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SCHEDULES

Section 7

SCHEDULE 1E+W+S+N.I.Corporation tax rates

PART 1E+W+S+N.I.Abolition of small profits rate for non-ring fence profits

1CTA 2010 is amended as follows.E+W+S+N.I.

2In section 1 (overview of Act), in subsection (2)—E+W+S+N.I.

(a)for “Parts 3” substitute “ Parts 4 ”, and

(b)omit paragraph (a).

3For section 3 (corporation tax rates) substitute—E+W+S+N.I.

3Corporation tax rates

(1)Corporation tax is charged at the rate set by Parliament for the financial year as the main rate.

(2)Subsection (1) is subject to any provision of the Corporation Tax Acts which provides for corporation tax to be charged at a different rate.

4Omit Part 3 (companies with small profits).E+W+S+N.I.

5(1)Part 8 (oil activities) is amended as follows.E+W+S+N.I.

(2)In section 270 (overview of Part 8), after subsection (3) insert—

(3A)Chapter 3A makes provision about the rates at which corporation tax is charged on ring fence profits.

(3)After Chapter 3 insert—

CHAPTER 3AE+W+S+N.I.Rates at which corporation tax is charged on ring fence profits

The ratesE+W+S+N.I.
279ACorporation tax rates on ring fence profits

(1)Corporation tax is charged on ring fence profits at the main ring fence profits rate.

(2)But subsection (3) provides for tax to be charged at the small ring fence profits rate instead of the main ring fence profits rate in certain circumstances.

(3)Corporation tax is charged at the small ring fence profits rate on a company's ring fence profits of an accounting period if—

(a)the company is UK resident in the accounting period, and

(b)its augmented profits of the accounting period do not exceed the lower limit.

(4)In this Act—

  • the main ring fence profits rate” means 30%, and

  • the small ring fence profits rate” means 19%.

Marginal reliefE+W+S+N.I.
279BCompany with only ring fence profits

(1)This section applies if—

(a)a company is UK resident in an accounting period,

(b)its augmented profits of the accounting period—

(i)exceed the lower limit, but

(ii)do not exceed the upper limit, and

(c)its augmented profits of that period consist exclusively of ring fence profits.

(2)The corporation tax charged on the company's taxable total profits of the accounting period is reduced by an amount equal to—

where—

R is the marginal relief fraction,

U is the upper limit,

A is the amount of the augmented profits, and

N is the amount of the taxable total profits.

(3)In this Chapter “the marginal relief fraction” means 11/400ths.

279CCompany with ring fence profits and other profits

(1)This section applies if—

(a)a company is UK resident in an accounting period,

(b)its augmented profits of the accounting period—

(i)exceed the lower limit, but

(ii)do not exceed the upper limit, and

(c)its augmented profits of that period consist of both ring fence profits and other profits.

(2)The corporation tax charged on the company's taxable total profits of the accounting period is reduced by the sum equal to the marginal relief fraction of the ring fence amount.

279DThe ring fence amount

(1)In section 279C “the ring fence amount” means the amount given by the formula—

(2)In this section—

UR is the amount given by multiplying the upper limit by—

AR is the total amount of any ring fence profits that form part of the augmented profits of the accounting period,

NR is the total amount of any ring fence profits that form part of the taxable total profits of the accounting period, and

A is the amount of the augmented profits of the accounting period.

The lower limit and the upper limitE+W+S+N.I.
279EThe lower limit and the upper limit

(1)This section gives the meaning in this Chapter of “the lower limit” and “the upper limit” in relation to an accounting period of a company (“A”).

(2)If no company is a related 51% group company of A in the accounting period—

(a)the lower limit is £300,000, and

(b)the upper limit is £1,500,000.

(3)If one or more companies are related 51% group companies of A in the accounting period—

(a)the lower limit is—

and

(b)the upper limit is—

where N is the number of those related 51% group companies.

(4)For an accounting period of less than 12 months the lower limit and the upper limit are proportionately reduced.

Related 51% group companiesE+W+S+N.I.
279F“Related 51% group company”

(1)For the purposes of this Chapter a company (“B”) is a related 51% group company of another company (“A”) in an accounting period if for any part of the accounting period—

(a)A is a 51% subsidiary of B,

(b)B is a 51% subsidiary of A, or

(c)both A and B are 51% subsidiaries of the same company.

(2)The rule in subsection (1) applies to each of two or more related 51% group companies even if they are related 51% group companies for different parts of the accounting period.

(3)But a related 51% group company is ignored for the purposes of section 279E if—

(a)it has not carried on a trade or business at any time in the accounting period, or

(b)it was a related 51% group company for part only of the accounting period and has not carried on a trade or business at any time in that part of the accounting period.

(4)Subsection (3) is subject to subsections (5) to (9).

(5)Subsection (6) applies if a company carries on a business of making investments in an accounting period and throughout the period the company—

(a)carries on no trade,

(b)has one or more 51% subsidiaries, and

(c)is a passive company.

(6)The company is treated for the purposes of subsection (3) as not carrying on a business at any time in the accounting period.

(7)A company is a passive company throughout an accounting period only if the following requirements are met—

(a)it has no assets in that period, other than shares in companies which are its 51% subsidiaries,

(b)no income arises to it in that period other than dividends,

(c)if income arises to it in that period in the form of dividends—

(i)the redistribution condition is met (see subsection (8)), and

(ii)the dividends are franked investment income received by it,

(d)no chargeable gains accrue to it in that period,

(e)no expenses of management of the business mentioned in subsection (5) are referable to that period, and

(f)no qualifying charitable donations are deductible from the company's total profits of that period.

(8)The redistribution condition is that—

(a)the company pays dividends to one or more of its shareholders in the accounting period, and

(b)the total amount paid in the form of those dividends is at least equal to the amount of the income arising to the company in the form of dividends in that period.

(9)If income arises to a company in an accounting period in the form of a dividend and the requirement in subsection (7)(c) is met in respect of the income—

(a)neither the dividend nor any asset representing it is treated as an asset of the company in that accounting period for the purposes of subsection (7)(a), and

(b)no right of the company to receive the dividend is treated as an asset of the company for the purposes of subsection (7)(a) in that period or any earlier accounting period.

Augmented profitsE+W+S+N.I.
279G“Augmented profits”

(1)For the purposes of this Chapter a company's augmented profits of an accounting period are—

(a)the company's adjusted taxable total profits of that period, plus

(b)any franked investment income received by the company that is not excluded by subsection (3).

(2)A company's “adjusted taxable total profits” of a period are what would have been the company's taxable total profits of the period in the absence of sections 1(2A), 2B and 8(4A) of TCGA 1992 and section 2(2A) of CTA 2009 (certain gains on relevant high value disposals by companies etc chargeable to capital gains tax not corporation tax).

(3)This subsection excludes any franked investment income which the company (“the receiving company”) receives from a company which is—

(a)a 51% subsidiary of—

(i)the receiving company, or

(ii)a company of which the receiving company is a 51% subsidiary, or

(b)a trading company or relevant holding company that is a quasi-subsidiary of the receiving company.

(4)For the purposes of subsection (3)(b) a company is a quasi-subsidiary of the receiving company if—

(a)it is owned by a consortium of which the receiving company is a member,

(b)it is not a 75% subsidiary of any company, and

(c)no arrangements of any kind (whether in writing or not) exist by virtue of which it could become a 75% subsidiary of any company.

279HInterpretation of section 279G(3) and (4)

(1)For the purposes of section 279G(3)(a), a company (“A”) is a 51% subsidiary of another company (“B”) only at times when—

(a)B would be beneficially entitled to more than 50% of any profits available for distribution to equity holders of A, and

(b)B would be beneficially entitled to more than 50% of any assets of A available for distribution to its equity holders on a winding up.

(2)The requirement in subsection (1) is in addition to the requirements of section 1154(2) (meaning of 51% subsidiary).

(3)In determining for the purposes of section 279G(3)(a) whether or not a company is a 51% subsidiary of another company (“C”), C is treated as not being the owner of share capital if—

(a)it owns the share capital indirectly,

(b)the share capital is owned directly by a company (“D”), and

(c)a profit on the sale of the shares would be a trading receipt for D.

(4)In section 279G(3)(b) and this section—

  • trading company” means a company whose business consists wholly or mainly of carrying on a trade or trades, and

  • relevant holding company” means a company whose business consists wholly or mainly of holding shares in or securities of trading companies that are its 90% subsidiaries.

(5)For the purposes of section 279G(4), a company is owned by a consortium if at least 75% of the company's ordinary share capital is beneficially owned by two or more companies each of which—

(a)beneficially owns at least 5% of that capital,

(b)would be beneficially entitled to at least 5% of any profits available for distribution to equity holders of the company, and

(c)would be beneficially entitled to at least 5% of any asset of the company available for distribution to its equity holders on a winding up.

(6)The companies meeting those conditions are called the members of the consortium.

(7)Chapter 6 of Part 5 (equity holders and profits or assets available for distribution) applies for the purposes of subsections (1) and (5) as it applies for the purposes of section 151(4)(a) and (b).

PART 2E+W+S+N.I.Amendments consequential on Part 1 of this Schedule

Finance Act 1998E+W+S+N.I.

6In Schedule 18 to FA 1998 (company tax returns, assessments and related matters), in paragraph 8 (calculation of tax payable), in subsection (1), for “section 19, 20 or 21 of the Corporation Tax Act 2010 (marginal relief for companies with small profits)” substitute “ Chapter 3A of Part 8 of the Corporation Tax Act 2010 (marginal relief for companies with small ring fence profits etc) ”.E+W+S+N.I.

Finance Act 2000E+W+S+N.I.

7In Schedule 22 to FA 2000 (tonnage tax), in paragraph 57 (exclusion of relief or set-off against tax liability), in sub-paragraph (6), for paragraph (a) substitute—E+W+S+N.I.

(a)any reduction under Chapter 3A of Part 8 of CTA 2010 (marginal relief for companies with small ring fence profits), or.

Capital Allowances Act 2001E+W+S+N.I.

8In section 99 of CAA 2001 (long-life assets: the monetary limit)—E+W+S+N.I.

(a)in subsection (4)—

(i)for “If, in a chargeable period, a company has one or more associated companies” substitute “ In the case of a company (“C”), if, in a chargeable period, one or more companies are related 51% group companies of C ”, and

(ii)for “number of associated” substitute “ number of related 51% group ”, and

(b)omit subsection (5).

9In Part 2 of Schedule 1 to that Act (defined expressions), at the appropriate place insert—E+W+S+N.I.

related 51% group companysection 279F of CTA 2010 (as applied by 1119 of that Act).

Corporation Tax Act 2009E+W+S+N.I.

10In section 104N of CTA 2009 (payment of R&D expenditure credit) in subsection (3), in the definition of “Amount A”, in paragraph (b), after “main rate” insert “ (or, in the case of ring fence profits, the main ring fence profits rate) ”.E+W+S+N.I.

11In section 1114 of that Act (calculation of total R&D aid for the purposes of the cap), after “aid is calculated” insert “ (or, in the case of a ring fence trade (within the meaning of section 277 of CTA 2010) the main ring fence profits rate at that time) ”.E+W+S+N.I.

12In Schedule 4 to that Act (index of defined expressions), at the appropriate place, insert—E+W+S+N.I.

main ring fence profits ratesection 279A(4) (as applied by 1119 of CTA 2010).

Corporation Tax Act 2010E+W+S+N.I.

13(1)Chapter 3 of Part 8A of CTA 2010 (profits arising from the exploitation of patents etc: relevant IP profits) is amended as follows.E+W+S+N.I.

(2)In section 357CL (companies eligible to elect for small claims treatment)—

(a)in subsection (5) for “the company has no associated company” substitute “ no other company is a related 51% group company of the company ”,

(b)in subsection (6)—

(i)for “the company has one or more associated companies” substitute “ one or more other companies are related 51% group companies of the company, ” and

(ii)for “those associated” substitute “ those related 51% group ”, and

(c)omit subsection (9).

(3)In section 357CM (small claims amount)—

(a)in subsection (5) for “the company has no associated company” substitute “ no other company is a related 51% group company of the company ”,

(b)in subsection (6)—

(i)for “the company has one or more associated companies” substitute “ one or more other companies are related 51% group companies of the company, ” and

(ii)for “those associated” substitute “ those related 51% group ”, and

(c)omit subsection (8).

14(1)Part 12 of CTA 2010 (real estate investment trusts) is amended as follows.E+W+S+N.I.

(2)In section 534 (tax treatment of profits), omit subsection (3).

(3)In section 535 (tax treatment of gains), omit subsection (6).

(4)In section 543 (profit: financing-cost ratio), omit subsection (5).

(5)In section 551 (tax consequences of distribution to holder of excessive rights), omit subsection (6).

(6)In section 552 (“the section 552 amount”), in subsection (2), for “rate of corporation tax mentioned in section 534(3) (rate determined without reference to sections 18 to 23)” substitute “ main rate of corporation tax ”.

(7)In section 564 (breach of condition as to distribution of profits), omit subsection (4).

15(1)Part 13 of CTA 2010 (other special types of company etc) is amended as follows.E+W+S+N.I.

(2)In section 614 (open-ended investment companies: applicable corporation tax rate), omit “(and sections 18 and 19 (relief for companies with small profits) do not apply)”.

(3)In section 618 (authorised unit trusts: applicable corporation tax rate), omit “(and sections 18 and 19 (relief for companies with small profits) do not apply)”.

(4)In section 627 (companies in liquidation etc: meaning of “rate of corporation tax” in case of companies with small profits)—

(a)for subsections (1) and (2) substitute—

(1)This section applies if corporation tax is chargeable on ring fence profits of a company for a financial year.

(2)References in this Chapter to the “main rate of corporation tax”, so far as relating to those profits, are to be taken—

(a)if corporation tax is to be charged on those profits at the main ring fence profits rate, as references to that rate;

(b)if corporation tax is to be charged on those profits at the small ring fence profits rate, as references to that rate;

(c)if corporation tax on those profits is to be reduced by reference to the marginal relief fraction within the meaning of Chapter 3A of Part 8 (see sections 279B and 279C), as including references to the marginal relief fraction (and with references to a rate being “fixed” or “proposed” read accordingly as references to the marginal relief fraction concerned being fixed or proposed).

(b)accordingly, in the heading for the section, for “small profits” substitute ring fence profits.

(5)In section 628 (company in liquidation: corporation tax rates), for “the rate of corporation tax” (in each place it occurs) substitute “ the main rate of corporation tax ”.

(6)In section 630 (company in administration: corporation tax rates), for “the rate of corporation tax” (in each place it occurs) substitute “ the main rate of corporation tax ”.

16In section 1119 of CTA 2010 (Corporation Tax Acts definitions), at the appropriate places insert—E+W+S+N.I.

main ring fence profits rate” has the meaning given by section 279A(4),, and

“ “related 51% group company” is to be read in accordance with section 279F,.

17(1)Schedule 4 to CTA 2010 (index of defined expressions) is amended as follows.E+W+S+N.I.

(2)Insert the following entries at the appropriate places—

the main ring fence profits ratesection 279A(4) (as applied by section 1119)
the marginal relief fraction (in Chapter 3A of Part 8)section 279B(3)
related 51% group companysection 279F (as applied by section 1119)
the small ring fence profits ratesection 279A(4)

(3)Omit the entries for—

  • “associated company (in Part 3)”;

  • “close investment holding company (in Part 3)”;

  • “the ring fence fraction (in Part 3)”;

  • “the small profits rate”;

  • “the standard fraction (in Part 3)”.

(4)In the entry for “augmented profits (in Part 3)”—

(a)in the first column for “Part 3” substitute “ Chapter 3A of Part 8 ”, and

(b)in the second column, for “32” substitute “ 279G ”.

(5)In the entry for “the lower limit (in Part 3)”—

(a)in the first column for “Part 3” substitute “ Chapter 3A of Part 8 ”, and

(b)in the second column for “24” substitute “ 279E ”.

(6)In the entry for “the upper limit (in Part 3)”—

(a)in the first column for “Part 3” substitute “ Chapter 3A of Part 8 ”, and

(b)in the second column for “24” substitute “ 279E ”.

Finance Act 2012E+W+S+N.I.

18In section 102 of FA 2012 (policy holders' rate of tax on policyholders' share of I-E profit), omit subsection (5).E+W+S+N.I.

Finance Act 2013E+W+S+N.I.

19In section 6 of FA 2013 (main rate for financial year 2015)—E+W+S+N.I.

(a)in subsection (1) for “the rate” substitute “ the main rate ”,

(b)in that subsection, omit “on profits of companies other than ring fence profits”, and

(c)omit subsection (2).

20In Schedule 25 to that Act (charge on certain high value disposals by companies etc), omit paragraph 19.E+W+S+N.I.

PART 3E+W+S+N.I.Commencement and transitional provision

21(1)The amendments made by paragraphs 8, 9 and 13 have effect in relation to accounting periods beginning on or after 1 April 2015.E+W+S+N.I.

(2)Accordingly—

(a)despite the repeal of Part 3 of CTA 2010 by paragraph 4 of this Schedule, sections 25 to 30 of that Act (interpretation of references to associated companies) continue to apply for the purposes of section 99 of CAA 2001, and sections 357CL and 357CM of CTA 2010, in relation to accounting periods beginning before but ending on or after 1 April 2015, and

(b)in relation to the application of sections 25 to 30 of CTA 2010 for those purposes, paragraph 22(2) of this Schedule is to be ignored.

22(1)The other amendments made by this Schedule have effect for the financial year 2015 and subsequent financial years.E+W+S+N.I.

(2)In the case of an accounting period (a “straddling period”)—

(a)beginning before 1 April 2015, and

(b)ending on or after that date,

the repealed small profit provisions and the new ring fence small profit provisions apply as if the different parts of the straddling period falling in the different financial years were separate accounting periods.

(3)For this purpose—

  • the repealed small profit provisions” means Part 3 of CTA 2010,

  • the new ring fence small profit provisions” means sections 279A(3) and 279B to 279H”.

(4)For the purposes of sub-paragraph (2) all necessary apportionments are to be made between the two separate accounting periods.

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Modifications etc. (not altering text)

Section 10

SCHEDULE 2E+W+S+N.I.Annual investment allowance: transitional provisions etc

PART 1E+W+S+N.I.Transitional provisions

Chargeable periods which straddle start dateE+W+S+N.I.

1(1)This paragraph applies in relation to a chargeable period which begins before the start date and ends on or after that date (“the first straddling period”).E+W+S+N.I.

For “the start date”, see section 10(3).

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

(a)so much (if any) of the first straddling period as falls before 1 January 2013,

(b)so much of the first straddling period as falls on or after that date but before the start date, and

(c)so much of the first straddling period as falls on or after the start date,

were each treated as separate chargeable periods.

(3)But this is subject to paragraphs 2 and 3.

First straddling period beginning before 1 January 2013E+W+S+N.I.

2(1)This paragraph applies where the first straddling period begins before 1 January 2013.E+W+S+N.I.

(2)So far as concerns expenditure incurred before 1 January 2013, the maximum allowance under section 51A of CAA 2001 for the first straddling period is what would have been the maximum allowance for that period if neither the amendment made by section 7(1) of FA 2013 nor the amendment made by section 10(1) had been made.

(3)So far as concerns expenditure incurred before the start date, the maximum allowance under section 51A of CAA 2001 for the first straddling period is what would have been the maximum allowance for that period if neither the amendment made by section 10(1) nor the amendments made by Part 2 of this Schedule had been made.

First straddling period beginning on or after 1 January 2013E+W+S+N.I.

3(1)This paragraph applies where no part of the first straddling period falls before 1 January 2013.E+W+S+N.I.

(2)So far as concerns expenditure incurred before the start date, the maximum allowance under section 51A of CAA 2001 for the first straddling period is what would have been the maximum allowance for that period if the amendment made by section 10(1) had not been made.

Chargeable periods which straddle 1 January 2016E+W+S+N.I.

4(1)This paragraph applies in relation to a chargeable period (“the second straddling period”) which begins before 1 January 2016 and ends on or after that date.E+W+S+N.I.

(2)The maximum allowance under section 51A of CAA 2001 for the second straddling 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 31 December 2015, and

(b)the period beginning with 1 January 2016 and ending with the last day of the chargeable period,

were treated as separate chargeable periods.

(3)But, so far as concerns expenditure incurred on or after 1 January 2016, the maximum allowance under section 51A of CAA 2001 for the second straddling period is the maximum allowance, calculated in accordance with sub-paragraph (2), for the period mentioned in paragraph (b) of that sub-paragraph.

Operation of annual investment allowance where restrictions applyE+W+S+N.I.

5(1)Paragraphs 1 to 4 also 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 paragraph 1(1) or 4(1).E+W+S+N.I.

(2)There is to be taken into account for the purpose mentioned in sub-paragraph (1) only chargeable periods of one year or less (whether or not they are chargeable periods within paragraph 1(1) or 4(1)), and, if there is more than one such period, only that period which gives rise to the greatest maximum allowance.

(3)For the purposes of sub-paragraph (2) any chargeable period which—

(a)is longer than a year, and

(b)ends in the tax year 2013-14, 2014-15, 2015-16, 2016-17 or 2017-18,

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

(4)Nothing in this paragraph affects the operation of sections 51M and 51N of CAA 2001.

PART 2E+W+S+N.I.Amendments of FA 2013

6(1)Section 7 of FA 2013 (temporary increase in annual investment allowance) is amended as follows.E+W+S+N.I.

(2)In subsection (1), for “of two years beginning with 1 January 2013” substitute “ beginning with 1 January 2013 and ending with the specified date ”.

(3)After subsection (1) insert—

(1A)The specified date is —

(a)for the purposes of corporation tax, 31 March 2014, and

(b)for the purposes of income tax, 5 April 2014.

(4)In subsection (2), omit “or 1 January 2015”.

7(1)Schedule 1 to FA 2013 (annual investment allowance) is amended as follows.E+W+S+N.I.

(2)In paragraph 1 (chargeable periods which straddle 1 January 2013)—

(a)in sub-paragraph (1), after “that date” insert “ but not later than the specified date ”, and

(b)after sub-paragraph (1) insert—

(1A)The specified date” means—

(a)for the purposes of corporation tax, 31 March 2014, and

(b)for the purposes of income tax, 5 April 2014.

(3)Omit paragraph 4 (chargeable periods which straddle 1 January 2015).

(4)In paragraph 5 (operation of annual investment allowance where restrictions apply)—

(a)in sub-paragraph (1)—

(i)for “to 4” substitute “ to 3 ”, and

(ii)omit “or 4(1)”, and

(b)in sub-paragraph (2), omit “or 4(1)”,

(c)in sub-paragraph (3)(b), for “, 2014-15, 2015-16 or 2016-17” substitute “ or 2014-15 ”.

Section 15

SCHEDULE 3E+W+S+N.I.Restrictions on remittance basis

1ITEPA 2003 is amended as follows.E+W+S+N.I.

2In section 23 (taxable earnings: calculation of “chargeable overseas earnings”) after subsection (1) insert—E+W+S+N.I.

(1A)But none of an employee's general earnings from an employment for a tax year are to be “chargeable overseas earnings” if section 24A applies in relation to the employment for the tax year.

3After section 24 insert—E+W+S+N.I.

24ARestrictions on remittance basis

(1)This section applies in relation to an employment (“the relevant employment”) for a tax year (“the relevant tax year”) if—

(a)one or more of the paragraphs in subsection (5) applies,

(b)conditions 1 to 4 are met, and

(c)condition 5 is not met.

(2)The consequences of this section applying are set out in sections 23(1A), 41C(4A), 41H(5) and 554Z9(1A).

(3)But, for the purpose of determining if, and the extent to which, any provision of Part 11 (PAYE), or of PAYE regulations, applies in relation to any income, the application of any provision mentioned in subsection (2) in relation to the income is to be ignored.

(4)In this section—

(a)the relevant employee” means the employee in respect of the relevant employment,

(b)the relevant employer” means the employer in respect of the relevant employment, and

(c)UK employment” means an employment the duties of which are not performed wholly outside the United Kingdom and “UK employer” is to be read accordingly,

and the rules in section 24(5) (“associated” persons) apply for the purposes of this section.

(5)The paragraphs referred to in subsection (1)(a) are—

(a)general earnings from the relevant employment which are for the relevant tax year would, apart from section 23(1A) and step 3 in section 23(3), be “chargeable overseas earnings” under section 23(3);

(b)employment income in respect of the relevant employment which is treated as accruing in the relevant tax year under section 41C(2) would, apart from sections 41C(4A), 41D and 41E, be “foreign” under section 41C(3);

(c)employment income in respect of the relevant employment which is treated as accruing in the relevant tax year under section 41H(2) would, apart from sections 41H(5), 41I and 41L, be “chargeable foreign securities income” under section 41H(3);

(d)section 554Z9(2) would, apart from section 554Z9(1A) and (4) and (5), apply to employment income in respect of the relevant employment which corresponds to 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.

(6)Condition 1 is that the relevant employee holds a UK employment—

(a)at a time in the relevant tax year when the relevant employee also holds the relevant employment, or

(b)if the relevant tax year is a split year as respects the relevant employee, at a time in the UK part of the relevant tax year when the relevant employee also holds the relevant employment.

(7)Condition 2 is that the UK employer is the same as, or is associated with, the relevant employer.

(8)Condition 3 is that the UK employment and the relevant employment are related to each other.

(9)Without prejudice to the generality of subsection (8), the UK employment and the relevant employment are to be assumed to be related to each other if one or more of the following paragraphs applies—

(a)it is reasonable to suppose that—

(i)the relevant employee would not hold one employment without holding the other employment, or

(ii)the employments will cease at the same time or one employment will cease in consequence of the other employment ceasing;

(b)the terms of one employment operate to any extent by reference to the other employment;

(c)the performance of duties of one employment is (wholly or partly) dependent upon, or otherwise linked (directly or indirectly) to, the performance of duties of the other employment;

(d)the duties of the employments are wholly or mainly of the same type (ignoring the fact that they may be performed (wholly or partly) in different locations);

(e)the duties of the employments involve (wholly or partly) the provision of goods or services to the same customers or clients;

(f)the relevant employee is—

(i)a director (as defined in section 67) of the UK employer or the relevant employer who has a material interest (as defined in section 68) in the UK employer or the relevant employer,

(ii)a senior employee of the UK employer or the relevant employer, or

(iii)one of the employees of the UK employer or the relevant employer who receives the higher or highest levels of remuneration.

(10)In subsection (9)(f) references to the UK employer or the relevant employer include references to—

(a)any person with which the UK employer or the relevant employer (as the case may be) is associated, and

(b)if the UK employer or the relevant employer (as the case may be) is a company, the following companies taken together as if they were one company—

(i)the UK employer or the relevant employer (as the case may be), and

(ii)all the companies with which the UK employer or the relevant employer (as the case may be) is associated.

(11)The Treasury may by regulations amend this section so as to add to, reduce or modify the cases in which the UK employment and the relevant employment are to be assumed to be related to each other.

(12)A statutory instrument containing regulations under subsection (11) may not be made unless a draft has been laid before, and approved by a resolution of, the House of Commons.

(13)Condition 4 is that X% is less than Y%.

(14)“X%” is given by the following formula—

See section 24B for the definitions of “C” and “I”.

(15)“Y%” is 65% of the additional rate for the relevant tax year.

(16)The Treasury may by regulations amend this section so as to amend the definition of “Y%”.

(17)Condition 5 is that—

(a)were the duties of the relevant employment to be duties of the UK employment instead, all or substantially all of them could not lawfully be performed in the relevant territory (whether on the meeting of any condition or otherwise) by virtue of any regulatory requirements imposed by or under the law of that territory, and

(b)were the UK duties of the UK employment to be duties of the relevant employment instead, all or substantially all of them could not lawfully be performed in the part of the United Kingdom in which they are performed (whether on the meeting of any condition or otherwise) by virtue of any regulatory requirements imposed by or under the law of that part of the United Kingdom.

(18)In subsection (17)—

  • the relevant territory” means the territory in which the duties of the relevant employment are performed, and

  • UK duties” means duties performed in the United Kingdom.

24BDefinitions of “C” and “I” for the purposes of section 24A(14)

(1)This section applies for the purposes of section 24A(14).

(2)“C” is the total amount of credit which would be allowed under section 18(2) of TIOPA 2010 (double taxation relief by way of credit) against income tax in respect of all the employment income falling within section 24A(5)(a) to (d) were none of that income to be, as relevant—

(a)“chargeable overseas earnings”,

(b)“foreign”,

(c)“chargeable foreign securities income”, or

(d)income to which section 554Z9(2) applies.

(3)For this purpose, assume—

(a)that all relief is claimed within the applicable time limit given by section 19 of TIOPA 2010, and

(b)that all reasonable steps are taken to minimise any amounts of tax payable as mentioned in section 33 of that Act.

(4)“I” is the total amount of all the employment income falling within section 24A(5)(a) to (d).

4(1)Section 41C (taxable specific income from employment-related securities etc: foreign securities income) is amended as follows.E+W+S+N.I.

(2)After subsection (4) insert—

(4A)But subsection (4) does not apply to a tax year if section 24A applies in relation to the employment for the tax year.

(3)After subsection (8) insert—

(9)If subsection (4) does not apply to a tax year by virtue of subsection (4A), it is to be assumed for the purposes of section 41E that it is just and reasonable for none of the securities income treated as accruing in the tax year to be “foreign”.

5In section 554Z9 (employment income provided through third parties: remittance basis) after subsection (1) insert—E+W+S+N.I.

(1A)But subsection (2) does not apply if section 24A applies in relation to A's employment with B for the relevant tax year.

6In section 717 (orders and regulations) in subsection (4) after “under” insert “ section 24A(11) (assumptions about related employments), ”.E+W+S+N.I.

7(1)Section 23(1A) of ITEPA 2003 (as inserted by paragraph 2) has effect in relation to general earnings which are general earnings from an employment for the tax year 2014-15 or any subsequent tax year.E+W+S+N.I.

(2)Section 41C(4A) of ITEPA 2003 (as inserted by paragraph 4(2)) has effect for cases where the tax year in question is the tax year 2014-15 or any subsequent tax year.

(3)Section 41H(5) of ITEPA 2003 (as inserted by Part 1 of Schedule 9 to this Act) has effect for cases where the tax year in question is the tax year 2014-15 or any subsequent tax year.

(4)Section 554Z9(1A) of ITEPA 2003 (as inserted by paragraph 5) has effect for cases where the relevant tax year (see section 554Z9(1)(a) of that Act) is the tax year 2014-15 or any subsequent tax year.

