SCHEDULE 8 Deemed domicile: income tax and capital gains tax
Section 29
PART 1 Application of deemed domicile rule
ICTA
1 (1) In section 266A of ICTA (life assurance premiums paid by employer), after subsection (8) insert—
(8A) Section 835BA of ITA 2007 (deemed domicile) applies for the purposes of subsection (6)(b).
(2) The amendment made by this paragraph has effect in relation to the tax year 2017-18 and subsequent tax years.
TCGA 1992
2 TCGA 1992 is amended as follows.
3 (1) Section 16ZA (losses: non-UK domiciled individuals) is amended as follows.
(2) For subsections (1) to (3) substitute—
(1) An individual may make an election under this section in respect of—
(a) the first tax year in which section 809B of ITA 2007 (claim for remittance basis) applies to the individual, or
(b) the first tax year in which that section applies to the individual following a period in which the individual has been domiciled in the United Kingdom.
(2) Where an individual makes an election under this section in respect of a tax year, the election has effect in relation to the individual for—
(a) that tax year, and
(b) all subsequent tax years.
(2A) But if after making an election under this section an individual becomes domiciled in the United Kingdom at any time in a tax year, the election does not have effect in relation to the individual for—
(a) that tax year, or
(b) any subsequent tax year.
(2B) Where an election made by an individual under this section in respect of a tax year ceases to have effect by virtue of subsection (2A), the fact that it has ceased to have effect does not prevent the individual from making another election under this section in respect of a later tax year.
(3) If an individual does not make an election under this section in respect of a year referred to in subsection (1)(a) or (b), foreign losses accruing to the individual in—
(a) that tax year, or
(b) any subsequent tax year except one in which the individual is domiciled in the United Kingdom,
are not allowable losses.
(3) After subsection (6) insert—
(7) Section 835BA of ITA 2007 (deemed domicile) applies for the purposes of this section.
(4) The amendments made by this paragraph have effect in relation to the tax year 2017-18 and subsequent tax years.
(5) Where—
(a) an individual makes an election under section 16ZA of TCGA 1992 as originally enacted for a tax year before the tax year 2017-18, but
(b) after making the election the individual becomes domiciled in the United Kingdom at any time in a tax year,
sections 16ZB and 16ZC of that Act do not have effect in relation to the individual by virtue of that election for that tax year or any subsequent tax year.
(6) Section 835BA of ITA 2007 (deemed domicile) applies for the purposes of sub-paragraph (5).
4 (1) In section 16ZB (election under section 16ZA: foreign chargeable gains remitted in the tax year after that in which they accrue), in subsection (1), for paragraphs (a) and (b) substitute—
(a) the individual has made an election under section 16ZA in respect of a tax year before the applicable year,
(aa) the election has effect in relation to the individual for the applicable year,
(b) foreign chargeable gains accrued to the individual in or after the tax year in respect of which the election was made but before the applicable year, and
.
(2) The amendment made by this paragraph has effect in relation to the tax year 2017-18 and subsequent tax years.
5 (1) In section 16ZC (election under section 16ZA by individual to whom remittance basis applies), in subsection (1), for paragraphs (a) to (c) substitute—
(a) the individual has made an election under section 16ZA in respect of the tax year or any earlier tax year,
(b) the election has effect in relation to the individual for the tax year, and
(c) section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to the individual for the tax year.
(2) The amendment made by this paragraph has effect in relation to the tax year 2017-18 and subsequent tax years.
6 (1) In section 69 (trustees of settlements), after subsection (2E) insert—
(2F) Section 835BA of ITA 2007 (deemed domicile) applies for the purposes of subsection (2B)(c).
(2) The amendment made by this paragraph has effect in relation to a settlement—
(a) in a case where the settlement arose on the settlor's death (whether by will, intestacy or otherwise), where the settlor died on or after 6 April 2017;
(b) in any other case, where the settlor made the settlement (or was treated for the purposes of TCGA 1992 as making the settlement) on or after 6 April 2017.
7 (1) In section 86 (attribution of gains to settlors with interest in non-resident or dual resident settlements), after subsection (3) insert—
(3A) Section 835BA of ITA 2007 (deemed domicile) applies for the purposes of subsection (1)(c).
(2) The amendment made by this paragraph has effect in relation to the tax year 2017-18 and subsequent tax years.
8 (1) In section 275 (location of assets), after subsection (3) insert—
(3A) Section 835BA of ITA 2007 (deemed domicile) applies for the purposes of subsection (1)(l)(iii).
(2) The amendment made by this paragraph has effect for the purposes of determining for the purposes of TCGA 1992 the situation of any asset, or whether the situation of any asset is in the United Kingdom, at any time on or after 6 April 2017 (irrespective of when the asset was acquired by the person holding it).
9 (1) In Schedule 5A (settlements with foreign element: information), in paragraph 3, after sub-paragraph (3) insert—
(3A) Section 835BA of ITA 2007 (deemed domicile) applies for the purposes of sub-paragraph (3).
(2) The amendment made by this paragraph has effect in relation to settlements created on or after 6 April 2017.
ITEPA 2003
10 (1) ITEPA 2003 is amended as follows.
(2) In section 355 (deductions for corresponding payments by non-domiciled employees with foreign employers), in subsection (2), at the end insert “ (and section 835BA of ITA 2007 (deemed domicile) applies for the purposes of this subsection) ”.
(3) In section 373 (non-domiciled employee's travel costs and expenses where duties performed in UK), at the end insert—
(7) Section 835BA of ITA 2007 (deemed domicile) applies for the purposes of subsection (1).
(4) In section 374 (non-domiciled employee's spouse's etc travel costs and expenses where duties performed in UK), at the end insert —
(10) Section 835BA of ITA 2007 (deemed domicile) applies for the purposes of subsection (1).
(5) In section 376 (foreign accommodation and subsistence costs and expenses (overseas employment)), at the end insert —
(6) Section 835BA of ITA 2007 (deemed domicile) applies for the purposes of subsection (1)(c).
(6) The amendments made by this paragraph have effect in relation to the tax year 2017-18 and subsequent tax years.
ITA 2007
11 ITA 2007 is amended as follows.
12 (1) In section 476 (how to work out whether settlor meets condition C in section 475), after subsection (3) insert—
(3A) Section 835BA (deemed domicile) applies for the purposes of subsections (2)(b) and (3)(b).
(2) The amendment made by this paragraph has effect—
(a) so far as relating to section 476(2)(b) of ITA 2007, in relation to a settlor who dies on or after 6 April 2017;
(b) so far as relating to section 476(3)(b) of ITA 2007, in relation to a settlement made on or after 6 April 2017.
13 (1) In section 718 (meaning of “person abroad” etc), after subsection (2) insert—
(3) Section 835BA (deemed domicile) applies for the purposes of subsection (1)(b).
(2) The amendment made by this paragraph has effect in relation to the tax year 2017-18 and subsequent tax years.
14 (1) Chapter A1 of Part 14 (remittance basis) is amended as follows.
(2) In section 809B (claim for remittance basis to apply), after subsection (1) insert—
(1A) Section 835BA (deemed domicile) applies for the purposes of subsection (1)(b).
(3) In section 809C (claim for remittance basis by long-term UK resident: nomination) omit the following—
(a) in subsection (1)(b), “the 17-year residence test,”;
(b) subsection (1ZA);
(c) subsection (1A)(a);
(d) in subsection (1B)(a), “the 17-year residence test or”;
(e) subsection (4)(za).
(4) In section 809E (application of remittance basis without claim: other cases), after subsection (1) insert—
(1A) Section 835BA (deemed domicile) applies for the purposes of subsection (1)(b).
(5) In section 809H (claim for remittance basis by long-term UK resident: charge) omit the following—
(a) in subsection (1)(c), “the 17-year residence test,”;
(b) in subsection (1A)—
(i) “(1ZA)”;
(ii) “the 17-year residence test,”;
(c) subsection (5B)(za).
(6) The amendments made by this paragraph have effect in relation to the tax year 2017-18 and subsequent tax years.
This is subject to paragraphs 15 and 16.
15 (1) This paragraph applies in a case where—
(a) section 10A of TCGA 1992 (temporary non-residents) as originally enacted applies in relation to an individual, and
(b) the year of return is 2017-18.
(2) For the purposes of capital gains tax in respect of foreign chargeable gains accruing to the individual during an intervening year, the amendment made by paragraph 14(2) does not have effect in relation to the year of return.
(3) Where by virtue of sub-paragraph (2) an individual makes a claim under section 809B of ITA 2007 for the tax year 2017-18, sections 809C, 809G and 809H of ITA 2007 do not apply to the individual for that tax year.
(4) In this paragraph—
“intervening year” and “year of return” have the same meanings as in section 10A of TCGA 1992 as originally enacted;
“foreign chargeable gain” has the meaning given by section 12(4) of TCGA 1992.
16 (1) This paragraph applies in a case where section 10A of TCGA 1992 as substituted by paragraph 119 of Schedule 45 to FA 2013 applies in relation to an individual.
(2) For the purposes of capital gains tax in respect of foreign chargeable gains accruing to the individual during a temporary period of non-residence beginning before 8 July 2015, the amendment made by paragraph 14(2) does not have effect in relation to the tax year which consists of or includes the period of return.
(3) Where by virtue of sub-paragraph (2) an individual makes a claim under section 809B of ITA 2007 for any of the tax years 2017-18 to 2020-21 inclusive, sections 809C, 809G and 809H of ITA 2007 do not apply to the individual for that tax year.
(4) In this paragraph, “foreign chargeable gain” has the meaning given by section 12(4) of TCGA 1992.
(5) Part 4 of Schedule 45 to FA 2013 explains what “temporary period of non-residence” and “period of return” mean.
17 (1) In section 834 (residence of personal representatives), at the end insert—
(5) Section 835BA (deemed domicile) applies for the purposes of subsection (3).
(2) The amendment made by this paragraph has effect in relation to the tax year 2017-18 and subsequent tax years.
PART 2 Protection of overseas trusts
TCGA 1992
18 In Schedule 5 to TCGA 1992 (provisions supplementing section 86 of TCGA 1992), after paragraph 5 insert—
5A (1) Section 86 does not apply in relation to a year (“the particular year”) if Conditions A to D are met.
(2) Condition A is that the particular year is—
(a) the tax year 2017-18, or
(b) a later tax year.
(3) Condition B is that when the settlement is created the settlor—
(a) is not domiciled in the United Kingdom, and
(b) if the settlement is created on or after 6 April 2017, is not deemed domiciled in the United Kingdom.
(4) Condition C is that there is no time in the particular year when the settlor is—
(a) domiciled in the United Kingdom, or
(b) deemed domiciled in the United Kingdom by virtue of Condition A in section 835BA of ITA 2007.
(5) Condition D is that no property or income is provided directly or indirectly for the purposes of the settlement by the settlor, or by the trustees of another settlement of which the settlor is the settlor or a beneficiary, at a time in the relevant period when the settlor is—
(a) domiciled in the United Kingdom, or
(b) deemed domiciled in the United Kingdom.
(6) In sub-paragraph (5) “relevant period” means the period—
(a) beginning with the start of 6 April 2017 or, if later, the creation of the settlement, and
(b) ending with the end of the particular year.
(7) For the purposes of Condition D, the addition of value to property comprised in the settlement is to be treated as the direct provision of property for the purposes of the settlement.
(8) Paragraph 5B contains further provision for the purposes of Condition D.
(9) In this paragraph “deemed domiciled” means regarded for the purposes of section 86(1)(c) as domiciled in the United Kingdom as a result of section 835BA of ITA 2007 having effect.
5B (1) This paragraph applies for the purposes of Condition D in paragraph 5A.
(2) Ignore—
(a) property or income provided under a transaction, other than a loan, where the transaction is entered into on arm's length terms,
(b) property or income provided, otherwise than under a loan, without any intention by the person providing it to confer a gratuitous benefit on any person,
(c) the principal of a loan which is made to the trustees of the settlement on arm's length terms,
(d) the payment of interest to the trustees of the settlement under a loan made by them on arm's length terms,
(e) repayment to the trustees of the settlement of the principal of a loan made by them,
(f) property or income provided in pursuance of a liability incurred by any person before 6 April 2017, and
(g) where the settlement's expenses relating to taxation and administration for a tax year exceed its income for that year, property or income provided towards meeting that excess if the value of any such property and income is not greater than the amount of—
(i) the excess, or
(ii) if greater, the amount by which such expenses exceed the amount of such expenses which may be paid out of the settlement's income.
(3) Where—
(a) a loan is made to the trustees of the settlement by the settlor or the trustees of a settlement connected with the settlor, and
(b) the loan is on arm's length terms, but
(c) a relevant event occurs,
the principal of the loan is to be regarded as having been provided to the trustees at the time of that event (despite sub-paragraph (2)).
(4) In sub-paragraph (3) “relevant event” means—
(a) capitalisation of interest payable under the loan,
(b) any other failure to pay interest in accordance with the terms of the loan, or
(c) variation of the terms of the loan such that they cease to be arm's length terms.
(5) Sub-paragraph (6) applies (subject to sub-paragraph (7)) where—
(a) the settlor becomes deemed domiciled in the United Kingdom on or after 6 April 2017,
(b) before the date on which the settlor becomes deemed domiciled in the United Kingdom ( “ the deemed domicile date ”), a loan has been made to the trustees of the settlement by—
(i) the settlor, or
(ii) the trustees of a settlement connected with the settlor,
(c) the loan is not entered into on arm's length terms, and
(d) any amount that is outstanding under the loan on the deemed domicile date (“the outstanding amount”) is payable or repayable on demand on or after that date.
(6) Where this sub-paragraph applies, the outstanding amount is to be regarded as property directly provided on the deemed domicile date by the lender for the purposes of the settlement (despite sub-paragraph (2)).
(7) But if the deemed domicile date is 6 April 2017, sub-paragraph (6) does not apply if—
(a) the principal of the loan is repaid, and all interest payable under the loan is paid, before 6 April 2018, or
(b) the loan becomes a loan on arm's length terms before 6 April 2018 and—
(i) before that date interest is paid to the lender in respect of the period beginning with 6 April 2017 and ending with 5 April 2018 as if those arm's length terms had been terms of the loan in relation to that period, and
(ii) interest continues to be payable from 6 April 2018 in accordance with those terms.
(8) For the purposes of this paragraph a loan is on “arm's length terms”—
(a) in the case of a loan made to the trustees of a settlement, only if interest at the official rate or more is payable at least annually under the loan;
(b) in the case of a loan made by the trustees of a settlement, only if any interest payable under the loan is payable at no more than the official rate.
(9) For the purposes of this paragraph—
a settlement is “connected” with a person if the person is the settlor or a beneficiary of it;
“deemed domiciled” has the same meaning as in paragraph 5A;
“official rate”, in relation to interest, means the rate of interest applicable from time to time under section 178 of the Finance Act 1989 for the purposes of Chapter 7 of Part 3 of ITEPA 2003.
FA 2004
19 In paragraph 8 of Schedule 15 to FA 2004 (income tax on benefits received by former owner of property: intangible property comprised in settlement where settlor retains an interest), after sub-paragraph (3) insert—
(4) For the purpose of deciding whether the condition in sub-paragraph (1)(a) is met, ignore section 628A of ITTOIA 2005 (which provides for section 624 of that Act not to apply to certain foreign income arising under a settlement).
ITTOIA 2005
20 Chapter 5 of Part 5 of ITTOIA 2005 (settlements) is amended as follows.
21 In section 624 (income under a settlement where settlor retains an interest), in subsection (3) (which lists provisions containing exceptions)—
(a) omit the “and” at the end of the entry for section 627, and
(b) after the entry for section 628 insert
, and
section 628A (exception for protected foreign-source income).
22 After section 628 insert—
Exception for protected foreign-source income
628A (1) The rule in section 624(1) does not apply to income which arises under a settlement if it is protected foreign-source income for a tax year.
(2) For this purpose, income arising under a settlement in a tax year is “protected foreign-source income” for the tax year if Conditions A to F are met.
(3) Condition A is that the income would be relevant foreign income if it were income of a UK resident individual.
(4) Condition B is that the income is from property originating from the settlor (see section 645).
(5) Condition C is that when the settlement is created the settlor—
(a) is not domiciled in the United Kingdom, and
(b) if the settlement is created on or after 6 April 2017, is not deemed domiciled in the United Kingdom.
(6) Condition D is that there is no time in the tax year when the settlor is—
(a) domiciled in the United Kingdom, or
(b) deemed domiciled in the United Kingdom by virtue of Condition A in section 835BA of ITA 2007.
(7) Condition E is that the trustees of the settlement are not UK resident for the tax year.
(8) Condition F is that no property or income is provided directly or indirectly for the purposes of the settlement by the settlor, or by the trustees of any other settlement of which the settlor is a beneficiary or settlor, at a time in the relevant period when the settlor is—
(a) domiciled in the United Kingdom, or
(b) deemed domiciled in the United Kingdom.
(9) In subsection (8) “relevant period” means the period—
(a) beginning with the start of 6 April 2017 or, if later, the creation of the settlement, and
(b) ending with the end of the tax year.
(10) For the purposes of Condition F, the addition of value to property comprised in the settlement is to be treated as the direct provision of property for the purposes of the settlement.
(11) Section 628B (tainting) contains further provision for the purposes of Condition F.
(12) In this section “deemed domiciled” means regarded for the purposes of section 809(1)(b) of ITA 2007 as domiciled in the United Kingdom as a result of section 835BA of ITA 2007 having effect.
(13) Section 648(3) to (5) (relevant foreign income treated as arising under settlement only if and when remitted) do not apply for the purposes of this section.
Section 628A: tainting
628B (1) This section applies for the purposes of Condition F in section 628A.
(2) Ignore—
(a) property or income provided under a transaction, other than a loan, where the transaction is entered into on arm's length terms,
(b) property or income provided, otherwise than under a loan, without any intention by the person providing it to confer a gratuitous benefit on any person,
(c) the principal of a loan which is made to the trustees of the settlement on arm's length terms,
(d) the payment of interest to the trustees of the settlement under a loan made by them on arm's length terms,
(e) repayment to the trustees of the settlement of the principal of a loan made by them,
(f) property or income provided in pursuance of a liability incurred by any person before 6 April 2017, and
(g) where the settlement's expenses relating to taxation and administration for a tax year exceed its income for that year, property or income provided towards meeting that excess if the value of any such property and income is not greater than the amount of—
(i) the excess, or
(ii) if greater, the amount by which such expenses exceed the amount of such expenses which may be paid out of the settlement's income.
(3) Where—
(a) a loan is made to the trustees of the settlement by the settlor or the trustees of a settlement connected with the settlor, and
(b) the loan is on arm's length terms, but
(c) a relevant event occurs,
the principal of the loan is to be regarded as having been provided to the trustees at the time of that event (despite subsection (2)).
(4) In subsection (3) “relevant event” means—
(a) capitalisation of interest payable under the loan,
(b) any other failure to pay interest in accordance with the terms of the loan, or
(c) variation of the terms of the loan such that they cease to be arm's length terms.
(5) Subsection (6) applies (subject to subsection (7)) where—
(a) the settlor becomes deemed domiciled in the United Kingdom on or after 6 April 2017,
(b) before the date on which the settlor becomes deemed domiciled in the United Kingdom ( “ the deemed domicile date ”), a loan has been made to the trustees of the settlement by—
(i) the settlor, or
(ii) the trustees of a settlement connected with the settlor,
(c) the loan is not entered into on arm's length terms, and
(d) any amount that is outstanding under the loan on the deemed domicile date (“the outstanding amount”) is payable or repayable on demand on or after that date.
(6) Where this subsection applies, the outstanding amount is to be regarded as property directly provided on the deemed domicile date by the lender for the purposes of the settlement (despite subsection (2)).
(7) But if the deemed domicile date is 6 April 2017, subsection (6) does not apply if—
(a) the principal of the loan is repaid, and all interest payable under the loan is paid, before 6 April 2018, or
(b) the loan becomes a loan on arm's length terms before 6 April 2018 and—
(i) before that date interest is paid to the lender in respect of the period beginning with 6 April 2017 and ending with 5 April 2018 as if those arm's length terms had been terms of the loan in relation to that period, and
(ii) interest continues to be payable from 6 April 2018 in accordance with those terms.
(8) For the purposes of this section, a loan is on “arm's length terms”—
(a) in the case of a loan made to the trustees of a settlement, only if interest at the official rate or more is payable at least annually under the loan;
(b) in the case of a loan made by the trustees of a settlement, only if any interest payable under the loan is payable at no more than the official rate.
(9) For the purposes of this section—
a settlement is “connected” with a person if the person is the settlor or a beneficiary of it;
“deemed domiciled” has the same meaning as in section 628A;
“official rate”, in relation to interest, means the rate of interest applicable from time to time under section 178 of FA 1989 for the purposes of Chapter 7 of Part 3 of ITEPA 2003.
Foreign income arising before, but remitted on or after, 6 April 2017
628C (1) For the purposes of applying section 809L of ITA 2007 (meaning of remitted to the UK) in relation to transitional trust income, “relevant person” in that section does not include the trustees of the settlement concerned.
(2) “Transitional trust income” means income—
(a) that arises under a settlement in the period beginning with the tax year 2008-09 and ending with the tax year 2016-17 (“the protection period”),
(b) that would be protected foreign-source income for the purposes of section 628A(1) if section 628A(2)—
(i) had effect for the protection period, and
(ii) so had effect with a reference to conditions A to E (instead of A to F),
(c) that prior to 6 April 2017 has neither been distributed by the trustees of the settlement nor treated under section 624(1) as income of the settlor, and
(d) that would for the tax year in which it arose under the settlement have been treated under section 624(1) as income of the settlor if the settlor had been domiciled in the United Kingdom for that year.
(3) Section 648(3) to (5) (relevant foreign income treated as arising under settlement only if and when remitted), and corresponding earlier enactments, do not apply for the purposes of subsection (2)(a) and (d).
23 (1) In section 629(5) (list of exceptions), at the end insert “or section 630A (exception for protected foreign-source income).
(2) After section 630 insert—
Exception for protected foreign-source income
630A (1) The rule in section 629(1) does not apply to income which arises under a settlement if it is protected foreign-source income for a tax year.
(2) Sections 628A(2) to (12) and 628B (meaning of “protected foreign-source income”) have effect also for this purpose.
(3) Section 648(3) to (5) (relevant foreign income treated as arising under settlement only if and when remitted) do not apply for the purposes of this section.
24 (1) Section 635 (capital sums treated under section 633 as income: meaning of “available income”) is amended as follows.
(2) In subsection (2), before “income” insert “ unprotected ”.
(3) After subsection (4) insert—
(5) In subsection (2) “unprotected income” means income which is not protected foreign-source income, and sections 628A(2) to (13) and 628B (meaning of “protected foreign-source income”) have effect also for this purpose.
25 In section 636(1) (meaning in section 635 of “undistributed”), before “income”, in both places it occurs, insert “ unprotected ”.
26 In section 645(1) (meaning of property originating from the settlor), for “section” substitute “ sections 628A and ”.
ITA 2007
27 Chapter 2 of Part 13 of ITA 2007 (transfer of assets abroad) is amended as follows.
28 In section 721 (income of a person abroad that is treated as arising to a UK resident individual), for subsection (3B) (amount treated as arising) substitute—
(3B) The amount of the income treated as arising under subsection (1) is (subject to sections 724 and 725) given by the following rules—
Rule 1 The amount is equal to the amount of the income of the person abroad if the individual—
is domiciled in the United Kingdom at any time in the tax year, or
is at any time in the tax year regarded for the purposes of section 718(1)(b) as domiciled in the United Kingdom as a result of section 835BA having effect because of Condition A in that section being met.
Rule 2 In any other case, the amount is equal to so much of the income of the person abroad as is not protected foreign-source income (see section 721A).
(3BA) In a case in which rule 2 of subsection (3B) applies, so much of the income of the person abroad as is protected foreign-source income for the purposes of that rule counts as “protected income” for the purposes of section 733A(1)(b)(i).
29 After section 721 insert—
Meaning of “protected foreign-source income” in section 721
721A (1) This section has effect for the purposes of rule 2 of section 721(3B) (cases where the individual is not UK domiciled and is not deemed domiciled by virtue of Condition A in section 835BA).
(2) The income of the person abroad is “protected foreign-source income” so far as it is within subsection (3) or (4).
(3) Income is within this subsection if—
(a) it would be relevant foreign income if it were the individual's,
(b) the person abroad is the trustees of a settlement,
(c) the trustees are non-UK resident for the tax year,
(d) when the settlement is created, the individual is—
(i) not domiciled in the United Kingdom, and
(ii) if the settlement is created on or after 6 April 2017, not deemed domiciled in the United Kingdom, and
(e) no property or income is provided directly or indirectly for the purposes of the settlement by the individual, or by the trustees of any other settlement of which the individual is a beneficiary or settlor, at a time in the period—
(i) beginning with the start of 6 April 2017 or, if later, the creation of the settlement, and
(ii) ending with the end of the tax year,
when the individual is domiciled or deemed domiciled in the United Kingdom.
(4) Income is within this subsection if—
(a) it would be relevant foreign income if it were the individual's,
(b) the person abroad is a company,
(c) the trustees of a settlement—
(i) are participators in the person abroad, or
(ii) are participators in the first in a chain of two or more companies where the last company in the chain is the person abroad and where each company in the chain (except the last) is a participator in the next company in the chain,
(d) the individual's power to enjoy the income results from the trustees being participators as mentioned in paragraph (c)(i) or (ii),
(e) the trustees are not UK resident for the tax year,
(f) when the settlement is created, the individual is—
(i) not domiciled in the United Kingdom, and
(ii) if the settlement is created on or after 6 April 2017, not deemed domiciled in the United Kingdom, and
(g) no property or income is provided directly or indirectly for the purposes of the settlement by the individual, or by the trustees of any other settlement of which the individual is a beneficiary or settlor, at a time in the period—
(i) beginning with the start of 6 April 2017 or, if later, the creation of the settlement, and
(ii) ending with the end of the tax year,
when the individual is domiciled or deemed domiciled in the United Kingdom.
(5) For the purposes of subsections (3)(e) and (4)(g), the addition of value to property comprised in the settlement is to be treated as the direct provision of property for the purposes of the settlement.
(6) Section 721B (tainting) contains further provision for the purposes of subsections (3)(e) and (4)(g).
(7) In this section—
“participator”, in relation to a company, has the meaning given by section 454 of CTA 2010;
“deemed domiciled” means regarded for the purposes of section 718(1)(b) as domiciled in the United Kingdom as a result of section 835BA of ITA 2007 having effect.
Section 721A: tainting
721B (1) This section applies for the purposes of subsections (3)(e) and (4)(g) of section 721A.
(2) Ignore—
(a) property or income provided under a transaction, other than a loan, where the transaction is entered into on arm's length terms,
(b) property or income provided, otherwise than under a loan, without any intention by the person providing it to confer a gratuitous benefit on any person,
(c) the principal of a loan which is made to the trustees of the settlement on arm's length terms,
(d) the payment of interest to the trustees of the settlement under a loan made by them on arm's length terms,
(e) repayment to the trustees of the settlement of the principal of a loan made by them,
(f) property or income provided in pursuance of a liability incurred by any person before 6 April 2017, and
(g) where the settlement's expenses relating to taxation and administration for a tax year exceed its income for that year, property or income provided towards meeting that excess if the value of any such property and income is not greater than the amount of—
(i) the excess, or
(ii) if greater, the amount by which such expenses exceed the amount of such expenses which may be paid out of the settlement's income.
(3) Where—
(a) a loan is made to the trustees of the settlement by the settlor or the trustees of a settlement connected with the settlor, and
(b) the loan is on arm's length terms, but
(c) a relevant event occurs,
the principal of the loan is to be regarded as having been provided to the trustees at the time of that event (despite subsection (2)).
(4) In subsection (3) “relevant event” means—
(a) capitalisation of interest payable under the loan,
(b) any other failure to pay interest in accordance with the terms of the loan, or
(c) variation of the terms of the loan such that they cease to be arm's length terms.
(5) Subsection (6) applies (subject to subsection (7)) where—
(a) the settlor becomes deemed domiciled in the United Kingdom on or after 6 April 2017,
(b) before the date on which the settlor becomes deemed domiciled in the United Kingdom ( “ the deemed domicile date ”), a loan has been made to the trustees of the settlement by—
(i) the settlor, or
(ii) the trustees of a settlement connected with the settlor,
(c) the loan is not entered into on arm's length terms, and
(d) any amount that is outstanding under the loan on the deemed domicile date (“the outstanding amount”) is payable or repayable on demand on or after that date.
(6) Where this subsection applies, the outstanding amount is to be regarded as property directly provided on the deemed domicile date by the lender for the purposes of the settlement (despite subsection (2)).
(7) But if the deemed domicile date is 6 April 2017, subsection (6) does not apply if—
(a) the principal of the loan is repaid, and all interest payable under the loan is paid, before 6 April 2018, or
(b) the loan becomes a loan on arm's length terms before 6 April 2018 and—
(i) before that date interest is paid to the lender in respect of the period beginning with 6 April 2017 and ending with 5 April 2018 as if those arm's length terms had been terms of the loan in relation to that period, and
(ii) interest continues to be payable from 6 April 2018 in accordance with those terms.
(8) For the purposes of this section, a loan is on “arm's length terms”—
(a) in the case of a loan made to the trustees of a settlement, only if interest at the official rate or more is payable at least annually under the loan;
(b) in the case of a loan made by the trustees of a settlement, only if any interest payable under the loan is payable at no more than the official rate.
(9) For the purposes of this section—
a settlement is “connected” with a person if the person is the settlor or a beneficiary of it;
“deemed domiciled” has the same meaning as in section 721A;
“official rate”, in relation to interest, means the rate of interest applicable from time to time under section 178 of FA 1989 for the purposes of Chapter 7 of Part 3 of ITEPA 2003.
30 In section 726 (individuals to whom remittance basis applies), after subsection (5) insert—
(6) In addition, where the tax year in which any foreign deemed income arises is earlier than the tax year 2017-18, section 832 of ITTOIA 2005 does not apply to the foreign deemed income so far as it—
(a) is remitted to the United Kingdom in the tax year 2017-18 or a later tax year, and
(b) is transitionally protected income.
(7) In subsection (6)—
“remitted to the United Kingdom” is to be read in accordance with Chapter A1 of Part 14, and
“transitionally protected income” means any foreign deemed income where the income mentioned in section 721(2)—
arises in a tax year earlier than the tax year 2017-18,
would be protected foreign-source income as defined by section 721A if section 721A—
had effect for tax years earlier than the tax year 2017-18, and
so had effect with the omission of its subsections (3)(e), (4)(g), (5) and (6), and
has not prior to 6 April 2017 been distributed by the trustees of the settlement concerned.
31 In section 728 (income of a person abroad that is treated as arising to a UK resident individual), for subsection (1A) (amount treated as arising) substitute—
(1A) The amount of the income treated as arising under subsection (1) is (subject to subsection (2)) given by the following rules—
Rule 1 The amount is equal to the amount of the income of the person abroad if the individual—
is domiciled in the United Kingdom at any time in the tax year, or
is at any time in the tax year regarded for the purposes of section 718(1)(b) as domiciled in the United Kingdom as a result of section 835BA having effect because of Condition A in that section being met.
Rule 2 In any other case, the amount is equal to so much of the income of the person abroad as is not protected foreign-source income (see section 729A).
(1B) In a case in which rule 2 of subsection (1A) applies, so much of the income of the person abroad as is protected foreign-source income for the purposes of that rule counts as “protected income” for the purposes of section 733A(1)(b)(i).
32 After section 729 insert—
Meaning of “protected foreign-source income” in section 728
729A (1) This section has effect for the purposes of rule 2 of section 728(1A) (cases where the individual is not UK domiciled and is not deemed domiciled by virtue of Condition A in section 835BA).
(2) The income of the person abroad is “protected foreign-source income” so far as it is within subsection (3) or (4).
(3) Income is within this subsection if—
(a) it would be relevant foreign income if it were the individual's,
(b) the person abroad is the trustees of a settlement,
(c) the trustees are non-UK resident for the tax year,
(d) when the settlement is created, the individual is—
(i) not domiciled in the United Kingdom, and
(ii) if the settlement is created on or after 6 April 2017, not deemed domiciled in the United Kingdom, and
(e) no property or income is provided directly or indirectly for the purposes of the settlement by the individual, or by the trustees of any other settlement of which the individual is a beneficiary or settlor, at a time in the period—
(i) beginning with the start of 6 April 2017 or, if later, the creation of the settlement, and
(ii) ending with the end of the tax year,
when the individual is domiciled or deemed domiciled in the United Kingdom.
(4) Income is within this subsection if—
(a) it would be relevant foreign income if it were the individual's,
(b) the person abroad is a company,
(c) the trustees of a settlement—
(i) are participators in the person abroad, or
(ii) are participators in the first in a chain of two or more companies where the last company in the chain is the person abroad and where each company in the chain (except the last) is a participator in the next company in the chain,
(d) the condition in paragraph (c) is met as a result of a relevant transaction (whether or not it is also met otherwise than as a result of a relevant transaction),
(e) the income has become the income of the person abroad as a result of that relevant transaction,
(f) the trustees are not UK resident for the tax year,
(g) when the settlement is created, the individual is—
(i) not domiciled in the United Kingdom, and
(ii) if the settlement is created on or after 6 April 2017, not deemed domiciled in the United Kingdom, and
(h) no property or income is provided directly or indirectly for the purposes of the settlement by the individual, or by the trustees of any other settlement of which the individual is a beneficiary or settlor, at a time in the period—
(i) beginning with start of 6 April 2017 or, if later, the creation of the settlement, and
(ii) ending with the end of the tax year,
when the individual is domiciled or deemed domiciled in the United Kingdom.
(5) For the purposes of subsections (3)(e) and (4)(h), the addition of value to property comprised in the settlement is to be treated as the direct provision of property for the purposes of the settlement.
(6) Section 721B (tainting) applies for the purposes of subsections (3)(e) and (4)(h) as it applies for the purposes of section 721A(3)(e) and (4)(g).
(7) In this section—
“participator”, in relation to a company, has the meaning given by section 454 of CTA 2010, and
“deemed domiciled” means regarded for the purposes of section 718(1)(b) as domiciled in the United Kingdom as a result of section 835BA of ITA 2007 having effect.
33 In section 730 (individuals to whom remittance basis applies), after subsection (5) insert—
(6) In addition, where the tax year in which any foreign deemed income arises is earlier than the tax year 2017-18, section 832 of ITTOIA 2005 does not apply to the foreign deemed income so far as it—
(a) is remitted to the United Kingdom in the tax year 2017-18 or a later tax year, and
(b) is transitionally protected income.
(7) In subsection (6)—
“remitted to the United Kingdom” is to be read in accordance with Chapter A1 of Part 14, and
“transitionally protected income” means any foreign deemed income where the income mentioned in section 728(1)(a)—
arises in a tax year earlier than the tax year 2017-18,
would be protected foreign-source income as defined by section 729A if section 729A—
had effect for tax years earlier than the tax year 2017-18, and
so had effect with the omission of its subsections (3)(e), (4)(h), (5) and (6), and
has not prior to 6 April 2017 been distributed by the trustees of the settlement concerned.
34 (1) Section 731 (charge to tax on income treated as arising under section 732) is amended as follows.
(2) In subsection (1), for “non-transferors” substitute “ individuals ”.
(3) After subsection (1) insert—
(1A) But where the individual is non-UK resident for the tax year in which a benefit is received, there is a charge to tax under this section on any matched deemed income—
(a) only so far as that matched deemed income would under section 735A (if it applied also for this purpose) be matched with an amount of relevant income that is protected income for the purposes of section 733A(1)(b)(i) (see sections 721(3BA) and 728(1B)), and
(b) only if—
(i) the individual is the settlor of the settlement concerned, or
(ii) the benefit is received by the individual at a time when the individual is a close member of the family of the settlor of that settlement.
(1B) For the purposes of subsection (1A)—
(a) “matched deemed income” means income which—
(i) is treated by section 732 as arising to the individual, and
(ii) would, if section 735A applied also for this purpose, be matched under that section with the benefit, and
(b) a person is a close member of the family of the settlor of a settlement if the person is—
(i) the settlor's spouse or civil partner, or
(ii) a child of the settlor, or of a person within sub-paragraph (i), if the child has not reached the age of 18;
and section 733A(7) (persons living together) applies also for the purposes of paragraph (b).
(4) In subsection (3) (person liable for tax is person to whom income is treated as arising), at the end insert “, but this is subject to section 733A.
35 (1) Section 732 (when income is treated as arising for the purposes of the charge under section 731) is amended in accordance with sub-paragraphs (2) to (4).
(2) In subsection (1) (cases in which tax can be charged under section 731)—
(a) in paragraph (b), for “who is UK resident for a tax year receives a benefit in that tax year” substitute “ receives a benefit in a tax year ”, and
(b) for paragraph (d) substitute—
(d) where there is a time in the year when the individual is relevantly domiciled, the individual is not liable to income tax under section 720 or 727 by reference to the transfer, and
.
(3) After subsection (3) insert—
(4) For the purposes of subsection (1)(d), the individual is “relevantly domiciled” at any time if at that time—
(a) the individual is domiciled in the United Kingdom, or
(b) the individual is regarded for the purposes of section 718(1)(b) as domiciled in the United Kingdom as a result of section 835BA having effect because of Condition A in that section being met.
(4) In the heading, for “Non-transferors” substitute “ Individuals ”.
(5) In section 733(1) (income charged under section 731), in the first sentence of Step 2, at the end insert “except that, where any of that income is matched deemed income for the purposes of section 731(1A), that matched deemed income is to be deducted only so far as it is matched deemed income on which tax has been charged under section 731 for an earlier tax year.
36 After section 733 insert—
Settlor liable for section 731 charge on closely-related beneficiary
733A (1) Subsections (2) and (3) apply if—
(a) an amount of income is treated as arising to an individual under section 732 for a tax year,
(b) under section 735A (if it applied also for this purpose) that amount would be matched—
(i) with an amount of relevant income that is protected income for the purposes of this sub-paragraph (see sections 721(3BA) and 728(1B)), and
(ii) with a benefit received by the individual at a time when the individual was a close member (see subsection (7)) of the family of the settlor of the settlement concerned,
(c) there is no time in the year when the trustees of the settlement are resident in the United Kingdom,
(d) there is a time in the year when the settlor is resident in the United Kingdom,
(e) there is no time in the year when the settlor is domiciled in the United Kingdom, and
(f) there is no time in the year when the settlor is regarded for the purposes of section 718(1)(b) as domiciled in the United Kingdom as a result of section 835BA having effect because of Condition A in that section being met.
(2) If—
(a) the individual is not resident in the United Kingdom at any time in the year, or
(b) section 809B, 809D or 809E (remittance basis) applies to the individual for the year and none of the amount mentioned in subsection (1)(a) of this section is remitted to the United Kingdom in the year,
the settlor is liable for the tax charged under section 731 on that amount as if that amount were income arising to the settlor in the year (and the individual is not liable in any later year for income tax on that amount).
(3) If—
(a) section 809B, 809D or 809E (remittance basis) applies to the individual for the year, and
(b) part only of the amount mentioned in subsection (1)(a) of this section is remitted to the United Kingdom in the year,
the settlor is liable for the tax charged under section 731 on the remainder of that amount as if that remainder were income arising to the settlor in the year (and the individual is not liable in any later year for income tax on that remainder).
(4) The amount mentioned in subsection (1)(a) may be the whole, or part only, of the amount treated as arising to the individual under section 732 for the year in the case of the relevant transfer and its associated operations.
(5) Where any tax for which the settlor is liable as a result of subsection (2) or (3) is paid, the settlor is entitled to recover the amount of the tax from the individual.
(6) For the purpose of recovering that amount, the settlor is entitled to require an officer of Revenue and Customs to give the settlor a certificate specifying—
(a) the amount of the income concerned, and
(b) the amount of tax paid,
and any such certificate is conclusive evidence of the facts stated in it.
(7) For the purposes of subsection (1)(b)(ii), a person is a close member of the family of the settlor if the person is—
(a) the settlor's spouse or civil partner, or
(b) a child of the settlor, or of a person within paragraph (a), if the child has not reached the age of 18.
(8) For the purposes of subsection (7)—
(a) two people living together as if they were spouses of each other are treated as if they were spouses of each other, and
(b) two people of the same sex living together as if they were civil partners of each other are treated as if they were civil partners of each other.
(9) Sections 809L to 809Z6 (remittance basis: rules about when income is remitted, including rule treating pre-arising remittances of deemed income as made when the income arises) apply for the purposes of this section.
37 In section 735A(6) (matching of income on which individual charged under section 731), after “individual” insert “ , or as a result of section 733A another person, ”.
38 After section 735A insert—
Settlor liable under section 733A and remittance basis applies
735B (1) This section applies in relation to income if—
(a) the income is treated by section 732 as arising to an individual (“the beneficiary”) for a tax year,
(b) another individual (“the settlor”) is under section 733A(2) or (3) liable for tax on the income, and
(c) section 809B, 809D or 809E (remittance basis) applies to the settlor for that year.
(2) The income (“the transferred-liability deemed income”) is treated as relevant foreign income of the settlor.
(3) If, for the purposes of section 735 as it applies in relation to the beneficiary, any benefit or relevant income relates to any part of the transferred-liability deemed income then, for the purposes of Chapter A1 of Part 14 as it applies in relation to the settlor, that benefit or relevant income is to be treated as deriving from that part of the transferred-liability deemed income.
