Finance Act 2022

Joint and several liability of connected persons and others who may benefit

5 (1) This paragraph applies to a person (“R”) and any person connected to R if—

(a) R or a person connected to R receives the proceeds (whether directly or indirectly) of any consideration paid directly or indirectly in connection with, or otherwise in consequence of, the taking of disqualifying steps by a person liable to public interest business protection tax as a result of paragraph 1 (“the principal taxpayer”), and

(b) the sum of amounts received by R and persons connected to R is equal to or exceeds 5% of the adjusted value of the asset.

(2) This paragraph also applies to a person (“S”) and any person connected to S if—

(a) S or a person connected to S had a qualifying interest in a company, partnership or unincorporated association liable to public interest business protection tax as a result of paragraph 1 (“the principal taxpayer”) during the disqualifying period, and

(b) the sum of qualifying interests S and persons connected to S had in the principal taxpayer during that period was equal to or exceeded 5% (see paragraph 6(1) which defines “qualifying interest” as a proportion).

(3) This paragraph does not apply to a person if the person is liable to tax as a result of paragraph 4 in relation to the same asset.

(4) A person to whom this paragraph applies is, together with the principal taxpayer, jointly and severally liable to public interest business protection tax.

(5) But the liability of a person liable to tax as a result of this paragraph is limited to—

(a) in the case of a person to whom this paragraph applies only as a result of sub-paragraph (1), the amount equal to the sum of the proceeds of consideration received (directly or indirectly) by R and persons connected to R,

(b) in the case of a person to whom this paragraph applies only as a result of sub-paragraph (2), the amount equal to the proportion of the principal taxpayer’s liability that is the same as the sum of qualifying interests S and persons connected to S had during the disqualifying period, and

(c) in the case of a person to whom this paragraph applies as a result of both sub-paragraphs (1) and (2), the greater of the amounts described in paragraphs (a) and (b).

(6) References in this paragraph to the receipt of the proceeds of consideration do not include the receipt of any amount pursuant to a loan if—

(a) the parties to that loan are not connected,

(b) the creditor carries on a business of lending money,

(c) the loan was made by the creditor in the ordinary course of that business, and

(d) the terms of the loan were agreed between parties dealing at arm’s length.