Section 36

SCHEDULE 4E+W+S+N.I.Tax relief for theatrical production

PART 1E+W+S+N.I.Amendments of CTA 2009

1Before Part 16 of CTA 2009 insert—E+W+S+N.I.

PART 15CE+W+S+N.I.Theatrical Productions

IntroductionE+W+S+N.I.
1217FOverview

(1)This Part contains provision about tax relief for production companies in respect of their theatrical productions.

(2)Sections 1217FA to 1217FC define “production company” and “theatrical production”.

(3)Section 1217G sets out the conditions a production company must meet to qualify for relief in relation to its theatrical production.

(4)Section 1217H provides for relief by way of additional deductions in respect of certain expenditure (and section 1217J is about the amount of the additional deduction).

(5)This Part also contains provision—

(a)for a company that claims relief to be treated as carrying on a separate trade relating to the theatrical production (see section 1217H(3)), and

(b)about the calculation of the profits and losses of that trade (see sections 1217I to 1217IF).

(6)Sections 1217K to 1217KC—

(a)provide for relief by way of payments (called “theatre tax credits”) to be made on the company's surrender of certain losses of that trade, and

(b)set out an upper limit on relief, in connection with State aid legislation.

(7)Sections 1217LA and 1217LB are about certain cases involving tax avoidance arrangements or arrangements entered into otherwise than for genuine commercial reasons.

(8)Sections 1217M to 1217MC contain provision about the use of losses of the separate trade (including provision about relief for terminal losses).

(9)Sections 1217N and 1217NA are concerned with the provisional nature of relief given for periods preceding the period in which the company ceases to carry on the separate theatrical trade.

1217FA“Theatrical production”

(1)In this Part “theatrical production” means a dramatic production or a ballet (and any ballet is therefore a theatrical production, whether or not it is also a dramatic production).

But see section 1217FB.

(2)Dramatic production” means a production of a play, opera, musical, or other dramatic piece (whether or not involving improvisation) in relation to which the following conditions are met—

(a)the actors, singers, dancers or other performers are to give their performances wholly or mainly through the playing of roles,

(b)each performance in the proposed run of performances is to be live, and

(c)the presentation of live performances is the main object, or one of the main objects, of the company's activities in relation to the production.

(3)“Dramatic piece” may also include, for example, a show that is to be performed by a circus.

(4)For the purposes of this section a performance is “live” if it is to an audience before whom the performers are actually present.

1217FBProductions not regarded as theatrical

(1)A dramatic production or ballet is not regarded as a theatrical production if—

(a)the main purpose, or one of the main purposes, for which it is made is to advertise or promote any goods or services,

(b)the performances are to consist of or include a competition or contest,

(c)a wild animal is to be used in any performance,

(d)the production is of a sexual nature (see subsection (3)), or

(e)the making of a relevant recording is the main object, or one of the main objects, of the company's activities in relation to the production.

(2)For the purposes of subsection (1)(c) an animal is used in a performance if the animal performs, or is shown, in the course of the performance.

(3)A production is of a sexual nature for the purposes of subsection (1)(d) if the performances are to include any content the nature of which is such that, ignoring financial gain, it would be reasonable to assume the content to be included solely or principally for the purpose of sexually stimulating any member of the audience (whether by verbal or other means).

(4)Relevant recording” means a recording of a performance—

(a)as a film (or part of a film) for exhibition to the paying general public at the commercial cinema, or

(b)for broadcast to the general public.

(5)In this section—

  • broadcast” means broadcast by any means (including television, radio or the internet);

  • film” has the same meaning as in Part 15 (see section 1181);

  • wild animal” means an animal of a kind which is not commonly domesticated in the British Islands (and in this definition “animal” has the meaning given by section 1(1) of the Animal Welfare Act 2006).

1217FC“Production company”

(1)A company is the production company in relation to a theatrical production if the company (acting otherwise than in partnership)—

(a)is responsible for producing, running and closing the theatrical production,

(b)is actively engaged in decision-making during the production, running and closing phases,

(c)makes an effective creative, technical and artistic contribution to the production, and

(d)directly negotiates for, contracts for and pays for rights, goods and services in relation to the production.

(2)No more than one company can be the production company in relation to a theatrical production.

(3)If more than one company meets the conditions in subsection (1) in relation to a theatrical production, the company that is most directly engaged in the activities mentioned in subsection (1) is the production company.

(4)If there is no company meeting the conditions in subsection (1), there is no production company in relation to the production.

Companies qualifying for reliefE+W+S+N.I.
1217GHow a company qualifies for relief

(1)A company qualifies for relief in relation to a theatrical production if—

(a)it is the production company in relation to the production, and

(b)the commercial purpose condition (see section 1217GA) and the EEA expenditure condition (see section 1217GB) are met.

(2)There is further provision relating to subsection (1) in section 1217LA (tax avoidance arrangements).

1217GAThe commercial purpose condition

(1)The “commercial purpose condition” is that at the beginning of the production phase the company intends that all, or a high proportion of, the live performances that it proposes to run will be—

(a)to paying members of the general public, or

(b)provided for educational purposes.

(2)The reference in subsection (1) to “live performances” is to be read in accordance with section 1217FA(4).

(3)A performance is not regarded as provided for educational purposes if the production company is, or is associated with, a person who—

(a)has responsibility for the beneficiaries, or

(b)is otherwise connected with the beneficiaries (for instance, by being their employer).

(4)For the purposes of subsection (3), a production company is associated with a person (“P”) if—

(a)P controls the production company, or

(b)P is a company which is controlled by the production company or by a person who also controls the production company.

(5)In this section—

  • the beneficiaries” means persons for whose benefit the performance will or may be provided;

  • control” has the same meaning as in Part 10 of CTA 2010 (see section 450 of that Act).

1217GBThe EEA expenditure condition

(1)The “EEA expenditure condition” is that at least 25% of the core expenditure on the theatrical production incurred by the company is EEA expenditure.

(2)In this Part “EEA expenditure” means expenditure on goods or services that are provided from within the European Economic Area.

(3)Any apportionment of expenditure as between EEA and non-EEA expenditure for the purposes of this Part is to be made on a just and reasonable basis.

(4)The Treasury may by regulations—

(a)amend the percentage specified in subsection (1);

(b)amend subsection (2).

(5)See also sections 1217N and 1217NA (which are about the giving of relief provisionally on the basis that the EEA expenditure condition will be met).

1217GC“Core expenditure”

(1)In this Part “core expenditure”, in relation to a theatrical production, means expenditure on the activities involved in—

(a)producing the production, and

(b)closing the production.

(2)The reference in subsection (1)(a) to “expenditure on the activities involved in producing the production”—

(a)does not include expenditure on any matters not directly involved in producing the production (for instance, financing, marketing, legal services or storage);

(b)does not include expenditure on the ordinary running of the production; but expenditure incurred on or after the date of the first performance of the production to the paying general public may fall within subsection (1)(a) (for instance, if it is incurred in connection with a substantial recasting or a substantial redesign of the set).

Claim for additional deductionE+W+S+N.I.
1217HClaim for additional deduction

(1)A company which qualifies for relief in relation to a theatrical production may claim an additional deduction in relation to the production.

(2)A claim under subsection (1) is made with respect to an accounting period.

(See Schedule 18 to FA 1998, and in particular Part 9D, for provision about the procedure for making claims.)

(3)Where a company has made a claim under subsection (1)—

(a)the company's activities in relation to the theatrical production are treated for corporation tax purposes as a trade separate from any other activities of the company (including activities in relation to any other theatrical production), and

(b)the company is entitled to make an additional deduction, in accordance with section 1217J, in calculating the profit or loss of the separate trade for the accounting period concerned.

(4)The company is treated as beginning to carry on the separate trade—

(a)when the production phase begins, or

(b)if earlier, at the time of the first receipt by the company of any income from the theatrical production.

(5)Where the company tax return in which a claim under subsection (1) is made is for an accounting period later than that in which the company begins to carry on the separate trade, the company must make any amendments of company tax returns for earlier periods that may be necessary.

(6)Any amendment or assessment necessary to give effect to subsection (5) may be made despite any limitation on the time within which an amendment or assessment may normally be made.

(7)If the company ceases at any time to meet the conditions in section 1217FC(1) (meaning of “production company”) in relation to the production, it is treated as ceasing to carry on the separate trade at that time.

The separate theatrical tradeE+W+S+N.I.
1217IIntroduction to sections 1217IA to 1217IF

Where a company is treated under section 1217H(3)(a) as carrying on a separate trade (“the separate theatrical trade”), the profits or losses of the trade are calculated for corporation tax purposes in accordance with sections 1217IA to 1217IF.

1217IACalculation of profits or losses of separate theatrical trade

(1)For the first period of account during which the separate theatrical trade is carried on, the following are brought into account—

(a)as a debit, the costs of the theatrical production incurred (and represented in work done) to date;

(b)as a credit, the proportion of the estimated total income from the production treated as earned at the end of that period.

(2)For subsequent periods of account the following are brought into account—

(a)as a debit, the difference between the amount (“C”) of the costs of the theatrical production incurred (and represented in work done) to date and the amount corresponding to C for the previous period, and

(b)as a credit, the difference between the proportion (“PI”) of the estimated total income from the production treated as earned at the end of that period and the amount corresponding to PI for the previous period.

(3)The proportion of the estimated total income treated as earned at the end of a period of account is—

where—

C is the total to date of costs incurred (and represented in work done);

T is the estimated total cost of the theatrical production;

I is the estimated total income from the theatrical production.

1217IBIncome from the production

(1)References in this Part to income from a theatrical production are to any receipts by the company in connection with the making or exploitation of the production.

(2)This includes—

(a)receipts from the sale of tickets or of rights in the theatrical production;

(b)royalties or other payments for use of aspects of the theatrical production (for example, characters or music);

(c)payments for rights to produce merchandise;

(d)receipts by the company by way of a profit share agreement.

(3)Receipts that (apart from this subsection) would be regarded as being of a capital nature are treated as being of a revenue nature.

1217ICCosts of the production

(1)References in this Part to the costs of a theatrical production are to expenditure incurred by the company on—

(a)the activities involved in developing, producing, running and closing the production, or

(b)activities with a view to exploiting the production.

(2)This is subject to any provision of the Corporation Tax Acts prohibiting the making of a deduction, or restricting the extent to which a deduction is allowed, in calculating the profits of a trade.

(3)Expenditure which, apart from this subsection, would be regarded as being of a capital nature only because it is incurred on the creation of an asset (i.e. the theatrical production) is treated as being of a revenue nature.

1217IDWhen costs are taken to be incurred

(1)For the purposes of this Part, the costs that have been incurred on a theatrical production at a given time—

(a)are those costs of the production that are represented in the state of completion of the work in progress, but

(b)do not include any amount that has not been paid unless it is the subject of an unconditional obligation to pay.

(2)In accordance with subsection (1)(a)—

(a)payments in advance of work to be done are ignored until the work has been carried out;

(b)deferred payments are recognised to the extent that the goods or services in question are represented in the state of completion of the work in progress (but this is subject to subsection (1)(b)).

(3)Where an obligation to pay an amount is linked to income being earned from the theatrical production, the obligation is not treated as having become unconditional unless an appropriate amount of income is or has been brought into account under section 1217IA.

(4)In determining for the purposes of this Part the amount of costs incurred on a theatrical production at the end of a period of account, any amount that has not been paid 4 months after the end of that period is to be ignored.

1217IEPre-trading expenditure

(1)This section applies if, before the company begins to carry on the separate theatrical trade, it incurs expenditure on activities falling within section 1217IC(1)(a).

(2)The expenditure may be treated as expenditure of the separate theatrical trade and as if incurred immediately after the company begins to carry on that trade.

(3)If expenditure so treated has previously been taken into account for other tax purposes, the company must amend any relevant company tax return accordingly.

(4)Any amendment or assessment necessary to give effect to subsection (3) may be made despite any limitation on the time within which an amendment or assessment may normally be made.

1217IFEstimates

Estimates for the purposes of section 1217IA must be made as at the balance sheet date for each period of account, on a just and reasonable basis taking into consideration all relevant circumstances.

Amount of additional deductionE+W+S+N.I.
1217JAmount of additional deduction

(1)The amount of an additional deduction to which a company is entitled as a result of a claim under section 1217H is calculated as follows.

(2)For the first period of account during which the separate theatrical trade is carried on, the amount of the additional deduction is E, where—

E is—

(a)

so much of the qualifying expenditure incurred to date as is EEA expenditure, or

(b)

if less, 80% of the total amount of qualifying expenditure incurred to date.

(3)For any period of account after the first, the amount of the additional deduction is—

where—

E is—

(a)

so much of the qualifying expenditure incurred to date as is EEA expenditure, or

(b)

if less, 80% of the total amount of qualifying expenditure incurred to date, and

P is the total amount of the additional deductions given for previous periods.

(4)The Treasury may by regulations amend the percentage specified in subsection (2) or (3).

1217JA“Qualifying expenditure”

(1)In this Part “qualifying expenditure”, in relation to a theatrical production, means core expenditure (see section 1217GC) on the theatrical production that—

(a)falls to be taken into account under sections 1217IA to 1217IF in calculating the profit or loss of the separate theatrical trade for tax purposes, and

(b)is not excluded by subsection (2).

(2)The following expenditure is excluded—

(a)expenditure in respect of which the company is entitled to an R&D expenditure credit under Chapter 6A of Part 3;

(b)expenditure in respect of which the company has obtained relief under Part 13 (additional relief for expenditure on research and development).

Theatre tax creditsE+W+S+N.I.
1217KTheatre tax credit claimable if company has surrenderable loss

(1)A company which—

(a)is treated under section 1217H(3) as carrying on a separate trade during the whole or part of an accounting period, and

(b)has a surrenderable loss in that period,

may claim a theatre tax credit for that accounting period.

(2)Section 1217KA sets out how to calculate the amount of any surrenderable loss that the company has in the accounting period.

(3)A company making a claim may surrender the whole or part of its surrenderable loss in the accounting period.

(4)The amount of the theatre tax credit to which a company making a claim is entitled for the accounting period is—

(a)25% of the amount of the loss surrendered if the theatrical production is a touring production, or

(b)20% of the amount of the loss surrendered if the theatrical production is not a touring production.

(5)The company's available loss for the accounting period (see section 1217KA(2)) is reduced by the amount surrendered.

(6)A theatrical production is a “touring production” only if the company intends at the beginning of the production phase—

(a)that it will present performances of the production in 6 or more separate premises, or

(b)that it will present performances of the production in at least two separate premises and that the number of performances will be at least 14.

(7)See Schedule 18 to FA 1998 (in particular, Part 9D) for provision about the procedure for making claims under subsection (1).

1217KAAmount of surrenderable loss

(1)The company's surrenderable loss in the accounting period is—

(a)the company's available loss for the period in the separate theatrical trade (see subsections (2) and (3)), or

(b)if less, the available qualifying expenditure for the period (see subsections (4) and (5)).

(2)The company's available loss for an accounting period is—

where—

L is the amount of the company's loss for the period in the separate theatrical trade, and

RUL is the amount of any relevant unused loss of the company (see subsection (3)).

(3)The “relevant unused loss” of a company is so much of any available loss of the company for the previous accounting period as has not been—

(a)surrendered under section 1217K, or

(b)carried forward under section 45 of CTA 2010 and set against profits of the separate theatrical trade.

(4)For the first period of account during which the separate theatrical trade is carried on, the available qualifying expenditure is the amount that is E for that period for the purposes of section 1217J(2).

(5)For any period of account after the first, the available qualifying expenditure is—

where—

E is the amount that is E for that period for the purposes of section 1217J(3), and

S is the total amount previously surrendered under section 1217K.

(6)If a period of account of the separate theatrical trade does not coincide with an accounting period, any necessary apportionments are to be made by reference to the number of days in the periods concerned.

1217KBPayment in respect of theatre tax credit

(1)If a company—

(a)is entitled to a theatre tax credit for an accounting period, and

(b)makes a claim,

the Commissioners for Her Majesty's Revenue and Customs (“the Commissioners”) must pay the amount of the credit to the company.

(2)An amount payable in respect of—

(a)a theatre tax credit, or

(b)interest on a theatre tax credit under section 826 of ICTA,

may be applied in discharging any liability of the company to pay corporation tax.

To the extent that it is so applied the Commissioners' liability under subsection (1) is discharged.

(3)If the company's company tax return for the accounting period is enquired into by the Commissioners, no payment in respect of a theatre tax credit for that period need be made before the Commissioners' enquiries are completed (see paragraph 32 of Schedule 18 to FA 1998).

In those circumstances the Commissioners may make a payment on a provisional basis of such amount as they consider appropriate.

(4)No payment need be made in respect of a theatre tax credit for an accounting period before the company has paid to the Commissioners any amount that it is required to pay for payment periods ending in that accounting period—

(a)under PAYE regulations,

(b)under section 966 of ITA 2007 (visiting performers), or

(c)in respect of Class 1 national insurance contributions under Part 1 of the Social Security Contributions and Benefits Act 1992 or Part 1 of the Social Security Contributions and Benefits (Northern Ireland) Act 1992.

(5)A payment in respect of a theatre tax credit is not income of the company for any tax purpose.

1217KCLimit on State aid

(1)The total amount of any theatre tax credits payable under section 1217KB in the case of any undertaking is not to exceed 50 million euros per year.

(2)In this section “undertaking” has the same meaning as in the General Block Exemption Regulation.

(3)In this section “the General Block Exemption Regulation” means any regulation that—

(a)is for the time being in force under Article 1 of Council Regulation (EC) No 994/98, and

(b)makes, in relation to aid in favour of culture and heritage conservation, the declaration provided for by that Article.

Anti-avoidance etcE+W+S+N.I.
1217LATax avoidance arrangements

(1)A company does not qualify for relief in relation to a theatrical production if there are any tax avoidance arrangements relating to the production.

(2)Arrangements are “tax avoidance arrangements” if their main purpose, or one of their main purposes, is the obtaining of a tax advantage.

(3)In this section—

  • arrangements” includes any scheme, agreement or understanding, whether or not legally enforceable;

  • tax advantage” has the meaning given by section 1139 of CTA 2010.

1217LBTransactions not entered into for genuine commercial reasons

(1)A transaction is to be ignored for the purpose of determining a relief mentioned in subsection (2) so far as the transaction is attributable to arrangements (other than tax avoidance arrangements) entered into otherwise than for genuine commercial reasons.

(2)The reliefs mentioned in subsection (1) are—

(a)any additional deduction which a company may make under this Part, and

(b)any theatre tax credit to be given to a company.

(3)In this section “arrangements” and “tax avoidance arrangements” have the same meaning as in section 1217LA.

Use of lossesE+W+S+N.I.
1217MApplication of sections 1217MA to 1217MC

(1)Sections 1217MA to 1217MC apply to a company that is treated under section 1217H(3) as carrying on a separate trade in relation to a theatrical production.

(2)In those sections—

  • the completion period” means the accounting period in which the company ceases to carry on the separate theatrical trade;

  • loss relief” includes any means by which a loss might be used to reduce the amount in respect of which a company, or any other person, is chargeable to tax.

1217MARestriction on use of losses before completion period

(1)Subsection (2) applies if a loss is made by the company in the separate theatrical trade in an accounting period preceding the completion period.

(2)The loss is not available for loss relief, except to the extent that the loss may be carried forward under section 45 of CTA 2010 to be set against profits of the separate theatrical trade in a subsequent period.

1217MBUse of losses in the completion period

(1)Subsection (2) applies if a loss made in the separate theatrical trade is carried forward under section 45 of CTA 2010 to the completion period.

(2)So much (if any) of the loss as is not attributable to relief under section 1217H (see subsection (4)) may be treated for the purposes of loss relief as if it were a loss made in the completion period.

(3)If a loss is made in the separate theatrical trade in the completion period, the amount of the loss that may be—

(a)deducted from total profits of the same or an earlier period under section 37 of CTA 2010, or

(b)surrendered as group relief under Part 5 of that Act,

is restricted to the amount (if any) that is not attributable to relief under section 1217H.

(4)The amount of a loss in any period that is attributable to relief under section 1217H is found by—

(a)calculating what the amount of the loss would have been if there had been no additional deduction under that section in that or any earlier period, and

(b)deducting that amount from the total amount of the loss.

(5)This section does not apply to loss surrendered, or treated as carried forward, under section 1217MC (terminal losses).

1217MCTerminal losses

(1)This section applies if—

(a)the company ceases to carry on the separate theatrical trade, and

(b)if the company had not ceased to carry on the separate theatrical trade, it could have carried forward an amount under section 45 of CTA 2010 to be set against profits of that trade in a later period (“the terminal loss”).

Below in this section the company is referred to as “company A” and the separate theatrical trade is referred to as “trade 1”.

(2)If company A—

(a)is treated under section 1217H(3) as carrying on a separate theatrical trade in relation to another theatrical production (“trade 2”), and

(b)is carrying on trade 2 when it ceases to carry on trade 1,

company A may (on making a claim) elect to transfer the terminal loss (or a part of it) to trade 2.

(3)If company A makes an election under subsection (2), the terminal loss (or part of the loss) is treated as if it were a loss brought forward under section 45 of CTA 2010 to be set against the profits of trade 2 of the first accounting period beginning after the cessation and so on.

(4)Subsection (5) applies if—

(a)another company (“company B”) is treated under section 1217H(3) as carrying on a separate theatrical trade (“company B's trade”) in relation to another theatrical production,

(b)company B is carrying on that trade when company A ceases to carry on trade 1, and

(c)company B is in the same group as company A for the purposes of Part 5 of CTA 2010 (group relief).

(5)Company A may surrender the loss (or part of it) to company B.

(6)On the making of a claim by company B the amount surrendered is treated as if it were a loss brought forward by company B under section 45 of CTA 2010 to be set against the profits of company B's trade of the first accounting period beginning after the cessation and so on.

(7)The Treasury may by regulations make administrative provision in relation to the surrender of a loss under subsection (5) and the resulting claim under subsection (6).

(8)Administrative provision” means provision corresponding, subject to such adaptations or other modifications as appear to the Treasury to be appropriate, to that made by Part 8 of Schedule 18 to FA 1998 (company tax returns: claims for group relief).

Provisional entitlement to reliefE+W+S+N.I.
1217NProvisional entitlement to relief

(1)In relation to a company that has made a claim under section 1217H in relation to a theatrical production, “interim accounting period” means any accounting period that—

(a)is one in which the company carries on the separate theatrical trade, and

(b)precedes the accounting period in which it ceases to do so.

(2)A company is not entitled to relief under any of the relieving provisions for an interim accounting period unless—

(a)its company tax return for the period states the amount of planned core expenditure on the theatrical production that is EEA expenditure, and

(b)that amount is such as to indicate that the EEA expenditure condition (see section 1217GB) will be met in relation to the production.

If those requirements are met, the company is provisionally treated in relation to that period as if the EEA expenditure condition were met.

(3)In this section “the relieving provisions” means—

(a)section 1217H (additional deduction),

(b)section 1217K (theatre tax credits), and

(c)section 1217MC (terminal losses).

1217NAClawback of provisional relief

(1)If a statement is made under section 1217N(2) but it subsequently appears that the EEA expenditure condition will not be met on the company's ceasing to carry on the separate theatrical trade, the company—

(a)is not entitled to relief under any of the relieving provisions for any period for which its entitlement depended on such a statement, and

(b)must amend its company tax return for any such period accordingly.

(2)When a company which has made a claim under section 1217H ceases to carry on the separate theatrical trade, the company's company tax return for the period in which that cessation occurs must—

(a)state that the company has ceased to carry on the separate theatrical trade, and

(b)be accompanied by a final statement of the amount of the core expenditure on the theatrical production that is EEA expenditure.

(3)If that statement shows that the EEA expenditure condition is not met—

(a)the company is not entitled to relief under any of the relieving provisions for any period,

(b)the company is treated for corporation tax purposes as if section 1217H(3)(a) (treatment as a separate trade) did not apply in relation to the theatrical production for any period, and

(c)accordingly, sections 1217MA and 1217MB (provisions about use of losses) do not apply in relation to the theatrical production for any period.

(4)Where subsection (3) applies, the company must amend its company tax return for any period in which (or in any part of which) it was treated as carrying on a separate trade relating to the theatrical production.

(5)Any amendment or assessment necessary to give effect to this section may be made despite any limitation on the time within which an amendment or assessment may normally be made.

(6)In this section “the relieving provisions” has the same meaning as in section 1217N.

InterpretationE+W+S+N.I.
1217OActivities involved in developing, producing, running or closing a production

The Treasury may by regulations amend section 1217GC (core expenditure) or 1217IC (costs of production) for the purpose of providing that activities of a specified description are, or are not, to be regarded as activities involved in developing or (as the case may be) producing, running or closing—

(a)a theatrical production, or

(b)a theatrical production of a specified description.

1217OA“Company tax return”

In this Part “company tax return” has the same meaning as in Schedule 18 to FA 1998 (see paragraph 3(1) of that Schedule).

1217OBIndex

In this Part—

  • commercial purpose condition” has the meaning given by section 1217GA;

  • company tax return” has the meaning given by section 1217OA;

  • core expenditure” has the meaning given by section 1217GC;

  • costs”, in relation to a theatrical production, has the meaning given by section 1217IC;

  • EEA expenditure” has the meaning given by section 1217GB;

  • EEA expenditure condition” has the meaning given by section 1217GB;

  • references to “income from a theatrical production” are to be read in accordance with section 1217IB;

  • production company” has the meaning given by section 1217FC;

  • qualifying expenditure” has the meaning given by section 1217JA;

  • references to the “separate theatrical trade” are to be read in accordance with section 1217I;

  • theatrical production” has the meaning given by section 1217FA (read with section 1217FB).

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Commencement Information

I1Sch. 4 para. 1 partly in force at Royal Assent; sch. 4 para. 1 in force at Royal Assent for specified purposes, see Sch. 4 para. 16

I2Sch. 4 para. 1 in force at 22.8.2014 for the purposes of the amendments made by that paragraph in so far as not already in force by S.I. 2014/2228, art. 2

PART 2E+W+S+N.I.Consequential amendments

ICTAE+W+S+N.I.

2(1)Section 826 of the Income and Corporation Taxes Act 1988 (interest on tax overpaid) is amended as follows.E+W+S+N.I.

(2)In subsection (1), after paragraph (fb) insert—

(fc)a payment of theatre tax credit falls to be made to a company; or.

(3)In subsection (3C), for “or video game tax credit” substitute “ , video game tax credit or theatre tax credit ”.

(4)In subsection (8A)—

(a)in paragraph (a) for “or (f)” substitute “ (f), (fa), (fb) or (fc) ”, and

(b)in paragraph (b)(ii), after “video game tax credit” insert “ or theatre tax credit ”.

(5)In subsection (8BA), after “video game tax credit” (in both places) insert “ or theatre tax credit ”.

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Commencement Information

I3Sch. 4 para. 2 in force at 22.8.2014 for the purposes of the amendments made by that paragraph by S.I. 2014/2228, art. 2

FA 1998E+W+S+N.I.

Prospective

3Schedule 18 to FA 1998 (company tax returns, assessments and related matters) is amended as follows.E+W+S+N.I.

4In paragraph 10 (other claims and elections to be included in return), in sub-paragraph (4)—E+W+S+N.I.

(a)before “claims” insert “ certain ”;

(b)for “or 15B” substitute “ , 15B or 15C ”.

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Commencement Information

I4Sch. 4 para. 4 in force at 22.8.2014 for the purposes of the amendments made by that paragraph by S.I. 2014/2228, art. 2

5(1)Paragraph 52 (recovery of excessive overpayments etc) is amended as follows.E+W+S+N.I.

(2)In sub-paragraph (2), after paragraph (bf) insert—

(bg)theatre tax credit under Part 15C of that Act,.

(3)In sub-paragraph (5)—

(a)after paragraph (ah) insert—

(ai)an amount of theatre tax credit paid to a company for an accounting period,;

(b)in the words after paragraph (b), after “(ah)” insert “ , (ai) ”.

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Commencement Information

I5Sch. 4 para. 5 in force at 22.8.2014 for the purposes of the amendments made by that paragraph by S.I. 2014/2228, art. 2

6(1)Part 9D (certain claims for tax relief) is amended as follows.E+W+S+N.I.

(2)In paragraph 83S (introduction), after paragraph (c) insert—

(d)an additional deduction under Part 15C of CTA 2009,

(e)a theatre tax credit under that Part of that Act.

(3)The heading of that Part becomes Claims for tax relief under Part 15, 15A, 15B or 15C of the Corporation Tax Act 2009.

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Commencement Information

I6Sch. 4 para. 6 in force at 22.8.2014 for the purposes of the amendments made by that paragraph by S.I. 2014/2228, art. 2

CAA 2001E+W+S+N.I.

7In Schedule A1 to CAA 2001 (first-year tax credits), in paragraph 11(4), omit the “and” at the end of paragraph (d) and after paragraph (e) insert , and E+W+S+N.I.

(f)section 1217K of that Act (theatre tax credits).

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Commencement Information

I7Sch. 4 para. 7 in force at 22.8.2014 for the purposes of the amendments made by that paragraph by S.I. 2014/2228, art. 2

FA 2007E+W+S+N.I.

8In Schedule 24 to FA 2007 (penalties for errors), in paragraph 28(fa) (meaning of “corporation tax credit”), omit the “or” at the end of sub-paragraph (ivb) and after that sub-paragraph insert—E+W+S+N.I.

(ivc)a theatre tax credit under section 1217K of that Act, or.

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Commencement Information

I8Sch. 4 para. 8 in force at 22.8.2014 for the purposes of the amendments made by that paragraph by S.I. 2014/2228, art. 2

CTA 2009E+W+S+N.I.

9In section 104BA of CTA 2009 (R&D expenditure credits: restrictions on claiming other tax reliefs), after subsection (3) insert—E+W+S+N.I.

(4)For provision prohibiting an R&D expenditure credit being given under this Chapter and relief being given under section 1217H or 1217K (theatrical productions: additional deduction or theatre tax credit), see section 1217JA(2).

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Commencement Information

I9Sch. 4 para. 9 in force at 22.8.2014 for the purposes of the amendments made by that paragraph by S.I. 2014/2228, art. 2

10In Part 8 of CTA 2009 (intangible fixed assets), in Chapter 10 (excluded assets), before section 809 insert—E+W+S+N.I.

808CAssets representing expenditure incurred in course of separate theatrical trade

(1)This Part does not apply to an intangible fixed asset held by a theatrical production company so far as the asset represents expenditure on a theatrical production that is treated under Part 15C as expenditure of a separate trade (see particularly sections 1217H and 1217IE).

