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What's going on in the UK Parliament

What's going on
in the UK Parliament

Finance (No. 2) Bill

EUROPEAN CONVENTION ON HUMAN RIGHTS

The Chancellor of the Exchequer has made the following statement under section 19(1)(a) of the Human Rights Act 1998:

In my view the provisions of the Finance (No. 2) Bill are compatible with the Convention rights.

Contents

  1. Part 1

    Direct taxes

    1. Chapter 1

      Charge and principal rates

      1. Income tax charge and rates

        1. 1. Income tax charge for tax year 2017-18

        2. 2. Main rates of income tax for tax year 2017-18

        3. 3. Default and savings rates of income tax for tax year 2017-18

        4. 4. Starting rate limit for savings for tax year 2017-18

        5. 5. Dividend nil rate for tax year 2018-19 etc

      2. Corporation tax charge

        1. 6. Corporation tax charge for financial year 2018

    2. Chapter 2

      Income tax

      1. Employment income

        1. 7. Workers’ services provided to public sector through intermediaries

        2. 8. Optional remuneration arrangements

        3. 9. Taxable benefits: time limit for making good

        4. 10. Taxable benefits: ultra-low emission vehicles

        5. 11. Taxable benefits: asset made available without transfer

        6. 12. Pensions advice

        7. 13. Legal expenses etc

        8. 14. Termination payments etc: amounts chargeable on employment income

        9. 15. PAYE settlement agreements

      2. Pensions

        1. 16. Money purchase annual allowance

        2. 17. Overseas pensions

        3. 18. Pensions: offshore transfers

      3. Trading and property businesses income

        1. 19. Calculation of profits of trades and property businesses

        2. 20. Trading and property allowances

      4. Investment income

        1. 21. Deduction of income tax at source

        2. 22. Life insurance policies: recalculating gains on part surrenders etc

        3. 23. Personal portfolio bonds

      5. Reliefs relating to investments

        1. 24. EIS and SEIS: the no pre-arranged exits requirement

        2. 25. VCTs: follow-on funding

        3. 26. VCTs: exchange of non-qualifying shares and securities

        4. 27. Social investment tax relief

        5. 28. Business investment relief

    3. Chapter 3

      Corporation tax

      1. Corporation tax reliefs

        1. 29. Carried-forward losses

        2. 30. Losses: counteraction of avoidance arrangements

        3. 31. Corporate interest restriction

        4. 32. Museum and gallery exhibitions

        5. 33. Grassroots sport

        6. 34. Profits from the exploitation of patents: cost-sharing arrangements

      2. Hybrids and other mismatches

        1. 35. Permitted taxable periods of payees and deductions for amortisation

      3. Northern Ireland

        1. 36. Trading profits taxable at the Northern Ireland rate

    4. Chapter 4

      Chargeable gains

      1. 37. Exemption from attribution of carried interest gains

      2. 38. Elections in relation to assets appropriated to trading stock

      3. 39. Substantial shareholding exemption

      4. 40. Substantial shareholding exemption: institutional investors

    5. Chapter 5

      Provisions relating to more than one tax

      1. Domicile, overseas property etc

        1. 41. Deemed domicile: income tax and capital gains tax

        2. 42. Deemed domicile: inheritance tax

        3. 43. Settlements and transfer of assets abroad: value of benefits

        4. 44. Inheritance tax on overseas property representing UK residential property

      2. Employee shareholder shares

        1. 45. Employee shareholder shares: amount treated as earnings

        2. 46. Employee shareholder shares: abolition of CGT exemption

        3. 47. Employee shareholder shares: purchase by company

      3. Disguised remuneration

        1. 48. Employment income provided through third parties

        2. 49. Trading income provided through third parties

        3. 50. Disguised remuneration schemes: restriction of income tax relief

        4. 51. Disguised remuneration schemes: restriction of corporation tax relief

      4. Capital allowances

        1. 52. First-year allowance for expenditure on electric vehicle charging points

      5. Transactions in UK land

        1. 53. Disposals concerned with land in United Kingdom

      6. Co-ownership authorised contractual schemes

        1. 54. Co-ownership authorised contractual schemes: capital allowances

        2. 55. Co-ownership authorised contractual schemes: information requirements

        3. 56. Co-ownership authorised contractual schemes: offshore funds

  2. Part 2

    Indirect taxes

    1. VAT

      1. 57. VAT: zero-rating of adapted motor vehicles etc

    2. Insurance premium tax

      1. 58. IPT: standard rate

      2. 59. IPT: anti-forestalling provision

    3. Landfill tax

      1. 60. Landfill tax: taxable disposals

    4. Air passenger duty

      1. 61. Air passenger duty: rates of duty from 1 April 2017

      2. 62. Air passenger duty: rates of duty from 1 April 2018

    5. Petroleum revenue tax

      1. 63. Petroleum revenue tax: elections for oil fields to become non-taxable

    6. Vehicle excise duty

      1. 64. VED: rates for light passenger vehicles, light goods vehicles, motorcycles etc

    7. Alcohol duties

      1. 65. Alcoholic liquor duties: rates

    8. Gaming duties

      1. 66. Gaming duty: rates

      2. 67. Remote gaming duty: freeplay

    9. Tobacco products

      1. 68. Tobacco products duty: rates

      2. 69. Tobacco products duty: minimum excise duty

      3. 70. Tobacco products manufacturing machinery: licensing scheme

  3. Part 3

    Soft drinks industry levy

    1. Introductory

      1. 71. Soft drinks industry levy

      2. 72. “Soft drink” and “package”

      3. 73. Meaning of “prepared drink”

    2. Chargeable soft drinks

      1. 74. Meaning of “chargeable soft drink”

      2. 75. Sugar content condition

      3. 76. Exempt soft drinks

    3. Charging of the soft drinks industry levy

      1. 77. Charge to soft drinks industry levy

      2. 78. Chargeable events: soft drinks packaged in the UK

      3. 79. Chargeable events: soft drinks imported into the UK

      4. 80. Secondary warehousing regulations

      5. 81. Liability to pay the levy

      6. 82. Levy rates

    4. Exemption etc

      1. 83. Small producer exemption

      2. 84. Meaning of “small producer”

      3. 85. Tax credits

    5. Registration

      1. 86. The register

      2. 87. Liability to register: packagers

      3. 88. Liability to register: producers

      4. 89. Liability to register: imported chargeable soft drinks

      5. 90. Notification of liability and registration

      6. 91. Voluntary registration: small producers

      7. 92. Cancellation of registration under section 87, 88 or 89

      8. 93. Cancellation of voluntary registration

      9. 94. Correction of the register

      10. 95. Applications, notifications etc

    6. Offences

      1. 96. Fraudulent evasion

      2. 97. Failure to notify registration liability

    7. Administration and enforcement

      1. 98. Payment, collection and recovery

      2. 99. Records

      3. 100. Power to make further provision about enforcement

      4. 101. Appeals etc

      5. 102. Supplementary amendments

    8. Miscellaneous

      1. 103. Regulations: death, incapacity or insolvency of person carrying on a business

      2. 104. Provisional collection of soft drinks industry levy

    9. General

      1. 105. Interpretation

      2. 106. Regulations

      3. 107. Commencement

  4. Part 4

    Fulfilment businesses

    1. 108. Carrying on a third country goods fulfilment business

    2. 109. Requirement for approval

    3. 110. Register of approved persons

    4. 111. Regulations relating to approval, registration etc.

    5. 112. Disclosure of information by HMRC

    6. 113. Offence

    7. 114. Forfeiture

    8. 115. Penalties

    9. 116. Appeals

    10. 117. Regulations

    11. 118. Interpretation

    12. 119. Commencement

  5. Part 5

    Administration, avoidance and enforcement

    1. Reporting and record-keeping

      1. 120. Digital reporting and record-keeping for income tax etc

      2. 121. Digital reporting and record-keeping for income tax etc: further amendments

      3. 122. Digital reporting and record-keeping for VAT

    2. Enquiries

      1. 123. Partial closure notices

    3. Avoidance etc

      1. 124. Errors in taxpayers’ documents

      2. 125. Penalties for enablers of defeated tax avoidance

      3. 126. Disclosure of tax avoidance schemes: VAT and other indirect taxes

      4. 127. Promoters of tax avoidance schemes: threshold conditions etc

      5. 128. Requirement to correct certain offshore tax non-compliance

      6. 129. Penalty for transactions connected with VAT fraud etc

    4. Customs enforcement powers

      1. 130. Power to enter premises and inspect goods

      2. 131. Power to search vehicles or vessels

    5. Information

      1. 132. Data-gathering from money service businesses

  6. Part 6

    Final

    1. 133. Northern Ireland welfare payments: updating statutory reference

    2. 134. Interpretation

    3. 135. Short title

    1. Schedule 1

      Workers’ services provided to public sector through intermediaries

      1. Part 1

        Preliminary amendments

      2. Part 2

        New Chapter 10 of Part 2 of ITEPA 2003

      3. Part 3

        Consequential amendments

      4. Part 4

        Commencement

    2. Schedule 2

      Optional remuneration arrangements

    3. Schedule 3

      Overseas pensions

      1. Part 1

        Registered pension schemes established outside the UK

      2. Part 2

        Income tax on pension income

      3. Part 3

        Lump sums for UK residents from foreign pension schemes

    4. Schedule 4

      Pensions: offshore transfers

      1. Part 1

        Charges where payments made in respect of overseas pensions

      2. Part 2

        Income tax on pension transfers: overseas transfer charge

    5. Schedule 5

      Trades and property businesses: calculation of profits

      1. Part 1

        Trades etc: amendments of ITTOIA 2005

      2. Part 2

        Property businesses: amendments of ITTOIA 2005

      3. Part 3

        Trades etc: amendments of other Acts

      4. Part 4

        Commencement and transitional provision

    6. Schedule 6

      Trading and property allowances

      1. Part 1

        Main provisions

      2. Part 2

        Consequential amendments

      3. Part 3

        Commencement

    7. Schedule 7

      Deduction of income tax at source

      1. Part 1

        Interest distributions of investment trust or authorised investment fund

      2. Part 2

        Interest on peer-to-peer lending

      3. Part 3

        Further amendment and commencement

    8. Schedule 8

      Social investment tax relief

      1. Part 1

        Amendments of Part 5B of ITA 2007

      2. Part 2

        Consequential amendments

      3. Part 3

        Commencement

    9. Schedule 9

      Relief for carried-forward losses

      1. Part 1

        Amendment of general rules about carrying forward losses

      2. Part 2

        Restriction on deductions in respect of carried-forward losses

      3. Part 3

        Group relief for carried-forward losses

      4. Part 4

        Insurance companies: carrying forward BLAGAB trade losses

      5. Part 5

        Carrying forward trade losses in certain creative industries

      6. Part 6

        Oil activities

      7. Part 7

        Oil contractors

      8. Part 8

        Tax avoidance

      9. Part 9

        Northern Ireland trading losses etc

      10. Part 10

        Minor and consequential amendments

      11. Part 11

        Commencement etc

    10. Schedule 10

      Corporate interest restriction

      1. Part 1

        New Part 10 of TIOPA 2010

      2. Part 2

        New Schedule 7A to TIOPA 2010

      3. Part 3

        Consequential amendments

      4. Part 4

        Commencement and transitional provision

    11. Schedule 11

      Relief for production of museum and gallery exhibitions

      1. Part 1

        Amendment of CTA 2009

      2. Part 2

        Consequential amendments

      3. Part 3

        Commencement

    12. Schedule 12

      Trading profits taxable at the Northern Ireland rate

      1. Part 1

        Amendments relating to SMEs

      2. Part 2

        Minor amendments

      3. Part 3

        Commencement etc

    13. Schedule 13

      Deemed domicile: income tax and capital gains tax

      1. Part 1

        Application of deemed domicile rule

      2. Part 2

        Protection of overseas trusts

      3. Part 3

        Capital gains tax rebasing

      4. Part 4

        Cleansing of mixed funds

    14. Schedule 14

      Settlements and transfer of assets abroad: value of benefits

    15. Schedule 15

      Inheritance tax on overseas property representing UK residential property

    16. Schedule 16

      Employment income provided through third parties

    17. Schedule 17

      Employment income provided through third parties: loans etc outstanding on 5 April 2019

      1. Part 1

        Application of Part 7A of ITEPA 2003

      2. Part 2

        Approval of a qualifying loan etc.

      3. Part 3

        Exclusions

      4. Part 4

        Supplementary provision

      5. Part 5

        Consequential amendments

    18. Schedule 18

      Trading income provided through third parties: loans etc outstanding on 5 April 2019

    19. Schedule 19

      VAT: zero-rating of adapted motor vehicles etc

    20. Schedule 20

      Soft drinks industry levy: recovery and overpayments

      1. Part 1

        Recovery

      2. Part 2

        Overpayments

      3. Part 3

        Further provision about notices etc.

    21. Schedule 21

      Soft drinks industry levy: requirements to keep records etc: penalties

      1. Part 1

        Penalties

      2. Part 2

        Assessments

    22. Schedule 22

      Soft drinks industry levy: appeals and reviews

      1. Part 1

        Appealable decisions

      2. Part 2

        Reviews

      3. Part 3

        Appeals

    23. Schedule 23

      Soft drinks industry levy: supplementary amendments

    24. Schedule 24

      Third country goods fulfilment businesses: penalty

    25. Schedule 25

      Digital reporting and record-keeping: amendment of TMA 1970

    26. Schedule 26

      Partial closure notices

    27. Schedule 27

      Penalties for enablers of defeated tax avoidance

      1. Part 1

        Liability to penalty

      2. Part 2

        “Abusive” and “tax arrangements”: meaning

      3. Part 3

        “Defeat” in respect of abusive tax arrangements

      4. Part 4

        Persons who “enabled” the arrangements

      5. Part 5

        Amount of penalty

      6. Part 6

        Assessment of penalty

      7. Part 7

        GAAR Advisory Panel opinion, and representations

      8. Part 8

        Appeals

      9. Part 9

        Information

      10. Part 10

        Publishing details of persons who have incurred penalties

      11. Part 11

        Miscellaneous

      12. Part 12

        General

    28. Schedule 28

      Disclosure of tax avoidance schemes: VAT and other indirect taxes

      1. Part 1

        Duties to disclose avoidance schemes etc

      2. Part 2

        Penalties

      3. Part 3

        Consequential amendments

      4. Part 4

        Supplemental

    29. Schedule 29

      Requirement to correct certain offshore tax non-compliance

      1. Part 1

        Liability for penalty for failure to correct

      2. Part 2

        Amount of penalty

      3. Part 3

        Further provisions relating to the requirement to correct

      4. Part 4

        Supplementary

A BILL

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.

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 1 Direct taxes

CHAPTER 1 Charge and principal rates

Income tax charge and rates

1 Income tax charge for tax year 2017-18

Income tax is charged for the tax year 2017-18.

2 Main rates of income tax for tax year 2017-18

For the tax year 2017-18 the main rates of income tax are as follows—

(a) the basic rate is 20%;

(b) the higher rate is 40%;

(c) the additional rate is 45%.

3 Default and savings rates of income tax for tax year 2017-18

(1) For the tax year 2017-18 the default rates of income tax are as follows—

(a) the default basic rate is 20%;

(b) the default higher rate is 40%;

(c) the default additional rate is 45%.

(2) For the tax year 2017-18 the savings rates of income tax are as follows—

(a) the savings basic rate is 20%;

(b) the savings higher rate is 40%;

(c) the savings additional rate is 45%.

4 Starting rate limit for savings for tax year 2017-18

(1) For the amount specified in section 12(3) of ITA 2007 (starting rate for savings) substitute “£5000”.

(2) The amendment made by subsection (1) has effect in relation to the tax year 2017-18 and subsequent tax years.

(3) Section 21 of ITA 2007 (indexation), so far as relating to the starting rate limit for savings, does not apply in relation to the tax year 2017-18 (but this section does not override that section for subsequent tax years).

5 Dividend nil rate for tax year 2018-19 etc

(1) In section 13A of ITA 2007 (income charged at the divided nil rate), for “£5000”, in each place, substitute “£2000”.

(2) The amendments made by this section have effect for the tax year 2018-19 and subsequent tax years.

Corporation tax charge

6 Corporation tax charge for financial year 2018

Corporation tax is charged for the financial year 2018.

CHAPTER 2 Income tax

Employment income

7 Workers’ services provided to public sector through intermediaries

Schedule 1 makes provision about workers’ services provided to the public sector through intermediaries.

8 Optional remuneration arrangements

Schedule 2 makes provision about optional remuneration arrangements.

9 Taxable benefits: time limit for making good

(1) Part 3 of ITEPA 2003 (employment income: earnings and benefits etc treated as earnings) is amended as follows.

(2) In section 87 (cash equivalent of benefit of non-cash voucher)—

(a) in subsection (2)(b), for “to the person incurring it” substitute “, to the person incurring it, on or before 6 July following the relevant tax year”, and

(b) after subsection (2) insert—

(2A) If the voucher is a non-cash voucher other than a cheque voucher, the relevant tax year is—

(a) the tax year in which the cost of provision is incurred, or

(b) if later, the tax year in which the employee receives the voucher.

(2B) If the voucher is a cheque voucher, the relevant tax year is the tax year in which the voucher is handed over in exchange for money, goods or services.”

(3) In section 88(3) (time at which cheque voucher treated as handed over), at the beginning insert “For the purposes of subsection (2) and sections 87(2B) and 87A(6),”.

(4) In section 94(2) (cash equivalent of benefit of credit-token), in paragraph (b), for the words from “employee” to the end substitute employee—

(i) to the person incurring it, and

(ii) on or before 6 July following the tax year which contains the occasion in question.”

(5) In section 105(2) (cash equivalent of benefit of living accommodation costing £75,000 or less), in paragraph (b), after “made good” insert “, on or before 6 July following the tax year which contains the taxable period,”.

(6) In section 106(3) (cash equivalent of benefit of living accommodation costing over £75,000), in paragraph (a), for the words from “paid” to “exceeds” substitute paid—

by the employee,

(ii) in respect of the accommodation,

(iii) to the person providing it, and

(iv) on or before 6 July following the tax year which contains the taxable period,

exceeds”.

(7) In section 144 (deduction for payments for private use of car)—

(a) in subsection (1)(b), for “in” substitute “on or before 6 July following”,

(b) in subsection (2), after “paid” insert “as mentioned in subsection (1)(b)”, and

(c) in subsection (3), after “paid” insert “as mentioned in subsection (1)(b)”.

(8) In section 151(2) (when cash equivalent of benefit of car fuel is nil)—

(a) in the words before paragraph (a) omit “in the tax year in question”,

(b) in paragraph (a), at the beginning insert “in the tax year in question,”, and

(c) in paragraph (b), at the end insert “on or before 6 July following that tax year”.

(9) In section 152(2) (car fuel: proportionate reduction of cash equivalent)—

(a) in the words before paragraph (a) omit “for any part of the tax year in question”,

(b) in paragraph (a), at the beginning insert “for any part of the tax year in question,”,

(c) in paragraph (b), at the beginning insert “for any part of the tax year in question,”, and

(d) in paragraph (c)—

(i) after “employee”, in the first place it occurs, insert

(i) for any part of the tax year in question,”, and

(ii) for “and the employee does make good that expense” substitute “, and

(ii) the employee does make good that expense on or before 6 July following that tax year”.

(10) In section 158 (reduction for payments for private use of van)—

(a) in subsection (1)(b), for “in” substitute “on or before 6 July following”,

(b) in subsection (2), after “paid” insert “as mentioned in subsection (1)(b)”, and

(c) in subsection (3), after “paid” insert “as mentioned in subsection (1)(b)”.

(11) In section 162(2) (when cash equivalent of benefit of van fuel is nil)—

(a) in the words before paragraph (a) omit “in the tax year in question”,

(b) in paragraph (a), at the beginning insert “in the tax year in question,”, and

(c) in paragraph (b), at the end insert “on or before 6 July following that tax year”.

(12) In section 163(3) (van fuel: proportionate reduction of cash equivalent)—

(a) in the words before paragraph (a) omit “for any part of the tax year in question”,

(b) in paragraph (a), at the beginning insert “for any part of the tax year in question,”,

(c) in paragraph (b), at the beginning insert “for any part of the tax year in question,”, and

(d) in paragraph (c)—

(i) after “employee”, in the first place it occurs, insert

(i) for any part of the tax year in question,”, and

(ii) for “and the employee does make good that expense” substitute “, and

(ii) the employee does make good that expense on or before 6 July following that tax year”.

(13) In section 203(2) (cash equivalent of benefit treated as earnings), for “to the persons providing the benefit” substitute “, to the persons providing the benefit, on or before 6 July following the tax year in which it is provided”.

(14) The amendments made by this section have effect for the purpose of calculating income tax charged for the tax year 2017-18 or any subsequent tax year.

10 Taxable benefits: ultra-low emission vehicles

(1) ITEPA 2003 is amended as follows.

(2) In section 139 (car with a CO2 emissions figure: the appropriate percentage), for subsections (1) to (6) substitute—

(1) The appropriate percentage for a year for a car with a CO2 emissions figure of less than 75 is determined in accordance with the following table.

Car Appropriate percentage
Car with CO2 emissions figure of 0 2%
Car with CO2 emissions figure of 1 - 50
Car with electric range figure of 130 or more 2%
Car with electric range figure of 70 - 129 5%
Car with electric range figure of 40 - 69 8%
Car with electric range figure of 30 - 39 12%
Car with electric range figure of less than 30 14%
Car with CO2 emissions figure of 51 - 54 15%
Car with CO2 emissions figure of 55 - 59 16%
Car with CO2 emissions figure of 60 - 64 17%
Car with CO2 emissions figure of 65 - 69 18%
Car with CO2 emissions figure of 70 - 74 19%

(2) For the purposes of subsection (1) and the table, if a CO2 emissions figure or an electric range figure is not a whole number, round it down to the nearest whole number.

(3) The appropriate percentage for a year for a car with a CO2 emissions figure of 75 or more is whichever is the lesser of—

(a) 20% plus one percentage point for each 5 grams per kilometre driven by which the CO2 emissions figure exceeds 75, and

(b) 37%.

(4) For the purposes of subsection (3), if a CO2 emissions figure is not a multiple of 5, round it down to the nearest multiple of 5.

(5) In this section, an “electric range figure” is the number of miles which is the equivalent of the number of kilometres specified in an EC certificate of conformity, an EC type-approval certificate or a UK approval certificate on the basis of which a car is registered, as being the maximum distance for which the car can be driven in electric mode without recharging the battery.”

(3) In section 140 (car without a CO2 emissions figure: the appropriate percentage)—

(a) in subsection (2), in the table —

(i) for “23%” substitute “24%”, and

(ii) for “34%” substitute “35%”;

(b) in subsection (3)(a), for “16%” substitute “2%”.

(4) In section 142(2) (car first registered before 1 January 1998: the appropriate percentage), in the table—

(a) for “23%” substitute “24%”, and

(b) for “34%” substitute “35%”.

(5) Omit subsection 170(3).

(6) The amendments made by this section have effect for the tax year 2020-21 and subsequent tax years.

11 Taxable benefits: asset made available without transfer

(1) ITEPA 2003 is amended as follows.

(2) In section 205 (cost of taxable benefit subject to the residual charge: asset made available without transfer)—

(a) in subsection (1), for paragraph (a) substitute—

(a) the benefit consists in an asset being made available for private use, and”,

(b) after subsection (1) insert—

(1A) In this section and section 205A, “private use” means private use by the employee or a member of the employee’s family or household.

(1B) For the purposes of subsection (1) and sections 205A and 205B, an asset made available in a tax year for use by the employee or a member of the employee’s family or household is to be treated as made available throughout the year for private use unless—

(a) at all times in the year when it is available for use by the employee or a member of the employee’s family or household, the terms under which it is made available prohibit private use, and

(b) no private use is made of it in the year.

(1C) The cost of the taxable benefit is—

(a) the annual cost of the benefit determined in accordance with subsection (2), less

(b) any amount required to be deducted by section 205A (deduction for periods when asset unavailable for private use).

(1D) In certain cases, the cost of the taxable benefit is calculated under this section in accordance with section 205B (reduction of cost of taxable benefit where asset is shared).”, and

(c) in subsection (2), in the words before paragraph (a), for “cost of the taxable” substitute “annual cost of the”.

(3) After section 205 insert—

205A Deduction for periods when asset unavailable for private use

(1) A deduction is to be made under section 205(1C)(b) if the asset mentioned in section 205(1) has been unavailable for private use on any day during the tax year concerned.

(2) For the purposes of this section an asset is “unavailable” for private use on any day if—

(a) that day falls before the day on which the asset is first available to the employee,

(b) that day falls after the day on which the asset is last available to the employee,

(c) for more than 12 hours during that day the asset—

(i) is not in a condition fit for use,

(ii) is undergoing repair or maintenance,

(iii) could not lawfully be used,

(iv) is in the possession of a person who has a lien over it and who is not the employer, not a person connected with the employer, not the employee, not a member of the employee’s family and not a member of the employee’s household, or

(v) is used in a way that is neither use by, nor use at the direction of, the employee or a member of the employee’s family or household, or

(d) on that day the employee—

(i) uses the asset in the performance of the duties of the employment, and

(ii) does not use the asset otherwise than in the performance of the duties of the employment.

(3) The amount of the deduction is given by—

where—

  • U is the number of days, in the tax year concerned, on which the asset is unavailable for private use,

  • Y is the number of days in that year, and

  • A is the annual cost of the benefit of the asset determined under section 205(2).

(4) The reference in subsection (2)(a) to the time when the asset is first available to the employee is to the earliest time when the asset is made available, by reason of the employment and without any transfer of the property in it, for private use.

(5) The reference in subsection (2)(b) to the time when the asset is last available to the employee is to the last time when the asset is made available, by reason of the employment and without any transfer of the property in it, for private use.

205B Reduction of cost of taxable benefit where asset is shared

(1) This section applies where the cost of an employment-related benefit (“the taxable benefit”) is to be determined under section 205.

(2) If, for the whole or part of the tax year concerned, the same asset is available for more than one employee’s private use at the same time, the total of the amounts which are the cost of the taxable benefit for each of those employees is to be limited to the annual cost of the benefit of the asset determined in accordance with section 205(2).

(3) The cost of the taxable benefit for each employee is determined by taking the amount given by section 205(1C) and then reducing that amount on a just and reasonable basis.

(4) For the purposes of this section, an asset is available for an employee’s private use if it is available for private use by the employee or a member of the employee’s family or household.”

(4) In section 365 (deductions where employment-related benefit provided)—

(a) in subsection (1)—

(i) omit the “and” at the end of paragraph (a), and

(ii) after that paragraph insert—

(aa) the cost of the benefit was determined under section 204 or 206, and”,

(b) in subsection (3), for “sections 204 to 206” substitute “section 204 or 206”, and

(c) in the heading, for “employment-related benefit” substitute “certain employment-related benefits”.

(5) The amendments made by this section have effect for the tax year 2017-18 and subsequent tax years.

12 Pensions advice

(1) In Chapter 9 of Part 4 of ITEPA 2003, after section 308B insert—

308C Provision of pensions advice: limited exemption

(1) No liability to income tax arises in respect of—

(a) the provision of relevant pensions advice to an employee or former or prospective employee, or

(b) the payment or reimbursement of costs incurred, by or in respect of an employee or former or prospective employee, in obtaining relevant pensions advice,

if Condition A or B is met.

(2) But subsection (1) does not apply in relation to a person in a tax year so far as the value of the exemption in the person’s case in that year exceeds £500.

(3) The “value of the exemption”, in relation to a person and a tax year, is the amount exempted by subsection (1) from income tax in the person’s case in that year, disregarding subsection (2) for this purpose.

(4) If in a tax year there is in relation to an individual more than one person who is an employer or former employer, subsections (1) to (3) apply in relation to the individual as employee or former or prospective employee of any one of those persons separately from their application in relation to the individual as employee or former or prospective employee of any other of those persons.

(5) “Relevant pensions advice”, in relation to a person, means information, or advice, in connection with—

(a) the person’s pension arrangements, or

(b) the use of the person’s pension funds.

(6) Condition A is that the relevant pensions advice, or payment or reimbursement, is provided under a scheme that is open—

(a) to the employer’s employees generally, or

(b) generally to the employer’s employees at a particular location.

(7) Condition B is that the relevant pensions advice, or payment or reimbursement, is provided under a scheme that is open generally to the employer’s employees, or generally to those of the employer’s employees at a particular location, who—

(a) have reached the minimum qualifying age, or

(b) meet the ill-health condition.

(8) The “minimum qualifying age”, in relation to an employee, means the employee’s relevant pension age less 5 years.

(9) “Relevant pension age”, in relation to an employee, means—

(a) where paragraph 22 or 23 of Schedule 36 to FA 2004 applies in relation to the employee and a registered pension scheme of which the employee is a member, the employee’s protected pension age (see paragraph 22(8) and 23(8) of Schedule 36 to FA 2004), or

(b) in any other case, the employee’s normal minimum pension age, as defined by section 279(1) of FA 2004.

(10) The “ill-health condition” is met by an employee if the employer is satisfied, on the basis of evidence provided by a registered medical practitioner, that the employee is (and will continue to be) incapable of carrying on his or her occupation because of physical or mental impairment.”

(2) In section 228 of ITEPA 2003 (effect of exemptions on liability under provisions outside Part 2 of ITEPA 2003), in subsection (2), after paragraph (da) insert—

(db) section 308C (provision of pensions advice),”.

(3) Regulation 5 of the Income Tax (Exemption of Minor Benefits) Regulations 2002 (S.I. 2002/205S.I. 2002/205) (exemption in respect of the provision of pensions advice) is revoked.

(4) In regulation 2 of the Income Tax (Exemption of Minor Benefits) (Amendment) Regulations 2004 (S.I. 2004/3087S.I. 2004/3087) omit the inserted regulation 5.

(5) The amendments made by this section have effect for the tax year 2017-18 and subsequent tax years.

13 Legal expenses etc

(1) ITEPA 2003 is amended as follows.

(2) In section 346 (deduction for employee liabilities)—

(a) in the heading, at the end insert “and expenses”,

(b) after paragraph B (in subsection (1)) insert—

BA Payment of any costs or expenses not falling within paragraph B which are incurred in connection with the employee giving evidence about matters related to the employment in, or for the purposes of—

(a) a proceeding or other process (whether or not involving the employee), or

(b) an investigation (whether or not likely to lead to any proceeding or other process involving the employee).

BB Payment of any costs or expenses not falling within paragraph B or BA which are incurred in connection with a proceeding or other process, or an investigation, in which—

(a) acts of the employee related to the employment, or

(b) any other matters related to the employment,

are being or are likely to be considered.”,

(c) in paragraph C(b) (in subsection (1)), after “B” insert “, BA or BB”,

(d) in subsection (2) for “or B” substitute “B, BA or BB”,

(e) in subsection (2A), for “paragraph A, B or C” substitute “any of paragraphs A to C”, and

(f) after subsection (3) insert—

(4) In this section and section 349—

(a) “acts” includes failures to act and acts are “related to the employment” if the employee was acting—

(i) in the employee’s capacity as holder of the employment, or

(ii) in any other capacity in which the employee was acting in the performance of the duties of the employment,

(b) “giving evidence” includes making a formal or informal statement or answering questions,

(c) “proceeding or other process” includes any civil, criminal or arbitration proceedings, any disciplinary or regulatory proceedings of any kind and any process operated for resolving disputes or adjudicating on complaints, and

(d) references to a proceeding or other process or an investigation include a reference to a proceeding or other process or an investigation that is likely to take place.”

(3) In section 349 (section 346: meaning of “qualifying insurance contract”), in subsection (2)—

(a) after paragraph (c) insert—

(ca) the payment of costs or expenses incurred in connection with an employee giving evidence about matters related to the employee’s employment in, or for the purposes of—

(i) a proceeding or other process (whether or not involving the employee), or

(ii) an investigation (whether or not likely to lead to any proceeding or other process involving the employee),

(cb) the payment of any costs or expenses incurred in connection with a proceeding or other process, or an investigation, in which—

(i) acts of an employee related to the employment, or

(ii) any other matters related to the employment of an employee,

are being or are likely to be considered,”, and

(b) in subsection (2)(d), after “(c)” insert “, (ca) or (cb)”.

(4) In section 409 (payments and benefits on termination of employment etc: exception for payments and benefits in respect of employee liabilities and indemnity insurance)—

(a) in the heading, for “employee liabilities etc” substitute “certain legal expenses etc”, and

(b) in subsection (3), at the end insert “or by the employer or former employer on behalf of the individual”.

(5) In section 410 (payments and benefits on termination of employment etc: exception for certain payments and benefits received by personal representatives of deceased individual)—

(a) in the heading for “employee liabilities etc” substitute “certain legal expenses etc”, and

(b) in subsection (3), at the end insert “or by the former employer on behalf of the individual’s personal representatives”.

(6) In section 558 (deductions for liabilities of former employees: meaning of “deductible payment”)—

(a) after paragraph B (in subsection (1)) insert—

BA Payment of any costs or expenses not falling within paragraph B which are incurred in connection with the former employee giving evidence about matters related to the former employment in, or for the purposes of—

(a) a proceeding or other process (whether or not involving the former employee), or

(b) an investigation (whether or not likely to lead to any proceeding or other process involving the former employee).

BB Payment of any costs or expenses not falling within paragraph B or BA which are incurred in connection with a proceeding or other process, or an investigation, in which—

(a) acts of the former employee related to the former employment, or

(b) any other matters related to the former employment,

are being or are likely to be considered.”, and

(b) in paragraph C(b) (in subsection (1)), after “B” insert “, BA or BB”,

(c) in subsection (2), for “or B” substitute “B, BA or BB”,

(d) after subsection (3) insert—

(4) In this section and section 560—

(a) “acts” includes failures to act and acts are “related to the former employment” if the former employee was acting—

(i) in the employee’s capacity as holder of the former employment, or

(ii) in any other capacity in which the former employee was acting in the performance of the duties of that employment,

(b) “giving evidence” includes making a formal or informal statement or answering questions,

(c) “proceeding or other process” includes any civil, criminal or arbitration proceedings, any disciplinary or regulatory proceedings of any kind and any process operated for resolving disputes or adjudicating on complaints, and

(d) references to a proceeding or other process or an investigation include a reference to a proceeding or other process or an investigation that is likely to take place.”

(7) In section 560 (section 558: meaning of “qualifying insurance contract”), in subsection (2)—

(a) after paragraph (c) insert—

(ca) the payment of costs or expenses incurred in connection with a former employee giving evidence about matters related to the former employment in, or for the purposes of—

(i) a proceeding or other process (whether or not involving the former employee), or

(ii) an investigation (whether or not likely to lead to any proceeding or other process involving the former employee).

(cb) the payment of any costs or expenses incurred in connection with a proceeding or other process, or an investigation, in which—

(i) acts of a former employee related to the employment, or

(ii) any other matters related to the former employment of a former employee,

are being or are likely to be considered,”, and

(b) in paragraph (d), after “(c)” insert “, (ca) or (cb)”.

(8) The amendments made by this section have effect in relation to the tax year 2017-18 and subsequent tax years.

14 Termination payments etc: amounts chargeable on employment income

(1) ITEPA 2003 is amended in accordance with subsections (2) to (9).

(2) In section 7(5) (list of provisions under which amounts are treated as earnings), before the “or” at the end of paragraph (c) insert—

(ca) section 402B (termination payments, and other benefits, that cannot benefit from section 403 threshold),”.

(3) Before section 403 (charge on payments and benefits in excess of £30,000 threshold) insert—

402A Split of payments and other benefits between sections 402B and 403

(1) In this Chapter “termination award” means a payment or other benefit to which this Chapter applies because of section 401(1)(a).

(2) Section 402B (termination awards not benefiting from threshold treated as earnings) applies to termination awards to the extent determined under section 402C.

(3) Section 403 (charge on payment or benefit where threshold applies) applies to termination awards so far as they are not ones to which section 402B applies.

(4) Section 403 also applies to payments and other benefits to which this Chapter applies because of section 401(1)(b) or (c) (change in duties or earnings).

402B Termination awards not benefiting from threshold to be treated as earnings

(1) The amount of a termination award to which this section applies is treated as an amount of earnings of the employee, or former employee, from the employment.

(2) See also section 7(3)(b) and (5)(ca) (which cause amounts treated as earnings under this section to be included in general earnings).

(3) Section 403(3) (when benefits are received) does not apply in relation to payments or other benefits to which this section applies.

402C The termination awards to which section 402B applies

(1) This section has effect for the purpose of identifying the extent to which section 402B applies to termination awards in respect of the termination of the employment of the employee.

(2) In this section “relevant termination award” means a termination award that is neither—

(a) a redundancy payment, nor

(b) so much of an approved contractual payment as is equal to or less than the amount which would have been due if a redundancy payment had been payable.

(3) If the post-employment notice pay (see section 402D) in respect of the termination is greater than, or equal to, the total amount of the relevant termination awards in respect of the termination, section 402B applies to all of those relevant termination awards.

(4) If the post-employment notice pay in respect of the termination is less than the total amount of the relevant termination awards in respect of the termination but is not nil—

(a) section 402B applies to a part of those relevant termination awards, and

(b) the amount of that part is equal to the post-employment notice pay.

(5) Section 309(4) to (6) (meaning of “redundancy payment” and “approved contractual payment” etc) apply for the purposes of subsection (2) as they apply for the purposes of section 309.

402D “Post-employment notice pay”

(1) “The post-employment notice pay” in respect of a termination is (subject to subsection (11)) given by—

where—

  • BP, D and P are given by subsections (3) to (7), and

  • T is the total of the amounts of any payment or benefit received in connection with the termination which—

    (a)

    would fall within section 401(1)(a) but for section 401(3),

    (b)

    is taxable as earnings under Chapter 1 of Part 3,

    (c)

    is not pay in respect of holiday entitlement for a period before the employment ends, and

    (d)

    is not a bonus payable for termination of the employment.

(2) If the amount given by the formula in subsection (1) is a negative amount, the post-employment notice pay is nil.

(3) Subject to subsections (5) and (6)

  • BP is the employee’s basic pay (see subsection (7)) from the employment in respect of the last pay period of the employee to end before the trigger date,

  • P is the number of days in that pay period, and

  • D is the number of days in the post-employment notice period.

(4) See section 402E for the meaning of “trigger date” and “post-employment notice period”.

(5) If there is no pay period of the employee which ends before the trigger date then—

  • BP is the employee’s basic pay from the employment in respect of the period starting with the first day of the employment and ending with the trigger date,

  • P is the number of days in that period, and

  • D is the number of days in the post-employment notice period.

(6) If the last pay period of the employee to end before the trigger date is a month, the minimum notice (see section 402E) is given by contractual terms and is expressed to be a whole number of months, and the post-

employment notice period is equal in length to the minimum notice or is otherwise a whole number of months, then—

  • BP is the employee’s basic pay from the employment in respect of the last pay period of the employee to end before the trigger date,

  • P is 1, and

  • D is the length of the post-employment notice period expressed in months.

(7) In this section “basic pay” means—

(a) employment income of the employee from the employment but disregarding—

(i) any amount received by way of overtime, bonus, commission, gratuity or allowance,

(ii) any amount received in connection with the termination of the employment,

(iii) any amount treated as earnings under Chapters 2 to 10 of Part 3 (the benefits code) or which would be so treated apart from section 64,

(iv) any amount which is treated as earnings under Chapter 12 of Part 3 (amounts treated as earnings),

(v) any amount which counts as employment income by virtue of Part 7 (income relating to securities and securities options), and

(vi) any employment-related securities that constitute earnings under Chapter 1 of Part 3 (earnings), and

(b) any amount which the employee has given up the right to receive but which would have fallen within paragraph (a) had the employee not done so.

(8) In subsection (7) “employment-related securities” has the same meaning as it has in Chapter 1 of Part 7 (see section 421B).

(9) The Treasury may by regulations amend this section for the purpose of altering the meaning of “basic pay”.

(10) A statutory instrument containing regulations under subsection (9) may not be made unless a draft of it has been laid before, and approved by a resolution of, the House of Commons.

(11) Where the purpose, or one of the purposes, of any arrangements is the avoidance of tax by causing the post-employment notice pay calculated under subsection (1) to be less than it would otherwise be, the post-employment notice pay is to be treated as the amount which the post-employment notice pay would have been but for the arrangements.

(12) In subsection (11) “arrangements” includes any scheme, arrangement or understanding of any kind, whether or not legally enforceable, involving a single transaction or two or more transactions.

402E Meaning of “trigger date” and “post-employment notice period” in section 402D

(1) Subsections (2) and (4) to (6) have effect for the purposes of section 402D (and subsection (4) has effect also for the purposes of this section).

(2) The “trigger date” is—

(a) if the termination is not a notice case, the last day of the employment, and

(b) if the termination is a notice case, the day the notice is given.

(3) For the purposes of this section, the termination is a “notice case” if the employer or employee gives notice to the other to terminate the employment, and here it does not matter—

(a) whether the notice is more or less than, or the same as, the minimum notice, or

(b) if the employment ends before the notice expires.

(4) The “minimum notice” is the minimum notice required to be given by the employer to terminate the employee’s employment by notice in accordance with the law and contractual terms effective—

(a) where the termination is not a notice case—

(i) immediately before the employment ends, or

(ii) where the employment ends by agreement entered into after the start of the employment, immediately before the agreement is entered into, and

(b) where the termination is a notice case, immediately before the notice is given.

(5) The “post-employment notice period” is the period—

(a) beginning at the end of the last day of the employment, and

(b) ending with the earliest lawful termination date.

(But see subsection (8) for provision about limited-term contracts.)

(6) If the earliest lawful termination date is, or precedes, the last day of the employment, the number of days in the post-employment notice period is nil.

(7) “The earliest lawful termination date” is the last day of the period which—

(a) is equal in length to the minimum notice, and

(b) begins at the end of the trigger date.

(8) In the case of a contract of employment which is a limited-term contract and which does not include provision for termination by notice by the employer, the post-employment notice period is the period—

(a) beginning at the end of the last day of the employment, and

(b) ending with the day of the occurrence of the limiting event.

(9) If, in a case to which subsection (8) applies, on the last day of the employment the day of the occurrence of the limiting event is not ascertained or ascertainable (because, for example, the limiting event is the performance of a task), then subsection (8) has effect as if for paragraph (b) there were substituted—

(b) ending with the day on which notice would have expired if the employer had, on the last day of the employment, given to the employee the minimum notice required to terminate the contract under section 86 of the Employment Rights Act 1996 (assuming that that section applies to the employment).”

(10) In this section “limited-term contract” and “limiting event” have the same meaning as in the Employment Rights Act 1996 (see section 235(2A) and (2B)).”

(4) In section 403 (charges on payments and benefits which can benefit from threshold)—

(a) in subsection (1), for “Chapter” substitute “section”,

(b) in subsection (3), after “Chapter” insert “(but see section 402B(3))”,

(c) in subsection (4), for the words from “when” to “exceeds” substitute “when aggregated with—

(1)(a)other payments or benefits in respect of the employee or former employee that are payments or benefits to which this section applies, and

(b) other payments or benefits in respect of the employee or former employee that are payments or benefits—

(i) received in the tax year 2017-18 or an earlier tax year, and

(ii) to which this Chapter applied in the tax year of receipt,

it exceeds”,

(d) in subsection (5)(a), for “Chapter” substitute “section”,

(e) in subsection (6), after “employment income” insert “or, as the case may be, in relation to whom section 402B(1) provides for an amount to be treated as an amount of earnings”, and

(f) in the heading, at the end insert “where threshold applies”.

(5) In section 404 (how the threshold applies)—

(a) in subsection (3)(b) (meaning of “termination or change date”), for “this Chapter” substitute “section 403”, and

(b) after subsection (5) insert—

(6) In subsection (3)(b), the reference to a payment or other benefit to which section 403 applies includes a reference to a payment or other benefit—

(a) received in the tax year 2017-18 or an earlier tax year, and

(b) to which this Chapter applied in the tax year of receipt.”

(6) After section 404A insert—

404B Power to vary threshold

(1) The Treasury may by regulations amend the listed provisions by substituting, for the amount for the time being mentioned in those provisions, a different amount.

(2) The listed provisions are—

  • subsections (1), (4) and (5) of section 403, and

  • subsections (1), (4) and (5) of section 404 and its heading.

(3) Regulations under this section may include transitional provision.

(4) A statutory instrument containing regulations under this section which reduce the mentioned amount may not be made unless a draft of it has

been laid before, and approved by a resolution of, the House of Commons.”

(7) In section 406 (exception in cases of death, injury or disability)—

(a) the existing text becomes subsection (1), and

(b) after that subsection insert—

(2) Although “injury” in subsection (1) includes psychiatric injury, it does not include injured feelings.”

(8) In section 414(2) (proportionate reduction for foreign service in certain cases), for “otherwise count as employment income under this Chapter” substitute “otherwise—

(a) be treated as earnings by section 402B(1), or

(b) count as employment income as a result of section 403”.

(9) In section 717(4) (regulations etc not subject to negative procedure), before “or section 681F(3)” insert “, section 402D(10) (meaning of basic pay for purpose of calculating charge on termination award), section 404B(4) (reduction of tax-free threshold for employment-termination etc payments)”.

(10) The amendments made by this section have effect for the tax year 2018-19 and subsequent tax years.

15 PAYE settlement agreements

(1) In Chapter 5 of Part 11 of ITEPA 2003 (PAYE settlement agreements), in sections 703(a) and 704(1)(a), for “an officer of Revenue and Customs” substitute “Her Majesty’s Revenue and Customs”.

(2) The amendment made by this section has effect in relation to the tax year 2018-19 and subsequent tax years.

Pensions

16 Money purchase annual allowance

(1) Part 4 of FA 2004 is amended as follows.

(2) In section 227ZA (chargeable amount), in subsection (1)(b), for “£10,000” substitute “£4,000”.

(3) In section 227B (alternative chargeable amount), in subsections (1)(b) and (2), for “£10,000” substitute “£4,000”.

(4) In section 227D (pension input amounts in respect of certain hybrid arrangements), in Steps 4 and 5 of subsection (4), for “£10,000” substitute “£4,000”.

(5) The amendments made by this section have effect for the tax year 2017-18 and subsequent tax years.

17 Overseas pensions

Schedule 3 makes provision about—

(a) registered pension schemes established outside the United Kingdom, and

(b) payments made in respect of overseas pension entitlement.

18 Pensions: offshore transfers

Schedule 4 contains provision about charging income tax—

(a) where payments are made in respect of overseas pensions, and

(b) on transfers to qualifying recognised overseas pension schemes.

Trading and property businesses income

19 Calculation of profits of trades and property businesses

Schedule 5 contains provision about the calculation of the profits of a trade, profession or vocation or a property business, in particular the calculation of profits on the cash basis.

20 Trading and property allowances

Schedule 6 contains provision about a trading allowance and a property allowance giving relief from income tax.

Investment income

21 Deduction of income tax at source

Schedule 7 makes provision about deduction of income tax at source.

22 Life insurance policies: recalculating gains on part surrenders etc

(1) ITTOIA 2005 is amended as follows.

(2) After section 507 (method for making periodic calculations in part surrender or assignment cases) insert—

507A Recalculating gains under section 507

(1) An interested person may apply to an officer of Revenue and Customs for a review of a calculation under section 507 on the ground that the gain arising from it is wholly disproportionate.

(2) For the purposes of this section an interested person in relation to a calculation under section 507 is a person who would be liable for all or any part of the amount of tax that would be chargeable under this Chapter if the gain were not recalculated.

(3) Applications under subsection (1) must be—

(a) made in writing, and

(b) received by an officer of Revenue and Customs within—

(i) the four tax years following the tax year in which the gain arose, or

(ii) such longer period as the officer may agree.

(4) In considering whether the gain is wholly disproportionate, the officer may take into account (as well as the amount of the gain) any factor

which the officer considers appropriate including, so far as the officer considers it appropriate to do so—

(a) the economic gain on the rights surrendered or assigned,

(b) the amount of the premiums paid under the policy or contract,

(c) the amount of tax that would be chargeable under this Chapter if the gain were not recalculated.

(5) If, following an application under subsection (1), an officer considers that the gain arising from the calculation under section 507 is wholly disproportionate, the officer must recalculate the gain on a just and reasonable basis.

(6) Following a recalculation under subsection (5), references in this Chapter (but excluding this section) to a calculation under section 507 are to be regarded as references to a recalculation under this section.

(7) Following a recalculation under subsection (5), an officer of Revenue and Customs must notify the interested person of the result of the recalculation.

(8) If two or more persons are interested persons in relation to a calculation under section 507—

(a) an application under subsection (1) may be made only by all the interested persons jointly, and

(b) subsection (7) applies as if the reference to the interested person were a reference to each of the interested persons.

(9) Following a recalculation under subsection (5), all necessary adjustments and repayments of income tax are to be made.

(10) No recalculation is to be made under this section if the gain mentioned in subsection (1) arises as a result of one or more transactions which form part of arrangements, the main purpose, or one of the main purposes, of which is to obtain a tax advantage for any person.

(11) In this section—

  • “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable), and

  • “tax advantage” has the meaning given by section 1139 of CTA 2010.”

(3) After section 512 (available premium left for relevant transaction in certain part surrender or assignment cases) insert—

512A Recalculating gains under section 511

(1) An interested person may apply to an officer of Revenue and Customs for a review of a calculation under section 511 on the ground that the gain arising from it is wholly disproportionate.

(2) For the purposes of this section an interested person in relation to a calculation under section 511 is a person who would be liable for all or any part of the amount of tax that would be chargeable under this Chapter—

(a) if the gain were not recalculated, or

(b) if all rights under the policy or contract had been surrendered immediately after the surrender or assignment of rights which gave rise to the calculation.

(3) Applications under subsection (1) must be—

(a) made in writing, and

(b) received by an officer of Revenue and Customs within—

(i) the four tax years following the tax year in which the gain arose, or

(ii) such longer period as the officer may agree.

(4) In considering whether the gain is wholly disproportionate, the officer may take into account (as well as the amount of the gain) any factor which the officer considers appropriate including, so far as the officer considers it appropriate to do so—

(a) the economic gain on the rights surrendered or assigned,

(b) the amount of the premiums paid under the policy or contract,

(c) the amount of tax that would be chargeable under this Chapter if the gain were not recalculated.

(5) If, following an application under subsection (1), an officer considers that the gain arising from the calculation under section 511 is wholly disproportionate, the officer must recalculate the gain on a just and reasonable basis.

(6) Following a recalculation under subsection (5), references in this Chapter (but excluding this section) to a calculation under section 511 are to be regarded as references to a recalculation under this section.

(7) Following a recalculation under subsection (5), an officer of Revenue and Customs must notify the interested person of the result of the recalculation.

(8) If two or more persons are interested persons in relation to a calculation under section 511—

(a) an application under subsection (1) may be made only by all the interested persons jointly, and

(b) subsection (7) applies as if the reference to the interested person were a reference to each of the interested persons.

(9) Following a recalculation under subsection (5), all necessary adjustments and repayments of income tax are to be made.

(10) No recalculation is to be made under this section if the gain mentioned in subsection (1) arises as a result of one or more transactions which form part of arrangements, the main purpose, or one of the main purposes, of which is to obtain a tax advantage for any person.

(11) In this section—

  • “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable), and

  • “tax advantage” has the meaning given by section 1139 of CTA 2010.”

(4) In section 538 (recovery of tax from trustees), after subsection (6) insert—

(7) Subsection (8) applies where—

(a) an individual has recovered an amount from trustees under this section, and

(b) subsequently the individual’s liability to tax under this Chapter has been reduced (or removed) as a result of a recalculation under section 507A or 512A.

(8) The individual must repay to the trustees the amount (if any) by which the recovered amount exceeds the individual’s revised entitlement.

(9) In subsection (8) the individual’s revised entitlement is the amount to which the individual is entitled under this section calculated by reference to the individual’s liability to tax under this Chapter as reduced (or removed) as a result of the recalculation under section 507A or 512A.”

(5) The amendments made by subsection (4) have effect in relation to amounts recovered before, as well as after, the day on which this Act is passed.

23 Personal portfolio bonds

In section 520 of ITTOIA 2005 (property categories), after subsection (4) insert—

(5) The Treasury may by regulations—

(a) amend the table in subsection (2) by adding, removing or amending a category of property;

(b) add, remove or amend a definition relating to any category of property in that table; and

(c) make consequential amendments.

(6) A statutory instrument containing regulations under this section which have the effect of removing a category of property from the table in subsection (2)—

(a) must be laid before the House of Commons; and

(b) ceases to have effect at the end of the period of 28 days beginning with the day on which it was made, unless it is approved during that period by a resolution of the House of Commons.

(7) In reckoning the period of 28 days, no account is to be taken of any time during which Parliament is dissolved or prorogued, or during which the House of Commons is adjourned for more than four days.”

Reliefs relating to investments

24 EIS and SEIS: the no pre-arranged exits requirement

(1) ITA 2007 is amended as follows.

(2) In section 177 (EIS: the no pre-arranged exits requirement), for subsection (2) substitute—

(2) The arrangements referred to in subsection (1)(a) do not include—

(a) any arrangements with a view to such an exchange of shares, or shares and securities, as is mentioned in section 247(1), or

(b) any arrangements with a view to any shares in the issuing company being exchanged for, or converted into, shares in that company of a different class.”

(3) In section 257CD (SEIS: the no pre-arranged exits requirement), for subsection (2) substitute—

(2) The arrangements referred to in subsection (1)(a) do not include—

(a) any arrangements with a view to such an exchange of shares, or shares and securities, as is mentioned in section 257HB(1), or

(b) any arrangements with a view to any shares in the issuing company being exchanged for, or converted into, shares in that company of a different class.”

