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Finance Act 2011

2011 CHAPTER 11

An Act to grant certain duties, to alter other duties, and to amend the law relating to the National Debt and the Public Revenue, and to make further provision in connection with finance.

[19th July 2011]

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 E+W+S+N.I.Charges, rates, allowances etc

Income taxE+W+S+N.I.

1Charge and main rates for 2011-12E+W+S+N.I.

(1)Income tax is charged for the tax year 2011-12.

(2)For that tax year—

(a)the basic rate is 20%,

(b)the higher rate is 40%, and

(c)the additional rate is 50%.

2Basic rate limit for 2011-12E+W+S+N.I.

(1)For the tax year 2011-12 the amount specified in section 10(5) of ITA 2007 (basic rate limit) is replaced with “ £35,000 ”.

(2)Accordingly section 21 of that Act (indexation of limits), so far as relating to the basic rate limit, does not apply for that tax year.

3Personal allowance for 2011-12 for those aged under 65E+W+S+N.I.

(1)For the tax year 2011-12 the amount specified in section 35(1) of ITA 2007 (personal allowance for those aged under 65) is replaced with “ £ 7,475 ”.

(2)Accordingly section 57 of that Act (indexation of allowances), so far as relating to the amount specified in section 35(1) of that Act, does not apply for that tax year.

Corporation taxE+W+S+N.I.

4Main rate for financial year 2011E+W+S+N.I.

(1)In section 2(2)(a) of FA 2010 (main corporation tax rate for financial year 2011 on profits other than ring fence profits), for “27%” substitute “ 26% ”.

(2)The amendment made by this section is treated as having come into force on 1 April 2011.

5Charge and main rate for financial year 2012E+W+S+N.I.

(1)Corporation tax is charged for the financial year 2012.

(2)For that year the rate of corporation tax is—

(a)25% on profits of companies other than ring fence profits, and

(b)30% on ring fence profits of companies.

(3)In subsection (2) “ring fence profits” has the same meaning as in Part 8 of CTA 2010 (see section 276 of that Act).

6Small profits rate and fractions for financial year 2011E+W+S+N.I.

(1)For the financial year 2011 the small profits rate is—

(a)20% on profits of companies other than ring fence profits, and

(b)19% on ring fence profits of companies.

(2)For the purposes of Part 3 of CTA 2010, for that year—

(a)the standard fraction is 3/200ths, and

(b)the ring fence fraction is 11/400ths.

(3)In subsection (1) “ring fence profits” has the same meaning as in Part 8 of that Act (see section 276 of that Act).

7Increase in rate of supplementary chargeE+W+S+N.I.

(1)In section 330 of CTA 2010 (supplementary charge in respect of ring fence trades), in subsection (1), for “20%” substitute “ 32% ”.

(2)The amendment made by subsection (1) has effect in relation to accounting periods beginning on or after 24 March 2011 (but see also subsection (3)).

(3)Subsections (4) to (10) apply where a company has an accounting period beginning before 24 March 2011 and ending on or after that date (“the straddling period”).

(4)For the purpose of calculating the amount of the supplementary charge on the company for the straddling period—

(a)so much of that period as falls before 24 March 2011, and so much of that period as falls on or after that date, are treated as separate accounting periods, and

(b)the company's adjusted ring fence profits for the straddling period are apportioned to the two separate accounting periods in proportion to the number of days in those periods.

(5)But if the basis of apportionment in subsection (4)(b) would work unjustly or unreasonably in the company's case, the company may elect for its profits to be apportioned on another basis that is just and reasonable and specified in the election.

(6)The amount of the supplementary charge on the company for the straddling period is the sum of the amounts of supplementary charge that would, in accordance with subsections (4) and (5), be chargeable on the company for those separate accounting periods.

(7)In relation to the straddling period—

(a)the Instalment Payments Regulations apply as if the amendment made by subsection (1) had not been made, but

(b)those Regulations also apply separately, in accordance with subsection (8), in relation to the increase in the amount of any supplementary charge on the company for that period that arises as a result of that amendment.

(8)In the separate application of those Regulations under subsection (7)(b), those Regulations have effect as if, for the purposes of those Regulations—

(a)the straddling period were an accounting period beginning on 24 March 2011,

(b)supplementary charge were chargeable on the company for that period, and

(c)the amount of that charge were equal to the increase in the amount of the supplementary charge for the straddling period that arises as a result of the amendment made by subsection (1).

(9)Any reference in the Instalment Payment Regulations to the total liability of a company is, accordingly, to be read—

(a)in their application as a result of subsection (7)(a), as a reference to the amount that would be the company's total liability for the straddling period if the amendment made by subsection (1) had not been made, and

(b)in their application as a result of subsection (7)(b), as a reference to the amount of the supplementary charge on the company for the deemed accounting period under subsection (8)(a).

(10)For the purposes of the Instalment Payment Regulations—

(a)a company is to be regarded as a large company as respects the deemed accounting period under subsection (8)(a) if (and only if) it is a large company for those purposes as respects the straddling period, and

(b)any question whether a company is a large company as respects the straddling period is to be determined as it would have been determined if the amendment made by subsection (1) had not been made.

(11)In this section—

  • adjusted ring fence profits” has the same meaning as in section 330 of CTA 2010;

  • the Instalment Payments Regulations” means the Corporation Tax (Instalment Payments) Regulations 1998 (S.I. 1998/3175);

  • supplementary charge” means any sum chargeable under section 330(1) of CTA 2010 as if it were an amount of corporation tax.

Capital gains taxE+W+S+N.I.

8Annual exempt amountE+W+S+N.I.

(1)Section 3 of TCGA 1992 (annual exempt amount) is amended as follows.

(2)For subsection (2) substitute—

(2)The exempt amount for a tax year is £10,600.

(3)For subsections (3) and (4) substitute—

(3)If there is a relevant increase in RPI in relation to a tax year—

(a)the exempt amount is to be increased in accordance with Steps 1 and 2, and

(b)subsection (2) has effect from then on (for that and subsequent tax years) as if it referred to the increased amount,

unless Parliament otherwise determines.

(3A)There is a relevant increase in RPI in relation to a tax year if the retail prices index for the September before the start of the tax year is higher than it was for the previous September.

(3B)Steps 1 and 2 are—

  • Step 1 Increase the exempt amount for the previous tax year by the same percentage as the percentage of the relevant increase in RPI.

  • Step 2 If the result of Step 1 is not a multiple of £100, round it up to the nearest multiple of £100.

(4)If there is a relevant increase in RPI in relation to a tax year, the Treasury must before the start of that tax year make an order showing the amount arrived at as a result of Steps 1 and 2.

(4)The amendment made by subsection (2) has effect for the tax year 2011-12 and subsequent tax years.

(5)For the tax year 2011-12, section 3(3) of TCGA 1992 (indexation) does not apply.

(6)The amendment made by subsection (3) has effect for the tax year 2012-13 and subsequent tax years.

9Entrepreneurs' reliefE+W+S+N.I.

(1)In section 169N of TCGA 1992 (amount of relief: general)—

(a)in subsection (4) for “£5 million” substitute “ £10 million ”, and

(b)in subsection (4A) for “£5 million” substitute “ £10 million ”.

(2)The amendments made by this section have effect in relation to qualifying business disposals occurring on or after 6 April 2011.

Capital allowancesE+W+S+N.I.

10Plant and machinery writing-down allowancesE+W+S+N.I.

(1)Part 2 of CAA 2001 (plant and machinery allowances) is amended as follows.

(2)In section 56 (amount of allowances and charges), in subsection (1) for “20%” substitute “ 18% ”.

(3)In section 104D (writing-down allowances: special rate expenditure)—

(a)in subsection (1) for “10%” substitute “ 8% ”, and

(b)after that subsection insert—

(1A)But, in relation to special rate expenditure incurred wholly for the purposes of a ring fence trade in respect of which tax is chargeable under section 330(1) of CTA 2010 (supplementary charge in respect of ring fence trades), the amount of the writing-down allowance to which a person is entitled for a chargeable period is 10% of the amount by which AQE exceeds TDR.

(4)Accordingly—

(a)in the heading for section 104D, after “at” insert 8% or, and

(b)in sections 56(2)(a) and 104E(1)(a), before “10%” insert “ 8% or ”.

(5)Part 10 of Schedule 22 to FA 2000 (companies within tonnage tax: capital allowances in respect of ship leasing), as it has effect (by virtue of section 57(9) of this Act) in relation to expenditure incurred before 1 January 2011, is amended as follows.

(6)In each of the following provisions, for “20%” (in each place) substitute “ 18% ”

(a)paragraph 94(3)(a) and (4),

(b)paragraph 95(4),

(c)paragraph 97(2) and (3),

(d)paragraph 98(8), and

(e)paragraph 99(2) and (5).

(7)In each of the following provisions, for “10%” substitute “ 8% ”

(a)paragraph 94(3)(b) and (4),

(b)paragraph 95(4),

(c)paragraph 97(2), (3) and (4),

(d)paragraph 98(8), and

(e)paragraph 99(2).

(8)The amendments made by this section have effect in relation to—

(a)chargeable periods beginning on or after the relevant day, and

(b)chargeable periods beginning before, and ending on or after, the relevant day.

(9)But in respect of a chargeable period within subsection (8)(b), they have effect as if—

(a)in section 56(1) of CAA 2001 and the provisions of Schedule 22 to FA 2000 mentioned in subsection (6), references to 18% were references to X%, and

(b)in section 104D(1) of CAA 2001 and the provisions of Schedule 22 to FA 2000 mentioned in subsection (7), references to 8% were references to Y%.

(10)For the purposes of subsection (9)—

(11)Where X or Y would be a figure with more than 2 decimal places, it is to be rounded up to the nearest second decimal place.

(12)In subsection (10)—

  • BRD is the number of days in the chargeable period before the relevant day,

  • ARD is the number of days in the chargeable period on and after the relevant day, and

  • CP is the number of days in the chargeable period.

(13)The relevant day is—

(a)for corporation tax purposes, 1 April 2012, and

(b)for income tax purposes, 6 April 2012.

11Annual investment allowanceE+W+S+N.I.

(1)Section 51A of CAA 2001 (entitlement to annual investment allowance) is amended as follows.

(2)In subsection (5) (maximum allowance), for “£100,000” substitute “ £25,000 ”.

(3)In subsection (8) (power to amend maximum allowance), for “other” substitute “ greater ”.

(4)The amendment made by subsection (2) has effect in relation to expenditure incurred on or after the relevant day.

(5)Subsections (6) and (7) apply in relation to a chargeable period (“the actual chargeable period”) which—

(a)begins before the relevant day, and

(b)ends on or after that day.

(6)The maximum allowance under section 51A of CAA 2001 for the actual chargeable period is the sum of each maximum allowance that would be found if—

(a)the period beginning with the first day of the chargeable period and ending with the day before the relevant day, and

(b)the period beginning with the relevant day and ending with the last day of the chargeable period,

were treated as separate chargeable periods.

(7)But, so far as concerns expenditure incurred on or after the relevant day, the maximum allowance under section 51A of CAA 2001 for the actual chargeable period is the maximum allowance, calculated in accordance with subsection (6), for the period mentioned in paragraph (b) of that subsection.

(8)Subsections (6) and (7) are also to apply for the purpose of determining the maximum allowance under section 51K of CAA 2001 (operation of annual investment allowance where restrictions apply) in a case where one or more chargeable periods in which the relevant AIA qualifying expenditure is incurred are chargeable periods within subsection (5), but the modifications in subsections (9) to (11) are to apply.

(9)There is to be taken into account for the purpose mentioned in subsection (8) only chargeable periods of one year or less (whether or not they are chargeable periods within subsection (5)), and if there is more than one such period, only that period which gives rise to the greatest maximum allowance.

(10)For the purposes of subsection (9) any chargeable period—

(a)which is longer than a year, and

(b)which ends in the tax year 2012-13,

is to be treated as being a chargeable period of one year ending at the same time as it actually ends.

(11)The limit in section 51K(6) of CAA 2001 in relation to a chargeable period (“the chargeable period concerned”) is to be treated as reduced (but not below nil) by the amount of the annual investment allowance allocated to relevant AIA qualifying expenditure incurred in any other chargeable period which ends on or after the last day of the chargeable period concerned.

(12)Nothing in subsections (8) to (11) affects the operation of sections 51M and 51N of that Act.

(13)In this section “the relevant day” means—

(a)for corporation tax purposes, 1 April 2012, and

(b)for income tax purposes, 6 April 2012.

12Short-life assetsE+W+S+N.I.

(1)Part 2 of CAA 2001 (plant and machinery allowances) is amended as follows.

(2)In section 86 (short-life asset pool)—

(a)in subsection (2), for “four-year” (in each place) substitute “ relevant ”,

(b)for subsection (3) substitute—

(3)In this Chapter “the relevant cut-off” means—

(a)if any of the qualifying expenditure incurred on the provision of the short-life asset was incurred before the designated day, the fourth anniversary of the end of the relevant chargeable period, and

(b)in any other case, the eighth anniversary of the end of the relevant chargeable period.

(3A)In subsection (3)—

  • the designated day” means—

    (a)

    for corporation tax purposes, 1 April 2011, and

    (b)

    for income tax purposes, 6 April 2011;

  • the relevant chargeable period” means—

    (a)

    the chargeable period in which the qualifying expenditure was incurred on the provision of the short-life asset, or

    (b)

    if the qualifying expenditure was incurred in different chargeable periods, the first chargeable period in which any of the qualifying expenditure was incurred., and

(c)in subsection (4), for “four-year” substitute “ relevant ”.

(3)In section 65 (the final chargeable period), in subsection (3), for “four-year” substitute “ relevant ”.

(4)In section 87 (short-life assets provided for leasing), in subsection (1)—

(a)in paragraph (b), for “four-year” substitute “ relevant ”, and

(b)in paragraph (c), for “4 years” substitute “ 8 years ”.

(5)In section 89 (disposal to connected person), in subsections (1) and (5), for “four-year” (in each place) substitute “ relevant ”.

(6)In Schedule 1 (defined expressions)—

(a)at the appropriate place insert—

relevant cut-off (in Chapter 9 of Part 2)section 86(3), and

(b)omit the entry for “four-year cut-off (in Chapter 9 of Part 2)”.

Alcohol dutiesE+W+S+N.I.

13Rates of alcoholic liquor dutiesE+W+S+N.I.

(1)ALDA 1979 is amended as follows.

(2)In section 5 (rate of duty on spirits), for “£23.80” substitute “ £25.52 ”.

(3)In section 36(1AA)(a) (standard rate of duty on beer), for “£17.32” substitute “ £18.57 ”.

(4)In section 62(1A) (rates of duty on cider)—

(a)in paragraph (a) (rate of duty per hectolitre in the case of sparkling cider of a strength exceeding 5.5 per cent), for “£217.83” substitute “ £233.55 ”,

(b)in paragraph (b) (rate of duty per hectolitre in the case of cider of a strength exceeding 7.5 per cent which is not sparkling cider), for “£50.22” substitute “ £53.84 ”, and

(c)in paragraph (c) (rate of duty per hectolitre in any other case), for “£33.46” substitute “ £35.87 ”.

(5)For the table in Schedule 1 substitute— TABLE OF RATES OF DUTY ON WINE AND MADE-WIN

PART 1 E+W+S+N.I.WINE OR MADE-WINE OF A STRENGTH NOT EXCEEDING 22 PER CENT
Description of wine or made-wineRates of duty per hectolitre £
Wine or made-wine of a strength not exceeding 4 per cent74.32
Wine or made-wine of a strength exceeding 4 per cent but not exceeding 5.5 per cent102.21
Wine or made-wine of a strength exceeding 5.5 per cent but not exceeding 15 per cent and not being sparkling241.23
Sparkling wine or sparkling made-wine of a strength exceeding 5.5 per cent but less than 8.5 per cent233.55
Sparkling wine or sparkling made-wine of a strength of 8.5 per cent or of a strength exceeding 8.5 per cent but not exceeding 15 per cent308.99
Wine or made-wine of a strength exceeding 15 per cent but not exceeding 22 per cent321.61
PART 2 E+W+S+N.I.WINE OR MADE-WINE OF A STRENGTH EXCEEDING 22 PER CENT
Description of wine or made-wineRates of duty per litre of alcohol in wine or made-wine £
Wine or made-wine of a strength exceeding 22 per cent25.52.

(6)The amendments made by this section are treated as having come into force on 28 March 2011.

14General beer duty: reduced rate for lower strength beerE+W+S+N.I.

(1)Part 3 of ALDA 1979 (beer) is amended as follows.

(2)In section 36 (general beer duty), in subsection (1AA) (rates of duty)—

(a)before paragraph (a) insert—

(za)in the case of beer that is of a strength which exceeds 1.2 per cent but does not exceed 2.8 per cent, £9.29 per hectolitre per cent of alcohol in the beer;,

(b)in paragraph (a), after “that” insert “ is of a strength which exceeds 2.8 per cent and ”,

(c)in paragraph (b), after “small brewery beer” insert “ that is of a strength which exceeds 2.8 per cent and is ”, and

(d)in paragraph (c), after “small brewery beer” insert “ that is of a strength which exceeds 2.8 per cent and is ”.

(3)For the italic heading immediately preceding section 36A substitute Beer from small breweries.

(4)In section 36D (rate of general beer duty for small brewery beer from singleton breweries)—

(a)in subsection (2), after “section” insert “ , unless the beer is within section 36(1AA)(za) (rate for lower strength beer) ”, and

(b)in the heading after “beer” insert (other than lower strength beer).

(5)In section 36F (rate of general beer duty for small brewery beer from co-operated breweries)—

(a)in subsection (2), after “section” insert “ , unless the beer is within section 36(1AA)(za) (rate for lower strength beer) ”, and

(b)in the heading after “beer” insert (other than lower strength beer).

(6)Immediately above section 36H (power to vary reduced rate provisions) insert as an italic heading Power to vary rates.

(7)The amendments made by this section come into force on 1 October 2011.

15New high strength beer dutyE+W+S+N.I.

(1)Schedule 1 contains provision for and in connection with a duty of excise on high strength beer.

(2)The Commissioners for Her Majesty's Revenue and Customs are responsible for the collection and management of that duty.

Tobacco dutiesE+W+S+N.I.

16Rates of tobacco products dutyE+W+S+N.I.

(1)For the table in Schedule 1 to TPDA 1979 substitute—

TABLE
1. CigarettesAn amount equal to 16.5 per cent of the retail price plus £154.95 per thousand cigarettes
2. Cigars£193.29 per kilogram
3. Hand-rolling tobacco£151.90 per kilogram
4. Other smoking tobacco and chewing tobacco£84.98 per kilogram.

(2)The amendment made by this section is treated as having come into force at 6 pm on 23 March 2011.

Gambling dutiesE+W+S+N.I.

17Rates of gaming dutyE+W+S+N.I.

(1)In section 11(2) of FA 1997 (rates of gaming duty), for the table substitute—

TABLE
Part of gross gaming yieldRate
The first £2,067,00015 per cent
The next £1,425,00020 per cent
The next £2,496,00030 per cent
The next £5,268,00040 per cent
The remainder50 per cent.

(2)The amendment made by this section has effect in relation to accounting periods beginning on or after 1 April 2011.

18Amusement machine licence dutyE+W+S+N.I.

(1)In section 23(2) of BGDA 1981 (amount of duty payable on amusement machine licence), for the table substitute—

TABLE
Months for which licence grantedCategory A £Category B1 £Category B2 £Category B3 £Category B4 £Category C £
153527021521519585
21070535425425385160
31605805635635575240
421401070845845765320
52675134010551055960400
632101605126512651150480
737451875147514751340555
842802140168516851530635
948152410189518951725715
1053502675210521051915795
1158852945231523152105875
1261103055240524052185905.

(2)The amendment made by this section has effect in relation to cases where the application for the amusement machine licence is received by the Commissioners for Her Majesty's Revenue and Customs after 4 pm on 25 March 2011.

Fuel dutiesE+W+S+N.I.

19Fuel duties: rates of duty and rebates from 23 March 2011E+W+S+N.I.

(1)HODA 1979 is amended as follows.

(2)In section 6(1A) (main rates)—

(a)in paragraph (a) (unleaded petrol), for “£0.5895” substitute “ £0.5795 ”,

(b)in paragraph (aa) (aviation gasoline), for “£0.3835” substitute “ £0.3770 ”,

(c)in paragraph (b) (light oil other than unleaded petrol or aviation gasoline), for “£0.6867” substitute “ £0.6767 ”, and

(d)in paragraph (c) (heavy oil), for “£0.5895” substitute “ £0.5795 ”.

(3)In section 8(3) (road fuel gas)—

(a)in paragraph (a) (natural road fuel gas), for “£0.2615” substitute “ £0.2470 ”, and

(b)in paragraph (b) (other road fuel gas), for “£0.3304” substitute “ £0.3161 ”.

(4)In section 11(1) (rebate on heavy oil)—

(a)in paragraph (a) (fuel oil), for “£0.1088” substitute “ £0.1070 ”, and

(b)in paragraph (b) (gas oil), for “£0.1133” substitute “ £0.1114 ”.

(5)In section 14(1) (rebate on light oil for use as furnace fuel), for “£0.1088” substitute “ £0.1070 ”.

(6)In section 14A(2) (rebate on certain biodiesel), for “£0.1133” substitute “ £0.1114 ”.

(7)The amendments made by this section are treated as having come into force at 6 pm on 23 March 2011.

20Fuel duties: rates of duty and rebates from 1 January 2012E+W+S+N.I.

(1)HODA 1979 is amended as follows.

(2)In section 6(1A) (main rates)—

(a)in paragraph (a) (unleaded petrol), for “£0.5795” substitute “ £0.6097 ”,

(b)in paragraph (aa) (aviation gasoline), for “£0.3770” substitute “ £0.3966 ”,

(c)in paragraph (b) (light oil other than unleaded petrol or aviation gasoline), for “£0.6767” substitute “ £0.7069 ”, and

(d)in paragraph (c) (heavy oil), for “£0.5795” substitute “ £0.6097 ”.

(3)In section 8(3) (road fuel gas)—

(a)in paragraph (a) (natural road fuel gas), for “£0.2470” substitute “ £0.2907 ”, and

(b)in paragraph (b) (other road fuel gas), for “£0.3161” substitute “ £0.3734 ”.

(4)In section 11(1) (rebate on heavy oil)—

(a)in paragraph (a) (fuel oil), for “£0.1070” substitute “ £0.1126 ”, and

(b)in paragraph (b) (gas oil), for “£0.1114” substitute “ £0.1172 ”.

(5)In section 14(1) (rebate on light oil for use as furnace fuel), for “£0.1070” substitute “ £0.1126 ”.

(6)In section 14A(2) (rebate on certain biodiesel), for “£0.1114” substitute “ £0.1172 ”.

(7)The amendments made by this section come into force on 1 January 2012.

Vehicle excise dutyE+W+S+N.I.

21VED rates for light passenger vehicles, light goods vehicles, motorcycles etcE+W+S+N.I.

(1)Schedule 1 to VERA 1994 (annual rates of duty) is amended as follows.

(2)In paragraph 1 (general)—

(a)in sub-paragraph (2) (vehicle not covered elsewhere in Schedule otherwise than with engine cylinder not exceeding 1,549cc), for “£205” substitute “ £215 ”, and

(b)in sub-paragraph (2A) (vehicle not covered elsewhere in Schedule with engine cylinder capacity not exceeding 1,549cc), for “£125” substitute “ £130 ”.

(3)In paragraph 1B (graduated rates of duty for light passenger vehicles)—

(a)for the tables substitute—

TABLE 1
RATES PAYABLE ON FIRST VEHICLE LICENCE FOR VEHICLE
CO2 emissions figureRate
(1)(2)(3)(4)
ExceedingNot exceedingReduced rateStandard rate
g/kmg/km££
130140105115
140150120130
150165155165
165175255265
175185305315
185200435445
200225570580
225255780790
2559901000
TABLE 2
RATES PAYABLE ON ANY OTHER VEHICLE LICENCE FOR VEHICLE
CO2 emissions figureRate
(1)(2)(3)(4)
ExceedingNot exceedingReduced rateStandard rate
g/kmg/km££
1001101020
1101202030
1201308595
130140105115
140150120130
150165155165
165175180190
175185200210
185200235245
200225250260
225255435445
255450460;

(b)in the sentence immediately following the tables, for paragraphs (a) and (b) substitute—

(a)in column (3), in the last two rows, “250” were substituted for “435” and “ 450 ”, and

(b)in column (4), in the last two rows, “260” were substituted for “445” and “ 460 ”.

(4)In paragraph 1J (VED rates for light goods vehicles)—

(a)in paragraph (a), for “£200” substitute “ £210 ”, and

(b)in paragraph (b), for “£125” substitute “ £130 ”.

(5)In paragraph 2(1) (VED rates for motorcycles)—

(a)in paragraph (a), for “£15” substitute “ £16 ”,

(b)in paragraph (b), for “£33” substitute “ £35 ”,

(c)in paragraph (c), for “£50” substitute “ £53 ”, and

(d)in paragraph (d), for “£70” substitute “ £74 ”.

(6)The amendments made by this section have effect in relation to licences taken out on or after 1 April 2011.

22VED rates for certain goods vehicles without road-friendly suspensionE+W+S+N.I.

(1)Part 8 of Schedule 1 to VERA 1994 (rates for goods vehicles) is amended as follows.

(2)In—

(a)paragraph 9(1) (rigid vehicles exceeding 3,500 kilograms revenue weight in case of which pollution requirements are not satisfied), and

(b)paragraph 9A(2) (rigid vehicles exceeding that weight in case of which pollution requirements are satisfied),

after “(3)” insert “ and paragraph 11D ”.

(3)In—

(a)paragraph 11(1) (tractive units exceeding 3,500 kilograms revenue weight in case of which pollution requirements are not satisfied), and

(b)paragraph 11A(2) (tractive units exceeding that weight in case of which pollution requirements are satisfied),

for “paragraph 11C” substitute “ paragraphs 11C and 11D ”.

(4)In paragraph 11C(2) (tractive units between 41,000 and 44,000 kilograms revenue weight, with 3 or more axles and used for conveyance of semi-trailers with 3 or more axles and usable on public road in accordance with law immediately before 21 March 2000), for “The” substitute “ Subject to paragraph 11D, the ”.

(5)After paragraph 11C insert—

11DCertain vehicles without road-friendly suspension

(1)This paragraph applies to goods vehicles which do not have road-friendly suspension.

(2)A goods vehicle does not have road-friendly suspension if any driving axle of the vehicle has neither—

(a)an air suspension (that is, a suspension system in which at least 75 per cent of the spring effect is caused by an air spring), nor

(b)a suspension which is regarded as being equivalent to an air suspension for the purposes under Annex II of Council Directive 96/53/EC.

(3)The annual rate of vehicle excise duty applicable to a rigid goods vehicle to which this paragraph applies and which has—

(a)a revenue weight of 15,000 kilograms, and

(b)two axles,

is £238.

(4)The annual rate of vehicle excise duty applicable to a rigid goods vehicle to which this paragraph applies and which—

(a)is a vehicle with respect to which the reduced pollution requirements are satisfied,

(b)has a revenue weight of 21,000 kilograms, and

(c)has three axles,

is £193.

(5)The annual rate of vehicle excise duty applicable to a rigid goods vehicle to which this paragraph applies and which—

(a)is a vehicle with respect to which the reduced pollution requirements are satisfied,

(b)has a revenue weight of not less than 23,000 kilograms but less than 26,000 kilograms, and

(c)has three axles,

is £299.

(6)The annual rate of vehicle excise duty applicable to a rigid goods vehicle to which this paragraph applies and which—

(a)is a vehicle with respect to which the reduced pollution requirements are satisfied,

(b)has a revenue weight of 27,000 kilograms, and

(c)has four or more axles,

is £314.

(7)The annual rate of vehicle excise duty applicable to a tractive unit to which this paragraph applies and which has two axles and either—

(a)has a revenue weight of 25,000 kilograms, or

(b)is a vehicle with respect to which the reduced pollution requirements are satisfied and has a revenue weight exceeding 25,000 kilograms but less than 28,000 kilograms,

is £266.

(8)The annual rate of vehicle excise duty applicable to a tractive unit to which this paragraph applies and which—

(a)has a revenue weight of 28,000 kilograms,

(b)has two axles, and

(c)is to draw semi-trailers with two or more axles,

is £177.

(9)The annual rate of vehicle excise duty applicable to a tractive unit to which this paragraph applies and which—

(a)is a vehicle with respect to which the reduced pollution requirements are satisfied,

(b)has a revenue weight of 31,000 kilograms,

(c)has two axles, and

(d)is to draw semi-trailers with two or more axles,

is £403.

(10)The annual rate of vehicle excise duty applicable to a tractive unit to which this paragraph applies and which—

(a)is a vehicle with respect to which the reduced pollution requirements are satisfied,

(b)has a revenue weight of 36,000 kilograms,

(c)has three axles, and

(d)is to draw semi-trailers with two or more axles,

is £394.

(11)The annual rate of vehicle excise duty applicable to a vehicle to which paragraph 11C and this paragraph apply and which—

(a)is a vehicle with respect to which the reduced pollution requirements are satisfied, and

(b)has a revenue weight less than 44,000 kilograms,

is £464.

(12)This paragraph does not apply to a vehicle for which the annual rate of duty is determined under paragraph 9(2) or 11(2).

(6)The amendments made by this section have effect in relation to licences taken out on or after 1 April 2011.

Environmental taxesE+W+S+N.I.

23Rates of climate change levyE+W+S+N.I.

(1)In Schedule 6 to FA 2000 (climate change levy), for the table in paragraph 42(1) substitute—

TABLE
Taxable commodity suppliedRate at which levy payable if supply is not a reduced-rate supply
Electricity£0.00509 per kilowatt hour
Gas supplied by a gas utility or any gas supplied in a gaseous state that is of a kind supplied by a gas utility£0.00177 per kilowatt hour
Any petroleum gas, or other gaseous hydrocarbon, supplied in a liquid state£0.01137 per kilogram
Any other taxable commodity£0.01387 per kilogram.

(2)The amendment made by this section has effect in relation to supplies treated as taking place on or after 1 April 2012.

Annotations:

Modifications etc. (not altering text)

C1S. 23: power to repeal conferred by Finance (No. 2) Act (c. 31), {ss. 5(1)}

24Rate of aggregates levyE+W+S+N.I.

(1)Section 16 of FA 2010 (increase in rate of aggregates levy from 1 April 2011) is repealed.

(2)Accordingly, the amendment made by section 20 of FA 2008 (increase in rate of aggregates levy from 1 April 2009) continues to have effect in relation to aggregate subjected to commercial exploitation on or after 1 April 2011.

(3)This section is treated as having come into force on 31 March 2011.

25Standard rate of landfill taxE+W+S+N.I.

(1)In section 42(1)(a) and (2) of FA 1996 (amount of landfill tax), for “£56” substitute “ £64 ”.

(2)The amendments made by this section have effect in relation to disposals made (or treated as made) on or after 1 April 2012.

Part 2 E+W+S+N.I.Income tax, corporation tax and capital gains tax

Anti-avoidance provisionsE+W+S+N.I.

26Employment income provided through third partiesE+W+S+N.I.

Schedule 2 contains provision about steps which are taken in pursuance of, or which have some other connection with, arrangements concerned with the provision of rewards or recognition or loans in connection with current, former or prospective employments.

27Tainted charity donationsE+W+S+N.I.

Schedule 3 contains provision about gifts and other disposals to charities and community amateur sports clubs.

28Amounts not fully recognised for accounting purposesE+W+S+N.I.