(2)In this section—

  • theatrical production” has the same meaning as in Part 15C (see section 1217FA);

  • theatrical production company” means a company which, for the purposes of that Part, is the production company in relation to a theatrical production (see section 1217FC).

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Commencement Information

I10Sch. 4 para. 10 in force at 22.8.2014 for the purposes of the amendments made by that paragraph by S.I. 2014/2228, art. 2

11In section 1040ZA of CTA 2009 (additional relief for expenditure on research and development), after subsection (3) insert—E+W+S+N.I.

(4)For provision prohibiting relief being given under this Part and under section 1217H or 1217K (theatrical productions: additional deduction or theatre tax credit), see section 1217JA(2).

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Commencement Information

I11Sch. 4 para. 11 in force at 22.8.2014 for the purposes of the amendments made by that paragraph by S.I. 2014/2228, art. 2

12In section 1310 of CTA 2009 (orders and regulations), in subsection (4), after paragraph (ej) insert—E+W+S+N.I.

(ek)section 1217GB(4) (EEA expenditure condition),

(el)section 1217J(4) (amount of additional deduction),

(em)section 1217O (activities involved in developing, producing, running or closing a production),.

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Commencement Information

I12Sch. 4 para. 12 in force at 22.8.2014 for the purposes of the amendments made by that paragraph by S.I. 2014/2228, art. 2

13In Schedule 4 to CTA 2009 (index of defined expressions) at the appropriate place insert—E+W+S+N.I.

commercial purpose condition (in Part 15C)section 1217OB;
company tax return (in Part 15C)section 1217OA;
core expenditure (in Part 15C)section 1217GC;
costs of a theatrical production (in Part 15C)section 1217IC;
EEA expenditure (in Part 15C)section 1217GB;
EEA expenditure condition (in Part 15C)section 1217OB;
income from a theatrical production (in Part 15C)section 1217IB;
production company (in Part 15C)section 1217FC;
qualifying expenditure (in Part 15C)section 1217JA;
the separate theatrical trade (in Part 15C)section 1217OB;
theatrical production (in Part 15C)section 1217FA.
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Commencement Information

I13Sch. 4 para. 13 in force at 22.8.2014 for the purposes of the amendments made by that paragraph by S.I. 2014/2228, art. 2

FA 2009E+W+S+N.I.

14In Schedule 54A to FA 2009 (which is prospectively inserted by F(No. 3)A 2010 and contains provision about the recovery of certain amounts of interest paid by HMRC), in paragraph 2—E+W+S+N.I.

(a)in sub-paragraph (2), omit the “or” at the end of paragraph (f) and after paragraph (g) insert , or

(h)a payment of theatre tax credit under section 1217K of CTA 2009 for an accounting period.;

(b)in sub-paragraph (4), for “(e)” substitute “ (h) ”.

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Commencement Information

I14Sch. 4 para. 14 in force at 22.8.2014 for the purposes of the amendments made by that paragraph by S.I. 2014/2228, art. 2

Prospective

CTA 2010E+W+S+N.I.

15(1)Section 357CG of CTA 2010 (profits arising from the exploitation of patents etc: adjustments in calculating profits of trade) is amended as follows.E+W+S+N.I.

(2)In subsection (3), omit the “and” at the end of paragraph (c) and after paragraph (d) insert , and

(e)the amount of any additional deduction for the accounting period obtained by the company under Part 15C of CTA 2009 in respect of qualifying expenditure on a theatrical production.

(3)In subsection (6)—

(a)in the definition of “qualifying expenditure”, omit the “and” at the end of paragraph (a) and after paragraph (b) insert , and

(c)in relation to a company that is the production company (as defined in section 1217FC of that Act) in relation to a theatrical production, has the same meaning as in Part 15C of that Act,;

(b)omit the “and” at the end of the definition of “television production company” and after that definition insert—

theatrical production” has the same meaning as in Part 15C of CTA 2009 (see section 1217FA of that Act), and.

Prospective

PART 3E+W+S+N.I.Commencement

16(1)Any power to make regulations conferred on the Treasury by virtue of this Schedule comes into force on the day on which this Act is passed.E+W+S+N.I.

(2)So far as not already brought into force by sub-paragraph (1), the amendments made by this Schedule come into force in accordance with provision contained in an order made by the Treasury.

(3)An order under sub-paragraph (2) may make different provision for different purposes.

17(1)The amendments made by this Schedule have effect in relation to accounting periods beginning on or after 1 September 2014.E+W+S+N.I.

(2)Sub-paragraph (3) applies where a company has an accounting period beginning before 1 September 2014 and ending on or after that date (“the straddling period”).

(3)For the purposes of Part 15C of CTA 2009—

(a)so much of the straddling period as falls before 1 September 2014, and so much of that period as falls on or after that date, are treated as separate accounting periods, and

(b)any amounts brought into account for the purposes of calculating for corporation tax purposes the profits of a trade for the straddling period are apportioned to the two separate accounting periods on such basis as is just and reasonable.

Section 43

SCHEDULE 5E+W+S+N.I.Pension flexibility: further amendments

Temporary extension of period by which commencement lump sum may precede pensionE+W+S+N.I.

1In Schedule 29 to FA 2004 (authorised lump sums under registered pension schemes) after paragraph 1 (conditions for a lump sum to be a pension commencement lump sum) insert—E+W+S+N.I.

1A(1)Paragraph 1(1)(c) is to be omitted when deciding whether a lump sum to which this paragraph applies is a pension commencement lump sum.

(2)This paragraph applies to a lump sum if—

(a)the sum is paid in respect of a money purchase arrangement,

(b)the sum is paid before the member becomes entitled to the sum,

(c)either—

(i)the sum is paid on or after 19 September 2013 but before 6 April 2015, or

(ii)the sum is paid before 19 September 2013, a contract for a lifetime annuity is entered into to provide the pension in connection with which the sum is paid, and on or after 19 March 2014 the contract is cancelled, and

(d)the member becomes entitled to the sum before 6 October 2015.

(3)Where—

(a)a lump sum to which this paragraph applies is a pension commencement lump sum but would not be a pension commencement lump sum if sub-paragraph (1) were omitted, and

(b)the lump sum is paid to the member in connection with a pension under the scheme to which it is expected that the member will become entitled (“the expected pension”),

no lump sum paid to the member out of the expected-pension fund is a pension commencement lump sum; and here “the expected-pension fund” means the sums and assets that from time to time represent the sums and assets that, when the lump sum mentioned in paragraph (a) was paid, were held for the purpose of providing the expected pension.

(4)For the purposes of sub-paragraph (2), if the circumstances are as described in sub-paragraph (2)(c)(ii), the member is treated as not having become entitled to the arranged pension as a result of the cancelled contract having been entered into; and here “the arranged pension” means the pension that would have been provided by that contract had it not been cancelled.

Temporary relaxation to allow transfer of pension rights after lump sum paidE+W+S+N.I.

2(1)In Schedule 29 to FA 2004 after paragraph 1A insert—E+W+S+N.I.

1B(1)When deciding whether a lump sum to which this paragraph applies is a pension commencement lump sum—

(a)paragraph 1(1)(aa) and (c) and (3) are to be omitted,

(b)paragraph 1(4) is to be treated as referring to the actual pension (see sub-paragraph (2)(h) of this paragraph), and

(c)paragraph 2(2) is to be treated as referring to the arrangement under which the member was expected to become entitled to the expected pension (see sub-paragraph (2)(b) of this paragraph).

(2)This paragraph applies to a lump sum if—

(a)the sum is paid in respect of a money purchase arrangement,

(b)the sum is paid to the member in connection with a pension under a registered pension scheme to which it is expected that the member will become entitled (“the expected pension”),

(c)the expected pension is income withdrawal, a lifetime annuity or a scheme pension,

(d)the sum is paid before the member becomes entitled to the expected pension,

(e)either—

(i)the sum is paid on or after 19 September 2013 but before 6 April 2015, or

(ii)the sum is paid before 19 September 2013, a contract for a lifetime annuity is entered into to provide the expected pension, and on or after 19 March 2014 the contract is cancelled,

(f)the sum is not repaid at any time before 6 October 2015,

(g)before the member becomes entitled to the expected pension, there is a recognised transfer of the sums and assets that immediately before the transfer represent the sums and assets that when the sum was paid were held for the purpose of providing the expected pension,

(h)the member becomes entitled before 6 October 2015 to a pension under the scheme to which the recognised transfer is made ( “ the actual pension ”),

(i)the actual pension is income withdrawal, a lifetime annuity or a scheme pension, or some combination of them, and

(j)all of the sums and assets that represent the sums and assets transferred by the recognised transfer are used to provide the actual pension.

(3)If a lump sum to which this paragraph applies is a pension commencement lump sum, any lump sum paid—

(a)to the member,

(b)by the scheme to which the recognised transfer mentioned in sub-paragraph (2)(g) is made or by any other registered pension scheme (including the scheme from which the transfer was made), and

(c)in connection with the member's becoming entitled to the actual pension,

is not a pension commencement lump sum.

(4)For the purposes of sub-paragraph (2), if the circumstances are as described in sub-paragraph (2)(e)(ii), the member is treated as not having become entitled to the expected pension as a result of the cancelled contract having been entered into.

(2)In section 166(2) of FA 2004 (time at which a person becomes entitled to a lump sum)—

(a)before paragraph (a) insert—

(za)in the case of a pension commencement lump sum to which paragraph 1B of Schedule 29 applies (certain sums paid before 6 April 2015), immediately before the person becomes entitled to the actual pension (see paragraph 1B(2)(h) of that Schedule),, and

(b)in paragraph (a) for “of a” substitute “ of any other ”.

Temporary relaxation to allow lump sum to be repaid to pension scheme that paid itE+W+S+N.I.

3In Chapter 3 of Part 4 of FA 2004 (payments by registered pension schemes) after section 185I insert—E+W+S+N.I.

Repayments of lump sumsE+W+S+N.I.

185JEffect of repayment of certain pre-6 April 2015 lump sums

(1)For the purposes of this Part—

(a)a lump sum to which this section applies is treated as never having been paid, and

(b)the payment by which it is repaid is treated as not being a payment.

(2)This section applies to a lump sum if—

(a)the sum is paid by a registered pension scheme to a member of the scheme in respect of a money purchase arrangement,

(b)the sum is paid to the member in connection with a pension under the scheme to which it is expected that the member will become entitled (“the expected pension”),

(c)the expected pension is income withdrawal, a lifetime annuity or a scheme pension,

(d)the sum is paid before the member becomes entitled to the expected pension,

(e)either—

(i)the sum is paid on or after 19 September 2013 but before 6 April 2015, or

(ii)the sum is paid before 19 September 2013, a contract for a lifetime annuity is entered into to provide the expected pension, and on or after 19 March 2014 the contract is cancelled,

(f)before the member becomes entitled to the expected pension, the member repays the sum to the pension scheme that paid it, and

(g)the repayment is made before 6 October 2015.

(3)For the purposes of subsection (2), if the circumstances are as described in subsection (2)(e)(ii), the member is treated as not having become entitled to the expected pension as a result of the cancelled contract having been entered into.

Calculation of “applicable amount” in certain casesE+W+S+N.I.

4In paragraph 3 of Schedule 29 to FA 2004 (pension commencement lump sums: applicable amount) after sub-paragraph (8) insert—E+W+S+N.I.

(8A)Sub-paragraphs (1) to (8) have effect subject to the following—

(a)if—

(i)paragraph 1A or 1B applies to the lump sum,

(ii)the lump sum is paid more than 6 months before the day on which the member becomes entitled to it,

(iii)a contract for a lifetime annuity is entered into to provide the pension in connection with which the lump sum is paid, and

(iv)on or after 19 March 2014 the contract is cancelled,

the applicable amount is one third of the annuity purchase price that would have been given by sub-paragraphs (4) to (5) in the case of that annuity had the contract not been cancelled, and

(b)if—

(i)paragraph 1A or 1B applies to the lump sum,

(ii)the lump sum is paid more than 6 months before the day on which the member becomes entitled to it, and

(iii)paragraph (a) does not apply,

the applicable amount is one third of the sums, plus one third of the then market value of the assets, held at the time the lump sum is paid for the purpose of providing the pension at that time expected to be the pension in connection with which the lump sum is paid.

(8B)For the purposes of sub-paragraph (8A)(a)(ii), the member is treated as not having become entitled to a pension as a result of the cancelled contract having been entered into.

Expected pension commencement lump sums treated as trivial commutation lump sumsE+W+S+N.I.

5(1)In section 166(1) of FA 2004, in the lump sum rule, omit the “or” after paragraph (f), and after paragraph (g) insert , or E+W+S+N.I.

(h)a transitional 2013/14 lump sum.

(2)In Schedule 29 to FA 2004, after paragraph 11 insert—

Transitional 2013/14 lump sum, and its related trivial commutation lump sumE+W+S+N.I.

11A(1)A lump sum is a transitional 2013/14 lump sum for the purposes of this Part if—

(a)the sum (“the earlier sum”) is paid to the member in connection with a pension under a registered pension scheme to which it is expected that the member will become entitled (“the expected pension”),

(b)the earlier sum is paid before the member becomes entitled to the expected pension,

(c)either—

(i)the earlier sum is paid on or after 19 September 2013 but before 27 March 2014, or

(ii)the earlier sum is paid before 19 September 2013, a contract for a lifetime annuity is entered into to provide the expected pension, and on or after 19 March 2014 the contract is cancelled,

(d)all of the sums and assets for the time being representing the sums and assets that when the earlier sum was paid were held for the purpose of providing the expected pension are, before the member becomes entitled to the expected pension, used in paying a further lump sum to the member ( “ the further sum ”),

(e)the further sum is paid on or after 6 July 2014 but before 6 April 2015, and

(f)the further sum is a trivial commutation lump sum (see sub-paragraph (2)).

(2)Sub-paragraph (4) applies when deciding under paragraph 7 whether the further sum is a trivial commutation lump sum in a case where the earlier sum is paid before the nominated date (see paragraph 7(3) for the meaning of “the nominated date”).

(3)If the earlier sum is a transitional 2013/14 lump sum, and the earlier sum and the further sum are not the only lump sums paid under registered pension schemes to the member, sub-paragraph (4) applies when deciding under paragraph 7 whether any other lump sum paid under a registered pension scheme to the member is a trivial commutation lump sum.

(4)If this sub-paragraph applies, the payment of the earlier sum is to be treated for the purposes of paragraph 8(1)(b) as a benefit crystallisation event—

(a)which occurs when the earlier sum is paid, and

(b)on which the amount crystallised is the amount of the earlier sum.

(5)If the earlier sum is a transitional 2013/14 lump sum, and only the sums and assets mentioned in sub-paragraph (1)(d) are used in paying the further sum, section 636B of ITEPA 2003 applies in relation to the further sum with the omission of its subsection (3).

(6)If the earlier sum is a transitional 2013/14 lump sum, and the sums and assets mentioned in sub-paragraph (1)(d) are used together with other sums and assets in paying the further sum—

(a)section 636B of ITEPA 2003 applies in relation to the further sum as if instead of the further sum there were two separate trivial commutation lump sums as follows—

(i)one (“the first part of the further sum”) consisting of so much of the further sum as is attributable to the sums and assets mentioned in sub-paragraph (1)(d), and

(ii)another consisting of the remainder of the further sum,

(b)the first part of the further sum is to be treated for the purposes of section 636B of ITEPA 2003 as having been paid immediately before the remainder of the further sum,

(c)section 636B of ITEPA 2003 applies in relation to the first part of the further sum with the omission of its subsection (3), and

(d)for the purposes of applying section 636B(3) of ITEPA 2003 in relation to the remainder of the further sum, the rights to which the first part of the further sum relates are to be treated as rights that are not uncrystallised rights immediately before the remainder of the further sum is paid.

(7)For the purposes of sub-paragraph (1), if the circumstances are as described in sub-paragraph (1)(c)(ii), the member is treated as not having become entitled to the expected pension as a result of the cancelled contract having been entered into.

(3)In section 636A of ITEPA 2003 (income tax exemption for certain lump sums)—

(a)in subsection (1) after paragraph (c) insert—

(ca)a transitional 2013/14 lump sum,, and

(b)in subsection (6) (definitions) omit the “and”, and after “ “short service refund lump sum”,” insert and

"transitional 2013/14 lump sum",.

(4)In section 280(2) of FA 2004 (index of expressions) at the appropriate place insert—

transitional 2013/14 lump sumparagraph 11A of Schedule 29

Small pot lump sumsE+W+S+N.I.

6(1)In the Registered Pension Schemes (Authorised Payments) Regulations 2009 (S.I. 2009/1171) after regulation 3 insert—E+W+S+N.I.

3A(1)This regulation applies to a lump sum if—

(a)the sum (“the earlier sum”) is paid under a registered pension scheme to a member of the scheme,

(b)the earlier sum is paid to the member in connection with a pension under a registered pension scheme to which it is expected that the member will become entitled (“the expected pension”),

(c)the earlier sum is paid before the member becomes entitled to the expected pension,

(d)either—

(i)the earlier sum is paid on or after 19 September 2013 but before 27 March 2014, or

(ii)the earlier sum is paid before 19 September 2013, a contract for a lifetime annuity is entered into to provide the expected pension, and on or after 19 March 2014 the contract is cancelled,

(e)all of the sums and assets for the time being representing the sums and assets that when the earlier sum was paid were held for the purpose of providing the expected pension are, before the member becomes entitled to the expected pension, used in paying a further lump sum to the member ( “ the further sum ”),

(f)the further sum is paid on or after 6 July 2014 but before 6 April 2015, and

(g)either—

(i)the payment of the further sum is a payment described in regulation 11, 11A or 12, or

(ii)the further sum is a trivial commutation lump sum within paragraph 7A of Schedule 29 and the earlier sum is the pension commencement lump sum in connection with which the further sum is paid.

(2)If this regulation applies to the earlier sum, and the payment of the further sum is a payment described in regulation 11, 11A or 12—

(a)the payment of the earlier sum is a payment of a prescribed description for the purposes of section 164(1)(f), and

(b)section 636A of ITEPA 2003 (exemption from income tax for certain lump sums) applies in relation to the earlier sum as if the earlier sum were a pension commencement lump sum.

(3)When deciding for the purposes of this regulation whether the further sum is a trivial commutation lump sum within paragraph 7A of Schedule 29, sub-paragraph (2)(c) of that paragraph is to be omitted.

(4)If this regulation applies to the earlier sum, and only the sums and assets mentioned in paragraph (1)(e) are used in paying the further sum, section 636B of ITEPA 2003 applies in relation to the further sum with the omission of its subsection (3).

(5)If this regulation applies to the earlier sum, and the sums and assets mentioned in paragraph (1)(e) are used together with other sums and assets in paying the further sum—

(a)section 636B of ITEPA 2003 applies in relation to the further sum as if instead of the further sum there were two separate trivial commutation lump sums as follows—

(i)one (“the first part of the further sum”) consisting of so much of the further sum as is attributable to the sums and assets mentioned in paragraph (1)(e), and

(ii)another consisting of the remainder of the further sum,

(b)the first part of the further sum is to be treated for the purposes of section 636B of ITEPA 2003 as having been paid immediately before the remainder of the further sum,

(c)section 636B of ITEPA 2003 applies in relation to the first part of the further sum with the omission of its subsection (3), and

(d)for the purposes of applying section 636B(3) of ITEPA 2003 in relation to the remainder of the further sum, the rights to which the first part of the further sum relates are to be treated as rights that are not uncrystallised rights immediately before the remainder of the further sum is paid.

(6)For the purposes of paragraph (1), if the circumstances are as described in paragraph (1)(d)(ii), the member is treated as not having become entitled to the expected pension as a result of the cancelled contract having been entered into.

(2)The amendment made by sub-paragraph (1) is to be treated as having been made by the Commissioners for Her Majesty's Revenue and Customs under the powers to make regulations conferred by section 164(1)(f) and (2) of FA 2004.

Preservation of protected pension age following certain transfers of pension rightsE+W+S+N.I.

7(1)In paragraph 22 of Schedule 36 to FA 2004 (protection of rights to take benefit before normal minimum pension age) after sub-paragraph (6) insert—E+W+S+N.I.

(6A)A transfer is also a block transfer if—

(a)it involves the transfer in a single transaction of all the sums and assets held for the purposes of, or representing accrued rights under, the arrangements under the pension scheme from which the transfer is made which relate to the member,

(b)the transfer takes place—

(i)on or after 19 March 2014, and

(ii)before 6 April 2015, and

(c)the date mentioned in sub-paragraph (7)(a) is before 6 October 2015.

(2)In paragraph 23(6) of Schedule 36 to FA 2004 (meaning of “block transfer”) after “22(6)” insert “ and (6A), but for this purpose paragraph 22(6A)(c) is to be read as if its reference to paragraph 22(7)(a) were a reference to sub-paragraph (7) of this paragraph ”.

Operation of enhanced protection of pre-6 April 2006 rights to take lump sumsE+W+S+N.I.

8In paragraph 29 of Schedule 36 to FA 2004 (modifications of paragraph 3 of Schedule 29 to FA 2004 for cases where there is enhanced protection) after sub-paragraph (3) insert—E+W+S+N.I.

(4)Paragraph 3 applies as if in sub-paragraph (8A)(a) for “is one third of” there were substituted “is—

where VULSR, VUR and LS have the same meaning as in sub-paragraph (1), and CAPP is”.

(5)Paragraph 3 applies as if in sub-paragraph (8A)(b) for “is one third of the sums, plus one third of” there were substituted “is—

where VULSR, VUR and LS have the same meaning as in sub-paragraph (1), and EP is the total of the sums, and”.

Protected lump sum entitlement following certain transfers of pension rightsE+W+S+N.I.

9In paragraph 31(8) of Schedule 36 to FA 2004 (“block transfer” has meaning given by paragraph 22(6) of Schedule 36 to FA 2004)—E+W+S+N.I.

(a)after “22(6)” insert “ and (6A) ”, and

(b)at the end insert “ , and reading paragraph 22(6A)(c) as if its reference to paragraph 22(7)(a) were a reference to sub-paragraph (3) of this paragraph. ”

10(1)In paragraph 34(2) of Schedule 36 to FA 2004 (modifications required by paragraph 31 in cases involving protected entitlements to lump sums) the sub-paragraphs treated as substituted in paragraph 2 of Schedule 29 to FA 2004 are amended as follows.E+W+S+N.I.

(2)In the substituted sub-paragraph (7A), in the definition of AC, for “(7AA) and (7B))” substitute “ (7AA) to (7B)) ”.

(3)After the substituted sub-paragraph (7AA) insert—

(7AB)Where paragraph 1A applies to the lump sum, AC is the total of—

(a)the sums held, at the time the lump sum is paid, for the purpose of providing the pension at that time expected to be the pension in connection with which the lump sum is paid, and

(b)the market value at that time of the assets held at that time for that purpose.

(7AC)Where paragraph 1B applies to the lump sum, AC is the total of—

(a)the sums held, at the time the lump sum is paid, for the purpose of providing the expected pension (see paragraph 1B(2)(b)), and

(b)the market value at that time of the assets held at that time for that purpose.

Reporting obligationsE+W+S+N.I.

11(1)In the Registered Pension Schemes (Provision of Information) Regulations 2006 (S.I. 2006/567) after regulation 18 insert—E+W+S+N.I.

Modified operation of these Regulations in the case of certain pre-6 April 2015 lump sumsE+W+S+N.I.

19Lump sums to which paragraph 1B of Schedule 29 applies

(1)Regulations 3 to 18 have effect subject to the following provisions of this regulation.

(2)Paragraphs (3) to (8) apply if—

(a)a lump sum is paid by a registered pension scheme (“the paying scheme”) to a member of the scheme,

(b)paragraph 1B of Schedule 29 applies to the lump sum, and

(c)the member's becoming entitled to the actual pension mentioned in paragraph 1B(2)(h) of Schedule 29 has the effect that—

(i)the member also becomes entitled to the lump sum, and

(ii)the member's becoming entitled to the lump sum is a benefit crystallisation event.

(3)For the purposes of—

(a)reportable event 6,

(b)regulation 3 so far as applying by virtue of that event, and

(c)obligations under regulation 14(1),

the benefit crystallisation event mentioned in paragraph (2)(c)(ii) is treated as occurring—

(i)in respect of the scheme to which the transfer mentioned in paragraph 1B(2)(g) of Schedule 29 was made (“the receiving scheme”) and not in respect of the paying scheme, and

(ii)when the member becomes entitled to the actual pension or, if later, on 5 August 2014.

(4)For the purposes of regulations 15(2)(a) and 17(5)(a)(i) and (7)(a)(i), that benefit crystallisation event is treated as occurring in respect of the receiving scheme and not in respect of the paying scheme.

(5)For the purposes of—

(a)reportable event 7 (but not its definition of “the entitlement amount”),

(b)reportable event 8, and

(c)regulation 3 so far as applying by virtue of either of those events,

the lump sum is treated as having been paid—

(i)by the receiving scheme and not by the paying scheme, and

(ii)when the member becomes entitled to the actual pension or, if later, on 5 August 2014.

(6)For the purposes of reportable event 7 “the entitlement amount” is the total of—

(a)the sums held, at the time the lump sum is actually paid, for the purpose of providing the expected pension mentioned in paragraph 1B(2)(b) of Schedule 29, and

(b)the market value at that time of the assets held at that time for that purpose.

(7)The scheme administrator of the paying scheme is to provide the scheme administrator of the receiving scheme with the following information—

(a)the date the lump sum was paid,

(b)the amount of the lump sum,

(c)the total of—

(i)the sums held, at the time lump sum is paid, for the purpose of providing the expected pension mentioned in paragraph 1B(2)(b) of Schedule 29, and

(ii)the market value at that time of the assets held at that time for that purpose, and

(d)a statement that no further pension commencement lump sum may be paid in connection with that expected pension.

(8)The scheme administrator of the paying scheme is to comply with its obligations under paragraph (7) before—

(a)the end of 30 days beginning with the date of the transfer mentioned in paragraph 1B(2)(g) of Schedule 29, or

(b)if later, the end of 3 September 2014.

Lump sums to which paragraph 1B of Schedule 29 fails to applyE+W+S+N.I.

20(1)Regulations 3 to 18 have effect subject to the following provisions of this regulation.

(2)Paragraph (3) applies if—

(a)a lump sum is paid by a registered pension scheme (“the paying scheme”) to a member of the scheme,

(b)paragraph 1B of Schedule 29 does not apply to the lump sum, but the conditions in paragraph 1B(2)(a) to (g) are met in the case of the lump sum, and

(c)as at the end of 5 October 2015 it is the case that the lump sum is to be taken as having been an unauthorised member payment.

(3)For the purposes of reportable event 1, and regulation 3 so far as applying by virtue of that event, the lump sum is treated as having been paid—

(a)by the receiving scheme and not by the paying scheme, and

(b)on 6 October 2015.

(2)The amendment made by sub-paragraph (1) is to be treated as having been made by the Commissioners for Her Majesty's Revenue and Customs under such of the powers cited in the instrument containing the Regulations as are applicable.

Scheme sanction chargesE+W+S+N.I.

12(1)In section 239(3) of FA 2004 (cases where person other than scheme administrator is liable for a scheme sanction charge)—E+W+S+N.I.

(a)after “But” insert

(a)”, and

(b)at the end insert , and

(b)in the case of a payment of a lump sum to a member where the conditions in paragraphs 1(1)(b) and (d) and 1B(2)(a) to (g) of Schedule 29 are met, the person liable to the scheme sanction charge so far as relating to any part of the lump sum within the permitted maximum is the scheme administrator of the registered pension scheme to which the transfer mentioned in paragraph 1B(2)(g) of Schedule 29 is made.

(2)In section 239 of FA 2004 (scheme sanction charges) after subsection (3) insert—

(3A)For the purposes of subsection (3)(b) “the permitted maximum”, in the case of a lump sum paid to an individual, is the amount that in accordance with paragraph 2 of Schedule 29 would be the permitted maximum for that lump sum if the individual became entitled at the time the lump sum is paid to the pension at that time expected to be the pension in connection with which the lump sum is paid.

(3)In section 268 of FA 2004 (discharge of liability to scheme sanction charges etc) after subsection (7) insert—

(7A)Subsection (7) applies with the omission of its paragraph (a) if the scheme chargeable payment is a payment of a lump sum where the conditions in paragraph 1B(2)(a) to (g) of Schedule 29 are met.

(4)In the Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572) in article 18 (which provides for paragraph 1(1)(b) of Schedule 29 to FA 2004 to be omitted in certain cases) at the end insert “ , and section 239 has effect in the case of a lump sum paid to that individual as if its subsection (3)(b) did not include a reference to paragraph 1(1)(b) of Schedule 29 ”.

(5)The amendment made by sub-paragraph (4) is to be treated as made by the Treasury under the powers to make orders conferred by section 283(2) of FA 2004.

Power to make further adjustmentsE+W+S+N.I.

13In section 166 of FA 2004 (payments by registered pension schemes: the lump sum rule) after subsection (4) insert—E+W+S+N.I.

(5)The Commissioners for Her Majesty's Revenue and Customs may by regulations amend Part 1 of Schedule 29, or Part 3 of Schedule 36, in connection with cases involving a lump sum within subsection (6).

(6)A lump sum is within this subsection if—

(a)the sum is paid on or after 19 September 2013 and before 6 April 2015, or

(b)the sum is paid before 19 September 2013, a contract for a lifetime annuity is entered into to provide the pension in connection with which the sum is paid, and on or after 19 March 2014 the contract is cancelled.

(7)The provision that may be made under subsection (5) includes provision altering the effect of amendments made by the Finance Act 2014.

14In section 282(1) and (2) of FA 2004 (making of regulations and orders) for “Board of Inland Revenue” substitute “ Commissioners for Her Majesty's Revenue and Customs ”.E+W+S+N.I.

CommencementE+W+S+N.I.

15The amendments made by paragraphs 1 to 5, 6(1), 7 to 10, 11(1) and 12(1) to (4) of this Schedule are to be treated as having come into force on 19 March 2014.E+W+S+N.I.

Section 44

SCHEDULE 6E+W+S+N.I.Transitional provision relating to new standard lifetime allowance for the tax year 2014-15 etc

PART 1E+W+S+N.I.“Individual protection 2014”

The protectionE+W+S+N.I.

1(1)Sub-paragraph (2) applies on and after 6 April 2014 in the case of an individual—E+W+S+N.I.

(a)who, on 5 April 2014, has one or more relevant arrangements (see sub-paragraph (4)),

(b)whose relevant amount is greater than £1,250,000 (see sub-paragraph (5)), and

(c)in relation to whom paragraph 7 of Schedule 36 to FA 2004 (primary protection) does not make provision for a lifetime allowance enhancement factor,

if notice of intention to rely on it is given to an officer of Revenue and Customs before 6 April 2017.

