Finance Act 2015
2015 Chapter 11
An Act to grant certain duties, to alter other duties, and to amend the law relating to the National Debt and the Public Revenue, and to make further provision in connection with finance.
[26th March 2015]
Most Gracious Sovereign
WE, Your Majesty’s most dutiful and loyal subjects, the Commons of the United Kingdom in Parliament assembled, towards raising the necessary supplies to defray Your Majesty’s public expenses, and making an addition to the public revenue, have freely and voluntarily resolved to give and to grant unto Your Majesty the several duties hereinafter mentioned; and do therefore most humbly beseech Your Majesty that it may be enacted, and be it enacted by the Queen’s most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:—
PART 1Income tax, corporation tax and capital gains tax
CHAPTER 1Charge, rates etc
Income tax
1Charge and rates for 2015-16
1
Income tax is charged for the year 2015-16.
2
For that tax year—
a
the basic rate is 20%,
b
the higher rate is 40%, and
c
the additional rate is 45%.
2Limits and allowances for 2015-16
1
For the tax year 2015-16—
a
the amount specified in section 37(2) of ITA 2007 (income limit for personal allowance for those born before 6 April 1938) is replaced with “£27,700”,
b
the amount specified in section 38(1) of that Act (blind person’s allowance) is replaced with “£2,290”,
c
the amount specified in section 43 of that Act (“minimum amount” for calculating tax reductions for married couples and civil partners) is replaced with “£3,220”,
d
the amount specified in section 45(3)(a) of that Act (amount for calculating allowance in relation to marriages before 5 December 2005 where spouse is 75 over) is replaced with “£8,355”,
e
the amount specified in section 45(4) of that Act (income limit for calculating allowance in relation to marriages before 5 December 2005) is replaced with “£27,700”,
f
the amount specified in section 46(3)(a) of that Act (amount for calculating allowance in relation to marriages and civil partnerships on or after 5 December 2005 where spouse or civil partner is 75 or over) is replaced with “£8,355”, and
g
the amount specified in section 46(4) of that Act (income limit for calculating allowance in relation to marriages and civil partnerships on or after 5 December 2005) is replaced with “£27,700”.
2
Accordingly, for that tax year, section 57 of that Act (indexation of allowances), so far as relating to the amounts specified in sections 37(2), 38(1), 43, 45(3)(a), 45(4), 46(3)(a) and 46(4) of that Act, does not apply.
3Personal allowances for 2015-16
1
Section 2 of FA 2014 (basic rate limit for 2015-16 and personal allowances from 2015) is amended as set out in subsections (2) and (3).
2
In subsection (1)(b) (amount specified for 2015-16 in section 35(1) of ITA 2007 (personal allowance for those born after 5 April 1938)), for ““£10,500”” substitute ““£10,600””.
3
In subsection (8) (amendments of section 57 of ITA 2007), omit the “and” at the end of paragraph (a) and after that paragraph insert—
aa
in subsection (1)(h), omit “36(2),”, and
4
In section 55B(4)(a) of ITA 2007 (transferable tax allowance for married couples and civil partners: entitlement to tax reduction), for “£1,050” substitute “£1,060”.
5
The amendments made by subsections (3) and (4) have effect for the tax year 2015-16 and subsequent tax years.
4Basic rate limit from 2016
1
The amount specified in section 10(5) of ITA 2007 (basic rate limit) is replaced—
a
for the tax year 2016-17, with “£31,900”, and
b
for the tax year 2017-18, with “£32,300”.
2
Accordingly, for those tax years section 21 of that Act (indexation of limits), so far as relating to the basic rate limit, does not apply.
5Personal allowance from 2016
1
The amount specified in section 35(1) of ITA 2007 (personal allowance for those born after 5 April 1938) is replaced—
a
for the tax year 2016-17, with “£10,800”, and
b
for the tax year 2017-18, with “£11,000”.
2
Accordingly, for those tax years, section 57 of that Act (indexation of allowances), so far as relating to the amount specified in section 35(1) of that Act, does not apply.
3
In section 34(1)(a) of that Act, for “sections 35 and 37 deal” substitute “section 35 deals”.
4
In section 35 of that Act (personal allowance for those born after 5 April 1938)—
a
for paragraphs (a) and (b) substitute “meets the requirements of section 56 (residence etc).”, and
b
for the heading substitute “Personal allowance”.
5
Omit section 37 of that Act (personal allowance for those born before 6 April 1938).
6
In section 45(4) of that Act (marriages before 5 December 2005), for paragraphs (a) and (b) substitute “half the excess”.
7
In section 46(4) of that Act (marriages and civil partnerships on or after 5 December 2005), for paragraphs (a) and (b) substitute “half the excess”.
8
In section 55B of that Act (transferable tax allowance for married couples and civil partners: tax reduction: entitlement), in subsection (6) omit “or 37”.
9
In section 55C of that Act (election to reduce personal allowance), in subsections (1)(b) and (2), omit “or 37”.
10
In section 57 of that Act (indexation of allowances)—
a
in subsection (1)(a), for the words following “35(1)” substitute “(personal allowance)”,
b
in subsection (1)(h), omit “37(2),”, and
c
in subsection (4), omit “37(2),”.
11
The amendments made by subsections (3) to (10) have effect for the tax year 2016-17 and subsequent tax years.
Corporation tax
6Charge for financial year 2016
1
Corporation tax is charged for the financial year 2016.
2
For that year the main rate of corporation tax is 20%.
CHAPTER 2Income tax: general
7Cars: the appropriate percentage for 2017-18
1
ITEPA 2003 is amended as follows.
2
Section 139 (car with a CO2 figure: the appropriate percentage) is amended as set out in subsections (3) and (4).
3
In subsection (2)—
a
in paragraph (a), for “7%” substitute “9%”,
b
in paragraph (aa), for “11%” substitute “13%”, and
c
in paragraph (b), for “15%” substitute “17%”.
4
In subsection (3), for “16%” substitute “18%”.
5
In section 140(2) (car without a CO2 figure: the appropriate percentage), in the Table—
a
for “16%” substitute “18%”, and
b
for “27%” substitute “29%”.
6
In section 142(2) (car first registered before 1 January 1998: the appropriate percentage), in the Table—
a
for “16%” substitute “18%”, and
b
for “27%” substitute “29%”.
7
The amendments made by this section have effect for the tax year 2017-18.
8Cars: the appropriate percentage for subsequent tax years
1
ITEPA 2003 is amended as follows.
2
Section 139 (car with a CO2 figure: the appropriate percentage) is amended as set out in subsections (3) and (4).
3
In subsection (2)—
a
in paragraph (a), for “9%” substitute “13%”,
b
in paragraph (aa), for “13%” substitute “16%”, and
c
in paragraph (b), for “17%” substitute “19%”.
4
In subsection (3), for “18%” substitute “20%”.
5
In section 140(2) (car without a CO2 figure: the appropriate percentage), in the Table—
a
for “18%” substitute “20%”, and
b
for “29%” substitute “31%”.
6
In section 142(2) (car first registered before 1 January 1998: the appropriate percentage), in the Table—
a
for “18%” substitute “20%”, and
b
for “29%” substitute “31%”.
7
The amendments made by this section have effect for the tax year 2018-19 and subsequent tax years.
9Diesel cars: the appropriate percentage for 2015-16
1
In section 141(2) of ITEPA 2003 (diesel cars: the appropriate percentage), in Step 3, for “35%” substitute “37%”.
2
The amendment made by this section has effect for the tax year 2015-16.
10Zero-emission vans
1
ITEPA 2003 is amended as follows.
2
In section 155 (cash equivalent of the benefit of a van), for subsections (1) and (2) substitute—
1
The cash equivalent of the benefit of a van for a tax year is calculated as follows.
1A
If the restricted private use condition is met in relation to the van for the tax year, the cash equivalent is nil.
1B
If that condition is not met in relation to the van for the tax year—
a
if the van cannot in any circumstances emit CO2 by being driven and the tax year is any of the tax years 2015-16 to 2019-20, the cash equivalent is the appropriate percentage of £3,150, and
b
in any other case, the cash equivalent is £3,150.
1C
The appropriate percentage for the purposes of subsection (1B)(a) is—
a
20% for the tax year 2015-16,
b
40% for the tax year 2016-17,
c
60% for the tax year 2017-18,
d
80% for the tax year 2018-19, and
e
90% for the tax year 2019-20.
3
In section 156(1) (reduction for periods when van unavailable), for “155(1)” substitute “155”.
4
In section 158(1) (reduction for payments for private use), for “155(1)” substitute “155”.
5
In section 160(1)(c) (benefit of fuel treated as earnings), for “section 155(1)(b)” substitute “section 155(1B)(b)”.
6
In section 170 (orders etc relating to Chapter 6 of Part 3), for subsection (1A) substitute—
1A
The Treasury may by order substitute a different amount for the amount for the time being specified in—
a
section 155(1A) (cash equivalent where van subject only to restricted private use by employee),
b
section 155(1B)(a) (cash equivalent for zero-emission van), and
c
section 155(1B)(b) (cash equivalent in other cases).
7
Article 3 of the Van Benefit and Car and Van Fuel Benefit Order 2014 (S.I. 2014/2896) is revoked.
8
The amendments made by this section have effect for the tax year 2015-16 and subsequent tax years.
11Exemption for amounts which would otherwise be deductible
1
In Part 4 of ITEPA 2003 (employment income: exemptions) after Chapter 7 insert—
CHAPTER 7AExemptions: amounts which would otherwise be deductible
289AExemption for paid or reimbursed expenses
1
No liability to income tax arises by virtue of Chapter 3 of Part 3 (taxable benefits: expenses payments) in respect of an amount (“amount A”) paid or reimbursed by a person to an employee (whether or not an employee of the person) in respect of expenses if—
a
an amount equal to or exceeding amount A would (ignoring this section) be allowed as a deduction from the employee’s earnings under Chapter 2 or 5 of Part 5 in respect of the expenses, and
b
the payment or reimbursement is not provided pursuant to relevant salary sacrifice arrangements.
2
No liability to income tax arises in respect of an amount paid or reimbursed by a person (“the payer”) to an employee (whether or not an employee of the payer) in respect of expenses if—
a
the amount has been calculated and paid or reimbursed in an approved way (see subsection (6)),
b
the payment or reimbursement is not provided pursuant to relevant salary sacrifice arrangements, and
c
conditions A and B are met.
3
Condition A is that the payer or another person operates a system for checking—
a
that the employee is, or employees are, in fact incurring and paying amounts in respect of expenses of the same kind, and
b
that a deduction would (ignoring this section) be allowed under Chapter 2 or 5 of Part 5 in respect of those amounts.
4
Condition B is that neither the payer nor any other person operating the system knows or suspects, or could reasonably be expected to know or suspect—
a
that the employee has not incurred and paid an amount in respect of the expenses, or
b
that a deduction from the employee’s earnings would not be allowed under Chapter 2 or 5 of Part 5 in respect of the amount.
5
“Relevant salary sacrifice arrangements”, in relation to an employee to whom an amount is paid or reimbursed in respect of expenses, means arrangements (whenever made, whether before or after the employment began) under which—
a
the employee gives up the right to receive an amount of general earnings or specific employment income in return for the payment or reimbursement, or
b
the amount of other general earnings or specific employment income received by the employee depends on the amount of the payment or reimbursement.
6
For the purposes of this section, a sum is calculated and paid or reimbursed in an approved way if—
a
it is calculated and paid or reimbursed in accordance with regulations made by the Commissioners for Her Majesty’s Revenue and Customs, or
b
it is calculated and paid or reimbursed in accordance with an approval given under section 289B.
7
Regulations made under subsection (6)(a) may make different provision for different purposes.
289BApproval to pay or reimburse expenses at a flat rate
1
A person (“the applicant”) may apply to Her Majesty’s Revenue and Customs for approval to pay or reimburse expenses of the applicant’s employees, or employees of another person, at a rate set out in the application (“the proposed rate”).
2
An officer of Revenue and Customs may give the approval if satisfied that any calculation of a payment or reimbursement of expenses in accordance with the proposed rate, or such other rate as is agreed between the applicant and the officer, would be a reasonable estimate of the amount of expenses actually incurred.
3
An approval under subsection (2) takes effect in accordance with a notice (an “approval notice”) given to the applicant by an officer of Revenue and Customs.
4
An approval notice must specify—
a
the rate at which expenses may be paid or reimbursed,
b
the day from which the approval takes effect, that day not being earlier than the day on which the approval notice is given,
c
the day on which the approval ceases to have effect, that day not being later than the end of the period of 5 years beginning with the day on which the approval takes effect, and
d
the type of expenses to which the approval relates.
5
An approval notice may specify that the approval is subject to conditions specified or described in the notice.
6
An application for an approval under this section must be in such form and manner, and contain such information, as is specified by Her Majesty’s Revenue and Customs.
289CRevocation of approvals
1
An officer of Revenue and Customs may, if in the officer’s opinion there is reason to do so, revoke an approval given under section 289B by giving a further notice (a “revocation notice”) to either or both of the following—
a
the person who applied for the approval, and
b
the person who is paying or reimbursing expenses in accordance with the approval.
2
A revocation notice may revoke the approval from—
a
the day on which the approval took effect, or
b
a later day specified in the notice.
3
A revocation under subsection (1) may be in relation to all expenses or expenses of a description specified in the revocation notice.
4
If the revocation notice revokes the approval from the day on which the approval took effect—
a
any liability to tax that would have arisen in respect of the payment or reimbursement of expenses if the approval had never been given in relation to such expenses is to be treated as having arisen, and
b
any person who has made, and any employee who has received, a payment or reimbursement of expenses calculated in accordance with the approval must make all the returns which they would have had to make if the approval had never been given in relation to such expenses.
5
If the revocation notice revokes the approval from a later day—
a
any liability to tax that would have arisen in respect of the payment or reimbursement of expenses if the approval had ceased to have effect on that day in relation to such expenses is to be treated as having arisen, and
b
any person who has made, and any employee who has received, a payment or reimbursement of expenses calculated in accordance with the approval must make all the returns which they would have had to make if the approval had ceased to have effect in relation to such expenses on that day.
289DExemption for other benefits
1
No liability to income tax arises by virtue of any provision of the benefits code in respect of an amount (“amount A”) treated as earnings of an employee as a result of the provision of a benefit if—
a
an amount equal to amount A would (ignoring this section) be allowed as a deduction from the employee’s earnings under Chapter 3 of Part 5 in respect of the provision of the benefit, and
b
the benefit is not provided pursuant to relevant salary sacrifice arrangements.
2
“Relevant salary sacrifice arrangements”, in relation to an employee to whom a benefit is provided, means arrangements (whenever made, whether before or after the employment began) under which—
a
the employee gives up the right to receive an amount of general earnings or specific employment income in return for the provision of the benefit, or
b
the amount of other general earnings or specific employment income received by the employee depends on the provision of the benefit.
289EAnti-avoidance
1
This section applies if conditions A to C are met.
2
Condition A is that, pursuant to arrangements, an amount—
a
is paid or reimbursed to an employee in respect of expenses, or
b
is treated as earnings of an employee as a result of the provision of a benefit,
which, in the absence of this section, would have been exempt from income tax.
3
Condition B is that, in the absence of those arrangements, the employee would have received a greater amount of general earnings or specific employment income in respect of which—
a
tax would have been chargeable, or
b
national insurance contributions would have been payable (whether by the employee or another person).
4
Condition C is that the main purpose, or one of the main purposes, of the arrangements is the avoidance of tax or national insurance contributions.
5
If this section applies—
a
the exemption conferred by section 289A does not apply in respect of the amount paid or reimbursed as mentioned in subsection (2)(a), and
b
the exemption conferred by section 289D does not apply in respect of the amount treated as earnings as mentioned in subsection (2)(b).
6
In this section “arrangements” includes any scheme, transaction or series of transactions, agreement or understanding, whether or not legally enforceable.
2
The amendment made by this section has effect for the tax year 2016-17 and subsequent tax years.
12Abolition of dispensation regime
1
ITEPA 2003 is amended as follows.
2
Omit section 65 (dispensations relating to benefits for certain employees).
3
Omit section 96 (dispensations relating to vouchers or credit-tokens).
4
Accordingly—
a
in section 95 (disregard for money, services or goods obtained), omit subsection (1)(b) and the “or” before it, and
b
in Schedule 7 (transitionals and savings), omit paragraphs 15, 16, 19 and 20 and the italic headings before paragraphs 15 and 19.
5
The amendments made by this section have effect for the tax year 2016-17 and subsequent tax years.
6
The repeal of sections 65 and 96 of ITEPA 2003 does not affect the power of an officer of Revenue and Customs to revoke a pre-commencement dispensation from a date earlier than 6 April 2016.
7
Accordingly, sections 65(6) to (9) and 96(5) to (8) of ITEPA 2003 continue to have effect in relation to a pre-commencement dispensation.
8
In this section “pre-commencement dispensation” means a dispensation given (or treated as given) under section 65 or 96 of ITEPA 2003 which is in force immediately before 6 April 2016.
13Extension of benefits code except in relation to certain ministers of religion
1
Omit Chapter 11 of Part 3 of ITEPA 2003 (taxable benefits: exclusion of lower-paid employments from parts of benefits code).
2
In Part 4 of that Act (employment income: exemptions), after section 290B insert—
290CProvisions of benefits code not applicable to lower-paid ministers of religion
1
This section applies where a person is in employment which is lower-paid employment as a minister of religion in relation to a tax year.
2
No liability to income tax arises in respect of the person in relation to the tax year by virtue of any of the following Chapters of the benefits code—
a
Chapter 3 (taxable benefits: expenses payments);
b
Chapter 6 (taxable benefits: cars, vans and related benefits);
c
Chapter 7 (taxable benefits: loans);
d
Chapter 10 (taxable benefits: residual liability to charge).
3
Subsection (2)—
a
means that in any of those Chapters a reference to an employee does not include an employee whose employment is within the exclusion in that subsection, if the context is such that the reference is to an employee in relation to whom the Chapter applies, but
b
does not restrict the meaning of references to employees in other contexts.
4
Subsection (2) has effect subject to—
a
section 188(2) (discharge of loan: where employment becomes lower-paid), and
b
section 290G (employment in two or more related employments).
290DMeaning of “lower-paid employment as a minister of religion”
1
For the purposes of this Part an employment is “lower-paid employment as a minister of religion” in relation to a tax year if—
a
the employment is direct employment as a minister of a religious denomination, and
b
the earnings rate for the employment for the year (calculated under section 290E) is less than £8,500.
2
An employment is not “direct employment” for the purposes of subsection (1)(a) if—
a
it is an employment which is treated as existing under—
i
section 56(2) (deemed employment of worker by intermediary), or
ii
section 61G(2) (deemed employment of worker by managed service company), or
b
an amount counts as employment income in respect of it by virtue of section 554Z2(1) (treatment of relevant step under Part 7A (employment income provided through third parties)).
3
Subsection (1) is subject to section 290G.
290ECalculation of earnings rate for a tax year
1
For any tax year the earnings rate for an employment is to be calculated as follows—
Step 1
Find the total of the following amounts—
a
the total amount of the earnings from the employment for the year within Chapter 1 of Part 3 (earnings),
b
the total of any amounts that are treated as earnings from the employment for the year under the benefits code (see subsections (2) and (3)), and
c
the total of any amounts that are treated as earnings from the employment for the year under Chapter 12 of Part 3 (other amounts treated as earnings),
excluding any exempt income, other than any attributable to section 290A or 290B (accommodation outgoings of ministers of religion).
Step 2
Add to that total any extra amount required to be added for the year by section 290F (extra amounts to be added in connection with a car).
Step 3
Subtract the total amount of any authorised deductions (see subsection (4)) from the result of step 2.
Step 4
The earnings rate for the employment for the year is given by the formula—
R×YE
where—
R is the result of step 3,
Y is the number of days in the year, and
E is the number of days in the year when the employment is held.
2
Section 290C(2) (provisions of benefits code not applicable to lower-paid ministers of religion) is to be disregarded for the purpose of determining any amount under step 1.
3
If the benefit of living accommodation is to be taken into account under step 1, the cash equivalent is to be calculated in accordance with section 105 (even if the cost of providing the accommodation exceeds £75,000).
4
For the purposes of step 3 “authorised deduction” means any deduction that would (assuming it was an amount of taxable earnings) be allowed from any amount within step 1 under—
section 346 (employee liabilities),
section 370 (travel costs and expenses where duties performed abroad: employee’s travel),
section 371 (travel costs and expenses where duties performed abroad: visiting spouse’s, civil partner’s or child’s travel),
section 373 (non-domiciled employee’s travel costs and expenses where duties performed in UK),
section 374 (non-domiciled employee’s spouse’s, civil partner’s or child’s travel costs and expenses where duties performed in UK),
section 376 (foreign accommodation and subsistence costs and expenses (overseas employments)),
section 713 (payroll giving to charities),
sections 188 to 194 of FA 2004 (contributions to registered pension schemes), or
section 262 of CAA 2001 (capital allowances to be given effect by treating them as deductions).
290FExtra amounts to be added in connection with a car
1
The provisions of this section apply for the purposes of section 290E in the case of a tax year in which a car is made available as mentioned in section 114(1) (cars, vans and related benefits) by reason of the employment.
2
Subsection (3) applies if in the tax year—
a
an alternative to the benefit of the car is offered, and
b
the amount that would be earnings within Chapter 1 of Part 3 if the benefit of the car were to be determined by reference to the alternative offered exceeds the benefit code earnings (see subsection (4)).
3
The amount of the excess is an extra amount to be added under step 2 in section 290E(1).
4
For the purposes of subsection (2) “the benefit code earnings” is the total for the year of—
a
the cash equivalent of the benefit of the car (calculated in accordance with Chapter 6 of Part 3 (taxable benefits: cars, vans etc)), and
b
the cash equivalent (calculated in accordance with that Chapter) of the benefit of any fuel provided for the car by reason of the employment.
5
Section 290C(2) (provisions of benefits code not applicable to lower-paid ministers of religion) is to be disregarded for the purpose of determining any amount under this section.
290GRelated employments
1
This section applies if a person is employed in two or more related employments.
2
None of the employments is to be regarded as lower-paid employment as a minister of religion in relation to a tax year if—
a
the total of the earnings rates for the employments for the year (calculated in each case under section 290E) is £8,500 or more, or
b
any of them is an employment falling outside the exclusion contained in section 290C(2) (provisions of benefits code not applicable to lower-paid ministers of religion).
3
For the purposes of this section two employments are “related” if—
a
both are with the same employer, or
b
one is with a body or partnership (“A”) and the other is either—
i
with an individual, partnership or body that controls A (“B”), or
ii
with another partnership or body also controlled by B.
4
Section 69 (extended meaning of “control”) applies for the purposes of this section as it applies for the purposes of the benefits code.
3
Schedule 1 contains amendments relating to subsections (1) and (2).
4
The amendments made by this section and Schedule 1 have effect for the tax year 2016-17 and subsequent tax years.
14Exemption for board or lodging provided to carers
1
Part 4 of ITEPA 2003 (employment income: exemptions) is amended as follows.
2
In Chapter 8 (exemptions: special kinds of employees), after section 306 insert—
Carers
306ACarers: board and lodging
1
For the purposes of this section an individual is employed as a home care worker if the duties of the employment consist wholly or mainly of the provision of personal care to another individual (“the recipient”) at the recipient’s home, in a case where the recipient is in need of personal care because of—
a
old age,
b
mental or physical disability,
c
past or present dependence on alcohol or drugs,
d
past or present illness, or
e
past or present mental disorder.
2
No liability to income tax arises by virtue of Chapter 10 of Part 3 (taxable benefits: residual liability to charge) in respect of the provision of board or lodging (or both) to an individual employed as a home care worker if the provision is—
a
on a reasonable scale,
b
at the recipient’s home, and
c
by reason of the individual’s employment as a home care worker.
3
In section 228 (effect of exemptions on liability under provisions outside Part 2), in subsection (2)(d), after “291” insert “and 306A”.
4
The amendments made by this section have effect for the tax year 2016-17 and subsequent tax years.
15Lump sums provided under armed forces early departure scheme
1
In section 640A of ITEPA 2003 (lump sums provided under armed forces early departure scheme), at the end insert “or the Armed Forces Early Departure Payments Scheme Regulations 2014 (S.I. 2014/2328)”.
2
Subsection (1) comes into force on 1 April 2015.
16Bereavement support payment: exemption from income tax
1
ITEPA 2003 is amended as follows.
2
In Part 1 of Table B in section 677(1) (UK social security benefits wholly exempt from tax), at the appropriate place insert—
Bereavement support payment
PA 2014
Section 30
Any provision made for Northern Ireland which corresponds to section 30 of PA 2014
3
In Part 1 of Schedule 1 (abbreviations of Acts and instruments), at the appropriate place insert—
PA 2014
The Pensions Act 2014
4
The amendments made by this section have effect in accordance with regulations made by the Treasury.
5
Regulations under subsection (4) may make different provision for different purposes.
6
Section 1014(4) of ITA 2007 (regulations etc subject to annulment) does not apply in relation to regulations under subsection (4).
17PAYE: benefits in kind
1
Section 684 of ITEPA 2003 (PAYE regulations) is amended as follows.
2
In the list in subsection (2), after item 1 insert—
1ZA
Provision—
a
for authorising a person (“P”), in a case where the PAYE income of an employee (whether an employee of P or of another person) includes an amount charged to tax under any of Chapters 3 and 5 to 10 of Part 3 in respect of the provision of a benefit of a specified kind—
i
to make deductions of income tax in respect of the benefit from any payment or payments actually made of, or on account of, PAYE income of the employee, or
ii
to make repayments of such income tax,
b
for any such deductions or repayments to be made at a specified time,
c
for the amount of any such deductions or repayments to be calculated in accordance with the regulations,
d
for the provision of the benefit to be treated for specified purposes as a payment of PAYE income, and
e
for making persons who make any such deductions or repayments accountable to or, as the case may be, entitled to repayment from the Commissioners.
3
For subsection (3) substitute—
3
The deductions of income tax—
a
required to be made by PAYE regulations under item 1 in the above list, or
b
which a person is authorised to make by PAYE regulations under item 1ZA in that list,
may be required to be made at the basic rate or other rates in such cases or classes of case as may be provided by the regulations.
18Employment intermediaries: determination of penalties
1
Section 100 of TMA 1970 (determination of penalties by officer of Board) is amended as follows.
2
In subsection (2)(c), after “those amendments” insert “, subject to subsection (2A)”.
3
After subsection (2) insert—
2A
Subsection (2)(c) does not exclude the application of subsection (1) where the penalty relates to a failure to furnish any information or produce any document or record in accordance with regulations under section 716B of ITEPA 2003 (employment intermediaries to keep, preserve and provide information etc).
19Arrangements offering a choice of capital or income return
1
Chapter 3 of Part 4 of ITTOIA 2005 (dividends etc from UK resident companies and tax credits etc in respect of certain distributions) is amended in accordance with subsections (2) to (6).
2
After section 396 insert—
Other amounts treated as distributions
396AArrangements offering a choice of capital or income return
1
Subsection (2) applies if a person (“S”) has a choice either—
a
to receive what would (ignoring this section) be a distribution of a company, or
b
to receive from that company, or from a third party, anything else (“the alternative receipt”) which—
i
is of the same or substantially the same value, and
ii
(ignoring this section) would not be charged to income tax.
2
If S chooses the alternative receipt—
a
for income tax purposes it is treated as a distribution made to S by that company in the tax year in which it is received by S, and
b
for the purposes of the following provisions it is treated as a qualifying distribution so made—
i
section 397 (tax credits for qualifying distributions of UK resident companies: UK residents and eligible non-UK residents);
ii
section 399 (qualifying distributions received by persons not entitled to tax credits);
iii
section 1100 of CTA 2010 (qualifying distributions: right to request a statement).
3
For the purposes of this section—
a
it does not matter if the choice mentioned in subsection (1) is subject to any conditions being met or to the exercise of any power;
b
where S is offered one thing subject to a right, however expressed, to choose another instead, S is to be regarded as making a choice if S abandons or fails to exercise such a right.
4
If at any time a tax other than income tax (“the other tax”) is charged in relation to the alternative receipt, in order to avoid a double charge to tax in respect of that receipt, a person may make a claim for one or more consequential adjustments to be made in respect of the other tax.
5
On a claim under subsection (4) an officer of Revenue and Customs must make such of the consequential adjustments claimed (if any) as are just and reasonable.
6
Consequential adjustments may be made—
a
in respect of any period,
b
by way of an assessment, the modification of an assessment, the amendment of a claim, or otherwise, and
c
despite any time limit imposed by or under an enactment.
3
In section 382 (contents of Chapter 3), in subsection (1), omit the “and” at the end of paragraph (b) and after paragraph (c) insert
, and
d
treats distributions as made in some circumstances (see section 396A).
4
In section 385 (person liable), in subsection (1)(a) for “and 389(3)” substitute “, 389(3) and 396A”.
5
In section 397 (tax credits for qualifying distributions of UK resident companies: UK residents and eligible non-UK residents), after subsection (5) insert—
5A
This section needs to be read with section 396A(2) (which treats certain receipts as “qualifying distributions” for the purposes of this section).
6
In section 399 (qualifying distributions received by persons not entitled to tax credits), after subsection (5) insert—
5A
This section needs to be read with section 396A(2) (which treats certain receipts as “qualifying distributions” for the purposes of this section).
7
In section 481 of ITA 2007 (other amounts to be charged at special rates for trustees), in subsection (3), after “Type 1” insert “or Type 12”.
8
In section 482 of that Act (types of amount to be charged at special rates for trustees), at the end insert—
Type 12 Income treated as arising to the trustees under section 396A of ITTOIA 2005 (arrangements offering a choice of income or capital return).
9
In section 1100 of CTA 2010 (qualifying distributions: right to request a statement), after subsection (6) insert—
7
This section needs to be read with section 396A(2) of ITTOIA 2005 (which treats certain receipts as “qualifying distributions” for the purposes of this section).
10
The amendments made by subsections (2) to (4), (7) and (8) have effect in relation to things received on or after 6 April 2015 (even if the choice to receive them was made before that date).
20Intermediaries and Gift Aid
1
Chapter 2 of Part 8 of ITA 2007 (gift aid) is amended as follows.
2
In section 416 (meaning of “qualifying donation” for the purpose of gift aid relief)—
a
in subsection (1)(b)—
i
after “the individual” insert “, or an intermediary representing the individual,” and
ii
after “the charity” insert “, or an intermediary representing the charity,”, and
b
after subsection (1) insert—
1A
For the purpose of subsection (1)(b) an intermediary is—
a
a person authorised by the individual to give a gift aid declaration on behalf of that individual to the charity,
b
a person authorised by a charity to receive a gift aid declaration on behalf of that charity, or
c
a person authorised to perform both of the roles described in paragraphs (a) and (b).
3
For section 428(3) (regulations in relation to gift aid declarations) substitute—
3
The regulations may also require—
a
charities, or intermediaries within the meaning of section 416(1A), to keep records with respect to declarations received from individuals or from those intermediaries,
b
charities or intermediaries to produce, for inspection by an officer of Revenue and Customs, any records required to be kept by those charities or intermediaries by regulations made under paragraph (a), and
c
intermediaries to provide statements of account, and other specified information relating to declarations made, in such form and at such times as may be specified, to individuals who have authorised those intermediaries to give those declarations to charities on their behalf.
4
The regulations may also make different provision for different cases or circumstances, including—
a
different provision for declarations made in a different manner or by different descriptions of persons, and
b
different provision depending on whether or not an intermediary, within the meaning of section 416(1A), is involved in the giving or receiving of the declaration.
4
The amendments made by this section have effect in relation to gifts made on or after a day appointed in regulations made by the Treasury.
5
Section 1014(4) of ITA 2007 (regulations etc subject to annulment) does not apply to regulations under subsection (4).
21Disguised investment management fees
1
In Part 13 of ITA 2007 (tax avoidance), after Chapter 5D insert—
CHAPTER 5EDisguised investment management fees
809EZADisguised investment management fees: charge to income tax
1
Where one or more disguised fees arise to an individual in a tax year from one or more investment schemes (whether or not by virtue of the same arrangements), the individual is liable for income tax for the tax year in respect of the disguised fee or fees as if—
a
the individual were carrying on a trade for the tax year,
b
the disguised fee or fees were the profits of the trade of the tax year, and
c
the individual were the person receiving or entitled to those profits.
2
For the purposes of subsection (1) the trade is treated as carried on—
a
in the United Kingdom, to the extent that the individual performs the relevant services in the United Kingdom;
b
outside the United Kingdom, to the extent that the individual performs the relevant services outside the United Kingdom;
and for this purpose “the relevant services” means the investment management services by virtue of which the disguised fee or fees arise to the individual in the tax year.
3
For the purposes of this Chapter a “disguised fee” arises to an individual in a tax year from an investment scheme if—
a
the individual performs investment management services directly or indirectly in respect of the scheme under any arrangements,
b
the arrangements involve at least one partnership,
c
under the arrangements, a management fee arises to the individual directly or indirectly from the scheme in the tax year (see section 809EZB), and
d
some or all of the management fee is untaxed;
and the amount of the disguised fee is so much of the management fee as is untaxed.
4
For the purposes of subsection (3) the management fee is “untaxed” if and to the extent that the fee would not (apart from this section)—
a
be charged to tax under ITEPA 2003 as employment income of the individual for any tax year, or
b
be brought into account in calculating the profits of a trade of the individual for the purposes of income tax for any tax year.
5
In subsection (4) “trade” includes profession or vocation.
6
In this Chapter “investment scheme” means—
a
a collective investment scheme, or
b
an investment trust.
809EZBMeaning of “management fee” in section 809EZA
1
Subject as follows, for the purposes of section 809EZA “management fee” means any sum (including a sum in the form of a loan or advance or an allocation of profits) except so far as the sum constitutes—
a
a repayment (in whole or part) of an investment made directly or indirectly by the individual in the scheme,
b
an arm’s length return on an investment made directly or indirectly by the individual in the scheme, or
c
carried interest (see sections 809EZC and 809EZD).
2
For the purposes of subsection (1)(b) a return on an investment is “an arm’s length return” if—
a
the return is on an investment which is of the same kind as investments in the scheme made by external investors,
b
the return on the investment is reasonably comparable to the return to external investors on those investments, and
c
the terms governing the return on the investment are reasonably comparable to the terms governing the return to external investors on those investments.
3
In this Chapter “sum” includes any money or money’s worth (and other expressions are to be construed accordingly).
4
Where—
a
a sum in the form of money’s worth arises to the individual from the scheme in the ordinary course of the scheme’s business, and
b
the individual gives the scheme money in exchange for the sum,
the sum constitutes a “management fee” only to the extent that its market value at the time it arises exceeds the amount of the money given by the individual.
809EZCMeaning of “carried interest” in section 809EZB
1
For the purposes of section 809EZB “carried interest” means a sum which arises to the individual under the arrangements by way of profit-related return.
This is subject to subsections (3) to (8) (sums where no significant risk of not arising); and see also section 809EZD (sums treated as carried interest).
2
A sum which arises to the individual under the arrangements does so by way of “profit-related return” if under the arrangements—
a
the sum is to, or may, arise only if—
i
there are profits for a period on the investments, or on particular investments, made for the purposes of the scheme, or
ii
there are profits arising from a disposal of the investments, or of particular investments, made for those purposes,
b
the amount of the sum which is to, or may, arise is variable, to a substantial extent, by reference to those profits, and
c
returns to external investors are also determined by reference to those profits;
but where any part of the sum does not meet these conditions, that part is not to be regarded as arising by way of “profit-related return”.
3
Where—
a
one or more sums (“actual sums”) arise to the individual under the arrangements by way of profit-related return in a tax year, and
b
there was no significant risk that a sum of at least a certain amount (“the minimum amount”) would not arise to the individual,
so much of the actual sum, or of the aggregate of the actual sums, as is equal to the minimum amount is not “carried interest”.
(See subsections (7) and (8) as to how the minimum amount is to be apportioned between the actual sums where more than one actual sum arises in the tax year.)
4
For the purposes of subsection (3)(b) assess the risk both—
a
in relation to each actual sum (and the investments to which it relates) individually, taking into account also any other sums that might have arisen to the individual under the arrangements instead of that sum, and
b
in relation to the actual sum or sums and any other sums that might have arisen to the individual under the arrangements by way of profit-related return in the tax year (and the investments to which all those sums relate) taken as a whole;
(so that, in a particular case, some of the minimum amount may arise by assessing the risk in accordance with paragraph (a) and some by assessing it in accordance with paragraph (b)).
5
For the purposes of subsection (3)(b) assess the risk as at the latest of—
a
the time when the individual becomes party to the arrangements,
b
the time when the individual begins to perform investment management services directly or indirectly in respect of the scheme under the arrangements, and
c
the time when a material change is made to the arrangements so far as relating to the sums which are to, or may, arise to the individual.
6
For the purposes of subsection (3)(b) ignore any risk that a sum is prevented from arising to the individual (by reason of insolvency or otherwise).
7
Where more than one actual sum arises in the tax year, the minimum amount is to be apportioned between the actual sums as follows for the purposes of subsection (3)—
a
so much of the minimum amount as is attributable to a particular actual sum is to be apportioned to that actual sum, and
b
so much of the minimum amount as is not attributable to any particular actual sum is to be apportioned between the actual sums on a just and reasonable basis.
8
For the purpose of subsection (7) any part of the minimum amount is attributable to a particular actual sum to the extent that there was no significant risk that that part would not arise to the individual in relation to that actual sum, assessing the risk in accordance with subsection (4)(a).
809EZDSums treated as “carried interest” for purposes of section 809EZB
1
A sum falling within subsection (2) or (3)—
a
is to be assumed to meet the requirements of section 809EZC, and
b
accordingly, is to be treated as constituting “carried interest” for the purposes of section 809EZB.
2
A sum falls within this subsection if, under the arrangements, it is to, or may, arise to the individual out of profits on the investments made for the purposes of the scheme, but only after—
a
all, or substantially all, of the investments in the scheme made by the participants have been repaid to the participants, and
b
each external investor has received a preferred return on all, or substantially all, of the investor’s investments in the scheme.
3
A sum falls within this subsection if, under the arrangements, it is to, or may, arise to the individual out of profits on a particular investment made for the purposes of the scheme, but only after—
a
all, or substantially all, of the relevant investments made by participants have been repaid to those participants, and
b
each of those participants who is an external investor has received a preferred return on all, or substantially all, of the investor’s relevant investments;
and for this purpose “relevant investments” means those investments in the scheme to which the particular investment made for the purposes of the scheme is attributable.
4
In this section “preferred return” means a return of not less than the amount that would be payable on the investment by way of interest if—
a
compound interest were payable on the investment for the whole of the period during which it was invested in the scheme, and
b
the interest were calculated at a rate of 6% per annum, with annual rests.
809EZEInterpretation of Chapter
1
In this Chapter—
“arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable);
“collective investment scheme” has the meaning given by section 235 of FISMA 2000;
“external investor”, in relation to an investment scheme and any arrangements, means a participant in the scheme other than—
a
an individual who performs investment management services directly or indirectly in respect of the scheme, or
b
a person through whom sums are to, or may, arise directly or indirectly to such an individual from the scheme under the arrangements;
“investment management services”, in relation to an investment scheme, includes—
a
seeking funds for the purposes of the scheme from participants or potential participants,
b
researching potential investments to be made for the purposes of the scheme,
c
acquiring, managing or disposing of property for the purposes of the scheme, and
d
acting for the purposes of the scheme with a view to assisting a body in which the scheme has made an investment to raise funds;
“investment trust” means a company in relation to which conditions A to C in section 1158 of CTA 2010 are met (or treated as met); and for this purpose “company” has the meaning given by section 1121 of CTA 2010;
“market value” has the same meaning as in TCGA 1992 (see sections 272 and 273 of that Act);
“participant”—
a
in relation to a collective investment scheme, is construed in accordance with section 235 of FISMA 2000;
b
in relation to an investment trust, means a member of the investment trust;
“profits”, in relation to an investment made for the purposes of an investment scheme, means profits (including unrealised profits) arising from the acquisition, holding, management or disposal of the investment (taking into account items of a revenue nature and items of a capital nature).
2
In this Chapter a reference to an investment made by a person in an investment scheme is a reference to a contribution by the person (whether by way of capital, loan or otherwise) towards the property subject to the scheme (but does not include a sum committed but not yet invested).
3
For the purposes of subsection (2) a person who holds a share in an investment scheme which is a company limited by shares and who acquired the share from a person other than the scheme is to be taken to have made a contribution towards the property subject to the scheme equal to—
a
the consideration given by the person for the acquisition of the share, or
b
if less, the market value of the share at the time of the acquisition.
4
In this Chapter, in relation to an investment scheme which is a company limited by shares—
a
references to a repayment of, or a return on, an investment in the scheme include a repayment of, or a return on, an investment represented by a share in the scheme resulting from—
i
the purchase of the share by the scheme,
ii
the redemption of the share by the scheme,
iii
the distribution of assets in respect of the share on the winding up of the scheme, or
iv
any similar process;
b
references to a return on an investment in the scheme include a dividend or similar distribution in respect of a share in the scheme representing the investment.
809EZFDisguised investment management fees: anti-avoidance
In determining whether section 809EZA applies in relation to an individual, no regard is to be had to any arrangements the main purpose, or one of the main purposes, of which is to secure that that section does not apply in relation to—
a
the individual, or
b
the individual and one or more other individuals.
809EZGDisguised investment management fees: avoidance of double taxation
1
This section applies where—
a
income tax is charged on an individual by virtue of section 809EZA in respect of a disguised fee, and
b
at any time, a tax (whether income tax or another tax) is charged on the individual otherwise than by virtue of section 809EZA in relation to the disguised fee.
2
This section also applies where—
a
income tax is charged on an individual by virtue of section 809EZA in respect of a disguised fee which arises to the individual under the arrangements by way of a loan or advance,
b
at any time, a tax (whether income tax or another tax) is charged on the individual in relation to another sum which arises to the individual under the arrangements, and
c
some or all of the loan or advance has to be repaid as a result of the other sum having arisen to the individual.
3
In order to avoid a double charge to tax, the individual may make a claim for one or more consequential adjustments to be made in respect of the tax charged as mentioned in subsection (1)(b) or (2)(b).
4
On a claim under this section an officer of Revenue and Customs must make such of the consequential adjustments claimed (if any) as are just and reasonable.
5
The value of any consequential adjustments must not exceed the lesser of the income tax charged on the individual as mentioned in subsection (1)(a) or (2)(a) and—
a
where subsection (1) applies, the tax charged as mentioned in subsection (1)(b);
b
where subsection (2) applies, the tax charged as mentioned in subsection (2)(b) in relation to so much of the other sum as does not exceed the amount of the loan or advance that has to be repaid as mentioned in subsection (2)(c).
6
Consequential adjustments may be made—
a
in respect of any period,
b
by way of an assessment, the modification of an assessment, the amendment of a claim, or otherwise, and
c
despite any time limit imposed by or under any enactment.
809EZHPowers to amend Chapter
1
The Treasury may by regulations amend this Chapter—
a
so as to change the definition of “investment scheme” for the purposes of this Chapter;
b
so as to change the definition of “participant” for those purposes;
c
so as to change what is “carried interest” for the purposes of section 809EZB.
2
Regulations under this section may—
a
make different provision for different purposes, and
b
contain incidental, supplemental, consequential and transitional provision and savings.
3
A statutory instrument containing regulations under this section to which subsection (4) applies 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
This subsection applies if the regulations contain any provision which has or may have the effect of increasing any person’s liability to tax.
5
Any other statutory instrument containing regulations under this section is subject to annulment in pursuance of a resolution of the House of Commons.
2
In section 2 of ITA 2007 (overview of Act), in subsection (13)—
a
after paragraph (h) insert—
ha
disposals of assets through partnerships (Chapter 5D),
b
after paragraph (ha) insert—
hb
disguised investment management fees (Chapter 5E),
3
In Schedule 4 to ITA 2007 (index of defined expressions), at the appropriate places insert—
arrangements (in Chapter 5E of Part 13)
section 809EZE(1)
collective investment scheme (in Chapter 5E of Part 13)
section 809EZE(1)
disguised fee (in Chapter 5E of Part 13)
section 809EZA(3)
external investor (in Chapter 5E of Part 13)
section 809EZE(1)
investment (in investment scheme) (in Chapter 5E of Part 13)
section 809EZE(2)
investment management services (in Chapter 5E of Part 13)
section 809EZE(1)
investment scheme (in Chapter 5E of Part 13)
section 809EZA(6)
investment trust (in Chapter 5E of Part 13)
section 809EZE(1)
market value (in Chapter 5E of Part 13)
section 809EZE(1)
participant (in Chapter 5E of Part 13)
section 809EZE(1)
profits (on investment made for purposes of investment scheme) (in Chapter 5E of Part 13)
section 809EZE(1)
repayment of, and return on, investment in certain investment schemes (in Chapter 5E of Part 13)
section 809EZE(4)
sum (in Chapter 5E of Part 13)
section 809EZB(3)
4
The amendments made by subsections (1), (2)(b) and (3) have effect in relation to sums arising on or after 6 April 2015 (whenever the arrangements under which the sums arise were made).
22Miscellaneous loss relief
1
Chapter 7 of Part 4 of ITA 2007 (losses from miscellaneous transactions) is amended as follows.
2
In section 152 (losses from miscellaneous transactions)—
a
for subsection (1) substitute—
1
If in a tax year (“the loss-making year”) a person makes a loss in a relevant transaction, the person may make a claim for loss relief against relevant miscellaneous income.
b
in subsection (2)(a), for “section 1016 income” substitute “income on which income tax is charged under, or by virtue of, a relevant section 1016 provision (“the relevant provision”)”;
c
after subsection (2) insert—
2A
A relevant section 1016 provision” means a provision to which section 1016 applies, other than—
a
regulation 17 of the Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001) (treatment of participants in non-reporting funds: charge to tax on disposal of asset), or
b
Chapter 9 of Part 4 of ITTOIA 2005 (gains from contracts for life insurance etc).
d
in subsection (4), after “person’s” insert “relevant”;
e
in subsection (5), for “A person’s miscellaneous income” substitute “The person’s “relevant miscellaneous income”, in relation to the loss,”;
f
for paragraph (b) of that subsection substitute—
b
income on which income tax is charged under, or by virtue of, the relevant provision.
g
in subsection (7), before “miscellaneous”, in both places it appears, insert “relevant”;
h
omit subsection (8);
i
in subsection (9), omit the “and” at the end of paragraph (b) and after that paragraph insert—
ba
section 154A (anti-avoidance), and
3
In section 153 (how relief works), before “miscellaneous”, in each place it appears, insert “relevant”.