Schedule 4 contains amendments of Parts 5 and 7 of CTA 2009 (loan relationships and derivative contracts) relating to cases where amounts are not fully recognised for accounting purposes.

29Loan relationships involving connected debtor and creditorE+W+S+N.I.

[F1(1)In section 418 of CTA 2009 (loan relationships involving connected debtor and creditor where debits exceed credits), in subsection (2), after “creditor company” insert “ or any company connected with it ”.

(2)In section 419 of that Act (section 418: supplementary), after subsection (6) insert—

(6A)References in section 418 to a company bringing debits or credits into account under or for the purposes of this Part include bringing debits or credits into account under or for the purposes of this Part in determining the chargeable profits of the company (or in determining that there were no such profits) for the purposes of Chapter 4 of Part 17 of ICTA (controlled foreign companies).

(3)The amendments made by this section have effect in relation to loan relationships to which a company is a party (or to which it is treated as a party under section 418(6A) of CTA 2009) on or after 6 December 2010.

(4)But amounts are to continue to be brought into account for the purposes of Part 5 of CTA 2009 disregarding those amendments if the amounts relate to a time before that day.]

Annotations:

Amendments (Textual)

F1S. 29 repealed (with effect in accordance with Sch. 5 para. 7(3)(4) of the repealing Act) by Finance Act 2011 (c. 11), s. 30, Sch. 5 paras. 6(1)(3), 7(2)(e)

30Group mismatch schemesE+W+S+N.I.

Schedule 5 contains provision about group mismatch schemes.

31Company ceasing to be member of group: availability of reliefE+W+S+N.I.

(1)Section 179 of TCGA 1992 (company ceasing to be member of group: post-appointed day cases) is amended as follows.

(2)In subsection (2A)—

(a)for “Where” substitute “ Subsection (2AA) applies where ”, and

(b)for paragraphs (c) and (d) and the words following those paragraphs substitute—

(c)at the time company A ceases to be a member of the first group there is a connection between that group and the group of companies of which company A becomes a member on leaving the first group ( “ the second group ”), and

(d)subsequently—

(i)company A ceases to be a member of the second group, or

(ii)(before sub-paragraph (i) applies) there ceases to be a connection between the two groups.

(3)After that subsection insert—

(2AA)Where this subsection applies—

(a)in a case within subsection (2A)(d)(ii), for the purposes of this section (other than subsection (2A)) as it applies as respects the acquisition, company A and any associated company are to be treated as having ceased to be members of the second group at the time the connection between the two groups ceases,

(b)subsection (1) has effect in relation to company A's ceasing to be a member of the second group as if it had been the second group of which both companies had been members at the time of the acquisition, and

(c)subsection (2) may operate to prevent subsection (1) applying by virtue of paragraph (b), unless subsection (2AB) applies.

(2AB)This subsection applies if company A's ceasing to be a member of the first group at the same time as one or more associated companies forms part of arrangements the main purpose, or one of the main purposes, of which is the avoidance of a liability to corporation tax.

(4)In subsection (2B) for “if, at the time when company A ceases to be a member of the second group” substitute “ at a particular time if, at that time, ”.

(5)The amendments made by this section have effect in relation to a company in any case in which the time of the company's ceasing to be a member of the first group is on or after 23 March 2011.

32Leasing businessesE+W+S+N.I.

Schedule 6 contains provision about leasing businesses carried on by companies alone or in partnership.

33Long funding finance leasesE+W+S+N.I.

(1)Chapter 6 of Part 2 of CAA 2001 (which includes provision about lessees under long funding leases) is amended as follows.

(2)In section 70C (long funding finance lease: amount of capital expenditure), after subsection (4) insert—

(4A)But where the minimum lease payments include a relievable amount, the present value of that amount must be excluded in determining the commencement PVMLP.

(4B)An amount (“amount X”) is a relievable amount if—

(a)an arrangement is in place under which all or part of any residual amount (as defined in section 70YE) is guaranteed by the lessee or a person connected with the lessee,

(b)amount X is within the minimum lease payments because of that arrangement (see subsection (1)(a) of that section), and

(c)it is reasonable to assume that, were amount X to be incurred under the arrangement, relief would be available as a result (beyond relief, by virtue of this section and section 70E, because amount X is within those minimum lease payments).

(4C)In deciding for the purposes of subsection (4B)(c) whether relief would be available as a result, no account is to be taken of—

(a)any part of the arrangement other than the part by virtue of which all or part of the residual amount is guaranteed, or

(b)any other arrangement connected with the arrangement or forming part of a set of arrangements that includes the arrangement.

(3)In section 70D (long funding finance lease: additional expenditure: allowances for lessee), after subsection (1) insert—

(1A)Any increase attributable to a relievable amount is to be ignored for the purposes of subsection (1)(d).

(1B)Subsections (4B) and (4C) of section 70C apply (with any necessary modifications) for the purposes of this section as for the purposes of that section.

(4)In section 70E (disposal events and disposal values), in subsection (2C)(b), after “section 70YE)” insert “ other than any relievable payment ”.

(5)In that section, after subsection (2D) insert—

(2DA)A payment (“payment X”) is a relievable payment if—

(a)an arrangement is in place under which all or part of any residual amount (as defined in section 70YE) is guaranteed by the lessee or a person connected with the lessee,

(b)payment X is within the minimum lease payments because of that arrangement (see subsection (1)(a) of that section), and

(c)it is reasonable to assume that relief would be available as a result of making payment X (beyond relief, by virtue of section 70C or 70D and this section, because payment X is within those minimum lease payments).

(2DB)For the purposes of subsection (2DA)(c)—

(a)relief” has the meaning given in section 70C, and

(b)subsection (4C) of that section applies as it applies for the purposes of subsection (4B)(c) of that section.

(6)The amendments made by subsections (2) and (3) have effect in cases where the arrangement is entered into on or after 9 March 2011.

(7)The amendments made by subsections (4) and (5) have effect in relation to payments made on or after 9 March 2011 (regardless of when the arrangement was entered into).

34Investment companiesE+W+S+N.I.

Schedule 7 contains provision about investment companies.

Exemptions and reliefsE+W+S+N.I.

35Reduction in childcare relief for higher earnersE+W+S+N.I.

Schedule 8 contains provision for reducing childcare relief for higher earners.

36Childcare: salary sacrifice etc and the national minimum wageE+W+S+N.I.

(1)In section 270A of ITEPA 2003 (limited exemption for qualifying childcare vouchers), after subsection (5) insert—

(5A)Where the scheme under which the vouchers are provided involves—

(a)relevant salary sacrifice arrangements, or

(b)relevant flexible remuneration arrangements,

Condition C is not prevented from being met by reason only that the scheme is not open to relevant low-paid employees.

(5B)In subsection (5A)—

  • relevant salary sacrifice arrangements” means arrangements (whenever made) under which the employees for whom the vouchers are provided give up the right to receive an amount of general earnings or specific employment income in return for the provision of the vouchers;

  • relevant flexible remuneration arrangements” means arrangements (whenever made) under which the employees for whom the vouchers are provided agree with the employer that they are to be provided with the vouchers rather than receive some other description of employment income;

  • relevant low-paid employees” means any of the employer's employees who are remunerated by the employer at a rate such that, if the relevant salary sacrifice arrangements or relevant flexible remuneration arrangements applied to them, the rate at which they would then be so remunerated would be likely to be lower than the national minimum wage.

(2)In section 318A of that Act (exemption for childcare other than employer-provided care), after subsection (5) insert—

(5A)Where the scheme under which the care is provided involves—

(a)relevant salary sacrifice arrangements, or

(b)relevant flexible remuneration arrangements,

Condition C is not prevented from being met by reason only that the scheme is not open to relevant low-paid employees.

(5B)In subsection (5A)—

  • relevant salary sacrifice arrangements” means arrangements (whenever made) under which the employees for whom the care is provided give up the right to receive an amount of general earnings or specific employment income in return for the provision of the care;

  • relevant flexible remuneration arrangements” means arrangements (whenever made) under which the employees for whom the care is provided agree with the employer that they are to be provided with the care rather than receive some other description of employment income;

  • relevant low-paid employees” means any of the employer's employees who are remunerated by the employer at a rate such that, if the relevant salary sacrifice arrangements or relevant flexible remuneration arrangements applied to them, the rate at which they would then be so remunerated would be likely to be lower than the national minimum wage.

(3)The amendments made by this section have effect for the tax year 2005-06 and subsequent tax years.

37Accommodation expenses of MPsE+W+S+N.I.

(1)In section 292 of ITEPA 2003 (accommodation expenses of MPs), after subsection (4) insert—

(5)The reference in subsection (1) to a payment made to a member of the House of Commons under section 5(1) of the Parliamentary Standards Act 2009 includes a payment made under that section to another person at the direction of a member (see section 6(7) of that Act).

(2)The amendment made by this section has effect in relation to payments made under section 5(1) of the Parliamentary Standards Act 2009 on or after 1 November 2010.

38Experts seconded to European Union bodiesE+W+S+N.I.

(1)In Chapter 8 of Part 4 of ITEPA 2003 (employment income: special kinds of employment), after section 304 insert—

304AExperts seconded to other European Union bodies

(1)No liability to income tax arises in respect of any subsistence allowances paid by a relevant EU body to persons who, because of their expertise in matters relating to the subject matter of the functions of the relevant EU body, have been seconded to the body by their employers.

(2)Each of the following is a “relevant EU body”—

(a)the European Medicines Agency, established as the European Agency for the Evaluation of Medicinal Products by Council Regulation (EEC) No 2309/93 of 22 July 1993,

(b)the European Police College, established by Council Decision of 20 September 2005 (2005/681/JHA),

(c)the European Banking Authority, established by Regulation (EU) No 1093/2010 of 24 November 2010, and

(d)any other body established by an EU instrument which is designated as a relevant EU body for the purposes of this section by an order made by the Treasury.

(2)The amendment made by this section has effect in relation to subsistence allowances paid in respect of periods beginning on or after 1 January 2011.

39Employment income: exemption for fees relating to monitoring schemesE+W+S+N.I.

(1)In Chapter 11 of Part 4 of ITEPA 2003 (employment income: miscellaneous exemptions), after section 326 insert—

Monitoring schemesE+W+S+N.I.
326AFees relating to monitoring schemes relating to vulnerable persons

(1)No liability to income tax arises by virtue of the payment or reimbursement of a fee in respect of an application to join the scheme administered under section 44 of the Protection of Vulnerable Groups (Scotland) Act 2007 (asp 14) (scheme to collate and disclose information about individuals working with vulnerable persons).

(2)The Treasury may by order amend subsection (1) so as—

(a)to add to the fees covered by that subsection a fee of a specified kind payable in connection with a scheme for England and Wales or Northern Ireland which corresponds to the scheme administered under section 44 of the Protection of Vulnerable Groups (Scotland) Act 2007, or

(b)to amend or remove a reference to a fee added under paragraph (a).

(2)The amendment made by this section has effect for the tax year 2010-11 and subsequent tax years.

40Individual investment plans for childrenE+W+S+N.I.

(1)Chapter 3 of Part 6 of ITTOIA 2005 (income from individual investment plans) is amended in accordance with subsections (2) to (5).

(2)In section 694 (income from individual investment plans), after subsection (1) insert—

(1A)In subsection (1) “income of an individual from investments under a plan” includes income from investments which is treated as the individual's income by virtue of section 629 (income paid to relevant children of settlor).

(3)After section 695 insert—

695AInvestment plans for children

(1)This section applies where investment plan regulations provide that income of a child from investments under a plan (a “child plan”) is exempt from income tax (either wholly or to such extent as is specified in the regulations).

(2)In addition to any provision which may be made by virtue of any other provision of this Chapter, investment plan regulations may—

(a)specify descriptions of persons by whom investments may be made for a child,

(b)provide that withdrawals may be made only in the circumstances specified in the regulations, and

(c)provide that, in the case of a child who is under 16, the plan managers may act only on the direction of a person of a description specified in the regulations.

(3)They may also provide—

(a)that any assignment of, or agreement to assign, investments under a child plan, and any charge on or agreement to charge any such investments, is void,

(b)that, on the bankruptcy of a child with investments under a child plan, the entitlement to those investments does not pass to any trustee or other person acting on behalf of the child's creditors, and

(c)that, where a contract is entered into by or on behalf of a child who is 16 or over in connection with a child plan under which investments are held—

(i)by the child, or

(ii)by another child in relation to whom the child has parental responsibility,

the contract has effect as if the child had been 18 or over when it was entered into.

(4)Where, by virtue of provision made in investment plan regulations under subsection (2)(a), investments are made for a child under a child plan, for the purposes of this Chapter the child is treated as having made those investments.

(5)In this section—

  • assignment” includes assignation, and “assign” is to be construed accordingly;

  • bankruptcy”, in relation to a child, includes the sequestration of the child's estate;

  • charge on or agreement to charge” includes a right in security over or an agreement to create a right in security over;

  • child” means an individual under 18;

  • parental responsibility” means—

    (a)

    parental responsibility within the meaning of the Children Act 1989 or the Children (Northern Ireland) Order 1995, or

    (b)

    parental responsibilities within the meaning of the Children (Scotland) Act 1995;

and any reference to investments being held by a child includes a reference to investments being held by plan managers on behalf of the child by virtue of section 696(1).

(4)In section 699 (non-entitlement to exemption), at the end insert—

(9)In this section references to an investor include an individual entitled to an exemption given by investment plan regulations by virtue of section 694(1A).

(5)In section 701 (general and supplementary powers), at the end insert—

(6)In this section references to an investor include an individual entitled to an exemption given by investment plan regulations by virtue of section 694(1A).

(6)In section 151 of TCGA 1992 (personal equity plans), in subsection (2)—

(a)for “section 694(1) and (2)” substitute “ section 694(1) to (2) ”, and

(b)for the words from “but with” to the end substitute but with the following modifications—

(a)any reference to income tax is to be read as a reference to capital gains tax,

(b)the reference in section 695A(1) to the case where regulations provide that income of a child from investments under a plan is exempt from income tax is to be read as a reference to the case where regulations provide that a child who invests under a plan is entitled to relief from capital gains tax in respect of the investments,

(c)the reference in section 695A(4) to that Chapter is to be read as a reference to this section, and

(d)that Chapter has effect as if sections 699(9) and 701(6) were omitted.

41Gift aid: increase of limits on total value of benefits associated with giftsE+W+S+N.I.

(1)In section 418 of ITA 2007 (gifts to charities by individuals: restrictions on associated benefits), in subsection (3), for “£500” substitute “ £2,500 ”.

(2)In section 197 of CTA 2010 (gifts to charities by companies: restrictions on associated benefits), in subsection (3), for “£500” substitute “ £2,500 ”.

(3)Accordingly, omit section 60(1)(b) of FA 2007.

(4)The amendments made by subsections (1) and (3) have effect in relation to gifts made on or after 6 April 2011.

(5)The amendment made by subsection (2) has effect in relation to gifts made in an accounting period ending on or after 1 April 2011.

42Enterprise investment scheme: amount of reliefE+W+S+N.I.

(1)Part 5 of ITA 2007 (enterprise investment scheme) is amended in accordance with subsections (2) to (4).

(2)In section 158 (form and amount of EIS relief), in subsection (2A) for “20%” substitute “ 30% ”.

(3)In the following provisions for “EIS rate” substitute “ EIS original rate ”

(a)section 209(3);

(b)section 210(1)(b);

(c)section 213(2);

(d)section 220(1)(b);

(e)section 224(2);

(f)section 229(1)(b).

(4)After section 256 insert—

256AMeaning of “the EIS original rate”

In this Part “the EIS original rate”, in relation to EIS relief, means the EIS rate for the tax year for which the EIS relief was obtained.

(5)In Schedule 4 to that Act (index of defined expressions), at the appropriate place insert—

EIS original rate (in Part 5)section 256A

(6)This section comes into force on such day as the Treasury may by order appoint.

(7)The amendments made by this section have effect in relation to the tax year 2011-12 and subsequent tax years.

(8)But where the EIS relief attributable to shares was obtained for the tax year 2007-08 or an earlier tax year, the references to the EIS original rate in the provisions mentioned in paragraph (a) to (f) of subsection (3) are to be read as references to 20%.

Annotations:

Subordinate Legislation Made

P1S. 42(6) power fully exercised: 13.10.2011 appointed by {S.I. 2011/2459}, art. 2

43Relief for expenditure on R&D by SMEsE+W+S+N.I.

(1)Part 13 of CTA 2009 (additional relief for expenditure on research and development) is amended as follows.

(2)Chapter 2 (relief for small or medium-sized enterprises (“SMEs”)) is amended in accordance with subsections (3) to (6).

(3)In section 1044 (additional deduction in calculating profits of trade), in subsection (8), for “75%” substitute “ 100% ”.

(4)In section 1045 (alternative treatment for pre-trading expenditure: deemed trading loss), in subsection (7), for “175%” substitute “ 200% ”.

(5)In section 1055 (tax credit: meaning of “Chapter 2 surrenderable loss”), in subsection (2)(b), for “175%” substitute “ 200% ”.

(6)In section 1058 (amount of tax credit), in subsection (1)(a), for “14%” substitute “ 12.5% ”.

(7)Chapter 7 (relief for SMEs and large companies: vaccine research etc) is amended in accordance with subsections (8) to (11).

(8)In section 1089 (SMEs: amount of deduction), in subsection (2), for “40%” substitute “ 20% ”.

(9)In section 1090 (modification of section 1089 for larger SMEs), in subsection (2), for “40%” substitute “ 20% ”.

(10)In section 1092 (SMEs: deemed trading loss for pre-trading expenditure), in subsection (8)—

(a)in paragraph (a), for “40%” substitute “ 20% ”, and

(b)in paragraph (b), for “140%” substitute “ 120% ”.

(11)In section 1104 (tax credit: meaning of “Chapter 7 surrenderable loss”), in subsection (5), for “140%” substitute “ 120% ”.

(12)This section comes into force on such day as the Treasury may by order appoint.

(13)The amendments made by this section have effect in relation to expenditure incurred on or after 1 April 2011.

Annotations:

Subordinate Legislation Made

P2S. 43(12) power fully exercised: 15.9.2011 appointed by {S.I. 2011/2280}, art. 2

Chargeable gainsE+W+S+N.I.

44Value shiftingE+W+S+N.I.

Schedule 9 contains provision about value shifting.

45Company ceasing to be member of a groupE+W+S+N.I.

Schedule 10 contains provision about the consequences, for the purposes of corporation tax on chargeable gains, of a company ceasing to be a member of a group.

46Pre-entry lossesE+W+S+N.I.

Schedule 11 contains provision about losses accruing to a company before the time when it becomes a member of a group of companies and losses accruing on assets held by a company at such a time.

Foreign profitsE+W+S+N.I.

47Controlled foreign companiesE+W+S+N.I.

Schedule 12 contains provision in relation to controlled foreign companies.

48Profits of foreign permanent establishments etcE+W+S+N.I.

Schedule 13 contains provision about the profits of foreign permanent establishments of UK resident companies etc.

Investment trustsE+W+S+N.I.

49Meaning of “investment trust”E+W+S+N.I.

(1)Chapter 4 of Part 24 of CTA 2010 (investment trusts) is amended as follows.

(2)For section 1158 (meaning of “investment trust” in the Corporation Tax Acts) substitute—

1158Meaning of “investment trust”

(1)For the purposes of the Corporation Tax Acts a company is an “investment trust” with respect to an accounting period if—

(a)conditions A to C are met throughout the period, and

(b)the company is approved for the period by the Commissioners for Her Majesty's Revenue and Customs (see section 1159).

(2)Condition A is that the business of the company consists of investing its funds in shares, land or other assets with the aim of spreading investment risk and giving members of the company the benefit of the results of the management of its funds.

(3)Condition B is that the shares making up the company's ordinary share capital (or, if there are such shares of more than one class, those of each class) are admitted to trading on a regulated market.

(4)For this purpose “regulated market” has the same meaning as in Directive 2004/39/EC of the European Parliament and of the Council on markets in financial instruments (see Article 4.1(14)).

(5)Condition C is that the company is not—

(a)a venture capital trust (within the meaning of Part 6 of ITA 2007), or

(b)a company UK REIT (within the meaning of Part 12 of this Act).

(6)The Treasury may by regulations provide—

(a)for one or both of conditions A and B to be treated as met in the cases, and subject to any conditions, specified in the regulations, and

(b)for the period for which the condition or conditions are treated as met.

(7)The Treasury may also by regulations amend subsection (3) or (4).

(8)A statutory instrument containing the first regulations under subsection (6) may not be made unless a draft of the instrument has been laid before and approved by a resolution of the House of Commons.

(9)Any other statutory instrument containing regulations under this section is subject to annulment in pursuance of a resolution of the House of Commons.

(3)For section 1159 (conditions for approval) substitute—

1159Approval

(1)The Treasury may by regulations make provision about the approval of a company for an accounting period for the purposes of section 1158(1)(b), including provision about—

(a)applications for approval,

(b)the determination of applications for approval,

(c)requirements to be met by the company while approved,

(d)the withdrawal of approval by notice, or

(e)the consequences of the withdrawal of approval.

(2)The regulations may, in particular—

(a)include provision under which an application for approval—

(i)is to be made by reference to the accounting period in which the application is made or such earlier or later accounting period as may be specified in the application, and

(ii)is to constitute an application for approval for that and all subsequent accounting periods,

(b)specify the form and content of, and information to accompany, an application,

(c)permit or require the Commissioners to grant or refuse an application where conditions specified in the regulations are met (or appear to the Commissioners to be met) in relation to the company,

(d)permit or require the Commissioners to withdraw approval where—

(i)conditions specified in the regulations are met (or appear to the Commissioners to be met) in relation to the company, or

(ii)the company has failed to comply with requirements imposed by the regulations,

(e)include provision prohibiting a company from which approval has been withdrawn from reapplying, or

(f)include provision under which approval may or must be withdrawn in relation to an accounting period that ends before the notice withdrawing approval is given.

(3)Regulations under this section—

(a)may make different provision for different cases or purposes, and

(b)may make incidental, consequential, supplementary or transitional provision.

(4)A statutory instrument containing the first regulations under this section may not be made unless a draft of the instrument has been laid before and approved by a resolution of the House of Commons.

(5)Any other statutory instrument containing regulations under this section is subject to annulment in pursuance of a resolution of the House of Commons.

(6)In this section “the Commissioners” means the Commissioners for Her Majesty's Revenue and Customs.

(4)Omit sections 1160 to 1165 (which relate to the interpretation of the provisions replaced by this section).

(5)In Schedule 4 (index of defined expressions), omit the following entries—

  • “company (in Chapter 4 of Part 24)”

  • “scheme of reconstruction (in Chapter 4 of Part 24)”

  • “shares (in Chapter 4 of Part 24)”.

(6)The amendments made by this section have effect in relation to accounting periods beginning on or after such day as the Treasury may by order appoint.

Annotations:

Subordinate Legislation Made

P3S. 49(6) power fully exercised: 1.1.2012 appointed by {S.I. 2011/2977}, art. 2

50Power to make provision about treatment of transactionsE+W+S+N.I.

In Part 13 of CTA 2010 (special types of company etc), after Chapter 3 insert—

CHAPTER 3AE+W+S+N.I.Investment trusts
622APower to make provision about treatment of transactions

(1)The Treasury may by regulations provide that a transaction of a specified kind entered into by an investment trust is to be treated for the purposes of the Corporation Tax Acts as entered into by it otherwise than in the course of a trade.

(2)Regulations under this section—

(a)may make different provision for different cases or purposes, and

(b)may make incidental, consequential, supplementary or transitional provision.

(3)A statutory instrument containing the first regulations under this section 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 section is subject to annulment in pursuance of a resolution of the House of Commons.

(5)In this section “specified” means specified in regulations under this section.

MiscellaneousE+W+S+N.I.

51Taxable benefits: calculating the appropriate percentage for carsE+W+S+N.I.

(1)In section 139 of ITEPA 2003 (cars with a CO2 emissions figure: the appropriate percentage), as substituted by section 59 of FA 2010 with effect for the tax year 2012-13 and subsequent tax years, in subsection (5) for “100 grams” substitute “ 95 grams ”.

(2)The amendment made by this section has effect for the tax year 2013-14 and subsequent tax years.

52Furnished holiday lettingsE+W+S+N.I.

Schedule 14 contains provisions about furnished holiday lettings.

53Leases and changes to accounting standardsE+W+S+N.I.

(1)This section applies where there is a change in a leasing accounting standard which—

(a)occurs on or after 1 January 2011, and

(b)is not within subsection (3),

(in this section referred to as a “leasing change”).

(2)Leasing accounting standard” means—

(a)International Accounting Standard 17 (leases) issued by the International Accounting Standards Board,

(b)Statement of Standard Accounting Practice 21 (accounting for leases and hire purchase contracts) recognised by the Accounting Standards Board,

(c)the part of the International Financial Reporting Standard for Small and Medium-sized Entities issued by the International Accounting Standards Board which relates specifically to leases,

(d)the part of the Financial Reporting Standard for Smaller Entities issued by the Accounting Standards Board which relates specifically to leases, or

(e)any accounting standard, or part of an accounting standard, which replaces (wholly or in part) a standard or part mentioned in paragraphs (a) to (d).

(3)A change is within this subsection if, and to the extent that, it is one which permits or requires persons, when preparing accounts in accordance with UK GAAP, to account for a lease, or a transaction accounted for as a lease, in a manner equivalent to that provided for by the International Financial Reporting Standard for Small and Medium-sized Entities issued by the International Accounting Standards Board (disregarding any leasing change which may be made to that Standard).

(4)Changes within subsection (1) include those which may or must be adopted for periods of account which fall wholly or partly before the time the change occurs or before the day on which this Act is passed.

(5)For the purposes of the Taxes Acts any reference in those Acts (other than this section)—

(a)to a thing being determined or done in accordance with or by reference to generally accepted accounting practice, or

(b)to accounts prepared (or not prepared) in accordance with international accounting standards or UK GAAP,

is to be construed as if any leasing change had not occurred.

(6)Section 997 of ITA 2007 and section 1127 of CTA 2010 (meaning of “generally accepted accounting practice” and related expressions in the Tax Acts) have effect subject to subsection (5).

(7)Where a person prepares or is required to prepare accounts in accordance with new standards for a period of account, the Taxes Acts (other than this section) have effect as if the person prepared or was required to prepare accounts, for that period, in accordance with the corresponding old standards.

(8)For the purposes of subsection (7)—

(a)if the new standards are international accounting standards, the corresponding old standards are international accounting standards disregarding any leasing change, and

(b)if the new standards are UK GAAP, the corresponding old standards are UK GAAP disregarding any leasing change.

(9)In this section—

  • accounting body” means the International Accounting Standards Board or the Accounting Standards Board, or a successor body to either of those Boards;

  • accounting standard” includes any statement of practice, guidance or other similar document issued or recognised by an accounting body;

  • change”, in relation to a leasing accounting standard, means the issue, revocation, amendment or recognition of, or withdrawal of recognition from, the standard by an accounting body;

  • international accounting standards” has the same meaning as in section 1127 of CTA 2010;

  • new standards” means accounting standards which reflect one or more leasing changes;

  • Taxes Acts” means—

    (a)

    the Tax Acts, and

    (b)

    TCGA 1992 and all other enactments relating to capital gains tax;

  • UK GAAP” means UK generally accepted accounting practice as defined in section 997(2) of ITA 2007 and section 1127(2) of CTA 2010.

(10)This section has effect in relation to any period (including any period falling wholly or partly before the day on which this Act is passed) in respect of which a change to a leasing accounting standard which occurs on or after 1 January 2011 may or must be adopted by any person for accounting purposes.

54Leasing companies: withdrawal of electionE+W+S+N.I.

(1)In section 398A(1)(a) of CTA 2010 (election out of qualifying change of ownership), after “day”)” insert “ before 23 March 2011 ”.

(2)The amendment made by this section is to be treated as having come into force on 23 March 2011.

55Companies with small profits: associated companiesE+W+S+N.I.

(1)For section 27 of CTA 2010 (meaning of “associated company”: attribution to persons of rights and powers of their partners) substitute—

27Attribution to persons of rights and powers of their associates

(1)This section applies if—

(a)it is necessary to determine in accordance with section 25(4) and (5) whether a company is an associated company of another company, and

(b)the relationship between the two companies is not one of substantial commercial interdependence.

(2)In the application of section 451 (meaning of “control”: rights to be attributed) for the purposes of the determination, any person to whom rights and duties fall to be attributed under subsections (4) and (5) of that section is to be treated, for the purposes of those subsections, as having no associates.

(3)The Treasury may by order prescribe factors that are to be taken into account in determining whether a relationship between two companies amounts to substantial commercial interdependence for the purposes of this section.

(2)The amendment made by this section has effect in relation to accounting periods ending on or after 1 April 2011.

(3)But a company may elect that the amendment made by this section is of no effect in relation to an accounting period that begins before that date.

(4)An election under subsection (3) must be made within one year from the end of the accounting period to which it relates.

(5)The first order under section 27(3) of CTA 2010 (as substituted by subsection (1) of this section) may be made so as to have effect in relation to accounting periods ending on or after 1 April 2011.

56Insurance companies: apportionment of amounts brought into accountE+W+S+N.I.

(1)In section 432C of ICTA (section 432B apportionment: non-participating funds), in subsection (9), for the words from “D is” to the end substitute— D is the sum of—

(a)the mean of the opening and closing liabilities of the relevant business so far as referable to basic life assurance and general annuity business (but taking that mean to be nil if it would otherwise be below nil), reduced (but not below nil) by the mean of the opening and closing net values of any assets linked to that category of business, and

(b)the mean of the opening and closing liabilities of the relevant business so far as referable to PHI business (but taking that mean to be nil if it would otherwise be below nil), reduced (but not below nil) by the mean of the opening and closing net values of any assets linked to that category of business.

(2)The amendment made by this section has effect in relation to periods of account beginning on or after 1 January 2011.

(3)For the purposes of section 432CA of ICTA, where the current period of account begins on or after 1 January 2011, the reference in subsection (4) to section 432C is a reference to that section as amended by this section even if the applicable appropriate period of account began before that date.

(4)In subsection (3), “current period of account”, “appropriate period of account” and “applicable” have the meaning given by section 432CA of ICTA.

57Tonnage tax: capital allowances in respect of ship leasingE+W+S+N.I.

(1)Part 10 of Schedule 22 to FA 2000 (companies within tonnage tax: capital allowances in respect of ship leasing) is amended as follows.

(2)In paragraph 94 (quantitative restrictions on allowances)—

(a)in sub-paragraph (3)(a), for “a rate of 20% per annum” substitute “ the rate determined under sub-paragraph (3A) ”,

(b)in sub-paragraph (3)(b), for “a rate of 10% per annum” substitute “ the rate specified in section 104D(1) of the Capital Allowances Act 2001 ”,

(c)after sub-paragraph (3) insert—

(3A)The rate mentioned in sub-paragraph (3)(a) is—

(a)if the rate of the writing down allowance to which the lessor would be entitled in respect of the expenditure apart from this paragraph is that specified in section 56(1) of the Capital Allowances Act 2001, that rate, and

(b)otherwise, the rate specified in section 104D(1) of that Act.,

(d)in sub-paragraph (4)—

(i)omit the words “within each of those bands”,

(ii)after “separate pools” insert “ in accordance with sub-paragraph (4A) ”, and

(iii)omit the second sentence, and

(e)after that sub-paragraph insert—

(4A)The expenditure is to be allocated to the following pools—

(a)to the extent that it is expenditure in respect of which the lessor is entitled to writing down allowance at the rate specified in section 56(1) of the Capital Allowances Act 2001, a pool to be known as “the tonnage tax (main rate) pool”, and

(b)to the extent that it is expenditure in respect of which the lessor is entitled to writing down allowance at the rate specified in section 104D(1) of that Act, a pool to be known as “the tonnage tax (special rate) pool”.