(2)Part 4 of FA 2004 has effect in relation to the individual as if the standard lifetime allowance were—

(a)if the individual's relevant amount is greater than £1,500,000, the greater of the standard lifetime allowance and £1,500,000, or

(b)otherwise, the greater of the standard lifetime allowance and the individual's relevant amount.

(3)But sub-paragraph (2) does not apply at any time when any of the following provisions applies in the case of the individual—

(a)paragraph 12 of Schedule 36 to FA 2004 (enhanced protection);

(b)paragraph 14 of Schedule 18 to FA 2011 (fixed protection 2012);

(c)paragraph 1 of Schedule 22 to FA 2013 (fixed protection 2014).

(4)Relevant arrangement”, in relation to an individual, means an arrangement relating to the individual under—

(a)a registered pension scheme of which the individual is a member, or

(b)a relieved non-UK pension scheme of which the individual is a relieved member.

(5)An individual's “relevant amount” is the sum of amounts A, B, C and D (see paragraphs 2 to 5).

(6)Sub-paragraphs (7) and (8) apply if rights of an individual under a relevant arrangement become subject to a pension debit where the transfer day falls on or after 6 April 2014.

(7)For the purpose of applying sub-paragraph (2) in the case of the individual on and after the transfer day, the individual's relevant amount is reduced (or further reduced) by the following amount—

where—

X is the appropriate amount,

Y is 5% of X, and

Z is the number of tax years beginning after 5 April 2014 but ending on or before the transfer day.

(If the formula gives a negative amount, it is to be taken to be nil.)

(8)But if the individual's relevant amount would be reduced (or further reduced) to £1,250,000 or less, sub-paragraph (2) is not to apply at all in the case of the individual on and after the transfer day.

(9)In sub-paragraphs (6) to (8) “appropriate amount” and “transfer day”, in relation to a pension debit, have the same meaning as in section 29 of WRPA 1999 or Article 26 of WRP(NI)O 1999 (as the case may be).

Amount A (pre-6 April 2006 pensions in payment)E+W+S+N.I.

2(1)To determine amount A—E+W+S+N.I.

(a)apply sub-paragraph (2) if a benefit crystallisation event has occurred in relation to the individual during the period comprising the tax year 2006-07 and all subsequent tax years up to (and including) the tax year 2013-14;

(b)otherwise, apply sub-paragraph (6).

(2)If this sub-paragraph is to be applied, amount A is—

where—

ARP is (subject to sub-paragraph (3)) an amount equal to—

(a)

the annual rate at which any relevant existing pension was payable to the individual at the time immediately before the benefit crystallisation event occurred, or

(b)

if more than one relevant existing pension was payable to the individual at that time, the sum of the annual rates at which each of the relevant existing pensions was so payable, and

SLT is an amount equal to what the standard lifetime allowance was at the time the benefit crystallisation event occurred.

(3)Paragraph 20(4) of Schedule 36 to FA 2004 applies for the purposes of the definition of “ARP” in sub-paragraph (2) (and, for this purpose, in paragraph 20(4) any reference to “the time” is to be read as a reference to the time immediately before the benefit crystallisation event occurred).

(4)If the time immediately before the benefit crystallisation event occurred falls before 6 April 2011, in sub-paragraph (3) references to paragraph 20(4) are to be read as references to that provision as it stood at the time immediately before the benefit crystallisation event occurred.

(5)If more than one benefit crystallisation event has occurred, in sub-paragraphs (2) to (4) references to the benefit crystallisation event are to be read as references to the first benefit crystallisation event.

(6)If this sub-paragraph is to be applied, amount A is—

where ARP is (subject to sub-paragraph (7)) an amount equal to—

a

the annual rate at which any relevant existing pension is payable to the individual at the end of 5 April 2014, or

b

if more than one relevant existing pension is payable to the individual at the end of 5 April 2014, the sum of the annual rates at which each of the relevant existing pensions is so payable.

(7)Paragraph 20(4) of Schedule 36 to FA 2004 applies for the purposes of the definition of “ARP” in sub-paragraph (6) (and, for this purpose, in paragraph 20(4) any reference to “the time” is to be read as a reference to 5 April 2014).

(8)In this paragraph “relevant existing pension” means (subject to sub-paragraph (9)) a pension, annuity or right—

(a)which was, at the end of 5 April 2006, a “relevant existing pension” as defined by paragraph 10(2) and (3) of Schedule 36 to FA 2004, and

(b)the payment of which the individual had, at the end of 5 April 2006, an actual (rather than a prospective) right to.

(9)If—

(a)before 6 April 2014, there was a recognised transfer of sums or assets representing a relevant existing pension, and

(b)those sums or assets were, after the transfer, applied towards the provision of a scheme pension (“the new scheme pension”),

the new scheme pension is also to be a “relevant existing pension” (including for the purposes of this sub-paragraph).

Amount B (pre-6 April 2014 benefit crystallisation events)E+W+S+N.I.

3(1)To determine amount B—E+W+S+N.I.

(a)identify each benefit crystallisation event that has occurred in relation to the individual during the period comprising the tax year 2006-07 and all subsequent tax years up to (and including) the tax year 2013-14,

(b)determine the amount which was crystallised by each of those benefit crystallisation events (applying paragraph 14 of Schedule 34 to FA 2004 if relevant), and

(c)multiply each crystallised amount by the following fraction—

where SLT is an amount equal to what the standard lifetime allowance was at the time the benefit crystallisation event in question occurred.

(2)Amount B is the sum of the crystallised amounts determined under sub-paragraph (1)(b) as adjusted under sub-paragraph (1)(c).

Amount C (uncrystallised rights at end of 5 April 2014 under registered pension schemes)E+W+S+N.I.

4Amount C is the total value of the individual's uncrystallised rights at the end of 5 April 2014 under arrangements relating to the individual under registered pension schemes of which the individual is a member as determined in accordance with section 212 of FA 2004.E+W+S+N.I.

Amount D (uncrystallised rights at end of 5 April 2014 under relieved non-UK pension schemes)E+W+S+N.I.

5(1)To determine amount D—E+W+S+N.I.

(a)identify each relieved non-UK pension scheme of which the individual is a relieved member at the end of 5 April 2014, and

(b)in relation to each such scheme—

(i)assume that a benefit crystallisation event occurs in relation to the individual at the end of 5 April 2014, and

(ii)in accordance with paragraph 14 of Schedule 34 to FA 2004, determine what the untested portion of the relevant relieved amount would be immediately before the assumed benefit crystallisation event.

(2)Amount D is the sum of the untested portions determined under sub-paragraph (1)(b)(ii).

InterpretationE+W+S+N.I.

6(1)Expressions used in this Part of this Schedule and Part 4 of FA 2004 have the same meaning in this Part as in that Part.E+W+S+N.I.

(2)In particular, references to a relieved non-UK pension scheme or a relieved member of such a scheme are to be read in accordance with paragraphs 13(3) and (4) and 18 of Schedule 34 to FA 2004.

PART 2E+W+S+N.I.Regulations

7(1)The Commissioners for Her Majesty's Revenue and Customs may by regulations amend Part 1 of this Schedule.E+W+S+N.I.

(2)Regulations under this paragraph may (for example) add to the cases in which paragraph 1(2) is to apply.

(3)Regulations under this paragraph must not increase any person's liability to tax.

(4)Regulations under this paragraph may include provision having effect in relation to a time before the regulations are made; but the time must be no earlier than 6 April 2014.

8(1)The Commissioners for Her Majesty's Revenue and Customs may by regulations make provision specifying how any notice required to be given to an officer of Revenue and Customs under Part 1 of this Schedule is to be given.E+W+S+N.I.

(2)In sub-paragraph (1) the reference to Part 1 of this Schedule is to that Part as amended from time to time by regulations under paragraph 7.

9(1)Regulations under paragraph 7 or 8 may include supplementary or incidental provision.E+W+S+N.I.

(2)The powers to make regulations under paragraphs 7 and 8 are exercisable by statutory instrument.

(3)A statutory instrument containing regulations under paragraph 7 or 8 is subject to annulment in pursuance of a resolution of the House of Commons.

PART 3E+W+S+N.I.Other provision

Amendment of section 219(5A) of FA 2004E+W+S+N.I.

10(1)In section 219 of FA 2004 (availability of individual's lifetime allowance) in subsection (5A) after “effect” insert “ where the previous benefit crystallisation event occurred before 6 April 2014 ”.E+W+S+N.I.

(2)The amendment made by this paragraph is treated as having come into force on 6 April 2014.

Amendment of section 98 of TMA 1970E+W+S+N.I.

11(1)Column 2 of the Table at the end of section 98 of TMA 1970 (special returns: penalties) is amended as follows.E+W+S+N.I.

(2)After the entry for section 228 of TIOPA 2010 insert—

Regulations under paragraph 16 of Schedule 18 to the Finance Act 2011.

(3)After the entry for regulations under section 61(5) of FA 2012 insert—

Regulations under paragraph 3 of Schedule 22 to the Finance Act 2013.
Regulations under paragraph 8 of Schedule 6 to the Finance Act 2014.

Section 46

SCHEDULE 7E+W+S+N.I.Pension schemes

IntroductionE+W+S+N.I.

1Part 4 of FA 2004 (pension schemes etc) is amended as follows.E+W+S+N.I.

Registration of pension schemesE+W+S+N.I.

2(1)Section 153 (applications for registration) is amended as follows.E+W+S+N.I.

(2)In subsection (4) for “On” substitute “ Following ”.

(3)In subsection (5) for paragraphs (a) and (b) substitute—

(a)any information falling within subsection (5A) is inaccurate in a material respect,

(b)any document falling within subsection (5B) contains a material inaccuracy,

(c)any declaration accompanying the application is false,

(d)the scheme administrator has failed to comply with an information notice under section 153A given in connection with the application (including any declaration accompanying it),

(e)the scheme administrator has deliberately obstructed an officer of Revenue and Customs in the course of an inspection under section 153B carried out in connection with the application (including any declaration accompanying it) where the inspection has been approved by the tribunal,

(f)the pension scheme has not been established, or is not being maintained, wholly or mainly for the purpose of making payments falling within section 164(1)(a) or (b) (authorised payments of pensions and lump sums), or

(g)the person who is, or any of the persons who are, the scheme administrator is not a fit and proper person to be, as the case may be—

(i)the scheme administrator, or

(ii)one of the persons who are the scheme administrator.

(4)After subsection (5) insert—

(5A)The information falling within this subsection is any information—

(a)contained in the application, or

(b)otherwise provided to an officer of Revenue and Customs by the scheme administrator (whether under section 153A or otherwise) in connection with the application (including any declaration accompanying it).

(5B)The documents falling within this subsection are any documents produced to an officer of Revenue and Customs by the scheme administrator (whether under section 153A or otherwise) in connection with the application (including any declaration accompanying it).

(5C)The reference in subsection (5)(d) to the scheme administrator having failed to comply with an information notice under section 153A includes a case where the scheme administrator has concealed, destroyed or otherwise disposed of, or has arranged for the concealment, destruction or disposal of, a document in breach of paragraph 42 or 43 of Schedule 36 to the Finance Act 2008 as applied by section 153A(3).

3After section 153 insert—E+W+S+N.I.

153APower to require information or documents in relation to applications for registration

(1)This section applies where an application for a pension scheme to be registered is made.

(2)An officer of Revenue and Customs may by notice (an “information notice”) require the scheme administrator or any other person—

(a)to provide the officer with any information, or

(b)to produce a document to the officer,

if the officer reasonably requires the information or document in connection with the application (including any declaration accompanying it).

(3)Paragraphs 6(2), 7, 8, 15, 16, 18 to 20, 23 to 27, 42 and 43 of Schedule 36 to the Finance Act 2008 (information notices etc) apply in relation to information notices under this section as they apply in relation to information notices under that Schedule.

(4)Where an information notice under this section is given to a person other than the scheme administrator, an officer of Revenue and Customs must give a copy of the notice to the scheme administrator.

(5)A person, other than the scheme administrator, who is given an information notice under this section may appeal against the notice or any requirement in the notice.

(6)Paragraph 32 of Schedule 36 to the Finance Act 2008 (procedures for appeals against information notices) applies for the purposes of an appeal under subsection (5) as it applies for the purposes of an appeal under Part 5 of that Schedule.

153BPower to inspect documents in relation to applications for registration

(1)This section applies where an application for a pension scheme to be registered is made.

(2)An officer of Revenue and Customs may—

(a)enter any business premises of the scheme administrator or any other person, and

(b)inspect documents that are on the premises,

if the officer reasonably requires to inspect the documents in connection with the application (including any declaration accompanying it).

(3)In subsection (2)(a) “business premises” has the meaning given by paragraph 10(3) of Schedule 36 to the Finance Act 2008 (power to inspect business premises etc).

(4)Paragraphs 10(2), 12, 15 and 16 of Schedule 36 to the Finance Act 2008 apply in relation to the power of inspection conferred by this section as they apply in relation to the power of inspection conferred by paragraph 10 of that Schedule.

(5)An officer of Revenue and Customs may not inspect a document under this section if or to the extent that, by virtue of a provision of Part 4 of Schedule 36 to the Finance Act 2008 (restrictions on powers) applied by section 153A(3), an information notice under section 153A given at the time of the inspection to the occupier of the premises could not require the occupier to produce the document.

(6)An officer of Revenue and Customs may ask the tribunal to approve an inspection under this section.

(7)Paragraph 13(1A), (2) and (3) of Schedule 36 to the Finance Act 2008 (approval of tribunal for inspections) applies in relation to an application under subsection (6) as it applies in relation to an application under paragraph 13 of that Schedule in relation to an inspection under paragraph 10 of that Schedule.

153CPenalties for failure to comply with information notices etc

(1)This section applies where a person other than the scheme administrator—

(a)fails to comply with an information notice under section 153A, or

(b)deliberately obstructs an officer of Revenue and Customs in the course of an inspection under section 153B that has been approved by the tribunal.

(2)The reference in subsection (1)(a) to a person who fails to comply with an information notice includes a person who conceals, destroys or otherwise disposes of, or arranges for the concealment, destruction or disposal of, a document in breach of paragraph 42 or 43 of Schedule 36 to the Finance Act 2008 as applied by section 153A(3).

(3)Paragraphs 39(2), 40 and 44 to 49 of Schedule 36 to the Finance Act 2008 (penalties for failure to comply with information notice etc) apply in relation to the failure or obstruction as they apply in relation to a failure or obstruction mentioned in paragraph 39(1) of that Schedule.

153DPenalties for inaccurate information in applications

(1)This section applies where—

(a)an application under section 153 contains information which is inaccurate,

(b)the inaccuracy is material, and

(c)condition A, B or C is met.

(2)Condition A is that the inaccuracy is careless or deliberate.

(3)An inaccuracy is careless if it is due to a failure by the scheme administrator to take reasonable care.

(4)Condition B is that the scheme administrator knows of the inaccuracy at the time the application is made but does not inform an officer of Revenue and Customs at that time.

(5)Condition C is that the scheme administrator—

(a)discovers the inaccuracy some time later, and

(b)fails to take reasonable steps to inform an officer of Revenue and Customs.

(6)The scheme administrator is liable to a penalty not exceeding the maximum penalty for which the scheme administrator could have been liable under paragraph 40A of Schedule 36 to the Finance Act 2008 (penalties for inaccurate information and documents) had that paragraph applied in relation to the inaccuracy.

(7)Where the information contains more than one material inaccuracy, a penalty is payable for each inaccuracy.

(8)Paragraphs 46 to 49 of Schedule 36 to the Finance Act 2008 (assessment of penalties etc) apply in relation to a penalty under this section as they apply in relation to a penalty under paragraph 40A of that Schedule.

153EPenalties for inaccurate information or documents provided under information notice

(1)This section applies where—

(a)in complying with an information notice under section 153A, a person provides inaccurate information or produces a document that contains an inaccuracy, and

(b)the inaccuracy is material.

(2)Paragraphs 40A and 46 to 49 of Schedule 36 to the Finance Act 2008 (penalties for inaccurate information and documents) apply in relation to the inaccuracy as they apply in relation to an inaccuracy connected with an information notice under that Schedule.

153FPenalties for false declarations

(1)This section applies where—

(a)a declaration accompanying an application under section 153 is false, and

(b)at least one of conditions A to C in section 153D is met (reading references to an inaccuracy as references to a falsehood and references to the scheme administrator as references to the person who made the declaration).

(2)The person who made the declaration is liable to a penalty not exceeding the maximum penalty for which the person could have been liable under paragraph 40A of Schedule 36 to the Finance Act 2008 (penalties for inaccurate information and documents) had that paragraph applied in relation to the falsehood.

(3)Where the declaration contains more than one falsehood, a penalty is payable in relation to each falsehood.

(4)Paragraphs 46 to 49 of Schedule 36 to the Finance Act 2008 (assessment of penalties etc) apply in relation to a penalty under this section as they apply in relation to a penalty under paragraph 40A of that Schedule.

4After section 156 insert—E+W+S+N.I.

156ACases where application for registration not decided within 6 months

(1)This section applies where—

(a)an application for a pension scheme to be registered is made, but

(b)the scheme administrator is not notified under section 153(6) within the period of 6 months after the day on which the application is made.

(2)The scheme administrator may appeal to the tribunal as if, at the end of that period of 6 months, the scheme administrator had been notified under section 153(6) of a decision not to register the scheme; and section 156(5) to (8) applies accordingly.

5(1)The amendments made by paragraphs 2 to 4 are treated as having come into force on 20 March 2014 and have effect in relation to applications made on or after that date.E+W+S+N.I.

(2)In relation to an application made before 1 September 2014, section 153(5) of FA 2004 (as amended by paragraph 2(3)) has effect with the omission of paragraph (g).

De-registration of pension schemesE+W+S+N.I.

6(1)Section 158 (grounds for de-registration) is amended as follows.E+W+S+N.I.

(2)In subsection (1)—

(a)before paragraph (a) insert—

(za)that the pension scheme has not been established, or is not being maintained, wholly or mainly for the purpose of making payments falling within section 164(1)(a) or (b) (authorised payments of pensions and lump sums),,

(b)in paragraph (d) for “incorrect” substitute “ inaccurate ”,

(c)after paragraph (d) insert—

(da)that the scheme administrator fails to produce any document required to be produced to an officer of Revenue and Customs by virtue of this Part or Part 1 of Schedule 36 to the Finance Act 2008,

(db)that any document produced to an officer of Revenue and Customs by the scheme administrator contains a material inaccuracy in relation to which at least one of conditions A to C in subsections (7) to (10) is met,”, and

(d)for paragraph (e) substitute—

(e)that any declaration accompanying the application to register the pension scheme, or otherwise made to an officer of Revenue and Customs in connection with the pension scheme, is false in a material particular,

(ea)that the scheme administrator has deliberately obstructed an officer of Revenue and Customs in the course of an inspection under Part 2 of Schedule 36 to the Finance Act 2008 that has been approved by the tribunal, or.

(3)In subsection (1) (as amended by sub-paragraph (2) above)—

(a)after paragraph (za) insert—

(zb)that the person who is, or any of the persons who are, the scheme administrator is not a fit and proper person to be, as the case may be—

(i)the scheme administrator, or

(ii)one of the persons who are the scheme administrator,, and

(b)in paragraph (ea) after “under” insert “ section 159B or ”.

(4)After subsection (5) insert—

(6)Subsections (7) to (10) apply for the purposes of subsection (1)(db).

(7)Condition A is that the inaccuracy is careless or deliberate.

(8)An inaccuracy is careless if it is due to a failure by the scheme administrator to take reasonable care.

(9)Condition B is that the scheme administrator knows of the inaccuracy at the time the document is produced to an officer of Revenue and Customs but does not inform such an officer at that time.

(10)Condition C is that the scheme administrator—

(a)discovers the inaccuracy some time later, and

(b)fails to take reasonable steps to inform an officer of Revenue and Customs.

7In Chapter 2, after section 159 insert—E+W+S+N.I.

159APower to require information or documents for purpose of considering if scheme administrator is fit and proper

(1)An officer of Revenue and Customs may by notice (an “information notice”) require the scheme administrator of a registered pension scheme or any other person—

(a)to provide the officer with any information, or

(b)to produce a document to the officer,

if the officer reasonably requires the information or document for the purpose of considering whether the person who is, or any of the persons who are, the scheme administrator is a fit and proper person to be the scheme administrator or one of those persons (as the case may be).

(2)Paragraphs 6(2), 7, 8, 15, 16, 18 to 20, 23 to 27, 42 and 43 of Schedule 36 to the Finance Act 2008 (information notices etc) apply in relation to information notices under this section as they apply in relation to information notices under that Schedule.

(3)Where an information notice under this section is given to a person other than the scheme administrator, an officer of Revenue and Customs must give a copy of the notice to the scheme administrator.

(4)A person who is given an information notice under this section may appeal against the notice or any requirement in the notice.

(5)Paragraph 32 of Schedule 36 to the Finance Act 2008 (procedures for appeals against information notices) applies for the purposes of an appeal under subsection (4) as it applies for the purposes of an appeal under Part 5 of that Schedule.

159BPower to inspect documents for purpose of considering if scheme administrator is fit and proper

(1)An officer of Revenue and Customs may—

(a)enter any business premises of the scheme administrator of a registered pension scheme or of any other person, and

(b)inspect documents that are on the premises,

if the officer reasonably requires to inspect the documents for the purpose of considering whether the person who is, or any of the persons who are, the scheme administrator is a fit and proper person to be the scheme administrator or one of those persons (as the case may be).

(2)In subsection (1)(a) “business premises” has the meaning given by paragraph 10(3) of Schedule 36 to the Finance Act 2008 (power to inspect business premises etc).

(3)Paragraphs 10(2), 12, 15 and 16 of Schedule 36 to the Finance Act 2008 apply in relation to the power of inspection conferred by this section as they apply in relation to the power of inspection conferred by paragraph 10 of that Schedule.

(4)An officer of Revenue and Customs may not inspect a document under this section if or to the extent that, by virtue of a provision of Part 4 of Schedule 36 to the Finance Act 2008 (restrictions on powers) applied by section 159A(2), an information notice under section 159A given at the time of the inspection to the occupier of the premises could not require the occupier to produce the document.

(5)An officer of Revenue and Customs may ask the tribunal to approve an inspection under this section.

(6)Paragraph 13(1A), (2) and (3) of Schedule 36 to the Finance Act 2008 (approval of tribunal for inspections) applies in relation to an application under subsection (5) as it applies in relation to an application under paragraph 13 of that Schedule in relation to an inspection under paragraph 10 of that Schedule.

159CPenalties for failure to comply with information notices etc

(1)This section applies where a person—

(a)fails to comply with an information notice under section 159A, or

(b)deliberately obstructs an officer of Revenue and Customs in the course of an inspection under section 159B that has been approved by the tribunal.

(2)The reference in subsection (1)(a) to a person who fails to comply with an information notice includes a person who conceals, destroys or otherwise disposes of, or arranges for the concealment, destruction or disposal of, a document in breach of paragraph 42 or 43 of Schedule 36 to the Finance Act 2008 as applied by section 159A(2).

(3)Paragraphs 39(2), 40 and 44 to 49 of Schedule 36 to the Finance Act 2008 (penalties for failure to comply with information notice etc) apply in relation to the failure or obstruction as they apply in relation to a failure or obstruction mentioned in paragraph 39(1) of that Schedule.

159DPenalties for inaccurate information or documents provided under information notice

(1)This section applies where—

(a)in complying with an information notice under section 159A, a person provides inaccurate information or produces a document that contains an inaccuracy, and

(b)the inaccuracy is material.

(2)Paragraphs 40A and 46 to 49 of Schedule 36 to the Finance Act 2008 (penalties for inaccurate information and documents) apply in relation to the inaccuracy as they apply in relation to an inaccuracy connected with an information notice under that Schedule.

8(1)The amendments made by paragraphs 6 and 7 have effect in relation to pension schemes whenever registered (including schemes registered by virtue of paragraph 1 of Schedule 36 to FA 2004 (deemed registration of existing schemes)).E+W+S+N.I.

(2)The amendments made by paragraph 6(2) and (4) are treated as having come into force on 20 March 2014.

(3)The amendments made by paragraphs 6(3) and 7 come into force on 1 September 2014 or, if later, the day after the day on which this Act is passed.

Declarations required from person who is to be a scheme administratorE+W+S+N.I.

9(1)In section 270 (meaning of “scheme administrator”) in subsection (2)—E+W+S+N.I.

(a)after paragraph (a) omit “and”, and

(b)after paragraph (b) insert , and

(c)has made to an officer of Revenue and Customs any other declarations which are reasonably required by Her Majesty's Revenue and Customs.

(2)The amendments made by this paragraph have effect in relation to appointments on or after 1 September 2014.

Payments by registered pension schemes: surrenderE+W+S+N.I.

10(1)Section 172A (payments by registered pension schemes: surrender) is amended as follows.E+W+S+N.I.

(2)In subsection (5) omit paragraph (d).

(3)After subsection (5) insert—

(5A)Subsection (5)(b) applies only if the entitlement is held (or is to be held) by the dependant under an arrangement under the pension scheme relating to the member or dependant.

11In section 207 (authorised surplus payments charge) after subsection (6) insert—E+W+S+N.I.

(6A)Subsection (1) does not apply to an authorised surplus payment to the extent that the payment is funded (directly or indirectly) by a surrender of (or an agreement to surrender) benefits or rights which results in the registered pension scheme being treated as making an unauthorised payment under section 172A.

(6B)Terms used in subsection (6A) which are defined in section 172A have the same meaning as they have in that section.

12The amendments made by paragraphs 10 and 11 have effect in relation to surrenders (or agreements to surrender) made on or after 20 March 2014.E+W+S+N.I.

Orders for money etc to be restored to pension schemesE+W+S+N.I.

13(1)Section 188 (relief for members' contributions) is amended as follows.E+W+S+N.I.

(2)In subsection (2) after “(3)” insert “ or (3A) ”.

(3)After subsection (3) insert—

(3A)This subsection applies to a contribution if the contribution results from the transfer of property or money, or the payment of a sum, towards the pension scheme pursuant to a relevant order in a case where—

(a)section 266A (members' liability in respect of unauthorised member payments) applies, and

(b)relief is claimed under that section in respect of the liability mentioned in subsection (1)(a) of that section.

(3B)In the case of a contribution which is greater than UMP (see section 266A(5)), subsection (3A) does not apply to the contribution so far as it is greater than UMP.

(3C)In subsection (3A) “relevant order” means an order under any of the following—

(a)section 16(1), 19(4) or 21(2)(a) of the Pensions Act 2004 (orders for money etc to be restored to pension schemes), or

(b)Article 12(1), 15(4) or 17(2)(a) of the Pensions (Northern Ireland) Order 2005 (corresponding provision for Northern Ireland).

14(1)Section 266A (member's liability) is amended as follows.E+W+S+N.I.

(2)In subsection (1)(b) for the words from “an order” to “Regulator)” substitute “ a relevant order ”.

(3)In subsection (5), in the definition of “ASO”—

(a)before the first “order” insert “ relevant ”, and

(b)for the words from the second “order” to “2005” substitute “ relevant order ”.

(4)After subsection (6) insert—

(6A)In this section “relevant order” means an order under any of the following—

(a)section 16(1), 19(4) or 21(2)(a) of the Pensions Act 2004 (orders for money etc to be restored to pension schemes), or

(b)Article 12(1), 15(4) or 17(2)(a) of the Pensions (Northern Ireland) Order 2005 (corresponding provision for Northern Ireland).

15(1)Section 266B (scheme's liability) is amended as follows.E+W+S+N.I.

(2)In subsection (1)(b) for the words from “an order” to “Regulator)” substitute “ a relevant order ”.

(3)In subsection (3), in the definition of “ASO”—

(a)before the first “order” insert “ relevant ”, and

(b)for the words from the second “order” to “2005” substitute “ relevant order ”.

(4)After subsection (4) insert—

(5)In this section “relevant order” means an order under any of the following—

(a)section 16(1), 19(4) or 21(2)(a) of the Pensions Act 2004 (orders for money etc to be restored to pension schemes), or

(b)Article 12(1), 15(4) or 17(2)(a) of the Pensions (Northern Ireland) Order 2005 (corresponding provision for Northern Ireland).

16The amendments made by paragraphs 13 to 15 have effect in relation to orders made on or after 1 September 2014.E+W+S+N.I.

Liabilities of trustees appointed by Pensions Regulator etcE+W+S+N.I.

17In section 255 (assessments under Part) in subsection (1) after paragraph (e) insert—E+W+S+N.I.

(ea)liability under section 272C (former scheme administrator to retain liability in cases involving independent trustees etc),.

18In section 272 (trustees etc liable as scheme administrator) in subsection (4) after “applying in relation to the pension scheme” insert “ or by reason of section 272C(7) applying in relation to a liability ”.E+W+S+N.I.

19After section 272 insert—E+W+S+N.I.

272ALiabilities of independent trustee

(1)This section applies in relation to a person (“P”) who is an independent trustee of a registered pension scheme.

(2)For the purposes of this section and section 272B an “independent trustee” is a trustee of a pension scheme—

(a)who is appointed by, or otherwise pursuant to, an order made—

(i)by the Pensions Regulator under section 7 of the Pensions Act 1995 or Article 7 of the Pensions (Northern Ireland) Order 1995 (appointment of trustees by the Pensions Regulator), or

(ii)by a court on an application made by the Pensions Regulator, and

(b)who is not a trustee of the pension scheme at any time before—

(i)the day on which the trustee's appointment as mentioned in paragraph (a) takes effect, or

(ii)if the trustee is appointed as mentioned in paragraph (a) on more than one occasion, the day on which the first appointment takes effect.

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

(a)the day on which P's appointment as trustee of the pension scheme as mentioned in subsection (2)(a) takes effect, or

(b)if P is appointed as trustee of the pension scheme as mentioned in subsection (2)(a) on more than one occasion, the day on which P's first appointment takes effect.

(4)If P is, or is one of the persons who are, the scheme administrator, P does not assume any liability falling within subsection (7) which P would otherwise assume (including by reason of section 272C(3) or (4)).

(5)Subsection (4) does not apply if P is, or is one of the persons who are, the scheme administrator at any time before the relevant day.

(6)In relation to any liability falling within subsection (7), in section 272(4) references to trustees or to persons who control the management of the pension scheme do not include P.

