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Finance Act 2021

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Finance Act 2021

2021 CHAPTER 26

An Act to grant certain duties, to alter other duties, and to amend the law relating to the national debt and the public revenue, and to make further provision in connection with finance.

[10th June 2021]

Most Gracious Sovereign

WE, Your Majesty’s most dutiful and loyal subjects, the Commons of the United Kingdom in Parliament assembled, towards raising the necessary supplies to defray Your Majesty’s public expenses, and making an addition to the public revenue, have freely and voluntarily resolved to give and to grant unto Your Majesty the several duties hereinafter mentioned; and do therefore most humbly beseech Your Majesty that it may be enacted, and be it enacted by the Queen’s most Excellent Majesty, by and with the advice and consent of the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the authority of the same, as follows:—

PART 1Income tax, corporation tax and capital gains tax

Income tax charge, rates etc

1Income tax charge for tax year 2021-22

Income tax is charged for the tax year 2021-22.

2Main rates of income tax for tax year 2021-22

For the tax year 2021-22 the main rates of income tax are as follows—

(a)the basic rate is 20%,

(b)the higher rate is 40%, and

(c)the additional rate is 45%.

3Default and savings rates of income tax for tax year 2021-22

(1)For the tax year 2021-22 the default rates of income tax are as follows—

(a)the default basic rate is 20%,

(b)the default higher rate is 40%, and

(c)the default additional rate is 45%.

(2)For the tax year 2021-22 the savings rates of income tax are as follows—

(a)the savings basic rate is 20%,

(b)the savings higher rate is 40%, and

(c)the savings additional rate is 45%.

4Starting rate limit for savings for tax year 2021-22

(1)For the tax year 2021-22, the amount specified in section 12(3) of ITA 2007 (the starting rate limit for savings) is “£5,000”.

(2)Accordingly, section 21 of that Act (indexation) does not apply in relation to the starting rate limit for savings for that tax year.

5Basic rate limit and personal allowance for future tax years

(1)For the tax years 2022-23, 2023-24, 2024-25 and 2025-26, the amount specified in section 10(5) of ITA 2007 (basic rate limit) is “£37,700”.

(2)For the tax years 2022-23, 2023-24, 2024-25 and 2025-26, the amount specified in section 35(1) of ITA 2007 (personal allowance) is “£12,570”.

(3)Accordingly—

(a)section 21 of ITA 2007 (indexation of basic rate limit) does not apply in relation to the basic rate limit, and

(b)section 57 of ITA 2007 (indexation of allowances) does not apply in relation to the amount specified in section 35(1) of that Act,

for the tax years 2022-23, 2023-24, 2024-25 and 2025-26.

Corporation tax charge and rates

6Charge and main rate for financial years 2022 and 2023

(1)Corporation tax is charged for the financial years 2022 and 2023.

(2)The main rate of corporation tax—

(a)is 19% for the financial year 2022, and

(b)is 25% for the financial year 2023.

7Small profits rate chargeable on companies from 1 April 2023

(1)Schedule 1 contains the following provision (with effect from 1 April 2023)—

(a)provision for corporation tax to be charged at the standard small profits rate on profits that are not ring fence profits,

(b)provision for marginal relief to be given by reference to the standard marginal relief fraction,

(c)provision making corresponding amendments to Chapter 3A of Part 8 of CTA 2010 (corporation tax rates on ring fence profits), and

(d)provision making other consequential amendments to provision made by the Corporation Tax Acts.

(2)For the financial year 2023—

(a)the standard small profits rate is 19%, and

(b)the standard marginal relief fraction is 3/200ths.

Rate of diverted profits tax

8Increase in the rate of diverted profits tax

(1)In section 79 of FA 2015 (charge to diverted profits tax)—

(a)in subsection (2)(a) (which sets the rate in a standard case), and

(b)in subsections (3) and (3A) (which contain modifications of the rate in the case of ring fence profits or banking surcharge profits),

for “25%” substitute “31%”.

(2)The amendments made by this section have effect for accounting periods beginning on or after 1 April 2023.

(3)The remaining provisions of this section deal with a case where a company has an accounting period (a “straddling period”) beginning before 1 April 2023 and ending on or after that date.

(4)For the purpose of calculating the amount of diverted profits tax chargeable on a company for the straddling period—

(a)so much of the straddling period as falls before 1 April 2023, and

(b)so much of it as falls on or after that date,

are to be treated as separate accounting periods.

(5)If it is necessary to apportion an amount for the straddling period to the two separate accounting periods, the apportionment is to be made on a time basis according to the respective lengths of the separate accounting periods.

Capital allowances: super-deductions etc

9Super-deductions and other temporary first-year allowances

(1)Part 2 of CAA 2001 has effect as if—

(a)in section 39 (first-year allowances available for certain types of qualifying expenditure only) a reference to this section were included in the list of provisions describing first-year qualifying expenditure, and

(b)in the Table in section 52(3) (amount of first-year allowances), at the end there were inserted—

Expenditure qualifying under section 9(2) of FA 2021130%
Expenditure qualifying under section 9(3) of that Act50%
Expenditure qualifying under section 9(4) of that Act100%.

(2)Expenditure is qualifying under this subsection if—

(a)it is incurred on or after 1 April 2021 but before 1 April 2023,

(b)it is incurred by a company within the charge to corporation tax,

(c)it is expenditure on plant or machinery which is unused and not second-hand,

(d)it is not within any of the general exclusions in section 46(2) of CAA 2001,

(e)it is not special rate expenditure, and

(f)it is not expenditure on the provision of plant or machinery for use wholly or partly for the purposes of a ring fence trade.

Expenditure qualifying under this subsection is referred to as “super-deduction expenditure” and a first-year allowance made as a result of expenditure qualifying under this subsection is referred to as a “super-deduction”.

(3)Expenditure is qualifying under this subsection if—

(a)it is special rate expenditure,

(b)it is incurred on or after 1 April 2021 but before 1 April 2023,

(c)it is incurred by a company within the charge to corporation tax,

(d)it is expenditure on plant or machinery which is unused and not second-hand, and

(e)it is not within any of the general exclusions in section 46(2) of CAA 2001.

Expenditure qualifying under this subsection is referred to as “SR allowance expenditure” and a first-year allowance made as a result of expenditure qualifying under this subsection is referred to as an “SR allowance”.

(4)Expenditure is qualifying under this subsection if—

(a)it is expenditure on the provision of plant or machinery for use partly for the purposes of a ring fence trade and partly for the purposes of another qualifying activity,

(b)it is incurred on or after 1 April 2021 but before 1 April 2023,

(c)it is incurred by a company within the charge to corporation tax,

(d)it is not within any of the general exclusions in section 46(2) of CAA 2001, and

(e)it is not special rate expenditure.

(5)A first-year allowance made as a result of expenditure qualifying under subsection (4) is to be allocated between the ring fence trade and the other qualifying activity on a just and reasonable basis.

(6)This section has effect as if it were contained in Chapter 4 of Part 2 of CAA 2001 (which, among other things, means that sections 5 and 50 of that Act are relevant for the purpose of determining when expenditure is incurred).

(7)For the purpose of determining when expenditure is incurred for the purpose of subsection (2)(a) or (3)(b), if an amount of expenditure is incurred as a result of a contract entered into before 3 March 2021—

(a)section 5 of CAA 2001 does not apply, and

(b)the expenditure is instead treated for that purpose as incurred when the contract was entered into (whether or not an unconditional obligation to pay it arises on or after that date).

(8)For the purpose of determining whether a person is entitled to a super-deduction or an SR allowance, section 67 of CAA 2001 (plant or machinery treated as owned by person entitled to benefit of contract, etc) applies as if for subsection (1)(b) of that section there were substituted—

(b)the expenditure is incurred under a contract in respect of which Conditions A and B in section 1129 of CTA 2010 (definition of hire-purchase agreement) are met on the basis that—

(i)the “goods” referred to in those conditions are the plant or machinery, and

(ii)the person to whom they are bailed or hired is the person who incurs the expenditure.

(9)General exclusion 6 in section 46(2) of CAA 2001 (expenditure on provision of plant or machinery for leasing) does not prevent expenditure being super-deduction expenditure or SR allowance expenditure if the plant or machinery is provided for leasing under an excluded lease of background plant or machinery for a building (as defined by section 70R of that Act).

(10)Section 130(1) of CAA 2001 (postponement of first-year allowances on the provision of a ship) does not apply in relation to a super-deduction or an SR allowance.

(11)In this section “ring fence trade” means a ring fence trade in respect of which tax is chargeable under section 330(1) of CTA 2010 (supplementary charge in respect of ring fence trades).

10Further provision about super-deductions etc

(1)Sections 11 to 14 contain further provision in connection with super-deductions and SR allowances.

(2)Section 11 contains provision that modifies the percentage that as a result of section 9(1)(b) would otherwise apply to—

(a)super-deduction expenditure incurred in a chargeable period that ends on or after 1 April 2023;

(b)an additional VAT liability accruing in a chargeable period that ends on or after 1 April 2023 that is regarded as super-deduction expenditure as a result of section 236(2) of CAA 2001 (additional VAT liability generates first-year allowance).

(3)Section 12 contains provision about the disposal of plant or machinery in respect of which a super-deduction was made and section 13 contains similar provision in relation to plant or machinery in respect of which an SR allowance was made.

(4)Section 14 contains provision about counteracting tax advantages in connection with super-deductions and SR allowances (but see also Chapter 17 of Part 2 of CAA 2001 which contains other provisions about anti-avoidance).

(5)Sections 11, 12 and 13 have effect as if they were contained in Chapter 5 of Part 2 of CAA 2001 (allowances and charges).

(6)In this section, and in sections 11 to 14—

  • “super-deduction expenditure” and “super-deduction” are to be construed in accordance with section 9(2);

  • “SR allowance expenditure” and “SR allowance” are to be construed in accordance with section 9(3);

  • “additional VAT liability” has the meaning given by section 547(1) of CAA 2001.

11Reduced super-deduction

(1)Subsection (2) applies where a person incurs super-deduction expenditure in a chargeable period (“the relevant period”) that ends on or after 1 April 2023.

(2)Where this subsection applies, section 9(1)(b) applies as if for “130%” there were substituted the relevant percentage.

(3)Subsection (4) applies where a person becomes entitled in a chargeable period (“the relevant period”) that ends on or after 1 April 2023 to a super-deduction as a result of section 236(2) in respect of an additional VAT liability that is regarded (as a result of that section) as super-deduction expenditure.

(4)Where this subsection applies, section 9(1)(b) applies as if for “130%” there were substituted—

(a)where the person becomes entitled to the super-deduction before 1 April 2023, the relevant percentage, or

(b)otherwise, “100%”.

(5)For the purposes of subsections (2) and (4)(a), the relevant percentage is X% where X is determined by—

(a)dividing the number of days in the relevant period before 1 April 2023 by the total number of days in that period,

(b)multiplying that amount by 30, and

(c)adding 100 to the result.

12Disposal of assets where super-deduction made

(1)This section applies to plant or machinery in respect of which a person incurred super-deduction expenditure if a super-deduction was made in respect of some or all of that expenditure.

(2)Where a disposal event occurs in relation to plant or machinery to which this section applies, the person who incurred relevant super-deduction expenditure in respect of it is liable to a balancing charge for the chargeable period in which the event occurs (whether or not the person is also liable to any other balancing charge for that period).

(3)The amount of the balancing charge is, subject to subsection (6), the relevant proportion of the disposal value of the plant or machinery (see sections 61 to 63 of CAA 2001 which, among other provisions of Part 2 of that Act, contain provision about disposal values).

(4)The relevant proportion is determined by dividing the amount of relevant super-deduction expenditure incurred in respect of the plant or machinery by the amount of total relevant expenditure in relation to it.

(5)For the purposes of this section—

  • super-deduction expenditure is “relevant” if a super-deduction was made in respect of it;

  • “total relevant expenditure” in relation to plant or machinery means the sum of the following expenditure incurred in respect of it—

    (a)

    relevant super-deduction expenditure;

    (b)

    any expenditure in respect of which any other first-year allowance was made;

    (c)

    any expenditure that was allocated to a pool for any chargeable period (including for the period in which the disposal event occurs).

(6)If the disposal event occurs in a chargeable period that commenced before 1 April 2023 the amount of the balancing charge is the amount determined under subsection (3) multiplied by the relevant factor.

(7)The relevant factor is 1.3 if the chargeable period ends before 1 April 2023.

(8)If the chargeable period ends on or after 1 April 2023, the relevant factor is determined by—

(a)dividing the number of days in the period before 1 April 2023 by the total number of days in that period,

(b)multiplying that amount by 0.3, and

(c)adding 1 to the result.

(9)The balance of an amount of super-deduction expenditure in respect of which a super-deduction is made after deducting that super-deduction is to be treated as nil for the purposes of section 58(5)(b) and (6) of CAA 2001 (allocation of balance of first-year qualifying expenditure to a pool).

(10)In relation to the chargeable period in which the disposal event occurred, TDR (see section 55(1)(b) of CAA 2001) for the pool to which the relevant super-deduction expenditure was allocated is to be reduced by the relevant proportion of the disposal value of the plant or machinery.

(11)Section 135(1) of CAA 2001 (claim for deferment of balancing charges) does not apply in relation to a disposal event in respect of a ship to which this section applies.

(12)This section has effect in relation to disposals occurring on or after 1 April 2021.

13Disposal of assets where SR allowance made

(1)This section applies to plant or machinery in respect of which a person incurred SR allowance expenditure in a chargeable period (“the allowance period”) if an SR allowance was made in respect of some or all of that expenditure.

(2)Where a disposal event occurs in relation to plant or machinery to which this section applies, the person who incurred relevant SR expenditure in respect of it is liable to a balancing charge for the chargeable period in which the event occurs (whether or not the person is also liable to any other balancing charge for that period).

(3)The amount of the balancing charge is the relevant proportion of the disposal value of the plant or machinery (see sections 61 to 63 of CAA 2001 which, among other provisions of Part 2 of that Act, contain provision about disposal values).

(4)The relevant proportion is determined by—

(a)dividing the amount of relevant SR allowance expenditure incurred in respect of the plant or machinery by 2, and

(b)dividing that amount by the amount of total relevant expenditure in relation to the plant or machinery.

(5)For the purposes of this section—

  • SR allowance expenditure is “relevant” if an SR allowance was made in respect of it;

  • “total relevant expenditure” in relation to plant or machinery means the sum of the following expenditure incurred in respect of it—

    (a)

    relevant SR allowance expenditure,

    (b)

    any expenditure in respect of which any other first-year allowance was made, and

    (c)

    any expenditure that is not relevant SR allowance expenditure that was allocated to a pool for any chargeable period (including for the period in which the disposal event occurs).

(6)In relation to the chargeable period in which the disposal event occurred, TDR (see section 55(1)(b) of CAA 2001) for the pool to which the SR allowance expenditure in respect of the plant or machinery was allocated is to be reduced by the amount of the balancing charge.

(7)Section 135(1) of CAA 2001 (claim for deferment of balancing charges) does not apply in relation to a disposal event in respect of a ship to which this section applies.

(8)This section has effect in relation to disposals occurring on or after 1 April 2021.

14Counteraction where arrangements are contrived etc

(1)Any relevant tax advantage that would (in the absence of this section) be obtained as a result of relevant arrangements is to be counteracted by the making of such adjustments as are just and reasonable.

(2)A tax advantage is “relevant” if that advantage is connected with a super-deduction or an SR allowance (for example, the obtaining of such a first-year allowance or the avoidance of a balancing charge under section 12 or 13).

(3)Arrangements are “relevant” if—

(a)the purpose, or one of the main purposes, of the arrangements is to obtain a relevant tax advantage, and

(b)it is reasonable, taking account of all the relevant circumstances—

(i)to conclude that the arrangements are, or include steps that are, contrived, abnormal or lacking a genuine commercial purpose, or

(ii)to regard the arrangements as circumventing the intended limits of relief under CAA 2001 or otherwise exploiting shortcomings in that Act.

(4)Any adjustments required to be made under this section (whether or not by an officer of Revenue and Customs) may be made by way of—

(a)an assessment,

(b)the modification of an assessment,

(c)amendment or disallowance of a claim (whether a claim for a first-year allowance or otherwise),

or otherwise.

(5)In this section—

  • “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable);

  • “tax advantage” is to be construed in accordance with section 577(4) of CAA 2001.

(6)This section has effect in relation to any relevant arrangements entered into on or after 3 March 2021.

Capital allowances: other measures

15Extension of temporary increase in annual investment allowance

(1)In section 32(1) of FA 2019 (which increases the maximum amount of the annual investment allowance to £1,000,000 for the period of two years beginning with 1 January 2019), for “two years” substitute “three years”.

(2)In consequence of the amendment made by subsection (1)—

(a)in section 32(2) of that Act, for “2021” substitute “2022”,

(b)in paragraph 2 of Schedule 13 to that Act and the heading before that paragraph, for “2021” (in each place) substitute “2022”,

(c)in paragraph 3(3)(b) of that Schedule, for “two years” substitute “three years”, and

(d)in the heading for that Schedule, for “2021” substitute “2022”.

16Meaning of “general decommissioning expenditure”

(1)Chapter 13 of Part 2 of CAA 2001 (plant and machinery allowances: provisions affecting mining and oil industries) is amended as follows.

(2)Section 163 (meaning of “general decommissioning expenditure” for purposes of sections 164 and 165) is amended as follows.

(3)In subsection (1), at the end of paragraph (a), omit “or” and insert—

(aa)the condition in subsection (3AB) is met, or.

(4)In subsection (2), for “that is” substitute “paragraphs (a) and (b) of subsection (1) are”.

(5)In subsection (3A)—

(a)in the words before paragraph (a), omit “in complying with”;

(b)in paragraph (a), at the beginning insert “in complying with”;

(c)in paragraph (b)—

(i)at the beginning insert “in complying with”;

(ii)at the end omit “or”;

(d)in paragraph (c)—

(i)at the beginning insert “in complying with”;

(ii)at the end insert , or

(d)otherwise in anticipation of a decommissioning measure.

(6)After subsection (3A) insert—

(3AA)For the purposes of subsection (3A)(d), expenditure is incurred otherwise in anticipation of a decommissioning measure if it is incurred—

(a)in preserving plant or machinery, the reuse or demolition of which it is reasonable to anticipate will be authorised or required by an approved abandonment programme, a condition to which the approval of such a programme will be subject or a condition or agreement described in subsection (3A)(c), or

(b)in doing something else which it is reasonable to anticipate will be authorised or required by an approved abandonment programme, a condition to which the approval of such a programme will be subject or a condition or agreement described in subsection (3A)(c).

(7)After subsection (3AA) (inserted by subsection (6) of this section) insert—

(3AB)The condition in this subsection is met if—

(a)the expenditure was incurred—

(i)in preparing an abandonment programme for approval, or

(ii)in preparing for the imposition of a condition by, or the making of an agreement with, the Secretary of State before the approval of an abandonment programme, and

(b)it is reasonable to anticipate that the approved abandonment programme, the condition imposed or the agreement made, as the case may be, will wholly or mainly relate to the decommissioning of plant or machinery to which subsection (3) applies.

(8)In each of subsections (4ZA) and (4ZB), for “subsection (1)” substitute “subsection (1)(a) or (b)”.

(9)After section 163 insert—

163AExpenditure in anticipation of approval of abandonment programme

(1)Expenditure to which section 163(3A)(d) applies by virtue of section 163(3AA)(b) is to be treated as never having been general decommissioning expenditure for the purposes of sections 164 and 165 unless, before the end of the relevant period, condition A or condition B is met in relation to the expenditure.

(2)Condition A is that—

(a)an abandonment programme is approved, and

(b)the programme, or a condition to which the approval of the programme was subject, authorises or requires the decommissioning of the plant or machinery to which the expenditure relates.

(3)Condition B is that—

(a)a condition is imposed by the Secretary of State, or an agreement is made with the Secretary of State, before the approval of an abandonment programme, and

(b)the condition or, as the case may be, the agreement authorises or requires the decommissioning of the plant or machinery to which the expenditure relates.

(4)For the purposes of this section “the relevant period” means the period—

(a)beginning with the day on which the expenditure was incurred, and

(b)ending with the fifth anniversary of the last day of the accounting period in which the expenditure was incurred.

(5)All such assessments and adjustments of assessments are to be made as are necessary to give effect to subsection (1).

(6)If a person who has made a return becomes aware that, after making it, anything in it has become incorrect because of the operation of this section, the person must give notice to an officer of Revenue and Customs specifying how the return needs to be amended.

(7)A notice under subsection (6) must be given within 3 months beginning with the day on which the person first became aware that anything in the return had become incorrect because of the operation of this section.

(8)In this section, “abandonment programme”, “approval” and “approved” (in relation to an abandonment programme) have the same meaning as in Part 4 of the Petroleum Act 1998.

(10)The amendments made by this section have effect in relation to expenditure incurred on or after 3 March 2021.

17Extensions of plant or machinery leases for reasons related to coronavirus

(1)In Part 2 of CAA 2001, Chapter 6A (interpretation of provisions about long funding leases) has effect subject to the following modifications.

(2)Section 70YB (long funding operating lease: extension of term of lease) has effect as if, in subsection (1), at the beginning there were inserted “Subject to section 70YCA (extension of term of lease for reasons related to coronavirus),”.

(3)Section 70YC (extension of term of lease that is not a long funding lease) has effect as if, in subsection (1), at the beginning there were inserted “Subject to section 70YCA (extension of term of lease for reasons related to coronavirus),”.

(4)That Chapter has effect as if after section 70YC there were inserted—

70YCAExtension of term of lease for reasons related to coronavirus

(1)Sections 70YB(1) and 70YC(1) (extension of lease terms) do not apply in any case where subsection (2) applies (but see subsection (3)).

(2)This subsection applies where, in relation to a relevant lease—

(a)on or after 1 January 2020, there is (or was) a change in the payments under the lease that would have been payable on or before 30 June 2021,

(b)the effect of the change is that the term of the lease is extended (and, were it not for this section, section 70YB(1) or 70YC(1) would apply),

(c)the change would not have been made if it were not for coronavirus,

(d)after the change, the consideration for the lease is substantially the same as, or less than, the consideration for the lease before the change,

(e)there is no other substantive change to the terms of the lease, and

(f)the lessor and lessee have not made any arrangement in connection with any changes to capital allowances relating to the lease and arising as a result of the change mentioned in paragraph (a).

(3)But subsection (2) does not apply where, in relation to a relevant lease, the lessor or the lessee elects that subsection (2) does not apply.

(4)The Treasury may by regulations substitute for the second date for the time being specified in subsection (2)(a) such other date as they consider appropriate.

(5)In this section—

  • “coronavirus” has the same meaning as in the Coronavirus Act 2020 (see section 1(1) of that Act);

  • “relevant lease” means—

    (a)

    a long funding operating lease, or

    (b)

    a plant or machinery lease that is not a long funding lease.