(4) The amendments made by this section have effect in relation to shares issued on or after 5 December 2016.

25 VCTs: follow-on funding

(1) ITA 2007 is amended as follows.

(2) In section 326 (restructuring to which sections 326A and 327 apply)—

(a) in the heading to section 326, for “section 327 applies” substitute “sections 326A, 327 and 327A apply”;

(b) in subsection (1), for “Sections 326A and 327 apply” substitute “Sections 326A, 327 and 327A apply”.

(3) After section 327 insert—

327A Follow-on funding

(1) Subsections (2) and (3) apply where—

(a) this section applies (see section 326(1)),

(b) the acquisition by the new company of all the old shares, which is provided for by the arrangements mentioned in section 326(1), takes place, and

(c) the acquisition falls within section 326(2).

(2) If, after the acquisition, another company makes an investment in the new company, section 280C (the permitted maximum age condition) has effect in relation to that investment as if—

(a) in subsection (4)(a) the reference to a relevant investment having been made in the relevant company before the end of the initial investing period included a reference to a relevant investment having been made in the old company before the acquisition and before the end of the initial investing period, and

(b) in subsection (6)(a) the reference to relevant investments made in the relevant company included a reference to relevant investments made in the old company before the acquisition.

(3) In relation to any relevant holding issued by the new company after the acquisition, section 294A (the permitted company age requirement) has effect as if—

(a) in subsection (3)(a) the reference to a relevant investment having been made in the relevant company before the end of the initial investing period included a reference to a relevant investment having been made in the old company before the acquisition and before the end of the initial investing period, and

(b) in subsection (5)(a) the reference to relevant investments made in the relevant company included a reference to relevant investments made in the old company before the acquisition.

(4) In subsection (3) “relevant holding” has the same meaning as in Chapter 4.”

(4) The amendments made by this section have effect—

(a) for the purposes of section 280C of ITA 2007, in relation to investments made on or after 6 April 2017;

(b) for the purposes of section 294A of ITA 2007, in relation to relevant holdings issued on or after 6 April 2017.

26 VCTs: exchange of non-qualifying shares and securities

(1) Section 330 of ITA 2007 (power to facilitate company reorganisations etc involving exchange of shares) is amended as follows.

(2) After subsection (1) insert—

(1A) The Treasury may by regulations make provision for the purposes of this Part for cases where—

(a) a holding of shares or securities that does not meet the requirements of Chapter 4 is exchanged for other shares or securities not meeting those requirements, and

(b) the exchange is made for genuine commercial reasons and does not form part of a scheme or arrangement the main purpose or one of the main purposes of which is the avoidance of tax.”

(3) In subsection (2), for “subsection (1)” substitute “subsections (1) and (1A)”.

(4) In subsection (3), for “The regulations” substitute “Regulations under subsection (1)”.

(5) After subsection (3) insert—

(3A) Regulations under subsection (1A) may, among other things, make provision—

(a) for the new shares or securities to be treated in any respect in the same way as the original shares and securities for any period;

(b) as to when the new shares or securities are to be regarded as having been acquired;

(c) as to the valuation of the original or the new shares or securities.”

(6) In subsection (4), for “The regulations” substitute “Regulations under this section”.

(7) In subsection (6). in paragraph (c), at the beginning insert “in the case of regulations under subsection (1)”.

27 Social investment tax relief

Schedule 8 makes provision about income tax relief for social investments.

28 Business investment relief

(1) Chapter A1 of Part 14 of ITA 2007 (remittance basis) is amended as follows.

(2) In section 809VC (qualifying investments), in subsection (1)(a), after “issued to” insert “or acquired by”.

(3) In section 809VD (condition relating to qualifying investments)—

(a) in subsection (1), omit the “or” at the end of paragraph (b) and after that paragraph insert—

(ba) an eligible hybrid company, or”;

(b) in subsection (2)(b), for “2” substitute “5”;

(c) in subsection (3)(c), for “2” substitute “5”;

(d) after subsection (3) insert—

(3A) A company is an “eligible hybrid company” if—

(a) it is a private limited company,

(b) it is not an eligible trading company or an eligible stakeholder company,

(c) it carries on one or more commercial trades or is preparing to do so within the next 5 years,

(d) it holds one or more investments in eligible trading companies or is preparing to do so within the next 5 years, and

(e) carrying on commercial trades and making investments in eligible trading companies are all or substantially all of what it does (or of what it is reasonably expected to do once it begins operating).”;

(e) in subsection (4), for “reference in subsection (3)” substitute “references in subsections (3) and (3A)”;

(f) in subsection (5)(a), for “2” substitute “5”.

(4) In section 809VE (commercial trades), after subsection (5) insert—

(6) A company which is a partner in a partnership is not to be regarded as carrying on a trade carried on by the partnership.”

(5) In section 809VH (meaning of “potentially chargeable event”)—

(a) in subsection (1)(a), after “eligible stakeholder company” insert “nor an eligible hybrid company”;

(b) in subsection (1)(d), for “2-year” substitute “5-year”;

(c) in subsection (2), for paragraph (b) substitute—

(b) the value is received from any person in circumstances that are directly or indirectly attributable to the investment, and”;

(d) omit subsection (4);

(e) in subsection (5)—

(i) for “2-year” substitute “5-year”;

(ii) in paragraph (a), for “2” substitute “5”;

(f) in subsection (6), omit the “or” at the end of paragraph (b) and after that

paragraph insert—

(ba) it is an eligible hybrid company but is not trading and—

(i) it holds no investments in eligible trading companies, or

(ii) none of the eligible trading companies in which it holds investments is trading, or”;

(g) in subsection (10)(b), after “eligible stakeholder company” insert “or an eligible hybrid company”.

(6) In section 809VJ (grace period), after subsection (2) insert—

(2A) But subsection (2B) applies instead of subsections (1) and (2) where the potentially chargeable event is a breach of the 5-year start-up rule by virtue of section 809VH(5)(b).

(2B) The grace period allowed for the steps mentioned in section 809VI(2)(a) and (2)(b) is the period of 2 years beginning with the day on which a relevant person first became aware or ought reasonably to have become aware of the potentially chargeable event referred to in subsection (2A).”

(7) In section 809VN (order of disposals etc), in subsections (1)(c) and (5)(a) and (b), after “eligible stakeholder company” insert “or eligible hybrid company”.

(8) The amendments made by this section come into force on 6 April 2017.

CHAPTER 3 Corporation tax

Corporation tax reliefs

29 Carried-forward losses

(1) Schedule 9 makes provision about corporation tax relief for losses and other amounts that are carried forward.

(2) The Commissioners may by regulations made by statutory instrument make provision consequential on any provision made by Schedule 9.

(3) Regulation under subsection (2)—

(a) may make provision amending or modifying any provision of the Taxes Acts (including any provision inserted by Schedule 9),

(b) may make incidental, supplemental, transitional, transitory or saving provision, and

(c) may make different provision for different purposes.

(4) A statutory instrument containing regulations under subsection (2) is subject to annulment in pursuance of a resolution of the House of Commons.

(5) In this section “the Taxes Acts” has the same meaning as in the Taxes Management Act 1970 (see section 118(1) of that Act).

30 Losses: counteraction of avoidance arrangements

(1) Any loss-related tax advantage that would (in the absence of this section) arise from relevant tax arrangements is to be counteracted by the making of such adjustments as are just and reasonable.

(2) Any adjustments required to be made under this section (whether or not by an officer of Revenue and Customs) may be made by way of—

(a) an assessment,

(b) the modification of an assessment,

(c) amendment or disallowance of a claim,

or otherwise.

(3) For the purposes of this section arrangements are “relevant tax arrangements” if conditions A and B are met.

(4) Condition A is that the purpose, or one of the main purposes, of the arrangements is to obtain a loss-related tax advantage.

(5) Condition B is that it is reasonable to regard the arrangements as circumventing the intended limits of relief under the relevant provisions or otherwise exploiting shortcomings in the relevant provisions.

(6) In determining whether or not condition B is met all the relevant circumstances are to be taken into account, including whether the arrangements include any steps that—

(a) are contrived or abnormal, or

(b) lack a genuine commercial purpose.

(7) In this section “loss-related tax advantage” means a tax advantage as a result of a deduction (or increased deduction) under a provision mentioned in subsection (8).

(8) The provisions are—

(a) sections 37, 45, 45A, 45B and 45F of CTA 2010 (deductions in respect of trade losses);

(b) section 62(5) of CTA 2010 (losses of a UK property business);

(c) Part 5 of CTA 2010 (group relief);

(d) Part 5A of CTA 2010 (group relief for carried-forward losses);

(e) sections 457, 459, 461, 462, 463B and 463G of CTA 2009 (non-trading deficits from loan relationships);

(f) section 753 of CTA 2009 (non-trading losses on intangible fixed assets);

(g) section 1219 of CTA 2009 (management expenses etc);

(h) section 124B of FA 2012 (excess carried-forward BLAGAB trade losses).

(9) In this section—

  • “arrangements” includes any agreement, understanding, scheme transaction or series of transactions (whether or not legally enforceable);

  • “tax advantage” has the meaning given by section 1139 of CTA 2010.

(10) This section has effect in relation to a tax advantage that relates (or would apart from this section relate) to an accounting period beginning on or after 1 April 2017 (regardless of when the arrangements in question were made).

(11) Where a tax advantage would (apart from this subsection) relate to an accounting period beginning before 1 April 2017 and ending on or after that date (“the straddling period”)—

(a) so much of the straddling period as falls before 1 April 2017, and so much of that period as falls on or after that date, are treated as separate accounting periods, and

(b) the extent (if any) to which the tax advantage relates to the second of those accounting periods is to be determined by apportioning amounts—

(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.

31 Corporate interest restriction

Schedule 10 makes provision about the amounts that may be brought into account for the purposes of corporation tax in respect of interest and other financing costs.

32 Museum and gallery exhibitions

Schedule 11 makes provision about relief in respect of the production of museum and gallery exhibitions.

33 Grassroots sport

(1) CTA 2010 is amended as follows.

(2) In section 1(2) (overview of Act)—

(a) omit the “and” at the end of paragraph (g), and

(b) after that paragraph insert—

(ga) relief for expenditure on grassroots sport (see Part 6A), and”.

(3) In section 99(1) (group relief: losses and other amounts which may be surrendered), after paragraph (d) insert—

(da) amounts allowable as qualifying expenditure on grassroots sport (see Part 6A),”.

(4) In section 105(4) (group relief: order in which amounts are treated as surrendered)—

(a) after paragraph (a) insert—

(aa) second, expenditure within section 99(1)(da),”,

(b) in paragraph (b), for “second” substitute “third”,

(c) in paragraph (c), for “third” substitute “fourth”, and

(d) in paragraph (d), for “fourth” substitute “fifth”.

(5) After Part 6 insert—

Part 6A
Relief for expenditure on grassroots sport
217A Relief for expenditure on grassroots sport

(1) A payment made by a company which is qualifying expenditure on grassroots sport (and which is not refunded) is allowed as a deduction in accordance with this section from the company’s total profits in calculating the corporation tax chargeable for the accounting period in which the payment is made.

(2) The deduction is from the company’s total profits for the accounting period after any other relief from corporation tax other than—

(a) relief under Part 6,

(b) group relief, and

(c) group relief for carried-forward losses.

(3) If the company is a qualifying sport body at the time of the payment, a deduction is allowed for the amount of the payment.

See section 217C for the meaning of “qualifying sport body”.

(4) If the company is not a qualifying sport body at the time of the payment, a deduction is allowed—

(a) if the payment is to a qualifying sport body, for the amount of the payment, and

(b) if the payment does not fall within paragraph (a) (a “direct payment”), in accordance with subsections (7) and (8).

(5) If at any time on or after 1 April 2017 the company receives income for use for charitable purposes which are purposes for facilitating participation in amateur eligible sport, a deduction is allowed only if, and in so far as, the payment exceeds an amount which is equal to the amount of that income which—

(a) the company does not have to bring into account for corporation tax purposes, and

(b) has not previously been taken into account under this subsection to disallow a deduction under this Part of all or any part of a payment.

See section 217B(3) for the meaning of terms used in this subsection.

(6) But in any case, the amount of the deduction is limited to the amount that reduces the company’s taxable total profits for the accounting period to nil.

(7) If the total of all the direct payments made by the company in the accounting period is equal to or less than the maximum deduction for direct payments, a deduction is allowed under subsection (4)(b) in respect of that total.

(8) If the total of all the direct payments made by the company in the accounting period is more than the maximum deduction for direct payments, a deduction is allowed under subsection (4)(b) in respect of so much of that total as does not exceed the maximum deduction for direct payments.

(9) The maximum deduction for direct payments is £2,500 or, if the accounting period is shorter than 12 months, a proportionately reduced amount.

(10) The Treasury may by regulations amend subsection (9) by substituting a higher amount for the amount for the time being specified there.

217B Meaning of qualifying expenditure on grassroots sport

(1) For the purposes of this Part, a payment is qualifying expenditure on grassroots sport if—

(a) it is expenditure incurred for charitable purposes which are purposes for facilitating participation in amateur eligible sport, and

(b) apart from this Part, no deduction from total profits, or in calculating any component of total profits, would be allowed in respect of the payment.

For the meaning of charitable purposes, see sections 2, 7 and 8 of the Charities Act 2011.

(2) Where expenditure is incurred for both—

(a) charitable purposes which are purposes for facilitating participation in amateur eligible sport, and

(b) other purposes,

then, for the purposes of subsection (1), it is to be apportioned between the purposes in paragraph (a) and the purposes in paragraph (b) on a just and reasonable basis.

(3) For the purposes of section 217A(5) and subsection (1)(a)

(a) paying a person to play or take part in a sport does not facilitate participation in amateur sport, but paying coaches or officials for their services may do so, and

(b) “eligible sport” means a sport that for the time being is an eligible sport for the purposes of Chapter 9 of Part 13 (see section 661).

217C Meaning of qualifying sport body

(1) For the purposes of this Part, a “qualifying sport body” is—

(a) a recognised sport governing body;

(b) a body which is wholly owned by a recognised sport governing body.

(2) A “recognised sport governing body” is a body which is included from time to time in a list, maintained by the National Sports Councils, of governing bodies of sport recognised by them.

(3) The Treasury may by regulations—

(a) amend this section for the purpose of altering the meaning of “qualifying sport body”;

(b) designate bodies to be treated as qualifying sport bodies for the purposes of this Part.

(4) Regulations under section (3)(b) may designate a body by reference to its inclusion in a class or description of bodies.

(5) In this section “the National Sports Councils” means—

(a) the United Kingdom Sports Council,

(b) the English Sports Council,

(c) the Scottish Sports Council,

(d) the Sports Council for Wales, and

(e) the Sports Council for Northern Ireland.

(6) Regulations under subsection (3)(b) made before 1 April 2018 may include provision having effect in relation to times before the regulations are made (but not times earlier than 1 April 2017).

217D Relationship between this Part and Part 6

If, but for section 217A, an amount—

(a) would be deductible under Part 6, or

(b) would be deductible under Part 6 but for Chapter 2A of Part 6,

the amount is not deductible under this Part, and nothing in this Part affects the amount’s deductibility (or non-deductibility) under Part 6.”

(6) The amendments made by this section have effect for the purpose of allowing deductions for payments made on or after 1 April 2017.

(7) Where a company has an accounting period beginning before 1 April 2017 and ending on or after that date, the accounting period for the purposes of the new section 217A(9) is so much of the accounting period as falls on or after 1 April 2017.

34 Profits from the exploitation of patents: cost-sharing arrangements

(1) Part 8A of CTA 2010 (profits from the exploitation of patents) is amended as follows.

(2) After section 357BLE insert—

357BLEA Cases where the company is a party to a CSA

(1) Subsection (2) applies if during the relevant period—

(a) the company is a party to a cost-sharing arrangement (see section 357GC),

(b) the company incurs expenditure in making payments under the arrangement that are within section 357BLC(2) by reason of section 357GCZC, and

(c) persons who are not connected with the company make payments under the arrangement to the company in respect of relevant research and development undertaken or contracted out by the company.

(2) So much of the expenditure referred to in paragraph (b) of subsection (1) as is equal to the amount of the payments referred to in paragraph (c) of that subsection is to be disregarded in determining the R&D fraction for the sub-stream.

(3) Subsection (4) applies if during the relevant period—

(a) the company is a party to a cost-sharing arrangement,

(b) the company incurs expenditure in making payments under the arrangement that are within subsection (5), and

(c) the company receives payments under the arrangement that are within subsection (6).

(4) So much of the expenditure referred to in paragraph (b) of subsection (3) as is equal to the amount of the payments referred to in paragraph (c) of that subsection is to be disregarded in determining the R&D fraction for the sub-stream.

(5) A payment is within this subsection if—

(a) it is within section 357BLD(2) by reason of section 357GCZC, or

(b) it is within section 357BLE(2) or (3) by reason of section 357GCZD.

(6) A payment is within this subsection if—

(a) it is made by persons connected with the company in respect of relevant research and development undertaken or contracted out by the company, or

(b) it is made in respect of an assignment to the company of a relevant qualifying IP right or a grant or transfer to the company of an exclusive licence in respect of such a right.”

(3) For section 357GC substitute—

357GC Meaning of “cost-sharing arrangement” etc

(1) This section applies for the purposes of this Part.

(2) A “cost-sharing arrangement” is an arrangement under which—

(a) each of the parties to the arrangement is required to contribute to the cost of, or undertake activities for the purpose of, creating or developing an item or process,

(b) each of those parties—

(i) is entitled to a share of any income attributable to the item or process, or

(ii) has one or more rights in respect of the item or process, and

(c) the amount of any income received by each of those parties is proportionate to its participation in the arrangement as described in paragraph (a).

(3) “Invention”, in relation to a cost-sharing arrangement, means the item or process that is the subject of the arrangement (or any item or process incorporated within it).

357GCZA Qualifying IP right held by another party to CSA

(1) This section applies if—

(a) a company is a party to a cost-sharing arrangement,

(b) another party to the arrangement (“P”) holds a qualifying IP right granted in respect of the invention, and

(c) the company does not hold an exclusive licence in respect of the right.

(2) But this section does not apply if the arrangement produces for the company a return within section 357BG(1)(c).

(3) The company is to be treated for the purposes of this Part as if it held the right.

(4) The right is to be treated for the purposes of this Part as a new qualifying IP right in relation to the company if—

(a) the company or P (or both) became a party to the arrangement on or after 1 April 2017, or

(b) the right is a new qualifying IP right in relation to P (or would be if P was a company).

(5) Subsection (4) does not apply if—

(a) the company held an exclusive licence in respect of the right immediately before it became a party to the arrangement, and

(b) that licence was granted to the company before the relevant date.

(6) The right is to be treated for the purposes of this Part as an old qualifying IP right in relation to the company if it is not to be treated as a new qualifying IP right by reason of subsection (4).

(7) Subsections (7) and (8) of section 357BP (meaning of “relevant date”) apply for the purposes of subsection (5) of this section as they apply for the purposes of subsection (6) of that section.

357GCZB Exclusive licence held by another party to CSA

(1) This section applies if—

(a) a company is a party to a cost-sharing arrangement,

(b) another party to the arrangement (“P”) holds an exclusive licence in respect of a qualifying IP right granted in respect of the invention, and

(c) the company does not hold the right or another exclusive licence in respect of it.

(2) But this section does not apply if the arrangement produces for the company a return within section 357BG(1)(c).

(3) The company is to be treated for the purposes of this Part as if it held an exclusive licence in respect of the right.

(4) The right is to be treated for the purposes of this Part as a new qualifying IP right in relation to the company if—

(a) the company or P (or both) became a party to the arrangement on or after 1 April 2017, or

(b) the right is a new qualifying IP right in relation to P (or would be if P was a company).

(5) Subsection (4) does not apply if—

(a) the company held the right immediately before it became a party to the arrangement, and

(b) either—

(i) the right had been granted or issued to the company in response to an application filed before 1 July 2016, or

(ii) the right had been assigned to the company before the relevant date.

(6) Subsection (4) also does not apply if—

(a) the company held an exclusive licence in respect of the right immediately before it became a party to the arrangement, and

(b) that licence was granted to the company before the relevant date.

(7) The right is to be treated for the purposes of this Part as an old qualifying IP right in relation to the company if it is not to be treated as a new qualifying IP right by reason of subsection (4).

(8) Subsections (7) and (8) of section 357BP (meaning of “relevant date”) apply for the purposes of subsections (5) and (6) of this section as they apply for the purposes of subsections (5) and (6) of that section.

357GCZC R&D undertaken or contracted out by another party to CSA

(1) Subsection (2) applies if—

(a) a company is a party to a cost-sharing arrangement, and

(b) another party to the arrangement (“P”) undertakes research and development for the purpose of creating or developing the invention.

(2) The research and development is to be treated for the purposes of sections 357BLC and 357BLD as having been contracted out by the company to P.

(3) Subsection (4) applies if—

(a) a company is a party to a cost-sharing arrangement,

(b) another party to the arrangement (“P”) contracts out to another person (“A”) research and development for the purpose of creating or developing the invention, and

(c) the company makes a payment under the arrangement in respect of that research and development (whether to P or to A).

(4) For the purposes of sections 357BLC and 357BLD—

(a) the company is to be treated as having contracted out to P research and development which is the same as that contracted out by P to A, and

(b) the payment mentioned in subsection (3)(c) is to be treated as if it were a payment made to P in respect of the research and development the company is treated as having contracted out to P.

(5) In this section “research and development” has the meaning given by section 1138.

357GCZD Acquisition of qualifying IP rights etc by another party to CSA

(1) Subsection (2) applies if—

(a) a company is a party to a cost-sharing arrangement,

(b) a person (“A”) assigns to another party to the arrangement (“P”) a qualifying IP right,

(c) the qualifying IP right is a right in respect of the invention, and

(d) the company makes under the arrangement a payment in respect of the assignment (whether to A or to P).

(2) The payment is to be treated for the purposes of section 357BLE as if it were a payment to A in respect of the assignment by A to the company of the right.

(3) Subsection (4) applies if—

(a) a company is a party to a cost-sharing arrangement,

(b) a person (“A”) grants or transfers to another party to the arrangement (“P”) an exclusive licence in respect of qualifying IP right,

(c) the qualifying IP right is a right granted in respect of the invention, and

(d) the company makes a payment under the arrangement in respect of the grant or transfer (whether to A or to P).

(4) The payment is to be treated for the purposes of section 357BLE as if it were a payment to A in respect of the grant or transfer by A to the company of the licence.

357GCZE Treatment of expenditure in connection with formation of CSA etc

(1) Where—

(a) a company makes a payment to a person (“P”) in consideration of that person entering into a cost-sharing arrangement with the company, and

(b) P holds a qualifying IP right granted in respect of the invention or holds an exclusive licence in respect of such a right,

a just and reasonable amount of the payment is to be treated for the purposes of section 357BLE as if it was an amount paid in respect of the assignment to the company of the right or (as the case may be) the transfer to the company of the licence.

(2) Where—

(a) a company makes a payment to a party to a cost-sharing arrangement (“P”) in consideration of P agreeing to the company becoming a party to the arrangement (whether in place of P or in addition to P), and

(b) any party to the arrangement holds a qualifying IP right in respect of the invention or holds an exclusive licence in respect of such a right,

a just and reasonable amount of the payment is to be treated for the purposes of section 357BLE as if it was an amount paid in respect of the assignment to the company of the right or (as the case may be) the transfer to the company of the licence.

(3) Where—

(a) a company that is a party to a cost-sharing arrangement makes a payment to another party to the arrangement in consideration of that party agreeing to the company becoming entitled to a greater share of the income attributable to the invention or acquiring additional rights in relation to the invention, and

(b) any party to the arrangement holds a qualifying IP right in respect of the invention or holds an exclusive licence in respect of such a right,

a just and reasonable amount of the payment is to be treated for the purposes of section 357BLE as if it was an amount paid in respect of the

assignment to the company of the right or (as the case may be) the transfer to the company of the licence.

357GCZF Treatment of income in connection with formation of CSA etc

(1) Where—

(a) a company receives a payment in consideration of its entering into a cost-sharing arrangement, and

(b) the company holds a qualifying IP right granted in respect of the invention or holds an exclusive licence in respect of such a right,

a just and reasonable amount of the payment is to be treated as relevant IP income of the company.

(2) Where—

(a) a company that is a party to a cost-sharing arrangement receives a payment from a person in consideration of its agreeing to that person becoming a party to the arrangement (whether in place of the company or in addition to it), and

(b) any party to the arrangement holds a qualifying IP right in respect of the invention or holds an exclusive licence in respect of such a right,

a just and reasonable amount of the payment is to be treated as relevant IP income of the company.

(3) Where—

(a) a company that is a party to a cost-sharing arrangement receives a payment from another party to the arrangement in consideration of its agreeing to that party becoming entitled to a greater share of the income attributable to the invention or acquiring additional rights in relation to the invention, and

(b) any party to the arrangement holds a qualifying IP right in respect of the invention or holds an exclusive licence in respect of such a right,

a just and reasonable amount of the payment is to be treated as relevant IP income of the company.”

(4) In section 357BP (meaning of “new qualifying IP right”) after subsection (12) insert—

(13) This section has effect subject to section 357GCZA (qualifying IP right held by another party to a cost-sharing arrangement) and section 357GCZB (exclusive licence held by another party to a cost-sharing arrangement).”

(5) The amendments made by this section have effect in relation to accounting periods beginning on or after 1 April 2017.

Hybrids and other mismatches

35 Permitted taxable periods of payees and deductions for amortisation

(1) Part 6A of TIOPA 2010 (hybrid and other mismatches) is amended as follows.

(2) In section 259CC(2) (hybrid and other mismatches from financial instruments: meaning of “permitted” taxable period of a payee), for paragraph (b)

substitute—

(b) the period begins at a later time and it is just and reasonable for the amount of ordinary income to arise for the period (rather than an earlier one).”

(3) In section 259DD(2) (hybrid transfer deduction/non-inclusion mismatches: meaning of “permitted” taxable period of a payee), for paragraph (b) substitute—

(b) the period begins at a later time and it is just and reasonable for the amount of ordinary income to arise for the period (rather than an earlier one).”

(4) In section 259EB (hybrid payer deduction/non-inclusion mismatches and their extent), after subsection (1) insert—

(1A) But there is no hybrid payer deduction/non-inclusion mismatch so far as the relevant deduction is—

(a) a debit in respect of amortisation that is brought into account under section 729 or 731 of CTA 2009 (writing down the capitalised cost of an intangible fixed asset), or

(b) an amount that is deductible in respect of amortisation under a provision of the law of a territory outside the United Kingdom that is equivalent to either of those sections.”

(5) In section 259FA (deduction/non-inclusion mismatches relating to transfers by permanent establishments), after subsection (4) insert—

(4A) For the purposes of this section “the PE deduction” does not include—

(a) a debit in respect of amortisation that is brought into account under section 729 or 731 of CTA 2009 (writing down the capitalised cost of an intangible fixed asset), or

(b) an amount that is deductible in respect of amortisation under a provision of the law of a territory outside the United Kingdom that is equivalent to either of those sections.”

(6) In section 259GB (hybrid payee deduction/non-inclusion mismatches and their extent), after subsection (1) insert—

(1A) But there is no hybrid payee deduction/non-inclusion mismatch so far as the relevant deduction is—

(a) a debit in respect of amortisation that is brought into account under section 729 or 731 of CTA 2009 (writing down the capitalised cost of an intangible fixed asset), or

(b) an amount that is deductible in respect of amortisation under a provision of the law of a territory outside the United Kingdom that is equivalent to either of those sections.”

(7) In section 259HB (multinational payee deduction/non-inclusion mismatches and their extent), after subsection (1) insert—

(1A) But there is no multinational payee deduction/non-inclusion mismatch so far as the relevant deduction is—

(a) a debit in respect of amortisation that is brought into account under section 729 or 731 of CTA 2009 (writing down the capitalised cost of an intangible fixed asset), or

(b) an amount that is deductible in respect of amortisation under a provision of the law of a territory outside the United Kingdom that is equivalent to either of those sections.”

(8) In section 259KB (imported mismatches: meaning of “excessive PE deduction” etc), after subsection (3) insert—

(3A) For the purposes of this section a “PE deduction” does not include—

(a) a debit in respect of amortisation that is brought into account under section 729 or 731 of CTA 2009 (writing down the capitalised cost of an intangible fixed asset), or

(b) an amount that is deductible in respect of amortisation under a provision of the law of a territory outside the United Kingdom that is equivalent to either of those sections.”

(9) Part 6A of TIOPA 2010 has effect, and is to be deemed always to have had effect, with the amendments set out in this section.

Northern Ireland

36 Trading profits taxable at the Northern Ireland rate

Schedule 12 contains—

(a) amendments of Part 8B of CTA 2010 (trading profits taxable at the Northern Ireland rate), and

(b) amendments consequential on or related to those amendments.

CHAPTER 4 Chargeable gains

37 Exemption from attribution of carried interest gains

(1) TCGA 1992 is amended as follows.

(2) In section 13(1A) (attribution of gains to members of non-resident companies)—

(a) omit the “or” at the end of paragraph (a), and

(b) at the end of paragraph (b), insert , or

(c) a chargeable gain treated as accruing under section 103KA(2) or (3) (carried interest gains).”

(3) In section 86 (attribution of gains to settlors with interest in non-resident or dual resident settlements), after subsection (4ZA) insert—

(4ZB) Where (apart from this subsection) the amount mentioned in subsection (1)(e) would include an amount of chargeable gains treated as accruing under section 103KA(2) or (3) (carried interest gains), the amount of the gains is to be disregarded for the purposes of subsection (1)(e).”

(4) In section 87 (non-UK resident settlements: attribution of gains to

beneficiaries), after subsection (5A) insert—

(5B) Where (apart from this subsection) the amount mentioned in subsection (4)(a) would include an amount of chargeable gains treated as accruing under section 103KA(2) or (3) (carried interest gains), the amount of the gains is to be disregarded for the purposes of determining the section 2(2) amount.”

(5) The amendments made by this section have effect in relation to chargeable gains treated as accruing under section 103KA(2) or (3) of TCGA 1992 at any time before, as well as after, the passing of this Act.

38 Elections in relation to assets appropriated to trading stock

(1) Section 161 of TCGA 1992 (appropriations to and from trading stock) is amended as follows.

(2) In subsection (3)—

(a) for “a person’s appropriation of an asset for the purposes of a trade” substitute “a case where a chargeable gain would have accrued to a person on the appropriation of an asset for the purposes of a trade as mentioned in that subsection”, and

(b) for “the chargeable gain or increased by the amount of the allowable loss referred to in subsection (1), and where that subsection” substitute “that chargeable gain, and where subsection (1)”.

(3) In subsection (3ZB)—

(a) in paragraph (a)—

(i) omit “or loss”, and

(ii) omit “or an allowable loss”,

(b) in paragraph (b)—

(i) omit “, or increased by the amount of any loss,” and

(ii) omit “or allowable loss”, and

(c) in paragraph (c), at the end insert “and a loss which accrues on that disposal which is not ATED-related is also unaffected by the election”.

(4) The amendments made by this section have effect in relation to appropriations of assets made on or after 8 March 2017.

39 Substantial shareholding exemption

(1) Schedule 7AC to TCGA 1992 (exemptions for disposals by companies with substantial shareholding) is amended as follows.

(2) Omit the following (which relate to requirements to be met by investing company)—

(a) in paragraph 1(2), “the investing company and”;

(b) in paragraph 3—

(i) in sub-paragraph (2)(b), “(but see sub-paragraph (3) below)”;

(ii) sub-paragraph (3);

(iii) in sub-paragraph (4), “of paragraph 18(1)(b) and”;

(c) in the heading to Part 3, “investing company and”;

(d) paragraph 18 and the preceding italic heading;

(e) in paragraph 23(3), “a member of a trading group or”.

(3) In paragraph 7 (substantial shareholding requirement), for “two” substitute “six”.

(4) In paragraph 10 (effect of earlier no-gain/no-loss transfer), in sub-paragraph (2)(b), after “but for” insert “subsection (1A) or”.

(5) In paragraph 19 (requirements relating to company invested in)—

(a) in sub-paragraph (1)(b), at the beginning insert “in a case where sub-paragraph 1A) applies,”;

(b) after sub-paragraph (1) insert—

(1A) This sub-paragraph applies where—

(a) the disposal is a disposal to a person connected with the investing company, or

(b) the requirement in paragraph 7 is met by virtue of paragraph 15A.”;

(c) at the end insert—

(4) Section 1122 of CTA 2010 (meaning of “connected” persons) applies for the purposes of sub-paragraph (1A)(a).”

(6) The amendments made by this section have effect in relation to disposals made on or after 1 April 2017.

40 Substantial shareholding exemption: institutional investors

(1) Schedule 7AC to TCGA 1992 (exemptions for disposals by companies with substantial shareholding) is amended as follows.

(2) After paragraph 3 insert—

“Subsidiary exemption: qualifying institutional investors

3A (1) This paragraph applies in relation to a gain or loss accruing to a company (“the investing company”) on a disposal of shares or an interest in shares in another company (“the company invested in”).

(2) This paragraph applies if—

(a) the requirement in paragraph 7 is met (substantial shareholder requirement),

(b) the requirement in paragraph 19 is not met (requirement relating to company invested in), and

(c) the investing company is not a disqualified listed company.

(3) If, immediately before the disposal, 80% or more of the ordinary share capital of the investing company is owned by qualifying institutional investors, no chargeable gain or loss accrues on the disposal.

(4) If, immediately before the disposal, at least 25% but less than 80% of the ordinary share capital of the investing company is owned by qualifying institutional investors, the amount of the chargeable gain or loss accruing on the disposal is reduced by the percentage of the ordinary share capital of the investing company which is owned by the qualifying institutional investors.

(5) A company is a “disqualified listed company” for the purposes of this Part of this Schedule if—

(a) any of the shares forming part of the ordinary share capital of the company are listed on a recognised stock exchange,

(b) the company is not a qualifying institutional investor, and

(c) the company is not a qualifying UK REIT

(6) In sub-paragraph (5)(c) “qualifying UK REIT” means a UK REIT within the meaning of Part 12 of CTA 2010 which—

(a) meets the condition in section 528(4)(b) of that Act (company not a close company by virtue of having an institutional investor as a participant), or

(b) by virtue of section 443 of that Act (companies controlled by or on behalf of Crown) is not treated as a close company.

3B (1) This paragraph applies for the purposes of paragraph 3A.

(2) A person “owns” ordinary share capital if the person owns it—

(a) directly,

(b) indirectly, or

(c) partly directly and partly indirectly.

(3) Sections 1155 to 1157 of CTA 2010 (meaning of “indirect ownership” and calculation of amounts owned indirectly) apply for the purposes of sub-paragraph (2).

(4) For the purposes of sections 1155 to 1157 of CTA 2010 as applied by sub-paragraph (3)—

(a) ordinary share capital may not be owned through a disqualified listed company;

(b) treat references to a body corporate as including an exempt unauthorised unit trust (and references to ordinary share capital, in the case of such a trust, as references to units in the trust).

(5) A person is also to be regarded as owning ordinary share capital in a company in circumstances where a person would, under paragraphs 12 and 13 of this Schedule, be regarded as holding shares in a company.

(6) Where the assets of a partnership include ordinary share capital of a company, each partner is to be regarded as owning a proportion of that share capital equal to the partner’s proportionate interest in that ordinary share capital.

(7) In this Schedule “exempt unauthorised unit trust” has the same meaning as in the Unauthorised Unit Trusts (Tax) Regulations 2013 (SI 2013/2819SI 2013/2819).”

(3) After paragraph 8 insert—

8A (1) This paragraph applies for the purposes of the exemption in paragraph 3 or 3A in a case where at least 25% of the ordinary share capital of the investing company is owned by qualifying institutional investors.

(2) The investing company also holds a “substantial shareholding” in the company invested in for the purposes of paragraph 7 if—

(a) the investing company holds shares or interests in shares in the company invested in the cost of which on acquisition was at least £20,000,000, and

(b) by virtue of those shares or interests in shares the investing company—

(i) is beneficially entitled to not less than a proportionate percentage of the profits available for distribution to equity holders of the company invested in, and

(ii) would be beneficially entitled on a winding up to not less than a proportionate percentage of the assets of the company invested in available for distribution to equity holders.

(3) In sub-paragraph (2)—

  • “cost” means the amount or value of the consideration, in money or money’s worth, given by the investing company or on its behalf wholly and exclusively for the acquisition of the shares or interests in shares, together with the incidental costs to it of the acquisition;

  • “proportionate percentage” means a percentage equal to the percentage of the ordinary share capital held by the investing company by virtue of the shares and interests in shares referred to in sub-paragraph (2)(a).

(4) For the purposes of sub-paragraph (2)(a) it does not matter whether there was a single acquisition or a series of acquisitions.

(5) Paragraph 3B (owning ordinary share capital) applies for the purposes of sub-paragraph (1).

(6) Paragraph 8(2) applies for the purposes of sub-paragraph (2).”

(4) In paragraph 9 (aggregation), in sub-paragraph (1), for “paragraph 7” substitute “paragraphs 7 and 8A(2)”.

(5) After paragraph 30 insert—

“Meaning of “qualifying institutional investor”

30A (1) In this Schedule “qualifying institutional investor” means a person falling within any of A to G below.

Pension schemes

A The trustee or manager of—

(a) a registered pension scheme, other than an investment-regulated pension scheme, or

(b) an overseas pension scheme, other than one which would be an investment-regulated pension scheme if it were a registered pension scheme.

“Investment-regulated pension scheme” has the same meaning as in Part 1 of Schedule 29A to the Finance Act 2004.

“Overseas pension scheme” has the same meaning as in Part 4 of that Act.

Life assurance businesses

B A company carrying on life assurance business, if immediately before the disposal its interest in the investing company is held for the purpose of providing benefits to policy holders in the course of that business.

“Life assurance business” has the meaning given in section 56 of the Finance Act 2012.

Sovereign wealth funds etc

C A person who cannot be liable for corporation tax or income tax (as relevant) on the ground of sovereign immunity.

Charities

D A charity.

Investment trusts

E An investment trust.

Authorised investment funds

F An authorised investment fund which meets the genuine diversity of ownership condition throughout the accounting period of the fund in which the disposal is made.

“Authorised investment fund” has the same meaning as in the Authorised Investment Funds (Tax) Regulations 2006 (SI 2006/964).

Regulation 9A of the Authorised Investment Funds (Tax) Regulations 2006 (genuine diversity of ownership) applies for this purpose.

Exempt unauthorised unit trusts

G The trustees of an exempt unauthorised unit trust, where the trust meets the genuine diversity of ownership condition throughout the accounting period of the trust in which the disposal is made.

Regulation 9A of the Authorised Investment Funds (Tax) Regulations 2006 (genuine diversity of ownership) applies for this purpose (treating references to an authorised investment fund as including an exempt unauthorised unit trust).

(2) The Treasury may by regulations amend this Schedule so as to add or remove a person as a “qualifying institutional investor” (and may in particular do so by changing the conditions subject to which a person is a qualifying institutional investor).”

(6) In paragraph 31 (index), at the appropriate places insert—

“Exempt unauthorised unit trust paragraph 3B(7)
“Qualifying institutional investor paragraph 30A”.

(7) The amendments made by this section have effect in relation to disposals made on or after 1 April 2017.

CHAPTER 5 Provisions relating to more than one tax

Domicile, overseas property etc

41 Deemed domicile: income tax and capital gains tax

(1) In Chapter 2A of Part 14 of ITA 2007 (income tax liability: domicile), after section 835B insert—

835BA Deemed domicile

(1) This section has effect for the purposes of the provisions of the Income Tax Acts or TCGA 1992 which apply this section.

(2) An individual not domiciled in the United Kingdom at a time in a tax year (“the relevant tax year”) is to be regarded as domiciled in the United Kingdom at that time if—

(a) condition A is met, or

(b) condition B is met.

(3) Condition A is that—

(a) the individual was born in the United Kingdom,

(b) the individual’s domicile of origin was in the United Kingdom, and

(c) the individual is UK resident for the relevant tax year.

(4) Condition B is that the individual has been UK resident for at least 15 of the 20 tax years immediately preceding the relevant tax year.

(5) But Condition B is not met if—

(a) the individual is not UK resident for the relevant tax year, and

(b) there is no tax year beginning after 5 April 2017 and preceding the relevant tax year in which the person was UK resident.”

(2) Schedule 13 contains—

(a) provision applying section 835BA of ITA 2007, and

(b) further provision relating to this section.

42 Deemed domicile: inheritance tax

(1) In section 267 of IHTA 1984 (persons treated as domiciled in the United Kingdom), in subsection (1)—

(a) in paragraph (a), omit the final “or”;

(b) after that paragraph insert—

(aa) he is a formerly domiciled resident for the tax year in which the relevant time falls (“the relevant tax year”), or”;

(c) for paragraph (b) substitute—

(b) he was resident in the United Kingdom—

(i) for at least fifteen of the twenty tax years immediately preceding the relevant tax year, and

(ii) for at least one of the four tax years ending with the relevant tax year.”

(2) In that section, omit subsection (3).

(3) In that section, in subsection (4), for “in any year of assessment” substitute “for any tax year”.

(4) In section 48 of that Act (settlements: excluded property)—

(a) in subsection (3)(b), for “and (3D)” substitute “to (3E)”;

(b) in subsection (3A)(b), for “subsection (3B)” substitute “subsections (3B) and (3E)”;

(c) after subsection (3D) insert—

(3E) In a case where the settlor of property comprised in a settlement is not domiciled in the United Kingdom at the time the settlement is made, the property is not excluded property by virtue of subsection (3) or (3A) above at any time in a tax year if the settlor was a formerly domiciled resident for that tax year.”

(5) In section 64 of that Act (charge at ten-year anniversary), in subsection (1B), after “was made” insert “and is not a formerly domiciled resident for the tax year in which the ten-year anniversary falls”.

(6) In section 65 of that Act (charge at other times), after subsection (7A) insert—

(7B) Tax shall not be charged under this section by reason only that property comprised in a settlement becomes excluded property by virtue of section 48(3E) ceasing to apply in relation to it.”

(7) In section 82 of that Act (excluded property)—

(a) for subsection (1) substitute—

(1) In a case where, apart from this section, property to which section 80 or 81 applies would be excluded property by virtue of section 48(3)(a) above, that property shall not be taken to be excluded property at any time (“the relevant time”) for the purposes of this Chapter (except sections 78 and 79) unless Conditions A and B are satisfied.”;

(b) in subsection (2), for “the condition in subsection (3) below” substitute “Condition A”;

(c) in subsection (3), for “The condition” substitute “Condition A”;

(d) after subsection (3) insert—

(4) Condition B referred to in subsection (1) above is—

(a) in the case of property to which section 80 above applies, that the person who is the settlor in relation to the settlement first mentioned in that section, and

(b) in the case of property to which subsection (1) or (2) of section 81 above applies, that the person who is the settlor in relation to the first or second of the settlements mentioned in that subsection,

was not a formerly domiciled resident for the tax year in which the relevant time falls.”

(8) In section 272 of that Act (interpretation)—

(a) for the definition of “foreign-owned” substitute—

  • ““foreign-owned”, in relation to property at any time, means property—

    (a)

    in the case of which the person beneficially entitled to it is at that time domiciled outside the United Kingdom, or

    (b)

    if the property is comprised in a settlement, in the case of which the settlor—

    (i)

    is not a formerly domiciled resident for the tax year in which that time falls, and

    (ii)

    was domiciled outside the United Kingdom when the property became comprised in the settlement;”;

(b) at the appropriate place insert—

  • ““formerly domiciled resident”, in relation to a tax year, means a person—

    (a)

    who was born in the United Kingdom,

    (b)

    whose domicile of origin was in the United Kingdom,

    (c)

    who was resident in the United Kingdom for that tax year, and

    (d)

    who was resident in the United Kingdom for at least one of the two tax years immediately preceding that tax year;”.

(9) The amendments made by this section have effect in relation to times after 5 April 2017, subject to subsections (10) to (12).

(10) The amendment to section 267(1) of IHTA 1984 made by subsection (1)(c) does not have effect in relation to a person if—

(a) the person is not resident in the United Kingdom for the relevant tax year, and

(b) there is no tax year beginning after 5 April 2017 and preceding the relevant tax year in which the person was resident in the United Kingdom.

In this subsection “relevant tax year” is to be construed in accordance with section 267(1) of IHTA 1984 as amended by subsection (1).

(11) The amendment to section 267(1) of IHTA 1984 made by subsection (1)(c) also does not have effect in determining—

(a) whether settled property which became comprised in the settlement on or before that date is excluded property for the purposes of IHTA 1984;

(b) the settlor’s domicile for the purposes of section 65(8) of that Act in relation to settled property which became comprised in the settlement on or before that date;

(c) whether, for the purpose of section 65(8) of that Act, the condition in section 82(3) of that Act is satisfied in relation to such settled property.

(12) Despite subsection (2), section 267(1) of IHTA 1984, as originally enacted, shall continue to be disregarded in determining—

(a) whether settled property which became comprised in the settlement on or before 9 December 1974 is excluded property for the purposes of IHTA 1984;

(b) the settlor’s domicile for the purposes of section 65(8) of that Act in relation to settled property which became comprised in the settlement on or before that date;

(c) whether, for the purpose of section 65(8) of that Act, the condition in section 82(3) of that Act is satisfied in relation to such settled property.

43 Settlements and transfer of assets abroad: value of benefits

Schedule 14 makes provision about the value of benefits received in relation to settlements and the transfer of assets abroad.

44 Inheritance tax on overseas property representing UK residential property

Schedule 15 makes provision about the extent to which overseas property is excluded property for the purposes of inheritance tax, in cases where the value of the overseas property is attributable to residential property in the United Kingdom.

Employee shareholder shares

45 Employee shareholder shares: amount treated as earnings

(1) In section 226A of ITEPA 2003 (amount treated as earnings)—

(a) in subsection (2), for “calculated in accordance with subsection (3)” substitute “equal to the market value of the shares”;

(b) omit subsection (3);

(c) in subsection (6), omit “and sections 226B to 226D”;

(d) in subsection (7), after “subsection (1)” insert “(but not subsection (2))”.

(2) Omit sections 226B to 226D of ITEPA 2003 (deemed payment).

(3) In consequence of subsection (2), in ITEPA 2003 omit the following—

(a) section 479(3A);

(b) section 531(3A);

(c) section 532(4A).

(4) In consequence of subsection (2), in CTA 2009 omit the following—

(a) in section 1005, the definition of “employee shareholder share”;

(b) section 1009(6);

(c) in section 1010(1), “and, in the case of employee shareholder shares, section 1038B”;

(d) in section 1011(4)(b), “(but see also section 1038B of this Act)“;

(e) in sections 1018(1) and 1019(1), “and, in the case of employee shareholder shares, section 1038B”;

(f) sections 1022(5), 1026(5), 1027(5), 1033(5) and 1034(5);

(g) section 1038B;

(h) sections 1292(6ZA) and 1293(5A);

(i) in Schedule 4, the entry relating to “employee shareholder share”.

(5) The amendments made by this section have effect in relation to shares acquired in consideration of an employee shareholder agreement entered into on or after the relevant day.

(6) The relevant day is 1 December 2016, subject to subsection (7).

(7) Where the individual entering into an employee shareholder agreement receives the advice referred to in section 205A(6)(a) of the Employment Rights Act 1996—

(a) on 23 November 2016, but

(b) before 1.30 pm on that day,

the relevant day is 2 December 2016.

46 Employee shareholder shares: abolition of CGT exemption

(1) TCGA 1992 is amended as follows.

(2) In section 58 (spouses and civil partners)—

(a) in subsection (2)—

(i) at the end of paragraph (a) insert “or”;

(ii) omit paragraph (c) and the preceding “or”;

(b) omit subsections (3) to (5).

(3) In section 149AA (restricted and convertible employment-related securities and employee shareholder shares), for subsection (6A) substitute—

(6A) For the purposes of this section—

  • shares are “acquired” by an employee if the employee becomes beneficially entitled to them (and they are acquired at the time when the employee becomes so entitled);

  • “employee shareholder share” means a share acquired in consideration of an employee shareholder agreement and held by the employee;

  • “employee shareholder agreement” means an agreement by virtue of which an employee is an employee shareholder (see section 205A(1)(a) to (d) of the Employment Rights Act 1996);

  • “employee” and “employer company”, in relation to an employee shareholder agreement, mean the individual and the company which enter into the agreement.”

(4) Omit sections 236B to 236F (exemption for employee shareholder shares).

(5) In section 236G (relinquishment of employment rights is not disposal of an asset), in subsection (1), for “employee shareholder agreement” substitute “agreement by virtue of which the individual is an employee shareholder (see section 205A(1)(a) to (d) of the Employment Rights Act 1996)”.

(6) The amendments made by this section have effect in relation to shares acquired in consideration of an employee shareholder agreement entered into on or after the relevant day.

(7) The relevant day is 1 December 2016, subject to subsection (8).

(8) Where the individual entering into an employee shareholder agreement receives the advice referred to in section 205A(6)(a) of the Employment Rights Act 1996—

(a) on 23 November 2016, but

(b) before 1.30 pm on that day,

the relevant day is 2 December 2016.

47 Employee shareholder shares: purchase by company

(1) In ITTOIA 2005, omit section 385A (no charge to income tax on purchase by company of exempt employee shareholder shares).

(2) The amendment made by this section has effect in relation to the purchase from an individual of shares which were acquired in consideration of an employee shareholder agreement entered into on or after the relevant day.

(3) The relevant day is 1 December 2016, subject to subsection (4).

(4) Where the individual entering into an employee shareholder agreement receives the advice referred to in section 205A(6)(a) of the Employment Rights Act 1996—

(a) on 23 November 2016, but

(b) before 1.30 pm on that day,

the relevant day is 2 December 2016.

Disguised remuneration

48 Employment income provided through third parties

Schedules 16 and 17 make provision about employment income provided through third parties.

49 Trading income provided through third parties

(1) ITTOIA 2005 is amended as follows.

(2) After section 23 insert—

“Trading income provided through third parties
23A Application of section 23E: conditions

(1) Section 23E (tax treatment of relevant benefits) applies if Conditions A to E are met.

(2) Condition A is that a person (“T”) is or has been carrying on a trade (the “relevant trade”) alone or in partnership.

(3) Condition B is that—

(a) there is an arrangement (“the arrangement”) in connection with the relevant trade to which T is a party or which otherwise (wholly or partly) covers or relates to T, and

(b) it is reasonable to suppose that, in essence—

(i) the arrangement, or

(ii) the arrangement so far as it covers or relates to T,

is (wholly or partly) a means of providing, or is otherwise concerned with the provision of, relevant benefits.

(4) Condition C is that—

(a) a relevant benefit arises to T, or a person who is or has been connected with T, in pursuance of the arrangement, or

(b) a relevant benefit arises to any other person in pursuance of the arrangement and any of the enjoyment conditions (see section 23F) is met in relation to the relevant benefit.

(5) Condition D is that it is reasonable to suppose that the relevant benefit (directly or indirectly) represents, or has arisen or derives from, or is otherwise connected with, the whole or part of a qualifying third party payment.

(6) Condition E is that it is reasonable to suppose that a tax advantage would be obtained by T, or a person who is or has been connected with T, as a result of the arrangement.

(7) For the purposes of subsection (3) in particular, all relevant circumstances are to be taken into account in order to get to the essence of the matter.

(8) In this section and sections 23B to 23H, “this group of sections” means this section and those sections.

(9) The provisions of this group of sections apply to professions and vocations as they apply to trades.

(10) See Schedule 18 to FA 2017 for provision about the application of this group of sections in relation to loans and quasi-loans that are outstanding on 5 April 2019.

23B Meaning of “relevant benefit”

(1) The following provisions apply for the purposes of this group of sections.

(2) “Relevant benefit” means any payment (including a payment by way of a loan), a transfer of money’s worth, or any other benefit.

(3) The assumption of a liability of T by another person is to be treated as the provision of a relevant benefit to T.

(4) The assumption, by a person other than T, of a liability of a person (“C”) who is or has been connected with T, is to be treated as the provision of a relevant benefit to C.

(5) “Loan” includes—

(a) any form of credit;

(b) a payment that is purported to be made by way of a loan.

23C Meaning of “qualifying third party payment”

(1) The following provisions apply for the purposes of this group of sections.

(2) A payment is a “third party payment” if it is made (by T or another person) to—

(a) T acting as trustee, or

(b) any person other than T.

(3) A third party payment is a “qualifying third party payment” if the deduction condition or the trade connection condition is met in relation to the payment.

(4) The “deduction condition” is met in relation to a payment if—

(a) a deduction for the payment is made in calculating the profits of the relevant trade, or

(b) where the relevant trade is or has been carried on in partnership, a deduction for the payment is made in calculating the amount on which T is liable to income tax in respect of the profits of the trade.

(5) The “trade connection condition” is met in relation to a payment if it is reasonable to suppose that in essence—

(a) the payment is by way of consideration for goods or services provided in the course of the relevant trade, or

(b) there is some other connection (direct or indirect) between the payment and the provision of goods or services in the course of the relevant trade.

(6) For the purposes of subsection (5) in particular, all relevant circumstances are to be taken into account in order to get to the essence of the matter.

23D Other definitions

(1) The following provisions apply for the purposes of this group of sections.

(2) “Arrangement” includes any agreement, understanding, scheme, settlement, trust, transaction or series of transactions (whether or not legally enforceable).