(7)The liabilities falling within this subsection are—

(a)liabilities for the following in respect of payments made (or treated as having been made) by the pension scheme on or before the relevant day—

(i)the short service refund lump sum charge;

(ii)the serious ill-health lump sum charge;

(iii)the special lump sum death benefits charge;

(iv)the authorised surplus payments charge;

(v)the scheme sanction charge in respect of scheme chargeable payments falling within section 241(1)(a) or (b);

(b)liabilities for the lifetime allowance charge in respect of benefit crystallisation events occurring on or before the relevant day;

(c)liabilities for the scheme sanction charge in respect of scheme chargeable payments treated under section 185A or 185F as having been made by the pension scheme in tax years earlier than the one in which the relevant day falls;

(d)any liability for the scheme sanction charge in respect of the relevant fraction of any scheme chargeable payment treated under section 185A as having been made by the pension scheme in the tax year in which the relevant day falls;

(e)where the pension scheme is treated under section 185F as having made a scheme chargeable payment in the tax year in which the relevant day falls and there is a relevant net gain, any liability for the scheme sanction charge in respect of the relevant amount;

(f)any liability to pay interest in respect of a liability mentioned in paragraphs (a) to (e) arising at any time.

(8)For the purposes of subsection (7)(d) “the relevant fraction” is—

where—

A is the number of days in the tax year up to (and including) the relevant day, and

B is the number of days in the tax year.

(9)For the purposes of subsection (7)(e)—

(a)there is a “relevant net gain” if—

(i)the total amount of any gains treated under section 185F as accruing in the tax year on or before the relevant day, exceeds

(ii)the total amount of any losses treated under section 185F as so accruing, and

(b)“the relevant amount” is—

(i)the scheme chargeable payment, or

(ii)if that payment is greater than the excess of gains over losses mentioned in paragraph (a), the amount of that excess.

(10)Subsection (11) applies if—

(a)apart from that subsection, losses in relation to which section 185G(10) applies would be included in the total amount mentioned in subsection (9)(a)(ii), and

(b)the losses exceed the gains—

(i)which are included in the total amount mentioned in subsection (9)(a)(i), and

(ii)from which the losses can be deducted in accordance with section 185G(10).

(11)The losses are not to be included in the total amount mentioned in subsection (9)(a)(ii) so far as they exceed the gains.

272BLiabilities of scheme administrator appointed by independent trustee etc

(1)This section applies in relation to a person (“Q”) who is, or is one of the persons who are, the scheme administrator of a registered pension scheme where Q's appointment as such takes effect at a time when the pension scheme has one or more independent trustees.

(2)Q does not assume any liability falling within section 272A(7) which Q would otherwise assume.

(3)In relation to any liability falling within section 272A(7), in section 272(4) references to persons who control the management of the pension scheme do not include Q.

(4)Subsections (2) and (3) do not apply if Q is, or is one of the persons who are, the scheme administrator at any time before the relevant day.

(5)In this section, and in section 272A as it applies for the purposes of this section, “the relevant day” means the first day on which the pension scheme has an independent trustee (whether or not there are days between that day and the day on which Q's appointment takes effect on which the pension scheme has no independent trustees).

272CFormer scheme administrator etc to retain liability

(1)This section applies in relation to a liability which, by reason of section 272A(4), is not assumed by P (in which case “the relevant day” is to be read in accordance with section 272A(3)).

(2)This section also applies in relation to a liability which, by reason of section 272B(2), is not assumed by Q (in which case “the relevant day” is to be read in accordance with section 272B(5)).

(3)The liability is to be retained or assumed by the person who is, or the persons who are, the scheme administrator immediately before the relevant day (unless dead or having ceased to exist).

(4)If there is no scheme administrator immediately before the relevant day, the liability is to be retained or assumed by the person who was, or the persons who were, the scheme administrator when there last was a scheme administrator before the relevant day (unless dead or having ceased to exist).

(5)Nothing in section 271 prevents a person from having (and continuing to have) the liability by reason of subsection (3) or (4).

(6)Subsection (7) applies if—

(a)no-one has the liability by reason of subsection (3) or (4),

(b)no-one who has the liability by reason of subsection (3) or (4) can be traced, or

(c)the person who has, or all the persons who have, the liability by reason of subsection (3) or (4) are in serious default (as determined in accordance with section 272(6)).

(7)The liability is to be assumed by the person or persons determined in accordance with section 272(4).

(8)Section 272(5) applies in relation to a person who assumes the liability by reason of subsection (7) as it applies in relation to a person who assumes a liability by reason of section 272.

(9)Nothing in this section prevents any person from being subject to the liability apart from this section (in addition to any person who is subject to the liability by reason of this section), and in particular the liability continues to be a liability of the scheme administrator for the purposes of section 271(2).

(10)If a person assumes the liability under section 271(2) at a time after P or Q's appointment as, or as one of the persons who are, the scheme administrator has ceased, the person who has, or the persons who have, the liability by reason of subsection (3) or (4) is, or are, released from the liability.

(11)A person who has, or persons who have, the liability by reason of subsection (3) or (4) may apply to an officer of Revenue and Customs to be released from the liability.

(12)Section 271(6) to (13) applies in relation to an application under subsection (11) as it applies in relation to an application under section 271(5).

20In section 273 (members liable as scheme administrator) after subsection (1) insert—E+W+S+N.I.

(1A)This section also applies in relation to a registered pension scheme if—

(a)a person has, or persons have, by reason of section 272C(7) assumed a liability to pay tax (or interest on tax) by virtue of section 239 (scheme sanction charge) in respect of the whole or a part of a scheme chargeable payment falling within section 241(1)(b) or (c) made (or treated as having been made) by the pension scheme,

(b)that person, or each of those persons, has failed (in whole or in part) to satisfy the liability, and

(c)that person, or each of those persons, has either died or ceased to exist or is a person in whose case an officer of Revenue and Customs considers the person's failure to satisfy the liability to be of a serious nature.

21(1)Section 274 (supplementary) is amended as follows.E+W+S+N.I.

(2)In subsection (1)—

(a)after “(trustees etc)” insert “ , section 272C(7) ”, and

(b)in paragraph (b) after “administrator)” insert “ , section 272C(3) or (4) ”.

(3)In subsection (3)(b) after “272” insert “ , 272C ”.

22Sections 272A to 272C (as inserted by paragraph 19) have effect for cases where the relevant day falls on or after 1 September 2014.E+W+S+N.I.

Other provisionE+W+S+N.I.

23In the following provisions (which relate to the giving of information etc) for “incorrect” (in all places) substitute “ inaccurate ”E+W+S+N.I.

(a)section 169(5)(a)(ii);

(b)section 257(4)(a) and (b);

(c)section 261(1)(a);

(d)section 264(2)(a).

Section 51

SCHEDULE 8E+W+S+N.I.Employee share schemes

PART 1E+W+S+N.I.Share incentive plans

Amendments to Chapter 6 of Part 7 of ITEPA 2003E+W+S+N.I.

1Chapter 6 of Part 7 of ITEPA 2003 (employment income: income and exemptions relating to securities: share incentive plans) is amended as follows.E+W+S+N.I.

2In the title omit “Approved”.E+W+S+N.I.

3(1)Section 488 (introduction to share incentive plans) is amended as follows.E+W+S+N.I.

(2)In the heading omit “Approved”.

(3)In subsection (1)—

(a)omit paragraph (a), and

(b)in paragraph (b) for “those plans” substitute “ share incentive plans (“SIPs”) which are Schedule 2 SIPs ”.

(4)Omit subsection (2).

(5)In subsection (4)—

(a)omit the definitions of “approved” and “approval”, and

(b)after the definition of “PAYE deduction” insert—

Schedule 2 SIP” is to be read in accordance with paragraph 1 and Part 10 of Schedule 2;.

4(1)Section 489 (operation of tax advantages) is amended as follows.E+W+S+N.I.

(2)In the heading for “approved” substitute Schedule 2.

(3)In subsection (1) for “an approved” substitute “ a Schedule 2 ”.

5In section 498 (no charge on shares ceasing to be subject to plan in certain circumstances) in subsection (9)(b) for “an approved” substitute “ a Schedule 2 ”.E+W+S+N.I.

6(1)Section 500 (operation of tax charges) is amended as follows.E+W+S+N.I.

(2)In the heading for “approved” substitute Schedule 2.

(3)In subsection (1) for “an approved” substitute “ a Schedule 2 ”.

7In section 503 (charge on partnership share money) in subsection (2), in the entry for paragraph 56, for “withdrawal of plan approval” substitute “ plan ceasing to be a Schedule 2 SIP ”.E+W+S+N.I.

8(1)Section 506 (charge on partnership shares ceasing to be subject to plan) is amended as follows.E+W+S+N.I.

(2)In subsection (2) for “market value of the shares at the exit date” substitute “ relevant amount ”.

(3)After subsection (2) insert—

(2A)Subject to subsection (2B), in subsection (2) “the relevant amount” means the market value of the shares at the exit date.

(2B)If the shares cease to be subject to the plan by virtue of a provision of the kind mentioned in paragraph 43(2B) of Schedule 2 (provision requiring partnership shares to be offered for sale), in subsection (2) “the relevant amount” means the lesser of—

(a)the amount of partnership share money used to acquire the shares, and

(b)the market value of the shares at the time they are offered for sale.

(2C)Paragraph 92(2) of Schedule 2 (market value of shares subject to a restriction) applies for the purposes of subsection (2B)(b).

(4)After subsection (3) insert—

(3A)If the shares cease to be subject to the plan by virtue of a provision of the kind mentioned in paragraph 43(2B) of Schedule 2, in subsection (3)(b) the reference to the market value of the shares at the exit date is to be read as a reference to the market value of the shares at the time they are offered for sale (as determined in accordance with paragraph 92(2) of Schedule 2 if relevant).

9In section 509 (modification of section 696) in subsection (1)(a) for “an approved” substitute “ a Schedule 2 ”.E+W+S+N.I.

10In section 510 (payments by trustees) in subsection (1) for “an approved” substitute “ a Schedule 2 ”.E+W+S+N.I.

11In section 511 (deductions to be made by trustees) in subsection (1) for “an approved” substitute “ a Schedule 2 ”.E+W+S+N.I.

12In section 515 (tax advantages and charges under other Acts) in subsection (2)(a) and (d) for “an approved” substitute “ a Schedule 2 ”.E+W+S+N.I.

13Schedule 2 is amended as follows.E+W+S+N.I.

14In the title omit “Approved”.E+W+S+N.I.

15In the cross-heading before paragraph 1 for “Approval of” substitute Introduction to Schedule 2.E+W+S+N.I.

16(1)Paragraph 1 (introduction) is amended as follows.E+W+S+N.I.

(2)For sub-paragraphs (1) and (2) substitute—

(A1)For the purposes of the SIP code a share incentive plan (a “SIP”) is a Schedule 2 SIP if the requirements of Parts 2 to 9 of this Schedule are met in relation to the SIP.

(3)For sub-paragraph (4) substitute—

(4)Sub-paragraph (A1) is subject to Part 10 of this Schedule which—

(a)requires notice of a plan to be given to Her Majesty's Revenue and Customs (“HMRC”) in order for the plan to be a Schedule 2 SIP (see paragraph 81A(1)),

(b)provides for a plan in relation to which such notice is given to be a Schedule 2 SIP (see paragraph 81A(4)), and

(c)gives power to HMRC to enquire into a plan and to decide that the plan should not be a Schedule 2 SIP (see paragraphs 81F to 81I).

17In the cross-heading before paragraph 6 omit “for approval”.E+W+S+N.I.

18(1)Paragraph 6 (general requirements for SIPs) is amended as follows.E+W+S+N.I.

(2)Make the existing text sub-paragraph (1).

(3)After the new sub-paragraph (1) insert—

(2)The requirements of this Part are also to be taken to include the requirements of paragraphs 89 and 90 (plan termination notices etc).

19(1)Paragraph 7 (the purpose of the plan) is amended as follows.E+W+S+N.I.

(2)In sub-paragraph (1)—

(a)after “provide” insert “ , in accordance with this Schedule, ”, and

(b)for “nature” substitute “ form ”.

(3)After sub-paragraph (1) insert—

(1A)The plan must not provide benefits to employees otherwise than in accordance with this Schedule.

(1B)For example, the plan must not provide cash to employees as an alternative to shares.

(1C)Sub-paragraph (1A) does not prohibit an employee receiving a benefit from a company as a result of any shares in that company being held on the employee's behalf under the plan where the employee would have received the same benefit from the company had the shares been acquired by the employee otherwise than by virtue of the plan.

(4)Omit sub-paragraph (2).

20In paragraph 18 (requirement not to participate in other SIPs) in sub-paragraph (1) for “approved” substitute “ Schedule 2 ”.E+W+S+N.I.

21In paragraph 18A (participation in more than one connected SIP) in sub-paragraph (1) for “approved” substitute “ Schedule 2 ”.E+W+S+N.I.

22In paragraph 37 (holding period: power of participant to direct trustees) in sub-paragraph (3)(b) for “an approved” substitute “ a Schedule 2 ”.E+W+S+N.I.

23In paragraph 43 (partnership shares: introduction) after sub-paragraph (2A) insert—E+W+S+N.I.

(2B)Partnership shares may (notwithstanding sub-paragraph (2A) if relevant) be subject to provision requiring partnership shares acquired on behalf of an employee to be offered for sale but only if the requirement of sub-paragraph (2C) is met.

(2C)The consideration at which the shares are required to be offered for sale must be at least equal to—

(a)the amount of partnership share money applied in acquiring the shares on behalf of the employee, or

(b)if lower, the market value of the shares at the time they are offered for sale.

24In the cross-heading before paragraph 56 for “withdrawal of approval” substitute plan ceasing to be a Schedule 2 SIP.E+W+S+N.I.

25(1)Paragraph 56 (repayment of partnership share money) is amended as follows.E+W+S+N.I.

(2)In sub-paragraph (1) for “approval of the plan is withdrawn (see paragraph 83)” substitute “ plan is not to be a Schedule 2 SIP by virtue of paragraph 81H or 81I ”.

(3)In sub-paragraph (2) for the words from “notice” to the end substitute “ the relevant day ”.

(4)After sub-paragraph (2) insert—

(2A)If the plan is not to be a Schedule 2 SIP by virtue of paragraph 81H, in sub-paragraph (2) “the relevant day” means—

(a)the last day of the period in which notice of an appeal under paragraph 81K(2)(a) may be given, or

(b)if notice of such an appeal is given, the day on which the appeal is determined or withdrawn.

(2B)If the plan is not to be a Schedule 2 SIP by virtue of paragraph 81I, in sub-paragraph (2) “the relevant day” means—

(a)the last day of the period in which notice of an appeal under paragraph 81K(3) may be given, or

(b)if notice of such an appeal is given, the day on which the appeal is determined or withdrawn.

26(1)Paragraph 65 (general requirements as to dividend shares) is amended as follows.E+W+S+N.I.

(2)Make the existing text sub-paragraph (1).

(3)After the new sub-paragraph (1) insert—

(2)Dividend shares may (notwithstanding sub-paragraph (1)(b) if relevant) be subject to provision requiring dividend shares acquired on behalf of an employee to be offered for sale but only if the requirement of sub-paragraph (3) is met.

(3)The consideration at which the shares are required to be offered for sale must be at least equal to—

(a)the amount of the cash dividends applied in acquiring the shares on behalf of the employee, or

(b)if lower, the market value of the shares at the time they are offered for sale.

27In paragraph 71A (duty to monitor participants) for “approved” substitute “ Schedule 2 ”.E+W+S+N.I.

28For Part 10 substitute—E+W+S+N.I.

PART 10E+W+S+N.I.Notification of plans, annual returns and enquiries
Notice of SIP to be given to HMRCE+W+S+N.I.

81A(1)For a SIP to be a Schedule 2 SIP, notice of the SIP must be given to Her Majesty's Revenue and Customs (“HMRC”).

(2)The notice must—

(a)be given by the company,

(b)contain, or be accompanied by, such information as HMRC may require, and

(c)contain a declaration within sub-paragraph (3) made by such persons as HMRC may require.

(3)A declaration within this sub-paragraph is a declaration—

(a)that the requirements of Parts 2 to 9 of this Schedule are met in relation to the SIP, and

(b)if the declaration is made after the first date on which awards of shares are made under the SIP (“the first award date”), that those requirements—

(i)were met in relation to those awards of shares, and

(ii)have otherwise been met in relation to the SIP at all times on or after the first award date when shares appropriated to, or acquired on behalf of, individuals under the SIP have been held under the SIP.

(4)If notice is given under this paragraph in relation to a SIP, for the purposes of the SIP code the SIP is to be a Schedule 2 SIP at all times on and after the relevant date (but not before that date).

(5)But if the notice is given after the initial notification deadline, the SIP is to be a Schedule 2 SIP only from the beginning of the relevant tax year.

(6)For the purposes of this Part—

  • “the initial notification deadline” is 6 July in the tax year following that in which the first award date falls,

  • “the relevant date” is—

    (a)

    the date on which the declaration within sub-paragraph (3) is made, or

    (b)

    if that declaration is made after the first award date, the first award date, and

  • “the relevant tax year” is—

    (a)

    the tax year in which the notice under this paragraph is given, or

    (b)

    if that notice is given on or before 6 July in that tax year, the preceding tax year.

(7)Sub-paragraph (4) is subject to the following paragraphs of this Part.

Annual returnsE+W+S+N.I.

81B(1)This paragraph applies if notice is given in relation to a SIP under paragraph 81A.

(2)The company must give to HMRC a return for the tax year in which the relevant date falls and for each subsequent tax year (subject to sub-paragraph (9)).

(3)If paragraph 81A(5) applies in relation to the SIP, in sub-paragraph (2) the reference to the tax year in which the relevant date falls is to be read as a reference to the relevant tax year.

(4)A return for a tax year must—

(a)contain, or be accompanied by, such information as HMRC may require, and

(b)be given on or before 6 July in the following tax year.

(5)The information which may be required under sub-paragraph (4)(a) includes (in particular) information to enable HMRC to determine the liability to tax, including capital gains tax, of—

(a)any person who has participated in the SIP, or

(b)any other person whose liability to tax the operation of the SIP is relevant to.

(6)If during a tax year an alteration is made in a key feature of—

(a)the SIP, or

(b)the plan trust,

the return for the tax year must contain a declaration within sub-paragraph (7) made by such persons as HMRC may require.

(7)A declaration within this sub-paragraph is a declaration that the alteration has not caused the requirements of Parts 2 to 9 of this Schedule not to be met in relation to the SIP.

(8)For the purposes of sub-paragraph (6) a “key feature” of a SIP or plan trust is a provision of the SIP or plan trust which is necessary in order for the requirements of Parts 2 to 9 of this Schedule to be met in relation to the SIP.

(9)A return is not required for any tax year following that in which the termination condition is met in relation to the SIP.

(10)For the purposes of this Part “the termination condition” is met in relation to a SIP when—

(a)a plan termination notice has been issued in relation to it under paragraph 89, and

(b)all the requirements under paragraphs 56(3), 68(4)(c) and 90 have been met by the trustees.

(11)If the company becomes aware that—

(a)anything which should have been included in, or should have accompanied, a return for a tax year was not included in, or did not accompany, the return,

(b)anything which should not have been included in, or should not have accompanied, a return for a tax year was included in, or accompanied, the return, or

(c)any other error or inaccuracy has occurred in relation to a return for a tax year,

the company must give an amended return correcting the position to HMRC without delay.

81C(1)This paragraph applies if the company fails to give a return for a tax year (containing, or accompanied by, all required information and declarations) on or before the date mentioned in paragraph 81B(4)(b) (“the date for delivery”).

(2)The company is liable for a penalty of £100.

(3)If the company's failure continues after the end of the period of 3 months beginning with the date for delivery, the company is liable for a further penalty of £300.

(4)If the company's failure continues after the end of the period of 6 months beginning with the date for delivery, the company is liable for a further penalty of £300.

(5)The company is liable for a further penalty under this sub-paragraph if—

(a)the company's failure continues after the end of the period of 9 months beginning with the date for delivery,

(b)HMRC decide that such a penalty should be payable, and

(c)HMRC give notice to the company specifying the period in respect of which the penalty is payable.

(The company may be liable for more than one penalty under this sub-paragraph.)

(6)The penalty under sub-paragraph (5) is £10 for each day that the failure continues during the period specified in the notice under sub-paragraph (5)(c).

(7)The period specified in the notice under sub-paragraph (5)(c)—

(a)may begin earlier than the date on which the notice is given, but

(b)may not begin until after the end of the period mentioned in sub-paragraph (5)(a) or, if relevant, the end of any period specified in any previous notice under sub-paragraph (5)(c) given in relation to the failure.

(8)Liability for a penalty under this paragraph does not arise if the company satisfies HMRC (or, on an appeal under paragraph 81K, the tribunal) that there is a reasonable excuse for its failure.

(9)For the purposes of sub-paragraph (8)—

(a)an insufficiency of funds is not a reasonable excuse, unless attributable to events outside the company's control,

(b)where the company relies on any other person to do anything, that is not a reasonable excuse unless the company took reasonable care to avoid the failure, and

(c)where the company had a reasonable excuse for the failure but the excuse ceased, the company is to be treated as having continued to have the excuse if the failure is remedied without unreasonable delay after the excuse ceased.

Notices and returns to be given electronically etcE+W+S+N.I.

81D(1)A notice under paragraph 81A, and any information accompanying the notice, must be given electronically.

(2)A return under paragraph 81B, and any information accompanying the return, must be given electronically.

(3)But, if HMRC consider it appropriate to do so, HMRC may allow the company to give a notice or return or any accompanying information in another way; and, if HMRC do so, the notice, return or information must be given in that other way.

(4)The Commissioners for Her Majesty's Revenue and Customs—

(a)must prescribe how notices, returns and accompanying information are to be given electronically;

(b)may make different provision for different cases or circumstances.

81E(1)This paragraph applies if a return under paragraph 81B, or any information accompanying such a return—

(a)is given otherwise than in accordance with paragraph 81D, or

(b)contains a material inaccuracy—

(i)which is careless or deliberate, or

(ii)which is not corrected as required by paragraph 81B(11).

(2)The company is liable for a penalty of an amount decided by HMRC.

(3)The penalty must not exceed £5,000.

(4)For the purposes of sub-paragraph (1)(b)(i) an inaccuracy is careless if it is due to a failure by the company to take reasonable care.

EnquiriesE+W+S+N.I.

81F(1)This paragraph applies if notice is given in relation to a SIP under paragraph 81A.

(2)HMRC may enquire into the SIP if HMRC give notice to the company of HMRC's intention to do so no later than—

(a)6 July in the tax year following the tax year in which the initial notification deadline falls, or

(b)if the notice under paragraph 81A is given after the initial notification deadline, 6 July in the second tax year following the relevant tax year.

(3)HMRC may enquire into the SIP if HMRC give notice to the company of HMRC's intention to do so no later than 12 months after the date on which a declaration within paragraph 81B(7) is given to HMRC.

(4)Sub-paragraph (5) applies if (at any time) HMRC have reasonable grounds for believing that requirements of Parts 2 to 9 of this Schedule—

(a)are not met in relation to the SIP, or

(b)have not been met in relation to the SIP.

(5)HMRC may enquire into the SIP if HMRC give notice to the company of HMRC's intention to do so.

(6)Notice may be given, and an enquiry may be conducted, under sub-paragraph (2), (3) or (5) even though the termination condition has been met in relation to the SIP.

81G(1)An enquiry under paragraph 81F(2), (3) or (5) is completed when HMRC give the company a notice (a “closure notice”) stating—

(a)that HMRC have completed the enquiry, and

(b)that—

(i)paragraph 81H is to apply,

(ii)paragraph 81I is to apply, or

(iii)neither paragraph 81H nor paragraph 81I is to apply.

(2)If the company receives notice under paragraph 81F(2), (3) or (5), the company may make an application to the tribunal for a direction requiring a closure notice for the enquiry to be given within a specified period.

(3)The application is to be subject to the relevant provisions of Part 5 of TMA 1970 (see, in particular, section 48(2)(b) of that Act).

(4)The tribunal must give a direction unless satisfied that HMRC have reasonable grounds for not giving the closure notice within the specified period.

81H(1)This paragraph applies if HMRC decide—

(a)that requirements of Parts 2 to 9 of this Schedule—

(i)are not met in relation to the SIP, or

(ii)have not been met in relation to the SIP, and

(b)that the situation is, or was, so serious that this paragraph should apply.

(2)If this paragraph applies—

(a)the SIP is not to be a Schedule 2 SIP with effect from—

(i)such relevant time as is specified in the closure notice, or

(ii)if no relevant time is specified, the time of the giving of the closure notice, and

(b)the company is liable for a penalty of an amount decided by HMRC.

(3)Sub-paragraph (2)(a) does not affect the operation of the SIP code in relation to shares appropriated to, or acquired on behalf of, an individual under the SIP before the time mentioned in sub-paragraph (2)(a)(i) or (ii) (as the case may be).

(4)In particular, if the SIP was a Schedule 2 SIP when the shares were appropriated to, or acquired on behalf of, the individual, the SIP is to continue to be a Schedule 2 SIP in relation to those shares.

(5)The penalty under sub-paragraph (2)(b) must not exceed an amount equal to twice HMRC's reasonable estimate of—

(a)the total income tax for which participants in the SIP have not been liable, or will not be liable in the future, and

(b)the total contributions under Part 1 of SSCBA 1992 or SSCB(NI)A 1992 for which any persons have not been liable, or will not be liable in the future,

in consequence of the SIP having been a Schedule 2 SIP at any relevant time before the time mentioned in sub-paragraph (2)(a)(i) or (ii) (as the case may be).

(6)The liabilities covered by sub-paragraph (5) include liabilities for income tax or contributions which a person has not had, or will not have, in consequence of sub-paragraphs (3) and (4).

(7)In this paragraph “relevant time” means any time before the giving of the closure notice when requirements of Parts 2 to 9 of this Schedule were not met in relation to the SIP.

81I(1)This paragraph applies if HMRC decide—

(a)that requirements of Parts 2 to 9 of this Schedule—

(i)are not met in relation to the SIP, or

(ii)have not been met in relation to the SIP, but

(b)that the situation is not, or was not, so serious that paragraph 81H should apply.

(2)If this paragraph applies, the company—

(a)is liable for a penalty of an amount decided by HMRC, and

(b)must, no later than 90 days after the relevant day, secure that the requirements of Parts 2 to 9 of this Schedule are met in relation to the SIP.

(3)The penalty under sub-paragraph (2)(a) must not exceed £5,000.

(4)In sub-paragraph (2)(b) “the relevant day” means—

(a)the last day of the period in which notice of an appeal under paragraph 81K(2)(b) may be given, or

(b)if notice of such an appeal is given, the day on which the appeal is determined or withdrawn.

(5)Sub-paragraph (2)(b) does not apply if the termination condition was met in relation to the SIP before the giving of the closure notice or is met before the end of the 90 day period mentioned in sub-paragraph (2)(b).

(6)If the company fails to comply with sub-paragraph (2)(b), HMRC may give the company a notice stating that that is the case (a “default notice”).

(7)If the company is given a default notice—

(a)the SIP is not to be a Schedule 2 SIP with effect from—

(i)such relevant time as is specified in the default notice, or

(ii)if no relevant time is specified, the time of the giving of the default notice, and

(b)the company is liable for a further penalty of an amount decided by HMRC.

(8)Sub-paragraph (7)(a) does not affect the operation of the SIP code in relation to shares appropriated to, or acquired on behalf of, an individual under the SIP before the time mentioned in sub-paragraph (7)(a)(i) or (ii) (as the case may be).

(9)In particular, if the SIP was a Schedule 2 SIP when the shares were appropriated to, or acquired on behalf of, the individual, the SIP is to continue to be a Schedule 2 SIP in relation to those shares.

(10)The penalty under sub-paragraph (7)(b) must not exceed an amount equal to twice HMRC's reasonable estimate of—

(a)the total income tax for which participants in the SIP have not been liable, or will not be liable in the future, and

(b)the total contributions under Part 1 of SSCBA 1992 or SSCB(NI)A 1992 for which any persons have not been liable, or will not be liable in the future,

in consequence of the SIP having been a Schedule 2 SIP at any relevant time before the time mentioned in sub-paragraph (7)(a)(i) or (ii) (as the case may be).

(11)The liabilities covered by sub-paragraph (10) include liabilities for income tax or contributions which a person has not had, or will not have, in consequence of sub-paragraphs (8) and (9).

(12)In this paragraph “relevant time” means any time before the giving of the default notice when requirements of Parts 2 to 9 of this Schedule were not met in relation to the SIP.

Assessment of penaltiesE+W+S+N.I.

81J(1)This paragraph applies if the company is liable for a penalty under this Part.

(2)HMRC must assess the penalty and notify the company of the assessment.

(3)Subject to sub-paragraphs (4) and (5), the assessment must be made no later than 12 months after the date on which the company becomes liable for the penalty.

(4)In the case of a penalty under paragraph 81E(1)(b), the assessment must be made no later than—

(a)12 months after the date on which HMRC become aware of the inaccuracy, and

(b)6 years after the date on which the company becomes liable for the penalty.

(5)In the case of a penalty under paragraph 81H(2)(b) or 81I(2)(a) or (7)(b) where notice of appeal is given under paragraph 81K(2) or (3), the assessment must be made no later than 12 months after the date on which the appeal is determined or withdrawn.

(6)A penalty payable under this Part must be paid—

(a)no later than 30 days after the date on which the notice under sub-paragraph (2) is given to the company, or

(b)if notice of appeal is given against the penalty under paragraph 81K(1) or (4), no later than 30 days after the date on which the appeal is determined or withdrawn.

(7)The penalty may be enforced as if it were corporation tax or, if the company is not within the charge to corporation tax, income tax charged in an assessment and due and payable.

(8)Sections 100 to 103 of TMA 1970 do not apply to a penalty under this Part.

AppealsE+W+S+N.I.

81K(1)The company may appeal against a decision of HMRC that the company is liable for a penalty under paragraph 81C or 81E.

(2)The company may appeal against—

(a)a decision of HMRC mentioned in paragraph 81H(1) or a decision of HMRC to specify, or not to specify, a relevant time in the closure notice;

(b)a decision of HMRC mentioned in paragraph 81I(1).

(3)The company may appeal against a decision of HMRC—

(a)to give the company a default notice under paragraph 81I;

(b)to specify, or not to specify, a relevant time in the default notice.

(4)The company may appeal against a decision of HMRC as to the amount of a penalty payable by the company under this Part.

(5)The company may appeal against a decision of an officer of Revenue and Customs to give a direction under section 998 of CTA 2009 (withdrawal of corporation tax deductions in relation to a Schedule 2 SIP).