70YCBElections under section 70YCA

(1)An election under section 70YCA must be made by notice to an officer of Revenue and Customs no later than the end of the period of 21 months beginning with the day after the day on which the change mentioned in section 70YCA(2)(a) occurred.

(2)But an election under that section is of no effect unless—

(a)the party making the election notifies the other party to the lease of the election, and

(b)the notice under subsection (1) is accompanied by a copy of the notification given to the other party.

(3)A notice under subsection (1) must include such information as may be specified (whether generally or specifically) by an officer of Revenue and Customs.

(4)An election under section 70YCA is irrevocable.

(5)Where a party to the lease makes or amends a tax return for a period in which the change mentioned in section 70YCA(2)(a) occurred, that party must include with that return or amended return a copy of any election made under that section in respect of the lease.

(6)The following provisions do not apply to an election under section 70YCA

(a)section 42 of, and Schedule 1A to, TMA 1970 (claims and elections for income tax purposes);

(b)paragraphs 54 to 60 of Schedule 18 to FA 1998 (claims and elections for corporation tax purposes).

(7)References in this section to a tax return, in the case of an election for the purposes of a trade, profession or business carried on by persons in partnership, are to be read, in relation to those persons, as references to a return under section 12AA of TMA 1970 (partnership returns).

Reliefs for business

18Temporary extension of periods to which trade losses may be carried back

Schedule 2 contains provision for a temporary extension of the periods to which trade losses may be carried back.

19R&D tax credits for SMEs

(1)Schedule 3 makes provision about the amount of the tax credit to which a company may be entitled under Chapter 2 of Part 13 of CTA 2009 (relief for cost of research and development incurred by small and medium-sized enterprises).

(2)Schedule 4 makes corresponding provision for Northern Ireland companies within the meaning of Part 8B of CTA 2010 (trading profits taxable at the Northern Ireland rate).

20Extension of social investment tax relief for further two years

In—

(a)section 257K(1)(a)(iii) of ITA 2007 (date by which investment must be made to qualify for social investment tax relief), and

(b)paragraphs 1(3)(b) and 2(2)(b) of Schedule 8B to TCGA 1992 (date by which gains re-invested in social enterprises must accrue to qualify for hold-over relief),

for “6 April 2021” substitute “6 April 2023”.

Employment income

21Workers’ services provided through intermediaries

(1)Chapter 10 of Part 2 of ITEPA 2003 (workers’ services provided through intermediaries to public authorities or medium or large clients) is amended as follows.

(2)In section 61N (worker treated as receiving earnings from employment)—

(a)in subsection (3), for “and 61V” substitute “, 61V and 61WA”;

(b)in subsection (5), for “section 61V” substitute “sections 61V and 61WA”;

(c)in subsection (5A), in the words before paragraph (a), for “and 61V” substitute “, 61V and 61WA”.

(3)In section 61O (conditions where intermediary is a company)—

(a)in subsection (1), for paragraph (b) substitute—

(b)subsection (1A) or (1B) is satisfied.;

(b)after subsection (1) insert—

(1A)This subsection is satisfied where the worker has a material interest in the intermediary.

(1B)This subsection is satisfied where—

(a)the worker has a non-material interest in the intermediary,

(b)the worker—

(i)has received,

(ii)has rights which entitle, or which in any circumstances would entitle, the worker to receive, or

(iii)expects to receive,

a chain payment from the intermediary, and

(c)the chain payment does not, or will not, wholly constitute employment income of the worker (apart from as a result of this Chapter).;

(c)after subsection (4) insert—

(4A)The worker is treated as having a non-material interest in the intermediary if—

(a)the worker, alone or with one or more associates of the worker, or

(b)an associate of the worker, with or without other associates of the worker,

has a non-material interest in the intermediary.

(4B)For this purpose a non-material interest means—

(a)beneficial ownership of, or the ability to control, directly or through the medium of other companies or by any other indirect means, 5% or less of the ordinary share capital of the company,

(b)possession of, or entitlement to acquire, rights entitling the holder to receive 5% or less of any distributions that may be made by the company, or

(c)where the company is a close company, possession of, or entitlement to acquire, rights that would in the event of the winding up of the company, or in any other circumstances, entitle the holder to receive 5% or less of the assets that would then be available for distribution among the participators.

(4C)In subsection (4B)(c) “participator” has the meaning given by section 454 of CTA 2010.

(4)In section 61S(4) (deductions from chain payments), for “services-provider” substitute “relevant person”.

(5)In section 61T(3) (client-led status disagreement process), for “section 61V” substitute “sections 61V and 61WA”.

(6)In section 61U (information to be provided by worker and consequences of failure)—

(a)in the heading, after “worker” insert “or intermediary”;

(b)in subsection (1), for “the worker” substitute “the relevant person”;

(c)in subsection (2), for “the worker” substitute “the relevant person”;

(d)in subsection (3), after “In this section” insert

  • “relevant person” means the worker or, in a case where the worker has not complied with subsection (1), the intermediary;.

(7)In section 61V (consequences of providing fraudulent information)—

(a)in subsection (2), in the words before paragraph (a), for “services-provider” substitute “relevant person (or if more than one, the first relevant person) in relation to whom the fraudulent documentation condition is met”;

(b)in subsection (3), for “involves the services-provider” substitute “may involve a services-provider”;

(c)in subsection (5), after paragraph (c) insert—

(d)a person in the chain who is resident in the United Kingdom or has a place of business in the United Kingdom.

(8)After section 61W insert—

61WAAnti-avoidance

(1)This section applies if in any case at least one relevant person in a chain participates in a relevant avoidance arrangement.

(2)An arrangement is a “relevant avoidance arrangement” if its main purpose, or one of its main purposes, is to secure a tax advantage by securing that at least one of the conditions mentioned in section 61O or 61P is not met in relation to an intermediary.

(3)Section 61N(3) has effect as if the reference to the fee-payer were a reference to the participating person, but—

(a)section 61N(4) continues to have effect as if the reference to the fee-payer were a reference to the deemed employer, and

(b)Step 1 of section 61Q(1) continues to have effect as referring to the chain payment made by the deemed employer.

(4)The participating person is—

(a)in a case where only one relevant person participates in the arrangement, that person;

(b)in any other case the highest relevant person in the chain who participated in the arrangement and from whom HMRC considers there is a realistic prospect of recovering, within a reasonable period, the amount of tax that would have been paid (or not repaid) in the absence of the arrangement.

(5)Subsection (3) has effect even though that may involve a participating person being treated as both employer and employee in relation to the deemed employment under section 61N(3).

(6)In this section—

  • “arrangement” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable);

  • “deemed employer” means a person who would, but for this section, be treated by section 61N(3) as making a payment to the worker;

  • “relevant person” means—

    (a)

    the worker;

    (b)

    a person who is resident in the United Kingdom or who has a place of business in the United Kingdom;

  • “tax” means income tax (and “tax advantage” is to be construed accordingly”);

  • “tax advantage” includes—

    (a)

    avoidance or reduction of a charge to tax or an assessment to tax,

    (b)

    repayment or increased repayment of tax,

    (c)

    avoidance of a possible assessment to tax, and

    (d)

    deferral of a payment of tax or advancement of a repayment of tax.

(9)In section 688AA(2)(a) (workers’ services provided through intermediaries: recovery of PAYE), after “to a worker” insert “(other than by virtue of section 61WA)”.

(10)The amendments made by this section have effect in relation to deemed direct payments treated as made on or after 6 April 2021.

22Payments on termination of employment

(1)Section 27 of ITEPA 2003 (UK-based earnings for year when employee not resident in UK) is amended in accordance with subsections (2) to (5).

(2)In subsection (1)—

(a)omit the “or” at the end of paragraph (a), and

(b)at the end of paragraph (b) insert , or

(c)general earnings to which section 402B (termination payments, and other benefits, that cannot benefit from the section 403 threshold, to be treated as earnings) applies.

(3)In subsection (2), for “(1)” substitute “(1)(a) or (b)”.

(4)After subsection (2) insert—

(2A)The percentage of the general earnings within subsection (1)(c) that are an amount of “taxable earnings” from the employment in the tax year in which they are received is given by—

where—

  • B is the total amount of general earnings from the employment that it is reasonable to assume the employee would have received in respect of the post-employment notice period (within the meaning given by section 402E(5)) if the employee’s employment had not been terminated until the end of that period, and

  • A is the total amount of those general earnings that it is reasonable to assume would have been taxable earnings by virtue of subsection (1)(a) or (b).

(5)In subsection (3), for “Subsection (2) applies” substitute “Subsections (2) and (2A) apply”.

(6)In section 402B of ITEPA 2003 (termination payments, and other benefits, that cannot benefit from the section 403 threshold, to be treated as earnings), in subsection (1)—

(a)the words from “is treated” to the end become paragraph (a), and

(b)after that paragraph insert , but

(b)is not capable of being an amount to which section 27 applies by virtue of subsection 1(a) or (b) of that section (UK-based taxable earnings for year when employee not resident in UK).

(7)In section 402D of ITEPA 2003 (post-employment notice pay)—

(a)in subsection (3), for “and (6)” substitute “, (6) and (6A)”;

(b)in subsection (6), after “month, ” insert “the employee’s basic pay is paid in equal monthly instalments,”;

(c)after subsection (6) insert—

(6A)In any other case where the last pay period of the employee to end before the trigger date is a month and the employee’s basic pay is paid in equal monthly instalments, then—

  • BP is the employee’s basic pay from the employment in respect of the last pay period of the employee to end before the trigger date,

  • P is 30.42, and

  • D is the number of days in the post-employment notice period.

(8)The amendments made by this section have effect in relation to general earnings to which section 402B of ITEPA 2003 applies that are paid—

(a)on or after 6 April 2021, and

(b)in connection with a termination of employment that takes place on or after that date.

23Cash equivalent benefit of a zero-emissions van

(1)Section 155 of ITEPA 2003 (cash equivalent of the benefit of a van) is amended in accordance with subsections (2) and (3).

(2)In subsection (1B)—

(a)in paragraph (a), for “2021-22” substitute “2020-21”;

(b)omit the “and” at the end of that paragraph;

(c)after that paragraph insert—

(aa)if the van cannot in any circumstances emit CO2 by being driven and the tax year is 2021-22 or a subsequent tax year, the cash equivalent is nil, and.

(3)In subsection (1C) omit paragraph (g).

(4)In section 170 of ITEPA 2003 (orders etc relating to Chapter 6 of Part 3 of ITEPA 2003), in subsection (1A)—

(a)in paragraph (b), after “zero-emission van” insert “in tax years 2015-16 to 2020-21”;

(b)omit the “and” at the end of that paragraph;

(c)after that paragraph insert—

(ba)section 155(1B)(aa) (cash equivalent for zero-emissions vans in tax year 2021-22 and subsequent tax years), and.

24Enterprise management incentives

In FA 2020, for section 107 substitute—

107Enterprise management incentives

(1)Schedule 5 to ITEPA 2003 (enterprise management incentives) is modified in accordance with subsections (2) and (3).

(2)Paragraph 26 (requirement as to commitment of working time) has effect as if, in sub-paragraph (3)—

(a)the “or” at the end of paragraph (c) were omitted, and

(b)at the end of paragraph (d), there were inserted , or

(e)not being required to work for reasons connected with coronavirus disease (within the meaning given by section 1(1) of the Coronavirus Act 2020).

(3)Paragraph 27 (meaning of “working time”) has effect as if, in sub-paragraph (1)(b), for “(d)” there were substituted “(e)”.

(4)Section 535 of ITEPA 2003 (disqualifying events relating to employee in relation to enterprise management incentives) has effect as if, in the closing words of subsection (3), for “(d)” there were substituted “(e)”.

(5)The modifications made by this section have effect in relation to the period—

(a)beginning with 19 March 2020, and

(b)ending with 5 April 2022.

25Cycles and cyclist’s safety equipment

(1)If a cycle, or cyclist’s safety equipment, was first provided for an employee before 21 December 2020, Condition B in section 244(3) of ITEPA 2003 (requirement that cycle or cyclist’s safety equipment is used mainly for commuting etc) is treated as met in relation to the provision for that employee of that cycle or equipment for the period commencing with 16 March 2020 and ending with 5 April 2022.

(2)In this section “cycle” and “cyclist” have the meanings they have in section 244 of ITEPA 2003 (see subsection (5) of that section).

26Exemption for coronavirus tests

(1)No liability to income tax arises in respect of—

(a)the provision to an employee of a coronavirus test, or

(b)the payment or reimbursement, to or in respect of an employee, of the cost of such a test.

(2)In this section “coronavirus test” means a test which detects the presence of a viral antigen or viral ribonucleic acid (RNA) specific to severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2).

(3)This section has effect as if it were contained in Part 4 of ITEPA 2003 (employment income: exceptions).

(4)This section has effect in relation to the tax years 2020-21 and 2021-22 (and to the extent the relief provided for by the Income Tax (Exemption of Minor Benefits) (Coronavirus) Regulations 2020 (S.I. 2020/1293) is provided for by this section, it supersedes those regulations).

(5)The Treasury may by regulations provide that this section is also to have effect in relation to such subsequent tax years as may be specified in the regulations.

27Optional remuneration arrangements: statutory parental bereavement pay

(1)In Schedule 2 to FA 2017 (optional remuneration arrangements), in paragraph 62(9), for “or statutory shared parental pay” substitute “, statutory shared parental pay or statutory parental bereavement pay”.

(2)That Schedule has effect, and is to be deemed always to have had effect, with the amendment made by subsection (1).

Pensions

28Freezing the standard lifetime allowance

Section 218(2C) and (2D) of FA 2004 (indexation of standard lifetime allowance) do not apply in relation to the standard lifetime allowance for the tax years 2021-22, 2022-23, 2023-24, 2024-25 and 2025-26 (so that the amount of the standard lifetime allowance for each of those tax years remains at the amount for the tax year 2020-21, namely £1,073,100).

29Collective money purchase benefits

Schedule 5 contains amendments of Part 4 of FA 2004 (pension schemes etc) relating to collective money purchase benefits.

Construction industry scheme

30Construction industry scheme

(1)Schedule 6 contains provision amending Chapter 3 of Part 3 of FA 2004 (construction industry scheme).

(2)In particular, the Schedule makes provision about—

(a)contractors,

(b)deductions on account of tax from contract payments,

(c)the treatment of sums deducted, and

(d)penalties.

Coronavirus support payments etc

31Covid-19 support scheme: working households receiving tax credits

(1)This section applies to a payment which—

(a)is made by Her Majesty’s Revenue and Customs in the exercise of a function which they have as a result of a direction given by the Treasury under section 76 of the Coronavirus Act 2020, and

(b)is made to a person by reason of the person’s receipt of any tax credit specified in the direction on a date so specified.

(2)No liability to income tax arises in respect of a payment to which this section applies.

(3)But subsection (2) does not prevent the application of paragraph 8 of Schedule 16 to FA 2020 (charge to income tax where person not entitled to coronavirus support payment) in relation to a payment to which this section applies.

32Self-employment income support scheme

(1)In section 106 of FA 2020 (taxation of coronavirus support payments), in subsection (3)—

(a)after “provision about” insert “(including provision modifying)”;

(b)for “(2)(c)” substitute “(2)(b)”.

(2)In paragraph 3(3) of Schedule 16 to FA 2020 (self-employment income support scheme payments to be treated as receipts of the tax year 2020-21), for “2020-21” substitute “in which the payment was received”.

(3)In paragraph 8 of that Schedule (charge if person not entitled to coronavirus support payment)—

(a)in sub-paragraph (3)—

(i)in the words before paragraph (a), after “scheme” insert “or the self-employment income support scheme”;

(ii)in paragraph (b), before “because” insert “in the case of a payment made under the coronavirus job retention scheme,”;

(b)in sub-paragraph (4)(a), after “scheme” insert “or the self-employment income support scheme”.

(4)The amendments made by subsections (2) and (3) have effect in relation to coronavirus support payments received on or after 6 April 2021.

(5)In this section “coronavirus support payment” has the meaning it has in Schedule 16 to FA 2020 (see section 106(2) and (5) of that Act).

33Deduction where business rates etc repaid

(1)This section applies if—

(a)a person (“A”) carrying on a business would, but for a coronavirus support arrangement, have incurred a liability to pay a charge to a public authority,

(b)an expense incurred in discharging that liability would have been deductible in calculating the profits of the business for the purposes of income tax or corporation tax, and

(c)an amount in respect of some or all of that liability is paid to that or any other public authority.

(2)In calculating the profits of the business of A for those purposes—

(a)a deduction is allowed for the amount paid, and

(b)that amount is treated as if it had been paid in the period in which the charge would have been due and payable.

(3)No deduction is otherwise allowed for the amount paid in calculating the profits of the business of any person for those purposes (including where the amount was paid by a person other than A).

(4)For the purposes of this section “coronavirus support arrangement” means an arrangement where—

(a)a liability in respect of non-domestic rates, or

(b)such other liability in respect of a charge payable to a public authority as may be specified in regulations made by the Treasury,

is waived, or reduced, for purposes connected with the provision of support to businesses in connection with coronavirus.

(5)Regulations under subsection (4)(b) may have retrospective effect.

(6)In this section “coronavirus” has the meaning it has in the Coronavirus Act 2020 (see section 1 of that Act).

(7)This section has effect in relation to payments whether made before or after the passing of this Act.

Exemptions from income tax

34Repeal of provisions relating to the Interest and Royalties Directive

(1)The following provisions are repealed—

(a)sections 757 to 767 of ITTOIA 2005 (exemption from income tax for certain interest and royalty payments) and the italic heading before those sections, and

(b)sections 914 to 917 of ITA 2007 (discretion to make royalty payments gross) and the italic heading before those sections;

and the remainder of this section makes amendments consequential on the repeal of those provisions.

(2)In section 98 of TMA 1970 (special returns, etc)—

(a)in subsection (4A)(b) omit “, (4DA)”, and

(b)omit subsection (4DA).

(3)In paragraph 3 of Schedule 18 to FA 1998 (company tax return), in sub- paragraph (5) for “, 912, 914 and 915” substitute “and 912”.

(4)In ITTOIA 2005—

(a)in section 369 (charge to tax on interest), in subsection (3) omit paragraph (f) (and the “and” before it),

(b)in section 578 (contents of chapter), in subsection (2)—

(i)for “exemptions” substitute “an exemption”,

(ii)for “sections” substitute “section”,

(iii)omit “and 758 (certain interest and royalty payments)”, and

(c)in section 683 (charge to tax on payments not otherwise charged), in subsection (4) omit paragraph (h).

(5)In section 100 of FA 2015 (diverted profits tax: credits for tax on the same profits)—

(a)in subsection (4C)(c) for “relevant provision” substitute “double taxation arrangements (as defined by section 2(4) of TIOPA 2010)”, and

(b)omit subsection (4E).

(6)In section 42(9) of FA 2016 (section 758 of ITTOIA 2005 not to apply to certain royalty payments)—

(a)in paragraph (b), at the end insert “under arrangements (within the meaning of section 917A of ITA 2007) entered into before that day”,

(b)omit paragraph (c) (but not the “and” at the end of it), and

(c)for the words after paragraph (d) substitute “the arrangements are to be regarded as DTA tax avoidance arrangements for the purposes of section 917A of ITA 2007”.

(7)In consequence of the repeal of section 762 of ITTOIA 2005 made by subsection (1), the Exemption From Tax For Certain Interest Payments Regulations 2004 (S.I. 2004/2622) are revoked (and, accordingly, exemption notices issued in accordance with those regulations are cancelled).

(8)The amendments made by this section have effect in relation to—

(a)payments made on or after 1 June 2021, and

(b)payments made in disqualifying circumstances on or after 3 March 2021 but before 1 June 2021.

(9)A payment is made in “disqualifying circumstances” if it is made directly or indirectly in consequence of, or otherwise in connection with, any arrangements the main purpose, or one of the main purposes, of which is to secure that the provisions mentioned in subsection (1)(a) or (b) continue to have effect in relation to it.

(10)For this purpose “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).

35Payments made to victims of modern slavery etc

(1)A payment that meets conditions A to C is to be regarded as a “qualifying payment” for the purposes of paragraph 3(1) and (2) of Schedule 15 to FA 2020 (exemption from income tax).

(2)Condition A is that the payment is made by or on behalf of a public authority.

(3)Condition B is that the payment is made to a person in respect of whom—

(a)there are reasonable grounds to believe the person may be a victim of slavery or human trafficking, and

(b)no conclusive determination has been made identifying the person as a victim for the purposes of Article 10 of the Trafficking Convention.

(4)Condition C is that the payment is made for the purposes of providing the person assistance or support of the kind mentioned in Article 12 of the Trafficking Convention (as contemplated by Article 10).

(5)In this section—

(a)“the Trafficking Convention” means the Council of Europe Convention on Action against Trafficking in Human Beings (done at Warsaw on 16 May 2005);

(b)“public authority” includes any person certain of whose functions are functions of a public nature.

(6)This section has effect in relation to qualifying payments received on or after 1 April 2009.

Miscellaneous corporation tax measures

36Hybrid and other mismatches

Schedule 7 makes amendments to Part 6A of TIOPA 2010 (hybrid and other mismatches).

37Relief for losses etc

Schedule 8 makes provision about corporation tax relief for losses and other amounts.

38Corporate interest restriction: minor amendments

(1)Part 10 of TIOPA 2010 (corporate interest restriction) is amended as follows.

(2)In section 452 (Real Estate Investment Trusts), after subsection (2) insert—

(2A)In applying subsection (2) and giving effect to the remainder of this section, the company is treated, at all times in the accounting period, as carrying on a residual business within the charge to corporation tax (and, accordingly, amounts falling to be brought into account in the accounting period as a result of this section are within the charge to corporation tax).

(3)The amendment made by subsection (2) is treated as having come into force on 21 July 2020.

(4)In Schedule 7A (interest restriction returns), after paragraph 29 insert—

29A(1)Liability to a penalty under paragraph 29 does not arise if the company has a reasonable excuse for failing to submit the return by the filing date.

(2)If the company has a reasonable excuse for the failure but the excuse has ceased, the company is to be treated as having continued to have the excuse if the return is submitted without unreasonable delay after the excuse ceased.

(5)That Schedule has effect, and is to be deemed always to have had effect, with the amendment made by subsection (4).

39Northern Ireland Housing Executive

(1)In CTA 2010, after section 987B insert—

Northern Ireland Housing Executive
987CNorthern Ireland Housing Executive

The Northern Ireland Housing Executive is not liable to corporation tax.

(2)The amendment made by this section has effect in relation to accounting periods beginning on or after 1 April 2020.

Capital gains tax

40Annual exempt amount

Section 1L of TCGA 1992 (which provides for an increase in the annual exempt amount to reflect increases in CPI) does not apply for the tax years 2021-22, 2022-23, 2023-24, 2024-25 and 2025-26 (so that the annual exempt amount for each of those tax years remains at £12,300).

