a person's income for a tax year includes a distribution of a company, and
(b) the person is non-UK resident.
(3) In subsection (2) omit “(but see subsection (7))”.
(4) Omit subsections (3) to (5) (amount of dividend received by non-UK resident to be treated as its grossed-up amount).
(5) Omit subsection (5A) (amounts treated as qualifying distributions for purposes of the section).
(6) Omit subsection (7) (which provides for subsection (2) to be subject to repealed provisions).
(7) For the heading substitute “ Tax treated as paid on distributions received by non-UK resident persons ”.
12 (1) Section 401 (relief: qualifying distribution after linked non-qualifying distribution) is amended as follows.
(2) For subsections (1) to (6) substitute—
(1) Where a person is liable to income tax on a CD distribution, the person's liability to income tax on a subsequent non-CD distribution is reduced in accordance with this section if the non-CD distribution consists of a repayment of—
(a) the share capital, or
(b) the principal of the security,
which constituted the CD distribution.
(1A) The reduction is—
(a) the amount of income tax to which the person is liable on the CD distribution, or
(b) if lower, the amount of income tax to which the person is liable on the non-CD distribution.
(1B) For the purposes of calculating the amounts mentioned in subsection (1A)(a) and (b) assume—
(a) that the CD distribution is the lowest part of the person's dividend income in the tax year (“year 1”) in which it is made,
(b) that the non-CD distribution, if it is made in year 1, is the part of the person's dividend income in year 1 that is next lowest after the CD distribution, and
(c) that the non-CD distribution, if it is made after year 1, is the lowest part of the person's dividend income in the tax year in which it is made.
(3) In subsection (7) (interpretation), for “ “security”” substitute
—
“CD distribution” means a distribution which is a distribution for the purposes of the Corporation Tax Acts only because it falls within paragraph C or D in section 1000(1) of CTA 2010 (redeemable share capital or security issued as bonus in respect of shares in, or securities of, the company),
“non-CD distribution” means a distribution which is not a CD distribution, and
“security”
.
(4) In the heading, for “qualifying distribution after linked non-qualifying distribution” substitute “ distribution repaying shares or security issued in earlier distribution ”.
13 Omit section 401A (recovery of overpaid tax credit etc).
14 In section 401B (power to obtain information for the purposes of section 397), for “section 397”, in each place it occurs, substitute “ this Chapter ”.
15 Omit sections 406(4A) and 407(4A) (determining entitlement to tax credit).
16 In section 408(2A) (interpretation of section 408(2)) omit the words from “after” to the end.
17 In section 411(2) (stock dividends: amount on which tax charged) omit “, grossed up by reference to the dividend ordinary rate for the tax year”.
18 In section 416 (released debts: amount on which tax charged)—
(a) in subsection (1) (tax charged on gross amount) omit “gross”, and
(b) omit subsection (2) (meaning of “gross amount”).
19 In section 418(3) (release of loan: tax only on grossed-up amount of excess where part previously charged) omit “, grossed up by reference to the dividend ordinary rate”.
20 In section 651 (meaning of “UK estate” and “foreign estate”)—
(a) in subsection (4), for “680(3) or (4) (sums” substitute “ 664(2)(c) or (d) or 680(4) (sums not liable to tax and sums ”, and
(b) in subsection (5), for “680(3) or (4)” substitute “ 664(2)(c) or (d) or 680(4) ”.
21 In section 657 (tax charged on estate income from foreign estates), for “680(3) or (4)”, in both places, substitute “ 680(4) ”.
22 In section 663 (applicable rate for purposes of grossing-up under sections 656 and 657), after subsection (4) insert—
(5) The aggregate income of the estate, so far as it consists of income within section 664(2)(c) or (d), is treated for the purposes of this section as bearing income tax at 0%.
23 In section 670 (applicable rate for purposes of Step 2 in section 665(1)), after subsection (4) insert—
(4A) The aggregate income of the estate, so far as it consists of income within section 664(2)(c) or (d), is treated for the purposes of this section as bearing income tax at 0%.
24 In section 680 (income of an estate that is treated as bearing income tax)—
(a) in subsection (2) omit “(3) or”, and
(b) omit subsection (3) (sums treated as bearing tax at the dividend ordinary rate).
25 In section 680A (estate income treated as dividend income), in each of subsections (1)(a) and (4)(a), after “at the dividend ordinary rate” insert “ or as bearing tax at 0% because of section 663(5) ”.
26 In section 854(6) (carrying on by partner of notional business: meaning of “untaxed income”)—
(a) omit the “or” at the end of paragraph (b), and
(b) after paragraph (c) insert—
(d) income chargeable under Chapter 5 of Part 4 (stock dividends from UK resident companies), or
(e) income chargeable under Chapter 6 of Part 4 (release of loan to participator in closed company).
27 Omit section 858(3) (partnerships with foreign element: entitlement to tax credit).
Further amendments in CTA 2010
28 CTA 2010 is further amended as follows.
29 (1) Section 279F (ring fence profits: related 51% group company) is amended as follows.
(2) In subsection (7)(c) (conditions to be met by a company's dividend income in order for company to be a passive company), in sub-paragraph (ii) (dividends must be franked investment income) for “franked investment income” substitute “ exempt ABGH distributions ”.
(3) After subsection (9) insert—
(10) In subsection (7)(c) “exempt ABGH distribution” means a distribution which—
(a) is a distribution for the purposes of the Corporation Tax Acts only because it falls within paragraph A, B, G or H in section 1000(1), and
(b) is exempt for the purposes of Part 9A of CTA 2009 (company distributions).
30 (1) Section 279G (ring fence profits: meaning of “augmented profits”) is amended as follows.
(2) In subsection (1)(b) (franked investment income is part of augmented profits unless excluded)—
(a) for “franked investment income” substitute “ exempt ABGH distributions ”, and
(b) for “is” substitute “ are ”.
(3) In subsection (3) (exclusion of franked investment income received from certain subsidiaries etc), for “franked investment income” substitute “ exempt ABGH distribution ”.
(4) After subsection (4) insert—
(5) In this section “exempt ABGH distribution” means a distribution which—
(a) is a distribution for the purposes of the Corporation Tax Acts only because it falls within paragraph A, B, G or H in section 1000(1), and
(b) is exempt for the purposes of Part 9A of CTA 2009 (company distributions).
31 For section 463(7) (loan to trustees of settlement which has ended: amount on which debtor taxed when all or part of loan released or written off) substitute—
(7) The amount which Y is treated as receiving is equal to the amount released or written off.
32 (1) Section 549 (distributions: supplementary) is amended as follows.
(2) Omit subsection (2) (which excludes entitlement to tax credits).
(3) In subsection (2A) (which disapplies sections 409 to 414 of ITTOIA 2005), for “414” substitute “ 413A ”.
33 (1) Section 751 (interpretation of Part 15 (transactions in securities)) is amended as follows.
(2) The existing text becomes subsection (1).
(3) In that subsection, in the definition of “dividends”, omit “qualifying”.
(4) After that subsection insert—
(2) In the definition of “dividends” given by subsection (1), “other distributions” does not include a distribution which is a distribution for the purposes of the Corporation Tax Acts only because it falls within paragraph C or D in section 1000(1) (redeemable share capital or security issued as bonus in respect of shares in, or securities of, the company).
34 Omit section 814D(8) (which excludes entitlement to tax credits).
35 Omit section 997(5) (which introduces sections 1109 to 1111).
36 In sections 1026(1)(b) and 1027(2)(b) (cases where amount paid up in respect of bonus shares does not fall to be treated as a qualifying distribution) omit “qualifying”.
37 (1) Section 1070 (distributions by company carrying on mutual business) is amended as follows.
(2) In subsection (2) (provisions about distributions apply to company's distributions only where made out of taxed profits or franked investment income), for paragraph (b) (franked investment income) substitute—
(b) income of the company consisting of exempt ABGH distributions.
(3) After subsection (5) insert—
(5A) In subsection (2) “exempt ABGH distribution” means a distribution which—
(a) is a distribution for the purposes of the Corporation Tax Acts only because it falls within paragraph A, B, G or H in section 1000(1), and
(b) is exempt for the purposes of Part 9A of CTA 2009 (company distributions).
38 (1) Section 1071 (company not carrying on business) is amended as follows.
(2) In subsection (5) (provisions about distributions apply to company's distributions only where made out of taxed profits or franked investment income), for paragraph (b) (franked investment income) substitute—
(b) income of the company consisting of exempt ABGH distributions.
(3) After subsection (5) insert—
(5A) In subsection (5) “exempt ABGH distribution” means a distribution which—
(a) is a distribution for the purposes of the Corporation Tax Acts only because it falls within paragraph A, B, G or H in section 1000(1), and
(b) is exempt for the purposes of Part 9A of CTA 2009 (company distributions).
39 (1) Section 1100 (qualifying distribution: right to request a statement) is amended as follows.
(2) In subsection (1) (requests for statement)—
(a) for “qualifying distribution” substitute “ distribution to which this section applies ”, and
(b) omit paragraph (b) (amount of any tax credit), and the “and” preceding it.
(3) After subsection (4) insert—
(4A) This section applies to any distribution other than one which is a distribution for the purposes of the Corporation Tax Acts only because it falls within paragraph C or D in section 1000(1) (redeemable share capital or security issued as bonus in respect of shares in, or securities of, the company).
(4) Omit subsections (2) and (5) (interpretation of subsection (1)(b)).
(5) In subsection (7) (section to be read with section 396A(2) of ITTOIA 2005)—
(a) for “needs” substitute “ , and sections 1101 to 1103, need ”, and
(b) for “as “qualifying distributions” for the purposes of this section” substitute “ as distributions to which this section applies ”.
(6) In the heading, for “Qualifying” substitute “ Certain ”.
40 (1) Section 1101 (non-qualifying distributions etc: returns and information) is amended as follows.
(2) In subsection (1) (duty to make return), for “which is not a qualifying distribution” substitute “ to which section 1100 does not apply ”.
(3) In subsection (4) (duty to make return where not clear whether distribution is non-qualifying), for “which is not a qualifying distribution” substitute “ to which section 1100 does not apply ”.
(4) In the heading, and in the heading of section 1102, for “Non-qualifying” substitute “ Other ”.
41 In section 1103 (regulations about information about non-qualifying distributions)—
(a) in subsection (2) (purpose for which sections 1101 and 1102 may be rewritten), for “which are not qualifying distributions” substitute “ to which section 1100 does not apply ”,
(b) in subsection (4) (special arrangements about matters specified in subsection (5)), for “matters” substitute “ matter ”, and
(c) in subsection (5)—
(i) for “Those matters are” substitute “ That matter is ”, and
(ii) omit paragraph (b) (tax credits), and the “and” preceding it.
42 (1) Section 1106 (interpretation of sections 1104 and 1105) is amended as follows.
(2) In subsection (4) (meaning of “tax certificate”)—
(a) after paragraph (a) insert “ and ”, and
(b) omit paragraph (c) (tax credits), and the “and” preceding it.
(3) Omit subsections (5) and (6) (interpretation of subsection (4)(c)).
43 Omit sections 1110 and 1111 (recovery of overpaid tax credits etc).
44 (1) Section 1115 (meaning of “new consideration” in Part 23) is amended as follows.
(2) In subsections (5)(a) and (6)(b) for “qualifying” substitute “ non-CD ”.
(3) After subsection (6) insert—
(7) In this section “non-CD distribution” means any distribution other than one which is a distribution for the purposes of the Corporation Tax Acts only because it falls within paragraph C or D in section 1000(1) (redeemable share capital or security issued as bonus in respect of shares in, or securities of, the company).
45 In section 1119 (definitions for the purposes of the Corporation Tax Acts) omit the entries for “franked investment income”, “qualifying distribution” and “tax credit”.
46 Omit section 1126 (meaning of “franked investment income”).
47 Omit section 1136 (meaning of “qualifying distribution”).
48 Omit section 1139(4) (“relief” includes tax credit).
49 In Schedule 2 (transitionals and savings etc) omit paragraph 106(1) (operation of sections 1026 and 1027 in relation to share capital issued before 7 April 1973).
50 In Schedule 4 (index of defined expressions) omit the entries for “franked investment income”, “qualifying distribution” and “tax credit”.
Other amendments
51 (1) TMA 1970 is amended as follows.
(2) In section 8(1AA)(b) (payable income tax is chargeable amount less tax deducted at source and tax credits) omit the words after “source”.
(3) In section 8A(1AA)(b) (payable income tax is chargeable amount less tax deducted at source and tax credits) omit the words after “source”.
(4) In section 9(1) (self-assessment)—
(a) in paragraph (b) (payable income tax is assessed amount less tax deducted at source and tax credits) omit the words after “source”, and
(b) in the words after paragraph (b) omit “, 400(2), 414(1), 421(1)”.
(5) In section 12AA(1A)(b) (partner's payable income tax is chargeable amount less tax deducted at source and tax credits) omit the words after “source”.
(6) In section 12AB (partnership statement in partnership return)—
(a) in subsection (1)(a)—
(i) after sub-paragraph (ia) insert “ and ”, and
(ii) omit sub-paragraph (iii) (tax credits), and the “and” preceding it,
(b) in subsection (1)(b) for “, tax or credit” substitute “ or tax ”, and
(c) in subsection (5) omit the definition of “tax credit”.
(7) In section 12B(4A)(a)(i) (statements themselves must be preserved if of amount of qualifying distribution and tax credit), after “amount” insert “ of distribution, formerly amount ”.
(8) In section 59A(8)(b) (amounts included in annual total of deductions at source) omit “or are tax credits to which section 397(1) or 397A(1) of ITTOIA 2005 applies,”.
(9) In section 59B (payment of income tax and capital gains tax)—
(a) in subsection (1) omit “, 400(2), 414(1), 421(1)”, and
(b) in subsection (2)(b) omit “or is a tax credit to which section 397(1) or 397A(1) of ITTOIA 2005 applies,”.
(10) Omit section 87A(5) (interest on assessments under section 1110 of CTA 2010 on overpaid tax credits etc).
(11) In section 98 (special returns), in the first column of the table omit the entry for section 1109 of CTA 2010.
52 (1) ICTA is amended as follows.
(2) Omit section 231B (arrangements to pass on value of tax credit).
(3) Omit section 824(2) (repayment supplements: tax credits).
(4) In section 824(4A) omit paragraph (b) (repayment supplements: tax credit treated as income tax deducted at source), and the “and” preceding it.
(5) In section 825(1) (repayment supplements: companies) omit paragraph (c) (tax credits comprised in franked investment income), and the “or” preceding it.
(6) In section 826 (interest on tax overpaid by companies)—
(a) in subsection (1) omit paragraph (c) (tax credits), including the “or” at the end, and
(b) in subsection (3)—
(i) omit “or a payment of the whole or part of a tax credit falling within subsection (1)(c) above”, and
(ii) omit “or, as the case may be, the franked investment income referred to in subsection (1)(c) above”.
53 In FA 1988, in Schedule 13 omit paragraph 7(c) (post-consolidation amendment of section 824(2) of ICTA).
54 In FA 1989—
(a) omit section 115 (double taxation: tax credits), and
(b) in section 179(1)(b)(i) (amendments of provisions of TMA 1970 including section 87A(1) and (5)) omit “and (5)”.
55 In FA 1993 omit section 171(2B) (which excludes entitlement to tax credits).
56 In FA 1994 omit section 219(4B) (which excludes entitlement to tax credits).
57 (1) F(No.2)A 1997 is amended as follows.
(2) Omit section 22(1) (which inserted section 171(2B) of FA 1993).
(3) Omit section 28 (which inserted section 231B of ICTA).
(4) Omit section 30(9) and (10) (effect of double taxation arrangements in relation to tax credits).
(5) In Schedule 6 (repeal of provisions relating to foreign income dividends), in paragraph 23 (transitional provision for certain foreign income dividends paid before 6 April 1999 but received on or after that date) omit—
(a) “qualifying”, and
(b) “nine tenths of”.
58 (1) FA 1998 is amended as follows.
(2) Omit section 76(3) (regulations about tax credits where non-UK residents have invested in individual savings accounts).
(3) In Schedule 18 (company tax returns etc)—
(a) omit paragraph 9(3) (certain claims by companies for payment of tax credits),
(b) in paragraphs 22(3)(a)(i) and 23(3)(a)(i) (which relate to a statement as to amount of qualifying distribution and tax credit), after “amount” insert “ of distribution, but formerly amount ”, and
(c) in paragraph 52(2)(a) omit “or payment of a tax credit”.
59 In the Commonwealth Development Corporation Act 1999, in Schedule 3 omit paragraph 6(2)(b) (provisions about tax credits do not apply in relation to distributions by the Corporation).
60 In the Financial Services and Markets Act 2000 (Consequential Amendments) (Taxes) Order 2001 (S.I. 2001/3629)—
(a) omit article 82(a), and
(b) in article 87(a) omit “and (4B)”.
61 (1) ITEPA 2003 is amended as follows.
(2) Omit sections 58(6) and 61H(6) (tax credits to be reduced in line with reductions in distributions).
(3) In Part 2 of Schedule 1 (index of defined expressions) omit the entry for “tax credit”.
62 In ITTOIA 2005, in Schedule 1 (minor and consequential amendments) omit paragraphs 116, 331(2), 359, 360, 361(a), 363, 364, 376, 377(3), 464(3), 496, 503 and 510(2).
63 (1) ITA 2007 is amended as follows.
(2) In section 26(1)(b) (list of provisions giving tax reductions), in the entry for section 401 of ITTOIA 2005, for “qualifying distribution after linked non-qualifying distribution” substitute “ distribution repaying shares or security issued in earlier distribution ”.
(3) In section 31 (calculation of total income)—
(a) omit subsection (3) (dividend etc treated as increased by amount of tax credit), and
(b) in subsection (4), for “Subsections (2) and (3) apply” substitute “ Subsection (2) applies ”.
(4) In section 425(5) (deductions in calculating total amount of income tax for gift aid purposes)—
(a) in paragraph (a)—
(i) in sub-paragraph (i) omit “or 400(2)”, and
(ii) omit sub-paragraphs (ii) and (iii),
(b) after paragraph (a) insert “ and ”,
(c) in paragraph (b), for “680(3)(b) or (4)” substitute “ 680(4) ”, and
(d) omit paragraph (c), and the “and” before it.
(5) In section 482 (types of amount charged at special rates for trustees), in the entry for Type 1 amounts, omit “qualifying”.
(6) In section 487(6) (non-UK resident trustees: disregarded income which is not included in untaxed income)—
(a) after paragraph (a) insert “ or ”, and
(b) omit paragraph (c) (income in respect of which there is a tax credit), and the “or” preceding it.
(7) In section 498 (discretionary payments by trustees: types of tax to be included in trustees' tax pool)—
(a) in subsection (1)—
(i) in Type 1 (tax at special rates for trustees on income not attracting tax credits), omit “2, 3 or”,
(ii) omit Types 2 and 3 (tax at dividend trust rate on income attracting dividend tax credits), and
(iii) in Type 4 (tax charged at basic rate as a result of section 491), omit “at the basic rate”, and
(b) omit subsection (2) (interpretation of Types 2 and 3).
(8) In section 502(3) (non-UK resident beneficiaries: disregarded income which is not included in untaxed income)—
(a) after paragraph (a) insert “ or ”, and
(b) omit paragraph (c) (income in respect of which there is a tax credit), and the “or” preceding it.
(9) In section 614ZD (treatment of recipient of manufactured payment)—
(a) in subsection (3), for “to (6)” substitute “ and (5) ”, and
(b) omit subsection (6) (which excludes entitlement to tax credits).
(10) In section 687 (transactions in securities: meaning of “income tax advantage”)—
(a) omit “qualifying” in each place, and
(b) in subsection (4), after “In this section” insert
—
(a) distribution” does not include a distribution which is a distribution for the purposes of the Corporation Tax Acts only because it falls within paragraph C or D in section 1000(1) of CTA 2010 (redeemable share capital or security issued as bonus in respect of shares in, or securities of, the company), and
(b)
.
(11) In section 713 (interpretation of Chapter 1 (transactions in securities))—
(a) the existing text becomes subsection (1),
(b) in that subsection, in the definition of “dividends”, omit “qualifying”, and
(c) after that subsection insert—
(2) In the definition of “dividends” given by subsection (1), “other distributions” does not include a distribution which is a distribution for the purposes of the Corporation Tax Acts only because it falls within paragraph C or D in section 1000(1) (redeemable share capital or security issued as bonus in respect of shares in, or securities of, the company).
(12) In section 745(1) (transfer of assets abroad: same rate of tax not to be charged twice)—
(a) after “at the basic rate,” insert “ or ”, and
(b) omit “or the dividend ordinary rate”.
(13) In section 809S(4) (meaning of “income tax advantage”) omit the words after paragraph (d).
(14) In section 811(4) (limit on liability to income tax of non-UK residents)—
(a) after paragraph (a) insert “ and ”, and
(b) omit paragraph (c) (tax credits), and the “and” preceding it.
(15) In section 815(3) (limit on liability to income tax of non-UK resident companies)—
(a) after paragraph (a) insert “ and ”, and
(b) omit paragraph (c) (tax credits), and the “and” preceding it.
(16) In section 989 (definitions for the purposes of the Income Tax Acts) omit the entries for “qualifying distribution” and “tax credit”.
(17) In section 1026 (“non-qualifying income” includes income on which tax treated as paid)—
(a) in paragraph (a) (deemed payment under sections 399 and 400 of ITTOIA 2005)—
(i) omit “or 400(2)”, and
(ii) for “from UK resident companies on which there is no tax credit” substitute “ to non-UK resident persons ”, and
(b) omit paragraphs (b) and (c) (deemed payment under sections 414 and 421 of ITTOIA 2005).
(18) In Schedule 1 (minor and consequential amendments) omit paragraphs 26, 245(2)(a) and (3), 446(27), 515(3), 516, 517(2), 520 and 522.
(19) In Schedule 4 (index of defined expressions) omit the entries for “qualifying distribution” and “tax credit”.
64 In FA 2008, in Schedule 12 (amendments relating to tax credits) omit paragraphs 3, 5, 6, 8 to 16, 19, 20, 24(b) and 31.
65 (1) CTA 2009 is amended as follows.
(2) In section 1222 (company with investment business: amount deductible for management expenses to be reduced by income from sources not charged to tax)—
(a) in subsection (1) (UK resident company), for paragraph (c) (franked investment income does not reduce deductibles) substitute—
(c) the income does not consist of exempt ABGH distributions.
,
(b) in subsection (2) (non-UK resident company), for paragraph (d) (franked investment income does not reduce deductibles) substitute—
(d) the income does not consist of exempt ABGH distributions.
, and
(c) after subsection (3) insert—
(4) In this section “exempt ABGH distribution” means a distribution which—
(a) is a distribution for the purposes of the Corporation Tax Acts only because it falls within paragraph A, B, G or H in section 1000(1) of CTA 2010, and
(b) is exempt for the purposes of Part 9A (company distributions).
(3) Omit section 1266(3) (partnerships with foreign element: entitlement to tax credit).
(4) In Schedule 4 (index of defined expressions) omit the entry for “qualifying distribution”.
66 (1) FA 2009 is amended as follows.
(2) In Schedule 19 (amendments relating to tax credits) omit paragraphs 2(2) and (3), 3, 5, 6(2)(a), (3) and (4), 7, 9, 10(a), 11, 12 and 13(c).
(3) In paragraph 14 of Schedule 19 (amendments made by the Schedule have effect in relation to distributions etc arising or paid on or after 22 April 2009), after sub-paragraph (2) insert—
(3) Section 873(4) of ITTOIA 2005 (inserted by paragraph 8), so far as relating to any order or regulations made after the passing of FA 2016 under any provision of ITTOIA 2005 other than section 397BA of that Act, has effect as if sub-paragraph (1) did not apply in relation to it.
(4) In Schedule 53 (late payment interest) omit—
(a) paragraph 6 (late payment interest start date in relation to assessments of overpaid tax credits etc under section 1110 of CTA 2010), and
(b) the italic heading preceding it.
(5) In paragraph 9B of Schedule 54 (repayment interest start date: companies: income tax and certain tax credits)—
(a) in sub-paragraph (1) omit paragraph (b) (tax credit comprised in franked investment income), and the “and” preceding it, and
(b) in sub-paragraph (2)—
(i) omit “or payment”, and
(ii) omit “or the franked investment income mentioned in sub-paragraph (1)(b)”.
(6) In paragraph 14 of Schedule 54 (interpretation) omit paragraph (b) (tax deducted at source treated as including tax credits), and the “and” preceding it.
67 In Schedule 1 to CTA 2010 (minor and consequential amendments) omit paragraphs 19, 153, 156(3), 282, 303(2), 456, 562(7), 704(27) and 722.
68 (1) TIOPA 2010 is amended as follows.
(2) In section 6(2) (effect of double taxation arrangements)—
(a) after paragraph (e) insert “ or ”, and
(b) omit paragraph (g) (tax credits), and the “or” preceding it.
(3) In section 187A (excess interest treated as a qualifying distribution), in subsection (2), and the heading, omit “qualifying”.
(4) Omit section 234(2) (“relief” includes tax credit).
(5) In Schedule 8 (minor and consequential amendments) omit paragraphs 38, 51, 52, 66 and 67.
69 In FA 2011—
(a) in Part 6 of Schedule 23 (consequential provisions) omit paragraph 64(3), and
(b) in Schedule 26 omit paragraph 1(2)(a)(i) (which amended section 231B of ICTA), including the “and” at the end.
70 In FA 2012, in section 169(2) (payments by certain friendly societies treated as qualifying distributions) omit “qualifying”.
71 In FA 2013—
(a) in paragraph 6(2) of Schedule 19 (which amends section 549 of CTA 2010), for “subsections (2) and” substitute “ subsection ”, and
(b) in Part 3 of Schedule 29 (manufactured dividends: consequential etc amendments) omit paragraphs 13, 14(a) and 44(3).
72 In FA 2015, in section 19—
(a) in subsection (1), for “credits etc” substitute “ treated as paid ”, and
(b) omit subsections (5) and (6) (which insert sections 397(5A) and 399(5A) of ITTOIA 2005).
Commencement
73 (1) Subject to the following sub-paragraphs of this paragraph, the amendments made by this Schedule have effect in relation to dividends paid or arising (or treated as paid), and other distributions made (or treated as made), in the tax year 2016-17 or at any later time.
(2) The following have effect for the tax year 2016-17 and subsequent tax years—
(a) the amendments in sections 8 to 9, 12AA and 59B of TMA 1970,
(b) the amendments in section 854(6) of ITTOIA 2005,
(c) the amendments in section 425 except the amendment in section 425(5)(b), and the amendments in sections 498, 745 and 1026, of ITA 2007,
(d) the repeals of paragraphs 359, 360, 361(a), 363 and 377(3) of Schedule 1 to ITTOIA 2005,
(e) the repeals of paragraphs 8 to 11 and 14 of Schedule 12 to FA 2008, and
(f) the repeals of the following provisions of Schedule 19 to FA 2009—
(i) paragraph 9(a) and (b),
(ii) paragraph 9(c) so far as relating to section 12AA of TMA 1970, and
(iii) paragraph 9(d) so far as relating to section 59B of TMA 1970.
(3) The amendment in paragraph 23 of Schedule 6 to F(No.2)A 1997 has effect in relation to foreign income dividends received on or after 6 April 2016.
(4) The amendments in sections 393 and 406 of ITTOIA 2005, and the repeal of paragraph 19 of Schedule 12 to FA 2008, have effect in relation to cash dividends paid over in the tax year 2016-17 or at any later time.
(5) The amendment in section 396A of ITTOIA 2005 has effect in relation to things received on or after 6 April 2016 (even if the choice to receive them was made before that date).
(6) The amendments in section 401 of ITTOIA 2005 have effect where the subsequent distribution is made in the tax year 2016-17 or at any later time, even if the prior distribution is made before 6 April 2016.
(7) The amendments in sections 411 and 414 of ITTOIA 2005, and the repeal of paragraph 520 of Schedule 1 to ITA 2007, have effect in relation to stock dividend income treated as arising in the tax year 2016-17 or at any later time.
(8) The amendments in sections 651 to 680A of ITTOIA 2005 (but not the repeal of section 680(3)(a) of that Act) and the amendment in section 425(5)(b) of ITA 2007—
(a) so far as they relate to income within section 664(2)(c) of ITTOIA 2005 (stock dividends), have effect in relation to stock dividend income treated as arising in the tax year 2016-17 or at any later time, and
(b) so far as they relate to income within section 664(2)(d) of ITTOIA 2005 (release of loans), have effect in relation to amounts released or written off in the tax year 2016-17 or at any later time.
(9) The amendments in Chapter 6 of Part 4 of ITTOIA 2005 and in section 463 of CTA 2010, and the repeal of paragraph 522 of Schedule 1 to ITA 2007, have effect in relation to amounts released or written off in the tax year 2016-17 or at any later time.
(10) The amendments in section 614ZD of ITA 2007 have effect in relation to manufactured payments made on or after 6 April 2016.
(11) The amendments in section 687 of ITA 2007 have effect where the relevant consideration is received in the tax year 2016-17 or at any later time.
(12) The amendments in section 1222 of CTA 2009 have effect in relation to income arising in the tax year 2016-17 or at any later time.
(13) The amendment in section 1026(1) of CTA 2010 has effect where the bonus share capital is issued on or after 6 April 2016.
(14) Sub-paragraph (1) does not apply in relation to—
(a) the amendments in section 401B of ITTOIA 2005;
(b) the amendment in paragraph 14 of Schedule 19 to FA 2009.
Section 12
Income tax: sporting testimonial payments treated as earnings
1 After section 226D of ITEPA 2003 (shareholder or connected person having material interest in company) insert—
Sporting testimonial payments
Sporting testimonial payments
226E (1) This section applies in relation to an individual who is or has been employed as a professional sportsperson (“S”).
(2) In this section “sporting testimonial” means—
(a) a series of relevant events or activities which each have the same controller, or
(b) a single relevant event or activity not forming part of such a series.
(3) An event or activity is (subject to subsection (4)(b)) a relevant event or activity if—
(a) its purpose (or one of its purposes) is to raise money for or for the benefit of S, and
(b) the only or main reason for doing that is to recognise S's service as a professional sportsperson who is or has been employed as such.
(4) An activity that meets the conditions in subsection (3)(a) and (b) and consists solely of inviting and collecting donations for or for the benefit of S—
(a) is a relevant activity if it is one of a series of relevant events or activities for the purposes of subsection (2)(a), but
(b) is not a relevant activity for the purposes of subsection (2)(b) so long as both conditions in subsection (5) are met while the activity takes place.
(5) The conditions are—
(a) that any person who is responsible (alone or with others) for collecting the donations or who is the controller (or a member of a committee which is the controller) of the activity is not—
(i) S,
(ii) a person who is (or has been) the controller of any other relevant event or activity for or for the benefit of S,
(iii) a person connected with S or a person mentioned in sub-paragraph (ii),
(iv) a person acting for or on behalf of a person mentioned in sub-paragraphs (i) to (iii), and
(b) that the donations collected do not include any sums paid (directly or indirectly) out of money raised by any other relevant event or activity.
(6) A “sporting testimonial payment” is a payment made by (or on behalf of) the controller of a sporting testimonial out of money raised for or for the benefit of S which—
(a) is made to S, to a member of S's family or household, to a prescribed person, to S's order or otherwise for S's benefit, and
(b) does not (apart from this section) constitute earnings from an employment.
(7) A sporting testimonial payment is to be treated as earnings of S from the employment or former employment to which the sporting testimonial is most closely linked.
(8) For the purposes of this section if at any material time S is dead—
(a) anything done for or for the benefit of S's estate is to be regarded as done for or for the benefit of S; and
(b) a payment made to S's personal representatives or to their order is to be treated as a payment to S or to S's order.
(9) In this section—
“controller”, in relation to an event or activity which meets the conditions in subsection (3)(a) and (b), means the person who controls the disbursement of any money raised for or for the benefit of S from that event or activity,
“money” includes money's worth and “payment” includes the transfer of money's worth or the provision of any benefit,
“prescribed person” means a person prescribed in regulations made by the Treasury.
(10) Section 993 of ITA 2007 (meaning of “connected” persons) has effect for the purposes of this section.
Income tax: limited exemption for sporting testimonial payments
2 After section 306A of ITEPA 2003 (exemption for carers) insert—
Professional sportspersons
Limited exemption for sporting testimonial payments
306B (1) This section applies to any sporting testimonial payments which are—
(a) made out of money raised by a sporting testimonial (“the sporting testimonial”), and
(b) treated by virtue of section 226E as earnings of a person (“S”).
(2) No liability to income tax arises in respect of sporting testimonial payments to which this section applies.
(3) Subsection (2) has effect subject to and in accordance with the following provisions.
(4) It only applies—
(a) if the controller of the relevant event or activity (or of all the relevant events or activities in a series) constituting the sporting testimonial is an independent person,
(b) if S has not already benefitted from an exemption under this section in relation to one or more sporting testimonial payments made out of money raised by another sporting testimonial, and
(c) where the sporting testimonial consists of a series of relevant events or activities taking place over more than a year, if the sporting testimonial payment is made out of money raised by events or activities taking place within the period of one year beginning with the day on which the first event or activity in the series took place.
(5) It only applies to the first £100,000 of sporting testimonial payments made out of money raised by the sporting testimonial.
(6) If sporting testimonial payments are made (out of money raised by the sporting testimonial) in two or more tax years, any part of the exempt amount that is not used in the first of those years is to be carried forward to the next tax year (and so on).
(7) This section applies to sporting testimonial payments made to or to the order of the personal representatives of S (where S has died) but only if the payments are made within the period of 24 months beginning with the date of death.
(8) In subsection (4)(a) “independent person” means a person who is not (or where the controller is a committee, a committee none of whose members are)—
(a) S or a person connected with S,
(b) an employer or former employer of S or a person connected with an employer or former employer of S, or
(c) a person acting for or on behalf of a person mentioned in paragraph (a) or (b).
(9) If the first relevant event or activity in a series took place before 6 April 2017, subsection (4)(c) has effect as if it referred to the year beginning with 6 April 2017.
(10) Section 993 of ITA 2007 (meaning of “connected” persons) has effect for the purposes of this section.
(11) Terms used in this section and section 226E have the same meaning as in that section.
Corporation tax: deductions from total profits for sporting testimonial payments and associated payments
3 After section 996 of CTA 2010 (miscellaneous provisions: use of different accounting periods within a group of companies) insert—
Sporting testimonial payments and associated payments
Deductions from total profits for sporting testimonial payments and associated payments
996A (1) This section applies where a company, in any accounting period—
(a) is the controller of a relevant event or activity that constitutes or is part of a sporting testimonial, and
(b) makes a relevant sporting testimonial payment out of money raised by the sporting testimonial.
(2) In this section “relevant sporting testimonial payment” means a sporting testimonial payment that is (or so much of it as is) made out of proceeds of a relevant event or activity which are brought into account in determining the company's total profits or any component of its total profits.
(3) In calculating the amount of corporation tax chargeable for the accounting period, an amount equal to the aggregate of the following amounts is allowed as a deduction from the company's total profits—
(a) so much of the relevant sporting testimonial payment as is paid to or for the benefit of the sportsperson to whom the sporting testimonial relates,
(b) any income tax or employee's national insurance contributions deducted at source from that payment, and
(c) any employer's national insurance contributions relating to that payment.
(4) The amount is deducted—
(a) from the company's total profits for the accounting period in which the relevant sporting testimonial payment is made, and
(b) if a claim by the company for relief so requires, previous accounting periods.
(5) A claim under subsection (4)(b) must be made within 2 years after the end of the accounting period in which the relevant sporting testimonial payment is made.
(6) If for an accounting period deductions under subsection (4) are to be made for relevant sporting testimonial payments made in more than one accounting period, the deductions are to be made in the order in which the payments were made (starting with the earliest of them).
(7) The amount of the deduction to be made under subsection (4) for an accounting period is the amount that cannot be deducted under that subsection for a subsequent accounting period.
(8) The amount of the deduction to be made for any accounting period is limited to the amount that reduces the company's taxable total profits for that period to nil.
(9) The deduction is only available if and to the extent that the amount mentioned in subsection (3) is not otherwise deductible in calculating the company's total profits or any component of its total profits.
(10) Terms used in this section and in section 226E of ITEPA 2003 have the same meaning as in that section.
Application of this Schedule
4 (1) The amendments made by this Schedule have effect in relation to a sporting testimonial payment made out of money raised by a sporting testimonial if—
(a) the sporting testimonial was made public on or after 25 November 2015, and
(b) the payment is made out of money raised by one or more relevant events or activities which take place on or after 6 April 2017.
(2) Terms used in sub-paragraph (1) and section 226E of ITEPA 2003 (as inserted by paragraph 1) have the same meaning as in that section.
SCHEDULE 3 Employee share schemes: minor amendments
Section 16
Enterprise management incentives and employee ownership trusts
1 (1) In section 534 of ITEPA 2003 (disqualifying events relating to relevant company), at the end insert—
(7) Subsection (1)(a) and (b) do not apply where the relevant company is subject to an employee-ownership trust (within the meaning of paragraph 27(4) to (6) of Schedule 2).
(2) The amendment made by this paragraph is treated as having come into force on 1 October 2014.
Share incentive plans
2 (1) Schedule 2 to ITEPA 2003 (share incentive plans) is amended as follows.
(2) In paragraph 1 (introduction), after sub-paragraph (4) insert—
(5) Sub-paragraph (A1) is also subject to Part 10A of this Schedule (disqualifying events).
(3) After Part 10 insert—
PART 10A Disqualifying events
85A (1) A SIP ceases to be a Schedule 2 SIP if (and with effect from the time when) a disqualifying event occurs.
(2) The following are disqualifying events—
(a) an alteration being made in—
(i) the share capital of a company any of whose shares are subject to the plan trust, or
(ii) the rights attaching to any shares of such a company,
that materially affects the value of the shares that are subject to the plan trust;
(b) shares of a class of shares that is subject to the plan trust receiving different treatment in any respect from the other shares of that class.
(3) Sub-paragraph (2)(b) applies in particular to different treatment in respect of—
(a) the dividend payable,
(b) repayment, or
(c) any offer of substituted or additional shares, securities or rights of any description in respect of the shares.
(4) Sub-paragraph (2)(b) does not however apply where the difference in treatment arises from—
(a) a key feature of the plan, or
(b) any of the participants' shares being subject to any restriction.
(5) Nor does sub-paragraph (2)(b) apply as a result only of the fact that shares which have been newly issued receive, in respect of dividends payable with respect to a period beginning before the date on which they were issued, treatment less favourable than that accorded to shares issued before that date.
(6) For the purposes of this paragraph a “key feature” of a plan is a provision of it that is necessary to meet the requirements of this Schedule.
(7) This paragraph does not affect the operation of the SIP code in relation to shares awarded to participants in the plan before the disqualifying event occurred.
(4) The amendments made by this paragraph have effect in relation to disqualifying events occurring on or after the day on which this Act is passed.
Notification of plans and schemes to HMRC
3 (1) In Schedule 2 to ITEPA 2003 (share incentive plans), Part 10 (notification of plans etc) is amended as follows.
(2) In paragraph 81A (notice of SIP to be given to HMRC), after sub-paragraph (5) insert—
(5A) Sub-paragraph (5) does not apply if the company satisfies HMRC (or, on an appeal under paragraph 81K, the tribunal) that there is a reasonable excuse for failing to give notice on or before the initial notification deadline.
(5B) Paragraph 81C(9) (what constitutes a reasonable excuse) applies for the purposes of sub-paragraph (5A).
(5C) Where HMRC are required under sub-paragraph (5A) to consider whether there was a reasonable excuse, HMRC must notify the company of their decision within the period of 45 days beginning with the day on which HMRC received the company's request to consider the excuse.
(5D) Where HMRC are required to notify the company as specified in sub-paragraph (5C) but do not do so—
(a) HMRC are to be treated as having decided that there was no reasonable excuse, and
(b) HMRC must notify the company of the decision which they are treated as having made.
(3) In paragraph 81K (appeals)—
(a) at the beginning insert—
(A1) The company may appeal against a decision of HMRC under paragraph 81A(5A) that there was no reasonable excuse for its failure to give notice on or before the initial notification deadline.
;
(b) in sub-paragraph (6), before paragraph (a) insert—
(za) in the case of an appeal under sub-paragraph (A1), notice of HMRC's decision is given to the company;
;
(c) in sub-paragraph (7), after “sub-paragraph” insert “ (A1), ”.
(4) The amendments made by this paragraph have effect in relation to notices given under paragraph 81A of Schedule 2 to ITEPA 2003 on or after 6 April 2016.
4 (1) In Schedule 3 to ITEPA 2003 (SAYE option schemes), Part 8 (notification of schemes etc) is amended as follows.
(2) In paragraph 40A (notice of scheme to be given to HMRC), after sub-paragraph (5) insert—
(5A) Sub-paragraph (5) does not apply if the scheme organiser satisfies HMRC (or, on an appeal under paragraph 40K, the tribunal) that there is a reasonable excuse for the failure to give notice on or before the initial notification deadline.
(5B) Paragraph 40C(9) (what constitutes a reasonable excuse) applies for the purposes of sub-paragraph (5A).
(5C) Where HMRC are required under sub-paragraph (5A) to consider whether there was a reasonable excuse, HMRC must notify the scheme organiser of their decision within the period of 45 days beginning with the day on which HMRC received the scheme organiser's request to consider the excuse.
(5D) Where HMRC are required to notify the scheme organiser as specified in sub-paragraph (5C) but do not do so—
(a) HMRC are to be treated as having decided that there was no reasonable excuse, and
(b) HMRC must notify the scheme organiser of the decision which they are treated as having made.
(3) In paragraph 40K (appeals)—
(a) at the beginning insert—
(A1) The scheme organiser may appeal against a decision of HMRC under paragraph 40A(5A) that there was no reasonable excuse for the failure to give notice on or before the initial notification deadline.
;
(b) in sub-paragraph (5), before paragraph (a) insert—
(za) in the case of an appeal under sub-paragraph (A1), notice of HMRC's decision is given to the scheme organiser;
;
(c) in sub-paragraph (6), after “sub-paragraph” insert “ (A1), ”.
(4) The amendments made by this paragraph have effect in relation to notices given under paragraph 40A of Schedule 3 to ITEPA 2003 on or after 6 April 2016.
5 (1) In Schedule 4 to ITEPA 2003 (CSOP schemes), Part 7 (notification of schemes etc) is amended as follows.
(2) In paragraph 28A (notice of scheme to be given to HMRC), after sub-paragraph (5) insert—
(5A) Sub-paragraph (5) does not apply if the scheme organiser satisfies HMRC (or, on an appeal under paragraph 28K, the tribunal) that there is a reasonable excuse for the failure to give notice on or before the initial notification deadline.
(5B) Paragraph 28C(9) (what constitutes a reasonable excuse) applies for the purposes of sub-paragraph (5A).
(5C) Where HMRC are required under sub-paragraph (5A) to consider whether there was a reasonable excuse, HMRC must notify the scheme organiser of their decision within the period of 45 days beginning with the day on which HMRC received the scheme organiser's request to consider the excuse.
(5D) Where HMRC are required to notify the scheme organiser as specified in sub-paragraph (5C) but do not do so—
(a) HMRC are to be treated as having decided that there was no reasonable excuse, and
(b) HMRC must notify the scheme organiser of the decision which they are treated as having made.
(3) In paragraph 28K (appeals)—
(a) at the beginning insert—
(A1) The scheme organiser may appeal against a decision of HMRC under paragraph 28A(5A) that there was no reasonable excuse for the failure to give notice on or before the initial notification deadline.
;
(b) in sub-paragraph (5), before paragraph (a) insert—
(za) in the case of an appeal under sub-paragraph (A1), notice of HMRC's decision is given to the scheme organiser;
;
(c) in sub-paragraph (6), after “sub-paragraph” insert “ (A1), ”.
(4) The amendments made by this paragraph have effect in relation to notices given under paragraph 28A of Schedule 4 to ITEPA 2003 on or after 6 April 2016.
Price for acquisition of shares under share option
6 (1) In Schedule 3 to ITEPA 2003 (SAYE option schemes), paragraph 28 (requirements as to price for acquisition of shares) is amended as follows.
(2) In sub-paragraph (1)—
(a) in paragraph (b), for “at that time” substitute
—
(i) at that time, or
(ii) at such earlier time as may be determined in accordance with guidance issued by the Commissioners for Her Majesty's Revenue and Customs.
(b) for “sub-paragraphs (2) and (3)” substitute “ sub-paragraph (3) ”.
(3) Omit sub-paragraph (2).
7 (1) In Schedule 4 to ITEPA 2003 (CSOP schemes), paragraph 22 (requirements as to price for acquisition of shares) is amended as follows.
(2) In sub-paragraph (1)—
(a) in paragraph (b), for “at the time when the option is granted” substitute
—
(i) at the time when the option is granted, or
(ii) at such earlier time as may be determined in accordance with guidance issued by the Commissioners for Her Majesty's Revenue and Customs.
;
(b) for “sub-paragraphs (2) and (3)” substitute “ sub-paragraph (3) ”.
(3) Omit sub-paragraph (2).