(6)Notice of appeal must be given to HMRC no later than 30 days after the date on which—

(a)in the case of an appeal under sub-paragraph (1) or (4), the notice under paragraph 81J(2) is given to the company;

(b)in the case of an appeal under sub-paragraph (2), the closure notice is given;

(c)in the case of an appeal under sub-paragraph (3), the default notice is given;

(d)in the case of an appeal under sub-paragraph (5), notice of the officer's decision is given to the company.

(7)On an appeal under sub-paragraph (1), (3)(a) or (5) which is notified to the tribunal, the tribunal may affirm or cancel the decision.

(8)On an appeal under sub-paragraph (2) or (3)(b) which is notified to the tribunal, the tribunal may—

(a)affirm or cancel the decision, or

(b)substitute for the decision another decision which HMRC had power to make.

(9)On an appeal under sub-paragraph (4) which is notified to the tribunal, the tribunal may—

(a)affirm the amount of the penalty decided, or

(b)substitute another amount for that amount.

(10)Subject to this paragraph and paragraph 81J, the provisions of Part 5 of TMA 1970 relating to appeals have effect in relation to an appeal under this paragraph as they have effect in relation to an appeal against an assessment to corporation tax or, if the company is not within the charge to corporation tax, income tax.

29In paragraph 89 (termination of plan) in sub-paragraph (2) omit paragraph (a).E+W+S+N.I.

30In paragraph 90 (effect of plan termination notice) in sub-paragraph (2) for “awarded to” substitute “ appropriated to, or acquired on behalf of, ”.E+W+S+N.I.

31(1)Paragraph 93 (power to require information) is amended as follows.E+W+S+N.I.

(2)For sub-paragraph (1) substitute—

(1)An officer of Revenue and Customs may by notice require a person to provide the officer with any information—

(a)which the officer reasonably requires for the performance of any functions of Her Majesty's Revenue and Customs or an officer of Revenue and Customs under the SIP code, and

(b)which the person to whom the notice is addressed has or can reasonably obtain.

(3)In sub-paragraph (2)(a)—

(a)for sub-paragraph (i) substitute—

(i)to check anything contained in a notice under paragraph 81A or a return under paragraph 81B or to check any information accompanying such a notice or return, or”, and

(b)in sub-paragraph (ii) after “plan” insert “ or any other person whose liability to tax the operation of a plan is relevant to ”.

32In paragraph 100 (index of defined expressions)—E+W+S+N.I.

(a)omit the entries for “approval” and “approved”, and

(b)at the appropriate place insert—

Schedule 2 SIPparagraph 1 and Part 10 of this Schedule.

Other amendments: TCGA 1992E+W+S+N.I.

33TCGA 1992 is amended as follows.E+W+S+N.I.

34In section 236A (relief for transfers to share incentive plans) for “an approved” substitute “ a Schedule 2 ”.E+W+S+N.I.

35(1)Section 238A (share schemes and share incentives) is amended as follows.E+W+S+N.I.

(2)In the heading omit “Approved”.

(3)In subsection (1) omit “approved”.

(4)In subsection (2)(a) for “approved” substitute “ Schedule 2 ”.

36Schedule 7C (relief for transfers to share plans) is amended as follows.E+W+S+N.I.

37In the title for “approved” substitute Schedule 2.E+W+S+N.I.

38In paragraph 2 (conditions relating to disposal) in sub-paragraph (1) for “approved” substitute “ a Schedule 2 SIP ”.E+W+S+N.I.

39Schedule 7D (share schemes and share incentives) is amended as follows.E+W+S+N.I.

40In the title omit “Approved”.E+W+S+N.I.

41In the title of Part 1 for “Approved” substitute Schedule 2.E+W+S+N.I.

42(1)Paragraph 1 (introduction to Part 1) is amended as follows.E+W+S+N.I.

(2)In sub-paragraph (1) for “an approved” substitute “ a Schedule 2 ”.

(3)In sub-paragraphs (2) and (3) omit “approved”.

43In paragraph 2 (gains accruing to trustees) in sub-paragraph (1)(a) omit “approved”.E+W+S+N.I.

Other amendments: ITEPA 2003 and Part 4 of FA 2004E+W+S+N.I.

44ITEPA 2003 is amended as follows.E+W+S+N.I.

45In section 227 (scope of Part 4) in subsection (4)(c) omit “approved”.E+W+S+N.I.

46In section 417 (scope of Part 7) in subsection (2), in the entry for Chapter 6, omit “approved”.E+W+S+N.I.

47(1)Section 431A (provision relating to restricted securities) is amended as follows.E+W+S+N.I.

(2)In the heading for “approved” substitute tax advantaged.

(3)In subsection (2)(a) for “an approved” substitute “ a Schedule 2 ”.

48In section 549 (application of Chapter 11 of Part 7) in subsection (2)(a) omit “approved”.E+W+S+N.I.

49(1)Section 554E (exclusions under Part 7A) is amended as follows.E+W+S+N.I.

(2)In subsections (1)(a) and (3)(a)(i) and (b)(i) for “an approved” substitute “ a Schedule 2 ”.

(3)In subsection (4)(a) and (b) for the first “approved” substitute “ Schedule 2 ”.

50In paragraph 11 of Schedule 4 (CSOP schemes: material interest) in sub-paragraph (5)(a) for “approved” substitute “ Schedule 2 ”.E+W+S+N.I.

51In paragraph 30 of Schedule 5 (enterprise management incentives: material interest) in sub-paragraph (7)(a) for “share incentive plan approved under Schedule 2 (SIPs)” substitute “ Schedule 2 SIP (see Schedule 2) ”.E+W+S+N.I.

52In section 195 of FA 2004 (pensions: transfer of certain shares to be treated as payment of contribution) in subsection (5), in the definition of “share incentive plan”, omit “approved”.E+W+S+N.I.

Other amendments: ITTOIA 2005E+W+S+N.I.

53Chapter 3 of Part 4 of ITTOIA 2005 (savings and investment income: dividends etc from UK resident companies) is amended as follows.E+W+S+N.I.

54In section 382 (contents of Chapter 3) in subsection (1)(c) for “an approved” substitute “ a Schedule 2 ”.E+W+S+N.I.

55In the cross-heading before section 392 for “approved” substitute Schedule 2.E+W+S+N.I.

56In section 392 (SIP shares: introduction) in subsection (1) for “an approved” substitute “ a Schedule 2 ”.E+W+S+N.I.

57(1)Section 394 (distribution when dividend shares cease to be subject to SIP) is amended as follows.E+W+S+N.I.

(2)In subsection (1) for “an approved” substitute “ a Schedule 2 ”.

(3)After subsection (3) insert—

(3A)But if the shares cease to be subject to the plan by virtue of a provision of the kind mentioned in paragraph 65(2) of Schedule 2 to ITEPA 2003 (provision requiring dividend shares to be offered for sale), the amount of the distribution treated as made is the amount equal to the relevant fraction of the market value of the shares at the time they are offered for sale if that amount is less than the amount given by subsection (3).

(3B)For the purposes of subsection (3A) “the relevant fraction” is—

where—

A is so much of the amount of the cash dividend applied to acquire the shares on the participant's behalf as represents a cash dividend paid in respect of plan shares in a UK resident company, and

B is the amount of the cash dividend applied to acquire the shares on the participant's behalf.

(3C)Paragraph 92(2) of Schedule 2 to ITEPA 2003 (market value of shares subject to a restriction) applies for the purposes of subsection (3A).

(4)In subsection (7) for “approved” substitute “ Schedule 2 ”.

58In section 395 (reduction in tax due in cases within section 394) in subsections (1)(b) and (4) for “approved” substitute “ Schedule 2 ”.E+W+S+N.I.

59In section 396 (interpretation) in subsections (1) and (2) omit “approved”.E+W+S+N.I.

60Chapter 4 of Part 4 of ITTOIA 2005 (savings and investment income: dividends etc from non-UK resident companies) is amended as follows.E+W+S+N.I.

61In the cross-heading before section 405 for “approved” substitute Schedule 2.E+W+S+N.I.

62(1)Section 405 (SIP shares: introduction) is amended as follows.E+W+S+N.I.

(2)In subsection (1) for “an approved” substitute “ a Schedule 2 ”.

(3)In subsections (3) and (4) omit “approved”.

63(1)Section 407 (dividend payment when dividend shares cease to be subject to SIP) is amended as follows.E+W+S+N.I.

(2)In subsection (1) for “an approved” substitute “ a Schedule 2 ”.

(3)After subsection (3) insert—

(3A)But if the shares cease to be subject to the plan by virtue of a provision of the kind mentioned in paragraph 65(2) of Schedule 2 to ITEPA 2003 (provision requiring dividend shares to be offered for sale), the amount of the dividend treated as paid is the amount equal to the relevant fraction of the market value of the shares at the time they are offered for sale if that amount is less than the amount given by subsection (3).

(3B)For the purposes of subsection (3A) “the relevant fraction” is—

where—

A is so much of the amount of the cash dividend applied to acquire the shares on the participant's behalf as represents a cash dividend paid in respect of plan shares in a non-UK resident company, and

B is the amount of the cash dividend applied to acquire the shares on the participant's behalf.

(3C)Paragraph 92(2) of Schedule 2 to ITEPA 2003 (market value of shares subject to a restriction) applies for the purposes of subsection (3A).

(4)In subsection (5) for “approved” substitute “ Schedule 2 ”.

64In section 408 (reduction in tax due in cases within section 407) in subsections (1)(b) and (3) for “approved” substitute “ Schedule 2 ”.E+W+S+N.I.

65Chapter 9 of Part 6 of ITTOIA 2005 (exempt income) is amended as follows.E+W+S+N.I.

66In the cross-heading before section 770 for “Approved” substitute Schedule 2.E+W+S+N.I.

67(1)Section 770 (amounts applied by SIP trustees) is amended as follows.E+W+S+N.I.

(2)In subsection (1)(a) for “an approved” substitute “ a Schedule 2 ”.

(3)In subsections (5) and (6) omit “approved”.

Other amendments: Part 9 of ITA 2007E+W+S+N.I.

68Part 9 of ITA 2007 (special rules about settlements and trusts) is amended as follows.E+W+S+N.I.

69In section 462 (overview of Part) in subsection (5) for “an approved” substitute “ a Schedule 2 ”.E+W+S+N.I.

70In section 479 (trustees' accumulated or discretionary income charged at special rates) in subsection (5) for “approved” substitute “ Schedule 2 ”.E+W+S+N.I.

71(1)Section 488 (application of section 479 to trustees of SIP) is amended as follows.E+W+S+N.I.

(2)In the heading for “approved” substitute Schedule 2.

(3)In subsection (1)—

(a)in paragraph (a) for “an approved” substitute “ a Schedule 2 ”, and

(b)in paragraph (b) omit “approved”.

72In section 489 (“the applicable period”) in subsection (8)(a) for “approved” substitute “ Schedule 2 ”.E+W+S+N.I.

73In section 490 (interpretation of Chapter 5) in subsection (1) omit “approved”.E+W+S+N.I.

Other amendments: Chapter 1 of Part 11 of CTA 2009E+W+S+N.I.

74Chapter 1 of Part 11 of CTA 2009 (relief for employee share acquisition schemes: share incentive plans) is amended as follows.E+W+S+N.I.

75(1)Section 983 (overview of Chapter) is amended as follows.E+W+S+N.I.

(2)In subsection (1) for “approved” substitute “ Schedule 2 ”.

(3)In subsection (7) for “approval for a plan is withdrawn” substitute “ a plan ceases to be a Schedule 2 share incentive plan ”.

76(1)Section 987 (deduction for cost of setting up plan) is amended as follows.E+W+S+N.I.

(2)In the heading for “an approved” substitute a Schedule 2.

(3)In subsection (1) for “approved by an officer of Revenue and Customs” substitute “ a Schedule 2 share incentive plan ”.

(4)Omit subsection (3).

(5)In subsection (4) for “approval is given” (in both places) substitute “ relevant date falls ”.

(6)After subsection (4) insert—

(4A)In subsection (4) “the relevant date”, in relation to a share incentive plan, has the meaning given in paragraph 81A(6) of Schedule 2 to ITEPA 2003.

77(1)Section 988 (deductions for running expenses) is amended as follows.E+W+S+N.I.

(2)In the heading for “an approved” substitute a Schedule 2.

(3)In subsections (1) and (3) for “an approved” substitute “ a Schedule 2 ”.

78In section 989 (deduction for contribution to plan trust) in subsection (1)(a) for “an approved” substitute “ a Schedule 2 ”.E+W+S+N.I.

79In section 994 (deduction for providing free or matching shares) in subsection (1) for “an approved” substitute “ a Schedule 2 ”.E+W+S+N.I.

80In section 995 (deduction for additional expense in providing partnership shares) in subsection (1)(a) for “an approved” substitute “ a Schedule 2 ”.E+W+S+N.I.

81In section 997 (no deduction for expenses in providing dividend shares) in subsection (1) for “an approved” substitute “ a Schedule 2 ”.E+W+S+N.I.

82For the cross-heading before section 998 substitute Plan ceasing to be a Schedule 2 SIP.E+W+S+N.I.

83(1)Section 998 (withdrawal of deductions) is amended as follows.E+W+S+N.I.

(2)In the heading for “approval for share incentive plan withdrawn” substitute share incentive plan ceases to be a Schedule 2 share incentive plan.

(3)In subsection (1)—

(a)in paragraph (a)—

(i)after “section” insert “ 987, ”, and

(ii)for “an approved” substitute “ a Schedule 2 ”, and

(b)for paragraph (b) substitute—

(b)by virtue of paragraph 81H or 81I of Schedule 2 to ITEPA 2003 the plan is not to be a Schedule 2 share incentive plan.

Other amendments: Individual Savings Account Regulations 1998 (S.I. 1998/1870)E+W+S+N.I.

84The Individual Savings Account Regulations 1998 are amended as follows.E+W+S+N.I.

85In regulation 2 (interpretation) in paragraph (1)(a)—E+W+S+N.I.

(a)omit the definition of “approved SIP”,

(b)in the definitions of “ceasing to be subject to the plan”, “participant” and “plan shares” for “an approved” substitute “ a Schedule 2 ”, and

(c)at the appropriate place insert—

Schedule 2 SIP” shall be construed in accordance with the SIP code (see section 488(3) of ITEPA 2003);.

86In regulation 7 (qualifying investments) in paragraph (2)(h)(iii) for “an approved” substitute “ a Schedule 2 ”.E+W+S+N.I.

87In regulation 34 (capital gains tax: adaptation of enactments) in paragraph (2)(a)—E+W+S+N.I.

(a)in the inserted subsections (12)(b)(iii) and (13)(d) for “an approved” substitute “ a Schedule 2 ”, and

(b)in the inserted subsection (13)(c) for “approved” substitute “ Schedule 2 ”.

Revocation of Employee Share Schemes (Electronic Communication of Returns and Information) Regulations 2007 (S.I. 2007/792)E+W+S+N.I.

88The Employee Share Schemes (Electronic Communication of Returns and Information) Regulations 2007 are revoked.E+W+S+N.I.

Commencement and transitional provisionE+W+S+N.I.

89This Part is treated as having come into force on 6 April 2014.E+W+S+N.I.

90Paragraphs 91 to 96 below apply in relation to a SIP established before 6 April 2014.E+W+S+N.I.

91(1)If the SIP was an approved SIP immediately before 6 April 2014, this paragraph applies to any provision which the SIP contains immediately before that date and which requires the approval or agreement of Her Majesty's Revenue and Customs or an officer of Revenue and Customs to be obtained in relation to any matter.E+W+S+N.I.

(2)On and after 6 April 2014, the provision is to have effect without the requirement for the approval or agreement, unless the requirement reflects a requirement for approval or agreement set out in Schedule 2 to ITEPA 2003 (as amended by this Part).

92(1)If the SIP was an approved SIP immediately before 6 April 2014, the amendments made by paragraph 19 above have effect in relation to the SIP only if, and when, there is an alteration in a key feature of the SIP or plan trust on or after that date.E+W+S+N.I.

(2)In sub-paragraph (1) “key feature” has the meaning given in paragraph 81B(8) of Schedule 2 to ITEPA 2003 (as inserted by paragraph 28 above).

93If the SIP was an approved SIP immediately before 6 April 2014, on and after that date the SIP and the plan trust have effect with any modifications needed to reflect the amendments made by paragraphs 20 to 22, 25, 27, 29 and 30 above.E+W+S+N.I.

94(1)Paragraph 81A of Schedule 2 to ITEPA 2003 (as inserted by paragraph 28 above) has effect in relation to the SIP—E+W+S+N.I.

(a)as if, at the end of sub-paragraph (1), the words “on or before 6 July 2015” were inserted,

(b)if the first date on which awards of shares are made under the SIP falls before 6 April 2014—

(i)as if, in sub-paragraph (3)(b), the reference to that date were a reference to 6 April 2014 and, accordingly, as if all references in paragraph 81A to the first award date were references to 6 April 2014,

(ii)as if sub-paragraph (3)(b)(i) were omitted, and

(iii)as if, in sub-paragraph (3)(b)(ii), “otherwise” were omitted,

(c)as if sub-paragraph (5) were omitted, and

(d)as if, in sub-paragraph (6), the definitions of “the initial notification deadline” and “the relevant tax year” were omitted.

(2)But the SIP cannot be a Schedule 2 SIP if, before 6 April 2014, an application for its approval was refused or an officer of Revenue and Customs decided to withdraw its approval.

(3)Sub-paragraph (2) is without prejudice to the outcome of any appeal under paragraph 82 or 85 of Schedule 2 to ITEPA 2003 against the refusal or decision to withdraw approval.

(4)The amendments made by this Part do not affect any right of appeal under paragraph 82 or 85 of Schedule 2 to ITEPA 2003 against a refusal or decision made before 6 April 2014 in relation to the SIP.

(5)Sub-paragraphs (6) and (7) apply if shares (“the relevant shares”) were appropriated to, or acquired on behalf of, an individual before 6 April 2014 under the SIP at a time when the SIP was an approved SIP.

(6)On and after 6 April 2014, the SIP code operates in relation to the relevant shares—

(a)as if the relevant shares were appropriated to, or acquired on behalf of, the individual under the SIP at a time when the SIP was a Schedule 2 SIP, and

(b)if no notice under paragraph 81A of Schedule 2 to ITEPA 2003 is given in relation to the SIP or if the SIP cannot be a Schedule 2 SIP because of sub-paragraph (2) of this paragraph, as if the SIP were a Schedule 2 SIP despite no notice being given or despite sub-paragraph (2).

(7)If no notice under paragraph 81A of Schedule 2 to ITEPA 2003 is given in relation to the SIP, paragraph 81B of that Schedule (as inserted by paragraph 28 above) is to apply in relation to the SIP despite no notice being given; and, for this purpose, the relevant date is to be taken to be 6 April 2014.

(8)In relation to the SIP—

(a)paragraph 81F of Schedule 2 to ITEPA 2003 (as inserted by paragraph 28 above) has effect as if for sub-paragraph (2) there were substituted—

(2)HMRC may enquire into the SIP if HMRC give notice to the company of HMRC's intention to do so no later than 6 July 2016., and

(b)the cases covered by paragraphs 81F(4)(b), 81H(1)(a)(ii) and 81I(1)(a)(ii) of Schedule 2 to ITEPA 2003 (as inserted by paragraph 28 above) include cases in which requirements of Parts 2 to 9 of that Schedule were not met before 6 April 2014.

95If the SIP was an approved SIP before 6 April 2014, the amendments made by this Part do not affect the deductions which may be made in relation to the SIP under section 987 of CTA 2009 (deduction for costs of setting up SIP) if they would otherwise do so; and the amendment made by paragraph 83(3)(a)(i) above has no effect in relation to such deductions.E+W+S+N.I.

96The amendments made by paragraph 31 above do not affect a notice given in relation to the SIP under paragraph 93 of Schedule 2 to ITEPA 2003 before 6 April 2014.E+W+S+N.I.

PART 2E+W+S+N.I.SAYE option schemes

Amendments to Chapter 7 of Part 7 of ITEPA 2003E+W+S+N.I.

97Chapter 7 of Part 7 of ITEPA 2003 (employment income: income and exemptions relating to securities: SAYE option schemes) is amended as follows.E+W+S+N.I.

98In the title omit “Approved”.E+W+S+N.I.

99(1)Section 516 (introduction to SAYE option schemes) is amended as follows.E+W+S+N.I.

(2)In the heading omit “Approved”.

(3)In subsection (1)—

(a)omit paragraph (a) and the “and” after it, and

(b)in paragraph (b) for “those” substitute “ SAYE option schemes which are Schedule 3 SAYE option ”.

(4)Omit subsection (2).

(5)In subsection (3)(c) for “approved” substitute “ Schedule 3 ”.

(6)In subsection (4)—

(a)omit the definition of “approved”, and

(b)after the definition of “SAYE option scheme” insert—

Schedule 3 SAYE option scheme” is to be read in accordance with paragraph 1 and Part 8 of Schedule 3;.

100In section 517 (share options to which Chapter applies) in subsection (1)(a) for “an approved” substitute “ a Schedule 3 ”.E+W+S+N.I.

101(1)Section 519 (no charge in respect of exercise of option) is amended as follows.E+W+S+N.I.

(2)In subsection (1)(a) for “approved” substitute “ a Schedule 3 SAYE option scheme ”.

(3)In subsection (3A)—

(a)in paragraph (a) for “approved” substitute “ a Schedule 3 SAYE option scheme ”,

(b)in paragraph (b)(i) for “or (4)” substitute “ , (4) or (4A) ”,

(c)in paragraphs (c), (d) and (f) after sub-paragraph (ii) omit “or” and insert—

(iia)the non-UK company reorganisation arrangement, or, and

(d)in paragraph (e) after sub-paragraph (ii) omit “or” and insert—

(iia)the making of any non-UK company reorganisation arrangement which would fall within subsection (3H), or.

(4)In subsection (3H)—

(a)after “arrangement” insert “ or a non-UK company reorganisation arrangement ”, and

(b)in paragraph (b) for “an approved” substitute “ a Schedule 3 ”.

(5)In subsection (5)(b)—

(a)for “paragraph 42(3) provides” substitute “ paragraphs 40H(4) and 40I(9) provide ”,

(b)for “approved” substitute “ a Schedule 3 SAYE option scheme ”, and

(c)for “approval of the scheme has been previously withdrawn” substitute “ the scheme is not a Schedule 3 SAYE option scheme ”.

102Schedule 3 is amended as follows.E+W+S+N.I.

103In the title omit “Approved”.E+W+S+N.I.

104In the cross-heading before paragraph 1 for “Approval of” substitute Introduction to Schedule 3.E+W+S+N.I.

105(1)Paragraph 1 (introduction) is amended as follows.E+W+S+N.I.

(2)For sub-paragraphs (1) and (2) substitute—

(A1)For the purposes of the SAYE code an SAYE option scheme is a Schedule 3 SAYE option scheme if the requirements of Parts 2 to 7 of this Schedule are met in relation to the scheme.

(3)For sub-paragraph (4) substitute—

(4)Sub-paragraph (A1) is subject to Part 8 of this Schedule which—

(a)requires notice of a scheme to be given to Her Majesty's Revenue and Customs (“HMRC”) in order for the scheme to be a Schedule 3 SAYE option scheme (see paragraph 40A(1)),

(b)provides for a scheme in relation to which such notice is given to be a Schedule 3 SAYE option scheme (see paragraph 40A(4)), and

(c)gives power to HMRC to enquire into a scheme and to decide that the scheme should not be a Schedule 3 SAYE option scheme (see paragraphs 40F to 40I).

106In the title of Part 2 omit “for approval”.E+W+S+N.I.

107In the cross-heading before paragraph 4 omit “for approval”.E+W+S+N.I.

108For paragraph 5 (general restriction on contents of scheme) substitute—E+W+S+N.I.

5(1)The purpose of the scheme must be to provide, in accordance with this Schedule, benefits for employees and directors in the form of share options.

(2)The scheme must not provide benefits to employees or directors otherwise than in accordance with this Schedule.

(3)For example, the scheme must not provide cash as an alternative to share options or shares which might otherwise be acquired by the exercise of share options.

109In paragraph 17 (requirements relating to shares that may be subject to share options) after sub-paragraph (1) insert—E+W+S+N.I.

(1A)Sub-paragraph (1) and the other paragraphs of this Part are subject to paragraph 37(6B).

110In paragraph 25 (requirements as to contributions to savings arrangements) in sub-paragraph (3)(a) for “approved” substitute “ Schedule 3 ”.E+W+S+N.I.

111(1)Paragraph 28 (requirements as to price for acquisition of shares) is amended as follows.E+W+S+N.I.

(2)After sub-paragraph (3) insert—

(3A)If the scheme makes provision under sub-paragraph (3), the variation or variations made under that provision to take account of a variation in any share capital must (in particular) secure—

(a)that the total market value of the shares which may be acquired by the exercise of the share option is immediately after the variation or variations substantially the same as what it was immediately before the variation or variations, and

(b)that the total price at which those shares may be acquired is immediately after the variation or variations substantially the same as what it was immediately before the variation or variations.

(3B)Sub-paragraph (3) does not authorise any variation which would result in the requirements of the other paragraphs of this Schedule not being met in relation to the share option.

(3)Omit sub-paragraph (4).

112In paragraph 32 (exercise of options: death) after “exercised” insert “ at any time ”.E+W+S+N.I.

113In paragraph 34 (exercise of options: scheme-related employment ends) in sub-paragraph (5)—E+W+S+N.I.

(a)omit paragraph (a) and the “or” after it, and

(b)in paragraph (b) after “organiser” insert “ where the transfer is not a relevant transfer within the meaning of the Transfer of Undertakings (Protection of Employment) Regulations 2006 ”.

114(1)Paragraph 37 (exercise of options: company events) is amended as follows.E+W+S+N.I.

(2)In sub-paragraph (1) after “(4)” insert “ , (4A) ”.

(3)In sub-paragraph (4)(b) for “an approved” substitute “ a Schedule 3 ”.

(4)After sub-paragraph (4) insert—

(4A)The relevant date for the purposes of this sub-paragraph is the date on which a non-UK company reorganisation arrangement applicable to or affecting—

(a)all the ordinary share capital of the company or all the shares of the same class as the shares to which the option relates, or

(b)all the shares, or all the shares of that same class, which are held by a class of shareholders identified otherwise than by reference to their employments or directorships or their participation in a Schedule 3 SAYE option scheme,

becomes binding on the shareholders covered by it.

(5)After sub-paragraph (6) insert—

(6A)Sub-paragraphs (6B) to (6F) apply if the scheme makes provision under sub-paragraph (1) or (6).

(6B)The scheme may provide that if, in consequence of a relevant event, shares in the company to which a share option relates no longer meet the requirements of Part 4 of this Schedule, the share option may be exercised under the provision made under sub-paragraph (1) or (6) (as the case may be) no later than 20 days after the day on which the relevant event occurs, notwithstanding that the shares no longer meet the requirements of Part 4 of this Schedule.

(6C)In sub-paragraph (6B) “relevant event” means—

(a)a person obtaining control of the company as mentioned in sub-paragraph (2)(a);

(b)a person obtaining control of the company as a result of a compromise or arrangement sanctioned by the court as mentioned in sub-paragraph (4);

(c)a person obtaining control of the company as a result of a non-UK company reorganisation arrangement which has become binding on the shareholders covered by it as mentioned in sub-paragraph (4A);

(d)a person who is bound or entitled to acquire shares in the company as mentioned in sub-paragraph (6) obtaining control of the company.

(6D)Provision made under sub-paragraph (6B) may not authorise the exercise of a share option, as the case may be—

(a)at a time outside the 6 month period mentioned in sub-paragraph (1), or

(b)at a time not covered by sub-paragraph (6).

(6E)The scheme may provide that a share option relating to shares in a company which is exercised during the period of 20 days ending with—

(a)the relevant date for the purposes of sub-paragraph (2), (4) or (4A), or

(b)the date on which any person becomes bound or entitled to acquire shares in the company as mentioned in sub-paragraph (6),

is to be treated as if it had been exercised in accordance with the provision made under sub-paragraph (1) or (6) (as the case may be).

(6F)If the scheme makes provision under sub-paragraph (6E) it must also provide that if—

(a)a share option is exercised in reliance on that provision in anticipation of—

(i)an event mentioned in sub-paragraph (2), (4) or (4A) occurring, or

(ii)a person becoming bound or entitled to acquire shares in the company as mentioned in sub-paragraph (6), but

(b)as the case may be—

(i)the relevant date for the purposes of sub-paragraph (2), (4) or (4A) does not fall during the period of 20 days beginning with the date on which the share option is exercised, or

(ii)the person does not become bound or entitled to acquire shares in the company by the end of the period of 20 days beginning with the date on which the share option is exercised,

the exercise of the share option is to be treated as having had no effect.

115(1)Paragraph 38 (exchanges of options on company reorganisation) is amended as follows.E+W+S+N.I.

(2)In sub-paragraph (2) after paragraph (b) omit “or” and insert—

(ba)obtains control of the scheme company as a result of a non-UK company reorganisation arrangement which has become binding on the shareholders covered by it; or.

(3)In sub-paragraph (3) after paragraph (b) omit “and” and insert—

(ba)where control is obtained in the way set out in sub-paragraph (2)(ba), within the period of 6 months beginning with the date on which the non-UK company reorganisation arrangement becomes binding on the shareholders covered by it, and.

116(1)Paragraph 39 (requirements about share options granted in exchange) is amended as follows.E+W+S+N.I.

(2)In sub-paragraph (4)—

(a)in paragraph (c) for “equal” substitute “ be substantially the same as ”, and

(b)in paragraph (d) for “equal to” substitute “ substantially the same as ”.

(3)After sub-paragraph (7) insert—

(8)For the purposes of this paragraph the market value of any shares is to be determined using a methodology agreed by Her Majesty's Revenue and Customs.

117For Part 8 substitute—E+W+S+N.I.

PART 8E+W+S+N.I.Notification of schemes, annual returns and enquiries
40ANotice of scheme to be given to HMRC

(1)For an SAYE option scheme to be a Schedule 3 SAYE option scheme, notice of the scheme must be given to Her Majesty's Revenue and Customs (“HMRC”).

(2)The notice must—

(a)be given by the scheme organiser,

(b)contain, or be accompanied by, such information as HMRC may require, and

(c)contain a declaration within sub-paragraph (3) made by such persons as HMRC may require.

(3)A declaration within this sub-paragraph is a declaration—

(a)that the requirements of Parts 2 to 7 of this Schedule are met in relation to the scheme, and

(b)if the declaration is made after the first date on which share options are granted under the scheme (“the first grant date”), that those requirements—

(i)were met in relation to those grants of share options, and

(ii)have otherwise been met in relation to the scheme at all times on or after the first grant date when share options granted under the scheme are outstanding.