(3) A “tax advantage” includes—

(a) relief or increased relief from tax,

(b) repayment or increased repayment of tax,

(c) avoidance or reduction of a charge to tax or an assessment to tax,

(d) avoidance of a possible assessment to tax,

(e) deferral of a payment of tax or advancement of a repayment of tax, and

(f) avoidance of an obligation to deduct or account for tax.

(4) Section 993 of ITA 2007 (meaning of “connected” persons) applies for the purposes of this group of sections as if subsection (4) of that section 993 were omitted.

23E Tax treatment of relevant benefits

(1) Where this section applies (see section 23A), the relevant benefit amount is to be treated for income tax purposes as profits of the relevant trade for—

(a) the tax year in which the relevant benefit arises, or

(b) if T has ceased to carry on the relevant trade in a tax year (the “earlier tax year”) before the tax year referred to in paragraph (a), the earlier tax year.

(2) For the purposes of this section, “the relevant benefit amount” means—

(a) if the relevant benefit is a payment otherwise than by way of a loan, an amount equal to the amount of the payment,

(b) if the relevant benefit is a payment by way of loan, an amount equal to the principal amount lent, or

(c) in any other case, an amount equal to the value of the relevant benefit.

(3) For the purposes of subsection(2)(c), the value of a relevant benefit is—

(a) its market value at the time it arises, or

(b) if higher, the cost of providing it.

(4) In subsection (3) “market value” has the same meaning as it has for the purposes of TCGA 1992 by virtue of Part 8 of that Act.

23F Relevant benefits: persons other than T

(1) For the purposes of section 23A(4), the enjoyment conditions are—

(a) that the relevant benefit, or part of it, is in fact so dealt with by any person as to be calculated at some time to enure for the benefit of T;

(b) that the arising of the relevant benefit operates to increase the value to T of any assets—

(i) which T holds, or

(ii) which are held for the benefit of T;

(c) that T receives, or is entitled to receive, at any time any benefit provided or to be provided out of, or deriving or to be derived from, the relevant benefit (or part of it);

(d) where the relevant benefit is the payment of a sum of money (including a payment by way of loan), that T may become entitled to the beneficial enjoyment of the sum or part of the sum if one or more powers are exercised or successively exercised (and for these purposes it does not matter who may exercise the powers or whether they are exercisable with or without the consent of another person);

(e) where the relevant benefit is the payment of a sum of money (including a payment by way of loan), that T is able in any manner to control directly or indirectly the application of the sum or part of the sum.

(2) Where an enjoyment condition is met in relation to part only of a relevant benefit, that part is to be treated as a separate benefit for the purposes of section 23A(4).

(3) In subsection (1) references to T include references to a person who is or has been connected with T.

(4) In determining whether any of the enjoyment conditions is met in relation to a relevant benefit, regard must be had to the substantial result and effect of all the relevant circumstances.

23G Anti-avoidance

(1) In determining whether section 23E applies in relation to a relevant benefit, no regard is to be had to any arrangements the main purpose, or one of the main purposes, of which is to secure that section 23E does not apply in relation to the whole, or any part, of—

(a) the relevant benefit, or

(b) the relevant benefit and one or more other relevant benefits (whether or not all arising to the same person).

(2) Where arrangements are disregarded under subsection (1), and a relevant benefit (or part of it)—

(a) would, if the arrangements were not disregarded, arise before 6 April 2017, but

(b) would, when the arrangements are disregarded, arise on or after that date,

the relevant benefit (or part) is to be regarded for the purposes of this group of sections as arising on the date on which it would arise apart from the arrangements.

23H Double taxation

(1) This section applies where—

(a) income tax is charged on an individual by virtue of the application of section 23E in relation to a relevant benefit amount, and

(b) at any time, a tax (whether income tax or another tax) is charged on the individual or another person otherwise than by virtue of the application of section 23E in relation to the relevant benefit concerned.

(2) 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).

(3) 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.

(4) The value of any consequential adjustments must not exceed the lesser of—

(a) the income tax charged on the individual as mentioned in subsection (1)(a), and

(b) the tax charged as mentioned in subsection (1)(b).

(5) 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.”

(3) In section 7(2) (income charged: profits of a tax year) at the end insert “(including amounts treated as profits of the tax year under section 23E(1)).”

(4) The amendments made by this section have effect in relation to relevant benefits arising on or after 6 April 2017.

(5) Schedule 18 contains provision about the application of new sections 23A to 23H of ITTOIA 2005 in relation to loans and quasi-loans that are outstanding on 5 April 2019.

50 Disguised remuneration schemes: restriction of income tax relief

(1) Section 38 of ITTOIA 2005 (restriction of deductions: employee benefit contributions) is amended in accordance with subsections (2) to (5).

(2) After subsection (1) insert—

(1A) No deduction is allowed under this section in respect of employee benefit contributions for a period of account which starts more than 5 years after the end of the period of account in which the contributions are made.”

(3) After subsection (2) insert—

(2AA) Subsection (2) is subject to subsections (1A) and (2AB).

(2AB) Where subsection (3C) applies, no deduction is allowed for an amount in respect of the contributions for the period except so far as the amount is a qualifying amount (see subsection (3D)).”

(4) After subsection (3) insert—

(3A) Subsection (3) is subject to subsections (1A) and (3B).

(3B) Where subsection (3C) applies, an amount disallowed under subsection (2) is allowed as a deduction for a subsequent period only so far as it is a qualifying amount.

(3C) This subsection applies where the provision of qualifying benefits out of, or by way of, the contributions gives rise both to an employment income tax charge and to an NIC charge.

(3D) An amount in respect of employee benefit contributions is a “qualifying amount” if the relevant tax charges are paid before the end of the relevant period (and are not repaid).

(3E) For the purposes of subsection (3D)

(a) the “relevant tax charges”, in relation to an amount, are the employment income tax charge and the NIC charge arising in respect of benefits which are provided out of, or by way of, that amount, and

(b) the “relevant period” is the period of 12 months immediately following the end of the period of account for which the deduction for the employee benefit contributions would (apart from this section) be allowable.

(3F) For the purposes of subsections (3C) and (3E),“employment income tax charge” and “NIC charge” have the meaning given by section 40(7).”

(5) After subsection (3F) (inserted by subsection (4)) insert—

(3G) Subsection (3H) applies where—

(a) a deduction would, apart from this section, be allowable for an amount (the “remuneration amount”) in respect of employees’ remuneration, and

(b) in consequence of the payment of the employees’ remuneration, employee benefit contributions are made, or are to be made, in respect of the remuneration amount.

(3H) In calculating for income tax purposes the profits of a trade, the deduction referred to in subsection (3G)(a) is to be treated as a deduction in respect of employee benefit contributions made or to be made (and is to be treated as not being a deduction in respect of employees’ remuneration).”

(6) Section 866 of ITTOIA 2005 (employee benefit contributions: non-trades and non-property businesses) is amended in accordance with subsections (7) to (10).

(7) After subsection (2) insert—

(2A) No deduction is allowed under this section in respect of employee benefit contributions for a period of account which starts more than 5 years after the end of the period of account in which the contributions are made.”

(8) After subsection (3) insert—

(3A) Subsection (3) is subject to subsections (2A) and (3B).

(3B) Where subsection (4C) applies, no deduction is allowed for an amount in respect of the contributions for the period except so far as the amount is a qualifying amount (see subsection (4D)).”

(9) After subsection (4) insert—

(4A) Subsection (4) is subject to subsections (2A) and (4B).

(4B) Where subsection (4C) applies, an amount disallowed under subsection (3) is allowed as a deduction for a subsequent period only so far as it is a qualifying amount.

(4C) This subsection applies where the provision of qualifying benefits out of, or by way of, the contributions gives rise both to an employment income tax charge and to an NIC charge.

(4D) An amount in respect of employee benefit contributions is a “qualifying amount” if the relevant tax charges are paid before the end of the relevant period (and are not repaid).

(4E) For the purposes of subsection (4D)—

(a) the “relevant tax charges”, in relation to an amount, are the employment income tax charge and the NIC charge arising in respect of benefits which are provided out of, or by way of, that amount, and

(b) the “relevant period” is the period of 12 months immediately following the end of the period of account for which the

deduction for the employee benefit contributions would (apart from this section) be allowable.

(4F) For the purposes of subsections (4C) and (4E), “employment income tax charge” and “NIC charge” have the meaning given by section 40(7).”

(10) After subsection (4F) (inserted by subsection (9)) insert—

(4G) Subsection (4H) applies where—

(a) a deduction would, apart from this section, be allowable for an amount (the “remuneration amount”) in respect of employees’ remuneration, and

(b) in consequence of the payment of the employees’ remuneration, employee benefit contributions are made, or are to be made, in respect of the remuneration amount.

(4H) In calculating for income tax purposes a person’s profits or other income, the deduction referred to in subsection (4G)(a) is to be treated as a deduction in respect of employee benefit contributions made or to be made (and is to be treated as not being a deduction in respect of employees’ remuneration).”

(11) The amendments made by subsections (2) to (4) and (7) to (9) have effect in relation to employee benefit contributions made, or to be made, on or after 6 April 2017.

(12) The amendments made by subsections (5) and (10) have effect in relation to remuneration paid on or after 6 April 2017.

51 Disguised remuneration schemes: restriction of corporation tax relief

(1) Section 1290 of CTA 2009 (restriction of deductions: employee benefit contributions) is amended in accordance with subsections (2) to (5).

(2) After subsection (1) insert—

(1A) No deduction is allowed under this section in respect of employee benefit contributions for a period of account which starts more than 5 years after the end of the period of account in which the contributions are made.”

(3) After subsection (2) insert—

(2A) Subsection (2) is subject to subsections (1A) and (2B).

(2B) Where subsection (3C) applies, no deduction is allowed for an amount in respect of the contributions for the period except so far as the amount is a qualifying amount (see subsection (3D)).”

(4) After subsection (3) insert—

(3A) Subsection (3) is subject to subsections (1A) and (3B).

(3B) Where subsection (3C) applies, an amount disallowed under subsection (2) is allowed as a deduction for a subsequent period only so far as it is a qualifying amount.

(3C) This subsection applies where the provision of qualifying benefits out of, or by way of, the contributions gives rise both to an employment income tax charge and to an NIC charge.

(3D) An amount in respect of employee benefit contributions is a “qualifying amount” if the relevant tax charges are paid before the end of the relevant period (and are not repaid).

(3E) For the purposes of subsection (3D)

(a) the “relevant tax charges”, in relation to an amount, are the employment income tax charge and the NIC charge arising in respect of benefits which are provided out of, or by way of, that amount, and

(b) the “relevant period” is the period of 12 months immediately following the end of the period of account for which the deduction for the employee benefit contributions would (apart from this section) be allowable.

(3F) For the purposes of subsections (3C) and (3E), “employment income tax charge” and “NIC charge” have the meaning given by section 1292(7).”

(5) After subsection (3F) (inserted by subsection (4)) insert—

(3G) Subsection (3H) applies where—

(a) a deduction would, apart from this section, be allowable for an amount (the “remuneration amount”) in respect of employees’ remuneration, and

(b) in consequence of the payment of the employees’ remuneration, employee benefit contributions are made, or are to be made, in respect of the remuneration amount.

(3H) In calculating for corporation tax purposes the profits of a company, the deduction referred to in subsection (3G)(a) is to be treated as a deduction in respect of employee benefit contributions made or to be made (and is to be treated as not being a deduction in respect of employees’ remuneration).”

(6) The amendments made by subsections (2) to (4) have effect in relation to employee benefit contributions made, or to be made, on or after 1 April 2017.

(7) The amendment made by subsection (5) has effect in relation to remuneration paid on or after 1 April 2017.

Capital allowances

52 First-year allowance for expenditure on electric vehicle charging points

(1) CAA 2001 is amended as follows.

(2) In section 39 (first-year qualifying expenditure) after the entry for section 45E insert—

“section 45EA expenditure on plant or machinery for electric vehicle charging point”.

(3) After section 45E insert—

45EA Expenditure on plant or machinery for electric vehicle charging point

(1) Expenditure is first-year qualifying expenditure if—

(a) it is incurred in the relevant period,

(b) it is expenditure on plant or machinery for an electric vehicle charging point where the plant or machinery is unused and not second-hand, and

(c) it is not excluded by section 46 (general exclusions).

(2) For the purposes of this section expenditure on plant or machinery for an electric vehicle charging point is expenditure on plant or machinery installed solely for the purpose of charging electric vehicles.

(3) The “relevant period” is the period beginning with 23 November 2016 and ending with—

(a) in the case of expenditure incurred by a person within the charge to corporation tax, 31 March 2019, and

(b) in the case of expenditure incurred by a person within the charge to income tax, 5 April 2019.

(4) The Treasury may by regulations amend subsection (3) so as to extend the relevant period.

(5) In this section—

  • “electric vehicle” means a road vehicle that can be propelled by electrical power (whether or not it can also be propelled by another kind of power);

  • “electric vehicle charging point” means a facility for charging an electric vehicle.”

(4) In section 46 (general exclusions), in subsection (1) after the entry for section 45E insert—

  • “section 45EA (expenditure on plant or machinery for electric vehicle charging point)”.

(5) In section 52 (amount of first-year allowances)—

(a) in the table in subsection (3), after the entry for expenditure qualifying under section 45E insert—

“Expenditure qualifying under section 45EA (expenditure on plant or machinery for electric vehicle charging point) 100%”

(b) after subsection (3) insert—

(3A) Subsection (3B) applies where the Treasury make regulations under section 45EA(4) (power to extend relevant period).

(3B) The regulations may amend the amount specified in column 2 of the Table in subsection (3) for expenditure qualifying under section 45EA, but only in relation to expenditure incurred after the date on which the relevant period would have ended but for the regulations.”

Transactions in UK land

53 Disposals concerned with land in United Kingdom

(1) The FA 2016 amendments have effect (so far as they would not otherwise have effect) in relation to—

(a) amounts that are recognised in GAAP accounts drawn up for any period of account beginning on or after 8 March 2017, or

(b) in the case of a straddling period, amounts that would be recognised in GAAP accounts drawn up for a period of account beginning on 8 March 2017 and ending when the straddling period ends.

(2) In subsection (1)

  • “the FA 2016 amendments” means—

    (a)

    the amendments made by sections 76, 77 and 80 of FA 2016 (corporation tax treatment of certain profits and gains realised from disposals concerned with land in the United Kingdom), or

    (b)

    the amendments made by sections 78 and 79 of that Act (corresponding rules for income tax purposes),

  • “GAAP accounts” means accounts drawn up in accordance with generally accepted accounting practice,

  • “recognised” means recognised as an item of profit or loss, and

  • “straddling period” means a period of account beginning before 8 March 2017 and ending on or after that date.

Co-ownership authorised contractual schemes

54 Co-ownership authorised contractual schemes: capital allowances

In Part 2 of CAA 2001 (plant and machinery), in Chapter 20 (supplementary provisions), after the Chapter heading insert—

“Co-ownership authorised contractual schemes
262AA Co-ownership schemes: carrying on qualifying activity

(1) This section applies where the participants in a co-ownership authorised contractual scheme together carry on a qualifying activity.

(2) Each participant in the scheme is for the purposes of this Part to be regarded as carrying on the qualifying activity.

(3) Subsection (2) applies in relation to a participant only to the extent that the profits or gains arising to the participant from the qualifying activity are, or (if there were any) would be, chargeable to tax.

(4) But in determining for the purposes of subsection (1) whether or to what extent the participants in a co-ownership authorised contractual scheme together carry on a qualifying activity, assume that profits or gains arising to all participants from the qualifying activity are, or (if there were any) would be, chargeable to tax.

262AB Co-ownership schemes: election

(1) The operator of a co-ownership authorised contractual scheme may make an election under this section.

(2) The election must specify an accounting period of the scheme as the first accounting period in relation to which the election has effect.

(3) That first accounting period must not—

(a) be longer than 12 months, or

(b) begin before 1 April 2017.

(4) The election has effect for that first accounting period and all subsequent accounting periods of the scheme.

(5) The election is irrevocable.

(6) The election is made by notice to an officer of Revenue and Customs.

262AC Co-ownership schemes: calculation of allowance after election

(1) This section applies where an election under section 262AB has effect for an accounting period of a co-ownership authorised contractual scheme (“the relevant period”).

(2) The operator of the scheme is to calculate the allowances that would be available to the scheme under this Part in relation to the relevant period on the basis of the assumptions in subsection (3).

(3) The assumptions are—

(a) the scheme is a person;

(b) the relevant period is a chargeable period for the purposes of this Act;

(c) any qualifying activity carried on by the participants in the scheme together is carried on by the scheme;

(d) property which was subject to the scheme at the beginning of the first accounting period for which the election has effect—

(i) ceased to be owned by the participants at that time, and

(ii) was acquired by the scheme at that time;

(e) the disposal value to be brought into account in relation to the cessation of ownership and the acquisition referred to in paragraph (d) is the tax written-down value;

(f) any property which became subject to the scheme at a time during an accounting period for which the election has effect was acquired by the scheme at that time;

(g) property which ceased to be subject to the scheme at any such time ceased to be owned by the scheme at that time;

(h) the disposal value to be brought into account in relation to the cessation of ownership referred to in paragraph (g) is the tax written-down value;

(i) the scheme is not entitled to a first-year allowance or an annual investment allowance in respect of any expenditure.

(4) The operator of the co-ownership authorised contractual scheme must allocate to each participant in the scheme a proportion (which may be zero) of the allowances calculated under this section.

(5) The allocation is to be on the basis of what is just and reasonable.

(6) In determining what is just and reasonable—

(a) regard is to be had in particular to the relative size of each participant’s holding of units in the scheme;

(b) no regard is to be had to—

(i) whether or to what extent a participant is liable to income tax or corporation tax, or

(ii) any other circumstances relating to a participant’s liability to tax.

(7) If the participants in the scheme together carry on more than one qualifying activity, the calculation and allocation under this section are to be made separately for each activity.

(8) The proportion of an allowance allocated by the operator to a participant under this section for a qualifying activity is the total amount of the allowance available to the participant under this Part in relation to the relevant period by virtue of carrying on that activity as a participant in the scheme.

(9) In this section “tax written-down value”, in relation to any cessation of ownership or acquisition, means such amount as would give rise to neither a balancing allowance nor a balancing charge.

(10) For the purposes of subsection (9) assume that expenditure to which the disposal value relates is in its own pool.

(11) For the purposes of subsections (3)(c) and (9), assume that profits or gains arising to all participants from the qualifying activity are, or (if there were any) would be, chargeable to tax.

262AD Co-ownership schemes: effect of election for participants

(1) This section has effect where an election under section 262AB is made by the operator of a co-ownership authorised contractual scheme.

(2) For the purposes of sections 61(1) and 196(1) (disposal events and values)—

(a) a participant in the scheme is to be regarded as ceasing to own the participant’s interest in the property subject to the scheme at the beginning of the first accounting period of the scheme for which the election has effect, and

(b) the disposal value to be brought into account in relation to that cessation of ownership is the tax written-down value.

(3) In subsection (2)(b) “tax written-down value” means such amount as would give rise to neither a balancing allowance nor a balancing charge.

(4) For the purposes of subsection (3) assume that—

(a) expenditure to which the disposal value relates is in its own pool;

(b) profits or gains arising to all participants from the qualifying activity are, or (if there were any) would be, chargeable to tax.

262AE Co-ownership schemes: effect of election for purchasers

(1) This section has effect where—

(a) an election under section 262AB is made by the operator of a co-ownership authorised contractual scheme,

(b) property consisting of a fixture ceased to be subject to the scheme at any time in an accounting period for which the election has effect,

(c) in a calculation made by the operator of the scheme under section 262AC(2) the assumption in section 262A(3)(g) was made in relation to that fixture, and

(d) a person (“the current owner”) is treated as the owner of the fixture as a result of incurring capital expenditure on its provision (“the new expenditure”).

(2) In determining the current owner’s qualifying expenditure—

(a) if the disposal value statement requirement is not satisfied, the new expenditure is to be treated as nil, and

(b) in any other case, any amount of the new expenditure which exceeds the assumed disposal value is to be left out of account (or, if such an amount has already been taken into account, is to be treated as an amount that should never have been taken into account).

(3) The disposal value statement requirement is that—

(a) the operator of the scheme has, no later than 2 years after the date when the fixture ceased to be property subject to the scheme, made a written statement of the assumed disposal value, and

(b) the current owner has obtained that statement or a copy of it (directly or indirectly) from the operator of the scheme.

(4) Sections 185 (fixture on which a plant and machinery allowance has been claimed) and 187A (effect of changes in ownership of fixture) do not apply in relation to the new expenditure.

(5) In this section “assumed disposal value” means the disposal value that, in making the calculation referred to in subsection (1)(c), was assumed to be brought into account pursuant to section 262AC(3)(h).

262AF Co-ownership schemes: definitions relating to schemes

In sections 262AA to 262AE and this section—

  • “co-ownership authorised contractual scheme” means a co-ownership scheme which is authorised for the purposes of the Financial Services and Markets Act 2000 by an authorisation order in force under section 261D(1) of that Act;

  • “co-ownership scheme” has the same meaning as in Part 17 of that Act (see section 235A(2) of that Act);

  • “operator” and “units”, in relation to a co-ownership authorised contractual scheme, have the meanings given by section 237(2) of that Act;

  • “participant”, in relation to such a scheme, is to be read in accordance with section 235 of that Act.”

55 Co-ownership authorised contractual schemes: information requirements

(1) The Treasury may by regulations impose requirements on the operator of a co-ownership authorised contractual scheme in relation to—

(a) the provision of information to participants in the scheme;

(b) the provision of information to Her Majesty’s Revenue and Customs.

(2) Regulations under subsection (1)(a) may be made only for the purpose of enabling participants in a co-ownership authorised contractual scheme to meet their tax obligations in the United Kingdom with respect to their interests in the scheme.

(3) Regulations under subsection (1)(b) may in particular require the provision of information about—

(a) who the participants in the scheme were in any accounting period of the scheme;

(b) the number and classes of units in the scheme in any such period;

(c) the amount of income per unit of any class in any such period;

(d) what information has been provided to participants.

(4) Regulations under this section may specify—

(a) the time when information is to be provided;

(b) the form and manner in which information is to be provided.

(5) Regulations under this section may make provision for the imposition of penalties in respect of contravention of, or non-compliance with, the regulations, including provision—

(a) for Her Majesty’s Revenue and Customs to exercise a discretion as to the amount of a penalty, and

(b) about appeals in relation to the imposition of a penalty.

(6) Regulations under this section may in particular be framed by reference to an accounting period of a co-ownership authorised contractual scheme beginning on or after 1 April 2017.

(7) Regulations under this section may contain consequential, supplementary and transitional provision.

(8) Regulations under this section must be made by statutory instrument.

(9) A statutory instrument containing regulations under this section is subject to annulment in pursuance of a resolution of the House of Commons.

(10) In this section—

  • “co-ownership authorised contractual scheme” means a co-ownership scheme which is authorised for the purposes of the Financial Services and Markets Act 2000 by an authorisation order in force under section 261D(1) of that Act;

  • “co-ownership scheme” has the same meaning as in Part 17 of that Act (see section 235A(2) of that Act);

  • “operator” and “units”, in relation to a co-ownership authorised contractual scheme, have the meanings given by section 237(2) of that Act;

  • “participant”, in relation to such a scheme, is to be read in accordance with section 235 of that Act.

56 Co-ownership authorised contractual schemes: offshore funds

(1) The Treasury may by regulations make provision about how participants in a co-ownership authorised contractual scheme are to be treated for income tax purposes or corporation tax purposes in relation to investments made for the purposes of the scheme in an offshore fund.

(2) Regulations under subsection (1) may, among other things, make provision—

(a) for the operator of a co-ownership authorised contractual scheme to allocate to participants in the scheme amounts relating to investments made for the purposes of the scheme in an offshore fund;

(b) for those amounts to be regarded as income of the participants to whom they are allocated;

(c) as to when that income is to be brought into account for income tax purposes or corporation tax purposes.

(3) Regulations under this section may—

(a) modify an enactment (whenever passed or made);

(b) contain consequential, supplementary and transitional provision.

(4) Regulations under this section must be made by statutory instrument.

(5) A statutory instrument containing regulations under this section is subject to annulment in pursuance of a resolution of the House of Commons.

(6) References in this section to investments made for the purposes of a co-ownership authorised contractual scheme in an offshore fund include investments so made through one or more other co-ownership authorised contractual schemes.

(7) In this section—

  • “co-ownership authorised contractual scheme” means a co-ownership scheme which is authorised for the purposes of the Financial Services and Markets Act 2000 by an authorisation order in force under section 261D(1) of that Act;

  • “co-ownership scheme” has the same meaning as in Part 17 of that Act (see section 235A(2) of that Act);

  • “offshore fund” has the meaning given by section 355 of TIOPA 2010;

  • “operator”, in relation to a co-ownership authorised contractual scheme, has the meaning given by section 237(2) of the Financial Services and Markets Act 2000;

  • “participant”, in relation to such a scheme, is to be read in accordance with section 235 of that Act.

Part 2 Indirect taxes

VAT

57 VAT: zero-rating of adapted motor vehicles etc

Schedule 19 contains amendments of Schedule 8 to VATA 1994 (zero-rating).

Insurance premium tax

58 IPT: standard rate

(1) In section 51(2)(b) of FA 1994 (standard rate of insurance premium tax), for “10 per cent” substitute “12 per cent”.

(2) Subject to subsection (3), the amendment made by subsection (1) has effect in relation to a premium falling to be regarded for the purposes of Part 3 of FA 1994 as received under a taxable insurance contract by an insurer on or after 1 June 2017.

(3) That amendment does not have effect in relation to a premium falling within subsection (4), unless the premium falls to be regarded for the purposes of Part 3 of FA 1994 as received under a taxable insurance contract by an insurer on or after 1 June 2018.

(4) A premium falls within this subsection if it is in respect of a risk for which the period of cover begins before 1 June 2017.

(5) In the application of sections 66A and 66B of FA 1994 (anti-forestalling provision) in relation to the increase in insurance premium tax made by this section, the announcement relating to that increase is to be taken to have been made on 8 March 2017 (and “the change date” is to be taken to be 1 June 2017).

(6) This section is to be read with section 66C of FA 1994 (premiums relating to more than one period of cover).

59 IPT: anti-forestalling provision

(1) FA 1994 is amended as follows.

(2) After section 66 insert—

66A Rate increases: deemed date of receipt of certain premiums

(1) This section applies where a Minister of the Crown announces a proposed increase in the rate at which tax is to be charged on a premium if it is received by the insurer on or after a date specified in the announcement (“the change date”).

(2) This section applies whether or not the announcement includes an announcement of a proposed exception from the increase (for example, for premiums in respect of risks for which the period of cover begins before the change date).

(3) Subsection (4) applies where—

(a) a premium under a contract of insurance is received by the insurer on or after the date of the announcement and before the change date, and

(b) the period of cover for the risk begins on or after the change date.

(4) For the purposes of this Part the premium is to be taken to be received on the change date.

(5) Subsection (6) applies where—

(a) a premium under a contract of insurance is received by the insurer on or after the date of the announcement and before the change date,

(b) the period of cover for the risk—

(i) begins before the change date, and

(ii) ends on or after the first anniversary of the change date (“the first anniversary”), and

(c) the premium, or any part of it, is attributable to such of the period of cover as falls on or after the first anniversary.

(6) For the purposes of this Part—

(a) so much of the premium as is attributable to such of the period of cover as falls on or after the first anniversary is to be taken to be received on the change date, and

(b) so much as is so attributable is to be taken to be a separate premium.

(7) In determining whether the condition in subsection (3)(a) or (5)(a) is met, regulations under section 68(3) or (7) apply as they would apart from this section.

(8) But where subsection (4) or (6) applies—

(a) that subsection has effect despite anything in section 68 or regulations under that section, and

(b) any regulations under section 68 have effect as if the entry made in the accounts of the insurer showing the premium as due to the insurer had been made as at the change date.

(9) A premium treated by subsection (6) as received on the change date is not to be taken to fall within any exception, from an increase announced by the announcement, for premiums in respect of risks for which the period of cover begins before the change date.

(10) Any attribution under this section is to be made on such basis as is just and reasonable.

(11) In this section—

  • “increase”, in relation to the rate of tax, includes the imposition of a charge to tax by adding to the descriptions of contract which are taxable insurance contracts;

  • “Minister of the Crown” has the same meaning as in the Ministers of the Crown Act 1975.

66B Section 66A: exceptions and apportionments

(1) Section 66A(3) and (4) do not apply in relation to a premium if the risk to which that premium relates belongs to a class of risk as regards which the normal practice is for a premium to be received by or on behalf of the insurer before the date when cover begins.

(2) Section 66A(5) and (6) do not apply in relation to a premium if the risk to which that premium relates belongs to a class of risk as regards which the normal practice is for cover to be provided for a period of more than twelve months.

(3) If a contract relates to more than one risk, then in the application of section 66A(3) and (4) or 66A(5) and (6)—

(a) the reference in section 66A(3)(b) or (5)(b) to the risk is to be read as a reference to any given risk,

(b) so much of the premium as is attributable to any given risk is to be taken for the purposes of section 66A(3) and (4) or 66A(5) and (6) to be a separate premium relating to that risk,

(c) those provisions then apply separately in the case of each given risk and the separate premium relating to it, and

(d) any further attribution required by section 66A(5) and (6) is to be made accordingly,

and subsections (1) and (2) and section 66A(9) apply accordingly.

(4) Any attribution under this section is to be made on such basis as is just and reasonable.

66C Rate changes: premiums relating to more than one period of cover

(1) This section applies if any Act—

(a) makes an amendment of section 51(2)(a) or (b) which alters the higher rate or standard rate (“the relevant rate”),

(b) provides for the amendment to have effect in relation to a premium falling to be regarded for the purposes of this Part as received under a taxable insurance contract by an insurer on or after a particular date (“the change date”), and

(c) makes provision that excepts from that amendment a premium which is in respect of a risk for which the period of cover begins before the change date.

(2) Subsection (3) applies if a premium which is liable to tax at the relevant rate, and which falls to be regarded for the purposes of this Part as received under a taxable insurance contract by an insurer on or after the change date, is—

(a) partly in respect of a risk for which the period of cover begins before the change date, and

(b) partly in respect of a risk for which the period of cover begins on or after that date.

(3) So much of the premium as is attributable to the risk for which the period of cover begins on or after the change date is to be treated for the purposes of this Part and the provision mentioned in subsection (1)(c) as a separate premium.

(4) Where a premium is in respect of a relevant rate matter and also a matter that is not a relevant rate matter—

(a) for the purposes of the provision mentioned in subsection (1)(c), the premium is to be treated as in respect of a risk for which the period of cover begins before the change date if the part of it attributable to the relevant rate matter is in respect of such a risk, and

(b) the reference in subsection (2) to a premium which is liable to tax at the relevant rate is to be read as a reference to so much of the premium as is attributable to the relevant rate matter (and subsection (3) is to be read accordingly).

(5) If premiums of any description are excluded from the exception mentioned in subsection (1)(c), nothing in subsections (2) to (4) applies to a premium of that description.

(6) Nothing in subsection (4) applies to an excepted premium (within the meaning given by section 69A).

(7) Any attribution under this section is to be made on such basis as is just and reasonable.

(8) In this section a “relevant rate matter” means—

(a) where the relevant rate is the standard rate, a standard rate matter as defined by section 69(12)(c);

(b) where the relevant rate is the higher rate, a higher rate matter as defined by section 69(12)(d).

(9) In subsection (1) the reference to any Act includes a resolution which has statutory effect under the Provisional Collection of Taxes Act 1968.”

(3) Omit—

(a) section 67 (spent transitional provision), and

(b) sections 67A to 67C (which are superseded by sections 66A and 66B inserted by subsection (2)).

(4) The amendments made by subsections (2) and (3)(b) have effect on and after 8 March 2017.

(5) Despite the repeal by subsection (3) of sections 67A and 67C of FA 1994, those sections continue to have effect so far as they apply to premiums received on or after 23 November 2016 and before 8 March 2017.

Landfill tax

60 Landfill tax: taxable disposals

(1) Part 3 of FA 1996 (landfill tax) is amended as follows.

(2) In section 40 (charge to tax), in subsection (2), for the words from “if—” to the end of the subsection substitute “if it is a disposal of material at a landfill site”.

(3) After section 40 insert—

40A Disposals of material

(1) For the purposes of section 40, there is a disposal of material if—

(a) material is disposed of on the surface of land or on a structure set into the surface, or

(b) material is disposed of under the surface of land.

(2) For the purposes of subsection (1)(a) and (b) it does not matter whether the material is placed in a container before it is disposed of.

(3) For the purposes of subsection (1)(b) it does not matter whether the material—

(a) is covered after it is disposed of, or

(b) is disposed of in a cavity (such as a cavern or mine).

(4) If material is disposed of on the surface of land or on a structure set into the surface with a view to the material being covered, the disposal is to be treated as made when the material is disposed of and not when it is covered.

(5) An order may for the purposes of section 40 provide for—

(a) material to be treated as disposed of in circumstances where it would not otherwise be so treated;

(b) material to be treated as not disposed of in circumstances where it would otherwise be so treated.

(6) An order under subsection (5) may, among other things, make provision by reference to—

(a) descriptions of material;

(b) the location of material in a landfill site (for example, whether it is in a discrete unit within the site).

(7) An order under subsection (5) may make provision subject to exceptions, conditions or other qualifications.

(8) In this section “land” includes land covered by water where the land is above the low water mark of ordinary spring tides.”

(4) In section 45 (pet cemeteries), in subsection (2)—

(a) in paragraph (a), for “landfill disposal” substitute “disposal of material”;

(b) in paragraph (b), for “landfill disposals” substitute “disposals of material”.

(5) Omits sections 64 to 65A (disposal of material as waste etc).

(6) In section 70 (interpretation)—

(a) omit subsection (2);

(b) in subsection (4), for “64” substitute “66”.

(7) In section 71 (orders and regulations), in subsection (7)—

(a) before paragraph (a) insert—

(za) an order under section 40A(5) which has the result that anything which would not otherwise be a taxable disposal is a taxable disposal;”;

(b) omit paragraphs (ca), (cb) and (d).

(8) In Schedule 5 (landfill tax), omit paragraph 1B.

(9) In Schedule 5, before paragraph 2 insert—

“Site information

1C (1) Regulations may require the operator of a landfill site to—

(a) retain plans, licences and permits relating to the site;

(b) provide the Commissioners with copies of, or information relating to, plans, licences and permits retained under paragraph (a).

(2) Regulations under sub-paragraph (1)(b) may be framed by reference to such copies or information as may be stipulated in any notice published by the Commissioners in pursuance of the regulations and not withdrawn by a further notice.”

(10) In Schedule 5—

(a) in paragraph 10(1), omit “as waste by way of landfill”;

(b) in paragraph 45(1)(a) and (c) and (2), omit “landfill”;

(c) in paragraph 46(1)(b), omit “landfill”.

(11) In FA 2008, in Schedule 36 (information and inspection powers), in entry 12 of the table in paragraph 61A, for “landfill disposal” substitute “disposal of material”.

(12) In FA 2011, in Schedule 23 (data-gathering powers), in paragraph 25(c), for “landfill disposal” substitute “disposal of material”.

(13) The amendments made by this section come into force—

(a) so far as conferring a power to make an order or regulations, on the day on which this Act is passed, and

(b) subject to that, in accordance with provision made by the Treasury by regulations made by statutory instrument.

(14) Regulations under subsection (13) may contain transitional provision and savings.

Air passenger duty

61 Air passenger duty: rates of duty from 1 April 2017

(1) In section 30 of FA 1994 (air passenger duty: rates of duty), in subsection (4A) (long haul rates of duty)—

(a) in paragraph (a), for “£73” substitute “£75”;

(b) in paragraph (b), for “£146” substitute “£150”.

(2) The amendments made by this section have effect in relation to the carriage of passengers beginning on or after 1 April 2017.

62 Air passenger duty: rates of duty from 1 April 2018

(1) In section 30 of FA 1994 (air passenger duty: rates of duty), in subsection (4A) (long haul rates of duty)—

(a) in paragraph (a), for “£75” substitute “£78”;

(b) in paragraph (b), for “£150” substitute “£156”.

(2) The amendments made by this section have effect in relation to the carriage of passengers beginning on or after 1 April 2018.

Petroleum revenue tax

63 Petroleum revenue tax: elections for oil fields to become non-taxable

(1) In Schedule 20B to FA 1993, for paragraphs 2 to 12 substitute—

“Method of election

2 An election must be made in writing.

3 An election must be notified to the Commissioners.

4 An election is deemed to have been made on the date on which notification of the election was sent to the Commissioners.

Effect of election

5 If an election is made, the field ceases to be taxable with effect from the start of the first chargeable period to begin after the election is made.

No unrelievable field losses from field

6 From the start of the first chargeable period to begin after an election is made, no allowable loss that accrues from the oil field is an allowable unrelievable field loss for the purposes of petroleum revenue tax.

Interpretation

7 (1) In this Schedule—

  • “Commissioners” means the Commissioners for Her Majesty‘s Revenue and Customs;

  • “participator”, in relation to a particular time, means a person who is a participator in the chargeable period which includes that time.

(2) Expressions used in this Schedule and in Part 1 of the Oil Taxation Act 1975 have the same meaning in this Schedule as in Part 1 of that Act.”

(2) In OTA 1975, in section 6(1A), for “paragraph 5” substitute “paragraph 6”.

(3) In FA 1980, in paragraph 15(9A) of Schedule 17, for “paragraph 5” substitute “paragraph 6”.

(4) The amendment made by this section is to be treated as having come into force on 23 November 2016.

Vehicle excise duty

64 VED: rates for light passenger vehicles, light goods vehicles, motorcycles etc

(1) Schedule 1 to VERA 1994 (annual rates of duty) is amended as follows.

(2) In paragraph 1 (general rate of duty)—

(a) in sub-paragraph (2) (vehicle not covered elsewhere in Schedule with engine cylinder capacity exceeding 1,549cc), for “£235” substitute “£245”, and

(b) in sub-paragraph (2A) (vehicle not covered elsewhere in Schedule with engine cylinder capacity not exceeding 1,549cc), for “£145” substitute “£150”.

(3) In paragraph 1B (graduated rates of duty for light passenger vehicles)—

(a) in the words before paragraph (a), for “tables” substitute “table”,

(b) in paragraph (a), at the end insert “and”,

(c) in paragraph (b), at the end omit “, and”,

(d) omit paragraph (c),

(e) for Tables 1 and 2 substitute—

“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
120 130 105 115
130 140 125 135
140 150 140 150
150 165 180 190
165 175 210 220
175 185 230 240
185 200 270 280
200 225 295 305
225 255 510 520
255 525 535”, and

(f) in the sentence immediately following Table 2—

(i) at the beginning, for “Table 2” substitute “The table”, and

(ii) for paragraphs (a) and (b) substitute—

(a) in column (3), in the last two rows, “295” were substituted for “510” and “525”, and

(b) in column (4), in the last two rows, “305” were substituted for “520” and “535”.”

(4) In paragraph 1J (VED rates for light goods vehicles), in paragraph (a), for “£230” substitute “£240”.

(5) In paragraph 2(1) (VED rates for motorcycles)—

(a) in paragraph (a), for “£17” substitute “£18”,

(b) in paragraph (b), for “£39” substitute “£41”,

(c) in paragraph (c), for “£60” substitute “£62”, and

(d) in paragraph (d), for “£82” substitute “£85”.

(6) The amendments made by this section have effect in relation to licences taken out on or after 1 April 2017.

Alcohol duties

65 Alcoholic liquor duties: rates

(1) ALDA 1979 is amended as follows.

(2) In section 5 (rate of duty on spirits), for “£27.66” substitute “£28.74”.

(3) In section 36(1AA) (rates of general beer duty)—

(a) in paragraph (za) (rate of duty on lower strength beer), for “£8.10” substitute “£8.42”, and

(b) in paragraph (a) (standard rate of duty on beer), for “£18.37” substitute “£19.08”.

(4) In section 37(4) (rate of high strength beer duty), for “£5.48” substitute “£5.69”.

(5) In section 62(1A) (rates of duty on cider)—

(a) in paragraph (a) (rate of duty per hectolitre on sparkling cider of a strength exceeding 5.5%), for “£268.99” substitute “£279.46”,

(b) in paragraph (b) (rate of duty per hectolitre on cider of a strength exceeding 7.5% which is not sparkling cider), for “£58.75” substitute “£61.04”, and

(c) in paragraph (c) (rate of duty per hectolitre in any other case), for “£38.87” substitute “£40.38”.

(6) For the table in Schedule 1 substitute—

Schedule 1 “Table of rates of duty on wine and made-wine
Part 1 Wine or made-wine of a strength not exceeding 22%
Description of wine or made-wine Rates of duty per hectolitre £
Wine or made-wine of a strength not exceeding 4% 88.93
Wine or made-wine of a strength exceeding 4% but not exceeding 5.5% 122.30
Wine or made-wine of a strength exceeding 5.5% but not exceeding 15% and not being sparkling 288.65
Sparkling wine or sparkling made-wine of a strength exceeding 5.5% but less than 8.5% 279.46
Sparkling wine or sparkling made-wine of a strength of 8.5% or of a strength exceeding 8.5% but not exceeding 15% 369.72
Wine or made-wine of a strength exceeding 15% but not exceeding 22% 384.82
Part 2 Wine or made-wine of a strength exceeding 22%
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% 28.74”.

(7) The amendments made by this section are treated as having come into force on 13 March 2017.

Gaming duties

66 Gaming duty: rates

(1) In section 11(2) of FA 1997 (rates of gaming duty), for the table substitute—

Schedule 1 “Table
Part of gross gaming yield Rate
The first £2,423,500 15%
The next £1,670,500 20%
The next £2,925,500 30%
The next £6,175,500 40%
The remainder 50%”.

(2) The amendment made by this section has effect in relation to accounting periods beginning on or after 1 April 2017.

67 Remote gaming duty: freeplay

(1) Part 3 of FA 2014 (general betting duty, pool betting duty and remote gaming duty) is amended in accordance with subsections (2) to (8).

(2) In section 159 (remote gaming duty: gaming payments), for subsection (4) substitute—

(4) For the purposes of this Chapter—

(a) where the chargeable person participates in the remote gaming in reliance on an offer which waives all of a gaming payment, the person is to be treated as having made a gaming payment of the amount which would have been required to be paid without the offer (“the full amount”), and

(b) where the chargeable person participates in the remote gaming in reliance on an offer which waives part of a gaming payment, the person is to be treated as having made an additional gaming payment of the difference between the gaming payment actually made and the full amount.

(5) Where a person is treated by subsection (4) as having made a gaming payment, the payment is to be treated for the purposes of this Chapter—

(a) as having been made to the gaming provider at the time when the chargeable person begins to participate in the remote gaming to which it relates, and

(b) as not having been—

(i) returned, or

(ii) assigned to a gaming prize fund.

(6) The Commissioners may by regulations make further provision about how a gaming payment which a person is treated as having made under subsection (4) is to be treated for the purposes of this Chapter.

(7) This section has effect subject to section 159A.”

(3) After section 159 insert—

159A Play using the results of successful freeplay

(1) Where a chargeable person participates in remote gaming, an amount is not to be taken into account in determining the “gaming payment” (if any) under section 159 so far as the amount is paid out of money in relation to which the first and second conditions are met (“excluded winnings”).

(2) The first condition is that the money has been won by participation in the gaming either—

(a) in reliance on an offer which waives all or part of a gaming payment, or

(b) in a case where the gaming payment was paid out of money in relation to which this condition and the second condition were met.

(3) The second condition is that the chargeable person is not entitled to use the money otherwise than for the purpose of participation in the gaming.

(4) Subsection (5) applies where—

(a) a chargeable person participates in remote gaming in reliance on an offer which waives all or part of a gaming payment, and

(b) that offer has been won in the course of the person’s participation in the gaming (and the person was not given the choice of receiving a different benefit instead of the offer).

(5) The amount which would, apart from this subsection, be treated by section 159(4)(a) or (b) as a gaming payment (or additional gaming payment) is not to be so treated.

(6) For the purposes of this section, where a payment is made out of moneys which include both excluded winnings and money which is

not excluded winnings (the “other funds”), the payment is not taken to be made out of excluded winnings except so far as the amount of the payment exceeds the amount of those other funds.

(7) In this section “money” includes any amount credited and any other money’s worth.”

(4) In section 160 (remote gaming duty: prizes)—

(a) in subsection (1), in the opening words, after “account” insert “only”,

(b) omit subsection (2),

(c) in subsection (3), at the end insert “(but where a gaming payment is returned by being credited to an account this subsection has effect subject to subsection (1))”, and

(d) at the end insert—

(9) This section has effect subject to section 160A.”

(5) After section 160 insert—

160A Prizes: freeplay

(1) Where a prize is a freeplay offer (whether or not in the form of a voucher) which does not fall within section 160(4)—

(a) for the purposes of sections 156 and 157, the expenditure on the prize is nil, and

(b) subsections (5) to (7) of section 160 do not apply in relation to the prize.

(2) Where a prize is a voucher which gives the recipient a choice of using it in place of money for freeplay or as whole or partial payment for another benefit, section 160(5)(b) has effect as if after “used” there were inserted “if it is used as payment for a benefit other than freeplay”.

(3) In this section—

  • “freeplay” means participation, in reliance on a freeplay offer, in—

    (a)

    remote gaming, or

    (b)

    an activity in respect of which a gambling tax listed in section 161(4) is charged;

  • “freeplay offer” means an offer which waives all or part of—

    (a)

    a gaming payment, or

    (b)

    a payment in connection with participation in an activity in respect of which a gambling tax listed in section 161(4) is charged.”

(6) In section 188 (gaming), after subsection (2) insert—

(3) But a game is not a “game of chance” for the purposes of this Part if—

(a) it can only be played with the participation of two or more persons, and

(b) no amounts are paid or required to be paid—

(i) in respect of entitlement to participate in the game, or

(ii) otherwise for, on account of or in connection with participation in the game.”

(7) In section 190 (index), in the Table, in the entry for “game of chance”, for “188(1)(b)” substitute “188(1)(b) and (3)”.

(8) In section 194(4) (regulations under Part 3 to which the procedure in section 194(5) is to apply), before paragraph (a), insert—

(za) regulations under section 159(6);”.

(9) The amendments made by this section have effect with respect to accounting periods beginning on or after 1 August 2017.

Tobacco products

68 Tobacco products duty: rates

(1) TPDA 1979 is amended as follows.

(2) For the table in Schedule 1 substitute—

Schedule 1 “TABLE
1. Cigarettes An amount equal to 16.5% of the retail price plus £207.99 per thousand cigarettes.
2. Cigars £259.44 per kilogram
3. Hand-rolling tobacco £209.77 per kilogram
4. Other smoking tobacco and chewing tobacco £114.06 per kilogram”.

(3) The amendment made by this section is treated as having come into force at 6pm on 8 March 2017.

69 Tobacco products duty: minimum excise duty

(1) TPDA 1979 is amended as follows.

(2) In section 6(5)(a) (alteration of rates of duty), for “the amount” substitute “each amount”.

(3) For the first row in the table in Schedule 1 (as substituted by section 68) substitute—

Schedule 1
“1. Cigarettes

An amount equal to the higher of—

(a)

16.5% of the retail price plus £207.99 per thousand cigarettes, or

(b)

£268.63 per thousand cigarettes.”

(4) The amendments made by this section are treated as having come into force on 20 May 2017.

70 Tobacco products manufacturing machinery: licensing scheme

(1) After section 8U of TPDA 1979 insert—

8V Tobacco products manufacturing machinery: licensing scheme

(1) In this section “tobacco products manufacturing machinery” means machinery that is designed primarily for use for the purpose of (or for purposes including) manufacturing tobacco products.

(2) The Commissioners may by regulations—

(a) prohibit a person from purchasing, acquiring, owning or being in possession of, or carrying out other specified activities in respect of, an item of tobacco products manufacturing machinery, except in accordance with a licence granted under the regulations;

(b) provide that if a person contravenes the prohibition in relation to an item of tobacco products manufacturing machinery, the machinery is liable to forfeiture.

(3) The regulations may provide that the prohibition does not apply—

(a) in relation to persons, or items of tobacco products manufacturing machinery, of a specified description;

(b) in specified circumstances.

(4) Regulations under this section may include provision—

(a) imposing obligations on licensed persons;

(b) for a licensed person who fails to comply with a condition or restriction of a licence, or with an obligation imposed by the regulations, to be liable to a penalty of the amount for the time being specified in section 9(2)(b) of the Finance Act 1994;

(c) for exceptions from liability to a penalty under the regulations;

(d) for the Commissioners, if they think it right because of special circumstances, to remit, reduce (including reduce to nil) or stay a penalty, or agree a compromise in relation to proceedings for a penalty;

(e) for two or more contraventions to be treated as a single contravention for the purposes of assessing a penalty;

(f) about reviews by the Commissioners, or by an officer of Revenue and Customs, of decisions in connection with licensing and the imposition of penalties under the regulations and about appeals against those decisions (which may include provision for specified decisions of the Commissioners to be treated as if they were listed in section 13A(2) of, or Schedule 5 to, the Finance Act 1994);

(g) for the Customs and Excise Management Act 1979 to have effect in relation to licensed persons as it has effect in relation to revenue traders, subject to such modifications as may be specified in the regulations.

(5) The Commissioners may, by or under regulations under this section, make provision—

(a) regulating the grant of licences, including provision about the circumstances in which a licence may be granted and the requirements to be met by or in relation to the applicant (which

may include a requirement that the applicant is a fit and proper person to hold a licence);

(b) about the form, manner and content of an application for or in respect of a licence;

(c) for licences to be subject to specified conditions or restrictions;

(d) regulating the variation or revocation of a licence, or of any condition or restriction to which a licence is subject;

(e) about the surrender or transfer of a licence;

(f) for communications by or with the Commissioners in connection with a licence to be made electronically;

(g) as to the arrangements for licensing bodies corporate which are members of the same group (as defined in the regulations);

(h) for members of a group to be jointly and severally liable for any penalties imposed under the regulations.”

(2) In section 9 of TPDA 1979 (regulations), in subsection (1A), for “or 8U” substitute “, 8U or 8V”.

Part 3 Soft drinks industry levy

Introductory

71 Soft drinks industry levy

(1) A tax called “soft drinks industry levy” is to be charged in accordance with this Part.

(2) The Commissioners are responsible for the collection and management of soft drinks industry levy.

72 “Soft drink” and “package”

(1) “Soft drink” means—

(a) a beverage of an alcoholic strength not exceeding 1.2%;

(b) a liquid which, when prepared in a specified manner, constitutes a beverage within paragraph (a).

(2) A liquid is prepared in a specified manner if it is—

(a) diluted with water,

(b) combined with crushed ice, or processed so as to create crushed ice,

(c) combined with carbon dioxide, or

(d) prepared by way of a process that involves any combination of the processes mentioned in paragraphs (a) to (c).

(3) A person “packages” a soft drink if the person cans, bottles or otherwise packages the soft drink in a form in which—

(a) in the case of a soft drink within subsection (1)(a), it is suitable to be consumed without further preparation, and

(b) in the case of a soft drink within subsection (1)(b), it is suitable to be consumed when prepared in a specified manner (and without any other preparation),

and “packaged” is to be construed accordingly.

73 Meaning of “prepared drink”

(1) In this Part a reference to “prepared drink” is a reference to—

(a) a soft drink within subsection (1)(a) of section 72;

(b) a beverage that would result from preparing a liquid within subsection (1)(b) of that section—

(i) in a specified manner (see section 72(2)), and

(ii) in accordance with the relevant dilution ratio.

(2) The “relevant dilution ratio” means—

(a) the dilution ratio stated on, or calculated by reference to information stated on, the packaging of the soft drink;

(b) where subsection (3) or (4) applies, the dilution ratio determined by the Commissioners.

(3) This subsection applies where the packaging of the soft drink states neither the dilution ratio nor information by reference to which the dilution ratio can be calculated.

(4) This subsection applies where—

(a) the dilution ratio, or information by reference to which the dilution ratio can be calculated, is stated on the packaging of the soft drink, and

(b) it is reasonable to assume that the main purpose, or one of the main purposes, of stating that particular dilution ratio or information is avoiding or reducing liability for soft drinks industry levy.

(5) The Commissioners may by or under regulations make provision about the criteria for—

(a) determining a dilution ratio for the purposes of subsection (2)(b);

(b) determining whether the main purpose, or one of the main purposes, of stating a particular dilution ratio or information is avoiding or reducing liability for soft drinks industry levy.

Chargeable soft drinks

74 Meaning of “chargeable soft drink”

“Chargeable soft drink” means a packaged soft drink that—

(a) meets the sugar content condition (see section 75), and

(b) is not an exempt soft drink (see section 76).

75 Sugar content condition

(1) A packaged soft drink meets the sugar content condition if it contains—

(a) added sugar ingredients, and

(b) at least 5 grams of sugars (whether or not as a result of containing added sugar ingredients) per 100 millilitres of prepared drink.

(2) A packaged soft drink contains “added sugar ingredients” if any of the following are combined with other ingredients at any stage in the production of the soft drink—

(a) calorific mono-saccharides or di-saccharides;

(b) a substance containing calorific mono-saccharides or di-saccharides.

(3) But a packaged soft drink does not contain “added sugar ingredients” only by reason of containing fruit juice, vegetable juice or milk (or any combination of them).

(4) The Commissioners may by regulations make provision about what is, or is not, to be treated for the purposes of this Part as fruit juice, vegetable juice or milk.