(3)In paragraph 95(4)—

(a)for “(4)” substitute “ (4A) ”, and

(b)for “20%” substitute “ tonnage tax (main rate) ” and for “10%” substitute “ tonnage tax (special rate) ”.

(4)In paragraph 97—

(a)in sub-paragraphs (2) and (3), for “20%” substitute “ tonnage tax (main rate) ” and for “10%” substitute “ tonnage tax (special rate) ”, and

(b)in sub-paragraph (4), for “10%” substitute “ tonnage tax (special rate) ”.

(5)In paragraph 98(8), for “20%” substitute “ tonnage tax (main rate) ” and for “10%” substitute “ tonnage tax (special rate) ”.

(6)In paragraph 99 (quantitative restrictions: change of circumstances taking case out of restrictions)—

(a)in sub-paragraph (2), for “20%” substitute “ tonnage tax (main rate) ” and for “10%” substitute “ tonnage tax (special rate) ”,

(b)in sub-paragraph (4), for the words from “the whole of” to the end substitute “ the amount that the tax written down value of the ship would have been, at the time the change of circumstances occurs, had paragraph 94 never applied. ”, and

(c)omit sub-paragraph (5).

(7)In consequence of the amendments made by this section, omit section 80(5) to (7) of FA 2008.

(8)The amendments made by this section have effect in relation to chargeable periods ending on or after 1 January 2011.

(9)But the amendments made by this section are of no effect in relation to expenditure incurred before that date.

58Transfer pricing: application of OECD principlesE+W+S+N.I.

(1)In section 164 of TIOPA 2010 (Part to be interpreted in accordance with OECD principles), for subsection (4) substitute—

(4)In this section “the transfer pricing guidelines” means—

(a)the version of the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations approved by the Organisation for Economic Co-operation and Development (OECD) on 22 July 2010, or

(b)such other document approved and published by the OECD in place of that (or a later) version or in place of those Guidelines as is designated for the time being by order made by the Treasury,

including, in either case, such material published by the OECD as part of (or by way of update or supplement to) the version or other document concerned as may be so designated.

(2)The amendment made by this section has effect (in relation to provision made or imposed at any time)—

(a)for corporation tax purposes, for accounting periods beginning on or after 1 April 2011, and

(b)for income tax purposes, for the tax year 2011-12 and subsequent tax years.

59Offshore fundsE+W+S+N.I.

In Part 8 of TIOPA 2010 (offshore funds), after section 363 insert—

363AResidence of offshore funds which are undertakings for collective investment in transferable securities

(1)This section applies to an offshore fund (within the meaning of section 355) which—

(a)is, for the purposes of the UCITS Directive, an undertaking for collective investment in transferable securities, and

(b)is authorised pursuant to Article 5 of the UCITS Directive in a Member State other than the United Kingdom.

(2)If—

(a)the offshore fund is a body corporate which, under the law of the Member State in which it is authorised pursuant to Article 5 of the UCITS Directive, is treated as resident in that State for the purposes of any tax imposed under that law on income, and

(b)(apart from this section) the body corporate would be treated as resident in the United Kingdom for the purposes of any enactment (within the meaning of section 354) relating to income tax, corporation tax or capital gains tax,

the body corporate is instead to be treated as if it were not resident in the United Kingdom.

(3)If, by virtue of section 99 or 103A of TCGA 1992, that Act applies in relation to the offshore fund as if it were a company, that Act applies as if the company were neither resident nor ordinarily resident in the United Kingdom (if it would not otherwise do so).

(4)In this section “the UCITS Directive” means Directive 2009/65/EC of the European Parliament and of the Council.

60Index-linked gilt-edged securitiesE+W+S+N.I.

(1)In section 399 of CTA 2009 (index-linked gilt-edged securities: basic rules), for subsection (4) substitute—

(4)In this section and sections 400 to 400C—

  • index-linked gilt-edged securities” means any gilt-edged securities under which the amounts of the payments are determined wholly or partly by reference to an index of prices published by the Statistics Board;

  • relevant prices index”, in relation to an index-linked gilt-edged security, means the index of prices by reference to which the amounts of the payments under the security are wholly or partly determined.

(2)In the following provisions of that Act, for “retail” substitute “ relevant ”

(a)section 400(1)(b), (2), (3) and (6);

(b)section 400A(3) and (7)(b).

(3)Accordingly, in Schedule 14 to FA 2010, omit paragraph 4(4).

(4)The amendments made by this section have effect in relation to securities issued on or after the day on which this Act is passed.

Part 3 E+W+S+N.I.Oil

61PRT: areas treated as continuing to be oil fieldsE+W+S+N.I.

(1)In Schedule 1 to OTA 1975 (determination of oil fields), in paragraph 7(4), for “the relevant area” substitute “ those qualifying assets ”.

(2)The amendment made by this section has effect in relation to chargeable periods that begin after 30 June 2009.

62Intangible fixed assets: oil licencesE+W+S+N.I.

(1)Section 809 of CTA 2009 (oil licences) is amended as follows.

(2)After subsection (1) insert—

(1A)The reference in subsection (1) to an oil licence or an interest in an oil licence includes all goodwill, and any intangible asset, which relates to, derives from or is connected with an oil licence or an interest in an oil licence.

(3)In subsection (2), for “subsection (1)” substitute “ this section ”.

(4)In subsection (4), for “subsection (1)” substitute “ this section ”.

(5)The amendments made by this section have effect in relation to accounting periods beginning on or after 23 March 2011 (and, in relation to those accounting periods, are to be treated as always having had effect).

(6)For the purposes of subsection (5), an accounting period beginning before, and ending on or after, 23 March 2011 is to be treated as if so much of the period as falls before that date, and so much of the period as falls on or after that date, were separate accounting periods.

63Reduction of supplementary charge for certain new oil fieldsE+W+S+N.I.

(1)In section 337 of CTA 2010 (initial licensee to hold a field allowance), in subsection (1), for “authorisation day” substitute “ accounting period in which the authorisation day falls ”.

(2)For section 350 of that Act (meaning of “new oil field”) substitute—

350New oil field”

(1)In this Chapter “new oil field” means an oil field—

(a)which is a qualifying oil field, and

(b)whose development (in whole or in part) is authorised for the first time on or after 22 April 2009.

(2)If all assets of an oil field which are relevant assets have been decommissioned, there is to be ignored for the purposes of subsection (1)(b) any authorisation in respect of that oil field which occurs before that decommissioning.

(3)Sub-paragraphs (2) to (9) of paragraph 7 of Schedule 1 to OTA 1975 apply for the purpose of determining whether relevant assets of an oil field are decommissioned as they apply for the purpose of determining whether qualifying assets of a relevant area are decommissioned.

(4)For the purposes of this section, an asset is a relevant asset of an oil field if—

(a)it has at any time been a qualifying asset (within the meaning of the Oil Taxation Act 1983) in relation to any participator in the field, and

(b)it has at any time been used for the purpose of winning oil from the field.

(3)In section 357 of that Act (other definitions), in the definition of “authorisation day”, after “authorised” insert “ as mentioned in section 350(1)(b) ”.

(4)The amendments made by this section have effect in relation to accounting periods ending on or after 1 April 2010.

(5)Corresponding amendments, having effect in relation to accounting periods ending on or after 22 April 2009, are to be treated as having been made in Schedule 44 to FA 2009.

64Chargeable gains: oil activitiesE+W+S+N.I.

Schedule 15 contains provisions about chargeable gains in relation to oil activities.

Part 4 E+W+S+N.I.Pensions

65Benefits under pension schemesE+W+S+N.I.

Schedule 16 contains provision about the benefits available under pension schemes and related matters.

66Annual allowance chargeE+W+S+N.I.

Schedule 17 contains provision about the annual allowance charge.

67Lifetime allowance chargeE+W+S+N.I.

Schedule 18 contains provision about the lifetime allowance charge.

68Borrowing by section 67 pension schemeE+W+S+N.I.

(1)Section 182 of FA 2004 (unauthorised borrowing) does not cause a section 67 pension scheme to be not authorised to borrow an amount for the purposes of meeting costs of establishing, administering or managing the pension scheme.

(2)Accordingly, in the case of a section 67 pension scheme, references in sections 182 and 183 of FA 2004 to amounts previously borrowed do not include any amount previously borrowed for those purposes.

(3)For the purposes of this section neither—

(a)borrowing an amount for making investments for the purposes of a pension scheme, nor

(b)borrowing an amount for making deposits with a view to deriving income for the purposes of a pension scheme (otherwise than prior to applying the amount for meeting costs of establishing, administering or managing the pension scheme),

is to be taken to be borrowing the amount for the purposes of meeting costs of establishing, administering or managing the pension scheme.

(4)In this section “section 67 pension scheme” means a pension scheme which is established under section 67 of the Pensions Act 2008.

(5)Section 163(2) of FA 2004 (meaning of “borrowing”) applies for the interpretation of this section.

(6)This section is treated as having come into force on 6 April 2011.

69Exemption from tax on interest on unpaid relevant contributionsE+W+S+N.I.

(1)ITTOIA 2005 is amended as follows.

(2)In section 369(3)(e) (exemptions from income tax charge on income), after “loans,” insert “ unpaid relevant contributions, ”.

(3)After section 753 insert—

753AInterest on unpaid relevant contributions

(1)No liability to income tax arises in respect of interest paid in compliance with a requirement in a compliance notice or an unpaid contributions notice to pay interest in respect of unpaid relevant contributions.

(2)In this section—

  • compliance notice” means a notice under section 35 of the Pensions Act;

  • the Pensions Act” means the Pensions Act 2008 or the Pensions (No.2) Act (Northern Ireland) 2008;

  • unpaid contributions notice” means a notice under section 37 of the Pensions Act;

  • unpaid relevant contributions” has the same meaning as in section 38(2)(a) of the Pensions Act.

70Power to make further provision about section 67 pension schemeE+W+S+N.I.

(1)The Treasury may by regulations make provision for and in connection with—

(a)the application of the relevant taxes in relation to a pension scheme established under section 67 of the Pensions Act 2008, and

(b)the application of the relevant taxes in relation to any person in connection with such a pension scheme.

(2)The provision that may be made by regulations under this section includes provision imposing any of the relevant taxes (as well as provisions for exemptions or reliefs).

(3)The relevant taxes are—

(a)income tax,

(b)capital gains tax,

(c)corporation tax, and

(d)inheritance tax.

(4)Regulations under this section may include provision having effect in relation to any time before they are made if the provision does not increase any person's liability to tax.

(5)Regulations under this section may include—

(a)provision amending any enactment or instrument, and

(b)consequential, supplementary and transitional provision.

(6)Regulations under this section are to be made by statutory instrument.

(7)A statutory instrument containing regulations under this section is subject to annulment in pursuance of a resolution of the House of Commons.

71Tax provision consequential on Part 1 of Pensions Act 2008 etcE+W+S+N.I.

(1)The Treasury may by regulations make provision in relation to any of the relevant taxes in consequence of Part 1 of the Pensions Act 2008 or Part 1 of the Pensions (No.2) Act (Northern Ireland) 2008.

(2)The provision that may be made by regulations under this section includes provision imposing any of the relevant taxes (as well as provisions for exemptions or reliefs).

(3)The relevant taxes are—

(a)income tax,

(b)capital gains tax,

(c)corporation tax,

(d)inheritance tax,

(e)value added tax,

(f)stamp duty land tax,

(g)stamp duty, and

(h)stamp duty reserve tax.

(4)Regulations under this section may include provision having effect in relation to any time before they are made if the provision does not increase any person's liability to tax.

(5)Regulations under this section may make different provision for different cases.

(6)Regulations under this section may include—

(a)provision amending any enactment or instrument, and

(b)consequential, supplementary and transitional provision.

(7)Regulations under this section are to be made by statutory instrument.

(8)A statutory instrument containing regulations under this section is subject to annulment in pursuance of a resolution of the House of Commons.

72Foreign pensions of UK residentsE+W+S+N.I.

(1)In Part 2 of TIOPA 2010 (double taxation relief), in Chapter 3 (miscellaneous provisions), after section 130 insert—

130AInterpreting provision about UK taxation of pensions etc

(1)Subsection (3) applies if double taxation arrangements make the provision, however expressed, mentioned in subsection (2).

(2)The provision is that pensions and other similar remuneration which—

(a)arise outside the United Kingdom, and

(b)are paid to persons who are resident in the United Kingdom,

are not to be subject to United Kingdom tax.

(3)That provision does not prevent a pension or other similar remuneration of a person resident in the United Kingdom being chargeable to income tax if—

(a)the pension or other similar remuneration is paid out of sums or assets that were the subject of a relevant transfer or related sums or assets, and

(b)the relevant transfer or any transaction forming part of that transfer was, or formed part of, a tax avoidance scheme.

(4)But nothing in subsection (3) prevents credit being allowed under Chapter 2 of this Part (double taxation relief by way of credit) against any tax so charged.

(5)In determining whether a pension or other similar remuneration is paid out of sums or assets within subsection (3)(a), it is to be assumed that it is paid out of such sums or assets in priority to any other sums or assets.

(6)A “relevant transfer”, in respect of any sums or assets, is a transaction or series of transactions as a result of which—

(a)the sums or assets are transferred out of a pension scheme, and

(b)the sums or assets or related sums or assets (or both) are transferred into the pension scheme under which the pension or other similar remuneration is paid.

(7)A scheme is a “tax avoidance scheme” if the main purpose, or one of the main purposes, of any party to the scheme in entering into the scheme is to secure an income tax advantage for any person under this Part by virtue of provision mentioned in subsection (2) made by double taxation arrangements.

(8)For the purposes of subsection (7)—

(a)scheme” includes any scheme, arrangements or understanding of any kind whatever, whether or not legally enforceable, involving a single transaction or two or more transactions,

(b)it does not matter whether or not the double taxation arrangements were in existence at the time the tax avoidance scheme was entered into or given effect to, and

(c)income tax advantage” is to be construed in accordance with section 572A(3) to (5) of ITA 2007.

(9)In this section—

  • pension” and “other similar remuneration” have the same meaning as in the Model Tax Convention on Income and on Capital published (from time to time) by the Organisation for Economic Co-operation and Development;

  • pension scheme” has the same meaning as in Part 4 of FA 2004 (see section 150 of that Act);

  • related sums or assets”, in relation to other sums or assets (“the original sums or assets”), means sums or assets which arise, or (directly or indirectly) derive, from the original sums or assets or from sums or assets which so arise or derive.

(2)The amendment made by this section has effect in relation to the tax year 2011-12 and subsequent tax years (and it does not matter whether the tax avoidance scheme was entered into or effected before, or on or after, 6 April 2011).

Part 5 E+W+S+N.I.Bank levy

73The bank levyE+W+S+N.I.

Schedule 19 contains provision for and in connection with the bank levy.

Part 6 E+W+S+N.I.Other taxes

Value added taxE+W+S+N.I.

74Business samplesE+W+S+N.I.

(1)In Schedule 4 to VATA 1994 (matters to be treated as supply of goods or services), paragraph 5 (transfer or disposal of goods forming part of the assets of a business) is amended as follows.

(2)For sub-paragraph (2)(b) substitute—

(b)the provision to a person, otherwise than for a consideration, of a sample of goods.

(3)Omit sub-paragraph (3).

75Zero-rating: splitting of suppliesE+W+S+N.I.

(1)In Part 2 of Schedule 8 to VATA 1994 (zero-rating: groups), Group 3 (books, etc) is amended as follows.

(2)For “Note: Items 1 to 6—” substitute—

Notes

(1)Items 1 to 6—.

(3)At the end insert—

(2)Items 1 to 6 do not include goods in circumstances where—

(a)the supply of the goods is connected with a supply of services, and

(b)those connected supplies are made by different suppliers.

(3)For the purposes of Note (2) a supply of goods is connected with a supply of services if, had those two supplies been made by a single supplier—

(a)they would have been treated as a single supply of services, and

(b)that single supply would have been a taxable supply (other than a zero-rated supply) or an exempt supply.

(4)The amendments made by this section have effect in relation to supplies made on or after the day on which this Act is passed.

76AcademiesE+W+S+N.I.

(1)In Part 2 of VATA 1994 (reliefs, exemptions and repayments), after section 33A insert —

33BRefunds of VAT to Academies

(1)This section applies where—

(a)VAT is chargeable on—

(i)the supply of goods or services to the proprietor of an Academy,

(ii)the acquisition of any goods from another member State by the proprietor of an Academy, or

(iii)the importation of any goods from a place outside the member States by the proprietor of an Academy, and

(b)the supply, acquisition or importation is not for the purposes of any business carried on by the proprietor of the Academy.

(2)The Commissioners shall, on a claim made by the proprietor of the Academy at such time and in such form and manner as the Commissioners may determine, refund to that proprietor the amount of VAT so chargeable.

(3)Subject to subsection (4), the claim must be made before the end of the period of 4 years beginning with the day on which the supply is made or the acquisition or importation takes place.

(4)If the Commissioners so determine, the claim period is such shorter period beginning with that day as the Commissioners may determine.

(5)Subsection (6) applies where goods or services supplied to, or acquired or imported by, the proprietor of the Academy cannot be conveniently distinguished from goods or services supplied to, or acquired or imported by, it for the purpose of a business carried on by that proprietor.

(6)The amount to be refunded under this section is such amount as remains after deducting from the whole of the VAT chargeable on any supply to, or acquisition or importation by, the proprietor of the Academy such proportion of that VAT as appears to the Commissioners to be attributable to the carrying on of the business.

(7)References in this section to VAT do not include any VAT which, by virtue of an order under section 25(7), is excluded from credit under section 25.

(8)In this section—

(a)references to the proprietor of an Academy are to the proprietor of the Academy acting in that capacity, and

(b)Academy” and “proprietor” have the same meaning as in the Education Act 1996 (see section 579 of that Act).

(2)In section 79 of that Act (repayment supplement in respect of certain delayed payments or refunds)—

(a)in subsection (1), after paragraph (c) insert , or

(d)the proprietor of an Academy who is registered is entitled to a refund under section 33B,,

(b)in subsection (5), after paragraph (c) insert , and

(d)a supplement paid to the proprietor of an Academy under subsection (1)(d) shall be treated as an amount due to that proprietor by way of refund under section 33B., and

(c)in subsection (6)(b) after “33A” insert “ or 33B ”.

(3)In section 90 of that Act (failure of resolution under the Provisional Collection of Taxes Act 1968), in subsection (3) after “33A,” insert “ 33B, ”.

(4)In Part 2 of Schedule 9 to that Act (exemptions: groups), in Group 14 (supplies of goods where input tax cannot be recovered), in Note (9) after “33A,” insert “ 33B, ”.

(5)The amendments made by this section have effect in relation to supplies made, and acquisitions and importations taking place, on or after 1 April 2011.

77Relief from VAT on imported goods of low valueE+W+S+N.I.

(1)In Schedule 2 to the Value Added Tax (Imported Goods) Relief Order 1984 (S.I. 1984/746) (reliefs for goods of certain descriptions), in item 8 of Group 8 (consignments of goods not exceeding a certain value), for “£18” substitute “ £15 ”.

(2)The amendment of that Schedule by this section is without prejudice to any power to amend that Schedule by subordinate legislation.

(3)The amendment made by this section has effect in relation to goods imported on or after 1 November 2011.

Climate change levyE+W+S+N.I.

78Supplies of commodities to be used in producing electricityE+W+S+N.I.

Schedule 20 contains provision for and in connection with the charging of climate change levy on supplies of commodities to be used in producing electricity.

79Northern Ireland gas suppliesE+W+S+N.I.

(1)In Schedule 6 to FA 2000 (climate change levy), omit paragraph 11A (exemption for Northern Ireland gas supplies).

(2)Subsection (3) applies to a supply of gas if—

(a)the supply is made by a gas utility (within the meaning of that Schedule (see paragraph 147)),

(b)the person to whom the supply is made intends to cause the gas to be burned in Northern Ireland, and

(c)the supply is treated as taking place on or after 1 April 2011 but before 1 November 2013.

(3)Paragraph 42 of that Schedule (amount payable by way of levy) has effect as if—

(a)for sub-paragraphs (1) and (1A) there were substituted—

(1)The amount payable by way of levy on a taxable supply is—

(a)if the supply is treated as taking place before 1 April 2012, £0.00059 per kilowatt hour, and

(b)if the supply is treated as taking place on or after that date, £0.00062 per kilowatt hour., and

(b)in sub-paragraph (3) the reference to a reduced-rate supply were a reference to a supply in relation to which this subsection applies.

(4)In FA 2001, omit section 105(2) (which inserted paragraph 11A of that Schedule).

(5)The amendments made by subsections (1) and (4) have effect in relation to a supply of gas to a person if the gas is actually supplied to the person on or after 1 April 2011.

(6)Subsections (2) and (3) are treated as having come into force on 1 April 2011.

Annotations:

Commencement Information

I1S. 79 wholly in force at Royal Assent; s. 79(2)(3) in force retrospective to 1.4.2011, see s. 79(6)

80Power to suspend exemption for supplies used in recycling processesE+W+S+N.I.

(1)The Treasury may by order provide that Schedule 6 to FA 2000 (climate change levy) is to have effect in relation to any supply of a taxable commodity made on or after 1 April 2011 as if—

(a)paragraph 18A (exemption: supply for use in recycling processes), and

(b)any reference to that paragraph,

were omitted.

(2)An order made under this section may apply—

(a)generally, or

(b)only in relation to supplies of a description specified in the order.

(3)Any revocation order made under this section may provide for the revocation to have effect in relation to supplies made on or after a day which is earlier than the day on which the revocation order is made.

(4)In this section a “revocation order” is an order revoking the whole or any part of an order containing the provision mentioned in subsection (1).

(5)The power to make an order under this section, other than a revocation order, may not be exercised after 31 March 2012.

(6)The power to make an order under this section is exercisable by statutory instrument.

(7)A statutory instrument containing an order under this section is subject to annulment in pursuance of a resolution of the House of Commons.

(8)Any reference in this section to the time at which a supply of a taxable commodity is made is to be read as a reference to the time at which the taxable commodity is actually supplied.

Aggregates levyE+W+S+N.I.

81Transitional tax creditE+W+S+N.I.

(1)Section 30A of FA 2001 (transitional tax credit in Northern Ireland) is amended as follows.

(2)For subsection (2) substitute—

(2)The cases are those where a charge to aggregates levy has arisen on a quantity of aggregate which has been subjected to commercial exploitation during a prescribed period.

(3)Omit subsection (3).

(4)In subsection (5), for paragraph (a) substitute—

(a)for a person to be entitled to a tax credit under the regulations in respect of aggregate originating from a site in respect of which any person holds an aggregates levy credit certificate which has not been withdrawn;.

Stamp duty land taxE+W+S+N.I.

82Prevention of avoidanceE+W+S+N.I.

Schedule 21 contains provision preventing avoidance of stamp duty land tax.

83Transfers involving multiple dwellingsE+W+S+N.I.

Schedule 22 contains provision about the amount of stamp duty land tax chargeable in respect of a transaction or set of transactions involving the acquisition of an interest in more than one dwelling.

Stamp duty reserve taxE+W+S+N.I.

84Interests in collective investment schemesE+W+S+N.I.

(1)Section 99 of FA 1986 (stamp duty reserve tax: interpretation) is amended as follows.

(2)In subsection (5B)—

(a)in paragraph (b), for the words after “exempt investment” substitute “ , unless subsection (5C) applies to the scheme; ”, and

(b)omit the sentence after paragraph (d).

(3)After subsection (5B) insert—

(5C)This subsection applies to a collective investment scheme if more than 20% of the market value of the investments in which the property subject to the scheme is invested is attributable to investments which are not exempt investments for the purposes of subsection (5A)(b).

(5D)In subsections (5B) and (5C) “collective investment scheme” has the same meaning as in Part 17 of the Financial Services and Markets Act 2000.

(4)This section comes into force on the first Sunday after the day on which this Act is passed.

Part 7 E+W+S+N.I.Administration etc

85Security for payment of PAYEE+W+S+N.I.

(1)Section 684 of ITEPA 2003 (PAYE regulations) is amended as follows.

(2)In subsection (2), after item 4A insert—

Provision for and in connection with requiring the giving, in specified circumstances, of security (or further security) for the payment of amounts in respect of which a person is or may be accountable to the Commissioners under the regulations.

(3)After subsection (4) insert—

(4A)A person who fails to comply with a requirement imposed under PAYE regulations to give security, or further security, for the payment of any amount commits an offence if the failure continues for such period as is specified; and a person guilty of an offence under this subsection is liable on summary conviction to a fine not exceeding level 5 on the standard scale.

86Data-gathering powersE+W+S+N.I.

(1)Schedule 23 contains provision for officers of Revenue and Customs to obtain data from data-holders.

(2)Schedule 24 contains amendments of Schedule 36 to FA 2008 (information and inspection powers).

87Mutual assistance for recovery of taxes etcE+W+S+N.I.

(1)Schedule 25 contains provision for the purpose of giving effect to Council Directive 2010/24/EU (which concerns mutual assistance for the recovery of claims relating to taxes, duties and other measures).

(2)The Treasury may by regulations make provision for the purpose of giving effect to—

(a)any amendments or extensions of Council Directive 2010/24/EU,

(b)any EU instrument that—

(i)wholly or partly replaces that Directive or a replacement of it, or

(ii)otherwise makes provision for or in connection with mutual assistance between member States in the recovery of claims relating to taxes, duties and other measures, and

(c)any amendments or extensions of any such EU instrument.

(3)Regulations under subsection (2) may amend, replace or repeal Schedule 25 and any other enactment (whenever passed).

(4)Regulations under subsection (2) are to be made by statutory instrument.

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

Part 8 E+W+S+N.I.Miscellaneous provisions

88Amendments of section 1 of the Provisional Collection of Taxes Act 1968E+W+S+N.I.

(1)Section 1 of the Provisional Collection of Taxes Act 1968 (temporary statutory effect of House of Commons resolutions relating to certain taxes) is amended in accordance with subsections (2) to (7).

(2)In subsection (2) for “(8)” substitute “ (9) ”.

(3)For subsection (3) substitute—

(3)The period is one expiring at the end of seven months after the date on which the resolution is expressed to take effect or, if no such date is expressed, after the date on which the resolution is passed.

(4)In subsection (5)—

(a)in paragraph (c) omit “or prorogued”, and

(b)after paragraph (c) insert , or

(d)Parliament is prorogued.

(5)After subsection (5) insert—

(5A)Subsection (5B) applies in relation to a resolution instead of subsection (5)(d) where Parliament is prorogued at the end of a session if—

(a)one of the following happens during the session—

(i)a Bill renewing, varying or, as the case may be, abolishing the tax is read a first time by the House, or

(ii)a Bill is amended by the House in Committee or on Report or by any Public Bill Committee of the House so as to include provision for the renewal, variation or, as the case may be, abolition of the tax,

(b)the Standing Orders or Sessional Orders of the House provide, or during the session the House orders, that proceedings on the Bill not completed before the end of the session shall be resumed in the next session, and

(c)proceedings on the Bill are not completed during the session.

(5B)The resolution shall cease to have statutory effect under this section if, during the period of thirty sitting days beginning with the first sitting day of the next session, no Bill renewing, varying or, as the case may be, abolishing the tax is presented to the House.

(5C)In subsection (5B) “sitting day” means a day on which the House sits.

(5D)Where a Bill is amended as mentioned in subsection (5A)(a)(ii), it does not matter for the purposes of subsection (5A)(b) if the House orders as mentioned in subsection (5A)(b) before the amendment to the Bill is made.

(6)In subsection (6) for “(4) or (5)” substitute “ (4), (5) or (5B) ”.

(7)After subsection (8) insert—

(9)Subsection (8) does not apply where the later resolution is passed in a different calendar year from that in which the earlier resolution is passed.

(8)Accordingly, the following provisions are repealed—

(a)section 205(4) of FA 1993;

(b)section 50(1) and (3) of F(No.2)A 1997.

(9)The amendments made by this section come into force on such day as the Treasury may by order made by statutory instrument appoint.

(10)Subject to subsection (11), the amendments do not apply in relation to any resolution passed before the day appointed under subsection (9).

(11)The cases covered by section 1(9) of the Provisional Collection of Taxes Act 1968 (as inserted by subsection (7)) include cases where the earlier resolution (but not the later resolution) is passed before the day appointed under subsection (9).

Annotations:

Subordinate Legislation Made

P4S. 88(9) power fully exercised: 30.12.2011 appointed by {S.I. 2011/2934}, art. 2

89Specified investmentsE+W+S+N.I.

(1)The amendments made by the second order are to be treated, for all tax purposes, as having come into force on 24 February 2010 immediately after the coming into force of the first order.

(2)A person may elect that subsection (1) is not to have effect in relation to that person.

(3)An election under subsection (2)—

(a)is to be made by notice in writing to an officer of Revenue and Customs,

(b)may not be made after the end of the period of 30 days beginning with the day on which this Act is passed, and

(c)is irrevocable.

(4)In this section—

  • the first order” means the Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2010 (S.I. 2010/86);

  • the second order” means the Financial Services and Markets Act 2000 (Regulated Activities) (Amendment) Order 2011 (S.I. 2011/133);

  • tax” means any tax or duty.

(5)Nothing in this section affects the commencement of the second order otherwise than as provided for by this section.

90Machine games dutyE+W+S+N.I.

The Commissioners for Her Majesty's Revenue and Customs may incur expenditure in preparing for the introduction of a new duty to be charged in respect of games played on machines.

91Redundant reliefsE+W+S+N.I.

Schedule 26 contains provision repealing redundant reliefs.

Part 9 E+W+S+N.I.Final provisions

92InterpretationE+W+S+N.I.

(1)In this Act—

  • ALDA 1979” means the Alcoholic Liquor Duties Act 1979,

  • BGDA 1981” means the Betting and Gaming Duties Act 1981,

  • CAA 2001” means the Capital Allowances Act 2001,

  • CRCA 2005” means the Commissioners for Revenue and Customs Act 2005,

  • CTA 2009” means the Corporation Tax Act 2009,

  • CTA 2010” means the Corporation Tax Act 2010,

  • FISMA 2000” means the Financial Services and Markets Act 2000,

  • HODA 1979” means the Hydrocarbon Oil Duties Act 1979,

  • ICTA” means the Income and Corporation Taxes Act 1988,

  • IHTA 1984” means the Inheritance Tax Act 1984,

  • ITA 2007” means the Income Tax Act 2007,

  • ITEPA 2003” means the Income Tax (Earnings and Pensions) Act 2003,

  • ITTOIA 2005” means the Income Tax (Trading and Other Income) Act 2005,

  • OTA 1975” means the Oil Taxation Act 1975,

  • PRTA 1980” means the Petroleum Revenue Tax Act 1980,

  • TCGA 1992” means the Taxation of Chargeable Gains Act 1992,

  • TIOPA 2010” means the Taxation (International and Other Provisions) Act 2010,

  • TMA 1970” means the Taxes Management Act 1970,

  • TPDA 1979” means the Tobacco Products Duty Act 1979,

  • VATA 1994” means the Value Added Tax Act 1994, and

  • VERA 1994” means the Vehicle Excise and Registration Act 1994.

(2)In this Act—

  • “FA”, followed by a year, means the Finance Act of that year;

  • “F(No.2)A”, followed by a year, means the Finance (No. 2) Act of that year.

93Short titleE+W+S+N.I.

This Act may be cited as the Finance Act 2011.

SCHEDULES

Section 15

SCHEDULE 1E+W+S+N.I.New high strength beer duty

High strength beer dutyE+W+S+N.I.