41Hold-over relief for foreign-controlled companies

(1)In section 167 of TCGA 1992 (gifts to foreign-controlled companies), in subsection (2)(b), at the beginning insert “is or”.

(2)The amendment made by subsection (1) has effect in relation to a disposal made on or after 6 April 2021.

PART 2Plastic packaging tax

Introductory

42Plastic packaging tax

(1)A tax called “plastic packaging tax” is to be charged in accordance with this Part.

(2)The Commissioners are responsible for the collection and management of plastic packaging tax.

Charging of plastic packaging tax

43Charge to plastic packaging tax

(1)The charge to plastic packaging tax arises when a chargeable plastic packaging component is—

(a)produced in the United Kingdom by a person acting in the course of a business, or

(b)imported into the United Kingdom on behalf of such a person.

(2)The reference in subsection (1) to “a business” includes any activity of a government department or other public authority, or of a charity, that is carried out for commercial purposes.

(3)Subsection (1) is subject to section 52 (exempt plastic packaging components).

44Liability to pay plastic packaging tax

(1)Where the charge to plastic packaging tax arises in respect of a chargeable plastic packaging component by virtue of section 43(1)(a), the person who produces the component is liable to pay the amount charged.

(2)Where the charge arises in respect of a chargeable plastic packaging component by virtue of section 43(1)(b), the person on whose behalf the component is imported is liable to pay the amount charged.

45Rate

(1)Plastic packaging tax is charged at the rate of £200 per metric tonne of chargeable plastic packaging components of a single specification.

(2)The amount charged on part of a tonne is the proportionately reduced amount.

46Payment

(1)Plastic packaging tax is to be paid by reference to accounting periods determined in accordance with regulations under section 61(1) (regulations about the payment, collection and recovery of plastic packaging tax).

(2)References in this Part to “accounting periods” are to those accounting periods.

Interpretation of main terms etc

47Chargeable plastic packaging components

(1)A plastic packaging component is chargeable if—

(a)the proportion of recycled plastic in the component, when measured by weight, is less than 30% of the total amount of plastic in the component, and

(b)it is finished.

(2)A plastic packaging component is taken to fall within subsection (1)(a) unless it is shown that it does not.

(3)For the purposes of this Part, a component is “finished” if it has undergone—

(a)its last substantial modification, or

(b)in the case of a component that undergoes a substantial modification when it is packed or filled, its last substantial modification before being packed or filled,

even if waste or surplus material remains attached to it.

(4)Accordingly, for the purposes of this Part, waste or surplus material that remains attached to a component after its last substantial modification is not to be treated as part of the component.

(5)The Commissioners may by regulations make provision about—

(a)the methodology to be used, or the information or evidence required, to satisfy them that a plastic packaging component does not fall within subsection (1)(a);

(b)the meaning of “substantial modification”.

48Meaning of “plastic packaging component”

(1)A “packaging component” is a product that is designed to be suitable for use, whether alone or in combination with other products, in the containment, protection, handling, delivery or presentation of goods at any stage in the supply chain of the goods from the producer of the goods to the user or consumer.

(2)Subject to section 52, it does not matter why a component within this definition is produced or imported (for example, whether it is produced or imported for use in the supply chain of the goods or by a user or consumer).

(3)A “plastic packaging component” is a packaging component that contains more plastic, when measured by weight, than any other single substance listed in regulations under subsection (7)(a).

(4)A packaging component that contains plastic is taken to be a plastic packaging component unless it is shown that it is not such a component.

(5)The Treasury may by regulations amend the meaning of “packaging component” by—

(a)adding descriptions of products, or

(b)removing descriptions of products.

(6)Regulations under subsection (5) may amend this Part.

(7)The Commissioners may by regulations—

(a)list substances for the purposes of subsection (3);

(b)make provision about the methodology to be used, or the information or evidence required, to satisfy them that a packaging component that contains plastic is not a plastic packaging component.

49Meaning of “plastic” and “recycled plastic”

(1)“Plastic” means a material consisting of a polymer, other than a cellulose-based polymer that has not been chemically modified, to which additives or other substances may have been added.

(2)“Recycled plastic” is plastic that has been reprocessed from recovered material by means of a chemical or manufacturing process, other than organic recycling, so that it can be used either for its original purpose or for other purposes.

(3)“Organic recycling” means the aerobic or anaerobic treatment, under controlled conditions and using micro-organisms, of biodegradable matter, which produces stabilised organic residues or methane.

(4)“Recovered material” is pre-consumer plastic or post-consumer plastic that—

(a)has been collected and recovered as a material input, in lieu of new primary material, for a recycling or a manufacturing process, and

(b)would otherwise have been disposed of as waste or used for energy recovery.

(5)“Pre-consumer plastic” is plastic that is—

(a)recovered from waste generated in a manufacturing process, and

(b)processed by a reprocessing facility,

but does not include plastic that is reused in the same process in which it was generated as scrap and from which it was recovered.

(6)“Post-consumer plastic” is plastic—

(a)that is generated by households or by commercial, industrial or institutional facilities in their role as end-users of the product, and

(b)that can no longer be used for its intended purpose.

This includes returns of plastic from the distribution chain.

(7)Plastic is not to be taken as recycled plastic unless it is shown that it is recycled plastic.

(8)The Treasury may by regulations amend the meaning of “plastic” and “recycled plastic”.

(9)Regulations under subsection (8) may amend this Part.

(10)The Commissioners may by regulations make provision about the methodology to be used, or the information or evidence required, to satisfy them that plastic is recycled plastic.

50Time of importation

(1)A chargeable plastic packaging component is imported into the United Kingdom—

(a)in the case of a component that is subject to customs formalities within the meaning given by section 1(1) of CEMA 1979, as soon as all such formalities have been complied with in respect of the component, and

(b)in any other case, at the time of importation for the purposes of the customs and excise Acts.

(2)This section is subject to section 76 (Isle of Man: import and export of chargeable plastic packaging components).

Deferrals, exemptions and credits

51Plastic packaging components intended for export

(1)A person’s liability under section 44 to pay an amount by way of plastic packaging tax in relation to a plastic packaging component is—

(a)deferred for as long as the direct export condition is met in relation to the component;

(b)cancelled if the direct export condition ceases to be met in relation to the component as a result of it being exported from the United Kingdom before the end of the deferral period in accordance with regulations made by the Commissioners.

(2)The direct export condition is met in relation to a component at any time if—

(a)the time is within the deferral period;

(b)the person who is liable to pay the tax (“the liable person”) intends to export it (and has intended to export it at all times since it was produced or imported);

(c)any other conditions or requirements specified in regulations made by the Commissioners are met.

(3)If the Commissioners are not satisfied of any matter within subsection (2) in relation to a component they may—

(a)in a case where they are satisfied that the direct export condition was met but no longer is, notify the liable person that the condition is to be taken to have ceased to be met in relation to that component from a date specified in the notification, or

(b)in any other case, notify the liable person that the direct export condition is to be taken never to have been met in relation to that component.

(4)The consequence of notification is that liability to pay an amount by way of plastic packaging tax—

(a)in a case within subsection (3)(a), ceases to be deferred in accordance with subsection (1)(a) with effect from such date as the Commissioners may specify in the notification, or

(b)in a case within subsection (3)(b), is taken never to have been deferred in accordance with subsection (1)(a).

(5)The deferral period in relation to a component is the period of 12 months beginning with the day on which the component is produced or imported.

(6)This section does not apply to plastic packaging components that are used in the removal of goods from the United Kingdom and that are—

(a)transport packaging or tertiary packaging within the meaning of regulation 3(2)(c) of the Packaging (Essential Requirements) Regulations 2015 (S.I. 2015/1640), or

(b)road, rail, ship and air containers.

(7)This section is subject to section 76 (Isle of Man: import and export of chargeable plastic packaging components).

52Exempt plastic packaging components

(1)No charge to plastic packaging tax arises by virtue of section 43(1)(b) in relation to plastic packaging components that are used in the delivery of goods into the United Kingdom and that are—

(a)transport packaging or tertiary packaging within the meaning of regulation 3(2)(c) of the Packaging (Essential Requirements) Regulations 2015 (S.I. 2015/1640), or

(b)road, rail, ship and air containers.

(2)No charge to plastic packaging tax arises in relation to plastic packaging components if subsection (3), (4) or (6) applies to them.

(3)This subsection applies to plastic packaging components if they are stores within the meaning of CEMA 1979 (see section 1 of that Act).

(4)This subsection applies to plastic packaging components if they are produced or imported for use in the immediate packaging of a medicinal product.

(5)In subsection (4)

  • “immediate packaging”, in relation to a medicinal product, has the meaning given by regulation 8(1) of the Human Medicines Regulations 2012 (S.I. 2012/1916);

  • “medicinal product” has the meaning given by regulation 2(1) of those Regulations.

(6)This subsection applies to plastic packaging components if—

(a)before or as soon as they have been produced or imported they are permanently designated or set aside for use other than in the containment, protection, handling, delivery or presentation of goods, and

(b)the producer or person on whose behalf they were imported keeps a record of that designation or setting aside.

(7)The Treasury may by regulations make provision creating further exemptions from plastic packaging tax.

53Tax credits

(1)The Commissioners may by regulations make provision in relation to cases where after a person has become liable to pay plastic packaging tax in respect of a prescribed plastic packaging component (the “charged component”), that component is—

(a)exported from the United Kingdom;

(b)converted into a different packaging component.

(2)The provision that may be made is provision—

(a)for the person to be entitled to a tax credit in respect of any plastic packaging tax charged on the charged component;

(b)for the tax credit to be brought into account when the person is accounting for plastic packaging tax due from the person for the prescribed accounting period or periods;

(c)for the person to be entitled to a repayment of plastic packaging tax (instead of a tax credit) in prescribed cases.

(3)Regulations under this section may (among other things) make provision—

(a)for any entitlement to a tax credit to be conditional on the making of a claim by the person, and specifying the period within which and the manner in which a claim may be made;

(b)for any entitlement to a tax credit or to bring a tax credit into account to be—

(i)conditional on compliance with prescribed requirements;

(ii)subject to prescribed minimum or maximum amounts;

(c)specifying circumstances in which, and criteria for determining the period for which, the person is or is not entitled to a tax credit;

(d)requiring a claim for a tax credit to be evidenced and quantified by reference to prescribed records and other documents;

(e)requiring a person claiming any entitlement to a tax credit to keep, for the prescribed period and in the prescribed form and manner, those records and documents and a record of prescribed information relating to the claim;

(f)for the withdrawal of a tax credit where any requirement of the regulations is not complied with;

(g)about adjustments of liability for plastic packaging tax in connection with entitlement or withdrawal of an entitlement to a tax credit in prescribed circumstances;

(h)about the treatment of a tax credit where the person ceases to carry on a business or otherwise is no longer liable to plastic packaging tax;

(i)for anything falling to be determined in accordance with the regulations to be determined by reference to a direction given in accordance with the regulations by the Commissioners;

(j)about the meaning of “converted” for the purposes of subsection (1)(b).

(4)In this section, “prescribed” means specified in or under, or determined in accordance with provision made in or under, regulations under this section.

Registration

54The register

(1)The Commissioners must establish and maintain a register for the purposes of collecting and managing plastic packaging tax.

(2)The register may contain such information as the Commissioners think is required for those purposes.

(3)The Commissioners may publish, by such means as they think fit, any information which—

(a)is derived from the register, and

(b)is within any of the descriptions in subsection (4),

apart from information relating to a registration which is subject to an outstanding appeal.

(4)The descriptions are—

(a)the names of registered persons;

(b)particulars of sites at which registered persons carry on business;

(c)registration numbers assigned to registered persons;

(d)where the registered person is a body corporate that is a member of a group—

(i)the fact that it is a member of a group,

(ii)the names of the other bodies corporate that are members of the group, and

(iii)particulars of any sites at which those other bodies carry on business.

(5)Subject to subsection (6), information may be published in accordance with this section despite any obligation not to disclose the information that would otherwise apply.

(6)Nothing in this section authorises a disclosure of information which contravenes the data protection legislation (but in determining whether a disclosure would do so, take into account the powers conferred by this section).

(7)In this Part—

  • “data protection legislation” has the meaning given by section 3(9) of the Data Protection Act 2018;

  • “the register” means the register under subsection (1) and references to registration are to registration in it.

55Liability to register: producers and importers

(1)A person (P) who—

(a)produces finished plastic packaging components, or

(b)on whose behalf finished plastic packaging components are imported,

becomes liable to be registered on a given day if subsection (2) applies in relation to P on that day.

(2)This subsection applies—

(a)on any day, where there are reasonable grounds for believing that the amount of finished plastic packaging components that will be produced by, or imported on behalf of, P within the period of 30 days beginning with that day will equal or exceed 10 metric tonnes, or

(b)on the first day of any calendar month, where the amount of finished plastic packaging components produced by, or imported on behalf of, P over the 12 months ending with the day before that day equals or exceeds 10 metric tonnes.

(3)Finished plastic packaging components to which section 52(1) or (3) applies are not to be taken into account for the purposes of subsection (2).

(4)In the application of subsection (2)(b) to the first day of a month falling within the year beginning with 1 April 2022, that paragraph has effect as if for “over the 12 months” there were substituted “during the period beginning with 1 April 2022 and”.

56Notification of liability and registration

(1)A person who becomes liable to be registered under section 55 must notify the Commissioners of the liability before the end of the notification period.

(2)The “notification period” is the period of 30 days beginning with the day on which the liability arises.

(3)Where the Commissioners are satisfied that a person is liable to be registered (whether or not the person has notified liability under subsection (1)), the Commissioners must register the person with effect from the day on which the liability arises.

(4)Where an unincorporated body (other than a partnership) is registered in the name of the body concerned, no account is to be taken of any change in its members in determining how any provision of or under this Part applies in relation to the body.

(5)The Commissioners may by regulations make provision—

(a)about the form and manner in which a notification under this section is to be given;

(b)about the information to be contained in or provided with a notification under this section;

(c)for the Commissioners to require further information from a person in connection with that person’s registration;

(d)requiring notifications and other communications with the Commissioners in connection with registration to be made electronically.

57Cancellation of registration

(1)A registration under section 56 may be cancelled only in accordance with this section.

(2)The Commissioners may cancel a person’s registration if—

(a)the person requests the cancellation, and

(b)the person satisfies the Commissioners that the person does not, on the day of the request, meet the liability condition.

(3)The Commissioners may cancel a person’s registration if they are satisfied that the person does not meet the liability condition and has not met the liability condition for a period of at least 12 months.

(4)The Commissioners may cancel a person’s registration if they are satisfied that the person did not meet the liability condition on the day on which the person was registered, and has not at any subsequent time met the liability condition.

(5)A cancellation under subsection (2) is to be made with effect from—

(a)the day on which the request is made, or

(b)such later day as may be agreed between the Commissioners and that person.

(6)A cancellation under subsection (3) is to be made with effect from—

(a)the day on which the person ceased to meet the liability condition, or

(b)such later day as may be agreed between the Commissioners and that person.

(7)A cancellation under subsection (4) is to be made with effect from the day on which the person was registered.

(8)But the Commissioners must not cancel a person’s registration under subsection (2) or (3) if—

(a)there are outstanding amounts of plastic packaging tax, or amounts recoverable as plastic packaging tax, due from that person, or

(b)there are one or more outstanding returns for the purposes of plastic packaging tax due from that person.

(9)The Commissioners may decline to cancel a person’s registration on any day if they reasonably believe that the person will become liable to be registered under section 55 during the period of 12 months beginning with that day.

(10)For the purposes of this section, a person meets the liability condition on a particular day if—

(a)the condition in section 55(2)(a) is met in relation to that person on that day,

(b)the day is the first day of a month and the condition in section 55(2)(b) is met in relation to that person on that day, or

(c)the day is in the same month as a day on which the condition in section 55(2)(b) was met in relation to that person.

58Correction of the register

(1)The Commissioners may by regulations make provision about the correction of entries in the register.

(2)Regulations under subsection (1) may make provision for requiring persons who are, or are liable to be, registered to notify the Commissioners of changes in circumstances which are relevant to the register.

Secondary liability and joint and several liability notices

59Notices imposing secondary or joint and several liability

Schedule 9 makes provision about notices that may in certain circumstances—

(a)impose secondary liability on a person in respect of an amount of plastic packaging tax which another person has failed to pay, or

(b)make one person jointly and severally liable with another person in respect of some or all of the other person’s liability to pay plastic packaging tax in respect of a period of time in the future.

Administration and enforcement

60Measurement of weight etc

(1)The Commissioners may by regulations make provision for and about the measurement of weight for the purposes of plastic packaging tax.

(2)The regulations may (among other things) include provision about—

(a)how weight is to be measured;

(b)the time in relation to which weight is to be measured;

(c)how weight is to be evidenced;

(d)agreements between the Commissioners and particular persons about how weight is to be measured or evidenced, including provision for the Commissioners to disregard the terms of an agreement in circumstances set out in the regulations;

(e)the Commissioners making their own assessment or best judgement of weight in relation to plastic packaging components and substituting that assessment or judgement for the assessment or judgement of any other person;

(f)the Commissioners inspecting or weighing plastic packaging components or samples;

(g)the assessment of weight by the Commissioners being based on estimates or assumptions.

61Payment, collection, recovery

(1)The Commissioners may by regulations make provision about the payment, collection and recovery of amounts for the purposes of plastic packaging tax.

(2)Regulations under subsection (1) may (among other things)—

(a)make provision for determining the accounting periods by reference to which payments are to be made;

(b)require persons who are registered or who are liable to be registered under section 55 (“relevant persons”) to keep accounts for the purposes of plastic packaging tax in a specified form and manner;

(c)require relevant persons to make returns for the purposes of plastic packaging tax;

(d)make provision about the times at which payments of plastic packaging tax are to be made and methods of payment;

(e)require the amounts payable by reference to accounting periods to be calculated by or under the regulations;

(f)make provision about the payment, collection and recovery of amounts payable by a person as a result of a secondary liability and assessment notice or a joint and several liability notice;

(g)make provision for the correction of errors made in accounting for plastic packaging tax.

(3)Provision may be made by or under regulations under subsection (2)(c) about—

(a)the form and manner of making returns;

(b)the information to be included in returns;

(c)declarations about the truth of information in returns;

(d)the periods by reference to which returns are to be made;

(e)timing.

(4)Schedule 10 makes provision about recovery and overpayments.

62Reviews and appeals

Schedule 11 makes provision about reviews and appeals.

63Records

(1)The Commissioners may by regulations require persons—

(a)to keep, for purposes connected with plastic packaging tax, records of specified matters, and

(b)to preserve records for a specified period.

(2)A duty under regulations under subsection (1) to preserve records may be discharged by preserving them, or the information contained in them, in any form and by any means, subject to any conditions or exceptions specified in the regulations.

(3)The period specified in regulations under subsection (1) may not exceed 6 years beginning with the end of the accounting period to which the records relate.

(4)The Commissioners may direct a person who is, or is liable to be, registered under this Part or to whom a secondary liability and assessment notice or a joint and several liability notice has been given—

(a)to keep such records as are specified in the direction;

(b)to preserve those records for a specified period.

(5)The Commissioners may not give a direction under subsection (4) unless they have reasonable grounds for believing that the records specified in the direction might assist in identifying chargeable plastic packaging components in respect of which plastic packaging tax might not be paid.

(6)A direction under subsection (4)

(a)must be in writing,

(b)must specify the consequences under section 80 of a failure to comply with a requirement imposed under that section, and

(c)may be revoked or replaced by a further direction.

(7)The period specified in a direction under subsection (4)(b) may not exceed 6 years.

64Information and evidence

Schedule 12 makes provision about the collection and sharing of information and about evidence.

65Security for tax

(1)The Commissioners may by regulations prescribe circumstances in which a person who is liable to be registered under section 55 may be required to give security (or further security) of such amount and in such manner as the Commissioners may determine for the payment of any plastic packaging tax due, or which may become due, from the person.

(2)The Commissioners may only exercise the power in subsection (1) if they consider it is necessary for the protection of the revenue.

66Unincorporated bodies

The Commissioners may by regulations make provision in relation to a business which is carried on by a partnership or by another unincorporated body specifying by what person anything required by or under this Part to be done by a person is to be done.

67Service

(1)Anything required to be given to a person (“P”) by or under a provision of this Part may be given by sending it to P or to P’s representative by post, addressed to that person’s last known address.

(2)Anything given to P’s representative is to be treated as having been given to P.

(3)In this section, “representative”, in relation to P, means—

(a)any of P’s personal representatives;

(b)any person holding office as receiver in relation to P or any of P’s property;

(c)P’s trustee in bankruptcy or liquidator;

(d)a trustee (or interim trustee) in a sequestration of P’s estate under the Bankruptcy (Scotland) Act 2016;

(e)any other person acting in a representative capacity in relation to P (including under section 69).

Miscellaneous

68Statements for business customers

(1)A person who—

(a)supplies to a business customer a plastic packaging component in respect of which a charge to plastic packaging tax has arisen, and

(b)is liable to pay plastic packaging tax on that component,

must, when invoicing that customer in respect of that component, include with that invoice a statement of the amount of plastic packaging tax arising in relation to that component (a “PPT statement”).

(2)The reference in subsection (1)(a) to supplying a plastic packaging component to a business customer includes supplying that component by virtue of supplying other goods, such as goods that are contained within the component.

(3)A PPT statement must contain such particulars as the Commissioners may prescribe in regulations.

(4)In this section, “business customer” means a person who is supplied with a plastic packaging component in the course of their carrying out a business (within the meaning of section 43(2)).

69Tax representatives of non-resident taxpayers

(1)The Commissioners may by regulations make provision requiring that every non-resident taxpayer appoint a person resident in the United Kingdom to act as the taxpayer’s tax representative for the purposes of plastic packaging tax.

(2)Regulations under subsection (1) may, in particular, make provision—

(a)requiring notification to be given to the Commissioners where a person becomes a non-resident taxpayer;

(b)requiring notification to be given to the Commissioners where a person appoints a person as a tax representative;

(c)for the appointment of a person as a tax representative to take effect only where the person appointed is approved by the Commissioners;

(d)authorising the Commissioners to give a direction requiring the replacement of a tax representative;

(e)about the circumstances in which a person ceases to be a tax representative and about the withdrawal by the Commissioners of their approval of a tax representative;

(f)enabling a tax representative to act on behalf of the person for whom they are the tax representative through an agent of the representative;

(g)for the purposes of any provision made by virtue of paragraphs (a) to (f) regulating the procedure to be followed in any case and imposing requirements as to the information and other particulars to be provided to the Commissioners;

(h)as to the time at which things done under or for the purposes of the regulations are to take effect.