(5) Where regulations under subsection (4) contain a reference to an EU instrument or any provision of an EU instrument, the regulations may provide that the reference is to be construed as a reference to that instrument or that provision as amended from time to time.

76 Exempt soft drinks

(1) The following are “exempt soft drinks”—

(a) milk-based drinks,

(b) milk substitute drinks,

(c) alcohol substitute drinks, and

(d) soft drinks of a specified description which are for use for medicinal or other specified purposes.

(2) “Milk-based drink” means a soft drink which contains at least 75 millilitres of milk per 100 millilitres of prepared drink.

(3) “Milk substitute drink” means a soft drink which—

(a) contains at least the specified quantities of calcium, and

(b) meets such other conditions as may be specified.

(4) “Alcohol substitute drink” means a soft drink which—

(a) is similar to a particular kind of alcoholic beverage, and

(b) meets such other conditions as may be specified.

(5) “Alcoholic beverage” means a beverage which is of an alcoholic strength exceeding 1.2%.

(6) The Commissioners may by regulations make further provision about the criteria for determining what is, or is not, to be treated as an exempt soft drink.

(7) Where regulations made under, or for the purposes of, this section contain a reference to an EU instrument or any provision of an EU instrument, the regulations may provide that the reference is to be construed as a reference to that instrument or that provision as amended from time to time.

Charging of the soft drinks industry levy

77 Charge to soft drinks industry levy

(1) The charge to soft drinks industry levy arises on a chargeable event which occurs on or after 6 April 2018.

(2) Subsection (1) is subject to section 83 (small producer exemption).

78 Chargeable events: soft drinks packaged in the UK

(1) This section applies where chargeable soft drinks are packaged by a person on premises in the United Kingdom (the “packaging premises”).

(2) A chargeable event occurs on the removal of the chargeable soft drinks from the packaging premises.

(3) But—

(a) if, on removal from the packaging premises, the secondary warehousing condition is met in relation to the chargeable soft drinks, a chargeable event occurs at the time that the secondary warehousing condition ceases to be met in relation to those soft drinks (and not at the time mentioned in subsection (2));

(b) if the chargeable soft drinks are made available for sale or free of charge before a chargeable event in relation to the soft drinks occurs under subsection (2) or paragraph (a), a chargeable event occurs at the time the soft drinks are made available (and not at the time mentioned in subsection (2) or paragraph (a)).

(4) For the purposes of this section and section 79, the secondary warehousing condition is met, at any time, in relation to chargeable soft drinks if the chargeable soft drinks are, at that time—

(a) in storage in a compliant warehouse, or

(b) being transported—

(i) from the packaging premises to a compliant warehouse, or

(ii) between compliant warehouses,

in compliance with such conditions and requirements as may be imposed by regulations under section 80.

(5) References in this section and in section 79 to a “compliant warehouse” are references to premises—

(a) that are, or are to be, used for the storage of chargeable soft drinks, and

(b) in respect of which the conditions and requirements specified in regulations under section 80(a) are met.

79 Chargeable events: soft drinks imported into the UK

(1) This section applies where chargeable soft drinks are imported into the United Kingdom.

(2) A chargeable event occurs, in relation to imported chargeable soft drinks, on first receipt of the soft drinks by a relevant person (the “first recipient”).

(3) But subsection (2) is subject to subsections (7) to (9).

(4) The “first receipt” of imported chargeable soft drinks is the first occasion on which the soft drinks are delivered to a place in the United Kingdom which is a relevant person’s place of business (including where the chargeable soft drinks are delivered from a place outside the United Kingdom which is another place of business of the relevant person).

(5) “Relevant person” means a person who carries on a business involving the sale of chargeable soft drinks.

(6) The reference in subsection (5) to the sale of chargeable soft drinks includes a reference to—

(a) sale by wholesale,

(b) sale by retail, and

(c) sale for consumption on or in the vicinity of premises on which the drinks are sold.

(7) Subsection (8) applies if, on first receipt of the imported chargeable soft drinks, the place of business to which the soft drinks are delivered is a compliant warehouse.

(8) Subject to subsection (9), a chargeable event occurs at the time that the secondary warehousing condition ceases to be met in relation to the imported chargeable soft drinks (and not at the time mentioned in subsection (2)).

(9) If the chargeable soft drinks are made available for sale or free of charge by a relevant person (the “first seller”) before a chargeable event in relation to the soft drinks occurs under subsection (2) or (8), a chargeable event occurs at the time the chargeable soft drinks are made available (and not at the time mentioned in subsection (2) or (8)).

80 Secondary warehousing regulations

The Commissioners may by regulations make provision, for the purposes of sections 78 and 79—

(a) specifying conditions and requirements in respect of premises on which chargeable soft drinks may be stored before the occurrence of a chargeable event (see section 78(5)(b));

(b) specifying other conditions and requirements as to the storage of chargeable soft drinks for the purposes of the secondary warehousing condition (see section 78(4));

(c) specifying conditions and requirements as to the transportation of chargeable soft drinks for the purposes of the secondary warehousing condition;

(d) imposing obligations on specified persons to provide information in connection with the storage or transportation of chargeable soft drinks.

81 Liability to pay the levy

(1) Where the charge to soft drinks industry levy arises on a chargeable event within section 78(2) or (3), the person who packages the chargeable soft drinks is liable to pay the amount charged.

(2) Where the charge to soft drinks industry levy arises on a chargeable event within section 79(2) or (8), the relevant person who is the first recipient is liable to pay the amount charged.

(3) Where the charge to soft drinks industry levy arises on a chargeable event within section 79(9), the relevant person who is the first seller is liable to pay the amount charged.

82 Levy rates

(1) Soft drinks industry levy is charged—

(a) in the case of chargeable soft drinks that meet the higher sugar threshold, at the rate of £0.24 per litre of prepared drink;

(b) in the case of chargeable soft drinks that do not meet the higher sugar threshold, at the rate of £0.18 per litre of prepared drink.

(2) A chargeable soft drink meets the higher sugar threshold if it contains at least 8 grams of sugars (whether or not as a result of containing added sugar ingredients) per 100 millilitres of prepared drink.

Exemption etc

83 Small producer exemption

(1) No charge to soft drinks industry levy arises—

(a) on a chargeable event within section 78 in relation to chargeable soft drinks produced by a person who is, on the relevant day, a qualifying small producer;

(b) on a chargeable event within section 79 in relation to chargeable soft drinks produced by a person who is, on the relevant day, a small producer.

(2) Chargeable soft drinks are “produced” by a person if they are packaged (by or on behalf of the person) for marketing under—

(a) the person’s name or business name, or

(b) another name which is used in accordance with a licence granted to the person.

(3) For the purposes of this section and section 84, the “relevant day”, in relation to chargeable soft drinks, is the day on which the charge to soft drinks industry levy on the chargeable soft drinks would (apart from this section) arise.

(4) “Small producer” has the meaning given by section 84.

(5) A person is a “qualifying small producer” if the person is a small producer who is either—

(a) registered under section 91 (voluntary registration: small producers), or

(b) ineligible for registration under that section because the person does not meet the condition in section 91(2)(c) (voluntary registration eligibility conditions: packaging by a person other than the producer).

84 Meaning of “small producer”

(1) A person (“the producer”) who produces chargeable soft drinks is a “small producer” on the relevant day if Conditions A and B are met.

(2) Condition A is met if the aggregate of—

(a) the amount of the producer’s chargeable soft drinks within section 72(1)(a) in respect of which a relevant event has occurred during the relevant 12 month period, and

(b) the amount of prepared drink that would result from the producer’s chargeable soft drinks within section 72(1)(b) in respect of which a relevant event has occurred during the relevant 12 month period,

does not exceed the small producer threshold.

(3) Condition B is met if there are reasonable grounds for believing that the aggregate of—

(a) the amount of the producer’s chargeable soft drinks within section 72(1)(a) in respect of which a relevant event will occur during the relevant 30 day period, and

(b) the amount of prepared drink that would result from the producer’s chargeable soft drinks within section 72(1)(b) in respect of which a relevant event will occur during the relevant 30 day period,

will not exceed the small producer threshold.

(4) A “relevant event” occurs in respect of chargeable soft drinks on the removal of the chargeable soft drinks from the premises on which they are packaged.

(5) But—

(a) if, on removal from the premises on which the chargeable soft drinks are packaged, the secondary warehousing condition is met in relation to the soft drinks, a “relevant event” occurs in relation to those soft drinks at the time that the secondary warehousing condition ceases to be met in relation to them (and not at the time mentioned in subsection (4));

(b) if the chargeable soft drinks are made available for sale or free of charge before a relevant event in relation to the soft drinks occurs under subsection (4) or paragraph (a), a “relevant event” occurs at the time they are made available (and not at the time mentioned in subsection (4) or paragraph (a)).

(6) For the purposes of subsections (2) and (3)

(a) the “relevant 12 month period” is the period of 12 months ending with the end of the month that immediately precedes the month in which the relevant day falls, and

(b) the “relevant 30 day period” is the period of 30 days beginning with the relevant day.

(7) The “small producer threshold” is 1 million litres.

(8) References in this section to “the producer’s chargeable soft drinks” are references to chargeable soft drinks produced by the producer or a person connected with the producer.

85 Tax credits

(1) The Commissioners may by regulations make provision in relation to cases where, after a charge to soft drinks industry levy has arisen in relation to chargeable soft drinks—

(a) the soft drinks are exported from the United Kingdom;

(b) the soft drinks are lost or destroyed.

(2) The provision that may be made is provision—

(a) for the liable person to be entitled to a tax credit in respect of any soft drinks industry levy charged on the soft drinks that are exported or (as the case may be) lost or destroyed;

(b) for the tax credit to be brought into account when the person is accounting for soft drinks industry levy due from the person for the prescribed accounting period or periods.

(3) Regulations under this section may include provision—

(a) for any entitlement to a tax credit to be conditional on the making of a claim by the liable person, and specifying the period within which and the manner in which a claim may be made;

(b) for any entitlement to bring a tax credit into account to be conditional on compliance with prescribed requirements;

(c) specifying circumstances in which, and criteria for determining the period for which, a liable person is not entitled to a tax credit;

(d) requiring a claim for a tax credit to be evidenced and quantified by reference to prescribed records and other documents;

(e) requiring a person claiming any entitlement to a tax credit to keep, for the prescribed period and in the prescribed form and manner, those records and documents and a record of prescribed information relating to the claim;

(f) for the withdrawal of a tax credit where any requirement of the regulations is not complied with;

(g) about adjustments of liability for soft drinks industry levy in connection with entitlement or withdrawal of entitlement to a tax credit in prescribed circumstances;

(h) about the treatment of a tax credit where the liable person ceases to carry on a business involving the package or sale of chargeable soft drinks.

(4) Regulations under paragraph (a) of subsection (1) may include provision for the sale or provision of chargeable soft drinks on passenger transport operating between the United Kingdom and a place outside of the United Kingdom to be treated as “export from the United Kingdom” for the purposes of regulations under that paragraph.

(5) Regulations under paragraph (b) of subsection (1) may include provision about the circumstances in which chargeable soft drinks are to be treated as lost or destroyed for the purposes of regulations under that paragraph.

(6) In this section—

  • “liable person” means the person who is liable under section 81 to pay the charge to soft drinks industry levy referred to in subsection (1);

  • “prescribed” means specified in, or determined in accordance with, regulations under this section.

Registration

86 The register

(1) The Commissioners must establish and maintain a register for the purposes of this Part.

(2) In this Part, “the register” means the register under subsection (1) and references to registration are to registration in it.

(3) The register may contain such information as the Commissioners think is required for the purposes of the collection and management of soft drinks industry levy.

87 Liability to register: packagers

(1) A person becomes liable to be registered—

(a) at the end of any month, if the person has packaged any chargeable soft drinks in respect of which a chargeable event within section 78 has occurred during that month;

(b) on any day, if there are reasonable grounds for believing that, during the period of 30 days beginning with that day, a chargeable event within section 78 will occur in respect of chargeable soft drinks packaged by the person.

(2) But subsection (1) does not apply to a person if—

(a) the chargeable soft drinks packaged by the person are also produced by the person, and

(b) the person is not liable to be registered under section 88 (liability to register: producers).

(3) Subsection (1) does not apply in relation to a person who is already registrable.

(4) In this section and in sections 88 and 89 references to “a person who is already registrable” are references to a person who—

(a) is registered under this section, section 88 or section 89,

(b) is subject to a relevant notification requirement, or

(c) would, if the person had complied with a relevant notification requirement, be registered under this section, section 88 or section 89.

(5) In subsection (4)(c) “relevant notification requirement” means a requirement under section 90(1) to notify the Commissioners of a liability to register—

(a) arising on a previous occasion, and

(b) in respect of which the notification period has expired.

(6) In this section “notification period” has the meaning given by section 90(2).

88 Liability to register: producers

(1) A person (“the producer”) who produces chargeable soft drinks becomes liable to be registered—

(a) at the end of any month, if the qualifying amount of the producer’s chargeable soft drinks in respect of which a chargeable event within section 78 has occurred during the immediately preceding period of 12 months exceeds the small producer threshold;

(b) on any day, if there are reasonable grounds for believing that the qualifying amount of the producer’s chargeable soft drinks in respect of which a chargeable event within section 78 will occur during the period of 30 days beginning with that day will exceed the small producer threshold.

(2) The “qualifying amount” of chargeable soft drinks in respect of which a chargeable event occurs is the aggregate of—

(a) the amount of the chargeable soft drinks within section 72(1)(a) in respect of which the chargeable event occurs, and

(b) the amount of prepared drink that would result from the chargeable soft drinks within section 72(1)(b) in respect of which the chargeable event occurs.

(3) Subsection (1) does not apply in relation to a person who is already registrable.

(4) References in this section to “the producer’s chargeable soft drinks” are references to chargeable soft drinks produced by the producer or a person connected with the producer.

89 Liability to register: imported chargeable soft drinks

(1) A person becomes liable to be registered—

(a) at the end of any month if, during that month, a chargeable event within section 79 has occurred—

(i) on the first receipt, or on the making available, of chargeable soft drinks by the person, or

(ii) on the secondary warehousing condition ceasing to be met in relation to chargeable soft drinks in respect of which the person is the first recipient;

(b) on any day, if there are reasonable grounds for believing that, during the period of 30 days beginning with that day, a chargeable event within section 79 will occur—

(i) on the first receipt, or on the making available, of chargeable soft drinks by the person, or

(ii) on the secondary warehousing condition ceasing to be met in relation to chargeable soft drinks in respect of which the person is the first recipient.

(2) Subsection (1) does not apply in relation to a person who is already registrable.

90 Notification of liability and registration

(1) A person who becomes liable to be registered under section 87, 88 or 89 must notify the Commissioners of the liability before the end of the notification period.

(2) The “notification period” is the period of 30 days beginning with the day on which the liability arises.

(3) Where the Commissioners are satisfied that a person is liable to be registered (whether or not the person has notified liability under subsection (1)), the Commissioners must register the person with effect from the day on which the liability to register arises.

91 Voluntary registration: small producers

(1) The Commissioners must register a person who—

(a) meets the voluntary registration eligibility conditions, and

(b) applies to the Commissioners for registration under this section.

(2) The voluntary registration eligibility conditions are met by a person (P) if—

(a) P produces chargeable soft drinks,

(b) P is not liable to be registered under section 88 (liability to register: producers), and

(c) some or all of the chargeable soft drinks produced by P are packaged on premises in the United Kingdom by a person other than P.

(3) A person who is registered under section 87 or 89 may also be registered under this section.

92 Cancellation of registration under section 87, 88 or 89

(1) A registration under section 87, 88 or 89 may be cancelled only in accordance with this section.

(2) For the purposes of this section, a person meets the “liability condition” at a particular time if—

(a) at the end of the preceding month, the condition in section 87(1)(a), 88(1)(a) or 89(1)(a) is met in relation to the person, or

(b) at that time, the condition in section 87(1)(b), 88(1)(b) or 89(1)(b) is met in relation to the person.

(3) The Commissioners must cancel a person’s registration under section 87, 88 or 89 if—

(a) the person requests the cancellation, and

(b) the person satisfies the Commissioners that the person does not, at the time of the request, meet the liability condition.

(4) A cancellation under subsection (3) is to be made with effect from—

(a) the day on which the request is made, or

(b) such later day as may be agreed between the Commissioners and the person.

(5) The Commissioners may cancel a person’s registration under section 87, 88 or 89 if they are satisfied that the person does not meet the liability condition.

(6) A cancellation under subsection (5) is to be made with effect from—

(a) the day on which the person ceased to meet the liability condition, or

(b) such later day as may be agreed between the Commissioners and the person.

(7) But the Commissioners must not cancel a registration under subsection (3) or (5) with effect from any time unless—

(a) they are satisfied that it is not a time when the person would meet the liability condition, and

(b) it is reasonable to believe that the person will not become liable to be registered under section 87(1)(a) or 89(1)(a) during the period of 12 months beginning with that time.

(8) The Commissioners may cancel a person’s registration under section 87, 88 or 89 if they are satisfied that the person did not meet the liability condition on the day on which the person was registered, and has not at any subsequent time met the liability condition.

(9) A cancellation under subsection (8) is to be made with effect from the day on which the person was registered.

93 Cancellation of voluntary registration

(1) The Commissioners may cancel a person’s registration under section 91 if they are satisfied that the person does not meet the voluntary registration eligibility conditions (see subsection (2) of that section).

(2) A cancellation under subsection (1) is to be made with effect from the day on which the person ceased to meet the voluntary registration eligibility conditions.

(3) The Commissioners must cancel a person’s registration under section 91 if the person requests the cancellation.

(4) A cancellation under subsection (3) is to be made with effect from—

(a) the day on which the request is made, or

(b) such later day as may be agreed between the Commissioners and the person.

94 Correction of the register

(1) The Commissioners may by regulations make provision about the correction of entries in the register.

(2) Regulations under subsection (1) may make provision for requiring persons who are, or are liable to be, registered to notify the Commissioners of changes in circumstances which are relevant to the register.

95 Applications, notifications etc

The Commissioners may by or under regulations make provision—

(a) about the form and manner in which a notification under section 90 (notification of liability to register) is to be given;

(b) about the information to be contained in or provided with a notification under that section;

(c) about the form and manner of an application under section 91 (voluntary registration: small producers);

(d) requiring applications, notifications and other communications with the Commissioners in connection with registration to be made electronically.

Offences

96 Fraudulent evasion

(1) A person commits an offence if the person is knowingly concerned in, or in the taking of steps with a view to, the fraudulent evasion (by that person or any other person) of soft drinks industry levy.

(2) The references in subsection (1) to the evasion of soft drinks industry levy include references to obtaining, in circumstances where there is no entitlement to it—

(a) a tax credit under regulations under section 85;

(b) a repayment of soft drinks industry levy under Schedule 20.

(3) A person guilty of an offence under this section is liable—

(a) on summary conviction in England and Wales—

(i) to imprisonment for a term not exceeding 12 months, or

(ii) to a fine not exceeding £20,000 or (if greater) 3 times the total of the amounts of soft drinks industry levy that were, or were intended to be, evaded, or

(iii) to both;

(b) on summary conviction in Scotland—

(i) to imprisonment for a term not exceeding 12 months, or

(ii) to a fine not exceeding the statutory maximum or (if greater) 3 times the total of the amounts of soft drinks industry levy that were, or were intended to be, evaded, or

(iii) to both;

(c) on summary conviction in Northern Ireland—

(i) to imprisonment for a term not exceeding 6 months, or

(ii) to a fine not exceeding the statutory maximum or (if greater) 3 times the total of the amounts of soft drinks industry levy that were, or were intended to be, evaded, or

(iii) to both;

(d) on conviction on indictment—

(i) to imprisonment for a term not exceeding 7 years,

(ii) to a fine, or

(iii) to both.

(4) For the purposes of subsection (3), the amounts of soft drinks industry levy that were, or were intended to be, evaded are to be taken as including—

(a) the amount of any tax credit under regulations under section 85, and

(b) the amount of any repayment of soft drinks industry levy under Schedule 20,

which was, or was intended to be, obtained in circumstances where there was no entitlement to it.

(5) In determining for the purposes of subsection (3) the amounts of soft drinks industry levy that were, or were intended to be, evaded, no account is to be taken of the extent to which any liability to levy of a person would be, or would have been, reduced by the amount of any tax credit or repayment of soft drinks industry levy to which the person was, or would have been, entitled.

(6) In relation to an offence committed before the commencement of section 154(1) of the Criminal Justice Act 2003 the reference in subsection (3)(a)(i) to 12 months is to be read as a reference to 6 months.

97 Failure to notify registration liability

(1) A person who fails to comply with section 90(1) (obligation to notify the Commissioners of liability to be registered) commits an offence.

(2) In proceedings against a person (P) for an offence under subsection (1), it is a defence for P to prove that P had a reasonable excuse for the failure to comply.

(3) For the purposes of subsection (2)

(a) where P relies on any other person to do anything, that is not a reasonable excuse unless P took reasonable care to avoid the failure;

(b) where P had a reasonable excuse for the failure but the excuse has ceased, P is to be treated as having continued to have the excuse if the failure is remedied without unreasonable delay after the excuse ceased.

(4) A person guilty of an offence under this section is liable—

(a) on summary conviction in England and Wales—

(i) to imprisonment for a term not exceeding 12 months, or

(ii) to a fine not exceeding £20,000 or (if greater) 3 times the amount of the potential lost revenue, or

(iii) to both;

(b) on summary conviction in Scotland—

(i) to imprisonment for a term not exceeding 12 months, or

(ii) to a fine not exceeding the statutory maximum or (if greater) 3 times the amount of the potential lost revenue, or

(iii) to both;

(c) on summary conviction in Northern Ireland—

(i) to imprisonment for a term not exceeding 6 months, or

(ii) to a fine not exceeding the statutory maximum or (if greater) 3 times the amount of the potential lost revenue, or

(iii) to both;

(d) on conviction on indictment—

(i) to imprisonment for a term not exceeding 3 years,

(ii) to a fine, or

(iii) to both.

(5) For the purposes of subsection (4), the “potential lost revenue” is the amount of soft drinks industry levy (if any) for which the person who committed the offence is liable for the period—

(a) beginning with the date with effect from which the person is liable to be registered under this Part, and

(b) ending with the date on which the Commissioners received notification of, or otherwise were satisfied as to, the person’s liability to be registered under this Part.

(6) In calculating potential lost revenue for the purposes of subsection (4), no account is to be taken of the fact that a potential loss of revenue from the person is or may be balanced by a potential over-payment by another person.

(7) In relation to an offence committed before the commencement of section 154(1) of the Criminal Justice Act 2003 the reference in subsection (4)(a)(i) to 12 months is to be read as a reference to 6 months.

Administration and enforcement

98 Payment, collection and recovery

(1) The Commissioners may by regulations make provision about the payment, collection and recovery of soft drinks industry levy.

(2) Regulations under subsection (1) may—

(a) require persons who are or are liable to be registered under this Part to keep accounts for the purposes of the levy in the specified form and manner;

(b) require persons who are or are liable to be registered under this Part to make returns for the purposes of the levy;

(c) make provision for determining the periods (“accounting periods”) by reference to which payments of the levy are to be made;

(d) make provision about the times at which payments of the levy are to be made and methods of payment;

(e) require the amounts payable by reference to accounting periods to be calculated by or under the regulations;

(f) make provision for the correction of errors made in accounting for the levy.

(3) Provision may be made by or under regulations under subsection (2)(b) about—

(a) the periods by reference to which returns are to be made,

(b) the information to be included in returns,

(c) timing, and

(d) the form of, and method of, making returns.

(4) Schedule 20 contains provision about recovery and overpayments.

99 Records

(1) The Commissioners may by regulations require persons—

(a) to keep, for purposes connected with soft drinks industry levy, records of specified matters, and

(b) to preserve records for a specified period.

(2) A duty under regulations under this section to preserve records may be discharged—

(a) by preserving them in any form and by any means, or

(b) by preserving the information contained in them in any form and by any means, subject to any specified conditions or exceptions.

(3) The Commissioners may direct a person who is, or is liable to be, registered under this Part—

(a) to keep such records as are specified in the direction;

(b) to preserve those records for a specified period.

(4) The period specified in a direction under subsection (3)(b) may not exceed 6 years.

(5) The Commissioners may not give a direction under subsection (3) unless they have reasonable grounds for believing that the records specified in the direction might assist in identifying chargeable soft drinks in respect of which soft drinks industry levy might not be paid.

(6) A direction under subsection (3)

(a) must be given in writing,

(b) must specify the consequences under Schedule 21 of failure to comply with a requirement imposed under subsection (3), and

(c) may be revoked or replaced by a further direction.

(7) Schedule 21 makes provision about penalties for failure to comply with requirements imposed by regulations or directions under this section.

100 Power to make further provision about enforcement

(1) The Commissioners may by regulations make further provision about enforcement of soft drinks industry levy, including provision conferring powers of entry, search or seizure.

(2) Regulations under this section may include provision—

(a) conferring powers to enter and inspect premises that are used, or are reasonably believed to be used, in connection with the production, packaging, sale, import or export of chargeable soft drinks;

(b) conferring powers to stop, board and search ships, aircraft and other vehicles entering, leaving or situated on premises referred to in paragraph (a);

(c) conferring powers to inspect and take copies of business documents on premises referred to in paragraph (a);

(d) conferring powers to examine and take samples of soft drinks found on premises referred to in paragraph (a);

(e) for the detention and seizure of chargeable soft drinks in respect of which a specified requirement of this Part has been contravened;

(f) requiring a person to provide such facilities as are reasonably necessary for an officer of Revenue and Customs to carry out an examination or search or exercise other powers conferred by the regulations;

(g) about reviews of, and appeals against, decisions made for the purposes of the regulations.

(3) Regulations under this section may, in particular, make provision by applying any provision of CEMA 1979.

101 Appeals etc

Schedule 22 makes provision about appeals and reviews.

102 Supplementary amendments

Schedule 23 contains supplementary amendments relating to administration and enforcement of soft drinks industry levy.

Miscellaneous

103 Regulations: death, incapacity or insolvency of person carrying on a business

(1) The Commissioners may by regulations make provision for the purposes of soft drinks industry levy in relation to cases where a person carries on a business of—

(a) an individual who has died or become incapacitated;

(b) a person (whether or not an individual) who is subject to an insolvency procedure (as defined in the regulations).

(2) Regulations under this section may include—

(a) provision requiring the person who is carrying on the business (P) to notify the Commissioners that P is carrying on the business and of the event that led to P carrying it on;

(b) provision allowing P to be treated for a limited time as if P and the person who has died, become incapacitated or is subject to an insolvency procedure were the same person;

(c) such other provision as the Commissioners think fit for securing continuity in the application of this Part in cases to which the regulations apply.

104 Provisional collection of soft drinks industry levy

In section 1 of the Provisional Collection of Taxes Act 1968 (temporary statutory effect of House of Commons resolutions), in subsection (1), after “aggregates levy,” insert “soft drinks industry levy,”.

General

105 Interpretation

(1) In this Part—

  • “accounting period” is to be construed in accordance with section 98(2)(c);

  • “chargeable soft drink” has the meaning given by section 74;

  • “the Commissioners” means the Commissioners for Her Majesty’s Revenue and Customs;

  • “compliant warehouse” is to be construed in accordance with section 78(5);

  • “first recipient” and “first receipt”, in relation to imported chargeable soft drinks, have the meaning given by section 79(2) and (4);

  • “first seller”, in relation to imported chargeable soft drinks, has the meaning given by section 79(9);

  • “HMRC” means Her Majesty’s Revenue and Customs;

  • “package” and “packaged” are to be construed in accordance with section 72(3);

  • “person who is already registrable” has the meaning given by section 87(4);

  • “prepared drink” has the meaning given by section 73(1);

  • “produce”, in relation to chargeable soft drinks, is to be construed in accordance with section 83(2);

  • “relevant person” has the meaning given by section 79(5);

  • “secondary warehousing condition” has the meaning given by section 78(4);

  • “small producer” has the meaning given by section 84;

  • “small producer threshold” has the meaning given by section 84(7);

  • “soft drink” has the meaning given by section 72(1);

  • “sugars” means anything that is required to be described as “sugars” for the purposes of a designated food labelling obligation (see subsection (3)).

(2) In sections 76, 80, 98, 99(1) and (2) and 100 and in paragraph 11 of Schedule 20, “specified” means specified in regulations made by the Commissioners for the purposes of this Part.

(3) In the definition of “sugars” in subsection (1), “designated food labelling obligation” means an obligation that—

(a) relates to the provision of nutritional information on the packaging of food or drinks,

(b) is imposed by an enactment, an EU instrument or subordinate legislation, and

(c) is designated by regulations made by the Commissioners for the purposes of this Part.

(4) Section 1122 of CTA 2010 (meaning of connected person) applies for the purposes of this Part.

(5) For the purposes of this Part, a person “packages” chargeable soft drinks if—

(a) the person packages soft drinks, and

(b) the packaged soft drinks are chargeable soft drinks.

106 Regulations

(1) Regulations under this Part—

(a) may make different provision for different purposes;

(b) may include incidental, consequential, supplementary or transitional provision.

(2) Regulations under this Part are to be made by statutory instrument.

(3) A statutory instrument containing regulations under section 100 may not be made unless a draft of the instrument has been laid before and approved by a resolution of the House of Commons.

(4) Any other statutory instrument containing regulations under this Part is subject to annulment in pursuance of a resolution of the House of Commons.

(5) But subsection (4) does not apply to a statutory instrument containing only regulations under section 107 (commencement of this Part).

107 Commencement

(1) Subject to subsection (2), this Part comes into force on such day as the Commissioners may by regulations appoint.

(2) The amendment made by paragraph 3 of Schedule 23 comes into force in accordance with provision made by the Treasury by regulations.

(3) Regulations under this section may appoint different days for different purposes.

Part 4 Fulfilment businesses

108 Carrying on a third country goods fulfilment business

(1) For the purposes of this Part a person carries on a third country goods fulfilment business if the person, by way of business—

(a) stores third country goods which are owned by a person who is not established in a Member State, or

(b) stores third country goods on behalf of a person who is not established in a Member State,

at a time when the conditions in subsection (2) are met in relation to the goods.

(2) The conditions are that—

(a) there has been no supply of the goods in the United Kingdom for the purposes of VATA 1994, and

(b) the goods are being offered for sale in the United Kingdom or elsewhere.

(3) But a person does not carry on a third country goods fulfilment business if the person’s activities within subsection (1) are incidental to the carriage of the goods.

(4) Goods are “third country” goods if they have been imported from a place outside the Member States within the meaning of section 15 of VATA 1994.

(5) Whether a person is established in a Member State is to be determined in accordance with Article 10 of Council Implementing Regulation (EU) No 282/2011 of 15 March 2011 laying down implementing measures for Directive 2006/112/EC on the common system of value added tax.

109 Requirement for approval

(1) A person may not carry on a third country goods fulfilment business otherwise than in accordance with an approval given by the Commissioners under this section.

(2) The Commissioners may approve a person to carry on a third country goods fulfilment business only if they are satisfied that the person is a fit and proper person to carry on the business.

(3) The Commissioners may approve a person to carry on a third country goods fulfilment business for such periods and subject to such conditions or restrictions as they may think fit or as they may by regulations made by them prescribe.

(4) The Commissioners may at any time for reasonable cause vary the terms of, or revoke, an approval under this section.

(5) In this Part “approved person” means a person approved under this section to carry on a third country goods fulfilment business.

110 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 third country goods fulfilment business 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 the internet) as the Commissioners consider appropriate.

111 Regulations relating to approval, registration etc.

(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 110,

(d) regulating the carrying on of a third country goods fulfilment business, 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;

(c) requiring approved persons to keep and make available for inspection such records as may be prescribed by or under the regulations.

112 Disclosure of information by HMRC

(1) The Commissioners may disclose to an approved person information held by Her Majesty’s Revenue and Customs in connection with a function of Her Majesty’s Revenue and Customs, but only for the purpose mentioned in subsection (2).

(2) The purpose is to assist the approved person in complying with obligations imposed on that person by virtue of section 111.

(3) An approved person to whom information is disclosed under subsection (1)

(a) may use the information only for the purpose of complying with obligations imposed on that person by virtue of section 111, and

(b) may not further disclose the information except with the consent of the Commissioners.

(4) Section 19 of the Commissioners for Revenue and Customs Act 2005 (offence) applies to a disclosure in contravention of subsection (3)(b) as it applies to a disclosure, in contravention of section 20(9) of that Act, of revenue and customs information relating to a person whose identity is specified in the disclosure or can be deduced from it.

113 Offence

(1) A person who—

(a) carries on a third country goods fulfilment business, and

(b) is not an approved person,

commits an offence.

(2) In proceedings for an offence under subsection (1) it is a defence to show that the person did not know, and had no reasonable grounds to suspect, that the person—

(a) was carrying on a third country goods fulfilment business, or

(b) was not an approved person.

(3) A person is taken to have shown the fact mentioned in subsection (2) if—

(a) sufficient evidence of that fact is adduced to raise an issue with respect to it, and

(b) the contrary is not proved beyond reasonable doubt.

(4) A person guilty of an offence under this section is liable on summary conviction—

(a) in England and Wales, to imprisonment for a term not exceeding 12 months, or a fine, or both;

(b) in Scotland, to imprisonment for a term not exceeding 12 months, or a fine not exceeding the statutory maximum, or both;

(c) in Northern Ireland, to imprisonment for a term not exceeding 6 months, or a fine not exceeding the statutory maximum, or both.

(5) 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.

(6) In relation to an offence committed before the commencement of section 154(1) of the Criminal Justice Act 2003 the reference in subsection (4)(a) to 12 months is to be read as a reference to 6 months.

114 Forfeiture

(1) If a person—

(a) carries on a third country goods fulfilment business, and

(b) is not an approved person,

any goods within subsection (2) are liable to forfeiture under CEMA 1979.

(2) Goods are within this subsection if—

(a) they are stored by the person, and

(b) their storage by the person constitutes, or has constituted, the carrying on of a third country goods fulfilment business by the person.

115 Penalties

(1) Schedule 24 provides for a penalty to be payable by a person who carries on a third country goods fulfilment business and is not an approved person.

(2) The Commissioners may make regulations (“penalty regulations”) imposing a penalty for the contravention by an approved person of—

(a) any condition or restriction imposed under this Part;

(b) regulations under this Part.

(3) The amount of a penalty imposed by the penalty regulations is to be specified in the regulations, but must not exceed £3,000.

(4) The penalty regulations may make provision for the assessment and recovery of a penalty imposed by the regulations.

(5) The Commissioners may by regulations make provision for corporate bodies which are members of the same group to be jointly and severally liable for any penalties imposed under—

(a) Schedule 24;

(b) penalty regulations.

116 Appeals

(1) FA 1994 is amended as follows.

(2) In section 13A(2) (customs and excise reviews and appeals: relevant decisions) after paragraph (gb) insert—

(gc) any decision by HMRC that a person is liable to a penalty, or as to the amount of a person’s liability, under—

(i) regulations under section 115 of the Finance Act 2017, or

(ii) Schedule 24 to that Act;”.

(3) In Schedule 5 to that Act (decisions subject to review and appeal) after paragraph 9A insert—

“The Finance Act 2017

9B Any decision for the purposes of Part 5 of the Finance Act 2017 (third country goods fulfilment businesses) as to—

(a) whether or not, and in which respects, any person is to be, or to continue to be, approved and registered, or

(b) the conditions or restrictions subject to which any person is approved and registered.”

117 Regulations

(1) Regulations under this Part may—

(a) make provision which applies generally or only for specified cases or purposes;

(b) make different provision for different cases or purposes;

(c) include incidental, consequential, transitional or transitory provision;

(d) confer a discretion on the Commissioners;

(e) make provision by reference to a notice to be published by the Commissioners.

(2) Regulations under this Part are to be made by statutory instrument.

(3) A statutory instrument containing regulations under this Part is subject to annulment in pursuance of a resolution of the House of Commons.

(4) This section does not apply to regulations under section 119 (commencement).

118 Interpretation

(1) In this Part—

  • “approved person” has the meaning given by section 109(5);

  • “the Commissioners” means the Commissioners for Her Majesty’s Revenue and Customs.

(2) For the purposes of this Part two or more bodies corporate are members of a group if—

(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.

(3) A body corporate is to be taken to control another body corporate if—

(a) it is empowered by or under legislation 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.

(4) 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.

119 Commencement

(1) This Part comes into force on such day as the Commissioners may by regulations made by statutory instrument appoint.

(2) Regulations under subsection (1) may appoint different days for different purposes.

Part 5 Administration, avoidance and enforcement

Reporting and record-keeping

120 Digital reporting and record-keeping for income tax etc

(1) TMA 1970 is amended as follows.

(2) After section 12B insert—

“Digital reporting and record-keeping

12C Digital reporting and record-keeping

Schedule A1 (digital reporting and record-keeping) has effect.”

(3) Before Schedule 1AA insert—

Section 12C

“Schedule A1 Digital reporting and record-keeping
Part 1 Application
Application: persons

1 (1) This Schedule applies to a person within the charge to income tax who, otherwise than in partnership, carries on (or has carried on)—

(a) a trade, profession or vocation the profits of which are chargeable to income tax under Part 2 of ITTOIA 2005,

(b) a property business the profits of which are chargeable to income tax under Part 3 of ITTOIA 2005, or

(c) any other activity which may give rise to profits or other income chargeable to income tax under Part 2 or 3 of ITTOIA 2005.

(2) This is subject to paragraph 2.

2 (1) This Schedule does not apply to—

(a) the trustees of a charitable trust, or

(b) the trustees of an exempt unauthorised unit trust (within the meaning of the Unauthorised Unit Trusts (Tax) Regulations 2013 (S.I. 2013/2819S.I. 2013/2819)),

unless the trustees elect for this Schedule to apply to them.

(2) This Schedule does not apply to a person in respect of an excluded activity unless the person elects for this Schedule to apply to the person in respect of the excluded activity.

(3) The following are excluded activities—

(a) the underwriting business of a member of Lloyd’s (within the meaning of section 184 of the Finance Act 1993),

(b) holding shares in respect of which a distribution may be made which is chargeable to income tax under Part 3 of ITTOIA 2005 by virtue of section 548(6) of CTA 2010 (distributions to shareholders in real estate investment trusts), and

(c) participating in an open-ended investment company which may make distributions chargeable to income tax under Part 3 of ITTOIA 2005 by virtue of regulation 69Z18 of the Authorised Investment Funds (Tax) Regulations 2006 (S.I. 2006/964) (property income distributions).

(4) The Commissioners may by regulations make provision about elections under this paragraph and the withdrawal of such elections, including provision—

(a) about how an election may be made or withdrawn, and

(b) about the period for which an election or withdrawal has effect.

Application: partnerships

3 (1) This Schedule applies to a partnership if one or more of the partners is within the charge to income tax.

(2) This is subject to paragraph 4.

4 (1) If all the activities of a partnership which may give rise to profits or income are excluded activities, this Schedule does not apply to the partnership unless the partnership elects for this Schedule to apply to it.

(2) The following are excluded activities—

(a) the underwriting business of a Lloyd’s partnership (as defined in section 184(1) of the Finance Act 1993),

(b) holding shares in respect of which a distribution may be made which is chargeable to income tax under Part 3 of ITTOIA 2005 by virtue of section 548(6) of CTA 2010

(distributions to shareholders in real estate investment trusts), and

(c) participating in an open-ended investment company which may make distributions chargeable to income tax under Part 3 of ITTOIA 2005 by virtue of regulation 69Z18 of the Authorised Investment Funds (Tax) Regulations 2006 (S.I. 2006/964) (property income distributions).

(3) The Commissioners may by regulations make provision about elections under this paragraph and the withdrawal of such elections, including provision—

(a) about how an election may be made or withdrawn, and

(b) about the period for which an election or withdrawal has effect.

Nominated partners

5 (1) Requirements imposed under this Schedule on a partnership are to be met by a nominated partner.

(2) A “nominated partner” is a partner nominated for the purposes of this Schedule—

(a) by the partners, or

(b) by the Commissioners.

(3) A nomination, or a revocation of a nomination, by the partners does not have effect until notice of the revocation or nomination is given to HMRC.

(4) The Commissioners may by regulations make provision about nominations and the revocation of nominations, including provision about the circumstances in which the Commissioners may nominate a partner.

(5) In this Act references to a nominated partner are to a partner nominated for the purposes of this Schedule.

Part 2 Digital reporting and record-keeping
Interpretation

6 In this Part of this Schedule “business”—

(a) in relation to a person to whom this Schedule applies (see paragraphs 1 and 2), means the activity by virtue of which this Schedule applies to the person (and if more than one, means each of them), and

(b) in relation to a partnership to which this Schedule applies (see paragraphs 3 and 4), means any activity of the partnership.

Periodic updates

7 (1) The Commissioners may by regulations require a person or partnership to whom this Schedule applies to provide to HMRC, by

electronic communications, specified information about the business of the person or partnership.

(2) The information which may be specified includes any information (“financial information”) relevant to calculating profits, losses or income of the business, including information about receipts and expenses.

(3) The regulations may require information to be provided at or for specified intervals, times or periods.

(4) The regulations may not require financial information about the business to be provided more often than once every 3 months.

End of period statement

8 (1) The Commissioners may by regulations require a person to whom this Schedule applies to provide to HMRC, by electronic communications, a statement containing specified information about the person’s business in relation to each relevant period.

(2) “Relevant period” means—

(a) in relation to a business the profits or income of which are chargeable to income tax under Chapter 2 of Part 2 of ITTOIA 2005, a basis period (see Chapter 15 of that Part), and

(b) otherwise, a tax year.

(3) The information which may be specified includes any information relevant to calculating profits, losses or income of the business for the relevant period, including information about receipts and expenses.

(4) Regulations under this paragraph may require the statement—

(a) to be provided before the end of a specified period, and

(b) to include a declaration to the effect that the information included in it is correct and complete.

(5) In this Act—

(a) references to an end of period statement are to a statement under this paragraph;

(b) references to an end of period statement for a tax year are to an end of period statement for that tax year or for the basis period for that tax year.

Facility for complying with notice to file under section 8 or 8A

9 The Commissioners may by regulations make provision for the establishment and use of a facility enabling a person to whom this Schedule applies to file or deliver, by electronic communications—

(a) anything which under section 8(1AB) may be required to be filed or delivered by a notice to file under section 8;

(b) anything which under section 8A(1AB) may be required to be filed or delivered by a notice to file under section 8A.

Partnership return

10 (1) The Commissioners may by regulations require a partnership to which this Schedule applies to provide to HMRC, by electronic communications, a return containing specified information about the partnership’s business in relation to each tax year.

(2) The information which may be specified includes any information which is or may be required to be included in a section 12AA partnership return, including information in respect of any partners within the charge to corporation tax.

(3) In particular, the information which may be specified includes the information required to be included in a section 12AA partnership return by section 12AB (partnership statements).

(4) Regulations under this paragraph may require the return—

(a) to be provided before the end of a specified period, and

(b) to include a declaration to the effect that the information included in it is correct and complete.

(5) In this Act—

(a) references to a Schedule A1 partnership return are to a return under this paragraph, and

(b) references to a partnership statement, in relation to a Schedule A1 partnership return, are to information required to be included in the return under sub-paragraph (3).

Record-keeping

11 (1) The Commissioners may by regulations require a person or partnership to whom this Schedule applies to—

(a) keep specified records relating to the business in electronic form, and

(b) preserve those records in electronic form for a specified period.

(2) The records which may be specified are any records the Commissioners consider relevant to ascertaining information required to be provided by regulations under this Part of this Schedule.

(3) A requirement imposed by regulations under this paragraph is in addition to, and not in place of, any other requirement that the person or partnership keep and preserve records (or keep and preserve records in a particular form).

(4) Paragraph 5(1) (requirements imposed on partnership to be met by nominated partner) does not apply to requirements under this paragraph.

12 (1) This paragraph applies where requirements imposed by regulations under paragraph 11 for any period are not complied with.

(2) The person, or in the case of a partnership each relevant partner, is liable for a penalty.

(3) “Relevant partner” means any person who was a partner in the partnership at any time during the period in question.

(4) The amount of the penalty must not exceed £3,000.

(5) A person or relevant partner is not liable to a penalty under this paragraph in relation to a period if the person or relevant partner is liable to a penalty under section 12B(5) in relation to that period.

Electronic communications and records: supplementary powers

13 (1) This paragraph applies to regulations under paragraphs 7, 8, 9, 10 and 11.

(2) The regulations may (amongst other things) make provision—

(a) as to the electronic form to be taken by information provided and records kept,

(b) requiring persons to prepare and keep records of information provided by means of electronic communications,

(c) for the production of the contents of records kept in accordance with regulations under this Part of this Schedule,

(d) as to conditions that must be complied with in connection with the use of electronic communications or the keeping of electronic records,

(e) for treating information as not having been provided or records as not having been kept unless conditions are complied with,

(f) for determining the time at which and person by whom information is taken to have been delivered, and

(g) for authenticating information or records.

(3) The regulations may also make provision (which may include provision for the application of conclusive or other presumptions) about the manner of proving for any purpose—

(a) whether any use of electronic communications is to be taken as having resulted in the provision of information,

(b) the time at which information was provided,

(c) the person by whom information was provided,

(d) the contents of any information provided,

(e) the contents of any records, and

(f) any other matter for which provision may be made by the regulations.

(4) The regulations may allow or require use to be made of intermediaries in connection with—

(a) the provision of information by means of electronic communications, and

(b) the authentication or security of anything transmitted by any such means.

(5) The regulations may—

(a) allow any authorisation or requirement for which the regulations may provide to be given by means of a specific or general direction given by the Commissioners, and

(b) provide that the conditions of an authorisation or requirement are to be taken to be satisfied only where the Commissioners are satisfied as to specified matters.

(6) The regulations may provide—

(a) that information provided must meet standards of accuracy and completeness set by specific or general directions given by the Commissioners, and

(b) that failure to meet those standards may be treated as a failure to provide the information, or as a failure to comply with the requirements of the regulations.

Part 3 Exemptions
Exemption for the digitally excluded

14 (1) The Commissioners must by regulations make provision—

(a) for a person to be exempt from requirements imposed by regulations under paragraphs 7, 8 and 11 if the Commissioners are satisfied that the person is digitally excluded, and

(b) for a partnership to be exempt from requirements imposed by regulations under paragraphs 7, 10 and 11 if the Commissioners are satisfied that the partnership is digitally excluded.

(2) A person is digitally excluded if the digital exclusion condition is met in relation to the person.

(3) A partnership is digitally excluded if the digital exclusion condition is met in relation to each partner.

(4) The digital exclusion condition is met in relation to a person or partner if—

(a) the person or partner is a practising member of a religious society or order whose beliefs are incompatible with using electronic communications or keeping electronic records, or

(b) for any reason (including age, disability or location) it is not reasonably practicable for the person or partner to use electronic communications or to keep electronic records.

Further exemptions

15 (1) The Commissioners may by regulations make provision for further exemptions.

(2) Regulations under sub-paragraph (1) may in particular make provision for exemptions based on income or other financial criteria.

Part 4 Supplementary provision
Appeals

16 (1) An appeal may be brought against any decision made by the Commissioners, or by an officer of Revenue and Customs, under regulations under this Schedule.

(2) Notice of an appeal under this paragraph must be given to HMRC within 30 days after the day on which notice of the decision is given.

(3) The notice of appeal must—

(a) be in writing, and

(b) specify the grounds of appeal.

Interpretation

17 Any power in this Schedule to require the provision of information includes power to require the provision of accounts, statements and documents relating to that information.

Regulations

18 (1) Regulations under this Schedule may—

(a) make provision which applies generally or only for specified cases or purposes;

(b) make different provision for different cases or purposes;

(c) include incidental, supplemental, consequential, transitional or transitory provision;

(d) make provision for matters to be specified by the Commissioners in accordance with the regulations.

(2) Sub-paragraph (1)(d) does not apply to the following matters (which may be specified only by the regulations): any interval, time or period specified by virtue of paragraph 7(3), 8(4)(a) or 10(4)(a).

(3) Regulations under this Schedule may provide that, for the purposes of any provision of this Schedule or of the regulations, a change in the accounting date of a business is to be disregarded (and its period of account determined accordingly).

(4) Regulations under Part 2 of this Schedule may not impose requirements having effect before the tax year 2018-19.

(5) The power to make regulations under this Schedule is exercisable by statutory instrument.

(6) A statutory instrument containing regulations under this Schedule is subject to annulment in pursuance of a resolution of the House of Commons.”

121 Digital reporting and record-keeping for income tax etc: further amendments

(1) Schedule 25 contains provision amending TMA 1970.

(2) The amendments made by Schedule 25 have effect in relation to the tax year 2018-19 and subsequent tax years.

(3) The Commissioners for Her Majesty’s Revenue and Customs may by regulations amend or modify any provision of the Taxes Acts in consequence of the provision made by section 120 or Schedule 25.

(4) Regulations under subsection (3) may make transitional, transitory or saving provision.

(5) Regulations under subsection (3) must be made by statutory instrument.

(6) A statutory instrument containing regulations under subsection (3) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.

122 Digital reporting and record-keeping for VAT

(1) Schedule 11 to VATA 1994 (administration, collection and enforcement) is amended as set out in subsections (2) and (3).

(2) In paragraph 2 (accounting and payment)—

(a) in sub-paragraph (1) for “and the making of returns” substitute “, the making of returns and the submission of information”;

(b) after sub-paragraph (11) insert—

(11A) Regulations under this paragraph may include incidental, supplemental, consequential, transitional or transitory provision.”

(3) In paragraph 6 (duty of taxable person to keep records), for sub-paragraph (4) substitute—

(4) The Commissioners may by regulations make provision about the form in, and means by which, records are to be kept and preserved.

(5) Regulations under sub-paragraph (4) may—

(a) make different provision for different cases;

(b) provide for any provision of the regulations to be subject to conditions and exceptions specified by the Commissioners by notice;

(c) include incidental, supplemental, consequential, transitional or transitory provision.

(6) If regulations under sub-paragraph (4) make provision requiring records to be kept or preserved in electronic form, paragraph 13 of Schedule A1 to the Taxes Management Act 1970 applies to those regulations as it applies to regulations under paragraph 11 of that Schedule.”

(4) In section 83(1) of VATA 1994 (appealable decisions), for paragraph (zc) substitute—

(zc) a decision of the Commissioners about the application of any provision of regulations under paragraph 2 or 6 of Schedule 11, or of regulations under section 135 or 136 of the Finance Act 2002 relating to VAT, which—

(i) requires returns to be made or information to be submitted by electronic communications, or

(ii) requires records to be kept or preserved in electronic form,

(including in particular a decision as to whether such a requirement applies and a decision to impose a penalty).”

Enquiries

123 Partial closure notices

Schedule 26 makes provision for partial closure notices in respect of enquiries under sections 9A, 12ZM and 12AC of TMA 1970 and Schedule 18 to FA 1998.

Avoidance etc

124 Errors in taxpayers’ documents

(1) Schedule 24 to FA 2007 (penalties for errors) is amended as set out in subsections (2) and (3).

(2) After paragraph 3 insert—

“Errors related to avoidance arrangements

3A (1) This paragraph applies where a document of a kind listed in the Table in paragraph 1 is given to HMRC by a person (“P”) and the document contains an inaccuracy which—

(a) falls within paragraph 1(2), and

(b) arises because the document is submitted on the basis that particular avoidance arrangements (within the meaning of paragraph 3B) had an effect which in fact they did not have.

(2) It is to be presumed that the inaccuracy was careless, within the meaning of paragraph 3, unless—

(a) the inaccuracy was deliberate on P’s part, or

(b) P satisfies HMRC or (on an appeal notified to the tribunal) the tribunal that P took reasonable care to avoid inaccuracy.

(3) In considering whether P took reasonable care to avoid inaccuracy, HMRC and (on an appeal notified to the tribunal) the tribunal must take no account of any evidence of any reliance by P on advice where the advice is disqualified.

(4) Advice is “disqualified” if any of the following applies—

(a) the advice was given to P by an interested person;

(b) the advice was given to P as a result of arrangements made between an interested person and the person who gave the advice;

(c) the person who gave the advice did not have appropriate expertise for giving the advice;

(d) the advice took no account of P’s individual circumstances;

(e) the advice was addressed to, or given to, a person other than P;

but this is subject to sub-paragraphs (5) and (7).

(5) Where (but for this sub-paragraph) advice would be disqualified under any of paragraphs (a) to (c) of sub-paragraph (4), the advice is not disqualified under that paragraph if at the relevant time P—

(a) has taken reasonable steps to find out whether the advice falls within that paragraph, and

(b) reasonably believes that it does not.

(6) In sub-paragraph (4) “an interested person” means—

(a) a person, other than P, who participated in the avoidance arrangements or any transaction forming part of them, or

(b) a person who for any consideration (whether or not in money) facilitated P’s entering into the avoidance arrangements.

(7) Where (but for this sub-paragraph) advice would be disqualified under paragraph (a) of sub-paragraph (4) because it was given by a person within sub-paragraph (6)(b), the advice is not disqualified under that paragraph if—

(a) the person giving the advice had appropriate expertise for giving it,

(b) the advice took account of P’s individual circumstances, and

(c) at the time when the question whether the advice is disqualified arises—

(i) Condition E in paragraph 3B(5) is met in relation to the avoidance arrangements, but

(ii) none of Conditions A to D in paragraph 3B(5) is or has at any time been met in relation to them.