Tag-along rights
8 (1) In Schedule 5 to ITEPA 2003 (enterprise management incentives), in paragraph 39 (company reorganisations: introduction), in sub-paragraph (2)(c), after “982” insert “ or 983 to 985 ”.
(2) The amendment made by this paragraph is treated as having come into force on 17 July 2013.
Exercise of EMI options
9 (1) In section 238A of TCGA 1992 (share schemes and share incentives), in subsection (2), omit paragraph (d) and the preceding “and”.
(2) In Schedule 7D to TCGA 1992 (share schemes and share incentives), omit Part 4.
(3) In section 527 of ITEPA 2003 (enterprise management incentives: qualifying options), in subsection (3)—
(a) after paragraph (a) insert “ and ”;
(b) omit paragraph (c) and the preceding “and”.
(4) The amendments made by this paragraph do not affect—
(a) the application of paragraph 14(4) of Schedule 7D to TCGA 1992 in relation to a disqualifying event occurring before 6 April 2016, or
(b) the application of paragraph 16 of that Schedule in relation to an allotment for payment mentioned in section 126(2)(a) of that Act taking place before 6 April 2016.
SCHEDULE 4 Pensions: lump sum allowance and lump sum and death benefit allowance: transitional provision
Section 19
PART 1 “Fixed protection 2016”
The protection
1 (1) Sub-paragraph (2) applies at any particular time on or after 6 April 2016 in the case of an individual if—
(a) each of the conditions specified in paragraph 2 is met,
(b) there is no protection-cessation event (see paragraph 3) in the period beginning with 6 April 2016 and ending with the particular time,
(c) paragraph 1(2) of Schedule 6 to FA 2014 (“individual protection 2014”) does not apply in the individual's case at the particular time, and
(d) at the particular time or any later time, the individual has a reference number (see Part 3 of this Schedule) for the purposes of sub-paragraph (2).
(2) Chapter 15A of Part 9 of ITEPA 2003 (pension income: lump sums under registered pension schemes) has effect in relation to the individual as if—
(a) the amount specified in section 637P of that Act (individual’s lump sum allowance) were £312,500, and
(b) the amount specified in section 637R of that Act (individual’s lump sum and death benefit allowance) were—
(i) if one or more lump sum and death benefit allowance enhancement factors operate in relation to the individual for the purposes of paragraph 20H of Schedule 36 to FA 2004, the individual’s enhanced lump sum and death benefit allowance (as determined under that paragraph of that Schedule), and
(ii) otherwise, £1,250,000.
(3) For the purposes of paragraph 20H of Schedule 36 to FA 2004, the individual’s “protected lump sum and death benefit allowance” is £1,250,000.
The initial conditions
2 The conditions mentioned in paragraph 1(1)(a) are—
(a) that, on 6 April 2016, the individual has one or more arrangements under—
(i) a registered pension scheme, or
(ii) a relieved non-UK pension scheme of which the individual is a relieved member,
(b) that paragraph 7 of Schedule 36 to FA 2004 (primary protection) does not apply on 6 April 2016 in relation to the individual,
(c) that paragraph 12 of that Schedule (enhanced protection) does not apply in the individual's case on 6 April 2016,
(d) that paragraph 14 of Schedule 18 to FA 2011 (transitional provision relating to new standard lifetime allowance for the tax year 2012-13) does not apply in the individual's case on 6 April 2016, and
(e) that paragraph 1 of Schedule 22 to FA 2013 (“fixed protection 2014” relating to new standard lifetime allowance for the tax year 2014-15) does not apply in the individual's case on 6 April 2016.
Protection-cessation events
3 There is a protection-cessation event if the reference number for the purposes of paragraph 1(2) was issued pursuant to an application made on or after 15 March 2023 and—
(a) there is benefit accrual in relation to the individual under an arrangement under a registered pension scheme,
(b) there is an impermissible transfer into any arrangement under a registered pension scheme relating to the individual,
(c) a transfer of sums or assets held for the purposes of, or representing accrued rights under, any such arrangement is made that is not a permitted transfer, or
(d) an arrangement relating to the individual is made under a registered pension scheme otherwise than in permitted circumstances.
Protection-cessation events: interpretation: “benefit accrual”
4 (1) For the purposes of paragraph 3(a) there is benefit accrual in relation to the individual under an arrangement—
(a) in the case of a money purchase arrangement that is not a cash balance arrangement, if a relevant contribution is paid under the arrangement on or after 6 April 2016,
(b) in the case of a cash balance arrangement or defined benefits arrangement, if there is an increase in the value of the individual's rights under the arrangement at any time on or after that date (but subject to sub-paragraph (5)), and
(c) in the case of a hybrid arrangement—
(i) where the benefits that may be provided to or in respect of the individual under the arrangement include money purchase benefits other than cash balance benefits, if a relevant contribution is paid under the arrangement on or after 6 April 2016, and
(ii) in any case, if there is an increase in the value of the individual's rights under the arrangement at any time on or after that date (but subject to sub-paragraph (5)).
(2) For the purposes of sub-paragraphs (1)(b) and (c)(ii) and (5) whether there is an increase in the value of the individual's rights under an arrangement (and its amount if there is) is to be determined—
(a) in the case of a cash balance arrangement (or a hybrid arrangement under which cash balance benefits may be provided to or in respect of the individual under the arrangement), by reference to whether there is an increase in the amount that would, on the valuation assumptions, be available for the provision of benefits to or in respect of the individual (and, if there is, the amount of the increase), and
(b) in the case of a defined benefits arrangement (or a hybrid arrangement under which defined benefits may be provided to or in respect of the individual under the arrangement), by reference to whether there is an increase in the benefits amount.
(3) For the purposes of sub-paragraph (2)(b) “the benefits amount” is—
(
P
×
RVF
)
+
LS
where—
LS is the lump sum to which the individual would, on the valuation assumptions, be entitled under the arrangement (otherwise than by commutation of pension),
P is the annual rate of the pension which would, on the valuation assumptions, be payable to the individual under the arrangement, and
RVF is the relevant valuation factor.
(4) Paragraph 14 of Schedule 36 to FA 2004 (when a relevant contribution is paid under an arrangement) applies for the purposes of sub-paragraph (1)(a) and (c)(i).
(5) Increases in the value of the individual's rights under an arrangement are to be ignored for the purposes of sub-paragraph (1)(b) or (c)(ii) if in no tax year do they exceed the relevant percentage.
(6) The relevant percentage, in relation to a tax year, means—
(a) where the arrangement (or a predecessor arrangement) includes provision for the value of the rights of the individual to increase during the tax year at an annual rate specified in the rules of the pension scheme (or a predecessor registered pension scheme) on 9 December 2015—
(i) that percentage (or, where more than one arrangement includes such provision, the higher or highest of the percentages specified), plus
(ii) the relevant statutory increase percentage;
(b) otherwise—
(i) the percentage by which the consumer prices index for the month of September in the previous tax year is higher than it was for the September before that (or 0% if it is not higher), or
(ii) if higher, the relevant statutory increase percentage.
(7) In sub-paragraph (6)(a)—
“predecessor arrangement”, in relation to an arrangement, means another arrangement (under the same or another registered pension scheme) from which some or all of the sums or assets held for the purposes of the arrangement directly or indirectly derive;
“predecessor registered pension scheme”, in relation to a registered pension scheme, means another registered pension scheme from which some or all of the sums or assets held for the purposes of the arrangement under the pension scheme directly or indirectly derive.
(8) In sub-paragraph (6) “the relevant statutory increase percentage”, in relation to a tax year, means the percentage increase in the value of the individual's rights under the arrangement during the tax year so far as it is attributable solely to one or more of the following—
(a) an increase in accordance with section 15 of the Pension Schemes Act 1993 or section 11 of the Pension Schemes (Northern Ireland) Act 1993 (increase of guaranteed minimum where commencement of guaranteed minimum pension postponed);
(b) a revaluation in accordance with section 16 of the Pension Schemes Act 1993 or section 12 of the Pension Schemes (Northern Ireland) Act 1993 (early leavers: revaluation of earnings factors);
(c) a revaluation in accordance with Chapter 2 of Part 4 of the Pension Schemes Act 1993 or the Pension Schemes (Northern Ireland) Act 1993 (early leavers: revaluation of accrued benefits);
(d) a revaluation in accordance with Chapter 3 of Part 4 of the Pension Schemes Act 1993 or the Pension Schemes (Northern Ireland) Act 1993 (early leavers: protection of increases in guaranteed minimum pensions);
(e) the application of section 67 of the Equality Act 2010 (sex equality rule for occupational pension schemes).
(9) Sub-paragraph (10) applies in relation to a tax year if—
(a) the arrangement is a defined benefits arrangement which is under an annuity contract treated as a registered pension scheme under section 153(8) of FA 2004,
(b) the contract provides for the value of the rights of the individual to be increased during the tax year at an annual rate specified in the contract, and
(c) the contract limits the annual rate to the percentage increase in the retail prices index over a 12 month period specified in the contract.
(10) Sub-paragraph (6)(b)(i) applies as if it referred instead to the annual rate of the increase in the value of the rights during the tax year.
(11) For the purposes of sub-paragraph (9)(c) the 12 month period must end during the 12 month period preceding the month in which the increase in the value of the rights occurs.
Protection-cessation events: interpretation: “impermissible transfer”
5 Paragraph 17A of Schedule 36 to FA 2004 (impermissible transfers) applies for the purposes of paragraph 3(b) but as if—
(a) the references to a relevant existing arrangement were to the arrangement, and
(b) the reference in sub-paragraph (2) to 5 April 2006 were to 5 April 2016.
Protection-cessation events: interpretation: “permitted transfer”
6 Sub-paragraphs (7) to (8B) of paragraph 12 of Schedule 36 to FA 2004 (when there is a permitted transfer) apply for the purposes of paragraph 3(c).
Protection-cessation events: interpretation: “permitted circumstances”
7 Sub-paragraphs (2A) to (2C) of paragraph 12 of Schedule 36 to FA 2004 (“permitted circumstances”) apply for the purposes of paragraph 3(d).
Protection-cessation events: interpretation: relieved non-UK pension schemes
8 (1) Subject to sub-paragraphs (2) to (4), paragraph 3 applies in relation to an individual who is a relieved member of a relieved non-UK pension scheme as if the relieved non-UK pension scheme were a registered pension scheme; and the other paragraphs of this Part of this Schedule apply accordingly.
(2) Sub-paragraphs (3) and (4) apply for the purposes of paragraph 3(a) (instead of paragraph 4(1)) in determining if there is benefit accrual in relation to an individual under an arrangement under a relieved non-UK pension scheme of which the individual is a relieved member.
(3) There is benefit accrual in relation to the individual under the arrangement if there is a pension input amount under sections 230 to 237 of FA 2004 (as applied by Schedule 34 to that Act) greater than nil in respect of the arrangement for a tax year; and, in such a case, the benefit accrual is treated as occurring at the end of the tax year.
(4) There is also benefit accrual in relation to the individual under the arrangement if—
(a) in a tax year there occurs a benefit crystallisation event in relation to the individual (whether in relation to the arrangement or to any other arrangement under any pension scheme or otherwise), and
(b) had the tax year ended immediately before the benefit crystallisation event, there would have been a pension input amount under sections 230 to 237 of FA 2004 greater than nil in respect of the arrangement for the tax year,
and, in such a case, the benefit accrual is treated as occurring immediately before the benefit crystallisation event.
PART 2 “Individual protection 2016”
The protection
9 (1) Sub-paragraphs (2) to (2B) apply at any particular time on or after 6 April 2016 in the case of an individual if—
(a) the individual has one or more relevant arrangements (see sub-paragraph (3)) on 5 April 2016,
(b) the individual's relevant amount at the particular time is greater than £1,073,100(see sub-paragraphs (4) and (7)),
(c) paragraph 7 of Schedule 36 to FA 2004 (primary protection) does not apply on 6 April 2016 in relation to the individual,
(d) none of the provisions listed in sub-paragraph (5) applies in the individual's case at the particular time, and
(e) at the particular time or any later time, the individual has a reference number (see Part 3 of this Schedule) for the purposes of sub-paragraph (2).
(2) Chapter 15A of Part 9 of ITEPA 2003 (pension income: lump sums under registered pension schemes) has effect in relation to the individual as if the amount specified in section 637P of that Act (individual’s lump sum allowance) were the lower of—
(a) 25% of the individual’s relevant amount, and
(b) £312,500.
(2A) Chapter 15A of Part 9 of ITEPA 2003 (pension income: lump sums under registered pension schemes) has effect in relation to the individual as if the amount specified in section 637R of that Act (individual’s lump sum and death benefit allowance) were ...—
(a) if one or more lump sum and death benefit allowance enhancement factors operate in relation to the individual for the purposes of paragraph 20H of Schedule 36 to FA 2004, the individual’s enhanced lump sum and death benefit allowance (as determined under that paragraph of that Schedule), and
(b) otherwise, the lower of—
(i) the individual’s relevant amount, and
(ii) £1,250,000.
(2B) For the purposes of paragraph 20H of Schedule 36 to FA 2004, the individual’s “protected lump sum and death benefit allowance” is the lower of—
(a) the individual’s relevant amount, and
(b) £1,250,000.
(3) “Relevant arrangement”, in relation to an individual, means an arrangement relating to the individual under—
(a) a registered pension scheme of which the individual is a member, or
(b) a relieved non-UK pension scheme of which the individual is a relieved member.
(4) An individual's “relevant amount” is the sum of amounts A, B, C and D (see paragraphs 10 to 13, but see also sub-paragraph (7)).
(5) The provisions mentioned in sub-paragraph (1)(d) are—
(a) paragraph 12 of Schedule 36 to FA 2004 (enhanced protection);
(b) paragraph 14 of Schedule 18 to FA 2011 (fixed protection 2012);
(c) paragraph 1 of Schedule 22 to FA 2013 (fixed protection 2014);
(d) paragraph 1(2) of Schedule 6 to FA 2014 (individual protection 2014);
(e) paragraph 1(2) of this Schedule (fixed protection 2016).
(6) Sub-paragraph (7) applies if rights of an individual under a relevant arrangement become subject to a pension debit where the transfer day falls on or after 6 April 2016.
(7) For the purposes of applying sub-paragraphs (2) to (2B) in the case of the individual on and after the transfer day, the individual's relevant amount is reduced (or further reduced) by the following amount—
X
−
(
Y
×
Z
)
where—
X is the appropriate amount,
Y is 5% of X, and
Z is the number of tax years beginning after 5 April 2016 and ending on or before the transfer day.
(If the formula gives a negative amount, it is to be taken to be nil.)
(8) In sub-paragraphs (6) and (7) “appropriate amount” and “transfer day”, in relation to a pension debit, have the same meaning as in section 29 of WRPA 1999 or Article 26 of WRP(NI)O 1999 (as the case may be).
Amount A (pre-6 April 2006 pensions in payment)
10 (1) To determine amount A—
(a) apply sub-paragraph (2) if a benefit crystallisation event has occurred in relation to the individual during the period beginning with 6 April 2006 and ending with 5 April 2016;
(b) otherwise, apply sub-paragraph (6).
(2) If this sub-paragraph is to be applied, amount A is—
25
×
ARP
×
£
1,250,000
SLT
where—
ARP is (subject to sub-paragraph (3)) an amount equal to—
the annual rate at which any relevant existing pension was payable to the individual at the time immediately before the benefit crystallisation event occurred, or
if more than one relevant existing pension was payable to the individual at that time, the sum of the annual rates at which each of the relevant existing pensions was so payable, and
SLT is an amount equal to what the standard lifetime allowance was at the time the benefit crystallisation event occurred.
(3) Paragraph 20(4) of Schedule 36 to FA 2004 applies for the purposes of the definition of “ARP” in sub-paragraph (2) (and, for this purpose, in paragraph 20(4) any reference to “the time” is to be read as a reference to the time immediately before the benefit crystallisation event occurred).
(4) If the time immediately before the benefit crystallisation event occurred falls before 6 April 2015, in sub-paragraph (3) references to paragraph 20(4) are to be read as references to that provision as it had effect in relation to benefit crystallisation events occurring at the time immediately before the benefit crystallisation event occurred.
(5) If more than one benefit crystallisation event has occurred, in sub-paragraphs (2) to (4) references to the benefit crystallisation event are to be read as references to the first benefit crystallisation event.
(6) If this sub-paragraph is to be applied, amount A is—
25
×
ARP
where ARP is (subject to sub-paragraph (7)) an amount equal to—
the annual rate at which any relevant existing pension is payable to the individual at the end of 5 April 2016, or
if more than one relevant existing pension is payable to the individual at the end of 5 April 2016, the sum of the annual rates at which each of the relevant existing pensions is so payable.
(7) Paragraph 20(4) of Schedule 36 to FA 2004 applies for the purposes of the definition of “ARP” in sub-paragraph (6) (and, for this purpose, in paragraph 20(4) any reference to “the time” is to be read as a reference to 5 April 2016).
(8) In this paragraph “relevant existing pension” means (subject to sub-paragraph (9)) a pension, annuity or right—
(a) which was, at the end of 5 April 2006, a “relevant existing pension” as defined by paragraph 10(2) and (3) of Schedule 36 to FA 2004, and
(b) to the payment of which the individual had, at the end of 5 April 2006, an actual (rather than a prospective) right.
(9) If—
(a) before 6 April 2016, there was a recognised transfer of sums or assets representing a relevant existing pension, and
(b) those sums or assets were, after the transfer, applied towards the provision of a scheme pension (“the new scheme pension”),
the new scheme pension is also to be a “relevant existing pension” (including for the purposes of this sub-paragraph).
Amount B (pre-6 April 2016 benefit crystallisation events)
11 (1) To determine amount B—
(a) identify each benefit crystallisation event that has occurred in relation to the individual during the period beginning with 6 April 2006 and ending with 5 April 2016,
(b) determine the amount that was crystallised by each of those benefit crystallisation events (applying paragraph 14 of Schedule 34 to FA 2004 if relevant), and
(c) multiply each crystallised amount by the following fraction—
1,250,000
SLT
where SLT is an amount equal to what the standard lifetime allowance was at the time when the benefit crystallisation event in question occurred.
(2) Amount B is the sum of the crystallised amounts determined under sub-paragraph (1)(b) as adjusted under sub-paragraph (1)(c).
Amount C (uncrystallised rights at end of 5 April 2016 under registered pension schemes)
12 Amount C is the total value of the individual's uncrystallised rights at the end of 5 April 2016 under arrangements relating to the individual under registered pension schemes of which the individual is a member as determined in accordance with section 212 of FA 2004.
Amount D (uncrystallised rights at end of 5 April 2016 under relieved non-UK schemes)
13 (1) To determine amount D—
(a) identify each relieved non-UK pension scheme of which the individual is a relieved member at the end of 5 April 2016, and
(b) in relation to each such scheme—
(i) assume that a benefit crystallisation event occurs in relation to the individual at the end of 5 April 2016, and
(ii) in accordance with paragraph 14 of Schedule 34 to FA 2004, determine what the untested portion of the relevant relieved amount would be immediately before the assumed benefit crystallisation event.
(2) Amount D is the sum of the untested portions determined under sub-paragraph (1)(b)(ii).
PART 3 Reference numbers etc
Issuing of reference numbers for fixed or individual protection 2016
14 (1) An individual has a reference number for the purposes of paragraph 1(2), or for the purposes of paragraph 9(2), if a reference number—
(a) has been issued by or on behalf of the Commissioners in respect of the individual for the purposes concerned, and
(b) has not been withdrawn.
(2) Such a reference number—
(a) may include, or consist of, characters other than figures, and
(b) may be issued only if a valid application for its issue is received by or on behalf of the Commissioners.
(3) A valid application is an application—
(a) made by or on behalf of the individual concerned,
(b) made on or after 6 April 2016 but before 6 April 2025,
(c) made by means of a digital service provided for the purpose by or on behalf of the Commissioners, or by other means authorised in a particular case by an officer of Revenue and Customs,
(d) containing—
(i) the following details for the individual and, where the individual is not the applicant, also for the applicant: title, full name, full postal address and e-mail address,
(ii) the individual's date of birth,
(iii) the individual's national insurance number, or the reason why the individual does not qualify for a national insurance number, and
(iv) a declaration that everything stated in the application is true and complete to the best of the applicant's knowledge and belief,
(e) containing also in the case of an application for a reference number for the purposes of paragraph 1(2)—
(i) a declaration that the conditions specified in paragraph 2 are met in the individual's case, and
(ii) a declaration that there has been no protection-cessation event (see paragraph 3) in the individual's case in the period beginning with 6 April 2016 and ending with the making of the application, and
(f) containing also in the case of an application for a reference number for the purposes of paragraph 9(2)—
(i) the individual's relevant amount (see paragraph 9(4) and (7)),
(ii) amounts A, B, C and D for the individual (see paragraphs 10 to 13),
(iii) if rights of the individual under a relevant arrangement have become subject to a relevant pension debit, the appropriate amount and transfer day for each such pension debit,
(iv) a declaration that the condition in paragraph 9(1)(c) is met in the individual's case, and
(v) a declaration that paragraph 1(2) of Schedule 6 to FA 2014 (“individual protection 2014”) does not apply in the individual's case.
(4) Where an application for a reference number for the purposes of paragraph 1(2) or 9(2) is unsuccessful, or is successful on a dormant basis, that must be notified to the applicant by or on behalf of the Commissioners.
(5) In sub-paragraph (3)(f)(iii) and this sub-paragraph—
“relevant arrangement” has the meaning given by paragraph 9(3);
“relevant pension debit”, in relation to an application for a reference number, means a pension debit where—
the transfer day falls on or after 6 April 2016 and before the day on which the application is made, and
the individual has, before the day on which the application is made, received notice under regulation 8(2) or (3) of the Pensions on Divorce etc. (Provision of Information) Regulations 2000 (S.I. 2000/1048) relating to discharge of liability in respect of the pension credit corresponding to the pension debit;
“appropriate amount” and “transfer day”, in relation to a pension debit, have the same meaning as in paragraph 9(6) and (7) (see paragraph 9(8)).
(6) Sub-paragraph (3)(c) is not to be read as requiring a digital service to be provided and available for the purpose referred to.
(7) For the purposes of this Part of this Schedule, an application for a reference number for the purposes of paragraph 1(2) is successful on a dormant basis if the decision on the application is that—
(a) the application would have been unconditionally successful but for the fact that paragraph 1(2) of Schedule 6 to FA 2014 (“individual protection 2014”) applies in the case of the individual concerned, and
(b) a reference number for the purposes of paragraph 1(2) will be issued in response to the application but only when paragraph 1(2) of Schedule 6 to FA 2014 does not apply in the individual's case.
(8) For the purposes of this Part of this Schedule, an application for a reference number for the purposes of paragraph 9(2) is successful on a dormant basis if the decision on the application is that—
(a) the application would have been unconditionally successful but for the fact that a prior provision applies in the case of the individual concerned, and
(b) a reference number for the purposes of paragraph 9(2) will be issued in response to the application but only when no prior provision applies in the individual's case.
(9) For the purposes of sub-paragraph (8), the prior provisions are—
(a) paragraph 12 of Schedule 36 to FA 2004 (enhanced protection),
(b) paragraph 14 of Schedule 18 to FA 2011 (fixed protection 2012),
(c) paragraph 1 of Schedule 22 to FA 2013 (fixed protection 2014), and
(d) paragraph 1(2) of this Schedule (fixed protection 2016).
Withdrawal of reference numbers
15 (1) This paragraph applies where a reference number for the purposes of paragraph 1(2) or 9(2) has been issued by or on behalf of the Commissioners in respect of an individual.
(2) The number may be withdrawn by an officer of Revenue and Customs.
(3) The number may be withdrawn only if—
(a) something contained in the application for the number was incorrect, or
(b) where the number was for the purposes of paragraph 1(2)—
(i) there has been a protection-cessation event (see paragraph 3) in the individual's case since the making of the application, or
(ii) paragraph 1(2) of Schedule 6 to FA 2014 has come to apply in the individual's case, or
(c) where the number was for the purposes of paragraph 9(2)—
(i) a provision listed in paragraph 9(5) has come to apply in the individual's case, or
(ii) paragraph 9(2) has ceased to apply in the individual's case as a result of the operation of paragraph 9(7), or
(d) the individual—
(i) has been given a notice under paragraph 1 of Schedule 36 to FA 2008 (information and inspection powers: taxpayer notice) in connection with (as the case may be) Part 1 or 2 of this Schedule, and
(ii) fails to comply with the notice within the period specified in the notice.
(4) Where the number is withdrawn—
(a) notice of the withdrawal, and
(b) reasons for the withdrawal,
are to be given by an officer of Revenue and Customs to the individual.
(5) Where the number is withdrawn, the effect of the withdrawal is as follows—
(a) in the case of withdrawal in reliance on sub-paragraph (3)(a), the number is treated as never having been issued,
(b) in the case of withdrawal in reliance on paragraph (b) or (c) of sub-paragraph (3), the number is treated as having been withdrawn at the time of the event mentioned in sub-paragraph (i) or (ii) of that paragraph, and
(c) in the case of withdrawal in reliance on sub-paragraph (3)(d), the number is treated as having been withdrawn at the time specified in the notice of the withdrawal as the effective time of the withdrawal, which may be any time not earlier than the time of issue of the number.
Appeals against non-issue or withdrawal of reference numbers
16 (1) Where—
(a) an application is made for a reference number for the purposes of paragraph 1(2) or 9(2) in respect of an individual, and
(b) the application is unsuccessful (see sub-paragraph (9)),
the individual may appeal against the decision on the application.
(2) Where a reference number issued in respect of an individual for the purposes of paragraph 1(2) or 9(2) is withdrawn, the individual may appeal against the withdrawal.
(3) Where a reference number issued in respect of an individual for the purposes of paragraph 1(2) or 9(2) is withdrawn in reliance on paragraph 15(3)(d), the individual may appeal against the time specified (in the notice of the withdrawal) as the effective time of the withdrawal.
(4) Where an appeal under sub-paragraph (1) is notified to the tribunal, the tribunal—
(a) must allow the appeal if satisfied—
(i) that the application was a valid application,
(ii) that everything in the application was correct, and
(iii) that, at the time of deciding the appeal, paragraph 15(3)(b), (c) or (d) does not authorise withdrawal of the requested number (assuming it had been issued), and
(b) must otherwise dismiss the appeal.
(5) Where an appeal under sub-paragraph (2) is notified to the tribunal, the tribunal—
(a) must allow the appeal if satisfied that the withdrawal was not authorised by paragraph 15(3), and
(b) must otherwise dismiss the appeal.
(6) Where an appeal under sub-paragraph (3) is notified to the tribunal, the tribunal must decide whether it was just and reasonable to specify the particular time specified and—
(a) if the tribunal decides that it was, the tribunal must dismiss the appeal, and
(b) otherwise—
(i) the tribunal must decide what time it would have been just and reasonable to specify, and
(ii) the withdrawal has effect as if the notice of the withdrawal had specified the time decided by the tribunal.
(7) Notice of an appeal under this paragraph must be given to Her Majesty's Revenue and Customs before the end of 30 days beginning with the date on which notice under paragraph 14(4) or 15(4) (as the case may be) is given.
(8) In this paragraph “the tribunal” means the First-tier Tribunal or, where determined by or under Tribunal Procedure Rules, the Upper Tribunal.
(9) The references in sub-paragraph (1) and paragraph 17(3)(b)(ii) to an application being unsuccessful do not include a case where an application for a reference number for the purposes of paragraph 1(2) or 9(2) is successful on a dormant basis (see paragraph 14(7) and (8)).
Notification of subsequent protection-cessation events
17 (1) Sub-paragraph (2) applies if, in the case of an individual, there is a protection-cessation event (see paragraphs 3 to 8) at a time when—
(a) the individual has a reference number for the purposes of paragraph 1(2),
(b) there is a pending application for a reference number for those purposes in respect of the individual, or
(c) an appeal under paragraph 16(2) or (3) is in progress in connection with withdrawal of a reference number issued for those purposes in respect of the individual.
(2) The individual—
(a) must notify the Commissioners of the event, and
(b) must do so—
(i) before the end of 90 days beginning with the day on which the individual could first reasonably be expected to have known that the event had occurred, and
(ii) by means of a digital service provided for the purpose by or on behalf of the Commissioners, or by other means authorised in a particular case by an officer of Revenue and Customs.
(3) For the purposes of this paragraph—
(a) an application is pending if—
(i) it has been made,
(ii) no reference number has been issued in response to the application, and
(iii) the applicant has not been notified that the application has been unsuccessful;
(b) an application is also pending if—
(i) it has been made,
(ii) it has been unsuccessful, and
(iii) an appeal under paragraph 16(1) is in progress against the decision on the application;
(c) an appeal under paragraph 16(1), (2) or (3) is in progress until one of the following happens—
(i) it, or any further appeal, is withdrawn, or
(ii) it and any further appeal brought have been determined, and there is no prospect of further appeal.
Notification of subsequent pension debits
18 (1) Sub-paragraph (2) applies if an individual receives a discharge notice related to a pension debit at a time when—
(a) the individual has a reference number for the purposes of paragraph 9(2),
(b) there is a pending application for a reference number for those purposes in respect of the individual, or
(c) an appeal under paragraph 16(2) or (3) is in progress in connection with withdrawal of a reference number issued for those purposes in respect of the individual.
(2) The individual—
(a) must notify the Commissioners of the appropriate amount and transfer day for the pension debit, and
(b) must do so—
(i) before the end of 60 days beginning with the date of the discharge notice related to the pension debit, and
(ii) by means of a digital service provided for the purpose by or on behalf of the Commissioners, or by other means authorised in a particular case by an officer of Revenue and Customs.
(3) For the purposes of this paragraph—
(a) a notice is a discharge notice related to a pension debit if it is notice under regulation 8(2) or (3) of the Pensions on Divorce etc. (Provision of Information) Regulations 2000 (S.I. 2000/1048) relating to discharge of liability in respect of the pension credit corresponding to the pension debit;
(b) an application is pending if—
(i) it has been made,
(ii) no reference number has been issued in response to the application,
(iii) the applicant has not been notified that the application has been unsuccessful, and
(iv) the applicant has not been notified that the application has been successful on a dormant basis (see paragraph 14(8));
(c) an application is also pending if—
(i) it has been made,
(ii) it has been unsuccessful, and
(iii) an appeal under paragraph 16(1) is in progress against the decision on the application;
(d) an appeal under paragraph 16(1), (2) or (3) is in progress until one of the following happens—
(i) it, or any further appeal, is withdrawn, or
(ii) it and any further appeal brought have been determined, and there is no prospect of further appeal.
Personal representatives
19 If an individual dies—
(a) anything which could have been done under or by virtue of this Part of this Schedule by the individual may be done by the individual's personal representatives,
(b) paragraph 14(3)(d)(ii) has effect in relation to an application made in respect of the individual after the individual's death as if it also required a valid application to contain the individual's date of death, and
(c) any notice or reasons given under paragraph 15(4) after the individual's death are to be given to the individual's personal representatives.
Penalties for non-supply, or fraudulent etc supply, of information under paragraph 17 or 18
20 In column 2 of the Table in section 98 of TMA 1970 (provisions about information where non-compliance etc attracts penalties), at the appropriate place insert—
paragraph 17 or 18 of Schedule 4 to FA 2016;
PART 4 Information
Preservation of records in connection with individual protection 2016
21 If an individual is issued with a reference number for the purposes of paragraph 9(2), the individual must preserve, for the period of 6 years beginning with the date the application for the reference number was made, all such records as were required for the purpose of enabling the individual's relevant amount (see paragraph 9), and amounts A, B, C and D for the individual (see paragraphs 10 to 13), to be correctly calculated.
Amendments of regulations
22 (1) The Registered Pension Schemes (Provision of Information) Regulations 2006 (S.I. 2006/567) are amended in accordance with paragraphs 23 to 26.
(2) The amendments made by those paragraphs are to be treated as having been made by the Commissioners under such of the powers cited in the instrument containing the Regulations as are applicable.
23 In regulation 2(1) (interpretation)—
(a) after the entry for “fixed protection 2014” insert—
“fixed protection 2016” means protection under paragraph 1(2) of Schedule 4 to FA 2016;
, and
(b) after the entry for “individual protection 2014” insert—
“individual protection 2016” means protection under paragraph 9(2) of Schedule 4 to FA 2016;
.
24 (1) In the table in regulation 3(1) (provision of event reports by scheme administrators to HM Revenue and Customs), the entry for reportable event 6 (report where benefit crystallisation event occurs in relation to member of scheme) is amended as follows.
(2) In column 1 of the entry, in paragraph (b)—
(a) omit the “or” at the end of sub-paragraph (iv), and
(b) after sub-paragraph (v) insert
, or
(vi) fixed protection 2016 or individual protection 2016.
(3) In column 2 of the entry—
(a) in the words before paragraph (a), before “the Commissioners” insert “ or on behalf of ”,
(b) omit the “or” at the end of paragraph (c), and
(c) after paragraph (d) insert
, or
(e) Schedule 4 to the Finance Act 2016 (where the member relies on fixed protection 2016 or individual protection 2016).
(4) In the heading of the entry, for the words after “Benefit crystallisation events and” substitute “ non-standard lifetime allowances ”.
25 (1) Regulation 11 (information provided to scheme administrator by member intending to rely on transitional protection in connection with lifetime allowance) is amended as follows.
(2) In paragraph (1)—
(a) omit the “or” at the end of sub-paragraph (b),
(b) after sub-paragraph (c) (but before the closing words of paragraph (1)) insert
, or
(d) fixed protection 2016 by virtue of Part 1 of Schedule 4 to the Finance Act 2016,
, and
(c) in those closing words—
(i) before “the Commissioners” insert “ or on behalf of ”, and
(ii) before “in respect of that entitlement” insert “ or Schedule 4 to the Finance Act 2016 ”.
(3) After paragraph (2) insert—
(3) If the member of a registered pension scheme intends to rely on individual protection 2016 by virtue of Part 2 of Schedule 4 to the Finance Act 2016, the member must notify the scheme administrator of—
(a) the reference number in respect of the member issued by or on behalf of the Commissioners for the purposes of paragraph 9(2) of that Schedule, and
(b) the member's relevant amount calculated in accordance with Part 2 of that Schedule.
(4) In the heading—
(a) for the “or” substitute a comma, and
(b) at the end insert “ , fixed protection 2016 or individual protection 2016 ”.
26 After regulation 14B insert—
Individual protection 2016: provision of information by scheme administrator to member on request
14C (1) Where—
(a) an individual is a member of a registered pension scheme on 5 April 2016,
(b) the individual makes a written request to the scheme administrator for the information mentioned in paragraph (2), and
(c) the request is received by the scheme administrator before 6 April 2020,
the scheme administrator must provide the individual with the information within 3 months following receipt of the request.
(2) The information is such information relating to the member's rights under the scheme as is necessary for calculating, in accordance with Part 2 of Schedule 4 to the Finance Act 2016 (individual protection 2016), the member's relevant amount for the purposes of paragraph 9(2) of that Schedule.
27 In consequence of paragraph 24(4), in each of—
(a) the Registered Pension Schemes (Provision of Information) (Amendment) Regulations 2013 (S.I. 2013/1742), and
(b) the Registered Pension Schemes (Provision of Information) (Amendment) Regulations 2014 (S.I. 2014/1843),
omit regulation 4(2)(a).
PART 5 Amendments in connection with protection of pre-6 April 2006 rights
28 (1) In Part 1 of Schedule 29 to FA 2004 (pension schemes: interpretation of the lump sum rule), in paragraph 2 (permitted maximum amount of pension commencement lump sums, calculated in certain cases by deducting adjusted value of previously crystallised amounts from current standard lifetime allowance), in sub-paragraph (10) (modified adjustments where member has protection under paragraph 7 or 12 of Schedule 36 by reference to pre-6 April 2006 rights), after “have effect” insert
—
(a) where the member becomes entitled to the lump sum on or after 6 April 2014, as if PSLA in the case of any previous benefit crystallisation event which occurs on or after 6 April 2014 were £1,500,000 if that is greater than PSLA in that case, and
(b)
.
(2) In paragraph 28(3) of Schedule 36 to FA 2004 (transitional provision for pre-6 April 2006 rights: modified version of paragraph 2 of Schedule 29 that applies in certain cases), in the sub-paragraph (7) treated as substituted in paragraph 2 of Schedule 29 to FA 2004, in the definition of “ PSLA ”, after “became entitled to the lump sum” insert “ if that occurred before 6 April 2012 but, if that occurred on or after 6 April 2012, PSLA is the greater of £1,800,000 and the standard lifetime allowance at the time the individual became entitled to the lump sum ”.
(3) The amendment made by sub-paragraph (1) is treated as having come into force on 6 April 2014.
(4) The amendment made by sub-paragraph (2) is treated as having come into force on 6 April 2012.
PART 6 Interpretation and regulations
Interpretation of Parts 1, 2 and 3
29 (1) Expressions used in Part 1, 2 or 3 of this Schedule, and in Part 4 of FA 2004 (pension schemes), have the same meaning in that Part of this Schedule as in that Part of that Act.
(2) In particular, references to a relieved non-UK pension scheme or a relieved member of such a scheme are to be read in accordance with paragraphs 13(3) and (4) and 18 of Schedule 34 to FA 2004 (application of lifetime allowance charge provisions to members of overseas pension schemes).
Interpretation of Parts 3 and 4 and this Part
30 In Parts 3 and 4, and this Part, of this Schedule “the Commissioners” means the Commissioners for Her Majesty's Revenue and Customs.
Regulations
31 (1) The Commissioners may by regulations amend Part 1, 2 or 3 of this Schedule.
(2) Regulations under this paragraph may (for example)—
(a) add to the cases in which paragraph 1(2) is to apply or is to cease to apply;
(b) add to the cases in which paragraph 9(2) is to apply.
(3) Regulations under this paragraph may include provision having effect in relation to a time before the regulations are made, but—
(a) the time must not be earlier than 6 April 2016, and
(b) the provision must not increase any person's liability to tax.
(4) Regulations under this paragraph may include—
(a) supplementary or incidental provision;
(b) consequential amendments of the Table in section 98 of TMA 1970 (information requirements: penalties).
(5) Power to make regulations under this paragraph is exercisable by statutory instrument.
(6) A statutory instrument containing regulations under this paragraph is subject to annulment in pursuance of a resolution of the House of Commons.
Section 22
Serious ill-health lump sums
1 (1) Part 4 of FA 2004 (registered pension schemes etc) is amended as follows.
(2) Omit section 205A (serious ill-health lump sum charge on payment to member who has reached 75).
(3) In Part 1 of Schedule 29 (interpretation of lump sum rule), paragraph 4 (serious ill-health lump sums) is amended in accordance with sub-paragraphs (4) and (5).
(4) In sub-paragraph (1) (meaning of “serious ill-heath lump sum”)—
(a) at the end of paragraph (b) insert “ and ”, and
(b) for paragraphs (c) and (d) substitute—
(ca) either—
(i) it is paid in respect of an uncrystallised arrangement, and it extinguishes the member's entitlement to benefits under the arrangement, or
(ii) it is paid in respect of uncrystallised rights of the member under an arrangement other than an uncrystallised arrangement, and it extinguishes the member's uncrystallised rights under the arrangement.
(5) After sub-paragraph (2) insert—
(2A) In subsection (1)(ca)(ii) “uncrystallised rights”, in relation to the member, means rights of the member that are uncrystallised rights as defined by section 212(1) and (2).
2 (1) Section 636A of ITEPA 2003 (exemption for certain lump sums under registered pension schemes) is amended as follows.
(2) In the heading, for “Exemption” substitute “ Exemptions and liabilities ”.
(3) For subsection (3A) (serious ill-health lump sum paid to member who has reached 75 is taxed only under section 205A of FA 2004) substitute—
(3A) Section 579A applies in relation to a serious ill-health lump sum which is paid under a registered pension scheme to a member who has reached the age of 75 as it applies to any pension under a registered pension scheme.
3 (1) In consequence of the amendment made by paragraph 1(2), in Part 4 of FA 2004—
(a) in section 164(2)(b) omit “, the serious ill-health lump sum charge”,
(b) omit section 272A(7)(a)(ii),
(c) in section 280(2) omit the entry for “serious ill-health lump sum charge”, and
(d) in Schedule 34—
(i) omit paragraph 1(3)(ca), and
(ii) in paragraph 5 omit “, serious ill-health lump sum charge”.
(2) In consequence of the amendment made by paragraph 1(2), in section 30(1) of ITA 2007 omit the entry for section 205A of FA 2004.
(3) In consequence of the amendments made by paragraphs 1 and 2 and sub-paragraphs (1) and (2)—
(a) in Schedule 16 to FA 2011, omit paragraphs 28(2)(a), 40, 42(3), 63, 77(4), 81(2) and (4)(b) and 83, and
(b) omit section 2(4) of the Taxation of Pensions Act 2014.
4 The amendments made by paragraphs 1 to 3 have effect in relation to lump sums paid after the day on which this Act is passed.
Charity lump sum death benefits
5 (1) In paragraph 18(1A) of Schedule 29 to FA 2004 (when lump sum paid out of uncrystallised funds is charity lump sum death benefit), omit paragraph (a) (member must have died after reaching 75).
(2) The amendment made by sub-paragraph (1) has effect in relation to lump sums paid after the day on which this Act is passed.
Dependants' flexi-access drawdown funds
6 (1) Part 2 of Schedule 28 to FA 2004 (interpretation of pension death benefit rules) is amended as follows.
(2) In paragraph 15 (meaning of “dependant”), after sub-paragraph (2) insert—
(2A) A child of the member is a dependant of the member if the child—
(a) has reached the age of 23, and
(b) is not within sub-paragraph (2)(b).
(2B) But this paragraph, so far as it has effect for the purpose of determining the meaning of “dependant”—
(a) in paragraphs 16 to 17 and 27A, and
(b) in paragraph 18 of Schedule 29,
has effect with the omission of sub-paragraph (2A).
(3) In paragraph 22 (meaning of “dependant's drawdown pension fund”)—
(a) in sub-paragraph (2)(a) and (aa) omit “to the dependant”, and
(b) in sub-paragraph (3), after “representing a” insert “person's”.
(4) The amendments made by this paragraph come into force on the day after the day on which this Act is passed.
(5) The sub-paragraphs inserted by sub-paragraph (2)—
(a) apply for the purpose of determining whether a payment of an annuity is a payment of a dependants' short-term annuity only if the annuity is purchased after the day on which this Act is passed, and
(b) apply for the purpose of determining whether a payment to a person is a payment of dependants' income withdrawal if, but only if, the person reaches the age of 23 after the day on which this Act is passed.
(6) In sub-paragraph (5) “dependants' short-term annuity” and “dependants' income withdrawal” have the same meaning as in Part 4 of FA 2004.
Trivial commutation lump sum
7 (1) Paragraph 7 of Schedule 29 to FA 2004 (interpretation of lump sum rule: meaning of “trivial commutation lump sum”) is amended as follows.
(2) In sub-paragraph (1)(aa) (sum must be paid in respect of a defined benefits arrangement), after “arrangement,” insert “ or in respect of a scheme pension payable by the scheme administrator to which the member has become entitled under a money purchase arrangement (an “in-payment money-purchase in-house scheme pension”), or partly in respect of the former and partly in respect of the latter, ”.
(3) In sub-paragraph (1)(d) (sum must extinguish member's entitlement to defined benefits under the scheme), after “defined benefits” insert “ , and any entitlement to payments of in-payment money-purchase in-house scheme pensions, ”.
8 (1) Section 636B of ITEPA 2003 (taxation of trivial commutation, and winding-up, lump sums) is amended as follows.
(2) In subsection (3) (taxation of lump sum where member has uncrystallised rights under the pension scheme)—
(a) in the words before paragraph (a) omit “(within the meaning of section 212 of FA 2004)”, and
(b) in paragraph (b), for “the uncrystallised rights calculated in accordance with that section” substitute “ any uncrystallised rights extinguished by the lump sum ”.
(3) After subsection (4) insert—
(5) In this section “uncrystallised rights” has the same meaning as in section 212 of FA 2004; and the value for the purposes of this section of any uncrystallised rights is to be calculated in accordance with that section.
9 The amendments made by paragraphs 7 and 8 have effect in relation to lump sums paid after the day on which this Act is passed.
Top-up of dependants' death benefits
10 (1) In paragraph 15 of Schedule 29 to FA 2004 (uncrystallised funds lump sum death benefits), after sub-paragraph (2) insert—
(2A) Where—
(a) the arrangement is a cash balance arrangement,
(b) under the arrangement, a dependant of the member is entitled to be paid after the member's death an amount by way of a lump sum,
(c) the dependant's entitlement to a lump sum of that amount under the arrangement comes into being at a time no later than the member's death,
(d) such of the sums and assets held for the purposes of the arrangement immediately after the member's death as are held for the purpose of meeting the liability to pay the lump sum are insufficient for that purpose (including where that is because none are held for that purpose), and
(e) a person who was an employer in relation to the member pays a contribution to the scheme—
(i) for or towards making good that insufficiency, and
(ii) of no more than is needed for making good the insufficiency,
the sums and assets held for the purposes of the arrangement that represent the contribution are to be treated as “relevant uncrystallised funds” for the purposes of this paragraph.