(4) In the application of section 832 of ITTOIA 2005 in relation to the income, subsection (2) of that section has effect with the omission of its paragraph (b).
Commencement of amendments in FA 2004, ITTOIA 2005 and ITA 2007
39 The amendments made by paragraphs 19 to 38 have effect for the tax year 2017-18 and subsequent tax years.
FA 2008
40 In Part 2 of Schedule 7 to FA 2008 (remittance basis: trusts etc), after paragraph 171 insert—
172 (1) Sub-paragraph (2) has effect for the purposes of—
paragraphs 100(1)(b), 101(1)(c) and 102(1)(e),
paragraph (b) of paragraph 118(3) so far as having effect for the purposes of paragraph 118(1)(d), and
paragraphs 124(1)(b), 126(7)(b), 127(1)(e) and 151(1)(b).
(2) An individual not domiciled in the United Kingdom at a time in the tax year 2017-18, or a later tax year, is to be regarded as domiciled in the United Kingdom at that time if—
(a) the individual was born in the United Kingdom,
(b) the individual's domicile of origin was in the United Kingdom, and
(c) the individual is resident in the United Kingdom for the tax year concerned.
PART 3 Capital gains tax rebasing
41 (1) This paragraph applies to the disposal of an asset by an individual (“P”) where—
(a) the asset was held by P on 5 April 2017,
(b) the disposal is made on or after 6 April 2017,
(c) the asset was not situated in the United Kingdom at any time in the relevant period, and
(d) P is a qualifying individual.
(2) The relevant period is the period which—
(a) begins with 16 March 2016 or, if later, the date on which P acquired the asset, and
(b) ends with 5 April 2017.
(3) P is a qualifying individual if—
(a) section 809H of ITA 2007 (claim for remittance basis by long-term UK resident: charge) applied in relation to P for any tax year before the tax year 2017-18,
(b) P is not an individual—
(i) who was born in the United Kingdom, and
(ii) whose domicile of origin was in the United Kingdom,
(c) P was not domiciled in the United Kingdom at any time in a relevant tax year, and
(d) P met condition B in section 835BA of ITA 2007 in relation to each relevant tax year.
(4) The relevant tax years are—
(a) the tax year 2017-18, and
(b) if the disposal was made after that tax year, all subsequent tax years up to and including the tax year 2024-25.
(5) In computing, for the purpose of TCGA 1992, the gain or loss accruing on the disposal, it is to be assumed that P acquired the asset on 5 April 2017 for a consideration equal to its market value on that date.
(6) Sub-paragraph (5) applies notwithstanding section 58(1) of TCGA 1992 (disposals between spouses).
(7) Where under section 127 of TCGA 1992 (including that section as applied by sections 132, 135 and 136 of that Act) an original and a new holding of shares or other securities are treated as the same asset, the condition in sub-paragraph (1)(c) applies to both the original and the new holding.
(8) This Part of this Schedule has effect as if it were included in TCGA 1992.
42 (1) This paragraph applies for the purposes of paragraph 41(1)(c) in the case of an asset which, having been situated outside the United Kingdom, becomes situated in the United Kingdom before the end of the relevant period.
(2) The asset is to be regarded as not situated in the United Kingdom at a time in the relevant period when—
(a) it meets the condition in section 809Z(3)(a), (b) or (c) of ITA 2007 (public access),
(b) it meets the condition in section 809Z3(3)(a), (b) or (c) of ITA 2007 (repairs),
(c) the sole or principal purpose of its being situated in the United Kingdom is to sell it or put it up for sale, or
(d) in the case of clothing, footwear, jewellery or a watch, it is for the personal use of—
(i) P or a husband, wife or civil partner of P, or
(ii) a child or grandchild of a person within sub-paragraph (i), if the child or grandchild has not reached the age of 18.
(3) The asset is to be regarded as not situated in the United Kingdom at any time in the relevant period if it is brought to, or received or used in, the United Kingdom in circumstances in which section 809L(2)(a) of ITA 2007 applies but—
(a) by virtue of section 809X(5)(c) of ITA 2007 (notional remitted amount less than £1000) it is treated as not remitted to the United Kingdom, or
(b) by the end of the relevant period it has not failed to meet the temporary importation rule in section 809Z4 of ITA 2007.
(4) Section 809M(3)(a) and (b) of ITA 2007 (persons living together) apply for the purposes of sub-paragraph (2)(d)(i).
43 (1) An individual may make an election for paragraph 41 not to apply to a disposal made by the individual.
(2) Sections 42 and 43 of TMA 1970 (procedure and time limit for claims), except section 42(1A) of that Act, apply in relation to an election under this paragraph as they apply in relation to a claim for relief.
(3) An election under this paragraph is irrevocable.
(4) All such adjustments are to be made, whether by way of discharge or repayment of tax, the making of assessments or otherwise, as are required to give effect to an election under this paragraph.
PART 4 Cleansing of mixed funds
44 (1) This paragraph applies for the purposes of the application of section 809Q(3) of ITA 2007 in relation to an individual (“P”).
(2) Section 809R(4) of ITA 2007 does not apply to an offshore transfer from a mixed fund where—
(a) the transfer is made in the tax year 2017-18 or the tax year 2018-19,
(b) the transfer is a transfer of money,
(c) the mixed fund from which the transfer is made is an account (account A) and the transfer is made to another account (account B),
(d) the transfer is nominated by P for the purposes of this sub-paragraph,
(e) at the time of the nomination no other transfer from account A to account B has been so nominated, and
(f) P is a qualifying individual.
(3) P is a qualifying individual if—
(a) section 809B, 809D or 809E of ITA 2007 (remittance basis) applied in relation to P for any tax year before the tax year 2017-18, and
(b) P is not an individual—
(i) who was born in the United Kingdom, and
(ii) whose domicile of origin was in the United Kingdom.
(4) An offshore transfer to which sub-paragraph (2) applies is to be treated as containing such amount of such kind or kinds of income and capital in the mixed fund immediately before the transfer as may be specified in the nomination under sub-paragraph (2)(d).
(5) An amount of a kind of income or capital specified under sub-paragraph (4) may not exceed the amount of that kind which is in the mixed fund immediately before the transfer.
(6) In this paragraph “mixed fund” and “offshore transfer” have the same meanings as in section 809R(4) of ITA 2007.
45 (1) This paragraph applies to a transfer made by a person (“P”) from a mixed fund where—
(a) the transfer is made in the tax year 2017-18 or the tax year 2018-19,
(b) the transfer is a transfer of money,
(c) the mixed fund from which the transfer is made is an overseas account (account A) containing pre-6 April 2008 income or chargeable gains,
(d) the transfer is made to another overseas account (account B),
(e) the transfer is nominated by the person for the purposes of this sub-paragraph,
(f) at the time of the nomination no other transfer from account A to account B has been so nominated, and
(g) P is a qualifying individual.
(2) P is a qualifying individual if—
(a) section 809B, 809D or 809E of ITA 2007 (remittance basis) applied in relation to P for any tax year before the tax year 2017-18, and
(b) P is not an individual—
(i) who was born in the United Kingdom, and
(ii) whose domicile of origin was in the United Kingdom.
(3) A transfer to which this paragraph applies is to be treated as containing such amount of such kind or kinds of income or capital in the mixed fund immediately before the transfer (for example, income or chargeable gains for a particular tax year) as may be specified in the nomination under sub-paragraph (1)(e).
(4) An amount of a kind of income or capital specified under sub-paragraph (3) may not exceed the amount of that kind which is in the mixed fund immediately before the transfer.
(5) In this paragraph and paragraph 46—
“mixed fund” has the same meaning as in section 809R(4) of ITA 2007;
“overseas account” means an account situated outside the United Kingdom;
“pre-6 April 2008 income or chargeable gains” means income or chargeable gains for the tax year 2007-8 or any earlier tax year.
46 (1) This paragraph applies to determine, for the purposes of paragraph 45, the composition of the mixed fund referred to in paragraph 45(1).
(2) Sub-paragraphs (3) to (5) apply where a transfer of money is made before 6 April 2008 from the mixed fund to another overseas account.
(3) Take the following Steps—
Step 1. Calculate the total amount of income and chargeable gains in the mixed fund immediately before the transfer (“the total income and gains”).
Step 2. Calculate what proportion of the total income and gains is income and what proportion is chargeable gains.
(4) If the amount transferred does not exceed the total income and gains, the transfer is to be treated as if it consisted of income and chargeable gains in the proportions found under Step 2 in sub-paragraph (3).
(5) If the amount transferred exceeds the total income and gains, the transfer is to be treated as if it consisted of—
(a) all the income and chargeable gains that were in the mixed fund immediately before the transfer, and
(b) in respect of the balance, other capital from the mixed fund.
(6) Sub-paragraphs (7) and (8) apply where—
(a) a transfer of money is made before 6 April 2008 from another overseas account to the mixed fund, and
(b) there is insufficient evidence to determine the composition of the transfer.
(7) Take the following Steps—
Step 1. Calculate the total amount of income and chargeable gains in the other overseas account immediately before the transfer (“the total income and gains”).
Step 2. Calculate what proportion of the total income and gains is income and what proportion is chargeable gains.
(8) The transfer is to be presumed to consist of income and chargeable gains in the proportions found under Step 2 in sub-paragraph (7).
(9) For the purposes of Steps 1 and 2 in sub-paragraph (7), if there is insufficient evidence to say that an amount is income or that it is chargeable gains, treat it as income.
SCHEDULE 9 Settlements and transfer of assets abroad: value of benefits
Section 31
Capital gains tax: settlements: value of benefit conferred by certain capital payments
1 (1) In section 97(4) of TCGA 1992 (supplementary provisions in relation to settlements), at the end insert “ (see sections 97A to 97C for the value of benefits conferred by a capital payment made by way of loan or by way of making movable property or land available) ”.
(2) After section 97 of TCGA 1992 insert—
Value of benefit conferred by capital payment made by way of loan
97A (1) For the purposes of section 97(4), the value of the benefit conferred on a person (P) by a capital payment made by way of loan to P is, for each tax year in which the loan is outstanding, the amount (if any) by which—
(a) the amount of interest that would have been payable in that year on the loan if interest had been payable on the loan at the official rate, exceeds
(b) the amount of interest (if any) actually paid by P in that year on the loan.
(2) In this section and section 97B the “official rate”, in relation to interest, means the rate applicable from time to time under section 178 of the Finance Act 1989 for the purposes of Chapter 7 of Part 3 of ITEPA 2003.
Value of benefit conferred by capital payment made by way of making movable property available
97B (1) For the purposes of section 97(4), the value of the benefit conferred by a capital payment consisting of making movable property available, without any transfer of the property in it, to a person (P) is, for each tax year in which the benefit is conferred on P—
(
CC
×
R
×
D
Y
)
−
T
where—
CC is the capital cost of the movable property on the date when the property is first made available to P in the tax year,
D is the number of days in the tax year on which the property is made available to P (the relevant period),
R is the official rate of interest for the relevant period (but see subsection (3)),
T is the total of the amounts (if any) paid in the tax year by P—
to the person conferring the benefit, in respect of the availability of the movable property, or
so far as not within paragraph (a), in respect of the repair, insurance, maintenance or storage of the movable property, and
Y is the number of days in the tax year.
(2) In subsection (1), in the meaning of CC, the “capital cost” of movable property means an amount equal to the total of—
(a) the amount which is the greater of—
(i) the amount or value of the consideration given for the acquisition of the movable property by, or on behalf of, the person (A) conferring the benefit, and
(ii) its market value at the time of that acquisition, and
(b) the amount of any expenditure wholly and exclusively incurred by, or on behalf of, A for the purpose of enhancing the value of the movable property.
(3) If the official rate of interest changes during the relevant period, then in subsection (1) R is the average official rate of interest for the period calculated as follows.
Step 1 Multiply each official rate of interest in force during the relevant period by the number of days when it is in force.
Step 2 Add together the products found in Step 1.
Step 3 Divide the total found in Step 2 by the number of days in the relevant period.
(4) In subsections (1) and (2), “movable property” means any tangible movable property other than money.
Value of benefit conferred by capital payment made by way of making land available
97C (1) For the purposes of section 97(4), the value of the benefit conferred by a capital payment consisting of making land available for the use of a person (P) is, for each tax year in which the benefit is conferred on P, the amount by which—
(a) the rental value of the land for the period of the tax year during which the land is made available to P, exceeds
(b) the total of the amounts (if any) paid in the tax year by P—
(i) to the person conferring the benefit, in respect of the availability of the land, or
(ii) so far as not within sub-paragraph (i), in respect of costs of repair, insurance or maintenance relating to the land.
(2) Subsection (1) does not apply in the case where the person conferring the benefit transfers the whole of the person's interest in the land to P.
(3) In subsection (1) “the rental value” of the land for a period means the rent which would have been payable for the period if the land had been let to P at an annual rent equal to the annual value.
(4) For the purposes of subsection (3) “the annual value” of land is the rent that might reasonably be expected to be obtained on a letting from year to year if—
(a) the tenant undertook to pay all taxes, rates and charges usually paid by a tenant, and
(b) the landlord undertook to bear the costs of the repairs and insurance and the other expenses (if any) necessary for maintaining the property in a state to command that rent.
(5) For the purposes of subsection (4) that rent—
(a) is to be taken to be the amount that might reasonably be expected to be so obtained in respect of a letting of the land, and
(b) is to be calculated on the basis that the only amounts that may be deducted in respect of services provided by the landlord are amounts in respect of the costs to the landlord of providing any relevant services.
(6) In subsection (5) “relevant service” means a service other than the repair, insurance or maintenance of the property.
Income tax: transfer of assets abroad: value of certain benefits
2 After section 742A of ITA 2007 insert—
Value of certain benefits
Value of certain benefits
742B Sections 742C to 742E apply where it is necessary, for the purpose of calculating a charge to income tax under the preceding provisions of this Chapter, to determine the value of a benefit provided to a person by way of—
(a) a payment by way of loan (see section 742C),
(b) making available movable property without any transfer of the property in it (see section 742D), or
(c) making available land for use without transferring the whole interest in it (see section 742E).
Value of benefit provided by a payment by way of loan
742C (1) The value of the benefit provided to a person (P) by a payment by way of loan to P is, for each tax year in which the loan is outstanding, the amount (if any) by which—
(a) the amount of interest that would have been payable in that year on the loan if interest had been payable on the loan at the official rate, exceeds
(b) the amount of interest (if any) actually paid by P in that year on the loan.
(2) In this section and section 742D the “official rate”, in relation to interest, means the rate applicable from time to time under section 178 of the Finance Act 1989 for the purposes of Chapter 7 of Part 3 of ITEPA 2003.
Value of benefit provided by making movable property available
742D (1) The value of the benefit provided by making movable property available, without any transfer of the property in it, to a person (P) is, for each tax year in which the benefit is provided to P—
(
CC
×
R
×
D
Y
)
−
T
where—
CC is the capital cost of the movable property on the date when the property is first made available to P in the tax year,
D is the number of days in the tax year on which the property is made available to P (the relevant period),
R is the official rate of interest for the relevant period (but see subsection (3)),
T is the total of the amounts (if any) paid in the tax year by P—
to the person providing the benefit, in respect of the availability of the movable property, or
so far as not within paragraph (a), in respect of the repair, insurance, maintenance or storage of the movable property, and
Y is the number of days in the tax year.
(2) In subsection (1), in the meaning of CC, the “capital cost” of the movable property means an amount equal to the total of—
(a) the amount which is the greater of—
(i) the amount or value of the consideration given for the acquisition of the movable property by, or on behalf of, the person (A) providing the benefit, and
(ii) its market value at the time of that acquisition, and
(b) the amount of any expenditure wholly and exclusively incurred by, or on behalf of, A for the purpose of enhancing the value of the movable property.
(3) If the official rate of interest changes during the relevant period, then in subsection (1) R is the average official rate of interest for the period calculated as follows.
Step 1 Multiply each official rate of interest in force during the relevant period by the number of days when it is in force.
Step 2 Add together the products found in Step 1.
Step 3 Divide the total found in Step 2 by the number of days in the relevant period.
(4) In subsections (1) and (2), “movable property” means any tangible movable property other than money.
Value of benefit provided by making land available
742E (1) The value of the benefit provided by making land available for the use of a person (P) is, for each tax year in which the benefit is provided to P, the amount by which—
(a) the rental value of the land for the period of the tax year during which the land is made available to P, exceeds
(b) the total of the amounts (if any) paid in the tax year by P—
(i) to the person providing the benefit, in respect of the availability of the land, or
(ii) so far as not within sub-paragraph (i), in respect of costs of repair, insurance or maintenance relating to the land.
(2) Subsection (1) does not apply in the case where the person providing the benefit transfers the whole of the person's interest in the land to P.
(3) In subsection (1) “the rental value” of the land for a period means the rent which would have been payable for the period if the land had been let to P at an annual rent equal to the annual value.
(4) For the purposes of subsection (3) “the annual value” of land is the rent that might reasonably be expected to be obtained on a letting from year to year if—
(a) the tenant undertook to pay all taxes, rates and charges usually paid by a tenant, and
(b) the landlord undertook to bear the costs of the repairs and insurance and the other expenses (if any) necessary for maintaining the property in a state to command that rent.
(5) For the purposes of subsection (4) that rent—
(a) is to be taken to be the amount that might reasonably be expected to be so obtained in respect of a letting of the land, and
(b) is to be calculated on the basis that the only amounts that may be deducted in respect of services provided by the landlord are amounts in respect of the costs to the landlord of providing any relevant services.
(6) In subsection (5) “relevant service” means a service other than the repair, insurance or maintenance of the property.
Commencement
3 The amendments made by this Schedule have effect in relation to capital payments or benefits received in the tax year 2017-18 and subsequent tax years.
SCHEDULE 10 Inheritance tax on overseas property representing UK residential property
Section 33
Non-excluded overseas property
1 In IHTA 1984, before Schedule 1 insert—
SCHEDULE A1
Non-excluded overseas property
PART 1 Overseas property with value attributable to UK residential property
Introductory
1 Property is not excluded property by virtue of section 6(1) or 48(3)(a) if and to the extent that paragraph 2 or 3 applies to it.
Close company and partnership interests
2 (1) This paragraph applies to an interest in a close company or in a partnership, if and to the extent that the interest meets the condition in sub-paragraph (2).
(2) The condition is that the value of the interest is—
(a) directly attributable to a UK residential property interest, or
(b) attributable to a UK residential property interest by virtue only of one or more of the following—
(i) an interest in a close company;
(ii) an interest in a partnership;
(iii) property to which paragraph 3 (loans) applies.
(3) For the purposes of sub-paragraphs (1) and (2) disregard—
(a) an interest in a close company, if the value of the interest is less than 5% of the total value of all the interests in the close company;
(b) an interest in a partnership, if the value of the interest is less than 5% of the total value of all the interests in the partnership.
(4) In determining under sub-paragraph (3) whether to disregard a person's interest in a close company or partnership, treat the value of the person's interest as increased by the value of any connected person's interest in the close company or partnership.
(5) In determining whether or to what extent the value of an interest in a close company or in a partnership is attributable to a UK residential property interest for the purposes of sub-paragraph (1), liabilities of a close company or partnership are to be attributed rateably to all of its property, whether or not they would otherwise be attributed to any particular property.
Loans
3 This paragraph applies to—
(a) the rights of a creditor in respect of a loan which is a relevant loan (see paragraph 4), and
(b) money or money's worth held or otherwise made available as security, collateral or guarantee for a loan which is a relevant loan, to the extent that it does not exceed the value of the relevant loan.
4 (1) For the purposes of this Schedule a loan is a relevant loan if and to the extent that money or money's worth made available under the loan is used to finance, directly or indirectly—
(a) the acquisition by an individual, a partnership or the trustees of a settlement of—
(i) a UK residential property interest, or
(ii) property to which paragraph 2 to any extent applies, or
(b) the acquisition by an individual, a partnership or the trustees of a settlement of an interest in a close company or a partnership (“the intermediary”) and the acquisition by the intermediary of property within paragraph (a)(i) or (ii).
(2) In this paragraph references to money or money's worth made available under a loan or sale proceeds being used “indirectly” to finance the acquisition of something include the money or money's worth or sale proceeds being used to finance—
(a) the acquisition of any property the proceeds of sale of which are used directly or indirectly to finance the acquisition of that thing, or
(b) the making, or repayment, of a loan to finance the acquisition of that thing.
(3) In this paragraph references to the acquisition of a UK residential property interest by an individual, a partnership, the trustees of a settlement or a close company include the maintenance, or an enhancement, of the value of a UK residential property interest which is (as the case may be) the property of the individual, property comprised in the settlement or property of the partnership or close company.
(4) Where the UK residential property interest by virtue of which a loan is a relevant loan is disposed of, the loan ceases to be a relevant loan.
(5) Where a proportion of the UK residential property interest by virtue of which a loan is a relevant loan is disposed of, the loan ceases to be a relevant loan by the same proportion.
(6) In this Schedule, references to a loan include an acknowledgment of debt by a person or any other arrangement under which a debt arises; and in such a case references to money or money's worth made available under the loan are to the amount of the debt.
PART 2 Supplementary
Disposals and repayments
5 (1) This paragraph applies to—
(a) property which constitutes consideration in money or money's worth for the disposal of property to which paragraph 2 or paragraph 3(a) applies;
(b) any money or money's worth paid in respect of a creditor's rights falling within paragraph 3(a);
(c) any property directly or indirectly representing property within paragraph (a) or (b).
(2) If and to the extent that this paragraph applies to any property—
(a) for the two-year period it is not excluded property by virtue of section 6(1), (1A) or (2) or 48(3)(a), (3A) or (4), and
(b) if it is held in a qualifying foreign currency account within the meaning of section 157 (non-residents' bank accounts), that section does not apply to it for the two-year period.
(3) The two-year period is the period of two years beginning with the date of—
(a) the disposal referred to in sub-paragraph (1)(a), or
(b) the payment referred to in sub-paragraph (1)(b).
(4) The value of any property within sub-paragraph (1)(c) is to be treated as not exceeding the relevant amount.
(5) The relevant amount is—
(a) where the property within sub-paragraph (1)(c) directly or indirectly represents property within sub-paragraph (1)(a) (“the consideration”), the value of the consideration at the time of the disposal referred to in that sub-paragraph, and
(b) where the property within sub-paragraph (1)(c) directly or indirectly represents property within sub-paragraph (1)(b), the amount of the money or money's worth paid as mentioned in that sub-paragraph.
Tax avoidance arrangements
6 (1) In determining whether or to what extent property situated outside the United Kingdom is excluded property, no regard is to be had to any arrangements the purpose or one of the main purposes of which is to secure a tax advantage by avoiding or minimising the effect of paragraph 1 or 5.
(2) In this paragraph—
“tax advantage” has the meaning given in section 208 of the Finance Act 2013;
“arrangements” includes any scheme, transaction or series of transactions, agreement or understanding (whether or not legally enforceable and whenever entered into) and any associated operations.
Double taxation relief arrangements
7 (1) Nothing in any double taxation relief arrangements made with the government of a territory outside the United Kingdom is to be read as preventing a person from being liable for any amount of inheritance tax by virtue of paragraph 1 or 5 in relation to any chargeable transfer if under the law of that territory—
(a) no tax of a character similar to inheritance tax is charged on that chargeable transfer, or
(b) a tax of a character similar to inheritance tax is charged in relation to that chargeable transfer at an effective rate of 0% (otherwise than by virtue of a relief or exemption).
(2) In this paragraph—
“double taxation relief arrangements” means arrangements having effect under section 158(1);
“effective rate” means the rate found by expressing the tax chargeable as a percentage of the amount by reference to which it is charged.
PART 3 Interpretation
UK residential property interest
8 (1) In this Schedule “UK residential property interest” means an interest in UK land—
(a) where the land consists of a dwelling,
(b) where and to the extent that the land includes a dwelling, or
(c) where the interest subsists under a contract for an off-plan purchase.
(2) For the purposes of sub-paragraph (1)(b), the extent to which land includes a dwelling is to be determined on a just and reasonable basis.
(3) In this paragraph—
“interest in UK land” has the meaning given by paragraph 2 of Schedule B1 to the 1992 Act (and the power in sub-paragraph (5) of that paragraph applies for the purposes of this Schedule);
“the land”, in relation to an interest in UK land which is an interest subsisting for the benefit of land, is a reference to the land for the benefit of which the interest subsists;
“dwelling” has the meaning given by paragraph 4 of Schedule B1 to the 1992 Act (and the power in paragraph 5 of that Schedule applies for the purposes of this Schedule);
“contract for an off-plan purchase” has the meaning given by paragraph 1(6) of Schedule B1 to the 1992 Act.
Close companies
9 (1) In this Schedule—
“close company” means a company within the meaning of the Corporation Tax Acts which is (or would be if resident in the United Kingdom) a close company for the purposes of those Acts;
references to an interest in a close company are to the rights and interests that a participator in a close company has in that company.
(2) In this paragraph—
“participator”, in relation to a close company, means any person who is (or would be if the company were resident in the United Kingdom) a participator in relation to that company within the meaning given by section 454 of the Corporation Tax Act 2010;
references to rights and interests in a close company include references to rights and interests in the assets of the company available for distribution among the participators in the event of a winding-up or in any other circumstances.
Partnerships
10 In this Schedule “partnership” means—
(a) a partnership within the Partnership Act 1890,
(b) a limited partnership registered under the Limited Partnerships Act 1907,
(c) a limited liability partnership formed under the Limited Liability Partnerships Act 2000 or the Limited Liability Partnerships Act (Northern Ireland) 2002, or
(d) a firm or entity of a similar character to either of those mentioned in paragraph (a) or (b) formed under the law of a country or territory outside the United Kingdom.
Consequential and supplementary amendments
2 IHTA 1984 is amended as follows.
3 In section 6 (excluded property), at the end insert—
(5) This section is subject to Schedule A1 (non-excluded overseas property).
4 In section 48 (excluded property)—
(a) in subsections (3) and (3A), at the end insert “ and to Schedule A1 ”;
(b) in subsection (4), at the end (but on a new line) insert “This subsection is subject to Schedule A1.
5 In section 65 (charge at other times), after subsection (7B) (as inserted by section 30) insert—
(7C) Tax shall not be charged under this section by reason only that property comprised in a settlement ceases to any extent to be property to which paragraph 2 or 3 of Schedule A1 applies and thereby becomes excluded property by virtue of section 48(3)(a) above.
(7D) Tax shall not be charged under this section where property comprised in a settlement or any part of that property—
(a) is, by virtue of paragraph 5(2)(a) of Schedule A1, not excluded property for the two year period referred to in that paragraph, but
(b) becomes excluded property at the end of that period.
6 In section 157 (non-residents' bank accounts), after subsection (3) insert—
(3A) This section is subject to paragraph 5 of Schedule A1 (non-excluded overseas property).
7 In section 237 (imposition of charge), after subsection (2) insert—
(2A) Where tax is charged by virtue of Schedule A1 on the value transferred by a chargeable transfer, the reference in subsection (1)(a) to property to the value of which the value transferred is wholly or partly attributable includes the UK residential property interest (within the meaning of that Schedule) to which the charge to tax relates.
8 In section 272 (general interpretation), in the definition of “excluded property”, after “above” insert “ and Schedule A1 ”.
Commencement
9 (1) The amendments made by this Schedule have effect in relation to times on or after 6 April 2017.
(2) But for the purposes of paragraph 5(1) of Schedule A1 to IHTA 1984 as inserted by this Schedule—
(a) paragraph (a) of that paragraph does not apply in relation to a disposal of property occurring before 6 April 2017, and
(b) paragraph (b) of that paragraph does not apply in relation to a payment of money or money's worth occurring before 6 April 2017.
Transitional provision
10 (1) Sub-paragraphs (2) and (3) apply if an amount of inheritance tax—
(a) would not be charged but for the amendments made by this Schedule, or
(b) is, because of those amendments, greater than it would otherwise have been.
(2) Section 233 of IHTA 1984 (interest on unpaid inheritance tax) applies in relation to the amount of inheritance tax as if the reference, in the closing words of subsection (1) of that section, to the end of the period mentioned in paragraph (a), (aa), (b) or (c) of that subsection were a reference to—
(a) the end of that period, or
(b) if later, the end of the month immediately following the month in which this Act is passed.
(3) Subsection (1) of section 234 of IHTA 1984 (cases where inheritance tax payable by instalments carries interest only from instalment dates) applies in relation to the amount of inheritance tax as if the reference, in the closing words of that subsection, to the date at which an instalment is payable were a reference to—
(a) the date at which the instalment is payable, or
(b) if later, the end of the month immediately following the month in which this Act is passed.
11 (1) Sub-paragraph (2) applies if—
(a) a person is liable as mentioned in section 216(1)(c) of IHTA 1984 (trustee liable on 10-year anniversary, and other trust cases) for an amount of inheritance tax charged on an occasion, and
(b) but for the amendments made by this Schedule—
(i) no inheritance tax would be charged on that occasion, or
(ii) a lesser amount of inheritance tax would be charged on that occasion.
(2) Section 216(6)(ad) of IHTA 1984 (delivery date for accounts required by section 216(1)(c)) applies in relation to the account to be delivered in connection with the occasion as if the reference to the expiration of the period of 6 months from the end of the month in which the occasion occurs were a reference to—
(a) the expiration of that period, or
(b) if later, the end of the month immediately following the month in which this Act is passed.
SCHEDULE 11 Employment income provided through third parties: loans etc outstanding on 5 April 2019
Section 34
PART 1 Application of Part 7A of ITEPA 2003
Relevant step
1 (1) A person (“P”) is treated as taking a relevant step for the purposes of Part 7A of ITEPA 2003 if—
(a) P has made a loan, or a quasi-loan, to a relevant person,
(b) the loan or quasi-loan was made on or after 9 December 2010, and
(c) an amount of the loan or quasi-loan is outstanding immediately before the end of 5 April 2019.
(2) P is treated as taking the step immediately before the end of 5 April 2019.
(3) Where P is treated by this paragraph as taking a relevant step, references to “the relevant step” in sections 554A(1)(e)(i) and (ii) and 554AA(1)(h)(i) and (ii) of ITEPA 2003 have effect as if they were references to the step of making the loan or, as the case may be, quasi-loan.
(4) For the purposes of section 554Z3(1) of ITEPA 2003 (value of relevant step), the step is to be treated as involving a sum of money equal to the amount of the loan or quasi-loan that is outstanding at the time P is treated as taking the step.
(5) Subsections (2) and (3) of section 554C of ITEPA 2003 (“relevant person”) apply for the purposes of this Schedule as they apply for the purposes of that section.
(6) Sub-paragraphs (1) and (2) are subject to paragraphs 23 and 24 (accelerated payments) and paragraph 36A (double taxation: close companies).
(6A) Sub-paragraph (4) is subject to paragraph 1A(5).
(7) For the purposes of this paragraph and paragraph 1A, whether an amount of a loan or quasi-loan is outstanding at a particular time—
(a) is to be determined in accordance with paragraphs 3 to 18, and
(b) does not depend on the loan or quasi-loan subsisting at that time.
(8) References in this Schedule and in Part 7A of ITEPA 2003 to a relevant step within paragraph 1 of this Schedule are to be read as references to a relevant step which a person is treated by this paragraph as taking.
1A (1) This paragraph applies where—
(a) a person (“P”) is treated as taking a relevant step within paragraph 1 (“the initial step”) by reason of making a loan or quasi-loan, and
(b) an election has been made by A for the purposes of this paragraph.
(2) P is treated as taking two further relevant steps for the purposes of Part 7A of ITEPA 2003.
(3) P is treated as taking one of the further steps on the first anniversary of the date on which P is treated as taking the initial step.
(4) P is treated as taking one of the further steps on the second anniversary of the date on which P is treated as taking the initial step.
(5) For the purposes of section 554Z3(1) of ITEPA 2003 (value of relevant step), the initial step and each of the further steps is to be treated as involving a sum of money equal to one third of the amount of the loan or quasi-loan that is outstanding at the time P is treated as taking the initial step.
(6) References in this Schedule and in Part 7A of ITEPA 2003 to a relevant step within paragraph 1A of this Schedule are to be read as references to a relevant step which a person is treated by this paragraph as taking.
(7) An election for the purposes of this paragraph—
(a) may be made at any time before 1 October 2020, and
(b) may be made at a later time if an officer of Revenue and Customs allows it.
(8) But a person who is under a duty imposed by paragraph 35C of this Schedule or paragraph 22 of Schedule 12 may not make an election for the purposes of this paragraph until that duty has been complied with.
(9) An election for the purposes of this paragraph may not be revoked.
(10) A person who has made an election for the purposes of paragraph 1(3A) of Schedule 12 is to be treated as having made an election for the purposes of this paragraph.
(11) The Commissioners for Her Majesty’s Revenue and Customs may by regulations provide that sub-paragraph (7)(a) applies to a specified class of persons as if the reference to 1 October 2020 were to such later date as is specified.
(12) In sub-paragraph (11) “specified” means specified in the regulations.
1B (1) This paragraph applies where—
(a) a person is treated as taking a relevant step within paragraph 1 by reason of making a loan or quasi-loan,
(b) a reasonable case could have been made that for a qualifying tax year (“the relevant year”) A was chargeable to income tax on an amount that was referable to the loan or quasi-loan,
(c) at a time when an officer of Revenue and Customs had power to recover (from A or any other person) income tax for the relevant year in respect of that amount, a qualifying tax return or two or more qualifying tax returns of the same type taken together contained a reasonable disclosure of the loan or quasi-loan, and
(d) as at 6 April 2019 an officer of Revenue and Customs had not taken steps to recover (from A or any other person) income tax for the relevant year in respect of that amount.
(2) But this paragraph does not apply if—
(a) a reasonable case could have been made that for a tax year other than the relevant year (“the alternative year”) A was chargeable to income tax on an amount within sub-paragraph (3), and
(b) it is the case that—
(i) on or before 5 April 2019 an officer of Revenue and Customs took steps to recover (from A or any other person) income tax for the alternative year in respect of that amount, or
(ii) the alternative year is not a qualifying tax year.
(3) An amount is within this sub-paragraph if —
(a) it is the same amount as is mentioned in sub-paragraph (1),
(b) it is part of the amount mentioned in sub-paragraph (1), or
(c) it is derived from or represents the whole or part of the amount mentioned in sub-paragraph (1).
(4) Where this paragraph applies, then for the purposes of paragraphs 1(4) and 1A(5) the amount of the loan or quasi-loan that is outstanding is to be taken to be reduced (but not below nil) by the amount mentioned in sub-paragraph (1).
(5) For the purposes of sub-paragraph (1)(c) a qualifying tax return, or two or more qualifying tax returns taken together, contained a reasonable disclosure of the loan or quasi-loan if the return or returns taken together—
(a) identified the loan or quasi-loan,
(b) identified the person to whom the loan or quasi-loan was made in a case where the loan or quasi-loan was made to a person other than A,
(c) identified the relevant arrangements in pursuance of which or in connection with which the loan or quasi-loan was made, and
(d) provided such other information as was sufficient for it to be apparent that a reasonable case could be made that for the relevant year A was chargeable to income tax on an amount that was referable to the loan or quasi-loan.
(6) A reference in sub-paragraph (1)(b), (2) or (5)(d) to A being chargeable to income tax does not include A being chargeable to income tax by reason of section 175 of ITEPA 2003 (benefit of taxable cheap loan treated as earnings).
(7) In this paragraph—
“qualifying tax year” means the tax year 2015-16 and any earlier tax year, and
“qualifying tax return” means —
a return made by A or B under section 8 of TMA 1970 for a qualifying tax year, and any accompanying accounts, statements or documents, or
a return made by B under paragraph 3 of Schedule 18 to FA 1998 for an accounting period that commenced before 6 April 2016,
and a qualifying tax return is of the same type as another if both fall within the same paragraph of this definition.
Meaning of “loan” and “quasi loan”
2 (1) In this Part of this Schedule “loan” includes—
(a) any form of credit;
(b) a payment that is purported to be made by way of a loan.
(2) For the purposes of paragraphs 1 and 1A, P makes a “quasi-loan” to a relevant person if (and when) P acquires a right (the “acquired debt”)—
(a) which is a right to a payment or a transfer of assets, and
(b) in respect of which the condition in sub-paragraph (3) is met.
(3) The condition is met in relation to a right if there is a connection (direct or indirect) between the acquisition of the right and—
(a) a payment made, by way of a loan or otherwise, to the relevant person, or
(b) a transfer of assets to the relevant person.
(4) Where a quasi-loan or a loan made by P to a relevant person is replaced, directly or indirectly, by a loan or another loan (the “replacement loan”), references in paragraphs 1 and 1A to the loan are references to the replacement loan.
(5) Where a loan or a quasi-loan made by P to a relevant person is replaced, directly or indirectly, by a quasi-loan or another quasi-loan (the “replacement quasi-loan”), references in paragraphs 1 and 1A to the quasi-loan are references to the replacement quasi-loan.
(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Meaning of “outstanding”: loans
3 (1) An amount of a loan is “outstanding” for the purposes of paragraphs 1 and 1A if the relevant principal amount exceeds the repayment amount.
(2) In sub-paragraph (1) “relevant principal amount”, in relation to a loan, means the total of—
(a) the initial principal amount lent, and
(b) any sums that have become principal under the loan, otherwise than by capitalisation of interest.
(3) In sub-paragraph (1) “repayment amount”, in relation to a loan, means the total of—
(a) the amount of principal under the loan that has been repaid before 17 March 2016, and
(b) payments in money made by the relevant person on or after 17 March 2016 by way of repayment of principal under the loan.
4 (1) A payment is to be disregarded for the purposes of paragraph 3(3)(b) if—
(a) there is any connection (direct or indirect) between the payment and a tax avoidance arrangement (other than the arrangement under which the loan was made), or
(b) the payment, or a sum or asset directly or indirectly representing the payment, is the subject of a relevant step (as defined in section 554A(2) of ITEPA 2003) that is taken—
(i) after the payment is made, but
(ii) before the end of 5 April 2019.
(2) But a payment is not to be disregarded under sub-paragraph (1)(b) if, by the end of 5 April 2019, each relevant tax liability has been paid in full.
(3) For the purposes of this paragraph, each of the following is a “relevant tax liability”—
(a) any liability for income tax arising by virtue of the application of Chapter 2 by reason of the relevant step mentioned in sub-paragraph (1)(b), and
(b) where section 554Z6 of ITEPA 2003 (overlap with certain earnings) applies because that relevant step gives rise to relevant earnings for the purposes of that section, any liability for income tax in respect of those relevant earnings.
(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5) Sub-paragraph (6) applies if a payment is disregarded under sub-paragraph (1)(b).
(6) The value of a relevant step treated as taken by paragraph 1 or 1A is not reduced under section 554Z5(3) of ITEPA 2003 (overlap with money or asset subject to earlier tax liability) by the amount of the sum, or the value of the asset, which is the subject of the relevant step mentioned in sub-paragraph (1)(b) unless the payment condition is met by reason of section 554Z5(4)(a) and (b)(ii) being met.
5 (1) This paragraph applies where—
(a) a person (“P”) has made a loan to a relevant person,
(b) the loan was made on or after 9 December 2010, and
(c) before the end of 5 April 2019, A or B acquires (whether or not for consideration) a right to payment of the whole or part of the loan.
(2) The amount of the loan in respect of which A or B acquires a right to payment is to be treated—
(a) for the purposes of paragraph 1(1) as an amount, of the loan made by P to the relevant person, that is outstanding immediately before the end of 5 April 2019;
(b) for the purposes of paragraphs 1(4) and 1A(5) and section 554Z3(1) of ITEPA 2003, as an amount of the loan that is outstanding at the time P is treated as taking the relevant step under paragraph 1(1).
(3) Where a quasi-loan or a loan made by P to a relevant person is replaced, directly or indirectly, by a loan or another loan (the “replacement loan”), references in sub-paragraphs (1) and (2) to the loan are references to the replacement loan.
Meaning of “outstanding”: loans in currencies other than sterling
6 (1) In paragraphs 7 to 10 “the loan currency”, in relation to a loan, means the currency in which the initial principal amount of the loan is denominated (whether or not that amount is paid in that currency).
(2) For the purposes of paragraphs 7 to 10, the value of an amount in a particular currency is to be determined by reference to an appropriate spot rate of exchange.
7 (1) This paragraph applies in relation to a loan where the loan currency is a currency other than sterling.
(2) But this paragraph does not apply if paragraph 10 applies in relation to the loan.
(3) The amount of the loan that is outstanding, at the time P is treated as taking the relevant step within paragraph 1, is to be calculated in sterling as follows—
Step 1 Calculate, in the loan currency, the amount that is outstanding at that time.
Step 2 Take the value in sterling, at that time, of that amount.
(4) See paragraph 8 for provision about repayments made in a currency other than the loan currency.
Repayments in currencies other than the loan currency
8 (1) This paragraph applies in relation to a loan where—
(a) payments in money are made by way of repayment of principal under the loan, and
(b) some or all of the payments are made in a currency other than the loan currency.
(2) But this paragraph does not apply if paragraph 10 applies in relation to the loan.
(3) For the purposes of calculating the repayment amount in relation to the loan, the amount of each of the payments referred to in sub-paragraph (1)(b) is an amount equal to its value in the loan currency on the date it is made.
Loans made in a depreciating currency
9 (1) Paragraph 10 applies in relation to a loan where—
(a) the loan currency is a currency other than sterling, and
(b) it is reasonable to suppose that the main reason, or one of the main reasons, for the loan being made in that currency is that the loan currency is expected to depreciate as against sterling during the loan period.
