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Finance Act 2014

Introduction

2.Section 234 is the first of a series of sections defining terms in the legislation.  It defines the tax avoidance schemes classed as “relevant arrangements” and “relevant proposals” in relation to which a person may be a promoter.  “Relevant arrangements” enable, or might be expected to enable, someone to obtain a tax advantage.  Obtaining the tax advantage must be the main benefit or one of the main benefits of entering into the arrangements.  “Tax advantage” is defined in subsection (3).  “Arrangements” is widely defined to include agreements, schemes, arrangements and understanding, whether or not they are legally enforceable.  “Relevant proposal” is a proposal for something which, if entered into, would be relevant arrangements and may relate to a single person or to a number of people.

3.Section 235 defines “promoter” in similar terms to sections 306 and 308 Finance Act 2004 (Disclosure of Tax Avoidance Schemes), but is not restricted to providers of tax or banking services.  A person is a promoter only in respect of relevant proposals and relevant arrangements.  Subsection (2) provides that a person is a promoter in respect of a relevant proposal if, at any time, the person is responsible for the design of the proposed arrangements, makes a “firm approach” to someone with a view to making the proposal available for implementation by that person or another, or makes the relevant proposal available for implementation by others.  Subsection (3) of section 235 defines a promoter in relation to relevant arrangements as a person who at any time is a promoter for a relevant proposal which becomes the relevant arrangements, or is responsible for the design, organisation or management of the arrangements.

4.Subsections (4) and (5) of section 235 define “firm approach”.  This is concerned with communicating information about the relevant proposal, at a stage when it has been “substantially designed” and includes an explanation of the expected tax advantage, to another person with a view to that person entering into the arrangements.  Subsection (5) of section 235 explains when proposed arrangements have been “substantially designed”.  This is when the transactions forming part of the proposed arrangements have been sufficiently developed, so that someone wanting to obtain the tax advantage could enter into those or similar transactions.

5.Subsections (6) and (7) contain a power to allow the definition of promoter to be amended to exclude persons from being a promoter in prescribed circumstances with retrospective effect.  Regulations to exclude from the definition of promoter those providing advice on the commercial aspects of a proposal or arrangement are planned for later in 2014 with retrospective effect to Royal Assent.

6.Section 236 defines intermediary for the purposes of these provisions.  There are three differences between the definition of promoter and intermediary. The first two are that the promoter definition includes the design of the proposed arrangements and making the relevant proposal available for implementation by others.  The third difference is that a person who explains about the tax advantage is a promoter; an intermediary for the purposes of this legislation does not.  Instead an intermediary is defined as a person who communicates information about the relevant proposal to another person with a view to that other person entering into the proposed arrangements.  Anyone who does this is an intermediary unless they are also a promoter.

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