(2) The amendment made by sub-paragraph (1) has effect in relation to contributions paid after the day on which this Act is passed.
Inheritance tax as respects cash alternatives to annuities for dependants etc
11 (1) In section 152 of the Inheritance Tax Act 1984 (where annuity payable on person' death to dependant etc, person treated as not beneficially entitled to sum that could have been paid to personal representatives instead of being used for annuity), for “or dependant” substitute “ , dependant or nominee ”.
(2) The amendment made by sub-paragraph (1)—
(a) is to be treated as having come into force on 6 April 2015, and
(b) has effect where the person on whose death an annuity is payable dies on or after that date.
Section 39
PART 1 Abolition of duty to deduct tax from interest on certain investments
1 In Chapter 2 of Part 15 of ITA 2007 (deduction of income tax at source by deposit-takers and building societies) omit—
(a) section 851 (duty to deduct when making payment of interest on relevant investment), and
(b) the italic heading preceding it.
PART 2 Deduction of tax from yearly interest: exception for deposit-takers
2 In section 876 of ITA 2007 (interest paid by deposit-takers), for subsections (1) and (2) substitute—
(1) The duty to deduct a sum representing income tax under section 874 does not apply to a payment of interest on an investment if—
(a) the payment is made by a deposit-taker, and
(b) when the payment is made, the investment is a relevant investment.
(1A) In this section “deposit-taker”, “investment” and “relevant investment” have the meaning given by Chapter 2.
PART 3 Amendments of or relating to Chapter 2 of Part 15 of ITA 2007
Amendments of Chapter 2 of Part 15 of ITA 2007
3 Chapter 2 of Part 15 of ITA 2007 (deduction of income tax at source by deposit-takers and building societies) is amended in accordance with paragraphs 4 to 18.
4 For the Chapter heading substitute “ Meaning of “relevant investment” for purposes of section 876 ”.
5 (1) Section 850 (overview of Chapter) is amended as follows.
(2) For subsection (1) substitute—
(1) This Chapter has effect for the purposes of section 876 (duty under section 874 to deduct tax from payments of yearly interest: exception for deposit-takers).
(3) Omit subsection (2) (which introduces sections 851 and 852).
(4) In subsection (4)(b) (which introduces sections 858 to 870), for “858” substitute “ 863 ”.
(5) In subsection (5) (which introduces sections 871 to 873), for “871 to” substitute “ 872 and ”.
(6) In subsection (6) (interpretation), for the words from “Chapter—” to “crediting” substitute “ Chapter, crediting ”.
6 Omit section 852 (power to disapply section 851).
7 In section 853(1) (meaning of “deposit-taker”), after “In this Chapter” insert “ and section 876 ”.
8 In section 854(3) (meaning of “relevant investment” in section 851(1)(b)), for “851(1)(b)” substitute “ 876(1)(b) ”.
9 For section 855(1) (meaning of “investment”) substitute—
(1) In this Chapter, and section 876, “investment” means a deposit with a deposit-taker.
10 (1) Section 856 (meaning of “relevant investment”) is amended as follows.
(2) In subsection (1), for “this Chapter” substitute “ section 876 ”.
(3) In subsection (2) (exceptions), for “858” substitute “ 863 ”.
11 In section 857 (treating investments as being or not being relevant investments) omit “or building society” in each place.
12 Omit—
(a) sections 858 to 861 (investments which are not relevant investments and in relation to which duty under section 874 does not apply), and
(b) the italic heading preceding section 858.
13 In the italic heading preceding section 863, for “Other investments” substitute “ Investments ”.
14 In sections 863, 864, 865 and 868(4) (investments with deposit-takers or building societies) omit “or building society” in each place.
15 Omit sections 868(3), 869 and 870(2) (investments with building societies).
16 Omit section 871 (power to make regulations to give effect to Chapter).
17 In section 872 (power to amend Chapter)—
(a) in subsection (2) (different provision for different deposit-takers)—
(i) for “which amends this Chapter in its application to deposit-takers may do so” substitute “ may amend this Chapter ”, and
(ii) in each of paragraphs (a) and (b), for “relation” substitute “ its application ”, and
(b) omit subsections (4) and (5) (which refer to provisions repealed by this Act).
18 Omit section 873(3) to (6) (interpretation of section 861).
Amendments relating to Chapter 2 of Part 15 of ITA 2007
19 In Schedule 12 to FA 1988 (transfer of building society's business to a company), in paragraph 6(1) (treatment for tax purposes of benefits conferred in connection with a transfer) omit—
(a) “either”, and
(b) paragraph (b) (benefit not to be subject to deduction of tax under Chapter 2 of Part 15 of ITA 2007), and the “or” preceding it.
20 (1) In section 564Q(1) of ITA 2007 (alternative finance return: deduction of income tax at source under Chapter 2 of Part 15)—
(a) after “Chapter 2 of Part 15” insert “ and section 876 ”,
(b) for “deduction by deposit-takers and building societies” substitute “ exception for deposit-takers ”, and
(c) after “Chapter 2 of that Part” insert “ and section 876 ”.
(2) In section 564Q(5) of ITA 2007 (alternative finance return: deduction of income tax at source under Chapters 3 to 5 of Part 15)—
(a) after “of Part 15” insert “ except section 876 ”, and
(b) for “those Chapters” substitute “ those provisions ”.
21 In section 847 of ITA 2007 (overview of Part 15)—
(a) in subsection (2) omit paragraph (a) (which introduces Chapter 2), and
(b) in subsection (5) (which introduces Chapters containing provision connected with the duties to deduct), before paragraph (a) insert—
(za) Chapter 2 (interpretation of section 876 in Chapter 3: exception for deposit-takers),
.
22 In section 946 of ITA 2007 (collection of tax deducted at source: payments to which Chapter applies) omit paragraph (a) (payments from which deductions required to be made under section 851).
23 In Schedule 2 to ITA 2007 omit paragraphs 154 to 156 (transitional provisions related to Chapter 2 of Part 15 of ITA 2007).
24 In Schedule 4 to ITA 2007 (index of defined expressions)—
(a) omit the entry for “beneficiary under a discretionary or accumulation settlement (in Chapter 2 of Part 15)”,
(b) in the entry for “deposit-taker (in Chapter 2 of Part 15)”, after “Part 15” insert “ and section 876 ”,
(c) omit the entry for “dividend (in Chapter 2 of Part 15)”,
(d) in the entry for “investment (in Chapter 2 of Part 15)”, after “Part 15” insert “ and section 876 ”, and
(e) omit the entry for “relevant investment (in Chapter 2 of Part 15)”.
25 In consequence of the amendments made by Part 1 of this Schedule and the preceding provisions of this Part of this Schedule—
(a) in Schedule 1 to ITA 2007 omit paragraph 277,
(b) in Schedule 1 to FA 2008 omit paragraph 25,
(c) in Schedule 46 to FA 2013—
(i) in paragraph 68(1) omit paragraph (a) including the “and” at the end,
(ii) in paragraph 69(1) omit paragraph (a) including the “and” at the end,
(iii) omit paragraph 70(1), and
(iv) in paragraph 71(3) omit paragraph (b) and the “and” preceding it, and
(d) in FA 2014 omit section 3(4).
PART 4 Deduction of tax from UK public revenue dividends
26 In section 877 of ITA 2007 (duty to deduct under section 874: exception relating to UK public revenue dividends)—
(a) for “in respect of” substitute “ that is ”, and
(b) after “dividend” insert “ (as defined by section 891) ”.
27 (1) Chapter 5 of Part 15 of ITA 2007 (deduction from payments of UK public revenue dividends) is amended as follows.
(2) In section 893(2) (securities which are gross-paying government securities)—
(a) before the “or” at the end of paragraph (a) insert—
(aa) securities, so far as they are not gilt-edged securities, issued or treated as issued under—
(i) the National Loans Act 1939, or
(ii) the National Loans Act 1968,
, and
(b) in paragraph (b), for “894(1) or (3)” substitute “ 894(3) ”.
(3) In section 894 (power to direct that securities are gross-paying government securities)—
(a) omit subsections (1) and (2) (power in relation to securities within the new section 893(2)(aa)), and
(b) in subsection (5) omit “(1) or”.
PART 5 Commencement
28 (1) The amendments made by Parts 1 and 3 of this Schedule have effect in relation to—
(a) interest paid or credited on or after 6 April 2016, and
(b) dividends or other distributions paid by a building society on or after that date.
(2) Sub-paragraph (1) does not apply to—
(a) the repeals in Schedule 12 to FA 1988;
(b) the amendments in section 564Q of ITA 2007;
(c) the repeal of paragraph 277 of Schedule 1 to ITA 2007.
(3) The repeals mentioned in sub-paragraph (2)(a) and (c) have effect in relation to benefits conferred on or after 6 April 2016.
(4) The amendments mentioned in sub-paragraph (2)(b) have effect in relation to alternative finance return paid on or after 6 April 2016.
(5) The amendments made by Part 2 of this Schedule, and the amendments made by this Schedule in sections 893 and 894 of ITA 2007, have effect in relation to interest paid on or after 6 April 2016.
SCHEDULE 7 Loan relationships and derivative contracts
Section 49
Introductory
1 CTA 2009 is amended as follows.
Non-market loans
2 In Chapter 15 of Part 5 (loan relationships: tax avoidance), after section 446 insert—
Non-market loans
Non-market loans
446A (1) This section applies as respects any accounting period if—
(a) a company has a debtor relationship in the period,
(b) the amount recognised in the company's accounts in respect of the debt at the time the company became party to the debtor relationship was less than the transaction price,
(c) credits in respect of the whole or part of the discount were not brought into account for the purposes of this Part, and
(d) in a case where the creditor is a company, the non-qualifying territory condition is met.
(2) The debits which are to be brought into account for the accounting period for the purposes of this Part by the debtor company in respect of the loan relationship are not to include debits relating to the relevant discount amount, to the extent that that amount is referable to the accounting period.
(3) In this section “relevant discount amount” means—
(a) in a case where credits in respect of the whole of the discount were not brought into account for the purposes of this Part, an amount equal to the whole discount, and
(b) in a case where credits in respect of part of the discount were not brought into account for the purposes of this Part, an amount equal to that part of the discount.
(4) The non-qualifying territory condition referred to in subsection (1)(d) is that the creditor company is—
(a) resident for tax purposes in a non-qualifying territory at any time in the accounting period, or
(b) effectively managed in a non-taxing non-qualifying territory at any such time.
(5) In this section—
“discount” means the difference between the two amounts referred to in subsection (1)(b);
“non-qualifying territory” has the meaning given in section 173 of TIOPA 2010;
“non-taxing non-qualifying territory” means a non-qualifying territory under whose law companies are not liable to tax by reason of domicile, residence or place of management;
“resident for tax purposes” means liable, under the law of the non-qualifying territory, to tax there by reason of domicile, residence or place of management.
Transfer pricing
3 In section 446 (loan relationships: bringing transfer-pricing adjustments into account), after subsection (7) insert—
(8) No credit is to be brought into account for the purposes of this Part to the extent that it corresponds to an amount which, as a result of the preceding provisions of this section, has not previously been brought into account as a debit.
4 In section 693 (derivative contracts: bringing transfer-pricing adjustments into account), after subsection (5) insert—
(6) No credit is to be brought into account for the purposes of this Part to the extent that it corresponds to an amount which, as a result of the preceding provisions of this section, has not previously been brought into account as a debit.
Exchange gains and losses
5 In section 447 (exchange gains and losses on debtor relationships: loans disregarded under Part 4 of TIOPA 2010), after subsection (4) insert—
(4A) If the debtor relationship is to any extent matched, subsections (2) and (3) apply to leave out of account only the lesser of—
(a) the amount of the exchange gain or loss (in the case of subsection (2)) or the proportion of the exchange gain or loss (in the case of subsection (3)) which would be left out of account apart from this subsection, and
(b) the amount of the exchange gain or loss arising in respect of a liability representing the debtor relationship to the extent that the debtor relationship is unmatched (an amount which may be nil).
6 In section 448 (exchange gains and losses on debtor relationships: equity notes where holder associated with issuer), after subsection (2) insert—
(3) If the debtor relationship is to any extent matched, subsection (2) applies to leave out of account only the amount of the exchange gain or loss arising in respect of a liability representing the debtor relationship to the extent that the debtor relationship is unmatched (an amount which may be nil).
7 In section 449 (exchange gains and losses on creditor relationships: no corresponding debtor relationship), after subsection (4) insert—
(4A) If the creditor relationship is to any extent matched, subsection (2) applies to leave out of account only the amount of the exchange gain or loss arising in respect of an asset representing the creditor relationship to the extent that the creditor relationship is unmatched (an amount which may be nil).
8 In section 451 (exception to section 449 where loan exceeds arm's length amount), after subsection (4) insert—
(4A) If the creditor relationship is to any extent matched, subsections (3) and (4) apply to leave out of account only the lesser of—
(a) the proportion of the exchange gain or loss which would be left out of account apart from this subsection, and
(b) the amount of the exchange gain or loss arising in respect of an asset representing the creditor relationship to the extent that the creditor relationship is unmatched (an amount which may be nil).
9 (1) Section 452 (exchange gains and losses where loan not on arm's length terms) is amended as follows.
(2) For subsection (3) substitute—
(3) Subsections (4) and (5) apply if, because of a claim made under section 192(1) of TIOPA 2010, or because of the claim that is assumed to be made under subsection (2)—
(a) one company is treated for any purpose as having a debtor relationship, or
(b) more than one company is treated for any purpose as having a debtor relationship represented by the same liability.
(3) In subsection (4)—
(a) after “exchange gains” insert “ from that debtor relationship (in a subsection (3)(a) case) or ”;
(b) after “those debtor relationships” insert “ (in a subsection (3)(b) case) ”;
(c) for the words from “debits” to the end substitute “ exchange gains or the proportion of the exchange gains to be left out of account under section 447 by the issuing company in respect of the loan relationship ”.
(4) In subsection (5)—
(a) after “exchange losses” insert “ from that debtor relationship (in a subsection (3)(a) case) or ”;
(b) after “those debtor relationships” insert “ (in a subsection (3)(b) case) ”;
(c) for the words from “credits” to the end substitute “ exchange losses or the proportion of the exchange losses to be left out of account under section 447 by the issuing company in respect of the loan relationship ”.
(5) After subsection (5) insert—
(5A) In this section “issuing company” is to be construed in accordance with section 191(1)(a) of TIOPA 2010.
10 After section 475A insert—
Meaning of “matched”
Meaning of “matched”
475B (1) This section applies for the purposes of this Part.
(2) A loan relationship of a company is matched if and to the extent that—
(a) it is in a matching relationship with another loan relationship or a derivative contract of the company, or
(b) exchange gains or losses arising in relation to an asset or liability representing the loan relationship are excluded from being brought into account under regulations under section 328(4),
and “unmatched” is to be construed accordingly.
(3) A loan relationship is in a matching relationship with another loan relationship or derivative contract if one is intended by the company to act to eliminate or substantially reduce the economic risk of the other.
(4) In this section “economic risk” means a risk which can be attributed to fluctuations in exchange rates between currencies over a period of time.
(5) In this section “derivative contract” has the same meaning as in Part 7 (see section 576).
11 (1) Section 694 (derivative contracts: exchange gains and losses) is amended as follows.
(2) After subsection (3) insert—
(3A) If the contract is to any extent matched, subsection (3) applies to leave out of account only the amount of the exchange gains or losses arising to the company in relation to the contract to the extent that the contract is unmatched (an amount which may be nil).
(3) After subsection (7) insert—
(7A) Subsections (5) to (7) apply only to the extent that the contract is unmatched.
(4) After subsection (10) insert—
(11) For the purposes of this section a derivative contract of a company is matched if and to the extent that—
(a) it is in a matching relationship with another derivative contract or loan relationship of the company, or
(b) exchange gains or losses arising in relation to the derivative contract are excluded from being brought into account under regulations under section 606(4)(b),
and “unmatched” is to be construed accordingly.
(12) A derivative contract is in a matching relationship with another derivative contract or loan relationship if one is intended by the company to act to eliminate or substantially reduce the economic risk of the other.
(13) In this section “economic risk” means a risk which can be attributed to fluctuations in exchange rates between currencies over a period of time.
(14) In this section “loan relationship” has the same meaning as in Part 5 (see section 302).
Commencement
12 (1) The amendments made by this Schedule have effect in relation to accounting periods beginning on or after 1 April 2016.
(2) For the purposes of sub-paragraph (1), where the accounting period of a company begins before 1 April 2016 and ends on or after that date (the “straddling period”), so much of the straddling period as falls before that date, and so much of the straddling period as falls on or after that date, are to be treated as separate accounting periods.
SCHEDULE 8 Tax relief for production of orchestral concerts
Section 54
PART 1 Amendment of CTA 2009
1 After Part 15C of CTA 2009 insert—
PART 15D Orchestra tax relief
CHAPTER 1 Introduction
Overview
Overview
1217P (1) This Part is about the production of orchestral concerts, and applies for corporation tax purposes.
(2) This Chapter explains what is meant by “orchestral concert” and how a company comes to be treated as the production company in relation to a concert.
(3) Chapter 2 is about the taxation of the activities of a production company and includes—
(a) provision for the company's activities in relation to its concert, or its concert series, to be treated as a separate trade, and
(b) provision about the calculation of the profits and losses of that trade.
(4) Chapter 3 is about relief (called “orchestra tax relief”) which may be given to a production company in relation to its concert or concert series—
(a) by way of additional deductions to be made in calculating the profits or losses of the company's separate trade, or
(b) by way of a payment (an “orchestra tax credit”) to be made on the company's surrender of losses from that trade,
and describes the conditions a company must meet to qualify for orchestra tax relief.
(5) Chapter 4 contains provision about the use of losses of the separate trade (including provision about relief for terminal losses).
(6) Chapter 5 provides—
(a) for relief under Chapters 3 and 4 to be given on a provisional basis, and
(b) for such relief to be withdrawn if it turns out that conditions that must be met for such relief to be given are not actually met.
Interpretation
“Orchestral concert”
1217PA (1) In this Part “orchestral concert” means a concert by an orchestra, ensemble, group or band consisting wholly or mainly of instrumentalists who are the primary focus of the concert.
(2) But a concert is not an orchestral concert if—
(a) the main purpose, or one of the main purposes, of the concert is to advertise or promote any goods or services,
(b) the concert is to consist of or include a competition or contest, or
(c) the making of a relevant recording is the main object of the production company's activities in relation to the concert.
(3) A recording of a concert is a “relevant recording” if the recording is made for the purpose of using it (or an edited version of it) in any of the following ways—
(a) broadcast, at the time of the concert or later, to the general public;
(b) release, at the time of the concert or later, to the paying public (by digital or other means);
(c) use as a soundtrack (or part of a soundtrack) to a television, radio, theatre, video game or similar production for broadcast, exhibition or release to the general public;
(d) use in a film (or part of a film) for exhibition to the paying public at the commercial cinema.
(4) In this section—
“broadcast” means broadcast by any means (including television, radio or the internet);
“film” has the same meaning as in Part 15 (see section 1181).
Production company
1217PB (1) A company is the production company in relation to a concert if the company (acting otherwise than in partnership)—
(a) is responsible for putting on the concert from the start of the production process to the finish, including employing or engaging the performers,
(b) is actively engaged in decision-making in relation to the concert,
(c) makes an effective creative, technical and artistic contribution to the concert, and
(d) directly negotiates for, contracts for and pays for rights, goods and services in relation to the concert.
(2) No more than one company can be the production company in relation to a concert.
(3) If more than one company meets the conditions in subsection (1) in relation to a concert, the company that is most directly engaged in the activities mentioned in that subsection is the production company.
(4) If no company meets the conditions in subsection (1), there is no production company in relation to the concert.
CHAPTER 2 Taxation of activities of production company
Separate orchestral trade
Separate orchestral trade
1217Q (1) Subsection (2) applies to a company in relation to a concert if—
(a) the company qualifies for orchestra tax relief in relation to the production of the concert (see section 1217RA(2)), and
(b) the concert is not included in a concert series in relation to which the company has made an election under subsection (4).
(2) The company's activities in relation to the production of the concert are treated as a trade separate from any other activities of the company (including activities in relation to the production of any other concert).
(3) Subsections (4) and (5) apply to a company in relation to concerts in a series if the conditions in section 1217RA(4)(a), (b), (c) and (d) are met in relation to the company and the concert series.
(4) The company may, for the purposes of this Part, make an election in relation to the concert series.
See section 1217QA for provision about making an election.
(5) Where the company makes an election in relation to a concert series (and accordingly qualifies for orchestra tax relief in relation to the production of the series), the company's activities in relation to the production of the concert series are treated as a trade separate from any other activities of the company (including activities in relation to the production of any other concert).
(6) In this Part the separate trade mentioned in subsection (2) or (5) is called the “separate orchestral trade”.
(7) If the separate orchestral trade relates to a single concert, the company is treated as beginning to carry on that trade—
(a) at the beginning of the pre-performance stage of the concert, or
(b) if earlier, at the time of the first receipt by the company of any income from the production of the concert.
Election for concert series
1217QA (1) An election under section 1217Q(4) must be made by the company by notice in writing to an officer of Her Majesty's Revenue and Customs before the date of the first concert in the series.
(2) An election has effect in relation to the orchestral concerts specified in it, and must also specify which of those concerts (if any) are not to be qualifying orchestral concerts (see section 1217RA(3)).
(3) An election—
(a) may have effect in relation to concerts in two or more accounting periods, and
(b) is irrevocable.
(4) If the separate orchestral trade relates to a concert series, the company is treated as beginning to carry on that trade—
(a) at the beginning of the pre-performance stage of the first concert in the series, or
(b) if earlier, at the time of the first receipt by the company of any income from the production of the concert series.
Profits and losses of separate orchestral trade
Calculation of profits or losses of separate orchestral trade
1217QB (1) This section applies for the purpose of calculating the profits or losses of the separate orchestral trade.
(2) For the first period of account during which the separate orchestral trade is carried on, the following are brought into account—
(a) as a debit, the costs of the production of the concert or concert series incurred to date;
(b) as a credit, the proportion of the estimated total income from that production treated as earned at the end of that period.
(3) For subsequent periods of account the following are brought into account—
(a) as a debit, the difference between the amount (“C”) of the costs of the production of the concert or concert series incurred to date and the amount corresponding to C for the previous period, and
(b) as a credit, the difference between the proportion (“PI”) of the estimated total income from that production treated as earned at the end of that period and the amount corresponding to PI for the previous period.
(4) The proportion of the estimated total income treated as earned at the end of a period of account is—
C
T
×
I
where—
C is the total to date of costs incurred;
T is the estimated total cost of the production of the concert or concert series;
I is the estimated total income from the production of the concert or concert series.
Income from the production
1217QC (1) References in this Chapter to income from a production of a concert or concert series are to any receipts by the company in connection with the production or exploitation of the concert or concert series.
(2) This includes—
(a) receipts from the sale of tickets or of rights in the concert or concert series;
(b) royalties or other payments for use of the concert or concert series;
(c) payments for rights to produce merchandise;
(d) receipts by the company by way of a profit share agreement.
(3) Receipts that (apart from this subsection) would be regarded as being of a capital nature are treated as being of a revenue nature.
Costs of the production
1217QD (1) References in this Chapter to the costs of a production of a concert or concert series are to expenditure incurred by the company on—
(a) activities involved in developing and putting on the concert or concert series, or
(b) activities with a view to exploiting the concert or concert series.
(2) This is subject to any provision of the Corporation Tax Acts prohibiting the making of a deduction, or restricting the extent to which a deduction is allowed, in calculating the profits of a trade.
(3) Expenditure which, apart from this subsection, would be regarded as being of a capital nature only because it is incurred on the creation of an asset (the concert or concert series) is treated as being of a revenue nature.
When costs are taken to be incurred
1217QE (1) For the purposes of this Chapter, the costs that have been incurred on a production of a concert or concert series at a given time do not include any amount that has not been paid unless it is the subject of an unconditional obligation to pay.
(2) Where an obligation to pay an amount is linked to income being earned from the production of the concert or concert series, the obligation is not treated as having become unconditional unless an appropriate amount of income is or has been brought into account under section 1217QB.
Pre-trading expenditure
1217QF (1) This section applies if, before the company begins to carry on the separate orchestral trade, it incurs expenditure on activities falling within section 1217QD(1)(a).
(2) The expenditure may be treated as expenditure of the separate orchestral trade and as if incurred immediately after the company begins to carry on that trade.
(3) If expenditure so treated has previously been taken into account for other tax purposes, the company must amend any relevant company tax return accordingly.
(4) Any amendment or assessment necessary to give effect to subsection (3) may be made despite any limitation on the time within which an amendment or assessment may normally be made.
Estimates
1217QG Estimates for the purposes of section 1217QB must be made as at the balance sheet date for each period of account, on a just and reasonable basis taking into consideration all relevant circumstances.
CHAPTER 3 Orchestra tax relief
Introduction
Overview of orchestra tax relief
1217R (1) Relief under this Chapter (“orchestra tax relief”) is given by way of—
(a) additional deductions (see sections 1217RD to 1217RF), and
(b) orchestra tax credits (see sections 1217RG to 1217RJ).
(2) See Schedule 18 to FA 1998 (in particular, Part 9D) for provision about the procedure for making claims for orchestra tax relief.
Companies qualifying for orchestra tax relief
Companies qualifying for orchestra tax relief
1217RA (1) Subsection (2) applies in the case of an orchestral concert which is not included in a concert series in relation to which an election has been made under section 1217Q(4).
(2) A company qualifies for orchestra tax relief in relation to the production of a concert if—
(a) the concert is a qualifying orchestral concert,
(b) the company is the production company in relation to the concert,
(c) the company intends that the concert should be performed live—
(i) before the paying public, or
(ii) for educational purposes, and
(d) the EEA expenditure condition is met in relation to the concert (see section 1217RB).
(3) In this Part “qualifying orchestral concert” means an orchestral concert—
(a) in which the instrumentalists number at least 12, and
(b) in which none of the musical instruments to be played, or a minority of those instruments, is electronically or directly amplified.
(4) A company qualifies for orchestra tax relief in relation to the production of a concert series if—
(a) the concert series is a qualifying orchestral concert series,
(b) the company is the production company in relation to every concert in the series,
(c) the company intends that all or a high proportion of the concerts in the series should be performed live—
(i) before the paying public, or
(ii) for educational purposes,
(d) the EEA expenditure condition is met in relation to the series, and
(e) the company has made an election under section 1217Q(4) in relation to the series.
(5) In this section “qualifying orchestral concert series” means two or more orchestral concerts, all or a high proportion of which are qualifying orchestral concerts.
(6) For the purposes of this section a concert is “live” if it is to an audience before whom the musicians are actually present.
(7) A concert is not regarded as performed for educational purposes if the production company is, or is associated with, a person who—
(a) has responsibility for the beneficiaries, or
(b) is otherwise connected with the beneficiaries (for instance, by being their employer).
(8) For the purposes of subsection (7), a production company is associated with a person (“P”) if—
(a) P controls the production company, or
(b) P is a company which is controlled by the production company or by a person who also controls the production company.
(9) In this section—
“the beneficiaries” means persons for whose benefit the concert will or may be performed;
“control” has the same meaning as in Part 10 of CTA 2010 (see section 450 of that Act).
(10) There is further related provision in section 1217RL (tax avoidance arrangements).
The EEA expenditure condition
1217RB (1) The “EEA expenditure condition” is that at least 25% of the core expenditure on the production of the concert or concert series incurred by the company is EEA expenditure.
(2) In this Part “EEA expenditure” means expenditure on goods or services that are provided from within the European Economic Area.
(3) Any apportionment of expenditure as between EEA and non-EEA expenditure for the purposes of this Part is to be made on a just and reasonable basis.
(4) The Treasury may by regulations—
(a) amend the percentage specified in subsection (1);
(b) amend subsection (2).
(5) See also sections 1217T and 1217TA (which are about the giving of relief provisionally on the basis that the EEA expenditure condition will be met).
“Core expenditure”
1217RC (1) In this Part “core expenditure”, in relation to the production of a concert or concert series, means expenditure on the activities involved in producing the concert or concert series.
(2) The reference in subsection (1) to “expenditure on the activities involved in producing the concert or concert series” includes expenditure on travel to and from a venue which is not a usual venue for concerts produced by the company.
(3) But that reference does not include—
(a) expenditure on any matters not directly involved with putting on the concert or concerts (for instance, financing, marketing, legal services or storage),
(b) speculative expenditure on activities not involved with putting on the concert or concerts, and
(c) expenditure on the actual performance or performances (for instance, payments to musicians for their performances in the concert or concert series).
Additional deduction
Claim for additional deduction
1217RD (1) A company which qualifies for orchestra tax relief in relation to the production of a concert or concert series may claim an additional deduction in relation to the production.
(2) A claim under subsection (1) is made with respect to an accounting period.
(3) Where a company has made a claim, the company is entitled to make an additional deduction, in accordance with section 1217RE, in calculating the profit or loss of the separate orchestral trade for the accounting period concerned.
(4) Where the company tax return in which a claim is made is for an accounting period later than that in which the company begins to carry on the separate orchestral trade, the company must make any amendments of company tax returns for earlier periods that may be necessary.
(5) Any amendment or assessment necessary to give effect to subsection (4) may be made despite any limitation on the time within which an amendment or assessment may normally be made.
Amount of additional deduction
1217RE (1) The amount of an additional deduction to which a company is entitled as a result of a claim under section 1217RD is calculated as follows.
(2) For the first period of account during which the separate orchestral trade is carried on, the amount of the additional deduction is E, where E is—
(a) so much of the qualifying expenditure incurred to date as is EEA expenditure, or
(b) if less, 80% of the total amount of qualifying expenditure incurred to date.
(3) For any period of account after the first, the amount of the additional deduction is—
E
−
P
where E is—
so much of the qualifying expenditure incurred to date as is EEA expenditure, or
if less, 80% of the total amount of qualifying expenditure incurred to date, and
P is the total amount of the additional deductions given for previous periods.
(4) The Treasury may by regulations amend the percentage specified in subsection (2) or (3).
“Qualifying expenditure”
1217RF (1) In this Chapter “qualifying expenditure”, in relation to the production of a concert or concert series, means core expenditure (see section 1217RC) on the production that—
(a) falls to be taken into account under sections 1217QB to 1217QG in calculating the profit or loss of the separate orchestral trade for tax purposes, and
(b) is not expenditure which is otherwise relievable.
(2) For the purposes of this section expenditure is otherwise relievable if it is expenditure in respect of which (assuming a claim were made) the company would be entitled to—
(a) film tax relief under Chapter 3 of Part 15,
(b) television tax relief under Chapter 3 of Part 15A,
(c) video games tax relief under Chapter 3 of Part 15B,
(d) an additional deduction under Part 15C (theatrical productions), or
(e) a theatre tax credit under Part 15C.
Orchestra tax credits
Orchestra tax credit claimable if company has surrenderable loss
1217RG (1) A company which qualifies for orchestra tax relief in relation to the production of a concert or concert series may claim an orchestra tax credit in relation to the production for an accounting period in which the company has a surrenderable loss.
(2) Section 1217RH sets out how to calculate the amount of any surrenderable loss that the company has in the accounting period.
(3) A company making a claim may surrender the whole or part of its surrenderable loss in the accounting period.
(4) The amount of the orchestra tax credit to which a company making a claim is entitled for the accounting period is 25% of the amount of the loss surrendered.
(5) The company's available loss for the accounting period (see section 1217RH(2)) is reduced by the amount surrendered.
Amount of surrenderable loss
1217RH (1) The company's surrenderable loss in the accounting period is—
(a) the company's available loss for the period in the separate orchestral trade (see subsections (2) and (3)), or
(b) if less, the available qualifying expenditure for the period (see subsections (4) and (5)).
(2) The company's available loss for an accounting period is—
L
+
RUL
where—
L is the amount of the company's loss for the period in the separate orchestral trade, and
RUL is the amount of any relevant unused loss of the company (see subsection (3)).
(3) The “relevant unused loss” of a company is so much of any available loss of the company for the previous accounting period as has not been—
(a) surrendered under section 1217RG, or
(b) carried forward under section 45 of CTA 2010 and set against profits of the separate orchestral trade.
(4) For the first period of account during which the separate orchestral trade is carried on, the available qualifying expenditure is the amount that is E for that period for the purposes of section 1217RE(2).
(5) For any period of account after the first, the available qualifying expenditure is—
E
−
S
where—
E is the amount that is E for that period for the purposes of section 1217RE(3), and
S is the total amount previously surrendered under section 1217RG.
(6) If a period of account of the separate orchestral trade does not coincide with an accounting period, any necessary apportionments are to be made by reference to the number of days in the periods concerned.
Payment in respect of orchestra tax credit
1217RI (1) If a company—
(a) is entitled to an orchestra tax credit for an accounting period, and
(b) makes a claim,
the Commissioners for Her Majesty's Revenue and Customs (“the Commissioners”) must pay the amount of the credit to the company.
(2) An amount payable in respect of—
(a) an orchestra tax credit, or
(b) interest on an orchestra tax credit under section 826 of ICTA,
may be applied in discharging any liability of the company to pay corporation tax.
To the extent that it is so applied the Commissioners' liability under subsection (1) is discharged.
(3) If the company's company tax return for the accounting period is enquired into by the Commissioners, no payment in respect of an orchestra tax credit for that period need be made before the Commissioners' enquiries are completed (see paragraph 32 of Schedule 18 to FA 1998).
In those circumstances the Commissioners may make a payment on a provisional basis of such amount as they consider appropriate.
(4) No payment need be made in respect of an orchestra tax credit for an accounting period before the company has paid to the Commissioners any amount that it is required to pay for payment periods ending in that accounting period—
(a) under PAYE regulations,
(b) under section 966 of ITA 2007 (visiting performers), or
(c) in respect of Class 1 national insurance 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.
(5) A payment in respect of an orchestra tax credit is not income of the company for any tax purpose.
Limit on State aid
1217RJ In accordance with Commission Regulation (EU) No. 651/2014 of 17 June 2014 declaring certain categories of aid compatible with the internal market, the total amount of orchestra tax credits payable under section 1217RI in the case of any undertaking is not to exceed 50 million euros per year.
No account to be taken of amount if unpaid
1217RK (1) In determining for the purposes of this Chapter the amount of costs incurred on a production of a concert or concert series at the end of a period of account, ignore any amount that has not been paid 4 months after the end of that period.
(2) This is without prejudice to the operation of section 1217QE (when costs are taken to be incurred).
Anti-avoidance etc
Tax avoidance arrangements
1217RL (1) A company does not qualify for orchestra tax relief in relation to the production of a concert or concert series if there are any tax avoidance arrangements relating to the production.
(2) Arrangements are “tax avoidance arrangements” if their main purpose, or one of their main purposes, is the obtaining of a tax advantage.
(3) In this section—
“arrangements” includes any scheme, agreement or understanding, whether or not legally enforceable;
“tax advantage” has the meaning given by section 1139 of CTA 2010.
Transactions not entered into for genuine commercial reasons
1217RM (1) A transaction is to be ignored for the purpose of determining orchestra tax relief so far as the transaction is attributable to arrangements (other than tax avoidance arrangements) entered into otherwise than for genuine commercial reasons.
(2) In this section “arrangements” and “tax avoidance arrangements” have the same meaning as in section 1217RL.
CHAPTER 4 Losses of separate orchestral trade
Application of sections 1217SA to 1217SC
1217S (1) Sections 1217SA to 1217SC apply to a company which is treated under section 1217Q(2) or (5) as carrying on a separate trade in relation to the production of a concert or concert series.
(2) In those sections—
(a) “the completion period” means the accounting period in which the company ceases to carry on the separate orchestral trade;
(b) “loss relief” includes any means by which a loss might be used to reduce the amount in respect of which a company, or any other person, is chargeable to tax.
Restriction on use of losses before completion period
1217SA (1) Subsection (2) applies if a loss is made by the company in the separate orchestral trade in an accounting period preceding the completion period.
(2) The loss is not available for loss relief, except to the extent that the loss may be carried forward under section 45 of CTA 2010 to be set against profits of the separate orchestral trade in a subsequent period.
Use of losses in the completion period
1217SB (1) Subsection (2) applies if a loss made in the separate orchestral trade is carried forward under section 45 of CTA 2010 to the completion period.
(2) So much (if any) of the loss as is not attributable to orchestra tax relief (see subsection (4)) may be treated for the purposes of loss relief as if it were a loss made in the completion period.
(3) If a loss is made in the separate orchestral trade in the completion period, the amount of the loss that may be—
(a) deducted from total profits of the same or an earlier period under section 37 of CTA 2010, or
(b) surrendered as group relief under Part 5 of that Act,
is restricted to the amount (if any) that is not attributable to orchestra tax relief (see subsection (4)).
(4) The amount of a loss in any period that is attributable to orchestra tax relief is found by—
(a) calculating what the amount of the loss would have been if there had been no additional deduction under Chapter 3 in that or any earlier period, and
(b) deducting that amount from the total amount of the loss.
(5) This section does not apply to loss surrendered, or treated as carried forward, under section 1217SC (terminal losses).
Terminal losses
1217SC (1) This section applies if—
(a) the company ceases to carry on the separate orchestral trade, and
(b) if the company had not ceased to carry on that trade, it could have carried forward an amount under section 45 of CTA 2010 to be set against profits of that trade in a later period (“the terminal loss”).
Below in this section the company is referred to as “company A” and the separate orchestral trade is referred to as “trade 1”.
(2) If company A—
(a) is treated under section 1217Q(2) or (5) as carrying on a separate trade in relation to the production of another concert or concert series (“trade 2”), and
(b) is carrying on trade 2 when it ceases to carry on trade 1,
company A may (on making a claim) make an election under subsection (3).
(3) The election is to have the terminal loss (or a part of it) treated as if it were a loss brought forward under section 45 of CTA 2010 to be set against the profits of trade 2 of the first accounting period beginning after the cessation and so on.
(4) Subsection (5) applies if—
(a) another company (“company B”) is treated under section 1217Q(2) or (5) as carrying on a separate trade (“company B's trade”) in relation to the production of another concert or concert series,
(b) company B is carrying on that trade when company A ceases to carry on trade 1, and
(c) company B is in the same group as company A for the purposes of Part 5 of CTA 2010 (group relief).
(5) Company A may surrender the loss (or a part of it) to company B.
(6) On the making of a claim by company B the amount surrendered is treated as if it were a loss brought forward by company B under section 45 of CTA 2010 to be set against the profits of company B's trade of the first accounting period beginning after the cessation and so on.
(7) The Treasury may by regulations make administrative provision in relation to the surrender of a loss under subsection (5) and the resulting claim under subsection (6).
(8) “Administrative provision” means provision corresponding, subject to such adaptations or other modifications as appear to the Treasury to be appropriate, to that made by Part 8 of Schedule 18 to FA 1998 (company tax returns: claims for group relief).
CHAPTER 5 Provisional entitlement to relief
Provisional entitlement to relief
1217T (1) In relation to a company and the production of a concert or concert series, “interim accounting period” means any accounting period that—
(a) is one in which the company carries on a separate orchestral trade, and
(b) precedes the accounting period in which it ceases to do so.
(2) A company is not entitled to orchestra tax relief for an interim accounting period unless—
(a) its company tax return for the period states the amount of planned core expenditure on the production of the concert or concert series that is EEA expenditure (see section 1217RB(2)), and
(b) that amount is such as to indicate that the EEA expenditure condition (see section 1217RB) will be met in relation to the production.
If those requirements are met, the company is provisionally treated in relation to that period as if the EEA expenditure condition were met.
Clawback of provisional relief
1217TA (1) If a statement is made under section 1217T(2) but it subsequently appears that the EEA expenditure condition will not be met on the company's ceasing to carry on the separate orchestral trade, the company—
(a) is not entitled to orchestra tax relief for any period for which its entitlement depended on such a statement, and
(b) must amend accordingly its company tax return for any such period.
(2) When a company ceases to carry on the separate orchestral trade, the company's company tax return for the period in which that cessation occurs must—
(a) state that the company has ceased to carry on the separate orchestral trade, and
(b) be accompanied by a final statement of the amount of the core expenditure on the production of the concert or concert series that is EEA expenditure.
(3) If that statement shows that the EEA expenditure condition is not met—
(a) the company is not entitled to orchestra tax relief or to relief under section 1217SC (transfer of terminal losses) for any period, and
(b) must amend accordingly its company tax return for any period for which such relief was claimed.
(4) Any amendment or assessment necessary to give effect to this section may be made despite any limitation on the time within which an amendment or assessment may normally be made.
CHAPTER 6 Interpretation
Interpretation
1217U In this Part—
“company tax return” has the same meaning as in Schedule 18 to FA 1998 (see paragraph 3(1) of that Schedule);
“core expenditure” has the meaning given by section 1217RC;
“costs”, in relation to a concert or concert series, has the meaning given by section 1217QD;
“EEA expenditure” has the meaning given by section 1217RB(2);
“EEA expenditure condition” has the meaning given by section 1217RB;
“income”, in relation to a concert or concert series, has the meaning given by section 1217QC;
“orchestra tax relief” is to be read in accordance with Chapter 3 (see in particular section 1217R(1));
“orchestral concert” has the meaning given by section 1217PA;
“production company” has the meaning given by section 1217PB;
“qualifying expenditure” has the meaning given by section 1217RF;
“qualifying orchestral concert” has the meaning given by section 1217RA(3);
“qualifying orchestral concert series” has the meaning given by section 1217RA(5);
the “separate orchestral trade” is to be read in accordance with section 1217Q.
PART 2 Consequential amendments
ICTA
2 (1) Section 826 of ICTA (interest on tax overpaid) is amended as follows.
(2) In subsection (1), after paragraph (fc) insert—
(fd) a payment of orchestra tax credit falls to be made to a company; or
.
(3) In subsection (3C), for “or theatre tax credit” substitute “ , theatre tax credit or orchestra tax credit ”.
(4) In subsection (8A)—
(a) in paragraph (a), for “or (fc)” substitute “ , (fc) or (fd) ”, and
(b) in paragraph (b)(ii), after “theatre tax credit” insert “ or orchestra tax credit ”.
(5) In subsection (8BA), after “theatre tax credit” (in both places) insert “ or orchestra tax credit ”.
FA 1998
3 Schedule 18 to FA 1998 (company tax returns, assessments and related matters) is amended as follows.
4 In paragraph 10 (other claims and elections to be included in return), in sub-paragraph (4), for “or 15C” substitute “ , 15C or 15D ”.
5 (1) Paragraph 52 (recovery of excessive repayments etc) is amended as follows.
(2) In sub-paragraph (2), after paragraph (bg) insert—
(bh) orchestra tax credit under Part 15D of that Act,
.
(3) In sub-paragraph (5)—
(a) after paragraph (ai) insert—
(aj) an amount of orchestra tax credit paid to a company for an accounting period,
, and
(b) in the words after paragraph (b), after “(ai)” insert “ , (aj) ”.
6 In Part 9D (certain claims for tax relief)—
(a) in the heading, for “or 15C” substitute “ , 15C or 15D ”, and
(b) in paragraph 83S (introduction), after sub-paragraph (e) insert—
(f) orchestra tax relief.
CAA 2001
7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FA 2007
8 In Schedule 24 to FA 2007 (penalties for errors), in paragraph 28(fa) (meaning of “corporation tax credit”), omit the “or” at the end of paragraph (ivc) and after that paragraph insert—
(ivd) an orchestra tax credit under Chapter 3 of Part 15D of that Act, or
.
CTA 2009
9 In Part 8 of CTA 2009 (intangible fixed assets), in Chapter 10 (excluded assets), after section 808C insert—
Assets representing expenditure incurred in course of separate orchestral trade
808D (1) This Part does not apply to an intangible fixed asset held by an orchestral concert production company so far as the asset represents expenditure on an orchestral concert or orchestral concert series that is treated under Part 15D as expenditure of a separate trade (see particularly sections 1217Q and 1217QF).
(2) In this section—
“orchestral concert” has the same meaning as in Part 15D (see section 1217PA);
“orchestral concert production company” means a company which, for the purposes of that Part, is the production company in relation to a concert (see section 1217PB).
10 In section 1310 of CTA 2009 (orders and regulations), in subsection (4), after paragraph (em) insert—
(en) section 1217RB (EEA expenditure condition),
(eo) section 1217RE (amount of additional deduction),
.
11 In Schedule 4 to CTA 2009 (index of defined expressions), insert at the appropriate places—
company tax return (in Part 15D) | section 1217U
core expenditure (in Part 15D) | section 1217RC
costs, in relation to a concert or concert series (in Part 15D) | section 1217QD
EEA expenditure (in Part 15D) | section 1217RB(2)
EEA expenditure condition (in Part 15D) | section 1217RB
income, in relation to a concert or concert series (in Part 15D) | section 1217QC
orchestra tax relief (in Part 15D) | section 1217R(1)
orchestral concert (in Part 15D) | section 1217PA
production company (in Part 15D) | section 1217PB
qualifying expenditure (in Part 15D) | section 1217RF
qualifying orchestral concert (in Part 15D) | section 1217RA(3)
qualifying orchestral concert series (in Part 15D) | section 1217RA(5)
separate orchestral trade (in Part 15D) | section 1217Q
FA 2009
12 In Schedule 54A to FA 2009 (which is prospectively inserted by F(No. 3)A 2010 and contains provision about the recovery of certain amounts of interest paid by HMRC), in paragraph 2—
(a) in sub-paragraph (2), omit the “or” at the end of paragraph (g) and after paragraph (h) insert
, or
(i) a payment of orchestra tax credit under Chapter 3 of Part 15D of CTA 2009 for an accounting period.