(2) The “loan period”, in relation to a loan, is the period—
(a) beginning at the time the loan is made, and
(b) ending with the time by which, under the terms of the loan, the whole of the loan is to be repaid.
10 (1) Where this paragraph applies in relation to a loan—
(a) paragraphs 7 and 8 do not apply in relation to the loan, and
(b) sub-paragraphs (2) to (5) apply for the purposes of calculating the amount of the loan that is outstanding at the time P is treated as taking the relevant step within paragraph 1.
(2) The relevant principal amount, in relation to the loan, is an amount equal to the total of—
(a) the value in sterling, at the reference date, of the initial principal amount lent, and
(b) the value in sterling, at the reference date, of any sums that become principal under the loan, otherwise than by capitalisation of interest.
(3) The “reference date”—
(a) in relation to an amount within sub-paragraph (2)(a), means the date on which the loan is made, and
(b) in relation to a sum within sub-paragraph (2)(b), means the date on which the sum becomes principal.
(4) The repayment amount, in relation to the loan, is an amount equal to the total of—
(a) the amount of principal under the loan that has been repaid in sterling, and
(b) where payments are made, in a currency other than sterling, by way of repayment of principal under the loan, the amount equal to the sterling value of the payments.
(5) The “sterling value” of a payment is its value in sterling on the date it is made.
Meaning of “outstanding”: quasi-loans
11 (1) An amount of a quasi-loan is outstanding for the purposes of paragraphs 1 and 1A if the initial debt amount exceeds the repayment amount.
(2) In sub-paragraph (1) “initial debt amount”, in relation to a quasi-loan, means the total of—
(a) an amount equal to the value of the acquired debt (see paragraph 2(2)), and
(b) where P subsequently acquires a further right (an “additional debt”) to a payment, or transfer of assets, in connection with the payment mentioned in paragraph 2(3)(a) or (as the case may be) the transfer mentioned in paragraph 2(3)(b), an amount equal to the value of the additional debt.
(3) For the purposes of sub-paragraph (2)—
(a) where the acquired debt is a right to payment of an amount, the “value” of the debt is that amount,
(b) where the additional debt is a right to payment of an amount, the “value” of the debt is that amount, but is nil if the additional debt accrued to P by the capitalisation of interest on the acquired debt or another additional debt, and
(c) where the acquired debt or additional debt is a right to a transfer of assets, the “value” of the debt is an amount equal to—
(i) the market value of the assets at the time the right is acquired (or the value of the right at that time if the assets are non-fungible and not in existence at that time), or
(ii) if higher, the cost of the assets at that time.
(4) In sub-paragraph (1) “repayment amount”, in relation to a quasi-loan, means the total of—
(a) the amount (if any) by which the initial debt amount has been reduced (by way of repayment) before 17 March 2016,
(b) payments in money (if any) made by the relevant person on or after 17 March 2016 by way of repayment of the initial debt amount, and
(c) if the acquired debt or an additional debt is a right to a transfer of assets, and the assets have been transferred, an amount equal to the market value of the assets at the time of the transfer.
12 (1) A payment or transfer is to be disregarded for the purposes of paragraph 11(4)(b) or (c) if—
(a) there is any connection (direct or indirect) between the payment or transfer and a tax avoidance arrangement (other than the arrangement under which the quasi-loan was made), or
(b) the payment or the asset transferred, or a sum or asset directly or indirectly representing the payment or asset, is the subject of a relevant step (as defined in section 554A(2) of ITEPA 2003) that is taken—
(i) after the payment is made or the asset transferred, but
(ii) before the end of 5 April 2019.
(2) But a payment or transfer is not to be disregarded under sub-paragraph (1)(b) if, by the end of 5 April 2019, each relevant tax liability has been paid in full.
(3) For the purposes of this paragraph, each of the following is a “relevant tax liability”—
(a) any liability for income tax arising by virtue of the application of Chapter 2 by reason of the relevant step mentioned in sub-paragraph (1)(b), and
(b) where section 554Z6 of ITEPA 2003 (overlap with certain earnings) applies because that relevant step gives rise to relevant earnings for the purposes of that section, any liability for income tax in respect of those relevant earnings.
(4) Sub-paragraph (5) applies if a payment is disregarded under sub-paragraph (1)(b).
(5) The value of a relevant step treated as taken by paragraph 1 or 1A is not reduced under section 554Z5(3) of ITEPA 2003 (overlap with money or asset subject to earlier tax liability) by the amount of the sum, or the value of the asset, which is the subject of the relevant step mentioned in sub-paragraph (1)(b) unless the payment condition is met by reason of section 554Z5(4)(a) and (b)(ii) being met.
13 (1) This paragraph applies where—
(a) a person (“P”) has made a quasi-loan to a relevant person,
(b) the quasi-loan was made on or after 9 December 2010, and
(c) before the end of 5 April 2019, A or B acquires (whether or not for consideration) a right to the payment or transfer of assets mentioned in paragraph 2(2)(a).
(2) The amount equal to the value of the right acquired by A or B is to be treated—
(a) for the purposes of paragraph 1(1) as an amount, of the quasi-loan made by P to the relevant person, that is outstanding immediately before the end of 5 April 2019;
(b) for the purposes of paragraphs 1(4) and 1A(5) and section 554Z3(1) of ITEPA 2003, as an amount of the quasi-loan that is outstanding at the time P is treated as taking the relevant step under paragraph 1(1).
(3) For the purposes of sub-paragraph (2)—
(a) where the right acquired by A or B is a right to payment of an amount, the “value” of the right is that amount;
(b) where the right acquired by A or B is a right to a transfer of assets, the “value” of the right is an amount equal to—
(i) the market value of the assets at the time the right is acquired (or the value of the right at that time if the assets are non-fungible and not in existence at that time), or
(ii) if higher, the cost of the assets at that time.
(4) Where a loan or a quasi-loan made by P to a relevant person is replaced, directly or indirectly, by a quasi-loan or another quasi-loan (the “replacement quasi-loan”), references in sub-paragraphs (1) and (2) to the quasi-loan are references to the replacement quasi-loan.
Meaning of “outstanding”: quasi-loans in currencies other than sterling
14 (1) Paragraphs 15 to 18 apply where P makes a quasi-loan to a relevant person by reason of acquiring a right to a payment in a particular currency (the “quasi-loan currency”).
(2) For the purposes of paragraphs 15 to 18, the value of an amount in a particular currency is to be determined by reference to an appropriate spot rate of exchange.
15 (1) This paragraph applies in relation to the quasi-loan if the quasi-loan currency is a currency other than sterling.
(2) But this paragraph does not apply if paragraph 18 applies in relation to the quasi-loan.
(3) The amount of the quasi-loan that is outstanding, at the time P is treated as taking the relevant step within paragraph 1, is to be calculated in sterling as follows—
Step 1 Calculate, in the quasi-loan currency, the amount that is outstanding at that time.
Step 2 Take the value in sterling, at that time, of that amount.
(4) See paragraph 16 for provision about repayments made in a currency other than the quasi-loan currency.
Repayments in currencies other than the quasi-loan currency
16 (1) This paragraph applies in relation to the quasi-loan if—
(a) payments in money are made by way of repayment of the initial debt amount, and
(b) some or all of the payments are made in a currency other than the quasi-loan currency.
(2) But this paragraph does not apply if paragraph 18 applies in relation to the quasi-loan.
(3) For the purposes of calculating the repayment amount in relation to the quasi-loan, the amount of each of the payments referred to in sub-paragraph (1)(b) is an amount equal to its value in the quasi-loan currency on the date it is made.
Quasi-loans made in a depreciating currency
17 (1) Paragraph 18 applies in relation to the quasi-loan if—
(a) the quasi-loan currency is a currency other than sterling, and
(b) it is reasonable to suppose that the main reason, or one of the main reasons, for the quasi-loan being made in that currency is that the quasi-loan currency is expected to depreciate during the quasi-loan period.
(2) The “quasi-loan period”, in relation to a quasi-loan, is the period—
(a) beginning at the time the quasi-loan is made, and
(b) ending with the time by which, under the terms of the quasi-loan, the whole of the quasi-loan is to be repaid.
18 (1) Where this paragraph applies in relation to the quasi-loan—
(a) paragraphs 15 and 16 do not apply in relation to the quasi-loan, and
(b) sub-paragraphs (2) to (5) apply for the purposes of calculating the amount of the quasi-loan that is outstanding at the time P is treated as taking the relevant step within paragraph 1.
(2) The initial debt amount, in relation to the quasi-loan, is an amount equal to the total of—
(a) the value in sterling, at the reference date, of the acquired debt, and
(b) the value in sterling, at the reference date, of any additional debt.
(3) The “reference date”—
(a) in relation to a right within sub-paragraph (2)(a), means the date on which P acquires it, and
(b) in relation to a right within sub-paragraph (2)(b), means the date on which P acquires it.
(4) The repayment amount, in relation to the quasi-loan, is an amount equal to the total of—
(a) the amount of the initial debt amount that has been repaid in sterling, and
(b) where payments are made, in a currency other than sterling, by way of repayment of the initial debt amount, the amount equal to the sterling value of the payments.
(5) The “sterling value” of a payment is its value in sterling on the date it is made.
...
19 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART 2 Accelerated payments
Application to HMRC
20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Qualifying payments condition
21 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
...
23 (1) Paragraph 24(1) applies where—
(a) a person (“P”) would (ignoring paragraph 24) be treated as taking a relevant step within paragraph 1 by reason of making a loan, or a quasi-loan, to a relevant person,
(b) an accelerated payment notice, or a partner payment notice, relating to a relevant charge (the “accelerated payment notice”) has been given under Chapter 3 of Part 4 of FA 2014,
(c) the relevant person makes a payment (the “accelerated payment”) in respect of the understated or disputed tax to which the notice relates,
(d) the accelerated payment is made on or before 5 April 2019, and
(e) the amount of the loan or quasi-loan that, at the end of 5 April 2019, is outstanding for the purposes of paragraph 1 (see paragraphs 3 to 18) is equal to or less than the amount of the accelerated payment.
(2) In sub-paragraph (1)(b), “relevant charge” means a charge to tax arising by reason of a step taken pursuant to the relevant arrangement concerned.
(3) The reference in sub-paragraph (2) to the relevant arrangement concerned is a reference to the relevant arrangement in pursuance of which, or in connection with which, the loan or quasi-loan mentioned in sub-paragraph (1)(a) is made.
(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5) In sub-paragraphs (1)(c) and (2)—
(a) the reference to tax includes a reference to relevant contributions, and
(b) the reference to a charge to tax includes a reference to a liability to pay relevant contributions;
and for those purposes “relevant contributions” has the same meaning as in Schedule 2 to the National Insurance Contributions Act 2015 (application of Part 4 of FA 2014 to national insurance contributions).
(6) If more than one notice relating to a particular relevant charge has been given—
(a) the reference in sub-paragraph (1)(e) to the amount of the accelerated payment is to be treated as a reference to the aggregate of the amounts of each accelerated payment in respect of which the conditions in sub-paragraph (1)(c) and (d) are met, and
(b) the reference in paragraph 24(2) to the accelerated payment notice is to be treated as a reference to the accelerated payment notices or any of them.
24 (1) The relevant person may make an application to the Commissioners for Her Majesty's Revenue and Customs for P to be treated—
(a) as taking the relevant step only if the condition in sub-paragraph (2) is met, and
(b) as doing so not at the time given by paragraph 1(2) but immediately before—
(i) the end of the 30 days beginning with the date on which the condition in sub-paragraph (2) becomes met, or
(ii) if later, the end of 5 April 2019.
(2) The condition is that, on the withdrawal of the accelerated payment notice or on the determination of an appeal, any part of the accelerated payment is repaid.
(3) Subject to sub-paragraph (4), an application under sub-paragraph (1) may be made in 2018.
(4) An application may be made after 2018 if an officer of Revenue and Customs considers it is reasonable in all the circumstances for the relevant person to make a late application.
(5) An application must be made in such form and manner, and contain such information, as may be specified by, or on behalf of, the Commissioners for Her Majesty's Revenue and Customs.
(6) An officer of Revenue and Customs must notify the applicant of the decision on an application under this paragraph.
(7) A favourable decision on an application under this paragraph may be revoked by an officer of Revenue and Customs if the officer considers that—
(a) information provided in making the application contained an inaccuracy, and
(b) the inaccuracy was deliberate on the applicant's part.
(8) Where the decision on an application is revoked under sub-paragraph (7), the application is to be treated as having been refused at the outset.
PART 3 Exclusions
Commercial transactions
25 Chapter 2 of Part 7A of ITEPA 2003 does not apply by reason of a relevant step within paragraph 1 which is treated as being taken by a person (“P”) if—
(a) P is treated as taking a relevant step by that paragraph by reason of the payment of a sum of money by way of a loan,
(b) the loan is (at the time it is made) a loan on ordinary commercial terms within the meaning of section 176 of ITEPA 2003, ignoring conditions B and C in that section, and
(c) there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement.
26 In section 554F of ITEPA 2003 (exclusions: commercial transactions), at the end insert—
(6) See paragraph 25 of Schedule 11 to F(No. 2)A 2017 for provision about exclusions where a loan is made on ordinary commercial terms and the relevant step is within paragraph 1 of that Schedule.
Transfer of employment-related loans
27 (1) Chapter 2 of Part 7A of ITEPA 2003 does not apply by reason of a relevant step within paragraph 1 which is treated as being taken by a person (“P”) if—
(a) P is treated as taking a relevant step within that paragraph by reason of making a quasi-loan by acquiring a right to payment of an amount equal to the whole or part of a payment made by way of a loan to a relevant person (the “borrower”),
(b) the loan, at the time it was made, was an employment-related loan,
(c) at the time the right is acquired, the section 180 threshold is not exceeded in relation to the loan,
(d) at the time the right is acquired, the borrower is an employee, or a prospective employee, of P, and
(e) there is no connection (direct or indirect) between the acquisition of the right and a tax avoidance arrangement.
(2) Subsections (2) to (5) of section 554OA of ITEPA 2003 (section 180 threshold) apply for the purposes of this paragraph as they apply for the purposes of that section.
(3) In this paragraph, “employment-related loan” has the same meaning as it has for the purposes of Chapter 7 of Part 3.
28 In section 554OA of ITEPA 2003 (exclusions: transfer of employment-related loans), at the end insert—
(6) See paragraph 27 of Schedule 11 to F(No. 2)A 2017 for provision about exclusions where a loan is an employment-related loan and the relevant step is within paragraph 1 of that Schedule.
Transactions under employee benefit packages
29 (1) Chapter 2 of Part 7A of ITEPA 2003 does not apply by reason of a relevant step within paragraph 1 which is treated as being taken by a person (“P”) if—
(a) P is treated as taking a relevant step by that paragraph by reason of the payment of a sum of money by way of a loan,
(b) the step is not taken under a pension scheme,
(c) the loan was made for the sole purpose of a transaction of P's with A and which P entered into in the ordinary course of P's business,
(d) at the time the loan was made (the “relevant time”)—
(i) a substantial proportion of P's business involved making similar loans to members of the public,
(ii) the transaction with A was part of a package of benefits which was available to a substantial proportion of B's employees, and
(iii) sub-paragraph (3) does not apply,
(e) the terms on which similar transactions were offered by P under the package of benefits mentioned in paragraph (d)(ii) were generous enough to enable substantially all of the employees of B to whom the package was available at or around the relevant time to take advantage of what was offered (if they wanted to),
(f) the terms on which P entered into the transaction with A were substantially the same as the terms on which at or around the relevant time P normally entered into similar transactions with employees of B under the package of benefits,
(g) if B is a company, a majority of B's employees to whom the package of benefits was available at the relevant time did not have a material interest (as defined in section 68 of ITEPA 2003) in B, and
(h) there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement.
(2) For the purposes of sub-paragraph (1)(d)(i)—
(a) a loan is “similar” if it is made for the same or similar purposes as the loan which is the subject of the relevant step, and
(b) “members of the public” means members of the public at large with whom P deals at arm‘s length.
(3) This sub-paragraph applies if any feature of the package of benefits mentioned in sub-paragraph (1)(d)(ii) had or would have been likely to have had the effect that, of the employees of B to whom the package was available, it is employees within sub-paragraph (4) on whom benefits under the package will be wholly or mainly conferred.
(4) The employees within this sub-paragraph are—
(a) directors,
(b) senior employees,
(c) employees who at the relevant time received, or as a result of the package of benefits would have been likely to have received, the higher or highest levels of remuneration, and
(d) if, at the relevant time, B was a company and was a member of a group of companies, any employees not within paragraph (b) or (c) who—
(i) were senior employees in the group, or
(ii) received, or as a result of the package of benefits would have been likely to have received, the higher or highest levels of remuneration in the group.
(5) For the purposes of sub-paragraph (1)(d) and (e) a transaction is “similar” if it is of the same or a similar type to the transaction which P has or had with A.
(6) In this paragraph references to A include references to any person linked with A.
(7) In this paragraph “pension scheme” has the same meaning as in Part 4 of FA 2004 (see section 150(1) of that Act).
30 In section 554G of ITEPA 2003 (exclusions: transactions under employee benefit packages), at the end insert—
(8) See paragraph 29 of Schedule 11 to F(No. 2)A 2017 for provision about exclusions for transactions under employee benefit packages in a case in which the relevant step is within paragraph 1 of that Schedule.
Cases involving employment-related securities
31 Chapter 2 of Part 7A of ITEPA 2003 does not apply by reason of a relevant step within paragraph 1 which is treated as being taken by a person (“P”) if—
(a) P is treated as taking a relevant step by that paragraph by reason of the payment of a sum of money by way of a loan (the “relevant loan”),
(b) the relevant loan is made and used solely for the purpose of enabling A to exercise an employment-related securities option (within the meaning of Chapter 5 of Part 7 of ITEPA 2003),
(c) the exercise of the option by A gives rise to employment income of A in respect of A's employment with B—
(i) which is chargeable to income tax or would be chargeable apart from Chapter 5B of Part 2 of ITEPA 2003, or
(ii) which is exempt income, and
(d) there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement.
32 In section 554N of ITEPA 2003 (exclusions: other cases involving employment-related securities etc.), at the end insert—
(17) See paragraph 31 of Schedule 11 to F(No. 2)A 2017 for provision about exclusions where a loan is made for the purpose of enabling the exercise of an employment-related securities option and the relevant step is within paragraph 1 of that Schedule.
Employee car ownership schemes
33 (1) This paragraph applies if—
(a) there is an arrangement (“the car ownership arrangement”) which—
(i) provides for A to purchase a new car from another person (“S”) using a loan (“the car loan”) to be made to A by an authorised lender,
(ii) specifies the date (“the repayment date”) by which the car loan must be fully repaid which must be no later than four years after the date on which the car loan is made, and
(iii) permits A, in order to obtain funds to repay the car loan, to sell the car back to S on a specified date at a specified price based on an estimate (made at the time the car ownership arrangement is made) of the likely outstanding amount of the car loan on the specified date, and
(iv) as provided for by the car ownership arrangement, A purchases the car using the car loan.
(2) Chapter 2 does not apply by reason of a relevant step within paragraph 1 which is treated as being taken by a person if—
(a) the person is treated as taking a relevant step by that paragraph by reason of making the car loan, and
(b) the car ownership arrangement is not a tax avoidance arrangement and there is no other connection (direct or indirect) between the relevant step and a tax avoidance arrangement.
(3) In this paragraph—
“car” has the meaning given by section 235(2) of ITEPA 2003, and
“authorised lender” means a person who—
has permission under Part 4A of the Financial Services and Markets Act 2000 to enter into, or to exercise or have the right to exercise rights and duties under, a contract of the kind mentioned in paragraph 23 of Schedule 2 to that Act, and
is not acting as a trustee.
(4) The definition of “authorised lender” must be read with—
(a) section 22 of the Financial Services and Markets Act 2000,
(b) any relevant order under that section, and
(c) Schedule 2 to that Act.
34 In section 554O of ITEPA 2003 (exclusions: employee car ownership schemes), at the end insert—
(7) See paragraph 33 of Schedule 11 to F(No. 2)A 2017 for provision about exclusions for car loans in a case in which the relevant step is within paragraph 1 of that Schedule.
Acquisition of unlisted employer shares
35 (1) Chapter 2 of Part 7A of ITEPA 2003 does not apply by reason of a relevant step within paragraph 1 which is treated as being taken by a person (“P”) if the conditions in sub-paragraph (2) are met.
(2) The conditions are that—
(a) the loan or quasi-loan concerned was made before 9 December 2010,
(b) if P is treated as taking a relevant step by paragraph 1 by reason of the payment of a sum of money by way of loan, the sum is used by A solely to acquire employer shares,
(c) if P is treated as taking a relevant step by paragraph 1 by reason of making a quasi-loan, the transfer of assets mentioned in paragraph 2(3)(b) is the transfer of employer shares to A,
(d) the employer shares are acquired, or transferred, before the end of the period of one year beginning with the day on which the loan, or quasi-loan, is made, and
(e) the employer shares are not listed on a recognised stock exchange at any time during the period beginning with the day on which the loan, or quasi-loan, is made and ending with the earlier of—
(i) the day on which A ceases to hold the shares, or
(ii) the day on which the loan, or quasi-loan, is repaid.
(3) In this paragraph “employer shares” means shares that form part of the ordinary share capital of—
(a) B, or
(b) if B is a company and is a member of a group of companies at the time the shares are acquired, any other company which is a member of that group at that time.
(4) Sub-paragraph (6) applies if—
(a) apart from sub-paragraph (1), Chapter 2 of Part 7A would apply by reason of the relevant step mentioned in sub-paragraph (1), and
(b) at the end of the relevant period, an amount of the loan, or quasi-loan, is outstanding.
(5) In this paragraph “the relevant period” means the period of 12 months beginning with the day on which A ceases to hold the shares.
(6) Part 7A of ITEPA 2003 has effect as if—
(a) a relevant step within paragraph 1 were taken by reason of making a loan, or quasi-loan, of an amount equal to the amount of the loan, or quasi-loan, outstanding at the end of the relevant period, and
(b) the relevant step were taken on the day after the end of the relevant period.
Exclusion for relevant step within paragraph 1A where initial step excluded
35ZA Chapter 2 of Part 7A of ITEPA 2003 does not apply by reason of a relevant step within paragraph 1A if that Chapter does not apply by reason of the initial step (within the meaning given by sub-paragraph (1)(a) of paragraph 1A).
PART 3A Duty to provide loan charge information to HMRC
Duty to provide loan charge information
35A (1) Paragraphs 35B and 35C apply if one of the following conditions is met.
(2) The first condition is that—
(a) a person (“P”) is treated as taking a relevant step within paragraph 1 immediately before the end of 5 April 2019, and
(b) Chapter 2 of Part 7A of ITEPA 2003 applies by reason of that relevant step.
(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4) The second condition is that—
(a) paragraph 24(1) applies by reference to a loan, or a quasi-loan, made by a person (“S”) to a relevant person (“R”),
(b) R makes an application under paragraph 24(1) for S to be treated as mentioned in paragraph 24(1) in relation to the relevant step concerned,
(c) a favourable decision is made on the application before 6 April 2019,
(d) that decision is not revoked before 6 April 2019,
(e) the first condition is not met, and
(f) A is living immediately before—
(i) the end of 30 September 2019, or
(ii) if earlier, the time given by sub-paragraphs (i) and (ii) of paragraph 24(1)(b).
(5) The third condition is that—
(a) neither the first nor the second condition is met, and
(b) if the date specified in paragraph 1(1)(c) and (2) were 16 March 2016 ...—
(i) a person (“T”) would be treated as taking a relevant step within paragraph 1 immediately before the end of 16 March 2016, and
(ii) Chapter 2 of Part 7A of ITEPA 2003 would apply by reason of that relevant step (using, for this purpose, the law that would be used to test whether that Chapter applies to a relevant step taken on 5 April 2019), and
(c) A is living immediately before the end of 5 April 2019.
(6) Paragraph 35C does not apply in a case where one of the first to third conditions is met if—
(a) a person agrees, with an officer of Revenue and Customs, terms for the discharge of liability for income tax,
(b) the terms cover all liability (if any) under Chapter 2 of Part 7A of ITEPA 2003 by reason of any loan-charge relevant step or result in there being no such liability, and
(c) the terms are agreed before 1 October 2019.
(7) In sub-paragraph (6)(b) “loan-charge relevant step” means (as the case may be)—
(a) the relevant step that P is treated as taking,
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(c) any relevant step within paragraph 1 that S is, or has yet to be, treated as taking by reference to the loan or quasi-loan mentioned in sub-paragraph (4), or
(d) any relevant step within paragraph 1 that T is, or has yet to be, treated as taking by reference to the loan or quasi-loan by reference to which T would be treated as taking the relevant step mentioned in sub-paragraph (5)(b)(i).
35B (1) In this paragraph “the appropriate third party” means P, ... S or T (as the case may be: see paragraph 35A).
(2) Sub-paragraph (3) applies if the appropriate third party receives a request from A or A’s personal representatives for information specified in the request that is reasonably required for the purpose of complying with paragraph 35C in the case concerned.
(3) The appropriate third party must provide A or A’s personal representatives—
(a) with such of the information as is available to the appropriate third party, and
(b) if any of the information is not available to the appropriate third party, with a statement confirming that so much of the information as is not provided is information that is not available to the appropriate third party.
(4) The information, and any such statement, must be provided promptly and, in any event, before the end of 30 days beginning with date of receipt of the request.
35C (1) A, or A’s personal representatives, must provide the loan charge information (see paragraph 35D(1)) to the Commissioners for Her Majesty’s Revenue and Customs.
(2) The loan charge information must be provided—
(a) after 5 April 2019, and
(b) before 1 October 2020.
(3) The loan charge information must be provided in such form and manner as may be specified by, or on behalf of, the Commissioners for Her Majesty’s Revenue and Customs.
“Loan charge information”
35D (1) For the purposes of paragraphs 35C and 36, the “loan charge information” consists of—
(a) A’s name and, if A’s personal representatives are providing the information, their names,
(b) the address and telephone number, and e-mail address (if any), of each person providing the information,
(c) A’s national insurance number (if any),
(d) the unique taxpayer reference number (if any) allocated to A by HMRC,
(e) if the loan or quasi-loan that is or would be the subject of the relevant step mentioned in paragraph 35A(2)(a) or (4)(b) or (5)(b)(i)... is made to someone other than A, the name of the person to whom it is made,
(f) B’s name,
(g) the name of the relevant arrangement,
(h) the reference number (if any) allocated to the relevant arrangement by HMRC under section 311 of FA 2004 (disclosure of tax avoidance schemes: arrangements to be given reference number),
(i) any other reference number allocated by HMRC in connection with the relevant arrangement or the relevant step,
(j) if a person has agreed terms with an officer of Revenue and Customs for the partial discharge of the liability for income tax arising because of the application of Chapter 2 of Part 7A of ITEPA 2003 by reason of the relevant step that P... or S is treated as taking, the date of that agreement and the amount of the liability to which it relates,
(k) if a loan is or would be the subject of the relevant step mentioned in paragraph 35A(2)(a) or (4)(b) or (5)(b)(i)... the loan payment information (see sub-paragraph (2)), and
(l) if a quasi-loan is or would be the subject of the relevant step mentioned in paragraph 35A(2)(a) or (4)(b) or (5)(b)(i), the quasi-loan payment information (see sub-paragraph (3)).
(2) The “loan payment information”, in relation to a loan, consists of statements of the following—
(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b) the initial principal amount of the loan,
(c) the amount that has become principal under the loan, otherwise than by capitalisation of interest, in each relevant tax year,
(d) the amount of principal under the loan repaid in each relevant tax year, ignoring any repayments not in money made on or after 17 March 2016,
(e) the details of any repayment that is to be disregarded under paragraph 4,
(f) the amount of principal under the loan that has been released or written off in each relevant tax year, and
(g) whether the liability for income tax arising because of the application of Chapter 2 of Part 7A of ITEPA 2003, or section 188 of that Act, by reason of the release or writing-off has been paid.
(3) The “quasi-loan payment information”, in relation to a quasi-loan, consists of statements of the following—
(a) the amount equal to the value of the acquired debt,
(b) the amount equal to the value of the additional debts acquired in each relevant tax year,
(c) the amount by which the initial debt amount has been reduced by way of repayment in each relevant tax year, ignoring any repayments not in money made on or after 17 March 2016,
(d) where the acquired debt or an additional debt is a right to a transfer of assets, and the assets have been transferred, the amount of the market value of the assets at the time of the transfer,
(e) the details of any repayment that is to be disregarded under paragraph 12,
(f) the amount by which the initial debt amount has been reduced by release or writing off in each relevant tax year, and
(g) whether the liability for income tax arising because of the application of Chapter 2 of Part 7A of ITEPA 2003, or section 188 of that Act, by reason of the release or writing-off has been paid.
(4) In this paragraph “relevant tax year” in relation to a loan, or a quasi-loan, means—
(a) the tax year in which the loan or quasi-loan was made, and
(b) each subsequent tax year.
(5) In sub-paragraph (3), “acquired debt”, “additional debt” and “initial debt amount” have the same meaning as in paragraph 11.
(6) In this paragraph and in paragraphs 35G to 35J, “HMRC” means Her Majesty’s Revenue and Customs.
Power to amend paragraph 35D
35E The Commissioners for Her Majesty’s Revenue and Customs may by regulations amend paragraph 35D so as to—
(a) add, remove or amend an entry in a list of information, and
(b) make incidental provision.
Penalties for failure to comply
35F (1) A person who fails to comply with paragraph 35C is liable to a penalty of £300.
(2) Sub-paragraph (3) applies if the failure continues after the date on which a penalty is imposed under sub-paragraph (1) in respect of the failure.
(3) The person is liable to a further penalty or penalties not exceeding £60 for each subsequent day, up to a maximum of 90 days, on which the failure continues.
Penalties for inaccurate information and documents
35G (1) This paragraph applies if—
(a) in complying with the duty under paragraph 35C, a person provides inaccurate information, and
(b) condition A, B or C is met.
(2) Condition A is that the inaccuracy is careless or deliberate.
(3) An inaccuracy is careless if it is due to a failure by the person to take reasonable care.
(4) Condition B is that the person knows of the inaccuracy at the time the information is provided but does not inform HMRC at that time.
(5) Condition C is that the person—
(a) discovers the inaccuracy some time later, and
(b) fails to take reasonable steps to inform HMRC.
(6) The person is liable to a penalty not exceeding £3000.
(7) Where the information contains more than one inaccuracy, a penalty is payable for each inaccuracy.
Reasonable excuse
35H (1) Liability to a penalty under paragraph 35F does not arise if the person satisfies HMRC or (on an appeal notified to the tribunal) the tribunal that there is a reasonable excuse for the failure.
(2) For the purposes of this paragraph—
(a) an insufficiency of funds is not a reasonable excuse unless attributable to events outside the person’s control,
(b) where the person relies on any other person to do anything, that is not a reasonable excuse unless the first person took reasonable care to avoid the failure, and
(c) where the person had a reasonable excuse for the failure but the excuse has ceased, the person is to be treated as having continued to have the excuse if the failure is remedied without unreasonable delay after the excuse ceased.
Assessment of a penalty
35I (1) Where a person becomes liable for a penalty under paragraph 35F or 35G—
(a) HMRC may assess the penalty, and
(b) if they do so, they must notify the person.
(2) An assessment of a penalty under paragraph 35F must be made before 1 October 2021.
(3) An assessment of a penalty under paragraph 35G must be made before 1 October 2023.
Appeals
35J (1) A person may appeal against any of the following decisions of an officer of Revenue and Customs—
(a) a decision that a penalty is payable by that person under paragraph 35F or 35G, or
(b) a decision as to the amount of such a penalty.
(2) Notice of an appeal under this paragraph must be given—
(a) in writing,
(b) before the end of the period of 30 days beginning with the date on which the notification under paragraph 35I was issued, and
(c) to HMRC.
(3) Notice of an appeal under this paragraph must state the grounds of appeal.
(4) On an appeal under sub-paragraph (1)(a) that is notified to the tribunal, the tribunal may confirm or cancel the decision.
(5) On an appeal under sub-paragraph (1)(b) that is notified to the tribunal, the tribunal may—
(a) confirm the decision, or
(b) substitute for the decision another decision that the officer of Revenue and Customs had power to make.
Enforcement
35K (1) A penalty under paragraph 35F or 35G must be paid—
(a) before the end of the period of 30 days beginning with the date on which the notification under paragraph 35I was issued, or
(b) if a notice of an appeal against the penalty is given, before the end of the period of 30 days beginning with the date on which the appeal is determined or withdrawn.
(2) A penalty under paragraph 35F or 35G may be enforced as if it were income tax charged in an assessment and due and payable.
PART 4 Supplementary provision
Duty to provide loan charge information to B
36 (1) This paragraph applies where—
(a) a person (“P”) has made a loan, or a quasi-loan, to a relevant person,
(b) the loan or quasi-loan was made on or after 9 December 2010, and
(c) an amount of the loan or quasi-loan is outstanding at any time—
(i) on or after 17 March 2016, and
(ii) before the end of 5 April 2019.
(2) Each of A and P must ensure that the loan charge information (see paragraph 35D) in relation to the loan or quasi-loan is provided to B before the end of 15 April 2019.
(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(7) “Loan”, “quasi-loan” and “outstanding” have the same meaning for the purposes of this paragraph as they have for the purposes of paragraph 1.
Double taxation
36A (1) Sub-paragraphs (2) to (8) apply if—
(a) a person (“P”) would, apart from this paragraph, be treated as taking a relevant step by paragraph 1 by reason of a loan made to a relevant person, and
(b) the loan gives rise to a charge to tax under section 455 of CTA 2010 by virtue of section 459 of that Act (loans treated as made to participators).
(2) In this paragraph “the key date” means the later of—
(a) 5 April 2019, and
(b) the day on which the tax referred to in sub-paragraph (1)(b) is due and payable (see section 455(3) of CTA 2010).
(3) Paragraph 1(2) has effect as if it treated P as taking the relevant step immediately before the end of the key date, but this is subject to sub-paragraphs (4) and (5).
(4) Paragraph 1(1) does not apply in the case of the loan if the payment condition is met.
(5) Paragraph 1(1) does not apply in the case of the loan if—
(a) the payment condition is not met,
(b) the charge to tax mentioned in sub-paragraph (1)(b) is reported, in a company tax return of B’s, as required under Schedule 18 to FA 1998 (company tax returns etc), and
(c) an officer of Revenue and Customs considers that paragraph 1(1) should not apply in the case of the loan.
(6) The payment condition is met if—
(a) the net section 455 charge is paid in full on or before the key date, or
(b) the net section 455 charge is nil.
(7) The “net section 455 charge” is the amount of the tax referred to sub-paragraph (1)(b) less the amount of section 458 relief from that tax.
(8) In sub-paragraph (7) “section 458 relief” means relief given under section 458 of CTA 2010—
(a) in respect of a repayment made, or a release or writing-off occurring, on or before the key date, and
(b) on a claim made on or before the key date.
37 (1) Sub-paragraph (2) applies where—
(a) P is treated as taking a relevant step by paragraph 1 by reason of a loan made to a relevant person, and
(b) the loan is an employment-related loan (within the meaning of Chapter 7 of Part 3 of ITEPA 2003).
(2) The effect of section 554Z2(2)(a) of ITEPA 2003 (value of relevant step to count as employment income: application of Part 7A instead of the benefits code) is that the loan is not be treated as a taxable cheap loan for the purposes of Chapter 7 of Part 3 of that Act for—
(a) the tax year in which the relevant step is treated as being taken, and
(b) any subsequent tax year.
38 In section 554Z2 of ITEPA 2003, at the end insert—
(4) See paragraph 37 of Schedule 11 to F(No. 2)A 2017 for provision about the effect of subsection (2)(a) in a case in which the relevant step is within paragraph 1 of that Schedule.
Remittance basis
39 Part 7A of ITEPA 2003 is amended as follows.
40 (1) Section 554Z9 (remittance basis: A does not meet section 26A requirement) is amended in accordance with this paragraph.
(2) In subsection (1), for “Subsection (2) applies” substitute “ Subsections (2) and (2A) apply ”.
(3) In subsection (1A), for “subsection (2) does not apply” substitute “ subsections (2) and (2A) do not apply ”.
(4) At the beginning of subsection (2) insert “ Except in a case within subsection (2A), ”.
(5) After subsection (2) insert—
(2A) Where the relevant step is within paragraph 1 of Schedule 11 to F(No. 2)A 2017, A's employment income by virtue of section 554Z2(1), or the relevant part of it, is “taxable specific income” in the tax year in which the relevant step is treated as being taken so far as the income is remitted to the United Kingdom in that tax year or in any previous tax year.
(6) In subsection (3) for “this purpose” substitute “ the purposes of subsections (2) and (2A) ”.
(7) In subsection (5)—
(a) in the words before paragraph (a), for “subsection (2)” substitute “ subsection (2) or (2A) ”;
(b) in the words after paragraph (d)—
(i) for “subsection (2)” substitute “ subsection (2) or (2A) ”;
(ii) for “that subsection” substitute “ subsection (2) or (2A) (as the case may be) ”.
41 (1) Section 554Z10 (remittance basis: A meets section 26A requirement) is amended in accordance with this paragraph.
(2) In subsection (1) for “Subsection (2) applies” substitute “ Subsections (2) and (2A) apply ”.
(3) At the beginning of subsection (2) insert “ Except in a case within subsection (2AA), ”.
(4) After subsection (2) insert—
(2AA) Where the relevant step is within paragraph 1 of Schedule 11 to F(No. 2)A 2017, the overseas portion of (as the case may be)—
(a) A's employment income by virtue of section 554Z2(1), or
(b) the relevant part of A's employment income by virtue of that section,
is “taxable specific income” in the tax year in which the relevant step is treated as being taken so far as the overseas portion is remitted to the United Kingdom in that tax year or in any previous tax year.
42 (1) Section 554Z11 (remittance basis: supplementary) is amended in accordance with this paragraph.
(2) In subsection (4), for “554Z9(2) or 554Z10(2)” substitute “ 554Z9(2) or (2A) or 554Z10(2) or (2AA) ”.
(3) In subsection (5), for “554Z9(2) or 554Z10(2)” substitute “ 554Z9(2) or (2A) or 554Z10(2) or (2AA) ”.
(4) In subsection (6), for “554Z9(2) or 554Z10(2)” substitute “ 554Z9(2) or (2A) or 554Z10(2) or (2AA) ”.
43 (1) Section 554Z11A (temporary non-residents) is amended in accordance with this paragraph.
(2) In subsection (2)—
(a) after “554Z9(2)” insert “ or (2A) ”;
(b) after “554Z10(2)” insert “ or (2AA) ”.
(3) In subsection (3)(d)(i), for “554Z9(2) or 554Z10(2)” substitute “ 554Z9(2) or (2A) or 554Z10(2) or (2AA) ”.
Interpretation
44 (1) In this Schedule, “tax avoidance arrangement” has the same meaning as it has for the purposes of Part 7A of ITEPA 2003 (see section 554Z(13) to (15) of that Act).
(2) Section 554Z(16) (determining whether a step is connected with a tax avoidance arrangement) applies for the purposes of this Schedule as it applies for the purposes of Part 7A of ITEPA 2003.
45 See section 554A(1)(a) and 554AA(1)(a) of ITEPA 2003 for the meaning of “A” and “B”.
PART 5 Consequential amendments
ITEPA 2003
46 (1) ITEPA 2003 is amended in accordance with this paragraph.
(2) In section 554A(2) (meaning of “relevant step”), after “or 554D” insert “ , or paragraph 1 of Schedule 11 to F(No. 2)A 2017 ”.
(3) In section 554A(4) (relevant step taken on or after A's death), in paragraph (a) after “section 554B taken” insert “ , or a relevant step within paragraph 1 of Schedule 11 to F(No.2)A 2017 which is treated as being taken, ”.
(4) In section 554Z(9) (interpretation: reference to definition of “relevant step”), at the end insert “ , but see also Schedule 11 to F(No. 2)A 2017 ”.
(5) In section 554Z(10) (interpretation: relevant step which involves a sum of money) omit “or” at the end of paragraph (b) and after paragraph (c) insert
, or
(d) a step within paragraph 1 of Schedule 11 to F(No. 2)A 2017.
(6) In section 554Z5 of ITEPA 2003 (overlap with money or asset subject to earlier tax liability), at the end insert—
(12) See paragraphs 4(5) and (6) and 12(4) and (5) of Schedule 11 of F(No. 2)A 2017) for provision about the effect of subsection (3) in certain cases where the relevant step is within paragraph 1 of that Schedule.
FA 2011
47 In paragraph 59 of Schedule 2 to FA 2011 (transitional provision relating to Part 7A of ITEPA 2003), in sub-paragraph (1)(a), after “ITEPA 2003” insert “ or paragraph 1 of Schedule 11 to F(No. 2)A 2017 ”.
SCHEDULE 12 Trading income provided through third parties: loans etc outstanding on 5 April 2019
Section 35
Application of sections 23A to 23H of ITTOIA 2005 in relation to loans etc. outstanding on 5 April 2019
1 (1) A loan or quasi-loan in relation to which sub-paragraph (2) applies is to be treated for the purposes of sections 23A to 23H of ITTOIA 2005 as a relevant benefit that arises immediately before the end of 5 April 2019.