1In Part 3 of ALDA 1979 (beer), after section 36H insert—E+W+S+N.I.

Charge of excise duty: high strength beerE+W+S+N.I.

37High strength beer duty

(1)A duty of excise is charged on high strength beer—

(a)imported into the United Kingdom, or

(b)produced in the United Kingdom,

on or after 1 October 2011.

(2)High strength beer” means beer which is of a strength exceeding 7.5 per cent.

(3)The duty charged by subsection (1) is referred to in this Act as “high strength beer duty”.

(4)High strength beer duty is charged at £4.64 per hectolitre per cent of alcohol in the beer.

(5)Subject to the provisions of this Act—

(a)the high strength beer duty on beer produced in, or imported into, the United Kingdom is to be charged and paid, and

(b)the amount chargeable in respect of any such duty is to be determined and becomes due,

in accordance with regulations under section 49 and with any regulations under section 1 of the Finance (No. 2) Act 1992.

Consequential amendments in ALDA 1979E+W+S+N.I.

2ALDA 1979 is amended as follows.E+W+S+N.I.

3In section 4 (interpretation), in subsection (1) insert at the appropriate places—E+W+S+N.I.

general beer duty” has the meaning given by section 36(1ZAA);, and

high strength beer duty” has the meaning given by section 37(3);.

4(1)Section 36 (beer: charge of excise duty) is amended as follows.E+W+S+N.I.

(2)After subsection (1) insert—

(1ZAA)The duty charged by subsection (1) is referred to in this Act as “general beer duty”.

(3)In subsection (1AA), for “the duty” substitute “ general beer duty ”.

(4)In subsection (1A), after “No” insert “ general beer ”.

(5)In subsection (2)(a), for “the duty” substitute “ general beer duty ”.

(6)For the heading substitute General beer duty.

5In section 36B (interpretation of provisions relating to small brewery beer), in subsection (5), after “rate of” insert “ general beer ”.E+W+S+N.I.

6(1)Section 36D (rate of duty for small brewery beer from singleton breweries) is amended as follows.E+W+S+N.I.

(2)In subsection (2), after “rate of” insert “ general beer ”.

(3)In the heading, after “Rate of” insert general beer.

7(1)Section 36F (rate of duty for small brewery beer from co-operated breweries) is amended as follows.E+W+S+N.I.

(2)In subsection (2), after “rate of” insert “ general beer ”.

(3)In the heading, after “Rate of” insert general beer.

8(1)Section 36G (assessments where incorrectly low rate of duty applied) is amended as follows.E+W+S+N.I.

(2)In subsection (1)(a), for “duty is charged by section 36 above” substitute “ general beer duty is charged ”.

(3)In subsection (2)(a), for “duty is charged by section 36 above” substitute “ general beer duty is charged ”.

(4)In subsection (3)(a), for “duty charged on the beer by section 36 above” (in both places) substitute “ general beer duty charged on the beer ”.

(5)In subsection (4)—

(a)for “duty charged” substitute “ general beer duty charged ”, and

(b)in paragraph (a), for “the duty” substitute “ that duty ”.

9In section 36H (power to vary reduced rate provisions), in subsection (1) for “excise duty” substitute “ general beer duty ”.E+W+S+N.I.

10In section 41 (exemption from duty of beer produced for private consumption), for “The duty on beer produced in the United Kingdom shall not be” substitute “ Neither general beer duty on beer produced in the United Kingdom, nor high strength beer duty on beer so produced, is ”.E+W+S+N.I.

11In section 49 (beer regulations), in subsection (1)—E+W+S+N.I.

(a)for “the duty” (in the first place it occurs) substitute “ general beer duty or high strength beer duty ”, and

(b)for “the duty” (in the second place it occurs) substitute “ any duty ”.

12In section 49A (drawback allowable to registered brewer), in subsection (2) for “the excise” substitute “ any excise ”.E+W+S+N.I.

Section 26

SCHEDULE 2E+W+S+N.I.Employment income provided through third parties

Main provisionE+W+S+N.I.

1After Part 7 of ITEPA 2003 insert—E+W+S+N.I.

Part 7A E+W+S+N.I.Employment income provided through third parties

CHAPTER 1E+W+S+N.I.Application etc
ApplicationE+W+S+N.I.
554AApplication of Chapter 2

(1)Chapter 2 applies if—

(a)a person (“A”) is an employee, or a former or prospective employee, of another person (“B”),

(b)there is an arrangement (“the relevant arrangement”) to which A is a party or which otherwise (wholly or partly) covers or relates to A,

(c)it is reasonable to suppose that, in essence—

(i)the relevant arrangement, or

(ii)the relevant arrangement so far as it covers or relates to A,

is (wholly or partly) a means of providing, or is otherwise concerned (wholly or partly) with the provision of, rewards or recognition or loans in connection with A's employment, or former or prospective employment, with B,

(d)a relevant step is taken by a relevant third person, and

(e)it is reasonable to suppose that, in essence—

(i)the relevant step is taken (wholly or partly) in pursuance of the relevant arrangement, or

(ii)there is some other connection (direct or indirect) between the relevant step and the relevant arrangement.

(2)In this Part “relevant step” means a step within section 554B, 554C or 554D.

(3)Subsection (1) is subject to subsection (4) and sections 554E to 554Y.

(4)Chapter 2 does not apply by reason of a relevant step within section 554B taken on or after A's death.

(5)In subsection (1)(b) and (c)(ii) references to A include references to any person linked with A.

(6)For the purposes of subsection (1)(c) it does not matter if the relevant arrangement does not include details of the steps which will or may be taken in connection with providing, in essence, rewards or recognition or loans as mentioned (for example, details of any sums of money or assets which will or may be involved or details of how or when or by whom or in whose favour any step will or may be taken).

(7)In subsection (1)(d) “relevant third person” means—

(a)A acting as a trustee,

(b)B acting as a trustee, or

(c)any person other than A and B.

(8)If B is a company and is a member of a group of companies at the time the relevant step is taken, in subsection (7) references to B are to be read as including references to any other company which is a member of that group at that time.

(9)If B is a limited liability partnership, in subsection (7) references to B are to be read as including references to any company which is a wholly-owned subsidiary (as defined in section 1159(2) of the Companies Act 2006) of B at the time the relevant step is taken.

(10)Neither subsection (8) nor subsection (9) applies if there is a connection (direct or indirect) between the relevant step and a tax avoidance arrangement.

(11)For the purposes of subsection (1)(e)—

(a)the relevant step is connected with the relevant arrangement if (for example) the relevant step is taken (wholly or partly) in pursuance of an arrangement at one end of a series of arrangements with the relevant arrangement being at the other end, and

(b)it does not matter if the person taking the relevant step is unaware of the relevant arrangement.

(12)For the purposes of subsection (1)(c) and (e) in particular, all relevant circumstances are to be taken into account in order to get to the essence of the matter.

Relevant stepsE+W+S+N.I.
554BRelevant steps: earmarking etc of sum of money or asset

(1)A person (“P”) takes a step within this section if—

(a)a sum of money or asset held by or on behalf of P is earmarked (however informally) by P with a view to a later relevant step being taken by P or any other person (on or following the meeting of any condition or otherwise) in relation to—

(i)that sum of money or asset, or

(ii)any sum of money or asset which may arise or derive (directly or indirectly) from it, or

(b)a sum of money or asset otherwise starts being held by or on behalf of P, specifically with a view, so far as P is concerned, to a later relevant step being taken by P or any other person (on or following the meeting of any condition or otherwise) in relation to—

(i)that sum of money or asset, or

(ii)any sum of money or asset which may arise or derive (directly or indirectly) from it.

(2)For the purposes of subsection (1)(a) and (b) it does not matter—

(a)if details of the later relevant step have not been worked out (for example, details of the sum of money or asset which will or may be the subject of the step or details of how or when or by whom or in whose favour the step will or may be taken),

(b)if any condition which would have to be met before the later relevant step is taken might never be met, or

(c)if A, or any person linked with A, has no legal right to have a relevant step taken in relation to any sum of money or asset mentioned in subsection (1)(a)(i) or (ii) or (b)(i) or (ii) (as the case may be).

(3)For the purposes of subsection (1)(b) it does not matter whether or not the sum of money or asset in question has previously been held by or on behalf of P on a basis which is different to that mentioned in subsection (1)(b).

554CRelevant steps: payment of sum, transfer of asset etc

(1)A person (“P”) takes a step within this section if P—

(a)pays a sum of money to a relevant person,

(b)transfers an asset to a relevant person,

(c)takes a step by virtue of which a relevant person acquires an asset within subsection (4),

(d)makes available a sum of money or asset for use, or makes it available under an arrangement which permits its use—

(i)as security for a loan made or to be made to a relevant person, or

(ii)otherwise as security for the meeting of any liability, or the performance of any undertaking, which a relevant person has or will have, or

(e)grants to a relevant person a lease of any premises the effective duration of which is likely to exceed 21 years.

(2)In subsection (1) “relevant person”—

(a)means A or a person chosen by A or within a class of person chosen by A, and

(b)includes, if P is taking a step on A's behalf or otherwise at A's direction or request, any other person.

(3)In subsection (2) references to A include references to any person linked with A.

(4)The following assets are within this subsection—

(a)securities,

(b)interests in securities, and

(c)securities options,

as defined in section 420 for the purposes of Chapters 1 to 5 of Part 7; and in subsection (1)(c) “acquires” is to be read in accordance with section 421B(2)(a).

(5)For the purposes of subsection (1)(d)—

(a)references to making a sum of money or asset available are references to making it available in any way, however informal,

(b)it does not matter if the relevant person has no legal right to have the sum of money or asset used as mentioned, and

(c)it does not matter if the sum of money or asset is not actually used as mentioned.

(6)Subsections (7) and (8) apply for the purpose of determining the likely effective duration of a lease of any premises granted to a relevant person (“the original lease”) for the purposes of subsection (1)(e).

(7)If there are circumstances which make it likely that the original lease will be extended for any period, the effective duration of the original lease is to be determined on the assumption that the original lease will be so extended.

(8)Further, if—

(a)A is, or is likely to become, entitled to a later lease, or the grant of a later lease, of the same premises, or

(b)it is otherwise likely that A will be granted a later lease of the same premises,

the original lease is to be treated as continuing until the end of the later lease (and subsection (7) also applies for the purpose of determining the duration of the later lease).

(9)In subsection (8)—

(a)references to A include references to—

(i)any person linked with A, and

(ii)the person to whom the original lease was granted where the original lease was not granted to A or any person linked with A, and

(b)references to the same premises include references to any premises which include the whole or part of the same premises.

(10)In this section “lease” and “premises” have the same meaning as they have in Chapter 4 of Part 3 of ITTOIA 2005.

554DRelevant steps: making asset available

(1)A person (“P”) takes a step within this section if, without transferring the asset to the relevant person, P—

(a)at any time, makes an asset available for a relevant person to benefit from in a way which is substantially similar to the way in which the relevant person would have been able to benefit from the asset had the asset been transferred to the relevant person at that time, or

(b)at or after the end of the relevant period, makes an asset available for a relevant person to benefit from.

(2)If—

(a)before the end of the relevant period, P makes available an asset for a relevant person to benefit from, and

(b)at the end of the relevant period, P continues to make the asset available for the relevant person to benefit from,

P is treated as taking a step within this section by virtue of subsection (1)(b) at the end of the relevant period.

(3)For the purposes of subsections (1) and (2)—

(a)references to making an asset available are references to making it available in any way, however informal,

(b)it does not matter if the relevant person has no legal right to benefit from the asset, and

(c)it does not matter if the relevant person does not actually benefit from the asset.

(4)In subsections (1) and (2) “the relevant period” means the period of two years starting with the day on which A's employment with B ceases.

(5)In subsections (1) and (2) “relevant person”—

(a)means A or a person chosen by A or within a class of person chosen by A, and

(b)includes, if P is taking a step on A's behalf or otherwise at A's direction or request, any other person.

(6)In subsection (5) references to A include references to any person linked with A.

(7)The following factors (among others) may be taken into account in determining whether a step within this section is taken by virtue of subsection (1)(a)—

(a)any limitations on the way in which the relevant person may benefit from the asset,

(b)the period over which the asset is being made available and (if relevant) the extent to which that period covers the expected remaining useful life of the asset,

(c)the extent to which the relevant person has, or is to have, a say over the disposal of the asset, and

(d)the extent to which the relevant person may benefit from any proceeds arising from the disposal of the asset or otherwise have a say in the way the proceeds are used.

ExclusionsE+W+S+N.I.
554EExclusions: steps under certain schemes etc

(1)Chapter 2 does not apply by reason of a relevant step if the step is taken under any of the following—

(a)an approved SIP (within the meaning of Chapter 6 of Part 7),

(b)an approved SAYE option scheme (within the meaning of Chapter 7 of Part 7),

(c)an approved CSOP scheme (within the meaning of Chapter 8 of Part 7),

(d)an arrangement the sole purpose of which is the provision of excluded benefits (as defined in section 393B(3)),

(e)an arrangement the sole purpose of which is the making of payments which are to be disregarded in the calculation mentioned in regulation 25 of the Social Security (Contributions) Regulations 2001 (S.I. 2001/1004) by virtue of paragraph 12 of Part 10 of Schedule 3 to those Regulations (as that paragraph has effect by virtue of regulation 2(3) of the Social Security (Contributions) (Amendment No. 9) Regulations 2007 (S.I. 2007/2905)),

(f)a pension scheme set up by a government outside the United Kingdom for the benefit of its employees or primarily for their benefit,

(g)a registered pension scheme, or

(h)an arrangement the sole purpose of which is the making of payments (within the meaning of Chapter 3 of Part 4 of FA 2004 (see section 161(2) of that Act))—

(i)to which section 161(4) of FA 2004 applies in relation to a registered pension scheme (or a registered pension scheme which has been wound up), and

(ii)which are authorised in relation to that scheme by section 160(1) of FA 2004.

(2)Subject to subsection (4), subsection (3) applies to a relevant step taken by a person (“P”) if—

(a)the relevant step is not taken under an arrangement mentioned in subsection (1)(a) to (c), and

(b)there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement.

(3)Chapter 2 does not apply by reason of the relevant step if the step is taken solely for the purpose of—

(a)acquiring or holding shares—

(i)to be awarded under an approved SIP, or

(ii)to be provided pursuant to options granted under an approved SAYE option scheme or an approved CSOP scheme, or

(b)providing shares pursuant to—

(i)an award of shares under an approved SIP, or

(ii)an option granted under an approved SAYE option scheme or an approved CSOP scheme.

(4)Subsection (3) does not apply to the relevant step if, immediately before or after the step is taken—

(a)the total number of shares of any type held, in relation to the approved SIP, the approved SAYE option scheme or the approved CSOP scheme, by P and any other persons for purposes within subsection (3)(a) and (b), exceeds

(b)the maximum number of shares of that type which might reasonably be expected to be required, in relation to the approved SIP, the approved SAYE option scheme or the approved CSOP scheme, for those purposes over the period of ten years starting with the day on which the relevant step is taken.

(5)Terms used in subsections (2) to (4) have the same meaning as they have in Chapter 6, 7 or 8 of Part 7 (as the case may be).

(6)Chapter 2 does not apply by reason of a relevant step taken by a person (“P”) if—

(a)the relevant step is taken for the sole purpose of—

(i)granting qualifying options under an EMI arrangement,

(ii)acquiring or holding shares to be provided pursuant to qualifying options granted under an EMI arrangement, or

(iii)providing shares pursuant to qualifying options granted under an EMI arrangement, and

(b)there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement.

(7)But subsection (6) does not apply to the relevant step if, immediately before or after the step is taken—

(a)the total number of shares of any type held, in relation to the EMI arrangement, by P and any other persons for purposes within subsection (6)(a)(i) to (iii), exceeds

(b)the maximum number of shares of that type which might reasonably be expected to be required, in relation to the EMI arrangement, for those purposes over the period of ten years starting with the day on which the relevant step is taken.

(8)In subsections (6) and (7) “EMI arrangement” means an arrangement under which qualifying options are granted.

(9)Terms used in subsections (6) to (8) have the same meaning as in Chapter 9 of Part 7.

(10)Subsection (11) applies if—

(a)a person (“P”) takes a relevant step within section 554B by reason of which Chapter 2 would apply apart from subsection (3) or (6), and

(b)at any time (“the relevant time”) the sum of money or asset (or any part of it) which is the subject of the relevant step—

(i)ceases to be held by or on behalf of P solely for purposes within subsection (3)(a) and (b) or (6)(a)(i) to (iii), but

(ii)continues to be held by or on behalf of P on the basis mentioned in section 554B(1)(a) or (b).

(11)This Part has effect as if a relevant step within section 554B were taken at the relevant time—

(a)the subject of which is the sum of money or asset (or the part of it) mentioned in subsection (10)(b), and

(b)by reason of which Chapter 2 is to apply (subject only to section 554A(4)).

(12)Chapter 2 does not apply by reason of a relevant step taken by the Independent Parliamentary Standards Authority in relation to a member of the House of Commons.

554FExclusions: commercial transactions

(1)Chapter 2 does not apply by reason of a relevant step which is the payment of a sum of money by way of a loan if—

(a)the loan is a loan on ordinary commercial terms within the meaning of section 176, ignoring conditions B and C in that section, and

(b)there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement.

(2)Chapter 2 does not apply by reason of a relevant step taken by a person (“P”), which is not the payment of a sum of money by way of a loan, if—

(a)the step is taken for the sole purpose of a transaction which P has with A and which P entered into in the ordinary course of P's business,

(b)a substantial proportion of P's business involves similar transactions with members of the public,

(c)the terms on which P entered into the transaction with A are substantially the same as the terms on which P normally enters into similar transactions with members of the public, and

(d)there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement.

(3)For the purposes of subsection (2)(b) and (c) a transaction is “similar” if it is of the same or a similar type to the transaction which P has with A.

(4)In subsection (2)(b) and (c) “members of the public” means members of the public at large with whom P deals at arm's length.

(5)In this section references to A include references to any person linked with A.

554GExclusions: transactions under employee benefit packages

(1)Chapter 2 does not apply by reason of a relevant step taken by a person (“P”) if—

(a)the step is not taken under a pension scheme,

(b)the step is taken for the sole purpose of a transaction which P has with A and which P entered into in the ordinary course of P's business,

(c)if the step is the payment of a sum of money by way of a loan—

(i)a substantial proportion of P's business involves making similar loans to members of the public,

(ii)the transaction with A is part of a package of benefits which is available to a substantial proportion of B's employees, and

(iii)subsection (3) does not apply,

(d)if the step is not the payment of a sum of money by way of a loan, the transaction with A is part of a package of benefits which is available—

(i)to a substantial proportion of B's employees, or

(ii)to a substantial proportion of those employees of B whose status as employees of B is comparable with A's status as an employee of B (taking into account (for example) levels of seniority, types of duties and levels of remuneration),

(e)the terms on which similar transactions are offered by P under the package of benefits mentioned in paragraph (c)(ii) or (d) (as the case may be) are generous enough to enable substantially all of the employees of B to whom the package is available to take advantage of what is offered (if they want to),

(f)the terms on which P entered into the transaction with A are substantially the same as the terms on which P normally enters into similar transactions with employees of B under the package of benefits,

(g)if B is a company, a majority of B's employees to whom the package of benefits is available do not have a material interest (as defined in section 68) in B, and

(h)there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement.

(2)For the purposes of subsection (1)(c)(i)—

(a)a loan is “similar” if it is made for the same or similar purposes as the loan which is the subject of the relevant step, and

(b)members of the public” means members of the public at large with whom P deals at arm's length.

(3)This subsection applies if any feature of the package of benefits mentioned in subsection (1)(c)(ii) has or is likely to have the effect that, of the employees of B to whom the package is available, it is employees within subsection (4) on whom benefits under the package will be wholly or mainly conferred.

(4)The employees within this subsection are—

(a)directors,

(b)senior employees,

(c)employees who receive, or as a result of the package of benefits are likely to receive, the higher or highest levels of remuneration, and

(d)if B is a company and is a member of a group of companies, any employees not within paragraph (b) or (c) who—

(i)are senior employees in the group, or

(ii)receive, or as a result of the package of benefits are likely to receive, the higher or highest levels of remuneration in the group.

(5)For the purposes of subsection (1)(e) and (f) a transaction is “similar” if it is of the same or a similar type to the transaction which P has with A.

(6)If the relevant step is not the payment of a sum of money by way of a loan, in this section references to employees of B are references to those employees of B whose duties of employment are performed in the United Kingdom; and for this purpose duties performed outside the United Kingdom the performance of which is merely incidental to the performance of duties in the United Kingdom are to be treated as performed in the United Kingdom.

(7)In this section (apart from subsection (1)(d)(ii)) references to A include references to any person linked with A.

554HExclusions: earmarking of deferred remuneration

(1)This section applies if—

(a)on a date (“the award date”) A is awarded remuneration (“the deferred remuneration”) in respect of A's employment with B,

(b)the main purpose of the award is not the provision of relevant benefits (within the meaning of Chapter 2 of Part 6, but ignoring section 393B(2)(a)),

(c)the deferred remuneration is awarded on terms (“the deferred remuneration terms”) the main purpose of which is to defer the provision to A of the deferred remuneration to a specified date (“the vesting date”) which is after the award date, while providing that the award of the deferred remuneration is revoked if specified conditions are not met on or before the vesting date,

(d)the vesting date is not more than five years after the award date,

(e)as at the award date, there is a reasonable chance that the award of the deferred remuneration will be revoked because not all the specified conditions will be met on or before the vesting date,

(f)if the deferred remuneration were to be provided to A by any person on the award date, that action would, for the purposes of Part 11, be a payment of PAYE employment income of A in respect of A's employment with B,

(g)before the end of the vesting date, a person (“P”) takes a relevant step within section 554B by reason of which Chapter 2 would apply apart from this section,

(h)on the taking of the relevant step, the sum of money or asset which is the subject of the step represents the deferred remuneration or any part of it (and nothing else), and

(i)there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement.

(2)In addition to the provision relating to revocation required by subsection (1)(c) (which must be included), the deferred remuneration terms may also provide that the award of the deferred remuneration is partly revoked if specified conditions are not met on or before the vesting date.

(3)Chapter 2 does not apply by reason of the relevant step mentioned in subsection (1)(g).

(4)In the following subsections “the earmarked deferred remuneration” means the deferred remuneration so far as, on the taking of the relevant step mentioned in subsection (1)(g), it is represented by the sum of money or asset which is the subject of the step as mentioned in subsection (1)(h).

(5)Subsection (6) applies if, at any time (“the relevant time”)—

(a)any sum of money or asset held by or on behalf of P on the basis mentioned in section 554B(1)(a) or (b) which represents any of the earmarked deferred remuneration ceases to represent that earmarked deferred remuneration or a part of it (because the remuneration is to be provided to A in another way or its award has been revoked or for any other reason), but

(b)the sum of money or asset continues to be held by or on behalf of P on the basis mentioned in section 554B(1)(a) or (b).

(6)This Part has effect as if a relevant step within section 554B were taken at the relevant time—

(a)the subject of which is—

(i)the sum of money or asset mentioned in subsection (5), and

(ii)a just and reasonable proportion of any relevant income (see subsection (12)), and

(b)by reason of which Chapter 2 is to apply (subject only to section 554A(4)).

(7)Subsection (8) applies if neither subsection (10) nor subsection (11) applies to the earmarked deferred remuneration or to a part of it.

(8)This Part has effect as if a relevant step within section 554B were taken at the end of the vesting date—

(a)the subject of which is—

(i)a sum of money of the notional PAYE amount, and

(ii)a just and reasonable proportion of any relevant income (see subsection (12)), and

(b)by reason of which Chapter 2 is to apply (subject only to section 554A(4)).

(9)In subsection (8)(a) “the notional PAYE amount” means the amount which the payment of PAYE employment income would have been had, as the case may be—

(a)the earmarked deferred remuneration, or

(b)the part of it to which neither subsection (10) nor subsection (11) applies,

been provided to A at the end of the vesting date in a way which is, for the purposes of Part 11, a payment of PAYE employment income of A in respect of A's employment with B.

(10)This subsection applies to the earmarked deferred remuneration so far as it is provided to A before the end of the vesting date in a way which is, for the purposes of Part 11, a payment of PAYE employment income of A in respect of A's employment with B.

(11)This subsection applies to the earmarked deferred remuneration so far as, before the end of the vesting date, the award of the earmarked deferred remuneration is revoked in accordance with the deferred remuneration terms.

(12)In subsections (6)(a)(ii) and (8)(a)(ii) “relevant income” means any income—

(a)which, before the relevant time or the end of the vesting date (as the case may be)—

(i)arises (directly or indirectly) from a sum of money or asset held by or on behalf of P representing any of the earmarked deferred remuneration, and

(ii)is the subject of a relevant step within section 554B taken by P by reason of which Chapter 2 would apply apart from section 554Q, and

(b)which, at the relevant time or the end of the vesting date (as the case may be), continues to be held by or on behalf of P on the basis mentioned in section 554B(1)(a) or (b).

554IExclusions: introduction to sections 554J to 554M

(1)Sections 554J and 554K are about steps within section 554B taken in relation to awards of certain shares or securities or of sums of money determined by reference to the market value of certain shares or securities.

(2)Sections 554L and 554M are about steps within section 554B taken in relation to grants of rights to acquire certain shares or securities or to receive sums of money determined by reference to the market value of certain shares or securities.

(3)Sections 554J to 554M apply only if B is a company.

(4)In those sections—

  • relevant benefits” has the same meaning as in Chapter 2 of Part 6, but ignoring section 393B(2)(a),

  • relevant shares” means—

    (a)

    shares (including stock) in B,

    (b)

    instruments issued by B which are securities for the purposes of Chapters 1 to 5 of Part 7 within section 420(1)(b), or

    (c)

    units in a collective investment scheme (as defined in section 420(2)) managed by B which are securities for the purposes of Chapters 1 to 5 of Part 7 within section 420(1)(e), and

  • trading company” means a company the business of which consists wholly or mainly in the carrying on of a trade.

(5)If B is a member of a group of companies, in the definition of “relevant shares” in subsection (4) references to B are to be read as including references to any other company which is a member of that group.

(6)For the purposes of sections 554K and 554M an exit event occurs if—

(a)shares in the relevant company are admitted to trading on a stock exchange,

(b)all the shares in the relevant company, or a substantial proportion of them, are disposed of to persons none of whom is connected with any of the persons making any disposal,

(c)if the relevant company is a trading company (as defined in subsection (4)), the company's trade, or a substantial proportion of it, is transferred to a person who is not a relevant connected person,

(d)the relevant company's assets, or a substantial proportion of them, are disposed of to a person who is not a relevant connected person,

(e)the winding up of the relevant company starts, or

(f)a person (“P”) who controls the relevant company ceases to control it, so long as no person connected with P starts to control it.

(7)For the purposes of subsection (6)—

(a)the relevant company” means—

(i)if the relevant shares mentioned in section 554K(1)(a)(i) or (ii) or 554M(1)(a)(i) or (ii) are shares (including stock), the company in which they are shares, or

(ii)if the relevant shares so mentioned are instruments within paragraph (b) of the definition of “relevant shares” in subsection (4), the company by which those instruments are issued,

(b)relevant connected person” means a person who—

(i)is connected with the relevant company, or

(ii)is a shareholder in the relevant company or is connected with a shareholder in the relevant company,

(c)the relevant company's trade, or a substantial proportion of it, is transferred to another person if—

(i)the relevant company ceases to carry on the trade or the proportion of it, and

(ii)on that occurring, the other person starts to carry on the trade or the proportion of it, and

(d)section 12(7) of CTA 2009 applies for the purpose of determining when the winding up of the relevant company starts.

554JExclusions: earmarking for employee share schemes (1)

(1)This section applies if—

(a)there is an arrangement (“B's employee share scheme”) under which, in respect of A's employment with B, an award may be made to A of—

(i)relevant shares, or

(ii)a sum of money the amount of which is to be determined by reference to the market value of any relevant shares at the time the sum is to be paid,

(b)the main purpose of the award of the relevant shares or sum of money would not be the provision of relevant benefits,

(c)the award of the relevant shares or sum of money would be on terms (“the deferred award terms”) the main purpose of which is to defer the receipt of the shares by A, or the payment of the sum of money to A, to a specified date (“the vesting date”) which is after the date (“the award date”) on which the award is made, while providing that the award is revoked if specified conditions are not met on or before the vesting date,

(d)the vesting date would not be more than ten years after the award date, and

(e)as at the award date, there would be a reasonable chance that the award of the relevant shares or sum of money will be revoked because not all the specified conditions will be met on or before the vesting date.

(2)In addition to the provision relating to revocation required by subsection (1)(c) (which must be included), the deferred award terms may also provide that the award of the relevant shares or sum of money is partly revoked if specified conditions are not met on or before the vesting date.

(3)Chapter 2 does not apply by reason of a relevant step within section 554B (by reason of which it would otherwise apply) taken by a person (“P”) if—

(a)the subject of the relevant step is relevant shares (“earmarked shares”) which are earmarked, or otherwise start being held, solely with a view to the meeting of—

(i)an award of relevant shares or a sum of money made to A under B's employee share scheme as mentioned in subsection (1)(a) in relation to which the requirements of subsection (1)(b) to (e) are met, or

(ii)an award of relevant shares or a sum of money which is expected to be made to A under B's employee share scheme as mentioned in subsection (1)(a) and in relation to which the requirements of subsection (1)(b) to (e) would be met,

(b)the number of relevant shares of any type which are earmarked shares does not exceed the maximum number of relevant shares of that type which might reasonably be expected to be needed for meeting the award or expected award, and

(c)there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement.

(4)If the relevant step mentioned in subsection (3) is taken in relation to an expected award as mentioned in subsection (3)(a)(ii), subsection (5) applies if—

(a)the award is not made before the end of the date (“the final award date”) falling immediately after the period of three months starting with the date on which P takes the relevant step, and

(b)as at the end of the final award date, any of the earmarked shares continue to be held by or on behalf of P solely on the basis mentioned in subsection (3)(a).

(5)This Part has effect as if a relevant step within section 554B were taken at the end of the final award date—

(a)the subject of which is—

(i)the shares which continue to be held as mentioned in subsection (4)(b), and

(ii)any relevant income in relation to those shares (see subsection (13)), and

(b)by reason of which Chapter 2 is to apply (subject only to section 554A(4)).

(6)Subsection (7) applies if, at any time (“the relevant time”)—

(a)any of the earmarked shares cease to be held by or on behalf of P solely on the basis mentioned in subsection (3)(a), but

(b)the shares continue to be held by or on behalf of P on the basis mentioned in section 554B(1)(a) or (b).

(7)This Part has effect as if a relevant step within section 554B were taken at the relevant time—

(a)the subject of which is—

(i)the shares mentioned in subsection (6), and

(ii)any relevant income in relation to those shares (see subsection (13)), and

(b)by reason of which Chapter 2 is to apply (subject only to section 554A(4)).

(8)Subsection (9) applies if—

(a)the relevant step mentioned in subsection (3) is taken in relation to an award which has been made as mentioned in subsection (3)(a)(i), or

(b)the relevant step mentioned in subsection (3) is taken in relation to an expected award as mentioned in subsection (3)(a)(ii) and the award is made before the end of the final award date.

(9)This Part has effect as if a relevant step within section 554B were taken at the end of the vesting date—

(a)the subject of which is—

(i)any of the earmarked shares to which none of subsections (10) to (12) applies, and

(ii)any relevant income in relation to any of the earmarked shares mentioned in sub-paragraph (i) (see subsection (13)), and

(b)by reason of which Chapter 2 is to apply (subject only to section 554A(4)).