4
In section 154 (transactions in deposit rights), in subsection (3)—
a
after “against” insert “relevant”, and
b
for the words from the second “miscellaneous” to the end substitute “relevant miscellaneous income, for the tax year, in relation to the loss.”
5
Before section 155 (time limit for claiming relief), but after the italic heading before that section (supplementary), insert—
154AAnti-avoidance
1
Subsection (2) applies if—
a
a person makes a loss in a relevant transaction, and
b
that loss arises directly or indirectly in consequence of, or otherwise in connection with, relevant tax avoidance arrangements.
2
The person is not to be given loss relief under section 152 for the loss.
3
Subsection (4) applies if—
a
a person has income on which income tax is chargeable under, or by virtue of, a relevant section 1016 provision, and
b
that income arises directly or indirectly in consequence of, or otherwise in connection with, relevant tax avoidance arrangements.
4
The person is not to be given loss relief against that income under section 152.
5
In this section “relevant tax avoidance arrangements” means arrangements—
a
to which the person is party, and
b
the main purpose, or one of the main purposes, of which is to obtain a reduction in tax liability by means of loss relief under section 152.
6
In subsection (5) “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).
6
In section 155 (time limit for claiming relief), in subsections (1) and (2), before “miscellaneous” insert “relevant”.
7
In consequence of subsection (2)(h), in FA 2009, omit section 69.
8
The amendments made by subsections (2)(a) to (h), (3), (4), (6) and (7)—
a
have effect for the tax year 2015-16 and subsequent tax years, and
b
apply in relation to a loss whether it is made before, during or after that tax year.
9
The amendments made by subsections (2)(i) and (5) have effect in relation to losses and income arising on or after 3 December 2014 directly or indirectly in consequence of, or otherwise in connection with, relevant tax avoidance arrangements (whenever the arrangements are made).
10
Subsection (4) of section 154A of ITA 2007 (inserted by subsection (5) of this section) applies in relation to loss relief, under section 152 of that Act, for losses whenever made.
11
In relation to income arising on or after 3 December 2014 but before the beginning of the tax year 2015-16, section 154A of ITA 2007 has effect as if for paragraph (a) of subsection (3) of that section there were substituted—
a
a person has section 1016 income (within the meaning of section 152), and
23Exceptions from duty to deduct tax: qualifying private placements
1
In Chapter 3 of Part 15 of ITA 2007 (deduction of tax from certain payments of yearly interest), after section 888 insert—
888AQualifying private placements
1
The duty to deduct a sum representing income tax under section 874 does not apply to a payment of interest on a qualifying private placement.
2
“Qualifying private placement” means a security—
a
which represents a loan relationship to which a company is a party as debtor,
b
which is not listed on a recognised stock exchange, and
c
in relation to which such other conditions as the Treasury may specify by regulations are met.
3
The conditions which may be specified under subsection (2)(c) include conditions relating to—
a
the security itself,
b
the loan relationship represented by the security,
c
the terms on which, or circumstances under which, the security or loan relationship is entered into,
d
the company which is party to the loan relationship as debtor,
e
any person by or through whom a payment of interest on the security is made, or
f
the holder of the security.
4
Regulations under this section may make provision about the consequences of failing to make a deduction under section 874, in respect of a payment of interest on a security, in cases where the person required to make the deduction had a reasonable, but mistaken, belief that the security was a qualifying private placement.
5
Regulations under this section may—
a
make different provision for different cases;
b
contain incidental, supplemental, consequential and transitional provision and savings.
6
In this section “loan relationship” has the same meaning as in Part 5 of CTA 2009.
2
Any power conferred on the Treasury by virtue of subsection (1) to make regulations comes into force on the day on which this Act is passed.
3
So far as not already brought into force by subsection (2), the amendment made by this section comes into force on such day as the Treasury may by regulations appoint.
4
Section 1014(4) of ITA 2007 (regulations etc subject to annulment) does not apply to regulations under subsection (3).
24Increased remittance basis charge
1
Chapter A1 of Part 14 of ITA 2007 (remittance basis) is amended as follows.
2
In section 809C (claim for remittance basis by long-term UK resident: nomination of foreign income and gains to which section 809H(2) is to apply)—
a
in subsection (1)(b), after “meets” insert “the 17-year residence test,”;
b
after subsection (1) insert—
1ZA
An individual meets the 17-year residence test for a tax year if the individual has been UK resident in at least 17 of the 20 tax years immediately preceding that year.
c
in subsection (1A), after “the individual” insert—
a
does not meet the 17-year residence test for that year, but
b
d
in subsection (1B)(a), after “meet” insert “the 17-year residence test or”;
e
in subsection (4)—
i
before paragraph (a) insert—
za
for an individual who meets the 17-year residence test for that year, £90,000;
ii
in paragraph (a), for “£50,000” substitute “£60,000”.
3
In section 809H (claim for remittance basis by long-term UK resident: charge)—
a
in subsection (1)(c), after “meets” insert “the 17-year residence test,”;
b
in subsection (1A)—
i
for “809C(1A)” substitute “809C(1ZA), (1A)”;
ii
after “meets” insert “the 17-year residence test,”;
c
in subsection (5B)—
i
before paragraph (a) insert—
za
if the individual meets the 17-year residence test for the relevant tax year, £90,000;
ii
in paragraph (a), for “£50,000” substitute “£60,000”.
4
The amendments made by this section have effect for the tax year 2015-16 and subsequent tax years.
CHAPTER 3Corporation tax: general
25Loan relationships: repeal of certain provisions relating to late interest etc
1
Part 5 of CTA 2009 (loan relationships) is amended as follows.
2
Omit the following provisions—
a
section 374 (connection between debtor and person standing in position of creditor),
b
section 377 (party to loan relationship having major interest in other party),
c
section 407 (postponement until redemption of debits for connected companies’ deeply discounted securities), and
d
section 408 (companies connected for section 407).
3
In section 372 (introduction to Chapter 8), in subsection (3)—
a
omit paragraph (a),
b
at the end of paragraph (b), insert “and”, and
c
omit paragraph (c) (including the “and” at the end).
4
In section 373 (late interest treated as not accruing until paid in some cases), in subsection (1)(b), for “374, 375, 377” substitute “375”.
5
In section 406 (introduction to provisions dealing with deeply discounted securities)—
a
omit subsection (1)(a), and
b
in subsections (2), (3) and (4), for “407” substitute “409”.
6
Subsections (2)(a) and (b), (3) and (4) have effect—
a
in relation to debtor relationships entered into by a company on or after 3 December 2014, and
b
in relation to debtor relationships entered into by a company before 3 December 2014, where the actual accrual period (within the meaning of Chapter 8 of Part 5 of CTA 2009) begins on or after 1 January 2016.
7
Subsections (2)(c) and (d) and (5) have effect—
a
in relation to debtor relationships entered into by a company on or after 3 December 2014, and
b
in relation to debtor relationships entered into by a company before 3 December 2014, where the relevant period (within the meaning of section 407 of CTA 2009) begins on or after 1 January 2016.
8
Subsections (6)(b) and (7)(b) are subject to subsections (9) to (14).
9
In the case of a company which has an accounting period beginning before 1 January 2016 and ending on or after that date (“the straddling period”), so much of the straddling period as falls before that date, and so much of that period as falls on or after that date, are treated for the purposes of subsections (6)(b) and (7)(b) as separate accounting periods.
10
If a debtor relationship entered into by a company before 3 December 2014 is modified on or after 3 December 2014 and before 1 January 2016, subsections (2)(a) and (b), (3) and (4) have effect in relation to that debtor relationship where the actual accrual period (within the meaning of Chapter 8 of Part 5 of CTA 2009) begins on or after the date on which the modification takes effect.
11
For the purposes of subsection (10) a debtor relationship of a company is modified if—
a
there is a material change in the terms of the relationship, or
b
there is a change in the person standing in the position of creditor.
12
If a the terms of a deeply discounted security issued by a company before 3 December 2014 are modified on or after 3 December 2014 and before 1 January 2016, subsections (2)(c) and (d) and (5) have effect in relation to the debtor relationship represented by that security where the relevant period (within the meaning of section 407 of CTA 2009) begins on or after the day on which the modification takes effect.
13
For the purposes of subsection (12) the terms of a deeply discounted security are modified if—
a
there is a material change in the terms of the security, or
b
there is a change in the person standing in the position of creditor.
14
Where subsection (10) or (12) applies, an accounting period is to be taken for the purposes of that subsection to end immediately before the day on which the modification takes effect, and a new accounting period is to be taken for those purposes to begin with that day.
26Intangible fixed assets: goodwill etc acquired from a related party
1
Part 8 of CTA 2009 (intangible fixed assets) is amended as follows.
2
In section 746 (“non-trading credits” and “non-trading debits”), in subsection (2), omit the “and” at the end of paragraph (b) and after that paragraph insert—
ba
sections 849C(3)(b) and 849D(3) (certain debits relating to goodwill etc acquired from a related individual or firm), and
3
In section 844 (overview of Chapter 13), after subsection (2) insert—
2A
Sections 849B to 849D contain restrictions relating to debits in respect of goodwill and certain other assets acquired by a company from—
a
an individual who is a related party in relation to the company, or
b
a firm with a member who is an individual and a related party in relation to the company.
4
After section 849A insert—
Transfers of goodwill etc to company by related individual or firm
849BCircumstances in which restrictions on debits in respect of goodwill etc apply
1
This section applies if—
a
a company (“C”) acquires a relevant asset directly or indirectly from an individual or a firm (“the transferor”), and
b
at the time of the acquisition—
i
if the transferor is an individual, the transferor is a related party in relation to C, or
ii
if the transferor is a firm, any individual who is a member of the transferor is a related party in relation to C.
2
“Relevant asset” means—
a
goodwill in a business, or part of a business, carried on by the transferor,
b
an intangible fixed asset that consists of information which relates to customers or potential customers of a business, or part of a business, carried on by the transferor,
c
an intangible fixed asset that consists of a relationship (whether contractual or not) that the transferor has with one or more customers of a business, or part of a business, carried on by the transferor,
d
an unregistered trade mark or other sign used in the course of a business, or part of a business, carried on by the transferor, or
e
a licence or other right in respect of an asset (“the licensed asset”) within any of paragraphs (a) to (d).
3
“The relevant business or part”, in relation to a relevant asset, means—
a
in the case of a relevant asset within subsection (2)(e), the business, or part of a business, mentioned in the paragraph of subsection (2) within which the licensed asset falls, and
b
in any other case, the business, or part of a business, mentioned in the paragraph of that subsection within which the relevant asset falls.
4
In a case in which the relevant asset is goodwill, section 849C applies if—
a
the transferor acquired all or part of the relevant business or part in one or more third party acquisitions as part of which the transferor acquired goodwill, and
b
the relevant asset is acquired by C as part of an acquisition of all of the relevant business or part.
5
In a case in which the relevant asset is not goodwill, section 849C applies if—
a
the transferor acquired the relevant asset in a third party acquisition, and
b
the relevant asset is acquired by C as part of an acquisition of all of the relevant business or part.
6
In a case not within subsection (4) or (5), section 849D applies.
7
The transferor acquires something in a “third party acquisition” if—
a
the transferor acquires it from a company and, at the time of that acquisition—
i
if the transferor is an individual, the transferor is not a related party in relation to the company, or
ii
if the transferor is a firm, no individual who is a member of the transferor is a related party in relation to the company, or
b
the transferor acquires it from a person (“P”) who is not a company and, at the time of that acquisition—
i
if the transferor is an individual, P is not connected with the transferor, or
ii
if the transferor is a firm, no individual who is a member of the transferor is connected with P.
This is subject to subsection (9).
8
In subsection (7)(b) “connected” has the same meaning as in Chapter 12 (see section 842).
9
An acquisition is not a “third party acquisition” if its main purpose, or one of its main purposes, is for any person to obtain a tax advantage (within the meaning of section 1139 of CTA 2010).
849CRestrictions in a case within section 849B(4) or (5)
1
This section contains restrictions relating to certain debits in respect of a relevant asset in a case within section 849B(4) or (5) (and in this section terms defined in section 849B have the same meaning as they have in that section).
2
If a debit is to be brought into account by C for tax purposes, in respect of the relevant asset, under a provision of Chapter 3 (debits in respect of intangible fixed assets), the amount of that debit is—
D×AM
where—
D is the amount of the debit that would be brought into account disregarding this section (and, accordingly, for the purposes of any calculation of the tax written-down value of the relevant asset needed to determine D, this section’s effect in relation to any debits previously brought into account is to be disregarded), and
AM is the appropriate multiplier (see subsection (6)).
3
If, but for this section, a debit would be brought into account by C for tax purposes, in respect of the relevant asset, under a provision of Chapter 4 (realisation of intangible fixed assets), two debits are to be brought into account under that provision instead—
a
a debit determined in accordance with subsection (4), and
b
a debit determined in accordance with subsection (5), which is to be treated for the purposes of Chapter 6 as a non-trading debit (“the non-trading debit”).
4
The amount of the debit determined in accordance with this subsection is—
D×AM
where—
D is the amount of the debit that would be brought into account under Chapter 4 disregarding this section (and, accordingly, for the purposes of any calculation of the tax written-down value of the relevant asset needed to determine D, this section’s effect in relation to any debits previously brought into account is to be disregarded), and
AM is the appropriate multiplier (see subsection (6)).
5
The amount of the non-trading debit is—
D−TD
where—
D is the amount of the debit that would be brought into account under Chapter 4 disregarding this section (but, for the purposes of any calculation of the tax written-down value of the relevant asset needed to determine D, this section’s effect in relation to any debits previously brought into account is not to be disregarded), and
TD is the amount of the debit determined in accordance with subsection (4).
6
The appropriate multiplier is the lesser of 1 and—
RAVTPACEA
where—
RAVTPA is the relevant accounting value of third party acquisitions (see subsections (7) to (9)), and
CEA is the expenditure incurred by C for, or in connection with, the acquisition of the relevant asset that is—
a
capitalised by C for accounting purposes, or
b
recognised in determining C’s profit or loss without being capitalised for accounting purposes,
subject to any adjustments under this Part or Part 4 of TIOPA 2010.
7
In a case in which this section applies by virtue of subsection (4) of section 849B, the relevant accounting value of third party acquisitions is the notional accounting value of the goodwill mentioned in paragraph (a) of that subsection (“the previously acquired goodwill”).
8
In a case in which this section applies by virtue of subsection (5) of section 849B, the relevant accounting value of third party acquisitions is the notional accounting value of the relevant asset.
9
The “notional accounting value” of the previously acquired goodwill, or of the relevant asset, is what its accounting value would have been in GAAP-compliant accounts drawn up by the transferor—
a
immediately before the relevant asset was acquired by C, and
b
on the basis that the relevant business or part was a going concern.
849DRestrictions in a case within section 849B(6)
1
This section contains restrictions relating to certain debits in respect of a relevant asset in a case within section 849B(6) (and in this section terms defined in section 849B have the same meaning as they have in that section).
2
No debits are to be brought into account by C for tax purposes, in respect of the relevant asset, under Chapter 3 (debits in respect of intangible fixed assets).
3
Any debit brought into account by C for tax purposes, in respect of the relevant asset, under Chapter 4 (realisation of intangible fixed assets) is treated for the purposes of Chapter 6 as a non-trading debit.
5
The amendments made by this section—
a
have effect in relation to accounting periods beginning on or after 3 December 2014, and
b
apply in relation to a relevant asset acquired by C on or after that date, unless C acquires the asset in pursuance of an obligation, under a contract, that was unconditional before that date.
6
If the relevant asset is acquired by C—
a
before 24 March 2015, or
b
in pursuance of an obligation, under a contract, that was unconditional before that date,
section 849B of CTA 2009 has effect as if in subsection (1)(a) of that section “directly or indirectly” were omitted.
7
For the purposes of subsection (5)(a), an accounting period beginning before, and ending on or after, 3 December 2014 is to be treated as if so much of the period as falls before that date, and so much of the period as falls on or after that date, were separate accounting periods.
8
For the purposes of subsections (5)(b) and (6)(b), an obligation is “unconditional” if it may not be varied or extinguished by the exercise of a right (whether under the contract or otherwise).
27Amount of relief for expenditure on research and development
1
CTA 2009 is amended as follows.
2
In Chapter 6A of Part 3 (trade profits: R&D expenditure credits), in section 104M (amount of R&D expenditure credit), in subsection (3), for “10%” substitute “11%”.
3
In Chapter 2 of Part 13 (relief for SMEs: cost of R&D incurred by SME)—
a
in section 1044 (additional deduction in calculating profits of trade), in subsection (8), for “125%” substitute “130%”,
b
in section 1045 (alternative treatment for pre-trading expenditure: deemed trading loss), in subsection (7), for “225%” substitute “230%”, and
c
in section 1055 (tax credit: meaning of “Chapter 2 surrenderable loss”), in subsection (2)(b), for “225%” substitute “230%”.
4
In consequence of subsection (3), in Schedule 3 to FA 2012, omit paragraph 2(2) to (4).
5
The amendments made by this section have effect in relation to expenditure incurred on or after 1 April 2015.
28Expenditure on research and development: consumable items
1
CTA 2009 is amended as follows.
2
In Part 13 (additional relief for expenditure on research and development), in section 1126 (software or consumable items: attributable expenditure), after subsection (6) insert—
7
This section is subject to sections 1126A and 1126B.
3
After section 1126 insert—
1126AAttributable expenditure: special rules
1
Expenditure on consumable items is not to be treated as attributable to relevant research and development if—
a
the relevant research and development relates to an item that is produced in the course of the research and development,
b
the consumable items form part of the item produced,
c
the item produced is transferred by a relevant person for consideration in money or money’s worth, and
d
the transfer is made in the ordinary course of the relevant person’s business.
2
Expenditure on consumable items is not to be treated as attributable to relevant research and development if—
a
the relevant research and development relates to a process of producing an item,
b
the consumable items form part of an item produced in the course of that research and development,
c
the item produced is transferred by a relevant person for consideration in money or money’s worth, and
d
the transfer is made in the ordinary course of the relevant person’s business.
3
If—
a
the item produced as described in subsection (1) or (2) may be divided, and
b
only a proportion (“the appropriate proportion”) of that item is transferred by a relevant person as described in subsection (1)(c) and (d) or (2)(c) and (d),
the appropriate proportion of the expenditure on the consumable items is not to be treated as attributable to the relevant research and development.
4
If—
a
a number of items are produced in the course of the relevant research and development described in subsection (2), and
b
only a proportion (“the appropriate proportion”) of those items is transferred by a relevant person as described in subsection (2)(c) and (d),
the appropriate proportion of the expenditure on the consumable items is not to be treated as attributable to the relevant research and development.
5
A reference in this section to producing an item includes a reference to preparing an item for transfer.
6
For the purposes of this section a consumable item forms part of an item produced if—
a
it is incorporated into the item produced, or
b
it is turned into, or it and other materials are turned into, the item produced or a part of the item produced.
7
A reference in this section to the transfer of an item is a reference to—
a
the transfer of ownership of an item to another person (whether by sale or otherwise), or
b
the transfer of possession of an item to another person (whether by letting on hire or otherwise),
and a reference to the transfer of an item includes, where the item is incorporated into another item, the transfer of that other item.
8
For the purposes of this section the provision of information obtained in testing an item is not to be regarded as consideration for the transfer of that item.
9
For the purposes of this section a transfer of an item produced in the course of research and development is not to be regarded as a transfer in the ordinary course of business if the item being transferred is waste.
10
In this section—
“item” includes any substance;
“relevant person”, in relation to relevant research and development, means—
a
the company that incurs the cost of the research and development, whether it is undertaken by itself or contracted out,
b
the company to which the research and development is contracted out, whether it is undertaken by itself or contracted out,
c
the person (other than a company) who contracts out the research and development to a company and incurs the cost of the research and development,
d
the person (other than a company) to whom the research and development is contracted out, or
e
a person who is connected to a company or person described in paragraph (a), (b), (c) or (d).
1126BAttributable expenditure: further provision
1
The Treasury may by regulations make provision for the purpose of identifying when expenditure on consumable items is attributable to relevant research and development, including provision modifying the effect of section 1126 or 1126A.
2
Regulations under this section may include provision about—
a
the circumstances in which expenditure on consumable items employed directly in relevant research and development is, or is not, to be treated as attributable to that relevant research and development;
b
the circumstances in which consumable items are, or are not, to be treated as employed directly in relevant research and development.
3
Regulations under this section may—
a
make different provision for different purposes;
b
make incidental, consequential, supplementary or transitional provision or savings.
4
Regulations under this section may amend—
a
section 1126;
b
section 1126A;
c
any other provision of this Act, if that is appropriate in consequence of provision made under paragraph (a) or (b).
5
Regulations under this section may make provision that has effect in relation to expenditure incurred before the making of the regulations, provided that it does not increase any person’s liability to tax.
4
In each of the following, after “1126” insert “to 1126B”—
a
section 104D(5);
b
section 104E(5);
c
section 104G(6);
d
section 104H(7);
e
section 104J(6);
f
section 104K(7);
g
section 1052(7);
h
section 1053(6);
i
section 1066(5);
j
section 1067(5);
k
section 1071(7);
l
section 1072(8);
m
section 1077(6);
n
section 1078(7);
o
section 1101(7);
p
section 1102(6).
5
In section 104Y(2), for “and 1126” substitute “to 1126B”.
6
In section 1310(4) (orders and regulations subject to affirmative procedure), after paragraph (za) insert—
zb
section 1126B (provision about when expenditure on consumable items is attributable to relevant research and development),
7
The amendments made by this section have effect in relation to expenditure incurred on or after 1 April 2015.
29Film tax relief
1
Part 15 of CTA 2009 (film production) is amended as follows.
2
In section 1184 (definitions of terms including “limited-budget film”)—
a
omit subsections (2) and (3), and
b
in the heading for that section omit “and “limited-budget film””.
3
For section 1200(3) (film tax relief: amount of additional deduction: rate of enhancement) substitute—
3
The rate of enhancement is 100%.
4
In section 1202 (surrendering of loss and amount of film tax credit)—
a
in subsection (2) for “R is the payable credit rate (see subsection (3))” substitute “R is 25%”, and
b
omit subsection (3).
5
Omit section 1215 (film tax relief on basis that film is limited-budget film).
6
In Schedule 4 (index of defined expressions) omit the entry for “limited-budget film”.
7
In consequence of subsection (4), in section 32 of FA 2014—
a
omit subsection (3),
b
in subsection (4) for “amendments made by subsections (2) and (3) have” substitute “amendment made by subsection (2) has”,
c
omit subsection (5), and
d
in subsection (7) for “sections 1198(1) and 1202(2) and (3)” substitute “section 1198(1)”.
8
The amendments made by this section have effect in relation to films the principal photography of which is not completed before such day as the Treasury may specify by regulations.
9
The specified day may be before the day on which the regulations are made, but may not be before 1 April 2015.
10
Section 1171(4) of CTA 2010 (orders and regulations subject to negative resolution procedure) does not apply in relation to any regulations made under subsection (8).
30Reliefs for makers of children’s television programmes
1
Part 15A of CTA 2009 (television production reliefs) is amended as follows.
2
In section 1216AB(2) (programmes that are not animation can be relevant programmes only if conditions C and D are met in addition to conditions A and B) for “not animation” substitute “neither animation nor a children’s programme”.
3
In section 1216AB(3) (condition A: types of programme that can be relevant programmes)—
a
omit the “or” after paragraph (b), and
b
after paragraph (c) insert
, or
d
a children’s programme.
4
In section 1216AC (types of programme: definitions) after subsection (2) insert—
2A
A programme is a children’s programme if, when television production activities begin, it is reasonable to expect that the persons who will make up the programme’s primary audience will be under the age of 15.
5
In section 1216AD(1) (meaning of “excluded programme”) after “For the purposes of this Part” insert “, but subject to section 1216ADA,”.
6
After section 1216AD insert—
1216ADACertain children’s programmes not to be excluded programmes
1
A children’s programme is not an excluded programme for the purposes of this Part if—
a
the programme falls within—
i
sub-head 3A set out in subsection (2), or
ii
Head 4 set out in section 1216AD(5), and
b
the prize total (see subsection (3)) does not exceed £1,000.
2
Sub-head 3A is any quiz show or game show.
3
“The prize total” for a programme is the total of—
a
the amount of each relevant prize that is a money prize, and
b
the amount spent on each other relevant prize by, or on behalf of, its provider,
and here “relevant prize” means a prize offered in connection with participation in a quiz, game, competition or contest in, or promoted by, the programme.
4
The Treasury may by regulations amend subsection (1)(b) for the purpose of increasing the amount of the money limit for the time being specified in subsection (1)(b).
7
The amendments made by this section have effect in relation to accounting periods beginning on or after 1 April 2015.
8
Subsections (9) and (10) apply where—
a
a company has an accounting period beginning before, and ending on or after, 1 April 2015 (“the straddling period”),
b
in the part of the straddling period beginning with 1 April 2015 and ending with the end of the straddling period, the company carries on activities in relation to a television programme that—
i
is within the definition of “children’s programme” given by the new section 1216AC(2A), but
ii
is not a relevant programme for the purposes of Part 15A of CTA 2009, and
c
if that part of the straddling period were a separate accounting period, in that separate accounting period—
i
the programme would be a relevant programme for the purposes of Part 15A of CTA 2009,
ii
the company would for those purposes be the television production company in relation to the programme, and
iii
the conditions for television tax relief (see section 1216C(2) of CTA 2009) would be met in relation to the programme.
9
For the purposes of calculating for corporation tax purposes the company’s profits or losses for the straddling period of its activities in relation to the programme—
a
so much of the straddling period as falls before 1 April 2015, and
b
so much of that period as falls on or after that date,
are to be treated as separate accounting periods.
10
Any amounts brought into account for the purposes of calculating for corporation tax purposes the company’s profits or losses for the straddling period of its activities in relation to the programme are to be apportioned to the two separate accounting periods on such basis as is just and reasonable.
31Television tax relief
1
In section 1216CE(1) of CTA 2009 (television tax relief: UK expenditure condition) for “25%” substitute “10%”.
2
The amendment made by subsection (1) has effect in relation to relevant programmes the principal photography of which is not completed before 1 April 2015.
32Restrictions applying to certain deductions made by banking companies
Schedule 2 contains provision restricting the amount of deductions which banking companies may make in respect of certain losses carried forward from previous accounting periods.
33Tax avoidance involving carried-forward losses
Schedule 3 contains provision restricting the circumstances in which companies may make a deduction in respect of certain losses carried forward from previous accounting periods.
CHAPTER 4Other provisions
Pensions
34Pension flexibility: annuities etc
Schedule 4 contains provision about pension annuities, and other pension, paid in respect of deceased members of pension schemes.
Flood and coastal defence
35Relief for contributions to flood and coastal erosion risk management projects
Schedule 5 makes provision about relief for contributions to flood and coastal erosion risk management projects.
Investment reliefs
36Investment reliefs: excluded activities
Schedule 6 makes provision about excluded activities for the purposes of the following provisions of ITA 2007—
a
Part 5 (enterprise investment scheme) and, by virtue of section 257DA(9) of that Act, Part 5A (seed enterprise investment scheme),
b
Part 5B (tax relief for social investments), and
c
Part 6 (venture capital trusts).
Capital gains tax
37Disposals of UK residential property interests by non-residents etc
Schedule 7 contains provision about capital gains tax on the disposal of UK residential property interests—
a
by a person who is not resident in the United Kingdom, or
b
by an individual, in the overseas part of a split tax year.
38Relevant high value disposals: gains and losses
Schedule 8 contains provision about the calculation of relevant high value disposals within the meaning of section 2C of TCGA 1992.
39Private residence relief
Schedule 9 contains amendments of TCGA 1992 in connection with private residence relief.
40Wasting assets
1
In section 45 of TCGA 1992 (exemption for certain wasting assets), after subsection (3) insert—
3A
But subsection (3) does not apply in the case of a disposal in relation to which subsection (3B) disapplies subsection (1).
3B
Subsection (1) does not apply to a disposal of, or of an interest in, an asset if—
a
at any time in the period of ownership of the person making the disposal, the asset is used for the purposes of a trade, profession or vocation carried on by another person,
b
as a result of that use, the asset becomes plant,
c
but for the asset therefore being regarded under section 44(1)(c) as having a predictable life of less than 50 years, the disposal would not be of, or of an interest in, a wasting asset, and
d
the disposal is not within subsection (3C).
3C
A disposal of, or of an interest in, an asset is within this subsection if the asset is plant used for the purpose of leasing under a long funding lease and—
a
the disposal takes place after the commencement of the term of the lease but before the termination of the lease, or
b
the disposal is the deemed disposal of the asset under section 25A(3)(a) on the termination of the lease.
3D
Section 25A(5) applies for the purposes of subsection (3C).
2
The amendment made by this section has effect—
a
for corporation tax purposes, in relation to disposals on or after 1 April 2015, and
b
for capital gains tax purposes, in relation to disposals on or after 6 April 2015.
41Entrepreneurs’ relief: associated disposals
1
Section 169K of TCGA 1992 (disposal associated with relevant material disposal) is amended as follows.
2
For subsections (1) and (2) substitute—
1
There is a disposal associated with a relevant material disposal if—
a
condition A1, A2 or A3 is met, and
b
conditions B and C are met.
1A
Condition A1 is that an individual (“P”) makes a material disposal of business assets which consists of the disposal of the whole or part of P’s interest in the assets of a partnership, and—
a
P’s disposed of interest is at least a 5% interest in the partnership’s assets, and
b
at the date of the disposal, no partnership purchase arrangements exist.
1B
Condition A2 is that P makes a material disposal of business assets which consists of the disposal of shares in a company, all or some of which are ordinary shares, and at the date of the disposal—
a
the ordinary shares disposed of—
i
constitute at least 5% of the company’s ordinary share capital, and
ii
carry at least 5% of the voting rights in the company, and
b
no share purchase arrangements exist.
1C
But condition A2 is not met if the disposal of shares is a disposal by virtue of section 122, other than such a disposal treated as made in consideration of a capital distribution from a company which is made in the course of dissolving or winding up the company.
1D
Condition A3 is that P makes a material disposal of business assets which consists of the disposal of securities of a company, and at the date of the disposal—
a
the securities disposed of constitute at least 5% of the value of the securities of the company, and
b
no share purchase arrangements exist.
1E
For the purposes of conditions A2 and A3, in relation to the disposal of shares in or securities of a company (“company A”), “share purchase arrangements” means arrangements under which P or a person connected with P is entitled to acquire shares in or securities of—
a
company A, or
b
a company which is a member of a trading group of which company A is a member.
2
For the purposes of subsection (1E)(b), a company is treated as a member of a trading group of which company A is a member if, at the date of the disposal mentioned in condition A2 or A3, arrangements exist which it is reasonable to assume will result in the company and company A becoming members of the same trading group.
3
In subsection (3)—
a
for “the individual”, in the first place it occurs, substitute “P”, and
b
for “the withdrawal of the individual” substitute “P’s withdrawal”.
4
After subsection (3) insert—
3A
The disposal mentioned in condition B is not treated as part of P’s withdrawal from participation in the business carried on by a partnership if at the date of that disposal there exist any partnership purchase arrangements.
3B
The disposal mentioned in condition B is not treated as part of P’s withdrawal from participation in the business carried on by a company (“company A”) if at the date of that disposal there exist any arrangements under which P or a person connected with P is entitled to acquire shares in or securities of—
a
company A, or
b
a company which is a member of a trading group of which company A is a member.
3C
For the purposes of subsection (3B)(b), a company is treated as a member of a trading group of which company A is a member if, at the date of the disposal mentioned in condition B, arrangements exist which it is reasonable to assume will result in the company and company A becoming members of the same trading group.
5
After subsection (5) insert—
6
In this section, in relation to a partnership, “partnership purchase arrangements” means arrangements under which P or a person connected with P is entitled to acquire any interest in, or increase that person’s interest in, the partnership (including a share of the profits or assets of the partnership or an interest in such a share).
7
In this section—
“arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable);
“securities” includes an interest in securities, and an “interest in securities” includes (in particular) an option to acquire securities;
“shares” includes an interest in shares, and an “interest in shares” includes (in particular) an option to acquire shares.
8
For the purposes of this section, a person is treated as entitled to acquire anything which the person—
a
is entitled to acquire at a future date, or
b
will at a future date be entitled to acquire.
9
For the purposes of this section the assets of—
a
a Scottish partnership, or
b
a partnership under the law of any other country or territory under which assets of a partnership are regarded as held by or on behalf of the partnership as such,
are to be treated as held by the members of the partnership in the proportions in which they are entitled to share in the profits of the partnership.
References in this section to an individual’s interest in the partnership’s assets are to be construed accordingly.
6
The amendments made by this section have effect in relation to disposals made on or after 18 March 2015.
42Entrepreneurs’ relief: exclusion of goodwill in certain circumstances
1
Chapter 3 of Part 5 of TCGA 1992 (entrepreneurs’ relief) is amended as follows.
2
In section 169H (introduction), in subsection (3), for “section 169L” substitute “sections 169L and 169LA”.
3
In section 169L (relevant business assets), in subsection (2), after “including” insert “, subject to section 169LA,”.
4
After that section insert—
169LARelevant business assets: goodwill transferred to a related party etc
1
Subsection (4) applies if—
a
as part of a qualifying business disposal, a person (“P”) disposes of goodwill directly or indirectly to a close company (“C”),
b
at the time of the disposal, P is a related party in relation to C, and
c
P is not a retiring partner.
2
P is a related party in relation to C for the purposes of this section if P is a related party in relation to C for the purposes of Part 8 of CTA 2009 (intangible fixed assets) (see Chapter 12 of that Part (related parties) and, in particular, section 835(5) of that Act).
3
P is a retiring partner if the goodwill is goodwill in a business carried on, immediately before the disposal, by a partnership of which P is a member and at the time of the disposal—
a
P is not, and no arrangements exist under which P could become, a participator in C or in a company that has control of, or holds a major interest in, C (a “relevant participator”),
b
P is a related party in relation to C because P is an associate of one or more relevant participators, and
c
P is only an associate of each of those relevant participators because they are also members of the partnership.
4
For the purposes of this Chapter, the goodwill is not one of the relevant business assets comprised in the qualifying business disposal.
5
If a company—
a
is not resident in the United Kingdom, but
b
would be a close company if it were resident in the United Kingdom,
the company is to be treated as being a close company for the purposes of this section (including for the purposes of determining whether a person is a related party in relation to the company for the purposes of this section).
6
If a person—
a
disposes of goodwill as part of a qualifying business disposal, and
b
is party to relevant avoidance arrangements,
subsection (4) applies (if it would not otherwise do so).
7
In subsection (6) “relevant avoidance arrangements” means arrangements the main purpose, or one of the main purposes, of which is to secure—
a
that subsection (4) does not apply in relation to the goodwill, or
b
that the person is not a related party (for whatever purposes) in relation to a company to which the disposal of goodwill is directly or indirectly made.
8
In this section—
“arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable);
“associate”, “control”, “major interest” and “participator” have the same meaning as in Chapter 12 of Part 8 of CTA 2009 (see, in particular, sections 836, 837 and 841 of that Act).
5
The amendments made by this section have effect in relation to qualifying business disposals made on or after 3 December 2014.
43Entrepreneurs’ relief: trading company etc
1
Section 169S of TCGA 1992 (entrepreneurs’ relief – interpretation) is amended as follows.
2
After subsection (4) insert—
4A
In this Chapter “trading company” and “trading group” have the same meaning as in section 165 (see section 165A), except that, for the purposes of this Chapter—
a
subsections (7) and (12) of section 165A are to be disregarded;
b
in determining whether a company which is a member of a partnership is a trading company, activities carried on by the company as a member of that partnership are to be treated as not being trading activities (see section 165A(4)); and
c
in determining whether a group of companies is a trading group in a case where any one or more companies in the group is a member of a partnership, activities carried on by such a company as a member of the partnership are to be treated as not being trading activities (see section 165A(9)).
3
In subsection (5), omit the entry relating to “trading company” and “trading group” and the “and” preceding that entry.
4
For the purposes of conditions B and D in section 169I of TCGA 1992 (material disposal of business assets), any reference to a company ceasing to be a trading company or ceasing to be a member of a trading group does not include a case where a company ceases to be a trading company or ceases to be a member of a trading group by virtue only of the coming into force of subsections (2) and (3).
5
This section comes into force on 18 March 2015.
44Deferred entrepreneurs’ relief on invested gains
1
In Part 5 of TCGA 1992 (transfer of business assets) after Chapter 3 (entrepreneurs’ relief) insert—
Chapter 4Entrepreneurs’ relief where held-over gains become chargeable
169TOverview of Chapter
This Chapter makes provision about claiming entrepreneurs’ relief in certain cases where, in relation to held-over gains that originally arose on a business disposal, there is a chargeable event for the purposes of Schedule 5B or 8B (relief for gains invested under the enterprise investment scheme or in social enterprises).
169UEligibility conditions for deferred entrepreneurs’ relief
1
Section 169V applies if, ignoring the operation of section 169V(2)(b), each of the following conditions is met.
2
The first condition is that a chargeable gain (“the first eventual gain”) accrues as a result of the operation of—
paragraph 4 of Schedule 5B (enterprise investment scheme), or
paragraph 5 of Schedule 8B (investments in social enterprises).
3
If the first condition is met, the paragraph and Schedule mentioned in subsection (2) that apply in the case are referred to in this section, and section 169V, as “the relevant paragraph” and “the applicable Schedule”.
4
The second condition is—
a
that the first eventual gain accrues in a case in which the original gain would, but for the operation of the applicable Schedule, have accrued on a relevant business disposal, or
b
where the first eventual gain accrues in a case in which the original gain would, but for the operation of the applicable Schedule, have accrued as a result of the operation of either of the paragraphs mentioned in subsection (2), that the underlying disposal is a relevant business disposal.
5
The third condition is that a claim for entrepreneurs’ relief in respect of the first eventual gain is made, on or before the first anniversary of the 31 January following the tax year in which the first eventual gain accrues, by the individual who made the disposal mentioned in subsection (4)(a) or (b).
6
The fourth condition is that the first eventual gain is the first gain to accrue in the case as a result of the operation of the relevant paragraph.
7
In subsection (4) “the underlying disposal” means the disposal (not being a disposal within paragraph 3 of Schedule 5B or paragraph 6 of Schedule 8B) by virtue of which Schedule 5B or 8B has effect.
8
For the purposes of subsection (4), whether the disposal on which the original gain would have accrued is a relevant business disposal, or whether the underlying disposal is a relevant business disposal, is to be decided according to the law applicable to disposals made at the time the disposal was made.
9
In this section—
“the original gain”, in relation to a particular case, has the same meaning as in the applicable Schedule,
“relevant business asset” has the meaning given by section 169L, and
“relevant business disposal” means—
a
a disposal—
i
within section 169H(2)(a) or (c) (qualifying business disposals), and
ii
consisting of the disposal of (or of interests in) shares in or securities of a company, or
b
a disposal of relevant business assets which is comprised in a disposal—
i
within section 169H(2)(a) or (c), and
ii
not consisting of the disposal of (or of interests in) shares in or securities of a company.
169VOperation of deferred entrepreneurs’ relief
1
Where this section applies, the following rules have effect.
2
The gain mentioned in section 169U(2) (“the first eventual gain”)—
a
is treated for ER purposes as the amount resulting from a calculation under section 169N(1) carried out—
i
in respect of a qualifying business disposal made when the first eventual gain accrues, and
ii
because of the claim mentioned in section 169U(5), and
b
except for ER purposes, is not to be taken into account under this Act as a chargeable gain.
3
If the first eventual gain is a part only of the original gain in the case concerned, each part of the original gain that subsequently accrues as a chargeable gain as a result of the operation of the relevant paragraph—
a
is treated for ER purposes as the amount resulting from a calculation under section 169N(1) carried out—
i
in respect of a qualifying business disposal made when that chargeable gain so accrues, and
ii
because of the claim mentioned in section 169U(5), and
b
except for ER purposes, is not to be taken into account under this Act as a chargeable gain.
4
If the disposal mentioned in paragraph (a) or (b) of section 169U(4) is a disposal within section 169H(2)(c) (qualifying business disposal: disposal associated with a relevant material disposal)—
a
a disposal mentioned in subsection (2) or (3) of this section is treated for the purposes of section 169P(1) as a disposal associated with a relevant material disposal, but
b
section 169P applies in relation to that disposal as if the disposal referred to in section 169P(4) were the disposal mentioned in section 169U(4)(a) or (b).
5
In this section “ER purposes” means the purposes of—
a
section 169N(2) to (4B), (7) and (8), and
b
section 169P.
2
The amendment made by subsection (1) has effect in relation to cases where the disposal mentioned in the new section 169U(4)(a) or (b) is made on or after 3 December 2014.
Capital allowances
45Zero-emission goods vehicles
1
CAA 2001 is amended as follows.
2
In section 45DA(1)(a) (period during which first-year qualifying expenditure may be incurred), for “5 years” substitute “8 years”.
3
Section 45DB (exclusions from allowances under section 45DA) is amended in accordance with subsections (4) to (7).
4
In subsection (7), omit “notified” (in both places).
5
In subsection (8), omit “to that extent”.
6
In subsection (11), omit the definition of “notified State aid”.
7
After that subsection insert—
11A
Nothing in this section limits references to “State aid” to State aid which is required to be notified to and approved by the European Commission.
8
The amendments made by subsections (3) to (7) have effect—
a
in relation to a relevant grant or relevant payment made at any time (whether before or on or after the specified day) towards expenditure incurred on or after that day, and
b
in relation to a relevant grant or relevant payment made on or after the specified day towards expenditure incurred before that day.
9
“The specified day” means—
a
for income tax purposes, 6 April 2015, and
b
for corporation tax purposes, 1 April 2015.
46Plant and machinery allowances: anti-avoidance
Schedule 10 contains provision about plant and machinery allowances.
Oil and gas
47Extension of ring fence expenditure supplement
Schedule 11 contains provision enabling the ring fence expenditure supplement to be claimed for an additional 4 accounting periods (and as a result repeals provision for the extended ring fence expenditure supplement for onshore activities).
48Reduction in rate of supplementary charge
1
In section 330 of CTA 2010 (supplementary charge in respect of ring fence trades), in subsection (1), for “32%” substitute “20%”.
2
The amendment made by subsection (1) has effect in relation to accounting periods beginning on or after 1 January 2015 (but see also subsection (3)).
3
Subsections (4) to (6) apply where a company has an accounting period beginning before 1 January 2015 and ending on or after that date (“the straddling period”).
4
For the purpose of calculating the amount of the supplementary charge on the company for the straddling period—
a
so much of that period as falls before 1 January 2015, and so much of that period as falls on or after that date, are treated as separate accounting periods, and
b
the company’s adjusted ring fence profits for the straddling period are apportioned to the two separate accounting periods in proportion to the number of days in those periods.
5
Sections 330A and 330B of CTA 2010 do not apply in relation to the straddling period (but do apply in relation to the separate accounting period ending on 31 December 2014).
6
The amount of the supplementary charge on the company for the straddling period is the sum of the amounts of supplementary charge that would, in accordance with subsections (4) and (5), be chargeable on the company for those separate accounting periods.
7
In this section—
“adjusted ring fence profits” has the same meaning as in section 330 of CTA 2010;
“supplementary charge” means any sum chargeable under section 330(1) of CTA 2010 as if it were an amount of corporation tax.
49Supplementary charge: investment allowance
Schedule 12 contains provision about the reduction of adjusted ring fence profits by means of an investment allowance.
50Supplementary charge: cluster area allowance
Schedule 13 contains provision about the reduction of adjusted ring fence profits by means of a cluster area allowance.
51Amendments relating to investment allowance and cluster area allowance
Schedule 14 contains further amendments related to the amendments made by Schedules 12 and 13.
PART 2Excise duties and other taxes
Petroleum revenue tax
52Reduction in rate of petroleum revenue tax
1
OTA 1975 is amended as follows.
2
In section 1(2) (rate of petroleum revenue tax) for “50” substitute “35”.
3
In paragraph 17(5)(b) of Schedule 2 (relevant percentage in relation to the amount of loss which is treated as reducing assessable profit) after “60 per cent” insert “if that later repayment period ends on or before 31 December 2015, and 45 per cent if it ends after 31 December 2015”.
4
The amendment made by subsection (2) has effect with respect to chargeable periods ending after 31 December 2015.
Alcohol
53Rates of alcoholic liquor duties
1
ALDA 1979 is amended as follows.
2
In section 5 (rate of duty on spirits), for “£28.22” substitute “£27.66”.
3
In section 36(1AA) (rates of general beer duty)—
a
in paragraph (za) (rate of duty on lower strength beer), for “£8.62” substitute “£8.10”, and
b
in paragraph (a) (standard rate of duty on beer), for “£18.74” substitute “£18.37”.
4
In section 37(4) (rate of high strength beer duty), for “£5.29” substitute “£5.48”.
5
In section 62(1A) (rates of duty on cider)—
a
in paragraph (b) (cider of strength exceeding 7.5% which is not sparkling cider) for “£59.52” substitute “£58.75”, and
b
in paragraph (c) (other cider), for “£39.66” substitute “£38.87”.
6
For Part 2 of the table in Schedule 1 substitute—
PART 2Wine or made-wine of a strength exceeding 22 per cent
Description of wine or made-wine
Rates of duty per litre of alcohol in wine or made-wine £
Wine or made-wine of a strength exceeding 22 per cent
27.66
7
The amendments made by this section are treated as having come into force on 23 March 2015.