;
(b) in sub-paragraph (4), for “(h)” substitute “ (i) ”.
CTA 2010
13 In Part 8B of CTA 2010 (trading profits taxable at Northern Ireland rate), in section 357H(7) (introduction), after “Chapter 14 for provision about theatrical productions;” insert “ Chapter 14A for provision about orchestra tax relief; ”.
14 In Part 8B of CTA 2010, after section 357UI insert—
CHAPTER 14A Orchestra tax relief
Introductory
Introduction and interpretation
357UJ (1) This Chapter makes provision about the operation of Part 15D of CTA 2009 (orchestra tax relief) in relation to expenditure incurred by a company in an accounting period in which it is a Northern Ireland company.
(2) In this Chapter—
(a) “Northern Ireland expenditure” means expenditure incurred in a trade to the extent that the expenditure forms part of the Northern Ireland profits or Northern Ireland losses of the trade;
(b) the “separate orchestral trade” has the same meaning as in Part 15D of CTA 2009 (see section 1217Q(6) of that Act);
(c) “qualifying expenditure” has the same meaning as in Chapter 3 of that Part (see section 1217RF of that Act).
(3) References in Part 15D of CTA 2009 to “orchestra tax relief” include relief under this Chapter.
Orchestra tax relief
Northern Ireland additional deduction
357UK (1) In this Chapter “a Northern Ireland additional deduction” means so much of a deduction under section 1217RD of CTA 2009 (claim for additional deduction) as is calculated by reference to qualifying expenditure that is Northern Ireland expenditure.
(2) A Northern Ireland additional deduction forms part of the Northern Ireland profits or Northern Ireland losses of the separate orchestral trade.
Northern Ireland supplementary deduction
357UL (1) This section applies where—
(a) a company is entitled under section 1217RD of CTA 2009 to an additional deduction in calculating the profit or loss of the separate orchestral trade in an accounting period,
(b) the company is a Northern Ireland company in the period,
(c) the additional deduction is wholly or partly a Northern Ireland additional deduction, and
(d) any of the following conditions is met—
(i) the company does not have a surrenderable loss in the accounting period;
(ii) the company has a surrenderable loss in the accounting period, but does not make a claim under section 1217RG of CTA 2009 (orchestra tax credit claimable if company has surrenderable loss) for the period;
(iii) the company has a surrenderable loss in the accounting period and makes a claim under that section for the period, but the amount of Northern Ireland losses surrendered on the claim is less than the Northern Ireland additional deduction.
(2) The company is entitled to make another deduction (“a Northern Ireland supplementary deduction”) in respect of qualifying expenditure.
(3) See section 357UM for provision about the amount of the Northern Ireland supplementary deduction.
(4) The Northern Ireland supplementary deduction—
(a) is made in calculating the profit or loss of the separate orchestral trade, and
(b) forms part of the Northern Ireland profits or Northern Ireland losses of the separate orchestral trade.
(5) In this section “surrenderable loss” has the meaning given by section 1217RH of CTA 2009.
Northern Ireland supplementary deduction: amount
357UM (1) This section contains provision for the purposes of section 357UL(2) about the amount of the Northern Ireland supplementary deduction.
(2) If the accounting period falls within only one financial year, the amount of the Northern Ireland supplementary deduction is—
(
A
−
B
)
×
(
(
MR
−
NIR
)
NIR
)
where—
A is the amount of the Northern Ireland additional deduction brought into account in the accounting period;
B is the amount of Northern Ireland losses surrendered in any claim under section 1217RG of CTA 2009 for the accounting period;
MR is the main rate for the financial year;
NIR is the Northern Ireland rate for the financial year.
(3) If the accounting period falls within more than one financial year, the amount of the Northern Ireland supplementary deduction is determined by taking the following steps.
Step 1 Calculate, for each financial year, the amount that would be the Northern Ireland supplementary deduction for the accounting period if it fell within only that financial year (see subsection (2)).
Step 2 Multiply each amount calculated under step 1 by the proportion of the accounting period that falls within the financial year for which it is calculated.
Step 3 Add together each amount found under step 2.
Orchestra tax credit: Northern Ireland supplementary deduction ignored
357UN For the purpose of determining the available loss of a company under section 1217RH of CTA 2009 (amount of surrenderable loss) for any accounting period, any Northern Ireland supplementary deduction made by the company in the period (and any Northern Ireland supplementary deduction made in any previous accounting period) is to be ignored.
Losses of separate orchestral trade
Restriction on use of losses before completion period
357UO (1) Section 1217SA of CTA 2009 (restriction on use of losses before completion period) has effect subject as follows.
(2) The reference in subsection (1) of that section to a loss made in the separate orchestral trade in an accounting period preceding the completion period is, if the company is a Northern Ireland company in that period, a reference to—
(a) any Northern Ireland losses of the trade of the period, or
(b) any mainstream losses of the trade of the period;
and references to losses in subsection (2) of that section are to be read accordingly.
(3) Subsection (4) applies if a Northern Ireland company has, in an accounting period preceding the completion period—
(a) both Northern Ireland losses of the trade and mainstream profits of the trade, or
(b) both mainstream losses of the trade and Northern Ireland profits of the trade.
(4) The company may make a claim under section 37 (relief for trade losses against total profits) for relief for the losses mentioned in subsection (3)(a) or (b).
(5) But relief on such a claim is available only—
(a) in the case of a claim for relief for Northern Ireland losses, against mainstream profits of the trade of the same period;
(b) in the case of a claim for relief for mainstream losses, against Northern Ireland profits of the trade of the same period.
(6) In this section “the completion period” has the same meaning as in section 1217SA of CTA 2009 (see section 1217S(2) of that Act).
Use of losses in the completion period
357UP (1) Section 1217SB of CTA 2009 (use of losses in the completion period) has effect subject as follows.
(2) The reference in subsection (1) of that section to a loss made in the separate orchestral trade is, in relation to a loss made in a period in which the company is a Northern Ireland company, a reference to—
(a) any Northern Ireland losses of the trade of the period, or
(b) any mainstream losses of the trade of the period;
and references to losses in subsections (2) and (4) of that section are to be read accordingly.
(3) The references in subsection (3) of that section to a loss made in the separate orchestral trade in the completion period are, where the company is a Northern Ireland company in the period, references to—
(a) any Northern Ireland losses of the trade of the period, or
(b) any mainstream losses of the trade of the period;
and references to losses in subsection (4) of that section are to be read accordingly.
(4) Subsection (4) of that section has effect, in relation to Northern Ireland losses, as if the reference to an additional deduction under Chapter 3 of Part 15D of CTA 2009 included a reference to a Northern Ireland supplementary deduction under this Chapter.
Terminal losses
357UQ (1) Section 1217SC of CTA 2009 (terminal losses) has effect subject as follows.
(2) Where—
(a) a company makes an election under subsection (3) of that section (election to treat terminal loss as loss brought forward of different trade) in relation to all or part of a terminal loss, and
(b) the terminal loss is a Northern Ireland loss,
that subsection has effect as if the reference in it to a loss brought forward were to a Northern Ireland loss brought forward.
(3) Where—
(a) a company makes a claim under subsection (6) of that section (claim to treat terminal loss as loss brought forward by different company) in relation to part or all of a terminal loss, and
(b) the terminal loss is a Northern Ireland loss,
that subsection has effect as if the reference in it to a loss brought forward were to a Northern Ireland loss brought forward.
15 (1) Schedule 4 to CTA 2010 (index of defined expressions) is amended as follows.
(2) In the entry for “Northern Ireland expenditure”—
(a) for “14” substitute “ 14A ”, and
(b) for “and 357U(2)” substitute “ , 357U(2) and 357UJ(2) ”.
(3) Insert at the appropriate places—
qualifying expenditure (in Chapter 14A of Part 8B) | section 357UJ(2)
the separate orchestral trade (in Chapter 14A of Part 8B) | section 357UJ(2)
.
PART 3 Commencement
16 Any power to make regulations conferred on the Treasury by virtue of this Schedule comes into force on the day on which this Act is passed.
17 (1) The amendments made by the following provisions of this Schedule have effect in relation to accounting periods beginning on or after 1 April 2016—
(a) Part 1, and
(b) in Part 2, paragraphs 2 to 12.
(2) Sub-paragraph (3) applies where a company has an accounting period beginning before 1 April 2016 and ending on or after that date (“the straddling period”).
(3) For the purposes of Part 15D of CTA 2009—
(a) so much of the straddling period as falls before 1 April 2016, and so much of that period as falls on or after that date, are separate accounting periods, and
(b) any amounts brought into account for the purposes of calculating for corporation tax purposes the profits of a trade for the straddling period are apportioned to the two separate accounting periods on such basis as is just and reasonable.
18 (1) The amendments made by paragraphs 13 to 15 of this Schedule have effect in relation to accounting periods beginning on or after the first day of the financial year appointed by the Treasury by regulations under section 5(3) of the Corporation Tax (Northern Ireland) Act 2015 (“the commencement day”).
(2) Sub-paragraph (3) applies where a company has an accounting period beginning before the commencement day and ending on or after that day (“the straddling period”).
(3) For the purposes of Chapter 14A of Part 8B of CTA 2010—
(a) so much of the straddling period as falls before the commencement day, and so much of that period as falls on or after that day, are separate accounting periods, and
(b) any amounts brought into account for the purposes of calculating for corporation tax purposes the profits of a trade for the straddling period are apportioned to the two separate accounting periods on such basis as is just and reasonable.
SCHEDULE 9 Profits from the exploitation of patents etc: consequential
Section 64
1 CTA 2010 is amended in accordance with this Schedule.
2 In section 357B (meaning of “qualifying company”), in subsection (3)(b)(ii), for “section 357A” substitute “ section 357A(1) ”.
3 In the heading of Chapter 3 of Part 8A, after “profits” insert “ : cases mentioned in section 357A(7): no income from new IP ”.
4 (1) Section 357C (relevant IP profits) is amended as follows.
(2) Before subsection (1) insert—
(A1) This section applies for the purposes of determining the relevant IP profits of a trade of a company for an accounting period in a case where—
(a) the accounting period began before 1 July 2021,
(b) the company is not a new entrant (see section 357A(11)), and
(c) none of the amounts of relevant IP income brought into account as credits in calculating the profits of the trade for the accounting period is properly attributable to a new qualifying IP right (see section 357BP).
But see also section 357D (alternative method of calculating relevant IP profits in such a case).
(3) In subsection (1)—
(a) in the words before Step 1, omit “of a trade of a company for an accounting period”,
(b) in Step 2, for “357CC and 357CD” substitute “ 357BH to 357BHC ”,
(c) in Step 4, after “routine return figure” insert “ in relation to the trade for the accounting period ”,
(d) in Step 5, for “elected” substitute “ made an election under section 357CL ”, and
(e) in Step 6, after “marketing assets return figure” insert “ in relation to the trade for the accounting period ”.
5 In section 357CA (total gross income of a trade), in subsection (2), for “section 357CB” substitute “ section 357BG ”.
6 Omit sections 357CB to 357CF.
7 (1) Section 357CG (adjustments in calculating profits of trade) is amended as follows.
(2) In subsection (1) after “determining” insert “ under section 357C ”.
(3) In subsection (4), in the words after paragraph (b), for “section 357CB” substitute “ section 357BG ”.
(4) In subsection (6), in paragraph (a)(ii) of the definition of “relevant accounting period”, for “section 357A” substitute “ section 357A(1) ”.
8 In section 357CI (routine return figure), in Step 1 in subsection (1), for “sections 357CJ and 357CK” substitute “ sections 357BJA and 357BJB ”.
9 Omit sections 357CJ and 357CK.
10 (1) Section 357CL (companies eligible to elect for small claims treatment) is amended as follows.
(2) In subsection (1) for “elect” substitute “ make an election under this section ”.
(3) In subsection (6) for “section 357A” substitute “ section 357A(1) ”.
11 In section 357CM (small claims amount), in subsection (1), for “elects” substitute “ makes an election under section 357CL ”.
12 (1) Section 357D (alternative method of calculating relevant IP profits: “streaming”) is amended as follows.
(2) In subsection (1) at the end insert
in a case where—
(a) the accounting period began before 1 July 2021,
(b) the company is not a new entrant (see section 357A(11)), and
(c) none of the amounts of relevant IP income brought into account as credits in calculating the profits of the trade for the accounting period is properly attributable to a new qualifying IP right (see section 357BP).
(3) For subsection (4) substitute—
(4) A company must apply section 357DA (instead of section 357C) for the purposes of determining the relevant IP profits of a trade of the company for an accounting period in a case mentioned in subsection (1) if any of the mandatory streaming conditions in section 357DC is met in relation to the trade for the period.
13 (1) Section 357DA (relevant IP profits) is amended as follows.
(2) In subsection (1)—
(a) in Step 1—
(i) for “section 357CB” substitute “ section 357BG ”, and
(ii) for “sections 357CC and 357CD” substitute “ sections 357BH to 357BHC ”,
(b) in Step 4, after “routine return figure” insert “ in relation to the trade for the accounting period ”,
(c) in Step 5, for “elected” substitute “ made an election under section 357CL ”, and
(d) in Step 6, after “marketing assets return figure” insert “ in relation to the trade for the accounting period ”.
(3) In subsection (4), in the words after paragraph (b), for “sections 357CJ and 357CK” substitute “ sections 357BJA and 357BJB ”.
14 (1) Section 357DC (the mandatory streaming conditions) is amended as follows.
(2) In subsection (8)(a) for “section 357CC” substitute “ section 357BH ”.
(3) In subsection (9)(a) for “section 357CC(6)” substitute “ section 357BH(6) ”.
15 In section 357EB (allocation of set-off amount within a group) in subsection (3)(a) for “section 357A” substitute “ section 357A(1) ”.
16 In section 357ED (company ceasing to carry on trade etc) in subsection (2)(c) for “section 357A” substitute “ section 357A(1) ”.
17 In section 357FA (incorporation of qualifying items), in subsection (2), for “357CC(2)” substitute “ 357BH(2) ”.
18 In section 357FB (tax advantage schemes) in subsection (4)(b) for “section 357A” substitute “ section 357A(1) ”.
19 (1) Section 357G (making an election under section 357A) is amended as follows.
(2) In the heading, for “section 357A” substitute “ section 357A(1) or (11)(b) ”.
(3) In subsection (1) for “section 357A” substitute “ section 357A(1) or (11)(b) ”.
20 (1) Section 357GA (revocation of election made under section 357A) is amended as follows.
(2) In the heading, for “section 357A” substitute “ section 357A(1) ”.
(3) In subsection (1) for “section 357A” substitute “ section 357A(1) ”.
(4) In subsection (5) for “section 357A” substitute “ section 357A(1) ”.
21 (1) Section 357GB (application of Part 8A in relation to partnerships) is amended as follows.
(2) In subsection (11)—
(a) in the words before paragraph (a), after “Sections” insert “ 357BK, 357BKA ”, and
(b) in paragraph (a) after “section” insert “ 357BK or ”.
(3) In subsection (12) for “section 357CB(1)(c)” substitute “ section 357BG(1)(c) ”.
22 In section 357GC (application of Part 8A in relation to cost-sharing arrangements), in subsection (3), for “section 357CB(1)(c)” substitute “ section 357BG(1)(c) ”.
23 (1) Section 357GE (other interpretation) is amended as follows.
(2) In subsection (1)—
(a) at the appropriate place insert—
“payment” includes payment in money's worth.
, and
(b) omit the definition of “qualifying residual profit”.
(3) After subsection (1) insert—
(1A) In Chapters 3 and 4 of this Part “qualifying residual profit” of a trade, in relation to any accounting period, is the amount obtained by the application of Steps 1 to 4 in section 357C or (as the case may be) section 357DA in relation to the trade for the accounting period.
24 In Schedule 4 (index of defined expressions)—
(a) for the entry for “finance income (in Part 8A)” substitute—
finance income (in Part 8A) | section 357BG
,
(b) after the entry for “new consideration (in Part 23)” insert—
new entrant (in Part 8A) | section 357A(11)
,
(c) in the entry for “qualifying residual profit of a trade (in Part 8A)”, in the left hand column, after “in” insert “ Chapters 3 and 4 of ”, and
(d) for the entry for “relevant IP income (in Part 8A)” substitute—
relevant IP income (in Part 8A) | section 357BH
.
Section 66
PART 1 Main provisions
1 In TIOPA 2010, after Part 6 insert—
PART 6A Hybrid and other mismatches
CHAPTER 1 Introduction
Overview of Part
259A (1) This Part has effect for the purposes of counteracting certain cases that it is reasonable to suppose would otherwise give rise to—
(a) a deduction/non-inclusion mismatch, or
(b) a double deduction mismatch.
(2) A deduction/non-inclusion mismatch arises where an amount is deductible from a person's income—
(a) without a corresponding amount of ordinary income arising to another person, or
(b) where an amount of ordinary income does arise to a person but is under taxed.
(3) A double deduction mismatch arises where—
(a) an amount is deductible from more than one person's income, or
(b) an amount is deductible from a person's income for the purposes of more than one tax.
(4) The cases with which this Part is concerned involve—
(a) payments or quasi-payments under or in connection with financial instruments or repos, stock lending arrangements or other transfers of financial instruments,
(b) hybrid entities,
(c) companies with permanent establishments, or
(d) dual resident companies.
(5) This Part counteracts mismatches that would otherwise arise by making certain adjustments to a person's treatment for corporation tax purposes.
(6) Chapter 2 contains some key definitions for the purposes of this Part, see in particular—
(a) section 259B which provides that “tax” means income tax, corporation tax on income, the diverted profits tax, the CFC charge, foreign tax or a foreign CFC charge,
(b) section 259BB which defines “payment”, “quasi-payment”, “payment period”, “relevant deduction”, “payer”, “payee”, and “payee jurisdiction”,
(c) section 259BC which defines “ordinary income” and “taxable profits”, in relation to taxes other than the CFC charge and foreign CFC charges,
(d) section 259BD which contains corresponding provision for the CFC charge and foreign CFC charges,
(e) section 259BE which defines “hybrid entity” and other related terms, and
(f) section 259BF which defines “permanent establishment”.
(7) Chapter 3 contains provision for the counteraction of certain deduction/non-inclusion mismatches arising from payments or quasi-payments under, or in connection with, financial instruments.
(8) Chapter 4 contains provision for the counteraction of certain deduction/non-inclusion mismatches arising from payments or quasi-payments and involving certain repos, stock lending arrangements or other arrangements for, or relating to, transfers of financial instruments.
(9) Chapter 5 contains provision for the counteraction of certain deduction/non-inclusion mismatches arising from payments or quasi-payments in relation to which the payer is a hybrid entity.
(10) Chapter 6 contains provision for the counteraction of certain deduction/non-inclusion mismatches arising in relation to internal transfers of money or money's worth made, or treated as made, by a multinational company's permanent establishment in the United Kingdom to the territory in which the company is resident for tax purposes.
(11) Chapter 7 contains provision for the counteraction of certain deduction/non-inclusion mismatches arising from payments or quasi-payments in relation to which a payee is a hybrid entity.
(12) Chapter 8 contains provision for the counteraction of certain deduction/non-inclusion mismatches arising from payments or quasi-payments in relation to which a payee is a multinational company.
(13) Chapter 9 contains provision for the counteraction of certain double deduction mismatches arising from a company being a hybrid entity.
(14) Chapter 10 contains provision for the counteraction of certain double deduction mismatches involving dual resident companies or relevant multinational companies.
(15) Chapter 11 contains provision about imported mismatches.
(16) Chapter 12 contains provision—
(a) for adjustments to be made where a reasonable supposition made for the purposes of this Part turns out to be mistaken or otherwise ceases to be reasonable, and
(b) for deductions from taxable total profits to be made where a relevant deduction has been denied under certain provisions of this Part and amounts of ordinary income arise later than is permitted.
(17) Chapter 13 contains anti-avoidance provision.
(18) Chapter 14 contains definitions and other provision about the interpretation of this Part.
(19) Each of Chapters 3 to 10 contains provision specifying that some or all of this Part (and any corresponding provision under the law of a territory outside the United Kingdom) is to be disregarded when determining whether a mismatch arises for the purposes of that Chapter and, if so, in what amount, see—
(a) section 259CA(4) and (5),
(b) section 259DA(5),
(c) section 259EA(5) and (6),
(d) section 259FA(4), (5) and (6),
(e) section 259GA(5) and (6),
(f) section 259HA(6) and (7),
(g) section 259IA(2) and (3), and
(h) section 259JA(5).
(20) The effect of the provisions mentioned in subsection (19) is that Chapters 3 to 10 (or any corresponding provision under the law of a territory outside the United Kingdom) have effect in the following sequence—
(a) Chapter 4,
(b) Chapter 3,
(c) Chapter 5,
(d) Chapter 6,
(e) Chapter 7,
(f) Chapter 8,
(g) Chapter 9, and
(h) Chapter 10.
CHAPTER 2 Key definitions
Meaning of “tax”
“Tax” means certain taxes on income and includes foreign tax etc
259B (1) In this Part “tax” means—
(a) income tax,
(b) the charge to corporation tax on income,
(c) diverted profits tax,
(d) the CFC charge,
(e) foreign tax, or
(f) a foreign CFC charge.
(2) In subsection (1) “foreign tax” means a tax chargeable under the law of a territory outside the United Kingdom so far as it—
(a) is charged on income and corresponds to United Kingdom income tax, or
(b) is charged on income and corresponds to the United Kingdom charge to corporation tax on income.
(3) A tax is not outside the scope of subsection (2) by reason only that it—
(a) is chargeable under the law of a province, state or other part of a country, or
(b) is levied by or on behalf of a municipality or other local body.
(4) In this Part—
“CFC” and “the CFC charge” have the same meaning as in Part 9A (see section 371VA);
“foreign CFC charge” means a charge (by whatever name known) under the law of a territory outside the United Kingdom which is similar to the CFC charge (and reference to a “foreign CFC” is to be read accordingly).
Equivalent provision to this Part under foreign law
References to equivalent provision to this Part under the law of a territory outside the United Kingdom
259BA (1) A reference in this Part to provision under the law of a territory outside the United Kingdom that is equivalent to—
(a) this Part, or
(b) a provision of this Part,
is to be read in accordance with subsection (2).
(2) The reference is to provision under the law of a territory outside the United Kingdom that it is reasonable to suppose—
(a) is based on the Final Report on Neutralising the Effects of Hybrid Mismatch Arrangements published by the Organisation for Economic Cooperation and Development (“OECD”) on 5 October 2015 or any replacement or supplementary publication, and
(b) has effect for the same, or similar, purposes to this Part or (as the case may be) the provision of this Part.
(3) In paragraph (a) of subsection (2) “replacement or supplementary publication” means any document that is approved and published by the OECD in place of, or to update or supplement, the report mentioned in that paragraph (or any replacement of, or supplement to, it).
Payments and quasi-payments etc
Meaning of “payment”, “quasi-payment”, “payer”, “payee” etc
259BB (1) In this Part “payment” means any transfer—
(a) of money or money's worth directly or indirectly from one person (“the payer”) to one or more other persons, and
(b) in relation to which (disregarding this Part and any equivalent provision under the law of a territory outside the United Kingdom) an amount (a “relevant deduction”) may be deducted from the payer's income for a taxable period (the “payment period”) for the purposes of calculating the payer's taxable profits.
(2) For the purposes of this Part, there is a “quasi-payment”, in relation to a taxable period (the “payment period”) of a person (“the payer”), if (disregarding this Part and any equivalent provision under the law of a territory outside the United Kingdom)—
(a) an amount (a “relevant deduction”) may be deducted from the payer's income for that period for the purposes of calculating the payer's taxable profits, and
(b) making the assumptions in subsection (4), it would be reasonable to expect an amount of ordinary income to arise to one or more other persons as a result of the circumstances giving rise to the relevant deduction.
(3) But a quasi-payment does not arise under subsection (2) if—
(a) the relevant deduction is an amount that is deemed, under the law of the payer jurisdiction, to arise for tax purposes, and
(b) the circumstances giving rise to the relevant deduction do not include any economic rights, in substance, existing between the payer and a person mentioned in subsection (2)(b).
(4) The assumptions are that (so far as would not otherwise be the case)—
(a) any question as to whether an entity is a distinct and separate person from the payer is determined in accordance with the law of the payer jurisdiction,
(b) any persons to whom amounts arise, or potentially arise, as a result of the circumstances giving rise to the relevant deduction adopt the same approach to accounting for those circumstances as the payer, and
(c) any persons to whom amounts arise, or potentially arise, as a result of those circumstances—
(i) are, under the law of the payer jurisdiction, resident in that jurisdiction for tax purposes, and
(ii) carry on a business, in connection with which those circumstances arise, in the payer jurisdiction.
(5) In this Part—
(a) references to a quasi-payment include all the circumstances giving rise to the relevant deduction mentioned in subsection (2)(a), and
(b) references to a quasi-payment being made are to those circumstances arising.
(6) In this Part “payee” means—
(a) in the case of a payment, any person—
(i) to whom the transfer is made as mentioned in subsection (1)(a), or
(ii) to whom an amount of ordinary income arises as a result of the payment, and
(b) in the case of a quasi-payment, any person—
(i) to whom it would be reasonable to expect an amount of ordinary income to arise as mentioned in subsection (2)(b), or
(ii) to whom an amount of ordinary income arises as a result of the quasi-payment.
(7) For the purposes of this Part, in the case of a quasi-payment, the payer is “also a payee” if—
(a) an entity is not a distinct and separate person from the payer for the purposes of a tax charged under the law of the United Kingdom,
(b) that entity is a distinct and separate person from the payer for the purposes of a tax charged under the law of the payer jurisdiction, and
(c) it would be reasonable to expect an amount of ordinary income to arise to that entity as mentioned in subsection (2)(b).
(8) In this section “payer jurisdiction” means the jurisdiction under the law of which the relevant deduction may (disregarding this Part and any equivalent provision under the law of a territory outside the United Kingdom) be deducted.
(9) In this Part “payee jurisdiction”, in relation to a payee, means a territory in which—
(a) the payee is resident for tax purposes under the law of that territory, or
(b) the payee has a permanent establishment.
Ordinary income
The basic rules
259BC (1) This section has effect for the purposes of this Part.
(2) “Ordinary income” means income that is brought into account, before any deductions, for the purposes of calculating the income or profits on which a relevant tax is charged (“taxable profits”).
(3) But an amount of income is not brought into account for those purposes to the extent that it is excluded, reduced or offset by any exemption, exclusion, relief or credit—
(a) that applies specifically to all or part of the amount of income (as opposed to ordinary income generally), or
(b) that arises as a result of, or otherwise in connection with, a payment or quasi-payment that gives rise to the amount of income.
(4) If all the relevant tax charged on taxable profits is, or falls to be, refunded, none of the income brought into account in calculating those taxable profits is “ordinary income”.
(5) If a proportion of the relevant tax charged on taxable profits is, or falls to be, refunded, the amount of any income brought into account in calculating those taxable profits that is “ordinary income” is proportionally reduced.
(6) For the purposes of subsections (4) and (5) an amount of relevant tax is refunded if and to the extent that—
(a) any repayment of relevant tax, or any payment in respect of a credit for relevant tax, is made to any person, and
(b) that repayment or payment is directly or indirectly in respect of the whole or part of the amount of relevant tax,
but an amount refunded is to be ignored if and to the extent that it results from qualifying loss relief.
(7) In subsection (6) “qualifying loss relief” means—
(a) any means by which a loss might be used for corporation tax or income tax purposes to reduce the amount in respect of which a person is liable to tax, or
(b) any corresponding means by which a loss corresponding to a relevant tax loss might be used for the purposes of a relevant tax other than corporation tax or income tax to reduce the amount in respect of which a person is liable to tax,
(and in paragraph (b) “relevant tax loss” means a loss that might be used as mentioned in paragraph (a)).
(8) References to an amount of ordinary income being “included in” taxable profits are to that amount being brought into account for the purposes of calculating those profits.
(9) In this section “relevant tax” means a tax other than the CFC charge or a foreign CFC charge.
(10) Section 259BD contains provision for ordinary income to arise to chargeable companies by virtue of the CFC charge or a foreign CFC charge.
Chargeable companies in respect of CFCs and foreign CFCs
259BD (1) This section has effect for the purposes of this Part.
(2) Subsections (3) to (7) apply where an amount of income arises to an entity (“C”) that is a CFC, a foreign CFC or both and all or part of that amount (the “relevant income”)—
(a) is not ordinary income of C under section 259BC, or
(b) arises as a result of a payment or quasi-payment under, or in connection with, a financial instrument or hybrid transfer arrangement and—
(i) is (disregarding subsection (4)) ordinary income of C under section 259BC for a taxable period, but
(ii) under taxed.
(3) The following steps determine whether, and to what extent, the relevant income is “ordinary income” of a chargeable company in relation to the CFC charge or a foreign CFC charge.
Step 1 Determine—
whether any of the relevant income is brought into account in calculating C's chargeable profits for the purposes of the CFC charge or a foreign CFC charge, and
if so, the amount of the relevant income that is so brought into account for the purposes of each relevant charge.
If none of the relevant income is so brought into account, then none of it is “ordinary income” of a chargeable company and no further steps are to be taken.
See subsections (10) to (12) for further provision about how this step is to be taken.
For the purposes of this section—
“relevant chargeable profits” are chargeable profits in relation to the calculation of which, for the purposes of the CFC charge or a foreign CFC charge, any of the relevant income is brought into account;
“relevant charge” means a charge in relation to which any of the relevant income is brought into account in calculating chargeable profits.
Step 2 In relation to each relevant charge, determine the proportion of C's relevant chargeable profits, for the purposes of that charge, that is apportioned to each chargeable company.
For the purposes of this section, each chargeable company to which 25% or more of C's relevant chargeable profits for the purposes of a relevant charge are apportioned is a “relevant chargeable company”.
If there are no relevant chargeable companies in relation to any relevant charges, then none of the relevant income is “ordinary income” of a chargeable company and no further steps are to be taken.
Step 3 In relation to each relevant chargeable company, determine what is the appropriate proportion of the relevant income brought into account in calculating relevant chargeable profits, for the purposes of the relevant charge concerned.
That proportion of that income is “ordinary income” of that company for the taxable period for which that charge is charged on it by reference to those profits.
For the purposes of this step, the “appropriate proportion”, in relation to a relevant chargeable company, is the same as the proportion of the relevant chargeable profits that is apportioned to it for the purposes of the relevant charge.
(4) An amount of relevant income that is ordinary income of a relevant chargeable company in accordance with subsection (3) is not ordinary income of C (so far as it otherwise would be).
(5) Relevant chargeable profits apportioned to a relevant chargeable company for the purposes of a relevant charge are “taxable profits” of that company for the taxable period for which the charge is charged on it by reference to those profits.
(6) The amount of the relevant income that is ordinary income of that relevant chargeable company under subsection (3), by virtue of being brought into account in calculating those relevant chargeable profits, is “included in” those taxable profits.
(7) References to tax charged on taxable profits include a relevant charge charged by reference to relevant chargeable profits that are taxable profits under subsection (5).
(8) For the purposes of subsection (2)(b), an amount of ordinary income is “under taxed” if the highest rate at which tax is charged, for C's taxable period, on the taxable profits in which the amount is included, taking into account on a just and reasonable basis any credit for underlying tax, is less than C's full marginal rate for that period.
(9) In subsection (8)—
(a) C's “full marginal rate” means the highest rate at which the tax that is chargeable on those taxable profits could be charged on taxable profits, of C for the taxable period, which include ordinary income that arises from, or in connection with, a financial instrument, and
(b) “credit for underlying tax” means a credit or relief given to reflect tax charged on profits that are wholly or partly used to fund (directly or indirectly) the payment or quasi-payment mentioned in subsection (2)(b).
(10) For the purposes of step 1 in subsection (3), section 259BC(3) applies for the purposes of determining the extent to which an amount of relevant income is brought into account in calculating chargeable profits as it applies for the purposes of determining the extent to which an amount of income is brought into account for the purposes of calculating taxable profits.
(11) Subsection (12) applies for the purposes of step 1 in subsection (3), if—
(a) the amount of income arising to C mentioned in subsection (2)—
(i) is not all relevant income, and
(ii) is only partly brought into account in calculating chargeable profits for the purposes of the CFC charge or a foreign CFC charge, and
(b) accordingly, it falls to be determined whether, and to what extent, the relevant income is brought into account in calculating those profits for the purposes of the charge concerned.
(12) The relevant income is to be taken to be brought into account (if at all) only to the extent that the total amount of income mentioned in subsection (2) that is brought into account exceeds the amount of income mentioned in that subsection that is not relevant income.
(13) In this section—
“chargeable company”—
in relation to the CFC charge, has the same meaning as in Part 9A (see section 371VA), and
in relation to a foreign CFC charge, means an entity (by whatever name known) corresponding to a chargeable company within the meaning of that Part;
“chargeable profits”—
in relation to the CFC charge, has the same meaning as in that Part (see that section), and
in relation to a foreign CFC charge, means the concept (by whatever name known) corresponding to chargeable profits within the meaning of that Part;
“hybrid transfer arrangement” has the meaning given by section 259DB.
Hybrid entity etc
Meaning of “hybrid entity”, “investor” and “investor jurisdiction”
259BE (1) For the purposes of this Part, an entity is “hybrid” if it meets conditions A and B.
(2) Condition A is that the entity is regarded as being a person for tax purposes under the law of any territory.
(3) Condition B is that—
(a) some or all of the entity's income or profits are treated (or would be if there were any) for the purposes of a tax charged under the law of any territory, as the income or profits of a person or persons other than the person mentioned in subsection (2), or
(b) under the law of a territory other than the one mentioned in subsection (2), the entity is not regarded as a distinct and separate person to an entity or entities that are distinct and separate persons under the law of the territory mentioned in that subsection.
(4) For the purposes of this Part—
(a) where subsection (3)(a) applies, a person who is treated as having the income or profits of the hybrid entity is an “investor” in it,
(b) where subsection (3)(b) applies, an entity that—
(i) is regarded as a distinct and separate person to the hybrid entity under the law of the territory mentioned in subsection (2), but
(ii) is not regarded as a distinct and separate person to the hybrid entity under the law of another territory,
is an “investor” in the hybrid entity, and
(c) any territory under the law of which an investor is within the charge to a tax is an “investor jurisdiction” in relation to that investor.
Permanent establishments
Meaning of “permanent establishment”
259BF (1) In this Part “permanent establishment” means anything that is—
(a) a permanent establishment of a company within the meaning of the Corporation Tax Acts (see section 1119 of CTA 2010), or
(b) within any similar concept under the law of a territory outside the United Kingdom.
(2) A concept is not outside the scope of subsection (1)(b) by reason only that it is not based on Article 5 of a Model Tax Convention on Income and Capital published by the Organisation for Economic Cooperation and Development.
CHAPTER 3 Hybrid and other mismatches from financial instruments
Introduction
Overview of Chapter
259C (1) This Chapter contains provision that counteracts hybrid or otherwise impermissible deduction/non-inclusion mismatches that it is reasonable to suppose would otherwise arise from payments or quasi-payments under, or in connection with, financial instruments.
(2) The Chapter counteracts mismatches where the payer or a payee is within the charge to corporation tax and does so by altering the corporation tax treatment of the payer or a payee.
(3) Section 259CA contains the conditions that must be met for this Chapter to apply.
(4) Section 259CB defines “hybrid or otherwise impermissible deduction/non-inclusion mismatch” and provides how the amount of the mismatch is to be calculated.
(5) Section 259CC contains definitions of certain terms used in section 259CB.
(6) Section 259CD contains provision that counteracts the mismatch where the payer is within the charge to corporation tax for the payment period.
(7) Section 259CE contains provision that counteracts the mismatch where a payee is within the charge to corporation tax and neither section 259CD nor any equivalent provision under the law of a territory outside the United Kingdom fully counteracts the mismatch.
(8) See also—
(a) section 259BB for the meaning of “payment”, “quasi-payment”, “payment period”, “relevant deduction”, “payer” and “payee”, and
(b) section 259N for the meaning of “financial instrument”.
Application of Chapter
Circumstances in which the Chapter applies
259CA (1) This Chapter applies if conditions A to D are met.
(2) Condition A is that a payment or quasi-payment is made under, or in connection with, a financial instrument.
(3) Condition B is that—
(a) the payer is within the charge to corporation tax for the payment period, or
(b) a payee is within the charge to corporation tax for an accounting period some or all of which falls within the payment period.
(4) Condition C is that it is reasonable to suppose that, disregarding the provisions mentioned in subsection (5), there would be a hybrid or otherwise impermissible deduction/non-inclusion mismatch in relation to the payment or quasi-payment (see section 259CB).
(5) The provisions are—
(a) this Chapter and Chapters 5 to 10, and
(b) any equivalent provision under the law of a territory outside the United Kingdom.
(6) Condition D is that—
(a) it is a quasi-payment that is made as mentioned in subsection (2) and the payer is also a payee (see section 259BB(7)),
(b) the payer and a payee are related (see section 259NC) at any time in the period—
(i) beginning with the day on which any arrangement is made by the payer or a payee in connection with the financial instrument, and
(ii) ending with the last day of the payment period, or
(c) the financial instrument, or any arrangement connected with it, is a structured arrangement.
(7) The financial instrument, or an arrangement connected with it, is a “structured arrangement” if it is reasonable to suppose that—
(a) the financial instrument, or arrangement, is designed to secure a hybrid or otherwise impermissible deduction/non-inclusion mismatch, or
(b) the terms of the financial instrument or arrangement share the economic benefit of the mismatch between the parties to the instrument or arrangement or otherwise reflect the fact that the mismatch is expected to arise.
(8) The financial instrument or arrangement may be designed to secure a hybrid or otherwise impermissible deduction/non-inclusion mismatch despite also being designed to secure any commercial or other objective.
(9) Sections 259CD (cases where the payer is within the charge to corporation tax for the payment period) and 259CE (cases where a payee is within the charge to corporation tax) contain provision for the counteraction of the hybrid or otherwise impermissible deduction/non-inclusion mismatch.
Hybrid or otherwise impermissible deduction/non-inclusion mismatches and their extent
259CB (1) There is a “hybrid or otherwise impermissible deduction/non-inclusion mismatch”, in relation to a payment or quasi-payment, if either or both of case 1 or 2 applies.
(2) Case 1 applies where—
(a) the relevant deduction exceeds the sum of the amounts of ordinary income that, by reason of the payment or quasi-payment, arise to each payee for a permitted taxable period, and
(b) all or part of that excess arises by reason of the terms, or any other feature, of the financial instrument.
(3) So far as the excess arises by reason of a relevant debt relief provision, it is to be taken not to arise by reason of the terms, or any other feature, of the financial instrument (whether or not it would have arisen by reason of the terms, or any other feature, of the financial instrument regardless of the relevant debt relief provision).
(4) Subject to that and subsection (9), for the purposes of subsection (2)(b)—
(a) it does not matter whether the excess or part arises for another reason as well as the terms, or any other feature, of the financial instrument (even if it would have arisen for that other reason regardless of the terms, or any other feature, of the financial instrument), and
(b) an excess or part of an excess is to be taken to arise by reason of the terms, or any other feature, of the financial instrument (so far as would not otherwise be the case) if, on making such of the relevant assumptions in relation to each payee as apply in relation to that payee (see subsections (5) and (6)), it could arise by reason of the terms, or any other feature, of the financial instrument.
(5) These are the “relevant assumptions”—
(a) where a payee is not within the charge to a tax under the law of a payee jurisdiction because the payee benefits from an exclusion, immunity, exemption or relief (however described) under that law, assume that the exclusion, immunity, exemption or relief does not apply;
(b) where an amount of income is not included in the ordinary income of a payee for the purposes of a tax charged under the law of a payee jurisdiction because the payment or quasi-payment is not made in connection with a business carried on by the payee in that jurisdiction, assume that the payment or quasi-payment is made in connection with such a business;
(c) where a payee is not within the charge to a tax under the law of any territory because there is no territory where the payee is—
(i) resident for the purposes of a tax charged under the law of that territory, or
(ii) within the charge to a tax under the law of that territory as a result of having a permanent establishment in that territory,
assume that the payee is a company that is resident for tax purposes, and carries on a business in connection with which the payment or quasi-payment is made, in the United Kingdom.
(6) Where the relevant assumption in subsection (5)(c) applies in relation to a payee the following provisions are to be disregarded in relation to that payee for the purposes of subsection (4)(b)—
(a) section 441 of CTA 2009 (loan relationships for unallowable purposes);
(b) section 690 of that Act (derivative contracts for unallowable purposes);
(c) Part 4 (transfer pricing);
(d) this Part;
(e) Part 7 (tax treatment of financing costs and income).
(7) Case 2 applies where there are one or more amounts of ordinary income (“under-taxed amounts”) that—
(a) arise, by reason of the payment or quasi-payment, to a payee for a permitted taxable period, and
(b) are under taxed by reason of the terms, or any other feature, of the financial instrument.
(8) Subject to subsection (9), for the purposes of subsection (7)(b) it does not matter whether an amount of ordinary income is under taxed for another reason as well as the terms, or any other feature, of the financial instrument (even if it would have been under taxed for that other reason regardless of the terms, or any other feature, of the financial instrument).
(9) For the purposes of this section disregard—
(a) any excess or part of an excess mentioned in subsection (2), and
(b) any under-taxed amount,
that arises as a result of a payee being a relevant investment fund (see section 259NA).
(10) Where case 1 applies, the amount of the hybrid or otherwise impermissible deduction/non-inclusion mismatch is equal to the excess that arises as mentioned in subsection (2)(b).
(11) Where case 2 applies, the amount of the hybrid or otherwise impermissible deduction/non-inclusion mismatch is equal to the sum of the amounts given in respect of each under-taxed amount by—
(
UTA
×
(
FMR
−
R
)
)
FMR
where—
“UTA” is the under-taxed amount;
“FMR” is the payee's full marginal rate (expressed as a percentage) for the permitted taxable period for which the under-taxed amount arises;
“R” is the highest rate (expressed as a percentage) at which tax is charged on the taxable profits in which the under-taxed amount is included, taking into account on a just and reasonable basis the effect of any credit for underlying tax.
(12) Where cases 1 and 2 both apply, the amount of the hybrid or otherwise impermissible deduction/non-inclusion mismatch is the sum of the amounts given by subsections (10) and (11).
(13) See section 259CC for the meaning of “permitted taxable period”, “relevant debt relief provision” and “under taxed”.
Interpretation of section 259CB
259CC (1) This section has effect for the purposes of section 259CB.
(2) A taxable period of a payee is “permitted” in relation to an amount of ordinary income that arises as a result of the payment or quasi-payment if—
(a) the period begins before the end of 12 months after the end of the payment period, or
(b) where the period begins after that—
(i) a claim has been made for the period to be a permitted period in relation to the amount of ordinary income, and
(ii) it is just and reasonable for the amount of ordinary income to arise for that taxable period rather than an earlier period.
(3) Each of these is a “relevant debt relief provision”—
(a) section 322 of CTA 2009 (release of debts: cases where credits not required to be brought into account),
(b) section 357 of that Act (insolvent creditors),
(c) section 358 of that Act (exclusion of credits on release of connected companies' debts: general),
(d) section 359 of that Act (exclusion of credits on release of connected companies' debts during creditor's insolvency),
(e) section 361C of that Act (the equity-for-debt exception),
(f) section 361D of that Act (corporate rescue: debt released shortly after acquisition), and
(g) section 362A of that Act (corporate rescue: debt released shortly after connection arises).
(4) An amount of ordinary income of a payee, for a permitted taxable period, is “under taxed” if the highest rate at which tax is charged on the taxable profits of the payee in which the amount is included, taking into account on a just and reasonable basis the effect of any credit for underlying tax, is less than the payee's full marginal rate for that period.
(5) The payee's “full marginal rate” means the highest rate at which the tax that is chargeable on the taxable profits mentioned in subsection (4) could be charged on taxable profits, of the payee for the permitted taxable period, which include ordinary income that arises from, or in connection with, a financial instrument.
(6) A “credit for underlying tax” means a credit or relief given to reflect tax charged on profits that are wholly or partly used to fund (directly or indirectly) the payment or quasi-payment.
Counteraction
Counteraction where the payer is within the charge to corporation tax for the payment period
259CD (1) This section applies where the payer is within the charge to corporation tax for the payment period.
(2) For corporation tax purposes, the relevant deduction that may be deducted from the payer's income for the payment period is reduced by an amount equal to the hybrid or otherwise impermissible deduction/non-inclusion mismatch mentioned in section 259CA(4).