(10)This subsection applies to any earmarked shares if—

(a)A receives the shares before the end of the vesting date, and

(b)the receipt of the shares by A gives rise to employment income of A which is chargeable to income tax or which is exempt income.

(11)This subsection applies to any earmarked shares if—

(a)the sum of money mentioned in subsection (1)(a)(ii) (or a part of it) is paid to A before the end of the vesting date,

(b)the payment of the sum to A gives rise to employment income of A which is chargeable to income tax or which is exempt income, and

(c)the payment represents the proceeds of the disposal of the shares, or the payment is made from another source and, correspondingly, the shares are no longer held by any person in relation to the award.

(12)This subsection applies to any earmarked shares if—

(a)before the end of the vesting date, the award (or any part of it) is revoked in accordance with the deferred award terms, and

(b)correspondingly, the shares are no longer held by any person in relation to the award.

(13)In subsections (5)(a)(ii), (7)(a)(ii) and (9)(a)(ii) “relevant income”, in relation to any earmarked shares, means any income—

(a)which, before the relevant step is treated as being taken by subsection (5), (7) or (9) (as the case may be)—

(i)arises (directly or indirectly) from the shares, and

(ii)is the subject of a relevant step within section 554B taken by P by reason of which Chapter 2 would apply apart from section 554Q, and

(b)which, at the time the relevant step is treated as being taken, continues to be held by or on behalf of P on the basis mentioned in section 554B(1)(a) or (b).

554KExclusions: earmarking for employee share schemes (2)

(1)This section applies if—

(a)there is an arrangement (“B's employee share scheme”) under which, in respect of A's employment with B, an award may be made to A of—

(i)relevant shares, or

(ii)a sum of money the amount of which is to be determined by reference to the market value of any relevant shares at the time the sum is to be paid,

(b)the main purpose of the award would not be the provision of relevant benefits,

(c)the relevant shares would be—

(i)shares (including stock) in, or

(ii)instruments within paragraph (b) of the definition of “relevant shares” in section 554I(4) issued by,

a trading company or a company which controls a trading company,

(d)the award would be on terms the main purpose of which is to ensure—

(i)that the relevant shares are received, or

(ii)that the sum of money is paid,

only if a specified exit event, or an exit event within a specified description, occurs, and

(e)as at the time the award is made, there would be a reasonable chance that the specified exit event, or an exit event within the specified description, will occur.

(2)Chapter 2 does not apply by reason of a relevant step within section 554B (by reason of which it would otherwise apply) taken by a person (“P”) if—

(a)the subject of the relevant step is relevant shares (“earmarked shares”) which are earmarked, or otherwise start being held, solely with a view to the meeting of—

(i)an award of relevant shares or a sum of money made to A under B's employee share scheme as mentioned in subsection (1)(a) in relation to which the requirements of subsection (1)(b) to (e) are met, or

(ii)an award of relevant shares or a sum of money which is expected to be made to A under B's employee share scheme as mentioned in subsection (1)(a) and in relation to which the requirements of subsection (1)(b) to (e) would be met,

(b)the number of relevant shares of any type which are earmarked shares does not exceed the maximum number of relevant shares of that type which might reasonably be expected to be needed for meeting the award or expected award, and

(c)there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement.

(3)If the relevant step mentioned in subsection (2) is taken in relation to an expected award as mentioned in subsection (2)(a)(ii), subsection (4) applies if—

(a)the award is not made before the end of the date (“the final award date”) falling immediately after the period of three months starting with the date on which P takes the relevant step, and

(b)as at the end of the final award date, any of the earmarked shares continue to be held by or on behalf of P solely on the basis mentioned in subsection (2)(a).

(4)This Part has effect as if a relevant step within section 554B were taken at the end of the final award date—

(a)the subject of which is—

(i)the shares which continue to be held as mentioned in subsection (3)(b), and

(ii)any relevant income in relation to those shares (see subsection (12)), and

(b)by reason of which Chapter 2 is to apply (subject only to section 554A(4)).

(5)Subsection (6) applies if, at any time (“the relevant time”)—

(a)any of the earmarked shares cease to be held by or on behalf of P solely on the basis mentioned in subsection (2)(a), but

(b)the shares continue to be held by or on behalf of P on the basis mentioned in section 554B(1)(a) or (b).

(6)This Part has effect as if a relevant step within section 554B were taken at the relevant time—

(a)the subject of which is—

(i)the shares mentioned in subsection (5), and

(ii)any relevant income in relation to those shares (see subsection (12)), and

(b)by reason of which Chapter 2 is to apply (subject only to section 554A(4)).

(7)Subsection (8) applies if—

(a)the relevant step mentioned in subsection (2) is taken in relation to an award which has been made as mentioned in subsection (2)(a)(i), or

(b)the relevant step mentioned in subsection (2) is taken in relation to an expected award as mentioned in subsection (2)(a)(ii) and the award is made before the end of the final award date,

and the specified exit event, or an exit event within the specified description, occurs.

(8)This Part has effect as if a relevant step within section 554B were taken at the end of the exit period—

(a)the subject of which is—

(i)any of the earmarked shares to which neither subsection (9) nor subsection (10) applies, and

(ii)any relevant income in relation to any of the earmarked shares mentioned in sub-paragraph (i) (see subsection (12)), and

(b)by reason of which Chapter 2 is to apply (subject only to section 554A(4)).

(9)This subsection applies to any earmarked shares if—

(a)A receives the shares before the end of the exit period, and

(b)the receipt of the shares by A gives rise to employment income of A which is chargeable to income tax or which is exempt income.

(10)This subsection applies to any earmarked shares if—

(a)the sum of money mentioned in subsection (1)(a)(ii) (or a part of it) is paid to A before the end of the exit period,

(b)the payment of the sum to A gives rise to employment income of A which is chargeable to income tax or which is exempt income, and

(c)the payment represents the proceeds of the disposal of the shares, or the payment is made from another source and, correspondingly, the shares are no longer held by any person in relation to the award.

(11)In subsections (8), (9)(a) and (10)(a) “the exit period” means the period of six months starting with the date on which the exit event occurs.

(12)In subsections (4)(a)(ii), (6)(a)(ii) and (8)(a)(ii) “relevant income”, in relation to any earmarked shares, means any income—

(a)which, before the relevant step is treated as being taken by subsection (4), (6) or (8) (as the case may be)—

(i)arises (directly or indirectly) from the shares, and

(ii)is the subject of a relevant step within section 554B taken by P by reason of which Chapter 2 would apply apart from section 554Q, and

(b)which, at the time the relevant step is treated as being taken, continues to be held by or on behalf of P on the basis mentioned in section 554B(1)(a) or (b).

554LExclusions: earmarking for employee share schemes (3)

(1)This section applies if—

(a)there is an arrangement (“B's employee share scheme”) under which, in respect of A's employment with B, a right (“a relevant share option”) may be granted to A—

(i)to acquire relevant shares, or

(ii)to receive a sum of money the amount of which is to be determined by reference to the market value of any relevant shares at the time the sum is to be paid,

(b)the main purpose of the grant of the relevant share option would not be the provision of relevant benefits,

(c)the grant would be made on terms (“the deferred grant terms”) the main purpose of which is to ensure that the relevant share option is not exercisable by A before a specified date (“the vesting date”) which is after the date (“the grant date”) on which the grant is made, while providing that the relevant share option is not to be exercisable at all by A if specified conditions are not met on or before the vesting date,

(d)the vesting date would not be more than ten years after the grant date, and

(e)as at the grant date, there would be a reasonable chance that the relevant share option will not be exercisable at all by A because not all the specified conditions will be met on or before the vesting date.

(2)In addition to the provision relating to revocation required by subsection (1)(c) (which must be included), the deferred grant terms may also provide that the relevant share option may be exercised by A only in part if specified conditions are not met on or before the vesting date.

(3)Chapter 2 does not apply by reason of a relevant step within section 554B (by reason of which it would otherwise apply) taken by a person (“P”) if—

(a)the subject of the relevant step is relevant shares (“earmarked shares”) which are earmarked, or otherwise start being held, solely with a view to providing relevant shares, or paying a sum of money, pursuant to—

(i)a relevant share option granted to A under B's employee share scheme as mentioned in subsection (1)(a) in relation to which the requirements of subsection (1)(b) to (e) are met, or

(ii)a relevant share option which is expected to be granted to A under B's employee share scheme as mentioned in subsection (1)(a) and in relation to which the requirements of subsection (1)(b) to (e) would be met,

(b)the number of relevant shares of any type which are earmarked shares does not exceed the maximum number of relevant shares of that type which might reasonably be expected to be needed for providing shares, or paying a sum of money, pursuant to the relevant share option which is granted or expected to be granted, and

(c)there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement.

(4)If the relevant step mentioned in subsection (3) is taken in relation to an expected grant of a relevant share option as mentioned in subsection (3)(a)(ii), subsection (5) applies if—

(a)the grant is not made before the end of the date (“the final grant date”) falling immediately after the period of three months starting with the date on which P takes the relevant step, and

(b)as at the end of the final grant date, any of the earmarked shares continue to be held by or on behalf of P solely on the basis mentioned in subsection (3)(a).

(5)This Part has effect as if a relevant step within section 554B were taken at the end of the final grant date—

(a)the subject of which is—

(i)the shares which continue to be held as mentioned in subsection (4)(b), and

(ii)any relevant income in relation to those shares (see subsection (15)), and

(b)by reason of which Chapter 2 is to apply (subject only to section 554A(4)).

(6)Subsection (7) applies if, at any time (“the relevant time”)—

(a)any of the earmarked shares cease to be held by or on behalf of P solely on the basis mentioned in subsection (3)(a), but

(b)the shares continue to be held by or on behalf of P on the basis mentioned in section 554B(1)(a) or (b).

(7)This Part has effect as if a relevant step within section 554B were taken at the relevant time—

(a)the subject of which is—

(i)the shares mentioned in subsection (6), and

(ii)any relevant income in relation to those shares (see subsection (15)), and

(b)by reason of which Chapter 2 is to apply (subject only to section 554A(4)).

(8)Subsection (9) applies if—

(a)the relevant step mentioned in subsection (3) is taken in relation to a grant of a relevant share option made as mentioned in subsection (3)(a)(i), or

(b)the relevant step mentioned in subsection (3) is taken in relation to an expected grant of a relevant share option as mentioned in subsection (3)(a)(ii) and the grant is made before the end of the final grant date.

(9)This Part has effect as if a relevant step within section 554B were taken at the end of the final exercise date—

(a)the subject of which is—

(i)any of the earmarked shares to which none of subsections (10) to (13) applies, and

(ii)any relevant income in relation to any of the earmarked shares mentioned in sub-paragraph (i) (see subsection (15)), and

(b)by reason of which Chapter 2 is to apply (subject only to section 554A(4)).

(10)This subsection applies to any earmarked shares if—

(a)the relevant share option becomes exercisable (in whole or in part) by A before the end of the vesting date,

(b)A exercises the option (wholly or partly) before the end of the final exercise date and, as a result, receives the shares, and

(c)the receipt of the shares gives rise to employment income of A—

(i)which is chargeable to income tax or would be chargeable apart from section 474, or

(ii)which is exempt income.

(11)This subsection applies to any earmarked shares if—

(a)the relevant share option becomes exercisable (in whole or in part) by A before the end of the vesting date,

(b)A exercises the option (wholly or partly) before the end of the final exercise date and, as a result, a sum of money is paid to A as mentioned in subsection (1)(a)(ii),

(c)the payment of the sum gives rise to employment income of A—

(i)which is chargeable to income tax or would be chargeable apart from section 474, or

(ii)which is exempt income, and

(d)the payment represents the proceeds of the disposal of the shares, or the payment is made from another source and, correspondingly, the shares are no longer held by any person in relation to the relevant share option.

(12)This subsection applies to any earmarked shares if—

(a)in accordance with the deferred grant terms, before the end of the vesting date, the relevant share option ceases to be exercisable by A (in whole or in part), and

(b)correspondingly, the shares are no longer held by any person in relation to the relevant share option.

(13)This subsection applies to any earmarked shares if—

(a)the relevant share option becomes exercisable by A (in whole or in part) before the end of the vesting date but the option lapses (in whole or in part) before the end of the final exercise date, and

(b)correspondingly, the shares are no longer held by any person in relation to the relevant share option.

(14)In subsections (9) to (13) “the final exercise date” means the date which is ten years after the grant date.

(15)In subsections (5)(a)(ii), (7)(a)(ii) and (9)(a)(ii) “relevant income”, in relation to any earmarked shares, means any income—

(a)which, before the relevant step is treated as being taken by subsection (5), (7) or (9) (as the case may be)—

(i)arises (directly or indirectly) from the shares, and

(ii)is the subject of a relevant step within section 554B taken by P by reason of which Chapter 2 would apply apart from section 554Q, and

(b)which, at the time the relevant step is treated as being taken, continues to be held by or on behalf of P on the basis mentioned in section 554B(1)(a) or (b).

554MExclusions: earmarking for employee share schemes (4)

(1)This section applies if—

(a)there is an arrangement (“B's employee share scheme”) under which, in respect of A's employment with B, a right (“a relevant share option”) may be granted to A—

(i)to acquire relevant shares, or

(ii)to receive a sum of money the amount of which is to be determined by reference to the market value of any relevant shares at the time the sum is to be paid,

(b)the main purpose of the grant of the relevant share option would not be the provision of relevant benefits,

(c)the relevant shares would be—

(i)shares (including stock) in, or

(ii)instruments within paragraph (b) of the definition of “relevant shares” in section 554I(4) issued by,

a trading company or a company which controls a trading company,

(d)the grant would be made on terms (“the deferred grant terms”) the main purpose of which is to ensure that the relevant share option is exercisable by A only if a specified exit event, or an exit event within a specified description, occurs, and

(e)as at the time the grant is made, there would be a reasonable chance that the specified exit event, or an exit event within the specified description, will occur.

(2)Chapter 2 does not apply by reason of a relevant step within section 554B (by reason of which it would otherwise apply) taken by a person (“P”) if—

(a)the subject of the relevant step is relevant shares (“earmarked shares”) which are earmarked, or otherwise start being held, solely with a view to providing relevant shares, or paying a sum of money, pursuant to—

(i)a relevant share option granted to A under B's employee share scheme as mentioned in subsection (1)(a) in relation to which the requirements of subsection (1)(b) to (e) are met, or

(ii)a relevant share option which is expected to be granted to A under B's employee share scheme as mentioned in subsection (1)(a) and in relation to which the requirements of subsection (1)(b) to (e) would be met,

(b)the number of relevant shares of any type which are earmarked shares does not exceed the maximum number of relevant shares of that type which might reasonably be expected to be needed for providing shares, or paying a sum of money, pursuant to the relevant share option which is granted or expected to be granted, and

(c)there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement.

(3)If the relevant step mentioned in subsection (2) is taken in relation to an expected grant of a relevant share option as mentioned in subsection (2)(a)(ii), subsection (4) applies if—

(a)the grant is not made before the end of the date (“the final grant date”) falling immediately after the period of three months starting with the date on which P takes the relevant step, and

(b)as at the end of the final grant date, any of the earmarked shares continue to be held by or on behalf of P solely on the basis mentioned in subsection (2)(a).

(4)This Part has effect as if a relevant step within section 554B were taken at the end of the final grant date—

(a)the subject of which is—

(i)the shares which continue to be held as mentioned in subsection (3)(b), and

(ii)any relevant income in relation to those shares (see subsection (14)), and

(b)by reason of which Chapter 2 is to apply (subject only to section 554A(4)).

(5)Subsection (6) applies if, at any time (“the relevant time”)—

(a)any of the earmarked shares cease to be held by or on behalf of P solely on the basis mentioned in subsection (2)(a), but

(b)the shares continue to be held by or on behalf of P on the basis mentioned in section 554B(1)(a) or (b).

(6)This Part has effect as if a relevant step within section 554B were taken at the relevant time—

(a)the subject of which is—

(i)the shares mentioned in subsection (5), and

(ii)any relevant income in relation to those shares (see subsection (14)), and

(b)by reason of which Chapter 2 is to apply (subject only to section 554A(4)).

(7)Subsection (8) applies if—

(a)the relevant step mentioned in subsection (2) is taken in relation to a grant of a relevant share option made as mentioned in subsection (2)(a)(i), or

(b)the relevant step mentioned in subsection (2) is taken in relation to an expected grant of a relevant share option as mentioned in subsection (2)(a)(ii) and the grant is made before the end of the final grant date,

and the specified exit event, or an exit event within the specified description, occurs.

(8)This Part has effect as if a relevant step within section 554B were taken at the end of the exit period—

(a)the subject of which is—

(i)any of the earmarked shares to which none of subsections (9) to (11) applies, and

(ii)any relevant income in relation to any of the earmarked shares mentioned in sub-paragraph (i) (see subsection (14)), and

(b)by reason of which Chapter 2 is to apply (subject only to section 554A(4)).

(9)This subsection applies to any earmarked shares if—

(a)A exercises the relevant share option (wholly or partly) before the end of the exit period and, as a result, receives the shares, and

(b)the receipt of the shares gives rise to employment income of A—

(i)which is chargeable to income tax or would be chargeable apart from section 474, or

(ii)which is exempt income.

(10)This subsection applies to any earmarked shares if—

(a)A exercises the relevant share option (wholly or partly) before the end of the exit period and, as a result, a sum of money is paid to A as mentioned in subsection (1)(a)(ii),

(b)the payment of the sum gives rise to employment income of A—

(i)which is chargeable to income tax or would be chargeable apart from section 474, or

(ii)which is exempt income, and

(c)the payment represents the proceeds of the disposal of the shares, or the payment is made from another source and, correspondingly, the shares are no longer held by any person in relation to the relevant share option.

(11)This subsection applies to any earmarked shares if—

(a)the relevant share option becomes exercisable by A before the end of the exit period but the option lapses (in whole or in part) at or before the end of that period, and

(b)correspondingly, the shares are no longer held by any person in relation to the relevant share option.

(12)In subsections (8), (9)(a), (10)(a) and (11)(a) “the exit period” means—

(a)the period of six months starting with the date on which the exit event occurs, or

(b)if it ends earlier, the period during which the relevant share option is exercisable by A in accordance with the deferred grant terms.

(13)If the exit event is an event within section 554I(6)(a), in subsection (12)(a) the reference to six months is to be read as a reference to five years.

(14)In subsections (4)(a)(ii), (6)(a)(ii) and (8)(a)(ii) “relevant income”, in relation to any earmarked shares, means any income—

(a)which, before the relevant step is treated as being taken by subsection (4), (6) or (8) (as the case may be)—

(i)arises (directly or indirectly) from the shares, and

(ii)is the subject of a relevant step within section 554B taken by P by reason of which Chapter 2 would apply apart from section 554Q, and

(b)which, at the time the relevant step is treated as being taken, continues to be held by or on behalf of P on the basis mentioned in section 554B(1)(a) or (b).

554NExclusions: other cases involving employment-related securities etc

(1)Chapter 2 does not apply by reason of a relevant step the subject of which is employment-related securities if—

(a)by virtue of the step, the securities are acquired by a person, and

(b)section 425(2) applies, or would apply apart from section 421E(1), to the acquisition.

(2)Chapter 2 does not apply by reason of a relevant step the subject of which is an employment-related securities option if—

(a)by virtue of the step, the option is acquired by a person, and

(b)section 475(1) applies, or would apply apart from section 474(1), to the acquisition.

(3)Terms used in subsection (1) or (2) have the same meaning as they have in Chapter 2 or 5 of Part 7 (as the case may be).

(4)Chapter 2 does not apply by reason of an event within subsection (5) if by virtue of the event an amount counts as employment income of A in respect of A's employment with B.

(5)The events within this subsection are—

(a)a chargeable event for the purposes of section 426, 438 or 476,

(b)an event which gives rise to the discharge of a notional loan for the purposes of section 446U, or

(c)a disposal to which Chapter 3D of Part 7 applies.

(6)Chapter 2 does not apply by reason of an event to which subsection (4) would apply apart from section 421B(6), 421E(1), 429, 443, 474(1) or 477(2) or apart from an election under section 430 or 431.

(7)Subsection (11) applies if there is an acquisition of an asset within section 554C(4)(a) or (b) (“the relevant asset”) and—

(a)relevant consideration is given by A for the relevant asset of an amount equal to or greater than the market value of the relevant asset at the time of the acquisition, or

(b)ignoring any relevant consideration given for the relevant asset, the acquisition gives rise (or would give rise) to earnings of A within Chapter 1 of Part 3 from A's employment with B—

(i)the amount of which is equal to or greater than the market value of the relevant asset at the time of the acquisition, and

(ii)which are not exempt income.

(8)In subsection (7) “relevant consideration”—

(a)means consideration—

(i)which is given before, or at or about, the time of the acquisition, and

(ii)which is money or money's worth, but

(b)does not include—

(i)a promise to do anything, or

(ii)the performance of any duties of, or in connection with, an employment.

(9)If section 437(1) or 452(1) applies in relation to the acquisition, or would apply if Chapter 3 or 4A of Part 7 (as the case may be) applied in relation to the acquisition, in subsection (7) references to the market value of the relevant asset are to be read as references to that value determined on the basis mentioned in section 437(1) or 452(1) (as the case may be).

(10)Subsection (11) also applies if—

(a)there is an acquisition of an asset within section 554C(4)(a) or (b) (“the relevant asset”),

(b)the acquisition is pursuant to an employment-related securities option (within the meaning of Chapter 5 of Part 7, but ignoring section 474(1)) acquired by reason of A's employment, or former or prospective employment, with B, and

(c)the acquisition is a chargeable event for the purposes of section 476 or would be a chargeable event apart from section 474(1).

(11)Chapter 2 does not apply by reason of a relevant step taken after the acquisition if—

(a)the subject of the relevant step is the relevant asset, and

(b)there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement.

(12)In subsections (7) to (11) “acquisition” is to be read in accordance with section 421B(2)(a).

(13)Chapter 2 does not apply by reason of a relevant step within section 554C(1)(a) taken by a person if—

(a)the payment of the sum of money is by way of a loan (“the relevant loan”),

(b)the relevant loan is made and used solely for the purpose of enabling A to exercise an employment-related securities option (within the meaning of Chapter 5 of Part 7),

(c)the exercise of the option by A gives rise to employment income of A in respect of A's employment with B—

(i)which is chargeable to income tax or would be chargeable apart from section 474, or

(ii)which is exempt income, and

(d)there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement.

(14)Subsection (15) applies if—

(a)apart from subsection (13), Chapter 2 would apply by reason of the relevant step mentioned in that subsection, and

(b)by the end of the relevant period, the relevant loan has not been fully repaid.

(15)This Part has effect as if a relevant step within section 554C(1)(a) were taken at the end of the relevant period—

(a)the subject of which is a sum of money of an amount equal to the outstanding amount of the relevant loan as at the end of the relevant period,

(b)in relation to which the relevant person (within the meaning of section 554C(1)) is the person to whom the relevant loan is made, and

(c)by reason of which Chapter 2 is to apply.

(16)In subsections (14) and (15) “the relevant period” means the period of 40 days starting with the day on which the relevant step mentioned in subsection (13) is taken.

554OExclusions: employee car ownership schemes

(1)This section applies if—

(a)there is an arrangement (“the car ownership arrangement”) which—

(i)provides for A to purchase a new car from another person (“P”) using a loan (“the car loan”) to be made to A by a licensed lender,

(ii)specifies the date (“the repayment date”) by which the car loan must be fully repaid which must be no later than four years after the date on which the car loan is made, and

(iii)permits A, in order to obtain funds to repay the car loan, to sell the car back to P on a specified date at a specified price based on an estimate (made at the time the car ownership arrangement is made) of the likely outstanding amount of the car loan on the specified date, and

(b)as provided for by the car ownership arrangement, A purchases the car using the car loan.

(2)Chapter 2 does not apply by reason of a relevant step taken for the sole purpose of—

(a)the purchase of the car or its sale-back as provided for by the car ownership arrangement, or

(b)the making of the car loan as so provided,

so long as the car ownership arrangement is not a tax avoidance arrangement and there is no other connection (direct or indirect) between the relevant step and a tax avoidance arrangement.

(3)Subsection (4) applies if—

(a)apart from subsection (2), Chapter 2 would apply by reason of the making of the car loan, and

(b)by the end of the repayment date, the car loan has not been fully repaid.

(4)This Part has effect as if a relevant step within section 554C(1)(a) were taken at the end of the repayment date—

(a)the subject of which is a sum of money of an amount equal to the outstanding amount of the car loan as at the end of the repayment date,

(b)in relation to which the relevant person (within the meaning of section 554C(1)) is A, and

(c)by reason of which Chapter 2 is to apply.

(5)In this section—

  • car” has the meaning given by section 235(2), and

  • licensed lender” means a person—

    (a)

    who is a licensee under the Consumer Credit Act 1974 acting within the terms of the person's licence, and

    (b)

    who is not acting as a trustee.

554PExclusions: employment income exemptions under Part 4

(1)Chapter 2 does not apply by reason of a relevant step if an employment income exemption under Part 4 applies to the subject of the relevant step.

(2)If the employment income exemption applies to the subject of the relevant step in part only, the relevant step is to be treated for the purposes of this Part as being two separate relevant steps—

(a)one in relation to the subject of the step so far as the exemption applies to it, and

(b)one in relation to the subject of the step so far as the exemption does not apply to it,

with subsection (1) applying only in relation to the separate relevant step mentioned in paragraph (a).

(3)In order to give effect to subsection (2), the sum of money or asset which is the subject of the relevant step is to be apportioned between the two separate relevant steps on a just and reasonable basis.

(4)In this section “employment income exemption” includes the exemption under section 271.

554QExclusions: income arising from earmarked sum or asset

(1)This section applies if—

(a)a sum of money or asset (“sum or asset R”) is held by or on behalf of a person (“P”),

(b)income arises from sum or asset R, and

(c)when the income arises, it—

(i)is received by or on behalf of P, and

(ii)is the subject of a relevant step within section 554B taken by P.

(2)Chapter 2 does not apply by reason of the relevant step mentioned in subsection (1)(c)(ii) if—

(a)before the income arises, sum or asset R was the subject of a relevant step within section 554B taken by P,

(b)Chapter 2 applied by reason of the relevant step mentioned in paragraph (a) in respect of A's employment with B or would have so applied apart from this section or section 554R or any of sections 554H to 554M or section 554T,

(c)immediately before the income arises, sum or asset R is still earmarked or otherwise held on the basis mentioned in section 554B(1)(a) or (b), and

(d)subsection (3) does not apply.

(3)This subsection applies if it is reasonable to suppose that, taking into account the type of investments from which the income derives (directly or indirectly), in essence, the income represents a return from sum or asset R which exceeds the return which might be expected applying the assumption that all relevant connected persons are acting at arm's length of each other.

(4)In subsection (3) “relevant connected person” means a person with a connection (direct or indirect) to the arrangement under which the income arises.

554RExclusions: acquisitions out of sums or assets

(1)This section applies if—

(a)a sum of money or asset (“sum or asset S”) is held by or on behalf of a person (“P”),

(b)a sum of money or asset (“sum or asset T”) is acquired by or on behalf of P wholly out of sum or asset S,

(c)sum or asset T is not acquired (directly or indirectly) from A or any person linked with A, and

(d)subsection (2) does not apply.

(2)This subsection applies if it is reasonable to suppose that, in essence—

(a)at the time of the acquisition of sum or asset T, the value of sum or asset T is greater or less than the value of sum or asset S, and

(b)the difference (or any part of the difference) in the values might not have been expected applying the assumption that all relevant connected persons are acting at arm's length of each other.

(3)In subsection (2)—

(a)the reference to sum or asset S is to sum or asset S so far as sum or asset T is acquired out of it, and

(b)relevant connected person” means a person with a connection (direct or indirect) to the arrangement under which sum or asset T is acquired.

(4)The cases covered by subsection (1)(b) include (in particular) cases in which sum or asset T represents the proceeds of the disposal of sum or asset S.

(5)Subsection (6) applies if, on its acquisition, sum or asset T is the subject of a relevant step within section 554B taken by P.

(6)Chapter 2 does not apply by reason of the relevant step if—

(a)before the acquisition, sum or asset S was the subject of a relevant step within section 554B taken by P,

(b)Chapter 2 applied by reason of the relevant step mentioned in paragraph (a) in respect of A's employment with B or would have applied apart from this section or section 554Q or 554T, and

(c)immediately before the acquisition, sum or asset S is still earmarked or otherwise held on the basis mentioned in section 554B(1)(a) or (b).

(7)Subsection (8) applies if—

(a)on its acquisition, sum or asset T—

(i)is the subject of a relevant step within section 554B taken by P by reason of which Chapter 2 applies or would apply apart from subsection (6) above or any of sections 554H to 554M, 554Q or 554T, or

(ii)if sub-paragraph (i) does not apply, is held by or on behalf of P on the same basis as that on which sum or asset S was held by or on behalf of P immediately before the acquisition, and

(b)for the sole purpose of the acquisition, sum or asset S or sum or asset T is the subject of a relevant step within section 554C(1)(a) to (c).

(8)Chapter 2 does not apply by reason of the relevant step mentioned in subsection (7)(b).

554SExclusions: pension income chargeable under Part 9 etc

(1)Chapter 2 does not apply by reason of a relevant step within section 554C or 554D if the step is the provision of pension income which is chargeable to income tax under Part 9 or is exempt income (within the meaning of that Part).

(2)Sections 554T, 554U, 554V, 554W and 554X contain further provision relating to retirement benefits etc and are to be applied, so far as applicable, in that order.

554TExclusions: employee pension contributions

(1)Chapter 2 does not apply by reason of a relevant step within section 554B if the sum of money or asset which is the subject of the step arises or derives (whether wholly or partly or directly or indirectly) from an excluded pension contribution paid by A on or after 6 April 2011.

(2)If the sum of money or asset arises or derives from the excluded pension contribution only partly, the relevant step is to be treated for the purposes of this Part as being two separate relevant steps—

(a)one in relation to the sum of money or asset so far as it arises or derives from the excluded pension contribution, and

(b)one in relation to the sum of money or asset so far as it does not arise or derive from the excluded pension contribution,

with subsection (1) applying only in relation to the separate relevant step mentioned in paragraph (a).

(3)Chapter 2 does not apply by reason of a relevant step within section 554C or 554D if the sum of money or asset which is the subject of the step—

(a)represents relevant benefits, and

(b)arises or derives (whether wholly or partly or directly or indirectly) from an excluded pension contribution paid by A.

(4)If the sum of money or asset arises or derives from the excluded pension contribution only partly, the relevant step is to be treated for the purposes of this Part as being two separate relevant steps—

(a)one in relation to the sum of money or asset so far as it arises or derives from the excluded pension contribution, and

(b)one in relation to the sum of money or asset so far as it does not arise or derive from the excluded pension contribution,

with subsection (3) applying only in relation to the separate relevant step mentioned in paragraph (a).

(5)In order to give effect to subsection (2) or (4), the sum of money or asset which is the subject of the relevant step is to be apportioned between the two separate relevant steps on a just and reasonable basis.

(6)For the purposes of this section an excluded pension contribution is a contribution—

(a)which is made to an arrangement by A by way of a payment of a sum of money,

(b)by virtue of which A acquires rights to receive relevant benefits under the arrangement (and nothing else),

(c)which is neither a relievable pension contribution nor a tax-relieved contribution, and

(d)which is not a repayment of any loan and otherwise has nothing to do with any loan and has nothing to do with a sum of money or asset which has been the subject of a relevant step within section 554C(1)(d).

