Finance Act 2014

Income tax

24 (1) After Chapter 5A insert—

“Chapter 5AA Disposals of income streams through partnerships

809AAZA Application of Chapter

(1) This Chapter applies (subject to subsection (2)) if directly or indirectly in consequence of, or otherwise in connection with, arrangements involving a person within the charge to income tax (“the transferor”) and another person (“the transferee”)—

(a) there is, or is in substance, a disposal of a right to relevant receipts by the transferor to the transferee,

(b) the disposal is effected (wholly or partly) by or through a partnership (“the relevant partnership”),

(c) at any time—

(i) the transferor is a member of the relevant partnership or of a partnership associated with the relevant partnership, and

(ii) the transferee is a member of the relevant partnership or of a partnership associated with the relevant partnership, and

(d) the main purpose, or one of the main purposes, of one or more steps taken in effecting the disposal is the obtaining of a tax advantage for any person.

(2) This Chapter does not apply if—

(a) the transferor is the spouse or civil partner of the transferee and they are living together, or

(b) the transferor is a brother, sister, ancestor or lineal descendant of the transferee.

(3) In subsection (1)(a) the reference to a disposal of a right to relevant receipts includes anything constituting a disposal of such a right for the purposes of TCGA 1992.

(4) For the purposes of subsection (1)(b) the disposal might, in particular, be effected by an acquisition or disposal of, or an increase or decrease in, an interest in the relevant partnership (including a share of the profits or assets of the relevant partnership or an interest in such a share).

(5) For the purposes of subsection (1)(c) it does not matter if the transferor and the transferee are not members of a partnership as mentioned at the same time.

(6) For the purposes of subsection (1)(c) a partnership is “associated” with the relevant partnership if—

(a) it is a member of the relevant partnership, or

(b) it is a member of a partnership which is associated with the relevant partnership (whether by virtue of paragraph (a) or this paragraph).

(7) In subsections (1)(c) and (5) references to the transferor include a person connected with the transferor and references to the transferee include a person connected with the transferee.

(8) In this Chapter—

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

• “partnership” includes a limited liability partnership whether or not section 863(1) of ITTOIA 2005 applies in relation to it,

• “relevant receipts” means any income—

  (a)

  which (but for the disposal) would be charged to income tax as income of the transferor (whether directly or as a member of a partnership), or

  (b)

  which (but for the disposal) would be brought into account as income in calculating profits of the transferor (whether directly or as a member of a partnership) for income tax purposes, and

• “tax advantage” means a tax advantage, as defined in section 1139 of CTA 2010, in relation to income tax or the charge to corporation tax on income.

809AAZB Relevant amount to be treated as income

(1) The relevant amount is to be treated as income of the transferor chargeable to income tax in the same way and to the same extent as that in which the relevant receipts—

(a) would have been chargeable to income tax as income of the transferor, or

(b) would have been brought into account as income in calculating profits of the transferor for income tax purposes,

but for the disposal.

(2) In subsection (1) “the relevant amount” is to be read in accordance with section 809AZB(2) and section 809AZB(3) to (6) applies for the purpose of determining when income under subsection (1) is treated as arising.

(3) For this purpose, in section 809AZB(2) to (6) references to the transfer of the right are to be read as references to the disposal of the right.

(4) If, apart from this subsection and section 809DZB(3)—

(a) both this Chapter and Chapter 5D would apply in relation to the disposal, and

(b) Chapter 5D would give a greater amount of income of the transferor chargeable to income tax,

this Chapter is not to apply in relation to the disposal.”

(2) The amendment made by this paragraph has effect for cases where the arrangements mentioned in section 809AAZA(1) of ITA 2007 are made on or after 6 April 2014.