(2) This sub-paragraph applies in relation to a loan or a quasi-loan if—
(a) the loan or quasi-loan was made—
(i) on or after 9 December 2010, and
(ii) before 6 April 2017, and
(b) an amount of the loan or quasi-loan is outstanding immediately before the end of 5 April 2019.
(3) Where section 23E of ITTOIA 2005 applies and T has not made an election for the purposes of sub-paragraph (3A) in relation to a relevant benefit which is a loan or quasi-loan in relation to which sub-paragraph (2) applies, section 23E has effect—
(a) as if the “relevant benefit amount” were the amount of the loan or quasi-loan that is outstanding at the time the relevant benefit is treated as arising, and
(b) where T ceases to carry on the relevant trade before the tax year in which the relevant benefit is treated as arising, as if section 23E(1)(b) were omitted and as if section 23E(1) provided that the relevant benefit amount is treated for income tax purposes as a post-cessation receipt of the trade received in that tax year.
(3A) Where section 23E of ITTOIA 2005 applies in relation to a relevant benefit which is a loan or quasi-loan in relation to which sub-paragraph (2) applies and T has made an election for the purposes of this sub-paragraph, section 23E has effect—
(a) as if the “relevant benefit amount” were one third of the amount of the loan or quasi-loan that is outstanding at the time the relevant benefit is treated as arising,
(b) as if section 23E(1)(a) specified the tax year in which the relevant benefit is treated as arising and each of the two subsequent tax years, and
(c) where T ceases to carry on the relevant trade before any tax year so specified in section 23E(1)(a), as if section 23E(1)(b) were omitted and as if section 23E(1) provided that the relevant benefit amount is to be treated for income tax purposes as a post-cessation receipt of the trade received in that tax year.
(3B) An election for the purposes of sub-paragraph (3A)—
(a) may be made at any time before 1 October 2020, and
(b) may be made at a later time if an officer of Revenue and Customs allows it.
(3C) But a person who is under a duty imposed by paragraph 22 of this Schedule or paragraph 35C of Schedule 11 may not make an election for the purposes of sub-paragraph (3A) until that duty has been complied with.
(3D) An election for the purposes of sub-paragraph (3A) may not be revoked.
(3E) A person who has made an election for the purposes of paragraph 1A of Schedule 11 is to be treated as having made an election for the purposes of sub-paragraph (3A) of this paragraph.
(3F) The Commissioners for Her Majesty’s Revenue and Customs may by regulations provide that sub-paragraph (3B)(a) applies to a specified class of persons as if the reference to 1 October 2020 were to such later date as is specified.
(3G) In sub-paragraph (3F) “specified” means specified in the regulations.
(4) This paragraph is subject to paragraphs 19 and 20 (accelerated payments).
(5) For the purposes of this paragraph, whether an amount of a loan or quasi-loan is outstanding at a particular time—
(a) is to be determined in accordance with the following provisions of this Schedule, and
(b) does not depend on the loan or quasi-loan subsisting at that time.
1A (1) This paragraph applies where—
(a) a loan or quasi-loan is to be treated for the purposes of sections 23A to 23H of ITTOIA 2005 as a relevant benefit by reason of paragraph 1,
(b) a reasonable case could have been made that for a qualifying tax year (“the relevant year”) T was chargeable to income tax on an amount that was referable to the loan or quasi-loan,
(c) at a time when an officer of Revenue and Customs had power to recover (from T or any other person) income tax for the relevant year in respect of that amount, a qualifying tax return or two or more qualifying tax returns taken together contained a reasonable disclosure of the loan or quasi-loan, and
(d) as at 6 April 2019 an officer of Revenue and Customs had not taken steps to recover (from T or any other person) income tax for the relevant year in respect of that amount.
(2) But this paragraph does not apply if—
(a) a reasonable case could have been made that for a tax year other than the relevant year (“the alternative year”) T was chargeable to income tax on an amount within sub-paragraph (3), and
(b) it is the case that—
(i) on or before 5 April 2019 an officer of Revenue and Customs took steps to recover (from T or any other person) income tax for the alternative year in respect of that amount, or
(ii) the alternative year is not a qualifying tax year.
(3) An amount is within this sub-paragraph if—
(a) it is the same amount as is mentioned in sub-paragraph (1),
(b) it is part of the amount mentioned in sub-paragraph (1), or
(c) it is derived from or represents the whole or part of the amount mentioned in sub-paragraph (1).
(4) Where this paragraph applies, then for the purposes of paragraph 1(3)(a) and (3A)(a) the amount of the loan or quasi-loan that is outstanding is to be taken to be reduced (but not below nil) by the amount mentioned in sub-paragraph (1).
(5) For the purposes of sub-paragraph (1)(c) a qualifying tax return, or two or more qualifying tax returns taken together, contained a reasonable disclosure of the loan or quasi-loan if the return or returns taken together—
(a) identified the loan or quasi-loan,
(b) identified the person to whom the loan or quasi-loan was made in a case where the loan or quasi-loan was made to a person other than T,
(c) identified the relevant arrangements in pursuance of which or in connection with which the loan or quasi-loan was made, and
(d) provided such other information as was sufficient for it to be apparent that a reasonable case could be made that for the relevant year T was chargeable to income tax on an amount that was referable to the loan or quasi-loan.
(6) In this paragraph—
“qualifying tax year” means the tax year 2015-16 and any earlier tax year, and
“qualifying tax return” means a return made by T under section 8 of TMA 1970 for a qualifying tax year, and any accompanying accounts, statements or documents.
Meaning of “loan” and “quasi loan”
Meaning of “outstanding”: loans
3 (1) An amount of a loan is “outstanding” for the purposes of paragraph 1 if the relevant principal amount exceeds the repayment amount.
(2) In sub-paragraph (1) “relevant principal amount”, in relation to a loan, means the total of—
(a) the initial principal amount lent, and
(b) any sums that have become principal under the loan, otherwise than by capitalisation of interest.
(3) In sub-paragraph (1) “repayment amount”, in relation to a loan, means the total of—
(a) the amount of principal under the loan that has been repaid before 5 December 2016, and
(b) payments in money made by T on or after 5 December 2016 by way of repayment of principal under the loan.
(4) A payment is to be disregarded for the purposes of sub-paragraph (3)(b) if there is any connection (direct or indirect) between the payment and a tax avoidance arrangement (other than the arrangement in pursuance of which the loan was made).
(5) In this paragraph and in paragraph 9, “tax avoidance arrangement” means an arrangement which has a tax avoidance purpose.
(6) For the purposes of sub-paragraph (5), an arrangement has a tax avoidance purpose if sub-paragraph (7) applies to a person who is a party to the arrangement.
(7) This sub-paragraph applies to a person if the main purpose, or one of the main purposes, of the person entering into the arrangement is the avoidance of tax.
(8) The following paragraphs apply for the purpose of determining whether any payment is connected with a tax avoidance arrangement—
(a) a payment is connected with a tax avoidance arrangement if (for example) the payment is made (wholly or partly) in pursuance of—
(i) the tax avoidance arrangement, or
(ii) an arrangement at one end of a series of arrangements with the tax avoidance arrangement being at the other end, and
(b) it does not matter whether the person making the payment is unaware of the tax avoidance arrangement.
Meaning of “outstanding”: loans in currencies other than sterling
4 (1) In paragraphs 5 to 8 “the loan currency”, in relation to a loan, means the currency in which the initial principal amount of the loan is denominated (whether or not that amount is paid in that currency).
(2) For the purposes of paragraphs 5 to 8, the value of an amount in a particular currency is to be determined by reference to an appropriate spot rate of exchange.
5 (1) This paragraph applies in relation to a loan where the loan currency is a currency other than sterling.
(2) But this paragraph does not apply if paragraph 8 applies in relation to the loan.
(3) The amount of the loan that is outstanding, at the relevant time, is to be calculated in sterling as follows—
Step 1 Calculate, in the loan currency, the amount that is outstanding at that time.
Step 2 Take the value in sterling, at that time, of that amount.
(4) For the purposes of this paragraph and paragraph 8, the “relevant time” in relation to a loan is the time immediately before—
(a) the end of the approved repayment date, if the loan is an approved fixed term loan on 5 April 2019, or
(b) the end of 5 April 2019 in any other case.
(5) See paragraph 6 for provision about repayments made in a currency other than the loan currency.
Repayments in currencies other than the loan currency
6 (1) This paragraph applies in relation to a loan where—
(a) payments in money are made by way of repayment of principal under the loan, and
(b) some or all of the payments are made in a currency other than the loan currency.
(2) But this paragraph does not apply if paragraph 8 applies in relation to the loan.
(3) For the purposes of calculating the repayment amount in relation to the loan, the amount of each of the payments referred to in sub-paragraph (1)(b) is an amount equal to its value in the loan currency on the date it is made.
Loans made in a depreciating currency
7 (1) Paragraph 8 applies in relation to a loan where—
(a) the loan currency is a currency other than sterling, and
(b) it is reasonable to suppose that the main reason, or one of the main reasons, for the loan being made in that currency is that the loan currency is expected to depreciate as against sterling during the loan period.
(2) The “loan period”, in relation to a loan, is the period—
(a) beginning at the time the loan is made, and
(b) ending with the time by which, under the terms of the loan, the whole of the loan is to be repaid.
8 (1) Where this paragraph applies in relation to a loan—
(a) paragraphs 5 and 6 do not apply in relation to the loan, and
(b) sub-paragraphs (2) to (5) apply for the purposes of calculating the amount of the loan that is outstanding at the relevant time (as defined in paragraph 5(4)).
(2) The relevant principal amount, in relation to the loan, is an amount equal to the total of—
(a) the value in sterling, at the reference date, of the initial principal amount lent, and
(b) the value in sterling, at the reference date, of any sums that become principal under the loan, otherwise than by capitalisation of interest.
(3) The “reference date”—
(a) in relation to an amount within sub-paragraph (2)(a), means the date on which the loan is made, and
(b) in relation to a sum within sub-paragraph (2)(b), means the date on which the sum becomes principal.
(4) The repayment amount, in relation to the loan, is an amount equal to the total of—
(a) the amount of principal under the loan that has been repaid in sterling, and
(b) where payments are made, in a currency other than sterling, by way of repayment of principal under the loan, the amount equal to the sterling value of the payments.
(5) The “sterling value” of a payment is its value in sterling on the date it is made.
Meaning of outstanding: “quasi-loans”
9 (1) An amount of a quasi-loan is outstanding for the purposes of paragraph 1 if the initial debt amount exceeds the repayment amount.
(2) In sub-paragraph (1), “initial debt amount” means the total of—
(a) an amount equal to the value of the acquired debt (see paragraph 2(2)), and
(b) where P subsequently acquires a further right (the “additional debt”) to a payment, or transfer of assets, in connection with the payment mentioned in paragraph 2(3)(a) or (as the case may be) the transfer mentioned in paragraph 2(3)(b), an amount equal to the value of the additional debt.
(3) For the purposes of sub-paragraph (2)—
(a) where the acquired debt is a right to payment of an amount, the “value” of the debt is that amount,
(b) where the additional debt is a right to payment of an amount, the “value” of the debt is that amount, but is nil if the additional debt accrued to P by the capitalisation of interest on the acquired debt or another additional debt, and
(c) where the acquired debt or additional debt is a right to a transfer of assets, the “value” of the debt is an amount equal to—
(i) the market value of the assets at the time the right is acquired (or the value of the right at that time if the assets are non-fungible and not in existence at that time), or
(ii) if higher, the cost of the assets at that time.
(4) In sub-paragraph (1), “repayment amount”, in relation to a quasi-loan, means the total of—
(a) the amount (if any) by which the initial debt amount has been reduced (by way of repayment) before 5 December 2016,
(b) payments in money (if any) made by T on or after 5 December 2016 by way of repayment of the initial debt amount, and
(c) if the acquired debt or additional debt is a right to a transfer of assets, and the assets have been transferred, an amount equal to the market value of the assets at the time of the transfer.
(5) A payment or transfer is to be disregarded for the purposes of sub-paragraph (4)(b) or (c) if there is any connection (direct or indirect) between the payment or transfer and a tax avoidance arrangement (other than the arrangement under which the quasi-loan was made).
(6) In this paragraph, “market value” has the same meaning as it has for the purposes of TCGA 1992 by virtue of Part 8 of that Act.
Meaning of “outstanding”: quasi-loans in currencies other than sterling
10 (1) Paragraphs 11 to 14 apply where P makes a quasi-loan to T by reason of acquiring a right to a payment in a particular currency (the “quasi-loan currency”).
(2) For the purposes of paragraphs 11 to 14, the value of an amount in a particular currency is to be determined by reference to an appropriate spot rate of exchange.
11 (1) This paragraph applies in relation to the quasi-loan if the quasi-loan currency is a currency other than sterling.
(2) But this paragraph does not apply if paragraph 14 applies in relation to the quasi-loan.
(3) The amount of the quasi-loan that is outstanding, at the relevant time, is to be calculated in sterling as follows—
Step 1 Calculate, in the quasi-loan currency, the amount that is outstanding at that time.
Step 2 Take the value in sterling, at that time, of that amount.
(4) For the purposes of this paragraph and paragraph 14, the “relevant time” in relation to a quasi-loan is the time immediately before the end of 5 April 2019.
(5) See paragraph 12 for provision about repayments made in a currency other than the quasi-loan currency.
Repayments in currencies other than the quasi-loan currency
12 (1) This paragraph applies in relation to the quasi-loan if—
(a) payments in money are made by way of repayment of the initial debt amount, and
(b) some or all of the payments are made in a currency other than the quasi-loan currency.
(2) But this paragraph does not apply if paragraph 14 applies in relation to the quasi-loan.
(3) For the purposes of calculating the repayment amount in relation to the quasi-loan, the amount of each of the payments referred to in sub-paragraph (1)(b) is an amount equal to its value in the quasi-loan currency on the date it is made.
Quasi-loans made in a depreciating currency
13 (1) Paragraph 14 applies in relation to the quasi-loan if—
(a) the quasi-loan currency is a currency other than sterling, and
(b) it is reasonable to suppose that the main reason, or one of the main reasons, for the quasi-loan being made in that currency is that the quasi-loan currency is expected to depreciate as against sterling during the quasi-loan period.
(2) The “quasi-loan period”, in relation to a quasi-loan, is the period—
(a) beginning at the time the quasi-loan is made, and
(b) ending with the time by which, under the terms of the quasi-loan, the whole of the quasi-loan is to be repaid.
14 (1) Where this paragraph applies in relation to the quasi-loan—
(a) paragraphs 11 and 12 do not apply in relation to the quasi-loan, and
(b) sub-paragraphs (2) to (5) apply for the purposes of calculating the amount of the quasi-loan that is outstanding at the relevant time (as defined in paragraph 11(4)).
(2) The initial debt amount, in relation to the quasi-loan, is an amount equal to the total of—
(a) the value in sterling, at the reference date, of the acquired debt, and
(b) the value in sterling, at the reference date, of any additional debt.
(3) The “reference date”, in relation to a right within sub-paragraph (2)(a) or (2)(b), means the date on which P acquires it.
(4) The repayment amount, in relation to the quasi-loan, is an amount equal to the total of—
(a) the amount of the initial debt amount that has been repaid in sterling, and
(b) where payments are made, in a currency other than sterling, by way of repayment of the initial debt amount, the amount equal to the sterling value of the payments.
(5) The “sterling value” of a payment is its value in sterling on the date it is made.
Meaning of “approved fixed term loan”
15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Approval: application to HMRC
16 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Approval: qualifying payments condition
17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accelerated payments
19 (1) Paragraph 20(1) applies where—
(a) section 23E of ITTOIA 2005 would (ignoring paragraph 20) apply in relation to a relevant benefit arising to T,
(b) the relevant benefit is a loan or quasi-loan in relation to which paragraph 1(2) applies,
(c) an accelerated payment notice, or a partner payment notice, relating to a relevant charge (the “accelerated payment notice”) has been given under Chapter 3 of Part 4 of FA 2014,
(d) T makes a payment (the “accelerated payment”) in respect of the understated or disputed tax to which the notice relates,
(e) the accelerated payment is made on or before 5 April 2019, and
(f) the amount of the loan or quasi-loan that, at the end of 5 April 2019, is outstanding for the purposes of paragraph 1 (see paragraphs 3 to 14) is equal to or less than the amount of the accelerated payment.
(2) In sub-paragraph (1)(c), “relevant charge” means a charge to tax under section 23E of ITTOIA 2005 arising by reason of a relevant benefit which arises to T in pursuance of the relevant arrangement in pursuance of which the relevant benefit mentioned in sub-paragraph (1)(a) and (b) arises.
(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20 (1) T may make an application to the Commissioners for Her Majesty's Revenue and Customs to be treated—
(a) as if the relevant benefit mentioned in paragraph 19(1)(a) and (b) arises only if the condition in sub-paragraph (2) is met, and
(b) as if it arises immediately before the end of the 30 days beginning with the date on which the condition in sub-paragraph (2) becomes met.
(2) The condition is that, on the withdrawal of the accelerated payment notice or on the determination of an appeal, any part of the accelerated payment is repaid.
(3) Subject to sub-paragraph (4), an application under sub-paragraph (1) may be made in 2018.
(4) An application may be made after 2018 if an officer of Revenue and Customs considers it reasonable in all the circumstances for a late application to be made.
(5) An application must be made in such form and manner, and contain such information, as may be specified by, or on behalf of, the Commissioners for Her Majesty's Revenue and Customs.
(6) An officer of Revenue and Customs must notify the applicant of the decision on an application under this paragraph.
Duty to provide loan charge information to HMRC
21 (1) Paragraph 22 applies if one of the following conditions is met.
(2) The first condition is that—
(a) a loan or quasi-loan in relation to which paragraph 1(2) applies is treated as a “relevant benefit” for the purposes of sections 23A to 23H of ITTOIA 2005, and
(b) section 23E of ITTOIA 2005 applies in relation to the relevant benefit (see section 23A of that Act).
(3) The second condition is that—
(a) an application is made under paragraph 20(1) by reference to a loan or quasi-loan in relation to which paragraph 1(2) applies,
(b) a favourable decision is made on the application before 6 April 2019, and
(c) the first condition is not met in relation to the loan or quasi-loan.
(4) Paragraph 22 does not apply in a case if—
(a) a person agrees, with an officer of Revenue and Customs, terms for the discharge of liability for income tax arising because of the application of section 23E of ITTOIA 2005,
(b) the terms cover all liability (if any) arising because of the application of that section by reference to a loan or quasi-loan in relation to which paragraph 1(2) applies, and
(c) the terms are agreed before 1 October 2019.
22 (1) T, or T’s personal representatives, must provide the loan charge information (see paragraph 23(1)) to the Commissioners for Her Majesty’s Revenue and Customs.
(2) The loan charge information must be provided—
(a) after 5 April 2019, and
(b) before 1 October 2020.
(3) The loan charge information must be provided in such form and manner as may be specified by, or on behalf of, the Commissioners for Her Majesty’s Revenue and Customs.
(4) In this paragraph and in paragraph 23, “T” is the person mentioned in section 23A(2) of ITTOIA 2005.
“Loan charge information”
23 (1) For the purposes of paragraph 22, the “loan charge information” consists of —
(a) T’s name and, if T’s personal representatives are providing the information, their names,
(b) the address and telephone number, and e-mail address (if any), of each person providing the information,
(c) T’s national insurance number (if any),
(d) the unique taxpayer reference number (if any) allocated to T by HMRC,
(e) the name of the arrangement mentioned in section 23A(3)(a) of ITTOIA 2005,
(f) the reference number (if any) allocated to the arrangement by HMRC under section 311 of FA 2004 (disclosure of tax avoidance schemes: arrangements to be given reference number),
(g) any other reference number allocated by HMRC in connection with the arrangement or with the loan or quasi-loan mentioned in paragraph 21(2) or (3),
(h) if the loan or quasi-loan mentioned in paragraph 21(2) or (3) is made to someone other than T, the name of the person to whom it is made,
(i) if a person has agreed terms with an officer of Revenue and Customs for the partial discharge of the liability for income tax arising because of the application of section 23E of ITTOIA 2005 in relation to the loan or quasi-loan mentioned in paragraph 21(2) or (3), the date of that agreement and the amount of the liability to which it relates,
(j) if the condition in paragraph 21(2) or (3) is met by reference to a loan, the loan payment information (see sub-paragraph (2)), and
(k) if the condition in paragraph 21(2) or (3) is met by reference to a quasi-loan, the quasi-loan payment information (see sub-paragraph (3)).
(2) The “loan payment information”, in relation to a loan, consists of statements of the following—
(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b) the initial principal amount of the loan,
(c) the amount that has become principal under the loan, otherwise than by capitalisation of interest, in each relevant tax year,
(d) the amount of principal under the loan repaid in each relevant tax year, ignoring any repayments not in money made on or after 5 December 2016,
(e) the details of any repayment that is to be disregarded under paragraph 3(4),
(f) the amount of principal under the loan that has been released or written off in each relevant tax year,
(g) whether any liability for income tax arising because of the application of section 23E of ITTOIA 2005 by reason of the release or writing-off has been paid, and
(h) any amount released that has, in accordance with section 97 of ITTOIA 2005, been brought into account as a receipt in calculating the profits of the relevant trade.
(3) The “quasi-loan payment information”, in relation to a quasi-loan, consists of statements of the following—
(a) the amount equal to the value of the acquired debt,
(b) the amount equal to the value of the additional debts acquired in each relevant tax year,
(c) the amount by which the initial debt amount has been reduced by way of repayment in each relevant tax year, ignoring any repayments not in money made on or after 5 December 2016,
(d) where the acquired debt or an additional debt is a right to a transfer of assets, and the assets have been transferred, the amount of the market value of the assets at the time of the transfer,
(e) the details of any repayment that is to be disregarded under paragraph 9(5),
(f) the amount by which the initial debt amount has been reduced by release or writing off in each relevant tax year,
(g) whether any liability for income tax arising because of the application of section 23E of ITTOIA 2005 by reason of the release or writing-off has been paid, and
(h) any amount released that has, in accordance with section 97 of ITTOIA 2005, been brought into account as a receipt in calculating the profits of the relevant trade.
(4) In this paragraph “relevant tax year” in relation to a loan, or a quasi-loan, means—
(a) the tax year in which the loan or quasi-loan was made, and
(b) each subsequent tax year.
(5) In sub-paragraph (3), “acquired debt”, “additional debt” and “initial debt amount” have the same meaning as in paragraph 9.
(6) In this paragraph and in paragraphs 26 to 29, “HMRC” means Her Majesty’s Revenue and Customs.
24 The Commissioners for Her Majesty’s Revenue and Customs may by regulations amend paragraph 23 so as to—
(a) add, remove or amend an entry in a list of information, and
(b) make incidental provision.
Duty to provide loan charge information: penalties
25 (1) A person who fails to comply with paragraph 22 is liable to a penalty of £300.
(2) Sub-paragraph (3) applies if the failure continues after the date on which a penalty is imposed under sub-paragraph (1) in respect of the failure.
(3) The person is liable to a further penalty or penalties not exceeding £60 for each subsequent day, up to a maximum of 90 days, on which the failure continues.
26 (1) This paragraph applies if—
(a) in complying with the duty under paragraph 22, a person provides inaccurate information, and
(b) condition A, B or C is met.
(2) Condition A is that the inaccuracy is careless or deliberate.
(3) An inaccuracy is careless if it is due to a failure by the person to take reasonable care.
(4) Condition B is that the person knows of the inaccuracy at the time the information is provided but does not inform HMRC at that time.
(5) Condition C is that the person—
(a) discovers the inaccuracy some time later, and
(b) fails to take reasonable steps to inform HMRC.
(6) The person is liable to a penalty not exceeding £3000.
(7) Where the information contains more than one inaccuracy, a penalty is payable for each inaccuracy.
Penalties under paragraph 25: reasonable excuse
27 (1) Liability to a penalty under paragraph 25 does not arise if the person satisfies HMRC or (on an appeal notified to the tribunal) the tribunal that there is a reasonable excuse for the failure.
(2) For the purposes of this paragraph—
(a) an insufficiency of funds is not a reasonable excuse unless attributable to events outside the person’s control,
(b) where the person relies on any other person to do anything, that is not a reasonable excuse unless the first person took reasonable care to avoid the failure, and
(c) where the person had a reasonable excuse for the failure but the excuse has ceased, the person is to be treated as having continued to have the excuse if the failure is remedied without unreasonable delay after the excuse ceased.
Penalties under paragraphs 25 and 26: assessment, appeals and enforcement
28 (1) Where a person becomes liable for a penalty under paragraph 25 or 26—
(a) HMRC may assess the penalty, and
(b) if they do so, they must notify the person.
(2) An assessment of a penalty under paragraph 25 must be made before 1 October 2021.
(3) An assessment of a penalty under paragraph 26 must be made before 1 October 2023.
29 (1) A person may appeal against any of the following decisions of an officer of Revenue and Customs—
(a) a decision that a penalty is payable by that person under paragraph 25 or 26, or
(b) a decision as to the amount of such a penalty.
(2) Notice of an appeal under this paragraph must be given—
(a) in writing,
(b) before the end of the period of 30 days beginning with the date on which the notification under paragraph 28 was issued, and
(c) to HMRC.
(3) Notice of an appeal under this paragraph must state the grounds of appeal.
(4) On an appeal under sub-paragraph (1)(a) that is notified to the tribunal, the tribunal may confirm or cancel the decision.
(5) On an appeal under sub-paragraph (1)(b) that is notified to the tribunal, the tribunal may—
(a) confirm the decision, or
(b) substitute for the decision another decision that the officer of Revenue and Customs had power to make.
30 (1) A penalty under paragraph 25 or 26 must be paid—
(a) before the end of the period of 30 days beginning with the date on which the notification under paragraph 28 was issued, or
(b) if a notice of an appeal against the penalty is given, before the end of the period of 30 days beginning with the date on which the appeal is determined or withdrawn.
(2) A penalty under paragraph 25 or 26 may be enforced as if it were income tax charged in an assessment and due and payable.
Section 55
Liability to penalty
1 (1) A penalty is payable by a person (“P”) who—
(a) carries on an imported goods fulfilment business, and
(b) is not an approved person.
(2) In this Schedule references to a “contravention” are to acting as mentioned in sub-paragraph (1).
Amount of penalty
2 (1) If the contravention is deliberate and concealed, the amount of the penalty is the maximum amount (see paragraph 10).
(2) If the contravention is deliberate but not concealed, the amount of the penalty is 70% of the maximum amount.
(3) In any other case, the amount of the penalty is 30% of the maximum amount.
(4) The contravention is—
(a) “deliberate and concealed” if the contravention is deliberate and P makes arrangements to conceal the contravention, and
(b) “deliberate but not concealed” if the contravention is deliberate but P does not make arrangements to conceal the contravention.
Reductions for disclosure
3 (1) Paragraph 4 provides for reductions in penalties under this Schedule where P discloses a contravention.
(2) P discloses a contravention by—
(a) telling the Commissioners about it,
(b) giving the Commissioners reasonable help in identifying any other contraventions of which P is aware, and
(c) allowing the Commissioners access to records for the purpose of identifying such contraventions.
(3) Disclosure of a contravention—
(a) is “unprompted” if made at a time when P has no reason to believe that the Commissioners have discovered or are about to discover the contravention, and
(b) otherwise, is “prompted”.
(4) In relation to disclosure, “quality” includes timing, nature and extent.
4 (1) Where P discloses a contravention, the Commissioners must reduce the penalty to one that reflects the quality of the disclosure.
(2) If the disclosure is prompted, the penalty may not be reduced below—
(a) in the case of a contravention that is deliberate and concealed, the maximum amount,
(b) in the case of a contravention that is deliberate but not concealed, 35% of the maximum amount, and
(c) in any other case, 20% of the maximum amount.
(3) If the disclosure is unprompted, the penalty may not be reduced below—
(a) in the case of a contravention that is deliberate and concealed, 30% of the maximum amount,
(b) in the case of a contravention that is deliberate but not concealed, 20% of the maximum amount, and
(c) in any other case, 10% of the maximum amount.
Special reduction
5 (1) If the Commissioners think it right because of special circumstances, they may reduce a penalty under this Schedule.
(2) In sub-paragraph (1) “special circumstances” does not include ability to pay.
(3) In sub-paragraph (1) the reference to reducing a penalty includes a reference to—
(a) staying a penalty, and
(b) agreeing a compromise in relation to proceedings for a penalty.
Assessment
6 (1) Where P becomes liable for a penalty under this Schedule, the Commissioners must—
(a) assess the penalty,
(b) notify P, and
(c) state in the notice the contravention in respect of which the penalty is assessed.
(2) A penalty under this Schedule must be paid before the end of the period of 30 days beginning with the day on which notification of the penalty is issued.
(3) A penalty under this Schedule is recoverable as a debt due to the Crown.
(4) An assessment of a penalty under this Schedule 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.
(5) Two or more contraventions may be treated by the Commissioners as a single contravention for the purposes of assessing a penalty under this Schedule.
Reasonable excuse
7 (1) Liability to a penalty does not arise under this Schedule in respect of a contravention which is not deliberate if P satisfies the Commissioners or (on an appeal made to the appeal tribunal) the tribunal that there is a reasonable excuse for the contravention.
(2) For the purposes of sub-paragraph (1), where P relies on any other person to do anything, that is not a reasonable excuse unless P took reasonable care to avoid the contravention.
Companies: officer's liability
8 (1) Where a penalty under this Schedule is payable by a company in respect of a contravention which was attributable to an officer of the company, the officer is liable to pay such portion of the penalty (which may be 100%) as the Commissioners may specify by written notice to the officer.
(2) Sub-paragraph (1) does not allow the Commissioners to recover more than 100% of a penalty.
(3) In the application of sub-paragraph (1) to a body corporate other than a limited liability partnership, “officer” means—
(a) a director (including a shadow director within the meaning of section 251 of the Companies Act 2006),
(b) a manager, and
(c) a secretary.
(4) In the application of sub-paragraph (1) to a limited liability partnership, “officer” means a member.
(5) In the application of sub-paragraph (1) in any other case, “officer” means—
(a) a director,
(b) a manager,
(c) a secretary, and
(d) any other person managing or purporting to manage any of the company's affairs.
(6) Where the Commissioners have specified a portion of a penalty in a notice given to an officer under sub-paragraph (1)—
(a) paragraph 5 applies to the specified portion as to a penalty,
(b) the officer must pay the specified portion before the end of the period of 30 days beginning with the day on which the notice is given,
(c) sub-paragraphs (3) to (5) of paragraph 6 apply as if the notice were an assessment of a penalty, and
(d) paragraph 9 applies as if the officer were liable to a penalty.
(7) In this paragraph “company” means any body corporate or unincorporated association, but does not include a partnership.
Double jeopardy
9 P is not liable to a penalty under this Schedule in respect of a contravention in respect of which P has been convicted of an offence.
The maximum amount
10 (1) In this Schedule “the maximum amount” means £10,000.
(2) If it appears to the Treasury that there has been a change in the value of money since the last relevant date, they may by regulations substitute for the sum for the time being specified in sub-paragraph (1) such other sum as appears to them to be justified by the change.
(3) In sub-paragraph (2), “relevant date” means—
(a) the date on which this Act is passed, and
(b) each date on which the power conferred by that sub-paragraph has been exercised.
(4) Regulations under this paragraph do not apply to any contravention which occurs wholly before the date on which they come into force.
Appeal tribunal
11 In this Schedule “appeal tribunal” has the same meaning as in Chapter 2 of Part 1 of the Finance Act 1994.
Section 63
TMA 1970
1 TMA 1970 is amended as follows.
2 In section 9A (notice of enquiry), in subsection (5)—
(a) in paragraph (a), omit the final “or”;
(b) for paragraph (b) substitute—
(b) after a final closure notice has been issued in relation to an enquiry into the return, or
(c) after a partial closure notice has been issued in such an enquiry in relation to the matters to which the amendment relates or which are affected by the amendment,
.
3 (1) Section 9B (amendment of return by taxpayer during enquiry) is amended as follows.
(2) In subsection (1), for “is in progress into the return” substitute “ into the return is in progress in relation to any matter to which the amendment relates or which is affected by the amendment ”.
(3) In subsection (3)—
(a) after “in progress” insert “ in relation to any matter to which the amendment relates or which is affected by the amendment ”;
(b) in paragraph (a), for “the closure notice” substitute “ a partial or final closure notice ”;
(c) in paragraph (b), for “the closure notice is issued” substitute “ a partial closure notice is issued in relation to the matters to which the amendment relates or which are affected by the amendment or, if no such notice is issued, a final closure notice is issued ”.
(4) In subsection (4)—
(a) after “in progress” insert “ in relation to any matter ”;
(b) for “the enquiry is completed” substitute “ a partial closure notice is issued in relation to the matter or, if no such notice is issued, a final closure notice is issued ”.
4 (1) Section 9C (amendment of self-assessment during enquiry to prevent loss of tax) is amended as follows.
(2) In subsection (1), for “is in progress into a return” substitute “ into a return is in progress in relation to any matter ”.
(3) In subsection (2), after “deficiency” insert “ so far as it relates to the matter ”.
(4) In subsection (4)—
(a) after “in progress” insert “ in relation to any matter ”;
(b) for “the enquiry is completed” substitute “ a partial closure notice is issued in relation to the matter or, if no such notice is issued, a final closure notice is issued ”.
5 In section 12ZM (NRCGT returns: notice of enquiry), in subsection (4)—
(a) in paragraph (a), omit the final “or”;
(b) for paragraph (b) substitute—
(b) after a final closure notice has been issued in relation to an enquiry into the return, or
(c) after a partial closure notice has been issued in such an enquiry in relation to the matters to which the amendment relates or which are affected by the amendment,
.
6 (1) Section 12ZN (NRCGT returns: amendment of return by taxpayer during enquiry) is amended as follows.
(2) In subsection (1), for “is in progress into the return” substitute “ into the return is in progress in relation to any matter to which the amendment relates or which is affected by the amendment ”.
(3) In subsection (3)—
(a) after “in progress” insert “ in relation to any matter to which the amendment relates or which is affected by the amendment ”;
(b) in paragraph (a), for “the closure notice” substitute “ a partial or final closure notice ”;
(c) in paragraph (b), for “the closure notice is issued” substitute “ a partial closure notice is issued in relation to the matters to which the amendment relates or which are affected by the amendment or, if no such notice is issued, a final closure notice is issued ”.
(4) In subsection (4)—
(a) after “in progress” insert “ in relation to any matter ”;
(b) for “the enquiry is completed” substitute “ a partial closure notice is issued in relation to the matter or, if no such notice is issued, a final closure notice is issued ”.
7 In section 12AC (partnership return: notice of enquiry), in subsection (5)—
(a) in paragraph (a), omit the final “or”;
(b) for paragraph (b) substitute—
(b) after a final closure notice has been issued in relation to an enquiry into the return, or
(c) after a partial closure notice has been issued in such an enquiry in relation to the matters to which the amendment relates or which are affected by the amendment,
.
8 (1) Section 12AD (amendment of partnership return by taxpayer during enquiry) is amended as follows.
(2) In subsection (1), for “is in progress into the return” substitute “ into the return is in progress in relation to any matter to which the amendment relates or which is affected by the amendment ”.
(3) In subsection (3)—
(a) after “in progress” insert “ in relation to any matter to which the amendment relates or which is affected by the amendment ”;
(b) in paragraph (a), for “the closure notice” substitute “ a partial or final closure notice ”;
(c) in paragraph (b), for “the closure notice is issued” substitute “ a partial closure notice is issued in relation to the matters to which the amendment relates or which are affected by the amendment or, if no such notice is issued, a final closure notice is issued ”.
(4) In subsection (4)(a), after “in progress” insert “ in relation to any matter to which the amendment relates or which is affected by the amendment ”.
(5) In subsection (5)—
(a) after “in progress” insert “ in relation to any matter ”;
(b) for “the enquiry is completed” substitute “ a partial closure notice is issued in relation to the matter or, if no such notice is issued, a final closure notice is issued ”.
9 In section 12B (records), in subsection (1)(b)(i), for “28A(1) or 28B(1)” substitute “ 28A(1B) or 28B(1B) ”.
10 (1) Section 28ZA (referral of questions during enquiry) is amended as follows.
(2) In subsection (1), after “of this Act” insert “ in relation to any matter ”.
(3) In subsection (5)—
(a) after “in progress” insert “ in relation to any matter ”;
(b) for “the enquiry is completed” substitute “ a partial closure notice is issued in relation to the matter or, if no such notice is issued, a final closure notice is issued ”.
11 In section 28ZD (effect of referral on enquiry), in subsection (1)—
(a) for paragraph (a) substitute—
(a) no partial closure notice relating to the question referred shall be given,
(aa) no final closure notice shall be given in relation to the enquiry, and
;
(b) in paragraph (b), for “such a notice” substitute “ a notice referred to in paragraph (a) or (aa) ”.
12 (1) Section 28A (completion of enquiry into personal, trustee or NRCGT return) is amended as follows.
(2) For subsection (1) substitute—
(1) This section applies in relation to an enquiry under section 9A(1) or 12ZM of this Act.
(1A) Any matter to which the enquiry relates is completed when an officer of Revenue and Customs informs the taxpayer by notice (a “partial closure notice”) that the officer has completed his enquiries into that matter.
(1B) The enquiry is completed when an officer of Revenue and Customs informs the taxpayer by notice (a “final closure notice”) —
(a) in a case where no partial closure notice has been given, that the officer has completed his enquiries, or
(b) in a case where one or more partial closure notices have been given, that the officer has completed his remaining enquiries.
(3) In subsection (2)—
(a) for “closure notice” substitute “ partial or final closure notice ”;
(b) for “either” substitute “ state the officer's conclusions and ”.
(4) In subsections (3) and (4), for “closure notice” substitute “ partial or final closure notice ”.
(5) In subsection (6), for “a closure notice” substitute “ the partial or final closure notice ”.
(6) After subsection (6) insert—
(7) In this section “the taxpayer” means the person to whom notice of enquiry was given.
(8) In the Taxes Acts, references to a closure notice under this section are to a partial or final closure notice under this section.
13 (1) Section 28B (completion of enquiry into partnership return) is amended as follows.
(2) For subsection (1) substitute—
(1) This section applies in relation to an enquiry under section 12AC of this Act.
(1A) Any matter to which the enquiry relates is completed when an officer of Revenue and Customs informs the taxpayer by notice (a “partial closure notice”) that the officer has completed his enquiries into that matter.
(1B) The enquiry is completed when an officer of Revenue and Customs informs the taxpayer by notice (a “final closure notice”)—
(a) in a case where no partial closure notice has been given, that the officer has completed his enquiries, or
(b) in a case where one or more partial closure notices have been given, that the officer has completed his remaining enquiries.
(3) In subsection (2)—
(a) for “closure notice” substitute “ partial or final closure notice ”;
(b) for “either” substitute “ state the officer's conclusions and ”.
(4) In subsections (3) and (5), for “closure notice” substitute “ partial or final closure notice ”.
(5) In subsection (7), for “a closure notice” substitute “ the partial or final closure notice ”.
(6) After subsection (7) insert—
(8) In this section “the taxpayer” means the person to whom notice of enquiry was given or his successor.
(9) In the Taxes Acts, references to a closure notice under this section are to a partial or final closure notice under this section.
14 In section 29 (assessment where loss of tax discovered), in subsection (5), for paragraph (b) substitute—
(b) in a case where a notice of enquiry into the return was given—
(i) issued a partial closure notice as regards a matter to which the situation mentioned in subsection (1) above relates, or
(ii) if no such partial closure notice was issued, issued a final closure notice,
.
15 In section 29A (NRCGT disposals: determination of amount which should have been assessed), in subsection (5), for paragraph (b) substitute—
(b) in a case where a notice of enquiry into the return was given—
(i) issued a partial closure notice as regards a matter to which the situation mentioned in subsection (1) relates, or
(ii) if no such partial closure notice was issued, issued a final closure notice,
.
16 In section 30 (recovery of overpayment of tax etc), in subsection (5)(b), for “28A(1)” substitute “ 28A(1B) ”.
17 In section 30B (amendment of partnership statement where loss of tax discovered), in subsection (6), for paragraph (b) substitute—
(b) in a case where a notice of enquiry into that return was given—
(i) issued a partial closure notice as regards a matter to which the situation mentioned in subsection (1) above relates, or
(ii) if no such partial closure notice was issued, issued a final closure notice,
.
18 In section 31 (appeals: right of appeal), in subsection (2)—
(a) after “in progress” insert “ in relation to any matter to which the amendment relates or which is affected by the amendment ”;
(b) for “the enquiry is completed” substitute “ a partial closure notice is issued in relation to the matter or, if no such notice is issued, a final closure notice is issued ”.
19 In section 59AA (NRCGT disposals: payments on account of CGT), in subsection (8)(a), for “28A(1)” substitute “ 28A(1B) ”.
20 In section 59B (payment of income tax and capital gains tax), in subsection (4A)(a), for “28A(1)” substitute “ 28A(1B) ”.
21 (1) In Schedule 3ZA (date by which payment to be made after amendment etc of self-assessment), paragraph 2 is amended as follows.
(2) In sub-paragraph (3)(b)—
(a) for the first “the closure notice” substitute “ a partial or final closure notice ”;
(b) for “the day on which the closure notice was given” substitute “ the relevant day ”.
(3) After sub-paragraph (3) insert—
(4) In sub-paragraph (3)(b), “the relevant day” means—
(a) in the case of an amount of tax that is payable, the day on which the partial or final closure notice was given;
(b) in the case of an amount of tax that is repayable—
(i) if the closure notice was a final closure notice, the day on which that notice was given, and
(ii) if the closure notice was a partial closure notice, the day on which the final closure notice relating to the enquiry was given.