Counteraction where a payee is within the charge to corporation tax
259CE (1) This section applies in relation to a payee where—
(a) the payee is within the charge to corporation tax for an accounting period some or all of which falls within the payment period, and
(b) it is reasonable to suppose that—
(i) neither section 259CD nor any equivalent provision under the law of a territory outside the United Kingdom applies, or
(ii) a provision of the law of a territory outside the United Kingdom that is equivalent to section 259CD applies, but does not fully counteract the hybrid or otherwise impermissible deduction/non-inclusion mismatch mentioned in section 259CA(4).
(2) A provision of the law of a territory outside the United Kingdom that is equivalent to section 259CD does not fully counteract that mismatch if (and only if)—
(a) it does not reduce the relevant deduction by the full amount of the mismatch, and
(b) the payer is still able to deduct some of the relevant deduction from income in calculating taxable profits.
(3) In this section “the relevant amount” is—
(a) in a case where subsection (1)(b)(i) applies, an amount equal to the hybrid or otherwise impermissible deduction/non-inclusion mismatch mentioned in section 259CA(4), or
(b) in a case where subsection (1)(b)(ii) applies, the lesser of—
(i) the amount by which that mismatch exceeds the amount by which it is reasonable to suppose the relevant deduction is reduced by a provision under the law of a territory outside the United Kingdom that is equivalent to section 259CD, and
(ii) the amount of the relevant deduction that may still be deducted as mentioned in subsection (2)(b).
(4) If the payee is the only payee, the relevant amount is to be treated as income arising to the payee for the counteraction period.
(5) If there is more than one payee, an amount equal to the payee's share of the relevant amount is to be treated as income arising to the payee for the counteraction period.
(6) The payee's share of the relevant amount is to be determined by apportioning that amount between all the payees on a just and reasonable basis, having regard (in particular)—
(a) to any arrangements as to profit sharing that may exist between some or all of the payees,
(b) to whom any under-taxed amounts (within the meaning given by section 259CB(7)) arise, and
(c) to whom any amounts of ordinary income that it would be reasonable to expect to arise as a result of the payment or quasi-payment, but that do not arise, would have arisen.
(7) An amount of income that is treated as arising under subsection (4) or (5) is chargeable under Chapter 8 of Part 10 of CTA 2009 (income not otherwise charged) (despite section 979(2) of that Act).
(8) The “counteraction period” means—
(a) if an accounting period of the payee coincides with the payment period, that accounting period, or
(b) otherwise, the first accounting period of the payee that is wholly or partly within the payment period.
CHAPTER 4 Hybrid transfer deduction/non-inclusion mismatches
Introduction
Overview of Chapter
259D (1) This Chapter contains provision that counteracts deduction/non-inclusion mismatches that it is reasonable to suppose would otherwise arise from payments or quasi-payments as a consequence of hybrid transfer arrangements.
(2) The Chapter counteracts mismatches where the payer or a payee is within the charge to corporation tax and does so by altering the corporation tax treatment of the payer or a payee.
(3) Section 259DA contains the conditions that must be met for this Chapter to apply.
(4) Section 259DB defines “hybrid transfer arrangement”.
(5) Section 259DC defines “hybrid transfer deduction/non-inclusion mismatch” and provides how the amount of the mismatch is to be calculated.
(6) Section 259DD contains definitions of certain terms used in section 259DC.
(7) Section 259DE contains provision in connection with excluding mismatches from counteraction by the Chapter where they arise as a consequence of the tax treatment of a financial trader.
(8) Section 259DF contains provision that counteracts the mismatch where the payer is within the charge to corporation tax for the payment period.
(9) Section 259DG contains provision that counteracts the mismatch where a payee is within the charge to corporation tax and neither section 259DF nor any equivalent provision under the law of a territory outside the United Kingdom fully counteracts the mismatch.
(10) See also section 259BB for the meaning of “payment”, “quasi-payment”, “payment period”, “relevant deduction”, “payer” and “payee”.
Application of Chapter
Circumstances in which the Chapter applies
259DA (1) This Chapter applies if conditions A to E are met.
(2) Condition A is that there is a hybrid transfer arrangement in relation to an underlying instrument (see section 259DB).
(3) Condition B is that a payment or quasi-payment is made under or in connection with—
(a) the hybrid transfer arrangement, or
(b) the underlying instrument.
(4) Condition C is that—
(a) the payer is within the charge to corporation tax for the payment period, or
(b) a payee is within the charge to corporation tax for an accounting period some or all of which falls within the payment period.
(5) Condition D is that it is reasonable to suppose that, disregarding this Part and any equivalent provision under the law of a territory outside the United Kingdom, there would be a hybrid transfer deduction/non-inclusion mismatch in relation to the payment or quasi-payment (see section 259DC).
(6) Condition E is that—
(a) it is a quasi-payment that is made as mentioned in subsection (3) and the payer is also a payee (see section 259BB(7)),
(b) the payer and a payee are related (see section 259NC) at any time in the period—
(i) beginning with the day on which the hybrid transfer arrangement is made, and
(ii) ending with the last day of the payment period, or
(c) the hybrid transfer arrangement is a structured arrangement.
(7) The hybrid transfer arrangement is a “structured arrangement” if it is reasonable to suppose that—
(a) the hybrid transfer arrangement is designed to secure a hybrid transfer deduction/non-inclusion mismatch, or
(b) the terms of the hybrid transfer arrangement share the economic benefit of the mismatch between the parties to the arrangement or otherwise reflect the fact that the mismatch is expected to arise.
(8) The hybrid transfer arrangement may be designed to secure a hybrid transfer deduction/non-inclusion mismatch despite also being designed to secure any commercial or other objective.
(9) Sections 259DF (cases where the payer is within the charge to corporation tax for the payment period) and 259DG (cases where a payee is within the charge to corporation tax) make provision for the counteraction of the hybrid transfer deduction/non-inclusion mismatch.
Meaning of “hybrid transfer arrangement”, “underlying instrument” etc
259DB (1) This section has effect for the purposes of this Chapter.
(2) A “hybrid transfer arrangement” means—
(a) a repo,
(b) a stock lending arrangement, or
(c) any other arrangement,
that is an arrangement within subsection (3).
(3) An arrangement is within this subsection if it provides for, or relates to, the transfer of a financial instrument (“the underlying instrument”) and—
(a) the dual treatment condition is met in relation to the arrangement, or
(b) a substitute payment could be made under the arrangement.
(4) The dual treatment condition is met in relation to the arrangement if—
(a) in relation to a person, for the purposes of a tax—
(i) the arrangement is regarded as equivalent, in substance, to a transaction for the lending of money at interest, and
(ii) a payment or quasi-payment made under, or in connection with, the arrangement or the underlying instrument could be treated so as to reflect the fact the arrangement is so regarded, and
(b) in relation to another person, for the purposes of a tax (whether or not the same one), such a payment or quasi-payment would not be treated so as to reflect the arrangement being regarded as equivalent, in substance, to a transaction for the lending of money at interest.
(5) A payment or quasi-payment is a “substitute payment” if—
(a) it consists of or involves—
(i) an amount being paid, or
(ii) a benefit being given (including the release of the whole or part of any liability to pay an amount),
(b) that amount, or the value of that benefit, is representative of a return of any kind (“the underlying return”) that arises on, or in connection with, the underlying instrument, and
(c) the amount is paid, or the benefit is given, to someone other than the person to whom the underlying return arises.
(6) For the purposes of subsection (3) where there is an arrangement, to which a person (“P”) and another person (“Q”) are party, under which—
(a) a financial instrument (“the first instrument”) ceases to be owned by P (whether or not because it ceases to exist), and
(b) Q comes to own a financial instrument (“the second instrument”) under which Q has the same, or substantially the same, rights and liabilities as P had under the first instrument,
the second instrument is to be treated as being transferred from P to Q.
Hybrid transfer deduction/non-inclusion mismatches and their extent
259DC (1) There is a “hybrid transfer deduction/non-inclusion mismatch”, in relation to a payment or quasi-payment, if either or both of case 1 or 2 applies.
(2) Case 1 applies where—
(a) the relevant deduction exceeds the sum of the amounts of ordinary income that, by reason of the payment or quasi-payment, arise to each payee for a permitted taxable period, and
(b) all or part of that excess arises for a reason mentioned in subsection (8).
(3) Subject to subsection (9), for the purposes of subsection (2)(b)—
(a) it does not matter whether the excess or part arises for another reason as well (even if it would have arisen for that other reason regardless of any reasons mentioned in subsection (8)), and
(b) an excess or part of an excess is to be taken to arise for a reason mentioned in subsection (8) (so far as would not otherwise be the case) if, on making such of the relevant assumptions in relation to each payee as apply in relation to that payee (see subsections (4) and (5))), it could arise for a reason mentioned in subsection (8).
(4) These are the “relevant assumptions”—
(a) where a payee is not within the charge to a tax under the law of a payee jurisdiction because the payee benefits from an exclusion, immunity, exemption or relief (however described) under that law, assume that the exclusion, immunity, exemption or relief does not apply;
(b) where an amount of income is not included in the ordinary income of a payee for the purposes of a tax charged under the law of a payee jurisdiction because the payment or quasi-payment is not made in connection with a business carried on by the payee in that jurisdiction, assume that the payment or quasi-payment is made in connection with such a business;
(c) where a payee is not within the charge to a tax under the law of any territory because there is no territory where the payee is—
(i) resident for the purposes of a tax charged under the law of that territory, or
(ii) within the charge to a tax under the law of that territory as a result of having a permanent establishment in that territory,
assume that the payee is a company that is resident for tax purposes, and carries on a business in connection with which the payment or quasi-payment is made, in the United Kingdom.
(5) Where the relevant assumption in subsection (4)(c) applies in relation to a payee the following provisions are to be disregarded in relation to that payee for the purposes of subsection (3)(b)—
(a) section 441 of CTA 2009 (loan relationships for unallowable purposes);
(b) Part 4 (transfer pricing);
(c) this Part;
(d) Part 7 (tax treatment of financing costs and income).
(6) Case 2 applies where there are one or more amounts of ordinary income (“under-taxed amounts”) that—
(a) arise, by reason of the payment or quasi-payment, to a payee for a permitted taxable period, and
(b) are under taxed for a reason mentioned in subsection (8).
(7) Subject to subsection (9), for the purposes of subsection (6)(b) it does not matter whether an amount of ordinary income is under taxed for another reason as well (even if it would have been under taxed for that other reason regardless of any reason mentioned in subsection (8)).
(8) The reasons are—
(a) the dual treatment condition being met in relation to a hybrid transfer arrangement under, or in connection with, which the payment or quasi-payment is made (see section 259DB(4));
(b) the payment or quasi-payment being a substitute payment.
(9) For the purposes of this section, disregard—
(a) any excess or part of an excess mentioned in subsection (2), and
(b) any under-taxed amount,
in relation to which the financial trader exclusion applies (see section 259DE) or that arises as a result of a payee being a relevant investment fund (see section 259NA).
(10) Where case 1 applies, the amount of the hybrid transfer deduction/non-inclusion mismatch is equal to the excess that arises as mentioned in subsection (2)(b).
(11) Where case 2 applies, the amount of the hybrid transfer deduction/non-inclusion mismatch is equal to the sum of the amounts given in respect of each under-taxed amount by—
(
UTA
×
(
FMR
−
R
)
)
FMR
where—
“UTA” is the under-taxed amount;
“FMR” is the payee's full marginal rate (expressed as a percentage) for the permitted taxable period for which the under-taxed amount arises;
“R” is the highest rate (expressed as a percentage) at which tax is charged on the taxable profits in which the under-taxed amount is included, taking into account on a just and reasonable basis the effect of any credit for underlying tax.
(12) Where cases 1 and 2 both apply, the amount of the hybrid transfer deduction/non-inclusion mismatch is the sum of the amounts given by subsections (10) and (11).
(13) See section 259DD for the meaning of “permitted taxable period” and “under taxed”.
Interpretation of section 259DC
259DD (1) This section has effect for the purposes of section 259DC.
(2) A taxable period of a payee is “permitted” in relation to an amount of ordinary income that arises as a result of the payment or quasi-payment if—
(a) the period begins before the end of 12 months after the end of the payment period, or
(b) where the period begins after that—
(i) a claim has been made for the period to be a permitted period in relation to the amount of ordinary income, and
(ii) it is just and reasonable for the amount of ordinary income to arise for that taxable period rather than an earlier period.
(3) An amount of ordinary income of a payee, for a permitted taxable period, is “under taxed” if the highest rate at which tax is charged on the taxable profits of the payee in which the amount is included, taking into account on a just and reasonable basis the effect of any credit for underlying tax, is less than the payee's full marginal rate for that period.
(4) The payee's “full marginal rate” means the highest rate at which the tax that is chargeable on the taxable profits mentioned in subsection (3) could be charged on taxable profits, of the payee for the permitted taxable period, which include ordinary income that arises from, or in connection with, a financial instrument.
(5) A “credit for underlying tax” means a credit or relief given to reflect tax charged on profits that are wholly or partly used to fund (directly or indirectly) the payment or quasi-payment.
The financial trader exclusion
259DE (1) This section has effect for the purposes of section 259DC(9).
(2) The financial trader exclusion applies, in relation to an excess or part of an excess mentioned in section 259DC(2) or an under-taxed amount, where conditions A to C are met.
(3) Condition A is that the excess or part arises, or the under-taxed amount is under taxed, because the payment or quasi-payment—
(a) is a substitute payment,
(b) is treated, for the purposes of tax charged on a person, so as to reflect the fact that it is representative of the underlying return, and
(c) is brought into account by another person (“the financial trader”) in calculating the profits of a trade under—
(i) Part 3 of CTA 2009 (trading income), or
(ii) an equivalent provision of the law of a territory outside the United Kingdom.
(4) Condition B is that the financial trader also brings any associated payments into account as mentioned in subsection (3)(c).
(5) In subsection (4) “associated payment” means a payment or quasi-payment—
(a) in relation to which the financial trader is the payer or a payee, and
(b) that is made under, or in connection with, the underlying instrument or an arrangement that relates to the underlying instrument.
(6) Condition C is that—
(a) if the underlying return were to arise, and be paid directly, to the payee or payees in relation to the substitute payment, neither Chapter 3 (hybrid and other mismatches from financial instruments) nor any equivalent provision under the law of a territory outside the United Kingdom would apply, and
(b) the hybrid transfer arrangement under, or in connection with, which the substitute payment is made is not a structured arrangement (within the meaning given by section 259DA(7) and (8)).
Counteraction
Counteraction where the payer is within the charge to corporation tax for the payment period
259DF (1) This section applies where the payer is within the charge to corporation tax for the payment period.
(2) For corporation tax purposes, the relevant deduction that may be deducted from the payer's income for the payment period is reduced by an amount equal to the hybrid transfer deduction/non-inclusion mismatch mentioned in section 259DA(5).
Counteraction where a payee is within the charge to corporation tax
259DG (1) This section applies in relation to a payee where—
(a) the payee is within the charge to corporation tax for an accounting period some or all of which falls within the payment period, and
(b) it is reasonable to suppose that—
(i) neither section 259DF nor any equivalent provision under the law of a territory outside the United Kingdom applies, or
(ii) a provision of the law of a territory outside the United Kingdom that is equivalent to section 259DF applies, but does not fully counteract the hybrid transfer deduction/non-inclusion mismatch mentioned in section 259DA(5).
(2) A provision of the law of a territory outside the United Kingdom that is equivalent to section 259DF does not fully counteract that mismatch if (and only if)—
(a) it does not reduce the relevant deduction by the full amount of the mismatch, and
(b) the payer is still able to deduct some of the relevant deduction from income in calculating taxable profits.
(3) In this section “the relevant amount” is—
(a) in a case where subsection (1)(b)(i) applies, an amount equal to the hybrid transfer deduction/non-inclusion mismatch mentioned in section 259DA(5), or
(b) in a case where subsection (1)(b)(ii) applies, the lesser of—
(i) the amount by which that mismatch exceeds the amount by which it is reasonable to suppose the relevant deduction is reduced by a provision under the law of a territory outside the United Kingdom that is equivalent to section 259DF, and
(ii) the amount of the relevant deduction that may still be deducted as mentioned in subsection (2)(b).
(4) If the payee is the only payee, the relevant amount is to be treated as income arising to the payee for the counteraction period.
(5) If there is more than one payee, an amount equal to the payee's share of the relevant amount is to be treated as income arising to the payee for the counteraction period.
(6) The payee's share of the relevant amount is to be determined by apportioning that amount between all the payees on a just and reasonable basis, having regard (in particular)—
(a) to any arrangements as to profit sharing that may exist between some or all of the payees,
(b) to whom any under-taxed amounts (within the meaning given by section 259DC(6)) arise, and
(c) to whom any amounts of ordinary income that it would be reasonable to expect to arise as a result of the payment or quasi-payment, but that do not arise, would have arisen.
(7) An amount of income that is treated as arising under subsection (4) or (5) is chargeable under Chapter 8 of Part 10 of CTA 2009 (income not otherwise charged) (despite section 979(2) of that Act).
(8) The “counteraction period” means—
(a) if an accounting period of the payee coincides with the payment period, that accounting period, or
(b) otherwise, the first accounting period of the payee that is wholly or partly within the payment period.
CHAPTER 5 Hybrid payer deduction/non-inclusion mismatches
Introduction
Overview of Chapter
259E (1) This Chapter contains provision that counteracts deduction/non-inclusion mismatches that it is reasonable to suppose would otherwise arise from payments or quasi-payments because the payer is a hybrid entity.
(2) The Chapter counteracts mismatches where the payer or a payee is within the charge to corporation tax and does so by altering the corporation tax treatment of the payer or a payee.
(3) Section 259EA contains the conditions that must be met for this Chapter to apply.
(4) Section 259EB defines “hybrid payer deduction/non-inclusion mismatch” and provides how the amount of the mismatch is to be calculated.
(5) Section 259EC contains provision that counteracts the mismatch where the payer is within the charge to corporation tax for the payment period.
(6) Section 259ED contains provision that counteracts the mismatch where a payee is within the charge to corporation tax and the mismatch is not fully counteracted by provision under the law of a territory outside the United Kingdom that is equivalent to section 259EC.
(7) See also—
(a) section 259BB for the meaning of “payment”, “quasi-payment”, “payment period”, “relevant deduction”, “payer” and “payee”, and
(b) section 259BE for the meaning of “hybrid entity”, “investor” and “investor jurisdiction”.
Application of Chapter
Circumstances in which the Chapter applies
259EA (1) This Chapter applies if conditions A to E are met.
(2) Condition A is that a payment or quasi-payment is made under, or in connection with, an arrangement.
(3) Condition B is that the payer is a hybrid entity (“the hybrid payer”).
(4) Condition C is that—
(a) the hybrid payer is within the charge to corporation tax for the payment period, or
(b) a payee is within the charge to corporation tax for an accounting period some or all of which falls within the payment period.
(5) Condition D is that it is reasonable to suppose that, disregarding the provisions mentioned in subsection (6), there would be a hybrid payer deduction/non-inclusion mismatch in relation to the payment or quasi-payment (see section 259EB).
(6) The provisions are—
(a) this Chapter and Chapters 6 to 10, and
(b) any equivalent provision under the law of a territory outside the United Kingdom.
(7) Condition E is that—
(a) it is a quasi-payment that is made as mentioned in subsection (2) and the hybrid payer is also a payee (see section 259BB(7)),
(b) the hybrid payer and a payee are in the same control group (see section 259NB) at any time in the period—
(i) beginning with the day on which the arrangement mentioned in subsection (2) is made, and
(ii) ending with the last day of the payment period, or
(c) that arrangement is a structured arrangement.
(8) The arrangement is “structured” if it is reasonable to suppose that—
(a) the arrangement is designed to secure a hybrid payer deduction/non-inclusion mismatch, or
(b) the terms of the arrangement share the economic benefit of the mismatch between the parties to the arrangement or otherwise reflect the fact that the mismatch is expected to arise.
(9) The arrangement may be designed to secure a hybrid payer deduction/non-inclusion mismatch despite also being designed to secure any commercial or other objective.
(10) Sections 259EC (cases where the hybrid payer is within the charge to corporation tax for the payment period) and 259ED (cases where a payee is within the charge to corporation tax) contain provision for the counteraction of the hybrid payer deduction/non-inclusion mismatch.
Hybrid payer deduction/non-inclusion mismatches and their extent
259EB (1) There is a “hybrid payer deduction/non-inclusion mismatch”, in relation to a payment or quasi-payment, if—
(a) the relevant deduction exceeds the sum of the amounts of ordinary income that, by reason of the payment or quasi-payment, arise to each payee for a permitted taxable period, and
(b) all or part of that excess arises by reason of the hybrid payer being a hybrid entity.
(2) The amount of the hybrid payer deduction/non-inclusion mismatch is equal to the excess that arises as mentioned in subsection (1)(b).
(3) For the purposes of subsection (1)(b)—
(a) it does not matter whether the excess or part arises for another reason as well (even if it would have arisen for that other reason regardless of whether the hybrid payer is a hybrid entity), and
(b) an excess or part of an excess is to be taken to arise by reason of the hybrid payer being a hybrid entity (so far as would not otherwise be the case) if, on making such of the relevant assumptions in relation to each payee as apply in relation to that payee (see subsection (4)), it could arise by reason of the hybrid payer being a hybrid entity.
(4) These are the “relevant assumptions”—
(a) where a payee is not within the charge to a tax under the law of a payee jurisdiction because the payee benefits from an exclusion, immunity, exemption or relief (however described) under that law, assume that the exclusion, immunity, exemption or relief does not apply;
(b) where an amount of income is not included in the ordinary income of a payee for the purposes of a tax charged under the law of a payee jurisdiction because the payment or quasi-payment is not made in connection with a business carried on by the payee in that jurisdiction, assume that the payment or quasi-payment is made in connection with such a business.
(5) A taxable period of a payee is “permitted” in relation to an amount of ordinary income that arises as a result of the payment or quasi-payment if—
(a) the period begins before the end of 12 months after the end of the payment period, or
(b) where the period begins after that—
(i) a claim has been made for the period to be a permitted period in relation to the amount of ordinary income, and
(ii) it is just and reasonable for the amount of ordinary income to arise for that taxable period rather than an earlier period.
Counteraction
Counteraction where the hybrid payer is within the charge to corporation tax for the payment period
259EC (1) This section applies where the hybrid payer is within the charge to corporation tax for the payment period.
(2) For corporation tax purposes, the relevant deduction so far as it does not exceed the hybrid payer deduction/non-inclusion mismatch mentioned in section 259EA(5) (“the restricted deduction”) may not be deducted from the hybrid payer's income for the payment period unless it is deducted from dual inclusion income for that period.
(3) So much of the restricted deduction (if any) as, by virtue of subsection (2), cannot be deducted from the payer's income for the payment period—
(a) is carried forward to subsequent accounting periods of the payer, and
(b) for corporation tax purposes, may be deducted from dual inclusion income for any such period (and not from any other income), so far as it cannot be deducted under this paragraph for an earlier period.
(4) In this section “dual inclusion income” of the payer for an accounting period means an amount that arises in connection with the arrangement mentioned in section 259EA(2) and is both—
(a) ordinary income of the payer for that period for corporation tax purposes, and
(b) ordinary income of an investor in the payer for a permitted taxable period for the purposes of any tax charged under the law of an investor jurisdiction.
(5) A taxable period of an investor is “permitted” for the purposes of paragraph (b) of subsection (4) if—
(a) the period begins before the end of 12 months after the end of the accounting period mentioned in paragraph (a) of that subsection, or
(b) where the period begins after that—
(i) a claim has been made for the period to be a permitted period in relation to the amount of ordinary income, and
(ii) it is just and reasonable for the amount of ordinary income to arise for that taxable period rather than an earlier period.
Counteraction where a payee is within the charge to corporation tax
259ED (1) This section applies in relation to a payee where—
(a) the payee is within the charge to corporation tax for an accounting period some or all of which falls within the payment period, and
(b) it is reasonable to suppose that—
(i) no provision under the law of a territory outside the United Kingdom that is equivalent to section 259EC applies, or
(ii) such a provision does apply, but does not fully counteract the hybrid payer deduction/non-inclusion mismatch mentioned in section 259EA(5).
(2) A provision of the law of a territory outside the United Kingdom that is equivalent to section 259EC does not fully counteract that mismatch if (and only if)—
(a) the amount of the relevant deduction that the provision prevents from being deducted from income of the hybrid payer, for the payment period, other than dual inclusion income, is less than the amount of the mismatch, and
(b) the hybrid payer is still able to deduct some of the relevant deduction from income, for the payment period, that is not dual inclusion income.
(3) In this section “the relevant amount” is—
(a) in a case where subsection (1)(b)(i) applies, an amount equal to the hybrid payer deduction/non-inclusion mismatch mentioned in section 259EA(5), or
(b) in a case where subsection (1)(b)(ii) applies, the lesser of—
(i) the amount by which that mismatch exceeds the amount of the relevant deduction that it is reasonable to suppose is prevented, by a provision of the law of a territory outside the United Kingdom that is equivalent to section 259EC, from being deducted from income of the hybrid payer, for the payment period, other than dual inclusion income, and
(ii) the amount of the relevant deduction that may still be deducted as mentioned in subsection (2)(b).
(4) If the payee is the only payee, an amount equal to—
(a) the relevant amount, less
(b) any dual inclusion income,
is to be treated as income arising to the payee for the counteraction period.
(5) If there is more than one payee, an amount equal to—
(a) the payee's share of the relevant amount, less
(b) the relevant proportion of any dual inclusion income,
is to be treated as income arising to the payee for the counteraction period.
(6) The payee's share of the relevant amount is to be determined by apportioning that amount between all the payees on a just and reasonable basis, having regard (in particular)—
(a) to any arrangements as to profit sharing that may exist between some or all of the payees, and
(b) to whom any amounts of ordinary income that it would be reasonable to expect to arise as a result of the payment or quasi-payment, but that do not arise, would have arisen.
(7) The “relevant” proportion of any dual inclusion income for the payment period is the same as the proportion of the relevant amount apportioned to the payee in accordance with subsection (6).
(8) An amount of income that is treated as arising under subsection (4) or (5) is chargeable under Chapter 8 of Part 10 of CTA 2009 (income not otherwise charged) (despite section 979(2) of that Act).
(9) In this section—
“counteraction period” means—
if an accounting period of the payee coincides with the payment period, that accounting period, or
otherwise, the first accounting period of the payee that is wholly or partly within the payment period;
“dual inclusion income” means an amount that arises in connection with the arrangement mentioned in section 259EA(2) and is both—
ordinary income of the payer for the payment period, and
ordinary income of an investor in the payer for a permitted taxable period for the purposes of a tax charged under the law of an investor jurisdiction.
(10) A taxable period of an investor is “permitted” for the purposes of subsection (9) if—
(a) the period begins before the end of 12 months after the end of the payment period, or
(b) where the period begins after that—
(i) a claim has been made for the period to be a permitted period in relation to the amount of ordinary income, and
(ii) it is just and reasonable for the amount of ordinary income to arise for that taxable period rather than an earlier period.
CHAPTER 6 Deduction/non-inclusion mismatches relating to transfers by permanent establishments
Introduction
Overview of Chapter
259F (1) This Chapter contains provision that counteracts certain excessive deductions that arise in relation to transfers of money or money's worth made, or taken to be made, by a multinational company's permanent establishment in the United Kingdom to the company in the parent jurisdiction.
(2) The Chapter counteracts such deductions by altering the corporation tax treatment of the company.
(3) Section 259FA contains the conditions that must be met for this Chapter to apply.
(4) Subsection (3) of that section defines “multinational company” and “the parent jurisdiction”.
(5) Subsection (8) of that section defines “the excessive PE deduction”.
(6) Section 259FB contains provision for the counteraction of the excessive PE deduction.
(7) See also section 259BF for the meaning of “permanent establishment”.
Application of Chapter
Circumstances in which the Chapter applies
259FA (1) This Chapter applies if conditions A to C are met.
(2) Condition A is that a company is a multinational company.
(3) For the purposes of this Chapter, a company is a multinational company if—
(a) it is resident in a territory outside the United Kingdom (“the parent jurisdiction”) for the purposes of a tax charged under the law of that territory, and
(b) it is within the charge to corporation tax because it carries on a business in the United Kingdom through a permanent establishment in the United Kingdom.
(4) Condition B is that, disregarding the provisions mentioned in subsection (5), there is an amount (“the PE deduction”) that—
(a) may (in substance) be deducted from the company's income for the purposes of calculating the company's taxable profits for an accounting period (“the relevant PE period”) for corporation tax purposes, and
(b) is in respect of a transfer of money or money's worth from the company in the United Kingdom to the company in the parent jurisdiction that—
(i) is actually made, or
(ii) is (in substance) treated as being made for corporation tax purposes.
(5) The provisions are—
(a) this Chapter and Chapters 7 to 10, and
(b) any equivalent provision under the law of a territory outside the United Kingdom.
(6) Condition C is that it is reasonable to suppose that, disregarding the provisions mentioned in subsection (5)—
(a) the circumstances giving rise to the PE deduction will not result in—
(i) an increase in the taxable profits of the company for any permitted taxable period, or
(ii) a reduction of a loss made by the company for any permitted taxable period,
for the purposes of a tax charged under the law of the parent jurisdiction, or
(b) those circumstances will result in such an increase or reduction for one or more permitted taxable periods, but the PE deduction exceeds the aggregate effect on taxable profits.
(7) “The aggregate effect on taxable profits” is the sum of—
(a) any increases, resulting from the circumstances giving rise to the PE deduction, in the taxable profits of the company, for a permitted taxable period, for the purposes of a tax charged under the law of the parent jurisdiction, and
(b) any amounts by which a loss made by the company, for a permitted taxable period, for the purposes of a tax charged under the law of the parent jurisdiction, is reduced as a result of the circumstances giving rise to the PE deduction.
(8) In this Chapter “the excessive PE deduction” means—
(a) where paragraph (a) of subsection (6) applies, the PE deduction, or
(b) where paragraph (b) of subsection (6) applies, the PE deduction so far as it is reasonable to suppose that it exceeds the aggregate effect on taxable profits.
(9) For the purposes of subsections (6) and (7) a taxable period of the company, for the purposes of a tax charged under the law of the parent jurisdiction, is “permitted” if—
(a) the period begins before the end of 12 months after the end of the relevant PE period, or
(b) where the period begins after that—
(i) a claim has been made for the period to be a permitted period for the purposes of subsections (6) and (7), and
(ii) it is just and reasonable for the circumstances giving rise to the PE deduction to affect the profits or loss made for that period rather than an earlier period.
(10) Section 259FB contains provision for counteracting the excessive PE deduction.
Counteraction
Counteraction of the excessive PE deduction
259FB (1) For corporation tax purposes, the excessive PE deduction may not be deducted from the company's income for the relevant PE period unless it is deducted from dual inclusion income for that period.
(2) So much of the excessive PE deduction (if any) as, by virtue of subsection (1), cannot be deducted from the company's income for the relevant PE period—
(a) is carried forward to subsequent accounting periods of the company, and
(b) for corporation tax purposes, may be deducted from dual inclusion income of the company for any such period (and not from any other income), so far as it cannot be deducted under this paragraph for an earlier period.
(3) In this section “dual inclusion income” of the company for an accounting period means an amount that is both—
(a) ordinary income of the company for that period for corporation tax purposes, and
(b) ordinary income of the company for a permitted taxable period for the purposes of a tax charged under the law of the parent jurisdiction.
(4) A taxable period of the company is “permitted” for the purposes of paragraph (b) of subsection (3) if—
(a) the period begins before the end of 12 months after the end of the accounting period mentioned in paragraph (a) of that subsection, or
(b) where the period begins after that—
(i) a claim has been made for the period to be a permitted period in relation to the amount of ordinary income, and
(ii) it is just and reasonable for the amount of ordinary income to arise for that taxable period rather than an earlier period.
CHAPTER 7 Hybrid payee deduction/non-inclusion mismatches
Introduction
Overview of Chapter
259G (1) This Chapter contains provision that counteracts deduction/non-inclusion mismatches that it is reasonable to suppose would otherwise arise from payments or quasi-payments because a payee is a hybrid entity.
(2) The Chapter counteracts mismatches by—
(a) altering the corporation tax treatment of the payer for the payment period,
(b) treating income chargeable to corporation tax as arising to an investor who is within the charge to corporation tax, or
(c) treating income chargeable to corporation tax as arising to a payee that is a hybrid entity and a limited liability partnership.
(3) Section 259GA contains the conditions that must be met for this Chapter to apply.
(4) Section 259GB defines “hybrid payee deduction/non-inclusion mismatch” and provides how the amount of the mismatch is to be calculated.
(5) Section 259GC contains provision that counteracts the mismatch where the payer is within the charge to corporation tax for the payment period.
(6) Section 259GD contains provision that counteracts the mismatch where an investor in the payee is within the charge to corporation tax and the mismatch is not fully counteracted by section 259GC or an equivalent provision under the law of a territory outside the United Kingdom.
(7) Section 259GE contains provision that counteracts the mismatch where a payee is a hybrid entity and limited liability partnership and the mismatch is not otherwise fully counteracted.
(8) See also—
(a) section 259BB for the meaning of “payment”, “quasi-payment”, “payment period”, “relevant deduction”, “payer” and “payee”;
(b) section 259BE for the meaning of “hybrid entity”, “investor” and “investor jurisdiction”.
Application of Chapter
Circumstances in which the Chapter applies
259GA (1) This Chapter applies if conditions A to E are met.
(2) Condition A is that a payment or quasi-payment is made under, or in connection with, an arrangement.
(3) Condition B is that a payee is a hybrid entity (a “hybrid payee”).
(4) Condition C is that—
(a) the payer is within the charge to corporation tax for the payment period,
(b) an investor in a hybrid payee is within the charge to corporation tax for an accounting period some or all of which falls within the payment period, or
(c) a hybrid payee is a limited liability partnership.
(5) Condition D is that it is reasonable to suppose that, disregarding the provisions mentioned in subsection (6), there would be a hybrid payee deduction/non-inclusion mismatch in relation to the payment or quasi-payment (see section 259GB).
(6) The provisions are—
(a) this Chapter and Chapters 8 to 10, and
(b) any equivalent provision under the law of a territory outside the United Kingdom.
(7) Condition E is that—
(a) it is a quasi-payment that is made as mentioned in subsection (2) and the payer is also a hybrid payee (see section 259BB(7)),
(b) the payer and a hybrid payee or an investor in a hybrid payee are in the same control group (see section 259NB) at any time in the period—
(i) beginning with the day on which the arrangement mentioned in subsection (2) is made, and
(ii) ending with the last day of the payment period, or
(c) that arrangement is a structured arrangement.
(8) The arrangement is “structured” if it is reasonable to suppose that—
(a) the arrangement is designed to secure a hybrid payee deduction/non-inclusion mismatch, or
(b) the terms of the arrangement share the economic benefit of the mismatch between the parties to the arrangement or otherwise reflect the fact that the mismatch is expected to arise.
(9) The arrangement may be designed to secure a hybrid payee deduction/non-inclusion mismatch despite also being designed to secure any commercial or other objective.
(10) The following provisions contain provision for the counteraction of the hybrid payee deduction/non-inclusion mismatch—
(a) section 259GC (cases where the payer is within the charge to corporation tax for the payment period),
(b) section 259GD (cases where an investor in a hybrid payee is within the charge to corporation tax), and
(c) section 259GE (cases where a hybrid payee is a limited liability partnership).
Hybrid payee deduction/non-inclusion mismatches and their extent
259GB (1) There is a “hybrid payee deduction/non-inclusion mismatch”, in relation to a payment or quasi-payment, if—
(a) the relevant deduction exceeds the sum of the amounts of ordinary income that, by reason of the payment or quasi-payment, arise to each payee for a permitted taxable period, and
(b) all or part of that excess arises by reason of one or more payees being hybrid entities.
(2) The extent of the hybrid payee deduction/non-inclusion mismatch is equal to the excess that arises as mentioned in subsection (1)(b).
(3) A relevant amount of the excess is to be taken (so far as would not otherwise be the case) to arise as mentioned in subsection (1)(b) where—
(a) a payee is a hybrid entity,
(b) there is no territory—
(i) where that payee is resident for the purposes of a tax charged under the law of that territory, or
(ii) under the law of which ordinary income arises to that payee, by reason of the payment or quasi-payment, for the purposes of a tax that is charged on that payee by virtue of that payee having a permanent establishment in that territory, and
(c) no income arising to that payee, by reason of the payment or quasi-payment, is brought into account in calculating chargeable profits for the purposes of the CFC charge or a foreign CFC charge.
(4) For the purposes of subsection (3), the “relevant amount” of the excess is the lesser of—
(a) the amount of the excess, and
(b) an amount equal to the amount of ordinary income that it is reasonable to suppose would, by reason of the payment or quasi-payment, arise to the payee for corporation tax purposes, if—
(i) the payee were a company, and
(ii) the payment or quasi-payment were made in connection with a trade carried on by the payee in the United Kingdom through a permanent establishment in the United Kingdom.
(5) In subsection (3)(c) “chargeable profits”—
(a) in relation to the CFC charge, has the same meaning as in Part 9A (see section 371VA), and
(b) in relation to a foreign CFC charge, means the concept (by whatever name known) corresponding to chargeable profits within the meaning of that Part.
(6) A taxable period of a payee is “permitted” in relation to an amount of ordinary income that arises as a result of the payment or quasi-payment if—
(a) the period begins before the end of 12 months after the end of the payment period, or
(b) where the period begins after that—
(i) a claim has been made for the period to be a permitted period in relation to the amount of ordinary income, and
(ii) it is just and reasonable for the amount of ordinary income to arise for that taxable period rather than an earlier period.
Counteraction
Counteraction where the payer is within the charge to corporation tax for the payment period
259GC (1) This section applies where the payer is within the charge to corporation tax for the payment period.
(2) For corporation tax purposes, the relevant deduction that may be deducted from the payer's income for the payment period is reduced by an amount equal to the hybrid payee deduction/non-inclusion mismatch mentioned in section 259GA(5).
Counteraction where the investor is within the charge to corporation tax
259GD (1) This section applies in relation to an investor in a hybrid payee where—
(a) the investor is within the charge to corporation tax for an accounting period some or all of which falls within the payment period, and
(b) it is reasonable to suppose that—
(i) neither section 259GC nor any equivalent provision under the law of a territory outside the United Kingdom applies, or
(ii) a provision of the law of a territory outside the United Kingdom that is equivalent to section 259GC applies, but does not fully counteract the hybrid payee deduction/non-inclusion mismatch mentioned in section 259GA(5).
(2) A provision of the law of a territory outside the United Kingdom that is equivalent to section 259GC does not fully counteract that mismatch if (and only if)—
(a) it does not reduce the relevant deduction by the full amount of the mismatch, and
(b) the payer is still able to deduct some of the relevant deduction from income in calculating taxable profits.
(3) In this section “the relevant amount” is—
(a) in a case where subsection (1)(b)(i) applies, an amount equal to the hybrid payee deduction/non-inclusion mismatch, or
(b) in a case where subsection (1)(b)(ii) applies, the lesser of—
(i) the amount by which that mismatch exceeds the amount by which it is reasonable to suppose the relevant deduction is reduced by a provision of the law of a territory outside the United Kingdom that is equivalent to section 259GC, and
(ii) the amount of the relevant deduction that may still be deducted as mentioned in subsection (2)(b).
(4) If the investor is the only investor in the hybrid payee, the appropriate proportion of the relevant amount is to be treated as income arising to the investor for the counteraction period.
(5) If there is more than one investor in the hybrid payee, an amount equal to the investor's share of the appropriate proportion of the relevant amount is to be treated as income arising to the investor for the counteraction period.
(6) For the purposes of subsections (4) and (5) the “appropriate proportion of the relevant amount”—
(a) if the hybrid payee is the only hybrid payee, is all of the relevant amount, or
(b) if there is more than one hybrid payee, is the proportion of the relevant amount apportioned to the hybrid payee upon an apportionment of that amount between all the hybrid payees on a just and reasonable basis having regard (in particular) to—
(i) any arrangements as to profit sharing that may exist between some or all of the payees, and
(ii) the extent to which it is reasonable to suppose that the hybrid payee deduction/non-inclusion mismatch mentioned in section 259GA(5) arises by reason of each hybrid payee being a hybrid entity.
(7) The investor's share of the appropriate proportion of the relevant amount is to be determined by apportioning that proportion of that amount between all the investors in the hybrid payee on a just and reasonable basis, having regard (in particular) to any arrangements as to profit sharing that may exist between some or all of those investors.
(8) An amount of income that is treated as arising under subsection (4) or (5) is chargeable under Chapter 8 of Part 10 of CTA 2009 (income not otherwise charged) (despite section 979(23) of that Act).
(9) The “counteraction period” means—
(a) if an accounting period of the investor coincides with the payment period, that accounting period, or
(b) otherwise, the first accounting period of the investor that is wholly or partly within the payment period.
Counteraction where a hybrid payee is an LLP
259GE (1) This section applies in relation to a hybrid payee where the hybrid payee is a limited liability partnership and it is reasonable to suppose that—
(a) none of the following provisions applies—
(i) section 259GC;
(ii) section 259GD;
(iii) any provision under the law of a territory outside the United Kingdom that is equivalent to either of those sections, or
(b) one or more of those provisions apply, but the hybrid payee deduction/non-inclusion mismatch mentioned in section 259GA(5) is not fully counteracted.
(2) The mismatch is not fully counteracted if (and only if), after the application of such of those provisions as apply—
(a) the relevant deduction is not reduced by the full amount of the mismatch,
(b) the payer is still able to deduct some of the relevant deduction from income in calculating taxable profits, and
(c) the lesser of—
(i) the difference between the amount of the mismatch and the amount by which it is reasonable to suppose the relevant deduction is reduced, and
(ii) the amount of the relevant deduction that may still be deducted,
exceeds the sum of any amounts of income treated as arising under section 259GD or any equivalent provision under the law of a territory outside the United Kingdom.
(3) In this section “the relevant amount” is—
(a) in a case where subsection (1)(a) applies, an amount equal to the hybrid payee deduction/non-inclusion mismatch mentioned in section 259GA(5), or
(b) in a case where subsection (1)(b) applies, an amount equal to the excess mentioned in subsection (2)(c).
(4) If the hybrid payee is the only hybrid payee, an amount equal to the relevant amount is to be treated as income arising to the hybrid payee on the last day of the payment period.
(5) If there is more than one hybrid payee, an amount equal to the hybrid payee's share of the relevant amount is to be treated as income arising to the hybrid payee on the last day of the payment period.
(6) The hybrid payee's share of the relevant amount is to be determined by apportioning that amount between all the hybrid payees on a just and reasonable basis, having regard (in particular) to—
(a) any arrangements as to profit sharing that may exist between some or all of the payees, and
(b) the extent to which it is reasonable to suppose that the hybrid payee deduction/non-inclusion mismatch mentioned in section 259GA(5) arises by reason of each hybrid payee being a hybrid entity.
(7) An amount of income that is treated as arising under subsection (4) or (5) is chargeable to corporation tax on the hybrid payee (as opposed to being chargeable to tax on any of its members) under Chapter 8 of Part 10 of CTA 2009 (income not otherwise charged) (despite section 979(2) of that Act).
(8) Section 863 of ITTOIA 2005 (treatment of certain limited liability partnerships for income tax purposes) and section 1273 of CTA 2009 (treatment of certain limited liability partnerships for corporation tax purposes) are disapplied in relation to the hybrid payee to the extent necessary for the purposes of subsection (7).
(9) This section is to be disregarded for the purposes of determining whether the hybrid payee is within the charge to corporation tax for the purposes of any other provision of this Part, except section 259M (anti-avoidance).
CHAPTER 8 Multinational payee deduction/non-inclusion mismatches
Introduction
Overview of Chapter
259H (1) This Chapter contains provision that counteracts deduction/non-inclusion mismatches that it is reasonable to suppose would otherwise arise from payments or quasi-payments, where the payer is within the charge to corporation tax, because a payee is multinational company.
(2) The Chapter counteracts mismatches by altering the corporation tax treatment of the payer.
(3) Section 259HA contains the conditions that must be met for this Chapter to apply.
(4) Subsection (4) of that section defines “multinational company”, “parent jurisdiction” and “PE jurisdiction”.
(5) Section 259HB defines “multinational payee deduction/non-inclusion mismatch” and provides how the amount of the mismatch is to be calculated.
(6) Section 259HC contains provision that counteracts the mismatch.
(7) See also—
(a) section 259BB for the meaning of “payment”, “quasi-payment”, “payment period”, “relevant deduction”, “payer” and “payee”;
(b) section 259BF for the meaning of “permanent establishment”.
Application of Chapter
Circumstances in which the Chapter applies
259HA (1) This Chapter applies if conditions A to E are met.
(2) Condition A is that a payment or quasi-payment is made under, or in connection with, an arrangement.
(3) Condition B is that a payee is a multinational company.
(4) For the purposes of this Chapter, a company is a “multinational company” if—
(a) it is resident in a territory (“the parent jurisdiction”) for tax purposes under the law of that territory, and
(b) it is regarded as carrying on a business in another territory (“the PE jurisdiction”) through a permanent establishment in that territory (whether it is so regarded under the law of the parent jurisdiction, the PE jurisdiction or any other territory).
(5) Condition C is that the payer is within the charge to corporation tax for the payment period.