(8) If the document mentioned in sub-paragraph (1) is given to HMRC by P as a personal representative of a deceased person (“D”)—

(a) sub-paragraph (4) is to be read as if—

(i) the references in paragraphs (a) and (b) to P were to P or D;

(ii) the reference in paragraph (d) to P were to D, and

(iii) the reference in paragraph (e) to a person other than P were to a person who is neither P nor D,

(b) sub-paragraph (6) is to be read as if—

(i) the reference in paragraph (a) to P were a reference to the person to whom the advice was given, and

(ii) the reference in paragraph (b) to P were to D (or, where P also participated in the avoidance arrangements, P or D), and

(c) sub-paragraph (7) is to be read as if the reference in paragraph (b) to P were to D.

(9) In this paragraph—

  • “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable);

  • “the relevant time” means the time when the document mentioned in sub-paragraph (1) is given to HMRC;

  • “the tribunal” has the same meaning as in paragraph 17 (see paragraph 17(5A)).

3B (1) In paragraph 3A “avoidance arrangements” means, subject to sub-paragraph (3), arrangements which fall within sub-paragraph (2).

(2) Arrangements fall within this sub-paragraph if, having regard to all the circumstances, it would be reasonable to conclude that the obtaining of a tax advantage was the main purpose, or one of the main purposes, of the arrangements.

(3) Arrangements are not avoidance arrangements for the purposes of paragraph 3A if (although they fall within sub-paragraph (2))—

(a) they are arrangements which accord with established practice, and

(b) HMRC had, at the time the arrangements were entered into, indicated its acceptance of that practice.

(4) If, at any time, any of Conditions A to E is met in relation to particular arrangements—

(a) for the purposes of this Schedule the arrangements are to be taken to fall within (and always to have fallen within) sub-paragraph (2), and

(b) in relation to the arrangements, sub-paragraph (3) (and the reference to it in sub-paragraph (1)) are to be treated as omitted.

This does not prevent arrangements from falling within sub-paragraph (2) other than by reason of one or more of Conditions A to E being met.

(5) Conditions A to E are as follows—

(a) Condition A is that the arrangements are DOTAS arrangements within the meaning given by section 219(5) and (6) of FA 2014;

(b) Condition B is that the arrangements are disclosable VAT arrangements or disclosable indirect tax arrangements for the purposes of Schedule 18 to FA 2016 (see paragraphs 8A to 9A of that Schedule);

(c) Condition C is that both of the following apply—

(i) P has been given a notice under a provision mentioned in sub-paragraph (6) stating that a tax advantage arising from the arrangements is to be counteracted, and

(ii) that tax advantage has been counteracted under section 209 of FA 2013;

(d) Condition D is that a follower notice under section 204 of FA 2014 has been given to P by reference to the arrangements (and not withdrawn) and—

(i) the necessary corrective action for the purposes of section 208 of FA 2014 has been taken in respect of the denied advantage, or

(ii) the denied advantage has been counteracted otherwise than as mentioned in sub-paragraph (i);

(e) Condition E is that a tax advantage asserted by reference to the arrangements has been counteracted (by an assessment, an amendment of a return or claim, or otherwise) on the basis that an avoidance-related rule applies in relation to P’s affairs.

(6) The provisions referred to in sub-paragraph (5)(c)(i) are—

(a) paragraph 12 of Schedule 43 to FA 2013 (general anti-abuse rule: notice of final decision);

(b) paragraph 8 or 9 of Schedule 43A to that Act (pooled or bound arrangements: notice of final decision);

(c) paragraph 8 of Schedule 43B to that Act (generic referrals: notice of final decision).

(7) In sub-paragraph (5)(d) the reference to giving a follower notice to P includes giving a partnership follower notice in respect of a partnership return in relation to which P is a relevant partner; and for the purposes of this sub-paragraph—

(a) “relevant partner” has the meaning given by paragraph 2(5) of Schedule 31 to FA 2014;

(b) a partnership follower notice is given “in respect of” the partnership return mentioned in paragraph 2(2)(a) or (b) of that Schedule.

(8) For the purposes of sub-paragraph (5)(d) it does not matter whether the denied advantage has been dealt with—

(a) wholly as mentioned in one or other of sub-paragraphs (i) and (ii) of sub-paragraph (5)(d), or

(b) partly as mentioned in one of those sub-paragraphs and partly as mentioned in the other;

and “the denied advantage” has the same meaning as in Chapter 2 of Part 4 of FA 2014 (see section 208(3) of and paragraph 4(3) of Schedule 31 to that Act).

(9) For the purposes of sub-paragraph (5)(e) a tax advantage has been “asserted by reference to” the arrangements if a return, claim or appeal has been made by P on the basis that the tax advantage results from the arrangements.

(10) In this paragraph—

  • “arrangements” has the same meaning as in paragraph 3A;

  • “avoidance-related rule” has the same meaning as in Part 4 of Schedule 18 to FA 2016 (see paragraph 25 of that Schedule);

  • a “tax advantage” includes—

    (a)

    relief or increased relief from tax,

    (b)

    repayment or increased repayment of tax,

    (c)

    avoidance or reduction of a charge to tax or an assessment to tax,

    (d)

    avoidance of a possible assessment to tax,

    (e)

    deferral of a payment of tax or advancement of a repayment of tax,

    (f)

    avoidance of an obligation to deduct or account for tax, and

    (g)

    in relation to VAT, anything which is a tax advantage for the purposes of Schedule 18 to FA 2016 under paragraph 5 of that Schedule.”

(3) In paragraph 18, after sub-paragraph (5) insert—

(6) Paragraph 3A applies where a document is given to HMRC on behalf of P as it applies where a document is given to HMRC by P (and in paragraph 3B(9) the reference to P includes a person acting on behalf of P).”

(4) In FA 2014, omit section 276 (which is superseded by the provision inserted by subsections (2) and (3)).

(5) The amendments made by this section have effect in relation to any document of a kind listed in the Table in paragraph 1 of Schedule 24 to FA 2007 which relates to a tax period that—

(a) begins on or after 6 April 2017, and

(b) ends on or after the day on which this Act is passed.

(6) In subsection (5) “tax period” has the meaning given by paragraph 28(g) of Schedule 24 to FA 2007.

125 Penalties for enablers of defeated tax avoidance

Schedule 27 makes provision for penalties for persons who enable tax avoidance which is defeated.

126 Disclosure of tax avoidance schemes: VAT and other indirect taxes

(1) Schedule 28 contains provision about the disclosure of tax avoidance schemes involving VAT or other indirect taxes.

(2) In consequence of the provision made by Schedule 28, section 58A of, and Schedule 11A to, VATA 1994 (disclosure of VAT avoidance schemes) cease to have effect to require a person to disclose any scheme which—

(a) is first entered into by that person on or after 1 September 2017,

(b) constitutes notifiable arrangements under Schedule 28,

(c) implements proposals which are notifiable proposals under Schedule 28.

(3) No scheme or proposed scheme may be notified to the Commissioners under paragraph 9 of Schedule 11A to VATA 1994 (voluntary notification of schemes) on or after 1 September 2017.

(4) This section and Schedule 28 come into force—

(a) so far as is necessary for enabling the making of regulations under that Schedule, on the passing of this Act, and

(b) for all other purposes, on 1 September 2017.

127 Promoters of tax avoidance schemes: threshold conditions etc

(1) In Part 2 of Schedule 34 to FA 2014 (meeting the threshold conditions: bodies corporate and partnerships), in paragraph 13A (interpretation), for sub-

paragraphs (6) to (8) substitute—

(6) Two or more persons together control a body corporate if together they have the power to secure that the affairs of the body corporate are conducted in accordance with their wishes in any way specified in sub-paragraph (5)(a) to (c).

(7) A person controls a partnership if the person is a member of the partnership and—

(a) has the right to a share of more than half the assets, or more than half the income, of the partnership, or

(b) directs, or is on a day-to-day level in control of, the management of the business of the partnership.

(8) Two or more persons together control a partnership if they are members of the partnership and together they—

(a) have the right to a share of more than half the assets, or of more than half the income, of the partnership, or

(b) direct, or are on a day-to-day level in control of, the management of the business of the partnership.

(9) Paragraph 19(2) to (5) of Schedule 36 (connected persons etc) applies to a person referred to in sub-paragraph (7) or (8) as if references to “P” were to that person.

(10) A person has significant influence over a body corporate or partnership if the person—

(a) does not control the body corporate or partnership, but

(b) is able to, or actually does, exercise significant influence over it (whether or not as the result of a legal entitlement).

(11) Two or more persons together have significant influence over a body corporate or partnership if together those persons—

(a) do not control the body corporate or partnership, but

(b) are able to, or actually do, exercise significant influence over it (whether or not as the result of a legal entitlement).

(12) References to a person being a promoter are to the person carrying on business as a promoter.”

(2) In Part 2 of Schedule 34 to FA 2014, for paragraphs 13B to 13D substitute—

“Relevant bodies controlled etc by other persons treated as meeting a threshold condition

13B (1) A relevant body is treated as meeting a threshold condition at the relevant time if any of Conditions A to C is met.

(2) Condition A is that—

(a) a person met the threshold condition at a time when the person was a promoter, and

(b) the person controls or has significant influence over the relevant body at the relevant time.

(3) Condition B is that—

(a) a person met the threshold condition at a time when the person controlled or had significant influence over the relevant body,

(b) the relevant body was a promoter at that time, and

(c) the person controls or has significant influence over the relevant body at the relevant time.

(4) Condition C is that—

(a) two or more persons together controlled or had significant influence over the relevant body at a time when one of those persons met the threshold condition,

(b) the relevant body was a promoter at that time, and

(c) those persons together control or have significant influence over the relevant body at the relevant time.

(5) Where the person referred to in sub-paragraph (2)(a) or (3)(a) or (4)(a) as meeting a threshold condition is an individual, sub-paragraph (1) only applies if the threshold condition is a relevant threshold condition.

(6) For the purposes of sub-paragraph (2) it does not matter whether the relevant body existed at the time referred to in sub-paragraph (2)(a).

Persons who control etc a relevant body treated as meeting a threshold condition

13C (1) If at a time when a person controlled or had significant influence over a relevant body—

(a) the relevant body met a threshold condition, and

(b) the relevant body, or another relevant body which the person controlled or had significant influence over, was a promoter,

the person is treated as meeting the threshold condition at the relevant time.

(2) It does not matter whether any relevant body referred to sub-paragraph (1) exists at the relevant time.

Relevant bodies controlled etc by the same person treated as meeting a threshold condition

13D (1) If—

(a) a person controlled or had significant influence over a relevant body at a time when it met a threshold condition, and

(b) at that time that body, or another relevant body which the person controlled or had significant influence over, was a promoter,

any relevant body which the person controls or has significant influence over at the relevant time is treated as meeting the threshold condition at the relevant time.

(2) If—

(a) two or more persons together controlled or had significant influence over a relevant body at a time when it met a threshold condition, and

(b) at that time that body, or another relevant body which those persons together controlled or had significant influence over, was a promoter,

any relevant body which those persons together control or have significant influence over at the relevant time is treated as meeting the threshold condition at the relevant time.

(3) It does not matter whether—

(a) a relevant body referred to in sub-paragraph (1)(a) or (b) or (2)(a) or (b) exists at the relevant time, or

(b) a relevant body existing at the relevant time existed at the time referred to in sub-paragraph (1)(a) or (2)(a).”

(3) In Part 4 of Schedule 34A to FA 2014 (meeting section 237A conditions: bodies corporate and partnerships), for paragraphs 20 to 22 substitute—

“Relevant bodies controlled etc by other persons treated as meeting section 237A condition

20 (1) A relevant body is treated as meeting a section 237A condition at the section 237A(2) relevant time if any of Conditions A to C is met.

(2) Condition A is that—

(a) a person met the section 237A condition at a time when the person was a promoter, and

(b) the person controls or has significant influence over the relevant body at the section 237A(2) relevant time.

(3) Condition B is that—

(a) a person met the section 237A condition at a time when the person controlled or had significant influence over the relevant body,

(b) the relevant body was a promoter at that time, and

(c) the person controls or has significant influence over the relevant body at the section 237A(2) relevant time.

(4) Condition C is that—

(a) two or more persons together controlled or had significant influence over the relevant body at a time when one of those persons met the section 237A condition,

(b) the relevant body was a promoter at that time, and

(c) those persons together control or have significant influence over the relevant body at the section 237A(2) relevant time.

(5) Sub-paragraph (1) does not apply where the person referred to in sub-paragraph (2)(a), (3)(a), or (4)(a) as meeting a section 237A condition is an individual.

(6) For the purposes of sub-paragraph (2) it does not matter whether the relevant body existed at the time referred to in sub-paragraph (2)(a).

Persons who control etc a relevant body treated as meeting a section 237A condition

21 (1) If at a time when a person controlled or had significant influence over a relevant body—

(a) the relevant body met a section 237A condition, and

(b) the relevant body, or another relevant body which the person controlled or had significant influence over, was a promoter,

the person is treated as meeting the section 237A condition at the section 237A(2) relevant time.

(2) It does not matter whether any relevant body referred to sub-paragraph (1) exists at the section 237A(2) relevant time.

Relevant bodies controlled etc by the same person treated as meeting a section 237A condition

22 (1) If—

(a) a person controlled or had significant influence over a relevant body at a time when it met a section 237A condition, and

(b) at that time that body, or another relevant body which the person controlled or had significant influence over, was a promoter,

any relevant body which the person controls or has significant influence over at the section 237A(2) relevant time is treated as meeting the section 237A condition at the section 237A(2) relevant time.

(2) If—

(a) two or more persons together controlled or had significant influence over a relevant body at a time when it met a section 237A condition, and

(b) at that time that body, or another relevant body which those persons together controlled or had significant influence over, was a promoter,

any relevant body which those persons together control or have significant influence over at the section 237A(2) relevant time is treated as meeting the section 237A condition at the section 237A(2) relevant time.

(3) It does not matter whether—

(a) a relevant body referred to in sub-paragraph (1)(a) or (b) or (2)(a) or (b) exists at the section 237A(2) relevant time, or

(b) a relevant body existing at the section 237A(2) relevant time existed at the time referred to in sub-paragraph (1)(a) or (2)(a).”

(4) In Part 4 of Schedule 34A to FA 2014, in paragraph 23 (interpretation)—

(a) in sub-paragraph (1), for the definition of “control” substitute—

  • ““control” and “significant influence” have the same meanings as in Part 4 of Schedule 34 (see paragraph 13A(5) to (11));

  • references to a person being a promoter are to the person carrying on business as a promoter;”;

(b) in sub-paragraph (2), for “20(1)(a), 21(1)(a) and 22(1)(a)” substitute “20 to 22”.

(5) The amendments made by subsections (1) and (2) have effect for the purposes of determining whether a person meets a threshold condition in a period of three years ending on or after 8 March 2017.

(6) The amendments made by subsections (3) and (4) have effect for the purposes of determining whether a person meets a section 237A condition in a period of three years ending on or after 8 March 2017.

128 Requirement to correct certain offshore tax non-compliance

Schedule 29 makes provision for and in connection with requiring persons to correct any offshore tax non-compliance subsisting on 6 April 2017.

129 Penalty for transactions connected with VAT fraud etc

(1) VATA 1994 is amended as follows.

(2) After section 69B (penalty for breach of record-keeping requirements imposed by directions) insert—

69C Transactions connected with VAT fraud

(1) A person (T) is liable to a penalty where—

(a) T has entered into a transaction involving the making of a supply by or to T (“the transaction”), and

(b) conditions A to C are satisfied.

(2) Condition A is that the transaction was connected with the fraudulent evasion of VAT by another person (whether occurring before or after T entered into the transaction).

(3) Condition B is that T knew or should have known that the transaction was connected with the fraudulent evasion of VAT by another person.

(4) Condition C is that HMRC have issued a decision (“the denial decision”) in relation to the supply which—

(a) prevents T from exercising or relying on a VAT right in relation to the supply,

(b) is based on the facts which satisfy conditions A and B in relation to the transaction, and

(c) applies a relevant principle of EU case law (whether or not in circumstances that are the same as the circumstances in which any relevant case was decided by the European Court of Justice).

(5) In this section “VAT right” includes the right to deduct input tax, the right to apply a zero rate to international supplies and any other right connected with VAT in relation to a supply.

(6) The relevant principles of EU case law for the purposes of this section are the principles established by the European Court of Justice in the following cases—

(a) joined Cases C-439/04 and C-440/04 Axel Kittel v. Belgian State; Belgium v. Recolta Recycling (denial of right to deduct input tax), and

(b)

Case C-273/11 (b)Mecsek-Gabona Kft v Nemzeti Adó- és Vámhivatal Dél-dunántúli Regionális Adó Főigazgatósága (denial of right to zero rate),

as developed or extended by that Court (whether before or after the coming into force of this section) in other cases relating to the denial or refusal of a VAT right in order to prevent abuses of the VAT system.

(7) The penalty payable under this section is 30% of the potential lost VAT.

(8) The potential lost VAT is—

(a) the additional VAT which becomes payable by T as a result of the denial decision,

(b) the VAT which is not repaid to T as a result of that decision, or

(c) in a case where as a result of that decision VAT is not repaid to T and additional VAT becomes payable by T, the aggregate of the VAT that is not repaid and the additional VAT.

(9) Where T is liable to a penalty under this section the Commissioners may assess the amount of the penalty and notify it to T accordingly.

(10) No assessment of a penalty under this section may be made more than two years after the denial decision is issued.

(11) The assessment of a penalty under this section may be made immediately after the denial decision is made (and notice of the assessment may be given to T in the same document as the notice of the decision).

(12) Where by reason of actions involved in making a claim to exercise or rely on a VAT right in relation to a supply T—

(a) is liable to a penalty for an inaccuracy under paragraph 1 of Schedule 24 to the Finance Act 2007 for which T has been assessed (and the assessment has not been successfully appealed against by T or withdrawn), or

(b) is convicted of an offence (whether under this Act or otherwise),

those actions do not give rise to liability to a penalty under this section.

69D Penalties under section 69C: officers’ liability

(1) Where—

(a) a company is liable to a penalty under section 69C, and

(b) the actions of the company which give rise to that liability were attributable to an officer of the company (“the officer”),

the officer is liable to pay such portion of the penalty (which may be equal to or less than 100%) as HMRC may specify in a notice given to the officer (a “decision notice”).

(2) Before giving the officer a decision notice HMRC must—

(a) inform the officer that they are considering doing so, and

(b) afford the officer the opportunity to make representations about whether a decision notice should be given or the portion that should be specified.

(3) A decision notice—

(a) may not be given before the amount of the penalty due from the company has been assessed (but it may be given immediately after that has happened), and

(b) may not be given more than two years after the denial decision relevant to that penalty was issued.

(4) Where the Commissioners have specified a portion of the penalty in a decision notice given to the officer—

(a) section 70 applies to the specified portion as to a penalty under section 69C,

(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) section 76(9) applies as if the decision notice were an assessment notified under section 76, and

(d) a further decision notice may be given in respect of a portion of any additional amount assessed in an additional assessment.

(5) HMRC may not recover more than 100% of the penalty through issuing decision notices in relation to two or more persons.

(6) A person is not liable to pay an amount by virtue of this section if the actions of the company concerned are attributable to the person by reference to conduct for which the person has been convicted of an offence.

In this subsection “conduct” includes omissions.

(7) In this section “company” means a body corporate or unincorporated association but does not include a partnership, a local authority or a local authority association.

(8) In its application 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, or

(c) a secretary.

(9) In in its application to a limited liability partnership “officer” means a member.

(10) In its application in any other case, “officer” means—

(a) a director,

(b) a manager,

(c) a secretary, or

(d) any other person managing or purporting to manage any of the company’s affairs.

69E Publication of details of persons liable to penalties under section 69C

(1) The Commissioners may publish information about a person if—

(a) in consequence of an investigation the person has been found liable to one or more penalties under section 69C (the amount of which has been assessed), and

(b) the potential lost VAT in relation to the penalty (or the aggregate of the potential lost VAT in relation to each of the penalties) exceeds £50,000.

(2) The information that may be published under subsection (1) is—

(a) the person’s name (including any trading name, previous name or pseudonym),

(b) the person’s address (or registered office),

(c) the nature of any business carried on by the person,

(d) the amount of the penalty or penalties in question,

(e) the periods or times to which the actions giving rise to the penalty or penalties relate,

(f) any other information that the Commissioners consider it appropriate to publish in order to make clear the person’s identity.

(3) In a case where—

(a) the requirements in subsection (1)(a) and (b) are met in relation to a penalty or penalties for which a company is liable,

(b) information about the company is published by virtue of this section,

(c) a person (“the officer”) has been given a decision notice under section 69D specifying a portion of the penalty (or, if there is more than one penalty, of any of the penalties) payable by the company as a portion which the officer is liable to pay, and

(d) the amount (or, if the decision notice specifies portions of more than one penalty, the aggregate amount) which the officer is liable to pay under the decision notice exceeds £25, 000,

the Commissioners may publish information about the officer.

(4) The information that may be published under subsection (3) is—

(a) the officer’s name,

(b) the officer’s address,

(c) the officer’s position (or former position) in the company,

(d) the amount of any penalty imposed on the company of which a portion is payable by the officer under the decision notice and the portion so payable,

(e) the periods or times to which the actions giving rise to any such penalty relate,

(f) any other information that the Commissioners consider it appropriate to publish in order to make clear the officer’s identity.

(5) Information published under this section may be published in any manner that the Commissioners consider appropriate.

(6) Before publishing any information under this section the Commissioners must—

(a) inform the person or officer to which it relates that they are considering doing so (in the case of an officer, on the assumption that they publish information about the company), and

(b) afford the person or officer the opportunity to make representations about whether it should be published.

(7) No information may be published under subsection (1) before the day on which the penalty becomes final or, where more than one penalty is involved, the latest day on which any of the penalties becomes final.

(8) No information may be published under subsection (1) for the first time after the end of the period of one year beginning with that day.

(9) No information may be published under subsection (3) before whichever is the later of—

(a) the day mentioned in subsection (7), and

(b) the day on which the decision notice given to the officer becomes final.

(10) No information may be published under subsection (3) for the first time after the end of the period of one year beginning with the later of the two days mentioned in subsection (9).

(11) No information may be published (or continue to be published) under subsection (1) or (3) after the end of the period of three years beginning with the day mentioned in subsection (7).

(12) For the purposes of this section a penalty or a decision notice becomes final when the time for any appeal or further appeal relating to it expires or, if later, any appeal or final appeal relating to it is finally determined.

(13) The Treasury may by regulations made by statutory instrument—

(a) amend subsection (1) to vary the amount for the time being specified in paragraph (b), or

(b) amend subsection (3) to vary the amount for the time being specified in paragraph (d).

(14) A statutory instrument containing regulations under subsection (13) is subject to annulment in pursuance of a resolution of the House of Commons.”

(3) In section 70 (mitigation of penalties)—

(a) in the heading, for “and 67” substitute “67, 69A and 69C”,

(b) in subsection (1) for “or 69A” substitute “69A or 69C”, and

(c) after subsection (4) insert—

(5) In the application of subsections (3) and (4) in relation to a penalty under section 69C, subsection (4) has effect with the omission of paragraphs (b) and (c).”

(4) In section 76 (assessment of amounts due by way of penalty etc), in subsection (1)(b) for “to 69B” (in both places) substitute “to 69C”.

(5) In section 83(1) (appeals), after paragraph (n) insert—

(na) any liability to a penalty under section 69C, any assessment of a penalty under that section or the amount of such an assessment;

(nb) the giving of a decision notice under section 69D or the portion of a penalty assessed under section 69C which is specified in such a notice;”.

(6) After paragraph 21 of Schedule 24 to FA 2007 (penalties for errors: double

jeopardy) insert—

21ZA (1) A person is not liable to a penalty under paragraph 1 in respect of an inaccuracy if—

(a) the inaccuracy involves a claim by the person to exercise or rely on a VAT right (in relation to a supply) that has been denied or refused by HMRC as mentioned in subsection (4) of section 69C of VATA 1994, and

(b) the person has been assessed to a penalty under that section (and the assessment has not been successfully appealed against or withdrawn).

(2) In sub-paragraph (1)(a) “VAT right” has the same meaning as in section 69C of VATA 1994.”

(7) Section 69C does not apply in relation to transactions entered into before this section comes into force.

Customs enforcement powers

130 Power to enter premises and inspect goods

(1) Section 24 of FA 1994 (power to enter premises and inspect goods) is amended as follows.

(2) The existing text becomes subsection (1).

(3) In that subsection—

(a) at the beginning insert “This section applies”;

(b) omit the words after paragraph (b).

(4) After that subsection insert—

(2) The officer may at any reasonable time enter and inspect the premises.

(3) The officer may inspect, examine and take account of any goods found on the premises.

(4) The officer may require a relevant person to provide any assistance that is reasonable for the purpose of exercising the power in subsection (3).

(5) For example, the officer may require a relevant person to move, open or unpack goods and containers.

(6) The officer may, for the purpose of exercising the power in subsection (3)

(a) move, open, or unpack goods and containers;

(b) search containers and anything in them;

(c) mark goods and containers.

(7) The Commissioners are not to bear any costs incurred by a relevant person in complying with a requirement under subsection (4).

(8) But the Commissioners are to bear the costs of anything done by the officer under subsection (6).

(9) In this section “relevant person” means—

(a) the person to whom this Chapter applies;

(b) the occupier of the premises;

(c) a person who has (or appears to have) possession or control of the goods;

(d) a person who is (or appears to be) acting on behalf of a person within any of paragraphs (a) to (c).

(10) Section 159(2) of the Customs and Excise Management Act 1979 (examinations of goods to be at a place appointed by the Commissioners) does not apply to an examination under subsection (3).”

131 Power to search vehicles or vessels

In section 163 of CEMA 1979 (power to search vehicles or vessels), after subsection (1) insert—

(1A) The officer, constable or member may use reasonable force if necessary for the purpose of exercising the power in subsection (1).”

Information

132 Data-gathering from money service businesses

(1) In Part 2 of Schedule 23 to FA 2011 (data-gathering powers: relevant data-holders), after paragraph 13C insert—

“Money service businesses

13D (1) A person is a relevant data-holder if the person—

(a) carries on any of the activities in sub-paragraph (2) by way of business,

(b) is a person to whom the Money Laundering Regulations 2007 (S.I. 2007/2157S.I. 2007/2157) apply, and

(c) is not an excluded credit institution.

(2) The activities referred to in sub-paragraph (1)(a) are—

(a) operating a currency exchange office;

(b) transmitting money (or any representation of monetary value) by any means;

(c) cashing cheques which are made payable to customers.

(3) An excluded credit institution is a credit institution which has permission to carry on the regulated activity of accepting deposits—

(a) under Part 4A of the Financial Services and Markets Act 2000 (permission to carry on regulated activities), or

(b) resulting from Part 2 of Schedule 3 to that Act (exercise of passport rights by EEA firms).

(4) Sub-paragraph (3) is to be read with section 22 of and Schedule 2 to the Financial Services and Markets Act 2000, and any order under that section (classes of regulated activities).

(5) In this paragraph “credit institution” has the meaning given by Article 4.1(1) of Regulation (EU) No 575/2013 of the European

Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms.”

(2) This section applies in relation to relevant data with a bearing on any period (whether before, on or after the day on which this Act is passed).

Part 6 Final

133 Northern Ireland welfare payments: updating statutory reference

In section 44(2) of FA 2016 (tax treatment of supplementary welfare payments: Northern Ireland) for “the Housing Benefit (Amendment) Regulations (Northern Ireland) 2016 (S.R. (N.I.) 2016 No. 258(N.I.) 2016 No. 258)” substitute “the Housing Benefit (Amendment No. 2) Regulations (Northern Ireland) 2016 (S.R. (N.I.) 2016 No. 3262016 No. 326)”.

134 Interpretation

In this Act the following abbreviations are references to the following Acts.

ALDA 1979 Alcoholic Liquor Duties Act 1979
CAA 2001 Capital Allowances Act 2001
CEMA 1979 Customs and Excise Management Act 1979
CTA 2009 Corporation Tax Act 2009
CTA 2010 Corporation Tax Act 2010
CT(NI)A 2015 Corporation Tax (Northern Ireland) Act 2015
FA, followed by a year Finance Act of that year
F(No.2)A, followed by a year Finance (No.2) Act of that year
F(No.3)A, followed by a year Finance (No.3) Act of that year
HODA 1979 Hydrocarbon Oil Duties Act 1979
ICTA Income and Corporation Taxes Act 1988
IHTA 1984 Inheritance Tax Act 1984
ITA 2007 Income Tax Act 2007
ITEPA 2003 Income Tax (Earnings and Pensions) Act 2003
ITTOIA 2005 Income Tax (Trading and Other Income) Act 2005
OTA 1975 Oil Taxation Act 1975
TCGA 1992 Taxation of Chargeable Gains Act 1992
TIOPA 2010 Taxation (International and Other Provisions) Act 2010
TMA 1970 Taxes Management Act 1970
TPDA 1979 Tobacco Products Duty Act 1979
VATA 1994 Value Added Tax Act 1994
VERA 1994 Vehicle Excise and Registration Act 1994

135 Short title

This Act may be cited as the Finance Act 2017.

SCHEDULES

Section 7

SCHEDULE 1 Workers’ services provided to public sector through intermediaries

Part 1 Preliminary amendments

1 ITEPA 2003 is amended as follows.

2 In section 48 (scope of Chapter 8 of Part 2: workers’ services provided through intermediaries)—

(a) in subsection (1), after “through an intermediary” insert “, but not where the services are provided to a public authority”, and

(b) after subsection (2) insert—

(3) In this Chapter “public authority” has the same meaning as in Chapter 10 of this Part (see section 61L).”

3 In section 49(1) (engagements to which Chapter applies), after paragraph (a) insert—

(aa) the client is not a public authority,”.

4 In section 52(2)(b) and (c) (conditions of liability under Chapter 8 where intermediary is a partnership), for “this Chapter” substitute “one or other of this Chapter and Chapter 10”.

5 In section 61(1) (interpretation of Chapter 8), before the definition of “engagement to which this Chapter applies” insert—

  • ““engagement to which Chapter 10 applies” has the meaning given by section 61M(5);”.

6 In section 61A (scope of Chapter 9 of Part 2: workers’ services provided by managed service companies), after subsection (2) insert—

(3) See also section 61D(4A)(disapplication of this Chapter if Chapter 10 applies).”

7 In section 61D (deemed earnings where worker’s services provided by managed service company), after subsection (4) insert—

(4A) This section does not apply where the provision of the relevant services gives rise (directly or indirectly) to an engagement to which Chapter 10 applies, and for this purpose it does not matter whether the client is also “the client” for the purposes of section 61M(1).”

8 In section 61J(1) (interpretation of Chapter 9), before the definition of

“managed service company” insert—

  • ““engagement to which Chapter 10 applies” has the meaning given by section 61M(5),”.

Part 2 New Chapter 10 of Part 2 of ITEPA 2003

9 In Part 2 of ITEPA 2003 (employment income: charge to tax), after Chapter 9 insert—

“Chapter 10

Workers’ services provided to public sector through intermediaries

61K Scope of this Chapter

(1) This Chapter has effect with respect to the provision of services to a public authority through an intermediary.

(2) Nothing in this Chapter—

(a) affects the operation of Chapter 7 of this Part (agency workers), or

(b) applies to payments or transfers to which section 966(3) or (4) of ITA 2007 applies (visiting performers: duty to deduct and account for sums representing income tax).

61L Meaning of “public authority”

(1) In this Chapter “public authority” means—

(a) a public authority as defined by the Freedom of Information Act 2000,

(b) a Scottish public authority as defined by the Freedom of Information (Scotland) Act 2002 (asp 13)2002 (asp 13),

(c) the Corporate Officer of the House of Commons,

(d) the Corporate Officer of the House of Lords,

(e) the National Assembly for Wales Commission, or

(f) the Northern Ireland Assembly Commission.

(2) An authority within paragraph (a) or (b) of subsection (1) is a public authority for the purposes of this Chapter in relation to all its activities even if provisions of the Act mentioned in that paragraph do not apply to all information held by the authority.

61M Engagements to which Chapter applies

(1) Sections 61N to 61R apply where—

(a) an individual (“the worker”) personally performs, or is under an obligation personally to perform, services for another person (“the client”),

(b) the client is a public authority,

(c) the services are provided not under a contract directly between the client and the worker but under arrangements involving a third party (“the intermediary”), and

(d) the circumstances are such that—

(i) if the services were provided under a contract directly between the client and the worker, the worker would be regarded for income tax purposes as an employee of the client or the holder of an office under the client, or

(ii) the worker is an office-holder who holds that office under the client and the services relate to the office.

(2) The reference in subsection (1)(c) to a “third party” includes a partnership or unincorporated association of which the worker is a member.

(3) The circumstances referred to in subsection (1)(d) include the terms on which the services are provided, having regard to the terms of the contracts forming part of the arrangements under which the services are provided.

(4) Holding office as statutory auditor of the client does not count as holding office under the client for the purposes of subsection (1)(d), and here “statutory auditor” means a statutory auditor within the meaning of Part 42 of the Companies Act 2006 (see section 1210 of that Act).

(5) In this Chapter “engagement to which this Chapter applies” means any such provision of services as is mentioned in subsection (1).

61N Worker treated as receiving earnings from employment

(1) If one of Conditions A to C is met, identify the chain of two or more persons where—

(a) the highest person in the chain is the client,

(b) the lowest person in the chain is the intermediary, and

(c) each person in the chain above the lowest makes a chain payment to the person immediately below them in the chain.

(See section 61U for cases where one of Conditions A to C is treated as being met.)

(2) In this section and sections 61O to 61S

  • “chain payment” means a payment, or money’s worth or any other benefit, that can reasonably be taken to be for the worker’s services to the client,

  • “make”—

    (a)

    in relation to a chain payment that is money’s worth, means transfer, and

    (b)

    in relation to a chain payment that is a benefit other than a payment or money’s worth, means provide, and

  • “the fee-payer” means the person in the chain immediately above the lowest.

(3) The fee-payer is treated as making to the worker, and the worker is treated as receiving, a payment which is to be treated as earnings from an employment (“the deemed direct payment”), but this is subject to subsections (5) to (7) and sections 61T and 61V.

(4) The deemed direct payment is treated as made at the same time as the chain payment made by the fee-payer.

(5) Subsections (6) and (7) apply, subject to sections 61T and 61V, if the fee-payer—

(a) is not the client, and

(b) is not a qualifying person.

(6) If there is no person in the chain below the highest and above the lowest who is a qualifying person, subsections (3) and (4) have effect as if for any reference to the fee-payer there were substituted a reference to the client.

(7) Otherwise, subsections (3) and (4) have effect as if for any reference to the fee-payer there were substituted a reference to the person in the chain who—

(a) is above the lowest,

(b) is a qualifying person, and

(c) is lower in the chain than any other person in the chain who—

(i) is above the lowest, and

(ii) is a qualifying person.

(8) In subsections (5) to (7) a “qualifying person” is a person who—

(a) is resident in the United Kingdom or has a place of business in the United Kingdom,

(b) is not a person who is controlled by—

(i) the worker, alone or with one or more associates of the worker, or

(ii) an associate of the worker, with or without other associates of the worker, and

(c) if a company, is not one in which—

(i) the worker, alone or with one or more associates of the worker, or

(ii) an associate of the worker, with or without other associates of the worker,

has a material interest (within the meaning given by section 51(4) and (5)).

(9) Condition A is that—

(a) the intermediary is a company, and

(b) the conditions in section 61O are met in relation to the intermediary.

(10) Condition B is that—

(a) the intermediary is a partnership,

(b) the worker is a member of the partnership,

(c) the provision of the services is by the worker as a member of the partnership, and

(d) the condition in section 61P is met in relation to the intermediary.

(11) Condition C is that the intermediary is an individual.

(12) Where a payment, money’s worth or any other benefit can reasonably be taken to be for both—

(a) the worker’s services to the client, and

(b) anything else,

then, for the purposes of this Chapter, so much of it as can, on a just and reasonable apportionment, be taken to be for the worker’s services is to be treated as (and the rest is to be treated as not being) a payment, or money’s worth or another benefit, that can reasonably be taken to be for the worker’s services.

61O Conditions where intermediary is a company

(1) The conditions mentioned in section 61N(9)(b) are that—

(a) the intermediary is not an associated company of the client that falls within subsection (2), and

(b) the worker has a material interest in the intermediary.

(2) An associated company of the client falls within this subsection if it is such a company by reason of the intermediary and the client being under the control—

(a) of the worker, or

(b) of the worker and other persons.

(3) The worker is treated as having a material interest in the intermediary if—

(a) the worker, alone or with one or more associates of the worker, or

(b) an associate of the worker, with or without other associates of the worker,

has a material interest in the intermediary.

(4) For this purpose “material interest” has the meaning given by section 51(4) and (5).

(5) In this section “associated company” has the meaning given by section 449 of CTA 2010.

61P Conditions where intermediary is a partnership

(1) The condition mentioned in section 61N(10)(d) is—

(a) that the worker, alone or with one or more relatives, is entitled to 60% or more of the profits of the partnership, or

(b) that most of the profits of the partnership derive from the provision of services under engagements to which one or other of this Chapter and Chapter 8 applies—

(i) to a single client, or

(ii) to a single client together with associates of that client, or

(c) that under the profit sharing arrangements the income of any of the partners is based on the amount of income generated by that partner by the provision of services under engagements to which one or other of this Chapter and Chapter 8 applies.

(2) In subsection (1)(a) “relative” means spouse or civil partner, parent or child or remoter relation in the direct line, or brother or sister.

(3) Section 61(4) and (5) apply for the purposes of this section as they apply for the purposes of Chapter 8.

61Q Calculation of deemed direct payment

(1) The amount of the deemed direct payment is the amount resulting from the following steps—

Step 1

Identify the amount or value of the chain payment made by the person who is treated as making the deemed direct payment, and deduct from that amount so much of it (if any) as is in respect of value added tax.

Step 2

Deduct, from the amount resulting from Step 1, so much of that amount as represents the direct cost to the intermediary of materials used, or to be used, in the performance of the services.

Step 3

Deduct, at the option of the person treated as making the deemed direct payment, from the amount resulting from Step 2, so much of that amount as represents expenses met by the intermediary that would have been deductible from the taxable earnings from the employment if—

(a) the worker had been employed by the client, and

(b) the expenses had been met by the worker out of those earnings.

Step 4

If the amount resulting from the preceding Steps is nil or negative, there is no deemed direct payment. Otherwise, that amount is the amount of the deemed direct payment.

(2) For the purposes of Step 1 of subsection (1), any part of the amount or value of the chain payment which is employment income of the worker by virtue of section 863G(4) of ITTOIA 2005 (salaried members of limited liability partnerships: anti-avoidance) is to be ignored.

(3) In subsection (1), the reference to the amount or value of the chain payment means the amount or value of that payment before the deduction (if any) permitted under section 61S.

(4) If the actual amount or value of the chain payment mentioned in Step 1 of subsection (1) is such that its recipient bears the cost of amounts due under PAYE regulations or contributions regulations in respect of the deemed direct payment, that Step applies as if the amount or value of that chain payment were what it would be if the burden of that cost were not being passed on through the setting of the level of the payment.

(5) In Step 3 of subsection (1), the reference to expenses met by the intermediary includes—

(a) expenses met by the worker and reimbursed by the intermediary, and

(b) where the intermediary is a partnership and the worker is a member of the partnership, expenses met by the worker for and on behalf of the partnership.

(6) In subsection (4) “contributions regulations” means regulations under the Contributions and Benefits Act providing for primary Class 1 contributions to be paid in a similar manner to income tax in relation to which PAYE regulations have effect (see, in particular, paragraph 6(1) of Schedule 1 to the Act); and here “primary Class 1 contribution” means a primary Class 1 contribution within the meaning of Part 1 of the Contributions and Benefits Act.

61R Application of Income Tax Acts in relation to deemed employment

(1) The Income Tax Acts (in particular, Part 11 and PAYE regulations) apply in relation to the deemed direct payment as follows.

(2) They apply as if—

(a) the worker were employed by the person treated as making the deemed direct payment, and

(b) the services were performed, or to be performed, by the worker in the course of performing the duties of that employment.

(3) The deemed direct payment is treated in particular—

(a) as taxable earnings from the employment for the purpose of securing that any deductions under Chapters 2 to 6 of Part 5 do not exceed the deemed direct payment, and

(b) as taxable earnings from the employment for the purposes of section 232.

(4) The worker is not chargeable to tax in respect of the deemed direct payment if, or to the extent that, by reason of any combination of the factors mentioned in subsection (5), the worker would not be chargeable to tax if—

(a) the client employed the worker,

(b) the worker performed the services in the course of that employment, and

(c) the deemed direct payment were a payment by the client of earnings from that employment.

(5) The factors are—

(a) the worker being resident or domiciled outside the United Kingdom or meeting the requirement of section 26A,

(b) the client being resident outside, or not resident in, the United Kingdom, and

(c) the services being provided outside the United Kingdom.

(6) Where the intermediary is a partnership or unincorporated association, the deemed direct payment is treated as received by the worker in the worker’s personal capacity and not as income of the partnership or association.

(7) Where—

(a) the client is the person treated as making the deemed direct payment,

(b) the worker is resident in the United Kingdom,

(c) the services are provided in the United Kingdom,

(d) the client is not resident in the United Kingdom, and

(e) the client does not have a place of business in the United Kingdom,

the client is treated as resident in the United Kingdom.

61S Deductions from chain payments

(1) This section applies if, as a result of section 61R, a person who is treated as making a deemed direct payment is required under PAYE Regulations to pay an amount to the Commissioners for Her Majesty’s Revenue and Customs (the Commissioners) in respect of the payment.

(But see subsection (4)).

(2) The person may deduct from the underlying chain payment an amount which is equal to the amount payable to the Commissioners, but where the amount or value of the underlying chain payment is treated by section 61Q(4) as increased by the cost of any amount due under PAYE Regulations, the amount that may be deducted is limited to the difference (if any) between the amount payable to the Commissioners and the amount of that increase.

(3) Where a person in the chain other than the intermediary receives a chain payment from which an amount has been deducted in reliance on subsection (2) or this subsection, that person may deduct the same amount from the chain payment made by them.

(4) This section does not apply in a case to which 61V(2) applies (services-provider treated as making deemed direct payment).

(5) In subsection (2) “the underlying chain payment” means the chain payment whose amount is used at Step 1 of section 61Q(1) as the starting point for calculating the amount of the deemed direct payment.

61T Information to be provided by clients and consequences of failure

(1) If the conditions in section 61M(1)(a) to (c) are met in any case, and a person as part of the arrangements mentioned in section 61M(1)(c) enters into a contract with the client, the client must inform that person (in the contract or otherwise) of which one of the following is applicable—

(a) the client has concluded that the condition in section 61M(1)(d) is met in the case;

(b) the client has concluded that the condition in section 61M(1)(d) is not met in the case.

(2) If the contract is entered into on or after 6 April 2017, the duty under subsection (1) must be complied with—

(a) on or before the time of entry into the contract, or

(b) if the services begin to be performed at a later time, before that later time.

(3) If the contract is entered into before 6 April 2017, the duty under subsection (1) must be complied with on or before the date of the first payment made under the contract on or after 6 April 2017.

(4) If the information which subsection (1) requires the client to give to a person has been given (whether in the contract, as required by

subsection (2) or (3) or otherwise), the client must, on a written request by the person, provide the person with a written response to any questions raised by the person about the client’s reasons for reaching the conclusion identified in the information.

(5) A response required by subsection (4) must be provided before the end of 31 days beginning with the day the request for it is received by the client.

(6) If—

(a) the client fails to comply with the duty under subsection (1) within the time allowed by subsection (2) or (3),

(b) the client fails to provide a response required by subsection (4) within the time allowed by subsection (5), or

(c) the client complies with the duty under subsection (1) but fails to take reasonable care in coming to its conclusion as to whether the condition in section 61M(1)(d) is met in the case,

section 61N(3) and (4) have effect in the case as if for any reference to the fee-payer there were substituted a reference to the client, but this is subject to section 61V.

61U Information to be provided by worker and consequences of failure

(1) In the case of an engagement to which this Chapter applies, the worker must inform the potential deemed employer of which one of the following is applicable—

(a) that one of conditions A to C in section 61N is met in the case;

(b) that none of conditions A to C in section 61N is met in the case.

(2) If the worker has not complied with subsection (1), then for the purposes of section 61N(1), one of conditions A to C in section 61N is to be treated as met.

(3) In this section, “the potential deemed employer” is the person who, if one of conditions A to C in section 61N were met, would be treated as making a deemed direct payment to the worker under section 61N(3).

61V Consequences of providing fraudulent information

(1) Subsection (2) applies if in any case—

(a) a person (“the deemed employer”) would, but for this section, be treated by section 61N(3) as making a payment to another person (“the services-provider”), and

(b) the fraudulent documentation condition is met.

(2) Section 61N(3) has effect in the case as if the reference to the fee-payer were a reference to the services-provider, but—

(a) section 61N(4) continues to have effect as if the reference to the fee-payer were a reference to the deemed employer, and

(b) Step 1 of section 61Q(1) continues to have effect as referring to the chain payment made by the deemed employer.

(3) Subsection (2) has effect even though that involves the services-provider being treated as both employer and employee in relation to the deemed employment under section 61N(3).

(4) “The fraudulent documentation condition” is that a relevant person provided any person with a fraudulent document intended to constitute evidence—

(a) that the case is not an engagement to which this Chapter applies, or

(b) that none of conditions A to C in section 61N is met in the case.

(5) A “relevant person” is—

(a) the services-provider;

(b) a person connected with the services-provider;

(c) if the intermediary in the case is a company, an office-holder in that company.

61W Prevention of double charge to tax and allowance of certain deductions

(1) Subsection (2) applies where—

(a) a person (“the payee”) receives a payment or benefit (“the end-of-line remuneration”) from another person (“the paying intermediary”),

(b) the end-of-line remuneration can reasonably be taken to represent remuneration for services of the payee to a public authority,

(c) a payment (“the deemed payment”) has been treated by section 61N(3) as made to the payee,

(d) the underlying chain payment can reasonably be taken to be for the same services of the payee to that public authority, and

(e) the recipient of the underlying chain payment has (whether by deduction from that payment or otherwise) borne the cost of any amounts due, under PAYE regulations and contributions regulations in respect of the deemed payment, from the person treated by section 61N(3) as making the deemed payment.

(2) For income tax purposes, the paying intermediary and the payee may treat the amount of the end-of-line remuneration as reduced (but not below nil) by any one or more of the following—

(a) the amount (see section 61Q) of the deemed payment;

(b) the amount of any capital allowances in respect of expenditure incurred by the paying intermediary that could have been deducted from employment income under section 262 of CAA 2001 if the payee had been employed by the public authority and had incurred the expenditure;

(c) the amount of any contributions made, in the same tax year as the end-of-line remuneration, for the benefit of the payee by the paying intermediary to a registered pension scheme that if made by an employer for the benefit of an employee would not be chargeable to income tax as income of the employee.

(3) Subsection (2)(c)does not apply to—

(a) excess contributions paid and later repaid,

(b) contributions set under subsection (2) against another payment by the paying intermediary, or

(c) contributions deductible at Step 5 of section 54(1) in calculating the amount of the payment (if any) treated by section 50 as made in the tax year concerned by the paying intermediary to the payee.

(4) For the purposes of subsection (3)(c), the contributions to which Step 5 of section 54(1) applies in the case of the particular calculation are “deductible” at that Step so far as their amount does not exceed the result after Step 4 in that calculation.

(5) In subsection (1)(d) “the underlying chain payment” means the chain payment whose amount is used at Step 1 of section 61Q(1) as the starting point for calculating the amount of the deemed payment.

(6) Subsection (2) applies whether the end-of-line remuneration—

(a) is earnings of the payee,

(b) is a distribution of the paying intermediary, or

(c) takes some other form.

61X Interpretation

In this Chapter—

  • “associate” has the meaning given by section 60;

  • “company” means a body corporate or unincorporated association, and does not include a partnership;

  • “engagement to which Chapter 8 applies” has the meaning given by section 49(5).”

Part 3 Consequential amendments

10 In section 7(5)(a) of ITEPA 2003 (amounts treated as earnings by Chapters 7 to 9 of Part 2 are “employment income” and “general earnings”), for “9” substitute “10”.

11 In section 49 of ITEPA 2003 (engagements to which Chapter 8 of Part 2 applies), after subsection (4) insert—

(4A) Holding office as statutory auditor of the client does not count as holding office under the client for the purposes of subsection (1)(c), and here “statutory auditor” means a statutory auditor within the meaning of Part 42 of the Companies Act 2006 (see section 1210 of that Act).”

12 In section 339A of ITEPA 2003 (travel for employment involving intermediaries), after subsection (6) insert—

(6A) Subsection (3) does not apply in relation to an engagement if—

(a) sections 61N to 61R in Chapter 10 of Part 2 apply in relation to the engagement,

(b) one of Conditions A to C in section 61N is met in relation to the employment intermediary, and

(c) the employment intermediary is not a managed service company.

(6B) This section does not apply in relation to an engagement if—

(a) sections 61N to 61R in Chapter 10 of Part 2 do not apply in relation to the engagement because the circumstances in section 61M(1)(d) are not met,

(b) assuming those circumstances were met, one of Conditions A to C in section 61N would be met in relation to the employment intermediary, and

(c) the employment intermediary is not a managed service company.

(6C) In determining for the purposes of subsection (6A) or (6B) whether one of Conditions A to C in section 61N is or would be met in relation to the employment intermediary, read references to the intermediary as references to the employment intermediary.”

13 In Chapter 11 of Part 2 of ITTOIA 2005 (trade profits: specific trades), after section 164A insert—

“Worker’s services provided to public sector through intermediary

164B Intermediaries providing worker’s services to public sector

(1) This section applies for the purposes of calculating the trading profits of a person where—

(a) the person is the intermediary in a chain identified under section 61N of ITEPA 2003 (see section 61N(1)(b)),

(b) a deemed direct payment is treated as made under subsection (3) of that section, and

(c) the person receives a payment which can reasonably be taken to be in respect of the same services as those in respect of which the underlying chain payment is made.

(2) The payment mentioned in subsection (1)(c) is not required to be brought into account in calculating the profits of the trade.

(3) In this section “underlying chain payment” means the payment whose amount is used at Step 1 of section 61Q(1) of ITEPA 2003 as the starting point for calculating the amount of the deemed direct payment mentioned in subsection (1)(b).”

14 In Chapter 9 of Part 3 of CTA 2009 (trade profits: specific trades), after section 141 insert—

“Worker’s services provided to public sector through intermediary

141A Intermediaries providing worker’s services to public sector

(1) This section applies for the purposes of calculating the trading profits of a person where—

(a) the person is the intermediary in a chain identified under section 61N of ITEPA 2003 (see section 61N(1)(b)),

(b) a deemed direct payment is treated as made under subsection (3) of that section, and

(c) the person receives a payment which can reasonably be taken to be in respect of the same services as those in respect of which the underlying chain payment is made.

(2) The payment mentioned in subsection (1)(c) is not required to be brought into account in calculating the profits of the trade.

(3) In this section “underlying chain payment” means the payment whose amount is used at Step 1 of section 61Q(1) of ITEPA 2003 as the starting point for calculating the amount of the deemed direct payment mentioned in subsection (1)(b).”

Part 4 Commencement

15 The amendments made in ITEPA 2003 by Parts 1 and 3 of this Schedule have effect for the tax year 2017-18 and subsequent tax years.

16 The amendment made by Part 2 of this Schedule has effect in relation to deemed direct payments treated as made on or after 6 April 2017, and does so even if relating to services provided before that date.

17 The payments to which the amendments made in ITTOIA 2005 and CTA 2009 by Part 3 of this Schedule apply include payments made before the passing of this Act.

Section 8

SCHEDULE 2 Optional remuneration arrangements

Optional remuneration arrangements

1 In Part 3 of ITEPA 2003 (employment income: earnings and benefits etc treated as earnings), in Chapter 2 (taxable benefits: the benefits code), after section 69 insert—

69A Optional remuneration arrangements

(1) Subsections (2) to (7) have effect for the purposes of the benefits code.

(2) A benefit provided for an employee is provided under “optional remuneration arrangements” so far as it is provided under arrangements of type A or B (regardless of whether those arrangements are made before or after the beginning of the person’s employment).

(3) “Type A arrangements” are arrangements under which, in return for the benefit, the employee gives up the right (or a future right) to receive an amount of earnings within Chapter 1 of Part 3.

(4) “Type B arrangements” are arrangements (other than type A arrangements) under which the employee agrees to be provided with the benefit rather than an amount of earnings within Chapter 1 of Part 3.

(5) A benefit provided for an employee is to be regarded as provided under optional remuneration arrangements (whether of type A or type B) so far as it is just and reasonable to attribute the provision of the benefit to the arrangements in question.

(6) Where a benefit is provided for an employee under any arrangements, the mere fact that under the arrangements the employee makes good, or is required to make good, any part of the cost of provision is not to be taken to show that the benefit is (to any extent) provided otherwise than under optional remuneration arrangements.

(7) Where a benefit is provided for an employee partly under optional remuneration arrangements and partly otherwise than under such arrangements, the benefits code is to apply with any modifications (including provision for just and reasonable apportionments) that may be required for ensuring that the benefit is treated—

(a) in accordance with the relevant provision in the column 2 of the table so far as it is provided under optional remuneration arrangements, and

(b) in accordance with the relevant provision in column 1 of the table so far as it is provided otherwise than under such arrangements.