TCGA 1992
22 (1) Section 184I of TCGA 1992 (notices under sections 184G and 184H) is amended as follows.
(2) In subsection (4)—
(a) after “completed” insert “ in relation to any matters ”;
(b) after “relevant notice” insert “ relating to those matters ”.
(3) In subsection (5), for “into the return” substitute “ referred to in subsection (4) ”.
(4) In subsection (7)(a), after “period” insert “ (so far as relating to the matters in question) ”.
(5) After subsection (9) insert—
(9A) Subsection (9) does not apply to a partial closure notice which does not relate to any matter to which the relevant notice relates.
(6) In subsection (10), after “completed,” insert “ so far as relating to the matters to which the relevant notice relates, ”.
FA 1998
23 Schedule 18 to FA 1998 (company tax returns, assessments and related matters) is amended as follows.
24 (1) Paragraph 30 (amendment of self-assessment during enquiry to prevent loss of tax) is amended as follows.
(2) In sub-paragraph (1)—
(a) for “before the enquiry is completed” substitute “ while the enquiry is in progress in relation to a matter ”;
(b) after “deficiency” insert “ so far as it relates to the matter ”.
(3) After sub-paragraph (5) insert—
(6) For the purposes of this paragraph, the period during which an enquiry is in progress in relation to any matter is the whole of the period—
(a) beginning with the day on which notice of enquiry is given, and
(b) ending with the day on which a partial closure notice is issued in relation to the matter or, if no such notice is issued, a final closure notice is issued.
25 (1) Paragraph 31 (amendment of return by company during enquiry) is amended as follows.
(2) In sub-paragraph (1), for “is in progress into the return” substitute “ into the return is in progress in relation to any matter to which the amendment relates or which is affected by the amendment ”.
(3) In sub-paragraph (3) for “until after the enquiry is completed” substitute “ while the enquiry is in progress in relation to any matter to which the amendment relates or which is affected by the amendment ”.
(4) In sub-paragraph (4)(a)—
(a) for “the closure notice” substitute “ a partial or final closure notice ”;
(b) for “on the completion of the enquiry” substitute “ when a partial closure notice is issued in relation to the matters to which the amendment relates or which are affected by the amendment or, if no such notice is issued, a final closure notice is issued ”.
(5) In sub-paragraph (5)—
(a) after “in progress” insert “ in relation to any matter ”;
(b) for “the enquiry is completed” substitute “ a partial closure notice is issued in relation to the matter or, if no such notice is issued, a final closure notice is issued ”.
26 (1) Paragraph 31A (referral of questions to the tribunal during enquiry) is amended as follows.
(2) In sub-paragraph (1), for “into” substitute “ in relation to any matter relating to ”.
(3) In sub-paragraph (5)—
(a) after “in progress” insert “ in relation to any matter ”;
(b) for “the enquiry is completed” substitute “ a partial closure notice is issued in relation to the matter or, if no such notice is issued, a final closure notice is issued ”.
27 In paragraph 31C (effect of referral on enquiry), in sub-paragraph (1)—
(a) for paragraph (a) substitute—
(a) no partial closure notice relating to the question referred shall be given,
(aa) no final closure notice shall be given in relation to the enquiry, and
;
(b) in paragraph (b), for “such a notice” substitute “ a notice referred to in paragraph (a) or (aa) ”.
28 (1) Paragraph 32 (completion of enquiry) is amended as follows.
(2) For sub-paragraph (1) substitute—
(1) Any matter to which an enquiry relates is completed when an officer of Revenue and Customs informs the company by notice (a “partial closure notice”) that they have completed their enquiries into that matter.
(1A) An enquiry is completed when an officer of Revenue and Customs informs the company by notice (a “final closure notice”)—
(a) in a case where no partial closure notice has been given, that they have completed their enquiries, or
(b) in a case where one or more partial closure notices have been given, that they have completed their remaining enquiries.
(1B) A partial or final closure notice takes effect when it is issued.
(3) In subsection (2), after “concludes” insert “ in a partial or final closure notice ”.
(4) After sub-paragraph (3) insert—
(4) In the Taxes Acts, references to a closure notice under this paragraph are to a partial or final closure notice under this paragraph.
29 In paragraph 33 (direction to complete enquiry), in sub-paragraphs (1) and (3), for “closure notice” substitute “ partial or final closure notice ”.
30 (1) Paragraph 34 (amendment of return after enquiry) is amended as follows.
(2) In sub-paragraph (1), for “closure notice” substitute “ partial or final closure notice ”.
(3) In sub-paragraph (2)—
(a) for “closure notice” substitute “ partial or final closure notice ”;
(b) after “must” insert “ state the officer's conclusions and ”.
(4) In sub-paragraphs (2A), (4)(c) and (5), for “closure notice” substitute “ partial or final closure notice ”.
31 In paragraph 42 (restriction on power to make discovery assessment or determination), in sub-paragraph (2A), for the words from “after any” to the end substitute “ a notice within sub-paragraph (4) after any enquiries have been completed into the return (so far as relating to the matters to which the notice relates) ”.
32 In paragraph 44 (situation not disclosed by return or related document etc), in sub-paragraph (1), for paragraph (b) substitute—
(b) in a case where a notice of enquiry into the return was given—
(i) issued a partial closure notice as regards a matter to which the situation mentioned in paragraph 41(1) or (2) relates, or
(ii) if no such partial closure notice was issued, issued a final closure notice,
.
33 In paragraph 61 (consequential claims etc), in sub-paragraphs (1)(a) and (3)(a), for “closure notice” substitute “ partial or final closure notice ”.
34 (1) Paragraph 88 (conclusiveness) is amended as follows.
(2) In sub-paragraph (3)(b), at the end insert “ (or is completed so far as relating to the matters to which the amount relates by the issue of a partial closure notice) ”.
(3) In sub-paragraph (4)(b), at the end insert “ (or the completion of the enquiry so far as relating to the matters to which the amount relates by the issue of a partial closure notice) ”.
Tax Credits Act 2002
35 (1) Section 20 of the Tax Credits Act 2002 (decisions on discovery) is amended as follows.
(2) In subsection (2)(f), for “a closure notice” substitute “ a partial or final closure notice ”.
(3) In subsection (3)(b), at the end insert “ as specified in subsection (1) ”.
FA 2008
36 In Schedule 36 to FA 2008 (information and inspection powers), in paragraphs 21(4) and 21ZA(3), at the end insert “ so far as relating to the matters to which the taxpayer notice relates ”.
TIOPA 2010
37 TIOPA 2010 is amended as follows.
38 (1) Section 92 (counteraction notices given after tax return made) is amended as follows.
(2) In subsection (3)—
(a) after “completed” insert “ in relation to any matters ”;
(b) after “counteraction notice” insert “ relating to those matters ”.
(3) In subsection (4), after “enquiries” insert “ referred to in subsection (3) ”.
(4) In subsection (5)(a), after “return” insert “ (so far as relating to the matters in question) ”.
39 (1) Section 93 (amendment, closure notices and discovery assessments in section 92 cases) is amended as follows.
(2) After subsection (3) insert—
(3A) Subsection (3) does not apply to a partial closure notice which does not relate to any matter to which the counteraction notice relates.
(3) In subsection (4), after “completed,” insert “ so far as relating to the matters to which the counteraction notice relates, ”.
40 In section 171 (tax returns where transfer pricing notice given), after subsection (2) insert—
(2A) Subsection (2) does not apply to a partial closure notice which does not relate to any matter to which the transfer pricing notice relates.
41 (1) Section 256 (notices given after tax return made), so far as continuing to have effect, is amended as follows.
(2) In subsection (2)—
(a) after “completed” insert “ in relation to any matters ”;
(b) after “receipt notice” insert “ relating to those matters ”.
(3) In subsection (6)(a), after “return” insert “ (so far as relating to the matters in question) ”.
42 (1) Section 257 (amendments, closure notices etc), so far as continuing to have effect, is amended as follows.
(2) After subsection (4) insert—
(4A) Subsection (4) does not apply to a partial closure notice which does not relate to any matter to which the Part 6 notice relates.
(3) In subsection (5), after “completed,” insert “ so far as relating to the matters to which the Part 6 notice relates, ”.
43 In section 371IJ (claims), in subsection (4)(b), after “completed” insert “ so far as relating to the matters to which the claim relates ”.
Commencement
44 The amendments made by this Schedule have effect in relation to an enquiry under section 9A, 12ZM or 12AC of TMA 1970 or Schedule 18 to FA 1998 where—
(a) notice of the enquiry is given on or after the day on which this Act is passed, or
(b) the enquiry is in progress immediately before that day.
SCHEDULE 16 Penalties for enablers of defeated tax avoidance
Section 65
PART 1 Liability to penalty
1 Where—
(a) a person (“T”) has entered into abusive tax arrangements, and
(b) T incurs a defeat in respect of the arrangements,
a penalty is payable by each person who enabled the arrangements.
2 (1) Parts 2 to 4 of this Schedule define—
“abusive tax arrangements”;
a “defeat in respect of the arrangements”;
a “person who enabled the arrangements”.
(2) The other Parts of this Schedule make provision supplementing paragraph 1 as follows—
(a) Part 5 makes provision about the amount of a penalty;
(b) Parts 6 to 8 provide for the assessment of penalties, referrals to the GAAR Advisory Panel and appeals against assessments;
(c) Part 9 applies information and inspection powers, and makes provision about declarations relating to legally privileged communications;
(d) Part 10 confers power to publish details of persons who have incurred penalties;
(e) Parts 11 and 12 contain miscellaneous and general provisions.
PART 2 “Abusive” and “tax arrangements”: meaning
3 (1) Arrangements are “tax arrangements” for the purposes of this Schedule if, having regard to all the circumstances, it would be reasonable to conclude that the obtaining of a tax advantage was the main purpose, or one of the main purposes, of the arrangements.
(2) Tax arrangements are “abusive” for the purposes of this Schedule if they are arrangements the entering into or carrying out of which cannot reasonably be regarded as a reasonable course of action in relation to the relevant tax provisions, having regard to all the circumstances.
(3) The circumstances to which regard must be had under sub-paragraph (2) include—
(a) whether the substantive results, or the intended substantive results, of the arrangements are consistent with any principles on which the relevant tax provisions are based (whether express or implied) and the policy objectives of those provisions,
(b) whether the means of achieving those results involves one or more contrived or abnormal steps, and
(c) whether the arrangements are intended to exploit any shortcomings in those provisions.
(4) Where the tax arrangements form part of any other arrangements regard must also be had to those other arrangements.
(5) Each of the following is an example of something which might indicate that tax arrangements are abusive—
(a) the arrangements result in an amount of income, profits or gains for tax purposes that is significantly less than the amount for economic purposes;
(b) the arrangements result in deductions or losses of an amount for tax purposes that is significantly greater than the amount for economic purposes;
(c) the arrangements result in a claim for the repayment or crediting of tax (including foreign tax) that has not been, and is unlikely to be, paid;
but a result mentioned in paragraph (a), (b) or (c) is to be taken to be such an example only if it is reasonable to assume that such a result was not the anticipated result when the relevant tax provisions were enacted.
(6) The fact that tax arrangements accord with established practice, and HMRC had, at the time the arrangements were entered into, indicated their acceptance of that practice, is an example of something which might indicate that the arrangements are not abusive.
(7) The examples given in sub-paragraphs (5) and (6) are not exhaustive.
(8) In sub-paragraph (5) the reference to income includes earnings, within the meaning of 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.
PART 3 “Defeat” in respect of abusive tax arrangements
“Defeat” in respect of abusive tax arrangements
4 T (within the meaning of paragraph 1) incurs a “defeat” in respect of abusive tax arrangements entered into by T (“the arrangements concerned”) if—
(a) Condition A (in paragraph 5) is met, or
(b) Condition B (in paragraph 6) is met.
Condition A
5 (1) Condition A is that—
(a) T, or a person on behalf of T, has given HMRC a document of a kind listed in the Table in paragraph 1 of Schedule 24 to FA 2007 (returns etc),
(b) the document was submitted on the basis that a tax advantage (“the relevant tax advantage”) arose from the arrangements concerned,
(c) the relevant tax advantage has been counteracted, and
(d) the counteraction is final.
(2) For the purposes of this paragraph the relevant tax advantage has been “counteracted” if adjustments have been made in respect of T's tax position on the basis that the whole or part of the relevant tax advantage does not arise.
(3) For the purposes of this paragraph a counteraction is “final” when the adjustments in question, and any amounts arising from the adjustments, can no longer be varied, on appeal or otherwise.
(4) In this paragraph “adjustments” means any adjustments, whether by way of an assessment, the modification of an assessment or return, the amendment or disallowance of a claim, a payment, the entering into of a contract settlement or otherwise.
Accordingly, references to “making” adjustments include securing that adjustments are made by entering into a contract settlement.
(5) Any reference in this paragraph to giving HMRC a document includes—
(a) communicating information to HMRC in any form and by any method;
(b) making a statement or declaration in a document.
(6) Any reference in this paragraph to a document of a kind listed in the Table in paragraph 1 of Schedule 24 to FA 2007 includes—
(a) a document amending a document of a kind so listed, and
(b) a document which—
(i) relates to national insurance contributions, and
(ii) is a document in relation to which that Schedule applies.
Condition B
6 (1) Condition B is that (in a case not falling within Condition A)—
(a) HMRC have made an assessment in relation to tax,
(b) the assessment counteracts a tax advantage that it is reasonable to assume T expected to obtain from the arrangements concerned (“the expected tax advantage”), and
(c) the counteraction is final.
(2) For the purposes of this paragraph an assessment “counteracts” the expected tax advantage if the assessment is on a basis which prevents T from obtaining (or obtaining the whole of) the expected tax advantage.
(3) For the purposes of this paragraph a counteraction is “final”—
(a) when a relevant contract settlement is made, or
(b) if no contract settlement has been made, when the assessment in question and any amounts arising from the assessment can no longer be varied, on appeal or otherwise.
(4) In sub-paragraph (3) a “relevant contract settlement” means a contract settlement on a basis which prevents T from obtaining (or obtaining the whole of) the expected tax advantage.
PART 4 Persons who “enabled” the arrangements
Persons who “enabled” the arrangements
7 (1) A person is a person who “enabled” the arrangements mentioned in paragraph 1 if that person is—
(a) a designer of the arrangements (see paragraph 8),
(b) a manager of the arrangements (see paragraph 9),
(c) a person who marketed the arrangements to T (see paragraph 10),
(d) an enabling participant in the arrangements (see paragraph 11), or
(e) a financial enabler in relation to the arrangements (see paragraph 12).
(2) This paragraph is subject to paragraph 13 (excluded persons).
Designers of arrangements
8 (1) For the purposes of paragraph 7 a person is a “designer” of the arrangements if that person was, in the course of a business carried on by that person, to any extent responsible for the design of—
(a) the arrangements, or
(b) a proposal which was implemented by the arrangements;
but this is subject to sub-paragraph (2).
(2) Where a person would (in the absence of this sub-paragraph) fall within sub-paragraph (1) because of having provided advice which was used in the design of the arrangements or of a proposal, that person does not because of that advice fall within that sub-paragraph unless—
(a) the advice is relevant advice, and
(b) the knowledge condition is met.
(3) Advice is “relevant advice” if—
(a) the advice or any part of it suggests arrangements or an alteration of proposed arrangements, and
(b) it is reasonable to assume that the suggestion was made with a view to arrangements being designed in such a way that a tax advantage (or a greater tax advantage) might be expected to arise from them.
(4) The knowledge condition is that, when the advice was provided, the person providing it knew or could reasonably be expected to know—
(a) that the advice would be used in the design of abusive tax arrangements or of a proposal for such arrangements, or
(b) that it was likely that the advice would be so used.
(5) For the purposes of sub-paragraph (3), advice is not to be taken to “suggest” anything—
(a) which is put forward by the advice for consideration, but
(b) which the advice can reasonably be read as recommending against.
(6) In sub-paragraph (3)—
(a) the reference in paragraph (a) to arrangements or an alteration of proposed arrangements includes a proposal for arrangements or an alteration of a proposal for arrangements, and
(b) the reference in paragraph (b) to arrangements includes arrangements proposed by a proposal.
(7) For the purposes of this paragraph—
(a) references to advice include an opinion;
(b) advice is “used” in a design if the advice is taken account of in that design.
Managers of arrangements
9 (1) For the purposes of paragraph 7 a person is a “manager” of the arrangements if that person—
(a) was, in the course of a business carried on by that person, to any extent responsible for the organisation or management of the arrangements, and
(b) when carrying out any functions in relation to the organisation or management of the arrangements, knew or could reasonably be expected to know that the arrangements involved were abusive tax arrangements.
(2) Where—
(a) a person is, in the course of a business carried on by the person, to any extent responsible for facilitating T's withdrawal from the arrangements, and
(b) it is reasonable to assume that the obtaining of a tax advantage is not T's purpose (or one of T's purposes) in withdrawing from the arrangements,
that person is not because of anything done in the course of facilitating that withdrawal to be regarded as to any extent responsible for the organisation or management of the arrangements.
Marketers of arrangements
10 For the purposes of paragraph 7 a person “marketed” the arrangements to T if, in the course of a business carried on by that person—
(a) that person made available for implementation by T a proposal which has since been implemented, in relation to T, by the arrangements, or
(b) that person—
(i) communicated information to T or another person about a proposal which has since been implemented, in relation to T, by the arrangements, and
(ii) did so with a view to T entering into the arrangements or transactions forming part of the arrangements.
Enabling participants
11 For the purposes of paragraph 7 a person is “an enabling participant” in the arrangements if—
(a) that person is a person (other than T) who enters into the arrangements or a transaction forming part of the arrangements,
(b) without that person's participation in the arrangements or transaction (or the participation of another person in the arrangements or transaction in the same capacity as that person), the arrangements could not be expected to result in a tax advantage for T, and
(c) when that person entered into the arrangements or transaction, that person knew or could reasonably be expected to know that what was being entered into was abusive tax arrangements or a transaction forming part of such arrangements.
Financial enablers
12 (1) For the purposes of paragraph 7 a person is a “financial enabler” in relation to the arrangements if—
(a) in the course of a business carried on by that person, that person provided a financial product (directly or indirectly) to a relevant party,
(b) it is reasonable to assume that the purpose (or a purpose) of the relevant party in obtaining the financial product was to participate in the arrangements, and
(c) when the financial product was provided, the person providing it knew or could reasonably be expected to know that the purpose (or a purpose) of obtaining it was to participate in abusive tax arrangements.
(2) In this paragraph “a relevant party” means T or an enabling participant in the arrangements within the meaning given by paragraph 11.
(3) Any reference in this paragraph to a person's providing a financial product to a relevant party includes (but is not limited to) the person's doing any of the following—
(a) providing a loan to a relevant party;
(b) issuing or transferring a share to a relevant party;
(c) entering into arrangements with a relevant party such that—
(i) the person becomes a party to a relevant contract within the meaning of section 577 of CTA 2009 (derivative contracts);
(ii) there is a repo in respect of securities within the meaning of section 263A(A1) of TCGA 1992;
(iii) the person or the relevant party has a creditor repo, creditor quasi-repo, debtor repo or debtor quasi-repo within the meaning of sections 543, 544, 548 and 549 of CTA 2009;
(d) entering into a stock lending arrangement, within the meaning of section 263B(1) of TCGA 1992, with a relevant party;
(e) entering into an alternative finance arrangement, within the meaning of Chapter 6 of Part 6 of CTA 2009 or Part 10A of ITA 2007, with a relevant party;
(f) entering into a contract with a relevant party which, whether alone or in combination with one or more other contracts—
(i) is in accordance with generally accepted accounting practice required to be treated as a loan, deposit or other financial asset or obligation, or
(ii) would be required to be so treated by the person if the person were a company to which the Companies Act 2006 applies;
and references to obtaining a financial product are to be read accordingly.
(4) The Treasury may by regulations amend sub-paragraph (3).
Excluded persons
13 (1) A person who—
(a) would (in the absence of this paragraph) be regarded for the purposes of this Schedule as having enabled particular arrangements mentioned in paragraph 1, but
(b) is a person within sub-paragraph (2),
is not to be regarded as having enabled those arrangements.
(2) The persons within this sub-paragraph are—
(a) T;
(b) where T is a company, any company in the same group as T.
Powers to add categories of enabler and to provide exceptions
14 (1) The Treasury may by regulations add to the categories of persons who, in relation to arrangements mentioned in paragraph 1, are for the purposes of this Schedule persons who enabled the arrangements.
(2) The Treasury may by regulations provide that a person who would otherwise be regarded for the purposes of this Schedule as having enabled arrangements is not to be so regarded where conditions prescribed by the regulations are met.
(3) Regulations under this paragraph may—
(a) amend this Part of this Schedule;
(b) make supplementary, incidental, and consequential provision, including provision amending any other Part of this Schedule;
(c) make transitional provision.
PART 5 Amount of penalty
Amount of penalty
15 (1) For each person who enabled the arrangements mentioned in paragraph 1, the penalty payable under paragraph 1 is the total amount or value of all the relevant consideration received or receivable by that person (“the person in question”).
(2) Particular consideration is “relevant” for the purposes of this paragraph if—
(a) it is consideration for anything done by the person in question which enabled the arrangements mentioned in paragraph 1, and
(b) it has not previously been taken into account in calculating the amount of a penalty payable under paragraph 1.
(3) For the purposes of this paragraph a thing done by a person “enabled” the arrangements mentioned in paragraph 1 if, by doing that thing (alone or with anything else), the person fell within the definition in Part 4 of this Schedule of a person who enabled those arrangements.
16 (1) This paragraph applies for the purposes of paragraph 15.
(2) Where consideration for anything done by a person (“A”) is, under any arrangements with A, paid or payable to a person other than A, it is to be taken to be received or receivable by A.
(3) The “consideration” for anything done by a person does not include any amount charged by that person in respect of value added tax.
(4) Consideration attributable to two or more transactions is to be apportioned on a just and reasonable basis.
(5) Any consideration given for what is in substance one bargain is to be treated as attributable to all elements of the bargain, even though—
(a) separate consideration is, or purports to be, given for different elements of the bargain, or
(b) there are, or purport to be, separate transactions in respect of different elements of the bargain.
Reduction of penalty where other penalties incurred
17 (1) The amount of a penalty for which a person is liable under paragraph 1 is to be reduced by the amount of any other penalty incurred by the person in respect of conduct for which the person is liable to the penalty under paragraph 1.
(2) In this paragraph “any other penalty” means a penalty—
(a) which is a penalty under a provision other than paragraph 1, and
(b) which has been assessed.
Mitigation of penalty
18 (1) HMRC may in their discretion reduce a penalty under paragraph 1.
(2) In this paragraph the reference to reducing a penalty includes a reference to—
(a) entirely remitting the penalty, or
(b) staying, or agreeing a compromise in relation to, proceedings for the recovery of a penalty.
PART 6 Assessment of penalty
Assessment of penalty
19 (1) Where a person is liable for a penalty under paragraph 1 HMRC must—
(a) assess the penalty, and
(b) notify the person.
(2) If—
(a) HMRC do not have all the information required to determine the amount or value of the relevant consideration within the meaning of paragraph 15, and
(b) HMRC have taken all reasonable steps to obtain that information,
HMRC may assess the penalty on the basis of a reasonable estimate by HMRC of that consideration.
(3) This paragraph is subject to—
(a) paragraphs 21 and 22 (limits on when penalty may be assessed); and
(b) Part 7 of this Schedule (requirement for opinion of GAAR Advisory Panel before penalty may be assessed).
20 (1) A penalty under paragraph 1 must be paid before the end of the period of 30 days beginning with the day on which notification of the penalty is issued.
(2) An assessment of a penalty under paragraph 1—
(a) is to be treated for procedural purposes in the same way as an assessment to tax (except in respect of a matter expressly provided for by this Schedule), and
(b) may be enforced as if it were an assessment to tax.
Special provision about assessment for multi-user schemes
21 (1) This paragraph applies where—
(a) a proposal for arrangements is implemented more than once, by a number of tax arrangements which are substantially the same as each other (“related arrangements”),
(b) paragraph 1 applies in relation to particular arrangements (“the arrangements concerned”) which are one of the number of related arrangements implementing the proposal, and
(c) at the time when the person who entered into the arrangements concerned incurs a defeat in respect of them (other than a tribunal or court defeat), neither condition 1 nor condition 2 has been met.
(2) HMRC may not assess any penalty payable under paragraph 1 in respect of the arrangements concerned until condition 1 or condition 2 is met.
(2A) Condition 1 is that a defeat that is a tribunal or court defeat is incurred in the case of at least one of the number of related arrangements implementing the proposal.
(2B) Condition 2 is that the required number or percentage of relevant defeats is reached.
(2C) For the purposes of this paragraph, a defeat incurred in respect of arrangements is a “tribunal or court defeat” if—
(a) condition A (in paragraph 5) is met and the adjustments mentioned in paragraph 5(2) have been confirmed by a tribunal or court, or
(b) condition B (in paragraph 6) is met and the assessment mentioned in paragraph 6(2) has been confirmed by a tribunal or court.
(2D) An adjustment or assessment (as the case may be) has been confirmed by a tribunal or court if the First-tier Tribunal, the Upper Tribunal or a court has determined in proceedings before it that the adjustment or assessment in question should not be varied.
(2E) For the purposes of sub-paragraph (2D), disregard variations that do not substantively alter the basis of the adjustment or assessment in question.
(3) For the purposes of this paragraph the “required number or percentage of relevant defeats” is reached when HMRC reasonably believe that —
(a) the number of related arrangements implementing the proposal is fewer than 21 and defeats have been incurred in the case of 50% or more of those arrangements;
(b) the number of related arrangements implementing the proposal is more than 20 but fewer than 44 and defeats have been incurred in the case of 11 or more of those arrangements;
(c) the number of related arrangements implementing the proposal is more than 43 but fewer than 200 and defeats have been incurred in the case of 25% or more of those arrangements;
(d) the number of related arrangements implementing the proposal is 200 or more and defeats have been incurred in the case of 50 or more of those arrangements.
(4) Sub-paragraph (2) does not apply in relation to a penalty if the person liable to the penalty requests assessment of the penalty sooner than the time allowed by sub-paragraph (2).
Time limit for assessment
22 (1) An assessment of a person as liable to a penalty under paragraph 1 may not take place after the relevant time.
(2) In this paragraph “the relevant time” means, subject to sub-paragraphs (3) to (6)—
(a) where a GAAR final decision notice within the meaning of paragraph 24(1) has been given in relation to the arrangements to which the penalty relates, the end of 12 months beginning with the date on which T incurs the defeat mentioned in paragraph 1;
(b) where a notice under paragraph 25 has been given to the person mentioned in sub-paragraph (1) above in respect of the arrangements to which the penalty relates, the end of 12 months beginning with the end of the time allowed for making representations in respect of that notice;
(c) where—
(i) a referral has been made under paragraph 26 in respect of the arrangements to which the penalty relates, and
(ii) paragraph (d) does not apply,
the end of 12 months beginning with the date on which the opinion of the GAAR Advisory Panel is given on the referral (within the meaning given by paragraph 34(6));
(d) where a notice under paragraph 35 has been given to the person mentioned in sub-paragraph (1) above in respect of the arrangements to which the penalty relates, the end of 12 months beginning with the end of the time allowed for making representations in respect of that notice.
(3) Where—
(a) paragraph 21 prevented a penalty from being assessed before condition 1 or condition 2 was met, and
(b) condition 1 or condition 2 has been met,
the relevant time in relation to that penalty is whichever is the later of—
(i) the relevant time given by sub-paragraph (2), and
(ii) the end of 12 months beginning with the date on which the first of condition 1 or condition 2 was met.
(4) Where under paragraph 21(4) a person requests assessment of a penalty, the relevant time in relation to that penalty is whichever is the later of—
(a) the relevant time given by sub-paragraph (2), and
(b) the end of 12 months beginning with the date on which the request is made,
and sub-paragraph (3) does not apply to the penalty even if condition 1 or condition 2 is met.
(5) Sub-paragraph (6) applies where—
(a) at any time a declaration has been made under paragraph 44 for the purposes of any determination of whether a person is liable to a penalty under paragraph 1 in relation to particular arrangements (“the arrangements concerned”), and
(b) subsequently, facts that in the Commissioners' opinion are sufficient to indicate that the declaration contains a material inaccuracy have come to the Commissioners' knowledge.
(6) The relevant time in respect of any penalty under paragraph 1 payable by that person in relation to the arrangements concerned is whichever is the later of—
(a) the relevant time given by the preceding provisions of this paragraph, and
(b) the end of 12 months beginning with the date on which such facts came to the Commissioners' knowledge.
PART 7 GAAR Advisory Panel opinion, and representations
Requirement for opinion of GAAR Advisory Panel
23 (1) A penalty under paragraph 1 may not be assessed unless—
(a) the decision that it should be assessed is taken by a designated HMRC officer, and
(b) either the condition in sub-paragraph (2) or the condition in sub-paragraph (3) is met.
(2) The condition in this sub-paragraph is that, when the assessment is made—
(a) a GAAR final decision notice has been given in relation to—
(i) the arrangements to which the penalty relates (“the relevant arrangements”), or
(ii) arrangements that are equivalent to the relevant arrangements,
(b) where a notice is required by paragraph 25 to be given to the person liable to the penalty, that notice has been given and the time allowed for making representations under that paragraph has expired, and
(c) a designated HMRC officer has, in deciding whether the penalty should be assessed, considered—
(i) the opinion of the GAAR Advisory Panel which was considered by HMRC in preparing that GAAR final decision notice, and
(ii) any representations made under paragraph 25.
(3) The condition in this sub-paragraph is that, when the assessment is made—
(a) an opinion of the GAAR Advisory Panel which applies to the relevant arrangements has been given on a referral under paragraph 26,
(b) where a notice is required by paragraph 35 to be given to the person liable to the penalty, that notice has been given and the time allowed for making representations under that paragraph has expired, and
(c) a designated HMRC officer has, in deciding whether the penalty should be assessed, considered—
(i) that opinion of the GAAR Advisory Panel, and
(ii) any representations made under paragraph 35.
(4) Where a notification of a penalty under paragraph 1 is given, the notification must be accompanied by a report prepared by HMRC of—
(a) if the condition in sub-paragraph (2) is met, the opinion of the GAAR Advisory Panel which was considered by HMRC in preparing the GAAR final decision notice;
(b) if the condition in sub-paragraph (3) is met, the opinion of the GAAR advisory panel mentioned in that sub-paragraph.
(5) Paragraph 24 contains definitions of terms used in this paragraph.
24 (1) In this Schedule a “GAAR final decision notice” means a notice under—
(a) paragraph 12 of Schedule 43 to FA 2013 (notice of final decision after considering opinion of GAAR Advisory Panel on referral under Schedule 43),
(b) paragraph 8 or 9 of Schedule 43A to FA 2013 (notice of final decision after considering opinion of GAAR Advisory Panel), or
(c) paragraph 8 of Schedule 43B to FA 2013 (notice of final decision after considering opinion of GAAR Advisory Panel on referral under Schedule 43B).
(2) For the purposes of this Part of this Schedule, where the GAAR Advisory Panel gives an opinion on a referral under paragraph 26 the arrangements to which the opinion “applies” are—
(a) the arrangements in respect of which the referral was made (that is, “the arrangements in question” within the meaning given by paragraph 26(1)), and
(b) any arrangements that are equivalent to those arrangements.
(3) For the purposes of this Part of this Schedule, arrangements are “equivalent” to one another if they are substantially the same as one another having regard to—
(a) their substantive results or intended substantive results,
(b) the means of achieving those results, and
(c) the characteristics on the basis of which it could reasonably be argued, in each case, that the arrangements are abusive tax arrangements.
Notice where Panel opinion already obtained in relation to equivalent arrangements
25 (1) This paragraph applies where a designated HMRC officer is of the view that—
(a) a person is liable to a penalty under paragraph 1 in relation to particular arrangements (“the arrangements concerned”),
(b) no GAAR final decision notice has been given in relation to those arrangements, but those arrangements are equivalent to arrangements in relation to which a GAAR final decision notice has been given (“the GAAR decision arrangements”), and
(c) accordingly, the opinion of the GAAR Advisory Panel which was considered by HMRC in preparing that GAAR final decision notice is relevant to the arrangements concerned.
(2) A designated HMRC officer must give the person mentioned in sub-paragraph (1) a notice in writing—
(a) explaining that the officer is of the view mentioned there,
(b) specifying the arrangements concerned,
(c) describing the material characteristics of the GAAR decision arrangements,
(d) setting out a report prepared by HMRC of the opinion of the GAAR Advisory Panel which was considered by HMRC in preparing the GAAR final decision notice, and
(e) explaining the effect of sub-paragraphs (3) and (4).
(3) A person to whom a notice under this paragraph is given has 30 days, beginning with the day on which the notice is given, to send to the designated HMRC officer (in writing) any representations that that person wishes to make as to why the arrangements concerned are not equivalent to the GAAR decision arrangements.
(4) A designated HMRC officer may, on a written request by that person, extend the period during which representations may be made by that person.
(5) Paragraph 24 contains definitions of the following terms used in this paragraph—
“GAAR final decision notice”;
“equivalent”, in relation to arrangements.
Referral to GAAR Advisory Panel
26 (1) A designated HMRC officer may make a referral under this paragraph if—
(a) the officer considers that a person is liable to a penalty under paragraph 1 in relation to particular arrangements (“the arrangements in question”), and
(b) the requirements of paragraph 28 (procedure before making of referral) have been complied with.
(2) But a referral may not be made under this paragraph if a GAAR final decision notice (within the meaning of paragraph 24(1)) has already been given in relation to—
(a) the arrangements in question, or
(b) arrangements that are equivalent to those arrangements.
(3) A referral under this paragraph is a referral to the GAAR Advisory Panel of the question whether the entering into and carrying out of tax arrangements such as are described in the referral statement (see paragraph 27) is a reasonable course of action in relation to the relevant tax provisions.
27 (1) In this Part of this Schedule “the referral statement”, in relation to a referral under paragraph 26, means a statement made by a designated HMRC officer which—
(a) accompanies the referral,
(b) is a general statement of the material characteristics of the arrangements in question (within the meaning given by paragraph 26(1)), and
(c) complies with sub-paragraph (2).
(2) A statement under this paragraph must—
(a) contain a factual description of the arrangements in question,
(b) set out HMRC's view as to whether those arrangements accord with established practice (as it stood when those arrangements were entered into),
(c) explain why it is the designated HMRC officer's view that a tax advantage of the nature described in the statement and arising from tax arrangements having the characteristics described in the statement would be a tax advantage arising from arrangements that are abusive,
(d) set out any matters the designated HMRC officer is aware of which may suggest that any view of HMRC or the designated HMRC officer expressed in the statement is not correct, and
(e) set out any other matters which the designated HMRC officer considers are required for the purposes of the exercise of the GAAR Advisory Panel's functions under paragraphs 33 and 34.
Notice before decision whether to refer
28 (1) A referral must not be made under paragraph 26 unless—
(a) a designated HMRC officer has given each relevant person a notice under this paragraph,
(b) in the case of each relevant person, the time allowed for making representations has expired, and
(c) in deciding whether to make the referral, a designated HMRC officer has considered any representations made by a relevant person within the time allowed.
(2) In this paragraph a “relevant person” means any person who at the time of the referral is considered by the officer making the referral to be liable to a penalty under paragraph 1 in relation to the arrangements in question (within the meaning given by paragraph 26(1)).
(3) A notice under this paragraph is a notice in writing which—
(a) explains that the officer giving the notice considers that the person to whom the notice is given is liable to a penalty under paragraph 1 in relation to the arrangements in question (specifying those arrangements),
(b) explains why the officer considers those arrangements to be abusive tax arrangements,
(c) explains that HMRC are proposing to make a referral under paragraph 26 of the question whether the entering into and carrying out of tax arrangements that have the characteristics of the arrangements in question is a reasonable course of action in relation to the relevant tax provisions, and
(d) explains the effect of sub-paragraphs (4) and (5).
(4) Each person to whom a notice under this paragraph is given has 45 days, beginning with the day on which the notice is given to that person, to send written representations to the designated HMRC officer in response to the notice.
(5) A designated HMRC officer may, on a written request by a person to whom a notice is given, extend the period during which representations may be made by that person.
Notice of decision whether to refer
29 Where a designated HMRC officer decides whether to make a referral under paragraph 26, the officer must, as soon as reasonably practicable, give written notice of that decision to each person to whom notice under paragraph 28 was given.
Information to accompany referral
30 A referral under paragraph 26 must (as well as being accompanied by the referral statement under paragraph 27) be accompanied by—
(a) a declaration that, as far as HMRC are aware, nothing which is material to the GAAR Advisory Panel's consideration of the matter has been omitted from that statement,
(b) a copy of each notice given under paragraph 28 by HMRC in relation to the referral,
(c) a copy of any representations received under paragraph 28 and any comments that HMRC wish to make in respect of those representations, and
(d) a copy of each notice given under paragraph 31 by HMRC.
Notice on making of referral
31 (1) Where a referral is made under paragraph 26, a designated HMRC officer must at the same time give to each relevant person a notice in writing which—
(a) notifies the person of the referral,
(b) is accompanied by a copy of the referral statement,
(c) is accompanied by a copy of any comments provided to the GAAR Advisory Panel under paragraph 30(c) in respect of representations made by the person,
(d) notifies the person of the period under paragraph 32 for making representations, and
(e) notifies the person of the requirement under that paragraph to send any representations to the officer.
(2) In this paragraph “relevant person” has the same meaning as in paragraph 28 (see sub-paragraph (2) of that paragraph).
Right to make representations to GAAR Advisory Panel
32 (1) A person who has received a notice under paragraph 31 has 21 days, beginning with the day on which that notice is given, to send to the GAAR Advisory Panel written representations about—
(a) the notice given to the person under paragraph 28, or
(b) any comments provided to the GAAR Advisory Panel under paragraph 30(c) in respect of representations made by the person.
(2) The GAAR Advisory Panel may, on a written request made by the person, extend the period during which representations may be made.
(3) If a person sends representations to the GAAR Advisory Panel under this paragraph, the person must at the same time send a copy of the representations to the designated HMRC officer.
(4) If a person sends representations to the GAAR Advisory Panel under this paragraph and that person made no representations under paragraph 28, a designated HMRC officer—
(a) may provide the GAAR Advisory Panel with comments on that person's representations under this paragraph, and
(b) if such comments are provided, must at the same time send a copy of them to that person.
Decision of GAAR Advisory Panel and opinion notices
33 (1) Where a referral is made to the GAAR Advisory Panel under paragraph 26, the Chair must arrange for a sub-panel consisting of 3 members of the GAAR Advisory Panel (one of whom may be the Chair) to consider it.
(2) The sub-panel may invite—
(a) any person to whom notice under paragraph 28 was given, or
(b) the designated HMRC officer,
(or both) to supply the sub-panel with further information within a period specified in the invitation.
(3) Invitations must explain the effect of sub-paragraph (4) or (5) (as appropriate).
(4) If a person invited under sub-paragraph (2)(a) supplies information to the sub-panel under this paragraph, that person must at the same time send a copy of the information to the designated HMRC officer.
(5) If a designated HMRC officer supplies information to the sub-panel under this paragraph, the officer must at the same time send a copy of the information to each person to whom notice under paragraph 28 was given.
34 (1) The sub-panel must produce—
(a) one opinion notice stating the joint opinion of all the members of the sub-panel, or
(b) two or three opinion notices which taken together state the opinions of all the members.
(2) The sub-panel must give a copy of the opinion notice or notices to the designated HMRC officer.
(3) An opinion notice is a notice which states that in the opinion of the members of the sub-panel, or one or more of those members—
(a) the entering into and carrying out of tax arrangements such as are described in the referral statement is a reasonable course of action in relation to the relevant tax provisions,
(b) the entering into or carrying out of such tax arrangements is not a reasonable course of action in relation to the relevant tax provisions, or
(c) it is not possible, on the information available, to reach a view on that matter,
and the reasons for that opinion.
(4) In forming their opinions for the purposes of sub-paragraph (3) members of the sub-panel must—
(a) have regard to all the matters set out in the referral statement,
(b) have regard to the matters mentioned in paragraphs (a) to (c) of paragraph 3(3) and paragraph 3(4), and
(c) take account of paragraph 3(5) to (7).
(5) For the purposes of the giving of an opinion under this paragraph, the arrangements are to be assumed to be tax arrangements.
(6) For the purposes of this Schedule—
(a) an opinion of the GAAR Advisory Panel is to be treated as having been given on a referral under paragraph 26 when an opinion notice (or notices) has been given under this paragraph in respect of the referral, and
(b) any requirement to consider the opinion of the GAAR Advisory Panel given on such a referral is a requirement to consider the contents of the opinion notice (or notices) given on the referral.
Notice before deciding that arrangements are ones to which Panel opinion applies
35 (1) This paragraph applies where—
(a) an opinion of the GAAR Advisory Panel has been given on a referral under paragraph 26,
(b) a designated HMRC officer is of the view that a person is liable to a penalty under paragraph 1 in relation to particular arrangements (“the arrangements concerned”) and that that opinion of the GAAR Advisory Panel applies to those arrangements, and
(c) that person is not a person to whom notice under paragraph 28 was given in connection with the referral.
