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Finance Act 2012

Paragraphs 4 to 8 – application and interpretation

64.Paragraphs 4-8 provide for application and interpretation of the terms used in Part 2.

65.Paragraph 4 provides that transitional provisions will apply where an ABC arrangement with the contribution paid before 29 November 2011 would not have received relief under new sections 196B to 196D in Part 1 had the contributions been paid on or after 29 November 2011 and the arrangement is not ‘completed’ as determined under paragraph 6 before that date.

66.Paragraph 5 provides that for the purposes of Part 2, the terms used in new sections 196B to 196D in Part 1 have the same meaning as in those new sections and where necessary it is assumed that those new sections have effect in relation to the employer’s contribution.

67.Paragraph 6 provides that an ABC arrangement that would be denied upfront relief under new sections 196B, 196C or 196D in Part 1 had the contribution been paid on or after 29 November 2011 is completed if :

  • where the arrangement is a simple case, the lender etc is no longer entitled to payments in respect of the security; or

  • where the arrangement is a complex case, the share in the partnership’s profits of the person involved in the relevant change is no longer to be determined by reference to payments in respect of the security, or, if earlier, when no “responsible authority” is any longer entitled to payments in connection with the arrangement.

“Responsible authority” is defined under paragraph 6(7) to mean those persons who from time to time are either the trustees of the relevant pension scheme or the persons controlling its management.

A responsible authority is entitled to a payment in connection with the ABC arrangement if it is entitled to the payment directly or indirectly in consequence of the arrangement or otherwise in connection with the arrangement.

Payments include drawings or distributions from a partnership, payments in respect of security and other payments in respect of an asset as read in accordance with section 776(4)(b) of CTA 2010.

68.Paragraph 7 provides that “the completion day” is the earliest of the day on which the ABC arrangement is to be completed as determined as at the beginning of 29 November 2011, or the day on which the arrangement is actually completed, or after 22 February 2012, the day on which a completion event takes place, or after 21 March 2012, an event as set out in paragraph 8 occurs. Only changes to payments made to the pension scheme in connection with an ABC arrangement will be taken into account in a completion event.

69.Paragraph 7(3) explains when a completion event occurs. This is where there is a change in the number of either payments or drawings/other payments, a significant change in the amount of either a payment or a drawing/other payment is to be made, or a significant change in the time at which either a payment or a drawing/other payment is to be made.

70.A “paragraph 8” event occurs when the employer ceases to be chargeable to tax. Paragraph 8 sets out the circumstances, similar to those set out in new sections 196H(4) and (5) in Part 1, surrounding such cessation (see paragraphs 48 to 50 above concerning Part 1).

71.These two paragraphs (7 and 8) prevent the employer seeking to extend the duration of the arrangement or make a material change to the original position as at 22 February or 21 March 2012 (depending on the type of events) to avoid the transitional provisions set out in paragraphs 12 to 14.

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