(6) Condition D is that it is reasonable to suppose that, disregarding the provisions mentioned in subsection (7), there would be a multinational payee deduction/non-inclusion mismatch in relation to the payment or quasi-payment (see section 259HB).
(7) The provisions are—
(a) this Chapter and Chapters 9 and 10, and
(b) any equivalent provision under the law of a territory outside the United Kingdom.
(8) Condition E is that—
(a) it is a quasi-payment that is made as mentioned in subsection (2) and the payer is also a payee (see section 259BB(7)),
(b) the payer and the multinational company are in the same control group (see section 259NB) at any time in the period—
(i) beginning with the day on which the arrangement mentioned in subsection (2) is made, and
(ii) ending with the last day of the payment period, or
(c) that arrangement is a structured arrangement.
(9) The arrangement is “structured” if it is reasonable to suppose that—
(a) the arrangement is designed to secure a multinational company deduction/non-inclusion mismatch, or
(b) the terms of the arrangement share the economic benefit of the mismatch between the parties to the arrangement or otherwise reflect the fact that the mismatch is expected to arise.
(10) The arrangement may be designed to secure a multinational payee deduction/non-inclusion mismatch despite also being designed to secure any commercial or other objective.
(11) Section 259HC contains provision for the counteraction of the multinational payee deduction/non-inclusion mismatch.
Multinational payee deduction/non-inclusion mismatches and their extent
259HB (1) There is a “multinational payee deduction/non-inclusion mismatch”, in relation to a payment or quasi-payment, if—
(a) the relevant deduction exceeds the sum of the amounts of ordinary income that, by reason of the payment or quasi-payment, arise to each payee for a permitted taxable period, and
(b) all or part of that excess arises by reason of one or more payees being multinational companies.
(2) The extent of the multinational payee deduction/non-inclusion mismatch is equal to the excess that arises as mentioned in subsection (1)(b).
(3) For the purposes of subsection (1)(b)—
(a) where the law of a PE jurisdiction in relation to a payee that is a multinational company makes no provision for charging tax on any companies, so much of the excess as arises as a result is to be taken not to arise by reason of that payee being a multinational company, but
(b) subject to that, it does not matter whether the excess or part arises for another reason as well as one or more payees being multinational companies (even if it would have arisen for that other reason regardless of whether any payees are multinational companies).
(4) A taxable period of a payee is “permitted” in relation to an amount of ordinary income that arises as a result of the payment or quasi-payment if—
(a) the period begins before the end of 12 months after the end of the payment period, or
(b) where the period begins after that—
(i) a claim has been made for the period to be a permitted period in relation to the amount of ordinary income, and
(ii) it is just and reasonable for the amount of ordinary income to arise for that taxable period rather than an earlier period.
Counteraction
Counteraction of the multinational payee deduction/non-inclusion mismatch
259HC For corporation tax purposes, the relevant deduction that may be deducted from the payer's income for the payment period is reduced by an amount equal to the multinational payee deduction/non-inclusion mismatch mentioned in section 259HA(6).
CHAPTER 9 Hybrid entity double deduction mismatches
Introduction
Overview of Chapter
259I (1) This Chapter contains provision that counteracts double deduction mismatches that it is reasonable to suppose would otherwise arise by reason of a person being a hybrid entity.
(2) The Chapter counteracts mismatches where the hybrid entity, or an investor in the hybrid entity, is within the charge to corporation tax and does so by altering the corporation tax treatment of the entity or investor.
(3) Section 259IA contains the conditions that must be met for this Chapter to apply.
(4) Subsection (4) of that section defines “hybrid entity double deduction amount”.
(5) Section 259IB contains provision that counteracts the mismatch where an investor in the hybrid entity is within the charge to corporation tax.
(6) Section 259IC contains provision that, in certain circumstances, counteracts the mismatch where the hybrid entity is within the charge to corporation tax and the mismatch is not fully counteracted by provision under the law of a territory outside the United Kingdom that is equivalent to section 259IB.
(7) See also section 259BE for the meaning of “hybrid entity”, “investor” and “investor jurisdiction”.
Application of Chapter
Circumstances in which the Chapter applies
259IA (1) This Chapter applies if conditions A to C are met.
(2) Condition A is that there is an amount or part of an amount that, disregarding the provisions mentioned in subsection (3), it is reasonable to suppose—
(a) could be deducted from the income of a hybrid entity for the purposes of calculating the taxable profits of that entity for a taxable period (“the hybrid entity deduction period”), and
(b) could also be deducted, under the law of the investor jurisdiction, from the income of an investor in the hybrid entity for the purposes of calculating the taxable profits of that investor for a taxable period (“the investor deduction period”).
(3) The provisions are—
(a) this Chapter and Chapter 10, and
(b) any equivalent provision under the law of a territory outside the United Kingdom.
(4) In this Chapter the amount or part of an amount mentioned in subsection (2) is referred to as “the hybrid entity double deduction amount”.
(5) Condition B is that—
(a) the investor is within the charge to corporation tax for the investor deduction period, or
(b) the hybrid entity is within the charge to corporation tax for the hybrid entity deduction period.
(6) Condition C is that—
(a) the hybrid entity and any investor in it are related (see section 259NC) at any time—
(i) in the hybrid entity deduction period, or
(ii) in the investor deduction period, or
(b) an arrangement, to which the hybrid entity or any investor in it is party, is a structured arrangement.
(7) An arrangement is “structured” if it is reasonable to suppose that—
(a) the arrangement is designed to secure the hybrid entity double deduction amount, or
(b) the terms of the arrangement share the economic benefit of that amount being deductible by both the hybrid entity and the investor between the parties to the arrangement or otherwise reflect the fact that the amount is expected to arise.
(8) The arrangement may be designed to secure the hybrid entity double deduction amount despite also being designed to secure any commercial or other objective.
(9) Sections 259IB (cases where the investor is within the charge to corporation tax for the investor deduction period) and 259IC (cases where the hybrid entity is within the charge to corporation tax for the hybrid entity deduction period) contain provision for the counteraction of the hybrid entity double deduction amount.
Counteraction
Counteraction where the investor is within the charge to corporation tax
259IB (1) This section applies in relation to the investor in the hybrid entity where the investor is within the charge to corporation tax for the investor deduction period.
(2) For corporation tax purposes, the hybrid entity double deduction amount may not be deducted from the investor's income for the investor deduction period unless it is deducted from dual inclusion income of the investor for that period.
(3) So much of the hybrid entity double deduction amount (if any) as, by virtue of subsection (2), cannot be deducted from the investor's income for the investor deduction period—
(a) is carried forward to subsequent accounting periods of the investor, and
(b) for corporation tax purposes, may be deducted from dual inclusion income of the investor for any such period (and not from any other income), so far as it cannot be deducted under this paragraph for an earlier period.
(4) If the Commissioners are satisfied that the investor will have no dual inclusion income—
(a) for an accounting period after the investor deduction period (“the relevant period”), nor
(b) for any accounting period after the relevant period,
any of the hybrid entity double deduction amount that has not been deducted from dual inclusion income for an accounting period before the relevant period in accordance with subsection (2) or (3) (“the stranded deduction”) may be deducted at step 2 in section 4(2) of CTA 2010 in calculating the investor's taxable total profits of the relevant period.
(5) So much of the stranded deduction (if any) as cannot be deducted, in accordance with subsection (4), at step 2 in section 4(2) of CTA 2010 in calculating the investor's taxable total profits of the relevant period—
(a) is carried forward to subsequent accounting periods of the investor, and
(b) may be so deducted for any such period, so far as it cannot be deducted under this paragraph for an earlier period.
(6) Subsection (7) applies if it is reasonable to suppose that all or part of the hybrid entity double deduction amount is (in substance) deducted (“the illegitimate overseas deduction”), under the law of a territory outside the United Kingdom, from income of any person, for a taxable period, that is not dual inclusion income of the investor for an accounting period.
(7) For the purposes of determining how much of the hybrid entity double deduction amount may be deducted (if any) for the accounting period of the investor in which the taxable period mentioned in subsection (6) ends, and any subsequent accounting periods of the investor, an amount of it equal to the illegitimate overseas deduction is to be taken to have already been deducted for a previous accounting period of the investor.
(8) In this section “dual inclusion income” of the investor for an accounting period means an amount that is both—
(a) ordinary income of the investor for that period for corporation tax purposes, and
(b) ordinary income of the hybrid entity for a permitted taxable period for the purposes of any tax under the law of a territory outside the United Kingdom.
(9) A taxable period of the hybrid entity is “permitted” for the purposes of paragraph (b) of subsection (8) if—
(a) the period begins before the end of 12 months after the end of the accounting period of the investor mentioned in paragraph (a) of that subsection, or
(b) where the period begins after that—
(i) a claim has been made for the period to be a permitted period in relation to the amount of ordinary income, and
(ii) it is just and reasonable for the amount of ordinary income to arise for that taxable period rather than an earlier period.
Counteraction where the hybrid entity is within the charge to corporation tax
259IC (1) This section applies where—
(a) the hybrid entity is within the charge to corporation tax for the hybrid entity deduction period,
(b) it is reasonable to suppose that—
(i) no provision under the law of an investor jurisdiction that is equivalent to section 259IB applies, or
(ii) such a provision does apply, but the hybrid entity double deduction amount exceeds the amount that, under that provision, cannot be deducted from income, for the investor deduction period, other than dual inclusion income of the hybrid entity for the hybrid entity deduction period, and
(c) the secondary counteraction condition is met.
(2) The secondary counteraction condition is met if—
(a) the hybrid entity and any investor in it are in the same control group (see section 259NB) at any time in—
(i) the hybrid entity deduction period, or
(ii) the investor deduction period, or
(b) there is an arrangement, to which the hybrid entity or any investor in it is party, that is a structured arrangement (within the meaning given by section 259IA(7) and (8)).
(3) In this section “the restricted deduction” means—
(a) in a case where subsection (1)(b)(i) applies, the hybrid entity double deduction amount, or
(b) in a case where subsection (1)(b)(ii) applies, the hybrid entity double deduction amount so far as it exceeds the amount that it is reasonable to suppose, under a provision of the law of a territory outside the United Kingdom that is equivalent to section 259IB, cannot be deducted from income, for the investor deduction period, other than dual inclusion income of the hybrid entity for the hybrid entity deduction period.
(4) For corporation tax purposes, the restricted deduction may not be deducted from the hybrid entity's income for the hybrid entity deduction period unless it is deducted from dual inclusion income for that period.
(5) So much of the restricted deduction (if any) as, by virtue of subsection (4), cannot be deducted from the hybrid entity's income for the hybrid entity deduction period—
(a) is carried forward to subsequent accounting periods of the hybrid entity, and
(b) for corporation tax purposes, may be deducted from dual inclusion income of the hybrid entity for any such period (and not from any other income), so far as it cannot be deducted under this paragraph for an earlier period.
(6) If the Commissioners are satisfied that the hybrid entity will have no dual inclusion income—
(a) for an accounting period after the hybrid entity deduction period (“the relevant period”), nor
(b) for any accounting period after the relevant period,
any of the restricted deduction that has not been deducted from dual inclusion income for an accounting period before the relevant period in accordance with subsection (4) or (5) (“the stranded deduction”) may be deducted at step 2 in section 4(2) of CTA 2010 in calculating the hybrid entity's taxable total profits of the relevant period.
(7) So much of the stranded deduction (if any) as cannot be deducted, in accordance with subsection (6), at step 2 in section 4(2) of CTA 2010 in calculating the hybrid entity's taxable total profits of the relevant period—
(a) is carried forward to subsequent accounting periods of the hybrid entity, and
(b) may be so deducted for any such period, so far as it cannot be deducted under this paragraph for an earlier period.
(8) Subsection (9) applies if it is reasonable to suppose that all or part of the hybrid entity double deduction amount is (in substance) deducted (“the illegitimate overseas deduction”), under the law of a territory outside the United Kingdom, from income of any person, for a taxable period, that is not dual inclusion income of the hybrid entity for an accounting period.
(9) For the purposes of determining how much of the hybrid entity double deduction amount may be deducted (if any) for the accounting period of the hybrid entity in which the taxable period mentioned in subsection (8) ends, and any subsequent accounting periods of the hybrid entity, an amount of it equal to the illegitimate overseas deduction is to be taken to have already been deducted for a previous accounting period of the hybrid entity.
(10) In this section “dual inclusion income” of the hybrid entity for an accounting period means an amount that is both—
(a) ordinary income of the hybrid entity for that period for corporation tax purposes, and
(b) ordinary income of an investor in the hybrid entity for a permitted taxable period for the purposes of any tax charged under the law of an investor jurisdiction.
(11) A taxable period of an investor is “permitted” for the purposes of paragraph (b) of subsection (10) if—
(a) the period begins before the end of 12 months after the end of the accounting period mentioned in paragraph (a) of that subsection, or
(b) where the period begins after that—
(i) a claim has been made for the period to be a permitted period in relation to the amount of ordinary income, and
(ii) it is just and reasonable for the amount of ordinary income to arise for that taxable period rather than an earlier period.
CHAPTER 10 Dual territory double deduction cases
Introduction
Overview of Chapter
259J (1) This Chapter contains provision that counteracts double deduction mismatches that it is reasonable to suppose would otherwise arise as a result of a company—
(a) being a dual resident company, or
(b) being a relevant multinational company.
(2) The counteraction operates by altering the corporation tax treatment of the company.
(3) Section 259JA contains the conditions that must be met for this Chapter to apply.
(4) Subsection (3) of that section defines “dual resident company”.
(5) Subsection (4) of that section defines “relevant multinational company”, “parent jurisdiction” and “PE jurisdiction”.
(6) Subsection (5) of that section defines “dual territory double deduction amount”.
(7) Section 259JB contains provision that counteracts the mismatch where the company is a dual resident company.
(8) Section 259JC contains provision that counteracts the mismatch where the company is a multinational company and the United Kingdom is the parent jurisdiction.
(9) Section 259JD contains provision that counteracts the mismatch where the company is a relevant multinational company, the United Kingdom is the PE jurisdiction and the mismatch is not counteracted under a provision of the law of a territory outside the United Kingdom that is equivalent to section 259JC.
(10) See also section 259BF for the meaning of “permanent establishment”.
Application of Chapter
Circumstances in which the Chapter applies
259JA (1) This Chapter applies if conditions A and B are met.
(2) Condition A is that a company is a—
(a) dual resident company, or
(b) relevant multinational company.
(3) For the purposes of this Chapter a company is a “dual resident company” if—
(a) it is UK resident, and
(b) it is also within the charge to a tax under the law of a territory outside the United Kingdom because—
(i) it derives its status as a company from that law,
(ii) its place of management is in that territory, or
(iii) it is for some other reason treated under that law as resident in that territory for the purposes of that tax.
(4) For the purposes of this Chapter a company is a “relevant multinational company” if—
(a) it is within the charge to a tax, under the law of a territory (“the PE jurisdiction”) in which it is not resident for tax purposes, because it carries on business in that territory through a permanent establishment in that territory, and
(b) either—
(i) the PE jurisdiction is the United Kingdom, or
(ii) the territory in which the company is resident for tax purposes (“the parent jurisdiction”) is the United Kingdom.
(5) Condition B is that there is an amount (“the dual territory double deduction amount”) that, disregarding this Chapter and any equivalent provision under the law of a territory outside the United Kingdom, it is reasonable to suppose could, by reason of the company being a dual resident company or a relevant multinational company—
(a) be deducted from the company's income for an accounting period (“the deduction period”) for corporation tax purposes, and
(b) also be deducted from the company's income for a taxable period (“the foreign deduction period”) for the purposes of a tax charged under the law of a territory outside the United Kingdom.
(6) The following provisions provide for the counteraction of the dual territory double deduction amount—
(a) section 259JB (cases where a company is dual resident),
(b) section 259JC (cases where a company is a relevant multinational and the United Kingdom is the parent jurisdiction), and
(c) section 259JD (cases where a company is a relevant multinational, the United Kingdom is the PE jurisdiction and the amount is not counteracted in the parent jurisdiction).
Counteraction
Counteraction where mismatch arises because of a dual resident company
259JB (1) This section applies where the dual territory double deduction amount arises by reason of the company being a dual resident company.
(2) For corporation tax purposes, the dual territory double deduction amount may not be deducted from the company's income for the deduction period unless it is deducted from dual inclusion income of the company for that period.
(3) So much of the dual territory double deduction amount (if any) as, by virtue of subsection (2), cannot be deducted from the company's income for the deduction period—
(a) is carried forward to subsequent accounting periods of the company, and
(b) for corporation tax purposes, may be deducted from dual inclusion income of the company for any such period (and not from any other income), so far as it cannot be deducted under this paragraph for an earlier period.
(4) If the Commissioners are satisfied that the company has ceased to be a dual resident company, any of the dual territory double deduction amount that has not been deducted from dual inclusion income in accordance with subsection (2) or (3) (“the stranded deduction”) may be deducted at step 2 in section 4(2) of CTA 2010 in calculating the company's taxable total profits of the accounting period in which it ceased to be a dual resident company.
(5) So much of the stranded deduction (if any) as cannot be deducted, in accordance with subsection (4), at step 2 in section 4(2) of CTA 2010 in calculating the company's taxable total profits of the accounting period in which the company ceased to be a dual resident company—
(a) is carried forward to subsequent accounting periods of the company, and
(b) may be so deducted for any such period, so far as it cannot be deducted under this paragraph for an earlier period.
(6) Subsection (7) applies if it is reasonable to suppose that all or part of the dual territory double deduction amount is (in substance) deducted (“the illegitimate overseas deduction”), under the law of a territory outside the United Kingdom, from income of any person, for a taxable period, that is not dual inclusion income of the company for an accounting period.
(7) For the purposes of determining how much of the dual territory double deduction amount may be deducted (if any) for the accounting period of the company in which the taxable period mentioned in subsection (6) ends, and any subsequent accounting periods of the company, an amount of it equal to the illegitimate overseas deduction is to be taken to have already been deducted for a previous accounting period of the company.
(8) In this section “dual inclusion income” of the company for an accounting period means an amount that is both—
(a) ordinary income of the company for that period for corporation tax purposes, and
(b) ordinary income of the company for a permitted taxable period for the purposes of a tax charged under the law of a territory outside the United Kingdom.
(9) A taxable period of the company is “permitted” for the purposes of paragraph (b) of subsection (8) if—
(a) the period begins before the end of 12 months after the end of the accounting period mentioned in paragraph (a) of that subsection, or
(b) where the period begins after that—
(i) a claim has been made for the period to be a permitted period in relation to the amount of ordinary income, and
(ii) it is just and reasonable for the amount of ordinary income to arise for that taxable period rather than an earlier period.
Counteraction where mismatch arises because of a relevant multinational and the UK is the parent jurisdiction
259JC (1) This section applies where—
(a) the dual territory double deduction amount arises by reason of the company being a relevant multinational company, and
(b) the United Kingdom is the parent jurisdiction.
(2) If some or all of the dual territory double deduction amount is (in substance) deducted (“the impermissible overseas deduction”), for the purposes of a tax under the law of a territory outside the United Kingdom, from the income of any person, for any taxable period, that is not dual inclusion income of the company—
(a) the dual territory double deduction amount that may be deducted, for corporation tax purposes, from the company's income for the deduction period is reduced by the amount of the impermissible overseas deduction, and
(b) such just and reasonable adjustments (if any) as are required to give effect to that reduction, for corporation tax purposes, are to be made.
(3) Any adjustment required to be made under subsection (2) may be made (whether or not by an officer of Revenue and Customs)—
(a) by way of an assessment, the modification of an assessment, amendment or disallowance of a claim, or otherwise, and
(b) despite any time limit imposed by or under any enactment.
(4) In this section “dual inclusion income” of the company means an amount that is both—
(a) ordinary income of the company for an accounting period for corporation tax purposes, and
(b) ordinary income of the company for a permitted taxable period for the purposes of a tax charged under the law of a territory outside the United Kingdom.
(5) A taxable period is “permitted” for the purposes of paragraph (b) of subsection (4) if—
(a) the period begins before the end of 12 months after the end of the accounting period of the company mentioned in paragraph (a) of that subsection, or
(b) where the period begins after that—
(i) a claim has been made for the period to be a permitted period in relation to the amount of ordinary income, and
(ii) it is just and reasonable for the amount of ordinary income to arise for that taxable period rather than an earlier period.
Counteraction where mismatch arises because of a relevant multinational and is not counteracted in the parent jurisdiction
259JD (1) This section applies where—
(a) the dual territory double deduction amount arises as a result of the company being a relevant multinational company,
(b) the United Kingdom is the PE jurisdiction, and
(c) it is reasonable to suppose that no provision of the law of the parent jurisdiction that is equivalent to section 259JC applies.
(2) For corporation tax purposes, the dual territory double deduction amount may not be deducted from the company's income for the deduction period unless it is deducted from dual inclusion income of the company for that period.
(3) So much of the dual territory double deduction amount (if any) as, by virtue of subsection (2), cannot be deducted from the company's income for the deduction period—
(a) is carried forward to subsequent accounting periods of the company, and
(b) for corporation tax purposes, may be deducted from dual inclusion income of the company for any such period (and not from any other income), so far as it cannot be deducted under this paragraph for an earlier period.
(4) If the Commissioners are satisfied that the company has ceased to be a relevant multinational company, any of the dual territory double deduction amount that has not been deducted from dual inclusion income in accordance with subsection (2) or (3) (“the stranded deduction”) may be deducted at step 2 in section 4(2) of CTA 2010 in calculating the company's taxable total profits of the accounting period in which it ceased to be a relevant multinational company.
(5) So much of the stranded deduction (if any) as cannot be deducted, in accordance with subsection (4), at step 2 in section 4(2) of CTA 2010 in calculating the company's taxable total profits of the accounting period in which the company ceased to be a relevant multinational company—
(a) is carried forward to subsequent accounting periods of the company, and
(b) may be so deducted for any such period, so far as it cannot be deducted under this paragraph for an earlier period.
(6) Subsection (7) applies if it is reasonable to suppose that all or part of the dual territory double deduction amount is (in substance) deducted (“the illegitimate overseas deduction”), under the law of a territory outside the United Kingdom, from income of any person, for a taxable period, that is not dual inclusion income of the company for an accounting period.
(7) For the purposes of determining how much of the dual territory double deduction amount may be deducted (if any) for the accounting period of the company in which the taxable period mentioned in subsection (6) ends, and any subsequent accounting periods of the company, an amount of it equal to the illegitimate overseas deduction is to be taken to have already been deducted for a previous accounting period of the company.
(8) In this section “dual inclusion income” of the company for an accounting period means an amount that is both—
(a) ordinary income of the company for that period for corporation tax purposes, and
(b) ordinary income of the company for a permitted taxable period for the purposes of a tax charged under the law of a territory outside the United Kingdom.
(9) A taxable period of the company is “permitted” for the purposes of paragraph (b) of subsection (8) if—
(a) the period begins before the end of 12 months after the end of the accounting period mentioned in paragraph (a) of that subsection, or
(b) where the period begins after that—
(i) a claim has been made for the period to be a permitted period in relation to the amount of ordinary income, and
(ii) it is just and reasonable for the amount of ordinary income to arise for that taxable period rather than an earlier period.
CHAPTER 11 Imported mismatches
Introduction
Overview of Chapter
259K (1) This Chapter contains provision denying deductions in connection with payments or quasi-payments that are made under, or in connection with, imported mismatch arrangements where the payer is within the charge to corporation tax for the payment period.
(2) Section 259KA contains the conditions that must be met for this Chapter to apply and defines “imported mismatch payment” and “imported mismatch arrangement”.
(3) Section 259KB defines “dual territory double deduction”, “excessive PE deduction” and “PE jurisdiction”.
(4) Section 259KC contains provision for denying some or all of a relevant deduction in relation to an imported mismatch payment.
(5) See also section 259BB for the meaning of “payment”, “quasi-payment”, “relevant deduction”, “payment period” and “payer”.
Application of Chapter
Circumstances in which the Chapter applies
259KA (1) This Chapter applies if conditions A to G are met.
(2) Condition A is that a payment or quasi-payment (“the imported mismatch payment”) is made under, or in connection with, an arrangement (“the imported mismatch arrangement”).
(3) Condition B is that, in relation to the imported mismatch payment, the payer (“P”) is within the charge to corporation tax for the payment period.
(4) Condition C is that the imported mismatch arrangement is one of a series of arrangements.
(5) A “series of arrangements” means a number of arrangements that are each entered into (whether or not one after the other) in pursuance of, or in relation to, another arrangement (“the over-arching arrangement”).
(6) Condition D is that—
(a) under an arrangement in the series other than the imported mismatch arrangement, there is a payment or quasi-payment (“the mismatch payment”) in relation to which it is reasonable to suppose that there is or will be—
(i) a hybrid or otherwise impermissible deduction/non-inclusion mismatch (see section 259CB),
(ii) a hybrid transfer deduction/non-inclusion mismatch (see section 259DC),
(iii) a hybrid payer deduction/non-inclusion mismatch (see section 259EB),
(iv) a hybrid payee deduction/non-inclusion mismatch (see section 259GB),
(v) a multinational payee deduction/non-inclusion mismatch (see section 259HB),
(vi) a hybrid entity double deduction amount (see section 259IA(4)), or
(vii) a dual territory double deduction (see section 259KB), or
(b) as a consequence of an arrangement in the series other than the imported mismatch arrangement, there is or will be an excessive PE deduction (see section 259KB),
and in this Chapter “the relevant mismatch” means the mismatch, amount or deduction concerned.
(7) Condition E is that it is reasonable to suppose—
(a) where subsection (6)(a) applies, that no provision of any of Chapters 3 to 5 or 7 to 10 nor any equivalent provision under the law of a territory outside the United Kingdom applies, or will apply, in relation to the tax treatment of any person in respect of the mismatch payment, or
(b) where subsection (6)(b) applies, that no provision of Chapter 6 nor any equivalent provision under the law of a territory outside the United Kingdom applies, or will apply, in relation to the tax treatment of the company in relation to which the excessive PE deduction arises.
(8) Condition F is that—
(a) subsection (6)(a) applies and it is reasonable to suppose that a provision of any of Chapters 3 to 5 or 7 to 10, or an equivalent provision under the law of a territory outside the United Kingdom, would apply in relation to the tax treatment of P if—
(i) P were the payer in relation to the mismatch payment,
(ii) P were a payee in relation to the mismatch payment, or
(iii) where the relevant mismatch is a hybrid payee deduction/non-inclusion mismatch or a hybrid entity double deduction amount, P were an investor in the hybrid entity concerned, or
(b) the relevant mismatch is an excessive PE deduction.
(9) Condition G is that—
(a) subsection (6)(a) applies and P is in the same control group (see section 259NB) as the payer, or a payee, in relation to the mismatch payment, at any time in the period—
(i) beginning with the day the over-arching arrangement is made, and
(ii) ending with the last day of the payment period in relation to the imported mismatch payment,
(b) subsection (6)(b) applies and P is in the same control group as the company in relation to whom the excessive PE deduction arises at any time in that period, or
(c) the imported mismatch arrangement, or the over-arching arrangement, is a structured arrangement.
(10) The imported mismatch arrangement, or the over-arching arrangement, is a “structured arrangement” if it is reasonable to suppose that—
(a) the arrangement concerned is designed to secure the relevant mismatch, or
(b) the terms of the arrangement concerned share the economic benefit of the relevant mismatch between the parties to that arrangement or otherwise reflect the fact that the relevant mismatch is expected to arise.
(11) An arrangement may be designed to secure the relevant mismatch despite also being designed to secure any commercial or other objective.
(12) Section 259KC contains provision for denying all or part of the relevant deduction in relation to the imported mismatch payment by reference to the relevant mismatch.
Meaning of “dual territory double deduction”, “excessive PE deduction” and “PE jurisdiction”
259KB (1) This section has effect for the purposes of this Chapter.
(2) A “dual territory double deduction” means an amount that can be deducted by a company both—
(a) from income for the purposes of a tax charged under the law of one territory, and
(b) from income for the purposes of a tax charged under the law of another territory.
(3) A “PE deduction” is an amount that—
(a) may (in substance) be deducted from a company's income for the purposes of calculating the company's taxable profits, for a taxable period, for the purposes of a tax that is charged on the company, under the law of a territory (“the PE jurisdiction”), by virtue of the company having a permanent establishment in that territory, and
(b) is in respect of a transfer of money or money's worth, from the company in the PE jurisdiction to the company in another territory (“the parent jurisdiction”) in which it is resident for the purposes of a tax, that—
(i) is actually made, or
(ii) is (in substance) treated as being made for tax purposes.
(4) A PE deduction is “excessive” so far as it exceeds the sum of—
(a) any increases, resulting from the circumstances giving rise to the PE deduction, in the taxable profits of the company, for a permitted taxable period, for the purposes of a tax charged under the law of the parent jurisdiction, and
(b) any amounts by which a loss made by the company, for a permitted taxable period, for the purposes of a tax charged under the law of the parent jurisdiction, is reduced as a result of the circumstances giving rise to the PE deduction.
(5) A taxable period of the company is “permitted” for the purposes of subsection (4) if—
(a) the period begins before the end of 12 months after the end of the taxable period mentioned in subsection (3)(a), or
(b) where the period begins after that—
(i) a claim has been made for the period to be a permitted period for the purposes of subsection (4), and
(ii) it is just and reasonable for the circumstances giving rise to the PE deduction to affect the profits or loss made for that period rather than an earlier period.
Counteraction
Denial of the relevant deduction in relation to the imported mismatch payment
259KC (1) If, in addition to the imported mismatch payment, there are, or will be, one or more relevant payments in relation to the relevant mismatch, subsection (3) applies.
(2) Otherwise, for corporation tax purposes, in relation to the imported mismatch payment, the relevant deduction that may be deducted from P's income for the payment period is to be reduced by the amount of the relevant mismatch.
(3) For corporation tax purposes, where this subsection applies, in relation to the imported mismatch payment, the relevant deduction that may be deducted from P's income for the payment period is to be reduced by P's share of the relevant mismatch.
(4) P's share of the relevant mismatch is to be determined by apportioning the relevant mismatch between P and every payer in relation to a relevant payment on a just and reasonable basis—
(a) where subsection (6)(a) applies, having regard (in particular) to the extent to which the imported mismatch payment and each relevant payment funds (directly or indirectly) the mismatch payment, or
(b) where the relevant mismatch is an excessive PE deduction, having regard (in particular) to—
(i) if the transfer of money or money's worth mentioned in section 259KB(3)(b) is actually made, the extent to which the imported mismatch payment and each relevant payment funds (directly or indirectly) the transfer, or
(ii) if the transfer of money or money's worth mentioned in section 259KB(3)(b) is (in substance) treated as being made, the extent to which the imported mismatch payment and each relevant payment would have funded (directly or indirectly) the transfer if it had actually been made.
(5) For the purposes of subsection (4)(a) and (b)(i), the imported mismatch payment is to be taken to fund the mismatch payment or transfer to the extent that the mismatch payment or transfer cannot be shown instead to be funded (directly or indirectly) by one or more relevant payments.
(6) For the purposes of subsection (4)(b)(ii), it is to be assumed that the imported mismatch payment would have funded the transfer if it had actually been made to the extent that it cannot be shown by P that, if it had been made, the transfer would have instead been funded (directly or indirectly) by one or more relevant payments.
(7) For the purposes of this section, a payment or quasi-payment, other than the imported mismatch payment or any mismatch payment, is a “relevant payment” in relation to the relevant mismatch if it is made under an arrangement in the series of arrangements mentioned in section 259KA(4) and—
(a) where subsection (6)(a) applies, it funds (directly or indirectly) the mismatch payment,
(b) where the relevant mismatch is an excessive PE deduction and the transfer of money or money's worth mentioned in section 259KB(3)(b) is actually made, it funds (directly or indirectly) that transfer, or
(c) where the relevant mismatch is an excessive PE deduction and the transfer of money or money's worth mentioned in section 259KB(3)(b) is (in substance) treated as being made, it would have funded (directly or indirectly) that transfer had that transfer actually been made.
(8) In proceedings before a court or tribunal in connection with this section—
(a) in relation to subsection (1), it is for P to show that, in addition to the imported mismatch payment, there are one or more relevant payments in relation to the relevant mismatch, and
(b) in relation to subsection (5), it is for P to show that the mismatch payment or transfer is funded (directly or indirectly) by one or more relevant payments instead of by the imported mismatch payment.
CHAPTER 12 Adjustments in light of subsequent events etc
Adjustments where suppositions cease to be reasonable
259L (1) Where—
(a) a reasonable supposition is made for the purposes of any provision of this Part, and
(b) the supposition turns out to be mistaken or otherwise ceases to be reasonable,
such consequential adjustments as are just and reasonable may be made.
(2) The adjustments may be made (whether or not by an officer of Revenue and Customs) by way of an assessment, the modification of an assessment, amendment or disallowance of a claim, or otherwise.
(3) But the power to make adjustments by virtue of this section is subject to any time limit imposed by or under any enactment other than this Part.
(4) No adjustment is to be made under this section on the basis that an amount of ordinary income arises, as a result of a payment or quasi-payment, to a payee after that payee's last permitted taxable period in relation to the payment or quasi-payment (see section 259LA, which makes provision about certain such cases).
Deduction from taxable total profits where an amount of ordinary income arises late
259LA (1) This section applies where—
(a) a relevant deduction in respect of a payment or quasi-payment is reduced by section 259CD, 259DF, 259GC or 259HC or by more than one of those sections,
(b) no other provision of this Part, or any equivalent provision of the law of a territory outside the United Kingdom, applies or will apply to the tax treatment of any person in respect of the payment or quasi-payment,
(c) the section or sections had effect because it was reasonable to suppose that the relevant deduction exceeded, or would exceed, the sum of the amounts of ordinary income arising, by reason of the payment or quasi-payment, to each payee for a permitted taxable period, and
(d) an amount of ordinary income (“the late income”) arises—
(i) by reason of the payment or quasi-payment, but
(ii) not as a consequence of any provision of this Part or any equivalent provision of the law of a territory outside the United Kingdom,
to a payee for a taxable period (“the late period”) that is not a permitted taxable period.
(2) An amount equal to the late income may be deducted at step 2 in section 4(2) of CTA 2010 in calculating the payer's taxable total profits of the accounting period in which the late period ends.
(3) So much of that amount (if any) as cannot be deducted, in accordance with subsection (2), at step 2 in section 4(2) of CTA 2010 in calculating the taxable total profits of the accounting period in which the late period ends—
(a) is carried forward to subsequent accounting periods of the payer, and
(b) may be so deducted for any such period, so far as it cannot be deducted under this paragraph for an earlier period.
(4) But the total amount deducted from taxable total profits under this section, in relation to a payment or quasi-payment, may not exceed the total amount by which the relevant deduction is reduced as mentioned in (1)(a).
(5) In this section “permitted taxable period”—
(a) where the relevant deduction was reduced under section 259CD, has the meaning given by section 259CC(2),
(b) where the relevant deduction was reduced under section 259DF, has the meaning given by section 259DD(2),
(c) where the relevant deduction was reduced under section 259GC, has the meaning given by section 259GB(6),
(d) where the relevant deduction was reduced under section 259HC, has the meaning given by section 259HB(4), or
(e) where the relevant deduction was reduced under two or more of the sections mentioned in the preceding paragraphs of this subsection, includes any taxable period that is a permitted period under a provision mentioned in the paragraphs concerned.
CHAPTER 13 Anti-avoidance
Countering the effect of avoidance arrangements
259M (1) This section applies where—
(a) relevant avoidance arrangements exist,
(b) as a result of those arrangements, any person (whether party to the arrangements or not) would, apart from this section, obtain a relevant tax advantage, and
(c) that person is—
(i) within the charge to corporation tax at the time the person would obtain the relevant tax advantage, or
(ii) would be within the charge to corporation tax at that time but for the relevant avoidance arrangements.
(2) The relevant tax advantage is to be counteracted by making such adjustments to the person's treatment for corporation tax purposes as are just and reasonable.
(3) Any adjustments required to be made under this section (whether or not by an officer of Revenue and Customs) may be made by way of an assessment, the modification of an assessment, amendment or disallowance of a claim, or otherwise.
(4) A person obtains a “relevant tax advantage” if—
(a) the person avoids, to any extent, any provision of this Part, or any equivalent provision of the law of a territory outside the United Kingdom, restricting whether or how that person may make a deduction from income for the purposes of calculating taxable profits, or
(b) the person avoids, to any extent, an amount being treated as income of that person under any provision of this Part or any equivalent provision of the law of a territory outside the United Kingdom.
(5) “Relevant avoidance arrangements” means arrangements the main purpose, or one of the main purposes, of which is to enable any person to obtain a relevant tax advantage.
(6) But arrangements are not “relevant avoidance arrangements” if the obtaining of the relevant tax advantage can reasonably be regarded as consistent with the principles on which the provisions of this Part, or the equivalent provisions under the law of a territory outside the United Kingdom, that are relevant to the arrangements are based (whether express or implied) and the policy objectives of those provisions.
(7) For the purposes of determining the principles and policy objectives mentioned in subsection (6), regard may, where appropriate, be had to the Final Report on Neutralising the Effects of Hybrid Mismatch Arrangements published by the Organisation for Economic Cooperation and Development (“OECD”) on 5 October 2015 or any replacement or supplementary publication.
(8) In subsection (7) “replacement or supplementary publication” means any document that is approved and published by the OECD in place of, or to update or supplement, the report mentioned in that subsection (or any replacement of, or supplement to, it).
CHAPTER 14 Interpretation
Financial instruments
Meaning of “financial instrument”
259N (1) A “financial instrument” means—
(a) an arrangement profits or deficits arising from which would, on the assumption that the person to whom they arise is within the charge to corporation tax, fall to be brought into account for corporation tax purposes in accordance with Part 5 or 6 of CTA 2009 (loan relationships and relationships treated as loan relationships),
(b) a contract profits or losses arising from which would, on the assumption that the person to whom they arise is within the charge to corporation tax, fall to be brought into account for corporation tax purposes in accordance with Part 7 of CTA 2009 (derivative contracts),
(c) a type 1, type 2 or type 3 finance arrangement for the purposes of Chapter 2 of Part 16 of CTA 2010 (factoring of income etc: finance arrangements),
(d) a share forming part of a company's issued share capital or any arrangement that provides a person with economic rights corresponding to those provided by holding such a share, or
(e) anything else that is a financial instrument.
(2) In subsection (1)(e) “financial instrument” has the meaning that it has for the purposes of UK generally accepted accounting practice.
(3) But “financial instrument” does not include—
(a) a hybrid transfer arrangement (within the meaning given by section 259DB), or
(b) anything that is a regulatory capital security for the purposes of the Taxation of Regulatory Capital Securities Regulations 2013 (S.I. 2013/3209) (as amended from time to time).
(4) Subsection (3)(b) is subject to any provision to the contrary that may be made by regulations under section 221 of FA 2012 (tax consequences of financial sector regulation).
Relevant investment funds
Meaning of “relevant investment fund”
259NA (1) “Relevant investment fund” means—
(a) an open-ended investment company within the meaning of section 613 of CTA 2010,
(b) an authorised unit trust within the meaning of section 616 of that Act, or
(c) an offshore fund within the meaning of section 354 of this Act (see section 355),
which meets the genuine diversity of ownership condition (whether or not a clearance has been given to that effect).
(2) “The genuine diversity of ownership condition” means—
(a) in the case of an offshore fund, the genuine diversity of ownership condition in regulation 75 of the Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001), and
(b) in the case of an open-ended investment company or an authorised unit trust, the genuine diversity of ownership condition in regulation 9A of the Authorised Investment Funds (Tax) Regulations 2006 (S.I. 2006/964).
Control groups and related persons
Control groups
259NB (1) A person (“A”) is in the same control group as another person (“B”)—
(a) throughout any period for which they are consolidated for accounting purposes,
(b) on any day on which the participation condition is met in relation to them, or
(c) on any day on which the 50% investment condition is met in relation to them.
(2) A and B are consolidated for accounting purposes for a period if—
(a) their financial results for the period are required to be comprised in group accounts,
(b) their financial results for the period would be required to be comprised in group accounts but for the application of an exemption, or
(c) their financial results for the period are in fact comprised in group accounts.
(3) In subsection (2), “group accounts” means accounts prepared under—
(a) section 399 of the Companies Act 2006, or
(b) any corresponding provision of the law of a territory outside the United Kingdom.
(4) The participation condition is met in relation to A and B (“the relevant parties”) on a day if, within the period of 6 months beginning with the day—
(a) one of the relevant parties directly or indirectly participates in the management, control or capital of the other, or
(b) the same person or persons directly or indirectly participate in the management, control or capital of each of the relevant parties.
(5) For the interpretation of subsection (4), see sections 157(1), 158(4), 159(1) and 160(1) (which have the effect that references in subsection (4) to direct or indirect participation are to be read in accordance with provisions of Chapter 2 of Part 4).
(6) The 50% investment condition is met in relation to A and B if—
(a) A has a 50% investment in B, or
(b) a third person has a 50% investment in each of A and B.
(7) Section 259ND applies for the purposes of determining whether a person has a “50% investment” in another person.
Related persons
259NC (1) Two persons are “related” on any day that—
(a) they are in the same control group (see section 259NB), or
(b) the 25% investment condition is met in relation to them.
(2) The 25% investment condition is met in relation to a person (“A”) and another person (“B”) if—
(a) A has a 25% investment in B, or
(b) a third person has a 25% investment in each of A and B.
(3) Section 259ND applies for the purposes of determining whether a person has a “25% investment” in another person.
Meaning of “50% investment” and “25% investment”
259ND (1) Where this section applies for the purposes of determining whether a person has a “50% investment” in another person for the purposes of section 259NB(6), references in this section to X% are to be read as references to 50%.
(2) Where this section applies for the purposes of determining whether a person has a “25% investment” in another person for the purposes of section 259NC(2), references in this section to X% are to be read as references to 25%.
(3) A person (“P”) has an X% investment in a company (“C”) if it is reasonable to suppose that—
(a) P possesses or is entitled to acquire X% or more of the share capital or issued share capital of C,
(b) P possesses or is entitled to acquire X% or more of the voting power in C, or
(c) if the whole of C's share capital were disposed of, P would receive (directly or indirectly and whether at the time of disposal or later) X% or more of the proceeds of the disposal.
(4) A person (“P”) has an X% investment in another person (“Q”) if it is reasonable to suppose that—
(a) if the whole of Q's income were distributed, P would receive (directly or indirectly and whether at the time of the distribution or later) X% or more of the distributed amount, or
(b) in the event of a winding-up of Q or in any other circumstances, P would receive (directly or indirectly and whether or not at the time of the winding-up or other circumstances or later) X% or more of Q's assets which would then be available for distribution.
(5) In this section, references to a person receiving any proceeds, amount or assets include references to the proceeds, amount or assets being applied (directly or indirectly) for that person's benefit.
(6) For the purposes of subsections (3) and (4), in determining what percentage investment a person (“P”) has in another person (“U”), where P acts together with a third person (“T”) in relation to U, P is to be taken to have all of T's rights and interests in relation to U.
(7) P is to be taken to “act together” with T in relation to U if (and only if)—
(a) P and T are connected (within the meaning given by section 163),
(b) for the purposes of influencing the conduct of U's affairs—
(i) P is able to secure that T acts in accordance with P's wishes,
(ii) T can reasonably be expected to act, or typically acts, in accordance with P's wishes,
(iii) T is able to secure that P acts in accordance with T's wishes, or
(iv) P can reasonably be expected to act, or typically acts, in accordance with T's wishes,
(c) P and T are party to any arrangement that—
(i) it is reasonable to suppose is designed to affect the value of any of T's rights or interests in relation to U, or
(ii) relates to the exercise of any of T's rights in relation to U, or
(d) the same person manages—
(i) some or all of P's rights or interests in relation to U, and
(ii) some or all of T's rights or interests in relation to U.
(8) But P does not “act together” with T in relation to U under paragraph (d) of subsection (7) where—
(a) the person who manages the rights or interests of P mentioned in sub-paragraph (i) of that paragraph, does so as the operator of a collective investment scheme,
(b) that person manages the rights or interests of T mentioned in sub-paragraph (ii) of that paragraph as the operator of a different collective investment scheme, and
(c) the Commissioners are satisfied that the management of the schemes is not coordinated for the purpose of influencing the conduct of U 's affairs.
(9) In subsection (8) “collective investment scheme” and “operator” have the same meaning as in Part 17 of the Financial Services and Markets Act 2000 (see sections 235 and 237 of that Act).
Partnerships
Treatment of a person who is a member of a partnership
259NE (1) This section applies where a person is a member of a partnership.
(2) Any reference in this Part to income, profits or an amount of the person includes a reference to the person's share of (as the case may be) income, profits or an amount of the partnership.
(3) For this purpose “the person's share” of income, profits or an amount is determined by apportioning the income, profits or amount between the partners on a just and reasonable basis.
(4) In this section—
(a) “partnership” includes an entity established under the law of a territory outside the United Kingdom of a similar character to a partnership, and
(b) “member” of a partnership is to be read accordingly.