(3)The tax representative of a non-resident taxpayer—

(a)may act on the non-resident taxpayer’s behalf for the purposes of any provision relating to plastic packaging tax, and

(b)is under a duty, except to such extent as the Commissioners may by regulations otherwise provide, to secure the non-resident taxpayer’s compliance with, and discharge of, the obligations and liabilities to which the non-resident taxpayer is subject by virtue of any provision relating to plastic packaging tax (including obligations and liabilities arising or incurred before the representative was appointed).

(4)A person who is or has been the tax representative of a non-resident taxpayer is personally liable—

(a)in respect of any failure to secure compliance with, or the discharge of, any obligation or liability to which subsection (3)(b) applies while they are or were the non-resident taxpayer’s tax representative, and

(b)in respect of anything done in the course of, or for purposes connected with, acting on the non-resident taxpayer’s behalf,

as if the obligations and liabilities to which subsection (3)(b) applies were imposed jointly and severally on the tax representative and the non-resident taxpayer.

(5)A tax representative is not liable by virtue of this section to be registered for the purposes of plastic packaging tax; but the Commissioners may by regulations—

(a)require the registration of the names of tax representatives against the names of the non-resident taxpayers of whom they are the representatives;

(b)make provision for the deletion of the names of persons who cease to be tax representatives.

(6)A tax representative is not, by virtue of this section, guilty of an offence except in so far as—

(a)they consented to, or connived in, the commission of the offence by the non-resident taxpayer;

(b)the commission of the offence by the non-resident taxpayer is attributable to any neglect on the part of the tax representative;

(c)the offence consists in a contravention by the tax representative of an obligation which, by virtue of this section, is imposed both on the tax representative and on the non-resident taxpayer.

(7)In this section “non-resident taxpayer” means a person who—

(a)is, or is liable to be, registered under this Part, and

(b)is not resident in the United Kingdom.

(8)For the purposes of subsection (7), a person is resident in the United Kingdom at any time if, at that time—

(a)that person has an established place of business in the United Kingdom;

(b)that person has a usual place of residence in the United Kingdom;

(c)that person is a firm or unincorporated body which (without being resident in the United Kingdom by virtue of paragraph (a)) has amongst its partners or members at least one individual with a usual place of residence in the United Kingdom.

70Adjustment of contracts

(1)Subsection (2) applies where—

(a)a person (S) supplies a chargeable plastic packaging component that S has produced, or that was imported on behalf of S, to another person (P) under a contract,

(b)a payment falls to be made under the contract for the supply of the component, and

(c)after the making of the contract—

(i)plastic packaging tax becomes chargeable on the component, or

(ii)there is a change in the plastic packaging tax chargeable on the component.

(2)Unless the contract otherwise provides, S may adjust the amount of the payment mentioned in subsection (1)(b) so as to reflect the tax chargeable on the component.

(3)Subsection (4) applies where a person (S) supplies another person (P) with a chargeable plastic packaging component under a contract.

(4)Unless the contract provides otherwise, S may adjust the contract so that if P subsequently converts the component into a different chargeable plastic packaging component, P must provide S with information about the conversion.

(5)For the purposes of subsections (1) and (3), it is immaterial—

(a)when the contract was made;

(b)whether the contract also provides for other matters.

71Groups of companies

(1)Subsection (2) applies where a body corporate (P) is liable to pay an amount of plastic packaging tax (or an amount recoverable on the basis that it is an amount of plastic packaging tax)—

(a)in respect of plastic packaging components produced by, or imported on behalf of, P, or

(b)by virtue of a secondary liability and assessment notice or a joint and several liability notice,

at the time P is a member of a group.

(2)For the purposes of this Part, the representative member of the group is to be treated as if it were liable to pay the amount instead of P.

(3)All the bodies corporate who are treated as members of a group when any amount becomes due from the representative member, together with any bodies corporate who become treated as members of the group while any such amount remains unpaid, are jointly and severally liable for the amount due from the representative member.

(4)For the purposes of this Part—

(a)a body corporate is to be treated as a member of a group at any time in relation to which it falls to be treated as such in accordance with provision made by Schedule 13, and

(b)the representative member of a group at any time is the body corporate which falls to treated as such in accordance with that Schedule.

(5)Schedule 13 makes provision about applications by two or more bodies corporate to be treated as members of the same group for the purposes of this Part.

72Prevention of artificial separation of business activities: directions

(1)This section, and section 73, apply for the purpose of preventing the maintenance or creation of any artificial separation of business activities carried on by two or more persons from resulting in an avoidance of plastic packaging tax.

(2)The Commissioners may make a direction under this section naming any person only if they are satisfied that—

(a)the person is producing or importing, or has produced or imported, chargeable plastic packaging components,

(b)the activities in the course of which the person produces or imports, or produced or imported, chargeable plastic packaging components form only part of certain activities, the other activities being carried on concurrently or previously (or both) by one or more other persons,

(c)the activities carried on by those persons have been, or are, artificially separated, having regard to whether the persons carrying on those activities are connected within the meaning of section 1122 of CTA 2010 (“connected” persons), and

(d)if all the activities of those persons were taken into account, a single person carrying on that business would at the time of the direction be liable to be registered by virtue of section 55.

(3)Subsection (4) applies where, after making a direction under this section that specifies a description of business, it appears to the Commissioners that a person (P) who was not named in that direction is producing or importing, or has produced or imported, chargeable plastic packaging components in the course of activities which should be regarded as part of the activities of that business.

(4)The Commissioners may make a supplementary direction referring to the earlier direction and the description of business specified in it and adding P’s name to those of the persons named in the earlier direction with effect from—

(a)the date on which P began to produce or import those components, or

(b)if later, the date with effect from which the single taxable person referred to in the earlier direction became liable to be registered under this Part.

(5)If, immediately before a direction (including a supplementary direction) is made under this section, any person named in the direction is registered under this Part, the person ceases to be liable to be so registered with effect from the later of—

(a)the date with effect from which the single taxable person concerned became liable to be registered, and

(b)the date of the direction.

(6)A direction under this section must be given to each person named in it.

73Prevention of artificial separation of business activities: effect of directions

(1)For the purposes of this Part, where a direction is made under section 72—

(a)the persons named in the direction are to be treated as a single taxable person carrying on the activities of a business described in the direction;

(b)the taxable person is liable to be registered under this Part with effect from—

(i)the date of the direction, or

(ii)such later date as may be specified in the direction;

(c)the taxable person is to be registrable in such name as—

(i)the persons named in the direction may jointly nominate in writing to the Commissioners not later than 14 days after the date of the direction, or

(ii)if no such name is nominated, in such name as may be specified in the direction;

(d)any production or import of chargeable plastic packaging components by or on behalf of one of the constituent members in the course of the activities of the taxable person is to be treated as production by or import on behalf of that person;

(e)each of the constituent members is to be jointly and severally liable for any plastic packaging tax due from the taxable person;

(f)any failure by the taxable person to comply with any requirement imposed by or under this Part is to be treated as a failure by each of the constituent members severally;

(g)subject to the preceding paragraphs, for the purposes of this Part the constituent members are to be treated as a partnership carrying on the business of the taxable person and any question as to the scope of the activities of that business at any time are to be determined accordingly.

(2)Subsection (3) applies where—

(a)it appears to the Commissioners that any person (P) who is one of the constituent members should no longer be regarded as such for the purposes of subsection (1)(e) and (f), and

(b)the Commissioners give notice to that effect.

(3)P is not liable by virtue of subsection (1)(e) and (f) for anything done after the date specified in that notice (and accordingly on that date P is to be treated as having ceased to be a member of the partnership referred to in subsection (1)(g)).

(4)In subsections (1) and (2), the “constituent members” means, in relation to a business specified in a direction under section 72, the persons named in the direction, together with any person named in a supplementary direction relating to that business (together being the persons who are to be treated as the taxable person).

74Death, incapacity or insolvency of person carrying on a business: regulations

(1)The Commissioners may by regulations make provision for the purposes of plastic packaging tax in relation to cases where a person carries on the business of—

(a)an individual who has died or become incapacitated;

(b)a person (whether or not an individual) who is subject to an insolvency procedure (as defined in the regulations).

(2)Provision may be made by regulations under this section—

(a)requiring the person who is carrying on the business (P) to inform the Commissioners that P is carrying on the business and of the event that has led to P carrying it on;

(b)allowing P to be treated for a limited time as if P and the person who has died, become incapacitated or is subject to an insolvency procedure were the same person;

(c)about such other matters as the Commissioners think fit for securing continuity in the application of this Part in cases to which the regulations apply.

75Transfer of business as a going concern: regulations

(1)The Commissioners may by regulations make provision for the purposes of plastic packaging tax in relation to cases where any business carried on by a person (P) is transferred to another person (T) as a going concern.

(2)Regulations under this section may (among other things) make—

(a)provision requiring P to inform the Commissioners of the transfer;

(b)provision for P’s liabilities and duties under this Part to become, to such extent as may be provided by the regulations, liabilities and duties of T;

(c)provision for any right of either P or T to a tax credit or repayment of plastic packaging tax to be satisfied by allowing the credit or making the repayment to the other;

(d)provision as to the preservation of any records or accounts relating to the business which, by virtue of any regulations under section 63, are required to be preserved for any period after the transfer;

(e)such other provision as the Commissioners think fit for securing continuity in the application of this Part in cases to which the regulations apply.

(3)Regulations under this section may provide that no such provision as is mentioned in subsection (2)(b) or (c) has effect in relation to any transferor or transferee unless an application for the purpose has been made by them under the regulations.

76Isle of Man: import and export of chargeable plastic packaging components

(1)Subsections (2) and (3) apply if—

(a)a chargeable plastic packaging component is imported into the United Kingdom from the Isle of Man, and

(b)a charge corresponding to plastic packaging tax (the “corresponding charge”) has arisen in relation to the component under the law of the Isle of Man.

(2)If the corresponding charge has arisen at a rate equal to, or greater than, the United Kingdom rate, the component is to be treated as not being imported into the United Kingdom for the purposes of plastic packaging tax.

(3)If the corresponding charge has arisen at a rate lower than the United Kingdom rate, the amount of plastic packaging tax charged under this Part in relation to the component is to be reduced by an amount equal to the corresponding charge.

(4)“The United Kingdom rate” in relation to a chargeable plastic packaging component is the rate of plastic packaging tax that would (apart from this section) be chargeable in relation to the component under this Part.

(5)For the purposes of provision made by or under sections 51 and 53, a chargeable plastic packaging component is to be treated as not being exported from the United Kingdom if it is exported from the United Kingdom to the Isle of Man.

(6)For the purposes of determining, in accordance with section 50, when a chargeable plastic packaging component is imported into the United Kingdom from the Isle of Man, section 8 of the Isle of Man Act 1979 (removal of goods from the Isle of Man) is to have effect as if, in subsection (2), at the end of paragraph (c), there were inserted ; or

(d)goods which are chargeable plastic packaging components for the purposes of plastic packaging tax.

Offences and penalties

77Fraudulent evasion

(1)A person commits an offence if the person is knowingly concerned in, or in the taking of steps with a view to, the fraudulent evasion (by that person or another person) of plastic packaging tax.

(2)The reference in subsection (1) to the evasion of plastic packaging tax includes reference to obtaining, in circumstances where there is no entitlement to it—

(a)a tax credit;

(b)a repayment of plastic packaging tax.

(3)A person guilty of an offence under this section is liable—

(a)on summary conviction in England and Wales—

(i)to imprisonment for a term not exceeding 12 months,

(ii)to a fine not exceeding £20,000 or (if greater) three times the total of the amounts of plastic packaging tax that were, or were intended to be, evaded, or

(iii)to both;

(b)on summary conviction in Scotland—

(i)to imprisonment for a term not exceeding 12 months,

(ii)to a fine not exceeding the statutory maximum or (if greater) three times the total of the amounts of plastic packaging tax that were, or were intended to be, evaded, or

(iii)to both;

(c)on summary conviction in Northern Ireland—

(i)to imprisonment for a term not exceeding 6 months,

(ii)to a fine not exceeding the statutory maximum or (if greater) three times the total of the amounts of plastic packaging tax that were, or were intended to be, evaded, or

(iii)to both;

(d)on conviction on indictment—

(i)to imprisonment for a term not exceeding 7 years,

(ii)to a fine, or

(iii)to both.

(4)For the purposes of subsection (3), the amounts of plastic packing tax that were, or were intended to be, evaded are to be taken as including—

(a)the amount of any tax credit, and

(b)the amount of any repayment of plastic packaging tax,

which was, or was intended to be, obtained in circumstances when there was no entitlement to it.

(5)In determining for the purposes of subsection (3) the amounts of plastic packaging tax that were, or were intended to be, evaded, no account is to be taken of the extent to which any liability to tax of a person would be, or would have been, reduced by the amount of any tax credit or repayment of plastic packaging tax to which the person was, or would have been, entitled.

(6)In relation to an offence committed before the commencement of paragraph 24(2) of Schedule 22 to the Sentencing Act 2020, the reference in subsection (3)(a)(i) to 12 months is to be read as a reference to 6 months.

78Misstatements

(1)A person commits an offence if, for purposes connected with plastic packaging tax, the person—

(a)produces or provides, causes to be produced or provided, or otherwise makes use of any document which is false in a material particular, and

(b)does so intending to deceive any person or to secure that a machine will respond to the document as if it were a true document.

(2)A person commits an offence if, in providing any information under any provision made by or under this Part the person—

(a)makes a statement which the person knows to be false in a material particular, or

(b)recklessly makes a statement which is false in a material particular.

(3)A person guilty of an offence under this section is liable (subject to subsection (4))—

(a)on summary conviction in England and Wales—

(i)to imprisonment for a term not exceeding 6 months,

(ii)to a fine not exceeding £20,000, or

(iii)to both;

(b)on summary conviction in Scotland—

(i)to imprisonment for a term not exceeding 6 months,

(ii)to a fine not exceeding the statutory maximum, or

(iii)to both;

(c)on summary conviction in Northern Ireland—

(i)to imprisonment for a term not exceeding 6 months,

(ii)to a fine not exceeding the statutory maximum, or

(iii)to both;

(d)on conviction on indictment—

(i)to imprisonment for a term not exceeding 7 years,

(ii)to a fine, or

(iii)to both.

(4)In the case of an offence under this section where—

(a)the document referred to in subsection (1) is a return required under any provision made by or under this Part of this Act, or

(b)the information referred to in subsection (2) is contained in or otherwise relevant to such a return,

the maximum amount of the fine on summary conviction is the greater of £20,000 or the statutory maximum (as the case may be), and the amount equal to three times the sum of the amounts (if any) by which the return underestimates any person’s liability to plastic packaging tax.

(5)In subsection (4) the reference to the amount by which a person’s liability to plastic packaging tax is understated is the sum of—

(a)the amount (if any) by which the person’s gross liability was understated, and

(b)the amount (if any) by which any entitlements of the person to tax credits and repayments of plastic packaging tax were overstated.

(6)In subsection (5) “gross liability” means liability to plastic packaging tax before any deduction is made in respect of—

(a)any entitlement to any tax credits, or

(b)any repayment of plastic packaging tax.

79Conduct involving evasions or misstatements

(1)A person commits an offence if the person’s conduct during any particular period must have involved the person committing one or more offences under section 77 or 78.

(2)For the purposes of any proceedings for an offence under this section it is immaterial whether the particulars of the offence or offences that must have been committed are known.

(3)A person guilty of an offence under this section is liable (subject to subsection (4))—

(a)on summary conviction in England and Wales—

(i)to imprisonment for a term not exceeding 6 months,

(ii)to a fine not exceeding £20,000, or

(iii)to both;

(b)on summary conviction in Scotland—

(i)to imprisonment for a term not exceeding 6 months,

(ii)to a fine not exceeding the statutory maximum, or

(iii)to both;

(c)on summary conviction in Northern Ireland—

(i)to imprisonment for a term not exceeding 6 months,

(ii)to a fine not exceeding the statutory maximum, or

(iii)to both;

(d)on conviction on indictment—

(i)to imprisonment for a term not exceeding 7 years,

(ii)to a fine, or

(iii)to both.

(4)In the case of any offence under this section, the maximum amount of the fine on summary conviction is the greater of £20,000 or the statutory maximum (as the case may be), and the amount equal to three times the sum of the amounts of plastic packaging tax which are shown to be amounts that were or were intended to be evaded by the conduct in question.

(5)For the purposes of subsection (4), the amounts of plastic packaging tax that were, or were intended to be, evaded are to be taken as including—

(a)the amount of any tax credit, and

(b)the amount of any repayment of plastic packaging tax,

which was, or was intended to be, obtained in circumstances when there was no entitlement to it.

(6)In determining for the purposes of subsection (4) the amounts of plastic packaging tax that were, or were intended to be, evaded, no account is to be taken of the extent to which any liability to tax of a person would be, or would have been, reduced by the amount of any tax credit or repayment of plastic packaging tax to which the person was, or would have been, entitled.

80Penalty for contravening relevant requirements

(1)Where a person (P) fails to comply with a relevant requirement, P is liable to—

(a)a fixed penalty of £500, and

(b)a daily penalty of £40 for each day, after the first, on which the person continues to fail to comply.

(2)Where P is liable to a daily penalty in respect of a continuing failure to comply with a relevant requirement P is not liable to a further fixed penalty in respect of that failure.

(3)P is not liable to a penalty under this section in respect of an act or omission in respect of which P—

(a)has been convicted of an offence, or

(b)is liable to a penalty other than under this section.

(4)P is not liable to a penalty under this section if P satisfies the Commissioners or (on appeal) the appeal tribunal within the meaning of Schedule 11 that there is a reasonable excuse for the failure.

(5)For the purposes of subsection (4)

(a)an insufficiency of funds is not a reasonable excuse, unless it is attributable to events outside P’s control,

(b)where P relies on any other person to do anything, that is not a reasonable excuse unless P took reasonable care to avoid the failure, and

(c)where P had a reasonable excuse for the failure but the excuse has ceased, P is to be treated as having continued to have the excuse if the failure is remedied without unreasonable delay after the excuse ceased.

(6)Where P is liable to a penalty under this section—

(a)the Commissioners or, on appeal, the appeal tribunal within the meaning of Schedule 11, may reduce the penalty to such amount (including nil) as they think proper;

(b)on an appeal relating to any penalty reduced by the Commissioners, the appeal tribunal may cancel the whole or any part of the Commissioners’ reduction.

(7)In this section, “relevant requirement” means an obligation or a requirement imposed by or under—

(a)section 58 (variation and correction of the register);

(b)section 61 (payment, collection and recovery);

(c)section 63 (records);

(d)section 65 (security for tax);

(e)section 68 (statements);

(f)section 69 (tax representatives);

(g)section 74 (death, incapacity or insolvency of person carrying on a business);

(h)section 75 (transfer of business as a going concern);

(i)Schedule 9 (secondary liability and assessment notices and joint and several liability notices);

(j)Schedule 13 (groups of companies).

(8)The Treasury may by regulations amend subsection (1) so as to substitute for the amounts for the time being specified there amounts taking account of inflation.

(9)The Treasury may by regulations amend subsection (7) so as to add or remove a requirement relating to plastic packaging tax as a “relevant requirement”.

(10)Schedule 14 makes provision about the assessment of penalties under this section.

81Criminal proceedings

Sections 145 to 155 of CEMA 1979 (proceedings for offences, mitigation of penalties and certain other matters) apply in relation to offences under this Part as they apply in relation to offences under the customs and excise Acts.

General

82Minor and consequential amendments

Schedule 15 makes minor and consequential amendments to other legislation.

83Interpretation

In this Part—

  • “accounting period” has the meaning given by section 46(2);

  • “chargeable plastic packaging component” is to be construed in accordance with section 47;

  • “the Commissioners” means the Commissioners for Her Majesty’s Revenue and Customs;

  • “the customs and excise Acts” has the same meaning as in CEMA 1979 (see section 1(1) of that Act);

  • “finished” has the meaning given by section 47(3);

  • “HMRC” means Her Majesty’s Revenue and Customs;

  • “imported” is to be construed in accordance with section 50;

  • “joint and several liability notice” has the meaning that it has in Part 2 of Schedule 9;

  • “packaging component” and “plastic packaging component” are to be construed in accordance with section 48;

  • “plastic” and “recycled plastic” are to be construed in accordance with section 49;

  • “the register” means the register under section 54(1) (and references to registration are to registration in that register);

  • “secondary liability and assessment notice” has the meaning that it has in Part 1 of Schedule 9;

  • “tax credit”, unless the context requires otherwise, means a tax credit in accordance with regulations under section 53.

84Regulations

(1)Regulations under this Part—

(a)may make different provision for different purposes;

(b)may include incidental, consequential, supplementary, transitional or transitory provision.

(2)Regulations under this Part may make provision by reference to things specified in a notice that is—

(a)published by the Commissioners in accordance with the regulations, and

(b)not withdrawn by a further notice.

(3)Any power of the Commissioners to make regulations under this Part may instead be exercised by the Treasury.

(4)Regulations under this Part are to be made by statutory instrument.

(5)A statutory instrument containing regulations under the following provisions is subject to the made affirmative procedure—

(a)section 48(5) (meaning of “packaging component”);

(b)section 49(8) (meaning of “plastic” and “recycled plastic”);

(c)section 52 (exempt plastic packaging components);

(d)section 80(8) or (9) (penalties for contravening relevant requirements).

(6)Any other statutory instrument containing regulations under this Part is subject to annulment in pursuance of a resolution of the House of Commons (“the negative procedure”).

(7)But subsection (6) does not apply to a statutory instrument containing only regulations under section 85 (commencement of this Part).

(8)Where a statutory instrument under this Act is subject to “the made affirmative procedure”—

(a)it must be laid before the House of Commons after being made, and

(b)it ceases to have effect at the end of the period of 28 sitting days beginning with the day on which the instrument is made, unless within that period the instrument is approved by a resolution of the House of Commons.

(9)Where regulations cease to have effect as a result of subsection (8), that does not—

(a)affect anything previously done under the regulations, or

(b)prevent the making of new regulations.

(10)Any provision that may be included in regulations in a statutory instrument under this Act subject to the negative procedure may be included in regulations in a statutory instrument subject to the made affirmative procedure.

(11)In this section, “sitting day” means a day on which the House of Commons is sitting (and a day is only a day on which the House of Commons is sitting if the House begins to sit on that day).

85Commencement etc

(1)This Part—

(a)comes into force on such day as the Treasury may by regulations appoint, and

(b)has effect in relation to packaging components that are produced in the United Kingdom or imported into the United Kingdom on or after 1 April 2022.

(2)Regulations under this section may appoint different days for different purposes.

PART 3Other taxes

Inheritance tax

86Rate bands etc for tax years 2021-22 to 2025-26

Sections 8 and 8D(7) of IHTA 1984 (indexation of rate bands, residential enhancement and taper threshold) do not have effect by virtue of any difference between—

(a)the consumer prices index for the month of September in 2020, 2021, 2022, 2023 or 2024, and

(b)that index for the previous September.