(2) A designated HMRC officer must give the person mentioned in sub-paragraph (1)(b) a notice in writing—
(a) explaining that the officer is of the view mentioned in that paragraph,
(b) specifying the arrangements concerned,
(c) setting out a report prepared by HMRC of the opinion mentioned in sub-paragraph (1)(a), and
(d) explaining the effect of sub-paragraphs (3) and (4).
(3) A person to whom a notice under this paragraph is given has 30 days, beginning with the day on which the notice is given, to send the designated HMRC officer (in writing) any representations as to why the opinion does not apply to the arrangements concerned.
(4) A designated HMRC officer may, on a written request by that person, extend the period during which representations may be made by that person.
(5) Paragraph 24(2) defines the arrangements that an opinion given on a referral under paragraph 26 “applies to”.
Requirement for court or tribunal to take Panel opinion into account
36 (1) In this paragraph “enabler penalty proceedings” means proceedings before a court or tribunal in connection with a penalty under paragraph 1.
(2) In determining in enabler penalty proceedings any question whether tax arrangements to which the penalty relates were abusive, the court or tribunal—
(a) must take into account the relevant Panel opinion, and
(b) may also take into account any matter mentioned in sub-paragraph (4).
(3) In sub-paragraph (2)(a) “the relevant Panel opinion” means the opinion of the GAAR Advisory Panel which under this Part of this Schedule was required to be considered by a designated HMRC officer in deciding whether the penalty should be assessed.
(4) The matters mentioned in sub-paragraph (2)(b) are—
(a) guidance, statements or other material (whether of HMRC, a Minister of the Crown or anyone else) that was in the public domain at the time the arrangements were entered into, and
(b) evidence of established practice at that time.
PART 8 Appeals
37 A person may appeal against—
(a) a decision of HMRC that a penalty under paragraph 1 is payable by that person, or
(b) a decision of HMRC as to the amount of a penalty under paragraph 1 payable by the person.
38 (1) An appeal under paragraph 37 is to be treated in the same way as an appeal against an assessment to the tax to which the arrangements concerned relate (including by the application of any provision about bringing the appeal by notice to HMRC, about HMRC review of the decision or about determination of the appeal by the First-tier Tribunal or Upper Tribunal).
(2) Sub-paragraph (1) does not apply—
(a) so as to require a person to pay a penalty under paragraph 1 before an appeal against the assessment of the penalty is determined;
(b) in respect of any other matter expressly provided for by this Schedule.
(3) In this paragraph “the arrangements concerned” means the arrangements to which the penalty relates.
39 (1) On an appeal under paragraph 37(a) that is notified to the tribunal, the tribunal may affirm or cancel HMRC's decision.
(2) On an appeal under paragraph 37(b) that is notified to the tribunal, the tribunal may—
(a) affirm HMRC's decision, or
(b) substitute for that decision another decision that HMRC had power to make.
(3) If the tribunal substitutes its decision for HMRC's, the tribunal may rely on paragraph 18—
(a) to the same extent as HMRC (which may mean applying the same percentage reduction as HMRC to a different starting point), or
(b) to a different extent, but only if the tribunal thinks that HMRC's decision in respect of the application of paragraph 18 was flawed.
(4) In sub-paragraph (3)(b) “flawed” means flawed when considered in the light of the principles applicable in proceedings for judicial review.
(5) In this paragraph “tribunal” means the First-tier Tribunal or Upper Tribunal (as appropriate by virtue of paragraph 38(1)).
PART 9 Information
Information and inspection powers: application of Schedule 36 to FA 2008
40 (1) Schedule 36 to FA 2008 (information and inspection powers) applies for the purpose of—
(a) checking a relevant person's position as regards liability for a penalty under paragraph 1 in relation to particular tax arrangements;
(b) ascertaining the identity of any other person who has or may have enabled those arrangements,
as it applies for the purpose of checking a person's tax position, subject to the modifications in paragraphs 41 to 43.
(2) In this paragraph and paragraphs 41 to 43—
“relevant person” means a person an officer of Revenue and Customs has reason to suspect is or may be liable to a penalty under paragraph 1 (or will become or may become so liable if T incurs a defeat);
“the Schedule” means Schedule 36 to FA 2008.
(3) References in this paragraph and paragraphs 41 and 42 to a person who has or may have enabled particular tax arrangements are to be read in accordance with Part 4 of this Schedule (persons who “enabled” the arrangements), save that—
(a) references in that Part to the arrangements mentioned in paragraph 1 (however expressed) are to be read as references to the particular tax arrangements, and
(b) references in that Part to “T” are to be read as references to the person who entered into the particular tax arrangements.
General modifications of Schedule 36 to FA 2008 as applied
41 In its application for a purpose mentioned in paragraph 40(1) above, the Schedule has effect as if—
(a) any provisions which can have no application for that purpose were omitted,
(b) references to “the taxpayer” were references to the relevant person whose position as regards liability for a penalty under paragraph 1 is to be checked, and references to “a taxpayer” were references to a relevant person,
(c) references to a person's “tax position” were to the relevant person's position as regards liability for a penalty under paragraph 1,
(d) references to prejudice to the assessment or collection of tax included prejudice to —
(i) the investigation of the relevant person's position as regards liability for a penalty under paragraph 1 in relation to particular tax arrangements, or (as the case may be)
(ii) the identification of any other person who has or may have enabled those arrangements, and
(e) references to a pending appeal relating to tax were to a pending appeal relating to an assessment of liability for a penalty under paragraph 1.
Specific modifications of Schedule 36 to FA 2008 as applied
Declarations about contents of legally privileged communications
44 (1) Subject to sub-paragraph (5), a declaration under this paragraph is to be treated by—
(a) HMRC, or
(b) in any proceedings before a court or tribunal in connection with a penalty under paragraph 1, the court or tribunal,
as conclusive evidence of the things stated in the declaration.
(2) A declaration under this paragraph is a declaration which—
(a) is made by a relevant lawyer,
(b) relates to one or more communications falling within sub-paragraph (3), and
(c) meets such requirements as may be prescribed by regulations under sub-paragraph (4).
(3) A communication falls within this sub-paragraph if—
(a) it was made by a relevant lawyer (whether or not the one making the declaration),
(b) it is legally privileged, and
(c) if it were not legally privileged, it would be relied on by a person for the purpose of establishing that that person is not liable to a penalty under paragraph 1 (whether or not that person is the person who made the communication or is making the declaration).
(4) The Treasury may by regulations impose requirements as to the form and contents of declarations under this paragraph.
(5) Sub-paragraph (1) does not apply where HMRC or (as the case may be) the court or tribunal is satisfied that the declaration contains information which is incorrect.
(6) In this paragraph “a relevant lawyer” means a barrister, advocate, solicitor or other legal representative communications with whom may be the subject of a claim to legal professional privilege or, in Scotland, protected from disclosure in legal proceedings on the grounds of confidentiality of communication.
(7) For the purpose of this paragraph, a communication is “legally privileged” if it is a communication in respect of which a claim to legal professional privilege, or (in Scotland) to confidentiality of communications as between client and professional legal adviser, could be maintained in legal proceedings.
45 (1) Where a person carelessly or deliberately gives any incorrect information in a declaration under paragraph 44, the person is liable to a penalty not exceeding £5,000.
(2) For the purposes of this paragraph, incorrect information is carelessly given by a person if the information is incorrect because of a failure by the person to take reasonable care.
(3) Paragraphs 19(1), 20, 22(1), 37, 38 and 39(1), (2) and (5) apply in relation to a penalty under this paragraph as they apply in relation to a penalty under paragraph 1, subject to the modifications in sub-paragraphs (4) and (5).
(4) In its application to a penalty under this paragraph, paragraph 22(1) has effect as if for “the relevant time” there were substituted “the end of 12 months beginning with the date on which facts sufficient to indicate that the person is liable to the penalty came to the Commissioners' knowledge”.
(5) In its application to a penalty under this paragraph, paragraph 38(3) has effect as if the reference to the arrangements to which the penalty relates were to the arrangements to which the declaration under paragraph 44 relates.
(6) In paragraph 44 any reference to a penalty under paragraph 1 includes a reference to a penalty under this paragraph.
PART 10 Publishing details of persons who have incurred penalties
Power to publish details
46 (1) The Commissioners may publish information about a person where—
(a) the person has incurred a penalty under paragraph 1,
(b) the penalty has become final, and
(c) either the condition in sub-paragraph (2) or the condition in sub-paragraph (3) is met.
(2) The condition in this sub-paragraph is that, at the time when the penalty mentioned in sub-paragraph (1) becomes final, 50 or more other penalties which are reckonable penalties have been incurred by the person.
(3) The condition in this sub-paragraph is that—
(a) the amount of the penalty mentioned in sub-paragraph (1), or
(b) the total amount of that penalty and any other penalties incurred by that person which are reckonable penalties,
is more than £25,000.
(4) The information that may be published under this paragraph is—
(a) the person's name (including any trading name, previous name or pseudonym),
(b) the person's address (or registered office),
(c) the nature of any business carried on by the person,
(d) the total number of the penalties in question (that is, the penalty mentioned in sub-paragraph (1) and any penalties that are reckonable penalties in relation to that penalty),
(e) the total amount of the penalties in question, and
(f) any other information that the Commissioners consider it appropriate to publish in order to make clear the person's identity.
(5) The information may be published in any way that the Commissioners consider appropriate.
(6) For the purposes of this Part of this Schedule a penalty becomes “ final ”
(a) if the penalty has been assessed and paragraph (b) does not apply, at the time when the period for any appeal or further appeal relating to the penalty expires or, if later, when any appeal or final appeal relating to it is finally determined;
(b) if a contract settlement has been made in relation to the penalty, at the time when the contract is made;
and “contract settlement” here means a contract between the Commissioners and the person under which the Commissioners undertake not to assess the penalty or (if it has been assessed) not to take proceedings to recover it.
(7) “Reckonable penalty” has the meaning given by paragraph 47.
(8) This paragraph is subject to paragraphs 48 to 50.
47 (1) A penalty is a “reckonable penalty” for the purposes of paragraph 46 if—
(a) it is a penalty under paragraph 1 which becomes final at the same time as, or before, the penalty mentioned in paragraph 46(1),
(b) its entry date and the entry date of the penalty mentioned in paragraph 46(1) are not more than 12 months apart, and
(c) it is not a penalty which under paragraph 48(1) is to be disregarded.
(2) For the purposes of this paragraph the “entry date” of a penalty under paragraph 1 is the date (or, if more than one, the latest date) on which the arrangements concerned or any agreement or transaction forming part of those arrangements was entered into by the taxpayer.
(3) In sub-paragraph (2)—
“the arrangements concerned” means the arrangements to which the penalty relates, and
“the taxpayer” means the person whose defeat in respect of those arrangements resulted in the penalty being payable.
(4) For the purposes of this paragraph, the entry date of a penalty is not more than 12 months apart from the entry date of another penalty if—
(a) the entry dates of those penalties are the same, or
(b) the period beginning with whichever of the entry dates is the earlier and ending with whichever of the entry dates is the later is 12 months or less.
Restrictions on power
48 (1) In determining at any time whether or what information may be published in relation to a person under paragraph 46, the following penalties incurred by the person are to be disregarded—
(a) a penalty which has been reduced to nil or stayed;
(b) a penalty by reference to which information has previously been published under paragraph 46;
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(d) a penalty that relates to arrangements which are related to arrangements that have already been dealt with (within the meaning given by sub-paragraph (4)).
(2) For the purposes of sub-paragraph (1)(d) arrangements are “related to” each other if they—
(a) implement the same proposal for tax arrangements, and
(b) are substantially the same as each other.
(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4) For the purposes of sub-paragraph (1)(d) arrangements have “already been dealt with” if information about the person has already been published under paragraph 46 by reference to a penalty that relates to those arrangements.
49 (1) Publication of information under paragraph 46 on the basis of a penalty or penalties incurred by a person may not take place after the relevant time.
(2) In this paragraph “the relevant time” means the end of 12 months beginning with the date on which the penalty became final or, where more than one penalty is involved, the latest date on which any of them became final.
(3) Sub-paragraph (1) is not to be taken to prevent the re-publishing, or continued publishing, after the relevant time of a set of information published under paragraph 46 before that time.
(4) Information published under paragraph 46 may not be re-published, or continue to be published, after the end of 12 months beginning with the date on which it was first published.
(5) Nothing in paragraph 48 applies in relation to determining whether to re-publish (or continue to publish) a set of information already published under paragraph 46.
50 Before publishing information under paragraph 46 the Commissioners must—
(a) inform the person that they are considering doing so, and
(b) afford the person the opportunity to make representations about whether it should be published.
Power to amend
51 The Treasury may by regulations amend this Part of this Schedule so as to alter any of the following—
(a) the figure for the time being specified in paragraph 46(2);
(b) the sum for the time being specified in paragraph 46(3);
(c) any period for the time being specified in paragraph 47(1)(b) or (4).
PART 11 Miscellaneous
Double jeopardy
52 A person is not liable to a penalty under paragraph 1 in respect of conduct for which the person has been convicted of an offence.
Application of provisions of TMA 1970
53 Subject to the provisions of this Schedule, the following provisions of TMA 1970 apply for the purposes of this Schedule as they apply for the purposes of the Taxes Acts—
(a) section 108 (responsibility of company officers),
(b) section 114 (want of form), and
(c) section 115 (delivery and service of documents).
PART 12 General
Meaning of “tax”
54 (1) In this Schedule “tax” includes any of the following taxes—
(a) income tax,
(b) corporation tax, including any amount chargeable as if it were corporation tax or treated as if it were corporation tax,
(c) capital gains tax,
(d) petroleum revenue tax,
(e) diverted profits tax,
(f) apprenticeship levy,
(g) inheritance tax,
(h) stamp duty land tax, and
(i) annual tax on enveloped dwellings,
and also includes national insurance contributions.
(2) The Treasury may by regulations amend sub-paragraph (1) so as to—
(a) add a tax to the list of taxes for the time being set out in that sub-paragraph;
(b) remove a tax for the time being set out in that sub-paragraph;
(c) remove the reference to national insurance contributions;
(d) substitute for that reference a reference to national insurance contributions of a particular class or classes;
(e) where provision has been made under paragraph (d)—
(i) add a class or classes of national insurance contributions to those for the time being specified in that sub-paragraph;
(ii) remove a class or classes of national insurance contributions for the time being so specified.
(3) Regulations under this paragraph may—
(a) make supplementary, incidental, and consequential provision, including provision amending or repealing any provision of this Schedule;
(b) make transitional provision.
Meaning of “tax advantage”
55 In this Schedule “tax advantage” includes—
(a) relief or increased relief from tax,
(b) repayment or increased repayment of tax,
(c) receipt, or advancement of a receipt, of a tax credit,
(d) avoidance or reduction of a charge to tax, an assessment of tax or a liability to pay tax,
(e) avoidance of a possible assessment to tax or liability to pay tax,
(f) deferral of a payment of tax or advancement of a repayment of tax, and
(g) avoidance of an obligation to deduct or account for tax.
Other definitions
56 (1) In this Schedule—
“abusive tax arrangements” has the meaning given by paragraph 3;
“arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable);
“business” includes any trade or profession;
“the Commissioners” means the Commissioners for Her Majesty‘s Revenue and Customs;
“company” has the same meaning as in the Corporation Tax Acts (see section 1121 of CTA 2010);
“contract settlement” (except in paragraph 46(6)) means an agreement in connection with a person's liability to make a payment to the Commissioners under or by virtue of an enactment;
“a defeat”, in relation to arrangements, is to be read in accordance with paragraph 4;
a “designated HMRC officer” means an officer of Revenue and Customs who has been designated by the Commissioners for the purposes of this Schedule;
“the GAAR Advisory Panel” has the meaning given by paragraph 1 of Schedule 43 to FA 2013;
“group” is to be read in accordance with sub-paragraph (2);
“HMRC” means Her Majesty's Revenue and Customs;
“national insurance contributions” means contributions under Part 1 of the Social Security Contributions and Benefits Act 1992 or Part 1 of the Social Security Contributions and Benefits (Northern Ireland) Act 1992;
a “NICs decision” means a decision under section 8 of the Social Security Contributions (Transfer of Functions, etc.) Act 1999 or Article 7 of the Social Security Contributions (Transfer of Functions, etc.) (Northern Ireland) Order 1999 (SI 1999/671) relating to a person‘s liability for relevant contributions;
“relevant contributions” means any of the following contributions under Part 1 of the Social Security Contributions and Benefits Act 1992 or Part 1 of the Social Security Contributions and Benefits (Northern Ireland) Act 1992—
Class 1 contributions;
Class 1A contributions;
Class 1B contributions;
Class 2 contributions which must be paid but in relation to which section 11A of the Act in question (application of certain provisions of the Income Tax Acts) does not apply;
“tax” is to be read in accordance with paragraph 54;
“tax advantage” is to be read in accordance with paragraph 55.
(2) For the purposes of this Schedule two companies are members of the same group if—
(a) one is a 75% subsidiary of the other, or
(b) both are 75% subsidiaries of a third company;
and in this paragraph “75% subsidiary” has, subject to sub-paragraph (3), the meaning given by section 1154 of CTA 2010.
(3) So far as relating to 75% subsidiaries, section 151(4) of CTA 2010 (requirements relating to beneficial ownership) applies for the purposes of this Schedule as it applies for the purposes of Part 5 of that Act.
(4) In this Schedule references to an assessment to tax, however expressed—
(a) in relation to inheritance tax and petroleum revenue tax, include a determination;
(b) in relation to relevant contributions, include a NICs decision.
Regulations
57 (1) Any regulations under this Schedule must be made by statutory instrument.
(2) A statutory instrument which contains (alone or with other provision) any regulations within sub-paragraph (3) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.
(3) Regulations within this sub-paragraph are—
(a) regulations under paragraph 12;
(b) regulations under paragraph 14(1);
(c) regulations under paragraph 14(2) which amend or repeal any provision of this Schedule;
(d) regulations under paragraph 51;
(e) regulations under paragraph 54.
(4) A statutory instrument containing only—
(a) regulations under paragraph 14(2) which do not amend or repeal any provision of this Schedule, or
(b) regulations under paragraph 44,
is subject to annulment in pursuance of a resolution of the House of Commons.
Consequential amendments
58 In section 103ZA of TMA 1970 (disapplication of sections 100 to 103 of that Act in the case of certain penalties)—
(a) omit “or” at the end of paragraph (i), and
(b) after paragraph (j) insert
or
(k) paragraph 1 or 45 of Schedule 16 to the Finance (No. 2) Act 2017 (enablers of defeated tax avoidance etc).
59 In section 54 of ITTOIA 2005 (no deduction allowed for certain penalties etc) at the end of the table in subsection (2) insert—
Penalty under Schedule 16 to F(No. 2)A 2017 | Various taxes
60 In section 1303 of CTA 2009 (no deduction allowed for certain penalties etc) at the end of the table in subsection (2) insert—
Penalty under Schedule 16 to F(No. 2)A 2017 | Various taxes
61 In Schedule 34 to FA 2014 (promoters of tax avoidance schemes: threshold conditions), in paragraph 7—
(a) in paragraph (a), for the words after “promoter” substitute
—
(i) have been referred to the GAAR Advisory Panel under Schedule 43 to FA 2013 (referrals of single schemes),
(ii) are in a pool in respect of which a referral has been made to that Panel under Schedule 43B to that Act (generic referrals), or
(iii) have been referred to that Panel under paragraph 26 of Schedule 16 to F(No. 2)A 2017 (referrals in relation to penalties for enablers of defeated tax avoidance),
;
(b) in paragraph (b), for the words after “referral” substitute
under (as the case may be)—
(i) paragraph 11(3)(b) of Schedule 43 to FA 2013,
(ii) paragraph 6(4)(b) of Schedule 43B to that Act, or
(iii) paragraph 34(3)(b) of Schedule 16 to F(No. 2)A 2017,
(opinion of sub-panel of GAAR Advisory Panel that arrangements are not reasonable), and
.
Commencement
62 (1) Subject to sub-paragraphs (2) and (3), paragraphs 1 to 61 of this Schedule have effect in relation to arrangements entered into on or after the day on which this Act is passed.
(2) In determining in relation to any particular arrangements whether a person is a person who enabled the arrangements, any action of the person carried out before the day on which this Act is passed is to be disregarded.
(3) The amendments made by paragraph 61 do not apply in relation to a person who is a promoter in relation to arrangements if by virtue of sub-paragraph (2) above that person is not a person who enabled the arrangements.
SCHEDULE 17 Disclosure of tax avoidance schemes: VAT and other indirect taxes
Section 66
PART A1 Introduction
A1 (1) This Schedule makes provision about the disclosure of information in relation to arrangements, or proposed arrangements, that enable, or might be expected to enable, a person to obtain a tax advantage in relation to VAT or another indirect tax.
(2) Among other things, this Schedule—
(a) imposes duties to provide information to HMRC (and others);
(b) allows HMRC to allocate reference numbers in relation to arrangements and proposed arrangements (in cases where the disclosure duties have been complied with and in other cases);
(c) makes provision about publication of information about arrangements and proposed arrangements, and persons involved in their supply;
(d) makes provision about penalties.
PART 1 Duties to disclose avoidance schemes etc
Preliminary: application of definitions
1 The definitions in paragraphs 2, 3, and 7 to 10 apply for the purposes of this Schedule.
“Indirect tax”
2 (1) “Indirect tax” means any of the following—
VAT
insurance premium tax
general betting duty
pool betting duty
remote gaming duty
machine games duty
gaming duty
lottery duty
...
air passenger duty
hydrocarbon oils duty
tobacco products duty
duties on spirits, beer, wine, made-wine and cider
vaping products duty
soft drinks industry levy
aggregates levy
landfill tax
plastic packaging tax
climate change levy
carbon border adjustment mechanism
customs duties.
(2) The Treasury may by regulations amend the list in sub-paragraph (1) by adding, varying or omitting an entry for a tax.
“Notifiable arrangements” and “notifiable proposal”
3 (1) “Notifiable arrangements” means any arrangements not excluded by sub-paragraph (2) which—
(a) fall within any description prescribed by the Treasury by regulations,
(b) enable, or might be expected to enable, any person to obtain a tax advantage in relation to any indirect tax that is so prescribed in relation to arrangements of that description, and
(c) are such that the main benefit, or one of the main benefits, that might be expected to arise from the arrangements is the obtaining of that tax advantage.
(2) Arrangements that meet the requirements in paragraphs (a) to (c) of sub-paragraph (1) are not notifiable arrangements if they implement a proposal which is excluded from being a notifiable proposal by sub-paragraph (4).
(3) “Notifiable proposal” means a proposal for arrangements which, if entered into, would be notifiable arrangements (whether the proposal relates to a particular person or to any person who may seek to take advantage of it).
(4) A proposal is not a notifiable proposal if any of the following occur before 1 January 2018—
(a) a promoter first makes a firm approach to another person in relation to the proposal,
(b) a promoter makes the proposal available for implementation by any other person, or
(c) a promoter first becomes aware of any transaction forming part of arrangements implementing the proposal.
4 (1) HMRC may apply to the tribunal for an order that—
(a) a proposal is notifiable, or
(b) arrangements are notifiable.
(2) An application must specify—
(a) the proposal or arrangements in respect of which the order is sought, and
(b) the promoter.
(3) On an application the tribunal may make the order only if satisfied that paragraph 3(1)(a) to (c) applies to the relevant arrangements and that they are not excluded from being notifiable by paragraph 3(2).
5 (1) HMRC may apply to the tribunal for an order that—
(a) a proposal is to be treated as notifiable, or
(b) arrangements are to be treated as notifiable.
(2) An application must specify—
(a) the proposal or arrangements in respect of which the order is sought, and
(b) the promoter.
(3) On an application the tribunal may make the order only if satisfied that HMRC—
(a) have taken all reasonable steps to establish whether the proposal or arrangements are notifiable, and
(b) have reasonable grounds for suspecting that the proposal or arrangements may be notifiable.
(4) Reasonable steps under sub-paragraph (3)(a) may (but need not) include taking action under paragraph 29 or 30.
(5) Grounds for suspicion under sub-paragraph (3)(b) may include—
(a) the fact that the relevant arrangements fall within a description prescribed under paragraph 3(1)(a),
(b) an attempt by the promoter to avoid or delay providing information or documents about the proposal or arrangements under or by virtue of paragraph 29 or 30,
(c) the promoter's failure to comply with a requirement under or by virtue of paragraph 29 or 30 in relation to another proposal or other arrangements.
(6) Where an order is made under this paragraph in respect of a proposal or arrangements, the relevant period for the purposes of sub-paragraph (1) of paragraph 11 or 12 in so far as it applies by virtue of the order is the period of 11 days beginning with the day on which the order is made.
(7) An order under this paragraph in relation to a proposal or arrangements is without prejudice to the possible application of any of paragraphs 11 to 15, other than by virtue of this paragraph, to the proposal or arrangements.
“Tax advantage” in relation to VAT
6 (1) A person (P) obtains a tax advantage in relation to VAT if—
(a) in any prescribed accounting period, the amount by which the output tax accounted for by P exceeds the input tax deducted by P is less than it would otherwise be;
(b) P obtains a VAT credit when P would otherwise not do so, or obtains a larger credit or obtains a credit earlier than would otherwise be the case;
(c) in a case where P recovers input tax as a recipient of a supply before the supplier accounts for the output tax, the period between the time when the input tax is recovered and the time when the output tax is accounted for is greater than would otherwise be the case;
(d) in any prescribed accounting period, the amount of P's non-deductible tax is less than it otherwise would be;
(e) P avoids an obligation to account for tax.
(2) In sub-paragraph (1)(d) “non-deductible tax”, in relation to a taxable person, means—
(a) input tax for which the person is not entitled to credit under section 25 of VATA 1994,
(b) any VAT incurred by the person which is not input tax and in respect of which the person is not entitled to a refund from the Commissioners by virtue of any provision of VATA 1994.
(3) For the purposes of sub-paragraph (2)(b), the VAT “incurred” by a taxable person is—
(a) VAT on the supply to the person of any goods or services,
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(c) VAT paid or payable by the person on the importation of any goods ....
(4) A person who is not a taxable person obtains a tax advantage in relation to VAT if that person's non-refundable tax is less that it otherwise would be.
(5) In sub-paragraph (4) “non-refundable tax” means—
(a) VAT on the supply to the person of any goods or services,
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(c) VAT paid or payable by the person on the importation of any goods ...,
but excluding (in each case) any VAT in respect of which the person is entitled to a refund from the Commissioners by virtue of any provision of VATA 1994.
(6) Terms used in this paragraph which are defined in section 96 of VATA 1994 have the meanings given by that section.
“Tax advantage” in relation to taxes other than VAT
7 “Tax advantage”, in relation to an indirect tax other than VAT, means—
(a) relief or increased relief from tax,
(b) repayment or increased repayment of tax,
(c) avoidance or reduction of a charge to tax, an assessment of tax or a liability to pay tax,
(d) avoidance of a possible assessment to tax or liability to pay tax,
(e) deferral of a payment of tax or advancement of a repayment of tax, or
(f) avoidance of an obligation to deduct or account for tax.
“Promoter”
8 (1) This paragraph describes when a person (P) is a promoter in relation to a notifiable proposal or notifiable arrangements.
(2) P is a promoter in relation to a notifiable proposal if, in the course of a relevant business, P—
(a) is to any extent responsible for the design of the proposed arrangements,
(b) makes a firm approach to another person (C) in relation to the proposal with a view to P making the proposal available for implementation by C or any other person, or
(c) makes the proposal available for implementation by other persons.
(3) P is a promoter in relation to notifiable arrangements if—
(a) P is by virtue of sub-paragraph (2)(b) or (c) a promoter in relation to a notifiable proposal which is implemented by the arrangements, or
(b) if in the course of a relevant business, P is to any extent responsible for—
(i) the design of the arrangements, or
(ii) the organisation or management of the arrangements.
(4) In this paragraph “relevant business” means any trade, profession or business which—
(a) involves the provision to other persons of services relating to taxation, or
(b) is carried on by a bank or securities house.
(5) In sub-paragraph (4)(b)—
“bank” has the meaning given by section 1120 of CTA 2010, and
“securities house” has the meaning given by section 1009(3) of that Act.
(6) For the purposes of this paragraph anything done by a company is to be taken to be done in the course of a relevant business if it is done for the purposes of a relevant business falling within sub-paragraph (4)(b) carried on by another company which is a member of the same group.
(7) Section 170 of the TCGA 1992 has effect for determining for the purposes of sub-paragraph (6) whether two companies are members of the same group, but as if in that section—
(a) for each of the references to a 75 per cent subsidiary there were substituted a reference to a 51 per cent subsidiary, and
(b) subsection (3)(b) and subsections (6) to (8) were omitted.
(8) A person is not to be treated as a promoter by reason of anything done in prescribed circumstances.
(9) In the application of this Schedule to a proposal or arrangements which are not notifiable, a reference to a promoter is a reference to a person who would be a promoter under this paragraph if the proposal or arrangements were notifiable.
“Introducer”
9 (1) A person is an introducer in relation to a notifiable proposal if the person makes a marketing contact with another person in relation to the proposal.
(2) A person is not to be treated as an introducer by reason of anything done in prescribed circumstances.
(3) In the application of this Schedule to a proposal or arrangements which are not notifiable, a reference to an introducer is a reference to a person who would be an introducer under this paragraph if the proposal or arrangements were notifiable.
“Makes a firm approach” and “marketing contact”
10 (1) A person makes a firm approach to another person in relation to a ... proposal if the person makes a marketing contact with the other person in relation to the proposal at a time when the proposed arrangements have been substantially designed.
(2) A person makes a marketing contact with another person in relation to a notifiable proposal if—
(a) the person communicates information about the proposal to the other person,
(b) the communication is made with a view to that other person, or any other person, entering into transactions forming part of the proposed arrangements, and
(c) the information communicated includes an explanation of the tax advantage that might be expected to be obtained from the proposed arrangements.
(3) For the purposes of sub-paragraph (1) proposed arrangements have been substantially designed at any time if by that time the nature of the transactions to form part of them has been sufficiently developed for it to be reasonable to believe that a person who wished to obtain the tax advantage mentioned in sub-paragraph (2)(c) might enter into—
(a) transactions of the nature developed, or
(b) transactions not substantially different from transactions of that nature.
Duties of promoter in relation to notifiable proposals or notifiable arrangements
11 (1) A person who is a promoter in relation to a notifiable proposal must, within the relevant period, provide HMRC with prescribed information relating to the proposal.
(2) In sub-paragraph (1) “the relevant period” is the period of 31 days beginning with the relevant date.
(3) In sub-paragraph (2) “the relevant date” is the earliest of the following—
(a) the date on which the promoter first makes a firm approach to another person in relation to the proposal,
(b) the date on which the promoter makes the proposal available for implementation by any other person, or
(c) the date on which the promoter first becomes aware of any transaction forming part of notifiable arrangements implementing the proposal.
12 (1) A person who is a promoter in relation to notifiable arrangements must, within the relevant period after the date on which the person first becomes aware of any transaction forming part of the arrangements, provide HMRC with prescribed information relating to the arrangements.
(2) In sub-paragraph (1) “the relevant period” is the period of 31 days beginning with that date.
(3) The duty under sub-paragraph (1) does not apply if the notifiable arrangements implement a proposal in respect of which notice has been given to HMRC under paragraph 11(1).
13 (1) This paragraph applies where a person complies with paragraph 11(1) in relation to a notifiable proposal for arrangements and another person is—
(a) also a promoter in relation to the proposal or is a promoter in relation to a notifiable proposal for arrangements which are substantially the same as the proposed arrangements (whether they relate to the same or different parties), or
(b) a promoter in relation to notifiable arrangements implementing the proposal or notifiable arrangements which are substantially the same as notifiable arrangements implementing the proposal (whether they relate to the same or different parties).
(2) Any duty of the other person under paragraph 11(1) or 12(1) in relation to the notifiable proposal or notifiable arrangements is discharged if—
(a) the person who complied with paragraph 11(1) has notified the identity and address of the other person to HMRC or the other person holds the reference number allocated to the proposed notifiable arrangements under paragraph 22(1), and
(b) the other person holds the information provided to HMRC in compliance with paragraph 11(1).
14 (1) This paragraph applies where a person complies with paragraph 12(1) in relation to notifiable arrangements and another person is—
(a) a promoter in relation to a notifiable proposal for arrangements which are substantially the same as the notifiable arrangements (whether they relate to the same or different parties), or
(b) also a promoter in relation to the notifiable arrangements or notifiable arrangements which are substantially the same (whether they relate to the same or different parties).
(2) Any duty of the other person under paragraph 11(1) or 12(1) in relation to the notifiable proposal or notifiable arrangements is discharged if—
(a) the person who complied with paragraph 12(1) has notified the identity and address of the other person to HMRC or the other person holds the reference number allocated to the notifiable arrangements under paragraph 22(1), and
(b) the other person holds the information provided to HMRC in compliance with paragraph 12(1).
15 Where a person is a promoter in relation to two or more notifiable proposals or sets of notifiable arrangements which are substantially the same (whether they relate to the same parties or different parties) the person need not provide information under paragraph 11(1) or 12(1) if the person has already provided information under either of those paragraphs in relation to any of the other proposals or arrangements.
Duty of promoter: supplemental information
16 (1) This paragraph applies where—
(a) a promoter (P) has provided information in purported compliance with paragraph 11(1) or 12(1), but
(b) HMRC believe that P has not provided all the prescribed information.
(2) HMRC may apply to the tribunal for an order requiring P to provide specified information about, or documents relating to, the notifiable proposal or arrangements.
(3) The tribunal may make an order under sub-paragraph (2) in respect of information or documents only if satisfied that HMRC have reasonable grounds for suspecting that the information or documents—
(a) form part of the prescribed information, or
(b) will support or explain the prescribed information.
(4) A requirement by virtue of sub-paragraph (2) is to be treated as part of P's duty under paragraph 11(1) or 12(1).
(5) In so far as P's duty under sub-paragraph (1) of paragraph 11 or 12 arises out of an order made by virtue of sub-paragraph (2) above the relevant period for the purposes of that sub-paragraph (1) is—
(a) the period of 11 days beginning with the date of the order, or
(b) such longer period as HMRC may direct.
Duty of person dealing with promoter outside United Kingdom
17 (1) This paragraph applies where a person enters into any transaction forming part of any notifiable arrangements in relation to which—
(a) a promoter is resident outside the United Kingdom, and
(b) no promoter is resident in the United Kingdom.
(2) The person must, within the relevant period, provide HMRC with prescribed information relating to the arrangements.
(3) In sub-paragraph (2) “the relevant period” is the period of 6 days beginning with the day on which the person enters into the first transaction forming part of the arrangements.
(4) Compliance with paragraph 11(1) or 12(1) by any promoter in relation to the arrangements discharges the person's duty under sub-paragraph (1).
Duty of parties to notifiable arrangements not involving promoter
18 (1) This paragraph applies to any person who enters into any transaction forming part of notifiable arrangements as respects which neither that person nor any other person in the United Kingdom is liable to comply with paragraph 11(1), 12(1) or 17(2).
(2) The person must at the prescribed time provide HMRC with prescribed information relating to the arrangements.
Duty to provide further information requested by HMRC
19 (1) This paragraph applies where—
(a) a person has provided the prescribed information about notifiable proposals or arrangements in compliance with paragraph 11(1), 12(1), 17(2) or 18(2), or
(b) a person has provided information in purported compliance with paragraph 17(2) or 18(2) but HMRC believe that the person has not provided all the prescribed information.
(2) HMRC may require the person to provide—
(a) further specified information about the notifiable proposals or arrangements (in addition to the prescribed information under paragraph 11(1), 12(1), 17(2) or 18(2));
(b) documents relating to the notifiable proposals or arrangements.
(3) Where HMRC impose a requirement on a person under this paragraph, the person must comply with the requirement within—
(a) the period of 10 working days beginning with the day on which HMRC imposed the requirement, or
(b) such longer period as HMRC may direct.
20 (1) This paragraph applies where HMRC—
(a) have required a person to provide information or documents under paragraph 19, but
(b) believe that the person has failed to provide the information or documents required.
(2) HMRC may apply to the tribunal for an order requiring the person to provide the information or documents required.
(3) The tribunal may make an order imposing such a requirement only if satisfied that HMRC have reasonable grounds for suspecting that the information or documents will assist HMRC in considering the notifiable proposals or arrangements.
(4) Where the tribunal makes an order imposing such a requirement, the person must comply with the requirement within—
(a) the period of 10 working days beginning with the day on which the tribunal made the order, or
(b) such longer period as HMRC may direct.
Duty of promoters to provide updated information
21 (1) This paragraph applies where—
(a) information has been provided under paragraph 11(1), or 12(1) about any notifiable arrangements, or proposed notifiable arrangements, to which a reference number is allocated under paragraph 22, and
(b) after the provision of the information, there is a change in relation to the arrangements of a kind mentioned in sub-paragraph (2).
(2) The changes referred to in sub-paragraph (1)(b) are—
(a) a change in the name by which the notifiable arrangements, or proposed notifiable arrangements, are known;
(b) a change in the name or address of any person who is a promoter in relation to the arrangements or, in the case of proposed arrangements, the notifiable proposal.
(3) A person who is a promoter in relation to the notifiable arrangements or, in the case of proposed notifiable arrangements, the notifiable proposal must inform HMRC of the change mentioned in sub-paragraph (1)(b) within 30 days after it is made.
(4) Sub-paragraphs (5) and (6) apply for the purposes of sub-paragraph (3) where there is more than one person who is a promoter in relation to the notifiable arrangements or proposal.
(5) If the change in question is a change in the name or address of a person who is a promoter in relation to the notifiable arrangements or proposal, it is the duty of that person to comply with sub-paragraph (3).
(6) If a person provides information in compliance with sub-paragraph (3), the duty imposed by that sub-paragraph on any other person, so far as relating to the provision of that information, is discharged.
Notice of potential allocation of reference number: arrangements and proposals suspected of being notifiable
21A (1) This paragraph applies where—
(a) HMRC have become aware that—
(i) a transaction forming part of arrangements has been entered into,
(ii) a firm approach has been made to a person in relation to a proposal for arrangements, with a view to making the proposal available for implementation, or
(iii) a proposal for arrangements is made available for implementation, and
(b) HMRC have reasonable grounds for suspecting that the arrangements are notifiable, or the proposal is notifiable.
(2) HMRC may issue a notice to a person explaining that, unless the person is able to satisfy HMRC, before the end of the notice period, that the arrangements are not notifiable or (as the case may be) the proposal is not notifiable, HMRC may allocate a reference number to the arrangements or (in the case of a proposal) the proposed arrangements.
(3) But HMRC may not issue a notice under this paragraph before the end of the period of 15 days beginning with the day on which they first become aware that the condition in paragraph (a)(i), (ii) or (iii) of sub-paragraph (1) is met.
(4) A notice under this paragraph must be issued to any person who, on the day the notice is issued, HMRC reasonably suspect to be a promoter in relation to the arrangements or proposal.
(5) A notice under this paragraph may be issued to any other person who HMRC reasonably suspect to be involved in the supply of the arrangements or proposed arrangements.
Allocation of reference number to arrangements
22 (1) This paragraph applies in—
(a) a sub-paragraph (2) case, or
(b) a sub-paragraph (3) case.
(2) A “sub-paragraph (2) case” is a case where a person complies, or purports to comply, with paragraph 11(1), 12(1), 17(2) or 18(2) in relation to a notifiable proposal or notifiable arrangements.
(3) A “sub-paragraph (3) case” is a case where—
(a) notice in relation to arrangements or a proposal has been issued in accordance with paragraph 21A (notice of potential allocation of reference number),
(b) the notice period has expired, and
(c) the person to whom the notice was given has failed to satisfy HMRC, before the expiry of the notice period, that the arrangements are not notifiable or (as the case may be) that the proposal is not notifiable.
(4) “The notice period” means—
(a) the period of 30 days beginning with the day on which the notice under paragraph 21A is issued, or
(b) such longer period as HMRC may direct.
(5) HMRC may allocate a reference number to the arrangements or, in the case of a proposal, the proposed arrangements, subject to sub-paragraph (6).
(6) HMRC may not allocate a reference number to arrangements or proposed arrangements after the time limit for doing so.
(7) The time limit for allocating a reference number is—
(a) in a sub-paragraph (2) case, the end of the period of 90 days beginning with the compliance, or purported compliance, with paragraph 11(1), 12(1), 17(2) or 18(2), as the case may be;
(b) in a sub-paragraph (3) case, the end of the period of one year beginning with the day after the end of the notice period (see sub-paragraph (4)).
(8) HMRC may at any time withdraw a reference number allocated to arrangements in a sub-paragraph (3) case.
(9) The allocation of a reference number to arrangements or proposed arrangements is not to be regarded as constituting an indication by HMRC that the arrangements could as a matter of law result in the obtaining by any person of a tax advantage.
Duty of HMRC to notify persons of reference number
22A (1) If a reference number is allocated in a case within paragraph 22(2), HMRC must notify the following of the number—
(a) the person who has complied, or purported to comply, with paragraph 11(1), 12(1), 17(2) or 18(2), and
(b) where the person has complied, or purported to comply, with paragraph 11(1) or 12(1), any other person—
(i) who is a promoter in relation to the proposal (or arrangements implementing it) or the arrangements (or a proposal implemented by them), and
(ii) whose identity and address have been notified to HMRC by the person who complied, or purported to comply, with paragraph 11(1) or 12(1).