(4)If notice is given under this paragraph in relation to an SAYE option scheme, for the purposes of the SAYE code the scheme is to be a Schedule 3 SAYE option scheme at all times on and after the relevant date (but not before that date).

(5)But if the notice is given after the initial notification deadline, the scheme is to be a Schedule 3 SAYE option scheme only from the beginning of the relevant tax year.

(6)For the purposes of this Part—

  • “the initial notification deadline” is 6 July in the tax year following that in which the first grant date falls,

  • outstanding”, in relation to a share option, means that the option—

    (a)

    has not been exercised, but

    (b)

    is capable of being exercised in accordance with the scheme (whether on the meeting of any condition or otherwise),

  • “the relevant date” is—

    (a)

    the date on which the declaration within sub-paragraph (3) is made, or

    (b)

    if that declaration is made after the first grant date, the first grant date, and

  • “the relevant tax year” is—

    (a)

    the tax year in which the notice under this paragraph is given, or

    (b)

    if that notice is given on or before 6 July in that tax year, the preceding tax year.

(7)Sub-paragraph (4) is subject to the following paragraphs of this Part.

40BAnnual returns

(1)This paragraph applies if notice is given in relation to an SAYE option scheme under paragraph 40A.

(2)The scheme organiser must give to HMRC a return for the tax year in which the relevant date falls and for each subsequent tax year (subject to sub-paragraph (9)).

(3)If paragraph 40A(5) applies in relation to the scheme, in sub-paragraph (2) the reference to the tax year in which the relevant date falls is to be read as a reference to the relevant tax year.

(4)A return for a tax year must—

(a)contain, or be accompanied by, such information as HMRC may require, and

(b)be given on or before 6 July in the following tax year.

(5)The information which may be required under sub-paragraph (4)(a) includes (in particular) information to enable HMRC to determine the liability to tax, including capital gains tax, of—

(a)any person who has participated in the scheme, or

(b)any other person whose liability to tax the operation of the scheme is relevant to.

(6)If during a tax year—

(a)an alteration is made in a key feature of the scheme, or

(b)variations are made under a provision made under paragraph 28(3) to take account of a variation in any share capital,

the return for the tax year must contain a declaration within sub-paragraph (7) made by such persons as HMRC may require.

(7)A declaration within this sub-paragraph is a declaration, as the case may be—

(a)that the alteration has, or

(b)that the variations have,

not caused the requirements of Parts 2 to 7 of this Schedule not to be met in relation to the scheme.

(8)For the purposes of sub-paragraph (6)(a) a “key feature” of a scheme is a provision of the scheme which is necessary in order for the requirements of Parts 2 to 7 of this Schedule to be met in relation to the scheme.

(9)A return is not required for any tax year following that in which the termination condition is met in relation to the scheme.

(10)For the purposes of this Part “the termination condition” is met in relation to a scheme when—

(a)all share options granted under the scheme—

(i)have been exercised, or

(ii)are no longer capable of being exercised in accordance with the scheme (because, for example, they have lapsed or been cancelled), and

(b)no more share options will be granted under the scheme.

(11)If the scheme organiser becomes aware that—

(a)anything which should have been included in, or should have accompanied, a return for a tax year was not included in, or did not accompany, the return,

(b)anything which should not have been included in, or should not have accompanied, a return for a tax year was included in, or accompanied, the return, or

(c)any other error or inaccuracy has occurred in relation to a return for a tax year,

the scheme organiser must give an amended return correcting the position to HMRC without delay.

40C(1)This paragraph applies if the scheme organiser fails to give a return for a tax year (containing, or accompanied by, all required information and declarations) on or before the date mentioned in paragraph 40B(4)(b) (“the date for delivery”).

(2)The scheme organiser is liable for a penalty of £100.

(3)If the scheme organiser's failure continues after the end of the period of 3 months beginning with the date for delivery, the scheme organiser is liable for a further penalty of £300.

(4)If the scheme organiser's failure continues after the end of the period of 6 months beginning with the date for delivery, the scheme organiser is liable for a further penalty of £300.

(5)The scheme organiser is liable for a further penalty under this sub-paragraph if—

(a)the scheme organiser's failure continues after the end of the period of 9 months beginning with the date for delivery,

(b)HMRC decide that such a penalty should be payable, and

(c)HMRC give notice to the scheme organiser specifying the period in respect of which the penalty is payable.

(The scheme organiser may be liable for more than one penalty under this sub-paragraph.)

(6)The penalty under sub-paragraph (5) is £10 for each day that the failure continues during the period specified in the notice under sub-paragraph (5)(c).

(7)The period specified in the notice under sub-paragraph (5)(c)—

(a)may begin earlier than the date on which the notice is given, but

(b)may not begin until after the end of the period mentioned in sub-paragraph (5)(a) or, if relevant, the end of any period specified in any previous notice under sub-paragraph (5)(c) given in relation to the failure.

(8)Liability for a penalty under this paragraph does not arise if the scheme organiser satisfies HMRC (or, on an appeal under paragraph 40K, the tribunal) that there is a reasonable excuse for its failure.

(9)For the purposes of sub-paragraph (8)—

(a)an insufficiency of funds is not a reasonable excuse, unless attributable to events outside the scheme organiser's control,

(b)where the scheme organiser relies on any other person to do anything, that is not a reasonable excuse unless the scheme organiser took reasonable care to avoid the failure, and

(c)where the scheme organiser had a reasonable excuse for the failure but the excuse ceased, the scheme organiser is to be treated as having continued to have the excuse if the failure is remedied without unreasonable delay after the excuse ceased.

40DNotices and returns to be given electronically etc

(1)A notice under paragraph 40A, and any information accompanying the notice, must be given electronically.

(2)A return under paragraph 40B, and any information accompanying the return, must be given electronically.

(3)But, if HMRC consider it appropriate to do so, HMRC may allow the scheme organiser to give a notice or return or any accompanying information in another way; and, if HMRC do so, the notice, return or information must be given in that other way.

(4)The Commissioners for Her Majesty's Revenue and Customs—

(a)must prescribe how notices, returns and accompanying information are to be given electronically;

(b)may make different provision for different cases or circumstances.

40E(1)This paragraph applies if a return under paragraph 40B, or any information accompanying such a return—

(a)is given otherwise than in accordance with paragraph 40D, or

(b)contains a material inaccuracy—

(i)which is careless or deliberate, or

(ii)which is not corrected as required by paragraph 40B(11).

(2)The scheme organiser is liable for a penalty of an amount decided by HMRC.

(3)The penalty must not exceed £5,000.

(4)For the purposes of sub-paragraph (1)(b)(i) an inaccuracy is careless if it is due to a failure by the scheme organiser to take reasonable care.

40FEnquiries

(1)This paragraph applies if notice is given in relation to an SAYE option scheme under paragraph 40A.

(2)HMRC may enquire into the scheme if HMRC give notice to the scheme organiser of HMRC's intention to do so no later than—

(a)6 July in the tax year following the tax year in which the initial notification deadline falls, or

(b)if the notice under paragraph 40A is given after the initial notification deadline, 6 July in the second tax year following the relevant tax year.

(3)HMRC may enquire into the scheme if HMRC give notice to the scheme organiser of HMRC's intention to do so no later than 12 months after the date on which a declaration within paragraph 40B(7) is given to HMRC.

(4)Sub-paragraph (5) applies if (at any time) HMRC have reasonable grounds for believing that requirements of Parts 2 to 7 of this Schedule—

(a)are not met in relation to the scheme, or

(b)have not been met in relation to the scheme.

(5)HMRC may enquire into the scheme if HMRC give notice to the scheme organiser of HMRC's intention to do so.

(6)Notice may be given, and an enquiry may be conducted, under sub-paragraph (2), (3) or (5) even though the termination condition is met in relation to the scheme.

40G(1)An enquiry under paragraph 40F(2), (3) or (5) is completed when HMRC give the scheme organiser a notice (a “closure notice”) stating—

(a)that HMRC have completed the enquiry, and

(b)that—

(i)paragraph 40H is to apply,

(ii)paragraph 40I is to apply, or

(iii)neither paragraph 40H nor paragraph 40I is to apply.

(2)If the scheme organiser receives notice under paragraph 40F(2), (3) or (5), the scheme organiser may make an application to the tribunal for a direction requiring a closure notice for the enquiry to be given within a specified period.

(3)The application is to be subject to the relevant provisions of Part 5 of TMA 1970 (see, in particular, section 48(2)(b) of that Act).

(4)The tribunal must give a direction unless satisfied that HMRC have reasonable grounds for not giving the closure notice within the specified period.

40H(1)This paragraph applies if HMRC decide—

(a)that requirements of Parts 2 to 7 of this Schedule—

(i)are not met in relation to the scheme, or

(ii)have not been met in relation to the scheme, and

(b)that the situation is, or was, so serious that this paragraph should apply.

(2)If this paragraph applies—

(a)the scheme is not to be a Schedule 3 SAYE option scheme with effect from—

(i)such relevant time as is specified in the closure notice, or

(ii)if no relevant time is specified, the time of the giving of the closure notice, and

(b)the scheme organiser is liable for a penalty of an amount decided by HMRC.

(3)Sub-paragraph (4) applies in relation to a share option granted under the scheme if the option—

(a)is granted at a time before that mentioned in sub-paragraph (2)(a)(i) or (ii) (as the case may be) when the scheme is a Schedule 3 SAYE option scheme, but

(b)is exercised at or after the time mentioned in sub-paragraph (2)(a)(i) or (ii) (as the case may be).

(4)For the purposes of section 519 (exemption in respect of exercise of share option) in its application to the option, the scheme is to be taken still to be a Schedule 3 SAYE option scheme at the time of the exercise of the option.

(5)The penalty under sub-paragraph (2)(b) must not exceed an amount equal to twice HMRC's reasonable estimate of—

(a)the total income tax for which persons who have been granted share options under the scheme have not been liable, or will not be liable in the future, and

(b)the total contributions under Part 1 of SSCBA 1992 or SSCB(NI)A 1992 for which any persons have not been liable, or will not be liable in the future,

in consequence of the scheme having been a Schedule 3 SAYE option scheme at any relevant time before the time mentioned in sub-paragraph (2)(a)(i) or (ii) (as the case may be).

(6)The liabilities covered by sub-paragraph (5) include liabilities for income tax or contributions which a person has not had, or will not have, in consequence of sub-paragraph (4).

(7)In this paragraph “relevant time” means any time before the giving of the closure notice when requirements of Parts 2 to 7 of this Schedule were not met in relation to the scheme.

40I(1)This paragraph applies if HMRC decide—

(a)that requirements of Parts 2 to 7 of this Schedule—

(i)are not met in relation to the scheme, or

(ii)have not been met in relation to the scheme, but

(b)that the situation is not, or was not, so serious that paragraph 40H should apply.

(2)If this paragraph applies, the scheme organiser—

(a)is liable for a penalty of an amount decided by HMRC, and

(b)must, no later than 90 days after the relevant day, secure that the requirements of Parts 2 to 7 of this Schedule are met in relation to the scheme.

(3)The penalty under sub-paragraph (2)(a) must not exceed £5,000.

(4)In sub-paragraph (2)(b) “the relevant day” means—

(a)the last day of the period in which notice of an appeal under paragraph 40K(2)(b) may be given, or

(b)if notice of such an appeal is given, the day on which the appeal is determined or withdrawn.

(5)Sub-paragraph (2)(b) does not apply if the termination condition was met in relation to the scheme before the closure notice was given or is met before the end of the 90 day period mentioned in sub-paragraph (2)(b).

(6)If the scheme organiser fails to comply with sub-paragraph (2)(b), HMRC may give the scheme organiser a notice stating that that is the case (a “default notice”).

(7)If the scheme organiser is given a default notice—

(a)the scheme is not to be a Schedule 3 SAYE option scheme with effect from—

(i)such relevant time as is specified in the default notice, or

(ii)if no relevant time is specified, the time of the giving of the default notice, and

(b)the scheme organiser is liable for a further penalty of an amount decided by HMRC.

(8)Sub-paragraph (9) applies in relation to a share option granted under the scheme if the option—

(a)is granted at a time before that mentioned in sub-paragraph (7)(a)(i) or (ii) (as the case may be) when the scheme is a Schedule 3 SAYE option scheme, but

(b)is exercised at or after the time mentioned in sub-paragraph (7)(a)(i) or (ii) (as the case may be).

(9)For the purposes of section 519 (exemption in respect of exercise of share option) in its application to the option, the scheme is to be taken still to be a Schedule 3 SAYE option scheme at the time of the exercise of the option.

(10)The penalty under sub-paragraph (7)(b) must not exceed an amount equal to twice HMRC's reasonable estimate of—

(a)the total income tax for which persons who have been granted share options under the scheme have not been liable, or will not be liable in the future, and

(b)the total contributions under Part 1 of SSCBA 1992 or SSCB(NI)A 1992 for which any persons have not been liable, or will not be liable in the future,

in consequence of the scheme having been a Schedule 3 SAYE option scheme at any relevant time before the time mentioned in sub-paragraph (7)(a)(i) or (ii) (as the case may be).

(11)The liabilities covered by sub-paragraph (10) include liabilities for income tax or contributions which a person has not had, or will not have, in consequence of sub-paragraph (9).

(12)In this paragraph “relevant time” means any time before the giving of the default notice when requirements of Parts 2 to 7 of this Schedule were not met in relation to the scheme.

40JAssessment of penalties

(1)This paragraph applies if the scheme organiser is liable for a penalty under this Part.

(2)HMRC must assess the penalty and notify the scheme organiser of the assessment.

(3)Subject to sub-paragraphs (4) and (5), the assessment must be made no later than 12 months after the date on which the scheme organiser becomes liable for the penalty.

(4)In the case of a penalty under paragraph 40E(1)(b), the assessment must be made no later than—

(a)12 months after the date on which HMRC become aware of the inaccuracy, and

(b)6 years after the date on which the scheme organiser becomes liable for the penalty.

(5)In the case of a penalty under paragraph 40H(2)(b) or 40I(2)(a) or (7)(b) where notice of appeal is given under paragraph 40K(2) or (3), the assessment must be made no later than 12 months after the date on which the appeal is determined or withdrawn.

(6)A penalty payable under this Part must be paid—

(a)no later than 30 days after the date on which the notice under sub-paragraph (2) is given to the scheme organiser, or

(b)if notice of appeal is given against the penalty under paragraph 40K(1) or (4), no later than 30 days after the date on which the appeal is determined or withdrawn.

(7)The penalty may be enforced as if it were corporation tax or, if the scheme organiser is not within the charge to corporation tax, income tax charged in an assessment and due and payable.

(8)Sections 100 to 103 of TMA 1970 do not apply to a penalty under this Part.

40KAppeals

(1)The scheme organiser may appeal against a decision of HMRC that the scheme organiser is liable for a penalty under paragraph 40C or 40E.

(2)The scheme organiser may appeal against—

(a)a decision of HMRC mentioned in paragraph 40H(1) or a decision of HMRC to specify, or not to specify, a relevant time in the closure notice;

(b)a decision of HMRC mentioned in paragraph 40I(1).

(3)The scheme organiser may appeal against a decision of HMRC—

(a)to give the scheme organiser a default notice under paragraph 40I;

(b)to specify, or not to specify, a relevant time in the default notice.

(4)The scheme organiser may appeal against a decision of HMRC as to the amount of a penalty payable by the scheme organiser under this Part.

(5)Notice of appeal must be given to HMRC no later than 30 days after the date on which—

(a)in the case of an appeal under sub-paragraph (1) or (4), the notice under paragraph 40J(2) is given to the scheme organiser;

(b)in the case of an appeal under sub-paragraph (2), the closure notice is given;

(c)in the case of an appeal under sub-paragraph (3), the default notice is given.

(6)On an appeal under sub-paragraph (1) or (3)(a) which is notified to the tribunal, the tribunal may affirm or cancel the decision.

(7)On an appeal under sub-paragraph (2) or (3)(b) which is notified to the tribunal, the tribunal may—

(a)affirm or cancel the decision, or

(b)substitute for the decision another decision which HMRC had power to make.

(8)On an appeal under sub-paragraph (4) which is notified to the tribunal, the tribunal may—

(a)affirm the amount of the penalty decided, or

(b)substitute another amount for that amount.

(9)Subject to this paragraph and paragraph 40J, the provisions of Part 5 of TMA 1970 relating to appeals have effect in relation to an appeal under this paragraph as they have effect in relation to an appeal against an assessment to corporation tax or, if the scheme organiser is not within the charge to corporation tax, income tax.

118(1)Paragraph 45 (power to require information) is amended as follows.E+W+S+N.I.

(2)For sub-paragraph (1) substitute—

(1)An officer of Revenue and Customs may by notice require a person to provide the officer with any information—

(a)which the officer reasonably requires for the performance of any functions of Her Majesty's Revenue and Customs or an officer of Revenue and Customs under the SAYE code, and

(b)which the person to whom the notice is addressed has or can reasonably obtain.

(3)In sub-paragraph (2)(a)—

(a)for sub-paragraph (i) substitute—

(i)to check anything contained in a notice under paragraph 40A or a return under paragraph 40B or to check any information accompanying such a notice or return, or”, and

(b)in sub-paragraph (ii) after “scheme” insert “ or any other person whose liability to tax the operation of a scheme is relevant to ”.

119After paragraph 47 insert—E+W+S+N.I.

Non-UK company reorganisation arrangementsE+W+S+N.I.

47A(1)For the purposes of the SAYE code a “non-UK company reorganisation arrangement” is an arrangement made in relation to a company under the law of a territory outside the United Kingdom—

(a)which gives effect to a reorganisation of the company's share capital by the consolidation of shares of different classes, or by the division of shares into shares of different classes, or by both of those methods, and

(b)which is approved by a resolution of members of the company.

(2)A resolution does not count for the purposes of sub-paragraph (1)(b) unless the members who vote in favour of approving the arrangement represent more than 50% of the total voting rights of all the members having the right to vote on the issue.

120In paragraph 49 (index of defined expressions)—E+W+S+N.I.

(a)omit the entry for “approved”, and

(b)at the appropriate places insert—

non-UK company reorganisation arrangementparagraph 47A
Schedule 3 SAYE option schemeparagraph 1 and Part 8 of this Schedule.

Other amendments: TCGA 1992E+W+S+N.I.

121TCGA 1992 is amended as follows.E+W+S+N.I.

122(1)Section 105A (shares acquired on same day: election for alternative treatment) is amended as follows.E+W+S+N.I.

(2)For “approved-scheme” (in all places) substitute “ tax-advantaged-scheme ”.

(3)In subsection (1)(b)(ii) omit “approved”.

123In section 105B (provision supplementary to section 105A) in subsections (7) and (8) for “approved-scheme” substitute “ tax-advantaged-scheme ”.E+W+S+N.I.

124In section 238A (share schemes and share incentives) in subsection (2)(b) for “approved” substitute “ Schedule 3 ”.E+W+S+N.I.

125Part 2 of Schedule 7D (SAYE option schemes) is amended as follows.E+W+S+N.I.

126In the title for “Approved” substitute Schedule 3.E+W+S+N.I.

127In paragraph 9 (introduction) in sub-paragraphs (1) and (2) omit “approved”.E+W+S+N.I.

128(1)Paragraph 10 (market value rule not to apply) is amended as follows.E+W+S+N.I.

(2)In sub-paragraph (1)—

(a)in paragraph (a)(i) for “an approved” substitute “ a Schedule 3 ”, and

(b)in paragraph (b) for “approved” substitute “ a Schedule 3 SAYE option scheme ”.

(3)For sub-paragraph (3) substitute—

(3)Sub-paragraph (3A) applies for the purposes of sub-paragraph (1)(b) if—

(a)the SAYE option scheme is not to be a Schedule 3 SAYE option scheme by virtue of paragraph 40H or 40I of Schedule 3 to ITEPA 2003, and

(b)the option was granted before, but exercised at or after, the time mentioned in paragraph 40H(2)(a)(i) or (ii) or 40I(7)(a)(i) or (ii) of that Schedule (as the case may be).

(3A)The scheme is to be taken still to be a Schedule 3 SAYE option scheme when the option is exercised.

Other amendments: ITEPA 2003, Part 4 of FA 2004, ITTOIA 2005 and CTA 2009E+W+S+N.I.

129ITEPA 2003 is amended as follows.E+W+S+N.I.

130In section 227 (scope of Part 4) in subsection (4)(e) omit “approved”.E+W+S+N.I.

131In section 417 (scope of Part 7) in subsection (2), in the entry for Chapter 7, omit “approved”.E+W+S+N.I.

132In section 431A (provision relating to restricted securities) in subsection (2)(b) for “an approved” substitute “ a Schedule 3 ”.E+W+S+N.I.

133In section 473 (introduction to taxation of securities options) in subsection (4)(a) for “approved” substitute “ Schedule 3 ”.E+W+S+N.I.

134In section 476 (charge on occurrence of chargeable event) in subsection (6), in the entry for section 519, omit “approved”.E+W+S+N.I.

135In section 549 (application of Chapter 11 of Part 7) in subsection (2)(b) omit “approved”.E+W+S+N.I.

136(1)Section 554E (exclusions under Part 7A) is amended as follows.E+W+S+N.I.

(2)In subsection (1)(b) for “an approved” substitute “ a Schedule 3 ”.

(3)In subsection (3)(a)(ii) and (b)(ii) for the first “an approved” substitute “ a Schedule 3 ”.

(4)In subsection (4)(a) and (b) for the second “approved” substitute “ Schedule 3 ”.

137In section 697 (PAYE: enhancing the value of an asset) in subsection (4)—E+W+S+N.I.

(a)in paragraph (a) omit the words from “Schedule 3” to the second “or”,

(b)after paragraph (a) insert—

(aa)any shares acquired by the employee under a scheme which is a Schedule 3 SAYE option scheme (see Schedule 3),, and

(c)in paragraph (b) for “such a scheme” substitute “ a scheme mentioned in any of the preceding paragraphs ”.

138In section 701 (PAYE: meaning of “asset”) in subsection (2)(c)—E+W+S+N.I.

(a)in sub-paragraph (i) omit “Schedule 3 (approved SAYE option schemes) or”, and

(b)after sub-paragraph (i) insert—

(iza)any shares acquired by the employee under a scheme which is a Schedule 3 SAYE option scheme (see Schedule 3),.

139In section 195 of FA 2004 (pensions: transfer of certain shares to be treated as payment of contribution) in subsection (5), in the definition of “SAYE option scheme”, omit “approved”.E+W+S+N.I.

140(1)Section 94A of ITTOIA 2005 (costs of setting up SAYE option scheme or CSOP scheme) is amended as follows.E+W+S+N.I.

(2)In subsection (1)—

(a)in paragraph (a) omit “that is approved by an officer of Revenue and Customs”, and

(b)omit paragraph (b) and the “and” before it.

(3)In subsection (2)—

(a)at the beginning of paragraph (a) insert “ Schedule 3 ”,

(b)at the beginning of paragraph (b) insert “ Schedule 4 ”, and

(c)omit the final sentence.

(4)In subsection (4) for “approval is given” (in both places) substitute “ relevant date falls ”.

(5)After subsection (4) insert—

(4A)In subsection (4) “the relevant date”—

(a)in relation to a Schedule 3 SAYE option scheme, has the meaning given in paragraph 40A(6) of Schedule 3 to ITEPA 2003, and

(b)in relation to a Schedule 4 CSOP scheme, has the meaning given in paragraph 28A(6) of Schedule 4 to ITEPA 2003.

141(1)Section 703 of ITTOIA 2005 (SAYE interest: meaning of “certified SAYE savings arrangement”) is amended as follows.E+W+S+N.I.

(2)In subsection (2)(b) for “an approved” substitute “ a Schedule 3 ”.

(3)In subsection (3) for the definition of “SAYE option scheme” substitute—

Schedule 3 SAYE option scheme” has the meaning given in Schedule 3 to ITEPA 2003.

142(1)Section 999 of CTA 2009 (deduction for costs of setting up SAYE option scheme etc) is amended as follows.E+W+S+N.I.

(2)In subsection (1)—

(a)in paragraph (a) omit “that is approved by an officer of Revenue and Customs”, and

(b)omit paragraph (b) and the “and” before it.

(3)In subsection (2)—

(a)at the beginning of paragraph (a) insert “ Schedule 3 ”,

(b)at the beginning of paragraph (b) insert “ Schedule 4 ”, and

(c)omit the final sentence.

(4)In subsection (6) for “approval is given” (in all places) substitute “ relevant date falls ”.

(5)After subsection (6) insert—

(6A)In subsection (6) “the relevant date”—

(a)in relation to a Schedule 3 SAYE option scheme, has the meaning given in paragraph 40A(6) of Schedule 3 to ITEPA 2003, and

(b)in relation to a Schedule 4 CSOP scheme, has the meaning given in paragraph 28A(6) of Schedule 4 to ITEPA 2003.

Other amendments: Individual Savings Account Regulations 1998 (S.I. 1998/1870)E+W+S+N.I.

143The Individual Savings Account Regulations 1998 are amended as follows.E+W+S+N.I.

144In regulation 2 (interpretation) in paragraph (1)(a)—E+W+S+N.I.

(a)omit the definition of “approved SAYE option scheme”, and

(b)at the appropriate place insert—

Schedule 3 SAYE option scheme” shall be construed in accordance with the SAYE code (see section 516(3) of ITEPA 2003);.

145In regulation 7 (qualifying investments) in paragraphs (2)(h)(i) and (10)(a) for “an approved” substitute “ a Schedule 3 ”.E+W+S+N.I.

Commencement and transitional provisionE+W+S+N.I.

146This Part is treated as having come into force on 6 April 2014.E+W+S+N.I.

147Paragraphs 148 to 157 below apply in relation to an SAYE option scheme established before 6 April 2014.E+W+S+N.I.

148(1)If the scheme was an approved SAYE option scheme immediately before 6 April 2014, this paragraph applies to any provision which the scheme contains immediately before that date and which requires the approval or agreement of Her Majesty's Revenue and Customs or an officer of Revenue and Customs to be obtained in relation to any matter.E+W+S+N.I.

(2)On and after 6 April 2014, the provision is to have effect without the requirement for the approval or agreement, unless the requirement reflects a requirement for approval or agreement set out in Schedule 3 to ITEPA 2003 (as amended by this Part).

149(1)If the scheme was an approved SAYE option scheme immediately before 6 April 2014, the amendment made by paragraph 108 above has effect in relation to the scheme only if, and when, there is an alteration in a key feature of the scheme on or after that date.E+W+S+N.I.

(2)In sub-paragraph (1) “key feature” has the meaning given in paragraph 40B(8) of Schedule 3 to ITEPA 2003 (as inserted by paragraph 117 above).

150If the scheme was an approved SAYE option scheme immediately before 6 April 2014, on and after that date the scheme has effect with any modifications needed to reflect the amendment made by paragraph 110 above.E+W+S+N.I.

151(1)This paragraph applies if, immediately before 6 April 2014, the scheme was an approved SAYE option scheme which contains provision authorised by paragraph 28(3) of Schedule 3 to ITEPA 2003.E+W+S+N.I.

(2)On and after 6 April 2014, the scheme has effect with any modifications needed to reflect the amendments made by paragraph 111 above.

152(1)The amendment made by paragraph 112 above has no effect in relation to share options granted before 6 April 2014 under the scheme.E+W+S+N.I.

(2)If the scheme was an approved SAYE option scheme immediately before 6 April 2014, on and after that date the scheme has effect with any modifications needed to reflect the amendment made by paragraph 112 above (subject to sub-paragraph (1) of this paragraph).

153(1)The amendments made by paragraph 113 above have no effect in a case where P ceases to hold the scheme-related employment before 6 April 2014.E+W+S+N.I.

(2)If immediately before 6 April 2014 the scheme was an approved SAYE option scheme which contains provision authorised by paragraph 34(5) of Schedule 3 to ITEPA 2003, on and after that date the scheme has effect with any modifications needed to reflect the amendments made by paragraph 113 above (subject to sub-paragraph (1) of this paragraph).

154(1)This paragraph applies if, immediately before 6 April 2014, the scheme was an approved SAYE option scheme which contains provision authorised by paragraph 37(1) of Schedule 3 to ITEPA 2003.E+W+S+N.I.

(2)On and after 6 April 2014, the scheme has effect with any modifications needed to reflect the amendment made by paragraph 114(3) above.

155(1)Paragraph 40A of Schedule 3 to ITEPA 2003 (as inserted by paragraph 117 above) has effect in relation to the scheme—E+W+S+N.I.

(a)as if, at the end of sub-paragraph (1), the words “on or before 6 July 2015” were inserted,

(b)if the first date on which share options are granted under the scheme falls before 6 April 2014—

(i)as if, in sub-paragraph (3)(b), the reference to that date were a reference to 6 April 2014 and, accordingly, as if all references in paragraph 40A to the first grant date were references to 6 April 2014,

(ii)as if sub-paragraph (3)(b)(i) were omitted, and

(iii)as if, in sub-paragraph (3)(b)(ii), “otherwise” were omitted,

(c)as if sub-paragraph (5) were omitted, and

(d)as if, in sub-paragraph (6), the definitions of “the initial notification deadline” and “the relevant tax year” were omitted.

(2)But the scheme cannot be a Schedule 3 SAYE option scheme if, before 6 April 2014, an application for its approval was refused or an officer of Revenue and Customs decided to withdraw its approval.

(3)Sub-paragraph (2) is without prejudice to the outcome of any appeal under paragraph 41 or 44 of Schedule 3 to ITEPA 2003 against the refusal or decision to withdraw approval.

(4)The amendments made by this Part do not affect any right of appeal under paragraph 41 or 44 of Schedule 3 to ITEPA 2003 against a refusal or decision made before 6 April 2014 in relation to the scheme.

(5)Sub-paragraphs (6) and (7) apply if a share option was granted before 6 April 2014 under the scheme at a time when the scheme was an approved SAYE option scheme.

(6)On and after 6 April 2014, the SAYE code has effect in relation to the option as if it were granted under the scheme at a time when the scheme was a Schedule 3 SAYE option scheme (even if no notice is given under paragraph 40A of Schedule 3 to ITEPA 2003 in relation to the scheme or the scheme cannot be a Schedule 3 SAYE option scheme because of sub-paragraph (2) of this paragraph).

(7)If no notice is given under paragraph 40A of Schedule 3 to ITEPA 2003 in relation to the scheme, paragraph 40B of that Schedule (as inserted by paragraph 117 above) is to apply in relation to the scheme despite no notice being given; and, for this purpose, the relevant date is to be taken to be 6 April 2014.