Column 1 Column 2
Section Section
81(1) 81(1A)(b)
87(1) 87A(1)(a)
94(1) 94A(1)(a)
102(1A) 102(1B)(b)
120(1) 120A(1)(a)
149(1) 149A(2)(a)
154(1) 154A(1)(a)
160(1) 160A(2)(a)
175(1) 175(1A)(b)
203(1) 203A(1)(a)

69B Optional remuneration arrangements: supplementary

(1) For the purposes of the benefits code “the amount foregone”—

(a) in relation to a benefit provided for an employee under type A arrangements means the amount of earnings mentioned in section 69A(3);

(b) in relation to a benefit provided for an employee under type B arrangements means the amount of earnings mentioned in section 69A(4);

(c) in relation to a benefit provided for an employee partly under type A arrangements and partly under type B arrangements, means the sum of the amounts foregone under the arrangements of each type.

(2) Subsection (3) applies where, in order to determine the amount foregone with respect to a particular benefit mentioned in section 69A(3) or (4), it is necessary to apportion an amount of earnings to the benefit.

(3) The apportionment is to be made on a just and reasonable basis.

(4) In this section and section 69A references to a benefit provided for an employee include a benefit provided for a member of an employee’s family or household.

(5) In this section and section 69A—

  • “benefit” includes any benefit or facility, regardless of its form and the manner of providing it;

  • “earnings” means earnings within Chapter 1 of Part 3 (and includes a reference to amounts which would have been such earnings if the employee had received them).”

Benefits in kind: amount treated as earnings

2 Part 3 of ITEPA 2003 (employment income: earnings and benefits in kind etc treated as earnings) is amended as follows.

3 (1) Section 81 (benefit of cash voucher treated as earnings) is amended as follows.

(2) After subsection (1) insert—

(1A) Where a cash voucher to which this Chapter applies is provided pursuant to optional remuneration arrangements—

(a) subsection (1) does not apply, and

(b) the relevant amount is to be treated as earnings from the employment for the tax year in which the voucher is received by the employee.

(1B) In this section “the relevant amount” means—

(a) the cash equivalent, or

(b) if greater, the amount foregone with respect to the benefit of the voucher (see section 69B).”

(3) At the end insert—

(3) For the purposes of subsection (1B), assume that the cash equivalent is zero if the condition in subsection (4) is met.

(4) The condition is that the benefit of the voucher would be exempt from income tax but for section 228A (exclusion of certain exemptions).”

4 After section 87 insert—

87A Benefit of non-cash voucher treated as earnings: optional remuneration arrangements

(1) Where a non-cash voucher to which this Chapter applies is provided pursuant to optional remuneration arrangements—

(a) the relevant amount is to be treated as earnings from the employment for the tax year in which the voucher is received by the employee, and

(b) section 87(1) does not apply.

(2) To find the relevant amount, first determine which (if any) is the greater of—

(a) the cost of provision (see section 87(3)), and

(b) the amount foregone with respect to the benefit of the voucher (see section 69B).

(3) If the cost of provision is greater than or equal to the amount foregone, the “relevant amount” is the cash equivalent of the benefit of the non-cash voucher (see section 87(2)).

(4) Otherwise, the “relevant amount” is the difference between—

(a) the amount foregone, and

(b) any part of the cost of provision that is made good by the employee, to the person incurring it, on or before 6 July following the relevant tax year.

(5) If the voucher is a non-cash voucher other than a cheque voucher, the relevant tax year is—

(a) the tax year in which the cost of provision is incurred, or

(b) if later, the tax year in which the employee receives the voucher.

(6) If the voucher is a cheque voucher, the relevant tax year is the tax year in which the voucher is handed over in exchange for money, goods or services.

(7) For the purposes of subsections (2) and (3), assume that the cost of provision is zero if the condition in subsection (8) is met.

(8) The condition is that the non-cash voucher would be exempt from income tax but for section 228A (exclusion of certain exemptions).”

5 In section 88 (year in which earnings treated as received)—

(a) in subsection (1), after “87” insert “or 87A”;

(b) in subsection (2), after “87” insert “or 87A.”

6 After section 94 insert—

94A Benefit of credit-token treated as earnings: optional remuneration arrangements

(1) If the conditions in subsections (2) and (3) are met in relation to any occasions on which a credit-token to which this Chapter applies is used by the employee in a tax year to obtain money, goods or services—

(a) the relevant amount is to be treated as earnings from the employment for that year, and

(b) section 94(1) does not apply in relation to the use of the credit-token on those occasions.

(2) The condition in this subsection is that the credit-token is used pursuant to optional remuneration arrangements.

(3) The condition in this subsection is that AF is greater than the relevant cost of provision for the tax year.

In this section “AF” means so much of the amount foregone (see section 69B) as is attributable on a just and reasonable basis to the use of the credit-token by the employee in the tax year pursuant to the optional remuneration arrangements to obtain money, goods or services.

(4) The “relevant amount” is the difference between—

(a) AF, and

(b) any part of the relevant cost of provision for the tax year that is made good by the employee, to the person incurring it, on or before 6 July following the tax year which contains the occasion of use of the credit-token to which the making good relates.

(5) But the relevant amount is taken to be zero if the amount given by paragraph (b) of subsection (4) exceeds AF.

(6) For the purposes of this section the “relevant cost of provision for the tax year” is determined as follows—

  • Step 1

  • Find the cost of provision with respect to each occasion of use of the credit-token by the employee in the tax year pursuant to the optional remuneration arrangements to obtain money, goods or services.

  • Step 2

  • The total of those amounts is the relevant cost of provision for the tax year.

(7) But the relevant cost of provision for the tax year is to be taken to be zero if the condition in subsection (8) is met.

(8) The condition is that use of the credit token by the employee in the tax year pursuant to the optional remuneration arrangements to obtain money, goods or services would be exempt from income tax but for section 228A (exclusion of certain exemptions).

(9) In this section “cost of provision” has the same meaning as in section 94.

7 In section 97 (living accommodation to which Chapter 5 applies), in subsection (1A)(b), for “the cash equivalent of” substitute “an amount in respect of”.

8 In section 98 (accommodation provided by local authority), in the words before paragraph (a), for “This Chapter” substitute “In section 102 (benefit of accommodation treated as earnings) subsection (1A) (accommodation

provided otherwise than pursuant to optional remuneration arrangements)”.

9 (1) Section 99 (accommodation provided for performance of duties) is amended as follows.

(2) In subsection (1), for “This Chapter” substitute “In section 102 (benefit of accommodation treated as earnings) subsection (1A) (accommodation provided otherwise than pursuant to optional remuneration arrangements)”.

(3) In subsection (2), for “This Chapter” substitute “In section 102 (benefit of accommodation treated as earnings) subsection (1A)”.

10 In section 100 (accommodation provided as result of security threat), in the words before paragraph (a), for “This Chapter” substitute “In section 102 (benefit of accommodation treated as earnings) subsection (1A) (accommodation provided otherwise than pursuant to optional remuneration arrangements)”.

11 In section 100A (homes outside UK owned by company etc), in subsection (1), for “This Chapter” substitute “In section 102 (benefit of accommodation treated as earnings) subsection (1A) (accommodation provided otherwise than pursuant to optional remuneration arrangements)”.

12 In section 101 (Chevening House), in the words before paragraph (a), for “This Chapter” substitute “In section 102 (benefit of accommodation treated as earnings) subsection (1A) (accommodation provided otherwise than pursuant to optional remuneration arrangements)”.

13 (1) Section 102 (benefit of living accommodation treated as earnings) is amended as follows.

(2) In subsection (1), for the words before paragraph (a) substitute “This section applies if living accommodation to which this Chapter applies is provided in any period (“the taxable period”)—”.

(3) The words in subsection (1) from “the cash equivalent” to the end become subsection (1A).

(4) After subsection (1A) insert—

(1B) If the benefit of the accommodation is provided pursuant to optional remuneration arrangements—

(a) subsection (1A) does not apply, and

(b) the relevant amount is to be treated as earnings from the employment for that tax year.”

(5) Omit subsection (2).

(6) At the end insert—

(4) Section 103A indicates how the relevant amount is determined.”

14 In section 103 (method of calculating cash equivalent), in subsection (3), for “102(2)” substitute “102(1)”.

15 After section 103 insert—

103A Accommodation provided pursuant to optional remuneration arrangements: relevant amount

(1) To find the relevant amount, first determine which (if any) is the greater of—

(a) the modified cash equivalent of the benefit of the accommodation (see sections 105(2A) and 106(2A)), and

(b) the amount foregone with respect to the benefit of the accommodation (see section 69B).

(2) If the amount mentioned in subsection (1)(a) is greater than or equal to the amount mentioned in subsection (1)(b), the “relevant amount” is the cash equivalent of the benefit of the accommodation (see section 103).

(3) Otherwise, the “relevant amount” is the difference between—

(a) the amount foregone with respect to the benefit of the accommodation, and

(b) the deductible amount (see subsections (7) and (8)).

(4) If the amount foregone with respect to the benefit of the accommodation does not exceed the deductible amount, the relevant amount is taken to be zero.

(5) For the purposes of subsections (1) and (2), assume that the modified cash equivalent of the benefit of the accommodation is zero if the condition in subsection (6) is met.

(6) The condition is that the benefit of the accommodation would be exempt from income tax but for section 228A (exclusion of certain exemptions).

(7) If the cost of providing the living accommodation does not exceed £75,000, the “deductible amount” means any sum made good, on or before 6 July following the tax year which contains the taxable period, by the employee to the person at whose cost the accommodation is provided that is properly attributable to its provision.

(8) If the cost of providing the living accommodation exceeds £75,000, the “deductible amount” means the total of amounts A and B where—

  • A is equal to so much of MG as does not exceed RV;

  • B is the amount of any excess rent paid by the employee in respect of the taxable period;

  • MG is the total of any sums made good, on or before 6 July following the tax year which contains the taxable period, by the employee to the person at whose cost the accommodation is provided that are properly attributable to its provision (in the taxable period);

  • RV is the rental value of the accommodation for the taxable period as set out in section 105(3) or (4A)(b) (as applicable).

(9) In subsection (8) “excess rent” means so much of the rent in respect of the taxable period paid—

(a) by the employee,

(b) in respect of the accommodation,

(c) to the person providing it, and

(d) on or before 6 July following the tax year which contains the taxable period,

as exceeds the rental value of the accommodation.

(10) Where it is necessary for the purposes of subsection (1)(b) and (3)(a) to apportion an amount of earnings to the benefit of the accommodation in the taxable period, the apportionment is to be made on a just and reasonable basis.

In this subsection “earnings” is to be interpreted in accordance with section 69B(5).”

16 (1) Section 105 (cash equivalent: cost of accommodation not over £75,000) is amended as follows.

(2) In subsection (1), after “equivalent” insert “or modified cash equivalent”.

(3) After subsection (2) insert—

(2A) The modified cash equivalent is equal to the rental value of the accommodation for the taxable period.”

17 (1) Section 106 (cash equivalent: cost of accommodation over £75,000) is amended as follows.

(2) In subsection (1), after “equivalent” insert “or modified cash equivalent”.

(3) After subsection (2) insert—

(2A) To calculate the modified cash equivalent—

(a) apply steps 1 to 3 in subsection (2), as if the words “cash equivalent” in step 1 were “modified cash equivalent (for the purposes of section 105)”;

(b) calculate the modified cash equivalent by adding together the amounts calculated under steps 1 and 3 as applied by paragraph (a).”

18 (1) Section 109 (priority of Chapter 5 over Chapter 1 of Part 3 of the Act) is amended as follows.

(2) In subsection (1)(a), for “the cash equivalent of the benefit of living accommodation” substitute “an amount”.

(3) In subsection (2), for “of the cash equivalent” substitute “mentioned in subsection (1)(a)”.

(4) In subsection (4), in the words before paragraph (a), for “cash equivalent of the benefit of the living accommodation” substitute “amount mentioned in subsection (1)(a)”.

19 In section 114 (cars, vans and related benefits), in subsection (2)—

(a) in paragraph (a), for “the cash equivalent of” substitute “an amount in respect of”;

(b) in paragraph (b), for “the cash equivalent of” substitute “an amount in respect of”;

(c) in paragraph (c), for “the cash equivalent of” substitute “an amount in respect of”;

(d) in paragraph (d), for “the cash equivalent of” substitute “an amount in respect of”.

20 (1) Section 119 (where alternative to benefit of car or van offered) is amended as follows.

(2) For subsection (1) substitute—

(1) This section applies where in a tax year—

(a) a car is made available as mentioned in section 114(1),

(b) the car’s CO2 emissions figure (see sections 133 to 138) does not exceed 75 grams per kilometre, and

(c) an alternative to the benefit of the car is offered.”

(3) In the heading, before “car” insert “low emission”.

21 In section 120 (benefit of car treated as earnings), after subsection (3) insert—

(4) This section is subject to section 120A.”

22 After section 120 insert—

120A Benefit of car treated as earnings: optional remuneration arrangements

(1) Where this Chapter applies to a car in relation to a particular tax year and the conditions in subsection (3) are met—

(a) the relevant amount (see section 121A) is to be treated as earnings from the employment for that tax year, and

(b) section 120(1) does not apply.

(2) In such a case (including a case where the relevant amount is nil) the employee is referred to in this Chapter as being chargeable to tax in respect of the car in the tax year.

(3) The conditions are that—

(a) the car is made available to the employee or member of the employee’s household pursuant to optional remuneration arrangements,

(b) the amount foregone (see section 69B) with respect to the benefit of the car for the tax year is greater than the modified cash equivalent of the benefit of the car for the tax year (see section 121B), and

(c) the car’s CO2 emissions figure (see sections 133 to 138) exceeds 75 grams per kilometre.”

23 After section 121 insert—

121A Optional remuneration arrangements: method of calculating relevant amount

(1) To find the relevant amount for the purposes of section 120A, take the following steps—

Step 1

Take the amount foregone with respect to the benefit of the car for the tax year.

Step 2

Make any deduction under section 132A in respect of capital contributions made by the employee to the cost of the car or accessories.

The resulting amount is the provisional sum.

Step 3

Make any deduction from the provisional sum under section 144 in respect of payments by the employee for the private use of the car.

The result is the “relevant amount” for the purposes of section 120A.

(2) Where it is necessary, for the purpose of determining the “amount foregone” under step 1 of subsection (1), to apportion an amount of earnings to the benefit of the car for the tax year, the apportionment is to be made on a just and reasonable basis.

In this subsection “earnings” is to be interpreted in accordance with section 69B(5).

121B Meaning of “modified cash equivalent”

(1) The “modified cash equivalent” of the benefit of a car for a tax year is calculated in accordance with the following steps (which must be read with subsections (2) to (4))—

Step 1

Find the price of the car in accordance with sections 122 to 124A.

Step 2

Add the price of any accessories which fall to be taken into account in accordance with sections 125 to 131.

The resulting amount is the interim sum.

Step 3

Find the appropriate percentage for the car for the year in accordance with sections 133 to 142.

Step 4

Multiply the interim sum by the appropriate percentage for the car for the year.

Step 5

Make any deduction under section 143 for any periods when the car was unavailable.

The resulting amount is the modified cash equivalent of the benefit of the car for the year.

(2) Where the car is shared the modified cash equivalent is calculated under this section in accordance with section 148.

(3) The modified cash equivalent of the benefit of a car for a tax year is to be taken to be zero if the condition in subsection (4) is met.

(4) The condition is that the benefit of car for the tax year would be exempt from income tax but for section 228A (exclusion of certain exemptions).

(5) The method of calculation set out in subsection (1) is modified in the special cases dealt with in—

(a) section 146 (cars that run on road fuel gas), and

(b) section 147A (classic cars: optional remuneration arrangements).”

24 In section 126 (amounts taken into account in respect of accessories), in subsection (1), in the words before paragraph (a), after “121(1)” insert “and step 2 of section 121B(1)”.

25 (1) Section 131 (replacement accessories) is amended as follows.

(2) In subsection (1), in the words before paragraph (a), after “applies” insert “for the purposes of sections 121(1) and 121B(1)”.

(3) After subsection (1) insert—

(1A) In the application of this section for the purposes of section 121B(1)—

(a) references to the cash equivalent of the benefit of the car for the tax year are to be read as references to the modified cash equivalent of the benefit of the car for the tax year, and

(b) references to step 2 of section 121(1) are to be read as references to step 2 of section 121B(1).”

26 In section 132 (capital contributions by employee), in subsection (1), in the words before paragraph (a), after “applies” insert “for the purposes of section 121(1)”.

27 After section 132 insert—

132A Capital contributions by employee: optional remuneration arrangements

(1) This section applies for the purposes of section 121A(1) if the employee contributes a capital sum to expenditure on the provision of—

(a) the car, or

(b) any qualifying accessory which is taken into account in calculating under section 121B the modified cash equivalent of the benefit of the car.

(2) A deduction is to be made from the amount carried forward from step 1 of section 121A(1)—

(a) for the tax year in which the contribution is made, and

(b) for all subsequent tax years in which the employee is chargeable to tax in respect of the car by virtue of section 120A.

(3) The amount of the deduction allowed in any tax year is found by multiplying the capped amount by the appropriate percentage.

(4) In subsection (3) the reference to “the appropriate percentage” is to the appropriate percentage for the car for the tax year (determined in accordance with sections 133 to 142).

(5) In this section “the capped amount” means the lesser of—

(a) the total of the capital sums contributed by the employee in that year and any earlier years to expenditure on the provision of—

(i) the car, or

(ii) any qualifying accessory which is taken into account in calculating under section 121B the modified cash equivalent of the benefit of the car for the tax year in question, and

(b) £5,000.

(6) This section is modified by section 147A (optional remuneration arrangements: classic cars).”

28 (1) Section 143 (deduction for periods when car unavailable) is amended as follows.

(2) Before subsection (1) insert—

(A1) This section has effect for the purposes of—

(a) section 121(1) (method of calculating the cash equivalent of the benefit of a car), and

(b) section 121B(1) (optional remuneration arrangements: meaning of “modified cash equivalent”).”

(3) In subsection (1), after “121(1)” insert “or (as the case may be) step 4 of section 121B(1)”.

(4) In subsection (3), in the definition of “A”, at the end insert “of section 121(1) or (as the case may be) step 4 of section 121B(1)”.

29 (1) Section 144 (deduction for payments for private use) is amended as follows.

(2) In subsection (1), for “calculated under step 7 of section 121(1)” substitute “(see subsection (1A))”.

(3) After subsection (1) insert

(1A) In this section “the provisional sum” means the provisional sum calculated under—

(a) step 7 of section 121(1) (method of calculating the cash equivalent of the benefit of a car), or

(b) step 2 of section 121A(1) (optional remuneration arrangements: method of calculating relevant amount”).”

(4) In subsection (2), for the words from “so that” to the end substitute so that—

(a) in a case within subsection (1A)(a), the cash equivalent of the benefit of the car for the year is nil, or

(b) in a case within subsection (1A)(b), the relevant amount for the purposes of section 120A is nil.”

(5) In subsection (3)—

(a) for “In any other case” substitute “Where subsection (2) does not apply,” and

(b) for the words from “give” to the end substitute give—

(a) in a case within subsection (1A)(a), the cash equivalent of the benefit of the car for the year, or

(b) in a case within subsection (1A)(b), the relevant amount for the purposes of section 120A.”

30 (1) Section 145 (modification of provisions where car temporarily replaced) is amended as follows.

(2) In subsection (1), for paragraph (c) substitute—

(c) the employee is chargeable to tax—

(i) in respect of both the normal car and the replacement car by virtue of section 120, or

(ii) in respect of both the normal car and the replacement car by virtue of section 120A, and”.

(3) After subsection (5) insert—

(6) Where this section applies by virtue of subsection (1)(c)(ii), the condition in subsection (5)(b) is to be taken to be met if it would be met on the assumption that the cash equivalent of the benefit of the cars in question is to be calculated under section 121(1).”

31 (1) Section 146 (cars that run on road fuel gas) is amended as follows.

(2) In subsection (1), in the words before paragraph (a), after “applies” insert “for the purposes of sections 121 and 121B”.

(3) In subsection (2), after “121(1)” insert “or (as the case may be) step 1 of section 121B(1)”.

32 After section 147 insert—

147A Classic cars: optional remuneration arrangements

(1) This section applies in calculating the relevant amount in respect of a car for a tax year for the purposes of section 120A (benefit of car treated as earnings: optional remuneration arrangements) if—

(a) the age of the car at the end of the year is 15 years or more,

(b) the market value of the car for the year is £15,000 or more, and

(c) that market value exceeds the specified amount (see subsection (4)).

(2) In calculating the modified cash equivalent of the benefit of the car, for the interim sum calculated under step 2 of section 121B(1) substitute the market value of the car for the tax year in question.

(3) Section 132A (capital contributions by employee: optional remuneration arrangements) has effect as if—

(a) in subsection (1)(b) the reference to calculating under section 121B the modified cash equivalent of the benefit of the car were to determining the market value of the car, and

(b) in subsection (5)(a)(ii) the reference to calculating under section 121B the modified cash equivalent of the benefit of the car for the tax year in question were to determining the market value of the car for the tax year in question.

(4) The “specified amount” is found as follows.

Step 1

Find what would be the interim sum under step 2 of section 121B(1) (if subsection (2) of this section did not have effect).

Step 2

(Assuming for this purpose that the reference in section 132(2) to step 2 of section 121(1) includes a reference to step 1 of this subsection) make any deduction under section 132 for capital contributions made by the employee to the cost of the car or accessories.

The resulting amount is the specified amount.

(5) The market value of a car for a tax year is to be determined in accordance with section 147(3) and (4).”

33 (1) Section 148 (reduction of cash equivalent where car is shared) is amended as follows.

(2) In subsection (1)—

(a) in the words before paragraph (a), after “applies” insert “for the purposes of sections 121 and 121B”;

(b) in the words after paragraph (c), for “section 120” substitute “sections 120 and 120A”.

(3) For subsection (2) substitute—

(2) The amount to be treated as earnings in respect of the benefit of the car is to be calculated separately for each of those employees for that tax year (whether under section 120 or section 120A).”

(4) In subsection (2A), at the beginning insert “In the case of an employee chargeable to tax in respect of the car by virtue of section 120”.

(5) After subsection (2A) insert—

(2B) In the case of an employee chargeable to tax in respect of the car by virtue of section 120A, the modified cash equivalent (as determined under section 121B(1)) is to be reduced on a just and reasonable basis.”

34 In section 149 (benefit of car fuel treated as earnings), in subsection (1)(b), at the end insert “or 120A”.

35 After section 149 insert—

149A Benefit of car fuel treated as earnings: optional remuneration arrangements

(1) This section applies if—

(a) fuel is provided for a car in a tax year by reason of an employee’s employment,

(b) the employee is chargeable to tax in respect of the car in the tax year by virtue of section 120 or 120A, and

(c) the fuel is provided pursuant to optional remuneration arrangements.

(2) If the condition in subsection (3) is met—

(a) the amount foregone with respect to the benefit of the fuel (see section 69B) is to be treated as earnings from the employment for the tax year, and

(b) section 149(1) does not apply.

(3) The condition mentioned in subsection (2) is that the amount foregone with respect to the benefit of the fuel is greater than the cash equivalent of the benefit of the fuel.

(4) For the purposes of subsection (3), assume that the cash equivalent of the benefit of the fuel is zero if the condition in subsection (5) is met.

(5) The condition mentioned in subsection (4) is that the benefit of the fuel would be exempt from income tax but for section 228A (exclusion of certain exemptions).

(6) References in this section to fuel do not include any facility or means for supplying electrical energy or any energy for a car which cannot in any circumstances emit CO2 by being driven.

(7) Where it is necessary for the purposes of subsections (2)(a) and (3) to apportion an amount of earnings to the benefit of the fuel in the tax year, the apportionment is to be made on a just and reasonable basis.

In this subsection “earnings” is to be interpreted in accordance with section 69B(5).”

36 In section 154 (benefit of van treated as earnings), after subsection (3) insert—

(4) This section is subject to section 154A.”

37 After section 154 insert—

154A Benefit of van treated as earnings: optional remuneration arrangements

(1) Where this Chapter applies to a van in relation to a particular tax year and the conditions in subsection (2) are met—

(a) the relevant amount is to be treated as earnings from the employment for that tax year, and

(b) section 154(1) does not apply.

In such a case (including a case where the relevant amount is nil) the employee is referred to in this Chapter as being chargeable to tax in respect of the van in the tax year.

(2) The conditions are that—

(a) the van is made available to the employee or member of the employee’s household pursuant to optional remuneration arrangements, and

(b) the amount foregone with respect to the benefit of the van (see section 69B) is greater than the modified cash equivalent of the benefit of the van.

(3) To find the relevant amount for the purposes of this section take the following steps—

Step 1

Take the amount foregone with respect to the benefit of the van for the tax year.

Step 2

Make any deduction under section 158A in respect of payments by the employee for the private use of the van.

The result is the “relevant amount”.

(4) In subsection (2) the reference to the “modified cash equivalent” is to the amount which would be the cash equivalent of the benefit of the van (after any reductions under section 156 or 157) if this Chapter had effect the following modifications—

(a) omit paragraph (c) of section 155(8);

(b) omit section 158;

(c) in section 159(2)(b), for “155, 157 and 158” substitute “155 and 157”.

(5) For the purposes of subsection (2) assume that the modified cash equivalent of the benefit of the van is zero if the condition in subsection (6) is met.

(6) The condition is that the benefit of the van would be exempt from income tax but for section 228A (exclusion of certain exemptions).

(7) Where it is necessary for the purposes of subsection (2)(b) and step 1 of subsection (3) to apportion an amount of earnings to the benefit of the van in the tax year, the apportionment is to be made on a just and reasonable basis.

In this subsection “earnings” is to be interpreted in accordance with section 69B(5).”

38 After section 158 insert—

158A Van provided pursuant to optional remuneration arrangements: private use

(1) In calculating the relevant amount under section 154A in relation to a van and a tax year, a deduction is to be made under step 2 of

subsection (3) of that section if, as a condition of the van being available for the employee’s private use, the employee—

(a) is required in that year to pay (whether by way of deduction from earnings or otherwise) an amount of money for that use, and

(b) pays that amount on or before 6 July following that year.

(2) The amount of the deduction is—

(a) the amount paid as mentioned in subsection (1)(b) by the employee in respect of the year, or

(b) if less, the amount that would reduce the relevant amount to nil.

(3) In this section the reference to the van being available for the employee’s private use includes a reference to the van being available for the private use of a member of the employee’s family or household.”

39 (1) Section 160 (benefit of van fuel treated as earnings) is amended as follows.

(2) In subsection (1)(b), after “154” insert “or 154A”.

(3) At the end insert—

(5) This section is subject to section 160A.”

40 After section 160 insert—

160A Benefit of van fuel treated as earnings: optional remuneration arrangements

(1) This section applies if—

(a) fuel is provided for a van in a tax year by reason of an employee’s employment,

(b) the benefit of the fuel is provided pursuant to optional remuneration arrangements, and

(c) the employee is chargeable to tax in respect of the van in the tax year by virtue of section 154 or 154A.

(2) If the condition in subsection (3) is met—

(a) the amount foregone with respect to the benefit of the fuel (see section 69B) is to be treated as earnings from the employment for that year, and

(b) section 160(1) does not apply.

(3) The condition mentioned in subsection (2) is that the amount foregone with respect to the benefit of the fuel is greater than the cash equivalent of the benefit of the fuel.

(4) For the purposes of subsection (3), assume that the cash equivalent of the benefit of the fuel is zero if the condition mentioned in subsection (5) is met.

(5) The condition mentioned in subsection (4) is that the benefit of the fuel would be exempt from income tax but for section 228A (exclusion of certain exemptions).

(6) Where it is necessary for the purposes of subsections (2)(a) and (3) to apportion an amount of earnings to the benefit of the fuel in the tax year, the apportionment is to be made on a just and reasonable basis.

In this subsection “earnings” is to be interpreted in accordance with section 69B(5).”

41 In section 170 (orders etc relating to Chapter 6 of Part 3), in subsection (1)—

(a) after paragraph (c) insert—

(ca) section 132A(5)(b) (corresponding provision with respect to optional remuneration arrangements),”;

(b) omit “or” at the end of paragraph (d);

(c) after paragraph (e) insert—

(f) section 147A(1)(b) (classic car: minimum value: optional remuneration arrangements).”

42 In section 173 (loans to which Chapter 7 applies), in subsection (1A)(b), for the words from “provide” to the end substitute “make provision about amounts which, in the case of a taxable cheap loan, are to be treated as earnings in certain circumstances”.

43 In section 175 (benefit of taxable cheap loan treated as earnings), for subsection (1) substitute—

(A1) This section applies where an employment-related loan is a taxable cheap loan in relation to a tax year.

(1) The cash equivalent of the benefit of the loan is to be treated as earnings from the employee’s employment for the tax year.

(1A) If the benefit of the loan is provided pursuant to optional remuneration arrangements and the condition in subsection (1B) is met—

(a) subsection (1) does not apply, and

(b) the relevant amount (see section 175A) is to be treated as earnings from the employee’s employment for the tax year.

(1B) The condition is that the amount foregone with respect to the benefit of the loan for the tax year (see section 69B) is greater than the modified cash equivalent of the benefit of the loan for the tax year (see section 175A).”

44 (1) After section 175 insert—

175A Optional remuneration arrangements: “relevant amount” and “modified cash equivalent”

(1) In section 175(1A) “the relevant amount”, in relation to a loan the benefit of which is provided pursuant to optional remuneration arrangements, means the difference between—

(a) the amount foregone (see section 69B) with respect to the benefit of the loan, and

(b) the amount of interest (if any) actually paid on the loan for the tax year.

(2) For the purposes of section 175 the “modified cash equivalent” of the benefit of an employment-related loan for a tax year is the amount

which would be the cash equivalent if section 175(3) had effect with the following modifications—

(a) in the opening words, omit “the difference between”;

(b) omit paragraph (b) and the “and” before it.”

(3) But the modified cash equivalent of the benefit of the loan is to be taken to be zero if the condition in subsection (4) is met.

(4) The condition is that the benefit of the loan for the tax year would be exempt from income tax but for section 228A (exclusion of certain exemptions).

(5) For the purpose of calculating the modified cash equivalent of the benefit of an employment-related loan, assume that section 186(2) (replacement loans: aggregation) and section 187(3) (aggregation of loans by close company to a director) do not have effect.

(6) Where it is necessary for the purposes of section 175(1B) and subsection (1) of this section to apportion an amount of earnings to the benefit of the loan for the tax year, the apportionment is to be made on a just and reasonable basis.

In this subsection “earnings” is to be interpreted in accordance with section 69B(5).”

45 In section 180 (threshold for benefit of loan to be treated as earnings), in subsection (1), for the words before paragraph (a) substitute “Section 175 does not have effect in relation to an employee and a tax year—”.

46 In section 184 (interest treated as paid), in subsection (1), for the words from “the cash equivalent” to the end substitute

(a) the cash equivalent of the benefit of a taxable cheap loan is treated as earnings from an employee’s employment for a tax year under section 175(1), or

(b) the relevant amount in respect of the benefit of a taxable cheap loan is treated as earnings from an employee’s employment for a tax year under section 175(1A).”

47 In section 202 (excluded benefits), after subsection (1) insert—

(1A) But a benefit provided to an employee or member of an employee’s family or household is to be taken not to be an excluded benefit by virtue of subsection (1)(c) so far as it is provided under optional remuneration arrangements.”

48 After section 203 insert—

203A Employment-related benefit provided under optional remuneration arrangements

(1) Where an employment-related benefit is provided pursuant to optional remuneration arrangements—

(a) the relevant amount is to be treated as earnings from the employment for the tax year in which the benefit is provided, and

(b) section 203(1) does not apply.

(2) To find the relevant amount, first determine which (if any) is the greater of—

(a) the cost of the employment-related benefit, and

(b) the amount foregone with respect to the benefit (see section 69B).

(3) If the cost of the employment-related benefit is greater than or equal to the amount foregone, the “relevant amount” is the cash equivalent (see section 203(2)).

(4) Otherwise, the “relevant amount” is—

(a) the amount foregone with respect to the employment-related benefit, less

(b) any part of the cost of the benefit made good by the employee, to the persons providing the benefit, on or before 6 July following the tax year in which it is provided.

(5) For the purposes of subsections (2) and (3), assume that the cost of the employment-related benefit is zero if the condition in subsection (6) is met.

(6) The condition is that the employment-related benefit would be exempt from income tax but for section 228A (exclusion of certain exemptions).

(7) Where it is necessary for the purposes of subsections (2)(b) and (4) to apportion an amount of earnings to the benefit provided in the tax year, the apportionment is to be made on a just and reasonable basis.

In this subsection “earnings” is to be interpreted in accordance with section 69B(5).”

Exemptions

49 In Part 4 of ITEPA 2003 (employment income: exemptions), after section 228 insert—

228A General exclusion from exemptions: optional remuneration arrangements

(1) A relevant exemption does not apply (whether to prevent liability to income tax from arising or to reduce liability to income tax) in respect of a benefit or facility so far as the benefit or facility is provided pursuant to optional remuneration arrangements.

(2) For the purposes of subsection (1) it does not matter whether the relevant exemption would (apart from that subsection) have effect as an employment income exemption or an earnings-only exemption.

(3) For the purposes of this section an exemption conferred by this Part is a “relevant exemption” unless it is—

(a) a special case exemption (see subsection (4)), or

(b) an excluded exemption (see subsection (5)).

(4) “Special case exemption” means an exemption conferred by any of the following provisions—

(a) section 289A (exemption for paid or reimbursed expenses);

(b) section 289D (exemption for other benefits);

(c) section 308B (independent advice in respect of conversions and transfers of pension scheme benefits);

(d) section 312A (limited exemption for qualifying bonus payments);

(e) section 317 (subsidised meals);

(f) section 320C (recommended medical treatment);

(g) section 323A (trivial benefits provided by employers).

(5) “Excluded exemption” means an exemption conferred by any of the following provisions—

(a) section 239 (payments and benefits connected with taxable cars and vans and exempt heavy goods vehicles);

(b) section 244 (cycles and cyclist’s safety equipment);

(c) section 266(2)(c) (non-cash voucher regarding entitlement to exemption within section 244);

(d) section 270A (limited exemption for qualifying childcare vouchers);

(e) section 308 (exemption of contribution to registered pension scheme);

(f) section 308A (exemption of contributions to overseas pension scheme);

(g) section 308C (provision of pensions advice);

(h) section 309 (limited exemptions for statutory redundancy payments);

(i) section 310 (counselling and other outplacement services);

(j) section 311 (retraining courses);

(k) section 318 (childcare: exemption for employer-provided care);

(l) section 318A (childcare: limited exemption for other care).

(6) In this section “benefit or facility” includes anything which constitutes employment income or in respect of which employment income is treated as arising to the employee (regardless of its form and the manner of providing it).

(7) In this section “optional remuneration arrangements” has the same meaning as in the benefits code (see section 69A).

(8) The Treasury may by order amend subsections (4) and (5) by adding or removing an exemption conferred by Part 4.”

Other amendments

50 (1) Section 19 of ITEPA 2003 (receipt of non-money earnings) is amended as follows.

(2) In subsection (2), after “94” insert “or 94A”.

(3) In subsection (3), after “87” insert “or 87A”.

51 In section 95 of ITEPA 2003 (disregard for money, goods or services obtained), in subsection (1), in the words before paragraph (a), after “credit-token” insert “or the relevant amount in respect of a cash voucher, a non-cash voucher or a credit-token”.

52 (1) In section 236 of ITEPA 2003 (interpretation of Chapter 2 of Part 4: exemptions for mileage allowance relief etc), in subsection (2)(b)—

(a) in the words before sub-paragraph (i), for “the cash equivalent of” substitute “an amount in respect of”;

(b) in sub-paragraph (i), after “120” insert “or 120A”;

(c) in sub-paragraph (ii), after “154” insert “or 154A”;

(d) in sub-paragraph (iii), after “203” insert “or 203A”.

(2) In section 236 of ITEPA 2003 (interpretation of Chapter 2 of Part 4), in subsection (2)(c), for “the cash equivalent of” substitute “an amount in respect of”.

53 (1) Section 239 of ITEPA 2003 (payments and benefits connected with taxable cars and vans etc) is amended as follows.

(2) In subsection (3)—

(a) after “149” insert “or 149A”;

(b) after “160” insert “or 160A”.

(3) In subsection (6), for “the cash equivalent of” substitute “an amount (whether the cash equivalent or the relevant amount) in respect of”.

54 In section 362 of ITEPA 2003 (deductions where non-cash voucher provided), in subsection (1)(a), for “87(1) (cash equivalent” substitute “87(1) or 87A(1) (amount in respect”.

55 In section 318A of ITEPA 2003 (childcare: limited exemption for other care), in subsection (1)(b), for “cash equivalent of the benefit” substitute “amount treated as earnings in respect of the benefit by virtue of section 203(1) or 203A(1) (as the case may be)”.

56 In section 363 of ITEPA 2003 (deductions where credit-token provided), in subsection (1)(a), for “94(1) (cash equivalent” substitute “94(1) or 94A(1) (amount in respect”.

57 In section 693 of ITEPA 2003 (cash vouchers), in subsection (1), for “section 81(2)” substitute “subsection (2) of, or (as the case may be) referred to in subsection (1A)(b) of, section 81”.

58 In section 694 of ITEPA 2003 (non-cash vouchers), in subsection (1), after “87(2)” insert “or 87A(4)”.

59 In section 695 of ITEPA 2003 (benefit of credit-token treated as earnings), after subsection (1) insert—

(1A) If the credit-token is provided pursuant to optional remuneration arrangements, the reference in subsection (1) to the amount ascertained under section 94(2) is to be read as a reference to what that amount would be were the credit-token provided otherwise than pursuant to optional remuneration arrangements.

60 In Part 2 of Schedule 1 to ITEPA 2003 (index of defined expressions), at the appropriate places insert—

“amount foregone (in relation to a benefit) (in the benefits code) section 69B”
“optional remuneration arrangements (in the benefits code) section 69A”

61 In Part 2 of Schedule 1 to ITEPA 2003 (index of defined expressions), in the entry relating to “the taxable period”, for “102(2)” substitute “102(1)”.

Commencement and transitional provision

62 (1) The amendments made by paragraphs 1, 52(1)(a) and (2) and 60 of this Schedule have effect for the tax year 2017-18 and subsequent tax years.

(2) The amendments made by paragraphs 2 to 51, 52(1)(b) to (d), 53 to 59 and 61 of this Schedule have effect for the tax year 2017-18 and subsequent tax years.

(3) In relation to a benefit provided pursuant to pre-6 April 2017 arrangements, the amendment made by paragraph 49 has effect for the tax year 2018-19 and subsequent tax years.

(4) In relation to a benefit provided pursuant to pre-6 April 2017 arrangements, the amendments made by paragraphs 7 to 41, 52(1)(b) and (c), 53 and 61 (and paragraph 2, so far as relating to those paragraphs) have effect for the tax year 2021-22 and subsequent tax years.

(5) In relation to a benefit provided pursuant to pre-6 April 2017 arrangements, the amendments made by paragraphs 3 to 6, 42 to 48, 50, 51, 52(1)(d) and 54 to 59 (and paragraph 2, so far as relating to those paragraphs) have effect for the tax year 2018-19 and subsequent tax years (but see sub-paragraph (10)).

(6) If any terms of a pre-6 April 2017 arrangement which relate to the provision of a particular benefit are varied on or after 6 April 2017, that benefit is treated, with effect from the beginning of the day on which the variation takes effect, as not being provided pursuant to pre-6 April 2017 arrangements for the purposes of this paragraph.

(7) If pre-6 April 2017 arrangements are renewed on or after 6 April 2017, this paragraph has effect as if those arrangements were entered into at the beginning of the day on which the renewal takes effect (and are distinct from the arrangements existing immediately before that day).

(8) In sub-paragraph (6) the reference to variation does not include any variation which is required in connection with accidental damage to a benefit provided under the arrangements, or otherwise for reasons beyond the control of the parties to the arrangements.

(9) In sub-paragraph (6) the reference to variation does not include any variation which occurs in connection with a person’s entitlement to statutory sick pay, statutory maternity pay, statutory adoption pay, statutory paternity pay or statutory shared parental pay.

(10) In relation to relevant school fee arrangements which were entered into before 6 April 2017—

(a) sub-paragraph (5) is to be read as if it did not include a reference to paragraph 48;

(b) the amendment made by paragraph 48 has effect for the tax year 2021-22 and subsequent tax years.

(11) Relevant school fee arrangements to which an employee is a party (“the continuing arrangements”) are to be regarded for the purposes of this paragraph as the same arrangements as any relevant school fee arrangements to which the employee was previously a party (“the previous arrangements”) if the continuing arrangements and the previous arrangements relate—

(a) to employment with the same employer,

(b) to the same school, and

(c) to school fees in respect of the same child.

(12) Sub-paragraphs (6) and (7) do not have effect in relation to relevant school fee arrangements.

(13) If a non-cash voucher is provided under pre-6 April 2017 arrangements and is used to obtain anything (whether money, goods or services) that is provided on or after 6 April 2018 (“delayed benefits”), so much of the benefit of the voucher as it is reasonable to regard as being applied to obtain the delayed benefits is to be treated for the purposes of this paragraph as not having been provided pursuant to pre-6 April 2017 arrangements.

(14) For the purposes of this paragraph arrangements are “relevant school fee arrangements” if the benefit mentioned in section 69A(1) of ITEPA 2003 consists in the payment or reimbursement (in whole or in part) of, or a waiver or reduction of, school fees.

(15) In this paragraph—

  • “arrangements” means optional remuneration arrangements (as defined in section 69A of ITEPA 2003);

  • “benefit” includes any benefit or facility, regardless of the manner of providing it;

  • “non-cash voucher” has the same meaning as in Chapter 4 of Part 3 of ITEPA 2003;

  • “pre-6 April 2017 arrangements” means arrangements which are entered into before 6 April 2017.

Section 17

SCHEDULE 3 Overseas pensions

Part 1 Registered pension schemes established outside the UK

1 (1) In Chapter 5A of Part 4 of FA 2004 (registered pension schemes established outside the UK), after section 242B (inserted by Schedule 4 to this Act)

insert—

242C Application of this Part to non-UK registered schemes

(1) This Part (so far as would not otherwise be the case) is to be read—

(a) as applying in relation to UK-relieved funds of a non-UK registered scheme as it applies in relation to sums or assets held for the purposes of, or representing accrued rights under, a registered pension scheme established in the United Kingdom,

(b) as applying in relation to a non-UK registered scheme, so far as the scheme relates to the scheme’s UK-relieved funds, as it applies in relation to a registered pension scheme established in the United Kingdom,

(c) as applying in relation to members of a non-UK registered scheme, so far as their rights under the scheme are represented by UK-relieved funds of the scheme, as it applies in relation to members of a registered pension scheme established in the United Kingdom, and

(d) as applying to relevant contributions to a non-UK registered scheme as it applies in relation to contributions to a registered pension scheme established in the United Kingdom.

(2) Subsection (1) has effect subject to, and in accordance with, the following provisions of this Chapter.

(3) The Commissioners for Her Majesty’s Revenue and Customs may by regulations make—

(a) provision elucidating the application of, or supplementing, subsection (1) or other provisions of this Chapter, or

(b) where relief from tax is involved, other provision for or in connection with the application of this Part where the interpretative presumption against extra-territorial application means that it would otherwise not apply.

(4) Regulations under subsection (3) may (in particular)—

(a) amend provisions of or made under—

(i) this Part, or

(ii) any other enactment related to taxation in connection with pensions, and

(b) make consequential amendments of provisions of, or made under, any enactment.

(5) See section 242B for the meaning of “UK-relieved funds” and “relevant contribution”.

242D Non-UK registered schemes: annual allowance charge

(1) This section is about the application of the provisions of this Part relating to the annual allowance charge.

(2) Pension input amounts in respect of arrangements relating to an individual under a non-UK registered scheme are to be taken into account in applying the provisions for a tax year in relation to the individual only if, in accordance with regulations made by the

Commissioners for Her Majesty’s Revenue and Customs, relieved inputs are to be taken to have been made in respect of the individual under the scheme in the year.

242E Investment-regulated non-UK registered schemes

For the purposes of the application of the taxable property provisions in relation to a non-UK registered scheme, property is taxable property in relation to the scheme if it would be taxable property in relation to the scheme were the scheme a registered pension scheme established in the United Kingdom.”

(2) The amendment made by this paragraph has effect for the tax year 2017-18 and subsequent tax years.

Part 2 Income tax on pension income

UK residents to be taxed on 100%, not 90%, of foreign pension income

2 (1) Omit section 575(2) of ITEPA 2003 (foreign pensions received by UK residents: taxable amount is 90% of actual amount).

(2) Omit section 613(3) of ITEPA 2003 (annuities from non-UK sources: taxable amount is 90% of actual amount).

(3) Omit section 635(3) of ITEPA 2003 (foreign voluntary annual payments: taxable amount is 90% of actual amount).

(4) In consequence—

(a) in section 575 of ITEPA 2003—

(i) in subsection (1) omit “, (2)”;

(ii) in subsection (1A), for “subsections (2) and” substitute “subsection”;

(iii) in subsection (3), for “That pension income” substitute “The full amount of the pension income arising in the tax year, or (as the case may be) the UK part of the tax year,”;

(iv) in subsection (3), for “that Act” substitute “ITTOIA 2005”;

(b) in section 613 of ITEPA 2003—

(i) in subsection (2), for “subsections (3) and” substitute “subsection”;

(ii) in subsection (4), for “that Act” substitute “ITTOIA 2005”;

(c) in section 635 of ITEPA 2003—

(i) in subsection (2), for “subsections (3) and” substitute “subsection”;

(ii) in subsection (4), for “That pension income” substitute “The full amount of the pension income arising in the tax year”;

(iii) in subsection (4), for “that Act” substitute “ITTOIA 2005”;

(d) in Schedule 45 to FA 2013 omit paragraph 72(4).

(5) In sections 613(5) and 635(5) (application of section 839 of ITTOIA 2005 in certain cases), for “condition B” substitute “conditions B1 and B2 (and the reference to them in subsection (1))”.

(6) The amendments made by this paragraph have effect for the tax year 2017-18 and subsequent tax years, subject to sub-paragraph (7).

(7) The amendments in section 575 of ITEPA 2003, so far as they relate to relevant withdrawals, have effect in relation to relevant withdrawals paid in or after the year 2017-18; and here “relevant withdrawal” has the meaning given by section 576A of ITEPA 2003.

Superannuation funds to which section 615(3) of ICTA applies

3 (1) Section 615 of ICTA (trust funds for pensions in respect of employment outside UK) is amended as follows.

(2) In subsection (6)—

(a) in paragraph (b), omit the final “and”;

(b) in paragraph (c), at the end insert “and”;

(c) after paragraph (c) insert—

(d) meets the benefit accrual condition (see subsection (6A)).”

(3) After subsection (6) insert—

(6A) The benefit accrual condition is—

(a) in the case of a superannuation fund which is a money purchase arrangement, that no contributions are made to the fund on or after 6 April 2017;

(b) in relation to a superannuation fund which is a defined benefits arrangement, that on or after 6 April 2017 there is no increase in the value of any person’s rights under the arrangement.

(6B) For the purposes of subsection (6A)(b)

(a) whether there is an increase in the value of a person’s rights is to be determined by reference to whether there is an increase in the benefits amount as defined by paragraph 14(7) of Schedule 18 to the Finance Act 2011, but

(b) ignore increases in the value of a person’s rights if in no tax year do they exceed the relevant percentage.

(6C) In subsection (6B)(b), “relevant percentage”, in relation to a tax year, means—

(a) where, on 20 March 2017, the rules of the fund include provision for the value of the rights of a person to increase during the tax year at an annual rate specified in those rules, that rate, or

(b) in any other case, the percentage by which the consumer prices index for September in the previous tax year is higher than it was for the September in the tax year before that (or, if greater, 0%).

(6D) The Commissioners for Her Majesty’s Revenue and Customs may by regulations make provision—

(a) so as to change, or modify the effect of, the benefit accrual condition;

(b) as to the matters to be taken into account in determining whether the benefit accrual condition is met;

(c) for a superannuation fund to be treated to any extent as meeting or not meeting the benefit accrual condition;

(d) for the treatment for tax purposes of a superannuation fund to the extent that it does not meet, or is treated as not meeting, the benefit accrual condition.

(6E) Provision under subsection (6D) may be made by amending this section.”

(4) In subsection (7), before the definition of “pension” insert—

  • “a superannuation fund is a “defined benefits arrangement” if all the benefits that may be provided by the fund are defined benefits within the meaning of Part 4 of the Finance Act 2004;

  • a superannuation fund is a “money purchase arrangement” if all the benefits provided by the fund are money purchase benefits within the meaning of that Part of that Act;”.

(5) The amendments made by this paragraph are to be treated as having come into force on 6 April 2017.

(6) But the amendments made by this paragraph do not apply in relation to annuities so far as relating to—

(a) contributions made before 6 April 2017, in the case of a money purchase arrangement, or

(b) rights accrued before 6 April 2017, in the case of a defined benefits arrangement.

(7) The reference in sub-paragraph (6)(b) to rights accrued before 6 April 2017 includes any increase in the value of those rights in the tax year 2017-18 or any subsequent tax year to the extent that the increase does not exceed the relevant percentage in that tax year.

(8) Section 615(6B)(a) and (6C) of ICTA (meaning of increase in value of rights and relevant percentage), as inserted by this paragraph, apply for the purposes of sub-paragraph (7).

Part 3 Lump sums for UK residents from foreign pension schemes

Introductory

4 ITEPA 2003 is amended as follows.

Employer-financed retirement benefit schemes: ending of foreign-service relief

5 (1) Section 395B (exemption or reduction for foreign service) is amended as follows.

(2) In subsection (1) (conditions for entitlement to exemption or reduction), after paragraph (c) insert—

(ca) the recipient is not resident in the United Kingdom in the tax year in which the lump sum is received,”.

(3) In subsection (8) (meaning of “foreign service”), for “413(2)” substitute “395C”.

(4) The amendments made by this paragraph have effect for the tax year 2017-18 and subsequent tax years.

6 After section 395B insert—

395C Meaning of “foreign service” in section 395B

(1) In section 395B “foreign service” means service to which subsection (2), (3), (6) or (8) applies.

(2) This subsection applies to service in or after the tax year 2013–14—

(a) to the extent that it consists of duties performed outside the United Kingdom in respect of which earnings would not be relevant earnings, or

(b) if a deduction equal to the whole amount of the earnings from the employment was or would have been allowable under Chapter 6 of Part 5 (deductions from seafarers’ earnings).

(3) This subsection applies to service in or after the tax year 2003–04 but before the tax year 2013–14 such that—

(a) any earnings from the employment would not be relevant earnings, or

(b) a deduction equal to the whole amount of the earnings from the employment was or would have been allowable under Chapter 6 of Part 5 (deductions from seafarers’ earnings).

(4) In subsection (2) “relevant earnings” means earnings for a tax year that are earnings to which section 15 applies and to which that section would apply even if the employee made a claim under section 809B of ITA 2007 (claim for remittance basis) for that year.

(5) In subsection (3) “relevant earnings” means—

(a) for service in or after the tax year 2008–09, earnings—

(i) which are for a tax year in which the employee is ordinarily UK resident,

(ii) to which section 15 applies, and

(iii) to which that section would apply, even if the employee made a claim under section 809B of ITA 2007 (claim for remittance basis) for that year, and

(b) for service before the tax year 2008–09, general earnings to which section 15 or 21 as originally enacted applies.

(6) This subsection applies to service before the tax year 2003–04 and after the tax year 1973–74 such that—

(a) the emoluments from the employment were not chargeable under Case I of Schedule E, or would not have been so chargeable had there been any, or

(b) a deduction equal to the whole amount of the emoluments from the employment was or would have been allowable under a foreign earnings deduction provision.

(7) In subsection (6) “foreign earnings deduction provision” means—

(a) paragraph 1 of Schedule 2 to FA 1974,

(b) paragraph 1 of Schedule 7 to FA 1977, or

(c) section 192A or 193(1) of ICTA.

(8) This subsection applies to service before the tax year 1974-75 such that tax was not chargeable in respect of the emoluments of the employment—

(a) in the tax year 1956–57 or later, under Case I of Schedule E, or

(b) in earlier tax years, under Schedule E,

or it would not have been so chargeable had there been any such emoluments.”

7 In section 554Z4 (treatment of relevant step: residence issues), after subsection (6) insert—

(7) Subsection (4) does not apply if—

(a) the relevant step is the payment of a lump sum,

(b) the payment of the lump sum is the provision of a relevant benefit under an employer-financed retirement benefits scheme, and

(c) the person by whom the lump sum is received is resident in the United Kingdom in the tax year in which the lump sum is received.

(8) In subsection (7)—

  • “employer-financed retirement benefits scheme” has the same meaning as in Chapter 2 of Part 6 (see section 393A), and

  • “relevant benefit” has the same meaning as in that Chapter (see section 393B).”

Lump sums under other foreign schemes

8 In section 573 (foreign pensions), after subsection (3) insert—

(4) This section also applies to a pension paid by or on behalf of a person who is outside the United Kingdom to a person who is not resident in the United Kingdom if—

(a) the pension is a relevant lump sum paid under a pension scheme to that person in respect of a member of the scheme, and

(b) the member is, or immediately before the member’s death was, resident in the United Kingdom.”

9 In section 574(1) (foreign pensions: meaning of “pension”), after paragraph (a) insert—

(aa) a relevant lump sum (see section 574A),”.

