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Finance Act 2012

The simple case – new sections 196B and 196C

103.All the conditions for the simple case as set out in Part 1 (see paragraphs 21-26 above) remain unchanged with the exception of Condition B where the reference is made to an acceptable SFA rather than a SFA. This new reference is required in relation to new qualifying conditions which are set out in new section 196C.

104.New section 196C set out the following conditions that must be met for those ABC arrangements that fall within Conditions A, B and C of new section 196B before they can qualify as an acceptable SFA:

  • the pension contribution promised upfront under the arrangement must be due to be paid to the pension scheme and is not intended to be held in a subsidiary structure;

  • the pension scheme being the responsible authority must be the direct lender giving an “advance” (the pension scheme investment) to the employer;

  • the advance must be wholly paid out of the promised contribution;

  • the contribution must equal both the advance and the financial liability recorded in respect of the advance;

  • from the outset, regular payments due to the pension scheme under the arrangement must reduce the financial liability to nil by the earlier of the completion day or 25 years;

  • the payments must be of equal amount due at intervals of no more than one year to the next working day and must be received by the pension scheme within three months from the due date to form part of the sums held for the purposes of the pension scheme. In determining if this requirement is met, certain planned increases to the payments can be ignored but such increase must be set at the outset and cannot be higher than the greatest of the increase in the consumer prices index, the retail prices index or 5% per annum;

  • the first payment must be due no later than one year after the day on which the advance is paid;

  • the total amount of the payments due to the pension scheme must not be less than the contribution; and

  • at the outset, no commitment has been given to a “relevant person” (which is not the responsible authority as defined in new section 196C(11)) directly or indirectly and the commitment is to secure that a person receives money or another asset that is linked to the making of any payment in respect of the security.

105.New section 196C(10) defines “relevant person” which has the same meaning as “relevant person” (as defined in paragraph 11(8) of the new Schedule) in relation to Amount C. New section 196C(11) stipulates that the “responsible authority” means the trustees or the persons in control of the management of the pension scheme.

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