(7)In this section—

  • relevant benefits” has the same meaning as in Chapter 2 of Part 6, but ignoring section 393B(2)(a),

  • relievable pension contribution” means a contribution in respect of which an individual is entitled to relief under section 188 of FA 2004, and

  • tax-relieved contribution” has the meaning given by paragraph 3(3) of Schedule 34 to FA 2004.

554UExclusions: pre-6 April 2006 contributions to employer-financed retirement benefit schemes

(1)This section applies if the subject of a relevant step is a sum of money or asset which has (wholly or partly) arisen or derived (directly or indirectly) from a sum of money (“the taxed sum”)—

(a)which was paid by B in accordance with an employer-financed retirement benefits scheme (within the meaning of Chapter 2 of Part 6) with a view to the provision of benefits under the scheme, and

(b)in respect of which A is taxed.

(2)For the purpose of determining whether A is taxed in respect of a sum of money, paragraph 53(3) of Schedule 36 to FA 2004 applies as it applies for the purpose of determining whether an employee is taxed for the purposes of paragraph 53(1)(b) of that Schedule.

(3)Chapter 2 does not apply by reason of the relevant step.

(4)Subsection (5) applies if the sum of money or asset which is the subject of the relevant step only partly arises or derives from the taxed sum.

(5)The relevant step is to be treated for the purposes of this Part as being two separate relevant steps—

(a)one in relation to the sum of money or asset so far as it arises or derives from the taxed sum, and

(b)one in relation to the sum of money or asset so far as it does not arise or derive from the taxed sum,

with subsection (3) applying only in relation to the separate relevant step mentioned in paragraph (a).

(6)In order to give effect to subsection (5), the sum of money or asset which is the subject of the relevant step is to be apportioned between the two separate relevant steps on a just and reasonable basis.

(7)If B is a company and is a member of a group of companies at any time (“the relevant time”), in subsection (1)(a), in relation to any sum of money paid at the relevant time, the reference to B is to be read as including a reference to any other company which is a member of that group at the relevant time.

554VExclusions: purchases of annuities out of pension scheme rights

(1)This section applies if—

(a)an annuity contract is purchased from an insurance company wholly out of rights which A has under a pension scheme, and

(b)A's rights out of which the annuity contract is purchased are, wholly or partly, pre-6 April 2011 annuity rights.

(2)If the purchaser—

(a)takes a relevant step for the sole purpose of purchasing the annuity contract or transferring the beneficiary's rights under the annuity contract to A or a person linked with A, or

(b)on the purchase of the annuity contract, otherwise takes a relevant step within section 554B the subject of which is the beneficiary's rights under the annuity contract,

Chapter 2 does not apply by reason of the relevant step.

(3)If the insurance company—

(a)takes a relevant step for the sole purpose of selling the annuity contract, or

(b)on the sale of the annuity contract, otherwise takes a relevant step within section 554B the subject of which is a sum of money or asset representing the purchase price received for the annuity contract,

Chapter 2 does not apply by reason of the relevant step.

(4)If A's rights out of which the annuity contract is purchased are only partly pre-6 April 2011 annuity rights, any relevant step mentioned in subsection (2)(a) or (b) or (3)(a) or (b) is to be treated for the purposes of this Part as being two separate relevant steps—

(a)one in relation to the annuity contract so far as it is purchased out of rights which are pre-6 April 2011 annuity rights, and

(b)one in relation to the annuity contract so far as it is purchased out of rights which are not pre-6 April 2011 annuity rights,

with subsection (2) or (3) (as the case may be) applying only in relation to the separate relevant step mentioned in paragraph (a) of this subsection.

(5)In order to give effect to subsection (4), the sum of money or asset which is the subject of the relevant step mentioned in subsection (2)(a) or (b) or (3)(a) or (b) is to be apportioned between the two separate relevant steps on a just and reasonable basis.

(6)In this section—

  • annuity contract” means a contract for the provision of an annuity—

    (a)

    granted for consideration in money or money's worth in the ordinary course of a business of granting annuities on human life, and

    (b)

    payable for a term ending at a time ascertainable only by reference to the end of a human life,

    although for this purpose it does not matter that the annuity may in some circumstances end before or after the life,

  • insurance company” means—

    (a)

    a person or EEA firm within section 275(1)(a) or (b) of FA 2004, or

    (b)

    a person resident in a territory outside the European Economic Area—

    (i)

    whose normal business includes the provision of annuities, and

    (ii)

    who is regulated in the conduct of that business by the government of that territory or by a body established under the law of that territory for the purpose of regulating such business, and

  • pre-6 April 2011 annuity rights” means rights, which accrued before 6 April 2011, specifically to receive an annuity.

554WExclusions: certain retirement benefits etc

(1)This section applies if—

(a)a relevant benefit is provided under a relevant scheme by way of a payment of a lump sum wholly out of rights which A has under the scheme,

(b)A's rights out of which the lump sum is paid are, wholly or partly, pre-6 April 2011 lump sum rights, and

(c)the payment of the lump sum is a relevant step within section 554C.

(2)Chapter 2 does not apply by reason of the relevant step.

(3)If A's rights out of which the lump sum is paid are only partly pre-6 April 2011 lump sum rights, the relevant step is to be treated for the purposes of this Part as being two separate relevant steps—

(a)one in relation to the lump sum so far as it is paid out of rights which are pre-6 April 2011 lump sum rights, and

(b)one in relation to the lump sum so far as it is paid out of rights which are not pre-6 April 2011 lump sum rights,

with subsection (2) applying only in relation to the separate relevant step mentioned in paragraph (a).

(4)In order to give effect to subsection (3), the lump sum is to be apportioned between the two separate relevant steps on a just and reasonable basis.

(5)In this section—

  • pre-6 April 2011 lump sum rights” means rights, which accrued before 6 April 2011, specifically to receive relevant benefits by way of lump sum payments,

  • relevant benefit” has the same meaning as in Chapter 2 of Part 6, and

  • relevant scheme” means an employer-financed retirement benefits scheme (within the meaning of that Chapter) or a superannuation fund to which section 615(3) of ICTA applies.

554XExclusions: transfers between certain foreign pension schemes

(1)This section applies if rights which A has under a section 390 scheme are transferred to another section 390 scheme or to an overseas pension scheme.

(2)This section also applies if—

(a)rights which A has under an overseas pension scheme are transferred to another overseas pension scheme, and

(b)some or all of the rights transferred are section 390 scheme rights.

(3)Chapter 2 does not apply by reason of—

(a)a relevant step within section 554C taken for the sole purpose of transferring the rights, or

(b)a relevant step within section 554B taken by the transferee in relation to the transferred rights on their transfer.

(4)Subsection (5) applies in relation to a transfer within subsection (2) if not all the transferred rights are section 390 scheme rights.

(5)Any relevant step mentioned in subsection (3) is to be treated for the purposes of this Part as being two separate relevant steps—

(a)one in relation to the section 390 scheme rights, and

(b)one in relation to the rest of the transferred rights,

with subsection (3) applying only in relation to the separate relevant step mentioned in paragraph (a) of this subsection.

(6)In order to give effect to subsection (5), the sum of money or asset which is the subject of the relevant step mentioned in subsection (3) is to be apportioned between the two separate relevant steps on a just and reasonable basis.

(7)Subsection (8) applies if any of the transferred rights arise or derive (directly or indirectly) from contributions to any scheme which—

(a)are paid by B on or after 6 April 2006, and

(b)are neither tax-relieved contributions nor tax-exempt provision.

(8)Any relevant step mentioned in subsection (3) is to be treated for the purposes of this Part as being two separate relevant steps—

(a)one in relation to the rights mentioned in subsection (7), and

(b)one in relation to the rest of the transferred rights,

with subsection (3) applying only in relation to the separate relevant step mentioned in paragraph (b) of this subsection.

(9)In order to give effect to subsection (8), the sum of money or asset which is the subject of the relevant step mentioned in subsection (3) is to be apportioned between the two separate relevant steps on a just and reasonable basis.

(10)If subsection (5) applies in relation to a transfer—

(a)in subsection (7) the reference to the transferred rights is to be read as a reference to the transferred section 390 scheme rights only, and

(b)in subsections (8) and (9) references to any relevant step mentioned in subsection (3) are to be read as references to the separate relevant step mentioned in subsection (5)(a).

(11)If B is a company and is a member of a group of companies at any time (“the relevant time”), in subsection (7)(a), in relation to any contribution paid at the relevant time, the reference to B is to be read as including a reference to any other company which is a member of that group at the relevant time.

(12)In this section—

  • overseas pension scheme” has the same meaning as in Part 4 of FA 2004 (see section 150(7) of that Act),

  • section 390 scheme” means a scheme in relation to which a claim was accepted under section 390,

  • section 390 scheme rights” means rights which A has under an overseas pension scheme and which—

    (a)

    have been transferred to the scheme (directly or indirectly) from a section 390 scheme, or

    (b)

    have arisen or derived (directly or indirectly) from rights that have been so transferred, and

  • “tax-exempt provision” and “tax-relieved contribution” have the meaning given by paragraph 3(3) and (4) of Schedule 34 to FA 2004.

554YPower to exclude other relevant steps

(1)The Commissioners for Her Majesty's Revenue and Customs may by regulations provide for Chapter 2 not to apply—

(a)by reason of a relevant step falling within a specified description, or

(b)in the cases otherwise specified in the regulations.

(2)Regulations under this section may, in consequence of provision within subsection (1)—

(a)provide—

(i)for a relevant step to be treated for the purposes of this Part as if it were two or more separate relevant steps,

(ii)for the provision within subsection (1) to apply only to one or some of the separate relevant steps, and

(iii)for the sum of money or asset which is the subject of the relevant step to be apportioned between the separate relevant steps on a just and reasonable basis,

(b)make provision, in relation to cases in which Chapter 2 does not apply by reason of a relevant step by virtue of the provision within subsection (1)—

(i)for a relevant step to be treated as taking place if, subsequently, specified conditions are met or not met, and

(ii)for Chapter 2 to apply by reason of the relevant step treated as taking place, and

(c)make other provision modifying the application of any provision of this Part.

(3)Regulations under this section may contain incidental, supplemental, consequential and transitional provision and savings.

(4)Regulations under this section may have retrospective effect.

InterpretationE+W+S+N.I.
554ZInterpretation: general

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

(2)A” and “B” are defined in section 554A(1)(a).

(3)Arrangement” includes any agreement, scheme, settlement, transaction, trust or understanding (whether or not it is legally enforceable).

(4)Market value” has the same meaning as it has for the purposes of TCGA 1992 by virtue of Part 8 of that Act.

(5)Section 170(2) to (11) of TCGA 1992 applies for the purpose of determining whether a company is a member of a group of companies.

(6)And for that purpose, section 170(2) to (11) is to be read as if for “75 per cent” (wherever occurring) there were substituted “ 51 per cent ” (with section 1154(2) of CTA 2010 applying accordingly).

(7)References to the payment of a sum of money include (in particular) references to the payment of a sum of money by way of a loan.

(8)Pension scheme” has the same meaning as in Part 4 of FA 2004 (see section 150(1) of that Act).

(9)“Relevant step” is defined in section 554A(2).

(10)References to a relevant step which involves a sum of money are references to—

(a)a step within section 554B where the subject of the relevant step is a sum of money,

(b)a step within section 554C(1)(a), or

(c)a step within section 554C(1)(d) where the subject of the relevant step is a sum of money.

(11)References to the asset which is the subject of a relevant step are, in the case of a step within section 554C(1)(e), references to the lease granted.

(12)For this purpose, the lease granted is to be treated as including any extensions of the lease, or any later lease, which by virtue of section 554C(7) or (8) is taken into account in determining the likely effective duration of the lease for the purposes of section 554C(1)(e).

(13)Tax avoidance arrangement” means an arrangement which has a tax avoidance purpose.

(14)For the purposes of subsection (13) an arrangement has a tax avoidance purpose if subsection (15) applies to a person who is a party to the arrangement.

(15)This subsection applies to a person if the main purpose, or one of the main purposes, of the person in entering into the arrangement is the avoidance of tax or national insurance contributions.

(16)The following paragraphs apply for the purpose of determining whether any relevant step or any other step is connected with a tax avoidance arrangement—

(a)the step is connected with a tax avoidance arrangement if (for example) the step is taken (wholly or partly) in pursuance of—

(i)the tax avoidance arrangement, or

(ii)an arrangement at one end of a series of arrangements with the tax avoidance arrangement being at the other end, and

(b)it does not matter if the person taking the step is unaware of the tax avoidance arrangement.

554Z1Interpretation: persons linked with A

(1)In this Part references to any person linked with A are references to—

(a)any person who is or has been connected with A,

(b)a close company in which A or a person within any other paragraph of this subsection is or has been a participator,

(c)a company in which A or a person within any other paragraph of this subsection is or has been a participator and which would be a close company if it were a UK resident company, or

(d)a company which is a 51% subsidiary of a company within paragraph (b) or (c).

(2)In applying section 993 of ITA 2007 for the purposes of subsection (1)—

(a)a man and woman living together as if they were spouses of each other are treated as if they were spouses of each other, and

(b)two people of the same sex living together as if they were civil partners of each other are treated as if they were civil partners of each other.

(3)In subsection (1) “participator”—

(a)in relation to a close company, means a person who is a participator in relation to the company for the purposes of section 455 of CTA 2010 (see sections 454 and 455(5) of that Act), and

(b)in relation to a company which would be a close company if it were a UK resident company, means a person who would be such a participator if the company were a close company.

CHAPTER 2E+W+S+N.I.Treatment of relevant step for income tax purposes
Employment incomeE+W+S+N.I.
554Z2Value of relevant step to count as employment income

(1)If this Chapter applies by reason of a relevant step, the value of the relevant step (see section 554Z3) counts as employment income of A in respect of A's employment with B—

(a)if the relevant step is taken before A's employment with B starts, for the tax year in which the employment starts, or

(b)otherwise, for the tax year in which the relevant step is taken.

(2)If the relevant step gives rise to—

(a)an amount which (apart from this subsection) would be treated as earnings of A under a provision of the benefits code, or

(b)any income of A which (apart from this subsection) would be dealt with under Chapter 3 of Part 4 of ITTOIA 2005,

subsection (1) applies instead of that provision of the benefits code or Chapter 3 of Part 4 of ITTOIA 2005 (as the case may be).

(3)In particular, in a case in which the relevant step is the making of an employment-related loan (within the meaning of Chapter 7 of Part 3), the effect of subsection (2)(a) is that the loan is not to be treated for any tax year as a taxable cheap loan for the purposes of that Chapter.

554Z3Value of relevant step

(1)If the relevant step involves a sum of money, its value is the amount of the sum.

(2)In any other case, the value of the relevant step is—

(a)the market value when the relevant step is taken of the asset which is the subject of the step, or

(b)if higher, the cost of the relevant step.

(3)Subsection (2)(a) is subject to sections 437 and 452.

(4)Subsection (2)(b) is to be ignored if—

(a)the relevant step is within section 554C(1)(c), and

(b)any of Chapters 2 to 4A of Part 7 apply by virtue of the acquisition.

(5)Subsection (2)(b) is also to be ignored if section 554Z7 applies.

(6)In subsection (2)(b) the reference to the cost of the relevant step is to the expense incurred in connection with the relevant step (including a proper proportion of any expense relating partly to the relevant step and partly to other matters) by the person or persons at whose cost the relevant step is taken.

(7)Subsections (1) and (2) are subject to sections 554Z4, 554Z5, 554Z6, 554Z7 and 554Z8, which, so far as applicable, are to be applied in that order.

554Z4Residence issues

(1)After the value of the relevant step is determined under section 554Z3, the particular tax year or years which the value of the relevant step is “for” are to be determined.

(2)For this purpose, apply sections 16(1) to (4) and 17(1) to (3) as if the value of the relevant step were general earnings.

(3)Subsection (4) applies if the value of the relevant step, or a part of it, is “for” a tax year in which A is non-UK resident.

(4)The value, or the part of it, is to be reduced so far as it is not in respect of duties performed in the United Kingdom.

(5)The question of the extent to which the value, or the part of it, is not in respect of duties performed in the United Kingdom is to be determined on a just and reasonable basis.

(6)This section does not change the tax year for which the value of the relevant step counts as employment income under section 554Z2(1).

554Z5Overlap with earlier relevant step

(1)This section applies if there is overlap between—

(a)the sum of money or asset (“sum or asset P”) which is the subject of the relevant step, and

(b)the sum of money or asset (“sum or asset Q”) which was the subject of an earlier relevant step (“the earlier relevant step”) by reason of which this Chapter applied in respect of A's employment with B.

(2)The value of the relevant step (after any reductions under section 554Z4) is reduced (but not below nil)—

(a)if the overlap covers the whole of sum or asset Q, by the value of the earlier relevant step, or

(b)if the overlap covers only part of sum or asset Q, by the part of the value of the earlier relevant step which corresponds to the part of sum or asset Q covered by the overlap as determined on a just and reasonable basis.

(3)In subsection (2) references to the value of the earlier relevant step are to that value—

(a)after any reductions made to it under section 554Z4 or this section or section 554Z7, but

(b)before any reductions made to it under section 554Z6 or 554Z8.

(4)For the purposes of this section there is overlap between sum or asset P and sum or asset Q so far as—

(a)they are the same sum of money or asset, or

(b)sum or asset P, essentially, replaces sum or asset Q.

(5)Further, if any reductions were made under this section to the value of the earlier relevant step, sum or asset P is treated as overlapping with any other sum of money or asset so far as the other sum of money or asset was treated as overlapping with sum or asset Q for the purposes of this section.

554Z6Overlap with certain earnings

(1)This section applies if the relevant step gives rise to relevant earnings of A from A's employment with B—

(a)which are, in accordance with section 16 and (if applicable) section 17, “for” a tax year in which A is UK resident, or

(b)which are, in accordance with section 29 and (if applicable) section 30, “for” a tax year in which A is non-UK resident but which are in respect of duties performed in the United Kingdom for the purposes of section 27(1)(a).

(2)The value of the relevant step (after any reductions under section 554Z4 or 554Z5) is reduced (but not below nil) by the amount of the relevant earnings.

(3)For the purposes of this section the following are “relevant” earnings—

(a)earnings within Chapter 1 of Part 3,

(b)amounts treated as earnings under Chapter 12 of Part 3, and

(c)a deemed employment payment under section 50 or any part of such a payment.

(4)But anything which is exempt income, or which falls within Chapter 3 of Part 4 of ITTOIA 2005, is not “relevant”.

554Z7Exercise price of share options

(1)Subsection (3) applies if—

(a)the relevant step is a step within section 554B (other than one treated as being taken by section 554L(5), (7) or (9) or 554M(4), (6) or (8)),

(b)B is a company,

(c)there is an arrangement (“B's employee share scheme”) under which, in respect of A's employment with B, a right (“a relevant share option”) may be granted to A—

(i)to acquire relevant shares, or

(ii)to receive a sum of money the amount of which is to be determined by reference to the market value of any relevant shares at the time the sum is to be paid,

(d)in order to exercise the relevant share option so as—

(i)to acquire the relevant shares, or

(ii)to receive the sum of money,

A would, under the terms of the option, have to pay a sum of money the amount of which can be determined at the time of the grant of the option,

(e)the subject of the relevant step is relevant shares (“earmarked shares”) which are earmarked, or otherwise start being held, solely with a view to providing shares, or paying a sum of money, pursuant to—

(i)a relevant share option granted to A under B's employee share scheme as mentioned in paragraph (c) in relation to which the requirements of paragraph (d) are met, or

(ii)a relevant share option which is expected to be granted to A under B's employee share scheme as mentioned in paragraph (c) and in relation to which the requirements of paragraph (d) would be met,

(f)the number of relevant shares of any type which are earmarked shares does not exceed the maximum number of relevant shares of that type which might reasonably be expected to be needed for providing shares, or paying a sum of money, pursuant to the relevant share option which is granted or expected to be granted, and

(g)there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement.

(2)Subsection (3) also applies if—

(a)the relevant step is a step treated as being taken by section 554L(9) or 554M(8), and

(b)in order to exercise the relevant share option to which the step relates so as—

(i)to acquire the shares which are the subject of the relevant step, or

(ii)to receive the sum of money determined by reference to the market value of those shares,

A would, under the terms of the option, have to pay a sum of money the amount of which can be determined at the time the option is granted.

(3)The value of the relevant step (after any reductions under sections 554Z4 to 554Z6) is to be reduced (but not below nil) by—

(a)the amount of the sum of money which A would have to pay as mentioned in subsection (1)(d) or (2)(b), or

(b)if the value of the relevant step was reduced under section 554Z4, X% of the amount of that sum of money.

(4)In subsection (3)(b) “X%” means the proportion of the value of the relevant step (as determined under section 554Z3) left after the reduction under section 554Z4.

(5)If subsection (3) applies by virtue of subsection (1) and the relevant step is taken in relation to an expected grant of a relevant share option as mentioned in subsection (1)(e)(ii), subsection (7) applies if—

(a)the grant is not made before the end of the date (“the final grant date”) falling immediately after the period of three months starting with the date on which the relevant step is taken, and

(b)as at the end of the final grant date, any of the earmarked shares continue to be held by or on behalf of P solely on the basis mentioned in subsection (1)(e).

(6)If subsection (3) applies by virtue of subsection (1), subsection (7) also applies if at any time after the taking of the relevant step—

(a)any of the earmarked shares cease to be held by or on behalf of P solely on the basis mentioned in subsection (1)(e), but

(b)the shares continue to be held by or on behalf of P on the basis mentioned in section 554B(1)(a) or (b).

(7)This Part has effect as if a relevant step within section 554B were taken at the end of the final grant date or when the shares cease to be held as mentioned in subsection (6)—

(a)the subject of which is the earmarked shares mentioned in subsection (5)(b) or (6), and

(b)by reason of which this Chapter is to apply (subject only to section 554A(4)).

(8)In this section “relevant shares” has the meaning given by section 554I(4).

554Z8Cases where consideration given for relevant step

(1)Subsection (2) applies if—

(a)the relevant step is a step within section 554C(1)(a) to (c),

(b)the relevant step is for consideration given by A in the form of the transfer of an asset to P from A,

(c)the transfer by A of the asset is made before, or at or about, the time the relevant step is taken and is not by way of a loan, and

(d)there is no connection (direct or indirect) between the transfer by A of the asset and a tax avoidance arrangement.

(2)The value of the relevant step (after any reductions under sections 554Z4 to 554Z6) is reduced (but not below nil) by—

(a)the market value of the asset transferred by A at the time of its transfer, or

(b)if the value of the relevant step was reduced under section 554Z4, X% of that market value.

(3)For the purposes of subsection (1)(d) it is (in particular) to be assumed that the transfer by A of the asset is connected with a tax avoidance arrangement if—

(a)before the transfer, the asset was transferred to A by another person by way of a loan, or

(b)the asset is, or carries with it, any rights or interests under the relevant arrangement or any arrangement which is connected (directly or indirectly) with the relevant arrangement.

(4)In subsection (3)(b) “the relevant arrangement” has the meaning given by section 554A(1)(b).

(5)Subsection (6) applies if—

(a)the relevant step is a step within section 554C(1)(b) or (c) or (e) or 554D and does not also involve a sum of money,

(b)the relevant step is for consideration given by A in the form of the payment of a sum of money to P by A, and

(c)the payment is made before, or at or about, the time the relevant step is taken.

(6)The value of the relevant step (after any reductions under sections 554Z4 to 554Z6) is reduced (but not below nil) by—

(a)the amount of the consideration given, or

(b)if the value of the relevant step was reduced under section 554Z4, X% of the amount of that consideration.

(7)In subsections (2)(b) and (6)(b) “X%” means the proportion of the value of the relevant step (as determined under section 554Z3) left after the reduction under section 554Z4.

(8)In this section references to A include references to any person linked with A.

Remittance basisE+W+S+N.I.
554Z9Remittance basis: A is ordinarily UK resident

(1)Subsection (2) applies if—

(a)the value of the relevant step, or a part of it, is “for” a tax year (“the relevant tax year”) as determined under section 554Z4,

(b)section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to A for the relevant tax year,

(c)A is ordinarily UK resident in the relevant tax year,

(d)A's employment with B in the relevant tax year is employment with a foreign employer, and

(e)the duties of A's employment with B in the relevant tax year are performed wholly outside the United Kingdom.

(2)A's employment income by virtue of section 554Z2(1), or the relevant part of it, is “taxable specific income” in a tax year so far as it is remitted to the United Kingdom in that year.

(3)For this purpose, any income which is remitted before A's employment with B starts is treated as being remitted in the tax year in which the employment starts.

(4)Subsection (5) applies if in the relevant tax year—

(a)A has associated employments, and

(b)the duties of the associated employments are not performed wholly outside the United Kingdom.

(5)The amount of A's employment income to which subsection (2) applies is limited to such amount as is just and reasonable, having regard to—

(a)A's employment income for the relevant tax year from all associated employments, together with A's employment with B,

(b)the proportion of that income which is general earnings to which section 22 applies or is employment income to which section 41A applies,

(c)the nature of and time devoted to the duties performed outside the United Kingdom, and those performed in the United Kingdom, in the relevant tax year, and

(d)all other relevant circumstances,

and, if the amount of A's employment income to which subsection (2) would otherwise apply exceeds that limit, the amount of A's employment income to which that subsection applies is instead to be such amount as is just and reasonable.

(6)In this section “associated employments” means employments with B or with employers associated with B; and section 24(5) and (6) applies for the purposes of this subsection.

554Z10Remittance basis: A is not ordinarily resident

(1)Subsection (2) applies if—

(a)the value of the relevant step, or a part of it—

(i)is “for” a tax year (“the relevant tax year”) as determined under section 554Z4, and

(ii)is not in respect of duties performed in the United Kingdom,

(b)section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to A for the relevant tax year, and

(c)A is not ordinarily UK resident in the relevant tax year.

(2)A's employment income by virtue of section 554Z2(1), or the relevant part of it, is “taxable specific income” in a tax year so far as it is remitted to the United Kingdom in that year.

(3)For this purpose, any income which is remitted before A's employment with B starts is treated as being remitted in the tax year in which the employment starts.

(4)The question of the extent to which the value of the relevant step, or any part of it, is not in respect of duties performed in the United Kingdom is to be determined on a just and reasonable basis.

554Z11Remittance basis: supplementary

(1)Subsection (2) applies if section 554Z9(1)(a) or 554Z10(1)(a) applies to a part (“the relevant part”) of the value of the relevant step.

(2)Any reduction to the value of the relevant step to be made under any of sections 554Z5 to 554Z8 is to be made so that X% of the reduction is made by way of reducing the relevant part.

(3)In subsection (2) “X%” means the proportion of the value of the relevant step represented by the relevant part before any reductions under any of sections 554Z5 to 554Z8.

(4)For the purpose of applying section 554Z9(2) or 554Z10(2), see Chapter A1 of Part 14 of ITA 2007 for the meaning of “remitted to the United Kingdom” etc.

(5)If the relevant step involves a sum of money, for the purposes of that Chapter the sum of money is treated as deriving from A's employment income (or the relevant part of it) to which section 554Z9(2) or 554Z10(2) applies.

(6)In any other case, for the purposes of that Chapter the asset which is the subject of the relevant step is treated as deriving from A's employment income (or the relevant part of it) to which section 554Z9(2) or 554Z10(2) applies.

(7)Subsection (8) applies if—

(a)after the relevant step is taken, there is another relevant step (“the later relevant step”) by reason of which this Chapter applies in respect of A's employment with B, and

(b)within the meaning of section 554Z5, there is overlap between the sum of money or asset (“sum or asset R”) which is the subject of the relevant step and the sum of money or asset (“sum or asset S”) which is the subject of the later relevant step.

(8)Except so far as, in any event—

(a)sum or asset S and sum or asset R are the same sum of money or asset, or

(b)sum or asset S derives from sum or asset R,

for the purposes of Chapter A1 of Part 14 of ITA 2007 sum or asset S is treated, to the extent of the overlap, as deriving from sum or asset R.

(9)Subsections (10) and (11) apply if—

(a)the relevant tax year within the meaning of section 554Z9 or 554Z10 is the tax year 2007-08 or any earlier tax year, and

(b)A—

(i)was UK resident in that year, but

(ii)was not domiciled in the United Kingdom, or was not ordinarily UK resident, in that year.

(10)Section 554Z9 or 554Z10 (as the case may be) applies as if section 809B of ITA 2007 applied to A for the relevant tax year.

(11)In section 554Z9(1)(d) the reference to a foreign employer is to be read as not including a person resident in the Republic of Ireland.

SupplementaryE+W+S+N.I.
554Z12Relevant step taken after A's death etc

(1)Subsection (3), (4) or (5) (as the case may be) applies if the relevant step is a step within section 554C or 554D and—

(a)the relevant step is taken on or after A's death, or

(b)if relevant, any of A's employment income by virtue of section 554Z2(1) is remitted to the United Kingdom on or after A's death.

But none of those subsections applies if A's employment with B never started before A's death.

(2)In subsections (3) to (5) “the relevant person” means the relevant person (within the meaning of section 554C(1) or 554D(1) or (2)) in relation to the relevant step.

(3)If the relevant person is A, A's personal representatives are liable for, as the case may be, the income tax on—

(a)A's employment income by virtue of section 554Z2(1), or

(b)so much of that income as is remitted.

(4)If the relevant person is an individual other than A, the amount which, as the case may be—

(a)counts as employment income of A, or

(b)is remitted,

is to count as an amount of employment income of the relevant person for the tax year in which the relevant step is taken or the income is remitted.

(5)If the relevant person is not an individual, the relevant taxable person is chargeable to income tax on the amount which, as the case may be—

(a)counts as employment income of A, or

(b)is remitted.

(6)In subsection (5) “the relevant taxable person” is to be read as follows—

(a)if the person (or any of the persons) who took the relevant step is UK resident, “the relevant taxable person” is the person (or each of the UK resident persons) who took the relevant step,

(b)if paragraph (a) does not apply and B is still alive or in existence when the relevant step is taken, “the relevant taxable person” is B, or

(c)if neither paragraph (a) nor paragraph (b) applies, “the relevant taxable person” is the non-UK resident person (or each of the non-UK resident persons) who took the relevant step.

(7)For the purposes of subsection (5)—

(a)the rate of tax is the rate applying for the purposes of section 394(2) (see section 394(4)) at the time of the relevant step or remittance of income, and

(b)the tax is charged for the tax year in which the relevant step is taken or the income is remitted.

(8)If there is more than one relevant person in relation to the relevant step, the amount which, as the case may be—

(a)counts as employment income of A, or

(b)is remitted,

is to be apportioned between the relevant persons on a just and reasonable basis with subsections (3) to (5) applying accordingly.

554Z13Subsequent income tax liability

(1)This section applies if—

(a)after the relevant step is taken, another event (“the later event”) occurs,

(b)other than by virtue of—

(i)this Chapter,

(ii)Chapters 2 to 5 of Part 7, or

(iii)Part 9,

the later event would (apart from this section) give rise to a liability for income tax of A or any other person on an amount (“the later amount”), and

(c)it is just and reasonable for this section to apply in order to avoid a double charge to income tax in respect of the sum of money or asset which is the subject of the relevant step.

(2)So far as it is just and reasonable in order to avoid a double charge to income tax as mentioned in subsection (1)(c), there is to be no liability to income tax on the later amount by virtue of the later event.

554Z14Relief where earmarking not followed by further relevant step

(1)An application for relief may be made by A (or, if A has died, A's personal representatives) to an officer of Revenue and Customs if—

(a)this Chapter has applied by reason of a relevant step (“the original relevant step”) within section 554B taken by a person (“P”),

(b)there occurs an event (“the relevant event”) which is not a relevant step in relation to a relevant sum or asset,

(c)by reason of the relevant event no further relevant step is or will be taken by P or any other person in relation to any relevant sum or asset, and

(d)there is no connection (direct or indirect) between the relevant event and a tax avoidance arrangement.

