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Finance Act 2012

Paragraphs 18 to 22 – application and interpretation

132.Paragraphs 18-22 provide for application and interpretation of the terms used in Part 4.

133.Paragraph 18 provides that these transitional provisions will apply where Part 2 does not apply and an ABC arrangement with the contribution paid at any time would not have received relief under new sections 196B, 196D or 196F of Part 3 had the contributions been paid on or after 22 February 2012, and the arrangement is not ‘completed’ as determined under paragraph 20 before that date. However, the reference to one year in new sections 196C(5), 196E(5) and 196G(5) should be read as a reference to 18 months for this provision.

134.Paragraph 19 provides that for the purposes of Part 4, the terms used in new sections 196B, 196D or 196F 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.

135.Paragraph 20 provides that an ABC arrangement that would be denied upfront relief under new section 196B, 196D or 196F had the contribution been paid on or after 22 February 2012 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.

136.Paragraph 21 provides that “the completion day” is the earliest of the day on which the ABC arrangement is to be completed as determined at the beginning of 22 February 2012, the day on which the arrangement is actually completed, the day which is the last day of the period of 25 years from the day on which the employer’s contribution is paid, or the day on which either a completion event occurs, or, after 21 March 2012, the day on which an event as set out in paragraph 22 of this Schedule 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. 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.

137.A completion event occurs 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.

138.A “paragraph 22” event occurs when the employer who has an ABC arrangement ceases to be chargeable to tax. Paragraph 22 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 in the section covering Part 1 of the Schedule).

139.These two paragraphs (21 and 22) 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 29 to 31.

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