54Wholesaling of controlled liquor
1
ALDA 1979 is amended as set out in subsections (2) to (5).
2
In section 4 (interpretation)—
a
in subsection (1), in the definition of “wholesale”, after ““wholesale”” insert “(except in Part 6A)”,
b
in the Table in subsection (3), at the appropriate place insert—
excise duty point
c
in subsection (4), after “Act” insert “(except in Part 6A)”.
3
After Part 6 insert—
PART 6AWholesaling of controlled liquor
88ADefinitions
1
This section defines certain expressions used in this Part.
2
A sale is of “controlled liquor” if—
a
it is a sale of dutiable alcoholic liquor on which duty is charged under this Act at a rate greater than nil, and
b
the excise duty point for the liquor falls at or before the time of the sale.
3
Controlled liquor is sold “wholesale” if—
a
the sale is of any quantity of the liquor,
b
the seller is carrying on a trade or business and the sale is made in the course of that trade or business,
c
the sale is to a buyer carrying on a trade or business, for sale or supply in the course of that trade or business, and
d
the sale is not an incidental sale, a group sale or an excluded sale,
and a reference to buying controlled liquor wholesale is to be read accordingly.
4
A sale is an “incidental sale” if—
a
the seller makes authorised retail sales of alcoholic liquor of any description, and
b
the sale is incidental to those sales.
5
A sale is an “authorised retail sale” if it is made by retail under and in accordance with a licence or other authorisation under an enactment regulating the sale and supply of alcohol.
6
A sale is a “group sale” if the seller and the buyer are both bodies corporate which are members of the same group (see section 88J).
7
A sale is an “excluded sale” if it is of a description prescribed by or under regulations made by the Commissioners.
8
“Controlled activity” means—
a
selling controlled liquor wholesale,
b
offering or exposing controlled liquor for sale in circumstances in which the sale (if made) would be a wholesale sale, or
c
arranging in the course of a trade or business for controlled liquor to be sold wholesale, or offered or exposed for sale in circumstances in which the sale (if made) would be a wholesale sale.
9
“UK person” means a person who is UK-established for the purposes of value added tax (see paragraph 1(10) of Schedule 1 to the Value Added Tax Act 1994).
10
“Enactment” includes an enactment contained in—
a
an Act of the Scottish Parliament;
b
an Act or Measure of the National Assembly for Wales;
c
Northern Ireland legislation.
88BFurther provision relating to definitions
1
The Commissioners may by regulations make provision as to the cases in which sales are, or are not, to be treated for the purposes of this Part as—
a
wholesale sales,
b
sales of controlled liquor,
c
incidental sales,
d
authorised retail sales, or
e
group sales.
2
The Commissioners may by regulations make provision as to the cases in which a person is, or is not, to be treated for the purposes of this Part as carrying on a controlled activity by virtue of section 88A(8)(b) or (c) (offering and exposing for sale and arranging for sale etc).
88CApproval to carry on controlled activity
1
A UK person may not carry on a controlled activity otherwise than in accordance with an approval given by the Commissioners under this section.
2
The Commissioners may approve a person under this section to carry on a controlled activity only if they are satisfied that the person is a fit and proper person to carry on the activity.
3
The Commissioners may approve a person under this section to carry on a controlled activity for such periods and subject to such conditions or restrictions as they may think fit or as they may by or under regulations made by them prescribe.
4
The conditions or restrictions may include conditions or restrictions requiring the controlled activity to be carried on only at or from premises specified or approved by the Commissioners.
5
The Commissioners may at any time for reasonable cause revoke or vary the terms of an approval under this section.
6
In this Part “approved person” means a person approved under this section to carry on a controlled activity.
88DThe register of approved persons
1
The Commissioners must maintain a register of approved persons.
2
The register is to contain such information relating to approved persons as the Commissioners consider appropriate.
3
The Commissioners may make publicly available such information contained in the register as they consider necessary to enable those who deal with a person who carries on a controlled activity to determine whether the person in question is an approved person in relation to that activity.
4
The information may be made available by such means (including on the internet) as the Commissioners consider appropriate.
88ERegulations relating to approval, registration and controlled activities
1
The Commissioners may by regulations make provision—
a
regulating the approval and registration of persons under this Part,
b
regulating the variation or revocation of any such approval or registration or of any condition or restriction to which such an approval or registration is subject,
c
about the register maintained under section 88D,
d
regulating the carrying on of controlled activities, and
e
imposing obligations on approved persons.
2
The regulations may, in particular, make provision—
a
requiring applications, and other communications with the Commissioners, to be made electronically,
b
as to the procedure for the approval and registration of bodies corporate which are members of the same group and for members of such a group to be jointly and severally liable for any penalties imposed under—
i
the regulations, or
ii
Schedule 2B,
c
requiring approved persons to keep and make available for inspection such records relating to controlled activities as may be prescribed by or under the regulations,
d
imposing a penalty of an amount prescribed by the regulations (which must not exceed £1,000) for a contravention of—
i
the regulations, or
ii
any condition or restriction imposed under this Part,
e
for the assessment and recovery of such a penalty, and
f
for dutiable alcoholic liquor (whether or not charged with any duty and whether or not that duty has been paid) to be subject to forfeiture for a contravention of—
i
this Part or the regulations, or
ii
any condition or restriction imposed under this Part.
88FRestriction on buying controlled liquor wholesale
A person may not buy controlled liquor wholesale from a UK person unless the UK person is an approved person in relation to the sale.
88GOffences
1
A person who contravenes section 88C(1) by selling controlled liquor wholesale is guilty of an offence if the person knows or has reasonable grounds to suspect that—
a
the buyer is carrying on a trade or business, and
b
the liquor is for sale or supply in the course of that trade or business.
2
A person who contravenes section 88C(1) by offering or exposing controlled liquor for sale in circumstances in which the sale (if made) would be a wholesale sale is guilty of an offence if the person intends to make a wholesale sale of the liquor.
3
A person who contravenes section 88C(1) by arranging in the course of a trade or business for controlled liquor to be sold wholesale, or offered or exposed for sale in circumstances in which the sale (if made) would be a wholesale sale, is guilty of an offence if the person intends to arrange for the liquor to be sold wholesale.
4
A person who contravenes section 88F is guilty of an offence if the person knows or has reasonable grounds to suspect that the UK person from whom the controlled liquor is bought is not an approved person in relation to the sale.
5
A person guilty of an offence under this section is liable on summary conviction—
a
in England and Wales to—
i
imprisonment for a term not exceeding 12 months,
ii
a fine, or
iii
both,
b
in Scotland to—
i
imprisonment for a term not exceeding 12 months,
ii
a fine not exceeding the statutory maximum, or
iii
both, and
c
in Northern Ireland to—
i
imprisonment for a term not exceeding 6 months,
ii
a fine not exceeding the statutory maximum, or
iii
both.
6
A person guilty of an offence under this section is liable on conviction on indictment to—
a
imprisonment for a period not exceeding 7 years,
b
a fine, or
c
both.
7
The reference in subsection (5)(a)(i) to 12 months is to be read as a reference to 6 months in relation to an offence committed before the commencement of section 154(1) of the Criminal Justice Act 2003.
88HPenalties
Schedule 2B contains provision about penalties for contraventions of this Part.
88IRegulations
Regulations under this Part—
a
may make provision which applies generally or only for specified cases or purposes,
b
may make different provision for different cases or purposes,
c
may include incidental, consequential, transitional or transitory provision, and
d
may confer a discretion on the Commissioners.
88JGroups
1
Two or more bodies corporate are members of a group for the purposes of this Part if each is established or has a fixed establishment in the United Kingdom and—
a
one of them controls each of the others,
b
one person (whether a body corporate or an individual) controls all of them, or
c
two or more individuals carrying on a business in partnership control all of them.
2
For the purposes of this section, a body corporate is to be taken to control another body corporate if—
a
it is empowered by or under an enactment to control that body’s activities, or
b
it is that body’s holding company within the meaning of section 1159 of, and Schedule 6 to, the Companies Act 2006.
3
For the purposes of this section—
a
an individual or individuals are to be taken to control a body corporate if the individual or individuals (were the individual or individuals a company) would be that body’s holding company within the meaning of section 1159 of, and Schedule 6 to, the Companies Act 2006, and
b
a body corporate is established or has a fixed establishment in the United Kingdom if it is so established or has such an establishment for the purposes of value added tax.
88KIndex
This Table lists the places where some of the expressions used in this Part are defined or otherwise explained.
approved person
section 88C(6)
authorised retail sale
section 88A(5)
controlled activity
section 88A(8)
enactment
section 88A(10)
group (in relation to bodies corporate)
section 88J(1)
group sale
section 88A(6)
incidental sale
section 88A(4)
sale of controlled liquor
section 88A(2)
UK person
section 88A(9)
wholesale
section 88A(3).
4
In section 90 (procedure for regulations)—
a
after subsection (1) insert—
1A
A statutory instrument containing regulations under Part 6A is subject to annulment in pursuance of a resolution of the House of Commons.
b
in subsection (2), after “containing” insert “any other”.
5
After Schedule 2A insert—
SCHEDULE 2BPenalties for contraventions of Part 6A
1Liability to penalty
A penalty is payable by a person (“P”) who contravenes section 88C(1) or 88F.
2Amount of penalty
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 section 88C(1) or 88F 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, 50% of 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.
5Special reduction
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.
6Assessment
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
An assessment is to be treated as an amount of duty due from P under this Act and may be recovered accordingly.
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.
7Reasonable excuse
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.
8Companies: officer’s liability
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.
9Double jeopardy
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.
10The maximum amount
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 the Finance Act 2015 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 occurred before the date on which they come into force.
11Appeal tribunal
In this Schedule “appeal tribunal” has the same meaning as in Chapter 2 of Part 1 of the Finance Act 1994.
6
In section 13A(2) of FA 1994 (meaning of “relevant decision”), after paragraph (e) insert—
ea
any decision by HMRC that a person is liable to a penalty, or as to the amount of the person’s liability, under—
i
regulations under section 88E of the Alcoholic Liquor Duties Act 1979; or
ii
Schedule 2B to that Act;
7
In Schedule 5 to that Act (decisions subject to review and appeal), in paragraph 3(1), after paragraph (o) insert—
p
any decision for the purposes of Part 6A (wholesaling of controlled liquor) as to whether or not, and in which respects, any person is to be, or to continue to be, approved and registered or as to the conditions or restrictions subject to which any person is approved and registered.
8
Subject as follows, the amendments made by this section come into force on the day on which this Act is passed.
9
So far as relating to section 88C(1) of ALDA 1979, subsection (3) comes into force on 1 January 2016 (but see subsection (12) for the application of section 88C(1) in cases where an application has been made but not disposed of by that date).
10
So far as relating to section 88F of ALDA 1979, subsection (3) comes into force on such day as the Treasury may by regulations made by statutory instrument appoint.
11
An application for a person to be approved under section 88C of ALDA 1979 may not be made before 1 October 2015.
12
Where such an application made before 1 January 2016 has not been disposed of by that date, section 88C(1) of ALDA 1979 does not apply in relation to the person until the application is disposed of.
13
An application is “disposed of” when—
a
it is determined by Her Majesty’s Revenue and Customs,
b
it is withdrawn, or
c
it is abandoned or otherwise ceases to have effect.
Tobacco
55Rates of tobacco products duty
1
For the table in Schedule 1 to TPDA 1979 substitute—
1. Cigarettes
An amount equal to 16.5 per cent of the retail price plus £189.49 per thousand cigarettes
2. Cigars
£236.37 per kilogram
3. Hand-rolling tobacco
£185.74 per kilogram
4. Other smoking tobacco and chewing tobacco
£103.91 per kilogram
2
The amendment made by this section is treated as having come into force at 6 pm on 18 March 2015.
56Excise duty on tobacco: anti-forestalling restrictions
After section 6 of TPDA 1979 (alteration of rates of duty) insert—
6AAnti-forestalling notices in connection with anticipated alteration of rate of duty
1
If the Commissioners consider that an alteration to a rate of duty charged under section 2 on tobacco products may be made (whether under section 6 or otherwise), they may publish a notice under this section (an “anti-forestalling notice”).
2
An anti-forestalling notice—
a
must specify a period of up to 3 months (“the controlled period”),
b
may impose such restrictions (“anti-forestalling restrictions”), as to the quantities of the tobacco products that may during the controlled period be removed for home use, as the Commissioners consider to be reasonable for the purpose of protecting the public revenue,
c
may make provision for, and in connection with, the controlled period coming to an end early (including provision modifying an anti-forestalling restriction in such circumstances),
d
may make provision for the removal of tobacco products for home use to be disregarded for the purposes of one or more anti-forestalling restrictions in certain circumstances, and
e
may make different provision for different cases.
3
The anti-forestalling restrictions that may be imposed include, in particular—
a
restrictions as to the total quantity of the tobacco products, or of the tobacco products of a particular description, that may, during the controlled period, be removed for home use, and
b
restrictions as to the quantity of the tobacco products, or the tobacco products of a particular description, that may be removed for home use during any month, or any period of two weeks, in the controlled period.
This is subject to subsections (4) and (5).
4
An anti-forestalling notice may not restrict a person, during the controlled period, to removing for home use a total quantity of the tobacco products, or of the tobacco products of a particular description, that is less than 80% of—
TPY365×DCP
where—
TPY is the total quantity of the tobacco products, or (as the case may be) of the tobacco products of a particular description, removed for home use by the person in the period of 12 months ending with the third month before the month in which the controlled period begins, and
DCP is the number of days in the controlled period.
5
An anti-forestalling notice may not restrict a person, in any month of the controlled period, to removing for home use less than 30% of the total quantity of the tobacco products, or of the tobacco products of a particular description, that could, under the anti-forestalling restrictions imposed by the notice, be removed for home use during the whole controlled period.
6
If, before the end of the controlled period, it appears to the Commissioners that the rate of duty—
a
will not be altered during the controlled period, but
b
may be altered within a month of the end of the controlled period,
the Commissioners may publish an extension notice.
7
An extension notice may—
a
extend the controlled period by up to one month, and
b
in accordance with subsections (2) to (5), make such other modifications of the anti-forestalling notice as the Commissioners think appropriate in consequence of the extension.
8
The Commissioners may vary or revoke an anti-forestalling notice—
a
as it applies generally, or
b
if the Commissioners consider that exceptional circumstances justify doing so, in relation to a particular person.
9
This section does not affect the Commissioners’ powers—
a
under section 128 of the Customs and Excise Management Act 1979 (restriction of delivery of goods), or
b
to make regulations under section 7 of this Act in relation to periods specified under that section of that Act.
6BAnti-forestalling notices: sanctions
1
This section applies if a person fails to comply with an anti-forestalling notice published under section 6A by, on one or more occasions, removing tobacco products for home use during the controlled period in contravention of an anti-forestalling restriction.
2
The failure to comply attracts a penalty under section 9 of the Finance Act 1994 (civil penalties) of an amount determined in accordance with subsection (3) (rather than that section).
3
The person is liable to a penalty of—
a
if the person has given an admission notice, 150% of the lost duty, and
b
otherwise, 200% of the lost duty.
4
An “admission notice” is a notice—
a
in which the person admits that the person—
i
has failed to comply with the anti-forestalling notice, and
ii
is liable to a penalty determined in accordance with subsection (3), and
b
that is in such form, and that provides such information, as the Commissioners may specify.
5
An admission notice cannot be given if, at any time in the period of 3 years ending with the day before the controlled period, the person has given an admission notice in relation to a failure to comply with another anti-forestalling notice.
6
An admission notice cannot be given—
a
at a time when the person has reason to believe that Her Majesty’s Revenue and Customs have discovered, or are about to discover, that the person has failed to comply with the anti-forestalling notice, or
b
after the end of the controlled period.
7
The “lost duty” is the amount (if any) by which the duty that would have been charged under section 2 on the excess tobacco products if they had, immediately after the end of the controlled period, been removed for home use exceeds the duty that was charged under that section on those tobacco products.
8
The “excess tobacco products” are the tobacco products mentioned in subsection (1) that the person removed, for home use, in contravention of an anti-forestalling restriction.
9
See section 6A for the meaning of “anti-forestalling notice”, “anti-forestalling restriction” and “controlled period”.
Air passenger duty
57Air passenger duty: exemption for children in standard class
1
In section 31 of FA 1994 (passengers: exceptions), after subsection (4) insert—
4ZA
A child who has not attained the age of 16 years is not a chargeable passenger in relation to a flight if the child’s agreement for carriage—
a
is evidenced by a ticket, and
b
provides for standard class travel in relation to every flight on the child’s journey.
4ZB
Subsections (10) to (12) of section 30 (meaning of “standard class travel”) apply for the purposes of subsection (4ZA) as they apply for the purposes of that section.
2
The amendment made by this section has effect in relation to any carriage of a passenger which begins on or after 1 May 2015.
But, in relation to any carriage of a passenger which begins before 1 March 2016, section 31(4ZA) of FA 1994 has effect as if for “16 years” there were substituted “12 years”.
Vehicle excise duty
58VED rates for light passenger vehicles and motorcycles
1
Schedule 1 to VERA 1994 (annual rates of duty) is amended as follows.
2
In paragraph 1B (graduated rates of duty for light passenger vehicles)—
a
for the tables substitute—
Table 1Rates payable on first vehicle licence for vehicle
CO2 emissions figure
Rate
(1)
(2)
(3)
(4)
Exceeding
Not exceeding
Reduced rate
Standard rate
g/km
g/km
£
£
130
140
120
130
140
150
135
145
150
165
170
180
165
175
285
295
175
185
340
350
185
200
480
490
200
225
630
640
225
255
860
870
255
—
1090
1100
Table 2Rates payable on any other vehicle licence for vehicle
CO2 emissions figure
Rate
(1)
(2)
(3)
(4)
Exceeding
Not exceeding
Reduced rate
Standard rate
g/km
g/km
£
£
100
110
10
20
110
120
20
30
120
130
100
110
130
140
120
130
140
150
135
145
150
165
170
180
165
175
195
205
175
185
215
225
185
200
255
265
200
225
280
290
225
255
480
490
255
—
495
505
b
in the sentence immediately following the tables, for paragraphs (a) and (b) substitute—
a
in column (3), in the last two rows, “280” were substituted for “480” and “495”, and
b
in column (4), in the last two rows, “290” were substituted for “490” and “505”.
3
In paragraph 2(1) (VED rates for motorcycles)—
a
in paragraph (c), for “£58” substitute “£59”, and
b
in paragraph (d), for “£80” substitute “£81”.
4
The amendments made by this section have effect in relation to licences taken out on or after 1 April 2015.
59VED: extension of old vehicles exemption from 1 April 2016
1
In Schedule 2 to VERA 1994 (exempt vehicles) in paragraph 1A(1) (exemption for old vehicles) for the words from “constructed” to the end substitute “constructed before 1 January 1976”.
2
The amendment made by subsection (1) comes into force on 1 April 2016; but nothing in that subsection has the effect that a nil licence is required to be in force in respect of a vehicle while a vehicle licence is in force in respect of it.
Gaming duty
60Rates of gaming duty
1
In section 11(2) of FA 1997 (rates of gaming duty) for the table substitute—
TABLE
Part of gross gaming yield
Rate
The first £2,347,500
15 per cent
The next £1,618,000
20 per cent
The next £2,833,500
30 per cent
The next £5,981,000
40 per cent
The remainder
50 per cent
2
The amendment made by this section has effect in relation to accounting periods beginning on or after 1 April 2015.
Aggregates levy
61Tax credit in Northern Ireland
1
Part 2 of FA 2001 (aggregates levy) is amended in accordance with subsections (2) to (6).
2
After section 30A insert—
30BSpecial tax credit in Northern Ireland
1
The Commissioners may by regulations make provision of the kind described in section 30(2) (entitlement to tax credit) in relation to cases within subsection (3) below.
2
Tax credit to which a person is entitled under the regulations is referred to in this section as “special tax credit”.
3
The cases are where—
a
a person has been charged with, and has fully accounted for, aggregates levy in respect of the commercial exploitation of a quantity of aggregate, and
b
the exploitation was of imported aggregate and occurred in Northern Ireland in the period defined in subsection (5).
4
For this purpose aggregate is “imported” if it was won from a site in a member State other than the United Kingdom.
5
The period mentioned in subsection (3)(b)—
a
begins with 1 April 2004, and
b
ends with 30 November 2010.
6
Regulations may in particular—
a
provide that a person is not entitled to special tax credit unless the Department of the Environment in Northern Ireland (“the Department”) has certified under section 30D(4) that it is satisfied that specified requirements were met in relation to the site from which the aggregate originates during a period which includes the time when the aggregate was won from the site (and the certification has not been revoked);
b
specify further conditions for entitlement to special tax credit;
c
make provision about the rate at which special tax credit is to be given (including provision restricting the amount of special tax credit in cases where entitlement to a tax credit has already arisen);
d
provide for compound interest at the applicable rate (see section 30C) to be treated as added, for such period and for such purposes as may be prescribed, to the amount of any special tax credit;
e
authorise the Commissioners to adjust a person’s claim for special tax credit in specified circumstances.
7
Regulations under subsection (6)(a) may specify the requirements in question by reference to any provisions of a notice published by the Department in pursuance of the regulations and not withdrawn by a further notice.
8
Subsection (3) of section 30 (except paragraph (f) of that subsection) applies to regulations under this section as it applies to regulations under that section.
9
Section 32(1) (time limit for claims) does not apply to a claim for repayment of aggregates levy made under regulations under this section.
30CSpecial tax credit: applicable rate of interest
1
The reference in section 30B(6)(d) to the applicable rate is to a rate provided for in regulations made by the Treasury.
2
Regulations under this section may—
a
provide for the rate to be determined, and to change from time to time, by reference to a rate referred to in the regulations;
b
include provision for different rates to apply at different times in a period for which interest is due to a person.
3
Regulations under this section are to be made by statutory instrument.
4
A statutory instrument containing regulations under this section is subject to annulment in pursuance of a resolution of the House of Commons.
30DSpecial tax credit: certification by Department
1
A person may, for the purpose of making a claim for special tax credit, apply to the Department for a certification under subsection (4)(a).
2
The application must specify—
a
a site, and
b
a time (“the relevant time”).
3
Where a certification relating to a site has been wholly or partly revoked by virtue of subsection (7)(b), an application specifying that site may not specify a time falling within the period with respect to which the revocation has effect.
4
Where an application is made and the Department has not previously made a certification under paragraph (a) relating to both the specified site and a period that includes the relevant time, the Department must either—
a
certify that it is satisfied that any requirements specified by virtue of section 30B(6)(a) were met in relation to the site during a period (specified in the certification) that includes the relevant time, or
b
refuse the application.
5
If the Department makes a certification under subsection (4)(a) (a “special tax credit certification”) it must give a written notice of the certification to—
a
the applicant, and
b
HMRC.
6
Where an application is made and the Department has previously made a special tax credit certification relating to both the specified site and a period that includes the relevant time, the Department must give the applicant a written notice of that certification.
7
The Commissioners may by regulations—
a
make provision about the time within which an application under subsection (1) must be made and the form and content of such an application;
b
authorise the Department to revoke a special tax credit certification with respect to the whole or part of the period to which the certification relates if the Department is satisfied that its decision as regards the meeting of the relevant requirements (or that decision, so far as relating to the relevant part of that period) was not correct;
c
make any other provision that is necessary in connection with paragraph (b) and subsection (8);
d
provide that a revocation by virtue of paragraph (b) may not be made after a specified date.
8
A special tax credit certification is to be treated as never having had effect in relation to any period with respect to which it is revoked by virtue of subsection (7)(b).
9
Regulations under this section which make provision such as is mentioned in subsection (7)(b) must require the Department to inform the Commissioners, and any other person to whom the Department has given a written notice of the certification, if the Department revokes a special tax credit certification.
10
Any expenses of the Department under or by virtue of this section or section 30B are to be appropriated from the Consolidated Fund of Northern Ireland by Act of the Northern Ireland Assembly.
11
In this section “the Department” and “special tax credit” have the same meaning as in section 30B.
3
In section 17 (meaning of “aggregate” and “taxable aggregate”), in subsection (6)(a), for “or 30A” substitute “, 30A or 30B”.
4
In section 48(1) (interpretation of Part), in the definition of “tax credit regulations”, for “or 30A” substitute “, 30A or 30B”.
5
In paragraph 9A of Schedule 6 (incorrect records etc evidencing claim for tax credit), in sub-paragraph (1)(a)—
a
omit the “or” at the end of sub-paragraph (i), and
b
after sub-paragraph (ii) insert
, or
iii
section 30B(3) of this Act (special tax credit in Northern Ireland);
6
In paragraph 2 of Schedule 8 (interest payable by the Commissioners), in sub-paragraph (3)—
a
in paragraph (b), for “of this Act; but” substitute “or 30B(6)(d);”, and
b
after paragraph (b) insert—
ba
do not include the amount of any tax credit to which a person is entitled by virtue of section 30B(1); but
Climate change levy
62Climate change levy: main rates from 1 April 2016
1
In paragraph 42(1) of Schedule 6 to FA 2000 (climate change levy: amount payable by way of levy) for the table substitute—
TABLE
Taxable commodity supplied
Rate at which levy payable if supply is not a reduced-rate supply
Electricity
£0.00559 per kilowatt hour
Gas supplied by a gas utility or any gas supplied in a gaseous state that is of a kind supplied by a gas utility
£0.00195 per kilowatt hour
Any petroleum gas, or other gaseous hydrocarbon, supplied in a liquid state
£0.01251 per kilogram
Any other taxable commodity
£0.01526 per kilogram
2
The amendment made by this section has effect in relation to supplies treated as taking place on or after 1 April 2016.
63Combined heat and power stations
1
Schedule 6 to FA 2000 (climate change levy) is amended as follows.
2
In paragraph 24B (deemed taxable supply: commodities to be used in combined heat and power station)—
a
in sub-paragraph (2), at the end insert “to which sub-paragraph (2A) does not apply”,
b
after that sub-paragraph insert—
2A
This sub-paragraph applies to electricity so far as—
a
it is included in the CHP Qualifying Power Output of the combined heat and power station’s CHPQA scheme, and
b
either condition A or B is met.
2B
Condition A is that the producer of the electricity makes no supply of it to another person, but causes it to be consumed in the United Kingdom.
2C
Condition B is that the electricity is supplied (within the meaning of Part 1 of the Electricity Act 1989 (see section 64 of that Act)) by a person who is an exempt unlicensed electricity supplier.
c
in sub-paragraph (3), after “electricity” insert “to which sub-paragraph (2A) does not apply”, and
d
for sub-paragraph (7) substitute—
7
For the purposes of this paragraph—
“CHP Qualifying Power Output” has the meaning given by section 4 of the Combined Heat and Power Quality Assurance Standard, Issue 5 (November 2013), prepared by the Department of Energy and Climate Change or, if that issue of the Standard has been replaced by another issue, by the current issue of the Standard (taking account, in either case, of any amendment which has been made to the issue);
“CHPQA scheme”, in relation to a combined heat and power station, means the scheme in relation to which the station’s CHPQA certificate was issued;
“CHPQA site”, in relation to a fully exempt combined heat and power station or a partly exempt combined heat and power station, means the site of the CHPQA scheme.
3
In paragraph 24C (initial determination under paragraph 24B(3) superseded by later determination), in sub-paragraph (1)—
a
in paragraph (a), at the end insert “to which paragraph 24B(2A) does not apply”, and
b
in paragraph (c)(i), after “electricity” insert “to which paragraph 24B(2A) does not apply”.
4
In paragraph 62 (tax credits), in sub-paragraph (1)(bb), after “electricity”, in both places, insert “to which paragraph 24B(2A) does not apply”.
5
The amendments made by this section have effect in relation to carbon price support rate commodities brought onto, or arriving at, a CHPQA site of a combined heat and power station in Great Britain on or after 1 April 2015.
Landfill tax
64Landfill tax: rates from 1 April 2016
1
Section 42 of FA 1996 (amount of landfill tax) is amended as follows.
2
In subsection (1) (standard rate), for paragraph (a) (but not the “or” following it) substitute—
a
£84.40 for each whole tonne disposed of and a proportionately reduced sum for any additional part of a tonne,
3
In subsection (2) (reduced rate for certain disposals), for the words from “reference” to the end substitute “reference to £84.40 were to £2.65.”
4
The amendments made by this section have effect in relation to disposals made (or treated as made) on or after 1 April 2016.
65Landfill tax: material consisting of fines
Schedule 15 makes provision about the treatment of fines for the purposes of landfill tax.
Value added tax
66VAT: refunds to certain charities
1
In Part 2 of VATA 1994 (reliefs, exemptions and repayments), after section 33B insert—
33CRefunds of VAT to charities within section 33D
1
This section applies to a charity that falls within any of the descriptions in section 33D.
A charity to which this section applies is referred to in this section as a “qualifying charity”.
2
This section applies where—
a
VAT is chargeable on—
i
the supply of goods or services to a qualifying charity,
ii
the acquisition of any goods from another member State by a qualifying charity, or
iii
the importation of any goods from a place outside the member States by a qualifying charity, and
b
the supply, acquisition or importation is not for the purpose of any business carried on by the qualifying charity.
3
The Commissioners shall, on a claim made by the qualifying charity at such time and in such form and manner as the Commissioners may determine, refund to the qualifying charity the amount of the VAT so chargeable.
4
A claim under subsection (3) above in respect of a supply, acquisition or importation must be made before the end of the period of 4 years beginning with the day on which the supply is made or the acquisition or importation takes place.
5
Subsection (6) applies where goods or services supplied to, or acquired or imported by, a qualifying charity otherwise than for the purpose of any business carried on by the qualifying charity cannot be conveniently distinguished from goods or services supplied to, or acquired or imported by, the qualifying charity for the purpose of such a business.
6
The amount to be refunded under this section is such amount as remains after deducting from the whole of the VAT chargeable on any supply to, or acquisition or importation by, the qualifying charity such proportion of that VAT as appears to the Commissioners to be attributable to the carrying on of the business.
7
References in this section to VAT do not include any VAT which, by virtue of an order under section 25(7), is excluded from credit under section 25.
33DCharities to which section 33C applies
Palliative care charities
1
“Palliative care charity” means a charity the main purpose of which is the provision of palliative care at the direction of, or under the supervision of, a medical professional to persons who are in need of such care as a result of having a terminal illness.
2
In subsection (1) “medical professional” means—
a
a registered medical practitioner, or
b
a registered nurse.
Air ambulance charities
3
“Air ambulance charity” means a charity the main purpose of which is to provide an air ambulance service in pursuance of arrangements made by, or at the request of, a relevant NHS body.
4
In subsection (3) “relevant NHS body” means a body the main purpose of which is to provide ambulance services and which is—
a
an NHS foundation trust in England,
b
an NHS trust in Wales,
c
a Special Health Board constituted under section 2 of the National Health Service (Scotland) Act 1978, or
d
a Health and Social Care trust established under the Health and Personal Social Services (Northern Ireland) Order 1991.
Search and rescue charities
5
“Search and rescue charity” means a charity that meets condition A or B.
6
Condition A is that—
a
the main purpose of the charity is to carry out search and rescue activities in the United Kingdom or the UK marine area, and
b
the search and rescue activities carried out by the charity are co-ordinated by a relevant authority.
7
Condition B is that the main purpose of the charity is to support, develop and promote the activities of a charity which meets condition A.
8
For the purposes of subsection (6)—
“search and rescue activities” means searching for, and rescuing, persons who are, or may be, at risk of death or serious injury;
“relevant authority” means—
a
the Secretary of State;
b
a police force;
c
the Scottish Fire and Rescue Service;
d
any other person or body specified for the purposes of subsection (6) by an order made by the Treasury;
“police force” means—
a
a police force within the meaning of the Police Act 1996;
b
the Police Service of Scotland;
c
the Police Service of Northern Ireland;
d
the Police Service of Northern Ireland Reserve;
e
the British Transport Police Force;
f
the Civil Nuclear Constabulary;
g
the Ministry of Defence Police;
“UK marine area” has the meaning given by section 42(1) of the Marine and Coastal Access Act 2009.
Medical courier charities
9
“Medical courier charity” means a charity that meets condition A or B.
10
Condition A is that the main purpose of the charity is to provide services for the transportation of items intended for use for medical purposes, including in particular—
a
blood;
b
medicines and other medical supplies;
c
items relating to people who are undergoing medical treatment.
11
Condition B is that the main purpose of the charity is to support, develop and promote the activities of a charity which meets condition A.
12
In subsection (10) “item” includes any substance.
2
In section 79 of VATA 1994 (repayment supplement in respect of certain delayed payments or refunds)—
a
in subsection (1), after paragraph (d) insert
or
e
a charity which is registered is entitled to a refund under section 33C,
b
in subsection (5), after paragraph (d) insert
, and
e
a supplement paid to a charity under subsection (1)(e) shall be treated as an amount due to the charity by way of refund under section 33C.
c
in subsection (6)(b), for “or 33B” substitute “, 33B or 33C”.
3
In section 90 of VATA 1994 (failure of resolution under Provisional Collection of Taxes Act 1968), in subsection (3), after “33B,” insert “33C,”.
4
In Schedule 9 to VATA 1994 (exemptions), in Group 14 (supplies of goods where input tax cannot be recovered), in Note (9), after “33B,” insert “33C,”.
5
The amendments made by this section have effect in relation to supplies made, and acquisitions and importations taking place, on or after 1 April 2015.
6
Until section 179 of the Health and Social Care Act 2012 (which abolishes NHS trusts in England) is fully brought into force, references in section 33D of VATA 1994 to an NHS foundation trust in England include an NHS trust in England.
67VAT: refunds to strategic highways companies
1
In section 41 of VATA 1994 (application of Act to the Crown), in subsection (7)—
a
after “subsection (6)” insert “each of the following is to be regarded as a body of persons exercising functions on behalf of a Minister of the Crown”,
b
omit the “and” after paragraph (j), and
c
for the words after paragraph (k) substitute—
l
a strategic highways company appointed under section 1 of the Infrastructure Act 2015.
2
The amendments made by this section come into force on 1 April 2015.
Stamp duty land tax
68SDLT: alternative property finance relief
1
FA 2003 is amended as follows.
2
In section 73BA (meaning of “financial institution”), after subsection (2) insert—
3
In sections 71A, 73AB and 73B, “financial institution” also includes a person with permission under Part 4A of the Financial Services and Markets Act 2000 to carry on the regulated activity specified in Article 63F(1) of the Financial Services and Markets Act (Regulated Activities) Order 2001 (S.I. 2001/544) (entering into regulated home purchase plans as home purchase provider).
3
In paragraph 9 of Schedule 4A (higher rate for certain SDLT transactions: interpretation), for the definition of “financial institution” substitute—
“financial institution” is to be read in accordance with subsections (1) and (2) of section 73BA and, in paragraphs 6A to 6H, also in accordance with subsection (3) of that section;
4
The amendment made by subsection (2) has effect where the effective date of the first transaction is, or is after, the day on which this Act is passed.
5
In subsection (4) “first transaction” means the first transaction within the meaning of section 71A(1)(a) of FA 2003.
69SDLT: multiple dwellings relief
1
After paragraph 2(6) of Schedule 6B to FA 2003 (stamp duty land tax: superior interest in dwellings subject to a long lease excluded from multiple dwellings relief) insert—
7
Sub-paragraph (6) does not apply where—
a
the vendor is a qualifying body within the meaning of paragraph 5 of Schedule 9,
b
the transaction is a sale under a sale and leaseback arrangement within the meaning of section 57A(2),
c
that sale is the grant of a leasehold interest, and
d
the leaseback element of that arrangement is exempt from charge under section 57A.
2
The amendment made by this section has effect in relation to any land transaction of which the effective date is, or is after, the day on which this Act is passed.
Annual tax on enveloped dwellings
70ATED: annual chargeable amount
1
In section 99 of FA 2013 (amount of tax chargeable), in the table in subsection (4), for the last four entries substitute—
£23,350
More than £2 million but not more than £5 million.
£54,450
More than £5 million but not more than £10 million.
£109,050
More than £10 million but not more than £20 million.
£218,200
More than £20 million.
2
The amendment made by subsection (1) has effect for the chargeable period beginning on 1 April 2015 and, subject to section 101 of FA 2013, for subsequent chargeable periods.
3
Section 101(1) of FA 2013 does not apply in relation to the chargeable period beginning on 1 April 2015.
4
Accordingly, the Treasury is not required to make an order under section 101(5) of FA 2013 in respect of that period.
71ATED: taxable value
In section 102 of FA 2013 (annual tax on enveloped dwellings: taxable value), after subsection (2) insert—
2A
But a day that is a valuation date only because of subsection (2)(b) (a “5-yearly valuation date”) is to be treated as if it were not a valuation date for the purpose of determining the taxable value of a single-dwelling interest on any day in the chargeable period beginning with that 5-yearly valuation date.
72ATED: interests held by connected persons
1
Section 110 of FA 2013 (interests held by connected persons) is amended as follows.
2
In subsection (1), after “If on any day” insert “(“the relevant day”)”.
3
In subsection (2)—
a
omit “on the day in question”;
b
after “P’s single dwelling interest” insert “on the relevant day”;
c
for “£500,000” substitute “£250,000”.
4
After subsection (2) insert—
2A
Subsection (2B) applies in any case where—
a
C would (without subsection (2B)) be treated, as a result of subsection (1) (read with section 109), as entitled to a single-dwelling interest with a taxable value (on the relevant day) of more than £2 million, but
b
C would not be so treated if the value specified in subsection (2) were £500,000 (instead of £250,000).
2B
Subsection (2) has effect as if the value specified in it were £500,000 (instead of £250,000).
5
The amendments made by this section have effect in relation to chargeable periods beginning on or after 1 April 2015.
73ATED: returns
1
Part 3 of FA 2013 (annual tax on enveloped dwellings) is amended as follows.
2
In section 159 (annual tax on enveloped dwellings return), after subsection (3) insert—
3A
Where a person—
a
would (apart from this subsection) be required in accordance with subsection (2) to deliver a return for a chargeable period (“the later period”) by 30 April in that period, and
b
is also required in accordance with subsection (3) to deliver a return for the previous chargeable period by a date (“the later date”) which is later than 30 April in the later period,
subsection (2) has effect as if it required the return mentioned in paragraph (a) to be delivered by the later date.
3
After section 159 insert—
159ARelief declaration returns
1
“Relief declaration return” means an annual tax on enveloped dwellings return which—
a
states that it is a relief declaration return,
b
relates to one (and only one) of the types of relief listed in the table in subsection (9), and
c
specifies which type of relief it relates to.
2
A relief declaration return may be made in respect of one or more single-dwelling interests.
3
A relief declaration return delivered to an officer of Revenue and Customs on a particular day (“the day of the claim”) is treated as made in respect of any single-dwelling interest in relation to which the conditions in subsection (4) are met (but need not contain information which identifies the particular single-dwelling interest or interests concerned).
4
The conditions are that—
a
the person making the return is within the charge with respect to the single-dwelling interest on the day of the claim;
b
the day of the claim is relievable in relation to the single-dwelling interest by virtue of a provision which relates to the type of relief specified in the return (see subsection (9));
c
none of the days in the pre-claim period is a taxable day.
5
The statement under subsection (1)(a) in a relief declaration return is treated as a claim for interim relief (see section 100) with respect to the single-dwelling interest (or interests) in respect of which the return is made.
6
Subsection (7) applies where—
a
a person has delivered to an officer of Revenue and Customs on any day a relief declaration return for a chargeable period with respect to one or more single-dwelling interests (“the existing return”), and
b
there is a subsequent day (“day S”) in the same chargeable period on which the relevant conditions are met in relation to another single-dwelling interest.
7
The existing return is treated as also made with respect to that other single-dwelling interest.
8
For the purposes of subsection (6)(b), the “relevant conditions” are the same as the conditions in subsection (4), except that for this purpose references in subsection (4) to the day of the claim are to be read as references to day S.
9
This table sets out the numbered types of relief to which the provisions specified in the left hand column relate—
Provision
Type of relief to which it relates
Section 133 or 134 (property rental business)
1
Section 137 (dwellings opened to the public)
2
Section 138 or 139 (property developers)
3
Section 141 (property traders)
4
Section 143 (financial institutions acquiring dwellings)
5
Section 145 (dwellings used for trade purposes: occupation by certain employees or partners)
6
Section 148 (farmhouses)
7
Section 150 (providers of social housing)
8
10
Where a person—
a
has failed to make annual tax on enveloped dwellings returns in respect of two or more single-dwelling interests, and
b
could have discharged the duties in question by making a single relief declaration return in respect of all the interests,
the failure may be taken, for the purposes of Schedule 55 to FA 2009, to be a failure to make a single annual tax on enveloped dwellings return.
11
In this section—
“pre-claim period” has the same meaning as in section 100;
“taxable day”, in relation to a person and a single-dwelling interest, means a day on which the person is within the charge with respect to the interest, other than a day which is relievable in relation to the interest.
4
In section 161 (return to include self-assessment), for subsection (2) substitute—
2
In subsection (1) “return” means—
a
an annual tax on enveloped dwellings return, or
b
a return of the adjusted chargeable amount.
2A
The reference in subsection (2)(a) to an annual tax on enveloped dwellings return does not include a relief declaration return.
5
In Schedule 33 (annual tax on enveloped dwellings: returns etc)—
a
in paragraph 2(a), after “159” insert “, 159A”;
b
in paragraph 20(1), for “in question, the self assessment included in that return” substitute “in question containing a self assessment, that self assessment”.
6
The amendments made by subsections (1) to (5) have effect for chargeable periods beginning on or after 1 April 2015.
7
In a case (not falling within section 109(5) of FA 2014) which falls within subsection (8), section 159 of FA 2013 (annual tax on enveloped dwellings return) has effect with the same modifications as are set out in section 109(6) of FA 2014 (which provides for extended filing periods in certain cases).
8
The case is where—
a
a person has a duty to deliver to an officer of Revenue and Customs an annual tax on enveloped dwellings return with respect to a single-dwelling interest for the chargeable period beginning with 1 April 2015, and
b
the circumstances on the first day in that chargeable period on which that person is within the charge with respect to that single-dwelling interest are such that that duty could be discharged by the delivery to an officer of Revenue and Customs on that day of a relief declaration return.
Inheritance tax
74Inheritance tax: exemption for decorations and other awards
1
In section 6 of IHTA 1984 (excluded property), for subsection (1B) substitute—
1B
A relevant decoration or award is excluded property if it has never been the subject of a disposition for a consideration in money or money’s worth.
1BA
In subsection (1B) “relevant decoration or award” means a decoration or other similar award—
a
that is designed to be worn to denote membership of—
i
an Order that is, or has been, specified in the Order of Wear published in the London Gazette (“the Order of Wear”), or
ii
an Order of a country or territory outside the United Kingdom,
b
that is, or has been, specified in the Order of Wear,
c
that was awarded for valour or gallant conduct,
d
that was awarded for, or in connection with, a person being, or having been, a member of, or employed or engaged in connection with, the armed forces of any country or territory,
e
that was awarded for, or in connection with, a person being, or having been, an emergency responder within the meaning of section 153A (death of emergency service personnel etc), or
f
that was awarded by the Crown or a country or territory outside the United Kingdom for, or in connection with, public service or achievement in public life.
2
The amendment made by subsection (1) has effect in relation to transfers of value made, or treated as made, on or after 3 December 2014.
75Inheritance tax: exemption for emergency service personnel etc
1
IHTA 1984 is amended as follows.
2
After section 153 insert—
Emergency services
153ADeath of emergency service personnel etc
1
The reliefs in subsection (2) apply where a person—
a
dies from an injury sustained, accident occurring or disease contracted at a time when that person was responding to emergency circumstances in that person’s capacity as an emergency responder, or
b
dies from a disease contracted at some previous time, the death being due to, or hastened by, the aggravation of the disease during a period when that person was responding to emergency circumstances in that person’s capacity as an emergency responder.
2
The reliefs are—
a
that no potentially exempt transfer made by the person becomes a chargeable transfer under section 3A(4) because of the death,
b
that section 4 (transfers on death) does not apply in relation to the death, and
c
that no additional tax becomes due under section 7(4) because of a transfer made by the person within 7 years of the death.
3
“Emergency circumstances” means circumstances which are present or imminent and are causing or likely to cause—
a
the death of a person,
b
serious injury to, or the serious illness of, a person,
c
the death of an animal,
d
serious injury to, or the serious illness of, an animal,
e
serious harm to the environment (including the life and health of plants and animals),
f
serious harm to any building or other property, or
g
a worsening of any such injury, illness or harm.
4
A person is “responding to emergency circumstances” if the person—
a
is going anywhere for the purpose of dealing with emergency circumstances occurring there, or
b
is dealing with emergency circumstances, preparing to do so imminently or dealing with the immediate aftermath of emergency circumstances.
5
For the purposes of this section, circumstances to which a person is responding are to be taken to be emergency circumstances if the person believes and has reasonable grounds for believing they are or may be emergency circumstances.
6
“Emergency responder” means—
a
a person employed, or engaged, in connection with the provision of fire services or fire and rescue services,
b
a person employed for the purposes of providing, or engaged to provide, search services or rescue services (or both),
c
a person employed for the purposes of providing, or engaged to provide, medical, ambulance or paramedic services,
d
a constable or a person employed for police purposes or engaged to provide services for police purposes,
e
a person employed for the purposes of providing, or engaged to provide, services for the transportation of organs, blood, medical equipment or medical personnel, or
f
a person employed, or engaged, by the government of a state or territory, an international organisation or a charity in connection with the provision of humanitarian assistance.
7
For the purposes of subsection (6)—
a
it is immaterial whether the employment or engagement is paid or unpaid, and
b
“international organisation” means an organisation of which—
i
two or more sovereign powers are members, or
ii
the governments of two or more sovereign powers are members.
8
The Treasury may, by regulations made by statutory instrument, extend the definition of “emergency responder” in subsection (6).
9
Regulations under this section are subject to annulment in pursuance of a resolution of the House of Commons.