(2) If a reference number is allocated in a case within paragraph 22(3), HMRC must notify the following of the number—
(a) any person who HMRC reasonably suspect to be, or to have been, a promoter in relation to the arrangements or the proposed arrangements, and
(b) any other person who HMRC reasonably suspect to be, or to have been, involved in the supply of the arrangements or the proposed arrangements.
(3) The duty in sub-paragraph (2) applies irrespective of whether the notice under paragraph 21A as a result of which the reference number was allocated has been issued to the person concerned.
Right of appeal: paragraph 22(3) case
22B (1) This paragraph applies where HMRC have allocated a reference number to arrangements or proposed arrangements in a case within paragraph 22(3).
(2) A person who has been notified of the reference number may appeal to the tribunal against its allocation.
(3) An appeal under this paragraph may be brought only on the following grounds—
(a) that, in issuing the notice under paragraph 21A as a result of which the reference number was allocated, HMRC did not act in accordance with that paragraph;
(b) that, in allocating the reference number, HMRC did not act in accordance with paragraph 22;
(c) that the arrangements are not in fact notifiable arrangements or, in the case of proposed arrangements, that the proposal for the arrangements is not in fact a notifiable proposal.
(4) Notice of appeal under this paragraph must be given to the tribunal in writing before the end of the period of 30 days beginning with the day on which the person is notified of the number by HMRC.
(5) Notice may be given after that time if the tribunal give permission.
(6) The notice of appeal must specify the grounds of appeal.
(7) On an appeal under this paragraph, the tribunal may affirm or cancel HMRC's decision.
(8) If the tribunal cancel HMRC's decision, HMRC must withdraw the reference number.
(9) Bringing an appeal under this paragraph does not prevent—
(a) a power conferred by this Part of this Schedule from being exercised, or
(b) a duty imposed by this Part of this Schedule from continuing to apply.
Duty to provide further information requested by HMRC: paragraph 22(3) case
22C (1) This paragraph applies where HMRC have allocated a reference number to arrangements or proposed arrangements in a case within paragraph 22(3).
(2) HMRC may require a relevant person to provide—
(a) specified information about the arrangements or proposed arrangements;
(b) documents relating to the arrangements or proposed arrangements.
(3) In sub-paragraph (2), “relevant person” means—
(a) any person who HMRC reasonably suspect to be, or to have been, a promoter in relation to the arrangements or the proposed arrangements;
(b) any other person who HMRC reasonably suspect to be, or to have been, involved in the supply of the arrangements or the proposed arrangements.
(4) HMRC may require information or documents only if they have reasonable grounds for suspecting that the information or documents will assist them in considering the arrangements or proposed arrangements.
(5) Where HMRC impose a requirement on a person under sub-paragraph (2), the person must comply with the requirement before the end of—
(a) the period of 10 working days beginning with the day on which HMRC imposed the requirement, or
(b) such longer period as HMRC may direct.
Duty of promoter to notify client of number : paragraph 22(2) case
23 (1) This paragraph applies where a person who is a promoter in relation to notifiable arrangements is providing (or has provided) services to any person (“the client”) in connection with the arrangements.
(2) The promoter must, within 30 days after the relevant date, provide the client with prescribed information relating to any reference number allocated in a case within paragraph 22(2) (or, if more than one, any one such reference number) that has been notified to the promoter (whether by HMRC or any other person) in relation to—
(a) the notifiable arrangements, or
(b) any arrangements substantially the same as the notifiable arrangements (whether involving the same or different parties).
(3) In sub-paragraph (2) “the relevant date” means the later of—
(a) the date on which the promoter becomes aware of any transaction which forms part of the notifiable arrangements, and
(b) the date on which the reference number is notified to the promoter.
(4) But where the conditions in sub-paragraph (5) are met the duty imposed on the promoter under sub-paragraph (2) to provide the client with information in relation to notifiable arrangements is discharged
(5) Those conditions are—
(a) that the promoter is also a promoter in relation to a notifiable proposal and provides services to the client in connection with them both,
(b) the notifiable proposal and the notifiable arrangements are substantially the same, and
(c) the promoter has provided to the client, in a form and manner specified by HMRC, prescribed information relating to the reference number that has been notified to the promoter in relation to the proposed notifiable arrangements.
(6) HMRC may give notice that, in relation to notifiable arrangements specified in the notice, promoters are not under the duty under sub-paragraph (2) after the date specified in the notice.
Duty to notify client of reference number: paragraph 22(3) case
23A (1) This paragraph applies where a person is providing (or has provided) services to any person (“the client”) in connection with arrangements or proposed arrangements.
(2) The person must, before the end of the period of 30 days beginning with the relevant date, provide the client with prescribed information relating to any reference number allocated in a case within paragraph 22(3) (or, if more than one, any one such reference number) that has been notified to the person (whether by HMRC or any other person) in relation to—
(a) the arrangements or proposed arrangements, or
(b) any arrangements substantially the same as the arrangements or proposed arrangements (whether involving the same or different parties).
(3) “The relevant date” means the date on which the person has been notified of the reference number.
(4) HMRC may give notice that, in relation to arrangements or proposed arrangements specified in the notice, no person is under the duty under sub-paragraph (2) after the date specified in the notice.
Duty of client to notify parties of number
24 (1) In this paragraph “client” means a person to whom a person ... is providing (or has provided) services in connection with arrangements or a proposal.
(2) Sub-paragraph (3) applies where—
(a) the client receives prescribed information under paragraph 23 relating to the reference number allocated to—
(i) the arrangements or proposed arrangements, or
(ii) any arrangements substantially the same as the arrangements or proposed arrangements; or
(b) the client receives prescribed information under paragraph 23A relating to the reference number allocated to—
(i) the arrangements or proposed arrangements, or
(ii) any arrangements substantially the same as the arrangements or proposed arrangements.
(3) The client must, within the relevant period, provide prescribed information relating to the reference number to any other person—
(a) who the client might reasonably be expected to know is or is likely to be a party to the arrangements or proposed arrangements, and
(b) who might reasonably be expected to gain a tax advantage in relation to any relevant tax by reason of the arrangements or proposed arrangements.
(4) In sub-paragraph (3) “the relevant period” is the period of 30 days beginning with the later of—
(a) the day on which the client first becomes aware of any transaction forming part of the arrangements or proposed arrangements, and
(b) the day on which the prescribed information is notified to the client under paragraph 23 or (as the case may be) paragraph 23A.
(5) HMRC may give notice that, in relation to arrangements or a proposal specified in the notice, persons are not under the duty under sub-paragraph (3) after the date specified in the notice.
(6) The duty under sub-paragraph (3) does not apply in prescribed circumstances.
(7) For the purposes of this paragraph a tax is a “relevant tax”, in relation to arrangements or arrangements proposed in a proposal of any description, if it is prescribed in relation to arrangements or proposals of that description by regulations under paragraph 3(1).
Duty of client to provide information ...
25 (1) This paragraph applies where a person (“the client”) has been provided with information under paragraph 23(2) or 23A(2) (prescribed information about reference number).
(2) The client must, within the relevant period, provide the person who provided the information with prescribed information relating to the client.
(3) In sub-paragraph (2) “the relevant period” is the period of 11 days beginning with the later of—
(a) the date the client receives the reference number for the arrangements, and
(b) the date the client first enters into a transaction which forms part of the arrangements.
(4) The duty under sub-paragraph (2) is subject to any exceptions that may be prescribed.
Duty of parties to notify HMRC of reference number etc
26 (1) Any person (P) who is a party to any ... arrangements must provide HMRC with prescribed information relating to—
(a) any reference number notified to P under paragraph 23 , 23A or 24, and
(b) the time when P obtains or expects to obtain by virtue of the arrangements a tax advantage in relation to any relevant tax.
(2) For the purposes of sub-paragraph (1) a tax is a “relevant tax” in relation to arrangements of any description if it is prescribed in relation to arrangements of that description by regulations under paragraph 3(1).
(3) Regulations made by the Commissioners may—
(a) in prescribed cases, require the information prescribed under sub-paragraph (1) to be given to HMRC—
(i) in the prescribed manner,
(ii) in the prescribed form,
(iii) at the prescribed time, and
(b) in prescribed cases, require the information prescribed under sub-paragraph (1) and such other information as is prescribed to be provided separately to HMRC at the prescribed time or times.
(4) In sub-paragraph (3) “prescribed” includes being prescribed in a document made under a power conferred by regulations made by the Commissioners.
(5) HMRC may give notice that, in relation to ... arrangements specified in the notice, persons are not under the duty under sub-paragraph (1) after the date specified in the notice.
(6) The duty under sub-paragraph (1) does not apply in prescribed circumstances.
Duty ... to provide details of clients
27 (1) This paragraph applies where a person who is a promoter in relation to notifiable arrangements is providing (or has provided) services to any person (“the client”) in connection with the arrangements and either—
(a) the promoter is subject to the requirement under paragraph 23(2) to provide to the client prescribed information relating to the reference number allocated to—
(i) the arrangements, or
(ii) any arrangements substantially the same as the arrangements; or
(b) the promoter has failed to comply with paragraph 11(1) or 12(1) in relation to the notifiable arrangements (or the notifiable proposal for them) but would be subject to that requirement if a reference number had been allocated to—
(i) the notifiable arrangements, or
(ii) any arrangements substantially the same as the arrangements.
(1A) This paragraph also applies where—
(a) a person (“the provider”) is providing (or has provided) services to another person (“the client”) in connection with arrangements or proposed arrangements, and
(b) the provider is subject to the requirement under paragraph 23A(2) to provide to the client prescribed information relating to the reference number allocated to—
(i) the arrangements or proposed arrangements, or
(ii) any arrangements substantially the same as the arrangements or proposed arrangements.
(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3) The promoter or (as the case may be) provider must, within the prescribed period after the end of the relevant period, provide HMRC with prescribed information in relation to the client.
(4) In sub-paragraph (3) “the relevant period” means—
(a) in a case within sub-paragraph (1), such period as is prescribed and is a period during which the promoter is or would be subject to the requirement mentioned in that sub-paragraph;
(b) in a case within sub-paragraph (1A), such period as is prescribed and is a period during which the provider is or would be subject to the requirement mentioned in that sub-paragraph.
(5) The promoter need not comply with sub-paragraph (3) in relation to any notifiable arrangements at any time after HMRC have given notice under paragraph 23(6) in relation to the arrangements.
(6) The provider need not comply with sub-paragraph (3) in relation to any arrangements at any time after HMRC have given notice under paragraph 23A(4) in relation to the arrangements.
Enquiry following disclosure of client details
28 (1) This paragraph applies where—
(a) a person (“the service provider”) is providing or has provided services to another person (“the client”) in connection with arrangements or proposed arrangements,
(aa) the service provider has provided HMRC with information in relation to the client under paragraph 27(3), and
(b) HMRC suspect that a person other than the client is or is likely to be a party to the arrangements.
(2) HMRC may by written notice require the service provider to provide prescribed information in relation to any person other than the client who the service provider might reasonably be expected to know is or is likely to be a party to the arrangements.
(3) The service provider must comply with a requirement under or by virtue of sub-paragraph (2) within—
(a) the relevant period, or
(b) such longer period as HMRC may direct.
(4) In sub-paragraph (3) “the relevant period” is the period of 11 days beginning with the day on which the service provider receives the notice under sub-paragraph (2).
Pre-disclosure enquiry
29 (1) Where HMRC suspect that a person (P) is the promoter or introducer of a proposal, or the promoter of arrangements, which may be notifiable, they may by written notice require P to state—
(a) whether in P's opinion the proposal or arrangements are notifiable by P, and
(b) if not, the reasons for P's opinion.
(2) The notice must specify the proposal or arrangements to which it relates.
(3) For the purposes of sub-paragraph (1)(b)—
(a) it is not sufficient to refer to the fact that a lawyer or other professional has given an opinion,
(b) the reasons must show, by reference to this Part of this Schedule and regulations under it, why P thinks the proposal or arrangements are not notifiable by P, and
(c) in particular, if P asserts that the arrangements do not fall within any description prescribed under paragraph 3(1)(a), the reasons must provide sufficient information to enable HMRC to confirm the assertion.
(4) P must comply with a requirement under or by virtue of sub-paragraph (1) within—
(a) the relevant period, or
(b) such longer period as HMRC may direct.
(5) In sub-paragraph (4) “the relevant period” is the period of 11 days beginning with the day on which the notice under sub-paragraph (1) is issued.
Reasons for non-disclosure: supporting information
30 (1) Where HMRC receive from a person (P) a statement of reasons why a proposal or arrangements are not notifiable by P, HMRC may apply to the tribunal for an order requiring P to provide specified information or documents in support of the reasons.
(2) P must comply with a requirement under or by virtue of sub-paragraph (1) within—
(a) the relevant period, or
(b) such longer period as HMRC may direct.
(3) In sub-paragraph (2) “the relevant period” is the period of 15 days beginning with the day on which the order concerned is made.
(4) The power under sub-paragraph (1)—
(a) may be exercised more than once, and
(b) applies whether or not the statement of reasons was received under paragraph 29(1)(b).
Provision of information to HMRC by introducers
31 (1) This paragraph applies where HMRC suspect—
(a) that a person (P) is an introducer in relation to a proposal, and
(b) that the proposal may be notifiable.
(2) HMRC may by written notice require P to provide HMRC with one or both of the following—
(a) prescribed information in relation to each person who has provided P with any information relating to the proposal,
(b) prescribed information in relation to each person with whom P has made a marketing contact in relation to the proposal.
(3) A notice must specify the proposal to which it relates.
(4) P must comply with a requirement under or sub-paragraph(2) within—
(a) the relevant period, or
(b) such longer period as HMRC may direct.
(5) In sub-paragraph (4) “the relevant period” is the period of 11 days beginning with the day on which the notice under sub-paragraph (2) is given.
Legal professional privilege
32 (1) Nothing in this Part of this Schedule requires any person to disclose to HMRC any privileged information.
(2) In this Part of this Schedule “privileged information” means information with respect to which a claim to legal professional privilege, or, in Scotland, to confidentiality of communications, could be maintained in legal proceedings.
Information
33 (1) This paragraph applies where a person is required to provide information under paragraph 23(2) , 23A(2) or 24(3).
(2) HMRC may specify additional information which must be provided by that person to the recipients under paragraph 23(2) , 23A(2) or 24(3) at the same time as the information referred to in sub-paragraph (1).
(3) HMRC may specify the form and manner in which the additional information is to be provided.
(4) For the purposes of this paragraph “additional information” means information supplied by HMRC which relates to notifiable proposals or notifiable arrangements in general.
34 (1) HMRC may specify the form and manner in which information required to be provided by or under any of the information provisions must be provided if the provision is to be complied with.
(2) The “information provisions” are paragraphs 11(1), 12(1), 17(2), 18(2), 19(2), 21(3), 22C, 23(2), 23A(2), 24(3), 26(1) and (3), 27(3), 28(2), 29(1), 31(2) and 33(2).
35 No duty of confidentiality or other restriction on disclosure (however imposed) prevents the voluntary disclosure by any person to HMRC of information or documents which the person has reasonable grounds for suspecting will assist HMRC in determining whether there has been a breach of any requirement imposed by or under this Part of this Schedule.
36 (1) HMRC may publish information about—
(a) any arrangements, or proposed arrangements, to which a reference number is allocated under paragraph 22;
(b) where the reference number is allocated in a case within paragraph 22(2), any person who is a promoter in relation to the arrangements or, in the case of proposed arrangements, the proposal;
(c) where the reference number is allocated in a case within paragraph 22(3), any person who is or has been—
(i) a promoter in relation to the arrangements or proposed arrangements, or
(ii) otherwise involved in the supply of the arrangements or proposed arrangements.
(2) The information that may be published is (subject to sub-paragraph (4))—
(a) any information relating to arrangements within sub-paragraph (1)(a), or a person within sub-paragraph (1)(b) or (c), that is prescribed information for the purposes of paragraph any provision of this Part;
(b) any ruling of a court or tribunal relating to—
(i) arrangements within sub-paragraph (1)(a);
(ii) a person within sub-paragraph (1)(b), in that person's capacity as a promoter;
(iii) a person within sub-paragraph (1)(c), in that person's capacity as a promoter or a person otherwise involved in the supply of arrangements or proposed arrangements;
(c) the number of persons in any period who enter into transactions forming part of ... arrangements within sub-paragraph (1)(a);
(d) any other information that HMRC considers it appropriate to publish for the purpose of identifying arrangements within sub-paragraph (1)(a) or a person within sub-paragraph (1)(b) or (c).
(3) The information may be published in any manner that HMRC considers appropriate.
(4) No information may be published under this paragraph that identifies a person who enters into a transaction forming part of ... arrangements within sub-paragraph (1)(a).
(4A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5) But where a person within sub-paragraph (1)(b) or (c) is also a person mentioned in sub-paragraph (4), nothing in sub-paragraph (4) is to be taken as preventing the publication under this paragraph of information so far as relating to the person's activities as a promoter or a person involved in the supply of arrangements or proposed arrangements.
(6) Before publishing any information under this paragraph that identifies a person as a person within sub-paragraph (1)(b) or (c), HMRC must—
(a) inform the person that they are considering doing so, and
(b) give the person reasonable opportunity to
(i) make representations about whether it should be published , and
(ii) where section 209(2) of FA 2026 applies, provide a declaration made under that subsection substantiating those representations.
(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
37 (1) This paragraph applies if—
(a) information about ... arrangements, or proposed ... arrangements, is published under paragraph 36,
(b) at any time after the information is published, a ruling of a court or tribunal is made in relation to tax arrangements, and
(c) HMRC is of the opinion that the ruling is relevant to the arrangements mentioned in paragraph (a)
(2) A ruling is “relevant” to the arrangements if—
(a) the principles laid down, or reasoning given, in the ruling would, if applied to the arrangements, allow the purported advantage arising from the arrangements in relation to tax, and
(b) the ruling is final.
(3) HMRC must publish information about the ruling.
(4) The information must be published in the same manner as HMRC published the information mentioned in sub-paragraph (1)(a) (and may also be published in any other manner that HMRC considers appropriate).
(5) A 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.
(6) Where a ruling is final by virtue of sub-paragraph (ii), (iii) or (iv) of sub-paragraph (5)(b), the ruling is to be treated as made at the time when the sub-paragraph in question is first satisfied.
(7) In this paragraph “tax arrangements” means arrangements in respect of which it would be reasonable to conclude (having regard to all the circumstances) that the main purpose, or one of the main purposes, was the obtaining of a tax advantage.
Power to vary certain relevant periods
38 The Commissioners may by regulations amend this Part of this Schedule with a view to altering the definition of “the relevant period” for the purposes of—
paragraph 5(6)
paragraph 11(1)
paragraph 12(1)
paragraph 16(5)
paragraph 17(2)
paragraph 24(3)
paragraph 25(2)
paragraph 27(3)
paragraph 28(3)
paragraph 29(4)
paragraph 30(2))
paragraph 31(4).
PART 2 Penalties
Penalty for failure to comply with duties under Part 1 ...
39 (1) A person who fails to comply with a duty imposed by a provision of Part 1 of this Schedule mentioned in the first column of the table is liable to a penalty not exceeding the amount specified in relation to that provision in the second column.
Provision | Maximum penalty amount
Paragraph 11(1) or 12(1) (promoter’s duty to notify) | The applicable rate for each day on which the person fails to comply or, if sub-paragraph (3) applies, £1 million
Paragraph 17(2) (client’s duty to notify: no UK promoter) | The applicable rate for each day on which the person fails to comply or, if sub-paragraph (3) applies, £1 million
Paragraph 18(2) (client’s duty to notify: no promoter) | The applicable rate for each day on which the person fails to comply or, if sub-paragraph (3) applies, £1 million
Paragraph 19 (duty to provide further information) | The applicable rate for each day on which the person fails to comply or, if sub-paragraph (3) applies, £1 million
Paragraph 21 (promoter’s duty to update information) | £5,000
Paragraph 22C (duty to provide further information: paragraph 22(3) case) | The applicable rate for each day on which the person fails to comply or, if sub-paragraph (3) applies, £1 million
Paragraph 23(2) (promoter’s duty to notify client of SRN) | £5,000
Paragraph 23A(2) (duty to notify client of SRN: paragraph 22(3) case) | £5,000
Paragraph 24(3) (client’s duty to notify other persons of SRN) | £5,000
Paragraph 25(2) (client’s duty to provide client information to promoter or service provider) | £5,000
Paragraph 26(1) or regulations under paragraph 26(3) (other party’s duty to provide information) | The amount specified in sub-paragraph (4)
Paragraph 27(3) (promoter’s or service provider’s duty to provide client information) | £5,000
Paragraph 28 (service provider’s duty to provide other party’s information) | £5,000
Paragraph 29 (duty to provide statement on notifiability) | £5,000
Paragraph 30 (duty to provide supporting evidence on notifiability) | £5,000
Paragraph 31 (introducer’s duty to provide other person’s information) | £5,000
Paragraph 33 (duty to provide information in addition to SRN to client or other persons) | £5,000
(2) The “applicable rate” means—
(a) £600, or
(b) where an order has been made under paragraph 4 or 5 (orders about notifiability) in respect of the arrangements or proposal in relation to which the person fails to comply—
(i) £600 for each day falling before the end of the period of eleven days beginning with the day on which the order was made, and
(ii) £5,000 for each day falling after the end of that period.
(3) This sub-paragraph applies where an authorised officer considers that the amount otherwise specified in relation to the provision is inappropriately low.
(4) The amount specified for paragraph 26(1) or regulations under paragraph 26(3) is—
(a) £10,000, if the person has failed to comply with the paragraph or regulations on two or more other occasions during the period of 36 months ending with the date of the current failure,
(b) £7,500, if the person has failed to comply with the paragraph or regulations on one other occasion during the period of 36 months ending with the date of the current failure, or
(c) £5,000, in any other case.
(5) In sub-paragraph (1), a reference to a day on which a person fails to comply with a duty is a reference to a day that—
(a) begins after the day by which the person was required to comply with the duty, and
(b) ends before the earlier of—
(i) the day on which the person complies with the duty,
(ii) the day on which any reference number is allocated to the arrangements or proposed arrangements concerned in the circumstances described in sub-paragraph (6), and
(iii) the day on which a penalty under sub-paragraph (1) is imposed in relation to the failure.
(6) The circumstances are—
(a) the duty referred to in sub-paragraph (5) is a duty imposed by paragraph 11(1), 12(1), 17(2) or 18(2), and
(b) it is a case within paragraph 22(3).
(7) In this paragraph “authorised officer” means an officer of Revenue and Customs authorised by HMRC for the purposes of this paragraph.
40 (1) If—
(a) a penalty under paragraph 39 is imposed in relation to a person’s failure to comply with a duty, and
(b) after the penalty has been imposed, the person continues to fail to comply with the duty,
the person is liable to a further penalty not exceeding the applicable rate (as defined in paragraph 39(2)) for each day on which the failure continues.
(2) Sub-paragraph (1) does not apply to a failure to comply with a duty imposed by paragraph 26(1) or regulations under paragraph 26(3).
41 (1) In assessing the amount of a specified penalty (including considering whether an amount is inappropriately low under paragraph 39(3)), an authorised officer must have regard to all relevant considerations, including—
(a) the desirability of the penalty being set at a level which appears appropriate for deterring the person, or other persons, from similar failures to comply on future occasions;
(b) the amount of any fees received, or likely to have been received, by the person in connection with the proposal or arrangements concerned;
(c) in the case of a person entering into the arrangements, the amount of any advantage gained, or sought to be gained, by that person.
(2) In this paragraph—
(a) “authorised officer” means an officer of Revenue and Customs authorised by HMRC for the purposes of this paragraph;
(b) a “specified penalty” is a penalty under paragraph 39 that is imposed in relation to a person’s failure to comply with a duty imposed by paragraph 11(1), 12(1), 17(2), 18(2), 19 or 22C.
42 (1) The Treasury may by regulations make provision for the purpose of varying any of the amounts specified in paragraph 39 or 40.
(2) Regulations under this paragraph may include incidental or transitional provision.
43 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Penalty for failure to comply with duties under paragraph 26
44 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
...
45 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assessment of penalties ...
46 (1) Where a person is liable to a penalty under paragraph 39 or 40 an authorised officer may assess the amount due by way of a penalty.
(2) An assessment may not be made more than 12 months after evidence of facts sufficient to justify the making of the assessment first comes to the knowledge of HMRC.
(3) A notice of an assessment under sub-paragraph (1) stating—
(a) the date on which it is issued, and
(b) the time within which an appeal against the assessment may be made,
must be served on the person liable to the penalty.
(4) After the notice has been served the assessment may not be altered except in accordance with this paragraph or on appeal.
(5) If it is discovered by an authorised officer that the amount of a penalty assessed under this paragraph is or has become insufficient the officer may make an assessment in a further amount so that the penalty is set at the amount which, in the officer's opinion, is correct or appropriate.
(6) A penalty imposed by a decision under this paragraph—
(a) is due and payable at the end of the period of 30 days beginning with the date of the issue of the notice of the decision, and
(b) is to be treated for all purposes as if it were tax charged in an assessment and due and payable.
(7) In this paragraph “authorised officer” means an officer of Revenue and Customs authorised by HMRC for the purposes of this paragraph.
47 (1) Where a person (P) is served with notice of an assessment under paragraph 46—
(a) P may appeal against the decision that a penalty is payable by P, and
(b) P may appeal against the decision as to the amount of the penalty.
(2) An appeal under sub-paragraph (1) is to be treated for procedural purposes in the same way as an appeal against an assessment to the relevant tax (including by the application of any provision about the bringing of an appeal by notice to HMRC, about HMRC review of the decision or about determination of the appeal by the First-tier Tribunal or Upper Tribunal)
(3) Sub-paragraph (2) does not apply—
(a) so as to require P to pay a penalty before an appeal under sub-paragraph (1) is determined, or
(b) in respect of any other matter expressly provided for by this Schedule.
(4) On an appeal under sub-paragraph (1)(a) the tribunal may affirm or cancel the decision that a penalty is payable by P.
(5) On an appeal under sub-paragraph (1)(b) the tribunal may—
(a) affirm the decision as to the amount of the penalty, or
(b) substitute for that decision another decision that the authorised officer had power to make.
(6) In this paragraph “tribunal” means the First-tier Tribunal or Upper Tribunal (as appropriate by virtue of sub-paragraph (2)).
Reasonable excuse
48 (1) Liability to a penalty under this Part of this Schedule does not arise in relation to a particular failure to comply if the person concerned (P) satisfies HMRC or the relevant tribunal (as the case may be) that there is a reasonable excuse for the failure.
(2) For this purpose—
(a) an insufficiency of funds is not a reasonable excuse, unless attributable to events outside P's control,
(b) where P relied on any other person to do anything, that cannot be a reasonable excuse unless P took reasonable care to avoid the failure,
(c) where P had a reasonable excuse but the excuse has ceased, P is to be treated as continuing to have the excuse if the failure is remedied without unreasonable delay after the excuse ceased, and
(d) reliance on advice is to be taken automatically not to be a reasonable excuse if the advice was addressed to, or was given to, a person other than P or takes no account of P's individual circumstances.
49 (1) The making of an order under paragraph 4 or 5 against P does not of itself mean that P either did or did not have a reasonable excuse for non- compliance before the order was made.
(2) Where an order is made under paragraph 4 or 5 then for the purposes of paragraph 48—
(a) the person identified in the order as the promoter of the proposal or arrangements cannot, in respect of any time after the end of the period mentioned in paragraph 39(2)(b), rely on doubt as to notifiability as a reasonable excuse for failure to comply with paragraph 11(1) or 12(1), and
(b) any delay in compliance with that provision after the end of that period is not capable of being a reasonable excuse unless attributable to something other than doubt as to notifiability.
50 (1) Where a person fails to comply with—
(a) paragraph 17(2) and the promoter for the purposes of paragraph 17 is a monitored promoter, or
(b) paragraph 18(2) and the arrangements for the purposes of paragraph 18 are arrangements of a monitored promoter,
then for the purposes of paragraph 48 legal advice which the person took into account is to be disregarded in determining whether the person had a reasonable excuse, if the advice was given or procured by that monitored promoter.
(2) In determining for the purpose of paragraph 48 whether or not a person who is a monitored promoter had a reasonable excuse for a failure to do something, reliance on legal advice is to be taken automatically not to constitute a reasonable excuse if either—
(a) the advice was not based on a full and accurate description of the facts, or
(b) the conclusions in the advice that the person relied on were unreasonable.
(3) In this paragraph “monitored promoter” means a person who is a monitored promoter for the purposes of Part 5 of FA 2014
PART 3 Consequential amendments
VATA 1994
51 In section 77(4A) of VATA 1994 (cases in which the time allowed for assessment is 20 years), in paragraph (d) after “11A” insert “ or an obligation under paragraph 17(2) or 18(2) of Schedule 17 to FA 2017 ”.
Promoters of tax avoidance schemes
52 Part 5 of FA 2014 (promoters of tax avoidance schemes) is amended as follows.
53 (1) Section 281A (VAT: meaning of “tax advantage”) is amended as follows.
(2) In the heading after “VAT” insert “ and other indirect taxes ”.
(3) In subsection (1)—
(a) in paragraph (a) after “VAT” insert “ and other indirect taxes ”, and
(b) in paragraph (b) for the words from “in paragraph 1” to the end substitute “for VAT in paragraph 6, and for other indirect taxes in paragraph 7, of Schedule 17 to FA 2017 (disclosure of tax avoidance schemes: VAT and other indirect taxes).
(4) In subsection (3) after “value added tax” (in both places) insert “ or other indirect taxes ”.
(5) After subsection (3) insert—
(4) In this section “indirect tax” has the same meaning as in Schedule 17 to FA 2017.
54 (1) Schedule 34A (defeated arrangements) is amended as follows.
(2) In paragraph 2(4) after “schemes)” insert “or paragraph 22 of Schedule 17 to FA 2017 (disclosure of avoidance schemes: VAT and other indirect taxes).
(3) In paragraph 14—
(a) in sub-paragraph (1)(a) after “VAT” insert “ or other indirect tax ”, and
(b) in sub-paragraphs (1)(a) and (b), (2) and (3) omit “taxable”.
(4) After paragraph 26 insert—
“Disclosable VAT or other indirect tax arrangements”
26A (1) For the purposes of this Schedule arrangements are “disclosable VAT or other indirect tax arrangements” at any time if at that time—
(a) the arrangements are disclosable Schedule 11A arrangements, or
(b) sub-paragraph (2) applies.
(2) This sub-paragraph applies if a person—
(a) has provided information in relation to the arrangements under paragraph 12(1), 17(2) or 18(2) of Schedule 17 to FA 2017, or
(b) has failed to comply with any of those provisions in relation to the arrangements.
(3) But for the purposes of this Schedule arrangements in respect of which HMRC have given notice under paragraph 23(6) of that Schedule (notice that promoters not under duty to notify client of reference number) are not to be regarded as disclosable VAT or other indirect tax arrangements.
(4) For the purposes of sub-paragraph (2) a person who would be required to provide information under paragraph 12(1) of that Schedule—
(a) but for the fact that the arrangements implement a proposal in respect of which notice has been given under paragraph 11(1) of that Schedule, or
(b) but for paragraph 13, 14 or 15 of that Schedule,
is treated as providing the information at the end of the period referred to in paragraph 12(1).
(5) In the heading before paragraph 27, after “ “disclosable” insert “ Schedule 11A ”.
(6) In paragraph 27—
(a) for “this Schedule” substitute “ paragraph 26A ”, and
(b) after “ “disclosable” insert “ Schedule 11A ”.
(7) In the heading before paragraph 28 for “and 27” substitute “ to 27 ”.
(8) In paragraph 28(1) after “26(1)(a)” insert “26A(2)(a)
Serial tax avoidance
55 (1) Schedule 18 to FA 2016 (serial tax avoidance) is amended as follows.
(2) In paragraph 4 (meaning of “tax”)—
(a) number the current text as sub-paragraph (1) of that paragraph,
(b) in that sub-paragraph (1), in paragraph (j) after “VAT” insert” “ and indirect taxes ”, and
(c) after that sub-paragraph (1) insert—
(2) For the purposes of this Schedule “indirect tax” means any of the following—
insurance premium tax
general betting duty
pool betting duty
remote gaming duty
machine games duty
gaming duty
lottery duty
bingo duty
air passenger duty
hydrocarbon oils duty
tobacco products duty
duties on spirits, beer, wine, made-wine and cider
soft drinks industry levy
aggregates levy
landfill tax
climate change levy
customs duties.
(3) Before paragraph 9 (meaning of “disclosable VAT arrangements”) insert—
8A (1) For the purposes of this Schedule arrangements are “disclosable VAT arrangements” at any time if at that time sub-paragraph (2) or (3) applies.
(2) This sub-paragraph applies if the arrangements are disclosable Schedule 11A VAT arrangements (see paragraph 9).
(3) This paragraph applies if—
(a) the arrangements are notifiable arrangements for the purposes of Schedule 17 to FA 2017,
(b) the main benefit, or one of the main benefits that might be expected to arise from the arrangements is the obtaining of a tax advantage in relation to VAT (within the meaning of paragraph 6 of that Schedule), and
(c) a person—
(i) has provided information about the arrangements under paragraph 12(1), 17(2) or 18(2) of that Schedule, or
(ii) has failed to comply with any of those provisions in relation to the arrangements.
(4) But for the purposes of this Schedule arrangements in respect of which HMRC have given notice under paragraph 23(6) of Schedule 17 (notice that promoters not under duty to notify client of reference number) are not to be regarded as “disclosable VAT arrangements”.
(5) For the purposes of sub-paragraph (3)(c) a person who would be required to provide information under paragraph 12(1) of Schedule 17 to FA 2017—
(a) but for the fact that the arrangements implement a proposal in respect of which notice has been given under paragraph 11(1) of that Schedule, or
(b) but for paragraph 13, 14 or 15 of that Schedule,
is treated as providing the information at the end of the period referred to in paragraph 12(1).
(4) In the heading before paragraph 9 after “ “Disclosable” insert “ Schedule 11A ”.
(5) In paragraph 9—
(a) for “this Schedule” substitute “ paragraph 8A ”, and
(b) after “ “disclosable” insert “ Schedule 11A ”.
(6) After paragraph 9 insert—
“Disclosable indirect tax arrangements”
9A (1) For the purposes of this Schedule arrangements are “disclosable indirect tax arrangements” at any time if at that time—
(a) the arrangements are notifiable arrangements for the purposes of Schedule 17 to FA 2017,
(b) the main benefit, or one of the main benefits that might be expected to arise from the arrangements is the obtaining of a tax advantage in relation to an indirect tax other than VAT (within the meaning of paragraph 7 of that Schedule), and
(c) a person—
(i) has provided information about the arrangements under paragraph 12(1), 17(2) or 18(2) of that Schedule, or
(ii) has failed to comply with any of those provisions in relation to the arrangements.
(2) But for the purposes of this Schedule arrangements in respect of which HMRC have given notice under paragraph 23(6) of Schedule 17 to FA 2016 (notice that promoters not under duty to notify client of reference number) are not to be regarded as “disclosable indirect tax arrangements”.
(3) For the purposes of sub-paragraph (1)(c) a person who would be required to provide information under paragraph 12(1) of Schedule 17—
(a) but for the fact that the arrangements implement a proposal in respect of which notice has been given under paragraph 11(1) of that Schedule, or
(b) but for paragraph 13, 14 or 15 of that Schedule,
is treated as providing the information at the end of the period referred to in paragraph 12(1).
(7) In the heading before paragraph 10 (meaning of “failure to comply”) for “and 9” substitute “ to 9A ”.
(8) In paragraph 10(1) for “or 9(a)” substitute “ , 8A(2)(c), 9(a) or 9A(1)(c) ”.
(9) In paragraph 11(1) (meaning of “relevant defeat”) for “E” substitute “ F ”.
(10) After paragraph 16 (condition E) insert—
Condition F
16A (1) Condition F is that—
(a) the arrangements are indirect tax arrangements,
(b) P has relied on the arrangements (see sub-paragraph (2),
(c) the arrangements have been counteracted, and
(d) the counteraction is final.
(2) For the purpose of sub-paragraph (1) P relies on the arrangements if—
(a) P makes a return, claim, declaration or application for approval on the basis that a relevant tax advantage arises, or
(b) P fails to discharge a relevant obligation (“the disputed obligation”) and there is reason to believe that P's failure to discharge that obligation is connected with the arrangements.
(3) For the purposes of sub-paragraph (2) “relevant tax advantage” means a tax advantage which the arrangements might be expected to enable P to obtain.
(4) For the purposes of sub-paragraph (2) an obligation is a relevant obligation if the arrangements might be expected to have the result that the obligation does not arise.
(5) For the purposes of this paragraph the arrangements are “counteracted” if—
(a) adjustments, other than taxpayer emendations, are made in respect of P's tax position —
(i) on the basis that the whole or part of the relevant tax advantage mentioned in sub-paragraph (2)(a) does not arise, or
(ii) on the basis that the disputed obligation does (or did) arise, or
(b) an assessment to tax is made, or any other action is taken by HMRC, on the basis mentioned in paragraph (a)(i) or (ii) (otherwise than by way of an adjustment).
(6) For the purposes of this paragraph a “counteraction” is final when the adjustments, assessment or action in question, and any amounts arising from the adjustments, assessment or action, can no longer be varied, on appeal or otherwise.
(7) For the purposes of sub-paragraph (1) the time at which it falls to be determined whether or not the arrangements are disclosable indirect tax arrangements is when the counteraction becomes final.
(8) The following are “taxpayer emendations” for the purposes of sub-paragraph (5)—
(a) an adjustment made by P at a time when P had no reason to believe that HMRC had begun or were about to begin enquiries into P's affairs in relation to the tax in question;
(b) an adjustment made by HMRC with respect to P's tax position (whether by way of an assessment or otherwise) as a result of a disclosure by P which meets the conditions in sub-paragraph (9).
(9) The conditions are that the disclosure—
(a) is a full and explicit disclosure of an inaccuracy in a return or other document or of a failure to comply with an obligation, and
(b) was made at a time when P had no reason to believe that HMRC were about to begin enquiries into P's affairs in relation to the tax in question.
(11) In paragraph 17 (annual information notices)—
(a) in sub-paragraph (3)(a) for “or election,” insert “ election, declaration or application for approval, ”,
(b) in sub-paragraphs (3)(b), (4) and (5)(a) for “DOTAS arrangements or VAT” substitute “ disclosable ”,
(c) in sub-paragraph (5) for “or election” insert “ election, declaration or application for approval ”, and
(d) after sub-paragraph (11) insert—
(12) In this paragraph “disclosable arrangements” means any of the following—
(a) DOTAS arrangements,
(b) disclosable VAT arrangements, and
(c) disclosable indirect tax arrangements.
(12) In the heading before paragraph 28 (exclusion of VAT from Part 4 of Schedule) after “VAT” insert “ and indirect taxes ”.
(13) In paragraph 28 after “VAT” insert “ or any other indirect tax ”.
(14) In paragraph 32 (value of counteracted advantage: basic rule for taxes other than VAT)—
(a) in sub-paragraph (1) for “or C” substitute “ C or F ” and after paragraph (c) insert
;
(d) in the case of a relevant defeat incurred by virtue of Condition F, the additional amount due or payable in respect of tax as a result of the counteraction mentioned in paragraph 16A(1)(d).
, and
(b) in sub-paragraph (2)(b) for “or (c)” substitute “ (c) or (d) ”.
(15) In paragraph 35 (meaning of “the counteracted advantage” in paragraphs 33 and 34) in sub-paragraph (1) after paragraph (c) insert
;
(d) in relation to a relevant defeat incurred by virtue of Condition F, means any tax advantage in respect of which the counteraction mentioned in paragraph 16A(1)(c) is made.
(16) In paragraph 43 (paragraph 42: meaning of “the relevant failure”) after sub-paragraph (7) insert—
(8) In relation to a relevant defeat incurred by virtue of Condition F, “the relevant failure” means the failures or inaccuracies as a result of which the adjustments, assessments, or other actions mentioned in paragraph 16A(5) are required.
(17) In paragraph 55 (time of “use” of defeated arrangements) after sub-paragraph (8) insert—
(8A) If the person incurs the relevant defeat by virtue of Condition F, the person is treated as having “used” the arrangements on the following dates—
(a) the filing date of any return made by the person on the basis mentioned in paragraph 16A(2)(a);
(b) the date on which the person makes any claim, declaration or application for approval;
(c) the date of any failure by the person to comply with a relevant obligation (as defined in paragraph 16A(4)).
(18) In paragraph 58(1) (interpretation)—
(a) after the definition of “contract settlement” insert—
“disclosable indirect tax arrangements” is to be interpreted in accordance with paragraph 9A;
“disclosable Schedule 11A VAT arrangements is to be interpreted in accordance with paragraph 9;
,
(b) after the definition of “HMRC” insert—
“indirect tax” has the meaning given by paragraph 4(2);
,
(c) in the definition of “disclosable VAT arrangements” for “9” substitute “ 8A ”, and
(d) in the definition of “tax” for “4” substitute “ 4(1) ”.
PART 4 Supplemental
Regulations
56 (1) Any power of the Treasury or the Commissioners to make regulations under this Schedule is exercisable by statutory instrument.
(2) Regulations made under any such power may make different provision for different cases and may contain transitional provisions and savings.
(3) A statutory instrument containing regulations made by the Treasury under paragraph 2(2) or 42(1) may not be made unless a draft of the instrument has been laid before and approved by a resolution of the House of Commons.
(4) Any other statutory instrument containing regulations made under this Schedule, if made without a draft having been approved by a resolution of the House of Commons, is subject to annulment in pursuance of a resolution of the House of Commons.