(2)In section 554Z(15) the reference to the avoidance of tax includes (in particular) a reference to the avoidance of tax by way of obtaining relief under this section.

(3)In subsection (1) “relevant sum or asset” means—

(a)the sum of money or asset which is the subject of the original relevant step, or

(b)a sum of money or asset which (directly or indirectly) has arisen or derived, or may arise or derive, from the sum of money or asset mentioned in paragraph (a).

(4)The application for relief must be made within four years from the time when the relevant event occurs.

(5)If an officer of Revenue and Customs is satisfied that the requirements in subsection (1) are met, the officer must give such relief as the officer considers just and reasonable (if any) in respect of income tax paid on any previously charged amount.

(6)In subsection (5) “previously charged amount” means—

(a)the amount which counted as employment income of A under this Chapter as a result of this Chapter applying by reason of the original relevant step, or

(b)any amount treated by section 222 as earnings of A in relation to the notional payment (within the meaning of that section) which B is treated as having made by virtue of the original relevant step.

(7)Subsection (8) applies if, by virtue of this Chapter having applied by reason of the original relevant step, any tax liability of A or any other person arising from another event is reduced (including to nil) by virtue of section 554Z5 or 554Z13 or otherwise.

(8)In determining what is a just and reasonable amount of relief, the officer of Revenue and Customs must have regard (in particular) to the reduction in the tax liability and reduce the amount of relief which would otherwise have been given accordingly (including to nil).

(9)The relief is to be given by repayment or otherwise as appropriate.

(10)In relation to times after the relief is given, the Tax Acts have effect as if this Chapter had never applied by reason of the original relevant step.

554Z15Location of employment duties

The following provisions apply for the purposes of this Chapter—

(a)section 38 (but as if references to general earnings were to the value of the relevant step or a part of it),

(b)section 39(1) and (2),

(c)section 40 (but as if in subsections (3) and (4) references to section 24(1)(b) were to section 554Z9(4)(b)), and

(d)section 41 (but as if references to general earnings were to the value of the relevant step or a part of it).

CHAPTER 3E+W+S+N.I.Undertakings given by employers etc in relation to retirement benefits etc
554Z16Application etc

(1)This Chapter applies if there is an undertaking (“the relevant undertaking”) that a contribution to which subsection (2) would apply will be paid.

(2)This subsection applies to a contribution if—

(a)the contribution is paid to an arrangement which is not a registered pension scheme,

(b)in connection with that arrangement (directly or indirectly), relevant benefits are to be provided (directly or indirectly) out of the contribution by a relevant third person,

(c)the provision of the relevant benefits would be a relevant step, and

(d)the contribution is neither a tax-relieved contribution nor tax-exempt provision.

(3)In subsection (2)—

  • relevant benefits” has the same meaning as in Chapter 2 of Part 6, but ignoring section 393B(2)(a),

  • relevant third person” means a person within section 554A(7)(a) to (c) (ignoring this Chapter), and

  • “tax-exempt provision” and “tax-relieved contribution” have the meaning given by paragraph 3(3) and (4) of Schedule 34 to FA 2004.

(4)In this Chapter references to an undertaking include references to—

(a)an undertaking which is not legally enforceable, and

(b)an undertaking which is to be performed only on or following the meeting of a condition (including a condition which might never be met).

554Z17Employer etc to be treated as relevant third person etc

(1)If B takes a step within section 554Z18 or 554Z19, Chapters 1 and 2 have effect in relation to the step—

(a)as if B were a relevant third person for the purposes of section 554A(1)(d), and

(b)as if the step were a relevant step within section 554B (if it would not otherwise be).

(2)For the purpose of determining whether Chapter 2 applies by reason of the step, Chapter 1 has effect—

(a)as if sections 554F to 554O, 554S to 554U, 554W and 554X were omitted,

(b)if the step is within section 554Z18, as if sections 554Q(2)(d), (3) and (4) and 554R(1)(c) and (d), (2) and (3) were omitted, and

(c)if the step is within section 554Z19, as if sections 554Q and 554R were omitted.

(3)If Chapter 2 applies by reason of the step, Chapter 2 has effect as if sections 554Z7 to 554Z12 were omitted.

(4)If Chapter 2 does not apply by reason of the step by virtue of section 554E(3) or (6), section 554E(10) and (11) does not apply in relation to the step.

(5)For further modifications of Chapters 1 and 2, see sections 554Z18(3) and (4), 554Z19(5) and (6), 554Z20 and 554Z21.

(6)Regulations under section 554Y may (in particular) make provision covering cases in which Chapters 1 and 2 have effect as provided for by this section.

(7)In this Chapter—

(a)references to B do not include references to B acting as a trustee,

(b)if B is a company and is a member of a group of companies, references to B are to be read as including references to any other company which is a member of that group, and

(c)if B is a limited liability partnership, references to B are to be read as including references to any company which is a wholly-owned subsidiary (as defined in section 1159(2) of the Companies Act 2006) of B.

554Z18Earmarking etc

(1)B takes a step within this section if—

(a)a sum of money or asset held by or on behalf of B is earmarked (however informally) by B with a view to the relevant undertaking being performed at a later time (wholly or partly) out of—

(i)that sum of money or asset, or

(ii)any sum of money or asset which may arise or derive (directly or indirectly) from it, or

(b)a sum of money or asset otherwise starts being held by or on behalf of B, specifically with a view, so far as B is concerned, to the relevant undertaking being performed at a later time (wholly or partly) out of—

(i)that sum of money or asset, or

(ii)any sum of money or asset which may arise or derive (directly or indirectly) from it.

(2)For the purposes of subsection (1)(b) it does not matter whether or not the sum of money or asset in question has previously been held by or on behalf of B on a basis which is different to that mentioned in subsection (1)(b).

(3)Subsection (4) applies if, in the application of section 554Q or 554R in any case, the relevant step mentioned in section 554Q(2)(a) or 554R(6)(a) is a step within this section taken by B.

(4)In section 554Q(2)(c) or 554R(6)(c) (as the case may be) the reference to section 554B(1)(a) or (b) is to be read as a reference to subsection (1)(a) or (b) above.

554Z19Provision of security

(1)B takes a step within this section if B provides security for the performance of the relevant undertaking.

(2)For the purposes of this Part, the sum of money or asset which is the subject of the step is to be taken to be—

(a)any sums of money which, as at the time the step is taken, are the subject of the security, and

(b)any assets which, as at that time, are the subject of the security,

and references to the sum of money or asset which is the subject of a relevant step are to be read accordingly.

(3)If, when the step is taken, the security covers other undertakings as well as the relevant undertaking, the sums of money and assets within subsection (2)(a) and (b) are to be apportioned between the relevant undertaking and the other undertakings on a just and reasonable basis.

(4)Subsections (2) and (3) are subject to section 554Z20(7).

(5)Section 554Q does not apply in any case in which the relevant step mentioned in section 554Q(2)(a) would be a step within this section taken by B.

(6)Section 554R(6) does not apply in any case in which the relevant step mentioned in section 554R(6)(a) would be a step within this section taken by B.

(7)In this Chapter references to providing security for the performance of an undertaking are references to providing such security in any way, however informal.

554Z20Valuation of step within section 554Z19

(1)This section applies if, by virtue of section 554Z17, Chapter 2 applies by reason of a step taken by B within section 554Z19.

(2)Section 554Z3 has effect as if subsections (3) and (4) below were substituted for subsections (1) to (6) of that section.

(3)The value of the relevant step is—

(a)the amount to be paid as a contribution under the relevant undertaking determined, as at the time the step is taken, on a just and reasonable basis assuming that any condition to be met before any payment is made will be met, or

(b)if lower, the value of the security.

(4)For the purposes of subsection (3)(b) the value of the security—

(a)consists of—

(i)the total amount of the sums of money included in the subject of the step (see section 554Z19(2)(a)), and

(ii)the total market value, as at the time the step is taken, of the assets included in the subject of the step (see section 554Z19(2)(b)), but

(b)is to be subject to a just and reasonable reduction to take account of any term of the security which limits the total amount which may be made available under the security for the performance of the relevant undertaking to an amount which is lower than the amount determined under paragraph (a).

(5)The following subsections apply if, as at the end of the day of an anniversary of the taking of the step (“the anniversary day”), B continues to provide the security for the performance of the relevant undertaking.

(6)This Part has effect as if B's continuing to provide the security were a new step (“the anniversary step”) within section 554Z19—

(a)which is taken by B at the end of the anniversary day, and

(b)by reason of which Chapter 2 is to apply by virtue of section 554Z17 (subject only to section 554A(4)).

(7)If the total amount of the sums of money which are the subject of the security (“the security sums”) varies from time to time, for the purpose of determining the sums of money included in the subject of the anniversary step, in section 554Z19(2)(a) the reference to the time the step is taken is to be read as a reference to the time during the preceding year at which the total amount of the security sums is at its highest.

(8)For the purposes of subsection (4)(a)(ii) the market value of any asset included in the subject of the anniversary step may be determined as at any time during the preceding year (so long as the asset is the subject of the security, or one of the assets which is the subject of the security, as at that time).

(9)In subsections (7) and (8) “the preceding year” means the year ending with the anniversary day.

554Z21Relief for earmarking or security not followed by contribution or relevant benefit

(1)This section applies if, by virtue of section 554Z17, Chapter 2 applies by reason of a step taken by B within section 554Z18 or 554Z19.

(2)Section 554Z14 has effect in relation to the step with the following modifications.

(3)Subsection (1)(b) has effect as if for “not a relevant step in relation to a relevant sum or asset” there were substituted “ neither the payment of the relevant contribution (or any part of it) nor the provision of any relevant benefit ”.

(4)Subsection (1)(c) has effect as if for the words from “no further relevant step” to “any relevant sum or asset” there were substituted “ the relevant contribution (or any part of it) will not be paid or a relevant benefit will not be provided ”.

(5)Subsection (1) has effect as if subsection (6) below were substituted for subsection (3).

(6)In subsection (1)—

(a)the relevant contribution” means the contribution to be paid under the relevant undertaking (within the meaning of Chapter 3), and

(b)relevant benefit” means a relevant benefit to be provided out of the relevant contribution as mentioned in section 554Z16(2)(b) and (c).

Other amendments to ITEPA 2003E+W+S+N.I.

2ITEPA 2003 is amended as follows.E+W+S+N.I.

3In section 1(1)(a) (overview of contents of Act) for “7” substitute “ 7A ”.E+W+S+N.I.

4(1)Amend section 3 (structure of employment income Parts) as follows.E+W+S+N.I.

(2)At the end of subsection (1) insert—

Part 7A deals with employment income provided through third parties.

(3)In subsection (2) for “7” substitute “ 7A ”.

5For the “or” after section 7(6)(b) (meaning of “specific employment income”) substitute—E+W+S+N.I.

(ba)Part 7A (employment income provided through third parties), or.

6(1)Amend section 10 (provision relating to “taxable specific income”) as follows.E+W+S+N.I.

(2)In subsection (3) for “or 7” substitute “ , 7 or 7A ”.

(3)After subsection (4) insert—

(5)Subsection (3) is also subject to sections 554Z9 to 554Z11 (employment income under Part 7A: remittance basis).

7(1)Amend section 13 (person liable for tax) as follows.E+W+S+N.I.

(2)In subsection (3) for “or 7” substitute “ , 7 or 7A ”.

(3)After subsection (4A) insert—

(4B)Subject to section 554Z12, if—

(a)the tax is on specific employment income under Chapter 2 of Part 7A, and

(b)the relevant step is taken, or (if relevant) the income is remitted to the United Kingdom, after the death of A,

A's personal representatives are liable for the tax.

(4C)Terms used in subsection (4B) have the same meaning as in Part 7A.

(4)In subsection (5) for “or (4A)” substitute “ , (4A) or (4B) or section 554Z12(3) ”.

8After section 63(4) (the benefits code) insert—E+W+S+N.I.

(5)The benefits code has effect subject to section 554Z2(2).

9Under Step 1 in section 218(1) (exclusion of lower-paid employments from benefits code: calculation of earnings rate for tax year)—E+W+S+N.I.

(a)omit the “and” after paragraphs (c) and (d), and

(b)after paragraph (e) insert , and

(f)the total amount which counts as employment income in respect of the employment for the year under Chapter 2 of Part 7A.

10In section 222(1)(a) and (3) (payments treated as earnings: payments by employer on account of tax where deduction not possible) after “687,” insert “ 687A, ”.E+W+S+N.I.

11After section 227(4) (scope of exemptions to income tax under Part 4) insert—E+W+S+N.I.

(5)In relation to the interaction between this Part and Part 7A, see section 554P(1).

12(1)Amend section 271 (income tax exemptions: removal benefits and expenses) as follows.E+W+S+N.I.

(2)In subsection (1) after “earnings” insert “ or by virtue of Part 7A ”.

(3)In subsection (2) for “Subsection” substitute “ In relation to earnings, subsection ”.

(4)After subsection (2) insert—

(2A)In relation to Part 7A, subsection (1) does not apply to any amount so far as the amount (disregarding this section and section 554P) would count as employment income to which section 554Z9 or 554Z10 would apply.

13(1)Amend section 287 (income tax exemptions: limit on exemption for removal benefits and expenses) as follows.E+W+S+N.I.

(2)In subsection (2)—

(a)omit the “and” after paragraph (a), and

(b)after paragraph (b) insert , and

(c)the Part 7A employment income.

(3)After subsection (5) insert—

(6)In this section “the Part 7A employment income” means the amount in respect of which section 271 (when read with section 554P) would prevent liability to income tax arising if this section were to be disregarded.

14(1)Amend section 394 (employer-financed retirement benefits: charge on benefit received) as follows.E+W+S+N.I.

(2)After subsection (4) insert—

(4A)Subsection (4B) applies if the receipt of a benefit to which this Chapter applies gives rise to other relevant income of the employee, or the former employee, to or in respect of whom the benefit is provided.

(4B)Subsection (1) or (2) (as the case may be) applies to the amount of the benefit only so far as that amount exceeds the other relevant income.

(4C)In subsections (4A) and (4B) “other relevant income” means—

(a)general earnings of the employee or former employee which are chargeable to income tax,

(b)an amount which counts as employment income of the employee or former employee under Chapter 2 of Part 7A, or

(c)an amount which would be within paragraph (a) or (b) apart from the employee or former employee having been non-UK resident for any tax year.

(3)After subsection (5) insert—

(6)Subsection (5) does not affect—

(a)any liability to income tax on general earnings, or

(b)any liability to income tax on an amount which counts as employment income under Chapter 2 of Part 7A.

15After section 428(6) (restricted employment-related securities: amount of charge) insert—E+W+S+N.I.

(6A)CE also includes any amount that has counted as employment income of the employee in respect of the employment under Chapter 2 of Part 7A in relation to the employment-related securities where the relevant step (within the meaning of that Part) was taken before the chargeable event occurred.

16In section 431(3) (restricted employment-related securities: election for disapplication of Chapter 2 of Part 7)—E+W+S+N.I.

(a)omit the “and” after paragraph (c), and

(b)after paragraph (d) insert , and

(e)determining any amount that counts as employment income of the employee in respect of the employment under Chapter 2 of Part 7A (employment income provided through third parties).

17In section 437(1)(a) (convertible employment-related securities: market value) after “option)” insert “ or Chapter 2 of Part 7A (employment income provided through third parties) ”.E+W+S+N.I.

18After section 441(9) (convertible employment-related securities: amount of gain realised) insert—E+W+S+N.I.

(10)Subsection (11) applies for the purposes of subsection (2) or (3) if—

(a)prior to the acquisition, the employment-related securities were the subject of a relevant step within the meaning of Part 7A by reason of which Chapter 2 of that Part applied in respect of the employment, and

(b)the amount mentioned in subsection (11)(a) is higher than the amount mentioned in subsection (11)(b).

(11)The amount of the gain realised is reduced (but not below nil) by the amount equal to—

(a)the amount that counted as employment income of the employee in respect of the employment under Chapter 2 of Part 7A, less

(b)the market value of the employment-related securities when the relevant step was taken determined as if they were not convertible securities or an interest in convertible securities.

19In section 446B(4) (employment-related securities with artificially depressed market value: charge on acquisition)—E+W+S+N.I.

(a)omit the “or” after paragraph (d), and

(b)after paragraph (e) insert , or

(f)Chapter 2 of Part 7A (employment income provided through third parties).

20After section 446C(4) (employment-related securities with artificially depressed market value: amount of charge) insert—E+W+S+N.I.

(4A)Subsection (4B) applies if, prior to the acquisition, the employment-related securities were the subject of a relevant step within the meaning of Part 7A by reason of which Chapter 2 of that Part applied in respect of the employment.

(4B)If what would be MV in accordance with subsection (3) or (4) (as the case may be) is less than the amount that counted as employment income of the employee in respect of the employment under Chapter 2 of Part 7A, MV is the amount of that employment income instead of the amount determined in accordance with subsection (3) or (4).

21After section 446S(3) (employment-related securities acquired for less than market value: notional loan) insert—E+W+S+N.I.

(4)This section is not affected by section 554Z2(2).

22In section 446T(3) (employment-related securities acquired for less than market value: amount of notional loan)—E+W+S+N.I.

(a)omit the “and” after paragraph (d), and

(b)after paragraph (e) insert , and

(f)any amount that has counted as employment income of the employee in respect of the employment under Chapter 2 of Part 7A in relation to the employment-related securities.

23In section 446V (employment-related securities acquired for less than market value: charges under Chapter 3C of Part 4 to be additional to other charges)—E+W+S+N.I.

(a)omit the “or” after paragraph (d), and

(b)after paragraph (e) insert , or

(f)Chapter 2 of Part 7A (employment income provided through third parties).

24In section 452(2) (shares in research institution spin-out companies: market value on acquisition)—E+W+S+N.I.

(a)omit the “and” after paragraph (c), and

(b)after paragraph (d) insert , and

(e)determining any amount that counts as employment income of the employee in respect of the employment under Chapter 2 of Part 7A (employment income provided through third parties).

25In section 480(5) (employment-related securities options: deductible amounts)—E+W+S+N.I.

(a)omit the “and” after paragraph (b), and

(b)after paragraph (c) insert , and

(d)any amount that has counted as employment income of the employee in respect of the employment under Chapter 2 of Part 7A in relation to the employment-related securities option or to any sum of money or asset held solely for the purposes of the option.

26In section 567(5) (pension income: amount charged to tax) before “section 617” insert—E+W+S+N.I.

section 567A (deduction to avoid double taxation where Part 7A has applied to the source of the pension income);.

27After section 567 insert—E+W+S+N.I.

567ACases in which Part 7A has applied to source of pension income

(1)This section applies if—

(a)for a tax year there is an amount (“amount TPI”) of taxable pension income for a pension, annuity or other item of pension income,

(b)the pension, annuity or other item of pension income accrues or arises out of rights (“the relevant rights”) which represent, or have arisen or derived (directly or indirectly) from, a sum of money or asset which was the subject of a relevant step within the meaning of Part 7A, and

(c)Chapter 2 of that Part applied by reason of the relevant step.

(2)A deduction is allowed from amount TPI.

(3)The amount of the deduction allowed is the amount (“amount EI”) which counted as employment income of A under Chapter 2 of Part 7A in relation to the relevant step (see section 554Z2(1)).

(4)If amount EI exceeds amount TPI, the excess is to be carried forward to future tax years to be deducted under this section (when applicable) until all of amount EI has been deducted.

(5)Subsection (6) applies if it is determined on a just and reasonable basis that the relevant rights represent, or have arisen or derived from, only part of the sum of money or asset which was the subject of the relevant step.

(6)In subsection (3) the reference to the amount which counted as employment income is to be read as a reference to the corresponding proportion of that amount.

28After section 687(4) (PAYE: payments by intermediary) insert—E+W+S+N.I.

(5)This section does not apply in relation to a payment so far as the sum paid is employment income under Chapter 2 of Part 7A.

29After section 687 insert—E+W+S+N.I.

687APayment of employment income under Part 7A

(1)This section applies if—

(a)the value of a relevant step counts as employment income under Chapter 2 of Part 7A, and

(b)the relevant step is the payment of a sum of money,

and references to A and B are to be read accordingly.

(2)For the purposes of PAYE regulations B is treated as making a payment of PAYE income of A of an amount which, on the basis of the best estimate which can reasonably be made, is the amount of the employment income.

(3)The payment is treated as made on the latest of the following days—

(a)the day on which the relevant step is taken,

(b)the day on which A's employment with B starts, and

(c)the day which is 30 days after the day on which FA 2011 is passed.

(4)Subsection (2) does not apply if the person who takes the relevant step (whether or not a person to whom PAYE regulations apply) deducts income tax from the payment, and accounts for it, in accordance with PAYE regulations.

30(1)Amend section 689 (PAYE: employee of non-UK employer) as follows.E+W+S+N.I.

(2)After subsection (1) insert—

(1A)Subject to subsection (4), subsection (1)(b) does not apply in relation to a payment so far as the sum paid is employment income under Chapter 2 of Part 7A.

(3)In subsection (4) after “sections” insert “ 687A and ”.

31Before section 696 insert—E+W+S+N.I.

695AEmployment income under Part 7A

(1)This section applies if—

(a)the value of a relevant step counts as employment income under Chapter 2 of Part 7A, and

(b)the relevant step is not the payment of a sum of money,

and references to A and B are to be read accordingly.

(2)For the purposes of PAYE regulations B is treated as making a payment of PAYE income of A of an amount which, on the basis of the best estimate which can reasonably be made, is—

(a)the amount of the employment income, less

(b)so much of that amount (if any) to which section 554Z9(2) or 554Z10(2) applies.

(3)The payment is treated as made on the latest of the following days—

(a)the day on which the relevant step is taken,

(b)the day on which A's employment with B starts, and

(c)the day which is 30 days after the day on which FA 2011 is passed.

(4)Subsection (2) does not apply if the person who takes the relevant step (whether or not a person to whom PAYE regulations apply) accounts for income tax on the relevant step in accordance with PAYE regulations.

32After section 696(2) (PAYE: readily convertible assets) insert—E+W+S+N.I.

(3)This section does not apply to any PAYE income so far as it is employment income under Chapter 2 of Part 7A.

33In section 710(2)(a) (PAYE: accounting for tax on notional payments) after “687,” insert “ 687A, ”.E+W+S+N.I.

34(1)Amend section 716A (priority rule in relation to certain dividend income) as follows.E+W+S+N.I.

(2)Make the existing text subsection (1).

(3)After subsection (1) insert—

(2)Subsection (1) is subject to section 554Z2(2).

Amendments to ITTOIA 2005E+W+S+N.I.

35ITTOIA 2005 is amended as follows.E+W+S+N.I.

36(1)Amend section 39 (employee benefit contributions: meaning of “employee benefit scheme” etc) as follows.E+W+S+N.I.

(2)In subsection (2) after “employer” insert “ or persons linked with present or former employees of the employer ”.

(3)After subsection (2) insert—

(3)Section 554Z1 of ITEPA 2003 applies for the purposes of subsection (2) but as if references to A were to a present or former employee of the employer.

(4)So far as it is not covered by subsection (2), “employee benefit scheme” also means—

(a)an arrangement (“the relevant arrangement”) within subsection (1)(b) of section 554A of ITEPA 2003 to which subsection (1)(c) of that section applies, or

(b)any other arrangement connected (directly or indirectly) with the relevant arrangement.

37(1)Amend section 40 (employee benefit contributions: provision of qualifying benefits) as follows.E+W+S+N.I.

(2)In subsection (5) after “scheme” insert and the payment or transfer—

(a)gives rise to an employment income tax charge under Chapter 2 of Part 6 of ITEPA 2003 or under Part 9 of that Act, or

(b)is an excluded benefit as defined in section 393B(3) of that Act.

(3)After subsection (6) insert—

(6A)For the purposes of section 38 qualifying benefits are also provided if—

(a)a relevant step within the meaning of Part 7A of ITEPA 2003 is taken, and

(b)Chapter 2 of that Part applies by reason of the step.

38(1)Amend section 41 (employee benefit contributions: timing of qualifying benefits etc) as follows.E+W+S+N.I.

(2)For subsection (1) substitute—

(1)If the provision of a qualifying benefit takes the form of a payment of money, the benefit, so far as Chapter 4 of Part 2 of ITEPA 2003 applies to the money, is provided for the purposes of section 38 when the money is treated as received for the purposes of that Chapter (applying the rules in section 18 of that Act (receipt of money earnings)).

(3)After subsection (1) insert—

(1A)Except so far as subsection (1) applies to the provision of the qualifying benefit, if the provision of a qualifying benefit is a chargeable relevant step, for the purposes of section 38—

(a)the benefit is provided when A's employment with B starts if the chargeable relevant step is taken before then, or

(b)otherwise, the benefit is provided when the chargeable relevant step is taken.

(4)In subsection (2)—

(a)after “an asset” insert “ which meets condition A, B, C or D in section 40 ”,

(b)omit the “and” after paragraph (a), and

(c)after paragraph (b) insert , and

(c)if the transfer is a chargeable relevant step, the cost of the relevant step so far as not covered by paragraph (a) or (b).

(5)After subsection (3) insert—

(4)If the provision of a qualifying benefit is a chargeable relevant step which does not involve a sum of money (see section 554Z(10) of ITEPA 2003) and is not covered by subsection (2), the amount provided for the purposes of section 38 is the cost of the relevant step (subject to subsection (5)).

(5)If the provision of a qualifying benefit is a chargeable relevant step which is not covered by subsection (2) (whether or not it involves a sum of money), the amount provided for the purposes of section 38 is not to exceed the amount that—

(a)is charged to tax under ITEPA 2003 in relation to the relevant step (whether under Part 7A of that Act or otherwise), or

(b)would be charged had not A been non-UK resident in any tax year.

(6)In this section—

(a)chargeable relevant step” means a relevant step within the meaning of Part 7A of ITEPA 2003 by reason of which Chapter 2 of that Part applies (and references to A and B are to be read accordingly), and

(b)references to the cost of a chargeable relevant step are to be read in accordance with section 554Z3(6) of that Act.

39In section 44(1) (employee benefit contributions: interpretation)—E+W+S+N.I.

(a)in the definition of “employee benefit scheme” for “39(2)” substitute “ 39(2) to (4) ”, and

(b)in the definition of “employer-financed retirement benefits scheme” after “Act)” insert “ but ignoring section 393B(2)(a) and (c) of that Act ”.

Amendments to ITA 2007E+W+S+N.I.

40ITA 2007 is amended as follows.E+W+S+N.I.

41After section 809F(5) (remittance basis: effect) insert—E+W+S+N.I.

(5A)For the effect on amounts which count as employment income under Chapter 2 of Part 7A of ITEPA 2003, see sections 554Z9 to 554Z11 of that Act.

42After section 809K(1)(c) (remittance basis: application of sections 809L to 809Z6) insert—E+W+S+N.I.

(ca)sections 554Z9 to 554Z11 of that Act (employment income provided through third parties charged on remittance basis),.

43For section 809Z7(4) (remittance basis: meaning of “foreign specific employment income”) substitute—E+W+S+N.I.

(4)An individual's “foreign specific employment income” for a tax year (“the relevant tax year”) consists of the income (if any) within subsections (4A) and (4B).

(4A)The income within this subsection is the individual's specific employment income for the relevant tax year so far as it consists of foreign securities income for the purposes of section 41A of ITEPA 2003.

(4B)The income within this subsection is any income, or any part of any income, of the individual—

(a)to which section 554Z9(2) or 554Z10(2) of ITEPA 2003 applies, and

(b)which consists of the value of a relevant step, or a part of the value of a relevant step, which is “for” the relevant tax year as determined under section 554Z4 of ITEPA 2003.

Amendments to CTA 2009E+W+S+N.I.

44CTA 2009 is amended as follows.E+W+S+N.I.

45(1)Amend section 1291 (employee benefit contributions: meaning of “employee benefit scheme” etc) as follows.E+W+S+N.I.

(2)In subsection (2) after “employer” insert “ or persons linked with present or former employees of the employer ”.

(3)After subsection (2) insert—

(3)Section 554Z1 of ITEPA 2003 applies for the purposes of subsection (2) but as if references to A were to a present or former employee of the employer.

(4)So far as it is not covered by subsection (2), “employee benefit scheme” also means—

(a)an arrangement (“the relevant arrangement”) within subsection (1)(b) of section 554A of ITEPA 2003 to which subsection (1)(c) of that section applies, or

(b)any other arrangement connected (directly or indirectly) with the relevant arrangement.

46(1)Amend section 1292 (employee benefit contributions: provision of qualifying benefits) as follows.E+W+S+N.I.

(2)In subsection (5) after “scheme” insert and the payment or transfer—

(a)gives rise to an employment income tax charge under Chapter 2 of Part 6 of ITEPA 2003 or under Part 9 of that Act, or

(b)is an excluded benefit as defined in section 393B(3) of that Act.

(3)After subsection (6) insert—

(6A)For the purposes of section 1290 qualifying benefits are also provided if—

(a)a relevant step within the meaning of Part 7A of ITEPA 2003 is taken, and

(b)Chapter 2 of that Part applies by reason of the step.

47(1)Amend section 1293 (employee benefit contributions: timing of qualifying benefits etc) as follows.E+W+S+N.I.

(2)For subsection (1) substitute—

(1)If the provision of a qualifying benefit takes the form of a payment of money, the benefit, so far as Chapter 4 of Part 2 of ITEPA 2003 applies to the money, is provided for the purposes of section 1290 when the money is treated as received for the purposes of that Chapter (applying the rules in section 18 of that Act (receipt of money earnings)).

(3)After subsection (1) insert—

(1A)Except so far as subsection (1) applies to the provision of the qualifying benefit, if the provision of a qualifying benefit is a chargeable relevant step, for the purposes of section 1290—

(a)the benefit is provided when A's employment with B starts if the chargeable relevant step is taken before then, or

(b)otherwise, the benefit is provided when the chargeable relevant step is taken.

(4)In subsection (2)—

(a)after “an asset” insert “ which meets condition A, B, C or D in section 1292 ”,

(b)omit the “and” after paragraph (a), and

(c)after paragraph (b) insert , and

(c)if the transfer is a chargeable relevant step, the cost of the relevant step so far as not covered by paragraph (a) or (b).

(5)After subsection (3) insert—

(4)If the provision of a qualifying benefit is a chargeable relevant step which does not involve a sum of money (see section 554Z(10) of ITEPA 2003) and is not covered by subsection (2), the amount provided for the purposes of section 1290 is the cost of the relevant step (subject to subsection (5)).

(5)If the provision of a qualifying benefit is a chargeable relevant step which is not covered by subsection (2) (whether or not it involves a sum of money), the amount provided for the purposes of section 1290 is not to exceed the amount that—

(a)is charged to tax under ITEPA 2003 in relation to the relevant step (whether under Part 7A of that Act or otherwise), or

(b)would be charged had not A been non-UK resident in any tax year.

(6)In this section—

(a)chargeable relevant step” means a relevant step within the meaning of Part 7A of ITEPA 2003 by reason of which Chapter 2 of that Part applies (and references to A and B are to be read accordingly), and

(b)references to the cost of a chargeable relevant step are to be read in accordance with section 554Z3(6) of that Act.

48In section 1296(1) (employee benefit contributions: interpretation)—E+W+S+N.I.

(a)in the definition of “employee benefit scheme” for “1291(2)” substitute “ 1291(2) to (4) ”, and

(b)in the definition of “employer-financed retirement benefits scheme” after “Act)” insert “ but ignoring section 393B(2)(a) and (c) of that Act ”.

Other amendmentsE+W+S+N.I.