3
In section 154 (death on active service)—
a
in subsection (1), for “Section 4 shall not apply” substitute “The reliefs in subsection (1A) apply”,
b
after that subsection insert—
1A
The reliefs are—
a
that no potentially exempt transfer made by the deceased becomes a chargeable transfer under section 3A(4) because of the death,
b
that section 4 (transfers on death) does not apply in relation to the death, and
c
that no additional tax becomes due under section 7(4) because of a transfer made by the deceased within 7 years of the death.
c
in subsection (2) omit “either” and after paragraph (b) insert
or
c
responding to emergency circumstances in the course of the person’s duties as a member of any of those armed forces or as a civilian subject to service discipline.
d
after that subsection insert—
2A
Section 153A(3) to (5) applies for the purposes of this section.
4
After section 155 insert—
Constables and service personnel
155ADeath of constables and service personnel targeted because of their status
1
The reliefs in subsection (3) apply where a person—
a
dies from an injury sustained or disease contracted in circumstances where the person was deliberately targeted by reason of his or her status as a constable or former constable, or
b
dies from a disease contracted at some previous time, the death being due to, or hastened by, the aggravation of the disease by an injury sustained or disease contracted in circumstances mentioned in paragraph (a).
2
The reliefs in subsection (3) apply where it is certified by the Defence Council or the Secretary of State that a person—
a
died from an injury sustained or disease contracted in circumstances where the person was deliberately targeted by reason of his or her status as a service person or former service person, or
b
died from a disease contracted at some previous time, the death being due to, or hastened by, the aggravation of the disease by an injury sustained or disease contracted in circumstances mentioned in paragraph (a).
3
The reliefs are—
a
that no potentially exempt transfer made by the person becomes a chargeable transfer under section 3A(4) because of the death,
b
that section 4 (transfers on death) does not apply in relation to the death, and
c
that no additional tax becomes due under section 7(4) because of a transfer made by the person within 7 years of the death.
4
For the purposes of this section, it is immaterial whether a person who was a constable or service person at the time the injury was sustained or the disease was contracted was acting in the course of his or her duties as such at that time (and for this purpose ignore the references in subsections (1)(b) and (2)(b) to a disease contracted at some previous time).
5
“Service person” means a person who is a member of the armed forces of the Crown or a civilian subject to service discipline (within the meaning of the Armed Forces Act 2006).
6
This section does not apply where section 153A or 154 applies in relation to a person’s death.
5
The amendments made by this section have effect in relation to deaths occurring on or after 19 March 2014.
The bank levy
76The bank levy: rates from 1 April 2015
1
Schedule 19 to FA 2011 (bank levy) is amended as follows.
2
In paragraph 6 (steps for determining the amount of the bank levy), in sub-paragraph (2)—
a
for “0.078%” substitute “0.105%”, and
b
for “0.156%” substitute “0.21%”.
3
In paragraph 7 (special provision for chargeable periods falling wholly or partly before 1 January 2014)—
a
in sub-paragraph (1) for “1 January 2014” substitute “1 April 2015”;
b
in sub-paragraph (2), in the first column of the table in the substituted Step 7, for “Any time on or after 1 January 2014” substitute “1 January 2014 to 31 March 2015”;
c
at the end of that table add—
Any time on or after 1 April 2015
0.105%
0.21%
d
in the italic heading before paragraph 7, for “1 January 2014” substitute “1 April 2015”.
4
The amendments made by subsections (2) and (3) come into force on 1 April 2015.
5
Subsections (6) to (12) apply where—
a
an amount of the bank levy is treated as if it were an amount of corporation tax chargeable on an entity (“E”) for an accounting period of E,
b
the chargeable period in respect of which the amount of the bank levy is charged begins before but ends on or after 1 April 2015, and
c
under the Instalment Payment Regulations, one or more instalment payments, in respect of the total liability of E for the accounting period, were treated as becoming due and payable before 1 April 2015 (“pre-commencement instalment payments”).
6
Subsections (1) to (4) are to be ignored for the purpose of determining the amount of any pre-commencement instalment payment.
7
If there is at least one instalment payment, in respect of the total liability of E for the accounting period, which under the Instalment Payment Regulations is treated as becoming due and payable on or after 1 April 2015 (“post-commencement instalment payments”), the amount of that instalment payment, or the first of them, is to be increased by the adjustment amount.
8
If there are no post-commencement instalment payments, a further instalment payment, in respect of the total liability of E for the accounting period, of an amount equal to the adjustment amount is to be treated as becoming due and payable on 30 April 2015.
9
“The adjustment amount” is the difference between—
a
the aggregate amount of the pre-commencement instalment payments determined in accordance with subsection (6), and
b
the aggregate amount of those instalment payments determined ignoring subsection (6) (and so taking account of subsections (1) to (4)).
10
In the Instalment Payment Regulations—
a
in regulations 6(1)(a), 7(2), 8(1)(a) and (2)(a), 9(5), 10(1), 11(1) and 13, references to regulation 4A, 4B, 4C, 4D, 5, 5A or 5B of those Regulations are to be read as including a reference to subsections (5) to (9) (and in regulation 7(2) “the regulation in question”, and in regulation 8(2) “that regulation”, are to be read accordingly), and
b
in regulation 9(3), the reference to those Regulations is to be read as including a reference to subsections (5) to (9).
11
In section 59D of TMA 1970 (general rule as to when corporation tax is due and payable), in subsection (5), the reference to section 59E is to be read as including a reference to subsections (5) to (10).
12
In this section—
“the chargeable period” is to be construed in accordance with paragraph 4 or (as the case may be) 5 of Schedule 19 to FA 2011;
“the Instalment Payment Regulations” means the Corporation Tax (Instalment Payments) Regulations 1998 (S.I. 1998/3175);
and references to the total liability of E for an accounting period are to be construed in accordance with regulation 2(3) of the Instalment Payment Regulations.
PART 3Diverted profits tax
Introduction and overview
77Introduction to the tax
1
A tax (to be known as “diverted profits tax”) is charged in accordance with this Part on taxable diverted profits arising to a company in an accounting period.
2
Taxable diverted profits arise to a company in an accounting period only if one or more of sections 80, 81 and 86 applies or apply in relation to the company for that period.
78Overview of Part 3
1
Sections 80 and 81 relate to cases involving entities or transactions which lack economic substance.
2
In these cases—
a
sections 82 to 85 deal with the calculation of taxable diverted profits (and ensure appropriate account is taken of any transfer pricing adjustments already made), and
b
section 96 deals with the estimation of those profits when initially imposing a charge.
3
Section 86 relates to cases where, despite activity being carried on in the United Kingdom, a company avoids carrying on its trade in the United Kingdom in circumstances where—
a
provision is made or imposed which involves entities or transactions lacking economic substance, or
b
there are tax avoidance arrangements.
4
In these cases—
a
sections 88 to 91 deal with the calculation of taxable diverted profits, and
b
section 97 deals with the estimation of those profits when initially imposing a charge.
5
There is an exception from section 86 for cases involving limited UK-related sales or expenses (see section 87).
6
Key terms used in this Part are defined in sections 106 to 114.
7
Other provisions in this Part—
ensure HMRC are notified of companies potentially within the scope of the tax (see section 92);
deal with the process for imposing a charge to diverted profits tax (see sections 93 to 97);
deal with payment of the tax and make provision about credits given for other tax paid on the same profits (see sections 98 to 100); and
provide for reviews of, and appeals against, decisions to impose a charge to diverted profits tax (see sections 101 and 102).
Charge to tax
79Charge to tax
1
A charge to diverted profits tax is imposed for an accounting period by a designated HMRC officer issuing to the company a charging notice in accordance with section 95 or a supplementary charging notice in accordance with section 101(8).
2
The amount of tax charged by a notice is the sum of—
a
25% of the amount of taxable diverted profits specified in the notice, and
b
the interest (if any) on the amount within paragraph (a) determined under subsection (4).
3
But if, and to the extent that, the taxable diverted profits are adjusted ring fence profits or notional adjusted ring fence profits, and determined under section 84 or 85, subsection (2)(a) has effect in relation to those profits as if the rate specified were 55% rather than 25%.
4
The interest mentioned in subsection (2)(b) is interest at the rate applicable under section 178 of FA 1989 for the period (if any) which—
a
begins 6 months after the end of the accounting period to which the charge relates, and
b
ends with the day the notice imposing the charge to tax is issued.
5
In this section—
“adjusted ring fence profits” has the same meaning as in section 330 of CTA 2010 (supplementary charge in respect of ring fence trades);
“notional adjusted ring fence profits”, in relation to the company, means the total of—
a
profits within section 85(5)(a), to the extent that (assuming they were profits of the company chargeable to corporation tax) they would have been adjusted ring fence profits, and
b
any amounts of relevant taxable income of a company (“CC”) within section 85(4)(b) or (5)(b), to the extent that (assuming those amounts were profits of CC chargeable to corporation tax) they would have been adjusted ring fence profits of CC.
Involvement of entities or transactions lacking economic substance
80UK company: involvement of entities or transactions lacking economic substance
1
This section applies in relation to a company (“C”) for an accounting period if—
a
C is UK resident in that period,
b
provision has been made or imposed as between C and another person (“P”) (whether or not P is UK resident) by means of a transaction or series of transactions (“the material provision”),
c
the participation condition is met in relation to C and P (see section 106),
d
the material provision results in an effective tax mismatch outcome, for the accounting period, as between C and P (see sections 107 and 108),
e
the effective tax mismatch outcome is not an excepted loan relationship outcome (see section 109),
f
the insufficient economic substance condition is met (see section 110), and
g
C and P are not both small or medium-sized enterprises for that period.
2
For the purposes of subsection (1)(b) provision made or imposed as between a partnership of which C is a member and another person is to be regarded as provision made or imposed as between C and that person.
81Non-UK company: involvement of entities or transactions lacking economic substance
1
This section applies in relation to a company (“the foreign company”) for an accounting period if—
a
it is non-UK resident in that period,
b
by reason of the foreign company carrying on a trade in the United Kingdom through a permanent establishment in the United Kingdom (“UKPE”), Chapter 4 of Part 2 of CTA 2009 (non-UK resident companies: chargeable profits) applies to determine the chargeable profits of the foreign company for that period, and
c
section 80 would apply to UKPE for that period were it treated for the purposes of section 80 and sections 106 to 110—
i
as a distinct and separate person from the foreign company (whether or not it would otherwise be so treated),
ii
as a UK resident company under the same control as the foreign company, and
iii
as having entered into any transaction or series of transactions entered into by the foreign company to the extent that the transaction or series is relevant to UKPE.
2
For the purposes of subsection (1)(c)(iii) a transaction or series of transactions is “relevant” to UKPE only if, and to the extent that, it is relevant, for corporation tax purposes, when determining the chargeable profits of the foreign company attributable (in accordance with sections 20 to 32 of CTA 2009) to UKPE.
3
Where section 1313(2) of CTA 2009 (UK sector of the continental shelf: profits of foreign company deemed to be profits of trade carried on by the company in the UK through a permanent establishment in the UK) applies to treat profits arising to a company as profits of a trade carried on by the company in the United Kingdom through a permanent establishment in the United Kingdom, this Part applies as if the company actually carried on that trade in the United Kingdom through that permanent establishment.
4
In this section “control” is to be construed in accordance with section 1124 of CTA 2010.
Calculation of taxable diverted profits: section 80 or 81 cases
82Calculation of taxable diverted profits in section 80 or 81 case: introduction
1
If section 80 or 81 applies in relation to a company (“the relevant company”) for an accounting period—
a
no taxable diverted profits arise, in relation to the material provision in question, if section 83 applies, and
b
in other cases, section 84 or 85 applies to determine the taxable diverted profits in relation to that material provision.
2
But see also section 96 for how a designated HMRC officer estimates those profits when issuing a preliminary notice under section 93 or a charging notice under section 95.
3
Subsections (4) to (9) define some key expressions used in sections 83 to 85 and this section.
4
“The material provision” has the same meaning as in section 80.
5
“The relevant alternative provision” means the alternative provision which it is just and reasonable to assume would have been made or imposed as between the relevant company and one or more companies connected with that company, instead of the material provision, had tax (including any non-UK tax) on income not been a relevant consideration for any person at any time.
6
For the purposes of subsection (5), making or imposing no provision is to be treated as making or imposing an alternative provision to the material provision.
7
“The actual provision condition” is met if—
a
the material provision results in expenses of the relevant company for which (ignoring Part 4 of TIOPA 2010 (transfer pricing)) a deduction for allowable expenses would be allowed in computing—
i
in a case where section 80 applies, its liability for corporation tax for the accounting period, and
ii
in a case where section 81 applies, its chargeable profits attributable (in accordance with sections 20 to 32 of CTA 2009) to UKPE, and
b
the relevant alternative provision—
i
would also have resulted in allowable expenses of the relevant company of the same type and for the same purposes (whether or not payable to the same person) as so much of the expenses mentioned in paragraph (a) as results in the effective tax mismatch outcome mentioned in section 80(1)(d), but
ii
would not have resulted in relevant taxable income of a connected company for that company’s corresponding accounting period.
8
“Relevant taxable income” of a company for a period is—
a
income of the company, for the period, which would have resulted from the relevant alternative provision and in relation to which the company would have been within the charge to corporation tax had that period been an accounting period of the company, less
b
the total amount of expenses which it is just and reasonable to assume would have been incurred in earning that income and would have been allowable expenses of the company for that period.
9
“Connected company” means a company which is or, if the relevant alternative provision had been made, would have been connected with the relevant company.
83Section 80 or 81 cases where no taxable diverted profits arise
1
Where section 80 or 81 applies in relation to a company for an accounting period, no taxable diverted profits arise to the company in that period in relation to the material provision in question if—
a
the actual provision condition is met, and
b
either—
i
there are no diverted profits of that company for the accounting period, or
ii
the full transfer pricing adjustment has been made.
2
“Diverted profits” of the company for the accounting period means an amount—
a
in respect of which the company is chargeable to corporation tax for that period by reason of the application of Part 4 of TIOPA 2010 (transfer pricing) to the results of the material provision, and
b
which, in a case where section 81 applies, is attributable (in accordance with sections 20 to 32 of CTA 2009) to UKPE.
3
“The full transfer pricing adjustment” is made if all of the company’s diverted profits for the accounting period are taken into account in an assessment to corporation tax included, before the end of the review period, in the company’s company tax return for the accounting period.
84Section 80 or 81: calculation of profits by reference to the actual provision
1
This section applies where—
a
section 80 or 81 applies in relation to a company for an accounting period,
b
the actual provision condition is met, and
c
section 83 (cases where no taxable diverted profits arise) does not apply for that period.
2
In relation to the material provision in question, the taxable diverted profits that arise to the company in the accounting period are the amount (if any)—
a
in respect of which the company is chargeable to corporation tax for that period by reason of the application of Part 4 of TIOPA 2010 (transfer pricing) to the results of the material provision,
b
which, in a case where section 81 applies, is attributable (in accordance with sections 20 to 32 of CTA 2009) to UKPE, and
c
which is not taken into account in an assessment to corporation tax which is included before the end of the review period in the company’s company tax return for that accounting period.
85Section 80 or 81: calculation of profits by reference to the relevant alternative provision
1
This section applies where—
a
section 80 or 81 applies in relation to a company (“the relevant company”) for an accounting period, and
b
the actual provision condition is not met.
2
The taxable diverted profits that arise to the relevant company in the accounting period in relation to the material provision in question are determined in accordance with subsections (3) to (5).
3
Subsection (4) applies if the actual provision condition would have been met but for the fact that the relevant alternative provision would have resulted in relevant taxable income of a company for that company’s corresponding accounting period.
4
The taxable diverted profits that arise to the relevant company in the accounting period are an amount equal to the sum of—
a
the amount described in section 84(2), and
b
the total amount of any relevant taxable income of a connected company, for that company’s corresponding accounting period, which would have resulted from the relevant alternative provision.
5
If subsection (4) does not apply, the taxable diverted profits that arise to the relevant company in the accounting period are the sum of—
a
the notional additional amount (if any) arising from the relevant alternative provision, and
b
the total amount (if any) of any relevant taxable income of a connected company, for that company’s corresponding accounting period, which would have resulted from the relevant alternative provision,
6
In subsection (5) “the notional additional amount” means the amount by which—
a
the amount in respect of which the company would have been chargeable to corporation tax for that period had the relevant alternative provision been made or imposed instead of the material provision, exceeds
b
the amount—
i
in respect of which the company is chargeable to corporation tax for that period by reason of the application of Part 4 of TIOPA 2010 (transfer pricing) to the results of the material provision,
ii
which, in a case where section 81 applies, is attributable (in accordance with sections 20 to 32 of CTA 2009) to UKPE, and
iii
which is taken into account in an assessment to corporation tax which is included before the end of the review period in the company’s company tax return for that accounting period.
Avoidance of a UK taxable presence
86Non-UK company avoiding a UK taxable presence
1
This section applies in relation to a company (“the foreign company”) for an accounting period if—
a
the company is non-UK resident in that period,
b
it carries on a trade during that period (or part of it),
c
a person (“the avoided PE”), whether or not UK resident, is carrying on activity in the United Kingdom in that period in connection with supplies of services, goods or other property made by the foreign company in the course of that trade,
d
section 87 (exception for companies with limited UK-related sales or expenses) does not operate to prevent this section applying in relation to the foreign company for the accounting period,
e
it is reasonable to assume that any of the activity of the avoided PE or the foreign company (or both) is designed so as to ensure that the foreign company does not, as a result of the avoided PE’s activity, carry on that trade in the United Kingdom for the purposes of corporation tax (whether or not it is also designed to secure any commercial or other objective),
f
the mismatch condition (see subsection (2)) or the tax avoidance condition (see subsection (3)) is met or both those conditions are met,
g
the avoided PE is not excepted by subsection (5), and
h
the avoided PE and the foreign company are not both small or medium-sized enterprises for that period.
2
“The mismatch condition” is that—
a
in connection with the supplies of services, goods or other property mentioned in subsection (1)(c) (or in connection with those supplies and other supplies), arrangements are in place as a result of which provision is made or imposed as between the foreign company and another person (“A”) by means of a transaction or series of transactions (“the material provision”),
b
the participation condition is met in relation to the foreign company and A (see section 106),
c
the material provision results in an effective tax mismatch outcome, for the accounting period, as between the foreign company and A (see sections 107 and 108),
d
the effective tax mismatch outcome is not an excepted loan relationship outcome (see section 109),
e
the insufficient economic substance condition is met (see section 110), and
f
the foreign company and A are not both small or medium-sized enterprises for the accounting period.
3
“The tax avoidance condition” is that, in connection with the supplies of services, goods or other property mentioned in subsection (1)(c) (or in connection with those supplies and other supplies), arrangements are in place the main purpose or one of the main purposes of which is to avoid or reduce a charge to corporation tax.
4
In subsection (1)(e) the reference to activity of the avoided PE or the foreign company includes any limitation which has been imposed or agreed in respect of that activity.
5
The avoided PE is “excepted” if—
a
activity of the avoided PE is such that, as a result of section 1142 or 1144 of CTA 2010, the foreign company would not be treated as carrying on a trade in the United Kingdom in the accounting period through a permanent establishment in the United Kingdom by reason of that activity, and
b
in a case where—
i
section 1142(1) of that Act applies, but
ii
the avoided PE is not regarded for the purposes of section 1142(1) of that Act as an agent of independent status by virtue of section 1145, 1146 or 1151 of that Act,
the foreign company and the avoided PE are not connected at any time in the accounting period.
6
Where the foreign company is a member of a partnership—
a
for the purposes of subsection (1)—
i
a trade carried on by the partnership is to be regarded as a trade carried on by the foreign company, and
ii
supplies made by the partnership in the course of that trade are to be regarded as supplies made by the foreign company in the course of that trade, and
b
for the purposes of subsection (2)(a) provision made or imposed as between the partnership and another person is to be regarded as made between the foreign company and that person.
7
In this section “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).
87Exception for companies with limited UK-related sales or expenses
1
Section 86 does not apply to the foreign company for an accounting period if one or both of the following conditions is or are met.
2
The first condition is that, for the accounting period, the total of—
a
the UK-related sales revenues of the foreign company, and
b
the UK-related sales revenues of companies connected with the foreign company,
does not exceed £10,000,000.
3
The second condition is that the total of—
a
the UK-related expenses of the foreign company incurred in the accounting period, and
b
the UK-related expenses of companies connected with the foreign company incurred in that period,
does not exceed £1,000,000.
4
But if the accounting period is a period of less than 12 months, the amounts specified in subsections (2) and (3) are to be reduced proportionally.
5
In this section—
“the foreign company” has the same meaning as in section 86;
“UK activity” means activity carried on in the United Kingdom in connection with supplies of services, goods or other property made by the foreign company in the course of the trade mentioned in section 86(1)(b);
“UK-related expenses”, of a company, means the expenses of that company which relate to UK activity;
“UK-related sales revenues” means—
a
in the case of the foreign company, the sales revenues of that company from UK-related supplies, and
b
in the case of a company connected with the foreign company, the sales revenues of the first mentioned company to the extent that they—
i
are from UK-related supplies, and
ii
are trading receipts which are not taken into account in calculating the profits of that company which are chargeable to corporation tax;
“UK-related supplies” means supplies of services, goods or other property which are made—
a
by the foreign company or a company connected with the foreign company, and
b
relate to UK activity.
6
For the purposes of this section “revenues” or “expenses” of a company, in the relevant accounting period, are amounts which, in accordance with generally accepted accounting practice (“GAAP”), are recognised as revenue or (as the case may be) expenses in the company’s profit and loss account or income statement for that period.
7
Where a company does not draw up accounts for the relevant accounting period in accordance with GAAP, the reference in subsection (6) to any amounts which in accordance with GAAP are recognised as revenue or expenses in the company’s profit and loss account or income statement for the relevant accounting period is to be read as a reference to any amounts which would be so recognised if the company had drawn up such accounts for the relevant accounting period.
8
“Generally accepted accounting practice” is to be construed in accordance with section 1127 of CTA 2010.
9
The Treasury may by regulations, made by statutory instrument, substitute a different figure for the figure for the time being specified in subsection (2) or (3).
10
Regulations under this section are subject to annulment in pursuance of a resolution of the House of Commons.
Calculation of taxable diverted profits: section 86 cases
88Calculation of taxable diverted profits in section 86 case: introduction
1
If section 86 applies for an accounting period, section 89, 90 or 91 applies to determine the taxable diverted profits of the foreign company.
2
But see also section 97 for how a designated HMRC officer estimates those profits when issuing a preliminary notice under section 93 or a charging notice under section 95.
3
Subsections (4) to (12) define some key expressions used in sections 89 to 91 and this section.
4
“The foreign company” has the same meaning as in section 86.
5
“The notional PE profits”, in relation to an accounting period, means the profits which would have been the chargeable profits of the foreign company for that period, attributable (in accordance with sections 20 to 32 of CTA 2009) to the avoided PE, had the avoided PE been a permanent establishment in the United Kingdom through which the foreign company carried on the trade mentioned in section 86(1)(b).
6
“The material provision” has the same meaning as in section 86.
7
“The relevant alternative provision” means the alternative provision which it is just and reasonable to assume would have been made or imposed as between the foreign company and one or more companies connected with that company, instead of the material provision, had tax (including any non-UK tax) on income not been a relevant consideration for any person at any time.
8
For the purposes of subsection (7), making or imposing no provision is to be treated as making or imposing an alternative provision to the material provision.
9
“The actual provision condition” is met if—
a
the material provision results in expenses of the foreign company for which (ignoring Part 4 of TIOPA 2010 (transfer pricing)) a deduction for allowable expenses would be allowed in computing what would have been the notional PE profits for the accounting period, and
b
the relevant alternative provision—
i
would also have resulted in allowable expenses of the foreign company of the same type and for the same purposes (whether or not payable to the same person) as so much of the expenses mentioned in paragraph (a) as results in the effective tax mismatch outcome mentioned in section 86(2)(c), but
ii
would not have resulted in relevant taxable income of a connected company for that company’s corresponding accounting period.
10
“Relevant taxable income” of a company for a period is—
a
income of the company, for the period, which would have resulted from the relevant alternative provision and in relation to which the company would have been within the charge to corporation tax had that period been an accounting period of the company, less
b
the total amount of expenses which it is just and reasonable to assume would have been incurred in earning that income and would have been allowable expenses of the company for that period.
11
“Connected company” means a company which is or, if the relevant alternative provision had been made, would have been connected with the foreign company.
12
“The mismatch condition” has the same meaning as in section 86.
89Section 86: calculation of profits where only tax avoidance condition is met
1
This section applies where—
a
section 86 applies for an accounting period, and
b
the mismatch condition is not met.
2
The taxable diverted profits that arise to the foreign company in the accounting period by reason of that section applying are an amount equal to the notional PE profits for that period.
90Section 86: mismatch condition is met: calculation of profits by reference to the actual provision
1
This section applies where—
a
section 86 applies for an accounting period,
b
the mismatch condition is met, and
c
the actual provision condition is met.
2
The taxable diverted profits that arise to the foreign company in the accounting period, in relation to the material provision in question, are an amount equal to the notional PE profits for that period.
91Section 86: mismatch condition is met: calculation of profits by reference to the relevant alternative provision
1
This section applies where —
a
section 86 applies for an accounting period,
b
the mismatch condition is met, and
c
the actual provision condition is not met.
2
The taxable diverted profits that arise to the foreign company in the accounting period, in relation to the material provision in question, are determined in accordance with subsections (3) to (5).
3
Subsection (4) applies if the actual provision condition would have been met but for the fact that the relevant alternative provision would have resulted in relevant taxable income of a company for that company’s corresponding accounting period.
4
The taxable diverted profits that arise to the foreign company in the accounting period are an amount equal to the sum of—
a
the notional PE profits for the accounting period, and
b
the total amount of any relevant taxable income of a connected company, for that company’s corresponding accounting period, which would have resulted from the relevant alternative provision.
5
If subsection (4) does not apply, the taxable diverted profits that arise to the foreign company in the accounting period are the sum of—
a
what would have been the notional PE profits of the foreign company for that period had the relevant alternative provision been made or imposed instead of the material provision, and
b
the total amount of any relevant taxable income of a connected company, for that company’s corresponding accounting period, which would have resulted from the relevant alternative provision.
Duty to notify if within scope
92Duty to notify if potentially within scope of tax
1
Where a company meets the requirements in subsection (3) or (4) in relation to an accounting period of the company, the company must notify an officer of Revenue and Customs to that effect.
This is subject to subsections (7) and (8).
2
A notification under subsection (1) must be made—
a
in writing, and
b
within the period of 3 months beginning at the end of the accounting period to which it relates (“the notification period”).
See also subsection (9) for provision about the content of notifications.
3
A company meets the requirements of this subsection if—
a
section 80 or 81 applies in relation to the company for the accounting period, and
b
in that period, the financial benefit of the tax reduction is significant relative to the non-tax benefits of the material provision.
4
A company meets the requirements of this subsection if—
a
section 86 applies in relation to the company for the accounting period, and
b
where that section applies by reason of the mismatch condition being met, in that period the financial benefit of the tax reduction is significant relative to the non-tax benefits of the material provision.
5
For the purposes of subsections (3) and (4), this Part has effect subject to the following modifications—
a
in section 80, ignore subsection (1)(f),
b
in section 86, for subsection (1)(e) substitute—
e
the foreign company is not, as a result of the avoided PE’s activity, within the charge to corporation tax by reason of the foreign company carrying on a trade in the United Kingdom,
c
in subsection (2) of that section, ignore paragraph (e), and
d
in subsection (3) of that section, for “the main purpose or one of the main purposes of which is to avoid or reduce a charge to corporation tax” substitute “that result in the reduction of a charge to corporation tax in consequence of which there is an overall reduction in the amount of tax (including foreign tax) that would otherwise have been payable in respect of the activity mentioned in subsection (1)(c)”.
6
In subsections (3)(b) and (4)(b), “non-tax benefits” means financial benefits other than—
a
the financial benefit of the tax reduction, and
b
any financial benefits which derive (directly or indirectly) from any reduction, elimination or delay of any liability of any person to pay any tax (including any non-UK tax).
7
The duty under subsection (1) does not apply in relation to an accounting period of the company (“the current period”)—
a
if, at the end of the notification period, it is reasonable (ignoring the possibility of future adjustments being made in accordance with Part 4 of TIOPA 2010 (transfer pricing)) for the company to conclude that no charge to diverted profits tax will arise to the company for the current period,
b
if, before the end of the notification period, an officer of Revenue and Customs has confirmed that the company does not have to notify an officer in relation to the current period because—
i
the company, or a company which is connected with it, has provided HMRC with sufficient information to enable a designated HMRC officer to determine whether or not to give a preliminary notice under section 93 to the first mentioned company in respect of the accounting period, and
ii
HMRC has examined that information (whether in the course of an enquiry made into a return or otherwise and whether in relation to diverted profits tax or otherwise),
c
if, at the end of the notification period, it is reasonable for the company to conclude that sub-paragraphs (i) and (ii) of paragraph (b) apply, or
d
if—
i
the immediately preceding accounting period of the company is a period in respect of which notification was given under subsection (1), or not required to be given by virtue of paragraph (b) or (c) or this paragraph, and
ii
at the end of the notification period for the current period, it is reasonable for the company to conclude that there has been no change in circumstances which is material to whether a charge to diverted profits tax may be imposed for the current period.
8
The Commissioners for Her Majesty’s Revenue and Customs may also direct that the duty under subsection (1) does not apply in relation to an accounting period in other circumstances specified in the direction.
9
A notification under subsection (1) must—
a
state whether the obligation to notify arises by reason of section 80, 81 or 86 (as modified by subsection (5)) applying in relation to the company for the accounting period;
b
if it states that section 86 applies, state the name of the avoided PE;
c
if it states that section 80 or 81 applies, contain a description of the material provision in question and the parties between whom it has been made or imposed;
d
if it states that section 86 applies—
i
state whether or not the mismatch condition is met, and
ii
if it is met, contain a description of the material provision in question and the parties between whom it has been made or imposed.
Process for imposing charge
93Preliminary notice
1
If a designated HMRC officer has reason to believe that—
a
one or more of sections 80, 81 and 86 applies or apply in relation to a company for an accounting period, and
b
as a result, taxable diverted profits arise to the company in the accounting period,
the officer must give the company a notice (a “preliminary notice”) in respect of that period.
2
See sections 96 and 97 for provision about the calculation of taxable diverted profits for the purposes of a preliminary notice.
3
A preliminary notice must—
a
state the accounting period of the company to which the notice applies;
b
set out the basis on which the officer has reason to believe that one or more of sections 80, 81 and 86 applies or apply in relation to the company for that accounting period;
c
explain the basis on which the proposed charge is calculated, including—
i
how the taxable diverted profits to which the proposed charge would relate have been determined,
ii
where relevant, details of the relevant alternative provision (see section 82(5) or 88(7)) by reference to which those profits have been determined, and
iii
how the amount of interest comprised in that charge in accordance with section 79(2)(b) would be calculated,
d
state who would be liable to pay the diverted profits tax;
e
explain how interest is applied in accordance with section 101 of FA 2009 (late payment interest on sums due to HMRC) if the diverted profits tax is not paid, the period for which interest is charged and the rate at which it is charged.
4
Where the designated HMRC officer has insufficient information to determine or identify any of the matters set out in subsection (3), it is sufficient if the preliminary notice sets out those matters determined to the best of the officer’s information and belief.
5
Subject to subsection (6), a preliminary notice may not be issued more than 24 months after the end of the accounting period to which it relates.
6
Where—
a
notification under section 92 has not been received by an officer of Revenue and Customs in respect of an accounting period of a company within the period specified in subsection (2)(b) of that section, and
b
a designated HMRC officer believes, in relation to that accounting period, that an amount of diverted profits tax that ought to have been charged under this Part has not been charged,
a designated HMRC officer may issue to the company a preliminary notice in respect of that tax within the period of 4 years after the end of the accounting period.
7
Where a preliminary notice is issued to a company, the officer must give a copy of the notice—
a
if the notice is issued on the basis that section 81 applies, to UKPE, and
b
if the notice is issued on the basis that section 86 applies, to the avoided PE.
94Representations
1
This section applies where a designated HMRC officer gives a preliminary notice, in respect of an accounting period, to a company under section 93 (and that notice is not withdrawn).
2
The company has 30 days beginning with the day the notice is issued to send written representations to the officer in respect of the notice.
3
Representations made in accordance with subsection (2) are to be considered by the officer only if they are made on the following grounds—
a
that there is an arithmetical error in the calculation of the amount of the diverted profits tax or the taxable diverted profits or an error in a figure on which an assumption in the notice is based;
b
that the small or medium-sized enterprise requirement is not met;
c
that in a case where the preliminary notice states that section 80 or 81 applies—
i
the participation condition is not met,
ii
the 80% payment test is met, or
iii
the effective tax mismatch outcome is an excepted loan relationship outcome;
d
that in a case where the preliminary notice states that section 86 applies—
i
section 87 (exception for companies with limited UK-related sales or expenses) operates to prevent section 86 from applying for the accounting period, or
ii
the avoided PE is “excepted” within the meaning of section 86(5);
e
that in a case where the preliminary notice states that section 86 applies and that the mismatch condition (within the meaning of section 86(2)) is met, the condition is not met because—
i
the participation condition is not met,
ii
the 80% payment test is met, or
iii
the effective tax mismatch outcome is an excepted loan relationship outcome (within the meaning of section 109(2)).
4
But, unless they are representations under subsection (3)(a) in respect of arithmetical errors, nothing in subsection (3) requires the officer to consider any representations if, and to the extent that, they relate to—
a
any provision of Part 4 of TIOPA 2010 (transfer pricing), or
b
the attribution of profits of a company to a permanent establishment in the United Kingdom through which the company carries on a trade (including any notional attribution made for the purposes of section 89, 90 or 91).
5
“The small or medium-sized enterprise requirement” is—
a
where the notice was issued on the basis that section 80 or 81 applies, the requirement in section 80(1)(g), and
b
where the notice was issued on the basis that section 86 applies to the company, the requirement in subsection (1)(h) or (2)(f) of that section.
6
“The participation condition” means—
a
where the notice was issued on the basis that section 80 or 81 applies, the condition in section 80(1)(c), and
b
where the notice was issued on the basis that section 86 applies to the company, the condition in subsection (2)(b) of that section.
7
“The 80% payment test” means the requirement in section 107(3)(d).
95Charging notice
1
This section applies where a designated HMRC officer has given a company a preliminary notice under section 93 in relation to an accounting period.
2
Having considered any representations in accordance with section 94, the officer must determine whether to—
a
issue a notice under this section (a “charging notice”) to the company for that accounting period, or
b
notify the company that no charging notice will be issued for that accounting period pursuant to that preliminary notice,
and must take that action before the end of the period of 30 days immediately following the period of 30 days mentioned in section 94(2).
3
A notification under subsection (2)(b) does not prevent a charging notice being issued for the same accounting period pursuant to any other preliminary notice the person may be given in respect of that period.
4
See sections 96 and 97 for provision about the calculation of taxable diverted profits for the purposes of a charging notice.
5
A charging notice must—
a
state the amount of the charge to diverted profits tax imposed by the notice;
b
set out the basis on which the officer considers that section 80, 81 or 86 applies;
c
state the accounting period of the company to which the notice applies;
d
set out an explanation of the basis on which the charge is calculated, including—
i
how the taxable diverted profits to which the charge relates have been determined,
ii
where relevant, details of the relevant alternative provision (see section 82(5) or 88(7)) by reference to which those profits have been determined, and
iii
how the amount of interest comprised in the charge under section 79(2)(b) has been calculated;
e
state who is liable to pay the diverted profits tax;
f
state when the tax is due and payable;
g
explain how interest is applied in accordance with section 101 of FA 2009 (late payment interest on sums due to HMRC) if the diverted profits tax is not paid, the period for which interest is charged and the rate at which it is charged.
6
Where a charging notice is issued to a company, the officer must give a copy of the notice—
a
if the notice is issued by reason of section 81 applying, to UKPE, and
b
if the notice is issued by reason of section 86 applying, to the avoided PE.
96Section 80 or 81 cases: estimating profits for preliminary and charging notices
1
Where taxable diverted profits arising to a company in an accounting period fall to be determined under section 84 or 85, for the purposes of issuing a preliminary notice under section 93 or a charging notice under section 95 the taxable diverted profits to be specified in the notice, in relation to the material provision in question, are determined in accordance with this section.
2
The taxable diverted profits are such amount (if any) as the designated HMRC officer issuing the notice determines, on the basis of the best estimate that can reasonably be made at that time, to be the amount calculated in accordance with sections 84 or 85 (as the case may be).
But this is subject to subsections (4) to (6).
3
For the purposes of this section, “the inflated expenses condition” is met if—
a
the material provision results in expenses of the company for which a deduction has been taken into account by the company in computing—
i
in a case where section 80 applies, its liability for corporation tax for the accounting period, and
ii
in a case where section 81 applies, its chargeable profits attributable (in accordance with sections 20 to 32 of CTA 2009) to UKPE,
b
the expenses result, or a part of the expenses results, in the effective tax mismatch outcome mentioned in section 80(1)(d), and
c
in consequence of paragraphs (a) and (b), the designated HMRC officer issuing the notice considers that the relevant expenses might be greater than they would have been if they had resulted from provision made or imposed as between independent persons dealing at arm’s length.
4
Subsection (5) applies where the designated HMRC officer issuing the notice considers that—
a
the inflated expenses condition is met, and
b
it is reasonable to assume that section 84 or 85(4) applies.
5
Where this subsection applies, the best estimate made by the officer in accordance with subsection (2) is to be made on the assumption that—
a
so much of the deduction mentioned in subsection (3)(a) as relates to the relevant expenses is reduced by 30%, and
b
in relation to the relevant expenses, Part 4 of TIOPA 2010 (transfer pricing) is ignored.
6
But—
a
if the deduction for the expenses taken into account by the company in computing its liability for corporation tax takes account of an adjustment required by Part 4 of TIOPA 2010 (transfer pricing) which is reflected in the company’s company tax return prior to the issue of the charging notice, and
b
as a result that deduction is less than it would otherwise have been,
the reduction required by subsection (5)(a) is reduced (but not below nil) to take account of that adjustment.
7
For the purposes of this section, sections 83(3) and 84(2)(c) have effect as if (in each case) the words “before the end of the review period” were omitted.
8
The Treasury may by regulations, made by statutory instrument, substitute a different percentage for the percentage for the time being specified in subsection (5)(a).
9
Regulations under this section are subject to annulment in pursuance of a resolution of the House of Commons.
10
In this section—
“the material provision” has the same meaning as in section 80;
“the relevant expenses” means so much of the expenses mentioned in subsection (3)(a) as result in the effective tax mismatch outcome as mentioned in subsection (3)(b).
97Section 86 cases: estimating profits for preliminary and charging notices
1
Where taxable diverted profits arising to the foreign company in an accounting period fall to be determined under section 89, 90 or 91, for the purposes of issuing a preliminary notice under section 93 or a charging notice under section 95 the taxable diverted profits to be specified in the notice are determined instead in accordance with this section.
2
The taxable diverted profits are such amount as the designated HMRC officer issuing the notice determines, on the basis of the best estimate that can reasonably be made at that time, to be the amount calculated in accordance with section 89, 90 or 91 (as the case may be).
But this is subject to subsections (4) and (5).
3
For the purposes of subsection (4), “the inflated expenses condition” is met if—
a
the mismatch condition is met,
b
the material provision results in expenses of the foreign company for which (ignoring Part 4 of TIOPA 2010 (transfer pricing)) a deduction for allowable expenses would be allowed in computing the notional PE profits of the foreign company for the accounting period,
c
the expenses result, or a part of the expenses results, in the effective tax mismatch outcome mentioned in section 86(2)(c), and
d
in consequence of paragraphs (a) to (c), the designated HMRC officer issuing the notice considers that the relevant expenses might be greater than they would have been if they had resulted from provision made or imposed as between independent persons dealing at arm’s length.
4
Subsection (5) applies where the designated HMRC officer issuing the notice considers that—
a
the inflated expenses condition is met, and
b
it is reasonable to assume that section 90 or 91(4) applies.
5
Where this subsection applies, the best estimate made by the officer in accordance with subsection (2) is to be made on the assumption that—
a
so much of the deduction mentioned in subsection (3)(b) as relates to the relevant expenses is reduced by 30%, and
b
in relation to the relevant expenses, Part 4 of TIOPA 2010 (transfer pricing) is ignored.
6
The Treasury may by regulations, made by statutory instrument, substitute a different percentage for the percentage for the time being specified in subsection (5)(a).
7
Regulations under this section are subject to annulment in pursuance of a resolution of the House of Commons.
8
In this section—
a
“the relevant expenses” means so much of the expenses mentioned in subsection (3)(b) as result in the effective tax mismatch outcome as mentioned in section 86(2)(c), and
b
“the foreign company”, “the material provision” and “the mismatch condition” have the same meaning as in section 86.
Payment and recovery of tax
98Payment of tax
1
This section applies where a charging notice is issued to a company.
2
Diverted profits tax charged by the notice must be paid within 30 days after the day the notice is issued.
3
The company is liable to pay the tax.
4
The payment of the tax may not be postponed on any grounds, and so the diverted profits tax charged by the charging notice remains due and payable despite any review being conducted under section 101 or any appeal in respect of the notice.
5
In Schedule 16—
a
Part 1 contains provision treating a liability of a non-UK resident company to pay diverted profits tax as if it were also a liability of its UK representative;
b
Part 2 contains provision enabling unpaid diverted profits tax due from a non-UK resident company to be recovered from a related company.
99Diverted profits tax ignored for tax purposes
1
In calculating income, profits or losses for any tax purpose—
a
no deduction, or other relief, is allowed in respect of diverted profits tax, and
b
no account is to be taken of any amount which is paid (directly or indirectly) by a person for the purposes of meeting or reimbursing the cost of diverted profits tax.
2
An amount paid as mentioned in subsection (1)(b) is not to be regarded for the purposes of the Corporation Tax Acts as a distribution (within the meaning of CTA 2010).
100Credit for UK or foreign tax on same profits
1
Subsection (2) applies where a company has paid—
a
corporation tax, or
b
a tax under the law of a territory outside the United Kingdom which corresponds to corporation tax,
which is calculated by reference to profits of the company (“the taxed profits”).
2
Such credit as is just and reasonable is allowed in respect of that tax against any liability which either—
a
that company has to diverted profits tax in respect of the taxed profits, or
b
another company has to diverted profits tax in respect of taxable diverted profits arising to that other company which are calculated by reference to amounts which also constitute all or part of the taxed profits.
3
Subsection (4) applies where a company has paid—
a
the CFC charge within the meaning of Part 9A of TIOPA 2010 (controlled foreign companies) (see section 371VA), or
b
a tax under the law of a territory outside the United Kingdom (by whatever name known) which is similar to the CFC charge,
which is calculated by reference to profits of another company (“the CFC profits”).
4
Such credit as is just and reasonable is allowed in respect of that charge or tax against any liability which a company has to diverted profits tax in respect of taxable diverted profits arising to that other company which are calculated by reference to amounts which also constitute all or part of the CFC profits.
5
But nothing in this section allows a credit, against a liability to diverted profits tax, for an amount of tax or charge which was paid after the end of—
a
the review period in respect of the charging notice which imposed the charge to diverted profits tax, or
b
where the charge to diverted profits tax was imposed by a supplementary charging notice, the review period within which that notice was issued.
6
For the purposes of subsection (1), any withholding tax paid on payments made to a person is (unless it is refunded) to be treated—
a
as tax within paragraph (a) or (b) of that subsection, and
b
as paid by that person (and not the person making the payment).
7
For the purposes of subsection (6), an amount of withholding tax paid on payments made to a person is refunded if and to the extent that—
a
any repayment of tax, or any payment in respect of a credit for tax, is made to any person, and
b
that repayment or payment is directly or indirectly in respect of the whole or part of the amount of that withholding tax.
Review and appeals
101HMRC review of charging notice
1
Where a charging notice is issued to a company for an accounting period, a designated HMRC officer, within the review period—
a
must carry out a review of the amount of diverted profits tax charged on the company for the accounting period, and
b
may carry out more than one such review.
2
Subject to subsection (13), “the review period” means the period of 12 months beginning immediately after the period of 30 days mentioned in section 98(2).
3
Subsection (4) applies if—
a
the company has paid (in full) the amount of diverted profits tax charged by the charging notice, and
b
the officer is satisfied that the total amount of diverted profits tax charged on the company for that period is excessive having regard to sections 83, 84, 85, 89, 90 and 91 (calculation of taxable diverted profits).
4
The officer may, during the review period, issue to the company an amending notice which amends the charging notice so as to—
a
reduce the amount of taxable diverted profits to which the notice relates, and
b
accordingly, reduce the charge to diverted profits tax imposed on the company in respect of the accounting period.
5
More than one amending notice may be issued to the company in respect of the charging notice.
6
Where an amending notice is issued, any tax overpaid must be repaid.
7
Subsection (8) applies if a designated HMRC officer is satisfied that the total amount of diverted profits tax charged on the company for the accounting period is insufficient having regard to sections 83, 84, 85, 89, 90 and 91 (calculation of taxable diverted profits).
8
The officer may, during the review period, issue a notice (a “supplementary charging notice”) to the company imposing an additional charge to diverted profits tax on the company in respect of the accounting period on taxable diverted profits which—
a
arise to the company for that period, and
b
are not already the subject of a charge to diverted profits tax.
9
Only one supplementary charging notice may be issued to the company in respect of a charging notice.
10
No supplementary charging notice may be issued during the last 30 days of the review period.
11
Subsections (3) to (6) (amending notices) apply in relation to a supplementary charging notice as they apply to the charging notice.
12
Section 95(5) (content of charging notice) and section 98 (payment of tax) apply in relation to a supplementary charging notice as they apply in relation to a charging notice.
13
If either of the following events occurs before the end of the period of 12 months referred to in subsection (2), the review period ends at the time of that event.
The events are—
a
that following the issuing of a supplementary charging notice, the company notifies HMRC that it is terminating the review period;
b
that a designated HMRC officer and the company agree (in writing) that the review period is to terminate.