Stamp duty land tax

87Temporary period for reduced rates on residential property

(1)The Stamp Duty Land Tax (Temporary Relief) Act 2020 is amended as follows.

(2)In section 1 (reduced rates of SDLT on residential property for a temporary period)—

(a)in subsection (1)(b) (which specifies the end of that temporary period), for “31 March 2021” substitute “30 June 2021”,

(b)in subsections (1) and (6)(a), for “temporary” substitute “initial temporary”, and

(c)in the heading, for “a temporary” substitute “an initial temporary”.

(3)After that section insert—

1AFurther period for reduced rates of SDLT on residential property

(1)This section makes modifications of Part 4 of the Finance Act 2003 in relation to any land transaction the effective date of which falls in the period (“the further temporary relief period”)—

(a)beginning with 1 July 2021, and

(b)ending with 30 September 2021.

(2)Section 55(1B) (amount of stamp duty land tax chargeable: general) has effect as if for Table A there were substituted—

TABLE A: RESIDENTIAL
Part of relevant considerationPercentage
So much as does not exceed £250,0000%
So much as exceeds £250,000 but does not exceed £925,0005%
So much as exceeds £925,000 but does not exceed £1,500,00010%
The remainder (if any)12%.

(3)Schedule 4ZA (higher rates of stamp duty land tax for additional dwellings etc) has effect as if for the Table A in section 55(1B) mentioned in paragraph 1(2) there were substituted—

TABLE A: RESIDENTIAL
Part of relevant considerationPercentage
So much as does not exceed £250,0003%
So much as exceeds £250,000 but does not exceed £925,0008%
So much as exceeds £925,000 but does not exceed £1,500,00013%
The remainder (if any)15%.

(4)Paragraph 2(3) of Schedule 5 (amount of SDLT chargeable in respect of rent) has effect as if for Table A there were substituted—

TABLE A: RESIDENTIAL
Rate bandsPercentage
£0 to £250,0000%
Over £250,0001%.

(5)In a case where—

(a)as a result of section 44(4) of the Finance Act 2003 the effective date of a land transaction falls in the further temporary relief period, and

(b)the contract concerned is completed by a conveyance after that period ends,

section 44(8) of that Act is not to apply in relation to that conveyance if the sole reason that (but for this subsection) it would have applied is that the modifications made by this section have no effect in relation to that conveyance.

(6)Section 44(10) of the Finance Act 2003 applies for the purposes of subsection (5).

88Increased rates for non-resident transactions

Schedule 16 makes provision for increased rates of stamp duty land tax in respect of non-resident transactions.

89Relief from higher rate charge for certain housing co-operatives etc

(1)In Schedule 4A to FA 2003 (higher rate of SDLT for certain transactions), after paragraph 5F insert—

Qualifying housing co-operatives

5FAParagraph 3 does not apply to a chargeable transaction so far as its subject-matter consists of a higher threshold interest that is acquired by a company on a day on which the company is a qualifying housing co-operative for the purposes of section 150(3A) of the Finance Act 2013 (relief from ATED).

(2)In that Schedule, after paragraph 5K insert—

5L(1)This paragraph applies where relief under paragraph 5FA (qualifying housing co-operatives) has been allowed in respect of a higher threshold interest forming the whole or part of the subject-matter of a chargeable transaction.

(2)References in this paragraph to a qualifying housing body are to—

(a)a company that is a qualifying housing co-operative for the purposes of section 150(3A) of the Finance Act 2013 (relief from ATED),

(b)a registered provider of social housing, or

(c)a registered social landlord.

(3)The relief under paragraph 5FA is withdrawn (subject to sub-paragraph (4)) if—

(a)on any day in the period of three years beginning with the effective date of the chargeable transaction (“the control period”), the purchaser is not a qualifying housing body, and

(b)immediately before the first day on which that is the case the purchaser still holds the higher threshold interest or holds a chargeable interest derived from it.

(4)If, on any day in the control period, the purchaser is not a qualifying housing body because it ceases to exist (whether by virtue of a conversion into, or amalgamation with, another person or for any other reason), relief is not to be withdrawn under this paragraph unless—

(a)another person (“the first successor”) has succeeded to the engagements of the purchaser, and

(b)condition A or condition B is met (and if condition B is met, subject to sub-paragraph (7)).

(5)Condition A is that, on the day the first successor succeeds to the engagements of the purchaser (“the day of succession”), the first successor is not a qualifying housing body.

(6)Condition B is that—

(a)on any day in the part of the control period that falls after the day of succession, the first successor is not a qualifying housing body, and

(b)immediately before the first day on which that is the case the first successor still holds the higher threshold interest or holds a chargeable interest derived from it.

(7)If condition B is met because the first successor ceases to exist (whether by virtue of a conversion into, or amalgamation with, another person or for any other reason), relief is not to be withdrawn under this paragraph unless it would have been withdrawn by virtue of sub-paragraph (4) if references in sub-paragraphs (4) to (6)—

(a)to the purchaser were references to the first successor, and

(b)to the first successor were references to the person who has succeeded to the engagements of the first successor (“the second successor”).

(8)Sub-paragraph (7) is to apply to the second successor as it applies to the first successor, and so on, subject to the necessary modifications.

(3)Schedule 17 contains minor and consequential amendments of Part 4 of FA 2003 (stamp duty land tax).

(4)The amendments made by this section and Schedule 17 have effect in relation to any land transaction of which the effective date is 3 March 2021 or a later date.

Annual tax on enveloped dwellings

90Relief for certain housing co-operatives

(1)In section 150 of FA 2013 (providers of social housing)—

(a)after subsection (3) insert—

(3A)A day in a chargeable period is relievable in relation to a single-dwelling interest if on that day a qualifying housing co-operative (as defined by section 150A) is entitled to the interest., and

(b)in the heading, at the end insert “etc”.

(2)After that section insert—

150AMeaning of “qualifying housing co-operative”

(1)A company is a “qualifying housing co-operative” for the purposes of section 150(3A) on any day if on that day—

(a)it is a housing association within the meaning of—

(i)the Housing Associations Act 1985, or

(ii)Part 2 of the Housing (Northern Ireland) Order 1992 (S.I. 1992/1725 (N.I. 15)),

(b)it is a registered society within the meaning of—

(i)the Co-operative and Community Benefit Societies Act 2014, or

(ii)the Co-operative and Community Benefit Societies Act (Northern Ireland) 1969, and

(c)the rules of the association comply with subsection (2).

(2)The rules of the association—

(a)must restrict membership to persons who are tenants, or prospective tenants, of the association,

(b)must preclude the granting or assignment of tenancies to persons other than members,

(c)must prevent members from transferring any of their shares,

(d)must prevent members from receiving any more than the nominal value of their shares on a return of share capital, and

(e)must confer on members equal voting rights.

(3)The amendments made by this section have effect in relation to—

(a)the chargeable period beginning with 1 April 2021 and all subsequent chargeable periods;

(b)the chargeable period beginning with 1 April 2020 but only in relation to a person and a single-dwelling interest falling within case A or case B.

(4)Case A is that the first day in the chargeable period on which the person is within the charge with respect to the single-dwelling interest is on or after 3 March 2021.

(5)Case B is that the person was within the charge with respect to the single-dwelling interest on one or more days in the chargeable period before 3 March 2021 but has not delivered an annual tax on enveloped dwellings return for the period with respect to the interest by 3 March 2021.

(6)For the purposes of subsections (3) to (5), “single-dwelling interest”, “within the charge” and “annual tax on enveloped dwellings return” have the same meanings that they have for the purposes of Part 3 of FA 2013.

91Repayment to certain housing co-operatives: 2020-21 chargeable period

(1)A claim for repayment of annual tax on enveloped dwellings paid, before 3 March 2021, by or on behalf of a chargeable person with respect to a single-dwelling interest may be made by the person for each day (if any) in the chargeable period beginning with 1 April 2020 on which—

(a)the person was within the charge with respect to the interest and not treated as being outside the charge by virtue of section 132(2) of FA 2013 (effect of reliefs under sections 133 to 150), and

(b)a qualifying housing co-operative was entitled to the interest.

(2)For the purposes of a claim under this section with respect to a single-dwelling interest—

(a)a company is a qualifying housing co-operative on any day if on that day it would have been a qualifying housing co-operative for the purposes of section 150(3A) of FA 2013 (if sections 150(3A) and 150A of FA 2013 (inserted by section 90) had been in force on that day);

(b)each day on which the conditions in subsection (1)(a) and (b) are met with respect to the interest is a “relievable day”;

(c)references to “the relevant return” are to the annual tax on enveloped dwellings return for the chargeable period beginning with 1 April 2020 with respect to the interest.

(3)Where a claim is made under this section with respect to a single-dwelling interest, HMRC must repay the total of the daily amounts for all the relievable days.

(4)A claim under this section must be made by amending the relevant return under paragraph 3 of Schedule 33 to FA 2013 on the same basis as it would have been amended if, on each of the relievable days, the chargeable person had been entitled to claim the type of relief numbered 8 in the table in section 159A(9) of FA 2013.

(5)Terms used in this section and in Part 3 of FA 2013 have the same meaning in this section as in that Part.

Value added tax

92Extension of temporary 5% reduced rate for hospitality and tourism sectors

In Articles 2 and 5 of the Value Added Tax (Reduced Rate) (Hospitality and Tourism) (Coronavirus) Order 2020 (S.I. 2020/728), for “31st March 2021” substitute “30th September 2021”.

93Temporary 12.5% reduced rate for hospitality and tourism sectors

(1)The modifications made by Articles 3 and 4 of the Value Added Tax (Reduced Rate) (Hospitality and Tourism) (Coronavirus) Order 2020 (S.I. 2020/728) (“the Reduced Rate Order”) continue to have effect (despite Article 2 of that Order) during the relevant period.

(2)During that period, in relation to a supply that is of a description within Groups 14 to 16 in Part 2 of Schedule 7A to VATA 1994, the reference in section 29A(1) of that Act to “5 per cent” is to be read as a reference to “12.5 per cent” (and any reference elsewhere in that Act to a rate of 5% in the context of a supply of a description specified in Schedule 7A is to be read accordingly).

(3)The modifications made by Article 6 of the Reduced Rate Order also continue to have effect (despite Article 5 of that Order) during the relevant period, but subject to the modifications in subsection (4).

(4)The modifications to Article 6 of the Reduced Rate Order mentioned in subsection (3) are—

(a)as if in paragraph (a), for “4.5” there were substituted “8.5”;

(b)as if in paragraph (b), for “0” there were substituted “5.5”;

(c)as if in paragraph (c), for “1” there were substituted “4”.

(5)The relevant period means the period—

(a)beginning with the day after the day on which the modifications made by Articles 3, 4 and 6 of the Reduced Rate Order would otherwise cease to apply by virtue of the ending of the periods mentioned in Articles 2 and 5 of that Order (whether in accordance with section 92 or any regulations made under section 26B or 29A(3) of VATA 1994), and

(b)ending on 31 March 2022.

(6)The Treasury may by regulations—

(a)repeal subsections (1) to (5);

(b)amend subsection (5) so as to substitute for the period for the time being mentioned there such other period as they consider appropriate.

(7)A statutory instrument containing regulations under subsection (6) that would increase the rate of value added tax to be charged on a supply must be laid before the House of Commons after being made and, unless approved by that House before the end of the period of 28 days beginning with the date on which the instrument is made, ceases to have effect at the end of that period.

(8)Any other statutory instrument containing regulations under subsection (6) is subject to annulment in pursuance of a resolution of the House of Commons.

(9)The fact that a statutory instrument ceases to have effect as a result of subsection (7) does not affect—

(a)anything previously done under the instrument, or

(b)the making of a new instrument.

(10)In calculating the period of 28 days mentioned in subsection (7), no account is to be taken of any time—

(a)during which Parliament is dissolved or prorogued, or

(b)during which the House of Commons is adjourned for more than four days.

94Extending digital record-keeping for VAT purposes to all businesses

In paragraph 6 of Schedule 11 to VATA 1994 (duty of taxable person to keep records), omit sub-paragraphs (7) to (9).

95Distance selling: Northern Ireland

(1)In Schedule 18, which makes provision in relation to the Protocol on Ireland/Northern Ireland in the EU withdrawal agreement about value added tax and distance selling—

(a)Part 1 makes provision amending—

(i)the criteria for registration under Part 9 of Schedule 9ZA to VATA 1994 (value added tax on acquisitions in Northern Ireland from member States: registration in respect of distance sales), and

(ii)the application of the place of supply rules in Part 5 of Schedule 9ZB to VATA 1994 (goods removed to or from Northern Ireland: rules relating to particular supplies);

(b)Part 2 makes provision implementing the European Union schemes known as the One Stop Shop (“OSS”) and the Import One Stop Shop (“IOSS”);

(c)Part 3 makes provision amending Schedule 9ZC to VATA 1994 (online sales by overseas persons and low value importations: modifications relating to the Northern Ireland Protocol) to omit Part 2 of that Schedule (modifications of the Value Added Tax (Imported Goods) Relief Order 1984);

(d)Part 4 makes provision about supplies of goods by persons established outside the United Kingdom that are facilitated by online marketplaces.

(2)The Treasury may by regulations made by statutory instrument make such provision as they consider appropriate in consequence of this section or Schedule 18, including provision amending, repealing or revoking any provision of an Act whenever passed or made (including this Act and any Act amended by it).

(3)The Treasury may by regulations made by statutory instrument make such transitional, transitory, saving, supplementary or incidental provision as they consider appropriate in connection with the coming into force of this section or Schedule 18.

(4)Regulations under subsections (2) and (3) may (among other things)—

(a)confer on a person specified in the regulations a discretion to do anything under, or for the purposes of, the regulations;

(b)make provision by reference to things specified in a notice published in accordance with the regulations;

(c)make different provision for different purposes or areas.

(5)A statutory instrument that—

(a)contains (whether alone or with other provision) regulations under subsection (2), and

(b)is not subject to any requirement under section 96 that the instrument be laid before, and approved by a resolution of, the House of Commons after being made,

is subject to annulment in pursuance of a resolution of the House of Commons.

(6)This subsection and the following provisions come into force on the day on which this Act is passed—

(a)subsection (1) and Schedule 18 so far as making provision for anything to be done by regulations, directions or public notice, and

(b)subsections (2) to (5), (7) and (8).

(7)Subsection (1) and Schedule 18 come into force for all remaining purposes on such day as the Treasury may by regulations made by statutory instrument appoint.

(8)Regulations under subsection (7) may appoint different days for different purposes.

96Distance selling: power to make further provision

(1)The Treasury may by regulations made by statutory instrument make such provision relating to value added tax as they consider appropriate in relation to the Protocol on Ireland/Northern Ireland in the EU withdrawal agreement—

(a)for the purposes of, or in connection with, giving effect to Council Directive (EU) 2017/2455 of 5 December 2017 amending Directive 2006/112/EC and Directive 2009/132/EC as regards certain value added tax obligations for supplies of services and distance sales of goods, or

(b)otherwise for the purposes of dealing with matters arising out of, or related to, that Directive.

(2)No regulations may be made under this section on or after 1 April 2024.

(3)Regulations under this section—

(a)may make any such provision as might be made by an Act of Parliament, including provision amending or repealing any provision of this Act, but

(b)may not make provision taking effect from a date earlier than that of the making of the regulations.

(4)A statutory instrument containing (whether alone or with other provision) regulations under this section that amend or repeal any Act of Parliament must be laid before the House of Commons after being made.

(5)Regulations contained in a statutory instrument laid before the House of Commons under subsection (4) cease to have effect at the end of the period of 28 days beginning with the day on which the instrument is made unless, during that period, the instrument is approved by a resolution of the House of Commons.

(6)In calculating the period of 28 days, no account is to be taken of any whole days that fall within a period during which—

(a)Parliament is dissolved or prorogued, or

(b)the House of Commons is adjourned for more than four days.

(7)If regulations cease to have effect as a result of subsection (5), that does not—

(a)affect the validity of anything previously done under or by virtue of the instrument, or

(b)prevent the making of new regulations.

(8)A statutory instrument containing (whether alone or with other provision) regulations under this section to which subsection (4) does not apply is subject to annulment in pursuance of a resolution of the House of Commons.

(9)This section comes into force on the day on which this Act is passed.

97Supply of imported works of art etc

(1)In Schedule 6 to VATA 1994 (valuation: special cases), after paragraph 11 insert—

11A(1)Sub-paragraph (2) applies to goods that—

(a)fall within subsection (5) of section 21 (works of art etc), and

(b)are treated as supplied in the United Kingdom as a result of section 7(5B) (importation of consignments with an intrinsic value not exceeding £135).

(2)The value of a supply of goods to which this sub-paragraph applies is to be taken to be an amount equal to 25% of the amount that, apart from this sub-paragraph, would be its value for the purposes of this Act.

(3)An order under section 2(2) may contain provision making such alteration of the percentage for the time being specified in sub-paragraph (2) as the Treasury consider appropriate in consequence of any increase or decrease by that order of the rate of VAT.

(2)The amendment made by subsection (1) has effect in relation to supplies made on or after IP completion day.

98Continuing effect of principle preventing the abuse of the VAT system

(1)In section 42 of TCTA 2018 (EU law relating to VAT), after subsection (4) insert—

(4A)Accordingly, that principle may continue to be relied upon in determining any matter relating to value added tax (including in determining the effect of any provision made by or under an enactment).

(2)That section has effect, and is to be deemed always to have had effect, with the amendment made by subsection (1).

99Deferring VAT payment by reason of the coronavirus emergency

(1)Schedule 19 makes provision about—

(a)powers of the Commissioners for Her Majesty’s Revenue and Customs to agree that payment of sums to meet liabilities described in article 5 of the Finance Act 2008, Section 135 (Coronavirus) Order 2020 (S.I. 2020/934) (“the Coronavirus Order 2020”) may be further deferred,

(b)surcharges arising on such sums, and

(c)a penalty payable in connection with non-payment of such sums.

(2)Subsection (1) and Schedule 19 are to be treated as having come into force on 9 March 2021.

(3)The Treasury may by regulations repeal paragraphs 4 to 11 of Schedule 19 (penalty) where they consider it appropriate to do so by reason of circumstances arising as a result of the emergency specified in article 2 of the Coronavirus Order 2020.

(4)Regulations made under subsection (3)—

(a)must make provision for the repayment of amounts paid in respect of penalties under Schedule 19, and

(b)may make other transitional provision.

(5)Regulations under this section are to be made by statutory instrument.

(6)A statutory instrument containing regulations under this section is subject to annulment in pursuance of a resolution of the House of Commons.

100Refunds to S4C

(1)In section 33(3) of the Value Added Tax Act 1994 (refunds of VAT in certain cases), after paragraph (i) insert—

(ia)S4C;.

(2)The amendment made by this section has effect in relation to supplies made, and acquisitions and importations taking place, on or after 1 April 2021.

Customs duty

101Steel removed to Northern Ireland

Schedule 20 contains amendments of the Customs (Northern Ireland) (EU Exit) Regulations 2020 (S.I. 2020/1605) in connection with the removal of certain steel products to Northern Ireland.

Fuel duties

102Restriction of use of rebated diesel and biofuels

(1)Schedule 21 makes—

(a)provision amending HODA 1979 to restrict the use of rebated diesel and biofuels to specified categories of machines, and

(b)related provision.

(2)Schedule 21 comes into force on 1 April 2022.

(3)The Treasury may by regulations make such consequential, supplementary, incidental, transitional, transitory or saving provision as the Treasury consider appropriate in connection with the coming into force of Schedule 21.

(4)Regulations under subsection (3) may—

(a)amend, repeal or revoke provision made by or under an Act passed before this Act;

(b)make different provision for different purposes or areas.

(5)Regulations under subsection (3) are to be made by statutory instrument.

(6)A statutory instrument containing regulations under subsection (3) is subject to annulment in pursuance of a resolution of the House of Commons.

(7)In Schedule 11 to FA 2020 (amendments of HODA 1979 relating to private pleasure craft), in paragraph 21 (power to make consequential amendments), after “enactment” insert “, including Schedule 21 to FA 2021,”.

Tobacco products duty

103Rates of tobacco products duty

(1)In Schedule 1 to TDPA 1979 (table of rates of tobacco products duty), for the Table substitute—

TABLE
1 Cigarettes

An amount equal to the higher of—

(a)

16.5% of the retail price plus £244.78 per thousand cigarettes, or

(b)

£320.90 per thousand cigarettes.

2 Cigars£305.32 per kilogram
3 Hand-rolling tobacco£271.40 per kilogram
4 Other smoking tobacco and chewing tobacco£134.24 per kilogram
5 Tobacco for heating£251.60 per kilogram

(2)In consequence of the provision made by subsection (1), the Tobacco Products Duty (Alteration of Rates) Order 2020 (S.I. 2020/1256) is revoked.

Vehicle taxes

104Rates for light passenger or light goods vehicles, motorcycles etc

(1)Schedule 1 to VERA 1994 (annual rates of vehicle excise duty) is amended as follows.

(2)In paragraph 1 (general rate)—

(a)in sub-paragraph (2) (vehicle not covered elsewhere in Schedule with engine cylinder capacity exceeding 1,549cc), for “£270” substitute “£280”, and

(b)in sub-paragraph (2A) (vehicle not covered elsewhere in Schedule with engine cylinder capacity not exceeding 1,549cc), for “£165” substitute “£170”.

(3)In paragraph 1B (graduated rates for light passenger vehicles registered before 1 April 2017), for the Table substitute—

CO2 emissions figureRate
(1)(2)(3)(4)
ExceedingNot exceedingReduced rateStandard rate
g/kmg/km££
1001101020
1101202030
120130120130
130140145155
140150160170
150165200210
165175240250
175185265275
185200305315
200225330340
225255575585
255590600.

(4)In the sentence immediately following the Table in that paragraph, for paragraphs (a) and (b) substitute—

(a)in column (3), in the last two rows, “330” were substituted for “575” and “590”, and

(b)in column (4), in the last two rows, “340” were substituted for “585” and “600”.

(5)In paragraph 1GC (graduated rates for first licence for light passenger vehicles registered on or after 1 April 2017), for Table 1 (vehicles other than higher rate diesel vehicles) substitute—

CO2 emissions figureRate
(1)(2)(3)(4)
ExceedingNot exceedingReduced rateStandard rate
g/kmg/km££
050010
50751525
7590105115
90100130140
100110150160
110130170180
130150210220
150170545555
170190885895
19022513351345
22525519001910
25522352245

(6)In that paragraph, for Table 2 (higher rate diesel vehicles) substitute—

CO2 emissions figureRate
(1)(2)(3)
ExceedingNot exceedingRate
g/kmg/km£
05025
5075115
7590140
90100160
100110180
110130220
130150555
150170895
1701901345
1902251910
2252552245
2552245.

