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Finance Act 2012

Paragraphs 23 to 28 – certain tax consequences not to have effect

140.Paragraphs 23-28 deem the relevant ABC arrangements not to have “the relevant effect” as set out in paragraphs 23(3), 24(3) and 25(2). This means that on or after 22 February 2012, no deduction will be given to any income payments that the borrower (the employer or a connected party or other relevant person) makes to the lender etc under the ABC arrangement and any income amounts that have been transferred to the lender etc will be bought back into charge on the employer etc or other relevant person.

141.Paragraph 23(1) provides that paragraph 23 applies to an ABC arrangement where, had the employer’s contribution been paid on or after 22 February 2012, new section 196B in Part 3 would have applied so that the arrangement would have the “relevant effect”. The “relevant effect” defined in paragraph 23(3) is that the borrower etc (the employer etc) would receive relief for payments to the lender etc (the pension scheme) made under the arrangement either by way of an income deduction or by an income amount which would otherwise have been charged to tax not being so charged.

142.Paragraph 23(2) deems the arrangement not to have the “relevant effect” which is set out in paragraph 23(3). This means that either no relief will be given for any income payments the borrower etc (the employer etc) makes to the lender etc (the pension scheme) under the ABC arrangement or any income amounts that would have been charged to tax if not for the ABC arrangement will be brought back into tax as a charge on the employer etc.

143.Paragraph 23(4) defines the relevant effect if the borrower is a partnership.

144.Paragraph 23(5) provides that “amount” in sub-paragraphs 3 and 4 means an amount that arises on or after 22 February 2012 but on or before the completion day as set out in paragraph 21. This means that before the completion day, this paragraph prevents relief for income payments made on or after 22 February 2012 or brings back income amounts into charge from that date.

145.Paragraph 24(1) provides that paragraph 24 applies to an ABC arrangement where, had the employer’s contribution been paid on or after 22 February 2012, new section 196D in Part 3 would have applied so that the ABC arrangement would have the “relevant effect”. The “relevant effect”, defined in paragraph 24(3), is that the transferor etc (the employer etc) would receive relief either by way of an income deduction or by an amount which would otherwise have been charged to tax not being so charged.

146.Paragraph 24(2) deems the arrangement not to have the “relevant effect”. This means that either no relief will be given for any income payment made by the partnership to the lender etc (the pension scheme) under the arrangement or any amount that would have been charged to tax if not for the ABC arrangement will be brought back into tax as a charge on the transferor etc (the employer etc).

147.Paragraph 24(4) provides that for the purposes of sub-paragraph 3, “amount” means an amount that arises on or after 22 February 2012 but on or before the completion day as set out in paragraph 21. This means that before the completion day, this paragraph prevents relief for income payments made on or after 22 February 2012 or brings back income amounts into charge from that date.

148.Paragraph 24(5) provides that in determining whether the ABC arrangement would have the relevant effect, it is to be assumed that the amounts of income equal to the payments mentioned in new section 196D(2)(g) in Part 3 were payable to the partnership before the relevant change occurred.

149.Paragraphs 25(1) provides that paragraph 25 applies to an ABC arrangement where had the employer’s contribution been paid on or after 22 February 2012, new section 196F in Part 3 would have applied so that the ABC arrangement would have the “relevant effect”. The “relevant effect”, defined in paragraph 25(2), is that the “relevant member” would receive relief by way of an income deduction or by an income amount which would otherwise have been charged to tax not being so charged.

150.Paragraph 25(3) provides that a “relevant member” is a person who was a member of the partnership immediately before the relevant change in the partnership occurred and the person is not the lender.

151.Paragraph 25(4) provides that for the purposes of sub-paragraph 2, “amount” means an amount that arises on or after 22 February 2012 but on or before the completion day as set out in paragraph 21. This means that before the completion day, this paragraph prevents relief for income payments made on or after 22 February 2012 or brings back income amounts into charge from that date.

152.Paragraph 25(5) deems the arrangement not to have the “relevant effect” as set out in paragraph 25(2). This means no relief will be given for any income payments made from the partnership to the lender (the pension scheme) or any income amounts that would have been charged to tax if not for the ABC arrangement will be brought back into tax as a charge on the relevant member (the employer etc or other relevant person).

153.Paragraph 25(6) provides that in determining whether the ABC arrangement would have the relevant effect, it is to be assumed that the amounts of income equal to the payments mentioned in new section 196F(2)(e) in Part 3 were payable to the partnership before the relevant change occurred.

154.Paragraph 26 applies instead of paragraph 23, 24 or 25 if a relevant charging provision under the SFA rules applies to the ABC arrangement.

155.Paragraph 27 applies not to treat the amount of the relevant interest provision as interest if the amount arises on or after 22 February 2012 but on or before the completion day.

156.Paragraph 28 stipulates that new section 196G in Part 1 does not apply in relation to the employer’s contribution if the relevant event occurs on or after 22 February 2012. It also states that new section 196H in Part 1 does not apply to the contribution.

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