14
When determining on a review whether the total amount of taxable diverted profits charged on the company for an accounting period is excessive or insufficient—
a
the designated HMRC officer must not take any account of section 96 or (as the case may be) section 97 (which apply only for the purposes of the officer estimating the taxable diverted profits for the purposes of issuing a preliminary notice or charging notice), and
b
nothing in section 94 applies to restrict the representations which the officer may consider.
15
Where a supplementary charging notice or an amending notice is issued to a company, the officer must give a copy of the notice—
a
if the charging notice was issued by reason of section 81 applying, to UKPE, and
b
if the charging notice was issued by reason of section 86 applying, to the avoided PE.
102Appeal against charging notice or supplementary charging notice
1
A company to which a charging notice or a supplementary charging notice is issued may appeal against the notice.
2
Notice of an appeal must be given to HMRC, in writing, within 30 days after the end of the review period (see section 101(2) and (13)).
3
The notice of appeal must specify the grounds of appeal.
4
For the purposes of an appeal, sections 96 and 97 (which apply only for the purposes of the officer estimating the taxable diverted profits for the purposes of issuing a preliminary notice or charging notice) are to be ignored when determining whether the taxable diverted profits in respect of which a charge is imposed have been correctly calculated.
5
On an appeal under this section the Tribunal may—
a
confirm the charging notice or supplementary charging notice to which the appeal relates,
b
amend that charging notice or supplementary charging notice, or
c
cancel that charging notice or supplementary charging notice.
6
For the purposes of Part 5 of TMA 1970 (appeals etc), an appeal under this section is to be treated as if it were an appeal under the Taxes Acts (within the meaning of that Act), and for that purpose references in that Part to an assessment include a charging notice or supplementary charging notice under this Part.
7
Subsection (6) is subject to section 98(4) (no postponement of payment of tax pending appeal etc).
Administration of tax
103Responsibility for collection and management
The Commissioners for Her Majesty’s Revenue and Customs are responsible for the collection and management of diverted profits tax.
104Penalties etc
1
Schedule 56 to FA 2009 (penalty for failure to make payments on time) is amended as follows.
2
In the Table at the end of paragraph 1, after item 6ZA insert—
6ZB
Diverted profits tax
Amount of diverted profits tax payable under Part 3 of FA 2015
The date when, in accordance with section 98(2) of FA 2015, the amount must be paid
3
In paragraph 3 (amount of penalty: occasional amounts and amounts in respect of periods of 6 months or more), after sub-paragraph (1)(a) insert—
aa
a payment of tax falling within item 6ZB in the Table,
4
Schedule 41 to FA 2008 (penalties: failure to notify etc) is amended as follows.
5
In the Table in paragraph 1, after the entry for corporation tax insert—
Diverted profits tax
Obligation under section 92 of FA 2015 (duty to notify if within scope of diverted profits tax).
6
In paragraph 7 (meaning of “potential lost revenue”), after sub-paragraph (4) insert—
4A
In the case of a relevant obligation relating to diverted profits tax, the potential lost revenue is the amount of diverted profits tax for which P would be liable at the end of the period of 6 months beginning immediately after the accounting period assuming—
a
a charge to diverted profits tax had been imposed on P on the taxable diverted profits arising to P for the accounting period, and
b
that tax was required to be paid before the end of that period of 6 months.
105Information and inspection powers etc
1
In Schedule 23 to FA 2011 (data-gathering powers), in paragraph 45(1) (taxes to which powers apply), after paragraph (c) insert—
ca
diverted profits tax,
2
In Schedule 36 to FA 2008 (information and inspection powers), in paragraph 63(1) (taxes to which powers apply), after paragraph (c) insert—
ca
diverted profits tax,
Interpretation
106“The participation condition”
1
This section applies for the purposes of sections 80 and 86(2).
2
In this section “the first party” and “the second party” mean—
a
where this section applies for the purposes of section 80, C and P (within the meaning of section 80) respectively, and
b
where this section applies for the purposes of section 86(2), the foreign company and A (within the meaning of section 86) respectively.
3
The participation condition is met in relation to the first party and the second party (“the relevant parties”) if—
a
condition A is met in relation to the material provision so far as the material provision is provision relating to financing arrangements, and
b
condition B is met in relation to the material provision so far as the material provision is not provision relating to financing arrangements.
4
Condition A is that, at the time of the making or imposition of the material provision or within the period of 6 months beginning with the day on which the material provision was made or imposed—
a
one of the relevant parties was directly or indirectly participating in the management, control or capital of the other, or
b
the same person or persons was or were directly or indirectly participating in the management, control or capital of each of the relevant parties.
5
Condition B is that, at the time of the making or imposition of the material provision—
a
one of the relevant parties was directly or indirectly participating in the management, control or capital of the other, or
b
the same person or persons was or were directly or indirectly participating in the management, control or capital of each of the relevant parties.
6
In this section “financing arrangements” means arrangements made for providing or guaranteeing, or otherwise in connection with, any debt, capital or other form of finance.
7
For the purposes of this section—
a
section 157(2) of TIOPA 2010 (“direct participation”) applies, and
b
sections 158 to 163 of that Act (“indirect participation” in management, control or capital of a person) apply as if in those sections—
i
references to section 148(2) of that Act included references to subsection (4) of this section,
ii
references to paragraph (a) or (b) of section 148(2) of that Act included (respectively) references to paragraph (a) or (b) of subsection (4) of this section,
iii
references to section 148(3) of that Act included references to subsection (5) of this section, and
iv
references to paragraph (a) or (b) of section 148(3) of that Act included (respectively) references to paragraph (a) or (b) of subsection (5) of this section.
107“Effective tax mismatch outcome”
1
This section applies for the purposes of sections 80 and 86(2).
2
In this section “the first party” and “the second party” mean—
a
where this section applies for the purposes of section 80, C and P (within the meaning of section 80) respectively, and
b
where this section applies for the purposes of section 86(2), the foreign company and A (within the meaning of section 86) respectively.
3
The material provision results in an effective tax mismatch outcome as between the first party and the second party for an accounting period of the first party if—
a
in that accounting period, in relation to a relevant tax, it results in one or both of—
i
expenses of the first party for which a deduction has been taken into account in computing the amount of the relevant tax payable by the first party, or
ii
a reduction in the income of the first party which would otherwise have been taken into account in computing the amount of a relevant tax payable by the first party,
b
the resulting reduction in the amount of the relevant tax which is payable by the first party exceeds the resulting increase in relevant taxes payable by the second party for the corresponding accounting period of the second party,
c
the results described in paragraphs (a) and (b) are not exempted by subsection (6), and
d
the second party does not meet the 80% payment test.
4
In this Part, references to “the tax reduction” are to the amount of the excess mentioned in subsection (3)(b).
5
It does not matter whether the tax reduction results from the application of different rates of tax, the operation of a relief, the exclusion of any amount from a charge to tax, or otherwise.
6
The results described in subsection (3)(a) and (b) are exempted if they arise solely by reason of—
a
contributions paid by an employer under a registered pension scheme, or overseas pension scheme, in respect of any individual,
b
a payment to a charity,
c
a payment to a person who, on the ground of sovereign immunity, cannot be liable for any relevant tax, or
d
a payment to an offshore fund or authorised investment fund—
i
which meets the genuine diversity of ownership condition (whether or not a clearance has been given to that effect), or
ii
at least 75% of the investors in which are, throughout the accounting period, registered pension schemes, overseas pension schemes, charities or persons who cannot be liable for any relevant tax on the ground of sovereign immunity.
7
“The 80% payment test” is met by the second party if the resulting increase in relevant taxes payable by the second party as mentioned in subsection (3)(b) is at least 80% of the amount of the resulting reduction in the amount of the relevant tax payable by the first party as mentioned in subsection (3)(b).
8
In this section—
“authorised investment fund” means—
a
an open-ended investment company within the meaning of section 613 of CTA 2010, or
b
an authorised unit trust within the meaning of section 616 of that Act;
“employer” has the same meaning as in Part 4 of FA 2004 (see section 279(1) of that Act);
“genuine diversity of ownership condition” means—
a
in the case of an offshore fund, the genuine diversity of ownership condition in regulation 75 of the Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001), and
b
in the case of an authorised investment fund, the genuine diversity of ownership condition in regulation 9A of the Authorised Investment Fund (Tax) Regulations 2006 (S.I. 2006/964);
“offshore fund” has the same meaning as in section 354 of TIOPA 2010 (see section 355 of that Act);
“overseas pension scheme” has the same meaning as in Part 4 of FA 2004 (see section 150(7) of that Act);
“registered pension scheme” has the same meaning as in that Part (see section 150(2) of that Act);
“relevant tax” means—
a
corporation tax on income,
b
a sum chargeable under section 330(1) of CTA 2010 (supplementary charge in respect of ring fence trades) as if it were an amount of corporation tax,
c
income tax, or
d
any non-UK tax on income.
9
See section 108 for further provision about the determination of the tax reduction and the 80% payment test.
108Provision supplementing section 107
1
For the purposes of section 107(3)(b) and (7), the resulting reduction in the first party’s liability to a relevant tax for an accounting period is—
A×TR
where—
A is the sum of—
a
if there are expenses within section 107(3)(a)(i), the lower of the amount of the expenses and the amount of the deduction mentioned in that provision, and
b
any reduction in income mentioned in section 107(3)(a)(ii), and
TR is the rate at which, assuming the first party has profits equal to A chargeable to the relevant tax for the accounting period, those profits would be chargeable to that tax.
2
For the purposes of section 107(3)(b) and (7), the resulting increase in relevant taxes payable by the second party for the corresponding accounting period is any increase in the total amount of relevant taxes that would fall to be paid by the second party (and not refunded) assuming that—
a
the second party’s income for that period, in consequence of the material provision were an amount equal to A,
b
account were taken of any deduction or relief (other than any qualifying deduction or qualifying loss relief) taken into account by the second party in determining its actual liability to any relevant tax in consequence of the material provision, and
c
all further reasonable steps were taken—
i
under the law of any part of the United Kingdom or any country or territory outside the United Kingdom, and
ii
under double taxation arrangements made in relation to any country or territory,
to minimise the amount of tax which would fall to be paid by the second party in the country or territory in question (other than steps to secure the benefit of any qualifying deduction or qualifying loss relief).
3
The steps mentioned in subsection (2)(c) include—
a
claiming, or otherwise securing the benefit of, reliefs, deductions, reductions or allowances, and
b
making elections for tax purposes.
4
For the purposes of this section, any withholding tax which falls to be paid on payments made to the second party is (unless it is refunded) to be treated as tax which falls to be paid by the second party (and not the person making the payment).
5
For the purposes of this section, an amount of tax payable by the second party is refunded if and to the extent that—
a
any repayment of tax, or any payment in respect of a credit for tax, is made to any person, and
b
that repayment or payment is directly or indirectly in respect of the whole or part of the amount of tax payable by the second party,
but an amount refunded is to be ignored if and to the extent that it results from qualifying loss relief obtained by the second party.
6
Where the second party is a partnership, in section 107 and this section—
a
references to the second party’s liability to any tax (however expressed) include a reference to the liabilities of all members of the partnership to the tax,
b
references to any tax being payable by the second party (however expressed) include a reference to tax being payable by any member of the partnership, and
c
references to loss relief obtained by the second party include a reference to loss relief obtained by any member of the partnership,
and subsection (4) applies to any member of the partnership as it applies to the second party.
7
In this section—
“the first party” and “the second party” have the same meaning as in section 107;
“qualifying deduction” means a deduction which—
a
is made in respect of actual expenditure of the second party,
b
does not arise directly from the making or imposition of the material provision,
c
is of a kind for which the first party would have obtained a deduction in calculating its liability to any relevant tax had it incurred the expenditure in respect of which the deduction is given, and
d
does not exceed the amount of the deduction that the first party would have so obtained;
“qualifying loss relief” means—
a
any means by which a loss might be used for corporation tax purposes to reduce the amount in respect of which the second party is liable to tax, and
b
in the case of a non-UK resident company, any corresponding means by which a loss corresponding to a relevant CT loss might be used for the purposes of a non-UK tax corresponding to corporation tax to reduce the amount in respect of which the second party is liable to tax,
(and in paragraph (b) “relevant CT loss” means a loss which might be used as mentioned in paragraph (a));
“relevant tax” has the same meaning as in section 107.
109“Excepted loan relationship outcome”
1
This section applies for the purposes of sections 80 and 86(2).
2
The effective tax mismatch outcome is an “excepted loan relationship outcome” if the result described in section 107(3)(a) arises wholly from—
a
anything that, if a company within the charge to corporation tax were party to it, would produce debits or credits under Part 5 of CTA 2009 (loan relationships and deemed loan relationships) (“a loan relationship”), or
b
a loan relationship and a relevant contract (within the meaning of Part 7 of that Act (derivative contracts)) taken together, where the relevant contract is entered into entirely as a hedge of risk in connection with the loan relationship.
110“The insufficient economic substance condition”
1
This section applies for the purposes of sections 80 and 86(2).
2
In this section “the first party” and “the second party” mean—
a
where this section applies for the purposes of section 80, C and P (within the meaning of section 80) respectively, and
b
where this section applies for the purposes of section 86(2), the foreign company and A (within the meaning of section 86) respectively.
3
The insufficient economic substance condition is met if one or more of subsections (4), (5) and (6) apply.
4
This subsection applies where—
a
the effective tax mismatch outcome is referable to a single transaction, and
b
it is reasonable to assume that the transaction was designed to secure the tax reduction,
unless, at the time of the making or imposition of the material provision, it was reasonable to assume that, for the first party and the second party (taken together) and taking account of all accounting periods for which the transaction was to have effect, the non-tax benefits referable to the transaction would exceed the financial benefit of the tax reduction.
5
This subsection applies where—
a
the effective tax mismatch outcome is referable to any one or more of the transactions in a series of transactions, and
b
it is reasonable to assume that the transaction was, or the transactions were, designed to secure the tax reduction,
unless, at the time of the making or imposition of the material provision, it was reasonable to assume that, for the first party and the second party (taken together) and taking account of all accounting periods for which the transaction or series was to have effect, the non-tax benefits referable to the transaction or transactions would exceed the financial benefits of the tax reduction.
6
This subsection applies where—
a
a person is a party to the transaction, or to any one or more of the transactions in the series of transactions, to which section 80(1)(b) or section 86(2)(a) refers, and
b
it is reasonable to assume that the person’s involvement in the transaction or transactions was designed to secure the tax reduction,
unless one or both of the conditions in subsection (7) is or are met.
7
Those conditions are—
a
that, at the time of the making or imposition of the material provision, it was reasonable to assume that, for the first party and the second party (taken together) and taking account of all accounting periods for which the transaction or series was to have effect, the non-tax benefits referable to the contribution made to the transaction or series by that person, in terms of the functions or activities that that person’s staff perform, would exceed the financial benefit of the tax reduction;
b
that, in the accounting period—
i
the income attributable to the ongoing functions or activities of that person’s staff in terms of their contribution to the transaction or transactions (ignoring functions or activities relating to the holding, maintaining or protecting of any asset from which income attributable to the transaction or transactions derives), exceeds
ii
the other income attributable to the transaction or transactions.
8
For the purposes of subsection (7) a person’s staff include—
a
any director or other officer of the person,
b
if the person is a partnership, any individual who is a member of the partnership, and
c
externally provided workers in relation to the person.
9
For the purposes of subsections (4)(b), (5)(b) and (6)(b)—
a
when determining whether it is reasonable to assume—
i
that a transaction was, or transactions were, designed to secure the tax reduction, or
ii
that a person’s involvement in a transaction or transactions was designed to secure the tax reduction,
regard must be had to all the circumstances, including any liability for any additional tax that arises directly or indirectly as a consequence of the transaction or transactions, and
b
a transaction or transactions, or a person’s involvement in a transaction or transactions, may be designed to secure the tax reduction despite it or them also being designed to secure any commercial or other objective.
10
In this section—
“externally provided worker” has the meaning given by section 1128 of CTA 2009, but as if in that section for “company” (in each place) there were substituted “person”;
“non-tax benefits” means financial benefits other than—
a
the financial benefit of the tax reduction, and
b
any other financial benefits which derive (directly or indirectly) from the reduction, elimination, or delay of any liability of any person to pay any tax;
“tax” includes non-UK tax.
111“Transaction” and “series of transactions”
1
In this Part “transaction” includes arrangements, understandings and mutual practices (whether or not they are, or are intended to be, legally enforceable).
2
References in this Part to a series of transactions include references to a number of transactions each entered into (whether or not one after the other) in pursuance of, or in relation to, the same arrangement.
3
A series of transactions is not prevented by reason only of one or more of the matters mentioned in subsection (4) from being regarded for the purposes of this Part as a series of transactions by means of which provision has been made or imposed as between any two persons.
4
Those matters are—
a
that there is no transaction in the series to which both those persons are parties,
b
that the parties to any arrangement in pursuance of which the transactions in the series are entered into do not include one or both of those persons, and
c
that there is one or more transactions in the series to which neither of those persons is a party.
5
In this section “arrangement” means any scheme or arrangement of any kind (whether or not it is, or is intended to be, legally enforceable).
112Treatment of a person who is a member of a partnership
1
This section applies where a person is a member of a partnership.
2
Any references in this Part to the expenses, income or revenue of, or a reduction in the income of, the person includes a reference to the person’s share of (as the case may be) the expenses, income or revenue of, or a reduction in the income of, the partnership.
3
For this purpose “the person’s share” of an amount is determined by apportioning the amount between the partners on a just and reasonable basis.
113“Accounting period” and “corresponding accounting period”
1
In this Part references to an accounting period of a company are to an accounting period of the company for the purposes of corporation tax.
2
Subsection (3) applies where—
a
a non-UK resident company (“FC”) is not within the charge to corporation tax,
b
a person, whether or not UK resident, is carrying on activity in the United Kingdom in connection with supplies of services, goods or other property made by FC in the course of a trade carried on by FC, and
c
it is reasonable to assume that any of the activity of that person or FC (or both) is designed so as to ensure that FC does not, as a result of that person’s activity, carry on that trade in the United Kingdom for the purposes of corporation tax (whether or not it is also designed to secure any commercial or other objective).
3
For the purposes of this Part, FC is assumed to have such accounting periods for the purposes of corporation tax as it would have had if it had carried on a trade in the United Kingdom through a permanent establishment in the United Kingdom by reason of the activity of the person mentioned in subsection (2)(b).
4
For the purposes of subsection (2)—
a
the reference in that subsection to activity of the person includes any limitation which has been imposed or agreed in respect of that activity;
b
where FC is a member of a partnership—
i
a trade carried on by the partnership is to be regarded as a trade carried on by FC, and
ii
supplies made by the partnership in the course of that trade are to be regarded as supplies made by FC in the course of that trade.
5
Where the designated HMRC officer has insufficient information to identify, in accordance with subsection (3), the accounting periods of FC, for the purposes of this Part the officer is to determine those accounting periods to the best of the officer’s information and belief.
6
Where a company (“C1”) does not have an actual accounting period which coincides with the accounting period of another company (“the relevant accounting period”) (whether by reason of having no accounting periods or otherwise), in this Part—
a
references to the corresponding accounting period of C1 in relation to the relevant accounting period are to the notional accounting period of C1 that would coincide with the relevant accounting period, and
b
such apportionments as are just and reasonable are to be made to determine the income or tax liability of C1 for that corresponding accounting period.
114Other defined terms in Part 3
1
In this Part—
“allowable expenses” means expenses of a kind in respect of which a deduction would be allowed for corporation tax purposes;
“the avoided PE” has the same meaning as in section 86;
“company” has the same meaning as in the Corporation Tax Acts (see section 1121 of CTA 2010);
“connected” is to be read in accordance with sections 1122 and 1123 of CTA 2010;
“designated HMRC officer” means an officer of Revenue and Customs who has been designated by the Commissioners for Her Majesty’s Revenue and Customs for the purposes of diverted profits tax;
“HMRC” means Her Majesty’s Revenue and Customs;
“non-UK resident” has the same meaning as in the Corporation Tax Acts (see section 1119 of CTA 2010);
“non-UK tax” has the meaning given by section 187 of CTA 2010;
“the notional PE profits” has the meaning given by section 88(5);
“partnership” includes—
a
a limited liability partnership to which section 1273 of CTA 2009 applies, and
b
an entity established under the law of a territory outside the United Kingdom of a similar character to a partnership,
and “member” of a partnership is to be read accordingly;
“permanent establishment”, in relation to a company, has the meaning given by Chapter 2 of Part 24 of CTA 2010 (and accordingly section 1141(1) of that Act has effect, for the purposes of this Part, as if the reference to the Corporation Tax Acts included a reference to this Part);
“small or medium-sized enterprise” means a small enterprise, or a medium-sized enterprise, within the meaning of section 172 of TIOPA 2010;
“the review period” has the meaning given by section 101;
“the tax reduction” has the meaning given by section 107(4);
“UK resident” has the same meaning as in the Corporation Tax Acts (see section 1119 of CTA 2010);
“UKPE” has the same meaning as in section 81.
2
For the purposes of this Part a tax may correspond to corporation tax even though—
a
it is chargeable under the law of a province, state or other part of a country, or
b
it is levied by or on behalf of a municipality or other local body.
Final provisions
115Application of other enactments to diverted profits tax
1
In section 206(3) of FA 2013 (taxes to which the general anti-abuse rule applies), after paragraph (d) insert—
da
diverted profits tax,
2
In paragraph 7 of Schedule 6 to FA 2010 (enactments to which definition of “charity” in Part 1 of that Schedule applies) omit the “and” after paragraph (h) and after paragraph (i) insert
, and
j
diverted profits tax.
3
In section 1139 of CTA 2010 (definition of “tax advantage” for the purposes of provisions of the Corporation Tax Acts which apply this section), in subsection (2), omit the “or” at the end of paragraph (da) and after paragraph (e) insert
, or
f
the avoidance or reduction of a charge to diverted profits tax.
4
In section 178 of FA 1989 (setting rates of interest), in subsection (2), omit the “and” before paragraph (u) and after that paragraph insert
, and
v
section 79 of FA 2015.
5
In section 1 of the Provisional Collection of Taxes Act 1968 (temporary statutory effect of House of Commons resolutions affecting income tax, purchase tax or customs or excise duties), in subsection (1), after “the bank levy,” insert “diverted profits tax,”.
116Commencement and transitional provision
1
This Part has effect in relation to accounting periods beginning on or after 1 April 2015.
2
For the purposes of this Part, if an accounting period of a company begins before and ends on or after 1 April 2015 (“the straddling period”)—
a
so much of that accounting period as falls before 1 April 2015 and so much of it as falls on or after that date are treated as separate accounting periods, and
b
where it is necessary to apportion amounts for the straddling period to the different parts of that period, that apportionment is to be made on a just and reasonable basis.
3
For the purposes of any accounting period which ends on or before 31 March 2016, section 92 has effect as if in subsection (2)(b) of that section the reference to 3 months were a reference to 6 months.
4
This Part does not apply in relation to any profits arising to a Lloyd’s corporate member which are—
a
mentioned in section 220(2) of FA 1994 (Lloyd’s underwriters: accounting period in which certain profits or losses arise), and
b
declared in the calendar year 2015 or a later calendar year,
to the extent that those profits are referable, on a just and reasonable basis, to times before 1 April 2015.
5
In subsection (4) “Lloyd’s corporate member” means a body corporate which is a member of Lloyd’s and is or has been an underwriting member.
PART 4Other provisions
Anti-avoidance
117Disclosure of tax avoidance schemes
Schedule 17 contains amendments relating to the disclosure of tax avoidance schemes.
118Accelerated payments and group relief
Schedule 18 contains provision about the relationship between accelerated payments and group relief.
119Promoters of tax avoidance schemes
Schedule 19 contains provision about promoters of tax avoidance schemes.
120Penalties in connection with offshore matters and offshore transfers
1
Schedule 20 contains provisions amending—
a
Schedule 24 to FA 2007 (penalties for errors),
b
Schedule 41 to FA 2008 (penalties for failure to notify), and
c
Schedule 55 to FA 2009 (penalties for failure to make returns etc).
2
That Schedule comes into force on such day as the Treasury may by order appoint.
3
An order under subsection (2)—
a
may commence a provision generally or only for specified purposes, and
b
may appoint different days for different provisions or for different purposes.
4
The power to make an order under this section is exercisable by statutory instrument.
121Penalties in connection with offshore asset moves
Schedule 21 contains provision for imposing an additional penalty in cases where—
a
a person is liable for a penalty for a failure to comply with an obligation or provide a document, or for providing an inaccurate document, relating to income tax, capital gains tax or inheritance tax, and
b
there is a related transfer of, or change in the ownership arrangements for, an asset situated or held outside the United Kingdom.
Government stock
124Redemption of undated government stocks
1
The Treasury may redeem at par any stock—
a
which is described in Schedule 1 to the National Debt Act 1870, or
b
to which that Act applies by virtue of section 1(5) of the National Debt (Conversion of Stock) Act 1884 or section 2(5) of the National Debt (Conversion) Act 1888.
2
The Treasury must give at least 3 months’ notice in the London Gazette of their intention to redeem any stock under this section.
3
The sums required to redeem the stock are charged on the National Loans Fund, with recourse to the Consolidated Fund (and section 22(2) of the National Loans Act 1968 applies for the purposes of this section as if this section were contained in that Act).
4
The following do not apply in relation to a redemption under this section—
a
in section 5 of the National Debt Act 1870, the words from “All the annuities” to the end,
b
section 1(2) and (3) of the National Debt (Conversion of Stock) Act 1884, and
c
section 2(2) of the National Debt (Conversion) Act 1888.
5
The following are repealed—
a
section 19 of the Revenue, Friendly Societies, and National Debt Act 1882,
b
the National Debt (Conversion of Stock) Act 1884, and
c
the National Debt (Conversion) Act 1888.
6
Subsection (5) comes into force on such day as the Treasury may by regulations made by statutory instrument appoint (and the regulations may appoint different days for different paragraphs of that subsection).
7
The other provisions of this section come into force on the day on which this Act is passed.
PART 5Final provisions
125Commencement orders and regulations
1
In section 287(4) of TCGA 1992 (exceptions from negative resolution procedure), for paragraph (b) substitute—
b
if the order or regulations provide for any provision of an enactment relating to the taxation of chargeable gains to come into force or have effect in accordance with the order or regulations.
2
In section 1014(6) of ITA 2007 (exceptions from negative resolution procedure), for paragraph (b) substitute—
b
if the order or regulations provide for any provision of the Income Tax Acts to come into force or have effect in accordance with the order or regulations,
3
In section 1171(6) of CTA 2010 (exceptions from negative resolution procedure), for paragraph (b) substitute—
b
if the order or regulations provide for any provision of the Corporation Tax Acts to come into force or have effect in accordance with the order or regulations.
4
The amendments made by this section have effect only in relation to powers conferred after this Act is passed.
126Interpretation
1
In this Act—
“ALDA 1979” means the Alcoholic Liquor Duties Act 1979,
“CAA 2001” means the Capital Allowances Act 2001,
“CTA 2009” means the Corporation Tax Act 2009,
“CTA 2010” means the Corporation Tax Act 2010,
“IHTA 1984” means the Inheritance Tax Act 1984,
“ITA 2007” means the Income Tax Act 2007,
“ITEPA 2003” means the Income Tax (Earnings and Pensions) Act 2003,
“ITTOIA 2005” means the Income Tax (Trading and Other Income) Act 2005,
“OTA 1975” means the Oil Taxation Act 1975,
“TCGA 1992” means the Taxation of Chargeable Gains Act 1992,
“TIOPA 2010” means the Taxation (International and Other Provisions) Act 2010,
“TMA 1970” means the Taxes Management Act 1970,
“TPDA 1979” means the Tobacco Products Duty Act 1979,
“VATA 1994” means the Value Added Tax Act 1994, and
“VERA 1994” means the Vehicle Excise and Registration Act 1994.
2
In this Act “FA”, followed by a year, means the Finance Act of that year.
127Short title
This Act may be cited as the Finance Act 2015.
SCHEDULES
SCHEDULE 1Extension of benefits code except in relation to certain ministers of religion
PART 1Amendments of ITEPA 2003
1
ITEPA 2003 is amended as follows.
2
In section 7 (meaning of “employment income”, “general earnings” and “specific employment income”), in subsection (5)(b), for “11” substitute “10”.
3
In section 17 (UK resident employees: treatment of earnings for year in which employment not held), in subsection (4), for “11” substitute “10”.
4
In section 30 (remittance basis and non-UK resident employees: treatment of earnings for year in which employment not held), in subsection (4), for “11” substitute “10”.
5
1
Section 63 (the benefits code) is amended as follows.
2
In subsection (1)—
a
at the end of the entry relating to Chapter 7 insert “and”, and
b
omit the entry relating to Chapter 11 and the “and” before it.
3
Omit subsections (2) to (4).
6
In section 66 (meaning of “employment” and related expressions), after subsection (4) insert—
5
In the benefits code “lower-paid employment as a minister of religion” has the same meaning as in Part 4 (see section 290D).
7
In section 148 (reduction of cash equivalent where car is shared), omit subsection (3).
8
In section 157 (reduction of cash equivalent where van is shared), omit subsection (3).
9
1
Section 169 (car available to more than one family member etc employed by same employer) is amended as follows.
2
For subsection (2)(b) substitute—
b
M’s employment is lower-paid employment as a minister of religion.
3
Omit subsections (3) and (4).
10
1
Section 169A (van available to more than one family member etc employed by same employer) is amended as follows.
2
For subsection (2)(b) substitute—
b
M’s employment is lower-paid employment as a minister of religion.
3
Omit subsections (3) and (4).
11
In section 184 (interest treated as paid), in subsection (3), for the words following “any of” substitute “the following Chapters of this Part—
Chapter 3 (taxable benefits: expenses payments);
Chapter 6 (taxable benefits: cars, vans and related benefits);
Chapter 10 (taxable benefits: residual liability to charge).”
12
1
Section 188 (loan released or written off: amount treated as earnings) is amended as follows.
2
In subsection (2), for “an excluded employment”, in each place, substitute “lower-paid employment as a minister of religion”.
3
In subsection (3)(a), for “excluded employment” substitute “lower-paid employment as a minister of religion”.
13
In section 228 (effect of exemptions in Part 4 on liability under provisions outside Part 2), in subsection (2)(d), for “290 and” substitute “290, 290C to”.
14
1
Section 239 (payments and benefits connected with taxable cars and vans and exempt heavy goods vehicles) is amended as follows.
2
In subsection (8), for “excluded employment” substitute “lower-paid employment as a minister of religion (see section 290D)”.
3
Omit subsection (9).
15
In section 266 (exemption of non-cash vouchers for exempt benefits), in subsection (5), for “excluded employment” substitute “lower-paid employment as a minister of religion”.
16
In section 267 (exemption of credit-tokens used for exempt benefits), in subsection (1)(b), for “excluded employment” substitute “lower-paid employment as a minister of religion”.
17
In section 269 (exemption where benefits or money obtained in connection with taxable car or van or exempt heavy goods vehicle), in subsection (4)(b), for “excluded employment” substitute “lower-paid employment as a minister of religion”.
18
In section 290 (accommodation benefits of ministers of religion), in subsection (2), for “excluded employment” substitute “lower-paid employment as a minister of religion (see section 290D)”.
19
In section 290A (accommodation outgoings of ministers of religion)—
a
in subsection (1), for “a religious denomination” substitute “religion”,
b
in subsection (3), omit the definition of “lower-paid employment”, and
c
in the heading of the section, after “outgoings of” insert “lower-paid”.
20
In section 290B (allowances paid to ministers of religion in respect of accommodation outgoings)—
a
in subsection (1), for “a religious denomination” substitute “religion”,
b
in subsection (3), for “and “lower-paid employment” have the same meanings” substitute “has the same meaning”, and
c
in the heading of the section, after “to” insert “lower-paid”.
21
1
Part 2 of Schedule 1 (index of defined expressions) is amended as follows.
2
Omit both entries relating to “excluded employment” and the entry relating to “lower-paid employment”.
3
At the appropriate place insert—
lower-paid employment as a minister of religion (in the benefits code)
section 66(5)
lower-paid employment as a minister of religion (in Part 4)
section 290D
22
1
Schedule 7 (transitionals and savings) is amended as follows.
2
In paragraph 17 (taxable benefits: benefits code)—
a
in sub-paragraph (2), for “the Chapters” to “lower-paid employments)” substitute “Chapters 3, 6, 7 and 10 of the benefits code (provisions not applicable before the tax year 2016-17 to lower-paid employments)”, and
b
omit sub-paragraph (4).
3
In paragraph 27(3) (loans released or written off)—
a
in paragraph (a), for ““not an excluded employment”” substitute ““not lower-paid employment as a minister of religion””;
b
in paragraph (b), for ““excluded employment”” substitute ““lower-paid employment as a minister of religion””.
PART 2Amendments of other enactments
23
1
The Social Security Contributions and Benefits Act 1992 is amended as follows.
2
In section 10 (Class 1A contributions: benefits in kind etc), in subsection (1)(b)(ii), for “an excluded employment” substitute “lower-paid employment as a minister of religion”.
3
In section 10ZB (non-cash vouchers provided by third parties), in subsection (2)—
a
in paragraph (a), for “an excluded employment for the purposes of the benefits code” substitute “lower-paid employment as a minister of religion”, and
b
in paragraph (b) and in the words following that paragraph, for “an excluded employment” substitute “lower-paid employment as a minister of religion”.
4
In section 122 (interpretation of Parts 1 to 6), in subsection (1)—
a
omit the entry relating to “excluded employment”, and
b
at the appropriate place insert—
“lower-paid employment as a minister of religion” has the meaning given by section 290D of ITEPA 2003;
24
1
The Social Security Contributions and Benefits (Northern Ireland) Act 1992 is amended as follows.
2
In section 10 (Class 1A contributions: benefits in kind etc), in subsection (1)(b)(ii), for “an excluded employment” substitute “lower-paid employment as a minister of religion”.
3
In section 10ZB (non-cash vouchers provided by third parties), in subsection (2)—
a
in paragraph (a), for “an excluded employment for the purposes of the benefits code” substitute “lower-paid employment as a minister of religion”, and
b
in paragraph (b) and in the words following that paragraph, for “an excluded employment” substitute “lower-paid employment as a minister of religion”.
4
In section 121 (interpretation of Parts 1 to 6), in subsection (1)—
a
omit the entry relating to “excluded employment”, and
b
at the appropriate place insert—
“lower-paid employment as a minister of religion” has the meaning given by section 290D of ITEPA 2003;
25
1
Section 173 of FA 2004 (provision of benefits by registered pension scheme) is amended as follows.
2
In subsection (2), for “an excluded employment” substitute “lower-paid employment as a minister of religion”.
3
In subsection (3)—
a
in the opening words, for “an excluded employment” substitute “an employment which is lower-paid employment as a minister of religion”, and
b
in paragraph (a), for “an excluded employment” substitute “lower-paid employment as a minister of religion”.
4
In subsection (6), for “an excluded employment” substitute “lower-paid employment as a minister of religion”.
5
In subsection (7), for “an excluded employment” substitute “an employment which is lower-paid employment as a minister of religion”.
6
In subsection (10), for the definition of “excluded employment” substitute—
“lower-paid employment as a minister of religion” has the meaning given by section 290D of that Act,
26
In CTA 2010, in section 1065 (exception for benefits treated as employment income etc), in the first column of the table, for the words from “in section 216” to “lower-paid employment)” substitute “in section 290C of that Act (provisions of benefits code not applicable to lower-paid ministers of religion)”.
SCHEDULE 2Restrictions applying to certain deductions made by banking companies
PART 1Main provisions
1
In CTA 2010, after Part 7 insert—
PART 7ABanking companies
CHAPTER 1Introduction
269AOverview of Part
1
This Part contains provision about banking companies.
2
Chapter 2 defines “banking company” and contains other definitions applying for the purposes of this Part.
3
Chapter 3 contains provision restricting the amount of certain deductions which a banking company may make in calculating its taxable total profits for an accounting period.
CHAPTER 2Key definitions
“Banking company”
269BMeaning of “banking company”
1
In this Part “banking company”, in relation to an accounting period, means—
a
a company which meets conditions A to E,
b
a company which—
i
meets conditions A and B, and
ii
is a member of a partnership which meets conditions C to E, or
c
a building society.
In subsections (4) to (6) “the relevant entity” means the company or the partnership (as the case may be).
2
Condition A is that at any time during the accounting period the company—
a
is a UK resident company, or
b
is a company which carries on a trade in the United Kingdom through a permanent establishment in the United Kingdom.
3
Condition B is that the company is not an excluded entity at any time during the accounting period (see section 269BA).
4
Condition C is that, at any time during the accounting period, the relevant entity is an authorised person for the purposes of FISMA 2000 (see section 31 of that Act).
5
Condition D is that, at any time during the accounting period—
a
the relevant entity’s activities include the relevant regulated activity described in the provision mentioned in section 269BB(a),
b
the relevant entity is both an IFPRU 730k firm and a full scope IFPRU investment firm, whose activities consist wholly or mainly of any of the relevant regulated activities described in the provisions mentioned in section 269BB(b) to (f), or
c
the relevant entity is both a BIPRU 730k firm and a full scope BIPRU investment firm, whose activities consist wholly or mainly of any of the relevant regulated activities described in the provisions mentioned in section 269BB(b) to (f).
6
Condition E is that the relevant entity carries on that relevant regulated activity, or those relevant regulated activities, wholly or mainly in the course of trade.
7
See also section 269BC (which contains definitions of terms used in this section).
269BAExcluded entities
1
For the purposes of section 269B “excluded entity” means any of the following entities—
a
an insurance company or an insurance special purpose vehicle;
b
an entity which is a member of a group and does not carry on any relevant regulated activities otherwise than on behalf of an insurance company or insurance special purpose vehicle which is a member of the group;
c
an entity which does not carry on any relevant regulated activities otherwise than as the manager of a pension scheme;
d
an investment trust;
e
an entity which does not carry on any relevant regulated activities other than asset management activities;
f
an exempt IFPRU commodities firm or exempt BIPRU commodities firm;
g
an entity which does not carry on any relevant regulated activities otherwise than for the purpose of trading in commodities or commodity derivatives;
h
an entity which does not carry on any relevant regulated activities otherwise than for the purpose of dealing in contracts for differences—
i
as principal with persons all or all but an insignificant proportion of whom are retail clients, or
ii
with another person to enable the entity or other person to deal in contracts for differences as principal with persons all or all but an insignificant proportion of whom are retail clients;
i
a society incorporated under the Friendly Societies Act 1992;
j
a society registered as a credit union under the Co-operative and Community Benefit Societies Act 2014 or the Credit Unions (Northern Ireland) Order 1985 (S.I. 1985/1205 (N.I. 12));
k
a building society.
2
For the meaning of “relevant regulated activity”, see section 269BB.
See also section 269BC (which contains definitions of other terms used in this section).
269BBRelevant regulated activities
In this Part “relevant regulated activity” means an activity which is a regulated activity for the purposes of FISMA 2000 by virtue of any of the following provisions of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544)—
a
article 5 (accepting deposits);
b
article 14 (dealing in investments as principal);
c
article 21 (dealing in investments as agent);
d
article 25 (arranging deals in investments);
e
article 40 (safeguarding and administering investments);
f
article 61 (entering into regulated mortgage contracts).
269BCBanking companies: supplementary definitions
1
This section contains definitions of terms used in sections 269B to 269BB (and this section).
2
“Asset management activities” means activities which consist (or, if they were carried on in the United Kingdom, would consist) of any or all of the following—
a
acting as the operator of a collective investment scheme (within the meaning of Part 17 of FISMA 2000: see sections 235 and 237 of that Act),
b
acting as a discretionary investment manager for clients none of which is a linked entity (see subsection (3)), and
c
acting as an authorised corporate director.
3
In subsection (2)(b) “linked entity”, in relation to an entity (“E”), means—
a
a member of the same group as E,
b
a company in which a company which is a member of the same group as E has a major interest (within the meaning of Part 5 of CTA 2009: see section 473 of that Act), or
c
a partnership the members of which include an entity—
i
which is a member of the same group as E, and
ii
whose share of the profits or losses of a trade carried on by the partnership for an accounting period of the partnership any part of which falls within the relevant accounting period is at least a 40% share (see Part 17 of CTA 2009 for provisions about shares of partnership profits and losses).
“The relevant accounting period” means the accounting period referred to in section 269B(3).
4
“Building society” has the same meaning as in the Building Societies Act 1986.
5
“Insurance company” and “insurance special purpose vehicle” have the meanings given by sections 65 and 139 of FA 2012 respectively.
6
“Partnership” includes—
a
a limited liability partnership, and
b
an entity established under the law of a territory outside the United Kingdom of a similar character to a partnership,
and “member”, in relation to a partnership, is to be read accordingly.
7
The terms in subsection (8)—
a
in relation to a PRA-authorised person, have the meaning given by the PRA Handbook;
b
in relation to any other authorised person, have the meaning given by the FCA Handbook.
8
The terms referred to in subsection (7) are—
“authorised corporate director”;
“BIPRU 730k firm”;
“contracts for differences”;
“discretionary investment manager”;
“exempt BIPRU commodities firm”;
“exempt IFPRU commodities firm”;
“full scope BIPRU investment firm”;
“full scope IFPRU investment firm”;
“IFPRU 730k firm”;
“pension scheme”;
“principal”;
“retail client”.
9
A company or partnership which would be a BIPRU 730k firm and a full scope BIPRU investment firm by virtue of activities carried on in the United Kingdom but for the fact that its registered office (or, if it does not have a registered office, its head office) is not in the United Kingdom is to be treated as being one for the purposes of section 269B.
10
A company or partnership which would be an IFPRU 730k firm and a full scope IFPRU investment firm by virtue of activities carried on in the United Kingdom but for the fact that its registered office (or, if it does not have a registered office, its head office) is not in the United Kingdom is to be treated as being one for the purposes of section 269B.
11
In subsection (7)—
“authorised person” and “PRA-authorised person” have the same meaning as in FISMA 2000;
“the FCA Handbook” means the Handbook made by the Financial Conduct Authority under FISMA 2000 (as that Handbook has effect from time to time);
“the PRA Handbook” means the Handbook made by the Prudential Regulation Authority under FISMA 2000 (as that Handbook has effect from time to time).
“Group”
269BDMeaning of “group”
1
In this Part “group” means a group for the purposes of—
a
those provisions of international accounting standards relating to the preparation of consolidated financial statements (whether or not the company that is the parent within the meaning of those provisions (“the parent company”) prepares financial statements under those standards), or
b
in a case where subsection (2) applies, those provisions of US GAAP which relate to the preparation of consolidated financial statements.
2
This subsection applies if—
a
as at the end of a period of account of the parent company—
i
the parent company is resident in a territory outside the United Kingdom,
ii
generally accepted accounting practice for companies resident in that territory is or includes US GAAP, and
iii
the parent company is a parent for the purposes of those provisions of US GAAP which relate to the preparation of consolidated financial statements (as well as being a parent for the purposes of the provisions mentioned in subsection (1)(a)), and
b
the parent company prepares consolidated financial statements for the period of account under US GAAP.
3
Accordingly, for the purposes of this Part a company is a member of a group if—
a
it is the parent company in relation to the group, or
b
it is a member of the group for the purposes of the provisions mentioned in subsection (1)(a) or (b) (as the case may be).
4
In this section “US GAAP” means United States Generally Accepted Accounting Principles.
5
Section 1127(1) and (3) (meaning of “generally accepted accounting practice”) do not apply for the purposes of this section.
Power to make consequential changes
269BEPower to make consequential changes
1
The Treasury may by regulations make such amendments of this Part as they consider appropriate in consequence of—
a
any change made to, or replacement of, the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544) (or any replacement);
b
any change made to, or replacement of, the FCA Handbook or the PRA Handbook (or any replacement);
c
any change in international accounting standards or US GAAP;
d
any regulatory requirement, or change to any regulatory requirement, imposed by EU legislation, or by or under any Act (whenever adopted, enacted or made).
2
In this section—
“the FCA Handbook” and “the PRA Handbook” have the meaning given by section 269BC(11);
“US GAAP” has the meaning given by section 269BD(4).
CHAPTER 3Restrictions on obtaining certain deductions
Introduction
269COverview of Chapter
1
This Chapter contains provision restricting the amount of certain deductions which a banking company may make in calculating its taxable total profits for an accounting period.
2
Sections 269CA to 269CD contain the restrictions.
3
Sections 269CE to 269CH contain exceptions to the restrictions.
4
Section 269CK contains anti-avoidance provision.
5
Sections 269CL to 269CN contain supplementary provision and definitions.
6
For the meaning of “banking company”, see section 269B.
Restrictions on obtaining certain deductions
269CARestriction on deductions for trading losses
1
This section has effect for determining the taxable total profits of a banking company for an accounting period.
2
Any deduction made by the company for the accounting period in respect of a pre-2015 carried-forward trading loss may not exceed 50% of the company’s relevant trading profits for the accounting period.
Section 269CD contains provision for calculating a company’s relevant trading profits for an accounting period (see step 5 in subsection (1) of that section).
3
But subsection (2) does not apply where the amount given by step 1 in section 269CD(1) is not greater than nil.
4
In this Chapter “pre-2015 carried-forward trading loss”, in relation to a company and an accounting period (“the current accounting period”), means a loss which—
a
was made in a trade of the company in an accounting period ending before 1 April 2015, and
b
is carried forward to the current accounting period under section 45 (carry forward of trade loss against subsequent trade profits).
5
See also sections 269CE to 269CH (losses to which restrictions do not apply).
269CBRestriction on deductions for non-trading deficits from loan relationships
1
This section has effect for determining the taxable total profits of a banking company for an accounting period.
2
Any deduction made by the company for the accounting period in respect of a pre-2015 carried-forward non-trading deficit may not exceed 50% of the company’s relevant non-trading profits for the accounting period.
Section 269CD contains provision for calculating a company’s relevant non-trading profits for an accounting period (see step 6 in subsection (1) of that section).
3
But subsection (2) does not apply where the amount given by step 1 in section 269CD(1) is not greater than nil.