(7)In paragraph 1GD(1) (rates for any other licence for light passenger vehicles registered on or after 1 April 2017)—

(a)in paragraph (a) (reduced rate), for “£140” substitute “£145”, and

(b)in paragraph (b) (standard rate), for “£150” substitute “£155”.

(8)In paragraph 1GE(2) (rates for light passenger vehicles registered on or after 1 April 2017 with a price exceeding £40,000)—

(a)in paragraph (a), for “£465” substitute “£480”, and

(b)in paragraph (b), for “£475” substitute “£490”.

(9)In paragraph 1J(a) (rates for light goods vehicles that are not pre-2007 or post-2008 lower emission vans), for “£265” substitute “£275”.

(10)In paragraph 2(1) (rates for motorcycles)—

(a)in paragraph (a) (engine cylinder capacity not exceeding 150cc), for “£20” substitute “£21”,

(b)in paragraph (b) (motorbicycles with engine cylinder capacity exceeding 150cc but not exceeding 400cc), for “£44” substitute “£45”,

(c)in paragraph (c) (motorbicycles with engine cylinder capacity exceeding 400cc but not exceeding 600cc), for “£67” substitute “£69”, and

(d)in paragraph (d) (other cases), for “£93” substitute “£96”.

(11)The amendments made by this section have effect in relation to licences taken out on or after 1 April 2021.

105Rebates where higher rate of duty paid

(1)Section 19 of VERA 1994 (rebates of vehicle excise duty) is amended as follows.

(2)In subsection (3A) for “subsection (3B)” substitute “subsections (3B) and (3C)”.

(3)After subsection (3B) insert—

(3C)Where the annual rate of duty chargeable on a vehicle licence at the time when it was taken out is determined in accordance with paragraph 1GE(2) of Schedule 1 (higher rates of duty: vehicles with a price exceeding £40,000) the relevant amount is given by—

where—

  • H is the annual rate of duty chargeable on the licence at the time when it was taken out;

  • R is the number of complete months (if any) of that part of the currency of the licence which is unexpired—

    (a)

    in respect of which the rebate condition is satisfied, and

    (b)

    which are within the period of six years beginning with the day of registration;

  • L is the annual rate of duty that would have been chargeable on the licence at the time when it was taken out if that time had been after the period of six years beginning with the day of registration;

  • P is the number of complete months (if any) of that part of the currency of the licence which is unexpired—

    (a)

    in respect of which the rebate condition is satisfied, and

    (b)

    which are not within R.

(3D)In subsection (3C) the “day of registration” means the day on which the vehicle in respect of which the licence is in force was first registered under this Act or under the law of a country or territory outside the United Kingdom.

(4)The amendments made by this section have effect in relation to cases where a rebate condition (within the meaning of section 19 of VERA 1994) is satisfied on or after 1 April 2021.

106HGV road user levy (extension of suspension)

In section 88 of FA 2020 (suspension of HGV road user levy), in subsection (3), for “12” substitute “24”.

Air passenger duty

107Rates of air passenger duty from 1 April 2022

(1)In section 30(4A) of FA 1994 (air passenger duty: long haul rates)—

(a)in paragraph (a), for “£82” substitute “£84”, and

(b)in paragraph (b), for “£180” substitute “£185”.

(2)The amendments made by this section have effect in relation to the carriage of passengers beginning on or after 1 April 2022.

Gaming duty

108Amounts of gross gaming yield charged to gaming duty

(1)In section 11(2) of FA 1997 (rates of gaming duty), for the table substitute—

TABLE
Part of gross gaming yieldRate
The first £2,548,50015%
The next £1,757,00020%
The next £3,077,00030%
The next £6,494,50040%
The remainder50%.

(2)The amendment made by this section has effect in relation to accounting periods beginning on or after 1 April 2021.

Environmental taxes

109Rates of climate change levy from 1 April 2022 to 31 March 2023

(1)Paragraph 42 of Schedule 6 to FA 2000 (climate change levy: amount payable by way of levy) is amended as follows.

(2)In sub-paragraph (1), for the table substitute—

TABLE
Taxable commodity suppliedRate at which levy payable if supply is not a reduced-rate supply
Electricity£0.00775 per kilowatt hour
Gas supplied by a gas utility or any gas supplied in a gaseous state that is of a kind supplied by a gas utility£0.00568 per kilowatt hour
Any petroleum gas, or other gaseous hydrocarbon, supplied in a liquid state£0.02175 per kilogram
Any other taxable commodity£0.04449 per kilogram.

(3)In sub-paragraph (1)(c) (reduced-rate supplies in respect of any taxable commodity other than electricity or petroleum gas, or other gaseous hydrocarbon, supplied in a liquid state), for “17” substitute “14”.

(4)In consequence of the amendment made by subsection (3), in the definition of “r” in the Notes to paragraph 2 of Schedule 1 to the Climate Change Levy (General) Regulations 2001, for “0.83” substitute “0.86”.

(5)The amendments made by this section have effect in relation to supplies treated as taking place on or after 1 April 2022 but before 1 April 2023.

110Rates of climate change levy from 1 April 2023

(1)Paragraph 42 of Schedule 6 to FA 2000 (climate change levy: amount payable by way of levy) is amended as follows.

(2)In sub-paragraph (1), for the table substitute—

TABLE
Taxable commodity suppliedRate at which levy payable if supply is not a reduced-rate supply
Electricity£0.00775 per kilowatt hour
Gas supplied by a gas utility or any gas supplied in a gaseous state that is of a kind supplied by a gas utility£0.00672 per kilowatt hour
Any petroleum gas, or other gaseous hydrocarbon, supplied in a liquid state£0.02175 per kilogram
Any other taxable commodity£0.05258 per kilogram.

(3)In sub-paragraph (1)(c) (reduced-rate supplies in respect of any taxable commodity other than electricity or petroleum gas, or other gaseous hydrocarbon, supplied in a liquid state), as amended by section 109(3), for “14” substitute “12”.

(4)In consequence of the amendment made by subsection (3), in the definition of “r” in the Notes to paragraph 2 of Schedule 1 to the Climate Change Levy (General) Regulations 2001, as amended by section 109(4), for “0.86” substitute “0.88”.

(5)The amendments made by this section have effect in relation to supplies treated as taking place on or after 1 April 2023.

111Rates of landfill tax

(1)Section 42 of FA 1996 (amount of landfill tax) is amended as follows.

(2)In subsection (1)(a) (standard rate), for “£94.15” substitute “£96.70”.

(3)In subsection (2) (reduced rate for certain disposals), in the words after paragraph (b)—

(a)for “£94.15” substitute “£96.70”, and

(b)for “£3” substitute “£3.10”.

(4)The amendments made by this section have effect in relation to disposals made (or treated as made) on or after 1 April 2021.

112Repeal of carbon emissions tax

(1)In FA 2019, omit Part 3 (carbon emissions tax).

(2)In FA 2020, omit section 95 and Schedule 12 (carbon emissions tax).

PART 4Miscellaneous and final

Freeports

113Designation of freeport tax sites

(1)The Treasury may by regulations designate an area in Great Britain as a special area for the purposes of—

(a)Part 2 of CAA 2001 (plant and machinery allowances),

(b)Part 2A of CAA 2001 (structures and buildings allowances), and

(c)where the area is in England, Part 4 of FA 2003 (stamp duty land tax).

(2)An area may only be designated by regulations under this section if, at the time the regulations are made—

(a)the area is situated in a freeport, or

(b)the Treasury consider that the area is being used, or is likely to be used, for purposes connected with activities carried on, or likely to be carried on, in a freeport.

(3)An area designated under this section is to be known as a “freeport tax site”.

(4)Regulations under this section must specify the date on which the designation takes effect.

(5)In this section, “freeport” means an area which is identified as a freeport in a document published by, or with the consent of, the Treasury for the purposes of this section (and not withdrawn).

(6)Any regulations made by the Treasury in reliance on a resolution under section 1 of the Provisional Collection of Taxes Act 1968 and in force immediately before the passing of this Act which make a designation described in subsections (1) and (2) have effect as if validly made under this section.

114Capital allowances for freeport tax sites

(1)Schedule 22 makes provision about capital allowances for expenditure incurred in connection with freeport tax sites.

(2)In that Schedule —

(a)Part 1 provides for a first-year allowance under Part 2 of CAA 2001 (plant and machinery allowances),

(b)Part 2 provides for a different rate of allowance under Part 2A of CAA 2001 (structures and buildings allowances), and

(c)Part 3 contains related amendments.

115Relief from stamp duty land tax for freeport tax sites

Schedule 23 provides for relief under Part 4 of FA 2003 in the case of transactions relating to land in a freeport tax site.

Penalties

116Penalties for failure to make returns etc

(1)Schedule 24 contains provision for imposing penalties on persons in respect of failures to make certain returns.

(2)Schedule 25 contains provision for imposing penalties on persons who, by failing to make certain returns, deliberately withhold information which would enable or assist HMRC to assess that person’s liability to tax.

(3)Schedules 24 and 25 come into force on such day as the Treasury may by regulations appoint.

(4)Different days may be appointed for different purposes.

(5)The Treasury may by regulations make transitional, transitory or saving provision in connection with the coming into force of any provision in Schedules 24 and 25.

(6)The power to make regulations under subsection (5) includes power to make different provision for different purposes.

(7)Regulations under this section are to be made by statutory instrument.

117Penalties for failure to pay tax

(1)Schedule 26 contains provision for imposing penalties on persons in respect of failures to make certain payments on time.

(2)Schedule 26 comes into force on such day as the Treasury may by regulations appoint.

(3)Different days may be appointed for different purposes.

(4)The Treasury may by regulations make transitional, transitory or saving provision in connection with the coming into force of any provision in Schedule 26.

(5)The power to make regulations under subsection (4) includes power to make different provision for different purposes.

(6)Regulations under this section are to be made by statutory instrument.

118Penalties for failure to make returns etc or pay tax: consequential provision

(1)Schedule 27 contains amendments that are consequential on Schedules 24 to 26.

(2)Schedule 27 comes into force on such day as the Treasury may by regulations appoint.

(3)Different days may be appointed for different purposes.

(4)The Treasury may by regulations make transitional, transitory or saving provision in connection with the coming into force of any provision in Schedule 27.

(5)The Treasury may by regulations make provision that is consequential on Schedules 24 to 26.

(6)Regulations under subsection (5) may—

(a)include provision amending, repealing or revoking any provision of an Act or subordinate legislation whenever passed or made (including this Act and any Act amended by it);

(b)make supplementary, incidental, transitional, transitory or saving provision.

(7)In subsection (6) “subordinate legislation” has the same meaning as in the Interpretation Act 1978.

(8)The power to make regulations under subsection (4) or (5) includes power to make different provision for different purposes.

(9)Regulations under this section are to be made by statutory instrument.

(10)A statutory instrument containing (whether alone or with other provision) regulations under subsection (5) that amend or repeal provision made by an Act is subject to annulment in pursuance of a resolution of the House of Commons.

119Follower notice penalties

Schedule 28 makes provision in relation to penalties to which a person may be liable after a follower notice has been given under Chapter 2 of Part 4 of FA 2014.

Interest

120Late payment interest and repayment interest: VAT

(1)Schedule 29 contains amendments of FA 2009 relating to late payment interest, repayment interest and VAT.

(2)Schedule 29 comes into force on such day as the Treasury may by regulations appoint.

(3)Different days may be appointed for different purposes.

(4)The Treasury may by regulations make transitional, transitory or saving provision in connection with the coming into force of any provision in Schedule 29.

(5)The Treasury may by regulations make provision that is consequential on Schedule 29.

(6)Regulations under subsection (5) may—

(a)include provision amending, repealing or revoking any provision of an Act or subordinate legislation whenever passed or made (including this Act and any Act amended by it);

(b)make supplementary, incidental, transitional, transitory or saving provision.

(7)In subsection (6) “subordinate legislation” has the same meaning as in the Interpretation Act 1978.

(8)The power to make regulations under subsection (4) or (5) includes power to make different provision for different purposes.

(9)Regulations under this section are to be made by statutory instrument.

(10)A statutory instrument containing (whether alone or with other provision) regulations under subsection (5) that amend or repeal provision made by an Act is subject to annulment in pursuance of a resolution of the House of Commons.

Avoidance

121Promoters of tax avoidance schemes

(1)Part 5 of FA 2014 (promoters of tax avoidance schemes) is amended in accordance with Schedule 30.

(2)Part 1 of that Schedule contains—

(a)amendments about “stop notices”, which prohibit the promotion of arrangements of a description specified in the notice, and

(b)amendments about the application of Schedule 36 to FA 2008 (information and inspection powers) in connection with Part 5 of FA 2014.

(3)Part 2 of that Schedule contains amendments in connection with providing for persons (whether or not they carry on a business) to be treated as carrying on business as a promoter as a result of their connection to other persons.

(4)Part 3 of that Schedule contains amendments about powers to give a person a conduct notice or monitoring notice as a result of the transfer of a business, a part of a business, or property of a business to that person.

(5)Part 4 of that Schedule contains miscellaneous amendments of Part 5 of FA 2014.

(6)The amendments made by that Schedule, other than the amendments made by paragraphs 20, 21 and 27 of that Schedule, have effect—

(a)from the day on which this Act is passed, and

(b)for the purposes of determining whether a person meets a threshold condition (within the meaning of Part 5 of FA 2014), or a condition in subsections (11) to (13) of Section 237A of FA 2014, in a period of three years ending on or after that day.

122Disclosure of tax avoidance schemes

Schedule 31 makes provision about the disclosure of tax avoidance schemes.

123Penalties for enablers of defeated tax avoidance

(1)Schedule 16 to F(No.2)A 2017 (penalties for enablers of defeated tax avoidance) is amended as follows.

(2)In paragraph 21 (special provision about assessment for multi-user schemes)—

(a)in sub-paragraph (1)(c), for “, the required percentage of relevant defeats has not been reached” substitute “(other than a tribunal or court defeat), neither condition 1 nor condition 2 has been met”;

(b)in sub-paragraph (2), for “the required percentage of relevant defeats is reached” substitute “condition 1 or condition 2 is met”;

(c)after sub-paragraph (2) insert—

(2A)Condition 1 is that a defeat that is a tribunal or court defeat is incurred in the case of at least one of the number of related arrangements implementing the proposal.

(2B)Condition 2 is that the required number or percentage of relevant defeats is reached.

(2C)For the purposes of this paragraph, a defeat incurred in respect of arrangements is a “tribunal or court defeat” if—

(a)condition A (in paragraph 5) is met and the adjustments mentioned in paragraph 5(2) have been confirmed by a tribunal or court, or

(b)condition B (in paragraph 6) is met and the assessment mentioned in paragraph 6(2) has been confirmed by a tribunal or court.

(2D)An adjustment or assessment (as the case may be) has been confirmed by a tribunal or court if the First-tier Tribunal, the Upper Tribunal or a court has determined in proceedings before it that the adjustment or assessment in question should not be varied.

(2E)For the purposes of sub-paragraph (2D), disregard variations that do not substantively alter the basis of the adjustment or assessment in question.;

(d)in sub-paragraph (3)—

(i)after “required” insert “number or”;

(ii)for the words from “defeats have” to the end of the sub-paragraph substitute

(a)the number of related arrangements implementing the proposal is fewer than 21 and defeats have been incurred in the case of 50% or more of those arrangements;

(b)the number of related arrangements implementing the proposal is more than 20 but fewer than 44 and defeats have been incurred in the case of 11 or more of those arrangements;

(c)the number of related arrangements implementing the proposal is more than 43 but fewer than 200 and defeats have been incurred in the case of 25% or more of those arrangements;

(d)the number of related arrangements implementing the proposal is 200 or more and defeats have been incurred in the case of 50 or more of those arrangements.

(3)In paragraph 22 (time limit for assessment)—

(a)in sub-paragraph (3)—

(i)in paragraph (a), for “the required percentage of defeats was reached” substitute “condition 1 or condition 2 was met”;

(ii)for paragraph (b) substitute—

(b)condition 1 or condition 2 has been met,;

(iii)in paragraph (ii) for “that required percentage was reached” substitute “the first of condition 1 or condition 2 was met”;

(b)in sub-paragraph (4), in the words after paragraph (b), for “the required percentage of relevant defeats is reached” substitute “condition 1 or condition 2 is met”.

(4)In paragraph 40 (information and inspection powers: application of Schedule 36 to FA 2008)—

(a)for sub-paragraph (1) substitute—

(1)Schedule 36 to FA 2008 (information and inspection powers) applies for the purpose of—

(a)checking a relevant person’s position as regards liability for a penalty under paragraph 1 in relation to particular tax arrangements;

(b)ascertaining the identity of any other person who has or may have enabled those arrangements,

as it applies for the purpose of checking a person’s tax position, subject to the modifications in paragraphs 41 to 43.;

(b)in sub-paragraph (2), in the definition of “relevant person”, at the end of the definition insert “(or will become or may become so liable if T incurs a defeat)”;

(c)after sub-paragraph (2) insert—

(3)References in this paragraph and paragraphs 41 and 42 to a person who has or may have enabled particular tax arrangements are to be read in accordance with Part 4 of this Schedule (persons who “enabled” the arrangements), save that—

(a)references in that Part to the arrangements mentioned in paragraph 1 (however expressed) are to be read as references to the particular tax arrangements, and

(b)references in that Part to “T” are to be read as references to the person who entered into the particular tax arrangements.

(5)In paragraph 41 (general modifications of Schedule 36 to FA 2008 as applied)—

(a)in the words before sub-paragraph (a), for “the purpose” substitute “a purpose”;

(b)in sub-paragraph (d), for the words from “the investigation” to the end of the sub-paragraph substitute

(i)the investigation of the relevant person’s position as regards liability for a penalty under paragraph 1 in relation to particular tax arrangements, or (as the case may be)

(ii)the identification of any other person who has or may have enabled those arrangements, and.

(6)In paragraph 42 (specific modifications of Schedule 36 to FA 2008 as applied)—

(a)in sub-paragraph (1)—

(i)for “the purpose” substitute “a purpose”;

(ii)for “(2)” substitute “(1A)”;

(b)after sub-paragraph (1) insert—

(1A)Paragraph 1 (taxpayer notices) has effect as if the reference to checking the taxpayer’s tax position (as modified by paragraph 41 of this Schedule) included a reference to ascertaining the identity of any other person who has or may have enabled the particular tax arrangements in relation to which the relevant person’s position as regards liability to a penalty under paragraph 1 is to be checked.

(1B)Paragraph 10 (power to inspect business premises etc) has effect as if the reference to checking that person’s tax position (as modified by paragraph 41 of this Schedule) included a reference to ascertaining the identity of any other person who has or may have enabled the particular tax arrangements in relation to which the relevant person’s position as regards liability to a penalty under paragraph 1 is to be checked.;

(c)after sub-paragraph (2) insert—

(2A)Paragraph 25 (tax advisers) is treated as omitted.

(7)In paragraph 43 (exclusion of paragraphs 50 and 51 of Schedule 36 to FA 2008), for “the purpose” substitute “a purpose”.

(8)In paragraph 48 (restrictions on power to publish information about persons who have incurred a penalty)—

(a)in sub-paragraph (1), omit paragraph (c);

(b)in sub-paragraph (2), for “(1)(c) and (d)” substitute “(1)(d)”;

(c)omit sub-paragraph (3).

(9)The amendments made by subsections (2) and (3) do not have effect in relation to a person who is liable to a penalty under paragraph 1 of Schedule 16 to F(No.2)A 2017 solely by reason of actions of the person carried out before the day on which this Act is passed.

(10)Where the amendments made by subsections (2) and (3) have effect, in determining whether condition 1 or 2 is met in relation to particular tax arrangements, account may be taken of defeats incurred in the case of other related arrangements before the day on which this Act is passed.

(11)For the purposes of subsection (10), “condition 1”, “condition 2”, “defeat” and “related arrangements” have the same meanings as in paragraph 21 of Schedule 16 to F(No.2)A 2017 (as amended by subsection (2)).

(12)The amendments made by subsections (4) to (7) have effect for a purpose mentioned in paragraph (a) or (b) of paragraph 40(1) of Schedule 16 to F(No.2)A 2017 (as substituted by subsection (4)(a)) in relation to tax arrangements whenever entered into (whether before or after the passing of this Act).

(13)The amendments made by subsection (8) do not have effect in relation to a person who incurs a penalty under paragraph 1 of Schedule 16 to F(No.2)A 2017 whose liability to the penalty arose solely by reason of actions of the person carried out before the day on which this Act is passed.

124The GAAR and partnerships

(1)Schedule 32 makes provision about the operation of the general anti-abuse rule in relation to partnerships.

(2)The amendments made by the Schedule have effect in relation to tax arrangements (within the meaning of Part 5 of FA 2013) entered into at any time (whether before or after the passing of this Act).

Conditionality

125Licensing authorities: requirements to give or obtain tax information

(1)Schedule 33 contains provision requiring licensing authorities, before considering an application for an authorisation to which that Schedule applies—

(a)in the case of a first-time application, to give the applicant information relating to tax compliance, and

(b)in the case of any other application, to obtain from HMRC confirmation that the applicant has given HMRC information relating to tax compliance.

(2)Schedule 33 has effect in relation to applications made on or after 4 April 2022.

HMRC powers

126Financial institution notices

(1)Schedule 36 to FA 2008 (information and inspection powers) is amended as follows.

(2)After paragraph 4 insert—

Power to obtain information and documents from financial institutions

4A(1)An officer of Revenue and Customs may by notice in writing require a financial institution—

(a)to provide information, or

(b)to produce a document,

if conditions A and B are met.

(2)Condition A is that the information or document is, in the reasonable opinion of the officer giving the notice, of a kind that it would not be onerous for the institution to provide or produce.

(3)Condition B is that the information or document is reasonably required by the officer—

(a)for the purpose of checking the tax position of another person whose identity is known to the officer (“the taxpayer”), or

(b)for the purpose of collecting a tax debt of the taxpayer.

(4)In this Schedule, “financial institution notice” means a notice under this paragraph.

(5)A financial institution notice may be given by an officer of Revenue and Customs only if—

(a)the officer is an authorised officer of Revenue and Customs, or

(b)an authorised officer of Revenue and Customs has agreed to the giving of the notice.

(6)A financial institution notice must name the taxpayer to whom it relates.

(7)An officer of Revenue and Customs—

(a)must give a copy of a financial institution notice to the taxpayer to whom it relates, and

(b)must give the taxpayer a summary of the reasons why an officer of Revenue and Customs requires the information and documents.

(8)An application (without notice) may be made to the tribunal by, or with the agreement of, an authorised officer of Revenue and Customs to disapply any of the requirements under sub-paragraph (6) or (7).