10 (1) After section 574 insert—

574A “Pension”: relevant lump sums

(1) A lump sum paid under a pension scheme to a member of the scheme, or to a person in respect of a member of the scheme, is “a relevant lump sum” for the purposes of this Chapter if—

(a) the scheme is none of the following—

(i) a registered pension scheme,

(ii) a relevant non-UK scheme, and

(iii) an employer-financed retirement benefits scheme established in the United Kingdom, and

(b) the payment of the lump sum is not a relevant step by reason of which Chapter 2 of Part 7A applies.

(2) A lump sum paid under a relevant non-UK scheme to a member of the scheme, or to a person in respect of a member of the scheme, is “a relevant lump sum” for the purposes of this Chapter if the effect of paragraphs 1 to 7 of Schedule 34 to FA 2004 is that the member payment provisions (see paragraph 1(4) of that Schedule) do not apply in relation to the payment of the lump sum.

(3) If section 573 applies to a relevant lump sum then, for the purposes of section 575, the full amount of the pension income arising by reason of the payment of the lump sum is the amount of the lump sum, reduced as follows—

Step 1

Deduct so much of the lump sum as is payable by reason of commutation of rights to receive pension income on which no liability to tax arises as a result of any provision of Chapter 17 of this Part.

Step 2

Deduct so much of the lump sum left after Step 1 as is paid in respect of rights, which accrued before 6 April 2017, specifically to receive benefits by way of lump sum payments.

Step 3

If the lump sum is paid under an overseas pension scheme, deduct so much of the lump sum left after Step 2 as would, if the scheme were a registered pension scheme, not be liable to income tax under this Part.

For the purposes of this Step—

  • “(a)

    treat amounts not included in taxable pension income because of section 636B(3) as being not liable to tax;

    (ii)

    assume that all or part of the member’s lifetime allowance is available.

(4) The amount given by subsection (3) is treated for the purposes of section 575 as arising when the lump sum is paid.

(5) The Commissioners may by regulations make provision (including provision amending this section) as to the assumptions to be made for the purposes of Step 3.

(6) In this section—

  • “employer-financed retirement benefits scheme” has the same meaning as in Chapter 2 of Part 6 (see section 393A),

  • “member”, in relation to a pension scheme, has the meaning given by section 151 of FA 2004,

  • “overseas pension scheme” has the same meaning as in Part 4 of FA 2004 (see section 150(7) of that Act),

  • “payment” includes a transfer of assets and any other transfer of money’s worth,

  • “pension scheme” has the meaning given by section 150(1) of FA 2004, and

  • “relevant non-UK scheme” is to be read in accordance with paragraph 1(5) of Schedule 34 to FA 2004.”

(2) The amendment made by this paragraph has effect in relation to lump sums paid on or after 6 April 2017.

11 (1) In section 576A of ITEPA 2003 (temporary non-residents), as it applies where the year of departure is the tax year 2013-14 or a later tax year, after subsection (4) insert—

(4ZA) Payment of a relevant lump sum is also a “relevant withdrawal”.”

(2) The amendment made by this paragraph applies in relation to relevant withdrawals on or after 6 April 2017.

12 (1) In section 576A of ITEPA 2003, as it applies where the year of departure is the tax year 2012-13 or an earlier tax year, after subsection (4A) insert—

(4AA) Payment of a relevant lump sum is also a “relevant withdrawal”.”

(2) The amendment made by this paragraph applies in relation to relevant withdrawals on or after 6 April 2017.

Section 18

SCHEDULE 4 Pensions: offshore transfers

Part 1 Charges where payments made in respect of overseas pensions

Amendments of Schedule 34 to FA 2004

1 Schedule 34 to FA 2004 (non-UK pension schemes: application of certain charges) is amended as follows.

2 (1) Paragraph 1 (application of member payment charges to relevant non-UK schemes) is amended as follows.

(2) After sub-paragraph (6) insert—

(6A) There are three types of relevant transfer—

(a) an original relevant transfer,

(b) a subsequent relevant transfer, and

(c) any other (including, in particular, all relevant transfers before 9 March 2017).

(6B) “An original relevant transfer” is—

(a) a relevant transfer within sub-paragraph (6)(a) made on or after 9 March 2017,

(b) a relevant transfer within sub-paragraph (6)(b), made on or after 9 March 2017, of the whole or part of the UK tax-relieved fund of a relieved member of a qualifying recognised overseas pension scheme, or

(c) a relevant transfer within sub-paragraph (6)(b), made on or after 6 April 2017, of the whole or part of the UK tax-relieved fund of a relieved member of a relevant non-UK scheme that is not a qualifying recognised overseas pension scheme.

(6C) The sums or assets transferred as a result of an original relevant transfer constitute a ring-fenced transfer fund, and the key date for that fund is the date of the transfer.

(6D) Where in the case of a ring-fenced transfer fund (“the source fund”) there is a relevant transfer of the whole or part of the fund—

(a) the sums or assets transferred as a result of the transfer constitute a ring-fenced transfer fund,

(b) that fund has the same key date as the source fund, and

(c) the transfer is “a subsequent relevant transfer”, and is not an original relevant transfer.

(6E) Sub-paragraph (6D) applies whether the source fund is a ring-fenced transfer fund as a result of sub-paragraph (6C) or as a result of sub-paragraph (6D).

(6F) The Commissioners for Her Majesty’s Revenue and Customs may by regulations provide that sums or assets identified in accordance with the regulations are not included in a ring-fenced transfer fund as a result of sub-paragraph (6D)(a).”

3 (1) Paragraph 2 (member payment provisions apply to payments out of non-UK schemes if member is UK resident or has been UK resident in any of the preceding 5 tax years) is amended as follows.

(2) The existing text becomes sub-paragraph (1).

(3) In that sub-paragraph, after “scheme” insert “so far as it is referable to 5-year-rule funds”.

(4) After that sub-paragraph insert—

(2) The member payment provisions do not apply in relation to a payment made (or treated by this Part as made) to or in respect of a relieved member of a relevant non-UK scheme so far as it is referable to 10-year rule funds unless the member—

(a) is resident in the United Kingdom when the payment is made (or treated as made), or

(b) although not resident in the United Kingdom at that time, has been resident in the United Kingdom earlier in the tax year in which the payment is made (or treated as made) or in any of the 10 tax years immediately preceding that year.

(3) The member payment provisions do not apply in relation to a payment made (or treated by this Part as made) to or in respect of a transfer member of a relevant non-UK scheme, so far as it is referable to any particular ring-fenced transfer fund of the member’s under the scheme which has a key date of 6 April 2017 or later, unless—

(a) the member is resident in the United Kingdom when the payment is made (or treated as made), or

(b) although the member is not resident in the United Kingdom at that time—

(i) the member has been resident in the United Kingdom earlier in the tax year containing that time, or

(ii) the member has been resident in the United Kingdom in any of the 10 tax years immediately preceding the tax year containing that time, or

(iii) that time is no later than the end of 5 years beginning with the key date for the particular fund.

(4) In this paragraph—

  • “5-year rule funds”, in relation to a payment to or in respect of a relieved member of a relevant non-UK scheme, means so much of the member’s UK tax-relieved fund under the scheme as represents tax-relieved contributions, or tax-exempt provision, made under the scheme before 6 April 2017;

  • “5-year rule funds”, in relation to a payment to or in respect of a transfer member of a relevant non-UK scheme, means—

    (a)

    the member’s relevant transfer fund under the scheme, and

    (b)

    any of the member’s ring-fenced transfer funds under the scheme that has a key date earlier than 6 April 2017;

  • “10-year rule funds”, in relation to a payment to or in respect of a relieved member of a relevant non-UK scheme, means so much of the member’s UK tax-relieved fund under the scheme as represents tax-relieved contributions, or tax-exempt provision, made under the scheme on or after 6 April 2017.

(5) See also—

  • paragraph 1(6C), (6D) and (6F) (meaning of “ring-fenced transfer fund”),

  • paragraph 3 (meaning of “UK tax-relieved fund”, “tax-relieved contributions” and “tax-exempt provision” etc), and

  • paragraph 4 (meaning of “relevant transfer fund” etc).”

4 (1) Paragraph 3 (payments to or in respect of relieved members of schemes) is amended as follows.

(2) After sub-paragraph (5) insert—

(5A) The Commissioners for Her Majesty’s Revenue and Customs may by regulations provide that, in circumstances specified in the regulations, something specified in the regulations is to be treated as done by, to, in respect of or in the case of a relieved member of a relevant non-UK scheme.”

(3) In sub-paragraph (6) (power to specify whether payments by scheme are referable to UK tax-relieved fund) after “payments made (or treated as made) by” insert “, or other things done by or to or under or in respect of or in the case of,”.

(4) After sub-paragraph (7) insert—

(8) Where regulations under sub-paragraph (6) make provision for a payment or something else to be treated as referable to a member’s UK tax-relieved fund under a scheme, regulations under that sub-paragraph may make provision for the payment or thing, or any part or aspect of the payment or thing, also to be treated as referable to a particular part of that fund.”

5 (1) Paragraph 4 (payments to or in respect of transfer members of schemes) is amended as follows.

(2) In sub-paragraph (1), after “relevant transfer fund” insert “, or ring-fenced transfer funds,”.

(3) In sub-paragraph (2) (meaning of “relevant transfer fund”), before “so much of” insert “, subject to sub-paragraph (3A),”.

(4) After sub-paragraph (3) insert—

(3A) The member’s relevant transfer fund under the scheme does not includes sums or assets that are in any of the member’s ring-fenced transfer funds under the scheme.”

(5) After sub-paragraph (4) insert—

(5) The Commissioners for Her Majesty’s Revenue and Customs may by regulations provide that, in circumstances specified in the regulations, something specified in the regulations is to be treated as done by, to, in respect of or in the case of a transfer member of a relevant non-UK scheme.

(6) Regulations made by the Commissioners for Her Majesty’s Revenue and Customs may make provision for determining whether payments or transfers made (or treated as made) by, or other things done by or to or under or in respect of or in the case of, a relevant non-UK scheme are to be treated as referable to a member’s ring-fenced transfer funds under the scheme (and so whether or not they reduce the funds or any of them).

(7) Where regulations under sub-paragraph (6) make provision for a payment or transfer or something else to be treated as referable to a member’s ring-fenced transfer funds under a scheme, regulations under that sub-paragraph may make provision for the payment or transfer or other thing, or any part or aspect of the payment or transfer or thing, also to be treated as referable to a particular one of those funds.”

6 In paragraph 7(2)(c) (regulations about application of member payment provisions), after “relevant transfer fund” insert “or ring-fenced transfer funds”.

7 (1) Paragraph 9ZB (application of section 227G) is amended as follows.

(2) In sub-paragraph (2), after “relevant transfer fund” insert “or ring-fenced transfer funds”.

(3) After sub-paragraph (3) insert—

(4) The reference in sub-paragraph (2) to the individual’s ring-fenced transfer funds under the relevant non-UK scheme is to be read in accordance with paragraph 1.”

8 The amendments made by paragraph 3 apply in relation to payments made (or treated as made) on or after 6 April 2017, and the amendments made by paragraphs 2 and 4 to 7 come into force on 9 March 2017.

Consequential amendments in ITEPA 2003

9 (1) Section 576A of ITEPA 2003 (as it applies where the year of departure is the tax year 2013-14 or a later tax year) is amended as follows.

(2) In subsection (6)(b) (pension income: temporary non-residents: non-application where payment not referable to relevant transfer fund)—

(a) for “not referable” substitute “referable neither”, and

(b) after “relevant transfer fund” insert “, nor to the member’s ring-fenced transfer funds,”.

(3) In subsection (10) (interpretation), at the end insert—

  • ““member’s ring-fenced transfer fund” (see paragraph 1(6C) and (6D).”

(4) The amendments made by this paragraph apply in relation to relevant withdrawals on or after 6 April 2017.

10 (1) Section 576A of ITEPA 2003, as it applies where the year of departure is the tax year 2012-13 or an earlier tax year, is amended as follows.

(2) In subsection (6) (pension income: temporary non-residents: non-application unless payment referable to relevant transfer fund), after “member’s relevant transfer fund” insert “, or the member’s ring-fenced transfer funds,”.

(3) In subsection (8) (interpretation), before the definition of “scheme pension” insert—

  • ““member’s ring-fenced transfer funds” has the same meaning as in that Schedule (see paragraph 1(6C) and (6D));”.

(4) The amendments made by this paragraph apply in relation to relevant withdrawals on or after 6 April 2017.

Part 2 Income tax on pension transfers: overseas transfer charge

Tax charge on transfers to qualifying recognised overseas pension schemes

11 In Part 4 of FA 2004 (pension schemes etc), after section 244 insert—

“Non-UK schemes: the overseas transfer charge

244A Overseas transfer charge

(1) A charge to income tax, to be known as the overseas transfer charge, arises where—

(a) a recognised transfer is made to a QROPS, or

(b) an onward transfer is made during the relevant period for the original transfer,

and the transfer is not excluded from the charge by or under any of sections 244B to 244H.

(2) Sections 244B to 244H are subject to section 244I (circumstances in which exclusions do not apply).

(3) In this group of sections, an “onward transfer” is a transfer of sums or assets held for the purposes of, or representing accrued rights under, an arrangement under a QROPS or former QROPS in relation to a member so as to become held for the purposes of, or to represent rights under, an arrangement under another QROPS in relation to that person as a member of that other QROPS.

(4) In this group of sections “relevant period” means—

(a) in the case of a recognised transfer made on 6 April in any year, the 5 years beginning with the date of the transfer,

(b) in the case of any other recognised transfer, the period consisting of the combination of—

(i) the period beginning with the date of the transfer and ending with the next 5 April, and

(ii) the 5 years beginning at the end of that initial period,

(c) in the case of an onward transfer, the period—

(i) beginning with the date of the transfer, and

(ii) ending at the end of the relevant period for the original transfer (see paragraphs (a) and (b) or, as the case may be, paragraphs (d) and (e)),

(d) in the case of a relevant transfer that—

(i) is made on 6 April in any year, and

(ii) is the original transfer for an onward transfer,

the 5 years beginning with the date of the relevant transfer, and

(e) in the case of a relevant transfer that—

(i) is made otherwise than on 6 April in any year, and

(ii) is the original transfer for an onward transfer,

the period consisting of the combination of: the period beginning with the date of the relevant transfer and ending

with the next 5 April; and the 5 years beginning at the end of that initial period.

(5) In this group of sections “the original transfer”, in relation to an onward transfer, means (subject to subsection (6))—

(a) the recognised transfer in respect of which the following conditions are met—

(i) it is from a registered pension scheme to a QROPS,

(ii) the sums and assets transferred by the onward transfer directly or indirectly derive from those transferred by it, and

(iii) it is more recent than any other recognised transfer in respect of which the conditions in sub-paragraphs (i) and (ii) are met, or

(b) where there is no such recognised transfer, the relevant transfer (see paragraph 1(6) of Schedule 34) in respect of which the following conditions are met—

(i) it is from a relevant non-UK scheme (see paragraph 1(5) of Schedule 34),

(ii) it is a transfer of the whole or part of the UK tax-relieved fund (see paragraph 3 of Schedule 34) of a member of the scheme,

(iii) it is to a QROPS, and

(iv) the sums and assets transferred by the onward transfer directly or indirectly derive from those transferred by it.

(6) Where apart from this subsection there would be different original transfers for different parts of an onward transfer, each such part of the onward transfer is to be treated as a separate onward transfer for the purposes of this group of sections.

(7) In this section and sections 244B to 244N—

  • “QROPS” means a qualifying recognised overseas pension scheme, and “former QROPS” means a scheme that has at any time been a QROPS;

  • “ring-fenced transfer fund”, in relation to a QROPS or former QROPS, has the meaning given by paragraph 1 of Schedule 34;

  • “this group of sections” means this section and sections 244B to 244N.

244B Exclusion: member and receiving scheme in same country

(1) A recognised transfer to a QROPS is excluded from the overseas transfer charge if during the relevant period—

(a) the member is resident in the country or territory in which the QROPS is established, and

(b) there is no onward transfer—

(i) for which the recognised transfer is the original transfer, and

(ii) which is not excluded from the charge.

(2) If the member is resident in that country or territory at the time of the transfer mentioned in subsection (1), it is to be assumed for the purposes of subsection (1) that the member will be resident in that country or territory during the relevant period; but if, at a time before the end of the relevant period, the transfer ceases to be excluded by subsection (1) otherwise than by reason of the member’s death—

(a) that assumption is from that time no longer to be made, and

(b) the charge on the transfer is treated for the purposes of sections 244L and 254 as charged at that time.

(3) An onward transfer to a QROPS (“transfer A”) is excluded from the overseas transfer charge if during so much of the relevant period as is after the time of transfer A—

(a) the member is resident in the country or territory in which the QROPS is established, and

(b) there is no subsequent onward transfer that—

(i) is of sums and assets which, in whole or part, directly or indirectly derive from those transferred by transfer A, and

(ii) is not excluded from the charge.

(4) If the member is resident in that country or territory at the time of transfer A, it is to be assumed for the purposes of subsection (3) that the member will be resident in that country or territory during so much of the relevant period as is after the time of transfer A; but if, at a time before the end of the relevant period, the transfer ceases to be excluded by subsection (3) otherwise than by reason of the member’s death—

(a) that assumption is from that time no longer to be made, and

(b) the charge on transfer A is treated for the purposes of sections 244L and 254 as charged at that time.

244C Exclusion: member and receiving scheme in EEA states

(1) This section applies to a transfer to a QROPS established in an EEA state.

(2) If the transfer is a recognised transfer, the transfer is excluded from the overseas transfer charge if during the relevant period—

(a) the member is resident in an EEA state (whether or not the same EEA state throughout that period), and

(b) there is no onward transfer—

(i) for which the recognised transfer is the original transfer, and

(ii) which is not excluded from the charge.

(3) If the member is resident in an EEA state at the time of the recognised transfer mentioned in subsection (2), it is to be assumed for the purposes of this section that the member will be resident in an EEA state during the relevant period; but if, at a time before the end of the relevant period, the transfer ceases be excluded by subsection (2) otherwise than by reason of the member’s death—

(a) that assumption is from that time no longer to be made, and

(b) the charge on the transfer is treated for the purposes of sections 244L and 254 as charged at that time.

(4) If the transfer is an onward transfer (“transfer B”), the transfer is excluded from the overseas transfer charge if during so much of the relevant period as is after the time of the onward transfer—

(a) the member is resident in an EEA state (whether or not the same EEA state at all of those times), and

(b) there is no subsequent onward transfer that—

(i) is of sums and assets which, in whole or part, directly or indirectly derive from those transferred by transfer B, and

(ii) is not excluded from the charge.

(5) If the member is resident in an EEA state at the time of transfer B, it is to be assumed for the purposes of subsection (4) that the member will be resident in an EEA state during so much of the relevant period as is after the time of transfer B; but if, at a time before the end of the relevant period, the transfer ceases to be excluded by subsection (4) otherwise than by reason of the member’s death—

(a) that assumption is from that time no longer to be made, and

(b) the charge on transfer B is treated for the purposes of sections 244L and 254 as charged at that time.

244D Exclusion: receiving scheme is an occupational pension scheme

A transfer to a QROPS is excluded from the overseas transfer charge if—

(a) the QROPS is an occupational pension scheme, and

(b) when the transfer is made, the member is an employee of a sponsoring employer of the QROPS.

244E Exclusion: receiving scheme set up by international organisation

(1) A transfer to a QROPS is excluded from the overseas transfer charge if—

(a) the QROPS is established by an international organisation and has effect so as to provide benefits for, or in respect of, past service as an employee of the organisation, and

(b) when the transfer is made, the member is an employee of the organisation.

(2) In this section “international organisation” means an organisation to which section 1 of the International Organisations Act 1968 applies by virtue of an Order in Council under subsection (1) of that section.

244F Exclusion: receiving scheme is an overseas public service scheme

(1) A transfer to a QROPS is excluded from the overseas transfer charge if—

(a) the QROPS is an overseas public service pension scheme, and

(b) when the transfer is made, the member is an employee of an employer that participates in the scheme.

(2) A QROPS is an “overseas public service pension scheme” for the purposes of this section if—

(a) either—

(i) it is established by or under the law of the country or territory in which it is established, or

(ii) it is approved by the government of that country or territory, and

(b) it is established solely for the purpose of providing benefits to individuals for or in respect of services rendered to—

(i) that country or territory, or

(ii) any political subdivision or local authority of that country or territory.

(3) For the purposes of this section, an employer participates in a QROPS that is an overseas public service pension scheme if the scheme has effect so as to provide benefits to or in respect of any or all of the employees of the employer in respect of their employment by the employer.

244G Exclusions: avoidance of double charge, and transitional protections

(1) A recognised transfer to a QROPS is excluded from the overseas transfer charge if it is made in execution of a request made before 9 March 2017.

(2) An onward transfer (“the current onward transfer”) is excluded from the overseas transfer charge if—

(a) the charge was paid on the original transfer and the amount paid is not repayable, or

(b) the charge was paid on an onward transfer (“the earlier onward transfer”) in respect of which the conditions in subsection (4) are met and the amount paid is not repayable, or

(c) the original transfer was made before 9 March 2017, or

(d) the original transfer was made on or after 9 March 2017 in execution of a request made before 9 March 2017.

(3) An onward transfer is excluded from the overseas transfer charge so far as the transfer is made otherwise than out of the member’s ring-fenced transfer funds under the scheme from which the onward transfer is made.

(4) The conditions mentioned in subsection (2)(b) are—

(a) that the earlier onward transfer was made before the current onward transfer,

(b) that the earlier onward transfer was made after the original transfer, and

(c) that all the sums and assets transferred by the current onward transfer directly or indirectly derive from those transferred by the earlier onward transfer.

244H Power to provide for further exclusions

The Commissioners for Her Majesty’s Revenue and Customs may by regulations make provision for a recognised transfer to a QROPS, or an onward transfer, to be excluded from the overseas transfer charge if the transfer is of a description specified in the regulations.

244I Circumstances in which exclusions do not apply

(1) Subsection (2) applies if a recognised transfer to a QROPS, or an onward transfer, would (but for this section) be excluded from the overseas transfer charge by any of sections 244B to 244F.

(2) The transfer is not excluded from the charge if the member has, in connection with the transfer, failed to comply with the relevant information regulation.

(3) In subsection (2) “the relevant information regulation” means whichever of the following is applicable—

(a) regulation 11BA of the Registered Pension Schemes (Provision of Information) Regulations 2006 (S.I. 2006/567S.I. 2006/567), or any regulation having effect in place of any of that regulation, as (in either case) from time to time amended, and

(b) regulation 3AE of the Pension Schemes (Information Requirements for Qualifying Overseas Pension Schemes, Qualifying Recognised Overseas Pension Schemes and Corresponding Relief) Regulations 2006 (S.I. 2006/208S.I. 2006/208), or any regulation having effect in place of any of that regulation, as (in either case) from time to time amended.

244J Persons liable to charge

(1) In the case of a recognised transfer to a QROPS, the persons liable to the overseas transfer charge are—

(a) the scheme administrator of the registered pension scheme from which the transfer is made, and

(b) the member,

and their liability is joint and several.

(2) In the case of an onward transfer, the persons liable to the overseas transfer charge are—

(a) the scheme manager of the QROPS, or former QROPS, from which the transfer is made, and

(b) the member,

and their liability is joint and several.

(3) Subsections (1) and (2) are subject to subsection (4), and subsections (2) and (4) are subject to subsection (5).

(4) If a transfer is one required by section 244B or 244C to be initially assumed to be excluded by that section but an event occurring before the end of the relevant period means that the transfer is not so excluded, the persons liable to the overseas transfer charge in the case of the transfer are—

(a) the scheme manager of any QROPS, or former QROPS, under which the member has, at the time of the event, ring-fenced transfer funds in which any of the sums and assets referred to in section 244K(6) in the case of the transfer are represented, and

(b) the member,

and their liability is joint and several.

(5) The scheme manager of a former QROPS is liable to the overseas transfer charge in the case of a transfer (“the transfer concerned”) only if the former QROPS—

(a) was a QROPS when a relevant inward transfer was made, and

(b) where a relevant inward transfer was made before 9 March 2017, was a QROPS at the start of 9 March 2017;

and here “relevant inward transfer” means a recognised or onwards transfer to the former QROPS (at a time when it was a QROPS) of sums and assets which, to any extent, are represented by sums or assets transferred by the transfer concerned.

(6) A person is liable to the overseas transfer charge whether or not—

(a) that person, and

(b) any other person who is liable to the charge,

are resident or domiciled in the United Kingdom.

244K Amount of charge

(1) Where the overseas transfer charge arises in the case of a transfer, the charge is 25% of the transferred value.

(2) If the transfer is from a registered pension scheme established in the United Kingdom, the transferred value is the total of—

(a) the amount of any sums transferred, and

(b) the value of any assets transferred,

but this is subject to subsections (5) to (9).

(3) If the transfer is from a registered pension scheme established in a country or territory outside the United Kingdom, the transferred value is the total of—

(a) the amount of any sums transferred that are attributable to UK-relieved funds of the scheme, and

(b) the value of any assets transferred that are attributable to UK-relieved funds of the scheme,

but this is subject to subsections (5) to (9).

(4) If the transfer is from a QROPS or former QROPS, the transferred value is the total of—

(a) the amount of any sums transferred that are attributable to the member’s ring-fenced transfer funds under the scheme, and

(b) the value of any assets transferred that are attributable to the member’s ring-fenced transfer funds under the scheme,

but this is subject to subsections (5) to (9).

(5) If the lifetime allowance charge arises in the case of the transfer and is to be deducted from the transfer, paragraphs (a) and (b) of subsections (2) to (4) are to be read as referring to what is to be transferred after deduction of the lifetime allowance charge.

(6) If the transfer is one initially assumed to be excluded by section 244B or 244C but an event occurring before the end of the relevant period means that the transfer is not so excluded, the sums and assets mentioned in whichever of subsections (2) to (4) is applicable include

only those that at the time of the event are represented in any of the member’s ring-fenced transfer funds under any QROPS or former QROPS.

(7) If the operator pays the charge on the transfer and does so—

(a) otherwise than by deduction from the transfer, and

(b) out of sums and assets held for the purposes of, or representing accrued rights under, the scheme from which the transfer is made,

the transferred value is the amount given by subsections (2) to (6) grossed up by reference to the rate specified in subsection (1).

(8) If the operator pays the charge on the transfer and does so by deduction from the transfer, the transferred value is the amount given by subsections (2) to (6) before the deduction.

(9) If the member pays the charge on the transfer, the transferred value is the amount given by subsections (2) to (6) without any deduction for the charge.

(10) If the lifetime allowance charge arises in the case of the transfer, the provisions of this Part relating to the lifetime allowance charge apply (whether or not in relation to the transfer) as if the overseas transfer charge did not arise in the case of the transfer.

(11) In this section—

  • “the operator” means—

    (a)

    the scheme administrator of the scheme from which the transfer is to be made if that scheme is a registered pension scheme, or

    (b)

    the scheme manager of the scheme from which the transfer is to be made if that scheme is a QROPS or former QROPS;

  • “UK-relieved funds”, in relation to a registered pension scheme established in a country or territory outside the United Kingdom, has the meaning given by section 242B.

244L Accounting for overseas transfer charge by scheme managers

(1) In this section “charge” means overseas transfer charge for which the scheme manager of a QROPS or former QROPS is liable.

(2) The Commissioners for Her Majesty’s Revenue and Customs may by regulations make provision for or in connection with—

(a) the payment of charge, including due dates for payment,

(b) the charging of interest on charge not paid on or before its due date,

(c) notification by the scheme manager of errors in information provided by the scheme manager to the Commissioners in connection with charge or the scheme manager’s liability for overseas transfer charge,

(d) repayments to scheme managers under section 244M of amounts paid by way of charge, and

(e) the making of assessments, repayments or adjustments in cases where the correct amount of charge has not been paid by the due date for payment of the charge.

(3) The regulations may, in particular—

(a) modify the operation of any provision of the Tax Acts, or

(b) provide for the application of any provision of the Tax Acts (with or without modification).

244M Repayments of charge on subsequent excluding events

(1) This section applies if—

(a) overseas transfer charge arose on a transfer at the time the transfer was made, and

(b) at a time during the relevant period for the transfer, circumstances arise such that, had those circumstances existed at the time the transfer was made, the transfer would at the time it was made have been excluded from the charge by sections 244B to 244F or under section 244H.

(2) Any amount paid in respect of charge on the transfer is to be repaid by the Commissioners for Her Majesty’s Revenue and Customs so far as not already repaid.

(3) Subsection (2) does not give rise to entitlement to repayment of, or cancellation of liabilities to, interest or penalties in respect of late payment of charge on the transfer.

(4) Repayment under this section to the scheme administrator of a registered pension scheme, or the scheme manager of a QROPS or former QROPS, is conditional on prior compliance with any requirements to give information to the Commissioners, about the circumstances in which the right to the repayment arises, that are imposed on the prospective recipient under section 169 or 251 (but repayment is not conditional on compliance with any time limits so imposed for compliance with any such requirements).

(5) Repayment under this section is not a relievable pension contribution.

(6) Where—

(a) an amount is repaid under this section to the scheme administrator of a registered pension scheme, and

(b) there is a recognised transfer from that scheme to a QROPS of some or all of that amount,

that transfer is not benefit crystallisation event 8 in relation to the member (but this does not affect the amount crystallised by the benefit crystallisation event consisting of the making of the transfer mentioned in subsection (1)).

(7) Repayment under this section to the member is conditional on making a claim, and such a claim must be made no later than one year after the end of the relevant period for the transfer concerned.

(8) The Commissioners for Her Majesty’s Revenue and Customs may by regulations make provision for or in connection with claims or repayments under this section, including provision—

(a) requiring claims,

(b) about who may claim,

(c) imposing conditions for making claims, including conditions about time limits,

(d) as to additional circumstances in which repayments may be made,

(e) modifying the operation of any provision of the Tax Acts, or

(f) applying any provision of the Tax Acts (with or without modifications).

244N Discharge of liability of scheme administrator or manager

(1) In this section “operator” means—

(a) the scheme administrator of a registered pension scheme, or

(b) the scheme manager of a QROPS or former QROPS.

(2) If an operator is liable under section 244J, the operator may apply to an officer of Revenue and Customs for the discharge of the operator’s liability on the following ground.

(3) The ground is that—

(a) the operator reasonably believed that there was no liability to the overseas transfer charge on the transfer concerned, and

(b) in all the circumstances of the case, it would not be just and reasonable for the operator to be liable to the charge on the transfer.

(4) On receiving an application under subsection (2), an officer of Revenue and Customs must decide whether to discharge the operator’s liability.

(5) An officer of Revenue and Customs must notify the operator of the decision on the application.

(6) The discharge of the operator’s liability does not affect the liability of any other person to overseas transfer charge on the transfer concerned.

(7) The Commissioners for Her Majesty’s Revenue and Customs may by regulations make provision supplementing this section, including provision for time limits for making an application under this section.”

Further amendments in Part 4 of FA 2004.

12 Part 4 of FA 2004 is further amended as follows.

13 (1) Section 169 (recognised transfers, and definition and obligations of a QROPS) is amended as follows.

(2) In subsection (2) (what makes a recognised overseas pension scheme a QROPS), after paragraph (b) insert—

(ba) the scheme manager has confirmed to an officer of Revenue and Customs that the scheme manager understands the scheme manager’s potential liability to overseas transfer charge and has undertaken to such an officer to operate the charge including by meeting the scheme manager’s liabilities to the charge,”.

(3) After subsection (2) insert—

(2A) Regulations may make provision as to—

(a) information that is to be included in, or is to accompany, a notification under subsection (2)(a);

(b) the way and form in which such a notification, or any required information or evidence, is to be given or provided.”

(4) After subsection (4) insert—

(4ZA) Regulations may require a member, or former member, of a QROPS or former QROPS to give information of a prescribed description to the scheme manager of a QROPS or former QROPS.”

(5) In subsection (4A) (inclusion of supplementary provision in regulations under subsection (4)), after “(4)” insert “or (4ZA)”.

(6) After subsection (4B) insert—

(4C) Provision under subsection (2A)(b) or (4A)(a) may, in particular, provide for use of a way or form specified by the Commissioners.”

(7) After subsection (7) insert—

(7A) Regulations may, in a case where—

(a) any of the sums and assets transferred by a relevant overseas transfer represent rights in respect of a pension to which a person has become entitled under the transferring scheme (“the original pension”), and

(b) those sums and assets are, after the transfer, applied towards the provision of a pension under the other scheme (“the new pension”),

provide that the new pension is to be treated, to such extent as is prescribed and for such of the purposes of this Part as are prescribed, as if it were the original pension.

(7B) For the purposes of subsection (7A), a “relevant overseas transfer” is a transfer of sums or assets held for the purposes of, or representing accrued rights under, a relevant overseas scheme (“the transferring scheme”) so as to become held for the purposes of, or to represent rights under—

(a) another relevant overseas scheme, or

(b) a registered pension scheme,

in connection with a member of that pension scheme.

(7C) In subsection (7B) “relevant overseas scheme” means—

(a) a QROPS, or

(b) a relevant non-UK scheme (see paragraph 1(5) of Schedule 34).

(7D) Regulations under subsection (7A) may—

(a) apply generally or only in specified cases, and

(b) make different provision for different cases.”

(8) In subsection (8) (interpretation)—

(a) in the opening words, after “subsections (4) to (6)” insert “, (7A) to (7D)”, and

(b) in the definition of “relevant requirement”, at the end insert , or

(c) a requirement to pay overseas transfer charge, or interest on overseas transfer charge, imposed by regulations under section 244L(2) or by an assessment under such regulations.”

14 After Chapter 5 insert—

“Chapter 5A

Registered pension schemes established outside the United Kingdom

242A Meaning of “non-UK registered scheme”

In this Chapter “non-UK registered scheme” means a registered pension scheme established in a country or territory outside the United Kingdom.

242B Meaning of “UK-relieved funds”

(1) For the purposes of this Chapter, the “UK-relieved funds” of a non-UK registered scheme are sums or assets held for the purposes of, or representing accrued rights under, the scheme—

(a) that (directly or indirectly) represent sums or assets that at any time were held for the purposes of, or represented accrued rights under, a registered pension scheme established in the United Kingdom,

(b) that (directly or indirectly) represent sums or assets that at any time formed the UK tax-relieved fund under a relevant non-UK scheme of a relieved member of that scheme, or

(c) that—

(i) are held for the purposes of, or represent accrued rights under, an arrangement under the scheme relating to a member of the scheme who on any day has been an accruing member of the scheme, and

(ii) in accordance with regulations made by the Commissioners for Her Majesty’s Revenue and Customs, are to be taken to have benefited from relief from tax.

(2) In this Chapter “relevant contribution” has the meaning given by regulation 14ZB(8) of the Information Regulations.

(3) Paragraphs (7) and (8) of regulation 14ZB of the Information Regulations (meaning of “accruing member”) apply for the purposes of this section as for those of that regulation.

(4) “The Information Regulations” means the Registered Pension Schemes (Provision of Information) Regulations 2006 (S.I. 2006/567).”

15 In section 254(6) (regulations about accounting for tax by scheme administrators), after paragraph (b) insert—

(ba) repayments under section 244M to scheme administrators,”.

16 In section 255(1) (power to make provision for assessments), after paragraph

(d) insert—

(da) liability of the scheme administrator of a registered pension scheme, or the scheme manager of a qualifying recognised overseas pension scheme or of a former such scheme, to the overseas transfer charge,”.

17 In section 269(1)(a) (appeal against decision on discharge of liability), before “section 267(2)” insert “section 244N (discharge of liability to overseas transfer charge),”.

Other amendments

18 In section 9(1A) of TMA 1970 (tax not within the scope of self-assessment), after paragraph (a) insert—

(aa) is chargeable, on the scheme manager of a qualifying recognised overseas pension scheme or a former such scheme, under Part 4 of the Finance Act 2004,”.

19 In Schedule 56 to FA 2009 (penalty for failure to make payments on time), in the Table in paragraph 1, after the entry for item 3 insert—

“3A Income tax Amount payable under regulations under section 244L(2)(a) of FA 2004 The date falling 30 days after the due date determined by or under the regulations”

20 (1) In regulation 3(1) of the Registered Pension Schemes (Accounting and Assessment) Regulations 2005 (S.I. 2005/3454S.I. 2005/3454), in Table 1, at the end insert—

“Charge under section 244A (overseas transfer charge). 1. The name, date of birth and national insurance number of each individual in whose case a transfer results in the scheme administrator becoming liable to the overseas transfer charge. 2. The date, and transferred value, of each transfer. 3. The reference number of the qualifying recognised overseas pension scheme to which each transfer is made. 4. The amount of tax due in respect of each transfer.”

(2) The amendment made by this paragraph is to be treated as having been made by the Commissioners for Her Majesty’s Revenue and Customs under the applicable powers to make regulations conferred by section 254 of FA 2004.

21 (1) The Pension Schemes (Information Requirements for Qualifying Overseas Pension Schemes, Qualifying Recognised Overseas Pension Schemes and

Corresponding Relief) Regulations 2006 (S.I. 2006/208S.I. 2006/208) are amended as follows.

(2) In regulation 1(2) (interpretation), after the definition of “HMRC” insert—

  • ““onward transfer” has the meaning given by section 244A;”.

(3) In regulation 3(2) (duty to provide information to HMRC)—

(a) in sub-paragraph (c), after “no relevant transfer fund remains” insert “and no ring-fenced transfer funds remain”, and

(b) after sub-paragraph (d) insert—

(da) if the payment is made to a QROPS—

(i) whether the overseas transfer charge arises on the payment,

(ii) if the charge does arise, the transferred value and the amount of charge the scheme manager deducted from the payment before making it,

(iii) if the charge does not arise, why it does not, and

(iv) the total amount or value of the member’s relevant transfer fund, and ring-fenced transfer funds, remaining immediately after the payment;”.

(4) In regulation 3, after paragraph (2) insert—

(2A) Paragraphs (2B) and (2C) apply where—

(a) a recognised transfer is made to a QROPS, or

(b) an onward transfer is made by a QROPS or former QROPS.

(2B) Where an event occurring before the end of the relevant period for the transfer (see section 244A(4)) means that the transfer no longer counts as excluded from the overseas transfer charge or that entitlement to repayment under section 244M arises, the scheme manager of the QROPS or former QROPS must, within 90 days after the date the scheme manager is notified of the event, provide to HMRC notification of—

(a) the occurrence, nature and date of the event,

(b) the transferred value of the transfer,

(c) the amount of overseas transfer charge on the transfer,

(d) whether, and to what extent, the scheme manager has accounted, or intends to account, for the charge, and

(e) the total amount or value of the member’s relevant transfer fund, and ring-fenced transfer funds, remaining immediately after the event.

This paragraph is subject to the qualification in paragraph (3A).

(2C) Where the scheme manager of the QROPS or former QROPS becomes aware that the member has at any time in the relevant period for the transfer acquired a new residential address that is neither—

(a) in the country or territory in which the QROPS or former QROPS is established, nor

(b) in an EEA state,

the scheme manager is to notify that address to HMRC within 3 months after the date on which the scheme manager becomes aware of it.”

(5) In regulation 3, after paragraph (3) insert—

(3A) No obligation arises under paragraph (2B) in relation to a transfer if the following conditions are met—

(a) at the date of the transfer more than 10 years has elapsed since the key date for the ring-fenced transfer fund arising from the transfer (see paragraph 1 of Schedule 34); and

(b) the relevant member to whom the transfer is made is a person to whom the member payment provisions do not apply.”

(6) In regulation 3(6), in the definition of “relevant member”, after “relevant transfer fund” insert “or any ring-fenced transfer fund”.

(7) In regulation 3AB(4), for the words from “as a result” to the end substitute “as a result of—

(1)(a)a transfer of the member’s relevant transfer fund,

(b) a transfer of any of the member’s ring-fenced transfer funds, or

(c) a recognised transfer,

after the date of the relevant event concerned.”

(8) In regulation 3AC—

(a) in paragraph (1)(a), before the “or” at the end of paragraph (i) insert—

(“ia) any of the member’s ring-fenced transfer funds;”, and

(b) in the title omit “relevant”.

(9) In regulation 3AD—

(a) in paragraph (1)(a), before the “or” at the end of paragraph (i) insert—

(“ia) any of the member’s ring-fenced transfer funds;”,

(b) in paragraph (2), after sub-paragraph (a) insert—

(aa) where any of the transferred sums or assets are referable to the member’s UK-tax relieved fund, the value of so many of them as are referable to tax-relieved contributions, or tax-exempt provision, made under the scheme before 9 March 2017;

(ab) the value of so many of the transferred sums or assets as are referable to any of the member’s ring-fenced transfer funds (if any);”,

(c) in paragraph (2)(b) omit the “and” at the end,

(d) in paragraph (2)(c)(i), after “fund” insert “or any of the member’s ring-fenced transfer funds”,

(e) in paragraph (2)(c), in the words after paragraph (ii)—

(i) omit “it is”, and

(ii) after “the date of that transfer” insert “and the date it was requested”,

(f) in paragraph (2), after sub-paragraph (c) insert—

(d) whether the overseas transfer charge arises on the transfer;

(e) if the charge does arise on the transfer—

(i) the transferred value of the transfer, and

(ii) the amount in respect of the charge deducted by the scheme manager from the transfer;

(f) if the transfer is excluded from the charge—

(i) the reason for its exclusion, and

(ii) where section 244G(2)(a) or (b) (charge paid on earlier transfer) is the reason for its exclusion, the date of the earlier transfer on which the charge was paid and the amount of charge paid on that earlier transfer; and

(g) the relevant period for the transfer (see section 244A(4)).”, and

(g) in the title omit “relevant”.

(10) After regulation 3AD insert—

3AE Information provided by member to QROPS: onward transfers

(1) Paragraph (4) applies where a member of a QROPS or former QROPS makes a request to the scheme manager to make an onward transfer to a QROPS.

(2) But paragraph (4) does not apply if—

(a) the transfer will be excluded from the overseas transfer charge by section 244G, or

(b) the transfer will take after the end of the relevant period (see section 244A(4)) for what would be the original transfer in relation to the requested onward transfer.

(3) In this regulation “original transfer”, in relation to an onward transfer, has the meaning given by section 244A(5).

(4) The member must provide to the scheme manager—

(a) the member’s name, date of birth and principal residential address,

(b) if the member is not UK resident for income tax purposes, the date when the member last ceased to be UK resident for those purposes,

(c) the member’s national insurance number or, where applicable, confirmation that the member does not qualify for a national insurance number,

(d) the name and address of the QROPS to which the transfer is to be made,

(e) the country or territory under the law of which that QROPS is established and regulated,

(f) the reference number, if any, given by the Commissioners for that QROPS,

(g) whether the member knows for certain that the transfer would be excluded from the overseas transfer charge by one

of sections 244D, 244E and 244F, and if the member does know that for certain—

(i) the section concerned (if known),

(ii) the name and address of the member’s employer whose connection with the QROPS gives rise to exclusion of the transfer from the charge,

(iii) the member’s job title as an employee of that employer,

(iv) the date the member’s employment with that employer began, and

(v) if known, that employer’s tax reference for that employment, and

(h) the member’s acknowledgement in writing that the member—

(i) is aware that an onward transfer to a qualifying recognised overseas pension scheme may give rise to a liability to overseas transfer charge, and

(ii) is aware of the circumstances in which liability arises, in which liability is excluded from the outset and in which liability is excluded only if conditions continue to be met over a period of time.

(5) The information specified in paragraph (4) must be provided within 60 days beginning with the day the transfer request is made.

(6) The scheme manager must send the member notification of the requirements specified in this regulation within 30 days beginning with that day.

3AF Provision of information about liability for overseas transfer charge

(1) If an onward transfer is made from a QROPS or former QROPS and the overseas transfer charge arises on the transfer, the scheme manager of the QROPS or former QROPS must within 90 days after the date of the transfer provide the member with a notice stating—

(a) the date of the transfer,

(b) that overseas transfer charge arises on the transfer,

(c) the transferred value of the transfer,

(d) the amount of the charge on the transfer,

(e) whether, and to what extent, the scheme manager has accounted, or intends to account, for the charge, and

(f) where the scheme manager has accounted for the charge, the date the scheme manager did so.

(2) If an onward transfer is made from a QROPS or former QROPS and the transfer is excluded from the overseas transfer charge by or under sections 244B to 244H, the scheme manager of the QROPS or former QROPS must within 90 days after the date of the transfer provide the member with a notice stating—

(a) the date of the transfer,

(b) that the transfer is excluded from the overseas transfer charge,

(c) the provision by reason of which the transfer is excluded, and

(d) where that provision is section 244B or 244C—

(i) when the relevant period for the transfer ends, and

(ii) how the transfer may turn out not to be excluded as a result of the member changing country or territory of residence within the relevant period for the transfer.

(3) Paragraph (4) applies if—

(a) a recognised transfer is made to a QROPS, or

(b) an onward transfer is made by a QROPS or former QROPS.

(a)(a)a recognised transfer is made to a QROPS, or

(b) an onward transfer is made by a QROPS or former QROPS.

(4) Where an event occurring before the end of the relevant period for the transfer (see section 244A(4)) means that the transfer no longer counts as excluded from the overseas transfer charge or that entitlement to repayment under section 244M arises, the scheme manager of the QROPS or former QROPS must, within 90 days after the date the scheme manager is notified of the event, provide the member with a notice stating—

(a) the amount of overseas transfer charge on the transfer,

(b) whether, and to what extent, the scheme manager has accounted, or intends to account, for the charge, and

(c) where the scheme manager has accounted for the charge, the date the scheme manager did so.

3AG Accounting for overseas transfer charge on onward transfers

(1) Paragraph (2) applies where—

(a) overseas transfer charge arises on an onward transfer from a QROPS or former QROPS,

(b) the scheme manager has notified HMRC of the transfer or, where applicable, of the event triggering payability of the charge on the transfer, and

(c) HMRC have provided the scheme manager with an accounting reference for paying the charge on the transfer.

(2) The scheme manager must pay the charge to HMRC using the accounting reference.

(3) Payment of the charge is due at the end of the 91 days beginning with the date of issue of the accounting reference.

3AH Assessments of unpaid overseas transfer charge on onward transfers

(1) Where the correct amount of overseas transfer charge due from a scheme manager under regulation 3AG on an onward transfer has not been paid by the time it is due, an officer of Revenue and Customs must issue an assessment to tax to the scheme manager.

(2) Tax assessed under this regulation is payable within 30 days after the issue of the notice of assessment.

3AI Interest on overdue overseas transfer charge

(1) Tax which—

(a) becomes due and payable in accordance with regulation 3AG, or

(b) is assessed under regulation 3AH,

carries interest at the prescribed rate from the due date under regulation 3AG until payment (“the interest period”).

(2) Paragraph (1) applies even if the due date is a non-business day as defined by section 92 of the Bills of Exchange Act 1882.

(3) The “prescribed rate” means the rate applicable under section 178 of the Finance Act 1989 for the purposes of section 86 of TMA.

(4) Any change made to the prescribed rate during the interest period applies to the unpaid amount from the date of the change.

3AJ Adjustments, repayments and interest on overpaid charge

(1) If the correct tax due under regulation 3AG has not been paid on or before the due date, an officer of Revenue and Customs may make such adjustments or repayments as may be required for securing that the resulting liabilities to tax (including interest on unpaid or overpaid tax) whether of the scheme manager or of any other person are the same as they would have been if the correct tax had been paid.

(2) Tax overpaid which is repaid to the scheme manager or any other person carries interest at the prescribed rate from the later of the due date and the date on which the tax was paid until the date of repayment (“the interest period”).

(3) The “prescribed rate” means the rate applicable under section 178 of the Finance Act 1989 for the purposes of section 824 of the Income and Corporation Taxes Act 1988.

(4) Any change to the prescribed rate during the interest period applies to the overpaid amount from the date of the change.”

(11) In regulation 3B (information on cessation of a QROPS), after “relevant transfer fund”, in both places, insert “, or ring-fenced transfer fund,”.

(12) In regulation 3C (correction of information)—

(a) in paragraph (3)(a)(i), after “existence” insert “or, where the information relates to a ring-fenced transfer fund in respect of the relevant member, more than 10 years has elapsed beginning with the date on which that ring-fenced transfer fund came into existence”, and

(b) in paragraph (3)(b), at the end insert “and there are no ring-fenced transfer funds”.

(13) In regulation 5(1) (application of provisions providing for penalties)—

(a) after “3(2),” insert “(2B) or (2C),”, and

(b) before “or 3C(1)” insert “, 3AE(6), 3AF”.

(14) The amendments made by this paragraph—

(a) are, so far as they insert new regulation 3AE(1) to (5), to be treated as having been made by the Commissioners for Her Majesty’s Revenue and Customs under the powers to make regulations conferred by section 169(4ZA) of FA 2004,

(b) are, so far as they insert new regulations 3AE(6) and 3AF and amend regulations 3 to 3AD and 3B to 5, to be treated as having been made by the Commissioners under the powers to make regulations under section 169(4) of FA 2004 (see section 169(4), (4A), (4B) and (4C) of that Act), and

(c) are, so far as they insert new regulations 3AG to 3AJ, to be treated as having been made by the Commissioners under the applicable powers to make regulations conferred by section 244L of FA 2004.

22 (1) The Registered Pension Schemes (Transfers of Sums and Assets) Regulations 2006 (S.I. 2006/499S.I. 2006/499) are amended as follows.

(2) In regulation 5, the existing text becomes paragraph (1).

(3) After that paragraph insert—

(2) In paragraph (1)(a) “administration costs” includes, in particular, payments of overseas transfer charge.”

(4) The amendments made by this paragraph are to be treated as made by the Commissioners for Her Majesty’s Customs and Revenue under the powers to make regulations conferred by paragraph 2(4)(h) of Schedule 28 to FA 2004.

23 (1) The Registered Pension Schemes (Provision of Information) Regulations 2006 (S.I. 2006/567S.I. 2006/567) are amended as follows.

(2) In regulation 3(1) (provision of information by scheme administrators to HMRC), in column 2 of the entry in the Table for reportable event 9—

(a) after paragraph (g) insert—

(ga) whether or not overseas transfer charge arises on the transfer;

(gb) if the transfer is excluded from the charge, the reason why it is excluded;

(gc) if the charge arises on the transfer—

(i) the transferred value, and

(ii) the amount in respect of the charge deducted from the transfer;”, and

(b) after paragraph (h) insert—

(ha) the reference number, if any, given by the Commissioners for the QROPS;”.

(3) In regulation 3(7) (deadline for event report for reportable event 9), at the end insert “but, if the scheme administrator applies before the end of those 60 days for a repayment of overseas transfer charge on the transfer, the report must be delivered before the administrator applies for the repayment.”

(4) In regulation 11BA(2) (information about transfer to be provided by member to scheme administrator)—

(a) in sub-paragraph (a), omit paragraphs (vi) and (vii), including the “and” at the end,

(b) after sub-paragraph (a) insert—

(aa) the name and address of, and (if known) the reference number given by the Commissioners for, the qualifying recognised overseas pension scheme (“the QROPS”);

(ab) the country or territory under the law of which the QROPS is established and regulated;

(ac) whether the member knows for certain that the transfer would be excluded from the overseas

transfer charge by one of sections 244D, 244E and 244F, and if the member does know that for certain—

(i) the section concerned (if known),

(ii) the name and address of the member’s employer whose connection with the QROPS gives rise to exclusion of the transfer from the charge,

(iii) the member’s job title as an employee of that employer,

(iv) the date the member’s employment with that employer began, and

(v) if known, that employer’s tax reference for that employment;”, and

(c) after sub-paragraph (b) insert ; and

(c) the member’s acknowledgement in writing that the member—

(i) is aware that a recognised transfer to a qualifying recognised overseas pension scheme may give rise to a liability to overseas transfer charge, and

(ii) is aware of the circumstances in which liability arises, in which liability is excluded from the outset and in which liability is excluded only if conditions continue to be met over a period of time.”

(5) After regulation 11BA insert—

11BB Information provided by members to scheme administrators: potentially excluded transfers

(1) Paragraph (2) applies where—

(a) a recognised transfer is made by a registered pension scheme to a qualifying recognised overseas pension scheme, and

(b) the transfer is required by section 244B or 244C to be initially assumed to be excluded from the overseas transfer charge by that section.

(2) Each time during the relevant period for the transfer that the member—

(a) becomes resident in a country or territory, or

(b) ceases to be resident in a country or territory,

the member must, within 60 days after the date that happens, inform the scheme administrator of the registered pension scheme that it has happened.”

(6) After regulation 12 insert—

12A Provision of information about liability for overseas transfer charge

(1) If a recognised transfer is made by a registered pension scheme to a qualifying recognised overseas pension scheme and the overseas transfer charge arises on the transfer, the scheme administrator of the registered pension scheme must within 90 days after the date of the transfer provide the member with a notice stating—

(a) the date of the transfer,

(b) that overseas transfer charge arises on the transfer,

(c) the transferred value of the transfer,

(d) the amount of the charge on the transfer,

(e) whether, and to what extent, the scheme administrator has accounted, or intends to account, for the charge, and

(f) where the scheme administrator has accounted for the charge, the date the scheme administrator did so.

(2) If a recognised transfer is made by a registered pension scheme to a qualifying recognised overseas pension scheme and the transfer is excluded from the overseas transfer charge by or under sections 244B to 244H, the scheme administrator of the registered pension scheme must within 90 days after the date of the transfer provide the member with a notice stating—

(a) the date of the transfer,

(b) that the transfer is excluded from the overseas transfer charge,

(c) the provision by reason of which the transfer is excluded, and

(d) where that provision is section 244B or 244C, how the transfer may turn out not to be excluded as a result of the member changing country or territory of residence within the relevant period for the transfer.