4
In this Chapter “pre-2015 carried-forward non-trading deficit”, in relation to a company and an accounting period (“the current accounting period”), means a non-trading deficit—
a
which the company had from its loan relationships under section 301(6) of CTA 2009 for an accounting period ending before 1 April 2015, and
b
which is carried forward under section 457 of that Act (carry forward of deficits to accounting periods after deficit period) to be set off against non-trading profits of the current accounting period.
5
In subsection (4) “non-trading profits” has the same meaning as in section 457 of CTA 2009.
6
See also sections 269CE to 269CH (losses to which restrictions do not apply).
269CCRestriction on deductions for management expenses etc
1
This section has effect for determining the taxable total profits of a banking company for an accounting period.
2
Any deduction made by the company for the accounting period in respect of pre-2015 carried-forward management expenses may not exceed the relevant maximum (see subsection (7)).
3
But subsection (2) does not apply where the amount given by step 1 in section 269CD(1) is not greater than nil.
4
In this Chapter “pre-2015 carried-forward management expenses”, in relation to a company and an accounting period (“the current accounting period”), means amounts falling within subsection (5) or (6).
See also sections 269CE to 269CH (losses to which restrictions do not apply).
5
The amounts within this subsection are amounts—
a
which fall within subsection (2) of section 1223 of CTA 2009 (carrying forward expenses of management and other amounts),
b
which—
i
for the purposes of Chapter 2 of Part 16 of CTA 2009 are referable to an accounting period ending before 1 April 2015, or
ii
in the case of qualifying charitable donations, were made in such an accounting period, and
c
which are treated by section 1223(3) of CTA 2009 as expenses of management deductible for the current accounting period.
6
The amounts within this subsection are amounts of loss which—
a
were made in an accounting period ending before 1 April 2015, and
b
are treated by section 63(3) (carrying forward certain losses made by company with investment business which ceases to carry on UK property business) as expenses of management deductible for the current accounting period for the purposes of Chapter 2 of Part 16 of CTA 2009.
7
The relevant maximum is determined as follows—
Step 1
Calculate 50% of the company’s relevant profits for the accounting period.
Section 269CD contains provision for calculating a company’s relevant profits for an accounting period.
Step 2
Calculate the sum of any deductions made by the company for the accounting period which are—
a
deductions in respect of a pre-2015 carried-forward trading loss, or
b
deductions in respect of a pre-2015 carried-forward non-trading deficit.
Step 3
The relevant maximum is the difference between the amount given by step 1 and the amount given by step 2.
If the amount given by step 1 does not exceed the amount given by step 2, the relevant maximum is nil.
269CDRelevant profits
1
To determine a company’s relevant profits for an accounting period—
Step 1
Calculate the company’s total profits for the accounting period, ignoring any pre-2015 carried-forward trading losses or pre-2015 carried-forward non-trading deficits.
(If the amount given by this step is not greater than nil, no further steps are to be taken: see sections 269CA(3), 269CB(3) and 269CC(3).)
Step 2
Divide the amount given by step 1 into profits that are profits of a trade of the company (the company’s “trade profits”) and profits that are not profits of a trade of the company (the company’s “non-trading profits”).
Step 3
Calculate the proportion (“the trading proportion”) of the amount given by step 1 that consists of the company’s trade profits and the proportion (“the non-trading proportion”) of that amount that consists of its non-trading profits.
Step 4
Calculate the sum of any amounts which can be relieved against the company’s total profits for the accounting period (as calculated in accordance with step 1), ignoring the amount of any excluded deductions for the accounting period (see subsection (2)).
Step 5
Deduct the trading proportion of the amount given by step 4 from the company’s trade profits for the accounting period.
The amount given by this step is the company’s relevant trading profits for the accounting period.
If the amount given by this step is not greater than nil, the company’s relevant trading profits for the accounting period are nil.
Step 6
Deduct the non-trading proportion of the amount given by step 4 from the company’s non-trading profits for the accounting period.
The amount given by this step is the company’s relevant non-trading profits for the accounting period.
If the amount given by this step is not greater than nil, the company’s relevant non-trading profits for the accounting period are nil.
Step 7
The company’s relevant profits for the accounting period are the sum of its relevant trading profits for the accounting period and its relevant non-trading profits for the accounting period.
2
The following are “excluded deductions” in relation to an accounting period (“the current accounting period”)—
a
a deduction made in respect of pre-2015 carried-forward management expenses;
b
a deduction for relief under section 37 (relief for trade losses against total profits) in relation to a loss made in an accounting period after the current accounting period;
c
a deduction for relief under section 260(3) of CAA 2001 (special leasing of plant or machinery: carry-back of excess allowances) in relation to capital allowances for an accounting period after the current accounting period;
d
a deduction for relief under section 459 of CTA 2009 (non-trading deficits from loan relationships) in relation to a deficit for a deficit period after the current accounting period.
Losses to which restrictions do not apply
269CELosses arising before company began banking activity
1
In this section “the first banking accounting period”, in relation to a company, means the accounting period in which the company first begins to carry on a relevant regulated activity.
2
References in this Chapter to a pre-2015 carried-forward trading loss do not include a loss which was made in a trade of a company in an accounting period ending before the first banking accounting period.
3
References in this Chapter to a pre-2015 carried-forward non-trading deficit do not include a non-trading deficit which a company had from its loan relationships under section 301(6) of CTA 2009 for an accounting period ending before the first banking accounting period.
4
References in this Chapter to pre-2015 carried-forward management expenses, in relation to a company, do not include—
a
any amounts falling within section 269CC(5) which—
i
for the purposes of Chapter 2 of Part 16 of CTA 2009 are referable to an accounting period ending before the first banking accounting period, or
ii
in the case of qualifying charitable donations, were made in an accounting period ending before the first banking accounting period, or
b
any amounts of loss falling within section 269CC(6) which were made in an accounting period ending before the first banking accounting period.
5
Section 269CL contains provision for determining when a company first begins to carry on a relevant regulated activity.
269CFLosses arising in company’s start-up period
1
References in this Chapter to a pre-2015 carried-forward trading loss do not include a loss which was made in a trade of a company in an accounting period ending in the company’s start-up period.
2
References in this Chapter to a pre-2015 carried-forward non-trading deficit do not include a non-trading deficit which a company had from its loan relationships under section 301(6) of CTA 2009 for an accounting period ending in the company’s start-up period.
3
References in this Chapter to pre-2015 carried-forward management expenses, in relation to a company, do not include—
a
any amounts falling within section 269CC(5) which—
i
for the purposes of Chapter 2 of Part 16 of CTA 2009 are referable to an accounting period ending in the company’s start-up period, or
ii
in the case of qualifying charitable donations, were made in such an accounting period, or
b
any amounts of loss falling within section 269CC(6) which were made in an accounting period ending in the company’s start-up period.
4
For the purposes of this Chapter any amounts which, by virtue of subsections (1) to (3), are not relevant carried-forward losses of a company are to be regarded as having been taken into account in determining the taxable total profits of the company for accounting periods ending before 1 April 2015 before any amounts which are relevant carried-forward losses of the company.
5
Subsection (6) applies where a company has an accounting period (“the straddling period”) beginning before, and ending after, the last day of its start-up period.
6
For the purposes of this section—
a
so much of the straddling period as falls within the start-up period, and so much of the straddling period as falls outside the start-up period, are treated as separate accounting periods, and
b
any relevant carried-forward losses of the company for the straddling period are apportioned to the two separate accounting periods—
i
in accordance with section 1172 (time basis), or
ii
if that method would produce a result that is unjust or unreasonable, on a just and reasonable basis.
7
In subsection (6)(b) the reference to any relevant carried-forward losses of the company “for” the straddling period is a reference to—
a
any pre-2015 carried-forward trading loss which was made in a trade of the company in the straddling period,
b
any pre-2015 carried-forward non-trading deficit which the company had from its loan relationships for the straddling period, and
c
any pre-2015 carried-forward management expenses which are referable to, or were made in, the straddling period (as the case may be).
8
For provision about determining a company’s start-up period, see section 269CG.
269CGThe “start-up period”
1
In this Chapter the “start-up period”, in relation to a company (“company C”), means the period of 5 years beginning with the day on which company C first begins to carry on a relevant regulated activity (“the start-up day”).
This is subject to the following provisions of this section.
2
If on the start-up day—
a
company C is a member of a group,
b
there are one or more other members of the group that have carried on a relevant regulated activity while a member of the group, and
c
none of those members first began to carry on such an activity more than 5 years before the start-up day,
company C’s start-up period is the period beginning with the start-up day and ending with the relevant group period.
3
The “relevant group period”, in relation to a group, means the period of 5 years beginning with the earliest day on which any member of the group first began to carry on a relevant regulated activity.
4
If on the start-up day—
a
company C is a member of a group,
b
there are one or more other members of the group that have carried on a relevant regulated activity while a member of the group, and
c
any of those members first began to carry on such an activity more than 5 years before the start-up day,
company C does not have a start-up period.
5
This subsection applies if—
a
on a day falling within company C’s start-up period (“the relevant day”), company C becomes a member of a group,
b
one or more of the members of the group which on the relevant day carry on a relevant regulated activity first began to do so before the beginning of company C’s start-up period, and
c
the relevant regulated activities carried on by company C do not form a significant proportion of the relevant regulated activities carried on immediately after the relevant day by the members of the group as a whole.
6
Where subsection (5) applies, company C’s start-up period—
a
in the case where any of the members of the group first began to carry on a relevant regulated activity more than 5 years before the relevant day, ends immediately before the relevant day;
b
in any other case, ends with the relevant group period.
7
This subsection applies if—
a
on a day falling within company C’s start-up period (“the relevant day”), another company that carries on a relevant regulated activity (“the new member”) becomes a member of a group of which company C is a member,
b
the new member first began to carry on a relevant regulated activity before the beginning of company C’s start-up period, and
c
the relevant regulated activities carried on by the new member form a significant proportion of the relevant regulated activities carried on immediately after the relevant day by the members of the group as a whole.
8
Where subsection (7) applies, company C’s start-up period—
a
in the case where the new member first began to carry on a relevant regulated activity more than 5 years before the relevant day, ends immediately before the relevant day;
b
in any other case, ends with the relevant group period.
9
Any reference in this section to being, or becoming, a member of a group includes a reference to being, or becoming, a member of a partnership; and references to the “relevant group period” are to be read accordingly.
10
Section 269CL contains provision for determining when a company first begins to carry on a relevant regulated activity.
269CHLosses covered by carried-forward loss allowance
1
This section applies to a banking company if—
a
it is a building society, or
b
an amount of carried-forward loss allowance is allocated to the company by a building society in accordance with section 269CI or 269CJ.
2
If a banking company to which this section applies has an amount of carried-forward loss allowance (see subsection (5)), the company may designate as unrestricted losses any losses which, in relation to any accounting period, would (in the absence of this section) be relevant carried-forward losses.
3
A loss designated under this section as an unrestricted loss is to be treated for the purposes of this Chapter as if it were not a relevant carried-forward loss.
4
The amount of losses which a company may designate at any time must not exceed the amount of carried-forward loss allowance which the company has at that time.
5
The amount of carried-forward loss allowance which a company has at any time is the difference between the company’s maximum available carried-forward loss allowance and the total amount of losses designated by the company under this section before that time.
6
The “maximum available carried-forward loss allowance” is—
a
in the case of a building society which has not made an allocation under section 269CI, £25,000,000;
b
in the case of a building society which has made an allocation under section 269CI, the amount given by—
(A−B)+C
where—
A is £25,000,000,
B is the sum of—
a
any amounts which it has allocated to another company under section 269CI, and
b
any amounts allocated to another company under section 269CJ which immediately before the allocation were amounts of carried-forward loss allowance which the building society had, and
C is the sum of any amounts allocated to the building society under section 269CJ;
c
in the case of any other company, the total amount of carried-forward loss allowance allocated to the company under section 269CI or 269CJ.
7
References in this Chapter to an amount of carried-forward loss allowance allocated to a company are references to an amount allocated to the company under section 269CI or 269CJ.
8
For the meaning of “relevant carried-forward loss”, see section 269CN.
9
For information about the procedure for making a designation under this section, see Schedule 18 to FA 1998, in particular Part 9E of that Schedule.
269CIAllocation of carried-forward loss allowance within a group
1
This section applies where a building society—
a
is a member of a group, and
b
has an amount of carried-forward loss allowance (see section 269CH(5)).
2
The building society may allocate some or all of that amount of carried-forward loss allowance to any other member of the group which is a banking company.
3
Where a building society makes an allocation under subsection (2), it must give HMRC a statement (a “statement of allocation”) which specifies—
a
the amount of carried-forward loss allowance which the building society had immediately before it made the allocation,
b
the companies (“the relevant companies”) to which an amount of carried-forward loss allowance has been allocated,
c
the amount of carried-forward loss allowance allocated to each of the relevant companies, and
d
the total amount of carried-forward loss allowance allocated by the building society.
4
The statement of allocation must be given to HMRC on or before—
a
the first day after the allocation on which the building society, or any of the relevant companies, delivers a company tax return which includes a designation made under section 269CH, or
b
if earlier, the first day after the allocation on which a company tax return of the building society, or any of the relevant companies, is amended so as to include such a designation.
This is subject to subsection (5).
5
An officer of Revenue and Customs may provide that the statement of allocation may be given to HMRC on or before a later day specified by the officer.
6
An allocation made under subsection (2) is not effective unless the requirements of this section have been complied with.
7
A statement of allocation that has been given to HMRC under this section may not be amended or withdrawn.
This is subject to section 269CJ.
269CJRe-allocation of carried-forward loss allowance
1
This section applies where—
a
a building society is a member of a group,
b
the building society has given HMRC a statement of allocation in accordance with section 269CI,
c
the building society, or any other member of the group that is a banking company, (the “designating company”) would, if it had an amount (or an additional amount) of carried-forward loss allowance, be able to designate an amount of losses under section 269CH equal to that amount, and
d
that amount is greater than the amount of carried-forward loss allowance which the building society could allocate under section 269CI.
2
In this section the “available carried-forward loss allowance” means the total of any amounts of carried-forward loss allowance which any member of the group, other than the designating company, has (see section 269CH(5)).
3
The building society may—
a
allocate some or all of the available carried-forward loss allowance to the designating company, and
b
provide that, to the extent that any of the amount allocated to the designating company under this subsection is an amount of carried-forward loss allowance which, immediately before the allocation, was an amount allocated to another company, that amount is no longer allocated to that other company.
4
Where a building society makes an allocation under subsection (3), it must give HMRC a statement (a “revised statement of allocation”) which specifies—
a
the amount of the available carried-forward loss allowance immediately before the allocation,
b
the companies which had an amount of carried-forward loss allowance immediately before the allocation, and the amount of carried-forward loss allowance which each of those companies had at that time, and
c
the companies which have an amount of carried-forward loss allowance immediately after the allocation (“the relevant companies”), and the amount of carried-forward loss allowance which each of those companies has.
5
The revised statement of allocation must be given to HMRC on or before—
a
the first day after the allocation on which any of the relevant companies delivers a company tax return which includes a designation made under section 269CH, or
b
if earlier, the first day after the allocation on which a company tax return of any of the relevant companies is amended so as to include such a designation.
This is subject to subsection (6).
6
An officer of Revenue and Customs may provide that the revised statement of allocation may be given to HMRC on or before a later day specified by the officer.
7
An allocation made under subsection (3) is not effective unless the requirements of this section have been complied with.
8
Except as provided for by this section, a revised statement of allocation that has been given to HMRC under this section may not be amended or withdrawn.
Anti-avoidance
269CKProfits arising from tax arrangements to be disregarded
1
This section applies if conditions A to C are met.
2
Condition A is that—
a
the amount given by step 1 in section 269CD(1) as the total profits of a banking company for an accounting period includes profits which arise to the banking company as a result of any arrangements (“the tax arrangements”), and
b
in the absence of those profits (“the additional profits”) any deduction which the banking company would be entitled to make for the accounting period in respect of any relevant carried-forward losses would be reduced.
3
Condition B is that the main purpose, or one of the main purposes, of the tax arrangements is to secure a relevant corporation tax advantage—
a
for the banking company, or
b
if there are any companies connected with that company, for the banking company and those connected companies (taken together).
4
In this section “relevant corporation tax advantage” means a corporation tax advantage involving—
a
the additional profits, and
b
the deduction of any relevant carried-forward losses from those profits.
5
Condition C is that, at the time when the tax arrangements were entered into, it would have been reasonable to assume that the tax value of the tax arrangements would be greater than the non-tax value of the tax arrangements.
6
The “tax value” of the tax arrangements is the total value of—
a
the relevant corporation tax advantage, and
b
any other economic benefits derived by—
i
the banking company, or
ii
if there are any companies connected with that company, the banking company and those connected companies (taken together),
as a result of securing the relevant corporation tax advantage.
7
The “non-tax value” of the tax arrangements is the total value of any economic benefits, other than those falling within subsection (6)(a) or (b), derived by—
a
the banking company, or
b
if there are any companies connected with that company, the banking company and those connected companies (taken together),
as a result of the tax arrangements.
8
If this section applies, the additional profits are not to be taken into account in calculating the banking company’s relevant profits for the accounting period (see section 269CD).
9
In this section—
“arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable);
“corporation tax advantage” means—
a
a relief from corporation tax or increased relief from corporation tax,
b
a repayment of corporation tax or increased repayment of corporation tax,
c
the avoidance or reduction of a charge to corporation tax or an assessment to corporation tax,
d
the avoidance of a possible assessment to corporation tax, or
e
the deferral of a payment of corporation tax or advancement of a repayment of corporation tax.
Supplementary
269CLWhen a company first begins to carry on relevant regulated activities
1
For the purposes of this Chapter, a company first begins to carry on a relevant regulated activity on a particular day if the company—
a
begins to carry on a relevant regulated activity on that day, and
b
has not carried on any relevant regulated activity before that day.
This is subject to subsection (2).
2
Where—
a
there is a transfer of a trade, and
b
immediately before the transfer the predecessor carried on a relevant regulated activity,
the successor is to be treated as having first begun to carry on a relevant regulated activity on the day on which the predecessor first began to carry on such an activity.
3
Section 940B (meaning of “transfer of a trade” etc) applies for the purposes of this section as it applies for the purposes of Chapter 1 of Part 22.
269CMJoint venture companies
1
Where a company (“the joint venturer”), together with one or more other persons, jointly controls another company that is a joint venture (“the joint venture company”), the joint venture company is to be treated for the purposes of this Chapter as a member of any group of which the joint venturer is a member.
2
References in subsection (1) to a joint venture and to jointly controlling a company that is a joint venture are to be read in accordance with those provisions of international accounting standards which relate to joint ventures.
269CNOther definitions
In this Chapter—
“banking company” has the meaning given by section 269B;
“building society” has the same meaning as in the Building Societies Act 1986;
“company tax return” has the same meaning as in Schedule 18 to FA 1998;
“group” has the meaning given by section 269BD;
“HMRC” means Her Majesty’s Revenue and Customs;
“partnership” includes—
a
a limited liability partnership, and
b
an entity established under the law of a territory outside the United Kingdom of a similar character to a partnership,
and “member”, in relation to a partnership, is to be read accordingly;
“pre-2015 carried-forward management expenses” has the meaning given by section 269CC(4);
“pre-2015 carried-forward non-trading deficit” has the meaning given by section 269CB(4);
“pre-2015 carried-forward trading loss” has the meaning given by section 269CA(4);
“relevant carried-forward loss” means—
a
a pre-2015 carried-forward trading loss,
b
a pre-2015 carried-forward non-trading deficit, or
c
any pre-2015 carried-forward management expenses;
“relevant non-trading profits”, in relation to a company, means the amount given by step 6 in section 269CD(1);
“relevant profits”, in relation to a company, means the amount given by step 7 in section 269CD(1);
“relevant regulated activity” has the meaning given by section 269BB;
“relevant trading profits”, in relation to a company, means the amount given by step 5 in section 269CD(1);
“start-up period”, in relation to a company, has the meaning given by section 269CG.
PART 2Consequential amendments
2FA 1998
In Schedule 18 to FA 1998 (company tax returns, assessments and related matters), after Part 9D insert—
PART 9EDesignation of losses as unrestricted losses for the purposes of Chapter 3 of Part 7A of the Corporation Tax Act 2010
83YIntroduction
1
This Part of this Schedule applies to the designation of losses within sub-paragraph (2) as unrestricted losses by a banking company under section 269CH of the Corporation Tax Act 2010 (losses covered by carried-forward loss allowance).
2
The losses mentioned in sub-paragraph (1) are losses which, in relation to any accounting period, would (in the absence of that section) be relevant carried-forward losses.
3
Expressions used in this Part of this Schedule and in Chapter 3 of Part 7A of the Corporation Tax Act 2010 have the same meaning in this Part of this Schedule as they have in that Chapter.
83YADesignation to be made in company tax return
1
A designation to which this Part of this Schedule applies must be made by being included in the company’s tax return for the accounting period for which the company makes a deduction in respect of the losses.
2
It may be included in the return originally made or by amendment.
83YBIdentification of losses
Where a company designates any relevant carried-forward loss in a company tax return, the return must specify—
a
the amount of the loss, and
b
whether the loss is—
i
a pre-2015 carried-forward trading loss,
ii
a pre-2015 carried-forward non-trading deficit, or
iii
pre-2015 carried-forward management expenses.
83YCAmendment or withdrawal of designation
A designation to which this Part of this Schedule applies may be amended or withdrawn by the company only by amending its company tax return.
3CTA 2009
In section 1223 of CTA 2009 (carrying forward expenses of management and other amounts), in subsection (1)—
a
the words after “because” become paragraph (a), and
b
after that paragraph insert
, or
b
in the case of amounts falling within subsection (2)(c), section 269CC of CTA 2010 (restriction on deductions for management expenses) has effect for the accounting period.
CTA 2010
4
In section 1 of CTA 2010 (overview of Act), in subsection (3)—
a
for “Parts 8” substitute “Parts 7A”, and
b
before paragraph (a) insert—
za
banking companies (see Part 7A),
5
In Schedule 4 to CTA 2010 (index of defined expressions), at the appropriate place insert—
banking company (in Part 7A)
section 269B
building society (in Chapter 3 of Part 7A)
section 269CN
company tax return (in Chapter 3 of Part 7A)
section 269CN
group (in Part 7A)
section 269BD
HMRC (in Chapter 3 of Part 7A)
section 269CN
partnership (in Chapter 3 of Part 7A)
section 269CN
pre-2015 carried-forward management expenses (in Chapter 3 of Part 7A)
section 269CC(4)
pre-2015 carried-forward non-trading deficit (in Chapter 3 of Part 7A)
section 269CB(4)
pre-2015 carried-forward trading loss (in Chapter 3 of Part 7A)
section 269CA(4)
relevant carried-forward loss (in Chapter 3 of Part 7A)
section 269CN
relevant non-trading profits (in Chapter 3 of Part 7A)
section 269CN
relevant profits (in Chapter 3 of Part 7A)
section 269CN
relevant regulated activity (in Part 7A)
section 269BB
relevant trading profits (in Chapter 3 of Part 7A)
section 269CN
start-up period (in Chapter 3 of Part 7A)
section 269CG
6TIOPA 2010
1
In Part 9A of TIOPA 2010 (controlled foreign companies), in Chapter 21 (management), section 371UD (relief against sum charged) is amended as follows.
2
In subsection (2), after “relevant allowance” insert “(but see subsection (9))”.
3
At the end insert—
9
A company which is a banking company (within the meaning of Part 7A of CTA 2010) for the relevant corporation tax accounting period may not make a claim under subsection (2) in respect of a relevant allowance consisting of—
a
a pre-2015 carried-forward non-trading deficit (within the meaning of Chapter 3 of Part 7A of that Act), or
b
pre-2015 carried-forward management expenses (within the meaning of that Chapter).
PART 3Commencement and anti-forestalling provision
Commencement
7
1
The amendments made by paragraphs 1 to 5 of this Schedule have effect for the purposes of calculating the taxable total profits of companies for accounting periods beginning on or after 1 April 2015.
2
But section 269CK of CTA 2010 (inserted by this Schedule) does not have effect in relation to any arrangements made before 3 December 2014.
3
Sub-paragraph (4) applies where a company has an accounting period beginning before 1 April 2015 and ending on or after that date (“the straddling period”).
4
For the purposes of Chapter 3 of Part 7A of CTA 2010—
a
so much of the straddling period as falls before 1 April 2015, and so much of that period as falls on or after that date, are treated as separate accounting periods, and
b
the profits or losses of the company for the straddling period are apportioned to the two separate accounting periods—
i
in accordance with section 1172 of CTA 2010 (time basis), or
ii
if that method would produce a result that is unjust or unreasonable, on a just and reasonable basis.
8
1
The amendments made by paragraph 6 of this Schedule (and the amendments made by paragraphs 1 to 5, so far as relating to those amendments) have effect for accounting periods of CFCs beginning on or after 1 April 2015.
2
Sub-paragraph (3) applies where a CFC has an accounting period beginning before 1 April 2015 and ending on or after that date (“the straddling period”).
3
For the purposes of the amendments made by paragraph 6—
a
so much of the straddling period as falls before 1 April 2015, and so much of that period as falls on or after that date, are treated as separate accounting periods, and
b
any amount charged on a company in accordance with section 371BC of TIOPA 2010 in relation to the straddling period is apportioned to the two separate accounting periods—
i
on a time basis according to the respective lengths of the separate accounting periods, or
ii
if that method would produce a result that is unjust or unreasonable, on a just and reasonable basis.
4
In determining whether an amount falls within section 371UD(9)(a) or (b) of TIOPA 2010 (inserted by this Schedule), paragraph 7(3) and (4) applies as it applies for the purposes of Chapter 3 of Part 7A of CTA 2010.
5
In this paragraph “CFC” has the same meaning as in Part 9A of TIOPA 2010.
9Anti-forestalling provision
1
This sub-paragraph applies if—
a
for the purposes of corporation tax a banking company has profits (“pre-commencement profits”) for an accounting period ending before 1 April 2015,
b
in the absence of this paragraph the banking company would, for corporation tax purposes, be entitled to deduct from the pre-commencement profits for the accounting period an amount in respect of any relevant carried-forward losses,
c
the pre-commencement profits arise as a result of any arrangements entered into on or after 3 December 2014, and
d
the main purpose, or one of the main purposes, of the arrangements is to secure a corporation tax advantage as a result of the fact that Chapter 3 of Part 7A of CTA 2010 (inserted by this Schedule) is not to have effect for the accounting period for which the deduction would be made.
2
If sub-paragraph (1) applies, the banking company is not entitled to deduct from the pre-commencement profits any amount in respect of the relevant carried-forward losses.
3
Sub-paragraph (1) does not apply in relation to a banking company which falls within section 269B(5)(b) of CTA 2010 (inserted by this Schedule).
4
In this paragraph—
“arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable);
“corporation tax advantage” means—
a
a relief from corporation tax or increased relief from corporation tax,
b
a repayment of corporation tax or increased repayment of corporation tax,
c
the avoidance or reduction of a charge to corporation tax or an assessment to corporation tax,
d
the avoidance of a possible assessment to corporation tax, or
e
the deferral of a payment of corporation tax or advancement of a repayment of corporation tax.
5
Terms used in this paragraph and in Chapter 3 of Part 7A of CTA 2010 have the same meaning in this paragraph as in that Chapter; and, so far as necessary for the purposes of this sub-paragraph, that Part is to be treated as having come into force on the same day as this paragraph.
6
This paragraph is treated as having come into force on 3 December 2014.
7
Sub-paragraph (8) applies where a company has an accounting period beginning before 1 April 2015 and ending on or after that date (“the straddling period”).
8
For the purposes of this paragraph—
a
so much of the straddling period as falls before 1 April 2015, and so much of that period as falls on or after that date, are treated as separate accounting periods, and
b
the profits or losses of the company for the straddling period are apportioned to the two separate accounting periods—
i
in accordance with section 1172 of CTA 2010 (time basis), or
ii
if that method would produce a result that is unjust or unreasonable, on a just and reasonable basis.
SCHEDULE 3Tax avoidance involving carried-forward losses
PART 1Amendments of CTA 2010
1
In CTA 2010, after Part 14A insert—
PART 14BTax avoidance involving carried-forward losses
730EOverview
1
This Part makes provision restricting the circumstances in which a company may make a deduction in respect of a relevant carried-forward loss.
2
For the meaning of “relevant carried-forward loss”, see section 730F.
730FMeaning of “relevant carried-forward loss”
1
In this Part “relevant carried-forward loss” means any of the following—
a
a carried-forward trading loss (see subsection (2)),
b
a carried-forward non-trading deficit (see subsection (3)),
c
any carried-forward management expenses (see subsection (4)).
2
“Carried-forward trading loss”, in relation to a company and an accounting period, means a loss in a trade of the company which is carried forward from a previous accounting period under section 45 (carry forward of trade loss against subsequent trade profits).
3
“Carried-forward non-trading deficit”, in relation to a company and an accounting period, means a non-trading deficit which the company has from its loan relationships under section 301(6) of CTA 2009 and which is carried forward from a previous accounting period under section 457 of that Act (carry forward of deficits to accounting periods after deficit period).
4
“Carried-forward management expenses”, in relation to a company and an accounting period, means—
a
any amounts which—
i
fall within subsection (2) of section 1223 of CTA 2009 (carrying forward expenses of management and other amounts), and
ii
are treated by subsection (3) of that section as expenses of management deductible for the period, and
b
any amounts which are treated by section 63(3) (carrying forward certain losses made by company with investment business which ceases to carry on UK property business) as expenses of management deductible for the period for the purposes of Chapter 2 of Part 16 of CTA 2009.
730GDisallowance of deductions for relevant carried-forward losses
1
This section applies if conditions A to E are met.
2
Condition A is that—
a
for the purposes of corporation tax a company has profits (“relevant profits”) for an accounting period,
b
the relevant profits arise to the company as a result of any arrangements (“the tax arrangements”), and
c
in the absence of this section the company (“the relevant company”) would, for corporation tax purposes, be entitled to deduct from the relevant profits for the period an amount in respect of any relevant carried-forward losses.
3
Condition B is that—
a
the relevant company, or a company connected with that company, brings a deductible amount into account as a deduction for an accounting period, and
b
it is reasonable to assume that neither the company, nor any company connected with it, would have brought that amount into account as a deduction for that period but for the tax arrangements.
4
Condition C is that the main purpose, or one of the main purposes, of the tax arrangements is to secure a relevant corporation tax advantage—
a
for the relevant company, or
b
if there are any companies connected with that company, for the relevant company and those connected companies (taken together).
5
In this section “relevant corporation tax advantage” means a corporation tax advantage involving—
a
the deductible amount mentioned in subsection (3), and
b
the deduction of any relevant carried-forward losses from the relevant profits.
6
Condition D is that, at the time when the tax arrangements were entered into, it would have been reasonable to assume that the tax value of the tax arrangements would be greater than the non-tax value of the tax arrangements.
7
The “tax value” of the tax arrangements is the total value of—
a
the relevant corporation tax advantage, and
b
any other economic benefits derived by—
i
the relevant company, or
ii
if there are any companies connected with that company, the relevant company and those connected companies (taken together),
as a result of securing the relevant corporation tax advantage.
8
The “non-tax value” of the tax arrangements is the total value of any economic benefits, other than those falling within subsection (7)(a) or (b), derived by—
a
the relevant company, or
b
if there are any companies connected with that company, the relevant company and those connected companies (taken together),
as a result of the tax arrangements.
9
Condition E is that the tax arrangements are not arrangements in relation to which section 269CK (banking companies: profits arising from tax arrangements to be disregarded) applies.
10
If this section applies, the relevant company is not entitled to deduct from the relevant profits any amount in respect of the relevant carried-forward losses.
730HInterpretation of section 730G
1
In section 730G—
“arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable);
“corporation tax advantage” means—
a
a relief from corporation tax or increased relief from corporation tax,
b
a repayment of corporation tax or increased repayment of corporation tax,
c
the avoidance or reduction of a charge to corporation tax or an assessment to corporation tax,
d
the avoidance of a possible assessment to corporation tax, or
e
the deferral of a payment of corporation tax or advancement of a repayment of corporation tax;
“deductible amount” means—
a
an expense of a trade, other than an amount treated as such an expense by section 450(a) of CAA 2001 (research and development allowances treated as expenses in calculating profits of a trade),
b
an expense of a UK property business or an overseas property business,
c
an expense of management of a company’s investment business within the meaning of section 1219 of CTA 2009,
d
a non-trading debit within the meaning of Parts 5 and 6 of CTA 2009 (loan relationships and derivative contracts) (see section 301(2) of that Act), or
e
a non-trading debit within the meaning of Part 8 of CTA 2009 (intangible fixed assets) (see section 746 of that Act),
but does not include any amount that has been taken into account in determining RTWDV within the meaning of Chapter 16A of Part 2 of CAA 2001 (restrictions on allowance buying) (see section 212K of that Act);
“relevant carried-forward loss” has the meaning given by section 730F.
2
References in section 730G to bringing an amount into account “as a deduction” in any period are to bringing it into account as a deduction in that period—
a
in calculating profits, losses or other amounts for corporation tax purposes, or
b
from profits or other amounts chargeable to corporation tax.
2
In section 1 of CTA 2010 (overview of Act), in subsection (4), after paragraph (aa) insert—
ab
carried-forward losses (see Part 14B),
3
In Schedule 4 to CTA 2010 (index of defined expressions), at the appropriate place insert—
relevant carried-forward loss (in Part 14B)
section 730F
PART 2Commencement
4
1
The amendments made by this Schedule have effect for the purposes of calculating the taxable total profits of companies for accounting periods beginning on or after 18 March 2015.
2
Sub-paragraph (3) applies where a company has an accounting period beginning before 18 March 2015 and ending on or after that date (“the straddling period”).
3
For the purposes of Part 14B of CTA 2010—
a
so much of the straddling period as falls before 18 March 2015, and so much of that period as falls on or after that date, are treated as separate accounting periods, and
b
any amounts brought into account for the purposes of calculating the taxable total profits of the company for the straddling period are apportioned to the two separate accounting periods—
i
in accordance with section 1172 of CTA 2010 (time basis), or
ii
if that method would produce a result that is unjust or unreasonable, on a just and reasonable basis.
SCHEDULE 4Pension flexibility: annuities etc
PART 1Death benefits for nominees, successors and dependants
1Introductory
Part 4 of FA 2004 is amended as follows.
2Nominees’ annuities and successors’ annuities to be authorised payments
1
Section 167(1) (the pension death benefit rules) is amended as follows.
2
In pension death benefit rule 3A (payments that may, by way of exception, be made to a nominee) after “other than” insert “a nominees’ annuity in respect of a money purchase arrangement or”.
3
In pension death benefit rule 3B (payments that may, by way of exception, be made to a successor) after “other than” insert “a successors’ annuity in respect of a money purchase arrangement or”.
3Nominees’ annuities and successors’ annuities: definitions
1
Part 2 of Schedule 28 (interpretation of the pension death benefit rules) is amended as follows.
2
After paragraph 27A insert—
27AANominees’ annuity
1
For the purposes of this Part an annuity payable to a nominee is a nominees’ annuity if—
a
either—
i
it is purchased together with a lifetime annuity payable to the member and the member becomes entitled to that lifetime annuity on or after 6 April 2015, or
ii
it is purchased after the member’s death, the member dies on or after 3 December 2014 and the nominee becomes entitled to the annuity on or after 6 April 2015,
b
it is payable by an insurance company, and
c
it is payable until the nominee’s death or until the earliest of the nominee’s marrying, entering into a civil partnership or dying.
2
For the purposes of sub-paragraph (1)(a) a nominees’ annuity is purchased together with a lifetime annuity if the nominees’ annuity is related to the lifetime annuity.
3
The Commissioners for Her Majesty’s Revenue and Customs may by regulations make provision in relation to cases in which a nominees’ annuity payable to a person (“the original nominees’ annuity”) ceases to be payable and in consequence of that—
a
sums or assets (or both) are transferred from the insurance company to another insurance company and are applied—
i
towards the provision of another nominees’ annuity (a “new nominees’ annuity”) by the other insurance company, or
ii
otherwise, or
b
sums or assets are transferred to the relevant registered pension scheme.
4
The regulations may provide that—
a
in a case where a new nominees’ annuity becomes payable, the new nominees’ annuity is to be treated, to such extent as is prescribed by the regulations and for such of the purposes of this Part as are so prescribed, as if it were the original nominees’ annuity, and
b
in any other case, the relevant registered pension scheme is to be treated as making an unauthorised payment in respect of the member of an amount equal to the aggregate of the sums, and the market value of the assets, transferred.
5
For the purposes of sub-paragraphs (3) and (4) a registered pension scheme is the relevant registered pension scheme if the original nominees’ annuity was acquired using sums or assets held for the purposes of the pension scheme.
3
After paragraph 27F insert—
27FASuccessors’ annuity
1
For the purposes of this Part an annuity payable to a successor is a successors’ annuity if—
a
the successor becomes entitled to it on or after 6 April 2015,
b
it is payable by an insurance company,
c
it is payable until the successor’s death or until the earliest of the successor’s marrying, entering into a civil partnership or dying,
d
it is purchased after the death of a dependant, nominee or successor of the member (“the beneficiary”),
e
it is purchased using undrawn funds, and
f
the beneficiary dies on or after 3 December 2014.
2
For the purposes of sub-paragraph (1)(e), sums or assets held for the purposes of an arrangement after the beneficiary’s death are undrawn funds if—
a
immediately before the beneficiary’s death, they were held for the purposes of the arrangement and, as the case may be, represented (alone or with other sums or assets) the beneficiary’s—
i
dependant’s flexi-access drawdown fund,
ii
dependant’s drawdown pension fund,
iii
nominee’s flexi-access drawdown fund, or
iv
successor’s flexi-access drawdown fund,
in respect of the arrangement, or
b
they arise, or (directly or indirectly) derive, from undrawn funds under paragraph (a) or from sums or assets which so arise or derive.
3
The Commissioners for Her Majesty’s Revenue and Customs may by regulations make provision in relation to cases in which a successors’ annuity payable to a person (“the original successors’ annuity”) ceases to be payable and in consequence of that—
a
sums or assets (or both) are transferred from the insurance company to another insurance company and are applied—
i
towards the provision of another successors’ annuity (a “new successors’ annuity”) by the other insurance company, or
ii
otherwise, or
b
sums or assets are transferred to the relevant registered pension scheme.
4
The regulations may provide that—
a
in a case where a new successors’ annuity becomes payable, the new successors’ annuity is to be treated, to such extent as is prescribed by the regulations and for such of the purposes of this Part as are so prescribed, as if it were the original successors’ annuity, and
b
in any other case, the relevant registered pension scheme is to be treated as making an unauthorised payment in respect of the member of an amount equal to the aggregate of the sums, and the market value of the assets, transferred.
5
For the purposes of sub-paragraphs (3) and (4) a registered pension scheme is the relevant registered pension scheme if the original successors’ annuity was acquired using sums or assets held for the purposes of the pension scheme.
4
Regulations made before 25 December 2015 under the paragraph 27AA or 27FA inserted by this paragraph may, for cases where the transfer concerned takes place on or after 6 April 2015, include provision having effect in relation to times before the regulations are made.
Dependants’ and nominees’ annuities: testing against deceased member’s lifetime allowance
4
1
In section 216(1) (benefit crystallisation events and amounts crystallised) the table is amended as follows.
2
In the second column of the entry relating to benefit crystallisation event 4, after “any related dependants’ annuity” insert “and any related nominees’ annuity”.
3
After the entry relating to benefit crystallisation event 5C insert—
5D. A person becoming entitled, on or after 6 April 2015 but before the end of the relevant two-year period, to a dependants’ annuity or nominees’ annuity in respect of the individual if—
a
the annuity is purchased using (whether or not exclusively) relevant unused uncrystallised funds, and
b
the individual died on or after 3 December 2014
The aggregate of—
a
the amount of such of the sums, and
b
the market value of such of the assets,
applied to purchase the annuity as are relevant unused uncrystallised funds
5
1
Section 217 (persons liable to lifetime allowance charge) is amended as follows.
2
In subsection (2A) (cases where dependant or nominee liable) after “event 5C,” insert “or by reason of a person becoming entitled to an annuity as mentioned in the description of benefit crystallisation event 5D,”.
3
In subsection (4A) (events 5C and 7 are “relevant post-death” events) after “benefit crystallisation event 5C” insert “, 5D”.
6
In section 219(7A) (events 5C and 7 are “relevant post-death” events) after “benefit crystallisation event 5C” insert “, 5D”.
7
In Schedule 32 (supplementary provisions about benefit crystallisation events)—
a
in paragraph 1 (meaning of “the relevant pension schemes”: in certain cases means schemes of which the individual was a member immediately before death) after “5C” insert “or 5D”,
b
in paragraph 4(1) (further provision about benefit crystallisation event 4) for the words from “if” to “purchased” substitute
if—
a
the lifetime annuity or a related dependants’ annuity or a related nominees’ annuity is, or
b
the lifetime annuity and a related dependants’ annuity are, or
c
the lifetime annuity and a related nominees’ annuity are, or
d
a related dependants’ annuity and a related nominees’ annuity are, or
e
the lifetime annuity and a related dependants’ annuity and a related nominees’ annuity are,
purchased
c
in paragraph 14B (event 5C: meaning of “relevant two-year period”), and in the italic heading before that paragraph, for “event 5C” substitute “events 5C and 5D”, and
d
in paragraph 14C(1) (event 5C: meaning of “relevant unused uncrystallised funds”), and in the italic heading before paragraph 14C, for “event 5C” substitute “events 5C and 5D”.
Minor and consequential amendments
8
In section 172(6A)(b) (“benefit” in section 172 includes rights to payments under certain annuities) after “lifetime annuity or dependants’ annuity” insert “, or nominees’ annuity or successors’ annuity,”.
9
1
Section 172A (surrenders of benefits and rights) is amended as follows.
2
In subsection (1)(aa) (surrender of rights to payments under certain annuities triggers operation of subsection (2)) after “lifetime annuity or dependants’ annuity” insert “, or nominees’ annuity or successors’ annuity,”.
3
In subsection (9A)(b) (references to benefits include references to rights to payments under certain annuities) after “lifetime annuity or dependants’ annuity” insert “, or nominees’ annuity or successors’ annuity,”.
10
1
Section 172B (increase of rights of connected person on death) is amended as follows.
2
In subsection (2)(aa) (relevant member includes person who has rights to payments under certain annuities) after “lifetime annuity or dependants’ annuity” insert “, or nominees’ annuity or successors’ annuity,”.
3
In subsection (7A) (section does not apply to certain increases in rights) after “dependants’ annuity”, in both places, insert “, nominees’ annuity, successors’ annuity”.
4
In subsection (7B)(b) (“benefit” in section 172B includes rights to payments under certain annuities) after “lifetime annuity or dependants’ annuity” insert “, or nominees’ annuity or successors’ annuity,”.
11
In section 273B(1) (power of trustees or managers to make certain payments) after paragraph (f) insert—
fa
paid to purchase a nominees’ annuity,
fb
paid to purchase a successors’ annuity,
12
In section 280(2) (index of defined expressions) at the appropriate places insert—
nominees’ annuity
paragraph 27AA of Schedule 28”
related nominees’ annuity
paragraph 3(4B) of Schedule 29
successors’ annuity
paragraph 27FA of Schedule 28
13
1
Schedule 28 (interpretation of the pension rules and the pension death benefit rules) is amended as follows.
2
In paragraph 3(2B)(a) (power to make regulations about cases where lifetime annuity ceases to be payable by insurance company) after “dependants’ annuity” insert “, nominees’ annuity”.
3
In paragraph 6(1B)(a) (power to make regulations about cases where short-term annuity ceases to be payable by insurance company) after “dependants’ annuity” insert “, nominees’ annuity”.
4
In paragraph 27E(3) (meaning of “unused drawdown funds”)—
a
in paragraph (b), for “derive.” substitute “derive,”, and
b
after paragraph (b) (but not as part of it) insert—
and since the member’s death they have not been designated as available for the payment of dependants’ drawdown pension, not been designated as available for the payment of nominees’ drawdown pension, not been applied towards the provision of a dependants’ annuity, not been applied towards the provision of a nominees’ annuity and not been applied towards the provision of a dependants’ scheme pension.
5
In paragraph 27E(4)(b) and (5) (meaning of “unused uncrystallised funds”) after “not been applied towards the provision of a dependants’ annuity” insert “, not been applied towards the provision of a nominees’ annuity”.
6
In paragraph 27K(3) (meaning of “unused drawdown funds of the beneficiary’s”)—
a
in paragraph (b) for “derive.” substitute “derive,”, and
b
after paragraph (b) (but not as part of it) insert—
and since the beneficiary’s death they have not been designated as available for the payment of successors’ drawdown pension and not been applied towards the provision of a successors’ annuity.
14
1
Paragraph 3 of Schedule 29 (interpretation of the lump sum rule: meaning of “the applicable amount”) is amended as follows.
2
In sub-paragraph (4) (amount applied to purchase certain annuities) after “any related dependants’ annuity” insert “and any related nominees’ annuity”.
3
After sub-paragraph (4A) (when a dependants’ annuity is related to a lifetime annuity) insert—
4B
For the purposes of this Part a nominees’ annuity is related to a lifetime annuity payable to a member of a registered pension scheme—
a
if they are purchased either in the form of a joint life annuity or separately in circumstances in which the day on which the one is purchased is no earlier than seven days before, and no later than seven days after, the day on which the other is purchased, and
b
the nominees’ annuity will be payable to a nominee of the member.
4
In sub-paragraph (5) (deductions in calculating applicable amount) after “any related dependants’ annuity”, in both places, insert “or any related nominees’ annuity”.
15
In paragraph 15(2)(a) of Schedule 29 (uncrystallised funds lump sum death benefit is sum paid in respect of funds not spent on certain annuities and other pensions) after “lifetime annuity,” insert “a nominees’ annuity,”.
16Consequential repeal
In consequence of paragraph 7(b) of this Schedule, omit paragraph 32 of Schedule 10 to FA 2005.