Definitions
Definitions
259NF In this Part—
“arrangement” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable);
“CFC” and “CFC charge” have the meaning given by section 259B(4);
“the Commissioners” means the Commissioners for Her Majesty's Revenue and Customs;
“control group” has the meaning given by section 259NB;
“financial instrument” has the meaning given by section 259N;
“foreign CFC” and “foreign CFC charge” have the meaning given by section 259B(4);
“hybrid entity” has the meaning given by section 259BE;
“investor”, in relation to a hybrid entity, has the meaning given by section 259BE(4);
“investor jurisdiction” has the meaning given by section 259BE(4);
“ordinary income” is to be read in accordance with sections 259BC and 259BD;
“payee”—
in relation to a payment, has the meaning given by section 259BB(6)(a), and
in relation to a quasi-payment, has the meaning given by section 259BB(6)(b);
“payee jurisdiction” has the meaning given by 259BB(9);
“payer”—
in relation to a payment, has the meaning given by section 259BB(1)(a), and
in relation to a quasi-payment, has the meaning given by section 259BB(2);
“payment” has the meaning given by section 259BB(1);
“payment period”—
in relation to a payment, has the meaning given by section 259BB(1)(b), and
in relation to a quasi-payment, has the meaning given by section 259BB(2);
“permanent establishment” has the meaning given by section 259BF;
“quasi-payment” has the meaning given by section 259BB(2) to (5);
“related” has the meaning given by section 259NC;
“relevant deduction”—
in relation to a payment, has the meaning given by section 259BB(1)(b), and
in relation to a quasi-payment, has the meaning given by section 259BB(2)(a);
“relevant investment fund” has the meaning given by section 259NA;
“tax” has the meaning given by section 259B;
“taxable period” means—
in relation to corporation tax, an accounting period,
in relation to income tax, a tax year,
in relation to the CFC charge, a relevant corporation tax accounting period (within the meaning given by section 371BC(3)),
in relation to a foreign CFC charge, a period (by whatever name known) that corresponds to a relevant corporation tax accounting period, and
in relation to any other tax, a period for which the tax is charged;
“taxable profits” is to be read in accordance with sections 259BC(2) and 259BD(5).
PART 2 Consequential amendments
FA 1998
2 Schedule 18 to FA 1998 (company tax returns) is amended as follows.
3 In paragraph 25(3)—
(a) insert “ or ” at the end of paragraph (b), and
(b) omit paragraph (d) and the “or” preceding it.
4 In paragraph 42(4)—
(a) insert “ or ” at the end of paragraph (a), and
(b) omit paragraph (c) and the “or” preceding it.
CTA 2009
5 In section A1 of CTA 2009 (overview of the Corporation Tax Acts), in subsection (2)—
(a) omit paragraph (h), and
(b) after that paragraph insert—
(ha) Part 6A of that Act (hybrid and other mismatches),
.
CTA 2010
6 CTA 2010 is amended as follows.
7 In section 938N (group mismatch schemes: priority)—
(a) omit paragraph (d), and
(b) after that paragraph insert—
(da) Part 6A of that Act (hybrid and other mismatches);
.
8 In section 938V (tax mismatch schemes: priority)—
(a) omit paragraph (c), and
(b) after that paragraph insert—
(ca) Part 6A of TIOPA 2010 (hybrid and other mismatches);
.
TIOPA 2010
9 TIOPA 2010 is amended as follows.
10 In section 1 (overview of Act), in subsection (1)—
(a) omit paragraph (c), and
(b) after that paragraph insert—
(ca) Part 6A (hybrid and other mismatches),
.
11 In section 157 (direct participation), in subsection (1)—
(a) omit the “and” at the end of paragraph (b), and
(b) after paragraph (c) insert
, and
(d) in Part 6A, section 259NB(4).
12 In section 158 (indirect participation: defined by sections 159 to 162), in subsection (4)—
(a) omit the “and” at the end of paragraph (b), and
(b) after paragraph (c) insert
, and
(d) in Part 6A, section 259NB(4),
.
13 In section 159 (indirect participation: potential direct participant), in subsection (1)—
(a) omit the “and” at the end of paragraph (b), and
(b) after paragraph (c) insert
, and
(d) in Part 6A, section 259NB(4).
14 In section 160 (indirect participation: one of several major participants), in subsection (1)—
(a) omit the “and” at the end of paragraph (b), and
(b) after paragraph (c) insert
, and
(d) in Part 6A, section 259NB(4).
15 Omit Part 6 (tax arbitrage).
16 Omit Part 4 of Schedule 11 (tax arbitrage: index of defined expressions used in Part 6).
17 After that Part of that Schedule insert—
PART 4A Hybrid and other mismatches: index of defined expressions used in Part 6A
arrangement (in Part 6A) | section 259NF
CFC and CFC charge (in Part 6A) | section 259B(4)
the Commissioners (in Part 6A) | section 259NF
control group (in Part 6A) | section 259NB
deduction period (in Chapter 10 of Part 6A) | section 259JA(5)(a)
dual resident company (in Chapter 10 of Part 6A) | section 259JA(3)
dual territory double deduction amount (in Chapter 10 of Part 6A) | section 259JA(5)
dual territory double deduction (in Chapter 11 of Part 6A) | section 259KB
excessive PE deduction (in Chapter 6 of Part 6A) | section 259FA(8)
excessive PE deduction (in Chapter 11 of Part 6A) | section 259KB
financial instrument (in Part 6A) | section 259N
foreign CFC and foreign CFC charge (in Part 6A) | section 259B(4)
foreign deduction period (in Chapter 10 of Part 6A) | section 259JA(5)(b)
hybrid entity (in Part 6A) | section 259BE
hybrid entity deduction period (in Chapter 9 of Part 6A) | section 259IA(2)(a)
hybrid entity double deduction amount (in Chapter 9 of Part 6A) | section 259IA(4)
hybrid or otherwise impermissible deduction/non-inclusion mismatch (in Chapter 3 of Part 6A) | section 259CB
hybrid payee (in Chapter 7 of Part 6A) | section 259GA(3)
hybrid payee deduction/non-inclusion mismatch (in Chapter 7 of Part 6A) | section 259GB
hybrid payer (in Chapter 5 of Part 6A) | section 259EA(3)
hybrid payer deduction/non-inclusion mismatch (in Chapter 5 of Part 6A) | section 259EB
hybrid transfer arrangement (in Chapter 4 of Part 6A) | section 259DB
hybrid transfer deduction/non-inclusion mismatch (in Chapter 4 of Part 6A) | section 259DC
imported mismatch payment (in Chapter 11 of Part 6A) | section 259KA(2)
imported mismatch arrangement (in Chapter 11 of Part 6A) | section 259KA(2)
investor (in Part 6A) | section 259BE(4)
investor deduction period (in Chapter 9 of Part 6A) | section 259IA(2)(b)
investor jurisdiction (in Part 6A) | section 259BE(4)
mismatch payment (in Chapter 11 of Part 6A) | section 259KA(6)
multinational company (in Chapter 6 of Part 6A) | section 259FA(3)
multinational company (in Chapter 8 of Part 6A) | section 259HA(4)
multinational payee deduction/non-inclusion mismatch (in Chapter 8 of Part 6A) | section 259HB
ordinary income (in Part 6A) | sections 259BC and 259BD
over-arching arrangement (in Chapter 11 of Part 6A) | section 259KA(5)
P (in Chapter 11 of Part 6A) | section 259KA(3)
parent jurisdiction (in Chapter 6 of Part 6A) | section 259FA(3)(a)
parent jurisdiction (in Chapter 8 of Part 6A) | section 259HA(4)(a)
parent jurisdiction (in Chapter 10 of Part 6A) | section 259JA(4)(b)(ii)
payee (in Part 6A) | section 259BB(6)
payee jurisdiction (in Part 6A) | section 259BB(9)
payer (in Part 6A) | section 259BB(1)(a) or (2)
payment (in Part 6A) | section 259BB(1)
payment period (in Part 6A) | section 259BB(1)(b) or (2)
PE jurisdiction (in Chapter 8 of Part 6A) | section 259HA(4)(b)
PE jurisdiction (in Chapter 10 of Part 6A) | section 259JA(4)(a)
PE jurisdiction (in Chapter 11 of Part 6A) | section 259KB(3)(a)
permanent establishment (in Part 6A) | section 259BF
quasi-payment (in Part 6A) | section 259BB(2) to (5)
related (in Part 6A) | section 259NC
relevant deduction (in Part 6A) | section 259BB(1)(b) or (2)(a)
relevant investment fund (in Part 6A) | section 259NA
relevant mismatch (in Chapter 11 of Part 6A) | section 259KA(6)
relevant multinational company (in Chapter 10 of Part 6A) | section 259JA(4)
relevant PE period (in Chapter 6 of Part 6A) | section 259FA(4)
series of arrangements (in Chapter 11 of Part 6A) | section 259KA(5)
substitute payment (in Chapter 4 of Part 6A) | section 259DB(5)
tax (in Part 6A) | section 259B
taxable period (in Part 6A) | section 259NF
taxable profits (in Part 6A) | sections 259BC(2) and 259BD(5)
underlying instrument (in Chapter 4 of Part 6A) | section 259DB(3)
underlying return (in Chapter 4 of Part 6A) | section 259DB(5)(b)
PART 3 Commencement
18 Chapters 3 to 5 and 7 and 8 of Part 6A of TIOPA 2010 (counteraction of deduction/non-inclusion mismatches arising from payments and quasi-payments) have effect in relation to—
(a) payments made on or after the commencement date, and
(b) quasi-payments in relation to which the payment period begins on or after the commencement date.
19 Chapter 6 of Part 6A of TIOPA 2010 (counteraction of deduction/non-inclusion mismatches relating to intra-company transfers from permanent establishments) has effect in relation to excessive PE deductions in relation to which the relevant PE period begins on or after the commencement date.
20 Chapters 9 and 10 of Part 6A of TIOPA 2010 (counteraction of double deduction mismatches) have effect for accounting periods beginning on or after the commencement date.
21 Chapter 11 of Part 6A of TIOPA 2010 (imported mismatch payments) has effect in relation to imported mismatch payments that are—
(a) payments made on or after the commencement date, or
(b) quasi-payments in relation to which the payment period begins on or after the commencement date.
22 The following provisions of this Schedule have effect in relation to accounting periods beginning on or after the commencement date—
(a) paragraphs 2 to 4, and
(b) paragraphs 5(a), 7(a), 8(a), 10(a), 15 and 16.
23 For the purposes of paragraph 18 and 21, where a payment period begins before the commencement date and ends on or after that date (“the straddling period”)—
(a) so much of the straddling period as falls before the commencement date, and so much of that period as falls on or after that date, are to be treated as separate taxable periods, and
(b) where it is necessary to apportion an amount for the straddling period to the two separate taxable periods, it is to be apportioned—
(i) on a time basis according to the respective length of the separate taxable periods, or
(ii) if that method would produce a result that is unjust or unreasonable, on a just and reasonable basis.
24 For the purposes of paragraphs 19, 20 and 22(b), where a company has an accounting period beginning before the commencement date and ending on or after that date (“the straddling period”)—
(a) so much of the straddling period as falls before the commencement date, and so much of the straddling period as falls on or after that date, are to be treated as separate accounting periods, and
(b) where it is necessary to apportion an amount for the straddling period to the two separate accounting periods, it is to be apportioned—
(i) in accordance with section 1172 of CTA 2010 (time basis), or
(ii) if that method would produce a result that is unjust or unreasonable, on a just and reasonable basis.
25 In this Part of this Schedule “the commencement date” means 1 January 2017.
SCHEDULE 11 Disposals of non-UK residential property interests
Section 83
1 TCGA 1992 is amended in accordance with this Schedule.
2 In section 14B(1) (meaning of “non-resident CGT disposal”), in paragraph (a) after “disposal of a UK residential property interest” insert “ (within the meaning given by Schedule B1) ”.
3 Omit section 14C (which introduces Schedule B1 and is superseded by the section 4BB inserted by section 83 of this Act).
4 In Schedule B1 (disposals of UK residential property interests), in paragraph 1—
(a) in sub-paragraph (4) for “6 April 2015” substitute “ the relevant date ”;
(b) after that sub-paragraph insert—
(4A) In sub-paragraph (4) “the relevant date” means—
(a) for the purpose of determining whether a disposal is a non-resident CGT disposal, 6 April 2015;
(b) for any other purpose, 31 March 1982.
5 After Schedule B1 insert—
SCHEDULE BA1
Disposals of non-UK residential property interests
Section 4BB.
Meaning of “disposal of a non-UK residential property interest”
1 (1) For the purposes of this Act, the disposal by a person (“P”) of an interest in non-UK land (whether made before or after this Schedule comes into force) is a “disposal of a non-UK residential property interest” if the first or second condition is met.
(2) The first condition is that—
(a) the land has at any time in the relevant ownership period consisted of or included a dwelling, or
(b) the interest in non-UK land subsists for the benefit of land that has at any time in the relevant ownership period consisted of or included a dwelling.
(3) The second condition is that the interest in non-UK land subsists under a contract for an off-plan purchase.
(4) In sub-paragraph (2) “relevant ownership period” means the period—
(a) beginning with the day on which P acquired the interest in non-UK land or 31 March 1982 (whichever is later), and
(b) ending with the day before the day on which the disposal occurs.
(5) If the interest in non-UK land disposed of by P as mentioned in sub-paragraph (1) results from interests in non-UK land which P has acquired at different times (“the acquired interests”), P is regarded for the purposes of sub-paragraph (4)(a) as having acquired the interest when P first acquired any of the acquired in-terests.
(6) In this paragraph—
“contract for an off-plan purchase” means a contract for the acquisition of land consisting of, or including, a building or part of a building that is to be constructed or adapted for use as a dwelling;
“dwelling” is to be read in accordance with paragraph 4.
(7) Paragraphs 6 and 20 of Schedule 4ZZC contain further provision about interests under contracts for off-plan purchases.
“Interest in non-UK land”
2 (1) In this Schedule “interest in non-UK land” means—
(a) an estate, interest, right or power in or over land outside the United Kingdom, or
(b) the benefit of an obligation, restriction or condition affecting the value of any such estate, interest, right or power,
other than an excluded interest.
(2) The following are excluded interests—
(a) any security interest;
(b) a licence to use or occupy land.
(3) In sub-paragraph (2) “security interest” means an interest or right held for the purpose of securing the payment of money or the performance of any other obligation.
(4) The Treasury may by regulations—
(a) provide that any other description of interest or right in relation to land outside the United Kingdom is an excluded interest;
(b) exclude from sub-paragraph (2) such interests or rights as may be prescribed in the regulations.
(5) Regulations under sub-paragraph (4) may make incidental, consequential, supplementary or transitional provision or savings.
Grants of options
3 (1) Sub-paragraph (2) applies where—
(a) a person (“P”) grants at any time an option binding P to sell an interest in non-UK land, and
(b) a disposal by P of that interest in non-UK land at that time would be a disposal of a non-UK residential property interest by virtue of paragraph 1.
(2) The grant of the option is regarded for the purposes of this Schedule as the disposal of an interest in the land in question (if it would not be so regarded apart from this paragraph).
(3) Nothing in this paragraph affects the operation of section 144 in relation to the grant of the option (or otherwise).
(4) Subsection (6) of section 144 (interpretation of references to “sale” etc) applies for the purposes of this paragraph as it applies for the purposes of that section.
Meaning of “dwelling”
4 (1) Paragraph 4 of Schedule B1 (meaning of “dwelling”), read with paragraphs 6 to 10 of that Schedule, applies for the purposes of this Schedule as it applies for the purposes of Schedule B1, but as if—
(a) in paragraph 4, sub-paragraphs (5) and (6) were omitted,
(b) in paragraphs 6 and 8—
(i) any reference to an interest in UK land were to an interest in non-UK land within the meaning of this Schedule, and
(ii) any reference to paragraph 1(4) of that Schedule were a reference to paragraph 1(4) of this Schedule, and
(c) in paragraphs 7 to 9 any reference to planning permission or development consent were to any permission or consent corresponding to planning permission or development consent within the meaning of that Schedule.
(2) In paragraph 5 of Schedule B1 (power to amend), the reference to paragraph 4 includes paragraph 4 as applied by this paragraph.
(3) The Treasury may by regulations under this sub-paragraph make provision changing or clarifying the cases where a building outside the United Kingdom counts as a dwelling for the purposes of this Schedule (and sub-paragraph (1) has effect subject to any such regulations).
(4) Provision made under sub-paragraph (3) may include provision corresponding to paragraph 4(5) of Schedule B1.
Interpretation
5 In this Schedule “land” includes a building.
SCHEDULE 12 Disposals of residential property interests: gains and losses
Section 83
1 TCGA 1992 is amended in accordance with this Schedule.
2 In section 57A(3) (gains and losses on relevant high value disposals: interaction with other provisions)—
(a) the words from “Part 4” to the end become paragraph (a), and
(b) after that paragraph insert
or,
(b) Part 3 of Schedule 4ZZC applies (other disposals of residential property interests which are or involve relevant high value disposals).
3 After section 57B insert—
CHAPTER 7 Computation of gains and losses: disposals of residential property interests
Gains and losses on disposals of residential property interests
57C Schedule 4ZZC makes provision about the computation of—
(a) residential property gains or losses, and
(b) other gains or losses,
on disposals of residential property interests which are not non-resident CGT disposals.
4 In Schedule B1 (disposals of UK residential property interests), in paragraph 1(7) after “Schedule 4ZZB” insert “ and paragraphs 6 and 20 of Schedule 4ZZC ”.
5 After Schedule 4ZZB insert—
SCHEDULE 4ZZC
Disposals of residential property interests: gains and losses
Section 57C
PART 1 Introduction and interpretation
Introduction
1 (1) In this Schedule “RPI disposal” means a disposal of a residential property interest which is not a non-resident CGT disposal.
(2) This Schedule applies for the purpose of determining, in relation to an RPI disposal—
(a) whether a residential property gain or loss accrues on the disposal, and the amount of any such gain or loss, and
(b) whether a gain or loss other than a residential property gain or loss accrues on the disposal, and the amount of any such gain or loss.
(3) In this Schedule—
(a) Part 2 contains the main rules for computing the gains and losses;
(b) Part 3 contains the rules for computing the gains and losses in a case where the RPI disposal is, or involves, a relevant high value disposal (as defined in section 2C).
Interpretation
2 (1) For the purposes of this Schedule, a relevant high value disposal is “comprised in” an RPI disposal if—
(a) the RPI disposal is treated for the purposes of section 2C and Schedule 4ZZA as two or more disposals, and
(b) the relevant high value disposal is one of those.
(2) In this Schedule—
“chargeable interest” has the same meaning as in Part 3 of the Finance Act 2013 (annual tax on enveloped dwellings) (see section 107 of that Act);
“dwelling” has the meaning given by —
paragraph 4 of Schedule B1, in relation to a disposal of a UK residential property interest;
paragraph 4 of Schedule BA1, in relation to a disposal of a non-UK residential property interest;
“subject-matter”, in relation to an interest in land (or a chargeable interest) means the land to which the interest relates.
PART 2 RPI disposals not involving relevant high value disposals
Application of Part
3 (1) This Part of this Schedule applies where a person (“P”) makes an RPI disposal of (or of part of) an interest in land.
(2) But this Part of this Schedule does not apply if the disposal is—
(a) a relevant high value disposal, or
(b) a disposal in which a relevant high value disposal is comprised.
(3) In this Part of this Schedule “the disposed of interest” means—
(a) the interest in land, or
(b) if the disposal is of part of that interest, the part disposed of.
Computation of residential property gains and losses
4 (1) The residential property gain or loss accruing on the disposal is computed as follows.
Step 1 Determine the amount of the gain or loss that accrues to P.
Step 2 The residential property gain or loss accruing on the disposal is an amount equal to the relevant fraction of that gain or loss (but see Step 3).
Step 3 If there has been mixed use of the subject matter of the disposed of interest on one or more days in the relevant ownership period, the residential property gain or loss accruing on the disposal is equal to the appropriate fraction of the amount given by Step 2.
(2) In Step 2 “the relevant fraction” means—
RD
TD
where—
“RD” is the number of days in the relevant ownership period on which the subject matter of the disposed of interest consists wholly or partly of a dwelling;
“TD” is the total number of days in the relevant ownership period.
(3) For the purposes of Step 3 there is “mixed use” of land on any day on which the land consists partly, but not exclusively, of one or more dwellings.
(4) In Step 3 “the appropriate fraction” means the fraction that is, on a just and reasonable apportionment, attributable to the dwelling or dwellings.
(5) In this paragraph the “relevant ownership period” means the period—
(a) beginning with the day on which P acquired the disposed of interest or, if later, 31 March 1982, and
(b) ending with the day before the day on which the disposal occurs.
Computation of balancing gains and loses
5 The gain or loss accruing on the disposal which is not a residential property gain or loss is computed as follows.
Step 1 In a case where there is a gain under Step 1 of paragraph 4(1), determine the amount of that gain remaining after the deduction of the residential property gain determined under that paragraph.
That remaining gain is the gain accruing on the disposal which is not a residential property gain.
Step 2 In a case where there is a loss under Step 1 of paragraph 4(1), determine the amount of that loss remaining after the deduction of the residential property loss determined under that paragraph.
That remaining loss is the loss accruing on the disposal which is not a residential property loss.
Interest subsisting under contract for off-plan purchase
6 (1) This paragraph applies where the disposal referred to in paragraph 3(1) is a disposal of a residential property interest only because of—
(a) the second condition in paragraph 1 of Schedule B1, or
(b) the second condition in paragraph 1 of Schedule BA1,
(interest subsisting under a contract for the acquisition of land that consists of, or includes, a building that is to be constructed for use as a dwelling).
(2) The land that is the subject of the contract concerned is treated for the purposes of this Part of this Schedule as consisting of (or, as the case requires, including) a dwelling throughout P's period of ownership of the disposed of interest.
PART 3 RPI disposals involving relevant high value disposals
Application of Part
7 (1) This Part of this Schedule applies where—
(a) a person (other than an excluded person) (“P”) makes an RPI disposal of (or of part of) an interest in land, and
(b) that disposal (“the disposal of land”) is a relevant high value disposal or a relevant high value disposal is comprised in it.
(2) “Excluded person” has the meaning given by section 2B(2).
Interpretation of Part
8 (1) This paragraph applies for the interpretation of this Part of this Schedule.
(2) “The asset”, in relation to a relevant high value disposal, means the chargeable interest which (or a part of which) is the subject of that disposal.
(3) “The disposed of interest”, in relation to a relevant high value disposal, means the asset or, if only part of the asset is the subject of the relevant high value disposal, that part of the asset.
(4) A day is a “residential property chargeable day” in relation to a relevant high value disposal if—
(a) it is a day on which the subject matter of the disposed of interest consists wholly or partly of a dwelling, but
(b) it is not an ATED chargeable day (as defined in paragraph 3 of Schedule 4ZZA).
Computation of residential property gains or losses on the RPI disposal
9 (1) The residential property gain or loss accruing on the disposal of land is computed as follows.
Step 1 Determine in accordance with paragraphs 10 to 15 the amount of the residential property gain or loss accruing on each relevant high value disposal.
Step 2 Add together the amounts of any gains or losses determined under Step 1 (treating any amount which is a loss as a negative amount).
(2) If the result is a positive amount, that amount is the residential property gain on the disposal of land.
(3) If the result is a negative amount, that amount (expressed as a positive number) is the residential property loss on the disposal of land.
Computation of residential property gains or losses on relevant high value disposal not within Case 1, 2 or 3 (or where an election is made)
10 (1) This paragraph applies to a relevant high value disposal where—
(a) the disposal does not fall within any of Cases 1, 2 or 3 in paragraph 2 of Schedule 4ZZA, or
(b) P has made an election under paragraph 5 of that Schedule in respect of the asset.
(2) The residential property gain or loss accruing on the relevant high value disposal is computed as follows—
Step 1 Determine the amount of gain or loss which accrues to P. (For the purpose of determining the amount of that gain or loss, no account is taken of section 57C or this Schedule.)
Step 2 The residential property gain or loss accruing on the relevant high value disposal is equal to the special fraction of that gain or loss.
(3) The “special fraction” is—
SD
TD
where—
“SD” is the number of residential property chargeable days in the relevant ownership period;
“TD” is the total number of days in the relevant ownership period.
(4) “Relevant ownership period” means the period—
(a) beginning with the day on which P acquired the disposed of interest or, if later, 31 March 1982, and
(b) ending with the day before the day on which the relevant high value disposal occurs.
Computation of residential property gains and losses on relevant high value disposal within Case 1, 2 or 3 (and no election made)
11 (1) This paragraph applies to a relevant high value disposal where—
(a) the disposal falls within Case 1, 2 or 3 in paragraph 2 of Schedule 4ZZA, and
(b) P has not made an election under paragraph 5 of that Schedule in respect of the asset.
(2) The residential property gain or loss accruing on the relevant high value disposal is computed in accordance with paragraphs 12 to 15.
(3) In those paragraphs “the relevant year” means—
(a) where the relevant high value disposal falls within Case 1 in paragraph 2 of Schedule 4ZZA, 2013,
(b) where it falls within Case 2 in that paragraph, 2015, and
(c) where it falls within Case 3 in that paragraph, 2016.
12 (1) Take the following steps—
Step 1 Determine the amount equal to the special fraction of the notional pre-ATED gain or loss (as the case may be) (see paragraph 13).
Step 2 Determine the amount equal to the special fraction of the notional post-ATED gain or loss (as the case may be) (see paragraph 14).
Step 3 Add (treating any amount which is a loss as a negative amount)—
the amount of any gain or loss determined under Step 1, and
the amount of any gain or loss determined under Step 2.
(2) If the result is a positive amount, that amount is the residential property gain on the relevant high value disposal.
(3) If the result is a negative amount, that amount (expressed as a positive number) is the residential property loss on the relevant high value disposal.
13 (1) This paragraph applies for the purposes of Step 1 in paragraph 12.
(2) “Notional pre-ATED gain or loss” means the gain or loss which would have accrued on 5 April of the relevant year had the disposed of interest been disposed of for a consideration equal to the market value of the interest on that date.
(3) The “special fraction” is—
SD
TD
where—
“SD” is the number of residential property chargeable days in the relevant ownership period;
“TD” is the total number of days in the relevant ownership period.
(4) The “relevant ownership period” is the period—
(a) beginning with the day on which P acquired the disposed of interest or, if later, 31 March 1982, and
(b) ending with 5 April of the relevant year.
14 (1) This paragraph applies for the purposes of Step 2 in paragraph 12.
(2) “Notional post-ATED gain or loss” means the gain or loss which would have accrued on the relevant high value disposal had P acquired the disposed of interest on 5 April of the relevant year for a consideration equal to its market value on that date (and see paragraph 15).
(3) The “special fraction” is—
SD
TD
where—
“SD” is the number of residential property chargeable days in the relevant ownership period;
“TD” is the total number of days in the relevant ownership period.
(4) The “relevant ownership period” is the period beginning with 6 April of the relevant year and ending with the day before the day on which the relevant high value disposal occurs.
15 (1) This paragraph applies for the purposes of computing the notional post-ATED gain or loss for the purposes of Step 2 in paragraph 12.
(2) In determining whether the asset which is the subject of the relevant high value disposal is a wasting asset (as defined for the purposes of Chapter 2 of Part 2), ignore the assumption that the asset was acquired on 5 April of the relevant year.
(3) Sections 41 (restriction of losses by reference to capital allowances and renewals allowances) and 47 (wasting assets subject to capital allowances) apply in relation to any capital allowance or renewals allowance made in respect of the expenditure actually incurred by P in acquiring or providing the asset as if that allowance were made in respect of the expenditure treated as incurred by P on 5 April of the relevant year.
Computation of balancing gains or losses on the RPI disposal
16 (1) The gain or loss on the disposal of land which is neither ATED-related nor a residential property gain or loss (“the balancing gain or loss”) is computed as follows.
Step 1 Determine in accordance with paragraphs 17 and 18 the amount of the gain or loss accruing on each relevant high value disposal which is neither ATED-related nor a residential property gain or loss.
This is the “balancing” gain or loss for each disposal.
Step 2 Add together the amounts of any balancing gains or losses determined under Step 1 (treating any amount which is a loss as a negative amount).
(2) If the result is a positive amount, that amount is the balancing gain on the disposal of land.
(3) If the result is a negative amount, that amount (expressed as a positive number) is the balancing loss on the disposal of land.
Computation of balancing gains or losses on relevant high value disposal not within Case 1, 2 or 3 (or where an election is made)
17 (1) In the case of a relevant high value disposal to which paragraph 10 applies, the amount of the balancing gain or loss is determined as follows.
(2) Determine the number of balancing days in the relevant ownership period.
(3) “Balancing day” means a day which is neither—
(a) a residential property chargeable day, nor
(b) an ATED chargeable day (as defined in paragraph 3 of Schedule 4ZZA).
(4) The balancing gain or loss on the disposal is equal to the balancing fraction of the amount of the gain or (as the case may be) loss determined under Step 1 of paragraph 10(2).
(5) The “balancing fraction” is—
BD
TD
where—
“BD” is the number of balancing days in the relevant ownership period;
“TD” is the total number of days in the relevant ownership period.
(6) In this paragraph “relevant ownership period” has the same meaning as in paragraph 10.
Computation of balancing gains or losses on relevant high value disposal within Case 1, 2 or 3 (and no election made)
18 (1) The amount of the balancing gain or loss on a relevant high value disposal to which paragraph 11 applies is found by adding—
(a) the amount of the balancing gain or loss belonging to the notional pre-ATED gain or loss, and
(b) the amount of the balancing gain or loss belonging to the notional post-ATED gain or loss,
(treating any amount which is a loss as a negative amount).
(2) If the result is a positive amount, that amount is the balancing gain on the relevant high value disposal.
(3) If the result is a negative amount, that amount (expressed as a positive number) is the balancing loss on the relevant high value disposal.
(4) The balancing gain or loss belonging to the notional pre-ATED gain or loss is equal to the balancing fraction of the notional pre-ATED gain or loss.
(5) The balancing gain or loss belonging to the notional post-ATED gain or loss is equal to the balancing fraction of the notional post-ATED gain or loss.
(6) The balancing fraction is—
BD
TD
where—
“BD” is the number of balancing days in the appropriate ownership period;
“TD” is the total number of days in the appropriate ownership period.
(7) “Balancing day” means a day which is neither—
(a) a residential property chargeable day, nor
(b) an ATED chargeable day (as defined in paragraph 3 of Schedule 4ZZA).
(8) The appropriate ownership period is—
(a) for the purpose of computing the balancing gain or loss belonging to the notional pre-ATED gain or loss, the relevant ownership period mentioned in paragraph 13(4);
(b) for the purpose of computing the balancing gain or loss belonging to the notional post-ATED gain or loss, the relevant ownership period mentioned in paragraph 14(4).
(9) In this paragraph—
“notional pre-ATED gain or loss” means the same as in paragraph 13(2);
“notional post-ATED gain or loss” means the same as in paragraph 14(2).
Relevant high value disposal and “other” disposal are comprised in the disposal of land
19 (1) This paragraph applies where the disposals comprised in the disposal of land include a disposal (the “non-ATED related disposal”) which is not a relevant high value disposal.
(2) This Part of this Schedule (apart from this paragraph) applies in relation to the non-ATED related disposal as if it were a relevant high value disposal.
(3) Sub-paragraph (4) applies if there has, at any time in the relevant ownership period, been mixed use of the subject matter of the disposed of interest.
(4) The amount of any residential property gain or loss on the non-ATED related disposal computed under this Part of this Schedule is taken to be the appropriate fraction of the amount that it would otherwise be.
(5) In sub-paragraph (4) “the appropriate fraction” means the fraction that is, on a just and reasonable apportionment, attributable to the dwelling or dwellings.
(6) In this paragraph the “relevant ownership period” means—
(a) where paragraph 10 applies, the relevant ownership period as defined in paragraph 10(4), or
(b) where paragraph 11 applies, the relevant ownership period as defined in paragraphs 13(4) and 14(4).
Interest subsisting under contract for off-plan purchase
20 (1) This paragraph applies where the RPI disposal made by P is a disposal of a residential property interest only because of—
(a) the second condition in paragraph 1 of Schedule B1, or
(b) the second condition in paragraph 1 of Schedule BA1,
(interest subsisting under a contract for the acquisition of land that consists of, or includes, a building that is to be constructed for use as a dwelling).
(2) The land that is the subject of the contract concerned is treated for the purposes of this Part of this Schedule as consisting of (or, as the case requires, including) a dwelling throughout P's period of ownership of the interest in land.
SCHEDULE 13 Entrepreneurs' relief: “trading company” and “trading group”
Section 86
1 TCGA 1992 is amended as follows.
2 In section 169H(7) (introduction), for “Section 169S contains” substitute “ Sections 169S and 169SA contain ”.
3 In section 169S (interpretation of Chapter), subsection (4A) is treated as never having had effect, and is omitted accordingly.
4 After section 169S insert—
Meaning of “trading company” and “trading group”
169SA Schedule 7ZA gives the meaning in this Chapter of “trading company” and “trading group”.
5 After Schedule 7 insert—
SCHEDULE 7ZA
Entrepreneurs' relief: “trading company” and “trading group”
Section 169SA
PART 1 Meaning of “trading company” and “trading group”
1 (1) This paragraph gives the meaning of “trading company” and “trading group” where used in the following provisions of Chapter 3 of Part 5 (entrepreneurs' relief)—
(a) in section 169I (material disposal of business assets)—
(i) paragraphs (a) and (b) of subsection (6) (which apply for the purposes of conditions A and B in that section), and
(ii) sub-paragraphs (i) and (ii) of subsection (7A)(c) (which apply for the purposes of conditions C and D in that section), and
(b) section 169J(4) (disposal of trust business assets).
(2) “Trading company” and “trading group” have the same meaning as in section 165 (see section 165A), but as modified by Part 2 of this Schedule.
(3) “Trading activities” (see section 165A(4) and (9)) is to be read in accordance with Part 3 of this Schedule.
2 In provisions of Chapter 3 of Part 5 not mentioned in paragraph 1(1), “trading company” and “trading group” have the same meaning as in section 165 (see section 165A), except that subsections (7) and (12) of section 165A are to be disregarded.
PART 2 Joint venture companies
Attribution of activities of a joint venture company
3 In relation to a disposal of assets consisting of (or of interests in) shares in or securities of a company (“company A”), activities of a joint venture company are to be attributed to a company under subsections (7) and (12) of section 165A only if P—
(a) passes the shareholding test in relation to the joint venture company (see paragraphs 5 to 8), and
(b) passes the voting rights test in relation to the joint venture company (see paragraphs 9 to 12).
Meaning of “investing company”
4 (1) For the purposes of this Part, a company is an “investing company” in relation to P and a joint venture company if it meets conditions 1 and 2.
(2) Condition 1 is that—
(a) the company is company A (see paragraph 3), or
(b) P directly owns some portion of the ordinary share capital of the company.
(3) Condition 2 is that the company owns some portion of the ordinary share capital of the joint venture company (whether it is owned directly, indirectly, or partly directly and partly indirectly).
(4) In sub-paragraph (3) the reference to a company owning share capital indirectly is to be read in accordance with section 1155 of CTA 2010.
Shareholding test
5 P passes the shareholding test in relation to a joint venture company if, throughout the relevant period, the sum of the percentages given by paragraphs (a) and (b) is at least 5%—
(a) the percentage of the ordinary share capital of the joint venture company that is owned directly by P, and
(b) P's indirect shareholding percentage (see paragraph 6).
6 P's “indirect shareholding percentage” is found by—
(a) calculating the percentage of the ordinary share capital of the joint venture company that is owned indirectly by P through a particular investing company (see paragraph 7), and
(b) where there are two or more investing companies, adding those percentages together.
7 The percentage of the ordinary share capital of a joint venture company that is owned indirectly by P through a particular investing company (“company IC”) at a particular time is given by—
R
×
S
×
100
where—
R is the fraction of company IC's ordinary share capital that is owned by P at that time, and
S is the fraction of the joint venture company's ordinary share capital that is owned by company IC at that time (whether it is owned directly, indirectly, or partly directly and partly indirectly) (see paragraph 8).
8 (1) The fraction of the joint venture company's ordinary share capital that is owned indirectly by company IC is calculated—
(a) by applying sections 1156 and 1157 of CTA 2010, as read with section 1155 of that Act, and
(b) on the assumptions specified in sub-paragraph (2).
(2) The assumptions are—
(a) where company IC directly owns more than 50% of the ordinary share capital of a company, company IC is taken to own the whole of the ordinary share capital of that company;
(b) where a company other than company IC (“company B”) directly owns more than 50% of the ordinary share capital of another company (“company C”) which is a member of a group of companies of which company IC is a member, company B is taken to own the whole of the ordinary share capital of company C.
Voting rights test
9 P passes the voting rights test in relation to a joint venture company if, throughout the relevant period, the sum of the percentages given by paragraphs (a) and (b) is at least 5%—
(a) the percentage of the voting rights that P holds directly in the joint venture company, and
(b) P's indirect voting rights percentage (see paragraph 10).
10 P's “indirect voting rights percentage” is found by—
(a) calculating the percentage of the voting rights in the joint venture company that P holds indirectly through a particular investing company (see paragraph 11), and
(b) where there are two or more investing companies, adding those percentages together.
11 The percentage of the voting rights in a joint venture company that P holds indirectly through a particular investing company (“company IC”) at a particular time is given by—
T
×
U
×
100
where—
T is the fraction of the voting rights in company IC that is held by P at that time, and
U is the fraction of the voting rights in the joint venture company that is held by company IC at that time (whether the voting rights are held directly, indirectly, or partly directly and partly indirectly) (see paragraph 12).
12 (1) The fraction of the voting rights in the joint venture company that is held indirectly by company IC is calculated—
(a) by applying sections 1156 and 1157 of CTA 2010, as read with section 1155 of that Act, as if references in those sections to owning the ordinary share capital of a company were references to holding voting rights in a company, and
(b) on the assumptions specified in sub-paragraph (2).
(2) The assumptions are—
(a) where company IC directly holds more than 50% of the voting rights in a company, company IC is taken to hold all the voting rights in that company;
(b) where a company other than company IC (“company B”) directly holds more than 50% of the voting rights in another company (“company C”) which is a member of a group of companies of which company IC is a member, company B is taken to hold all the voting rights in company C.
PART 3 Partnerships
Activities of a company as a member of a partnership
13 (1) In relation to a disposal of assets consisting of (or of interests in) shares in or securities of a company (“company A”), activities carried on by a company as a member of a partnership are to be treated as not being trading activities of the company (see section 165A(4) and (9)) if P fails either or both of the following—
(a) the profits and assets test in relation to the partnership (see paragraphs 15 to 20);
(b) the voting rights test in relation to the partnership (see paragraphs 21 to 23).
(2) In relation to such a disposal, activities carried on by a company as a member of a partnership are also to be treated as not being trading activities of the company if the company is not a member of the partnership throughout the relevant period.
Meaning of “direct interest company” and “relevant corporate partner”
14 (1) This paragraph applies for the purposes of this Part.
(2) A company is a “direct interest company” in relation to P if—
(a) it is company A (see paragraph 13(1)), or
(b) P directly owns some portion of the ordinary share capital of the company.
(3) A company is a “relevant corporate partner” in relation to P and a partnership if—
(a) a direct interest company in relation to P (“company DIC”) owns some portion of the ordinary share capital of the company (whether it is owned directly, indirectly or partly directly and partly indirectly),
(b) the company is a member of a group of companies of which company DIC is a member, and
(c) the company is a member of the partnership.
(4) In sub-paragraph (3) the reference to a company owning share capital indirectly is to be read in accordance with section 1155 of CTA 2010.
Profits and assets test
15 P passes the profits and assets test in relation to a partnership if, throughout the relevant period, the sum of the percentages given by paragraphs (a), (b) and (c) is at least 5%—
(a) the percentage which is P's direct interest in the assets of the partnership,
(b) the percentage which is P's share of the partnership through direct interest companies that are members of the partnership (see paragraph 16), and
(c) the percentage which is P's share of the partnership through direct interest companies and relevant corporate partners in the partnership (see paragraph 18).
16 P's “share of the partnership through direct interest companies that are members of the partnership” is found by—
(a) calculating the percentage which is P's indirect share of the partnership through each direct interest company that is a member of the partnership (see paragraph 17), and
(b) where there are two or more direct interest companies that are members of the partnership, adding those percentages together.
17 The percentage which is P's indirect share of the partnership through a particular direct interest company that is a member of the partnership (“company DICP”) at a particular time is given by—
R
×
V
×
100
where—
R is the fraction of company DICP's ordinary share capital that is owned by P at that time, and
V is the lower of—
the fraction of the profits of the partnership in which company DICP has an interest at that time, and
the fraction of the assets of the partnership in which company DICP has an interest at that time.
18 P's “share of the partnership through direct interest companies and relevant corporate partners in the partnership” is found by—
(a) calculating the percentage which is P's indirect share of the partnership through each direct interest company and each relevant corporate partner in the partnership (see paragraph 19), and
(b) where there are two or more direct interest companies or two or more relevant corporate partners, or both, adding those percentages together.
19 The percentage which is P's indirect share of the partnership through a particular direct interest company (“company DIC”) and a particular relevant corporate partner in the partnership (“company CP”) at a particular time is given by—
R
×
V
×
W
×
100
where—
R is the fraction of company DIC's ordinary share capital that is owned by P at that time,
V is the lower of—
the fraction of the profits of the partnership in which company CP has an interest at that time, and
the fraction of the assets of the partnership in which company CP has an interest at that time, and
W is the fraction of company CP's ordinary share capital that is owned by company DIC at that time (whether it is owned directly, indirectly, or partly directly and partly indirectly) (see paragraph 20).
20 (1) The fraction of a company's ordinary share capital that is owned indirectly by company DIC is calculated—
(a) by applying sections 1156 and 1157 of CTA 2010, as read with section 1155 of that Act, and
(b) on the assumptions specified in sub-paragraph (2).
(2) The assumptions are—
(a) where company DIC directly owns more than 50% of the ordinary share capital of a company, company DIC is taken to own the whole of the ordinary share capital of that company;
(b) where a company other than company DIC (“company B”) directly owns more than 50% of the ordinary share capital of another company (“company C”) which is a member of a group of companies of which company DIC is a member, company B is taken to own the whole of the ordinary share capital of company C.
Voting rights test
21 (1) P passes the voting rights test in relation to a partnership if, throughout the relevant period, the sum of P's direct voting rights percentage and P's indirect voting rights percentage is at least 5%.
(2) P's “direct voting rights percentage” is found by—
(a) taking the percentage of the voting rights that P holds directly in each direct interest company that is a member of the partnership, and
(b) where P directly holds voting rights in two or more direct interest companies that are members of the partnership, adding those percentages together.
(3) P's “indirect voting rights percentage” is found by—
(a) calculating the percentage which is P's indirect holding of voting rights in each relevant corporate partner in the partnership through each direct interest company (see paragraph 22), and
(b) where there are two or more relevant corporate partners or two or more direct interest companies, or both, adding those percentages together.
22 The percentage which is P's indirect holding of voting rights in a particular relevant corporate partner in the partnership (“company CP”) through a particular direct interest company (“company DIC”) at a particular time is given by—
T
×
X
×
100
where—
T is the fraction of the voting rights in company DIC that is held by P at that time, and
X is the fraction of the voting rights in company CP that is held by company DIC at that time (whether the voting rights are held directly, indirectly, or partly directly and partly indirectly) (see paragraph 23).
23 (1) The fraction of the voting rights in a company that is held indirectly by company DIC is calculated—
(a) by applying sections 1156 and 1157 of CTA 2010, as read with section 1155 of that Act, as if references in those sections to owning the ordinary share capital of a company were references to holding voting rights in a company, and
(b) on the assumptions specified in sub-paragraph (2).
(2) The assumptions are—
(a) where company DIC directly holds more than 50% of the voting rights in a company, company DIC is taken to hold all the voting rights in that company;
(b) where a company other than company DIC (“company B”) directly holds more than 50% of the voting rights in another company (“company C”) which is a member of a group of companies of which company DIC is a member, company B is taken to hold all the voting rights in company C.
PART 4 Interpretation of this schedule
Meaning of “P”
24 (1) In the case of a material disposal of business assets, “P” means the individual making the disposal.
(2) In the case of a disposal of trust business assets—
(a) “P” means any relevant beneficiary, but
(b) in any reference to P passing or failing the tests mentioned in paragraphs 3 and 13(1), P is to be read as being a single body consisting of all the relevant beneficiaries (so that, for the purposes of determining if those tests are met, percentages are to be calculated in respect of each relevant beneficiary and then aggregated).
(3) The following are “relevant beneficiaries”—
(a) the qualifying beneficiary in relation to the disposal (see section 169J(3)), and
(b) any other beneficiary who is, in relation to the disposal, a beneficiary mentioned in section 169O(1).
Meaning of “relevant period”
25 “The relevant period” means—
(a) for the purposes of conditions A and C in section 169I, the period of 1 year ending with the date of the disposal,
(b) for the purposes of conditions B and D in section 169I, the period of 1 year ending with the date mentioned in subsection (7)(a) or (b) or (7O)(a) or (b) of that section, and
(c) for the purposes of section 169J(4), a period of 1 year ending not earlier than 3 years before the date of the disposal.