(8)Sub-paragraph (9) applies in relation to a share option granted before 6 April 2014 under the scheme at a time when the scheme was an approved SAYE option scheme if—

(a)no notice is given under paragraph 40A of Schedule 3 to ITEPA 2003 in relation to the scheme or the scheme cannot be a Schedule 3 SAYE option scheme because of sub-paragraph (2) of this paragraph, and

(b)the option is exercised on or after 6 April 2014.

(9)The scheme is to be taken to be a Schedule 3 SAYE option scheme at the time of the exercise of the option for the purposes of the following provisions in their application to the option—

(a)section 519 of ITEPA 2003 (exemption in respect of exercise of share option), and

(b)paragraph 10(1)(b) of Schedule 7D to TCGA 1992 (market value rule not to apply).

(10)In relation to the scheme—

(a)paragraph 40F of Schedule 3 to ITEPA 2003 (as inserted by paragraph 117 above) has effect as if for sub-paragraph (2) there were substituted—

(2)HMRC may enquire into the scheme if HMRC give notice to the scheme organiser of HMRC's intention to do so no later than 6 July 2016., and

(b)the cases covered by paragraphs 40F(4)(b), 40H(1)(a)(ii) and 40I(1)(a)(ii) of Schedule 3 to ITEPA 2003 (as inserted by paragraph 117 above) include cases in which requirements of Parts 2 to 7 of that Schedule were not met before 6 April 2014.

156If the scheme was an approved SAYE option scheme before 6 April 2014, the amendments made by this Part do not affect the deductions which may be made in relation to the scheme under section 94A of ITTOIA 2005 or section 999 of CTA 2009 (deduction for costs of setting up scheme) if they would otherwise do so.E+W+S+N.I.

157The amendments made by paragraph 118 above do not affect a notice given in relation to the scheme under paragraph 45 of Schedule 3 to ITEPA 2003 before 6 April 2014.E+W+S+N.I.

PART 3E+W+S+N.I.CSOP schemes

Amendments to Chapter 8 of Part 7 of ITEPA 2003E+W+S+N.I.

158Chapter 8 of Part 7 of ITEPA 2003 (employment income: income and exemptions relating to securities: CSOP schemes) is amended as follows.E+W+S+N.I.

159In the title omit “Approved”.E+W+S+N.I.

160(1)Section 521 (introduction to CSOP schemes) is amended as follows.E+W+S+N.I.

(2)In the heading omit “Approved”.

(3)In subsection (1)—

(a)omit paragraph (a), and

(b)in paragraph (b) for “those” substitute “ CSOP schemes which are Schedule 4 CSOP ”.

(4)Omit subsection (2).

(5)In subsection (3)(c) for “approved” substitute “ Schedule 4 ”.

(6)In subsection (4)—

(a)omit the definition of “approved”, and

(b)after the definition of “CSOP scheme” insert—

Schedule 4 CSOP scheme” is to be read in accordance with paragraph 1 and Part 7 of Schedule 4;.

161In section 522 (share options to which Chapter applies) in subsection (1)(a) for “an approved” substitute “ a Schedule 4 ”.E+W+S+N.I.

162(1)Section 524 (no charge in respect of exercise of option) is amended as follows.E+W+S+N.I.

(2)In subsection (1)(a) for “approved” substitute “ a Schedule 4 CSOP scheme ”.

(3)In subsection (2E)—

(a)in paragraph (a) for “approved” substitute “ a Schedule 4 CSOP scheme ”,

(b)in paragraphs (c), (d) and (f) after sub-paragraph (ii) omit “or” and insert—

(iia)the non-UK company reorganisation arrangement, or, and

(c)in paragraph (e) after sub-paragraph (ii) omit “or” and insert—

(iia)the making of any non-UK company reorganisation arrangement which would fall within subsection (2L), or.

(4)In subsection (2L)—

(a)after “arrangement” insert “ or a non-UK company reorganisation arrangement ”, and

(b)in paragraph (b) for “an approved” substitute “ a Schedule 4 ”.

163Schedule 4 is amended as follows.E+W+S+N.I.

164In the title omit “Approved”.E+W+S+N.I.

165In the cross-heading before paragraph 1 for “Approval of” substitute Introduction to Schedule 4.E+W+S+N.I.

166(1)Paragraph 1 (introduction) is amended as follows.E+W+S+N.I.

(2)For sub-paragraphs (1) and (2) substitute—

(A1)For the purposes of the CSOP code a CSOP scheme is a Schedule 4 CSOP scheme if the requirements of Parts 2 to 6 of this Schedule are met in relation to the scheme.

(3)For sub-paragraph (4) substitute—

(4)Sub-paragraph (A1) is subject to Part 7 of this Schedule which—

(a)requires notice of a scheme to be given to Her Majesty's Revenue and Customs (“HMRC”) in order for the scheme to be a Schedule 4 CSOP scheme (see paragraph 28A(1)),

(b)provides for a scheme in relation to which such notice is given to be a Schedule 4 CSOP scheme (see paragraph 28A(4)), and

(c)gives power to HMRC to enquire into a scheme and to decide that the scheme should not be a Schedule 4 CSOP scheme (see paragraphs 28F to 28I).

167In the title for Part 2 omit “for approval”.E+W+S+N.I.

168In the cross-heading before paragraph 4 omit “for approval”.E+W+S+N.I.

169For paragraph 5 (general restriction on contents of scheme) substitute—E+W+S+N.I.

5(1)The purpose of the scheme must be to provide, in accordance with this Schedule, benefits for employees and directors in the form of share options.

(2)The scheme must not provide benefits to employees or directors otherwise than in accordance with this Schedule.

(3)For example, the scheme must not provide cash as an alternative to share options or shares which might otherwise be acquired by the exercise of share options.

170In paragraph 6 (limit on value of shares subject to options) in sub-paragraph (1)(b) for “approved” substitute “ Schedule 4 ”.E+W+S+N.I.

171In paragraph 15 (requirements relating to shares that may be subject to share options) after sub-paragraph (1) insert—E+W+S+N.I.

(1A)Sub-paragraph (1) and the other paragraphs of this Part are subject to paragraph 25A(7B).

172In paragraph 21 (requirements relating to share options) in sub-paragraph (1) before the entry for paragraph 22 insert— “ paragraph 21A (general requirements as to terms of option), ”.E+W+S+N.I.

173After paragraph 21 insert—E+W+S+N.I.

General requirements as to terms of optionE+W+S+N.I.

21A(1)The following terms of a share option which is granted under the scheme must be stated at the time the option is granted—

(a)the price at which shares may be acquired by the exercise of the option,

(b)the number and description of the shares which may be acquired by the exercise of the option,

(c)the restrictions to which those shares may be subject,

(d)the times at which the option may be exercised (in whole or in part), and

(e)the circumstances under which the option will lapse or be cancelled (in whole or in part), including any conditions to which the exercise of the option is subject (in whole or in part).

(2)Terms stated as required by sub-paragraph (1) may be varied after the grant of the option, but—

(a)in the case of the price, only as provided for in paragraph 22,

(b)in the case of the number or description of shares, only as provided for in paragraph 22 or by way of a mechanism which is stated at the time the option is granted, and

(c)in any other case, only by way of a mechanism which is stated at the time the option is granted.

(3)Any mechanism stated for the purposes of sub-paragraph (2)(b) or (c) must be applied in a way that is fair and reasonable.

(4)Terms stated as required by sub-paragraph (1), and any mechanism stated for the purposes of sub-paragraph (2)(b) or (c), must be notified to the participant as soon as practicable after the grant of the option.

174(1)Paragraph 22 (requirements as to price for acquisition of shares etc) is amended as follows.E+W+S+N.I.

(2)In sub-paragraph (1)—

(a)omit paragraph (a) and the “and” after it, and

(b)in paragraph (b) for “that time” substitute “ the time when the option is granted ”.

(3)After sub-paragraph (3) insert—

(3A)If the scheme makes provision under sub-paragraph (3), the variation or variations made under that provision to take account of a variation in any share capital must (in particular) secure—

(a)that the total market value of the shares which may be acquired by the exercise of the share option is immediately after the variation or variations substantially the same as what it was immediately before the variation or variations, and

(b)that the total price at which those shares may be acquired is immediately after the variation or variations substantially the same as what it was immediately before the variation or variations.

(3B)Sub-paragraph (3) does not authorise any variation which would result in the requirements of the other paragraphs of this Schedule not being met in relation to the share option.

(4)Omit sub-paragraph (4).

(5)Omit sub-paragraph (5).

175(1)Paragraph 25 (exercise of options: death) is amended as follows.E+W+S+N.I.

(2)Make the existing text sub-paragraph (1).

(3)In the new sub-paragraph (1) omit “but not later than 12 months after that date”.

(4)After the new sub-paragraph (1) insert—

(2)Provision made under sub-paragraph (1) must permit the exercise of the options at any time on or after the date of death but not later than 12 months after that date.

176(1)Paragraph 25A (exercise of options: company events) is amended as follows.E+W+S+N.I.

(2)In sub-paragraph (1) for “or (6)” substitute “ , (6) or (6A) ”.

(3)In sub-paragraph (6)(b) for “an approved” substitute “ a Schedule 4 ”.

(4)After sub-paragraph (6) insert—

(6A)The relevant date for the purposes of this sub-paragraph is the date on which a non-UK company reorganisation arrangement applicable to or affecting—

(a)all the ordinary share capital of the company or all the shares of the same class as the shares to which the option relates, or

(b)all the shares, or all the shares of that same class, which are held by a class of shareholders identified otherwise than by reference to their employments or directorships or their participation in a Schedule 4 CSOP scheme,

becomes binding on the shareholders covered by it.

(5)After sub-paragraph (7) insert—

(7A)Sub-paragraphs (7B) to (7F) apply if the scheme makes provision under sub-paragraph (1) or (7).

(7B)The scheme may provide that if, in consequence of a relevant event, shares in the company to which a share option relates no longer meet the requirements of Part 4 of this Schedule, the share option may be exercised under the provision made under sub-paragraph (1) or (7) (as the case may be) no later than 20 days after the day on which the relevant event occurs, notwithstanding that the shares no longer meet the requirements of Part 4 of this Schedule.

(7C)In sub-paragraph (7B) “relevant event” means—

(a)a person obtaining control of the company as mentioned in sub-paragraph (2)(a);

(b)a person obtaining control of the company as a result of a compromise or arrangement sanctioned by the court as mentioned in sub-paragraph (6);

(c)a person obtaining control of the company as a result of a non-UK company reorganisation arrangement which has become binding on the shareholders covered by it as mentioned in sub-paragraph (6A);

(d)a person who is bound or entitled to acquire shares in the company as mentioned in sub-paragraph (7) obtaining control of the company.

(7D)Provision made under sub-paragraph (7B) may not authorise the exercise of a share option, as the case may be—

(a)at a time outside the 6 month period mentioned in sub-paragraph (1), or

(b)at a time not covered by sub-paragraph (7).

(7E)The scheme may provide that a share option relating to shares in a company which is exercised during the period of 20 days ending with—

(a)the relevant date for the purposes of sub-paragraph (2), (6) or (6A), or

(b)the date on which any person becomes bound or entitled to acquire shares in the company as mentioned in sub-paragraph (7),

is to be treated as if it had been exercised in accordance with the provision made under sub-paragraph (1) or (7) (as the case may be).

(7F)If the scheme makes provision under sub-paragraph (7E) it must also provide that if—

(a)a share option is exercised in reliance on that provision in anticipation of—

(i)an event mentioned in sub-paragraph (2), (6) or (6A) occurring, or

(ii)a person becoming bound or entitled to acquire shares in the company as mentioned in sub-paragraph (7), but

(b)as the case may be—

(i)the relevant date for the purposes of sub-paragraph (2), (6) or (6A) does not fall during the period of 20 days beginning with the date on which the share option is exercised, or

(ii)the person does not become bound or entitled to acquire shares in the company by the end of the period of 20 days beginning with the date on which the share option is exercised,

the exercise of the share option is to be treated as having had no effect.

177(1)Paragraph 26 (exchanges of options on company reorganisation) is amended as follows.E+W+S+N.I.

(2)In sub-paragraph (2) after paragraph (b) insert—

(ba)obtains control of the scheme company as a result of a non-UK company reorganisation arrangement which has become binding on the shareholders covered by it; or.

(3)In sub-paragraph (3) after paragraph (b) omit “and” and insert—

(ba)where control is obtained in the way set out in sub-paragraph (2)(ba), within the period of 6 months beginning with the date on which the non-UK company reorganisation arrangement becomes binding on the shareholders covered by it, and.

178(1)Paragraph 27 (requirements about share options granted in exchange) is amended as follows.E+W+S+N.I.

(2)In sub-paragraph (4)—

(a)in paragraph (c) for “equal” substitute “ be substantially the same as ”, and

(b)in paragraph (d) for “equal to” substitute “ substantially the same as ”.

(3)After sub-paragraph (7) insert—

(8)For the purposes of this paragraph the market value of any shares is to be determined using a methodology agreed by Her Majesty's Revenue and Customs.

179For Part 7 substitute—E+W+S+N.I.

PART 7E+W+S+N.I.Notification of schemes, annual returns and enquiries
Notice of scheme to be given to HMRCE+W+S+N.I.

28A(1)For a CSOP scheme to be a Schedule 4 CSOP scheme, notice of the scheme must be given to Her Majesty's Revenue and Customs (“HMRC”).

(2)The notice must—

(a)be given by the scheme organiser,

(b)contain, or be accompanied by, such information as HMRC may require, and

(c)contain a declaration within sub-paragraph (3) made by such persons as HMRC may require.

(3)A declaration within this sub-paragraph is a declaration—

(a)that the requirements of Parts 2 to 6 of this Schedule are met in relation to the scheme, and

(b)if the declaration is made after the first date on which share options are granted under the scheme (“the first grant date”), that those requirements—

(i)were met in relation to those grants of share options, and

(ii)have otherwise been met in relation to the scheme at all times on or after the first grant date when share options granted under the scheme are outstanding.

(4)If notice is given under this paragraph in relation to a CSOP scheme, for the purposes of the CSOP code the scheme is to be a Schedule 4 CSOP scheme at all times on and after the relevant date (but not before that date).

(5)But if the notice is given after the initial notification deadline, the scheme is to be a Schedule 4 CSOP scheme only from the beginning of the relevant tax year.

(6)For the purposes of this Part—

  • “the initial notification deadline” is 6 July in the tax year following that in which the first grant date falls,

  • outstanding”, in relation to a share option, means that the option—

    (a)

    has not been exercised, but

    (b)

    is capable of being exercised in accordance with the scheme (whether on the meeting of any condition or otherwise),

  • “the relevant date” is—

    (a)

    the date on which the declaration within sub-paragraph (3) is made, or

    (b)

    if that declaration is made after the first grant date, the first grant date, and

  • “the relevant tax year” is—

    (a)

    the tax year in which the notice under this paragraph is given, or

    (b)

    if that notice is given on or before 6 July in that tax year, the preceding tax year.

(7)Sub-paragraph (4) is subject to the following paragraphs of this Part.

Annual returnsE+W+S+N.I.

28B(1)This paragraph applies if notice is given in relation to a CSOP scheme under paragraph 28A.

(2)The scheme organiser must give to HMRC a return for the tax year in which the relevant date falls and for each subsequent tax year (subject to sub-paragraph (9)).

(3)If paragraph 28A(5) applies in relation to the scheme, in sub-paragraph (2) the reference to the tax year in which the relevant date falls is to be read as a reference to the relevant tax year.

(4)A return for a tax year must—

(a)contain, or be accompanied by, such information as HMRC may require, and

(b)be given on or before 6 July in the following tax year.

(5)The information which may be required under sub-paragraph (4)(a) includes (in particular) information to enable HMRC to determine the liability to tax, including capital gains tax, of—

(a)any person who has participated in the scheme, or

(b)any other person whose liability to tax the operation of the scheme is relevant to.

(6)If during a tax year—

(a)an alteration is made in a key feature of the scheme, or

(b)variations are made under a provision made under paragraph 22(3) to take account of a variation in any share capital,

the return for the tax year must contain a declaration within sub-paragraph (7) made by such persons as HMRC may require.

(7)A declaration within this sub-paragraph is a declaration, as the case may be—

(a)that the alteration has, or

(b)that the variations have,

not caused the requirements of Parts 2 to 6 of this Schedule not to be met in relation to the scheme.

(8)For the purposes of sub-paragraph (6)(a) a “key feature” of a scheme is a provision of the scheme which is necessary in order for the requirements of Parts 2 to 6 of this Schedule to be met in relation to the scheme.

(9)A return is not required for any tax year following that in which the termination condition is met in relation to the scheme.

(10)For the purposes of this Part “the termination condition” is met in relation to a scheme when—

(a)all share options granted under the scheme—

(i)have been exercised, or

(ii)are no longer capable of being exercised in accordance with the scheme (because, for example, they have lapsed or been cancelled), and

(b)no more share options will be granted under the scheme.

(11)If the scheme organiser becomes aware that—

(a)anything which should have been included in, or should have accompanied, a return for a tax year was not included in, or did not accompany, the return,

(b)anything which should not have been included in, or should not have accompanied, a return for a tax year was included in, or accompanied, the return, or

(c)any other error or inaccuracy has occurred in relation to a return for a tax year,

the scheme organiser must give an amended return correcting the position to HMRC without delay.

28C(1)This paragraph applies if the scheme organiser fails to give a return for a tax year (containing, or accompanied by, all required information and declarations) on or before the date mentioned in paragraph 28B(4)(b) (“the date for delivery”).

(2)The scheme organiser is liable for a penalty of £100.

(3)If the scheme organiser's failure continues after the end of the period of 3 months beginning with the date for delivery, the scheme organiser is liable for a further penalty of £300.

(4)If the scheme organiser's failure continues after the end of the period of 6 months beginning with the date for delivery, the scheme organiser is liable for a further penalty of £300.

(5)The scheme organiser is liable for a further penalty under this sub-paragraph if—

(a)the scheme organiser's failure continues after the end of the period of 9 months beginning with the date for delivery,

(b)HMRC decide that such a penalty should be payable, and

(c)HMRC give notice to the scheme organiser specifying the period in respect of which the penalty is payable.

(The scheme organiser may be liable for more than one penalty under this sub-paragraph.)

(6)The penalty under sub-paragraph (5) is £10 for each day that the failure continues during the period specified in the notice under sub-paragraph (5)(c).

(7)The period specified in the notice under sub-paragraph (5)(c)—

(a)may begin earlier than the date on which the notice is given, but

(b)may not begin until after the end of the period mentioned in sub-paragraph (5)(a) or, if relevant, the end of any period specified in any previous notice under sub-paragraph (5)(c) given in relation to the failure.

(8)Liability for a penalty under this paragraph does not arise if the scheme organiser satisfies HMRC (or, on an appeal under paragraph 28K, the tribunal) that there is a reasonable excuse for its failure.

(9)For the purposes of sub-paragraph (8)—

(a)an insufficiency of funds is not a reasonable excuse, unless attributable to events outside the scheme organiser's control,

(b)where the scheme organiser relies on any other person to do anything, that is not a reasonable excuse unless the scheme organiser took reasonable care to avoid the failure, and

(c)where the scheme organiser had a reasonable excuse for the failure but the excuse ceased, the scheme organiser is to be treated as having continued to have the excuse if the failure is remedied without unreasonable delay after the excuse ceased.

Notices and returns to be given electronically etcE+W+S+N.I.

28D(1)A notice under paragraph 28A, and any information accompanying the notice, must be given electronically.

(2)A return under paragraph 28B, and any information accompanying the return, must be given electronically.

(3)But, if HMRC consider it appropriate to do so, HMRC may allow the scheme organiser to give a notice or return or any accompanying information in another way; and, if HMRC do so, the notice, return or information must be given in that other way.

(4)The Commissioners for Her Majesty's Revenue and Customs—

(a)must prescribe how notices, returns and accompanying information are to be given electronically;

(b)may make different provision for different cases or circumstances.

28E(1)This paragraph applies if a return under paragraph 28B, or any information accompanying such a return—

(a)is given otherwise than in accordance with paragraph 28D, or

(b)contains a material inaccuracy—

(i)which is careless or deliberate, or

(ii)which is not corrected as required by paragraph 28B(11).

(2)The scheme organiser is liable for a penalty of an amount decided by HMRC.

(3)The penalty must not exceed £5,000.

(4)For the purposes of sub-paragraph (1)(b)(i) an inaccuracy is careless if it is due to a failure by the scheme organiser to take reasonable care.

EnquiriesE+W+S+N.I.

28F(1)This paragraph applies if notice is given in relation to a CSOP scheme under paragraph 28A.

(2)HMRC may enquire into the scheme if HMRC give notice to the scheme organiser of HMRC's intention to do so no later than—

(a)6 July in the tax year following that in which the initial notification deadline falls, or

(b)if the notice under paragraph 28A is given after the initial notification deadline, 6 July in the second tax year following the relevant tax year.

(3)HMRC may enquire into the scheme if HMRC give notice to the scheme organiser of HMRC's intention to do so no later than 12 months after the date on which a declaration within paragraph 28B(7) is given to HMRC.

(4)Sub-paragraph (5) applies if (at any time) HMRC have reasonable grounds for believing that requirements of Parts 2 to 6 of this Schedule—

(a)are not met in relation to the scheme, or

(b)have not been met in relation to the scheme.

(5)HMRC may enquire into the scheme if HMRC give notice to the scheme organiser of HMRC's intention to do so.

(6)Notice may be given, and an enquiry may be conducted, under sub-paragraph (2), (3) or (5) even though the termination condition is met in relation to the scheme.

28G(1)An enquiry under paragraph 28F(2), (3) or (5) is completed when HMRC give the scheme organiser a notice (a “closure notice”) stating—

(a)that HMRC have completed the enquiry, and

(b)that—

(i)paragraph 28H is to apply,

(ii)paragraph 28I is to apply, or

(iii)neither paragraph 28H nor paragraph 28I is to apply.

(2)If the scheme organiser receives notice under paragraph 28F(2), (3) or (5), the scheme organiser may make an application to the tribunal for a direction requiring a closure notice for the enquiry to be given within a specified period.

(3)The application is to be subject to the relevant provisions of Part 5 of TMA 1970 (see, in particular, section 48(2)(b) of that Act).

(4)The tribunal must give a direction unless satisfied that HMRC have reasonable grounds for not giving the closure notice within the specified period.

28H(1)This paragraph applies if HMRC decide—

(a)that requirements of Parts 2 to 6 of this Schedule—

(i)are not met in relation to the scheme, or

(ii)have not been met in relation to the scheme, and

(b)that the situation is, or was, so serious that this paragraph should apply.

(2)If this paragraph applies—

(a)the scheme is not to be a Schedule 4 CSOP scheme with effect from—

(i)such relevant time as is specified in the closure notice, or

(ii)if no relevant time is specified, the time of the giving of the closure notice, and

(b)the scheme organiser is liable for a penalty of an amount decided by HMRC.

(3)The penalty under sub-paragraph (2)(b) must not exceed an amount equal to twice HMRC's reasonable estimate of—

(a)the total income tax for which persons who have been granted share options under the scheme have not been liable, or will not be liable in the future, and

(b)the total contributions under Part 1 of SSCBA 1992 or SSCB(NI)A 1992 for which any persons have not been liable, or will not be liable in the future,

in consequence of the scheme having been a Schedule 4 CSOP scheme at any relevant time before the time mentioned in sub-paragraph (2)(a)(i) or (ii) (as the case may be).

(4)In this paragraph “relevant time” means any time before the giving of the closure notice when requirements of Parts 2 to 6 of this Schedule were not met in relation to the scheme.

28I(1)This paragraph applies if HMRC decide—

(a)that requirements of Parts 2 to 6 of this Schedule—

(i)are not met in relation to the scheme, or

(ii)have not been met in relation to the scheme, but

(b)that the situation is not, or was not, so serious that paragraph 28H should apply.

(2)If this paragraph applies, the scheme organiser—

(a)is liable for a penalty of an amount decided by HMRC, and

(b)must, no later than 90 days after the relevant day, secure that the requirements of Parts 2 to 6 of this Schedule are met in relation to the scheme.

(3)The penalty under sub-paragraph (2)(a) must not exceed £5,000.

(4)In sub-paragraph (2)(b) “the relevant day” means—

(a)the last day of the period in which notice of an appeal under paragraph 28K(2)(b) may be given, or

(b)if notice of such an appeal is given, the day on which the appeal is determined or withdrawn.

(5)Sub-paragraph (2)(b) does not apply if the termination condition was met in relation to the scheme before the closure notice was given or is met before the end of the 90 day period mentioned in sub-paragraph (2)(b).

(6)If the scheme organiser fails to comply with sub-paragraph (2)(b), HMRC may give the scheme organiser a notice stating that that is the case (a “default notice”).

(7)If the scheme organiser is given a default notice—

(a)the scheme is not to be a Schedule 4 CSOP scheme with effect from—

(i)such relevant time as is specified in the default notice, or

(ii)if no relevant time is specified, the time of the giving of the default notice, and

(b)the scheme organiser is liable for a further penalty of an amount decided by HMRC.

(8)The penalty under sub-paragraph (7)(b) must not exceed an amount equal to twice HMRC's reasonable estimate of—

(a)the total income tax for which persons who have been granted share options under the scheme have not been liable, or will not be liable in the future, and

(b)the total contributions under Part 1 of SSCBA 1992 or SSCB(NI)A 1992 for which any persons have not been liable, or will not be liable in the future,

in consequence of the scheme having been a Schedule 4 CSOP scheme at any relevant time before the time mentioned in sub-paragraph (7)(a)(i) or (ii) (as the case may be).

(9)In this paragraph “relevant time” means any time before the giving of the default notice when requirements of Parts 2 to 6 of this Schedule were not met in relation to the scheme.

Assessment of penaltiesE+W+S+N.I.

28J(1)This paragraph applies if the scheme organiser is liable for a penalty under this Part.

(2)HMRC must assess the penalty and notify the scheme organiser of the assessment.

(3)Subject to sub-paragraphs (4) and (5), the assessment must be made no later than 12 months after the date on which the scheme organiser becomes liable for the penalty.

(4)In the case of a penalty under paragraph 28E(1)(b), the assessment must be made no later than—

(a)12 months after the date on which HMRC become aware of the inaccuracy, and

(b)6 years after the date on which the scheme organiser becomes liable for the penalty.

(5)In the case of a penalty under paragraph 28H(2)(b) or 28I(2)(a) or (7)(b) where notice of appeal is given under paragraph 28K(2) or (3), the assessment must be made no later than 12 months after the date on which the appeal is determined or withdrawn.

(6)A penalty payable under this Part must be paid—

(a)no later than 30 days after the date on which the notice under sub-paragraph (2) is given to the scheme organiser, or

(b)if notice of appeal is given against the penalty under paragraph 28K(1) or (4), no later than 30 days after the date on which the appeal is determined or withdrawn.

(7)The penalty may be enforced as if it were corporation tax or, if the scheme organiser is not within the charge to corporation tax, income tax charged in an assessment and due and payable.

(8)Sections 100 to 103 of TMA 1970 do not apply to a penalty under this Part.

AppealsE+W+S+N.I.

28K(1)The scheme organiser may appeal against a decision of HMRC that the scheme organiser is liable for a penalty under paragraph 28C or 28E.

(2)The scheme organiser may appeal against—

(a)a decision of HMRC mentioned in paragraph 28H(1) or a decision of HMRC to specify, or not to specify, a relevant time in the closure notice;

(b)a decision of HMRC mentioned in paragraph 28I(1).

(3)The scheme organiser may appeal against a decision of HMRC—

(a)to give the scheme organiser a default notice under paragraph 28I;

(b)to specify, or not to specify, a relevant time in the default notice.

(4)The scheme organiser may appeal against a decision of HMRC as to the amount of a penalty payable by the scheme organiser under this Part.

(5)Notice of appeal must be given to HMRC no later than 30 days after the date on which—

(a)in the case of an appeal under sub-paragraph (1) or (4), the notice under paragraph 28J(2) is given to the scheme organiser;

(b)in the case of an appeal under sub-paragraph (2), the closure notice is given;

(c)in the case of an appeal under sub-paragraph (3), the default notice is given.

(6)On an appeal under sub-paragraph (1) or (3)(a) which is notified to the tribunal, the tribunal may affirm or cancel the decision.

(7)On an appeal under sub-paragraph (2) or (3)(b) which is notified to the tribunal, the tribunal may—

(a)affirm or cancel the decision, or

(b)substitute for the decision another decision which HMRC had power to make.

(8)On an appeal under sub-paragraph (4) which is notified to the tribunal, the tribunal may—

(a)affirm the amount of the penalty decided, or

(b)substitute another amount for that amount.

(9)Subject to this paragraph and paragraph 28J, the provisions of Part 5 of TMA 1970 relating to appeals have effect in relation to an appeal under this paragraph as they have effect in relation to an appeal against an assessment to corporation tax or, if the scheme organiser is not within the charge to corporation tax, income tax.

180(1)Paragraph 33 (power to require information) is amended as follows.E+W+S+N.I.

(2)For sub-paragraph (1) substitute—

(1)An officer of Revenue and Customs may by notice require a person to provide the officer with any information—

(a)which the officer reasonably requires for the performance of any functions of Her Majesty's Revenue and Customs or an officer of Revenue and Customs under the CSOP code, and

(b)which the person to whom the notice is addressed has or can reasonably obtain.

(3)In sub-paragraph (2)(a)—

(a)for sub-paragraph (i) substitute—

(i)to check anything contained in a notice under paragraph 28A or a return under paragraph 28B or to check any information accompanying such a notice or return, or”, and

(b)in sub-paragraph (ii) after “scheme” insert “ or any other person whose liability to tax the operation of a scheme is relevant to ”.

181After paragraph 35 insert—E+W+S+N.I.

Non-UK company reorganisation arrangementsE+W+S+N.I.

35ZA(1)For the purposes of the CSOP code a “non-UK company reorganisation arrangement” is an arrangement made in relation to a company under the law of a territory outside the United Kingdom—

(a)which gives effect to a reorganisation of the company's share capital by the consolidation of shares of different classes, or by the division of shares into shares of different classes, or by both of those methods, and

(b)which is approved by a resolution of members of the company.

(2)A resolution does not count for the purposes of sub-paragraph (1)(b) unless the members who vote in favour of approving the arrangement represent more than 50% of the total voting rights of all the members having the right to vote on the issue.

182In paragraph 37 (index of defined expressions)—E+W+S+N.I.

(a)omit the entry for “approved”, and

(b)