PART 2Income tax on beneficiaries’ annuities etc
17Exemption in certain cases for annuities for dependants, nominees and successors
1
In Chapter 17 of Part 9 of ITEPA 2003 (tax on pension income: exemptions) after section 646A insert—
646BRegistered schemes: beneficiaries’ annuities from unused funds
1
The charge to tax under this Part does not apply to a dependants’ annuity, or nominees’ annuity, payable to a person if—
a
it is paid in respect of a deceased member of a registered pension scheme who had not reached the age of 75 at the date of the member’s death,
b
the member died on or after 3 December 2014,
c
either—
i
the annuity was purchased using unused drawdown funds or unused uncrystallised funds, or
ii
the annuity was purchased using sums or assets transferred to an insurance company by another insurance company in consequence of an annuity that was payable to the person by that other company, and was a dependants’ annuity or nominees’ annuity (as the case may be) purchased as mentioned in sub-paragraph (i) or this sub-paragraph, ceasing to be payable,
d
in a case where the annuity is purchased as mentioned in paragraph (c)(i) and using (whether or not exclusively) unused uncrystallised funds, the person became entitled to it before the end of the period of two years beginning with the earlier of—
i
the day on which the scheme administrator first knew of the member’s death, and
ii
the day on which the scheme administrator could first reasonably have been expected to know of the death,
e
in a case where the annuity is purchased as mentioned in paragraph (c)(ii) and the prior annuity purchased as mentioned in paragraph (c)(i) was purchased using (whether or not exclusively) unused uncrystallised funds, the person became entitled to that prior annuity before the end of the period of two years specified in paragraph (d),
f
no payment of the annuity is made before 6 April 2015, and
g
in a case where the annuity is purchased as mentioned in paragraph (c)(ii), no payment is made before 6 April 2015 of—
i
the prior annuity purchased as mentioned in paragraph (c)(i), and
ii
any other annuity purchased as mentioned in paragraph (c)(ii) that is in the chain of annuities beginning with that prior annuity and ending with the annuity.
2
The charge to tax under this Part does not apply to a successor’s annuity payable to a person if—
a
it is paid in respect of a deceased member of a registered pension scheme,
b
it is paid on the subsequent death of a dependant, nominee or successor of the member (“the beneficiary”),
c
the beneficiary had not reached the age of 75 at the date of the beneficiary’s death,
d
the beneficiary died on or after 3 December 2014,
e
either—
i
the annuity was purchased using undrawn funds, or
ii
the annuity was purchased using sums or assets transferred to an insurance company by another insurance company in consequence of an annuity that was payable to the person by that other company, and was a successors’ annuity purchased as mentioned in sub-paragraph (i) or this sub-paragraph, ceasing to be payable,
f
no payment of the annuity is made before 6 April 2015, and
g
in a case where the annuity is purchased as mentioned in paragraph (e)(ii), no payment is made before 6 April 2015 of—
i
the prior annuity purchased as mentioned in paragraph (e)(i), and
ii
any other annuity purchased as mentioned in paragraph (e)(ii) that is in the chain of annuities beginning with that prior annuity and ending with the annuity.
3
The charge to tax under this Part does not apply to a dependants’ annuity or nominees’ annuity payable to a person if—
a
it is paid in respect of a deceased member of a registered pension scheme who had not reached the age of 75 at the date of the member’s death,
b
the member died on or after 3 December 2014,
c
the annuity—
i
was purchased together with a lifetime annuity payable to the member, or
ii
was purchased using sums or assets transferred to an insurance company by another insurance company in consequence of an annuity that was payable to the person by that other company, and was a dependants’ annuity or nominees’ annuity (as the case may be) purchased as mentioned in sub-paragraph (i) or this sub-paragraph, ceasing to be payable,
d
no payment of the annuity is made before 6 April 2015, and
e
in a case where the annuity is purchased as mentioned in paragraph (c)(ii), no payment is made before 6 April 2015 of—
i
the prior annuity purchased as mentioned in paragraph (c)(i), and
ii
any other annuity purchased as mentioned in paragraph (c)(ii) that is in the chain of annuities beginning with that prior annuity and ending with the annuity.
4
The charge to tax under this Part does not apply to payments to a person of a lifetime annuity if—
a
the payments are payable to the person under pension rule 2 (see section 165 of FA 2004),
b
either—
i
a member of a registered pension scheme was entitled to be paid the annuity immediately before the member’s death, or
ii
the annuity was purchased using sums or assets transferred to an insurance company by another insurance company in consequence of an annuity to which there was entitlement as mentioned in sub-paragraph (i), or which was purchased as mentioned in this sub-paragraph, ceasing to be payable,
c
the member had not reached the age of 75 at the date of the member’s death,
d
the member died on or after 3 December 2014,
e
any payment of the annuity made before 6 April 2015 is made to the member, and
f
in a case where the annuity is one purchased as mentioned in paragraph (b)(ii), any payment made before 6 April 2015—
i
of the prior annuity to which there is entitlement as mentioned in paragraph (b)(i), or
ii
of any other annuity purchased as mentioned in paragraph (b)(ii) that is in the chain of annuities beginning with that prior annuity and ending with the annuity,
is made to the member.
5
Paragraph 27E(3) to (5) of Schedule 28 to FA 2004 (meaning of “unused drawdown funds” and “unused uncrystallised funds”) apply for the purposes of subsection (1).
6
Paragraph 27FA(2) of Schedule 28 to FA 2004 (meaning of “undrawn funds”) applies for the purposes of subsection (2)(e).
7
For the purposes of subsection (3)(c), a dependants’ annuity or nominees’ annuity is purchased together with a lifetime annuity if the dependants’ annuity or nominees’ annuity (as the case may be) is related to the lifetime annuity, and paragraph 3(4A) and (4B) of Schedule 29 to FA 2004 (meaning of “related”) apply for the purposes of this subsection.
8
For the purposes of this section, a person becomes entitled to an annuity when the person first acquires an actual (rather than a prospective right) to receive the annuity.
646CRegistered schemes: beneficiaries’ annuities from drawdown funds
1
The charge to tax under this Part does not apply to a dependants’ short-term annuity, nominees’ short-term annuity, dependants’ annuity or nominees’ annuity paid to a person if—
a
it is paid in respect of a deceased member of a registered pension scheme who had not reached the age of 75 at the date of the member’s death,
b
the member died on or after 3 December 2014, and
c
the annuity was purchased using sums or assets out of the person’s—
i
dependant’s drawdown pension fund,
ii
dependant’s flexi-access drawdown fund, or
iii
nominee’s flexi-access drawdown fund,
in respect of a money purchase arrangement under a registered pension scheme.
2
The charge to tax under this Part does not apply to a successors’ short-term annuity, or successors’ annuity, paid to a person if—
a
it is paid in respect of a deceased beneficiary of a deceased member of a registered pension scheme where the beneficiary had not reached the age of 75 at the date of the beneficiary’s death,
b
the beneficiary died on or after 3 December 2014, and
c
the annuity was purchased using sums or assets out of the person’s successor’s flexi-access drawdown fund in respect of a money purchase arrangement under a registered pension scheme,
and here “beneficiary” means dependant, nominee or successor.
3
Subsection (1) is subject to subsections (4) to (6).
4
Subsection (1) does not exempt payments on or after 6 April 2015 to a person of a dependants’ short-term annuity, or dependants’ annuity, payable in respect of a deceased member of a registered pension scheme and purchased using sums or assets out of the person’s dependant’s drawdown pension fund in respect of a money purchase arrangement under a registered pension scheme (“the drawdown fund”) if before 6 April 2015—
a
any payment of the annuity was made,
b
any payment was made of any other dependants’ short-term annuity, or dependants’ annuity, purchased using sums or assets out of—
i
the drawdown fund, or
ii
any fund represented (to any extent) by the drawdown fund, or
c
any payment of dependants’ income withdrawal was made from—
i
the drawdown fund, or
ii
any fund represented (to any extent) by the drawdown fund.
5
Subsection (1) does not exempt payments to a person of a dependants’ short-term annuity, or dependants’ annuity, payable in respect of a deceased member of a registered pension scheme and purchased using sums or assets out of the person’s dependant’s flexi-access drawdown fund in respect of a money purchase arrangement under a registered pension scheme (“the new fund”) if—
a
any of the sums or assets that make up the new fund—
i
became newly-designated dependant funds under paragraph 22A(2)(b) of Schedule 28 to FA 2004 or as a result of the operation of any of paragraphs 22B to 22D of that Schedule, or
ii
arise, or (directly or indirectly) derive, from any such newly-designated funds or from sums or assets that to any extent so arise or derive,
b
before 6 April 2015—
i
any payment of dependants’ income withdrawal in respect of the deceased member was made to the person from, or
ii
any payment in respect of the deceased member was made to the person of a dependants’ short-term annuity, or dependants’ annuity, purchased using sums or assets out of,
the person’s dependant’s drawdown pension fund in respect of a money purchase arrangement under a registered pension scheme, and
c
any of the sums or assets that made up that fund at the time of the payment make up, or are represented by sums or assets that to any extent make up, the new fund.
6
Where relevant unused uncrystallised funds—
a
are designated on or after 6 April 2015 as available for the payment of dependants’ drawdown pension or nominees’ drawdown pension, and
b
as a result of the designation make up (to any extent) a person’s dependant’s flexi-access drawdown fund or nominee’s flexi-access drawdown fund in respect of a money purchase arrangement under a registered pension scheme, but
c
are not so designated before the end of the relevant two-year period,
subsection (1) does not exempt payments to the person of a dependants’ short-term annuity, nominees’ short-term annuity, dependants’ annuity or nominees’ annuity if any of the sums or assets used to purchase the annuity represent, at the time of the purchase, the whole or any part of those relevant unused uncrystallised funds.
7
In this section “the relevant two-year period”, in relation to relevant unused uncrystallised funds held for the purposes of a money purchase arrangement relating to a deceased individual under a registered pension scheme, means the period of two years beginning with the earlier of—
a
the day on which the scheme administrator first knew of the individual’s death, and
b
the day on which the scheme administrator could first reasonably have been expected to know of it.
8
For the purposes of this section, sums or assets held after the death of a member of a registered pension scheme for the purposes of a money purchase arrangement relating to the member under the scheme are “relevant unused uncrystallised funds” if—
a
they are unused uncrystallised funds, and
b
the member had not reached the age of 75 at the date of the member’s death.
9
Paragraph 27E(4) and (5) of Schedule 28 to FA 2004 (meaning of “unused uncrystallised funds”) apply for the purposes of subsection (8)(a).
646DNon-registered schemes: beneficiaries’ annuities from unused funds
1
The charge to tax under this Part does not apply to an annuity payable to a person if—
a
it is paid in respect of a deceased member of an overseas pension scheme, or relevant non-UK scheme, who had not reached the age of 75 at the date of the member’s death,
b
it would, if the scheme were a registered pension scheme and if “insurance company” in Part 4 of FA 2004 had the meaning given by subsection (8), be a dependants’ annuity or nominees’ annuity,
c
the member died on or after 3 December 2014,
d
either—
i
the annuity was purchased using sums or assets that would, if the scheme were a registered pension scheme, be unused drawdown funds or unused uncrystallised funds, or
ii
the annuity was purchased using sums or assets transferred to an insurance company by another insurance company in consequence of an annuity—
a
that was payable to the person by that other insurance company,
b
that was purchased as mentioned in sub-paragraph (i) or this sub-paragraph, and
c
that would have been a dependants’ annuity or nominees’ annuity (as the case may be) if the scheme had been a registered pension scheme,
ceasing to be payable,
e
no payment of the annuity is made before 6 April 2015, and
f
in a case where the annuity is purchased as mentioned in paragraph (d)(ii), no payment is made before 6 April 2015 of—
i
the prior annuity purchased as mentioned in paragraph (d)(i), and
ii
any other annuity purchased as mentioned in paragraph (d)(ii) that is in the chain of annuities beginning with that prior annuity and ending with the annuity.
2
The charge to tax under this Part does not apply to an annuity payable to a person if—
a
it is paid in respect of a deceased member of an overseas pension scheme or relevant non-UK scheme,
b
it is paid on the subsequent death of an individual who would, if the scheme were a registered pension scheme, be a dependant, nominee or successor of the member (“the beneficiary”),
c
it would, if the scheme were a registered pension scheme and if “insurance company” in Part 4 of FA 2004 had the meaning given by subsection (8), be a successors’ annuity,
d
the beneficiary had not reached the age of 75 at the date of the beneficiary’s death,
e
the beneficiary died on or after 3 December 2014,
f
either—
i
the annuity was purchased using sums or assets that would, if the scheme were a registered pension scheme, be undrawn funds, or
ii
the annuity was purchased using sums or assets transferred to an insurance company by another insurance company in consequence of an annuity—
a
that was payable to the person by that other insurance company,
b
that was purchased as mentioned in sub-paragraph (i) or this sub-paragraph, and
c
that would have been a successors’ annuity if the scheme had been a registered pension scheme and if “insurance company” in Part 4 of FA 2004 had the meaning given by subsection (8),
ceasing to be payable,
g
no payment of the annuity is made before 6 April 2015, and
h
in a case where the annuity is purchased as mentioned in paragraph (f)(ii), no payment is made before 6 April 2015 of—
i
the prior annuity purchased as mentioned in paragraph (f)(i), and
ii
any other annuity purchased as mentioned in paragraph (f)(ii) that is in the chain of annuities beginning with that prior annuity and ending with the annuity.
3
The charge to tax under this Part does not apply to an annuity payable to a person if—
a
it is paid in respect of a deceased member of an overseas pension scheme, or relevant non-UK scheme, who had not reached the age of 75 at the date of the member’s death,
b
it would, if the scheme were a registered pension scheme and if “insurance company” in Part 4 of FA 2004 had the meaning given by subsection (8), be a dependants’ annuity payable to a dependant of the member or a nominees’ annuity payable to a nominee of the member,
c
the member died on or after 3 December 2014,
d
the annuity—
i
was purchased together with an annuity payable to the member that would, if the scheme were a registered pension scheme and if “insurance company” in Part 4 of FA 2004 had the meaning given by subsection (8), have been a lifetime annuity, or
ii
was purchased using sums or assets transferred to an insurance company by another insurance company in consequence of an annuity—
a
that was payable to the person by that other insurance company, and
b
that would, if the scheme were a registered pension scheme and if “insurance company” in Part 4 of FA 2004 had the meaning given by subsection (8), have been a dependants’ annuity or nominees’ annuity (as the case may be) purchased as mentioned in sub-paragraph (i) or this sub-paragraph,
ceasing to be payable,
e
no payment of the annuity is made before 6 April 2015, and
f
in a case where the annuity is purchased as mentioned in paragraph (d)(ii), no payment is made before 6 April 2015 of—
i
the prior annuity purchased as mentioned in paragraph (d)(i), and
ii
any other annuity purchased as mentioned in paragraph (d)(ii) that is in the chain of annuities beginning with that prior annuity and ending with the annuity.
4
The charge to tax under this Part does not apply to payments to a person of an annuity if—
a
either—
i
a member of an overseas pension scheme, or relevant non-UK scheme, was entitled to be paid the annuity immediately before the member’s death, or
ii
the annuity was purchased using sums or assets transferred to an insurance company by another insurance company in consequence of an annuity to which there was entitlement as mentioned in sub-paragraph (i), or which was purchased as mentioned in this sub-paragraph, ceasing to be payable,
b
the payments would, if the scheme were a registered pension scheme and if “insurance company” in Part 4 of FA 2004 had the meaning given by subsection (8), be—
i
payments of a lifetime annuity, and
ii
payable to the person under pension rule 2 (see section 165 of FA 2004),
c
the member had not reached the age of 75 at the date of the member’s death,
d
the member died on or after 3 December 2014,
e
any payment of the annuity made before 6 April 2015 is made to the member, and
f
in a case where the annuity is one purchased as mentioned in paragraph (a)(ii), any payment made before 6 April 2015—
i
of the prior annuity to which there is entitlement as mentioned in paragraph (a)(i), or
ii
of any other annuity purchased as mentioned in paragraph (a)(ii) that is in the chain of annuities beginning with that prior annuity and ending with the annuity,
is made to the member.
5
Paragraph 27E(3) to (5) of Schedule 28 to FA 2004 (meaning of “unused drawdown funds” and “unused uncrystallised funds”) apply for the purposes of subsection (1).
6
Paragraph 27FA(2) of Schedule 28 to FA 2004 (meaning of “undrawn funds”) applies for the purposes of subsection (2)(f).
7
For the purposes of subsection (3)(d), an annuity is purchased together with another if they are purchased—
a
in the form of a joint life annuity, or
b
separately in circumstances in which the day on which the one is purchased is no earlier than seven days before, and no later than seven days after, the day on which the other is purchased.
8
In this section “insurance company” means—
a
an insurance company as defined by section 275 of FA 2004, or
b
a person—
i
whose normal business includes the activity of providing annuities,
ii
who carries on that activity in a country or territory outside the United Kingdom, and
iii
whose carrying on of that activity in any particular country or territory outside the United Kingdom—
a
is regulated in that country or territory, or
b
is lawful under the law of that country or territory because it is regulated in another country or territory,
and for this purpose an activity is regulated in a country or territory if it is regulated by the government of that country or territory or by a body established under the law of that country or territory for the purpose of regulating the carrying-on of the activity.
646ENon-registered schemes: beneficiaries’ annuities from drawdown funds
1
The charge to tax under this Part does not apply to an annuity paid to a person if—
a
it is paid in respect of a deceased member of an overseas pension scheme, or a relevant non-UK scheme, who had not reached the age of 75 at the date of the member’s death,
b
the person would, if that scheme were a registered pension scheme, be a dependant or nominee of the member,
c
the annuity was purchased using sums or assets held for the purposes of a money purchase arrangement under an overseas pension scheme or relevant non-UK scheme, and those sums or assets would if that scheme were a registered pension scheme form the whole or part of the person’s—
i
dependant’s drawdown pension fund,
ii
dependant’s flexi-access drawdown fund, or
iii
nominee’s flexi-access drawdown fund,
in respect of the arrangement,
d
the annuity would, if the scheme were a registered pension scheme and if “insurance company” in Part 4 of FA 2004 had the meaning given by section 646D(8), be a dependants’ short-term annuity or dependants’ annuity or (as the case may be) a nominees’ short-term annuity or nominees’ annuity, and
e
the member died on or after 3 December 2014.
2
The charge to tax under this Part does not apply to an annuity payable to a person if—
a
it is paid in respect of a deceased individual (“the beneficiary”) who had not reached the age of 75 at the date of the beneficiary’s death,
b
the beneficiary would have been a dependant, nominee or successor of a deceased member of an overseas pension scheme, or relevant non-UK scheme, if that scheme had been a registered pension scheme,
c
the person would, if that scheme were a registered pension scheme, be a successor of the member,
d
the annuity was purchased using sums or assets out of a fund held for the purposes of a money purchase arrangement under an overseas pension scheme or relevant non-UK scheme and would, if that scheme were a registered pension scheme and if “insurance company” in Part 4 of FA 2004 had the meaning given by section 646D(8), be a successors’ short-term annuity, or successors’ annuity, purchased using sums or assets out of the person’s successor’s flexi-access drawdown fund in respect of the arrangement, and
e
the beneficiary died on or after 3 December 2014.
3
Subsection (1) is subject to subsections (4) and (5).
4
Subsection (1) does not exempt payments on or after 6 April 2015 to a person of an annuity payable in respect of a deceased member of an overseas pension scheme, or relevant non-UK scheme, if—
a
the annuity is purchased using sums or assets held for the purposes of a money purchase arrangement under an overseas pension scheme or relevant non-UK scheme,
b
the annuity would, if that scheme were a registered pension scheme and if “insurance company” in Part 4 of FA 2004 had the meaning given by section 646D(8), be a dependants’ short-term annuity or dependants’ annuity,
c
the annuity was purchased using sums or assets out of a fund that would, if that scheme were a registered pension scheme, be the person’s dependant’s drawdown pension fund in respect of the arrangement (“the drawdown fund”), and
d
before 6 April 2015—
i
any payment of the annuity was made,
ii
any payment was made to the person of any other annuity purchased using sums or assets out of the drawdown fund or out of any fund represented (to any extent) by the drawdown fund, or
iii
any payment was made to the person out of the drawdown fund, or out of any fund represented (to any extent) by the drawdown fund, of any pension that would be dependants’ income withdrawal if the fund concerned were held for the purposes of a registered pension scheme.
5
Subsection (1) does not exempt payments to a person of an annuity payable in respect of a deceased member of an overseas pension scheme, or relevant non-UK scheme, if—
a
the annuity was purchased using sums or assets held for the purposes of a money purchase arrangement under an overseas pension scheme or relevant non-UK scheme and would, if that scheme were a registered pension scheme and “insurance company” in Part 4 of FA 2004 had the meaning given by section 646D(8), be a dependants’ short-term annuity or dependants’ annuity,
b
the annuity was purchased using sums or assets out of a fund (“the new fund”) that would, if that scheme were a registered pension scheme, be the person’s dependant’s flexi-access drawdown fund in respect of the arrangement,
c
before 6 April 2015—
i
any payment of pension in respect of the deceased member was made to the person from a fund held for the purposes of a money purchase arrangement under an overseas pension scheme, or relevant non-UK scheme, that would be a payment of dependants’ income withdrawal from the person’s dependant’s drawdown pension fund in respect of the arrangement if the scheme were a registered pension scheme, or
ii
any payment in respect of the deceased member was made to the person of an annuity purchased using sums or assets out of a fund held for the purposes of a money purchase arrangement under an overseas pension scheme, or relevant non-UK scheme, that would be a payment of a dependants’ short-term annuity, or dependants’ annuity, purchased using sums or assets out of the person’s dependant’s drawdown pension fund in respect of the arrangement if the scheme were a registered pension scheme, and
d
any of the sums or assets that made up the fund mentioned in paragraph (c)(i) or (ii) make up, or are represented by sums or assets that to any extent make up, the new fund.
646FInterpretation of sections 646B to 646E
In sections 646B to 646E, an expression listed in the first column of the table has the meaning given by the provision of FA 2004 listed against that expression in the second column of the table.
Expression
Provision of FA 2004
dependant
Schedule 28, paragraph 15
dependants’ annuity
Schedule 28, paragraph 17
dependant’s drawdown pension fund
Schedule 28, paragraph 22
dependant’s flexi-access drawdown fund
Schedule 28, paragraph 22A
dependants’ income withdrawal
Schedule 28, paragraph 21
dependants’ short-term annuity
Schedule 28, paragraph 20
insurance company (in sections 646B and 646C)
section 275
lifetime annuity
Schedule 28, paragraph 3
money purchase arrangement
section 152
nominee
Schedule 28, paragraph 27A
nominees’ annuity
Schedule 28, paragraph 27AA
nominee’s flexi-access drawdown fund
Schedule 28, paragraph 27E
nominees’ short-term annuity
Schedule 28, paragraph 27C
overseas pension scheme
section 150(1) and (7)
relevant non-UK scheme
Schedule 34, paragraph 1(5)
successor
Schedule 28, paragraph 27F
successors’ annuity
Schedule 28, paragraph 27FA
successor’s flexi-access drawdown fund
Schedule 28, paragraph 27K
successors’ short-term annuity
Schedule 28, paragraph 27H
2
The amendment made by this paragraph has effect in relation to pension paid on or after 6 April 2015.
18Exemption from tax under Part 9 of ITEPA 2003 not to give rise to tax under other provisions
In section 393B(2)(a) of ITEPA 2003 (tax on benefits under employer-financed retirement benefit schemes: “relevant benefits” do not include benefits charged to tax under Part 9) after “charged to tax under Part 9 (pension income)” insert “, or that would be charged to tax under that Part but for section 573(2A) or (2B), 646D or 646E”.
19Annuity for dependant purchased before 6 April 2006 jointly with annuity for member
In Schedule 36 to FA 2004 (transitional provision etc in relation to pre-6 April 2006 pensions) after paragraph 45 insert—
45ATaxation of certain annuities for dependants purchased pre-commencement
1
The charge to tax under Part 9 of ITEPA 2003 (taxation of pension income) does not apply to an annuity payable to a person (“the dependant”) if—
a
the annuity is payable on the death of a member of a pension scheme,
b
the annuity is paid in respect of the deceased member,
c
the member had not reached the age of 75 at the date of the member’s death,
d
the member died on or after 3 December 2014,
e
no payment of the annuity is made before 6 April 2015,
f
the annuity has fulfilled the transitional conditions at all times on or after 6 April 2006,
g
the annuity was purchased together with an annuity payable to the member, and
h
that annuity payable to the member fulfilled the transitional conditions at all times in the period beginning with 6 April 2006 and ending with the member’s death.
2
For the purposes of sub-paragraph (1)(g), an annuity is purchased together with another if they are purchased—
a
in the form of a joint life annuity, or
b
separately in circumstances in which the day on which the one is purchased is no earlier than seven days before, and no later than seven days after, the day on which the other is purchased.
3
In sub-paragraph (1) “the transitional conditions” means the conditions specified in the subsection (3A) set out in article 2(3) of the Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572).
Minor and consequential amendments
20
In section 573 of ITEPA 2003 (foreign pensions to which other provisions of Part 9 of ITEPA 2003 do not apply) after subsection (2D) insert—
2E
Chapter 17 of this Part provides exemptions for certain annuities (see sections 646D and 646E: certain beneficiaries’ annuities purchased out of unused or drawdown funds).
2F
See also paragraph 45A of Schedule 36 to FA 2004 (exemption in certain cases for payments on or after 6 April 2015 to beneficiaries under joint-life or similar annuities purchased before 6 April 2006).
21
In Chapter 10 of Part 9 of ITEPA 2003 (other employment-related annuities) after section 611 insert—
611AExemptions from sections 609 to 611
1
Chapter 17 of this Part provides exemptions for certain annuities (see sections 646B to 646E: certain beneficiaries’ annuities purchased out of unused or drawdown funds).
2
See also paragraph 45A of Schedule 36 to FA 2004 (exemption in certain cases for payments on or after 6 April 2015 to beneficiaries under joint-life or similar annuities purchased before 6 April 2006).
22
In section 579A of ITEPA 2003 (section applies to pensions under registered pension schemes, with exceptions) after subsection (2) insert—
3
Chapter 17 of this Part provides exemptions for certain annuities (see sections 646B and 646C: certain beneficiaries’ annuities purchased out of unused or drawdown funds).
23
1
For section 579CZA(5)(b) of ITEPA 2003 (tax exemption for dependants’ income withdrawal overridden where any paid before 6 April 2015) substitute—
b
before 6 April 2015—
i
any payment of dependants’ income withdrawal in respect of the deceased member was made to the person from, or
ii
any payment in respect of the deceased member was made to the person of a dependants’ short-term annuity purchased using sums or assets out of,
the person’s dependant’s drawdown pension fund in respect of a money purchase arrangement under a registered pension scheme, and
2
The amendment made by this paragraph has effect in relation to pension paid on or after 6 April 2015.
SCHEDULE 5Relief for contributions to flood and coastal erosion risk management projects
1Income tax: trade profits
In Chapter 5 of Part 2 of ITTOIA 2005 (trade profits: rules allowing deductions), after section 86 insert—
Contributions to flood and coastal erosion risk management projects
86AContributions to flood and coastal erosion risk management projects
1
This section applies if—
a
a person carrying on a trade (“the contributor”) incurs expenses in making a qualifying contribution to a qualifying flood or coastal erosion risk management project, and
b
a deduction would not otherwise be allowable for the expenses in calculating the profits of the trade.
2
In determining whether the condition in subsection (1)(b) is satisfied, a deduction giving effect to a capital allowance is to be disregarded.
3
In calculating the profits of the trade, a deduction is allowed under this section for the expenses.
4
But if, in connection with the making of the contribution, the contributor or a connected person—
a
receives a disqualifying benefit, or
b
is entitled to receive such a benefit,
no deduction is allowed.
5
For the purposes of subsection (4) it does not matter whether a person receives, or is entitled to receive, the benefit—
a
from the carrying out of the project, or
b
from any person.
6
Subsection (7) applies if—
a
a deduction has been made under this section in relation to the contribution, and
b
the contributor or a connected person receives—
i
a refund of any part of the contribution, if the contribution is a sum of money, or
ii
compensation for any part of the contribution, if the contribution is the provision of services,
in money or money’s worth.
7
The amount of, or an amount equal to the value of, the refund or compensation (so far as not otherwise brought into account in calculating the profits of the trade or treated as a post-cessation receipt)—
a
is brought into account in calculating the profits of the trade, as a receipt arising on the date on which the refund or compensation is received, or
b
if the contributor has permanently ceased to carry on the trade before that date, is treated as a post-cessation receipt (see Chapter 18).
8
In this section “disqualifying benefit” means a benefit consisting of money or other property, but it does not include—
a
a refund of the contribution, if the contribution is a sum of money;
b
compensation for the contribution, if the contribution is the provision of services;
c
a structure that—
i
is or is to be used for the purposes of flood or coastal erosion risk management, and
ii
is put in place in carrying out the project;
d
an addition to a structure where—
i
the structure is or is to be used for the purposes of flood or coastal erosion risk management, and
ii
the addition is made in carrying out the project;
e
land, plant or machinery that is or is to be used, in the realization of the project, for the purposes of flood or coastal erosion risk management;
f
a right over land that is or is to be used, in the realization of the project, for the purposes of flood or coastal erosion risk management.
9
In subsection (8) “structure” includes road, path, pipe, earthwork, plant and machinery.
86BInterpretation of section 86A
1
This section applies for the purposes of section 86A.
2
A flood or coastal erosion risk management project is a qualifying project if—
a
an English risk management authority has applied to the Environment Agency for a grant under section 16 of the Flood and Water Management Act 2010 in order to fund the project, or
b
the Environment Agency has determined that it will carry out the project,
and the Environment Agency has allocated funding by way of grant-in-aid to the project.
3
A contribution to a flood or coastal erosion risk management project is a qualifying contribution if the contribution is made—
a
for the purposes of the project, and
b
under an agreement between—
i
the person making the contribution, and
ii
the applicant authority or (as the case may be) the Environment Agency,
or between those two persons and other persons.
4
References to a flood risk management project or a coastal erosion risk management project are to be interpreted in accordance with sections 1 to 3 of the Flood and Water Management Act 2010.
5
In section 86A and this section—
“contribution”, in relation to a period of account, means—
a
a sum of money paid in that period of account, or
b
any services provided in that period of account;
“English risk management authority” has the meaning given by section 6(14) of the Flood and Water Management Act 2010.
2Income tax: profits of a property business
In section 272 of ITTOIA 2005 (application of trading income rules), in the table in subsection (2), after the entry for sections 82 to 86 insert—
sections 86A and 86B
contributions to flood and coastal erosion risk management projects
3Corporation tax: trading income and trade profits
In Chapter 5 of Part 3 of CTA 2009 (trading income and trade profits: rules allowing deductions), after section 86 insert—
Contributions to flood and coastal erosion risk management projects
86AContributions to flood and coastal erosion risk management projects
1
This section applies if—
a
a company carrying on a trade (“the contributor”) incurs expenses in making a qualifying contribution to a qualifying flood or coastal erosion risk management project, and
b
a deduction would not otherwise be allowable for the expenses in calculating the profits of the trade.
2
In determining whether the condition in subsection (1)(b) is satisfied, a deduction giving effect to a capital allowance is to be disregarded.
3
In calculating the profits of the trade, a deduction is allowed under this section for the expenses.
4
But if, in connection with the making of the contribution, the contributor or a connected person—
a
receives a disqualifying benefit, or
b
is entitled to receive such a benefit,
no deduction is allowed.
5
For the purposes of subsection (4) it does not matter whether a person receives, or is entitled to receive, the benefit—
a
from the carrying out of the project, or
b
from any person.
6
Subsection (7) applies if—
a
a deduction has been made under this section in relation to the contribution, and
b
the contributor or a connected person receives—
i
a refund of any part of the contribution, if the contribution is a sum of money, or
ii
compensation for any part of the contribution, if the contribution is the provision of services,
in money or money’s worth.
7
The amount of, or an amount equal to the value of, the refund or compensation (so far as not otherwise brought into account in calculating the profits of the trade or treated as a post-cessation receipt)—
a
is brought into account in calculating the profits of the trade, as a receipt arising in the accounting period in which the refund or compensation is received, or
b
if the contributor has permanently ceased to carry on the trade before the refund or compensation is received, is treated as a post-cessation receipt (see Chapter 15).
8
In this section “disqualifying benefit” means a benefit consisting of money or other property, but it does not include—
a
a refund of the contribution, if the contribution is a sum of money;
b
compensation for the contribution, if the contribution is the provision of services;
c
a structure that—
i
is or is to be used for the purposes of flood or coastal erosion risk management, and
ii
is put in place in carrying out the project;
d
an addition to a structure where—
i
the structure is or is to be used for the purposes of flood or coastal erosion risk management, and
ii
the addition is made in carrying out the project;
e
land, plant or machinery that is or is to be used, in the realization of the project, for the purposes of flood or coastal erosion risk management;
f
a right over land that is or is to be used, in the realization of the project, for the purposes of flood or coastal erosion risk management.
9
In subsection (8) “structure” includes road, path, pipe, earthwork, plant and machinery.
86BInterpretation of section 86A
1
This section applies for the purposes of section 86A.
2
A flood or coastal erosion risk management project is a qualifying project if—
a
an English risk management authority has applied to the Environment Agency for a grant under section 16 of the Flood and Water Management Act 2010 in order to fund the project, or
b
the Environment Agency has determined that it will carry out the project,
and the Environment Agency has allocated funding by way of grant-in-aid to the project.
3
A contribution to a flood or coastal erosion risk management project is a qualifying contribution if the contribution is made—
a
for the purposes of the project, and
b
under an agreement between—
i
the company making the contribution, and
ii
the applicant authority or (as the case may be) the Environment Agency,
or between those two bodies and other persons.
4
References to a flood risk management project or a coastal erosion risk management project are to be interpreted in accordance with sections 1 to 3 of the Flood and Water Management Act 2010.
5
In section 86A and this section—
“contribution”, in relation to an accounting period, means—
a
a sum of money paid in that accounting period, or
b
any services provided in that accounting period;
“English risk management authority” has the meaning given by section 6(14) of the Flood and Water Management Act 2010.
4Corporation tax: profits of a property business
In section 210 of CTA 2009 (application of trading income rules), in the table in subsection (2), after the entry for sections 82 to 86 insert—
sections 86A and 86B
contributions to flood and coastal erosion risk management projects
Corporation tax: investment business
5
In Chapter 2 of Part 16 of CTA 2009 (investment business: management expenses), in section 1221 (amounts treated as expenses of management), in subsection (3), after paragraph (i) insert—
ia
section 1244A (contributions to flood and coastal erosion risk management projects),
6
In Chapter 3 of Part 16 of CTA 2009 (investment business: amounts treated as expenses of management), after section 1244 insert—
Contributions to flood and coastal erosion risk management projects
1244AContributions to flood and coastal erosion risk management projects
1
This section applies if a company with investment business (“the contributor”) incurs expenses in making a qualifying contribution to a qualifying flood or coastal erosion risk management project.
2
The expenses are treated for the purposes of Chapter 2 as expenses of management.
3
But if, in connection with the making of the contribution, the contributor or a connected person—
a
receives a disqualifying benefit, or
b
is entitled to receive such a benefit,
no deduction is allowed under section 1219.
4
For the purposes of subsection (3) it does not matter whether a person receives, or is entitled to receive, the benefit—
a
from the carrying out of the project, or
b
from any person.
5
In this section “disqualifying benefit” means a benefit consisting of money or other property, but it does not include—
a
a refund of the contribution, if the contribution is a sum of money;
b
compensation for the contribution, if the contribution is the provision of services;
c
a structure that—
i
is or is to be used for the purposes of flood or coastal erosion risk management, and
ii
is put in place in carrying out the project;
d
an addition to a structure where—
i
the structure is or is to be used for the purposes of flood or coastal erosion risk management, and
ii
the addition is made in carrying out the project;
e
land, plant or machinery that is or is to be used, in the realization of the project, for the purposes of flood or coastal erosion risk management;
f
a right over land that is or is to be used, in the realization of the project, for the purposes of flood or coastal erosion risk management.
6
In subsection (5) “structure” includes road, path, pipe, earthwork, plant and machinery.
7
Section 86B applies for the purposes of this section as it applies for the purposes of section 86A.
7
In Chapter 5 of Part 16 of CTA 2009 (investment business: receipts), after section 1253 insert—
1253AContributions to flood and coastal erosion risk management projects: refunds etc
1
This section applies if—
a
a deduction has been made under section 1219 by virtue of section 1244A (contributions to flood and coastal erosion risk management projects: expenses of management), and
b
the contributor or a connected person receives—
i
a refund of any part of the contribution, if the contribution is a sum of money, or
ii
compensation for any part of the contribution, if the contribution is the provision of services,
in money or money’s worth.
2
The contributor is to be treated as receiving, when the refund or compensation is received, an amount—
a
which is equal to so much of the refund or compensation, or so much of the value of the refund or compensation, as is not otherwise taken into account for corporation tax purposes, and
b
to which the charge to corporation tax on income applies.
8
In section 253 of CAA 2001 (companies with investment business), in subsection (6), after “1233” insert “or 1244A”.
9Commencement
The amendments made by this Schedule have effect in relation to contributions paid or provided on or after 1 January 2015.
SCHEDULE 6Investment reliefs: excluded activities
PART 1Part 5B of ITA 2007: amendment coming into force on passing of Act
1Tax relief for social investments: power to amend excluded activities
In Part 5B of ITA 2007 (tax relief for social investments), after section 257MV insert—
257MWExcluded activities: power to amend
1
The Treasury may by regulations add to, repeal or otherwise amend any provision of sections 257MQ to 257MT (excluded activities).
2
Regulations under this section may—
a
make different provision for different cases or purposes;
b
contain incidental, supplemental, consequential and transitional provision and savings.
3
So far as they cause an activity to cease to be an excluded activity, amendments made by regulations under this section may have effect in relation to times before they come into force, but not times before 6 April 2015.
4
This section is without prejudice to any other power to amend any provision of this Part.
PART 2Part 5 of ITA 2007: excluded activities from 6 April 2015
2Introductory
The following provisions of Part 5 of ITA 2007 (enterprise investment scheme) are amended as set out in paragraphs 3 and 4—
a
section 198A (excluded activities for purposes of Part 5 (and, by virtue of section 257DA(9), Part 5A): subsidised generation or export of electricity), and
b
section 198B (excluded activities for those purposes: subsidised generation of heat and subsidised production of gas or fuel).
3Generation of electricity involving contracts for difference
In section 198A—
a
in subsection (3), omit “or” at the end of paragraph (b) and for paragraph (c) substitute—
ba
a contract for difference has been entered into in connection with the generation of the electricity, or
c
a scheme established in a territory outside the United Kingdom that—
i
corresponds to one set out in a renewables obligation order under section 32 of the Electricity Act 1989, or
ii
is similar to one established by virtue of regulations under Chapter 2 of Part 2 of the Energy Act 2013 (contracts for difference),
operates to incentivise the generation of the electricity.
b
in subsection (9), at the appropriate place insert—
“contract for difference” means a contract for difference within the meaning of Chapter 2 of Part 2 of the Energy Act 2013 (see section 6(2) of that Act);
4Subsidised energy-related activities: anaerobic digestion and hydroelectric power
1
In section 198A—
a
in subsection (5), omit “, B or C” (exceptions for generation involving anaerobic digestion and hydroelectric power),
b
omit subsections (7) and (8), and
c
in subsection (9), omit the definition of “anaerobic digestion”.
2
In section 198B—
a
in subsection (3), omit “or B” (exception for generation or production involving anaerobic digestion), and
b
omit subsection (5).
5Application
The amendments made by this Part of this Schedule have effect in relation to shares issued on or after 6 April 2015.
PART 3Part 6 of ITA 2007: excluded activities from 6 April 2015
6Introductory
The following provisions of Part 6 of ITA 2007 (venture capital trusts) are amended as set out in paragraphs 7 and 8—
a
section 309A (excluded activities for purposes of Part 6: subsidised generation or export of electricity), and
b
section 309B (excluded activities for those purposes: subsidised generation of heat and subsidised production of gas or fuel).
7Generation of electricity involving contracts for difference
In section 309A—
a
in subsection (3), omit “or” at the end of paragraph (b) and for paragraph (c) substitute—
ba
a contract for difference has been entered into in connection with the generation of the electricity, or
c
a scheme established in a territory outside the United Kingdom that—
i
corresponds to one set out in a renewables obligation order under section 32 of the Electricity Act 1989, or
ii
is similar to one established by virtue of regulations under Chapter 2 of Part 2 of the Energy Act 2013 (contracts for difference),
operates to incentivise the generation of the electricity.
b
in subsection (9), at the appropriate place insert—
“contract for difference” means a contract for difference within the meaning of Chapter 2 of Part 2 of the Energy Act 2013 (see section 6(2) of that Act);
8Subsidised energy-related activities: anaerobic digestion and hydroelectric power
1
In section 309A—
a
in subsection (5), omit “, B or C” (exceptions for generation involving anaerobic digestion and hydroelectric power),
b
omit subsections (7) and (8), and
c
in subsection (9), omit the definition of “anaerobic digestion”.
2
In section 309B—
a
in subsection (3), omit “or B” (exception for generation or production involving anaerobic digestion), and
b
omit subsection (5).
9Application
The amendments made by this Part of this Schedule have effect in relation to relevant holdings issued on or after 6 April 2015.
PART 4Further amendments of Parts 5 to 6 of ITA 2007
Parts 5 and 6: certain community-based activities to be excluded activities
10
1
Part 5 of ITA 2007 is further amended as follows.
2
In section 198A—
a
omit subsections (5) and (6) (exception for community-based generation), and
b
in subsection (9), omit the definitions of “community benefit society”, “co-operative society” and “NI industrial and provident society”.
3
In section 198B—
a
omit subsections (3) and (4) (exception for community-based generation or production), and
b
omit subsection (6) (interpretation of section).
11
1
Part 6 of ITA 2007 is further amended as follows.
2
In section 309A—
a
omit subsections (5) and (6) (exception for community-based generation), and
b
in subsection (9), omit the definitions of “community benefit society”, “co-operative society” and “NI industrial and provident society”.
3
In section 309B—
a
omit subsections (3) and (4) (exception for community-based generation or production), and
b
omit subsection (6) (interpretation of section).
12
In consequence of paragraphs 10 and 11—
a
in FA 2014, omit section 56(3)(b) and (6)(b), and
b
in the Co-operative and Community Benefit Societies Act 2014, omit paragraphs 106 and 107 of Schedule 4.
13Part 5B: subsidised generation or export of electricity to cease to be excluded activity
1
Part 5B of ITA 2007 is further amended as follows.
2
In section 257MQ(1) (list of excluded activities) omit paragraph (f) (subsidised generation or export of electricity).
3
Omit section 257MS (subsidised generation or export of electricity).
14Application of Part
1
The amendments made by this Part of this Schedule have effect in accordance with regulations made by the Treasury.
2
Regulations under this paragraph may make different provision for different purposes.
3
Section 1014(4) of ITA 2007 (regulations etc subject to annulment) does not apply in relation to regulations under this paragraph.
4
Regulations under this paragraph may not provide for amendments of ITA 2007 to have effect—
a
in the case of amendments of Part 5 of that Act, in relation to shares issued before 6 April 2015;
b
in the case of amendments of Part 6 of that Act, in relation to relevant holdings issued before 6 April 2015.
SCHEDULE 7Disposals of UK residential property interests by non-residents etc
PART 1Amendments of TCGA 1992
1
TCGA 1992 is amended in accordance with paragraphs 2 to 40.
2
In section 1 (the charge to tax), in subsection (2A), for the words from “gains are” to the end substitute
gains are—
a
ATED-related gains in respect of which the companies are chargeable to capital gains tax under section 2B, or
b
NRCGT gains in respect of which the companies are chargeable to capital gains tax under section 14D or 188D.
3
1
Section 2 (persons and gains chargeable to capital gains tax, and allowable losses) is amended as follows.
2
After subsection (2) insert—
2A
Where subsection (1B) applies, the amounts that may be deducted under subsection (2)(a) include any allowable NRCGT losses accruing to the person in the overseas part of the tax year concerned (see section 14B(4)).
2B
The amounts that may be deducted under subsection (2)(b) include any allowable NRCGT losses (other than group losses, as defined in section 188E(4)) accruing to the person in a tax year (“year P”) previous to the year mentioned in subsection (2)(a) (so far as those losses have not been allowed as a deduction from chargeable gains accruing in year P or any previous year).
3
After subsection (7A) insert—
7B
Except where otherwise specified (see subsections (2A) and (2B)), nothing in this section applies in relation to an NRCGT gain chargeable to, or an NRCGT loss allowable for the purposes of, capital gains tax by virtue of section 14D or 188D.
4
In section 2B (persons chargeable to capital gains tax on ATED-related gains), in subsection (10), in paragraph (b) of the definition of “ring-fenced ATED-related allowable losses”, for “from ATED-related chargeable gains accruing in any previous tax year on relevant high value disposals,” substitute “from chargeable gains accruing in any previous tax year,”.
5
1
Section 3 (annual exempt amount) is amended as follows.
2
In subsection (5), for the words from “is the amount” to the end substitute
is (what would apart from this section be) the total of the amounts for that year on which that individual is chargeable to capital gains tax in accordance with either (or both) of—
a
section 2 (gains, other than ATED-related gains and NRCGT gains, chargeable to capital gains tax), and
b
section 14D (NRCGT gains chargeable to capital gains tax).
3
After subsection (5B) insert—
5BA
In this section, “adjusted net gains”, in relation to a tax year and an individual, means—
a
if the residence condition is met (see section 2(1A)) and the year is not a split year as respects the individual, the section 2 adjusted net gains;
b
if the residence condition is not met, the section 14D adjusted net gains;
c
if the residence condition is met and the year is a split year as respects the individual, the total of the section 2 adjusted net gains (if any) and the section 14D adjusted net gains (if any).
4
In subsection (5C), for the words from “In subsections” to “in his case by—” substitute “In subsection (5BA) “section 2 adjusted net gains”, in relation to an individual and a tax year, means the amount given in the individual’s case by—”.