(9)The tribunal must grant the application to disapply the requirement under sub-paragraph (6) if it is satisfied that the officer has reasonable grounds for believing that naming the taxpayer might seriously prejudice the assessment or collection of tax.

(10)The tribunal must grant the application to disapply a requirement under sub-paragraph (7) if it is satisfied that complying with the requirement might prejudice the assessment or collection of tax.

(3)In paragraph 6 (notices)—

(a)in sub-paragraph (1), after “2,” insert “4A,”;

(b)in sub-paragraph (4), after “4” insert “, 4A”.

(4)After paragraph 61 insert—

Financial institution

61ZA(1)In this Schedule “financial institution” means—

(a)a financial institution under the CRS other than one which is such an institution because (and only because) it is an investment entity within section VIII (A)(6)(b) of the CRS, or

(b)a person who issues credit cards.

(2)In this paragraph “the CRS” means the common reporting standard for automatic exchange of financial account information developed by the Organisation for Economic Co-operation and Development, as that standard has effect from time to time.

(5)As soon as reasonably practicable after the end of each financial year, the Commissioners for Her Majesty’s Revenue and Customs must provide the Treasury with—

(a)information about the number of financial institution notices given during that financial year, and

(b)such other information (if any) relating to financial institution notices as the Treasury may reasonably require.

(6)Information received under subsection (5) must be included in a report laid before the House of Commons by the Treasury.

(7)The report mentioned in subsection (6) must be laid not later than 31 January following the end of the financial year to which the information relates.

(8)For the purposes of subsections (5) to (7)

  • “financial institution notice” means a notice under paragraph 4A of Schedule 36 to FA 2008;

  • each of the following is a “financial year”—

    (a)

    the period beginning with the date on which this Schedule comes into force and ending with 31 March 2022, and

    (b)

    each successive period of 12 months.

(9)The amendments made by subsections (2) to (4) have effect—

(a)for the purpose of checking the tax position of a taxpayer as regards periods or tax liabilities whenever arising, or

(b)for the purpose of collecting a tax debt of a taxpayer whenever arising.

127Collection of tax debts

(1)Schedule 36 to FA 2008 (information and inspection powers) is amended as follows.

(2)In paragraph 1(1) (taxpayer notices), at the end insert “or for the purpose of collecting a tax debt of the taxpayer”.

(3)In paragraph 2(1) (third party notices), at the end insert “or for the purpose of collecting a tax debt of the taxpayer”.

(4)In paragraph 5(2) (persons whose identities are not known), after “tax position of” insert “or for the purpose of collecting a tax debt of”.

(5)In paragraph 5A (persons whose identity can be ascertained)—

(a)in sub-paragraph (2), at the end insert “or for the purpose of collecting a tax debt of the taxpayer”, and

(b)in sub-paragraph (7), after “tax position of”, in both places, insert “, or for the purpose of collecting a tax debt of,”.

(6)After paragraph 63 insert—

Tax debts: collection

63A(1)In this Schedule a reference to collecting a tax debt of a person is a reference to taking any steps for, or in connection with, the recovery of—

(a)an amount of tax due from the person, or

(b)any other amount due from the person in connection with any tax.

(2)It does not matter whether or not another person is, or has been, at any time liable to pay the tax or other amount.

(7)After paragraph 63A (inserted by subsection (6)) insert—

Tax debts: extended meaning of “relevant foreign tax”

63BWhere this Schedule applies for the purpose of collecting a tax debt of a person, “relevant foreign tax” is to be taken to include (in addition to what is mentioned in paragraph 63(4)) any tax or duty which is covered by the provisions for the exchange of information under Council Directive 2010/24/EU of 16 March 2010 concerning mutual assistance for the recovery of claims relating to taxes, duties and other measures (as it had effect immediately before IP completion day).

(8)The amendments made by this section have effect for the purpose of collecting a tax debt of a person whenever arising.

128Miscellaneous amendments of Schedule 36 to FA 2008

Schedule 34 makes miscellaneous amendments of Schedule 36 to FA 2008 (information and inspection powers).

129International arrangements for exchanging information on the gig economy

(1)The Treasury may by regulations make such provision as they consider appropriate for the purpose of giving effect to—

(a)the OECD Model Rules for Reporting by Platform Operators with respect to Sellers in the Sharing and Gig Economy, published on 3 July 2020 (“the Model Rules”);

(b)any other international agreement or arrangements to which the United Kingdom is a party that make provision corresponding, or similar, to that made by the Model Rules.

(2)References in subsection (1) to the Model Rules, agreements or arrangements include those Model Rules, agreements or arrangements as modified or supplemented from time to time.

(3)Regulations under this section may (among other things)—

(a)make provision about penalties for failure to comply with the regulations;

(b)provide that a reference in the regulations to, or to a provision of, the Model Rules or an agreement or arrangement to which subsection (1) refers is to be construed as a reference to the Model Rules, agreement or arrangement, or provision, as amended from time to time;

(c)make consequential, supplementary, incidental, transitional or saving provision (including amending, repealing or revoking an enactment whenever passed or made).

(4)Regulations under this section are to be made by statutory instrument.

(5)A statutory instrument containing regulations under this section is subject to annulment in pursuance of a resolution of the House of Commons.

130Unauthorised removal or disposal of seized goods

(1)In Schedule 3 to CEMA 1979 (provisions relating to forfeiture), after paragraph 17 insert—

Unauthorised removal or disposal: penalties etc

18(1)This paragraph applies where a thing is seized as liable to forfeiture and, with the agreement of a person within sub-paragraph (2) (“the responsible person”), the thing remains at the place where it is first seized.

(2)A person is within this sub-paragraph if the person is—

(a)the person whose offence or suspected offence occasioned the seizure,

(b)the owner or any of the owners of the thing seized or any servant or agent of such an owner,

(c)a person who has (or appears to have) possession or control over the thing being seized,

(d)in the case of any thing seized on a ship or aircraft, the master or commander,

(e)in the case of any thing seized on any other vehicle, the vehicle operator, or

(f)a person whom the person who seizes the thing reasonably believes to be a person within any of paragraphs (a) to (e).

(3)Where the thing is deemed to be seized as liable to forfeiture under paragraph 2(3) of Schedule 2A—

(a)the offence or suspected offence that occasioned its detention is to be treated, for the purpose of sub-paragraph (2)(a), as having occasioned its seizure, and

(b)sub-paragraph (2)(f) has effect as if the reference to the person who seizes the thing were a reference to any officer of Revenue and Customs.

(4)If the responsible person fails to prevent the unauthorised removal or disposal of the thing from the place where it is seized, that failure attracts a penalty under section 9 of the Finance Act 1994 (civil penalties).

(5)The removal or disposal of the thing is unauthorised unless it is done with the permission of a proper officer of Revenue and Customs.

(6)Where any duty of excise is payable in respect of the thing—

(a)the penalty is to be calculated by reference to the amount of that duty (whether it has been paid or not), and

(b)section 9 of the Finance Act 1994 has effect as if in subsection (2)(a) the words “5 per cent of” were omitted.

(7)If no duty of excise is payable in respect of the thing, that section has effect as if the penalty provided for by subsection (2)(b) of that section were whichever is the greater of—

(a)the value of the thing at the time when it was first seized, or

(b)£250.

19(1)This paragraph applies where—

(a)a thing is seized at a revenue trader’s premises,

(b)the thing is liable to forfeiture under the customs and excise Acts, and

(c)without the permission of a proper officer of Revenue and Customs, the thing is removed from the trader’s premises, or otherwise disposed of, by any person.

(2)The Commissioners may seize as liable to forfeiture goods of equivalent value to the thing from the revenue trader’s stock.

(3)For the purposes of this paragraph, a revenue trader’s premises include any premises used to hold or store anything for the purposes of the revenue trader’s trade, regardless of who owns or occupies the premises.

(2)The amendments made by this section have effect in relation to a thing seized as liable to forfeiture on or after the day on which this Act is passed.

131Temporary approvals etc pending review or appeal

(1)In Chapter 2 of Part 1 of FA 1994 (customs and excise: appeals and penalties), after section 16 insert—

16ATemporary approvals etc pending review or appeal: eligibility

(1)Section 16B applies where HMRC notify P of an approval decision and—

(a)HMRC are required to review the decision under section 15C or 15E, or

(b)the decision, or the decision on a review under that section, has been appealed to an appeal tribunal under section 16.

(2)An approval decision is a decision as to whether or not, and in which respects, any person or place (as the case may be) is to be or is to continue to be—

(a)approved under section 92 of CEMA 1979 (warehousekeepers and owners of warehouses goods regime: approval of excise warehouses);

(b)approved and registered under section 100G of CEMA 1979 by virtue of—

(i)regulation 3 of the Warehousekeepers and Owners of Warehoused Goods Regulations 1999 (S.I. 1999/1278) (authorized warehousekeepers);

(ii)regulation 5 of those Regulations (registered owners);

(iii)regulation 6 of those Regulations (duty representatives);

(iv)regulation 4 of the Hydrocarbon Oil (Registered Dealers in Controlled Oil) Regulations 2002 (S.I. 2002/3057) (registered dealers in controlled oil);

(c)approved and registered to carry on a controlled activity under section 88C ALDA 1979 (alcohol wholesalers registration scheme);

(d)approved to carry on a controlled activity under section 8L of TPDA 1979 (raw tobacco scheme);

(e)approved and registered under section 49 F(No.2)A 2017 (fulfilment houses due diligence scheme);

(f)licensed to carry out a regulated activity under the Tobacco Products Manufacturing Machinery (Licensing Scheme) Regulations 2018 (S.I. 2018/75) (tobacco machinery scheme).

(3)The Commissioners may by regulations made by statutory instrument amend subsection (2) so as to add, vary or remove a paragraph of that subsection.

(4)A statutory instrument containing regulations under subsection (3) is subject to annulment in pursuance of a resolution of the House of Commons.

16BTemporary approvals etc pending review or appeal: process

(1)On an application by P, HMRC may grant temporary approval if they are satisfied that—

(a)P has demonstrated that if temporary approval were not granted the review or appeal in respect of the approval decision, or the appeal from a decision on review of that decision, would be rendered nugatory by virtue of P being unable to continue as a going concern or otherwise, and

(b)it is appropriate in all the circumstances to grant temporary approval (despite the approval decision).

(2)In determining whether it would be appropriate to grant temporary approval, HMRC must have regard to—

(a)the prospect of the review or appeal in respect of the approval decision, or appeal from a decision on review of that decision, being determined in P’s favour;

(b)any alternative steps available to, and taken by, P to protect P’s position pending the final determination of the review or appeal;

(c)whether P has acted expeditiously in requiring the review or in bringing and progressing the appeal.

(3)Subject to any provision made in regulations under section 16C, temporary approval has effect as an approval, registration or licence (as the case may be) under the relevant provision listed in section 16A(2) that—

(a)commences on the day on which the application for temporary approval is granted,

(b)expires on the day determined in accordance with subsection (4), and

(c)is subject to any conditions or restrictions imposed on the temporary approval.

(4)The day on which a temporary approval expires is—

(a)in a case where the approval decision is cancelled on a review, the day on which it is cancelled;

(b)in a case where the approval decision is upheld on a review, the last day on which an appeal could be brought against that decision (ignoring any possibility of an appeal brought out of time with permission), unless paragraph (4)(c) applies;

(c)in a case where an appeal (other than an appeal brought out of time with permission) is brought in respect of an approval decision or a decision on a review of that decision, the day on which the appeal is finally determined.

(5)HMRC may revoke a temporary approval, or vary the conditions or restrictions to which it is subject, if they are satisfied that a change in circumstances justifies doing so.

(6)HMRC may by notice published in such form as HMRC considers appropriate make provision about the timing, form, content and determination of applications under subsection (1).

(7)Subsection (8) applies if HMRC—

(a)refuse an application under subsection (1),

(b)grant an application under that subsection subject to conditions or restrictions,

(c)vary the conditions or restrictions to which a temporary approval is subject, or

(d)revoke a temporary approval, and

the approval decision, or the decision on a review of that decision under section 15C or 15E, has been appealed to an appeal tribunal under section 16.

(8)If, on an application by P, the appeal tribunal decides that HMRC should not have (as the case may be)—

(a)refused the application,

(b)granted the application subject to particular conditions or restrictions,

(c)varied the conditions or restrictions to which the temporary approval is subject, or

(d)revoked the temporary approval,

the appeal tribunal may order HMRC to make any decision that it would have been open to HMRC to make under this section.

(9)If the appeal tribunal makes an order under subsection (8), HMRC or P may apply to the appeal tribunal to vary or revoke that order.

(10)HMRC must notify P of any decision to grant or revoke a temporary approval or to vary the conditions or restrictions to which such approval is subject.

16CTemporary approvals etc pending review or appeal: modifications

(1)The Commissioners may by regulations make such provision as they consider appropriate in consequence of provision made in sections 16A and 16B (including by virtue of regulations under section 16A(3)).

(2)Regulations under this section may amend, repeal, revoke or otherwise modify any enactment.

(3)Regulations under this section are to be made by statutory instrument.

(4)A statutory instrument containing regulations under this section which amend, repeal or modify the application of an Act of Parliament must be laid before the House of Commons after being made and, unless approved by that House before the end of the period of 28 days beginning with the date on which the instrument is made, ceases to have effect at the end of that period.

(5)Any other statutory instrument containing regulations under this section is subject to annulment in pursuance of a resolution of the House of Commons.

(6)The fact that a statutory instrument ceases to have effect as a result of subsection (4) does not affect—

(a)anything previously done under the instrument, or

(b)the making of a new instrument.

(7)In calculating the period of 28 days mentioned in subsection (4), no account is to be taken of any time—

(a)during which Parliament is dissolved or prorogued, or

(b)during which the House of Commons is adjourned for more than four days.

(8)In this section “enactment” includes an enactment contained in subordinate legislation within the meaning of the Interpretation Act 1978.

(2)In section 16A(1) of FA 1994 (inserted by subsection (1) of this section), the reference to HMRC notifying P of an approval decision includes a reference to HMRC having notified P of such a decision before the coming into force of this section.

(3)This section comes into force on such day as the Commissioners may by regulations made by statutory instrument appoint.

Banking

132Replacement of LIBOR with incremental borrowing rate

(1)In section 70O of CAA 2001 (funding leases: the lease payments test)—

(a)in subsection (4)(b), for “1% above LIBOR” substitute “the incremental borrowing rate”;

(b)for subsection (5) substitute—

(5)For this purpose, the incremental borrowing rate has the same meaning as it has for accounting purposes.

(6)The Treasury may by regulations amend this section for the purpose of replacing references to the incremental borrowing rate with references to another rate.

(2)In section 228MB of CAA 2001 (plant or machinery leases: present value of asset)—

(a)in subsection (3), for “1% above LIBOR” substitute “the incremental borrowing rate”;

(b)for subsection (4) substitute—

(4)For this purpose, the incremental borrowing rate has the same meaning as it has for accounting purposes.

(5)The Treasury may by regulations amend this section for the purpose of replacing references to the incremental borrowing rate with references to another rate.

(3)In section 437C of CTA 2010 (plant or machinery lease: present value of lease)—

(a)in subsection (6), for “1% above LIBOR” substitute “the incremental borrowing rate”;

(b)for subsection (7) substitute—

(7)For this purpose, the incremental borrowing rate has the same meaning as it has for accounting purposes.

(7A)The Treasury may by regulations amend this section for the purpose of replacing references to the incremental borrowing rate with references to another rate.

(4)Subsection (1) has effect in relation to leases the inception of which (within the meaning of section 70YI of CAA 2001) is on or after 1 January 2022.

(5)Subsection (2) has effect in relation to leases entered into on or after 1 January 2022.

(6)Subsection (3) has effect in cases where the relevant time for the purposes of section 437C of CTA 2010 is on or after 1 January 2022.

133Tax consequences of reform etc of LIBOR and other reference rates

(1)The Treasury may by regulations make provision about the tax consequences of things done in anticipation of or in connection with—

(a)the reform or discontinuance of LIBOR, or

(b)the reform or discontinuance of another reference rate.

(2)Regulations under this section may, for example, make provision—

(a)changing the tax treatment of transactions (including by disregarding a transaction or treating a transaction as taking place at a different time or to a different extent);

(b)changing the tax treatment of amounts (including by disregarding an amount or treating an amount as larger or smaller than it actually is).

(3)Regulations under this section may include retrospective provision.

(4)Where regulations under this section do so—

(a)they must include provision conferring power on a person to make an election for no provision of the regulations to have retrospective effect in the person’s case;

(b)they may include provision conferring power on a person to make such other election limiting the retrospective effect of the regulations in the person’s case as is specified in the regulations.

(5)Regulations that include provision for an election mentioned in subsection (4)—

(a)must include provision about how the election is to be made, and

(b)may include provision for a time limit within which the election is to be made.

(6)Regulations under this section may—

(a)apply an enactment (with or without modifications) or disapply an enactment, or

(b)amend, repeal or revoke an enactment.

(7)Regulations under this section may—

(a)make different provision for different cases or purposes, and

(b)include incidental, consequential, supplementary or transitional provision.

(8)Regulations under this section are to be made by statutory instrument.

(9)No regulations may be made under this section unless a draft of the statutory instrument containing them has been laid before and approved by a resolution of the House of Commons.

(10)In this section—

  • “enactment” includes an enactment contained in subordinate legislation (within the meaning of the Interpretation Act 1978);

  • “reference rate” means a published rate used to set interest rates for financial instruments;

  • “tax” includes stamp duty.

(11)The power conferred by this section is not exercisable after 31 December 2023, except for the purpose of revoking regulations made under it on or before that date.

134Powers of the Treasury to amend legislation relating to banks

(1)In section 133N of CTA 2009 (powers to amend provisions relating to banking companies), after subsection (3) insert—

(3A)Regulations under this section made on or before 30 June 2022 may have retrospective effect in relation to any time on or after 1 January 2022.

(2)Chapter 2 of Part 7A of CTA 2010 (banking companies: key definitions) is amended as follows.

(3)For the italic heading before section 269BE (power to make consequential changes) substitute “Powers to amend”.

(4)In section 269BE—

(a)for the heading substitute “Powers to amend”;

(b)after subsection (1) insert—

(1A)The Treasury may by regulations—

(a)amend sections 269B to 269BD;

(b)amend other provisions of this Part in consequence of provision made under paragraph (a).

(1B)Regulations under this section may include transitional provision.

(1C)Regulations under this section made on or before 30 June 2022 may have retrospective effect in relation to any accounting period ending on or after 1 January 2022.

(1D)A statutory instrument containing (whether alone or with other provision) regulations under subsection (1A) may not be made unless a draft of the instrument has been laid before and approved by a resolution of the House of Commons.

(5)Part 9 of Schedule 19 to FA 2011 (the bank levy: power to make consequential changes) is amended as follows.

(6)For the Part heading substitute “Powers to amend”.

(7)In paragraph 81—

(a)after sub-paragraph (1) insert—

(1A)The Treasury may by regulations made by statutory instrument—

(a)amend Part 8 of this Schedule (definitions);

(b)amend other Parts of this Schedule in consequence of provision made under paragraph (a).”

(1B)An order under sub-paragraph (1) or regulations under sub-paragraph (1A) may include transitional provision.;

(b)in sub-paragraph (2)—

(i)in the words before paragraph (a), for “this paragraph” substitute “sub-paragraph (1)”;

(ii)omit paragraph (b);

(iii)at the end insert—

(c)in the case of an order made on or before 30 June 2022, in relation to any chargeable period ending on or after 1 January 2022.;

(c)after sub-paragraph (2) insert—

(2A)Regulations under sub-paragraph (1A) made on or before 30 June 2022 may have retrospective effect in relation to any chargeable period ending on or after 1 January 2022.;

(d)in sub-paragraph (3), for “an order under this paragraph” substitute “only an order under sub-paragraph (1)”;

(e)after sub-paragraph (3) insert—

(4)Any other statutory instrument containing provision made under this paragraph may not be made unless a draft of the instrument has been laid before and approved by a resolution of the House of Commons.

Other

135Interpretation

In this Act the following abbreviations are references to the following Acts—

CAA 2001Capital Allowances Act 2001
CEMA 1979Customs and Excise Management Act 1979
CRCA 2005Commissioners for Revenue and Customs Act 2005
CTA 2009Corporation Tax Act 2009
CTA 2010Corporation Tax Act 2010
CT(NI)A 2015Corporation Tax (Northern Ireland) Act 2015
FA followed by a yearFinance Act of that year
F(No.2)A or F(No.3)A followed by a yearFinance (No.2) Act or Finance (No.3) Act of that year
HODA 1979Hydrocarbon Oil Duties Act 1979
IHTA 1984Inheritance Tax Act 1984
ITA 2007Income Tax Act 2007
ITEPA 2003Income Tax (Earnings and Pensions) Act 2003
ITTOIA 2005Income Tax (Trading and Other Income) Act 2005
TCGA 1992Taxation of Chargeable Gains Act 1992
TCTA 2018Taxation (Cross-border Trade) Act 2018
TIOPA 2010Taxation (International and Other Provisions) Act 2010
TMA 1970Taxes Management Act 1970
TPDA 1979Tobacco Products Duty Act 1979
VATA 1994Value Added Tax Act 1994
VERA 1994Vehicle Excise and Registration Act 1994

136Short title

This Act may be cited as the Finance Act 2021.

SCHEDULES

Section 7

SCHEDULE 1Small profits rate for non-ring fence profits

PART 1Small profits rate

1CTA 2010 is amended as follows.

2In section 3 (corporation tax rates), for subsection (2) substitute—

(2)Subsection (1) is subject to—

(a)section 18A (which provides for tax to be charged at the standard small profits rate instead of the main rate in certain cases), and

(b)any other provision of the Corporation Tax Acts which provides for corporation tax to be charged at a different rate.

3Before Part 4 insert the following as a new Part 3A—

PART 3ACompanies with small profits

The standard small profits rate for non-ring fence profits
18AProfits charged at the standard small profits rate

(1)Corporation tax is charged at the standard small profits rate on a company’s taxable total profits of an accounting period which are not ring fence profits if—

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

(b)it is not a close investment-holding company in the period, and

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

(2)In this Act “the standard small profits rate” means a rate that—

(a)is lower than the main rate, and

(b)is set by Parliament for the financial year as the standard small profits rate.

(3)In this Part “ring fence profits” has the same meaning as in Part 8 (see section 276).

(4)In the case of a company with ring fence profits, see section 279A(3) (small ring fence profits rate chargeable on ring fence profits).

Marginal relief
18BMarginal relief for companies without ring fence profits

(1)This section applies if—

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

(b)it is not a close investment-holding company in the period,

(c)its augmented profits of the accounting period exceed the lower limit but do not exceed the upper limit, and

(d)its augmented profits of the accounting period do not include any 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—

  • F is the standard 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 Act “the standard marginal relief fraction” means the fraction set by Parliament for the financial year as the standard marginal relief fraction for the purposes of this Part.