Interpretation
57 In this Schedule—
“arrangements” includes any scheme, transaction or series of transactions;
“the Commissioners” means the Commissioners for Her Majesty's Revenue and Customs;
“company” has the meaning given by section 1121 of the Corporation Tax Act 2010;
“HMRC” means Her Majesty's Revenue and Customs;
“indirect tax” has the meaning given by paragraph 2(1);
“introducer” is to be construed in accordance with paragraph 9;
“makes a firm approach” has the meaning given by paragraph 10(1);
“makes a marketing contact” has the meaning given by paragraph 10(2);
“marketing contact” has the meaning give by paragraph 10(2);
“notifiable arrangements” has the meaning given by paragraph 3(1);
“notifiable proposal” has the meaning given by paragraph 3(3);
“prescribed” (except in or in references to paragraph 3(1)(a)), means prescribed by regulations made by HMRC;
“promoter” is to be construed in accordance with paragraph 8;
“reference number” means a reference number allocated under paragraph 22;
“TCEA 2007” means the Tribunals, Courts and Enforcement Act 2007;
“tax advantage” means a tax advantage within the meaning of—
paragraph 6 (in relation to VAT), or
paragraph 7 (in relation to indirect taxes other than VAT);
“trade” includes every venture in the nature of a trade;
“tribunal” means the First-tier tribunal, or where determined by or under Tribunal Procedure Rules, the Upper Tribunal;
“working day” means a day which is not a Saturday or a Sunday, Christmas Day, Good Friday or a bank holiday under the Banking and Financial Dealings Act 1971 in any part of the United Kingdom.
SCHEDULE 18 Requirement to correct certain offshore tax non-compliance
Section 67
PART 1 Liability for penalty for failure to correct
Failure to correct relevant offshore tax non-compliance
1 A penalty is payable by a person who—
(a) has any relevant offshore tax non-compliance to correct at the end of the tax year 2016-17, and
(b) fails to correct the relevant offshore tax non-compliance within the period beginning with 6 April 2017 and ending with 30 September 2018 (referred to in this Schedule as “the RTC period”).
Main definitions: general
2 Paragraphs 3 to 13 have effect for the purposes of this Schedule.
“Relevant offshore tax non-compliance”
3 (1) At the end of the 2016-17 tax year a person has “relevant offshore tax non-compliance” to correct if—
(a) Conditions A and B are satisfied in respect of any offshore tax non-compliance committed by that person on or before 5 April 2017 (“the original offshore tax non-compliance”), and
(b) Condition C will be satisfied on the relevant date (see paragraph 6).
(2) Where the original offshore tax non-compliance committed by a person has been corrected in part by the end of the tax year 2016-17, the person's “relevant offshore tax non-compliance” is the uncorrected part of the original offshore tax non-compliance.
4 Condition A is that the original offshore tax non-compliance has not been fully corrected before the end of the tax year 2016-17 (see paragraph 13).
5 Condition B is that—
(a) the original offshore tax non-compliance involved a potential loss of revenue when it was committed, and
(b) if the original offshore tax non-compliance has been corrected in part by the end of the tax year 2016-17, the uncorrected part at that time involved a potential loss of revenue.
6 (1) Condition C is that on the relevant date it is lawful, on the assumptions set out in sub-paragraph (2), for HMRC to assess the person concerned to any tax the liability to which would have been disclosed to or discovered by HMRC if on that date—
(a) where none of the original offshore tax non-compliance was corrected before the end of the 2016-17 tax year, HMRC were aware of the information missing as a result of the failure to correct that tax non-compliance, or
(b) where the original offshore tax non compliance was corrected in part before that time, HMRC were aware of the information missing as a result of the failure to correct the rest of that tax non-compliance.
(2) The assumptions are—
(a) that paragraph 26 is to be disregarded, and
(b) where the tax at stake is inheritance tax, that the relevant offshore tax non-compliance is not corrected before the relevant date
(3) In this paragraph “the relevant date” is—
(a) where the tax at stake is income tax or capital gains tax, 6 April 2017, and
(b) where the tax at stake is inheritance tax, the day after the day on which this Act is passed.
“Offshore tax-non compliance” etc
7 (1) “Offshore tax non-compliance” means tax non-compliance which involves an offshore matter or an offshore transfer, whether or not it also involves an onshore matter.
(2) Tax non-compliance “involves an onshore matter” if and to the extent that it does not involve an offshore matter or an offshore transfer.
(3) For the meaning of “involves an offshore matter or an offshore transfer” (in relation to the different descriptions of tax non-compliance) see paragraphs 9 to 11.
“Tax non-compliance”
8 (1) “Tax non-compliance” means any of the following—
(a) a failure to comply on or before the filing date with an obligation under section 7 of TMA 1970 to give notice of chargeability to income tax or capital gains tax,
(b) a failure to comply on or before the filing date with an obligation to deliver to HMRC a return or other document which is listed in sub-paragraph (3), or
(c) delivering to HMRC a return or other document which is listed in sub-paragraph (3) or (4) and contains an inaccuracy which amounts to, or leads to—
(i) an understatement of a liability to tax,
(ii) a false or inflated statement of a loss, or
(iii) a false or inflated claim to repayment of tax.
(2) In sub-paragraph (1)—
(a) “filing date”, in relation to a notice of chargeability or a return or other document, means the date by which it is required to be given, made or delivered to HMRC,
(b) “loss” includes a charge, expense, deficit and any other amount which may be available for, or relied on to claim, a deduction or relief, and
(c) “repayment of tax” includes a reference to allowing a credit against tax.
(3) The documents relevant for the purposes of both of paragraphs (b) and (c) of sub-paragraph (1) are (so far as they relate to the tax or taxes shown in the first column)—
Tax to which document relates | Document
Income tax or capital gains tax | Return, accounts, statement or document required under section 8(1) of TMA 1970 (personal return)
Income tax or capital gains tax | Return, accounts, statement or document required under section 8A(1) of TMA 1970 (trustee's return)
Income tax | Return, accounts, statement or document required under section 12AA(2) or (3) of TMA 1970 (partnership return)
Income tax | Return under section 254 of FA 2004 (pension schemes)
Income tax | Particulars or documents required under regulation 12 of the Retirement Benefits Schemes (Information Powers) Regulations 1995 (SI 1995/3101) (information relating to pension schemes)
Capital gains tax | NRCGT return under section 12ZB of TMA 1970
Inheritance tax | Account under section 216 or 217 of IHTA 1984.
(4) The documents relevant for the purposes only of paragraph (c) of sub-paragraph (1) are (so far as they relate to the tax or taxes shown in the first column)—
Tax to which document relates | Document
Income tax or capital gains tax | Return, statement or declaration in connection with a claim for an allowance, deduction or relief
Income tax or capital gains tax | Accounts in connection with ascertaining liability to tax
Income tax or capital gains tax | Statement or declaration in connection with a partnership return
Income tax or capital gains tax | Accounts in connection with a partnership return
Inheritance tax | Information or document under regulations under section 256 of IHTA 1984
Inheritance tax | Statement or declaration in connection with a deduction, exemption or relief.
Income tax, capital gains tax or inheritance tax | Any other document given to HMRC by a person (“P”) which is likely to be relied on by HMRC to determine, without further inquiry, a question about— P's liability to tax; payments by P by way of or in connection with tax; any other payment by P (including penalties); repayments, or any other kind of payment or credit, to P.
“Involves an offshore matter” and “involves an offshore transfer”
9 (1) This paragraph applies to any tax non-compliance consisting of a failure to comply with an obligation under section 7 of TMA 1970 to notify chargeability to income tax or capital gains tax.
(2) The tax non-compliance “involves an offshore matter” if the potential loss of revenue is charged on or by reference to—
(a) income arising from a source in a territory outside the UK,
(b) assets situated or held in a territory outside the UK,
(c) activities carried on wholly or mainly in a territory outside the UK, or
(d) anything having effect as if it were income, assets or activities of a kind described above.
(3) The tax non-compliance “involves an offshore transfer” if—
(a) it does not involve an offshore matter, and
(b) the applicable condition is satisfied (see sub-paragraphs (4) and (5)).
(4) Where the tax at stake is income tax the applicable condition is satisfied if the income on or by reference to which tax is charged, or any part of the income—
(a) was received in a territory outside the UK, or
(b) was transferred on or before 5 April 2017 to a territory outside the UK.
(5) Where the tax at stake is capital gains tax, the applicable condition is satisfied if the proceeds of the disposal on or by reference to which the tax is charged, or any part of the proceeds—
(a) were received in a territory outside the UK, or
(b) were transferred on or before 5 April 2017 to a territory outside the UK.
(6) In the case of a transfer falling within sub-paragraph (4)(b) or (5)(b), references to the income or proceeds transferred are to be read as including references to any assets derived from or representing the income or proceeds.
(7) In this paragraph and paragraphs 10 and 11 “assets” has the meaning given in section 21(1) of TCGA 1992, but also includes sterling.
10 (1) This paragraph applies where—
(a) any tax non-compliance by a person consists of a failure to comply with an obligation to deliver a return or other document, and
(b) a complete and accurate return or other document would have included information that would have enabled or assisted HMRC to assess the person's liability to tax.
(2) The tax non-compliance “involves an offshore matter” if the liability to tax that would have been shown in the return or other document is or includes a liability to tax charged on or by reference to—
(a) income arising from a source in a territory outside the UK,
(b) assets situated or held in a territory outside the UK,
(c) activities carried on wholly or mainly in a territory outside the UK, or
(d) anything having effect as if it were income, assets or activities of a kind described above.
(3) Where the tax at stake is inheritance tax, assets are treated for the purposes of sub-paragraph (2) as situated or held in a territory outside the UK if they are so situated or held immediately after the transfer of value by reason of which inheritance tax becomes chargeable.
(4) The tax non-compliance “involves an offshore transfer” if—
(a) it does not involve an offshore matter, and
(b) the applicable condition is satisfied in respect of the liability to tax that would have been shown by the return or other document (see sub-paragraphs (5) to (7)).
(5) Where the tax at stake is income tax the applicable condition is satisfied if the income on or by reference to which tax is charged, or any part of the income—
(a) was received in a territory outside the UK, or
(b) was transferred on or before 5 April 2017 to a territory outside the UK.
(6) Where the tax at stake is capital gains tax, the applicable condition is satisfied if the proceeds of the disposal on or by reference to which the tax is charged, or any part of the proceeds—
(a) was received in a territory outside the UK, or
(b) was transferred on or before 5 April 2017 to a territory outside the UK.
(7) Where the liability to tax which would have been shown in the document is a liability to inheritance tax, the applicable condition is satisfied if—
(a) the disposition that gives rise to the transfer of value by reason of which the tax becomes chargeable involves a transfer of assets, and
(b) after that disposition but on or before 5 April 2017 the assets, or any part of the assets, are transferred to a territory outside the UK.
(8) In the case of a transfer falling within sub-paragraph (5)(b), (6)(b) or (7)(b), references to the income or proceeds transferred are to be read as including references to any assets derived from or representing the income or proceeds.
11 (1) This paragraph applies to any tax non-compliance by a person if—
(a) the tax non-compliance consists of delivering or giving HMRC a return or other document which contains an inaccuracy, and
(b) the inaccuracy relates to information that would have enabled or assisted HMRC to assess the person's liability to tax.
(2) The tax non-compliance to which this paragraph applies “involves an offshore matter” if the information that should have been given in the tax document relates to—
(a) income arising from a source in a territory outside the UK,
(b) assets situated or held in a territory outside the UK,
(c) activities carried on wholly or mainly in a territory outside the UK, or
(d) anything having effect as if it were income, assets or activities of a kind described above.
(3) Where the tax at stake is inheritance tax, assets are treated for the purposes of sub-paragraph (2) as situated or held in a territory outside the UK if they are so situated or held immediately after the transfer of value by reason of which inheritance tax becomes chargeable.
(4) Tax non-compliance to which this paragraph applies “involves an offshore transfer” if—
(a) it does not involve an offshore matter, and
(b) the applicable condition is satisfied in respect of the liability to tax that would have been shown by the return or other document (see sub-paragraphs (5) to (7)).
(5) Where the tax at stake is income tax the applicable condition is satisfied if the income on or by reference to which the tax is charged, or any part of the income—
(a) was received in a territory outside the UK, or
(b) was transferred on or before 5 April 2017 to a territory outside the UK.
(6) Where the tax at stake is capital gains tax, the applicable condition is satisfied if—
(a) the information that should have been given in the tax document relates to the proceeds of the disposal on or by reference to which the tax is charged, and
(b) the proceeds, or any part of the proceeds—
(i) were received in a territory outside the UK, or
(ii) were transferred on or before 5 April 2017 to a territory outside the UK.
(7) Where the tax at stake is inheritance tax, the applicable condition is satisfied if—
(a) the information that should have been given in the tax document relates to the disposition that gives rise to the transfer of value by reason of which the tax becomes payable relates to a transfer of assets, and
(b) after that disposition but on or before 5 April 2017 the assets or any part of the assets are transferred to a territory outside the UK.
(8) In the case of a transfer falling within sub-paragraph (5)(b), (6)(b) or (7)(b), references to the income, proceeds or assets transferred are to be read as including references to any assets derived from or representing the income, proceeds or assets.
“Tax”
12 (1) References to “tax” are (unless in the context the reference is more specific) to income tax, capital gains tax or inheritance tax.
(2) References to “capital gains tax” do not include capital gains tax payable by companies in respect of chargeable gains accruing to them to the extent that those gains are NRCGT gains in respect of which the companies are chargeable to capital gains tax under section 14D or 188D of TCGA 1992 (see section 1(2A)(b) of that Act).
(3) In sub-paragraph (2) “company” has the same meaning as in TCGA 1992.
Correcting offshore tax non-compliance
13 (1) This paragraph sets out how offshore tax non-compliance may be corrected.
(2) References to the correction of offshore tax non-compliance of any description are to the taking of any action specified in this paragraph as a means of correcting offshore tax non-compliance of that description.
(3) Offshore tax non-compliance consisting of a failure to notify chargeability may be corrected by—
(a) giving the requisite notice to HMRC (unless before doing so the person has received a notice requiring the person to make and deliver a tax return) and giving HMRC the relevant information by any means mentioned in paragraph (b),
(b) giving HMRC the relevant information—
(i) by making and delivering a tax return,
(ii) using the digital disclosure service or any other service provided by HMRC as a means of correcting tax non-compliance,
(iii) communicating it to an officer of Revenue and Customs in the course of an enquiry into the person's tax affairs, or
(iv) using a method agreed with an officer of Revenue and Customs.
(4) In sub-paragraph (3) “relevant information” means information relating to offshore tax that—
(a) had the requisite notice been given in time and the person given a notice to make and deliver a tax return, would have been required to be included in the tax return, and
(b) would have enabled or assisted HMRC to calculate the offshore tax due.
(5) Offshore tax non-compliance consisting of a failure to make or deliver a return or other document may be corrected by giving HMRC the relevant information by—
(a) making or delivering the requisite return or document,
(b) using the digital disclosure service or any other service provided by HMRC as a means of correcting tax non-compliance,
(c) communicating it to an officer of Revenue and Customs in the course of an enquiry into the person's tax affairs, or
(d) using a method agreed with an officer of Revenue and Customs.
(6) In subsection (5) “relevant information” means information relating to offshore tax that—
(a) should have been included in the return or other document, and
(b) would have enabled or assisted HMRC to calculate the offshore tax due.
(7) Offshore tax non-compliance consisting of making and delivering a return or other document containing an inaccuracy may be corrected by giving HMRC the relevant information by—
(a) in the case of an inaccurate tax document, amending the document or delivering a new document,
(b) using the digital disclosure service or any other service provided by HMRC as a means of correcting tax non-compliance,
(c) communicating it to an officer of Revenue and Customs in the course of an enquiry into the person's tax affairs, or
(d) using a method agreed with an officer of Revenue and Customs.
(8) In sub-paragraph (7) “relevant information” means information relating to offshore tax that—
(a) should have been included in the return but was not (whether due to an omission or the giving of inaccurate information), and
(b) would have enabled or assisted HMRC to calculate the offshore tax due.
(9) In this paragraph “offshore tax”, in relation to any offshore tax non-compliance, means tax corresponding to the offshore PLR in respect of the non-compliance.
PART 2 Amount of penalty
Amount of penalty
14 (1) The penalty payable under paragraph 1 is 200% of the offshore PLR attributable to the uncorrected offshore tax non-compliance (subject to any reduction under a provision of this Part of this Schedule).
(2) In this Part of this Schedule “the uncorrected offshore tax non-compliance” means—
(a) the relevant offshore tax non-compliance, in a case where none of it is corrected within the RTC period, or
(b) so much of the relevant offshore tax non-compliance as has not been corrected within the RTC period, in a case where part of it is corrected within that period.
Offshore PLR
15 (1) In this Schedule “offshore PLR”, in relation to any offshore tax non-compliance means the potential loss of revenue attributable to that non-compliance, to be determined as follows.
(2) The potential lost revenue attributable to any offshore tax non-compliance is (subject to sub-paragraphs (5) and (6)) —
(a) if the non-compliance is a failure to notify chargeability, the potential lost revenue under the applicable provisions of paragraph 7 of Schedule 41 to FA 2008 (or, where the original offshore tax non-compliance took place before 1 April 2010, the amount referred to in section 7(8) of TMA 1970),
(b) if the non-compliance is a failure to deliver a return or other document, the amount of the liability to tax under the applicable provisions of paragraph 24 of Schedule 55 to FA 2009 or of paragraph 11 of Schedule 25 to FA 2021, as the case may be (or, where the original offshore tax non-compliance took place before 1 April 2011, the amount of liability to tax that would have been shown in the return as defined in section 93(9) of TMA 1970), and
(c) if the non-compliance is delivering a return or other document containing an inaccuracy, the potential lost revenue under the applicable provisions of paragraphs 5 to 8 of Schedule 24 to FA 2007 (or, where the original offshore tax non-compliance took place before 1 April 2008, the difference described in section 95(2) of TMA 1970).
(3) In its application for the purposes of sub-paragraph (2)(c) above, paragraph 6 of Schedule 24 to FA 2007 has effect as if—
(a) for sub-paragraph (1) there were substituted—
(1) Where—
(a) P is liable to a penalty in respect of two or more inaccuracies (each being an inaccuracy in a return or other document listed in paragraph 8(3) or (4) of Schedule 18) to F(No.2)A 2017) in relation to a tax year or, in the case of inheritance tax, a single transfer of value,
(b) in relation to any one (or more than one) of those inaccuracies, the delivery of the return or other document containing it constitutes offshore tax non-compliance, and
(c) the calculation of potential lost revenue attributable to each of those inaccuracies depends on the order in which they are corrected,
the potential lost revenue attributable to any offshore tax non-compliance constituted by any one of those inaccuracies is to be taken to be such amount as is just and reasonable.
(1A) In sub-paragraph (1) “offshore tax non-compliance” has the same meaning as in Schedule 18 to F(No2)A 2017.
; and
(b) in sub-paragraph (4), for paragraphs (b) to (d) there were substituted—
(b) other understatements.
(4) In sub-paragraphs (5) and (6) “combined tax non-compliance” is tax non-compliance that—
(a) involves an offshore matter or an offshore transfer, but
(b) also involves an onshore matter.
(5) Any combined tax non-compliance is to be treated for the purposes of this Schedule as if it were two separate acts of tax non-compliance, namely—
(a) the combined tax non-compliance so far as it involves an offshore matter or an offshore transfer (which is then offshore tax non-compliance within the meaning of this Schedule), and
(b) the combined tax non-compliance so far as it involves an onshore matter.
(6) The potential lost revenue attributable to the offshore tax non-compliance referred to in sub-paragraph (5)(a) is to be taken to be such share of the potential lost revenue attributable to the combined tax non-compliance as is just and reasonable.
Reduction of penalty for disclosure etc by person liable to penalty
16 (1) This paragraph provides for a reduction in a penalty under paragraph 1 for any uncorrected relevant offshore tax non-compliance if the person (“P”) who is liable to the penalty discloses any matter mentioned in sub-paragraph (2) that is relevant to the non-compliance or its correction or to the assessment or enforcement of the offshore tax attributable to it.
(2) The matters are—
(a) chargeability to income tax or capital gains tax (where the tax non-compliance is a failure to notify chargeability),
(b) a missing tax return,
(c) an inaccuracy in a document,
(d) a supply of false information or a withholding of information, or
(e) a failure to disclose an under-assessment.
(3) A person discloses a matter for the purposes of this paragraph only by—
(a) telling HMRC about it,
(b) giving HMRC reasonable help in relation to the matter (for example by quantifying an inaccuracy in a document),
(c) informing HMRC of any person who acted as an enabler of the relevant offshore tax non-compliance or the failure to correct it, and
(d) allowing HMRC access to records—
(i) for any reasonable purpose connected with resolving the matter (for example for the purpose of ensuring that an inaccuracy in a document is fully corrected), and
(ii) for the purpose of ensuring that HMRC can identify all persons who may have acted as an enabler of the relevant offshore tax non-compliance or the failure to correct it.
(4) Where a person liable to a penalty under paragraph 1 discloses a matter HMRC must reduce the penalty to one that reflects the quality of the disclosure.
(5) But the penalty may not be reduced below 100% of the offshore PLR.
(6) In relation to disclosure or assistance, “quality” includes timing, nature and extent.
(7) For the purposes of sub-paragraph (3) a person “acted as an enabler” of relevant offshore tax non-compliance by another if the person encouraged, assisted or otherwise facilitated the conduct by the other person that constituted the offshore tax non-compliance.
17 (1) If they think it right because of special circumstances, HMRC may reduce a penalty under paragraph 1.
(2) In sub-paragraph (1) “special circumstances” does not include—
(a) ability to pay, or
(b) the fact that a potential loss of revenue from one taxpayer is balanced by a potential overpayment by another.
(3) In sub-paragraph (1) the reference to reducing a penalty includes a reference to—
(a) staying a penalty, or
(b) agreeing a compromise in relation to proceedings for a penalty.
Procedure for assessing penalty, etc
18 (1) Where a person is found liable for a penalty under paragraph 1 HMRC must—
(a) assess the penalty,
(b) notify the person, and
(c) state in the notice—
(i) the uncorrected relevant offshore tax non-compliance to which the penalty relates, and
(ii) the tax period to which that offshore tax non-compliance relates.
(2) A penalty must be paid before the end of the period of 30 days beginning with the day on which notification of the penalty is issued.
(3) An assessment of a penalty—
(a) is to be treated for procedural purposes in the same way as an assessment to tax (except in respect of a matter expressly provided for by this Schedule),
(b) may be enforced as if it were an assessment to tax, and
(c) may be combined with an assessment to tax.
(4) A supplementary assessment may be made in respect of a penalty if an earlier assessment operated by reference to an underestimate of the liability to tax that would have been shown in a return.
(5) Sub-paragraph (6) applies if—
(a) an assessment in respect of a penalty is based on a liability to offshore tax that would have been shown on a return, and
(b) that liability is found by HMRC to have been excessive.
(6) HMRC may amend the assessment so that it is based upon the correct amount.
(7) But an amendment under sub-paragraph (6)—
(a) does not affect when the penalty must be paid, and
(b) may be made after the last day on which the assessment in question could have been made under paragraph 19.
19 (1) An assessment of a penalty under paragraph 1 in respect of uncorrected relevant offshore tax non-compliance must be made before the end of the relevant period for that non-compliance.
(2) If the non-compliance consists of a failure to notify chargeability, the relevant period is the period of 12 months beginning with—
(a) the end of the appeal period for the assessment of tax unpaid by reason of the failure, or
(b) if there is no such assessment, the date on which the amount of tax unpaid by reason of the failure is ascertained.
(3) If the non-compliance consists of a failure to submit a return or other document, the relevant period is the period of 12 months beginning with—
(a) the end of the appeal period for the assessment of the liability to tax which would have been shown in the return, or
(b) if there is no such assessment, the date on which that liability is ascertained.
(4) If the non-compliance consists of making and delivering a tax document containing an inaccuracy, the relevant period is the period of 12 months beginning with—
(a) the end of the appeal period for the decision correcting the inaccuracy, or
(b) if there is no assessment to the tax concerned within paragraph (a), the date on which the inaccuracy is corrected.
(5) In this paragraph references to the appeal period are to the period during which—
(a) an appeal could be brought, or
(b) an appeal that has been brought has not been finally determined or withdrawn.
Appeals
20 A person may appeal against—
(a) a decision of HMRC that a penalty under paragraph 1 is payable by that person, or
(b) a decision of HMRC as to the amount of a penalty under paragraph 1 payable by the person.
21 (1) An appeal under paragraph 20 is to be treated in the same way as an appeal against an assessment to the tax at stake (including by the application of any provision about bringing the appeal by notice to HMRC, about HMRC review of the decision or about determination of the appeal by the First-tier Tribunal or Upper Tribunal).
(2) Sub-paragraph (1) does not apply—
(a) so as to require the person bringing the appeal to pay a penalty before an appeal against the assessment of the penalty is determined,
(b) in respect of any other matter expressly provided for by this Schedule.
22 (1) On an appeal under paragraph 20(a) that is notified to the tribunal, the tribunal may affirm or cancel HMRC's decision.
(2) On an appeal under paragraph 20(b) that is notified to the tribunal, the tribunal may—
(a) affirm HMRC's decision, or
(b) substitute for that decision another decision that HMRC had power to make.
(3) If the tribunal substitutes its own decision for HMRC's, the tribunal may rely on paragraph 16 or 17 (or both)—
(a) to the same extent as HMRC (which may mean applying the same percentage reduction as HMRC to a different starting point),
(b) to a different extent, but only if the tribunal thinks that HMRC's decision in respect of the application of that paragraph was flawed.
(4) In sub-paragraph (3)(b) “flawed” means flawed when considered in the light of the principles applicable in proceedings for judicial review.
(5) In this paragraph “tribunal” means the First-tier Tribunal or Upper Tribunal (as appropriate by virtue of paragraph 21(1)).
Reasonable excuse
23 (1) Liability to a penalty under paragraph 1 does not arise in relation to a particular failure to correct any relevant offshore tax non-compliance within the RTC period if the person concerned (P) satisfies HMRC or the relevant tribunal (as the case may be) that there is a reasonable excuse for the failure.
(2) For this purpose—
(a) an insufficiency of funds is not a reasonable excuse, unless attributable to events outside P's control,
(b) where P relied on any other person to do anything, that cannot be a reasonable excuse unless P took reasonable care to avoid the failure,
(c) where P had a reasonable excuse but the excuse has ceased, P is to be treated as continuing to have the excuse if the failure is remedied without unreasonable delay after the excuse ceased, and
(d) reliance on advice is to be taken automatically not to be a reasonable excuse if it is disqualified under sub-paragraph (3).
(3) Advice is disqualified (subject to sub-paragraph (4)) if—
(a) the advice was given to P by an interested person,
(b) the advice was given to P as a result of arrangements made between an interested person and the person who gave the advice,
(c) the person who gave the advice did not have appropriate expertise for giving the advice,
(d) the advice failed to take account of all P's individual circumstances (so far as relevant to the matters to which the advice relates), or
(e) the advice was addressed to, or was given to, a person other than P.
(4) Where advice would otherwise be disqualified under any of paragraphs (a) to (d) of sub-paragraph (3) the advice is not disqualified if at the end of the RTC period P—
(a) has taken reasonable steps to find out whether or not the advice falls within that paragraph, and
(b) reasonably believes that it does not.
(5) In sub-paragraph (3) “an interested person” means, in relation to any relevant offshore tax non-compliance—
(a) a person (other than P) who participated in relevant avoidance arrangements or any transaction forming part of them, or
(b) a person who for any consideration (whether or not in money) facilitated P's entering into relevant avoidance arrangements.
(6) In this paragraph “avoidance arrangements” means arrangements as respects which, in all the circumstances, it would be reasonable to conclude that their main purpose, or one of their main purposes, is the obtaining of a tax advantage.
(7) But arrangements are not avoidance arrangements for the purposes of this paragraph if (although they fall within sub-paragraph (6))—
(a) they are arrangements which accord with established practice, and
(b) HMRC had, at the time the arrangements were entered into, indicated its acceptance of that practice.
(8) Where any relevant offshore tax non-compliance arose originally because information was submitted to HMRC on the basis that particular avoidance arrangements had an effect which they did not have, those avoidance arrangements are “relevant avoidance arrangements” in relation to that tax non-compliance.
(9) In sub-paragraph (6)—
(a) “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable), and
(b) a “tax advantage” includes—
(i) relief or increased relief from tax,
(ii) repayment or increased repayment of tax,
(iii) avoidance or reduction of a charge to tax or an assessment to tax,
(iv) avoidance of a possible assessment to tax,
(v) deferral of a payment of tax or advancement of a repayment of tax.
Double jeopardy
24 (1) Where by reason of any conduct a person—
(a) has been convicted of an offence, or
(b) is liable to a penalty otherwise than under paragraph 1 for which the person has been assessed (and the assessment has not been successfully appealed against or withdrawn),
that conduct does not give rise to liability to a penalty under paragraph 1.
(2) In sub-paragraph (1) the reference to a penalty otherwise than under paragraph 1—
(a) includes a penalty under paragraph 6 of Schedule 55 to FA 2009, but does not include penalties under any other provision of that Schedule, and
(b) includes a penalty under subsection (5) of section 93 of TMA 1970 but, does not include penalties under any other provision of that section.
(3) But the aggregate of—
(a) the amount of a penalty under paragraph 1, and
(b) the amount of a penalty under paragraph 5 of Schedule 55 which is determined by reference to a liability to tax,
must not exceed 200% of that liability to tax.
(4) In sub-paragraph (1) “conduct” includes a failure to act.
Application of provisions of TMA 1970
25 Subject to the provisions of this Part of this Schedule, the following provisions of TMA 1970 apply for the purposes of this Part of this Schedule as they apply for the purposes of the Taxes Acts—
(a) section 108 (responsibility of company officers),
(b) section 114 (want of form), and
(c) section 115 (delivery and service of documents).
PART 3 Further provisions relating to the requirement to correct
Extension of period for assessment etc of offshore tax
26 (1) This paragraph applies where—
(a) at the end of the tax year 2016-17 a person has relevant offshore tax non-compliance to correct, and
(b) the last day on which it would (disregarding this paragraph) be lawful for HMRC to assess the person to any offshore tax falls within the period beginning with 6 April 2017 and ending with 4 April 2021.
(2) The period in which it is lawful for HMRC to assess the person to the offshore tax is extended by virtue of this paragraph to end with 5 April 2021.
(3) In this paragraph “offshore tax”, in relation to any relevant offshore tax non-compliance, means tax corresponding to the offshore PLR in respect of the non-compliance.
Further penalty in connection with offshore asset moves
27 (1) Schedule 21 to FA 2015 (penalties in connection with offshore asset moves) is amended as follows.
(2) In paragraph 2 (original penalties triggering penalties under Schedule 21) omit “and” after paragraph (b) and after paragraph (c) insert
, and
(d) a penalty under paragraph 1 of Schedule 18 to FA 2017 (requirement to correct relevant offshore tax non-compliance).
(3) In paragraph 3 (meaning of deliberate failure) after paragraph (c) insert—
(d) in the case of a penalty within paragraph 2(d), P was aware at any time during the RTC period that at the end of the 2016-17 tax year P had relevant offshore tax non-compliance to correct;
and terms used in paragraph (d) have the same meaning as in Schedule 18 to FA 2017.
(4) In paragraph 5 (meaning of “relevant time”) after sub-paragraph (4) insert—
(5) Where the original penalty is under paragraph 1 of Schedule 18 to FA 2017, the relevant time is the time when that Schedule comes into force.
Asset-based penalty in addition to penalty under paragraph 1
28 (1) Schedule 22 to FA 2016 (asset-based penalty for offshore inaccuracies and failures) is amended as follows.
(2) In paragraph 2 (meaning of standard offshore penalty)—
(a) in sub-paragraph (1) for “or (4)” substitute “ (4) or (4A) ”,
(b) after sub-paragraph (4) insert—
(4A) A penalty falls within this paragraph if—
(a) it is imposed on a person under paragraph 1 of Schedule 18 to FA 2017 (requirement to correct relevant offshore tax non-compliance),
(b) the person was aware at any time during the RTC period that at the end of the 2016-17 tax year P had relevant offshore tax non-compliance to correct, and
(c) the tax at stake is (or includes) capital gains tax, inheritance tax or asset-based income tax.
, and
(c) after sub-paragraph (5) insert—
(5A) Sub-paragraph (5) does not apply to a penalty imposed under paragraph 1 of Schedule 18 to FA 2017.
(3) In paragraph 3 (tax year to which standard offshore penalty relates) after sub-paragraph (3) insert—
(4) Where a standard offshore penalty is imposed under paragraph 1 of Schedule 18 to FA 2017, the tax year to which that penalty relates is—
(a) if the tax at stake in relation to the uncorrected relevant offshore tax non-compliance is income tax or capital gains tax, the tax year or years to which the failure or inaccuracy constituting the relevant offshore tax non-compliance in question relates;
(b) if the tax at stake in relation to the uncorrected relevant offshore tax non-compliance is inheritance tax, the year, beginning on 6 April and ending on the following 5 April, in which the liability to tax first arose.
(5) In sub-paragraph (4) references to uncorrected relevant offshore tax non-compliance are to the relevant offshore tax non-compliance in respect of which the standard offshore penalty is imposed.
(4) In paragraph 5 (meaning of offshore PLR), in sub-paragraph (1)(a) after “FA 2008” insert “ or Schedule 18 to FA 2017 ”.
(5) In paragraph 6 (restriction on imposition of multiple asset-based penalties for same asset), in sub-paragraph (1)(a) after “penalty” insert “ (other than one imposed under paragraph 1 of Schedule 18 to FA 2017) ”.
(6) After paragraph 6 insert—
6A Where—
(a) a penalty has been imposed on a person under paragraph 1 of Schedule 18 to FA 2017, and
(b) the potential loss of revenue threshold has been met,
only one asset-based penalty is payable by the person in relation to any given asset.
(7) In paragraph 13 (asset-based income tax) after sub-paragraph (2) insert—
(2A) In relation to cases where the standard offshore penalty is a penalty falling within paragraph 2(4A), each reference to provisions of ITTOIA 2005 in column 1 of the Table in sub-paragraph (2) includes a reference—
(a) to the corresponding provisions of the legislation in force immediately before those provisions of ITTOIA 2005 came into force (and to any previous text of those corresponding provisions), and
(b) to any other provision that had the same purpose as, or a similar purpose to, any of those corresponding provisions (or any earlier text mentioned in paragraph (a)), if and so far as that other provision was in force—
(i) on or after 6 April 1997, but
(ii) before the corresponding provisions (or the earlier text mentioned in paragraph (a)) came into force.”
(8) In paragraph 19(2) (interpretation: incorporation of definitions from other legislation for “or Schedule 55 to FA 2009” substitute “ Schedule 55 to FA 2009 or Part 1 of Schedule 18 to FA 2017 ”.
29 (1) TMA 1970 is amended as follows.
(2) In section 103ZA (disapplication of sections 100 to 103 in the case of certain penalties) omit the “or” after paragraph (j) and after paragraph (k) insert
, or
(l) Schedule 18 to the Finance Act 2017.
(3) In section 107A (relevant trustees)—
(a) in subsection (2)(a) after “Finance Act 2009” insert or Schedule 18 to the Finance Act 2017”, and
(b) in subsection (3), after paragraph (c) insert—
(d) in relation to—
(i) a penalty under Schedule 18 to the Finance Act 2017, or
(ii) interest under section 101 of the Finance Act 2009 on a penalty within sub-paragraph (i),
the end of the RTC period (within the meaning of Schedule 18 to the Finance Act 2017);
.
Publishing details of persons assessed to penalty or penalties under paragraph 1
30 (1) The Commissioners for Her Majesty's Revenue and Customs (“the Commissioners”) may publish information about a person (P) if in consequence of an investigation they consider that sub-paragraph (2) or (3) applies in relation to P.
(2) This sub-paragraph applies if—
(a) P has been found to have incurred one or more relevant penalties under paragraph 1 (and has been assessed or is the subject of a contract settlement), and
(b) the offshore potential lost revenue in relation to the penalty, or the aggregate of the offshore potential lost revenue in relation to each of the penalties, exceeds £25,000.
(3) This sub-paragraph applies if P has been found to have incurred 5 or more relevant penalties under paragraph 1.
(4) A penalty incurred by P under paragraph 1 is “relevant” if —
(a) P was aware at any time during the RTC period that at the end of the 2016-17 tax year the person had relevant offshore tax non-compliance to correct, and
(b) the penalty relates to the failure to correct that non-compliance.
(5) The information that may be published is—
(a) P's name (including any trading name, previous name or pseudonym),
(b) P's address (or registered office),
(c) the nature of any business carried on by P,
(d) the amount of the penalty or penalties,
(e) the offshore potential lost revenue in relation to the penalty or the aggregate of the offshore potential lost revenue in relation to each of the penalties,
(f) the periods or times to which the uncorrected relevant offshore tax non-compliance relates,
(g) any other information that the Commissioners consider it appropriate to publish in order to make clear the person's identity.
(6) In sub-paragraph (5)(f) the reference to the uncorrected relevant offshore tax non-compliance is to so much of P's relevant offshore tax non-compliance at the end of the 2016-17 tax year as P failed to correct within the RTC period.
(7) The information may be published in any manner that the Commissioners consider appropriate.
(8) Before publishing any information the Commissioners must—
(a) inform P that they are considering doing so, and
(b) afford P the opportunity to make representations about whether it should be published.
(9) No information may be published before the day on which the penalty becomes final or, where more than one penalty is involved, the latest day on which any of the penalties becomes final.
(10) No information may be published for the first time after the end of the period of one year beginning with that day.
(11) No information may be published (or continue to be published) after the end of the period of one year beginning with the day on which it is first published.
(12) No information may be published if the amount of the penalty—
(a) is reduced under paragraph 16 to the minimum permitted amount (being 100% of the offshore PLR), or
(b) is reduced under paragraph 17 to nil or stayed.
(13) For the purposes of this paragraph a penalty becomes final—
(a) if it has been assessed, when the time for any appeal or further appeal relating to it expires or, if later, any appeal or final appeal relating to it is finally determined, and
(b) if a contract settlement has been made, at the time when the contract is made.
(14) In this paragraph “contract settlement”, in relation to a penalty, means a contract between the Commissioners and the person under which the Commissioners undertake not to assess the penalty or (if it has been assessed) not to take proceedings to recover it.
31 (1) The Treasury may by regulations amend paragraph 30(2) to vary the amount for the time being specified in paragraph (b).
(2) Regulations under this paragraph are to be made by statutory instrument.
(3) A statutory instrument under this paragraph is subject to annulment in pursuance of a resolution of the House of Commons.
PART 4 Supplementary
Interpretation: minor
32 (1) In this Schedule (apart from the amendments made by Part 3)—
“HMRC” means Her Majesty's Revenue and Customs;
“tax period” means a tax year or other period in respect of which tax is charged (or in the case of inheritance tax, the year beginning with 6 April and ending on the following 5 April in which the liability to tax first arose);
“tax year”, in relation to inheritance tax, means a period of 12 months beginning on 6 April and ending on the following 5 April;
“UK” means the United Kingdom, including its territorial sea.
(2) A reference to making a return or doing anything in relation to a return includes a reference to amending a return or doing anything in relation to an amended return.
(3) References to delivery (of a document) include giving, sending and any other similar expressions.
(4) A reference to delivering a document to HMRC includes—
(a) a reference to communicating information to HMRC in any form and by any method (whether by post, fax, email, telephone or otherwise, and
(b) a reference to making a statement or declaration in a document.
(5) References to an assessment to tax, in relation to inheritance tax, are to a determination.
(6) An expression used in relation to income tax has the same meaning as in the Income Tax Acts.
(7) An expression used in relation to capital gains tax has the same meaning as in the enactments relating to that tax.
(8) An expression used in relation to inheritance tax has the same meaning as in IHTA 1984.
Terms defined or explained for purposes of more than one paragraph of this Schedule
Term | Paragraph
assets (in paragraphs 8 to 10) | paragraph 9(7)
capital gains tax | paragraph 12(2)
HMRC | paragraph 32(1)
involves an offshore matter (in relation to failure to notify chargeability) | paragraph 9(2)
involves an offshore matter (in relation to failure to deliver a return or other document) | paragraph 10(2) and (3)
involves an offshore matter (in relation to delivery of a return or other document containing an inaccuracy) | paragraph 11(2) and (3)
involves an offshore transfer (in relation to failure to notify chargeability) | paragraph 9(3) to (6)
involves an offshore transfer (in relation to failure to deliver a return or other document) | paragraph 10(4) to (8)
involves an offshore transfer (in relation to delivery of a return or other document containing an inaccuracy) | paragraph 11(4) to (8)
involves an onshore matter (in relation to any tax non-compliance) | paragraph 7(2)
offshore tax non-compliance | paragraph 7(1)
offshore PLR | paragraph 15(1)
potential lost revenue | paragraph 15(2)
RTC period | paragraph 1(b)
relevant offshore tax non-compliance | paragraph 3
tax non-compliance | paragraph 8(1)
tax period | paragraph 32(1)
tax year (in relation to inheritance tax) | paragraph 32(1)
tax | paragraph 12(1)
UK | paragraph 32(1)
uncorrected offshore tax non-compliance (in Part 2) | paragraph 14(2)