49(1)TCGA 1992 is amended as follows.E+W+S+N.I.

(2)In section 119A (increase in expenditure by reference to tax charged in relation to employment-related securities)—

(a)in subsection (5)(a) for “or (b)” substitute “ , (b) or (d) ”, and

(b)at the end of subsection (5A) insert “ and section 119C (unremitted Part 7A income) ”.

(3)After section 119B insert—

119CSection 119A: unremitted Part 7A income

(1)This section applies for the purposes of section 119A if an amount deducted under section 480(5)(d) of ITEPA 2003, which (apart from this section) would by virtue of section 119A(5)(a) be added back to an amount counting as employment income, is or includes unremitted Part 7A income.

(2)So much of the amount deducted as is unremitted Part 7A income is not to be added back.

(3)In this section “unremitted Part 7A income” means an amount counting as employment income under Chapter 2 of Part 7A of ITEPA 2003—

(a)to which section 554Z9(2) or 554Z10(2) of that Act applies, and

(b)which has not been remitted to the United Kingdom by the end of the tax year in which the disposal mentioned in section 119A(1) occurs.

(4)Section 119B(4) to (6) applies if any of the unremitted Part 7A income is remitted to the United Kingdom after the end of the tax year referred to in subsection (3)(b).

50In the following provisions, in the definition of “the employment income Parts of ITEPA 2003”, for “7” substitute “ 7A ”E+W+S+N.I.

(a)section 122(1) of the Social Security Contributions and Benefits Act 1992, and

(b)section 121(1) of the Social Security Contributions and Benefits (Northern Ireland) Act 1992.

51In Schedule 34 to FA 2004 (non-UK pension schemes) after paragraph 3(6) insert—E+W+S+N.I.

(7)The provision which may be made under sub-paragraph (6) includes (in particular) provision in consequence of Part 7A of ITEPA 2003.

Commencement and transitional provision relating to Part 7A of ITEPA 2003E+W+S+N.I.

52(1)Part 7A of ITEPA 2003 (as inserted by paragraph 1 of this Schedule) has effect in relation to relevant steps taken on or after 6 April 2011; and the other amendments made by this Schedule have effect accordingly.E+W+S+N.I.

(2)Sub-paragraph (1) is subject to the following paragraphs.

53(1)This paragraph applies if—E+W+S+N.I.

(a)on or after 9 December 2010 but before 6 April 2011 a relevant step (“the early step”) within section 554C(1)(a) of ITEPA 2003 is taken,

(b)Chapter 2 of Part 7A of ITEPA 2003 would have applied by reason of the early step had the reference in paragraph 52(1) of this Schedule to 6 April 2011 been a reference to 9 December 2010, and

(c)the early step is not chargeable to income tax by virtue of Schedule 34 to FA 2004 in whole or in part.

(2)Subject to what follows, Chapter 2 of Part 7A of ITEPA 2003 is to apply by reason of the early step; and the amendments made by this Schedule have effect accordingly.

(3)In determining the tax year for which the employment income of A counts for the purposes of section 554Z2(1) of ITEPA 2003, the early step is treated as having been taken on 6 April 2012; but otherwise Chapter 2 of Part 7A of that Act applies by reference to when the early step was actually taken.

(4)The amount which (apart from this sub-paragraph) would count as employment income of A is to be reduced by an amount to reflect so much of the sum paid as has been repaid to P before 6 April 2012 by the person to whom the payment was made; and the Tax Acts are to apply in relation to the sum paid so far as repaid to P before that date by that person as if Chapter 2 of Part 7A of ITEPA 2003 had never applied by reason of the early step, with any adjustments that need to be made to any assessment to tax being made accordingly.

(5)The amount of the reduction (if any) under sub-paragraph (4)—

(a)is to be determined on a just and reasonable basis, and

(b)may be the full amount of the employment income or nil or an amount in between (depending on the circumstances).

(6)Section 554Z5 of ITEPA 2003 does not apply in relation to the early step and, in the application of that section in relation to any other relevant step (whenever taken), the early step is to be ignored.

(7)Section 554Z12 of ITEPA 2003 does not apply in relation to the early step.

(8)For the purposes of section 687A(3)(a) of ITEPA 2003 (as inserted by paragraph 29 of this Schedule), the early step is treated as having been taken on 6 April 2012.

(9)For the purposes of section 41(1A) of ITTOIA 2005 (as inserted by paragraph 38(3) of this Schedule), the early step is treated as having been taken on 6 April 2012; and for the purpose of determining whether section 41(1A) of that Act applies, section 41(1) is to be read as substituted by paragraph 38(2) of this Schedule.

(10)For the purposes of section 1293(1A) of CTA 2009 (as inserted by paragraph 47(3) of this Schedule), the early step is treated as having been taken on 6 April 2012; and for the purpose of determining whether section 1293(1A) of that Act applies, section 1293(1) is to be read as substituted by paragraph 47(2) of this Schedule.

54(1)This paragraph applies if—E+W+S+N.I.

(a)on or after 9 December 2010 but before 6 April 2011 a relevant step (“the early step”) within section 554C(1)(d) of ITEPA 2003 is taken,

(b)the relevant step does not involve a sum of money within the meaning of section 554Z(10) of ITEPA 2003,

(c)the asset which is the subject of the early step is a readily convertible asset which P makes available to secure the payment of a sum of money,

(d)Chapter 2 of Part 7A of ITEPA 2003 would have applied by reason of the early step had the reference in paragraph 52(1) of this Schedule to 6 April 2011 been a reference to 9 December 2010, and

(e)the early step is not chargeable to income tax by virtue of Schedule 34 to FA 2004 in whole or in part.

(2)For the purposes of sub-paragraph (1)(a) section 554C(1)(d) of ITEPA 2003 is to be read as if the words “or makes it available under an arrangement which permits its use” were omitted.

(3)In this paragraph “readily convertible asset” means anything mentioned in section 702(1)(a) to (c) of ITEPA 2003 (ignoring section 702(3)).

(4)Subject to what follows, Chapter 2 of Part 7A of ITEPA 2003 is to apply by reason of the early step; and the amendments made by this Schedule have effect accordingly.

(5)In determining the tax year for which the employment income of A counts for the purposes of section 554Z2(1) of ITEPA 2003, the early step is treated as having been taken on 6 April 2012; but otherwise Chapter 2 of Part 7A of that Act applies by reference to when the early step was actually taken.

(6)The amount which (apart from this sub-paragraph) would count as employment income of A is to be reduced to nil if—

(a)before 6 April 2012 the readily convertible asset has been returned to P, and

(b)as at that date the asset is not being used to secure the payment of the sum of money (or any part of it),

and the Tax Acts are to apply in relation to the early step as if Chapter 2 of Part 7A of ITEPA 2003 had never applied by reason of it, with any adjustments that need to be made to any assessment to tax being made accordingly.

(7)Section 554Z5 of ITEPA 2003 does not apply in relation to the early step and, in the application of that section in relation to any other relevant step (whenever taken), the early step is to be ignored.

(8)Section 554Z8 of ITEPA 2003 applies in relation to the early step as if subsection (6)(b) were omitted.

(9)Section 554Z12 of ITEPA 2003 does not apply in relation to the early step.

(10)For the purposes of section 695A(3)(a) of ITEPA 2003 (as inserted by paragraph 31 of this Schedule), the early step is treated as having been taken on 6 April 2012.

(11)For the purposes of section 41(1A) of ITTOIA 2005 (as inserted by paragraph 38(3) of this Schedule), the early step is treated as having been taken on 6 April 2012; and for the purpose of determining whether section 41(1A) of that Act applies, section 41(1) is to be read as substituted by paragraph 38(2) of this Schedule.

(12)For the purposes of section 1293(1A) of CTA 2009 (as inserted by paragraph 47(3) of this Schedule), the early step is treated as having been taken on 6 April 2012; and for the purpose of determining whether section 1293(1A) of that Act applies, section 1293(1) is to be read as substituted by paragraph 47(2) of this Schedule.

55(1)For the purpose of determining whether Chapter 2 of Part 7A of ITEPA 2003 would have applied by reason of the early step as mentioned in paragraph 53(1)(b) or 54(1)(d), section 554G of ITEPA 2003 is to be read—E+W+S+N.I.

(a)as if subsection (1)(a) were omitted, and

(b)as if the definition contained in sub-paragraph (2) applied for the purposes of the reference to a group of companies in subsection (4)(d) instead of section 554Z(5) of ITEPA 2003.

(2)The definition referred to in sub-paragraph (1)(b) is—

group of companies” means a company and any other companies of which it has control (as defined in section 995 of ITA 2007).

(3)For the purpose of determining whether Chapter 2 of Part 7A of ITEPA 2003 would have applied by reason of the early step, Chapter 1 of that Part is to be read as if section 554N(13) to (16) were omitted.

(4)If, by virtue of section 554O of ITEPA 2003, Chapter 2 of Part 7A of that Act would not have applied by reason of the early step, section 554O(3) and (4) have effect in relation to the car loan.

(5)But, for this purpose, if the repayment date is before 6 April 2012, in section section 554O(3) and (4) references to the repayment date are to be read as references to 6 April 2012.

56(1)This paragraph applies for the purposes of section 554Q of ITEPA 2003 in a case in which—E+W+S+N.I.

(a)the relevant step mentioned in subsection (2)(a) of that section was taken before 6 April 2011, and

(b)the requirement of subsection (2)(b) of that section would have been met had Part 7A of ITEPA 2003 had effect in relation to relevant steps within section 554B of that Act taken before that date.

(2)The requirement of subsection (2)(b) of that section is to be treated as met in that case.

57(1)This paragraph applies for the purposes of section 554R of ITEPA 2003 in a case in which—E+W+S+N.I.

(a)the relevant step mentioned in subsection (6)(a) of that section was taken before 6 April 2011, and

(b)the requirement of subsection (6)(b) of that section would have been met had Part 7A of ITEPA 2003 had effect in relation to relevant steps within section 554B of that Act taken before that date.

(2)The requirement of subsection (6)(b) of that section is to be treated as met in that case.

58(1)This paragraph applies if—E+W+S+N.I.

(a)B takes a step within section 554Z19 of ITEPA 2003 before 6 April 2011 by providing security (“the early security”) for the performance of an undertaking (“the early undertaking”),

(b)on or after 6 April 2011 at a time when B is continuing to provide the early security, there is a change in the terms of the early undertaking which does not amount to the giving of a new undertaking, and

(c)as a result of the change, the amount to be paid as a contribution (“the early contribution”) under the early undertaking increases, or will increase.

(2)Chapter 3 of Part 7A of ITEPA 2003 has effect—

(a)as if the change in the terms of the early undertaking were a new undertaking to pay a contribution covering the increase in the amount of the early contribution as determined on a just and reasonable basis, and

(b)as if B, in continuing to provide the early security, provides security for the performance of the new undertaking at the time of the change in the terms.

(3)Section 554Z17(7) of ITEPA 2003 applies for the purposes of this paragraph as it applies for the purposes of Chapter 3 of Part 7A of that Act.

59(1)This paragraph applies if—E+W+S+N.I.

(a)a relevant step within section 554C or 554D of ITEPA 2003 (“the chargeable step”) is taken,

(b)Chapter 2 of Part 7A of ITEPA 2003 applies by reason of the chargeable step,

(c)in a tax year before 6 April 2011 (“the pre-6 April 2011 tax year”) a relevant step (“the pre-6 April 2011 step”) within section 554B of ITEPA 2003 was taken,

(d)before the chargeable step is taken—

(i)an agreement was made between Her Majesty's Revenue and Customs and either A or B (or both) under which it was agreed that the pre-6 April 2011 step was to be treated as giving rise to earnings of A from A's employment with B within Chapter 1 of Part 3 of ITEPA 2003 for the pre-6 April 2011 tax year, or

(ii)the tax payable by A for the pre-6 April 2011 tax year was otherwise decided on the basis that the pre-6 April 2011 step was to be treated as giving rise to earnings of A from A's employment with B within Chapter 1 of Part 3 of ITEPA 2003 for that tax year,

(e)before the chargeable step is taken, A or B has paid, or otherwise accounted for, any tax which A or B is required to pay or otherwise account for as a consequence of—

(i)the agreement mentioned in paragraph (d)(i), or

(ii)the tax payable by A for the pre-6 April 2011 tax year having otherwise been decided on the basis mentioned in paragraph (d)(ii), and

(f)after any reductions under sections 554Z4 to 554Z8 of ITEPA 2003, it is determined on a just and reasonable basis that the value of the chargeable step represents (or still represents after any such reductions) to any extent—

(i)the earnings treated as arising from the pre-6 April 2011 step as mentioned in paragraph (d)(i) or (ii), or

(ii)any return on those earnings since the taking of the pre-6 April 2011 step (whether income or capital, direct or indirect or realised or unrealised).

(2)After any reductions under sections 554Z4 to 554Z8 of ITEPA 2003, the value of the chargeable step is to be reduced (but not below nil) by an amount reflecting the extent to which, as determined under sub-paragraph (1)(f), that value represents (or still represents) the earnings mentioned in subparagraph (1)(f)(i) or any return on those earnings mentioned in subparagraph (1)(f)(ii).

(3)In sub-paragraph (1)(f)(ii) “return” does not include any return so far as, it is reasonable to suppose, the return exceeds the return which might have been expected applying the assumption that all relevant connected persons are acting at arm's length of each other.

(4)In sub-paragraph (3) “relevant connected person” means a person with a connection (direct or indirect) to an arrangement (within the meaning of Part 7A of ITEPA 2003) by virtue of which the return arises.

Other commencement provisionE+W+S+N.I.

60The amendments made by paragraph 14 of this Schedule, so far as relating to general earnings, have effect in relation to benefits to which Chapter 2 of Part 6 of ITEPA 2003 applies received on or after 6 April 2011.E+W+S+N.I.

61The amendments made by paragraphs 36, 39(a), 45 and 48(a) of this Schedule have effect in relation to acts or omissions occurring on or after 6 April 2011.E+W+S+N.I.

62The amendments made by paragraphs 37(2), 39(b), 46(2) and 48(b) of this Schedule have effect in relation to payments or transfers made on or after 6 April 2011.E+W+S+N.I.

63The amendments made by paragraphs 38(2) and 47(2) of this Schedule have effect in relation to money treated as received on or after 6 April 2011 (subject to paragraphs 53(9) and (10) and 54(11) and (12) of this Schedule).E+W+S+N.I.

Power to make provision dealing with interactions etcE+W+S+N.I.

64(1)The Treasury may by order made by statutory instrument make such provision as the Treasury consider appropriate dealing with the interaction between Part 7A of ITEPA 2003 (as inserted by paragraph 1 of this Schedule) and any other provision of the Tax Acts or any enactment relating to capital gains tax or inheritance tax.E+W+S+N.I.

(2)The Treasury may by order made by statutory instrument make such provision as the Treasury consider appropriate in consequence of this Schedule.

(3)An order under this paragraph may contain provision having retrospective effect, so long as it does not increase any person's liability to any tax.

(4)An order under this paragraph may amend, repeal or revoke any provision made by or under an Act, including, in the case of an order under sub-paragraph (1), Part 7A of ITEPA 2003.

(5)An order under this paragraph may contain incidental, supplemental, consequential and transitional provision and savings.

(6)The powers conferred by this paragraph may not be exercised after 5 April 2015.

(7)A statutory instrument containing an order under this paragraph is subject to annulment in pursuance of a resolution of the House of Commons.

Section 27

SCHEDULE 3E+W+S+N.I.Tainted charity donations

Part 1 E+W+S+N.I.Income tax

1In Part 13 of ITA 2007 (tax avoidance), after Chapter 7 insert—E+W+S+N.I.

CHAPTER 8E+W+S+N.I.Tainted charity donations

IntroductionE+W+S+N.I.
809ZHOverview of Chapter

(1)This Chapter makes provision for removing entitlement to income tax reliefs, and counteracting income tax advantages, where a person makes a relievable charity donation which is a tainted donation.

(2)See section 257A of TCGA 1992 and Part 21C of CTA 2010 for the removal of entitlement to other reliefs where a person makes a relievable charity donation which is a tainted donation.

809ZIRelievable charity donations

(1)In this Chapter “relievable charity donation” means a gift or other disposal which—

(a)is made by a person to a charity, and

(b)is eligible for tax relief.

(2)A gift or other disposal is eligible for tax relief if one or both of the following apply—

(a)(ignoring the tainted donation provisions) tax relief would be available in respect of it under a relevant relieving provision;

(b)the charity is entitled to claim a repayment of tax in respect of it.

(3)“The tainted donation provisions” are—

(a)this Chapter,

(b)section 257A of TCGA 1992 (tainted charity donations: disapplication of section 257), and

(c)Part 21C of CTA 2010 (tainted charity donations: removal of corporation tax reliefs).

(4)The following are “relevant relieving provisions”—

(a)section 257 of TCGA 1992 (gifts of chargeable assets),

(b)section 63(2)(a), (aa) and (ab) of CAA 2001 (gifts of plant and machinery),

(c)Part 12 of ITEPA 2003 (payroll giving),

(d)section 108 of ITTOIA 2005 (gifts of trading stock),

(e)Chapters 2 and 3 of Part 8 of this Act (gift aid and gifts of shares),

(f)section 105 of CTA 2009 (gifts of trading stock), and

(g)Part 6 of CTA 2010 (charitable donations relief).

(5)For the purposes of this Chapter, an amount of income which arises under a UK settlement and to which a charity is entitled under the terms of the settlement is to be regarded as an amount gifted to the charity by the trustees of the settlement.

UK settlement” has the same meaning as in section 628 of ITTOIA 2005.

Tainted donationsE+W+S+N.I.
809ZJTainted donations

(1)For the purposes of this Chapter, a relievable charity donation is a tainted donation if (and only if) Conditions A, B and C are met.

(2)Condition A is that—

(a)a linked person enters into arrangements (whether before or after the donation is made), and

(b)it is reasonable to assume from either or both of—

(i)the likely effects of the donation and the arrangements, and

(ii)the circumstances in which the donation is made and the circumstances in which the arrangements are entered into,

that the donation would not have been made and the arrangements would not have been entered into independently of one another.

(3)Linked person” means—

(a)the person who made the donation (“the donor”), or

(b)a person connected with the donor at a relevant time.

(4)In subsection (3) “relevant time” means a time during the period which begins with the earliest, and ends with the latest, of the following times—

(a)the time when the arrangements are entered into as mentioned in subsection (2);

(b)the time when the relievable charity donation is made;

(c)the time when the arrangements are first materially implemented.

(5)Condition B is that the main purpose, or one of the main purposes, of the linked person in entering into the arrangements is to obtain a financial advantage—

(a)directly or indirectly from the charity to which the donation is made or a connected charity,

(b)for one or more linked persons who are not charities (each of whom is referred to in this Chapter as “a potentially advantaged person”).

(6)Condition C is that the donor is not—

(a)a qualifying charity-owned company, or

(b)a relevant housing provider linked with the charity to which the donation is made.

(7)For the purposes of subsection (6)(b) a relevant housing provider is linked with the charity if (and only if)—

(a)one is wholly owned, or subject to control, by the other, or

(b)both are wholly owned, or subject to control, by the same person.

(8)In this section—

  • qualifying charity-owned company”, in relation to a relievable charity donation, means a company which—

    (a)

    is wholly owned by one or more charities, at least one of which is the charity to which the donation is made or a connected charity, and

    (b)

    has not previously been under the control of, and does not carry on a trade or business previously carried on by, one or more of the following—

    (i)

    a potentially advantaged person;

    (ii)

    a person (other than a charity) who, at any time within the period of 4 years ending with the day on which paragraph (a) was first satisfied, was connected with a person who is a potentially advantaged person;

  • relevant housing provider” means a body which is—

    (a)

    a non-profit registered provider of social housing, or

    (b)

    entered on a register maintained under section 1 of the Housing Act 1996, section 20 of the Housing (Scotland) Act 2010 (asp 17) or Article 14 of the Housing (Northern Ireland) Order 1992 (S.I. 1992/1725 (N.I. 15)).

(9)Section 200 of CTA 2010 (company wholly owned by a charity) applies for the purposes of subsection (8), and for those purposes references in that section to “charity” include a registered club within the meaning of section 658(6) of that Act.

(10)This section is subject to section 809ZL (certain financial advantages to be ignored).

809ZKCircumstances in which financial advantage deemed to be obtained

(1)This section applies for the purposes of Condition B.

(2)Subsection (3) applies where the arrangements entered into by the linked person (as mentioned in Condition A) involve a transaction to which—

(a)that or any other linked person (“X”), and

(b)another person (“Y”),

are parties.

(3)X obtains a financial advantage from the charity to which the donation is made or a connected charity if—

(a)the terms of the transaction are less beneficial to Y or more beneficial to X (or both) than those which might reasonably be expected in a transaction concluded between parties dealing at arm's length, or

(b)the transaction is not of a kind which a person dealing at arm's length and in place of Y might reasonably be expected to make.

(4)Nothing in this section is intended to limit the circumstances in which a linked person may be regarded as obtaining a financial advantage for the purposes of section 809ZJ.

(5)In this section—

  • Condition A” and “Condition B” have the same meaning as in section 809ZJ;

  • linked person” has the meaning given by section 809ZJ(3);

  • transaction” includes (for example)—

    (a)

    the sale or letting of property,

    (b)

    the provision of services,

    (c)

    the exchange of property,

    (d)

    the provision of a loan or any other form of financial assistance, and

    (e)

    investment in a business.

809ZLCertain financial advantages to be ignored

(1)When determining whether a relievable charity donation is a tainted donation, a financial advantage within subsection (2), (3), (4) or (5) is to be ignored.

(2)A financial advantage is within this subsection if the person for whom it is obtained applies the advantage for charitable purposes only.

(3)A financial advantage is within this subsection if (ignoring the tainted donation provisions) it is—

(a)a benefit associated with a gift which is a qualifying donation for the purposes of Chapter 2 of Part 8 (gift aid), or

(b)a benefit associated with a payment which is a qualifying payment for the purposes of Chapter 2 of Part 6 of CTA 2010 (charitable donations relief: payments to charity).

(4)A financial advantage is within this subsection if (ignoring the tainted donation provisions)—

(a)the relievable charity donation is a disposal in respect of which tax relief would be available under Chapter 3 of Part 8 of this Act (gifts of shares, securities and real property to charities etc) or Chapter 3 of Part 6 of CTA 2010 (charitable donations: certain disposals to charity), and

(b)the advantage is a benefit the value of which would be taken into account in determining the relievable amount in respect of the disposal for the purposes of the Chapter in question.

(5)A financial advantage is within this subsection if (ignoring the tainted donation provisions)—

(a)the relievable charity donation is a gift in respect of which tax relief would be available under section 108 of ITTOIA 2005 or section 105 of CTA 2009 (gifts of trading stock to charities etc), and

(b)the advantage is a benefit attributable to the making of the gift in respect of which an amount would be brought into account under section 109 of ITTOIA 2005 or section 108 of CTA 2009 (receipt of benefits by donor or connected person).

(6)In this section—

  • benefit associated with a gift” has the meaning given by section 417;

  • benefit associated with a payment” has the meaning given by section 196 of CTA 2010;

  • the tainted donation provisions” has the meaning given by section 809ZI(3).

Removal of reliefs and imposition of charge to taxE+W+S+N.I.
809ZMRemoval of income tax relief in respect of tainted donations etc

(1)This section applies where a tainted donation is made by a person.

(2)Where (ignoring this Chapter) income tax relief would be available in respect of the tainted donation, that relief is not available.

(3)Where—

(a)(ignoring this Chapter) income tax relief would be available in respect of an associated donation, and

(b)entitlement to that relief is not withdrawn by subsection (2),

that relief is not available.

(4)In this section—

  • associated donation”, in relation to a tainted donation, means a relievable charity donation made—

    (a)

    in accordance with the relevant arrangements, and

    (b)

    by a person, other than—

    (i)

    a qualifying charity-owned company in relation to that relievable charity donation, or

    (ii)

    a relevant housing provider linked (within the meaning of section 809ZJ(7)) with the charity to which that donation is made;

  • income tax relief” means relief under—

    (a)

    section 63(2)(a), (aa) or (ab) of CAA 2001 (gifts of plant and machinery), so far as it applies in relation to income tax,

    (b)

    Part 12 of ITEPA 2003 (payroll giving),

    (c)

    section 108 of ITTOIA 2005 (gifts of trading stock),

    (d)

    Chapter 2 of Part 8 of this Act (gift aid), or

    (e)

    Chapter 3 of that Part (gifts of shares etc);

  • qualifying charity-owned company” has the meaning given by section 809ZJ(8) (except that paragraph (b) of that definition does not apply);

  • relevant housing provider” has the meaning given by section 809ZJ(8);

  • the relevant arrangements”, in relation to a tainted donation, means the arrangements by reference to which Conditions A and B in section 809ZJ are met.

(5)Where entitlement to relief is withdrawn under this section in respect of a donation—

(a)subsections (6) and (7) apply if the relief is under Chapter 2 of Part 8 (gift aid), and

(b)subsection (8) applies if the relief is under Part 12 of ITEPA 2003 (payroll giving).

(6)For the purposes of Step 2 in section 58(1), the donation is not a qualifying donation for the purposes of Chapter 2 of Part 8.

(7)But—

(a)the donation remains a qualifying donation for the purposes of—

(i)Part 10 (special rules about charitable trusts etc),

(ii)section 899(5) (meaning of “qualifying annual payment”),

(iii)Chapter 2 of Part 11 of CTA 2010 (charitable companies: gifts and other payments),

(iv)section 664 of that Act (community amateur sports clubs: exemption for interest and gift aid income), and

(b)accordingly, section 414(2)(a) (donation treated as made after deduction of basic rate income tax) applies for the purposes of section 520(4) (income tax treated as deducted to be treated as income tax paid by charitable trust).

(8)The donation remains a donation for the purposes of Part 12 of ITEPA 2003 for the purposes of—

(a)section 521A (gifts under payroll deduction scheme: income tax liability and exemption), and

(b)section 472A of CTA 2010 (gifts under payroll reduction scheme: corporation tax liability and exemption).

809ZNIncome tax charge where gift aid is withdrawn

(1)Income tax is charged under this section if—

(a)a person makes a tainted donation in a tax year,

(b)(ignoring this Chapter) relief would have been available under Chapter 2 of Part 8 in respect of the tainted donation or an associated donation (“the gift aid donation”), and

(c)the charity to which the gift aid donation is made is entitled to claim a repayment of tax in respect of that donation.

(2)The amount of the tax charged under this section is equal to the amount of the repayment of tax which the charity is entitled to claim in respect of the gift aid donation (whether or not such a claim is made).

(3)Each of the persons mentioned in subsection (4) is liable for any tax charged under this section, and the liability of those persons is joint and several.

(4)The persons are—

(a)the donor in respect of the gift aid donation,

(b)if different, the donor in respect of the tainted donation,

(c)each potentially advantaged person under the relevant arrangements relating to the tainted donation, and

(d)any charity to which the gift aid donation or (if different) the tainted donation is made, or any connected charity, which falls within subsection (5).

(5)A charity falls within this subsection if the charity—

(a)is or was party to the relevant arrangements relating to the tainted donation, and

(b)was aware, at the time it entered into those arrangements, that a linked person was entering (or had entered or was likely to enter) into the arrangements in circumstances falling within Condition B in section 809ZJ.

(6)No liability to income tax arises under this section in respect of a repayment of tax, if (and to the extent that) the repayment is itself repaid to the Commissioners for Her Majesty's Revenue and Customs under any other provision of the Tax Acts.

(7)In this section—

  • associated donation” has the same meaning as in section 809ZM;

  • linked person” has the same meaning as in section 809ZJ;

  • the relevant arrangements” has the same meaning as in section 809ZM.

809ZOIncome tax charge where payment of trust income to charity

(1)Income tax is charged under this section if—

(a)a person makes a tainted donation in a tax year,

(b)the tainted donation or an associated donation is a payment by the trustees of a settlement of income arising under the settlement (“the trust donation”), and

(c)the charity to which the trust donation is made is entitled to claim a repayment of tax in respect of that donation.

(2)The amount of the tax charged under this section is equal to the amount of the repayment of tax which the charity is entitled to claim in respect of the trust donation (whether or not such a claim is made).

(3)Each of the persons mentioned in subsection (4) is liable for any tax charged under this section, and the liability of those persons is joint and several.

(4)The persons are—

(a)the trustees of the settlement who made the trust donation,

(b)if different, the donor in respect of the tainted donation,

(c)if section 628 or 630 of ITTOIA 2005 (gifts from settlor-interested trusts etc) applies in relation to the income out of which the trust donation is made, the settlor in relation to the settlement,

(d)each potentially advantaged person under the relevant arrangements relating to the tainted donation,

(e)any beneficiary of the settlement who is party to those arrangements, and

(f)any charity to which the trust donation or (if different) the tainted donation is made, or any connected charity, which falls within subsection (5).

(5)A charity falls within this subsection if—

(a)the charity is or was party to the relevant arrangements relating to the tainted donation, and

(b)the charity was aware, at the time it entered into those arrangements, that a linked person was entering (or had entered or was likely to enter) into the arrangements in circumstances falling within Condition B in section 809ZJ.

(6)No liability to income tax arises under this section in respect of a repayment of tax if that repayment is itself repaid to the Commissioners for Her Majesty's Revenue and Customs under any other provision of the Tax Acts.

(7)In this section—

  • associated donation” has the same meaning as in section 809ZM;

  • linked person” has the same meaning as in section 809ZJ;

  • the relevant arrangements” has the same meaning as in section 809ZM;

  • settlement” and “settlor” have the same meaning as in Chapter 5 of Part 5 of ITTOIA 2005 (see section 620 of that Act).

SupplementaryE+W+S+N.I.
809ZPConnected charities

For the purposes of this Chapter, a “connected charity” in relation to another charity means a charity which is connected with that other charity in a matter relating to the structure, administration or control of either charity.

809ZQConnected persons

(1)Section 993 (meaning of “connected” persons) applies for the purposes of this Chapter—

(a)subject to section 809ZP, and

(b)as if, after subsection (7) there were inserted the provision in subsection (2).

(2)That provision is—

(8)A person who is a beneficiary of a settlement is connected with—

(a)a person in the capacity as trustee of the settlement, and

(b)the settlor in relation to the settlement.

(9)For the purposes of this section—

(a)a man and woman living together as husband and wife are treated as if they were husband and wife,

(b)two people of the same sex living together as if they were civil partners of each other are treated as if they were civil partners of each other, and

(c)close company” includes a company that would be a close company if it were resident in the United Kingdom.

809ZRMinor definitions

(1)In this Chapter—

  • arrangements” includes any scheme, arrangement or understanding of any kind, whether or not legally enforceable, involving a single transaction or two or more transactions;

  • charity” includes a registered club within the meaning of section 658(6) of CTA 2010 (meaning of “community amateur sports club” and “registered club”).

(2)In this Chapter, in the case of a charitable trust, references to a charity being entitled to a repayment of, or liable to pay, tax are to be read as references to the trustees of the trust being so entitled or liable.

Part 2 E+W+S+N.I.Corporation tax

2After Part 21B of CTA 2010 (inserted by Schedule 5 to this Act) insert—E+W+S+N.I.

Part 21C E+W+S+N.I.Tainted charity donations

IntroductionE+W+S+N.I.
939AOverview of Part

(1)This Part makes provision for removing entitlement to corporation tax reliefs where a person makes a relievable charity donation which is a tainted donation.

(2)See Chapter 8 of Part 13 of ITA 2007 and section 257A of TCGA 1992 for the removal of entitlement to other reliefs, and the ways in which other income tax advantages are counteracted, where a person makes a relievable charity donation which is a tainted donation.