Other interpretation provisions
26 (1) Terms used in this Schedule which are defined in subsection (14) of section 165A have the same meaning as they have in that subsection.
(2) References to a person holding voting rights include references to a person who has the ability to control the exercise of voting rights by another person.
(3) For the purposes of Part 3 of this Schedule, the assets of—
(a) a Scottish partnership, or
(b) a partnership under the law of any other country or territory under which assets of a partnership are regarded as held by or on behalf of the partnership as such,
are to be treated as held by the members of the partnership in the proportions in which they are entitled to share in the capital profits of the partnership.
References in Part 3 to a person's interest in the assets of a partnership are to be construed accordingly.
6 (1) The amendments made by this Schedule (except paragraph 3) have effect in relation to disposals made on or after 18 March 2015, but only for the purposes of determining what is a trading company or trading group at times on or after that date.
(2) In conditions B and D in section 169I of TCGA 1992 (material disposal of business assets)—
(a) a reference to a company ceasing to be a trading company does not include a case where, as a result of the coming into force of the amendments made by this Schedule, a company which was a trading company immediately before 18 March 2015 is treated as ceasing on that day to be a trading company, and
(b) a reference to a company ceasing to be a member of a trading group does not include a case where, as a result of the coming into force of the amendments made by this Schedule, a company which was a member of a trading group immediately before 18 March 2015 is treated as ceasing on that day to be a member of a trading group.
(3) Sub-paragraph (2) is without prejudice to the operation of section 43(4) of FA 2015.
Section 87
1 (1) In the heading to Part 5 of TGCA 1992, after “ASSETS” insert “, ENTREPRENEURS' RELIEF AND INVESTORS' RELIEF”.
(2) In the heading to Chapter 1 of that Part, before “GENERAL PROVISIONS” insert “ TRANSFER OF BUSINESS ASSETS: ”
2 In Part 5 of TCGA 1992, after section 169V insert—
CHAPTER 5 Investors' relief
Overview
Overview of Chapter
169VA (1) This Chapter provides for a relief, in the form of a lower rate of capital gains tax, in respect of disposals of (and disposals of interests in) certain ordinary shares in unlisted companies.
(2) Section 169VB defines “qualifying shares”, “potentially qualifying shares” and “excluded shares”.
(3) Section 169VC creates the relief, and relief under that section is to be known as “investors' relief”.
(4) Section 169VD makes provision about disposals from holdings consisting partly of qualifying shares.
(5) Sections 169VE to 169VG contain rules for cases where there have been previous disposals from a holding, to determine which shares remain in the holding.
(6) Sections 169VH and 169VI make provision about disposals by trustees of a settlement.
(7) Section 169VJ makes provision about disposals of interests in shares.
(8) Sections 169VK and 169VL provide for a cap on the amount of investors' relief that can be claimed.
(9) Section 169VM makes provision about claims for investors' relief.
(10) Sections 169VN to 169VT make provision about how investors' relief applies following a company's reorganisation of its share capital, an exchange of shares or securities or a scheme of reconstruction.
(11) Sections 169VU to 169VY contain definitions for the purposes of this Chapter.
Qualifying shares
Qualifying shares, potentially qualifying shares and excluded shares
169VB (1) Where there is a disposal of all or part of (or of an interest in) a holding of shares in a company, this section applies to determine whether a share which is in the holding at the time immediately before the disposal (“the relevant time”) is for the purposes of this Chapter—
(a) a qualifying share,
(b) a potentially qualifying share, or
(c) an excluded share.
(2) The share is a “qualifying share” at the relevant time if—
(a) the share was subscribed for, within the meaning given by section 169VU, by the person making the disposal (“the investor”),
(b) the investor has held the share continuously for the period beginning with the issue of the share and ending with the relevant time (“the share-holding period”),
(c) the share was issued on or after 17 March 2016,
(d) at the time the share was issued, none of the shares or securities of the company that issued it were listed on a recognised stock exchange,
(e) the share was an ordinary share when issued and is an ordinary share at the relevant time,
(f) the company that issued the share—
(i) was a trading company or the holding company of a trading group (as defined by section 169VV) when the share was issued, and
(ii) has been so throughout the share-holding period,
(g) at no time in the share-holding period was the investor or a person connected with the investor a relevant employee in respect of that company (within the meaning given by section 169VW), and
(h) the period beginning with the date the share was issued and ending with the date of the disposal is at least 3 years.
(3) The share is a “potentially qualifying share” at the relevant time if—
(a) the conditions in subsection (2)(a) to (g) are met, but
(b) the period beginning with the date the share was issued and ending with the date of the disposal is less than 3 years.
(4) The share is an “excluded share” at the relevant time if it is, at that time—
(a) not a qualifying share, and
(b) not a potentially qualifying share.
(5) This section is subject to Schedule 7ZB (disqualification of share where value received by investor).
(6) In relation to a share issued on or after 17 March 2016 but before 6 April 2016, any reference in subsection (2)(h) or (3) to “3 years” is to be read as a reference to the minimum period.
(7) In subsection (6) “the minimum period” means the period of 3 years extended by a period equal in length to the period beginning with the date the share was issued and ending with 5 April 2016.
The relief
Investors' relief
169VC (1) This section applies where—
(a) a qualifying person disposes of a holding, or part of a holding, of shares in a company, and
(b) immediately before that disposal some or all of the shares in the holding are qualifying shares.
(2) If—
(a) a chargeable gain accrues to the qualifying person on the disposal, and
(b) a claim for relief under this section is made,
the rate of capital gains tax in respect of the relevant gain is 10 per cent.
(3) In subsection (2) “the relevant gain” means—
(a) where immediately before the disposal all the shares in the holding are qualifying shares, the chargeable gain on the disposal;
(b) where at that time only some of the shares in the holding are qualifying shares, the appropriate part of that chargeable gain (defined by section 169VD).
(4) In this section—
(a) subsection (1) is subject to section 169VH (disposals by trustees of a settlement: further conditions for relief), and
(b) subsection (2) is subject to—
section 169VI (reduction of relief for certain disposals by trustees of a settlement), and
sections 169VK and 169VL (cap on investors' relief).
(5) A reference in subsection (3) to the chargeable gain on the disposal, or to the appropriate part of that gain, is a reference to that chargeable gain, or (as the case may be) that part, after any deduction of allowable losses which is made in accordance with this Act from that chargeable gain or from that part.
(6) For the application of this section to disposals of interests in shares, see section 169VJ.
(7) In this Chapter a “qualifying person” means—
(a) an individual, or
(b) the trustees of a settlement.
Disposal where holding consists partly of qualifying shares
169VD (1) This section applies where—
(a) a disposal (“the disposal concerned”) is made as mentioned in section 169VC(1), and
(b) at the time immediately before the disposal, only some of the shares in the holding are qualifying shares.
(2) Where this section applies, for the purposes of section 169VC(3) “the appropriate part” of the chargeable gain on the disposal is so much of that chargeable gain as is found by multiplying it by the appropriate fraction.
(3) The appropriate fraction is—
Q
T
where—
Q is the number of qualifying shares found under subsection (4), and
T is the total number of shares disposed of in the disposal concerned.
(4) The number of qualifying shares found under this subsection is—
(a) all the qualifying shares in the holding at the time immediately before the disposal concerned, or
(b) if less, such number of those qualifying shares as equals the number of shares disposed of in that disposal.
Which shares are in holding immediately before disposal
169VE (1) This section applies where—
(a) a particular disposal is made as mentioned in section 169VC(1)(a) (“the current disposal”),
(b) there have been one or more previous disposals of shares from the holding mentioned in section 169VC(1) before the current disposal, and
(c) it is necessary to determine for the purposes of this Chapter which shares are to be treated as in the holding immediately before the current disposal (and, accordingly, which shares are to be treated as having been disposed of in those previous disposals).
(2) In the case of a previous disposal as regards which investors' relief has been claimed or is being claimed, the shares to be treated as disposed of in that previous disposal are to be determined in accordance with the rules in section 169VF.
(3) In the case of a previous disposal not falling within subsection (2), the shares to be treated as disposed of in that previous disposal are to be determined in accordance with the rules in section 169VG.
Shares treated as disposed of in previous disposal where claim made
169VF (1) The rules referred to in section 169VE(2) are as follows; and in this section “the disposal concerned” means the previous disposal mentioned in section 169VE(2).
(2) There are to be treated as having been disposed of in the disposal concerned—
(a) all the qualifying shares in the holding at the time immediately before that disposal (“the material time”), or
(b) if less, such number of those qualifying shares as equals the number of shares disposed of in that disposal.
(3) If—
(a) the number of qualifying shares in the holding at the material time was less than the total number of shares disposed of, and
(b) excluded shares were in the holding at the material time,
the available excluded shares are also to be treated as having been disposed of.
(4) “The available excluded shares” means—
(a) all the excluded shares in the holding at the material time, or
(b) if less, such number of those excluded shares as is equal to the difference between—
(i) the total number of shares disposed of, and
(ii) the number of qualifying shares in the holding at the material time.
(5) If the number of shares treated under subsections (2) to (4) as disposed of in the disposal concerned is less than the total number of shares disposed of, such number of the potentially qualifying shares in the holding at the material time as is equal to the difference are also to be treated as having been disposed of.
(6) Where the number of potentially qualifying shares in the holding at the material time exceeds the difference mentioned in subsection (5), under that subsection potentially qualifying shares acquired later are to be treated as disposed of in preference to ones acquired earlier.
(7) In this section “disposed of” (without more) means disposed of in the disposal concerned.
Shares treated as disposed of in previous disposal: no claim made
169VG (1) The rules referred to in section 169VE(3) are as follows; and in this section “the disposal concerned” means the previous disposal mentioned in section 169VE(3).
(2) If any excluded shares were in the holding at the time immediately before the disposal concerned (“the material time”), the maximum number of excluded shares are to be treated as having been disposed of in the disposal concerned.
(3) “The maximum number of excluded shares” means—
(a) all the excluded shares in the holding at the material time, or
(b) if less, such number of those excluded shares as is equal to the number of shares disposed of.
(4) If—
(a) there were no excluded shares in the holding at the material time, or the number of such shares was less than the total number of shares disposed of, and
(b) potentially qualifying shares were in the holding at the material time,
the available potentially qualifying shares are to be treated as having been disposed of.
(5) “The available potentially qualifying shares” means—
(a) all the potentially qualifying shares in the holding at the material time, or
(b) if less, such number of those potentially qualifying shares as is equal to the difference between—
(i) the total number of shares disposed of, and
(ii) the number of excluded shares in the holding at the material time.
(6) Where the number of potentially qualifying shares in the holding at the material time exceeds the difference mentioned in subsection (5), potentially qualifying shares acquired later are to be treated as disposed of in preference to ones acquired earlier.
(7) If the number of shares treated under subsections (2) to (5) as disposed of in the disposal concerned is less than the total number of shares disposed of, such number of the qualifying shares in the holding at the material time as is equal to the difference are to be treated as having been disposed of.
(8) In this section “disposed of” (without more) means disposed of in the disposal concerned.
Trustees of a settlement: special provision
Disposals by trustees: further conditions for relief
169VH (1) Where a disposal falling within section 169VC(1)(a) and (b) is made by the trustees of a settlement, section 169VC does not apply to the disposal unless there is at least one individual who is an eligible beneficiary in respect of the disposal.
(2) For the purposes of this section, an individual is an “eligible beneficiary” in respect of the disposal if—
(a) at the time immediately before the disposal, the individual has under the settlement an interest in possession in settled property that includes or consists of the holding of shares mentioned in section 169VC(1),
(b) the individual has had such an interest in possession under the settlement throughout the period of 3 years ending with the date of the disposal,
(c) at no time in that period has the individual been a relevant employee in respect of the company that issued the shares (within the meaning given by section 169VW), and
(d) the individual has (by the time of the claim under section 169VC in respect of the disposal) elected to be treated as an eligible beneficiary in respect of the disposal.
(3) For the purposes of subsection (2)(d), an individual elects to be treated as an eligible beneficiary in respect of a disposal if the individual tells the trustees (by whatever means) that he or she wishes to be so treated; and an election under subsection (2)(d) may be withdrawn by the individual at any time until the claim is made.
(4) In this section “interest in possession” does not include an interest in possession for a fixed term.
(5) In relation to a disposal made by the trustees of a settlement, any reference in section 169VB(2)(g) to the investor is to be read as a reference to any trustee of the settlement.
Disposals by trustees: relief reduced in certain cases
169VI (1) Subsection (2) applies where—
(a) a disposal falling within section 169VC(1)(a) and (b) is made by the trustees of a settlement,
(b) section 169VC applies to the disposal by reason of there being at least one individual who is an eligible beneficiary in respect of the disposal (see section 169VH), and
(c) at the time immediately before the disposal, there are two or more persons each of whom has under the settlement an interest in possession in the settled property.
(2) In such a case the reference in section 169VC(2) to the relevant gain is to be read as a reference—
(a) to the eligible beneficiary's share of the relevant gain (see subsections (3) to (6)), or
(b) if there is more than one individual who is an eligible beneficiary in respect of the disposal, to so much of the relevant gain as is equal to the aggregate of the eligible beneficiaries' shares of that gain.
(3) In this section—
“eligible beneficiary” has the meaning given by section 169VH(2);
“relevant gain” has the meaning given by section 169VC(3);
“the settled property” means settled property that includes or consists of the holding of shares mentioned in section 169VC(1).
(4) Subsection (5) applies to determine for the purposes of this Chapter, in relation to any individual who is an eligible beneficiary in respect of a disposal within section 169VC(1) made by the trustees of a settlement, that individual's share of the relevant gain.
(5) That individual's share of the relevant gain on the disposal is so much of the relevant gain on the disposal as bears to the whole of that gain the same proportion as X bears to Y, where—
X is the interest in possession (other than for a fixed term) which, at the time immediately before the disposal, that individual has under the settlement in the income from the holding of shares mentioned in section 169VC(1), and
Y is all the interests in that income that persons (including that individual) with interests in possession in that holding have under the settlement at that time.
Disposals of interests in shares
Disposals of interests in shares: joint holdings etc
169VJ (1) In section 169VC(1)(a), the reference to the case where a qualifying person disposes of a holding, or part of a holding, of shares in a company includes the case where a qualifying person disposes of an interest in a relevant holding.
(2) In this section a “relevant holding” means either—
(a) a number of shares in a company which are of the same class and were acquired in the same capacity jointly by the same two or more persons including the qualifying person, or
(b) a number of shares in a company which are of the same class and were acquired in the same capacity by the qualifying person solely.
(3) In this section—
(a) “an interest” in a relevant holding means any interests of the qualifying person, in any of the shares in the relevant holding, which are by virtue of section 104 to be regarded as a single asset, and
(b) references to an interest include part of an interest.
(4) Where section 169VC(1) applies by reason of this section, section 169VD(3) and (4) have effect as if any reference to the number of shares disposed of were a reference to the number of shares an interest in which is disposed of.
(5) In relation to a disposal by the trustees of a settlement of an interest in a relevant holding falling within subsection (2)(a), sections 169VH(2) and 169VI(3) and (5) have effect as if any reference to the holding of shares mentioned in section 169VC(1) were to the interest disposed of.
(6) In accordance with subsection (1)—
(a) in sections 169VN(1)(d), 169VP(1)(d) and 169VS(1)(d) (reorganisations), any reference to a disposal of all or part of a holding includes a disposal by the qualifying person of an interest in the holding, and
(b) the reference in section 169VT(2) to a disposal of the original shares is to be read, in relation to a case where the original shares fall within subsection (2)(a) above, as a reference to a disposal of the qualifying person's interest in those shares.
Cap on relief
Cap on relief for disposal by an individual
169VK (1) This section applies if, on a disposal within section 169VC(1) made by an individual (“the individual concerned”), the aggregate of—
(a) the amount of the relevant gain on the disposal (“the gain in question”),
(b) the total amount of any gains that, in relation to earlier disposals by the individual concerned, were charged at the rate in section 169VC(2), and
(c) the total amount of any reckonable trust gains that, on any previous trust disposals in respect of which the individual concerned was an eligible beneficiary, were charged at the rate in section 169VC(2),
exceeds £10 million.
(2) The rate in section 169VC(2) applies only to so much (if any) of the gain in question as, when added to the aggregate of the total amounts mentioned in subsection (1)(b) and (c), does not exceed £10 million.
(3) Section 4 (rates of capital gains tax) applies to so much of the gain in question as is not subject to the rate in section 169VC(2).
(4) In this section—
“eligible beneficiary”, in relation to a disposal, is to be read in accordance with section 169VH(2);
“reckonable trust gain”, in relation to a trust disposal in respect of which the individual concerned was an eligible beneficiary, means—
if section 169VI(1)(c) applied in relation to the disposal, that individual's share of the relevant gain on that disposal, within the meaning given by section 169VI(4) and (5);
otherwise, the relevant gain on that disposal;
“the relevant gain”, in relation to a disposal, has the meaning given by section 169VC(3);
“trust disposal” means a disposal by the trustees of a settlement.
Cap on relief for disposal by trustees of a settlement
169VL (1) This section applies where—
(a) a disposal (“the disposal in question”) is made by the trustees of a settlement,
(b) that disposal is within section 169VC(1), and
(c) there is an excess amount in relation to an individual who is an eligible beneficiary in respect of the disposal in question (“the individual concerned”).
(2) For the purposes of this section there is an “excess amount” in relation to the individual concerned if the aggregate of—
(a) the amount of the current gain,
(b) the total amount of any gains that, in relation to earlier disposals made by the individual concerned, were charged at the rate in section 169VC(2), and
(c) the total amount of any reckonable trust gains that, on any previous trust disposals in respect of which the individual concerned was an eligible beneficiary, were charged at the rate in section 169VC(2),
exceeds £10 million.
(3) The rate in section 169VC(2) applies to the current gain only to the extent (if any) that the current gain when added to the aggregate of the total amounts mentioned in subsection (2)(b) and (c) does not exceed £10 million.
(4) Section 4 (rates of capital gains tax) applies to so much of the current gain as is not subject to the rate in section 169VC(2).
(5) In this section—
“the current gain” means the reckonable trust gain on the disposal in question;
“eligible beneficiary”, in relation to a disposal, is to be read in accordance with section 169VH(2);
“reckonable trust gain”, in relation to any trust disposal in respect of which the individual concerned is an eligible beneficiary, means—
if section 169VI(1)(c) applies in relation to the disposal, that individual's share of the relevant gain on that disposal, within the meaning given by section 169VI(4) and (5);
otherwise, the relevant gain on that disposal;
“the relevant gain”, in relation to a disposal, has the meaning given by section 169VC(3);
“trust disposal” means a disposal by the trustees of a settlement.
Claims for relief
Claims for relief
169VM (1) Any claim for investors' relief must be made—
(a) in the case of a disposal by an individual, by that individual;
(b) in the case of a disposal by the trustees of a settlement, jointly by—
(i) the trustees, and
(ii) the eligible beneficiary in respect of the disposal, within the meaning given by section 169VH(2) (or, if more than one, all those eligible beneficiaries).
(2) Any claim for investors' relief in respect of a disposal must be made on or before the first anniversary of the 31 January following the tax year in which the disposal is made.
Reorganisations
Reorganisations where no consideration given
169VN (1) This section applies where—
(a) there is a reorganisation within the meaning of section 126,
(b) immediately before the reorganisation, a qualifying person holds ordinary shares which, in relation to that reorganisation, are original shares within the meaning of section 126,
(c) on the reorganisation that person does not give or become liable to give any consideration for, or for any part of, a new holding, and
(d) at a time after the reorganisation, there is a disposal of all or part of a new holding.
(2) In this section a “new holding” means—
(a) the holding that immediately after the reorganisation is (in relation to the original shares) the new holding within the meaning of section 126, or
(b) where the new holding within the meaning of section 126 consists of two or more actual holdings, any of those actual holdings.
(3) Subsections (4) and (5) apply for the purposes of determining (for any purpose of this Chapter) the status of shares that immediately before the disposal mentioned in subsection (1)(d) are in the new holding mentioned there (“the new holding concerned”).
(4) Where a number of the original shares were—
(a) subscribed for by the qualifying person,
(b) issued on a particular date (“the relevant issue date”), and
(c) held continuously by that person for a particular period ending immediately before the reorganisation (“the period concerned”),
the following assumption is to be made.
(5) That assumption is that an appropriate number of the new shares were—
(a) subscribed for by the qualifying person,
(b) issued on the relevant issue date, and
(c) had by the time immediately after the reorganisation already been held continuously by that person for the period concerned.
(6) In subsections (4) and (5)—
“the appropriate number” has the meaning given by section 169VO;
“the original shares” means the shares held by the qualifying person immediately before the reorganisation that were original shares in relation to the reorganisation;
“the new shares” means the shares that immediately after the reorganisation were in the new holding concerned (including such, if any, of the original shares as remained after the reorganisation and were in that holding).
(7) In this section a reference to the “status” of a share is to whether it is qualifying, potentially qualifying or excluded.
(8) Section 169VE applies to determine, for the purposes of this Chapter, which shares are included in a holding immediately before a reorganisation as it applies for the purposes of determining which shares are included in a holding immediately before a particular disposal.
(9) References in this section to consideration are to be read in accordance with section 128(2).
The appropriate number
169VO (1) The “appropriate number” for the purposes of section 169VN(5) is the number found by multiplying the number of shares that are in the new holding concerned immediately after the reorganisation by the fraction—
A
B
where—
A is the number of the original shares that were—
subscribed for by the qualifying person,
issued on the relevant issue date, and
continuously held by that person for the period concerned, and
B is the total number of the original shares.
(2) In this section—
“the new holding concerned” has the meaning given by section 169VN(3);
“the original shares” has the meaning given by section 169VN(6);
“the relevant issue date” has the meaning given by section 169VN(4);
“the period concerned” has the meaning given by section 169VN(4).
Reorganisations where consideration given
169VP (1) This section applies where—
(a) there is a reorganisation within the meaning of section 126,
(b) immediately before the reorganisation, a qualifying person holds ordinary shares which, in relation to that reorganisation, are original shares within the meaning of section 126,
(c) on the reorganisation that person gives or becomes liable to give consideration for shares ( “ shares issued for consideration ”) which—
(i) are issued to that person on the reorganisation, and
(ii) immediately after the reorganisation are in a new holding, and
(d) at a time after the reorganisation, there is a disposal of all or part of that new holding.
(2) In this section a “new holding” means—
(a) the holding that immediately after the reorganisation is (in relation to the original shares) the new holding within the meaning of section 126, or
(b) where the new holding within the meaning of section 126 consists of two or more actual holdings, any of those actual holdings.
(3) In determining, for any purpose of this Chapter, the status of shares that immediately before the disposal mentioned in subsection (1)(d) are in the new holding mentioned there—
(a) the date of issue of the shares issued for consideration is to be taken to be their actual date of issue (rather than the date of issue of any of the original shares), and
(b) in relation to any part of the new holding for which consideration was not given, sections 169VN(3) to (6) and 169VO apply but as if any reference to the new holding concerned were to that part of the new holding.
(4) Section 169VN(3) to (6) and 169VO also apply in relation to any other holding which is a new holding in relation to the reorganisation and as respects which the person did not, on the reorganisation, give or become liable to give any consideration.
(5) In this section a reference to the “status” of a share is to whether it is qualifying, potentially qualifying or excluded.
(6) References in this section to consideration are to be read in accordance with section 128(2).
Exchange of shares for those in another company
169VQ (1) This section applies where section 135 applies in relation to an issue of shares in a company (“company B”) in exchange for shares in another company (“company A”).
(2) For the purposes of sections 169VN to 169VP—
(a) companies A and B are to be treated as if they were the same company, and
(b) the exchange of shares is to be treated as if it were a reorganisation of that company's share capital.
New shares issued on scheme of reconstruction
169VR (1) This section applies where—
(a) section 136 applies in relation to an arrangement between a company (“company A”) and the persons holding shares, or any class of shares, in company A, under which another company (“company B”) issues shares to those persons, and
(b) under section 136(2)(a) those persons are treated as exchanging shares in company A for the shares held by them in consequence of the arrangement.
(2) For the purposes of sections 169VN to 169VP—
(a) companies A and B are to be treated as if they were the same company, and
(b) the exchange of shares is to be treated as if it were a reorganisation of that company's share capital.
(3) In the following provisions of this Chapter, any reference to an exchange of shares includes anything that section 136(2)(a) treats as an exchange of shares.
Modification of conditions for being a qualifying share
169VS (1) This section applies where—
(a) an ordinary share (“the original share”) is subscribed for by a qualifying person (“the investor”);
(b) the conditions in section 169VB(2)(c) and (d) are met in relation to the original share,
(c) the share is involved in an exchange of shares treated under section 169VQ or 169VR as a reorganisation of share capital, and accordingly is included in the original shares within the meaning of section 169VN(6), and
(d) subsequently there is a disposal of all or part of a holding of shares that in relation to that exchange is a new holding within the meaning given by section 169VN(2).
(2) As respects a share which is in that holding immediately before that disposal, the conditions in section 169VB(2)(f) and (g) are to be regarded as met if (and only if)—
(a) in relation to the period beginning with the issue of the original share and ending with the exchange of shares, those conditions were met by the original share, and
(b) in relation to the period beginning with the exchange of shares and ending with the disposal, those conditions were met by a share representing the original share.
(3) Accordingly—
(a) in section 169VB(2)(f) and (g) as they apply to the original share, any reference to the share-holding period is to be read as to the period mentioned in subsection (2)(a) above, and
(b) in section 169VB(2)(f) and (g) as they apply to a share representing the original share, any reference to the share-holding period is to be read as to the period mentioned in subsection (2)(b) above.
(4) In subsection (1)(c) “the share” includes a share that, following a reorganisation or following an exchange of shares in relation to which section 169VQ or 169VR applies, represents the original share, and subsections (2) and (3) apply in such a case with the necessary modifications.
Election to disapply section 127
169VT (1) This section applies where—
(a) there is—
(i) a reorganisation (within the meaning of section 126), or
(ii) an exchange of shares which is treated as such a reorganisation by virtue of section 135 or 136, and
(b) the original shares and the new holding would fall to be treated by virtue of section 127 as the same asset.
(2) If an election is made under this section, a claim for investors' relief may be made as if the reorganisation or exchange of shares involved a disposal of the original shares; and if such a claim is made section 127 and sections 169VN to 169VS do not apply.
(3) Any election under this section must be made—
(a) if the reorganisation or exchange of shares would (apart from section 127) involve a disposal by the trustees of a settlement, jointly by—
(i) the trustees, and
(ii) the person who if the disposal were made would be the eligible beneficiary in respect of the disposal, within the meaning given by section 169VH(2) (or, if more than one, all the persons who would be such eligible beneficiaries);
(b) otherwise, by the individual concerned.
(4) Any election under this section must be made on or before the first anniversary of the 31 January following the tax year in which the reorganisation or exchange of shares takes place.
(5) In this section “the original shares” and “the new holding” have the meaning given by section 126.
Supplemental
“Subscribe” etc
169VU (1) For the purposes of this Chapter (other than this subsection) a person “subscribes for” a share in a company if—
(a) that person subscribes for the share,
(b) the share is issued to that person by the company for consideration consisting wholly of cash,
(c) the share is fully paid up at the time it is issued,
(d) the share is subscribed for, and issued, for genuine commercial reasons and not as part of arrangements the main purpose, or one of the main purposes, of which is to secure a tax advantage to any person, and
(e) the share is subscribed for, and issued, by way of a bargain at arm's length.
(2) In subsection (1) “arrangements” and “tax advantage” have the same meaning as in section 16A.
(3) If—
(a) an individual (“A”) subscribed for, or is treated under this subsection as having subscribed for, any shares,
(b) A transferred the shares to another individual (“B”) during their lives, and
(c) A was living together with B as B's spouse or civil partner at the time of the transfer,
B is to be treated for the purposes of this Chapter as having subscribed for the shares.
(4) Accordingly, for the purposes of this Chapter any period for which A held the shares continuously is to be added to, and treated as part of, the period for which B held the shares continuously.
(5) In this Chapter, apart from subsections (3) and (4), references to a person's having subscribed for a share include the person's having subscribed for the share jointly with any other person (and references to a person's holding a share or to a share being issued to a person are to be read accordingly).
“Trading company” etc
169VV (1) In this Chapter “trading company” and “the holding company of a trading group” have the same meaning as in section 165 (see section 165A).
(2) For the purposes of this Chapter a company is not to be regarded as ceasing to be a trading company, or the holding company of a trading group, merely because of anything done in consequence of—
(a) the company, or any of its subsidiaries, being in administration or receivership, or
(b) a resolution having been passed, or an order made, for the winding up of the company or any of its subsidiaries.
(3) But subsection (2) applies only if—
(a) the entry into administration or receivership, or the resolution or order for winding up, and
(b) everything done as a result of the company concerned being in administration or receivership, or as a result of that resolution or order,
is for genuine commercial reasons and is not part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax.
“Relevant employee”
169VW (1) This section applies to determine for the purposes of—
(a) section 169VB(2)(g), or
(b) section 169VH(2)(c),
whether a particular person has at any time in the relevant period been a “relevant employee” in respect of the issuing company.
(2) A person who has at any time in the relevant period been an officer or employee of—
(a) the issuing company, or
(b) a connected company,
is to be regarded as having at that time been a relevant employee in respect of the issuing company, but this is subject to subsections (3) and (5).
(3) If—
(a) a person is an unremunerated director of the issuing company or a connected company at any time in the relevant period, and
(b) the condition in subsection (4) is met,
the fact that the person holds that directorship at that time does not make the person a relevant employee in respect of the issuing company at that time.
(4) The condition referred to in subsection (3) is that at no time before the relevant period had the person mentioned in that subsection, or a person connected with that person, been—
(a) connected with the issuing company, or
(b) involved in carrying on (whether on the person's own account or as a partner, director or employee) the whole or any part of the trade, business or profession carried on by the issuing company or a company connected with that company.
(5) If—
(a) a person becomes an employee of the issuing company or a connected company at a time which is—
(i) within the relevant period, but
(ii) not within the first 180 days of that period,
(b) at the beginning of the relevant period, there was no reasonable prospect that the person would become such an employee within the relevant period, and
(c) the person is not at any time in the relevant period a director of the issuing company or a connected company,
that employment of the person does not make the person a relevant employee in respect of the issuing company at any time in the relevant period.
(6) For the purposes of subsection (5) there is a “reasonable prospect” of a thing if it is more likely than not.
(7) In this section—
“director” is to be read in accordance with section 452 of CTA 2010,
“connected company” means a company which at any time in the relevant period is connected with the issuing company (and it does not matter for this purpose whether that time is a time when the person in question is an officer or employee of either company);
“the issuing company” means the company mentioned in (as the case may be) section 169VB(2)(g) or section 169VH(2)(c);
“the relevant period” means the period mentioned in (as the case may be) section 169VB(2)(g) or section 169VH(2)(c);
“unremunerated director” has the meaning given by section 169VX.
“Unremunerated director”
169VX (1) For the purposes of section 169VW a person (“the person concerned”) is an “unremunerated director” of the issuing company or a connected company at a particular time in the relevant period if that person is a director of that company at that time and—
(a) does not receive in the relevant period any disqualifying payment from the issuing company or a related person, and
(b) is not entitled to receive any such payment in respect of that period or any part of it.
(2) In this section “disqualifying payment” means any payment other than—
(a) a payment or reimbursement of travelling or other expenses wholly, exclusively and necessarily incurred by the person concerned in the performance of his or her duties as a director,
(b) any interest which represents no more than a reasonable commercial return on money lent to the issuing company or a related person,
(c) any dividend or other distribution which does not exceed a normal return on the investment to which the dividend or distribution relates,
(d) any payment for the supply of goods which does not exceed their market value,
(e) any payment of rent for any property occupied by the issuing company or a related person which does not exceed a reasonable and commercial rent for the property, or
(f) any necessary and reasonable remuneration which is—
(i) paid for qualifying services that are provided to the issuing company or a related person in the course of a trade or profession carried on wholly or partly in the United Kingdom, and
(ii) taken into account in calculating for tax purposes the profits of that trade or profession.
(3) In this section a “related person” means—
(a) a connected company of which the person concerned is a director, or
(b) any person connected with the issuing company or with a company within paragraph (a).
(4) In this section any reference to a payment to the person concerned includes a payment made to that person indirectly or to that person's order or for that person's benefit.
(5) In this section “qualifying services” means services which are—
(a) not secretarial or managerial services, and
(b) not services of a kind provided by the person to whom they are provided.
(6) In this section the following expressions have the same meaning as in section 169VW—
“connected company”;
“director”;
“issuing company”;
“relevant period”.
General definitions
169VY In this Chapter—
“employee” (except in the expression “relevant employee”, which is to be read in accordance with section 169VW) has the meaning given by section 4 of ITEPA 2003;
“employment” has the meaning given by section 4 of ITEPA 2003;
“exchange of shares” is to be read in accordance with section 169VR(3);
“excluded share” has the meaning given by section 169VB;
a “holding” of shares in a company means a holding of such shares which by virtue of section 104(1) is to be regarded as a single asset;
“investors' relief” has the meaning given by section 169VA(3);
“office” has the meaning given by section 5(3) of ITEPA 2003;
“ordinary shares”, in relation to a company, means any shares forming part of the company's ordinary share capital (within the meaning given by section 989 of ITA 2007);
“potentially qualifying share” has the meaning given by section 169VB;
“qualifying person” has the meaning given by section 169VC(7);
“qualifying share” has the meaning given by section 169VB;
“subscribe” is to be read in accordance with section 169VU;
“trading company” and “the holding company of a trading group” are to be read in accordance with section 169VV.
3 After Schedule 7ZA of TCGA 1992 (inserted by Schedule 13) insert—
SCHEDULE 7ZB
Investors' relief: disqualification of shares
Section 169VB
Disqualification of shares where value received in period of restriction
1 (1) Sub-paragraph (2) applies where—
(a) shares in a company are issued to a qualifying person (“the investor”) on a particular date,
(b) any of those shares would, apart from this Schedule, be or be treated as being qualifying shares or potentially qualifying shares at a particular time (“the relevant time”), and
(c) the investor receives any value, other than insignificant value, from the company at any time in the period of restriction.
(2) The shares in question are to be treated for the purposes of this Chapter as being excluded shares at the relevant time.
(3) Where—
(a) the investor receives value (“the relevant receipt”) from the company during the period of restriction,
(b) the investor has received from the company one or more receipts of insignificant value at a time or times—
(i) during that period, but
(ii) not later than the time of the relevant receipt, and
(c) the aggregate amount of the value of the receipts within paragraphs (a) and (b) is not an amount of insignificant value,
the investor is to be treated for the purposes of this Schedule as if the relevant receipt had been a receipt of an amount equal to that aggregate amount.
For this purpose a receipt does not fall within paragraph (b) in relation to the shares if it has previously been aggregated under this sub-paragraph in relation to them.
(4) In this Schedule “the period of restriction” means the period—
(a) beginning one year before the date the shares are issued, and
(b) ending immediately before the third anniversary of the date the shares are issued.
(5) In sub-paragraphs (3) and (4) and in the following provisions of this Schedule references to “the shares” are to the shares referred to in sub-paragraph (1)(a).
(6) This paragraph is subject to paragraph 4.
“Receives value”
2 (1) For the purposes of this Schedule the investor receives value from the company if the company—
(a) repays, redeems or repurchases any of its share capital or securities which belong to the investor or makes any payment to the investor for giving up a right to any of the company's share capital or any security on its cancellation or extinguishment,
(b) repays, in pursuance of any arrangements for or in connection with the acquisition of the shares, any debt owed to the investor other than a debt which was incurred by the company—
(i) on or after the date of issue of the shares, and
(ii) otherwise than in consideration of the extinguishment of a debt incurred before that date,
(c) makes to the investor any payment for giving up the investor's right to any debt on its extinguishment,
(d) releases or waives any liability of the investor to the company or discharges, or undertakes to discharge, any liability of the investor to a third person,
(e) makes a loan or advance to the investor which has not been repaid in full before the issue of the shares,
(f) provides a benefit or facility for the investor,
(g) disposes of an asset to the investor for no consideration or for a consideration which is or the value of which is less than the market value of the asset,
(h) acquires an asset from the investor for a consideration which is or the value of which is more than the market value of the asset, or
(i) makes any payment to the investor other than a qualifying payment.
(2) For the purposes of sub-paragraph (1)(e) there is to be treated as if it were a loan made by the company to the investor—
(a) the amount of any debt (other than an ordinary trade debt) incurred by the investor to the company, and
(b) the amount of any debt due from the investor to a third person which has been assigned to the company.
(3) For the purposes of this paragraph the investor also receives value from the company if any person connected with the company—
(a) purchases any of its share capital or securities which belong to the investor, or
(b) makes any payment to the investor for giving up any right in relation to any of the company's share capital or securities.
(4) In this paragraph “qualifying payment” means—
(a) the payment by any company of such remuneration for service as an officer or employee of that company as may be reasonable in relation to the duties of that office or employment,
(b) any payment or reimbursement by any company of travelling or other expenses wholly, exclusively and necessarily incurred by the investor to whom the payment is made in the performance of duties as an officer or employee of that company,
(c) the payment by any company of any interest which represents no more than a reasonable commercial return on money lent to that company,
(d) the payment by any company of any dividend or other distribution which does not exceed a normal return on any investment in shares in or other securities of that company,
(e) any payment for the supply of goods which does not exceed their market value,
(f) any payment for the acquisition of an asset which does not exceed its market value,
(g) the payment by any company, as rent for any property occupied by the company, of an amount not exceeding a reasonable and commercial rent for the property,
(h) any reasonable and necessary remuneration which—
(i) is paid by any company for services rendered to that company in the course of a trade or profession carried on wholly or partly in the United Kingdom; and
(ii) is taken into account in calculating for tax purposes the profits of that trade or profession, or
(i) a payment in discharge of an ordinary trade debt.
(5) For the purposes of this paragraph a company is to be treated as having released or waived a liability if the liability is not discharged within 12 months of the time when it ought to have been discharged.
(6) In this paragraph—
(a) references to a debt or liability do not, in relation to a company, include references to any debt or liability which would be discharged by the making by that company of a qualifying payment, and
(b) references to a benefit or facility do not include references to any benefit or facility provided in circumstances such that, if a payment had been made of an amount equal to its value, that payment would be a qualifying payment.
(7) In this paragraph and paragraph 3—
(a) any reference to a payment or disposal to the investor includes a reference to a payment or disposal made to the investor indirectly or to the investor's order or for the investor's benefit;
(b) any reference to the investor includes an associate of the investor;
(c) any reference to a company includes a person who at any time in the period of restriction is connected with the company, whether or not that person is connected at the material time.
(8) In this paragraph “ordinary trade debt” means any debt for goods or services supplied in the ordinary course of a trade or business where any credit given—
(a) does not exceed six months, and
(b) is not longer than that normally given to customers of the person carrying on the trade or business.
Amount of value
3 (1) For the purposes of paragraph 1, the value received by the investor is—
(a) in a case within paragraph 2(1)(a), (b) or (c), the amount received by the investor or, if greater, the market value of the share capital, securities or debt in question;
(b) in a case within paragraph 2(1)(d), the amount of the liability;
(c) in a case within paragraph 2(1)(e), the amount of the loan or advance reduced by the amount of any repayment made before the issue of the shares;
(d) in a case within paragraph 2(1)(f), the cost to the company of providing the benefit or facility less any consideration given for it by the investor;
(e) in a case within paragraph 2(1)(g) or (h), the difference between the market value of the asset and the consideration (if any) given for it;
(f) in a case within paragraph 2(1)(i), the amount of the payment;
(g) in a case within paragraph 2(3), the amount received by the investor or, if greater, the market value of the share capital or securities in question.
(2) In this Schedule references to a receipt of insignificant value (however expressed) are references to a receipt of an amount of insignificant value.
This is subject to sub-paragraph (4).
(3) For the purposes of this Schedule “an amount of insignificant value” means an amount of value which does not exceed £1,000.
(4) For the purposes of this Schedule, if at any time in the period—
(a) beginning one year before the shares are issued, and
(b) expiring at the end of the issue date,
arrangements are in existence which provide for the investor to receive or to be entitled to receive, at any time in the period of restriction, any value from the company that issued the shares, no amount of value received by the investor is to be treated as a receipt of insignificant value.
(5) In sub-paragraph (4)—
(a) any reference to the investor includes a reference to any person who, at any time in the period of restriction, is an associate of the investor (whether or not that person is such an associate at the material time), and
(b) the reference to the company includes a reference to any person who, at any time in the period of restriction, is connected with the company (whether or not that person is so connected at the material time).
Receipt of replacement value
4 (1) Where—
(a) by reason of a receipt of value within sub-paragraph (1) (other than paragraph (b)) or sub-paragraph (3) of paragraph 2 (“the original value”), any shares would, in the absence of this paragraph, be treated under this Schedule as excluded shares at a particular time,
(b) at or before that time the original supplier receives value (“the replacement value”) from the original recipient by reason of a qualifying receipt, and
(c) the amount of the replacement value is not less than the amount of the original value,
the receipt of the original value is to be disregarded for the purposes of this Schedule.
(2) This paragraph is subject to paragraph 5.
(3) For the purposes of this paragraph and paragraph 5—
(a) “the original recipient” means the person who receives the original value, and
(b) “the original supplier” means the person from whom that value was received.
(4) A receipt of the replacement value is a qualifying receipt for the purposes of sub-paragraph (1) if it arises—
(a) by reason of the original recipient doing one or more of the following—
(i) making a payment to the original supplier, other than a payment which falls within paragraph (c) or to which sub-paragraph (5) applies,
(ii) acquiring any asset from the original supplier for a consideration the amount or value of which is more than the market value of the asset,
(iii) disposing of any asset to the original supplier for no consideration or for a consideration the amount or value of which is less than the market value of the asset,
(b) where the receipt of the original value was within paragraph 2(1)(d), by reason of an event the effect of which is to reverse the event which constituted the receipt of the original value, or
(c) where the receipt of the original value was within paragraph 2(3), by reason of the original recipient repurchasing the share capital or securities in question, or (as the case may be) reacquiring the right in question, for a consideration the amount or value of which is not less than the amount of the original value.
(5) This sub-paragraph applies to—
(a) any payment for any goods, services or facilities, provided (whether in the course of a trade or otherwise) by—
(i) the original supplier, or
(ii) any other person who, at any time in the period of restriction, is an associate of, or connected with, that supplier (whether or not that person is such an associate, or so connected, at the material time),
which is reasonable in relation to the market value of those goods, services or facilities,
(b) any payment of any interest which represents no more than a reasonable commercial return on money lent to—
(i) the original recipient, or
(ii) any person who, at any time in the period of restriction, is an associate of the original recipient (whether or not such an associate at the material time),
(c) any payment for the acquisition of an asset which does not exceed its market value,
(d) any payment, as rent for any property occupied by—
(i) the original recipient, or
(ii) any person who, at any time in the period of restriction, is an associate of the original recipient (whether or not such an associate at the material time),
of an amount not exceeding a reasonable and commercial rent for the property,
(e) any payment in discharge of an ordinary trade debt (within the meaning of paragraph 2(8)), and
(f) any payment for shares in or securities of any company in circumstances that do not fall within sub-paragraph (4)(a)(ii).
(6) For the purposes of this paragraph, the amount of the replacement value is—
(a) in a case within paragraph (a) of sub-paragraph (4), the aggregate of—
(i) the amount of any payment within sub-paragraph (i) of that paragraph, and
(ii) the difference between the market value of any asset within sub-paragraph (ii) or (iii) of that paragraph and the amount or value of the consideration (if any) received for it,
(b) in a case within sub-paragraph (4)(b), the same as the amount of the original value, and
(c) in a case within sub-paragraph (4)(c), the amount or value of the consideration received by the original supplier,
and paragraph 3(1) applies for the purposes of determining the amount of the original value.
(7) In this paragraph any reference to a payment to a person (however expressed) includes a reference to a payment made to the person indirectly or to the person's order or for the person's benefit.
5 (1) The receipt of the replacement value by the original supplier is to be disregarded for the purposes of paragraph 4, as it applies in relation to the shares, to the extent to which that receipt has previously been set (under that paragraph) against any receipts of value which are, in consequence, disregarded for the purposes of paragraph 4 as that paragraph applies in relation to those shares or any other shares subscribed for by the investor.
(2) The receipt of the replacement value by the original supplier (“the event”) is also be disregarded for the purposes of paragraph 4 if—
(a) the event occurs before the start of the period of restriction, or
(b) in a case where the event occurs after the time the original recipient receives the original value, it does not occur as soon after that time as is reasonably practicable in the circumstances.
But nothing in paragraph 4 or this paragraph requires the replacement value to be received after the original value.
(3) In this paragraph “the original value” and “the replacement value” are to be construed in accordance with paragraph 4.
Interpretation
6 In this Schedule—
“arrangements” includes any scheme, agreement, understanding, transaction or series of transactions (whether or not legally enforceable);
“associate” has the meaning that would be given by section 448 of CTA 2010 if in that section “relative” did not include a brother or sister;
“period of restriction” has the meaning given by paragraph 1(4);
“the shares” has the meaning given by paragraph 1(5).