(3) If overseas transfer charge on a transfer is repaid to the scheme administrator of a registered pension scheme, the scheme administrator must within 90 days after the date of the repayment provide the member with a notice stating—

(a) the date of the repayment,

(b) the amount of the repayment, and

(c) the reason for the repayment.”

(7) After regulation 14ZC insert—

14ZCA Further information provided by scheme administrators on recognised transfers to overseas schemes

(1) This regulation applies if there is a recognised transfer from a registered pension scheme to a qualifying recognised overseas pensions scheme.

(2) The scheme administrator of the registered pension scheme must provide the scheme manager of the qualifying recognised overseas pension scheme with a statement—

(a) stating whether or not the overseas transfer charge arose on the transfer, and

(b) stating—

(i) if the charge arose, the amount of the charge, and

(ii) if the transfer is excluded from the charge, the reason why it is excluded.

(3) The requirement under paragraph (2) is to be complied with before the end of the 31 days beginning with the date of the transfer.

(4) Paragraph (5) applies if overseas transfer charge on the transfer is repaid to the scheme administrator of the registered pension scheme.

(5) The scheme administrator of the registered pension scheme must provide the scheme manager of the qualifying recognised overseas pension scheme with—

(a) a copy of the statement under paragraph (2),

(b) a statement that the original statement is inaccurate and that the overseas transfer charge on the transfer has been repaid to the scheme administrator, and

(c) the reason why the transfer is excluded from the charge.

(6) The requirement under paragraph (5) is to be complied with before the end of the 31 days beginning with the date of the repayment.”

(8) The amendments made by this paragraph are to be treated as made by the Commissioners for Her Majesty’s Revenue and Customs under the applicable powers to make regulations conferred by section 251 of FA 2004.

Commencement and transitional provision

24 (1) Subject to sub-paragraphs (2) to (4), the amendments made by this Part of this Schedule have effect in relation to transfers made on or after 9 March 2017.

(2) The new section 169(2)(ba) of FA 2004—

(a) has effect on and after 9 March 2017 in the case of a recognised overseas pension scheme where—

(i) the notification mentioned in section 169(2)(a) of FA 2004 (notification that scheme is a recognised overseas pension scheme) is given on or after 9 March 2017, or

(ii) although that notification is given before 9 March 2017, the letter from the Commissioners for Her Majesty’s Revenue and Customs advising the scheme of the reference number allocated to the scheme is dated on or after 9 March 2017, and

(b) has effect on and after 14 April 2017 in the case of a recognised overseas pension scheme where that letter is dated before 9 March 2017.

(3) The other amendments in section 169 of FA 2004, and the amendment in section 255 of that Act, come into force on 9 March 2017.

(4) The amendments in regulation 3(2) of the Pension Schemes (Information Requirements for Qualifying Overseas Pension Schemes, Qualifying Recognised Overseas Pension Schemes and Corresponding Relief) Regulations 2006 have effect in relation to payments made on or after 9 March 2017; and the new regulation 3AE inserted into those Regulations, and the reference to the new regulation 3AE(6) inserted into regulation 5(1) of those Regulations, have effect in relation to requests made on or after 9 March 2017.

(5) Overseas transfer charge on transfers made in the period beginning with 9 March 2017 and ending with 30 June 2017 is, for the purposes of section 254 of FA 2004, to be treated as charged in the 3 months ending with 30 September 2017.

Section 19

SCHEDULE 5 Trades and property businesses: calculation of profits

Part 1 Trades etc: amendments of ITTOIA 2005

1 ITTOIA 2005 is amended as follows.

2 For section 33A (cash basis: capital expenditure) substitute—

33A Cash basis: capital expenditure

(1) This section applies in relation to the calculation of the profits of a trade on the cash basis.

(2) No deduction is allowed for an item of a capital nature incurred on, or in connection with, the acquisition or disposal of a business or part of a business.

(3) No deduction is allowed for an item of a capital nature incurred on, or in connection with, education or training.

(4) No deduction is allowed for an item of a capital nature incurred on, or in connection with, the provision, alteration or disposal of—

(a) any asset that is not a depreciating asset (see subsections (6) and (7)),

(b) any asset not acquired or created for use on a continuing basis in the trade,

(c) a car (see subsection (14)),

(d) land,

(e) a non-qualifying intangible asset (see subsections (8) to (11)), or

(f) a financial asset (see subsection (12)).

(5) But subsection (4)(d) does not prevent a deduction being made for expenditure that—

(a) is incurred on the provision of a depreciating asset which, in being provided, is installed or otherwise fixed to land so as to become, in law, part of the land, but

(b) is not incurred on, or in connection with, the provision of—

(i) a building,

(ii) a wall, floor, ceiling, door, gate, shutter or window or stairs,

(iii) a waste disposal system,

(iv) a sewerage or drainage system, or

(v) a shaft or other structure in which a lift, hoist, escalator or moving walkway may be installed.

(6) An asset is a “depreciating” asset if, on the date the item of a capital nature is incurred, it is reasonable to expect that before the end of 20 years beginning with that date—

(a) the useful life of the asset will end, or

(b) the asset will decline in value by 90% or more.

(7) The useful life of an asset ends when it could no longer be of use to any person for any purpose as an asset of a business.

(8) “Intangible asset” means anything that is capable of being an intangible asset within the meaning of FRS 105 and, in particular, includes—

(a) an internally-generated intangible asset, and

(b) intellectual property.

(9) An intangible asset is “non-qualifying” unless, by virtue of having a fixed maximum duration, it must cease to exist before the end of 20 years beginning with the date on which the item of a capital nature is incurred.

(10) An intangible asset is “non-qualifying” if it consists of a right, whether conditional or not, to obtain an intangible asset without a fixed maximum duration by virtue of which that asset must, assuming the right is exercised at the last possible time, cease to exist before the end of 20 years beginning with the date on which the item of a capital nature is incurred.

(11) Where—

(a) the trader has an intangible asset, and

(b) the trader grants a licence or any other right in respect of that asset to another person,

any intangible asset that consists of a licence or other right granted to the trader in respect of the intangible asset mentioned in paragraph (a) is “non-qualifying”.

(12) A “financial asset” means any right under or in connection with—

(a) a financial instrument, or

(b) an arrangement that is capable of producing a return that is economically equivalent to a return produced under any financial instrument.

(13) A reference to acquisition, provision, alteration or disposal includes potential acquisition, provision, alteration or (as the case may be) disposal.

(14) In this section—

  • “arrangement” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable);

  • “building” includes any fixed structure;

  • “car” has the same meaning as in Part 2 of CAA 2001 (see section 268A of that Act);

  • “financial instrument” has the same meaning as in FRS 105;

  • “FRS 105” means Financial Reporting Standard 105 (the Financial Reporting Standard applicable to the Micro-entities Regime), issued by the Financial Reporting Council in July 2015;

  • “intellectual property” means—

    (a)

    any patent, trade mark, registered design, copyright or design right, plant breeders’ rights or rights under section 7 of the Plant Varieties Act 1997,

    (b)

    any right under the law of a country or territory outside the United Kingdom corresponding or similar to a right within paragraph (a),

    (c)

    any information or technique not protected by a right within paragraph (a) or (b) but having industrial, commercial or other economic value, or

    (d)

    any licence or other right in respect of anything within paragraph (a), (b) or (c);

  • “provision” includes creation, construction or acquisition;

  • “the trader” means the person carrying on the trade.”

3 In section 95A (application of Chapter 6 of Part 2 (trade profits: receipts) to the cash basis)—

(a) the existing text becomes subsection (1),

(b) in that subsection, omit the entry relating to section 96A, and

(c) after that subsection insert—

(2) Section 96A makes provision about capital receipts in certain cases where the profits of a trade are calculated on the cash basis or have previously been calculated on the cash basis (and see also section 96B).”

4 (1) Section 96A (cash basis: capital receipts) is amended as follows.

(2) For the heading substitute “Capital receipts under, or after leaving, cash basis”.

(3) For subsections (1) to (3) substitute—

(1) This section applies in relation to a trade carried on by a person in two cases—

(a) Case 1 (see subsections (2) to (3A)), and

(b) Case 2 (see subsections (3B) to (3E)).

(2) Case 1 is a case in which conditions A and B are met.

(3) Condition A is that the person receives disposal proceeds or a capital refund in relation to an asset at a time when an election under section 25A (cash basis for trades) has effect in relation to the trade.

(3A) Condition B is that—

(a) an amount of capital expenditure (see subsection (3H)) relating to the asset has been brought into account in calculating the profits of the trade on the cash basis, or

(b) an amount of capital expenditure relating to the asset which—

(i) has been incurred (or treated as incurred) by the person before the tax year for which the person last entered the cash basis, and

(ii) is cash basis deductible in relation to that tax year (see section 96B(4)),

has been brought into account in calculating the profits of the trade for a tax year for which no election under section 25A had effect in relation to the trade.

The reference in this paragraph to expenditure brought intoaccount includes a reference to expenditure brought intoaccount under CAA 2001 (see section 96B(5)).

(3B) Case 2 is a case in which—

(a) condition C is met, and

(b) condition D or E is met.

(3C) Condition C is that disposal proceeds or a capital refund arise to the person in relation to an asset at a time—

(a) when no election under section 25A has effect in relation to the trade, and

(b) which is after a time when such an election had had effect in relation to the trade.

(3D) Condition D is that an amount of capital expenditure relating to the asset—

(a) has been paid at a time when an election under section 25A had effect in relation to the trade,

(b) has been brought into account in calculating the profits of the trade on the cash basis, and

(c) on the assumption that an election under section 25A had not had effect at the time the expenditure was paid, would not have been qualifying expenditure.

(3E) Condition E is that an amount of capital expenditure relating to the asset has been brought into account in calculating the profits of the trade for a tax year—

(a) for which no election under section 25A had effect in relation to the trade, and

(b) which is before the tax year for which the person last entered the cash basis.

The reference in this subsection to expenditure brought into account does not include a reference to expenditure brought into account under CAA 2001 (see section 96B(5)).

(3F) “Disposal proceeds” means—

(a) any proceeds arising from the disposal of an asset or any part of it,

(b) any proceeds arising from the grant of any right in respect of, or any interest in, the asset, or

(c) any amount of damages, proceeds of insurance or other compensation received in respect of the asset.

See also subsections (4) and (5) for circumstances in which a person is to be regarded as disposing of an asset.

(3G) “Capital refund” means an amount that is (in substance) a refund of capital expenditure relating to an asset.

(3H) “Capital expenditure” means expenditure of a capital nature incurred, or treated as incurred, on or in connection with—

(a) the provision, alteration or disposal of an asset, or

(b) the potential provision, alteration or disposal of an asset.

(3I) The disposal proceeds or capital refund mentioned in condition A or (as the case may be) condition C are to be brought into account as a receipt in calculating the profits of the trade.

(3J) In a case where only part of the total capital expenditure incurred, or treated as incurred, by the person in relation to the asset has been brought into account in calculating the profits of the trade (whether or not on the cash basis), the amount brought into account under subsection (3I) is proportionately reduced.

(3K) Subsection (3I) does not apply if the whole of the amount which would otherwise be brought into account under that subsection—

(a) has already been brought into account as a receipt in calculating the profits of the trade under this section,

(b) is brought into account as a receipt in calculating the profits of the trade under any other provision of this Part (except section 240D(3) (assets not fully paid for)), or

(c) is brought into account under any Part of CAA 2001 as a disposal value.

(3L) If part of the amount which would otherwise be brought into account under subsection (3I) has already been or is brought into account as mentioned in subsection (3K), subsection (3I) applies in relation to the remainder of that amount.”

(4) Omit subsection (7).

5 After section 96A insert—

96B Section 96A: supplementary provision

(1) This section has effect for the purposes of section 96A.

(2) Any question as to whether or to what extent expenditure is brought into account in calculating the profits of a trade is to be determined on such basis as is just and reasonable in all the circumstances.

(3) A person carrying on a trade “enters the cash basis” for a tax year if—

(a) an election under section 25A has effect in relation to the trade for the tax year, and

(b) no such election had effect in relation to the trade for the previous tax year.

(4) Expenditure is “cash basis deductible” in relation to a tax year if, on the assumption that the expenditure was paid in that tax year, a deduction would be allowed in respect of the expenditure in calculating the profits of the trade on the cash basis for that tax year.

(5) Expenditure is “brought into account under CAA 2001” in calculating the profits of a trade if and to the extent that—

(a) a capital allowance made under Part 2, 5, 6, 7 or 8 of that Act in respect of the expenditure is treated as an expense in calculating those profits (see, for example, section 247 of that Act), or

(b) qualifying expenditure (within the meaning of Part 2, 7 or 8 of CAA 2001) is allocated to a pool for the trade and is set-off against different disposal receipts.

(6) An amount of qualifying expenditure is “set-off against different disposal receipts” if—

(a) the amount would have been unrelieved qualifying expenditure carried forward in the pool for the trade, but

(b) the amount is not so carried forward because (and only because) one or more disposal values in respect of one or more assets, other than the asset in respect of which the qualifying expenditure was incurred (or treated as incurred), have at any time been brought into account in that pool.

(7) For the purposes of subsection (6), an amount of qualifying expenditure incurred (or treated as incurred) by a person is not to be regarded as not carried forward because the person enters the cash basis.

(8) In this section and in section 96A—

  • “disposal value” means—

    (a)

    in section 96A(3K)(c)

    (i)

    a disposal value for the purposes of Part 2, 4A, 5, 6, 7 8 or 10 of CAA 2001 (for example, in relation to Part 2 of that Act, see (in particular) section 61 of that Act), or

    (ii)

    proceeds from a balancing event for the purposes of Part 3 or 3A of that Act (see sections 316 and 360O of that Act), and

    (b)

    in subsection (6), a disposal value for the purposes of—

    (i)

    Part 2 of that Act (see, in particular, section 61 of that Act),

    (ii)

    Part 7 of that Act (see section 462 of that Act), or

    (iii)

    Part 8 of that Act (see sections 476 and 477 of that Act);

  • “market value amount” means the amount that would be regarded as normal and reasonable—

    (a)

    in the market conditions then prevailing, and

    (b)

    between persons dealing with each other at arm’s length in the open market;

  • “pool” means—

    (a)

    the main pool or a class pool to which qualifying expenditure is allocated under Part 2 of CAA 2001 (see section 54 of that Act),

    (b)

    a pool to which qualifying expenditure is allocated under Part 7 of that Act (see section 456 of that Act), or

    (c)

    a pool to which qualifying expenditure is allocated under Part 8 of that Act (see section 470 of that Act);

  • “provision” includes creation, construction or acquisition;

  • “qualifying expenditure” means—

    (a)

    qualifying expenditure within the meaning of Part 2 of CAA 2001 (see section 11(4) of that Act for the general rule),

    (b)

    qualifying expenditure within the meaning of Part 5 of that Act (see section 395 of that Act),

    (c)

    qualifying expenditure within the meaning of Part 6 of that Act (see section 439 of that Act),

    (d)

    qualifying expenditure within the meaning of Part 7 of that Act (see section 454 of that Act), or

    (e)

    qualifying trade expenditure within the meaning of Part 8 of that Act (see section 468 of that Act);

  • “unrelieved qualifying expenditure” means unrelieved qualifying expenditure for the purposes of—

    (a)

    Part 2 of CAA 2001 (see section 59(1) and (2) of that Act),

    (b)

    Part 7 of that Act (see section 461 of that Act), or

    (c)

    Part 8 of that Act (see section 475 of that Act).”

6 In section 106D (capital receipts), for “(cash basis: capital receipts)” substitute “(capital receipts under, or after leaving, cash basis)”.

7 (1) Section 240C (unrelieved qualifying expenditure) is amended as follows.

(2) For the heading substitute “Unrelieved qualifying expenditure: Parts 2, 7 and 8 of CAA 2001”.

(3) In subsection (1)(b), after “unrelieved qualifying expenditure” insert “relating to the trade”.

(4) In subsection (3), for “the relevant portion of the expenditure” substitute “any cash basis deductible amount of the expenditure”.

(5) For subsection (4) substitute—

(4) A “cash basis deductible amount” of the expenditure means any amount of the expenditure for which a deduction would be allowed in calculating the profits of the trade on the cash basis on the assumption that the expenditure was paid in the current tax year.”

(6) In subsection (5), for “The relevant portion” substitute “Any cash basis deductible amount”.

(7) After subsection (5) insert—

(5A) For the purposes of subsection (1)(b), in determining the unrelieved qualifying expenditure the person has to carry forward, disregard sections 59(4), 461A(1) and 475A(1) of CAA 2001 (which provide that an amount is not to be carried forward as unrelieved qualifying expenditure when a person enters the cash basis).”

(8) For subsection (6) substitute—

(6) In this section “unrelieved qualifying expenditure” means unrelieved qualifying expenditure for the purposes of—

(a) Part 2 of CAA 2001 (see section 59(1) and (2) of that Act),

(b) Part 7 of that Act (see section 461 of that Act), or

(c) Part 8 of that Act (see section 475 of that Act).”

8 After section 240C insert—

240CA Unrelieved qualifying expenditure: Part 5 of CAA 2001

(1) This section applies if a person carrying on a mineral extraction trade enters the cash basis for a tax year (“the current tax year”).

(2) But this section does not apply if section 240D applies.

(3) In calculating the profits of the trade for the current tax year, a deduction is allowed for any amount of expenditure—

(a) which would, apart from section 419A(1) of CAA 2001, have been unrelieved qualifying expenditure for the current tax year, and

(b) for which a deduction would be allowed in calculating the profits of the trade on the cash basis on the assumption that the expenditure was paid in the current tax year.

(4) In this section—

  • “mineral extraction trade” has the meaning given in section 394 of CAA 2001;

  • “unrelieved qualifying expenditure” means unrelieved qualifying expenditure for the purposes of Part 5 of CAA 2001 (see section 419 of that Act).”

9 (1) Section 240D (assets not fully paid for) is amended as follows.

(2) In subsection (1)(b), for “obtained” to the end substitute “incurred relevant expenditure, and”.

(3) After subsection (1) insert—

(1A) “Relevant expenditure” means expenditure—

(a) for which a deduction would be allowed in calculating the profits of the trade on the cash basis on the assumption that the expenditure was paid in the tax year, and

(b) in respect of which the person has obtained capital allowances under Part 2, 5, 6, 7 or 8 of CAA 2001.”

(4) In subsection (4), for “The amount of any capital allowance obtained in respect of expenditure on the provision of any plant or machinery” substitute “Any question as to whether or to what extent expenditure is relevant expenditure, or as to whether or to what extent any capital allowance obtained is in respect of relevant expenditure,”.

(5) In subsection (5), after “given” insert “under Part 2 of CAA 2001”.

(6) Omit subsection (6).

10 In section 786(6) (meaning of “rent-a-room receipts”), for “(capital receipts)” substitute “(capital receipts under, or after leaving, cash basis)”.

11 In section 805(5) (meaning of “qualifying care receipts”), for “(capital receipts)” substitute “(capital receipts under, or after leaving, cash basis)”.

Part 2 Property businesses: amendments of ITTOIA 2005

12 ITTOIA 2005 is amended as follows.

13 In Chapter 3 of Part 3 (profits of property businesses: basic rules), after section 271 insert—

“Basis of calculation of profits

271A Basis of calculation of profits: GAAP required

(1) The profits of a property business for a tax year must be calculated in accordance with GAAP if condition A, B, C, D or E is met.

(2) Condition A is that the business is carried on at any time in the tax year by—

(a) a company,

(b) a limited liability partnership,

(c) a corporate firm, or

(d) the trustees of a trust.

(3) For the purposes of subsection (2) a firm is a “corporate firm” if a partner in the firm is not an individual.

(4) Condition B is that the cash basis receipts for the tax year exceed £150,000.

(5) In subsection (4) “the cash basis receipts for the tax year” means the total of the amounts that would be brought into account as receipts in calculating the profits of the property business for the tax year on the cash basis (see section 271D).

(6) If the property business is carried on for only part of the tax year, the sum given in subsection (4) is proportionately reduced.

(7) Condition C is that—

(a) the property business is carried on by an individual (“P”),

(b) a share of joint property income is brought into account in calculating the profits of the business for the tax year,

(c) a share of that joint property income is brought into account in calculating the profits for the tax year of a property business carried on by another individual (“Q’s property business”), and

(d) the profits of Q’s property business for the tax year are calculated in accordance with GAAP.

(8) In subsection (7) “joint property income” means income to which P and Q are treated for income tax purposes as beneficially entitled in equal shares by virtue of section 836 of ITA 2007.

(9) Condition D is that—

(a) an allowance under Part 3A of CAA 2001 (business premises renovation allowances) is made at any time in calculating the profits of the property business, and

(b) if the profits of the business were to be calculated in accordance with GAAP for the tax year, there would be a day in the tax year on which the occurrence of a balancing event (within the meaning of that Part) would give rise to a balancing adjustment for the tax year (see section 360M of that Act).

(10) Condition E is that an election under this subsection made by the person who is or has been carrying on the property business has effect in relation to the business for the tax year.

(11) An election under subsection (10) must be made on or before the first anniversary of the normal self-assessment filing date for the tax year for which the election is made.

(12) The Treasury may by regulations—

(a) amend subsection (2);

(b) amend subsection (4) so as to substitute another sum for the sum for the time being specified in that subsection.

(13) A statutory instrument containing regulations under subsection (12) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, the House of Commons.

(14) Subsection (13) does not apply if the regulations omit one or more paragraphs of subsection (2) and make no other provision.

271B Calculation of profits in accordance with GAAP

(1) In this Part, references to calculating the profits of a property business in accordance with GAAP are to calculating the profits in accordance with generally accepted accounting practice, subject to any adjustment required or authorised by law in calculating profits for income tax purposes.

(2) A requirement under this Part to calculate profits in accordance with GAAP does not—

(a) require a person to comply with the requirements of the Companies Act 2006 or subordinate legislation made under that Act except as to the basis of calculation, or

(b) impose any requirements as to audit or disclosure.

(3) See section 272 (application of trading income rules: GAAP) which applies only where profits are calculated in accordance with GAAP.

271C Basis of calculation of profits: cash basis required

The profits of a property business for a tax year must be calculated on the cash basis if none of conditions A, B, C, D or E in section 271A is met.

271D Calculation of profits on the cash basis

(1) In this Part, references to calculating the profits of a property business on the cash basis are to calculating the profits in accordance with subsections (2) and (3).

(2) In calculating the profits, receipts of the business are brought into account at the time they are received, and expenses of the business are brought into account at the time they are paid.

(3) Subsection (2) is subject to any adjustment required or authorised by law in calculating profits for income tax purposes.

(4) For provision about the application of Chapter 4 (profits of property businesses: lease premiums etc) in relation to profits calculated on the cash basis, see section 276A.

(5) For provision about the application of Chapter 5 (rules about deductions and receipts) in relation to profits calculated on the cash basis, see section 307A.

(6) The following provisions apply only where profits are calculated on the cash basis—

(a) section 272ZA (application of trading income rules: cash basis), and

(b) Chapter 7A (cash basis: adjustments for capital allowances).”

14 In the italic heading before section 272, at the end insert “: application of trading income rules”.

15 After that italic heading insert—

271E Profits of a property business: application of trading income rules

(1) The profits of a property business are calculated in the same way as the profits of a trade.

(2) But this is subject to—

(a) section 272, which limits the rule in subsection (1) in relation to a property business whose profits are calculated in accordance with GAAP, and

(b) section 272ZA, which limits that rule in relation to a property business whose profits are calculated on the cash basis.”

16 (1) Section 272 (profits of a property business: application of trading income rules) is amended as follows.

(2) For the heading substitute “Application of trading income rules: GAAP”.

(3) Omit subsection (1).

(4) In subsection (2), for the words before the table substitute “In relation to a property business whose profits are calculated in accordance with GAAP, the provisions of Part 2 (trading income) which apply as a result of section 271E(1) are limited to the following—”.

(5) In the table in subsection (2), omit the entry relating to section 25 (generally accepted accounting practice).

17 After section 272 insert—

272ZA Application of trading income rules: cash basis

(1) In relation to a property business whose profits are calculated on the cash basis, the provisions of Part 2 (trading income) which apply as

a result of section 271E(1) are limited to the following—

In Chapter 3 (basic rules)—
section 26 losses calculated on same basis as profits
section 28A money’s worth
section 29 interest
In Chapter 4 (rules restricting deductions)—
section 34 expenses not wholly and exclusively for trade and unconnected losses
sections 38 to 42 and 44 employee benefit contributions
sections 45 to 47 business entertainment and gifts
section 52 exclusion of double relief for interest
section 53 social security contributions
section 54 penalties, interest and VAT surcharges
section 55 crime-related payments
section 55A expenditure on integral features
In Chapter 5 (rules allowing deductions)—
section 57 pre-trading expenses
sections 58 and 59 incidental costs of obtaining finance
section 69 payments for restrictive undertakings
sections 70 and 71 seconded employees
section 72 payroll deduction schemes: contributions to agents’ expenses
sections 73 to 75 counselling and retraining expenses
sections 76 to 80 redundancy payments etc
section 81 personal security expenses
sections 82 to 86 contributions to local enterprise organisations or urban regeneration companies
sections 86A and 86B contributions to flood and coastal erosion risk management projects
sections 87 and 88 scientific research
sections 89 and 90 expenses connected with patents, designs and trade marks
section 91 payments to Export Credits Guarantee Department
In Chapter 6 (receipts)—
section 96 capital receipts
section 97 debts incurred and later released
section 104 distribution of assets of mutual concerns
section 105(1) and (2)(b) and (c) industrial development grants
section 106 sums recovered under insurance policies etc
In Chapter 6A (amounts not reflecting commercial transactions)—
section 106C amounts not reflecting commercial transactions
section 106D capital receipts
section 106E gifts to charities etc
In Chapter 7 (gifts to charities etc)—
section 109 receipt by donor or connected person of benefit attributable to certain gifts

(2) In those provisions, the expression “this Part” is to be read as a reference to those provisions as applied by subsection (1) and to the other provisions of Part 3.

(3) In section 106D, the reference to subsection (4) or (5) of section 96A is to be read as a reference to subsection (2), (3) or (5) of section 307F (deemed capital receipts under, or after leaving, cash basis).”

18 After section 272ZA insert—

19 In section 272A (restricting deductions for finance costs related to residential property), after subsection (6) insert—

(7) See also section 307D (cash basis: modification of deduction for costs of loans).”

20 (1) Section 274 (relationship between rules prohibiting and allowing deductions) is amended as follows.

(2) For subsection (1)(b) substitute—

(b) is subject to—

(i) section 36 (unpaid remuneration), as applied by section 272,

(ii) section 38 (employee benefit contributions), as applied by sections 272 and 272ZA,

(iii) section 48 (car hire), as applied by section 272,

(iv) section 55 (crime-related payments), as applied by sections 272 and 272ZA,

(v) section 272A (finance costs), and

(vi) section 307D (cash basis: modification of deduction for costs of loans).”

(3) In subsection (3)—

(a) after “section 272” insert “, or sections 38 and 55 as applied by section 272ZA”, and

(b) for “section 272A” insert “sections 272A and 307D”.

(4) In subsection (4), after “section 272” insert “or 272ZA”.

21 In section 276(5) (introduction: profits of property businesses: lease premiums etc), after “292” insert “; but see also section 276A”.

22 After section 276 insert—

276A Application of Chapter to property businesses using cash basis

The following provisions of this Chapter do not apply in calculating the profits of a property business on the cash basis—

(a) sections 291 to 294 (tenants under taxed leases: deductions), and

(b) sections 296 and 298 (ICTA modifications).”

23 In Chapter 5 of Part 3 (profits of property businesses: other rules about receipts and deductions), after the Chapter heading insert—

“Cash basis: application of Chapter

307A Cash basis: application of Chapter

(1) The following provisions of this Chapter apply only where the profits of a property business are calculated on the cash basis—

(a) section 307B (cash basis: capital expenditure),

(b) section 307C (cash basis: deduction for costs of loans), and

(c) section 307D (cash basis: modification of deduction for costs of loans).

(2) Sections 307E and 307F make provision about capital receipts in certain cases where the profits of a property business are calculated on the cash basis or have previously been calculated on the cash basis.

Property businesses using cash basis

307B Cash basis: capital expenditure

(1) This section applies in relation to the calculation of the profits of a property business on the cash basis.

(2) No deduction is allowed for an item of a capital nature incurred on, or in connection with, the acquisition or disposal of a business or part of a business.

(3) No deduction is allowed for an item of a capital nature incurred on, or in connection with, education or training.

(4) No deduction is allowed for an item of a capital nature incurred on, or in connection with, the provision, alteration or disposal of land.

(5) But subsection (4) does not prevent a deduction being made for expenditure that—

(a) is incurred on the provision of a depreciating asset which, in being provided, is installed or otherwise fixed to qualifying land (see subsection (8)) so as to become, in law, part of the land, but

(b) is not incurred on, or in connection with, the provision of—

(i) a building,

(ii) a wall, floor, ceiling, door, gate, shutter or window or stairs,

(iii) a waste disposal system,

(iv) a sewerage or drainage system, or

(v) a shaft or other structure in which a lift, hoist, escalator or moving walkway may be installed.

(6) No deduction is allowed for an item of a capital nature incurred on, or in connection with, the provision, alteration or disposal of an asset for use in ordinary residential property (see subsection (8)).

But see section 311A (replacement domestic items relief).

(7) If an asset is provided partly for use in ordinary residential property and partly for other purposes, such apportionment of the expenditure incurred on, or in connection with, the provision, alteration or disposal of the asset is to be made for the purposes of subsection (6) as is just and reasonable.

(8) In relation to the calculation of profits for a tax year—

(a) “ordinary residential property” means a dwelling-house or part of a dwelling-house in relation to which an ordinary property business (see subsection (9)) is carried on in the tax year, and

(b) “qualifying land” means land not falling within paragraph (a).

(9) “Ordinary property business” means—

(a) so much of a UK property business as does not consist of the commercial letting of furnished holiday accommodation (within the meaning of Chapter 6) in the UK, or

(b) so much of an overseas property business as does not consist of the commercial letting of furnished holiday accommodation in one or more EEA states.

(10) No deduction is allowed for an item of a capital nature incurred on, or in connection with, the provision, alteration or disposal of—

(a) any asset that is not a depreciating asset (see subsections (11) and (12)),

(b) any asset not acquired or created for use on a continuing basis in the property business,

(c) a car (see subsection (20)),

(d) a non-qualifying intangible asset (see subsections (13) to (16)), or

(e) a financial asset (see subsection (17)).

(11) An asset is a “depreciating” asset if, on the date the item of a capital nature is incurred, it is reasonable to expect that before the end of 20 years beginning with that date—

(a) the useful life of the asset will end, or

(b) the asset will decline in value by 90% or more.

(12) The useful life of an asset ends when it could no longer be of use to any person for any purpose as an asset of a business.

(13) “Intangible asset” means anything that is capable of being an intangible asset within the meaning of FRS 105 and, in particular, includes—

(a) an internally-generated intangible asset, and

(b) intellectual property.

(14) An intangible asset is “non-qualifying” unless, by virtue of having a fixed maximum duration, it must cease to exist before the end of 20 years beginning with the date on which the item of a capital nature is incurred.

(15) An intangible asset is “non-qualifying” if it consists of a right, whether conditional or not, to obtain an intangible asset without a fixed maximum duration by virtue of which that asset must, assuming the right is exercised at the last possible time, cease to exist before the end of 20 years beginning with the date on which the item of a capital nature is incurred.

(16) Where—

(a) the person carrying on the property business (“P”) has an intangible asset, and

(b) P grants a licence or any other right in respect of that asset to another person,

any intangible asset that consists of a licence or other right granted to P in respect of the intangible asset mentioned in paragraph (a) is “non-qualifying”.

(17) A “financial asset” means any right under or in connection with—

(a) a financial instrument, or

(b) an arrangement that is capable of producing a return that is economically equivalent to a return produced under any financial instrument.

(18) A reference to acquisition, provision, alteration or disposal includes potential acquisition, provision, alteration or (as the case may be) disposal.

(19) If there is a letting of accommodation only part of which is furnished holiday accommodation, such apportionments as are just and reasonable in all the circumstances are to be made for the purposes of this section.

(20) In this section—

  • “arrangement” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable);

  • “building” includes any fixed structure;

  • “car” has the same meaning as in Part 2 of CAA 2001 (see section 268A of that Act);

  • “financial instrument” has the same meaning as in FRS 105;

  • “FRS 105” means Financial Reporting Standard 105 (the Financial Reporting Standard applicable to the Micro-entities Regime), issued by the Financial Reporting Council in July 2015;

  • “intellectual property” means—

    (a)

    any patent, trade mark, registered design, copyright or design right, plant breeders’ rights or rights under section 7 of the Plant Varieties Act 1997,

    (b)

    any right under the law of a country or territory outside the United Kingdom corresponding or similar to a right within paragraph (a),

    (c)

    any information or technique not protected by a right within paragraph (a) or (b) but having industrial, commercial or other economic value, or

    (d)

    any licence or other right in respect of anything within paragraph (a), (b) or (c);

  • “provision” includes creation, construction or acquisition.

307C Cash basis: deduction for costs of loans

(1) Section 307D applies in calculating the profits of a property business for a tax year if conditions A to C are met.

(2) Condition A is that the profits of the business are calculated on the cash basis for the tax year.

(3) Condition B is that, apart from section 272A (restricting deductions for finance costs related to residential property) and section 307D (cash basis: modification of deduction for costs of loans), a deduction for costs of a loan would be allowed in calculating the profits of the business for the tax year.

In this section and in section 307D such a loan is referred to as a “relevant loan”.

(4) Condition C is that—

L > V

where—

  • L is the total loan amount for the tax year (see subsections (5) and (6)), and

  • V is the sum of the values of all the properties involved in the property business on the last day of the tax year (see subsections (7) and (8)).

(5) The “total loan amount for the tax year”—

(a) if there is only one relevant loan, is the business amount of that loan, and

(b) if there are two or more relevant loans, is found by calculating the business amount of each of those loans and adding those business amounts together.

(6) The “business amount” of a relevant loan is given by—

where—

  • A is the amount borrowed by way of the loan,

  • X is the amount of the deduction for costs of the loan that would be allowed, apart from sections 272A and 307D, in calculating the profits of the business for the tax year, and

  • Y is the amount of the deduction for costs of the loan that would be allowed, apart from the wholly and exclusively rule and sections 272A and 307D, in calculating the profits of the business for the tax year.

(7) The “value” of a property is the total of—

(a) the market value of the property at the time that it is first involved in the property business, and

(b) such amount of any expenditure of a capital nature incurred by the person carrying on the business in respect of the property as is not brought into account in calculating the profits of the business for the tax year or any previous tax year.

(8) A property is “involved in the property business” if it is a property whose exploitation forms the whole or part of the business.

(9) “Costs”, in relation to a loan, means—

(a) interest on the loan, or

(b) incidental costs of obtaining finance by means of the loan.

(10) Section 58(2) to (4) (meaning of “incidental costs of obtaining finance”) apply for the purposes of subsection (9)(b).

(11) In this section—

  • “market value”, in relation to a property, means the price which the property might reasonably be expected to fetch—

    (a)

    in the market conditions then prevailing, and

    (b)

    between persons dealing with each other at arm’s length in the open market;

  • “property” means an estate, interest or right in or over land;

  • “the wholly and exclusively rule” means the rule in section 34 (expenses not wholly and exclusively for trade and unconnected losses), as applied by section 272ZA (application of trading income rules: cash basis).

307D Cash basis: modification of deduction for costs of loans

(1) Where section 307C provides that this section applies in calculating the profits of a property business for a tax year, the amount which is allowed as a deduction for costs of a relevant loan in calculating the profits for the tax year is the non-adjusted deduction multiplied by the relevant fraction.

This is subject to section 272A (restricting deductions for finance costs related to residential property).

(2) “The non-adjusted deduction” means the deduction for costs of the relevant loan that would be allowed, apart from section 272A and this section, in calculating the profits of the business for the tax year.

(3) “The relevant fraction” means—

where V and L have the same meaning as in section 307C.

Property businesses that use, or have used, cash basis

307E Capital receipts under, or after leaving, cash basis

(1) This section applies in relation to a property business carried on by a person in two cases—

(a) Case 1 (see subsections (2) to (4)), and

(b) Case 2 (see subsections (5) to (8)).

(2) Case 1 is a case in which conditions A and B are met.

(3) Condition A is that the person receives disposal proceeds or a capital refund in relation to an asset in a tax year for which the profits of the property business are calculated on the cash basis (see section 271D).

For the meaning of “disposal proceeds” and “capital refund” see subsections (9) and (10).

(4) Condition B is that—

(a) an amount of capital expenditure (see subsection (11)) relating to the asset has been brought into account in calculating the profits of the property business on the cash basis, or

(b) an amount of relevant capital expenditure (see subsection (17)) relating to the asset has been brought into account in calculating the profits of the property business in accordance with GAAP (see section 271B)—

(i) by means of a deduction allowed under section 58 or 59 (incidental costs of obtaining finance) (as applied by section 272) or section 311A (replacement domestic items relief), or

(ii) under CAA 2001 (see subsection (20)).

(5) Case 2 is a case in which—

(a) condition C is met, and

(b) condition D or E is met.

(6) Condition C is that disposal proceeds or a capital refund arise to the person in relation to an asset in a tax year—

(a) for which the profits of the property business are calculated in accordance with GAAP, and

(b) which is after a tax year for which the profits of the business had been calculated on the cash basis.

(7) Condition D is that an amount of capital expenditure relating to the asset—

(a) has been paid in a tax year for which the profits of the property business were calculated on the cash basis,

(b) has been brought into account in calculating the profits of the business on the cash basis, and

(c) on the assumption that the profits had not been calculated on the cash basis at the time the expenditure was paid, would not have been qualifying expenditure.

(8) Condition E is that—

(a) an amount of capital expenditure relating to the asset has been brought into account in calculating the profits of the property business for a tax year in accordance with GAAP by means of a deduction allowed under section 58 or 59 (as applied by section 272) or section 311A, and

(b) that tax year is before the tax year for which the person last entered the cash basis.

(9) “Disposal proceeds” means—

(a) any proceeds arising from the disposal of an asset or any part of it,

(b) any proceeds arising from the grant of any right in respect of, or any interest in, the asset, or

(c) any amount of damages, proceeds of insurance or other compensation received in respect of the asset.

See also section 307F for circumstances in which a person is to be regarded as disposing of an asset.

(10) “Capital refund” means an amount that is (in substance) a refund of capital expenditure relating to an asset.

(11) “Capital expenditure” means expenditure of a capital nature incurred, or treated as incurred, on or in connection with—

(a) the provision, alteration or disposal of an asset, or

(b) the potential provision, alteration or disposal of an asset.

(12) The disposal proceeds or capital refund mentioned in condition A or (as the case may be) condition C are to be brought into account as a receipt in calculating the profits of the property business.

(13) In a case where only part of the total capital expenditure incurred, or treated as incurred, by the person in relation to the asset has been brought into account in calculating the profits of the property business (whether or not on the cash basis), the amount brought into account under subsection (12) is proportionately reduced.

The reference in this subsection to expenditure brought into account includes a reference to expenditure brought into account under CAA 2001 (see subsection (20)).

(14) Subsection (12) does not apply if the whole of the amount which would otherwise be brought into account under that subsection—

(a) has already been brought into account as a receipt in calculating the profits of the property business under this section,

(b) is brought into account as a receipt in calculating the profits of the business under any other provision of this Part (except section 334D(4) (assets not fully paid for)), or

(c) is brought into account under Part 2 or 3A of CAA 2001 as a disposal value.

The reference to any other provision of this Part in paragraph (b) includes a reference to any provision applied by section 272 or 272ZA.

(15) If part of the amount which would otherwise be brought into account under subsection (12) has already been or is brought into account as mentioned in subsection (14), subsection (12) applies in relation to the remainder of that amount.

(16) For the purposes of this section, any question as to whether or to what extent expenditure is brought into account in calculating the profits of a property business is to be determined on such basis as is just and reasonable in all the circumstances.

(17) In subsection (4)(b) “relevant capital expenditure” means capital expenditure which—

(a) has been incurred (or treated as incurred) by the person before the tax year for which the person last entered the cash basis, and

(b) is cash basis deductible in relation to that tax year.

(18) For the purposes of this section, a person carrying on a property business “enters the cash basis” for a tax year if the profits of the business are calculated—

(a) on the cash basis for the tax year, and

(b) in accordance with GAAP for the previous tax year.

(19) Expenditure is “cash basis deductible” in relation to a tax year if, on the assumption that the expenditure was paid in that tax year, a deduction would be allowed in respect of the expenditure in calculating the profits of the property business on the cash basis for that tax year.

(20) For the purposes of this section, expenditure is “brought into account under CAA 2001” in calculating the profits of a property business if and to the extent that—

(a) a capital allowance made under Part 2 of that Act in respect of the expenditure is treated as an expense in calculating those profits (see sections 248 to 250A of that Act), or

(b) qualifying expenditure (within the meaning of Part 2 of CAA 2001) is allocated to a pool for a relevant qualifying activity and is set-off against different disposal receipts.

(21) An amount of qualifying expenditure is “set-off against different disposal receipts” if—

(a) the amount would have been unrelieved qualifying expenditure carried forward in the pool for the relevant qualifying activity, but

(b) the amount is not so carried forward because (and only because) one or more disposal values in respect of one or more assets, other than the asset in respect of which the

qualifying expenditure was incurred (or treated as incurred), have at any time been brought into account in that pool.

(22) For the purposes of subsections (20) and (21), an activity is a “relevant qualifying activity” if—

(a) it is a qualifying activity mentioned in section 15(1)(b) to (da) of CAA 2001 (property business activities), and

(b) the property business consists of or includes that qualifying activity.

(23) For the purposes of subsection (21), an amount of qualifying expenditure incurred (or treated as incurred) by a person is not to be regarded as not carried forward because the person enters the cash basis.

(24) In this section—

  • “disposal value” means—

    (a)

    in subsection (14)(c)

    (i)

    a disposal value for the purposes of Part 2 of CAA 2001 (see, in particular, section 61 of that Act), or

    (ii)

    proceeds from a balancing event for the purposes of Part 3A of that Act (see section 360O of that Act), and

    (b)

    in subsection (21), a disposal value for the purposes of Part 2 of that Act;

  • “pool” means the main pool or a class pool to which qualifying expenditure is allocated under Part 2 of CAA 2001 (see section 54 of that Act);

  • “provision” includes creation, construction or acquisition;

  • “qualifying expenditure” means qualifying expenditure within the meaning of Part 2 of CAA 2001 (see section 11(4) of that Act for the general rule);

  • “unrelieved qualifying expenditure” means unrelieved qualifying expenditure for the purposes of Part 2 of CAA 2001 (see section 59(1) and (2) of that Act).

307F Deemed capital receipts under, or after leaving, cash basis

(1) This section makes provision supplementary to section 307E.

(2) If—

(a) at any time a person ceases to use an asset or any part of it for the purposes of a property business (other than in the circumstances mentioned in subsection (5)), but

(b) the person does not dispose of the asset (or that part) at that time,

the person is to be regarded for the purposes of section 307E as disposing of the asset (or that part) at that time for an amount equal to the market value amount.

(3) If at any time there is a material increase in the person’s non-business use of an asset or any part of it, the person is to be regarded for the purposes of section 307E as disposing of the asset (or that part) at that

time for an amount equal to the relevant proportion of the market value amount.

(4) For the purposes of subsection (3)

(a) there is an increase in a person’s non-business use of an asset (or part of an asset) if—

(i) the proportion of the person’s use of the asset (or that part) that is for the purposes of the property business decreases, and

(ii) the proportion of the person’s use of the asset (or that part) that is for other purposes (the “non-business use”) increases;

(b) “the relevant proportion” is the difference between—

(i) the proportion of the person’s use of the asset (or part of the asset) that is non-business use, and

(ii) the proportion of the person’s use of the asset (or that part) that was non-business use before the increase mentioned in subsection (3).

(5) If—

(a) the property business in respect of which capital expenditure relating to an asset has been brought into account as mentioned in section 307E is an overseas property business, and

(b) there is a move overseas,

the person is to be regarded for the purposes of section 307E as disposing of the asset at the time of the move overseas for an amount equal to the market value amount.

(6) For the purposes of subsection (5) there is a “move overseas” if—

(a) the person ceases to be UK resident, or

(b) the tax year is, as respects the person, a split year, and the overseas part of the tax year is the later part.

(7) The move overseas occurs—

(a) in a case falling within subsection (6)(a), on the last day of the tax year for which the person is UK resident, or

(b) in a case falling within subsection (6)(b), on the last day of the UK part of the tax year.

(8) In this section—

  • “capital expenditure” has the same meaning as in section 307E,

  • “market value amount” means the amount that would be regarded as normal and reasonable—

    (a)

    in the market conditions then prevailing, and

    (b)

    between persons dealing with each other at arm’s length in the open market.”

24 In section 311A (replacement domestic items relief), in subsection (15)—

(a) for the definition of “the capital expenditure rule” substitute—

  • ““the capital expenditure rule” means—

    (a)

    in relation to a property business whose profits are calculated in accordance with

    GAAP, section 33 (capital expenditure), as applied by section 272, and

    (b)

    in relation to a property business whose profits are calculated on the cash basis, section 307B (cash basis: capital expenditure);”;

(b) in the definition of “the wholly and exclusively rule”—

(i) omit “the rule in”, and

(ii) after “section 272” insert “or 272ZA”.

25 In section 315 (deduction for expenditure on sea walls), after subsection (6) insert—

(7) In calculating the profits of a property business on the cash basis, any reference in this section to the incurring of expenditure is to the paying of expenditure.”

26 In section 322 (commercial letting of furnished holiday accommodation), after paragraph (za) in subsections (2) and (2A) insert—

(zaa) section 307B (cash basis: capital expenditure),”.

27 After section 329 insert—

329A Application of Chapter where cash basis used

This Chapter applies if—

(a) the profits of a property business are calculated—

(i) on the cash basis for a tax year (see section 271D), and

(ii) in accordance with GAAP (see section 271B) for the following tax year, or

(b) the profits of a property business are calculated—

(i) in accordance with GAAP for a tax year, and

(ii) on the cash basis for the following tax year.”

28 In section 331 (income charged)—

(a) the existing text becomes subsection (1), and

(b) after that subsection insert—

(2) This is subject to section 334A (spreading on leaving cash basis and related election).”

29 After section 334 insert—

“Spreading of adjustment income on leaving cash basis

334A Spreading on leaving cash basis and related election

Sections 239A (spreading on leaving cash basis) and 239B (election to accelerate charge under section 239A) apply for the purposes of this Chapter as they apply for the purposes of Chapter 17 of Part 2, but as if—

(a) for section 239A(1) there were substituted—

(1) This section applies if the profits of a property business are calculated—

(a) on the cash basis for a tax year (see section 271D), and

(b) in accordance with GAAP (see section 271B) for the following tax year.”, and

(b) any reference to section 239A or 239B were to the section concerned as applied by this section.

CHAPTER 7A Cash basis: adjustments for capital allowances

334B “Entering the cash basis”

For the purposes of this Chapter, a person carrying on a property business enters the cash basis for a tax year if the profits of the business are calculated—

(a) on the cash basis for the tax year (see section 271D), and

(b) in accordance with GAAP (see section 271B) for the previous tax year.

334C Unrelieved qualifying expenditure

(1) This section applies if—

(a) a person carrying on a property business enters the cash basis for a tax year (“the current tax year”), and

(b) the person would, apart from section 59(4A) of CAA 2001, have unrelieved qualifying expenditure relating to a relevant property business activity to carry forward from the chargeable period which is the previous tax year.

(2) But this section does not apply if section 334D applies.

(3) In calculating the profits of the property business for the current tax year, a deduction is allowed for any cash basis deductible amount of the expenditure relating to each relevant property business activity.

(4) A “cash basis deductible amount” of the expenditure means any amount of the expenditure for which a deduction would be allowed in calculating the profits of the property business on the cash basis on the assumption that the expenditure was paid in the current tax year.

(5) Any cash basis deductible amount of the expenditure is to be determined on such basis as is just and reasonable in all the circumstances.

(6) In this section—

  • “relevant property business activity” means—

    (a)

    in relation to a UK property business, an ordinary UK property business and a UK furnished holiday lettings business (within the meaning of Part 2 of CAA 2001 (see sections 16 and 17 of that Act)), and

    (b)

    in relation to an overseas property business, an ordinary overseas property business and an EEA furnished holiday lettings business (within the meaning of Part 2 of that Act (see sections 17A and 17B of that Act));

  • “unrelieved qualifying expenditure” means unrelieved qualifying expenditure for the purposes of Part 2 of CAA 2001 (see section 59(1) and (2) of that Act).

334D Assets not fully paid for

(1) This section applies if—

(a) a person carrying on a property business enters the cash basis for a tax year (“the current tax year”),

(b) at any time before the end of the chargeable period which is the previous tax year the person has incurred relevant expenditure, and

(c) not all of the relevant expenditure has actually been paid by the person.

(2) “Relevant expenditure” means expenditure on plant or machinery—

(a) for which a deduction would be allowed in calculating the profits of the property business on the cash basis on the assumption that the expenditure was paid in the current tax year, and

(b) in respect of which the person has obtained capital allowances.

(3) If the amount of the relevant expenditure that the person has actually paid exceeds the amount of capital allowances given in respect of the relevant expenditure, the difference is to be deducted in calculating the profits of the property business for the current tax year.

(4) If the amount of the relevant expenditure that the person has actually paid is less than the amount of capital allowances given in respect of the relevant expenditure, the difference is to be treated as a receipt in calculating the profits of the property business for the current tax year.

(5) Any question as to whether or to what extent expenditure is relevant expenditure, or as to whether or to what extent any capital allowance obtained is in respect of relevant expenditure, is to be determined on such basis as is just and reasonable in all the circumstances.

(6) If the amount of capital allowances given in respect of the relevant expenditure has been reduced under section 205 or 207 of CAA 2001 (reduction where asset provided or used only partly for qualifying activity), the amount of the relevant expenditure that the person has actually paid is to be proportionately reduced for the purposes of this section.

334E Effect of election where predecessor and successor are connected persons

(1) This section applies if—

(a) a person carrying on a property business enters the cash basis for a tax year,

(b) the person is the successor for the purposes of section 266 of CAA 2001, and

(c) as a result of an election under that section, relevant plant or machinery is treated as sold by the predecessor to the successor at any time during the tax year.

(2) The provisions of this Chapter have effect in relation to the successor as if everything done to or by the predecessor had been done to or by the successor.

(3) Any expenditure actually incurred by the successor on acquiring the relevant plant or machinery is to be ignored for the purposes of calculating the profits of the property business for the tax year.

(4) In this section—

  • “the predecessor” has the same meaning as in section 266 of CAA 2001, and

  • “relevant plant or machinery” has the same meaning as in section 267 of that Act.”

30 In section 351 (income charged), after subsection (2) insert—

(3) Further to subsection (2), section 254 applies for the purposes of this Chapter as if for subsection (2A) of that section there were substituted—

(2A) If the time immediately before the person permanently ceases to carry on the UK property business falls in a cash basis tax year, assume for the purposes of subsection (2) that the profits of the business are calculated on the cash basis.”

(4) For the purposes of sections 254 (as so applied) and 353, a tax year is “a cash basis tax year” in relation to a property business if the profits of the business for the tax year are calculated on the cash basis (see section 271D).”

31 In section 353 (basic meaning of “post-cessation receipt”), after subsection (1) insert—

(1A) If the time immediately before a person permanently ceases to carry on a UK property business falls in a cash basis tax year (see section 351(4)), a sum is to be treated as a post-cessation receipt only if it would have been brought into account in calculating the profits of the business on the cash basis had it been received at that time.”

32 In section 356 (application to businesses within the charge to corporation tax), in subsection (1), for “section 355” substitute “sections 353(1A) and 355, and in the modification of section 254 in section 351(3)”.

33 In section 786 (meaning of “rent-a-room receipts”), after subsection (6) insert—

(6A) Subsections (6B) and (7) apply if—

(a) the receipts would otherwise be brought into account in calculating the profits of a UK property business, and

(b) the profits are calculated on the cash basis (see section 271D).

(6B) Any amounts brought into account under section 307E (capital receipts under, or after leaving, cash basis) as a receipt in calculating the profits of the property business are to be treated as receipts within paragraph (a) of subsection (1) above.”

34 In section 860 (adjustment income), in subsection (5), after “Chapter 17 of Part 2” insert “, or under section 239B as applied to property businesses by section 334A,”.

35 In section 866 (employee benefit contributions: non-trades and non-property businesses), in subsection (7)(b), for “section 272” substitute “sections 272 and 272ZA”.

36 In section 867 (business entertainment and gifts: non-trades and non-property businesses), in subsection (7)(b), for “section 272” substitute “sections 272 and 272ZA”.

37 In section 868 (social security contributions: non-trades etc), in subsection (6)(b), for “section 272” insert “sections 272 and 272ZA”.

38 In section 869 (penalties, interest and VAT surcharges: non-trades etc), in subsection (6)(b), for “section 272” substitute “sections 272 and 272ZA”.

39 In section 870 (crime-related payments: non-trades and non-property businesses), in subsection (4)(b), for “section 272” substitute “sections 272 and 272ZA”.

40 In section 872 (losses calculated on same basis as miscellaneous income), in subsection (4)(b), for “section 272” substitute “sections 272 and 272ZA”.

41 In Part 2 of Schedule 4 (index of defined expressions), at the appropriate place insert—