5
After subsection (5C) insert—
5D
In subsection (5BA) “section 14D adjusted net gains”, in relation to an individual and a tax year, means the amount given in the individual’s case by—
a
taking the amount from which the deductions provided for by paragraphs (a) and (b) of subsection (2) of section 14D are to be made, and
b
deducting only the amounts falling to be deducted in accordance with paragraph (a) of that subsection.
6
In subsection (7), for “(5C)” substitute “(5D)”.
6
In section 4 (rates of capital gains tax), after subsection (3A) insert—
3B
The rate of capital gains tax is 20% in respect of—
a
gains chargeable under section 14D accruing to a company in a tax year, and
b
gains chargeable under section 188D accruing in a tax year to the relevant body of an NRCGT group (as defined in that section).
7
For section 4B (deduction of losses etc in most beneficial way) substitute—
4BDeduction of losses etc in most beneficial way
1
Where it is necessary to determine—
a
from which chargeable gains an allowable loss accruing to a person is to be deducted, or
b
which allowable losses are to be deducted from any chargeable gains accruing to a person,
(including in a case falling within subsection (2)), the losses concerned may be used in whichever way is most beneficial to that person.
2
Where the gains accruing to a person in a tax year are (apart from this section) chargeable to capital gains tax at different rates, the exempt amount under section 3 may be used in respect of those gains in whichever way is most beneficial to that person.
3
This section is subject to any enactment which contains a limitation on the gains from which allowable losses may be deducted.
8
1
Section 8 (company’s profits for corporation tax purposes to include chargeable gains) is amended as follows.
2
In subsection (1), in paragraph (b), omit the words from “period” to the end and insert
period—
i
any allowable losses previously accruing to the company while it has been within the charge to corporation tax, and
ii
any allowable NRCGT losses previously accruing to the company.
3
After subsection (4A) insert—
4B
Subject to subsection (1)(b)(ii), nothing in this section applies in relation to an NRCGT gain chargeable to, or an NRCGT loss allowable for the purposes of, capital gains tax by virtue of section 14D or 188D.
9
In section 10A (temporary non-residents), as that section has effect where the year of departure (as defined in Part 4 of Schedule 45 to FA 2013) is the tax year 2012-13 or an earlier tax year, in subsection (5) after “section 10” insert “, 14D”.
10
In section 13 (attribution of gains to members of non-resident companies), in subsection (1A), for the words from “an ATED-related gain” to the end substitute—
a
an ATED-related gain chargeable to capital gains tax by virtue of section 2B (capital gains tax on ATED-related gains), or
b
an NRCGT gain chargeable to capital gains tax by virtue of section 14D or 188D (capital gains tax on NRCGT gains).
11
After section 14A insert—
UK residential property: non-resident CGT
14BMeaning of “non-resident CGT disposal”
1
For the purposes of this Act a disposal made by a person is a “non-resident CGT disposal” if—
a
it is a disposal of a UK residential property interest, and
b
condition A or B is met.
But see also subsection (5).
2
Condition A is—
a
in the case of an individual, that the individual is not resident in the United Kingdom for the tax year in question (see subsection (3)),
b
in the case of personal representatives of a deceased person, that the single and continuing body mentioned in section 62(3) is not resident in the United Kingdom,
c
in the case of the trustees of a settlement, that the single person mentioned in section 69(1) is not resident in the United Kingdom during any part of the tax year in question, and
d
in any other case, that the person is not resident in the United Kingdom at the relevant time.
3
In subsection (2)—
a
“the tax year in question” means the tax year in which any gain on the disposal accrues (or would accrue were there to be such a gain);
b
“the relevant time” means the time at which any gain on the disposal accrues (or would accrue were there to be such a gain).
4
Condition B is that—
a
the person is an individual, and
b
any gain accruing to the individual on the disposal would accrue in the overseas part of a tax year which is a split year as respects the individual.
5
A disposal by a person of a UK residential property interest is not a non-resident CGT disposal so far as any chargeable gains accruing to the person on the disposal—
a
would be gains in respect of which the person would be chargeable to capital gains tax—
i
under section 10(1) (non-resident with UK branch or agency), or
ii
under section 2 as a result of subsection (1C) of that section (corresponding provision relating to the overseas part of a split year), or
b
would be gains forming part of the person’s chargeable profits for corporation tax purposes by virtue of section 10B (non-resident company with UK permanent establishment).
14CMeaning of “disposal of a UK residential property interest”
Schedule B1 gives the meaning in this Act of “disposal of a UK residential property interest”.
14DPersons chargeable to capital gains tax on NRCGT gains
1
A person is chargeable to capital gains tax in respect of any chargeable NRCGT gain accruing to the person in the tax year on a non-resident CGT disposal.
See also section 188D(1).
2
Capital gains tax is charged on the total amount of chargeable NRCGT gains accruing to the person in the tax year, after deducting—
a
any allowable losses accruing to the person in the tax year on disposals of UK residential property interests, and
b
so far as they have not been allowed as a deduction from chargeable gains accruing in any previous tax year, any allowable losses accruing to the person in any previous tax year (not earlier than the tax year 1965-66) on disposals of UK residential property interests.
3
In subsection (2), the reference to chargeable NRCGT gains does not include any such gains which accrue to a member of an NRCGT group.
4
The only deductions that can be made from chargeable NRCGT gains to which subsection (2) applies are those permitted by this section.
This is subject to section 62(2AA) (carry-back of losses accruing in year of death).
5
See section 57B and Schedule 4ZZB for how to determine—
a
whether an NRCGT gain (or loss) accrues on a non-resident CGT disposal, and
b
the amount of any NRCGT gain (or loss) so accruing.
14EFurther provision about use of NRCGT losses
1
Subsections (2) to (4) apply in relation to an allowable NRCGT loss accruing to a person in a tax year on a non-resident CGT disposal.
2
The loss is not allowable as a deduction from chargeable gains accruing in any earlier tax year.
This is subject to section 62(2) and (2AA) (carry-back of losses accruing in year of death).
3
Relief is not to be given under this Act more than once in respect of the loss or any part of the loss.
4
Relief is not to be given under this Act in respect of the loss if, and so far as, relief has been or may be given in respect of it under the Tax Acts.
14FPersons not chargeable under section 14D if a claim is made
1
A person is not chargeable to capital gains tax under section 14D in respect of a chargeable NRCGT gain accruing to the person on a non-resident CGT disposal if the person—
a
is an eligible person in relation to the disposal, and
b
makes a claim under this section with respect to the disposal.
2
A diversely-held company which makes a non-resident CGT disposal is an eligible person in relation to the disposal.
3
A scheme (see subsection (7)) which makes a non-resident CGT disposal is an eligible person in relation to the disposal if condition A or B is met.
4
Condition A is that the scheme is a widely-marketed scheme throughout the relevant ownership period.
5
Condition B is that—
a
an investor in the scheme is an offshore fund, an open-ended investment company or an authorised unit trust (“the feeder fund”),
b
the scheme is a widely-marketed scheme throughout the alternative period, after taking into account—
i
the scheme documents relating to the feeder fund, and
ii
the intended investors in the feeder fund, and
c
the scheme and the feeder fund have the same manager.
6
A company carrying on life assurance business (as defined in section 56 of the Finance Act 2012) which makes a non-resident CGT disposal is an eligible person if immediately before the time of the disposal the interest in UK land which is the subject of that disposal is held for the purpose of providing benefits to policyholders in the course of that business.
7
In this section “scheme” means any of the following—
a
a unit trust scheme;
b
a company which is an open-ended investment company incorporated by virtue of regulations under section 262 of the Financial Services and Markets Act 2000;
c
a company incorporated under the law of a territory outside the United Kingdom which is, under that law, the equivalent of an open-ended investment company.
8
In this section “the relevant ownership period”, in relation to a scheme, means—
a
the period beginning with the day on which the scheme acquired the interest in UK land which (or part of which) is the subject of the non-resident CGT disposal and ending with the day on which that disposal occurs, or
b
if shorter, the period of 5 years ending with the day on which that disposal occurs.
9
For the purposes of subsection (5), the “alternative period”, in relation to a scheme, is the shorter of—
a
the relevant ownership period, and
b
the period beginning when the feeder fund first became an investor in the scheme and ending with the date of the disposal.
10
In this section—
“diversely-held company” means a company which is not a closely-held company;
“interest in UK land” has the same meaning as in Schedule B1;
“open-ended investment company” has the same meaning as in Part 17 of the Financial Services and Markets Act 2000 (see section 236 of that Act).
11
In Schedule C1—
a
Part 1 sets out the rules for determining whether or not a company is a closely-held company;
b
Part 2 sets out how to determine whether or not a scheme is a widely-marketed scheme at any time.
14GSection 14F: divided companies
1
This section applies where a company which makes a non-resident CGT disposal—
a
is a divided company, and
b
would, without this section, be an eligible person for the purposes of section 14F in relation to the disposal.
2
In determining for the purposes of section 14F whether or not the company is an eligible company in relation to the disposal, the company is to be treated as if it were a closely-held company if the conditions in subsection (3) are met.
3
The conditions are that—
a
the gain or loss accruing on the disposal is primarily or wholly attributable to a particular division of the company, and
b
if that division were a separate company, that separate company would be a closely-held company.
4
For the purposes of this section a company is a “divided company” if, under the law under which the company is formed, under the company’s articles of association or other document regulating the company or under arrangements entered into by or in relation to the company—
a
some or all of the assets of the company are available primarily, or only, to meet particular liabilities of the company, and
b
some or all of the members of the company, and some or all of its creditors, have rights primarily, or only, in relation to particular assets of the company.
5
References in this section to a “division” of a divided company are to an identifiable part of the company that carries on distinct business activities and to which particular assets and liabilities of the company are primarily or wholly attributable.
14HSection 14F: arrangements for avoiding tax
1
Subsection (2) applies where—
a
arrangements are entered into, and
b
the main purpose, or one of the main purposes, of any party entering into them (or any part of them) is to avoid capital gains tax being charged under section 14D as a result of a person not being an eligible person in relation to the disposal by virtue of subsection (2) (diversely-held companies) or, as the case may be, subsection (3) (widely-marketed schemes) of section 14F (persons not chargeable under section 14D if a claim is made).
2
The arrangements (or that part of the arrangements) are to be disregarded in determining whether or not the company is an eligible person by virtue of that subsection.
3
In this section “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).
12
In section 16 (computation of losses), in subsection (3), for “or 10B,” substitute “, 10B, 14D or 188D”.
13
After section 25 insert—
25ZADeemed disposal of UK residential property interest under section 25(3)
1
This section applies if, ignoring subsections (3) and (4)—
a
a gain or loss would accrue to a person on a disposal of a UK residential property interest deemed to have been made by virtue of section 25(3), and
b
on the assumptions in subsection (2), that gain or loss would be an NRCGT gain chargeable to, or an NRCGT loss allowable for the purposes of, capital gains tax by virtue of section 14D (see section 57B and Schedule 4ZZB).
2
The assumptions are—
a
the disposal is a non-resident CGT disposal, and
b
if the person is a company, any claim which the company could make under section 14F is made.
3
No gain or loss accrues to the person on that disposal.
4
But, on a subsequent disposal of the whole or part of the interest in UK land which is the subject of the disposal mentioned in subsection (1)(a), the whole or a corresponding part of the gain or loss which would have accrued to the person were it not for subsection (3)—
a
is deemed to accrue to the person (in addition to any gain or loss that actually accrues on that subsequent disposal), and
b
(if that would not otherwise be the case) is to be treated as an NRCGT gain chargeable to, or an NRCGT loss allowable for the purposes of, capital gains tax by virtue of section 14D accruing on a non-resident CGT disposal.
5
A person may make an election for subsections (3) and (4) not to apply in relation to the disposal mentioned in subsection (1)(a).
6
If the person is a company, such an election must be made within 2 years after the day on which the company ceases to carry on a trade in the United Kingdom through a branch or agency.
7
In this section, “interest in UK land” has the meaning given by paragraph 2 of Schedule B1.
14
After section 48 insert—
48AUnascertainable consideration
1
This section applies where—
a
a person (“P”) has made a non-resident CGT disposal in relation to which there accrued to P an NRCGT gain chargeable to, or an NRCGT loss allowable for the purposes of, capital gains tax by virtue of section 14D or 188D (“the original disposal”),
b
P acquired a right as the whole or part of the consideration for that disposal,
c
on P’s acquisition of the right, there was no corresponding disposal of it, and
d
the right is a right to unascertainable consideration (see subsections (4) to (6)).
2
If P subsequently receives consideration (“the ascertained consideration”) representing the whole or part of the consideration referred to in subsection (1)(d) and condition A in section 14B would have been met in relation to the original disposal had a gain on that disposal accrued at the time of the receipt of the ascertained consideration—
a
the ascertained consideration is treated as not accruing on the disposal of the right,
b
the costs of P’s acquisition of the right (or, in the case of a part disposal of the right, those costs so far as referable to the part disposed of) are taken to be nil, and
c
the following steps are taken.
Step 1
Any amount by which the ascertained consideration exceeds the relevant original consideration is treated as consideration (or further consideration) accruing on the original disposal.
If the relevant original consideration exceeds the ascertained consideration, the consideration accruing on the original disposal is treated as reduced by the amount of the excess.
Step 2
Compute the difference that the adjustment under step 1 makes to what (if any) NRCGT gain or loss, ATED-related gain or loss or other gain or loss accrues on the original disposal (computing this separately for each type of gain or loss).
The difference is “positive” if a loss is decreased (to nil or otherwise) or a gain created or increased.
The difference is “negative” if a gain is reduced (to nil or otherwise) or a loss created or increased.
Step 3
Any positive amount computed under step 2 is treated for the purposes of this Act and the Management Act as a gain (of the type appropriate to the computation) accruing to P at the time of the receipt of the ascertained consideration.
Any negative amount computed under step 2 is treated for the purposes of this Act and the Management Act as a loss (of the type appropriate to the computation) accruing to P at the time of the receipt of the ascertained consideration.
3
In step 1 in subsection (2), “the relevant original consideration” means the consideration accruing on the original disposal, so far as referable to the right mentioned in subsection (1)(b) (or, in the case of a part disposal of the right, referable to the part disposed of).
4
A right is a right to unascertainable consideration if, and only if—
a
it is a right to consideration the amount or value of which is unascertainable at the time when the right is conferred, and
b
that amount or value is unascertainable at that time on account of its being referable, in whole or in part, to matters which are uncertain at that time because they have not yet occurred.
This subsection is subject to subsections (5) and (6).
5
The amount or value of any consideration is not to be regarded as being unascertainable by reason only—
a
that the right to receive the whole or any part of the consideration is postponed or contingent, if the consideration or, as the case may be, that part of it is, in accordance with section 48, brought into account in the computation of the gain accruing to a person on the disposal of an asset, or
b
in a case where the right to receive the whole or any part of the consideration is postponed and is to be, or may be, to any extent satisfied by the receipt of property of one description or property of some other description, that some person has a right to select the property, or the description of property, that is to be received.
6
A right is not to be taken to be a right to unascertainable consideration by reason only that either the amount or the value of the consideration has not been fixed, if—
a
the amount will be fixed by reference to the value, and the value is ascertainable, or
b
the value will be fixed by reference to the amount, and the amount is ascertainable.
15
In section 57A (gains and losses on relevant high value disposals), after subsection (2) insert—
3
Subsection (2) does not apply where Part 4 of Schedule 4ZZB applies (non-resident CGT disposals which are or involve relevant high value disposals).
16
In Part 2, after Chapter 5 insert—
CHAPTER 6Computation of gains and losses: non-resident CGT disposals
57BGains and losses on non-resident CGT disposals
1
Schedule 4ZZB makes provision about the computation of—
a
NRCGT gains or losses, and
b
other gains or losses,
on non-resident CGT disposals.
2
For further provision about non-resident CGT disposals and NRCGT gains and losses see sections 14B to 14H and 188D and 188E.
17
1
Section 62 (death: general provisions) is amended as follows.
2
In subsection (2A), for the words from “are gains” to the end substitute
are—
a
gains that are treated as accruing by virtue of section 87 or 89(2) (read, where appropriate, with section 10A), or
b
NRCGT gains (see section 57B and Schedule 4ZZB).
3
After subsection (2A) insert—
2AA
Where allowable NRCGT losses (see section 57B and Schedule 4ZZB) are sustained by an individual in the year of assessment in which the individual dies, the losses may, so far as they cannot be deducted from chargeable gains accruing to the individual in that year, be deducted from any gains such as are mentioned in subsection (2A)(b) that accrued to the deceased in the 3 years of assessment preceding the year of assessment in which the death occurs, taking chargeable gains accruing in a later year before those accruing in an earlier year.
18
After section 80 insert—
80ADeemed disposal of UK residential property interest under section 80
1
Subsection (2) applies if, ignoring subsections (2) to (4)—
a
a gain or loss would accrue to the trustees of a settlement on a disposal of a UK residential property interest deemed to have been made by virtue of section 80(2), and
b
on the assumption that the disposal is a non-resident CGT disposal, that gain or loss would be a chargeable NRCGT gain or an allowable NRCGT loss (see section 57B and Schedule 4ZZB).
2
The trustees may elect for subsections (3) and (4) to have effect.
3
No gain or loss accrues to the trustees on that disposal.
4
But, on a subsequent disposal of the whole or part of the interest in UK land which is the subject of the disposal mentioned in subsection (1)(a), the whole or a corresponding part of the gain or loss which would have accrued to the trustees were it not for subsection (3)—
a
is deemed to accrue to the trustees (in addition to any gain or loss that actually accrues on that subsequent disposal), and
b
(if that would not otherwise be the case) is to be treated as a chargeable NRCGT gain or an allowable NRCGT loss accruing on a non-resident CGT disposal.
5
In this section, “interest in UK land” has the meaning given by paragraph 2 of Schedule B1.
19
In section 86 (attribution of gains to settlors with interest in non-resident or dual-resident settlements), after subsection (4) insert—
4ZA
Where a disposal of any settled property (which would apart from this subsection meet the condition in subsection (1)(e) with respect to the tax year) is a non-resident CGT disposal—
a
any chargeable gain or allowable loss accruing on the disposal, other than an NRCGT gain chargeable to, or an NRCGT loss allowable for the purposes of, capital gains tax by virtue of section 14D, is to be treated as if it were a chargeable gain or (as the case requires) allowable loss falling to be taken into account in calculating the amount mentioned in subsection (1)(e) for the tax year, and
b
the disposal is otherwise to be disregarded for the purposes of subsection (1)(e).
20
In section 87 (non-UK resident settlements: attribution of gains to beneficiaries), after subsection (5) insert—
5A
For the purpose of determining the section 2(2) amount for a settlement for a tax year—
a
any chargeable gain or allowable loss accruing in that tax year on a non-resident CGT disposal made (or treated as made) by the trustees, other than an NRCGT gain chargeable to, or an NRCGT loss allowable for the purposes of, capital gains tax by virtue of section 14D, is to be treated as if it were a chargeable gain or (as the case requires) allowable loss falling to be taken into account in calculating the amount mentioned in subsection (4)(a), and
b
such a disposal is otherwise to be disregarded.
21
1
Section 139 (reconstruction involving transfer of business) is amended as follows.
2
In subsection (1A)—
a
in paragraph (a), after “chargeable assets” insert “or NRCGT assets”;
b
in paragraph (b), after “chargeable assets” insert “or NRCGT assets”.
3
After subsection (1A) insert—
1AA
For the purposes of subsection (1A), an asset is an “NRCGT asset” in relation to a company at any time if—
a
the disposal of the asset by the company at that time would be a non-resident CGT disposal, and
b
the company would not be, in relation to that disposal, an eligible person (as defined in section 14F).
22
After section 159 insert—
159ANon-resident CGT disposals: roll-over relief
1
Section 152 does not apply in relation to a person who would (apart from that section) be chargeable to capital gains tax under section 14D or 188D in respect of NRCGT gains accruing on the disposal of the old assets, unless the new assets are qualifying residential property interests immediately after the time they are acquired.
2
For the purposes of this section an asset is a “qualifying residential property interest” at any time if it—
a
is an interest in UK land, and
b
consists of or includes a dwelling.
3
In this section—
a
“dwelling” has the meaning given by paragraph 4 of Schedule B1;
b
“interest in UK land” has the meaning given by paragraph 2 of Schedule B1;
c
“the old assets” and “the new assets” have the same meaning as in section 152;
d
the reference to disposal of the old assets includes a reference to disposal of an interest in them;
e
the reference to acquisition of the new assets includes a reference to acquisition of an interest in them or entering into an unconditional contract for the acquisition of them.
23
1
Section 165 (relief for gifts of business assets) is amended as follows.
2
In subsection (1), after “167,” insert “167A,”.
3
After subsection (7) insert—
7A
Subsections (7B) and (7C) apply in any case where—
a
the disposal is a non-resident CGT disposal, and
b
the transferee is resident in the United Kingdom.
7B
Subsections (4) and (6) have effect in relation to the disposal as if the references to “chargeable gain” were references to “chargeable NRCGT gain”.
7C
Subsection (7) has effect in relation to the disposal as if the reference to “the excess referred to in paragraph (b) above” were a reference to “the chargeable NRCGT gain which, ignoring this section and section 17(1), would accrue to the transferor on the disposal”.
24
In section 166 (gifts to non-residents), in subsection (1), for “Section 165(4)” substitute “Subject to section 167A, section 165(4)”.
25
In section 167 (gifts to foreign-controlled companies), in subsection (1), for “Section 165(4)” substitute “Subject to section 167A, section 165(4)”.
26
After section 167 insert—
167AGifts of UK residential property interests to non-residents
1
This section applies where the disposal in relation to which a claim could be made under section 165 is a disposal of a UK residential property interest to a transferee who is not resident in the United Kingdom and, ignoring section 165—
a
a gain would accrue to the transferor on the disposal, and
b
on the assumption that the disposal is a non-resident CGT disposal (whether or not that is the case), that gain would be a chargeable NRCGT gain (see section 57B and Schedule 4ZZB).
2
Section 165(4) has effect in relation to the disposal as if it read—
4
Where a claim for relief is made under this section in respect of the disposal, the amount of any chargeable gain which, apart from this section, would accrue to the transferor on the disposal, shall be reduced by an amount equal to the held-over gain on the disposal.
3
Where the disposal is a non-resident CGT disposal—
a
section 165(4), as modified by subsection (2) of this section, has effect in relation to the disposal as if the reference to “chargeable gain” were a reference to “chargeable NRCGT gain”,
b
section 165(6) has effect in relation to the disposal as if the references to “chargeable gain” were references to “chargeable NRCGT gain”, and
c
section 165(7) has effect in relation to the disposal as if the reference to “the excess referred to in paragraph (b) above” were a reference to “the chargeable NRCGT gain which, ignoring this section and section 17(1), would accrue to the transferor on the disposal”.
4
Where a claim for relief is made under section 165 in relation to the disposal mentioned in subsection (1), on a subsequent disposal by the transferee of the whole or part of the interest in UK land which is the subject of the disposal mentioned in subsection (1), the whole or a corresponding part of the held-over gain (see section 165(6))—
a
is deemed to accrue to the transferee (in addition to any gain or loss that actually accrues on that subsequent disposal), and
b
(if that would not otherwise be the case) is to be treated as an NRCGT gain chargeable to capital gains tax by virtue of section 14D accruing on a non-resident CGT disposal.
5
Where the subsequent disposal mentioned in subsection (4) is (or proves to be) a chargeable transfer for inheritance tax purposes, section 165(10) has effect in relation to the disposal as if—
a
the reference to “the chargeable gain accruing to the transferee on the disposal of the asset” were a reference to the chargeable gain accruing on the disposal as computed apart from subsection (4), and
b
the reference in section 165(10)(b) to “the chargeable gain” were a reference to—
i
the chargeable gain chargeable to capital gains tax by virtue of any provision of this Act accruing on the disposal, and
ii
the held-over gain deemed to accrue under subsection (4).
6
In this section, “interest in UK land” has the meaning given by paragraph 2 of Schedule B1.
27
In section 168 (emigration of donee), in subsection (1), after paragraph (a) insert—
aa
the transferee is resident in the United Kingdom at the time of that disposal; and
28
After section 168 insert—
168ADeemed disposal of UK residential property interest under section 168
1
Subsection (2) applies if, ignoring subsections (2) to (4)—
a
a gain would accrue to a transferee on a disposal of a UK residential property interest deemed to have been made by virtue of section 168(1), and
b
on the assumption that the disposal is a non-resident CGT disposal, that gain would be an NRCGT gain chargeable to capital gains tax by virtue of section 14D (see section 57B and Schedule 4ZZB).
2
The transferee may elect for subsections (3) and (4) to have effect.
3
The held-over gain (within the meaning of section 165 or 260) does not accrue to the transferee on that disposal.
4
But, on a subsequent disposal of the whole or part of the interest in UK land which is the subject of the disposal mentioned in subsection (1)(a), the whole or a corresponding part of the held-over gain which would have accrued to the transferee were it not for subsection (3)—
a
is deemed to accrue to the transferee (in addition to any gain or loss that actually accrues on that subsequent disposal), and
b
(if that would not otherwise be the case) is to be treated as an NRCGT gain chargeable to capital gains tax by virtue of section 14D accruing on a non-resident CGT disposal.
5
In this section, “interest in UK land” has the meaning given by paragraph 2 of Schedule B1.
29
After section 187A insert—
187BDeemed disposal of UK residential property interest under section 185
1
This section applies if, ignoring subsections (3) and (4)—
a
a gain or loss would accrue to a company on a disposal of a UK residential property interest deemed to have been made by virtue of section 185(2), and
b
on the assumptions in subsection (2), that gain or loss would be an NRCGT gain chargeable to, or an NRCGT loss allowable for the purposes of, capital gains tax by virtue of section 14D or 188D (see section 57B and Schedule 4ZZB).
2
The assumptions are that—
a
the disposal is a non-resident CGT disposal, and
b
any claim which the company could make under section 14F is made.
3
No gain or loss accrues to the company on that disposal.
4
But, on a subsequent disposal of the whole or part of the interest in UK land which is the subject of the disposal mentioned in subsection (1)(a), the whole or a corresponding part of the gain or loss which would have accrued to the company were it not for subsection (3)—
a
is deemed to accrue to the company (in addition to any gain or loss that actually accrues on that subsequent disposal), and
b
(if that would not otherwise be the case) is to be treated as an NRCGT gain chargeable to, or an NRCGT loss allowable for the purposes of, capital gains tax by virtue of section 14D accruing on a non-resident CGT disposal.
5
A company may make an election for subsections (3) and (4) not to apply in relation to the disposal mentioned in subsection (1)(a).
6
Such an election must be made within 2 years after the day on which the company ceases to be resident in the United Kingdom.
7
In this section, “interest in UK land” has the meaning given by paragraph 2 of Schedule B1.
30
Before section 189 (and the italic heading before it), insert—
Pooling of NRCGT gains and losses
188AElection for pooling
1
A “pooling election” is an election which—
a
specifies the date from which the election is to have effect (the “effective date” of the election), and
b
is made by all those members of a group (the “potential pooling group”) which are qualifying members.
2
For this purpose the “qualifying members” of a group are all the companies which are members of that group and meet the qualifying conditions on the effective date of the election.
3
The “qualifying conditions” are met by a company at any time when it—
a
is not resident in the United Kingdom,
b
is a closely-held company,
c
is not a company carrying on life assurance business (as defined in section 56 of the Finance Act 2012),
d
does not hold any chargeable residential assets, and
e
holds an asset the disposal of which would be a disposal of a UK residential property interest.
4
For the purposes of subsection (3), an asset is a “chargeable residential asset” at any time if a disposal of the asset at that time would be a non-resident CGT disposal but for section 14B(5) (gains forming part of chargeable profits for corporation tax purposes by virtue of section 10B etc).
5
The day on which a pooling election is made must not be later than the 30th day after the day specified as its effective date.
6
A pooling election is irrevocable.
7
In this section—
“closely-held company” is to be interpreted in accordance with Part 1 of Schedule C1;
“group” is to be interpreted in accordance with section 170.
188BMeaning of “NRCGT group”
1
The companies which make a pooling election form an NRCGT group.
2
An NRCGT group continues to exist as long as at least one member of the NRCGT group continues to be a member of the potential pooling group and to meet the conditions in paragraphs (a) to (d) of section 188A(3).
3
See also section 188F (companies becoming eligible to join NRCGT group) and section 188G (company ceasing to be a member of an NRCGT group).
188CTransfers within an NRCGT group
1
This section applies where a company (“company A”) makes a non-resident CGT disposal to another company (“company B”) at a time when both companies are members of the same NRCGT group.
2
In subsections (3) to (5) “the asset” means the asset which is the subject of that disposal.
3
For the relevant purposes (see subsection (4))—
a
company A’s acquisition of the asset is treated as company B’s acquisition of the asset,
b
everything done by company A in relation to the asset in the period of company A’s ownership of the asset is accordingly treated as done by company B, and
c
the disposal mentioned in subsection (1) is accordingly disregarded.
4
The “relevant purposes” means the purposes of—
a
the determination of whether or not an NRCGT gain or loss accrues on the disposal mentioned in subsection (1) or any subsequent disposal of the asset;
b
the determination of the amount of any such gain or loss;
c
the treatment for capital gains tax purposes of any such gain or loss.
5
Accordingly, references in subsection (3) to an acquisition made by, or anything else done by, company A include anything that company A is treated as having done as a result of the application of this section in relation to an earlier disposal of the asset.
6
Nothing in this section affects the treatment of the disposal in question for any other purposes (including the computation of any gains or losses, other than NRCGT gains or losses, that may accrue on the disposal).
188DPerson chargeable to capital gains tax on NRCGT gains accruing to members of an NRCGT group
1
The relevant body for a tax year (“year Y”) of an NRCGT group (see subsection (4)) is chargeable to capital gains tax in respect of chargeable NRCGT gains accruing to members of the group in the tax year on non-resident CGT disposals (and section 14D(1) does not apply to such gains).
2
Capital gains tax is charged on the total amount of chargeable NRCGT gains accruing in year Y to members of the NRCGT group, after deducting—
a
any allowable NRCGT losses accruing in year Y to any member of the NRCGT group,
b
so far as they have not been allowed as a deduction from chargeable gains accruing in any previous tax year, any allowable NRCGT losses which in any previous tax year (not earlier than the tax year 2015-16) accrued to any member of the NRCGT group, and
c
so far as they have not been allowed as a deduction from chargeable gains accruing in any previous tax year, any allowable losses (not falling within paragraph (b)) on disposals of UK residential property interests which in any previous tax year (not earlier than the tax year 1965-66) accrued to any company which is, at any time in year Y, a member of the NRCGT group.
3
The only deductions that can be made in calculating the total amount of chargeable NRCGT gains accruing as mentioned in subsection (2) are those permitted by this section.
4
The “relevant body” of an NRCGT group for a tax year is the body constituted by all the companies which are members of that NRCGT group at any time in that tax year.
5
This Act and the Management Act have effect with any modifications that may be necessary in relation to cases where the relevant body of an NRCGT group is chargeable to capital gains tax in accordance with this section.
188EFurther provision about group losses
1
Relief is not to be given under this Act more than once in respect of a group loss or any part of a group loss.
2
Relief is not to be given under this Act in respect of a group loss if, and so far as, relief has been or may be given in respect of it under the Tax Acts.
3
No relief is to be given otherwise than in accordance with this section for group losses.
4
In this section “group loss” means an NRCGT loss accruing to a member of an NRCGT group.
188FCompanies becoming eligible to join an NRCGT group
1
A company which is not a member of an NRCGT group and is eligible to become a member of that group may elect to do so.
2
A company is eligible to become a member of an NRCGT group at any time when it—
a
is a member of the potential pooling group, and
b
meets the qualifying conditions.
But see subsections (3) and (4).
3
Subsection (4) applies if, throughout a period of 12 months, a company—
a
holds a UK residential asset, and
b
is eligible to become a member of an NRCGT group.
4
If the company has not elected to become a member of the NRCGT group by the end of that period of 12 months, the company is not eligible to become a member of the NRCGT group at any time after the end of that period of 12 months.
5
The effect of subsection (4) in relation to a company expires if at any time the company—
a
no longer holds the whole or part of any UK residential asset that was held by the company at any time in the 12 month period referred to in subsection (3), but
b
holds another UK residential asset.
6
For the purposes of this section a person holds a “UK residential asset” at any time when the person holds an interest in UK land the disposal of which would be a disposal of a UK residential property interest.
188GCompany ceasing to be a member of an NRCGT group
1
A company ceases to be a member of an NRCGT group if it ceases—
a
to be a member of the potential pooling group, or
b
to meet the any of the conditions in paragraphs (a) to (d) of section 188A(3).
2
Where a company ceases to be a member of an NRCGT group, the company is treated for the purposes of this Act and the Management Act as having—
a
disposed of the relevant assets immediately before the company ceased to be a member of the NRCGT group, and
b
immediately re-acquired them,
at their market value at that time.
3
References in subsection (2) to a company ceasing to be a member of an NRCGT group do not apply to cases where a company ceases to be a member of the potential pooling group in consequence of another member of that group ceasing to exist.
4
Subsection (2) does not apply in a case where all the companies which are members of an NRCGT group cease to be members of that NRCGT group by reason only of an event which causes—
a
the principal company of the potential pooling group to cease to be a closely-held company, or
b
the head of a sub-group of which they are members, to cease to be a closely-held company or to become a member of another group (as defined in section 170).
5
Subsection (2) does not apply where a company which is a member of an NRCGT group ceases to be a member of the potential pooling group by reason only of the fact that the principal company of the potential pooling group becomes a member of another group (as defined in section 170).
6
In subsection (2) “the relevant assets” means any assets the company holds immediately before it ceases to be a member of the NRCGT group the disposal of which would be a disposal of a UK residential property interest (see Schedule B1).
7
For the purposes of this section—
“sub-group” means anything that would be a group (as defined in section 170) in the absence of subsections (4) and (6) of section 170;
the “head” of a sub-group is the company which is not a 75% subsidiary of any other member of the sub-group;
references to the “principal company” of the potential pooling group are to be interpreted in accordance with section 170.
188HThe responsible members of an NRCGT group
1
Anything required or authorised to be done under this Act or the Management Act by or in relation to the relevant body of an NRCGT group is required or authorised to be done by or in relation to all the responsible members of that NRCGT group for that tax year.
2
The “responsible members” of an NRCGT group for a tax year are—
a
all the companies which are members of the NRCGT group at any time in that tax year, and
b
any companies which have subsequently become members of the NRCGT group.
3
This section is subject to section 188J (representative company).
188IJoint and several liability of responsible members
Where the responsible members of an NRCGT group are liable, in connection with their responsibility under section 188H to make a payment of tax or interest on unpaid tax, or pay any other amount, that liability is a joint and several liability of those responsible members.
188JThe representative company of an NRCGT group
1
Anything required or authorised to be done under this Act or the Management Act by or in relation to the relevant body of an NRCGT group may instead be done by or in relation to the company which is for the time being the representative company of the group.
2
This includes the making of the declaration required by section 9(2) or 12ZB(4)(b) of the Management Act (declaration that return is correct and complete).
3
The “representative company” means a member of the NRCGT group nominated by all the members of that group for the purposes of this section.
4
A nomination under subsection (3), or the revocation of such a nomination, has effect only after written notice of the nomination or revocation has been given to an officer of Revenue and Customs.
188KInterpretation of sections 188A to 188J
1
In sections 188A to 188J—
a
references to the “relevant body” of an NRCGT group are to be interpreted in accordance with section 188D(4);
b
references to an NRCGT gain or loss accruing to a member of an NRCGT group are to such a gain or loss accruing to a company at a time when the company is a member of the NRCGT group.
2
In sections 188A to 188J and this section—
“company” is to be interpreted in accordance with section 170(9);
“interest in UK land” has the same meaning as in Schedule B1;
“pooling election” has the meaning given by section 188A(1);
“potential pooling group”, in relation to an NRCGT group, is to be interpreted in accordance with section 188A(1)(b);
“qualifying conditions” has the meaning given by section 188A(3).
31
1
Section 260 (gifts on which inheritance tax is chargeable etc) is amended as follows.
2
In subsection (1), for “and 261” substitute “, 261 and 261ZA”.
3
After subsection (6) insert—
6ZA
Subsections (6ZB) and (6ZC) apply in any case where—
a
the disposal is a non-resident CGT disposal, and
b
the transferee is resident in the United Kingdom.
6ZB
Subsections (3) and (4) have effect in relation to the disposal as if the reference to “chargeable gain” were a reference to “chargeable NRCGT gain”.
6ZC
Subsection (5) has effect in relation to the disposal as if the reference to “the excess referred to in paragraph (b) above” were a reference to “the chargeable NRCGT gain which, ignoring this section and section 17(1), would accrue to the transferor on the disposal”.
32
In section 261 (section 260 relief: gifts to non-residents), in subsection (1), for “Section 260(3)” substitute “Subject to section 261ZA, section 260(3)”.
33
After section 261 insert—
261ZAGifts of UK residential property interests to non-residents
1
This section applies where the disposal in relation to which a claim could be made under section 260 is a disposal of a UK residential property interest to a transferee who is not resident in the United Kingdom and, ignoring section 260—
a
a gain would accrue to the transferor on the disposal, and
b
on the assumption that the disposal is a non-resident CGT disposal (whether or not that is the case), that gain would be a chargeable NRCGT gain (see section 57B and Schedule 4ZZB).
2
Section 260(3) has effect in relation to the disposal as if it read—
3
Where this subsection applies in relation to a disposal, the amount of any chargeable gain which, apart from this section, would accrue to the transferor on the disposal, shall be reduced by an amount equal to the held-over gain on the disposal.
3
Where the disposal is a non-resident CGT disposal—
a
section 260(3), as modified by subsection (2) of this section, and section 260(4) have effect in relation to the disposal as if the references to “chargeable gain” were references to “chargeable NRCGT gain”, and
b
section 260(5) has effect in relation to the disposal as if the reference to “the excess referred to in paragraph (b) above” were a reference to “the chargeable NRCGT gain which, ignoring this section and section 17(1), would accrue to the transferor on the disposal”.
4
Where a claim for relief is made under section 260 in relation to the disposal mentioned in subsection (1), on a subsequent disposal by the transferee of the whole or part of the interest in UK land which is the subject of the disposal mentioned in subsection (1), the whole or a corresponding part of the held-over gain (see section 260(4))—
a
is deemed to accrue to the transferee (in addition to any gain or loss that actually accrues on that subsequent disposal), and
b
(if that would not otherwise be the case) is to be treated as a chargeable NRCGT gain accruing on a non-resident CGT disposal.
5
Where the subsequent disposal mentioned in subsection (4) is a disposal within section 260(2)(a), subsection (7) of that section has effect in relation to the disposal as if—
a
the reference to “the chargeable gain accruing to the transferee on the disposal of the asset” were a reference to the chargeable gain accruing on the disposal as computed apart from subsection (4), and
b
the reference in section 260(7)(b) to “the chargeable gain” were a reference to—
i
the chargeable gain (or, where the disposal is a non-resident CGT disposal, the chargeable NRCGT gain) accruing on the disposal, and
ii
the held-over gain deemed to accrue under subsection (4).
6
In this section, “interest in UK land” has the meaning given by paragraph 2 of Schedule B1.
34
In section 288 (interpretation), in subsection (1), at the appropriate places insert—
“disposal of a UK residential property interest” has the meaning given by Schedule B1;”
“non-resident CGT disposal” has the meaning given by section 14B;
“NRCGT gain” is to be interpreted in accordance with section 57B and Schedule 4ZZB;
“NRCGT group” is to be interpreted in accordance with section 188B (read with sections 188F and 188G);
“NRCGT loss” is to be interpreted in accordance with section 57B and Schedule 4ZZB;
“NRCGT return” has the meaning given by section 12ZB(2) of the Management Act;
35
1
Schedule 1 (application of exempt amount etc in cases involving settled property) is amended as follows.
2
In paragraph 1(1), for “(5C)” substitute “(5D)”.
3
In paragraph 2(1), for “(5C)” substitute “(5D)”.
36
After Schedule A1, insert—
SCHEDULE B1Disposals of UK residential property interests
1Meaning of “disposal of a UK residential property interest”
1
For the purposes of this Act, the disposal by a person (“P”) of an interest in UK land (whether made before or after this Schedule comes into force) is a “disposal of a UK residential property interest” if the first or second condition is met.
2
The first condition is that—
a
the land has at any time in the relevant ownership period consisted of or included a dwelling, or
b
the interest in UK land subsists for the benefit of land that has at any time in the relevant ownership period consisted of or included a dwelling.
3
The second condition is that the interest in UK land subsists under a contract for an off-plan purchase.
4
In sub-paragraph (2) “relevant ownership period” means the period—
a
beginning with the day on which P acquired the interest in UK land or 6 April 2015 (whichever is later), and
b
ending with the day before the day on which the disposal occurs.
5
If the interest in UK land disposed of by P as mentioned in sub-paragraph (1) results from interests in UK land which P has acquired at different times (“the acquired interests”), P is regarded for the purposes of sub-paragraph (4)(a) as having acquired the interest when P first acquired any of the acquired interests.
6
In this paragraph—
“contract for an off-plan purchase” means a contract for the acquisition of land consisting of, or including, a building or part of a building that is to be constructed or adapted for use as a dwelling;
“dwelling” has the meaning given by paragraph 4.
7
Paragraphs 10 and 21 of Schedule 4ZZB contain further provision about interests under contracts for off-plan purchases.
2“Interest in UK land”
1
In this Schedule, “interest in UK land” means—
a
an estate, interest, right or power in or over land in the United Kingdom, or
b
the benefit of an obligation, restriction or condition affecting the value of any such estate, interest, right or power,
other than an excluded interest.
2
The following are excluded interests—
a
any security interest;
b
a licence to use or occupy land;
c
in England and Wales or Northern Ireland—
i
a tenancy at will;
ii
a manor.
3
In sub-paragraph (2) “security interest” means an interest or right (other than a rentcharge) held for the purpose of securing the payment of money or the performance of any other obligation.
4
In relation to land in Scotland the reference in sub-paragraph (3) to a rentcharge is to be read as a reference to a feu duty or a payment mentioned in section 56(1) of the Abolition of Feudal Tenure etc (Scotland) Act 2000 (asp 5).
5
The Treasury may by regulations provide that any other description of interest or right in relation to land in the United Kingdom is an excluded interest.
6
Regulations under sub-paragraph (5) may make incidental, consequential, supplementary or transitional provision or savings.
3Grants of options
1
Sub-paragraph (2) applies where—
a
a person (“P”) grants at any time an option binding P to sell an interest in UK land, and
b
a disposal by P of that interest in UK land at that time would be a disposal of a UK residential property interest by virtue of paragraph 1.
2
The grant of the option is regarded for the purposes of this Schedule as the disposal of an interest in the land in question (if it would not be so regarded apart from this paragraph).
3
Nothing in this paragraph affects the operation of section 144 in relation to the grant of the option (or otherwise).
4
Subsection (6) of section 144 (interpretation of references to “sale” etc) applies for the purposes of this paragraph as it applies for the purposes of that section.
4Meaning of “dwelling”
1
For the purposes of this Schedule, a building counts as a dwelling at any time when—
a
it is used or suitable for use as a dwelling, or
b
it is in the process of being constructed or adapted for such use.
2
Land that at any time is, or is intended to be, occupied or enjoyed with a dwelling as a garden or grounds (including any building or structure on such land) is taken to be part of that dwelling at that time.
3
For the purposes of sub-paragraph (1) a building is not used (or suitable for use) as a dwelling if it is used as—
a
residential accommodation for school pupils;
b
residential accommodation for members of the armed forces;
c
a home or other institution providing residential accommodation for children;
d
a home or other institution providing residential accommodation with personal care for persons in need of personal care by reason of old age, disability, past or present dependence on alcohol or drugs or past or present mental disorder;
e
a hospital or hospice;
f
a prison or similar establishment;
g
a hotel or inn or similar establishment.
4
For the purposes of sub-paragraph (1) a building is not used (or suitable for use) as a dwelling if it is used, or suitable for use, as an institution (not falling within any of paragraphs (c) to (f) of sub-paragraph (3)) that is the sole or main residence of its residents.
5
For the purposes of sub-paragraph (1) a building is not used (or suitable for use) as a dwelling if it falls within—
a
paragraph 4 of Schedule 14 to the Housing Act 2004 (certain buildings occupied by students and managed or controlled by their educational establishment etc),
b
any corresponding provision having effect in Scotland, or
c
any corresponding provision having effect in Northern Ireland.
6
In sub-paragraph (5) “corresponding provision” means provision designated by regulations made by the Treasury as corresponding to the provision mentioned in sub-paragraph (5)(a).
7
If the accommodation provided by a building meets the conditions in sub-paragraph (8) in a tax year, the building is not to be regarded for the purposes of sub-paragraph (1) as used or suitable for use as a dwelling at any time in that tax year.
8
The conditions are that the accommodation—
a
includes at least 15 bedrooms,
b
is purpose-built for occupation by students, and
c
is occupied by students on at least 165 days in the tax year.
In the expression “purpose-built” the reference to building includes conversion.
9
For the purposes of sub-paragraph (8), accommodation is occupied by students if it is occupied exclusively or mainly by persons who occupy it for the purpose of undertaking a course of education (otherwise than as school pupils).
10
A building which (for any reason) becomes temporarily unsuitable for use as a dwelling is treated for the purposes of sub-paragraph (1) as continuing to be suitable for use as a dwelling; but see also the special rules in—
a
paragraph 6 (damage to a dwelling), and
b
paragraph 8(7) (periods before or during certain works).
11
In this paragraph “building” includes a part of a building.
5Power to modify meaning of “use as a dwelling”
1
The Treasury may by regulations amend paragraph 4 for the purpose of clarifying or changing the cases where a building is or is not to be regarded as being used as a dwelling (or suitable for use as a dwelling).
2
The provision that may be made under sub-paragraph (1) includes, in particular, provision omitting or adding cases where a building is or is not to be regarded as being used (or as suitable for use) as a dwelling.
3
Regulations under this paragraph may make incidental, consequential, supp