18CMarginal relief for companies with ring fence profits

In the case of a company with ring fence profits—

(a)see section 279B (if the company’s augmented profits of an accounting period consist exclusively of ring fence profits), and

(b)see section 279C (if the company’s augmented profits of an accounting period consist of both ring fence profits and other profits).

The lower limit and the upper limit
18DThe lower limit and the upper limit

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

(2)If C has no associated company in the accounting period—

(a)the lower limit is £50,000, and

(b)the upper limit is £250,000.

(3)If C has one or more associated companies in the accounting period—

(a)the lower limit is—

(b)the upper limit is—

where N is the number of those associated companies.

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

18EAssociated companies

(1)For the purposes of section 18D, a company is another company’s associated company in an accounting period if it is an associated company (see subsection (4)) for any part of the accounting period.

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

(3)But an associated company is ignored for the purposes of section 18D if—

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

(b)it was an associated 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)For the purposes of this Part, a company is an associated company of another at any time when—

(a)one of the two has control of the other, or

(b)both are under the control of the same person or persons.

(5)In subsection (4) “control” has the same meaning as in Part 10 (see sections 450 and 451).

(6)In this section—

(a)subsection (3) is subject to section 18F, and

(b)subsections (4) and (5) are subject to sections 18G to 18J.

18FSection 18E(3): treatment of certain non-trading companies

(1)Subsection (2) 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.

(2)The company is treated for the purposes of section 18E(3) as not carrying on a business at any time in the accounting period.

(3)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 (4)), and

(ii)the dividends are exempt distributions of a qualifying kind received by it (see subsection (5)),

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

(e)no expenses of management of the business mentioned in subsection (1) are referable to that period, and

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

(4)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.

(5)For the purposes of this section a distribution is an “exempt distribution of a qualifying kind” if—

(a)it is a distribution for the purposes of the Corporation Tax Acts because (and only because) it falls within paragraph A, B, G or H in section 1000(1), and

(b)it is exempt for the purposes of Part 9A of CTA 2009 (company distributions).

(6)If income arises to a company in an accounting period in the form of a dividend and the requirement in subsection (3)(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 (3)(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 (3)(a) in that period or any earlier accounting period.

18GAttribution to persons of rights and powers of their partners

(1)This section applies if—

(a)it is necessary to determine in accordance with section 18E(4) and (5) whether a company is an associated company of another company, and

(b)the relationship between the two companies is not one of substantial commercial interdependence.

(2)In the application of section 451 (meaning of “control”: rights to be attributed) for the purposes of the determination, any person to whom rights and duties fall to be attributed under subsections (4) and (5) of that section is to be treated, for the purposes of those subsections, as having no associates.

(3)The Treasury may by regulations prescribe factors that are to be taken into account in determining whether a relationship between two companies amounts to substantial commercial interdependence for the purposes of this section.

18HAssociated companies: fixed-rate preference shares

(1)In determining for the purposes of section 18E(4) whether a company is under the control of another, fixed-rate preference shares held by a company are ignored if the company holding them—

(a)is not a close company,

(b)takes no part in the management or conduct of the company which issued the shares, or in the management or conduct of its business, and

(c)subscribed for the shares in the ordinary course of a business which includes the provision of finance.

(2)In this section “fixed-rate preference shares” means shares which—

(a)were issued wholly for new consideration,

(b)do not carry any right either to conversion into shares or securities of any other description or to the acquisition of any additional shares or securities, and

(c)do not carry any right to dividends other than dividends which—

(i)are of a fixed amount or at a fixed rate per cent of the nominal value of the shares, and

(ii)together with any sum paid on redemption, represent no more than a reasonable commercial return on the consideration for which the shares were issued.

(3)In subsection (2)(a) “new consideration” has the meaning given by section 1115.

18IAssociation through a loan creditor

(1)A company (“A”) is not under the control of another company (“B”) for the purposes of section 18E(4) if—

(a)B is a loan creditor of A,

(b)there is no other connection between A and B, and

(c)either—

(i)B is not a close company, or

(ii)B’s relationship to A as a loan creditor arose in the ordinary course of a business which B carries on.

(2)Subsection (3) applies if—

(a)two companies (“A” and “B”) are controlled by the same person who is a loan creditor of each of them,

(b)there is no other connection between A and B, and

(c)either—

(i)the loan creditor is a company which is not a close company, or

(ii)the loan creditor’s relationship to each of A and B as a loan creditor arose in the ordinary course of a business which the loan creditor carries on.

(3)In determining for the purposes of this Part whether A and B are associated with each other, rights which the loan creditor has as a loan creditor of A, or as a loan creditor of B, are ignored.

(4)In subsection (2)(a) “control” has the same meaning as in section 18E(4).

(5)In this section—

(a)“connection” includes a connection in the past as well as a connection in the present, and

(b)references to a connection between two companies include any dealings between them.

(6)In this section references to a loan creditor of a company are to be read in accordance with section 453.

18JAssociation through a trustee

(1)Subsection (2) applies if—

(a)two companies (“A” and “B”) are controlled by the same person by virtue of rights or powers (or both) held in trust by that person, and

(b)there is no other connection between A and B.

(2)In determining for the purposes of this Part whether A and B are associated with each other, the rights and powers mentioned in subsection (1)(a) are ignored.

(3)In subsection (1)—

(a)“control” has the same meaning as in section 18E(4),

(b)“connection” includes a connection in the past as well as a connection in the present, and

(c)the reference to a connection between A and B includes any dealings between them.

Supplementary
18KPower to obtain information

(1)This section applies if a company (“the issuing company”) appears to an officer of Revenue and Customs to be a close company.

(2)The officer may, for the purposes of this Part, by notice require the issuing company to provide the officer with—

(a)particulars of any bearer securities issued by the company,

(b)the names and addresses of the persons to whom the securities were issued, and

(c)details of the amounts issued to each person.

(3)The officer may, for the purposes of this Part, by notice require—

(a)any person to whom bearer securities were issued by the company, or

(b)any person to or through whom bearer securities issued by the company were subsequently sold or transferred,

to provide any further information that the officer reasonably requires with a view to enabling the officer to find out the names and addresses of the persons beneficially interested in the securities.

(4)In this section—

  • “loan creditor” has the meaning given by section 453, and

  • “securities” includes—

    (a)

    shares, stocks, bonds, debentures and debenture stock, and

    (b)

    any promissory note or other instrument evidencing indebtedness to a loan creditor of the company.

18LMeaning of “augmented profits”

(1)For the purposes of this Part a company’s “augmented profits” of an accounting period are—

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

(b)any exempt distributions of a qualifying kind received by the company (“R”) that are not excluded.

(2)For the purposes of this section a distribution is an “exempt distribution of a qualifying kind” if—

(a)it is a distribution for the purposes of the Corporation Tax Acts because (and only because) it falls within paragraph A, B, G or H in section 1000(1), and

(b)it is exempt for the purposes of Part 9A of CTA 2009 (company distributions).

(3)For the purposes of this section a distribution which R receives from a company (“C”) is excluded if—

(a)C is a 51% subsidiary of R or of a company of which R is a 51% subsidiary, or

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

(4)Section 18M

(a)makes further provision for determining whether a company is a 51% subsidiary of another for the purposes of subsection (3), and

(b)defines expressions used in that subsection.

18MInterpretation of section 18L(3)

(1)This section applies for the purposes of section 18L(3).

(2)In addition to meeting the requirements of section 1154(2), 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.

(3)In determining whether or not a company is a 51% subsidiary of another company (“C”), C is treated as not owning 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)A company is a “trading company” if its business consists wholly or mainly of carrying on one or more trades.

(5)A company is a “relevant holding company” if its business consists wholly or mainly of holding shares in or securities of trading companies (as defined by subsection (4)) that are its 90% subsidiaries.

(6)A company is a “quasi-subsidiary” of R if—

(a)it is owned by a consortium of which R 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 as a result of which it could become a 75% subsidiary of any company.

(7)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.

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

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

18NClose investment-holding companies

(1)For the purposes of this Part, a close company (“the candidate company”) is a close investment-holding company in an accounting period unless throughout the period it exists wholly or mainly for one or more of the permitted purposes set out in subsection (2).

There is an exception to this rule in subsection (5).

(2)The candidate company exists for a permitted purpose so far as it exists—

(a)for the purpose of carrying on a trade or trades on a commercial basis,

(b)for the purpose of making investments in land, or estates or interests in land, in cases where the land is, or is intended to be, let commercially (see subsection (3)),

(c)for the purpose of holding shares in and securities of, or making loans to, one or more companies each of which—

(i)is a qualifying company, or

(ii)falls within subsection (4),

(d)for the purpose of co-ordinating the administration of two or more qualifying companies,

(e)for the purpose of the making of investments as mentioned in paragraph (b)—

(i)by one or more qualifying companies, or

(ii)by a company which has control of the candidate company, or

(f)for the purpose of a trade or trades carried on on a commercial basis—

(i)by one or more qualifying companies, or

(ii)by a company which has control of the candidate company.

(3)For the purposes of subsection (2)(b), any letting of land is taken to be commercial unless the land is let to—

(a)a person connected with the candidate company (“a connected person”), or

(b)a person who is—

(i)the spouse or civil partner of a connected person,

(ii)a relative of a connected person, or the spouse or civil partner of a relative of a connected person,

(iii)a relative of the spouse or civil partner of a connected person, or

(iv)the spouse or civil partner of a relative of the spouse or civil partner of the connected person.

(4)A company falls within this subsection (see subsection (2)(c)(ii)) if—

(a)it is under the control of the candidate company or of a company which has control of the candidate company, and

(b)it exists wholly or mainly for the purpose of holding shares in or securities of, or of making loans to, one or more qualifying companies.

(5)If a company is wound up and was not a close investment-holding company in the accounting period that ends (by virtue of section 12(2) of CTA 2009) immediately before the winding up starts, the company is not treated for the purposes of this Part as being a close investment-holding company in the subsequent accounting period.

(6)In this section “qualifying company” means a company which—

(a)is under the control of the candidate company or of a company which has control of the candidate company, and

(b)exists wholly or mainly for either or both of the purposes mentioned in subsection (2)(a) or (b).

(7)In this section—

  • “control” has the meaning given by section 450, and

  • “relative” means brother, sister, ancestor or lineal descendant.

PART 2Amendments of Chapter 3A of Part 8 of CTA 2010

4Chapter 3A of Part 8 of CTA 2010 (rates at which corporation tax is charged on ring fence profits) is amended as follows.

5In section 279A (corporation tax rates on ring fence profits), in subsection (3), after paragraph (a) but before the “and” at the end of that paragraph insert—

(ab)it is not a close investment-holding company in the period,.

6In section 279B (company with only ring fence profits)—

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

(ab)it is not a close investment-holding company in the period,,

(b)in subsection (2), in the definition of “R”, for “marginal” substitute “ring fence marginal”, and

(c)in subsection (3), for “marginal” substitute “ring fence marginal”.

7(1)Section 279C (company with ring fence profits and other profits) is amended as follows.

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

(ab)it is not a close investment-holding company in the period,.

(3)For subsection (2) substitute—

(2)The corporation tax charged on the company’s taxable total profits of the accounting period is reduced by the total of—

(a)the sum equal to the ring fence marginal relief fraction of the ring fence amount, and

(b)the sum equal to the standard marginal relief fraction of the remaining amount.

8After section 279D insert—

279DAThe remaining amount

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

(2)In this section—

  • UZ is the amount given by multiplying the upper limit by—

  • AZ is the total amount of any profits other than ring fence profits that form part of the augmented profits of the accounting period,

  • NZ is the total amount of any profits other than 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.

9(1)Section 279E (the lower limit and the upper limit) is amended as follows.

(2)In subsection (2)—

(a)in the opening words, for “If no company is a related 51% group company of A” substitute “If A has no associated company”,

(b)in paragraph (a), for “£300,000” substitute “£50,000”, and

(c)in paragraph (b), for “£1,500,000” substitute “£250,000”.

(3)In subsection (3)—

(a)in the opening words, for “If one or more companies are related 51% group companies of A” substitute “If A has one or more associated companies”,

(b)in paragraph (a), for “£300,000” substitute “£50,000”, and

(c)in paragraph (b), for “£1,500,000” substitute “£250,000”.

10After section 279E insert—

Supplementary

279EAInterpretation etc

(1)The rules in Part 3A (see sections 18E to 18J) which apply for determining whether a company is another company’s associated company in an accounting period for the purposes of section 18D apply for the purposes of section 279E.

(2)Section 18K (power to obtain information) applies for the purposes of this Part as it applies for the purposes of Part 3A.

(3)For the purposes of this Chapter—

  • “augmented profits” has the same meaning as in Part 3A (see sections 18L and 18M), and

  • “close investment-holding company” has the same meaning as in that Part (see section 18N).

11Omit sections 279F to 279H (meaning of “related 51% group company” etc).

PART 3Consequential amendments

FA 1998

12In Schedule 18 to FA 1998 (company tax returns, assessments and related matters), in paragraph 8(1) (calculation of tax payable), in the second step, for “Chapter 3A of Part 8 of the Corporation Tax Act 2010 (marginal relief for companies with small ring fence profits etc)” substitute “Part 3A or Chapter 3A of Part 8 of the Corporation Tax Act 2010 (marginal relief for companies with small profits)”.

Corporation Tax (Instalment Payments) Regulations 1998

13(1)The Corporation Tax (Instalment Payments) Regulations 1998 (interpretation) are amended as follows.

(2)In regulation 2 (interpretation)—

(a)in paragraph (1), omit the entry for “related 51% group company”,

(b)in paragraph (2), for “section 279G” substitute “sections 18L and 18M”, and

(c)after that paragraph insert—

(2A)The rules in Part 3A of CTA 2010 (see sections 18E to 18J) which apply for determining whether a company is another company’s associated company in an accounting period for the purposes of section 18D of that Act apply for the purposes of these Regulations.

(3)In regulations 3 and 3A (large and very large companies), for “related 51% group” (in each place) substitute “associated”.

FA 2000

14In Schedule 22 to FA 2000 (tonnage tax), in paragraph 57(6)(a) (exclusion of relief or set-off against tax liability), for “Chapter 3A of Part 8 of CTA 2010 (marginal relief for companies with small ring fence profits)” substitute “Part 3A or Chapter 3A of Part 8 of the Corporation Tax Act 2010 (marginal relief for companies with small profits)”.

CAA 2001

15CAA 2001 is amended as follows.

16(1)Section 99 (long-life assets: the monetary limit) is amended as follows.

(2)In subsection (4)—

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

(b)in the definition of “N”, for “number of related 51% group” substitute “number of associated”.

(3)After that subsection insert—

(4A)The rules in Part 3A of CTA 2010 (see sections 18E to 18J) which apply for determining whether a company is another company’s associated company in an accounting period for the purposes of section 18D of that Act apply for the purposes of subsection (4).

17In Part 2 of Schedule 1 (defined expressions), omit the entry for “related 51% group company”.

CTA 2010

18CTA 2010 is amended as follows.

19In section 1(2) (overview of Act)—

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

(b)before paragraph (b) insert—

(a)relief for companies with small profits (other than ring-fence profits) (see Part 3A),.

20(1)Section 357BN (profits arising from the exploitation of patents etc: small claims treatment) is amended as follows.

(2)In subsection (7)—

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

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

(c)in the definition of “N”, for “those related 51% group” substitute “those associated”.

(3)After subsection (8) insert—

(9)The rules in Part 3A (see sections 18E to 18J) which apply for determining whether a company is another company’s associated company in an accounting period for the purposes of section 18D apply for the purposes of this section.

21(1)Section 357BNB (profits arising from the exploitation of patents etc: small claims figure election) is amended as follows.

(2)In subsection (6), for “no company is a related 51% group company of the company” substitute “the company has no associated company”.

(3)In subsection (7)—

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

(b)in the definition of “N”, for “those related 51% group” substitute “those associated”.

(4)After subsection (9) insert—

(10)The rules in Part 3A (see sections 18E to 18J) which apply for determining whether a company is another company’s associated company in an accounting period for the purposes of section 18D apply for the purposes of this section.

22In section 534 (REITs: profits), after subsection (2) insert—

(3)Profits which—

(a)arise from the residual business of a UK company which is, or is a member of, a UK REIT, and

(b)are charged to corporation tax,

are to be charged at a rate determined without reference to sections 18A and 18B (companies with small profits).

23In section 535 (REITs: gains), after subsection (5) insert—

(6)Gains which—

(a)accrue to residual business of a company which is, or is a member of, a UK REIT, and

(b)are charged to corporation tax,

are to be charged at a rate determined without reference to sections 18A and 18B (companies with small profits).

24In section 543 (REITs: financing-cost ratio), after subsection (4) insert—

(5)Accordingly, it is charged to corporation tax at the main rate of corporation tax.

25In section 551 (REITs: distribution to holder of excessive rights), after subsection (5) insert—

(6)Accordingly, it is charged to corporation tax at the main rate of corporation tax.

26In section 564 (REITs: breach of condition as to distribution of profits), after subsection (3) insert—

(4)Accordingly, it is charged to corporation tax at the main rate of corporation tax.

27In section 614 (open-ended investment companies: applicable corporation tax rate), at the end insert “(and sections 18A and 18B (relief for companies with small profits) do not apply)”.

28In section 618 (authorised unit trusts: applicable corporation tax rate), at the end insert “(and sections 18A and 18B (relief for companies with small profits) do not apply)”.

29For section 627 substitute—

627Meaning of “main rate of corporation tax” for companies with ring fence profits or small profits

(1)This section applies if corporation tax chargeable on any profits of a company for a financial year—

(a)is to be charged at the main ring fence profits rate,

(b)is to be charged at the standard small profits rate or the small ring profits rate, or

(c)is to be reduced by reference to the standard marginal relief fraction or the ring fence marginal relief fraction (within the meaning of Part 3A or Chapter 3A of Part 8).

(2)References in this Chapter to the main rate of corporation tax are to be taken, so far as relating to profits charged at any of the rates mentioned in subsection (1)(a) or (b), as references to the rate or rates concerned.

(3)References in this Chapter to the main rate of corporation tax are, if corporation tax is reduced as mentioned in subsection (1)(c), to be taken as including references to the fraction or fractions concerned (and with references to a rate being “fixed” or “proposed” read accordingly as references to the fraction or fractions concerned being fixed or proposed).

30In section 1119 (Corporation Tax Acts definitions), omit the definition of “related 51% group company”.

31In Schedule 4 (index of defined expressions)—

(a)insert the following entries at the appropriate places—

close investment-holding company (in Part 3A or Chapter 3A of Part 8)section 18N (including as applied by section 279EA)
the standard marginal relief fractionsection 18B
the standard small profits ratesection 18A,

(b)in the entry for “augmented profits”—

(i)in the first column, before “Chapter 3A” insert “Part 3A or”, and

(ii)in the second column, for “section 279G” substitute “sections 18L and 18M (including as applied by section 279EA)”,

(c)in the entry for “the lower limit”—

(i)in the first column, before “Chapter 3A” insert “Part 3A or”, and

(ii)in the second column, after “section” insert “18D or”,

(d)in the entry for “the marginal relief fraction”, in the first column, for “marginal” substitute “ring fence marginal” (and, accordingly, move the entry to the appropriate place),

(e)omit the entry for “related 51% group company”,

(f)for the entries for “ring fence profits” (in Parts 3 and 8) substitute—

ring fence profits (in Part 3A or 8)section 276 (including as applied by section 18A), and

(g)in the entry for “the upper limit”—

(i)in the first column, before “Chapter 3A” insert “Part 3A or”, and

(ii)in the second column, after “section” insert “18D or”.

FA 2012

32In section 102 of FA 2012 (policyholders’ rate of tax on policyholders’ share of I - E profit), at the end insert—

(5)The policyholders’ share of the I - E profit for an insurance company’s accounting period is to be left out of account in determining for the purposes of Part 3A of CTA 2010 (companies with small profits)—

(a)the augmented profits of the company for the accounting period, and

(b)the taxable total profits of the company for the accounting period.

PART 4Commencement etc

Commencement

33The amendments made by paragraphs 13, 16, 17, 20 and 21 have effect in relation to accounting periods beginning on or after 1 April 2023.

34(1)The other amendments made by this Schedule have effect for the financial year 2023 and subsequent financial years.

(2)In the case of an accounting period (a “straddling period”) beginning before 1 April 2023 and ending on or after date, those other amendments have effect as if the different parts of the straddling period falling in the different financial years were separate accounting periods.

(3)For this purpose all necessary apportionments are to be made between the two separate accounting periods.

Power to make further consequential amendments

35(1)The Treasury may by regulations make such provision as they consider appropriate in consequence of the provision made by this Schedule.

(2)The regulations—

(a)may amend any provision of the Corporation Tax Acts or any other enactment, and

(b)may contain incidental, supplemental, consequential or transitional provision.

Section 18

SCHEDULE 2Temporary extension of periods to which trade losses may be carried back

PART 1Income tax

Relief for trade losses made in tax year 2020-21

1(1)A person who has made a loss in a trade in the tax year 2020-21 may make a claim for relief under this paragraph if—

(a)some or all of the loss (“the section 64 amount”) is an amount in respect of which the person is entitled to make a claim under section 64 of ITA 2007 (trade loss relief against general income) or would be so entitled were there sufficient income from which to deduct it, and

(b)condition A or B is met.

(2)Condition A is that the person makes a claim under section 64 of ITA 2007 for relief in respect of the section 64 amount for either or both of the tax years 2019-20 and 2020-21.

(3)Condition B is that the person’s total income for the tax years 2019-20 and 2020-21—

(a)is nil, or

(b)does not include any income from which a deduction could be made in pursuance of a claim under section 64 of ITA 2007 in respect of the section 64 amount.

(4)The amount of the loss that may be relieved under this paragraph (“the deductible amount”) is—

(a)if condition A is met, so much of the section 64 amount as cannot be relieved pursuant to the claim under section 64 of ITA 2007;

(b)if condition B is met, the whole of the section 64 amount.

But see sub-paragraph (9) (limit on total deductions under this paragraph).

(5)A claim for relief under this paragraph is for the deductible amount to be deducted (in accordance with whichever is applicable of sub-paragraphs (7) and (8)) in calculating the person’s net income for one or more of the tax years 2017-18, 2018-19 and 2019-20 at Step 2 of the calculation in section 23 of ITA 2007 (which applies as if this paragraph were a provision listed in section 24 of that Act).

(6)A deduction is to be made only from the profits of the trade (and accordingly subsection (2) of section 25 of ITA 2007 has effect as if this sub-paragraph were included in subsection (3) of that section).

(7)This sub-paragraph explains how the deductions are to be made in a case where the person makes a claim under section 64 of ITA 2007 for relief in respect of the section 64 amount for the tax year 2019-20.

  • Step 1

    Deduct the deductible amount from the profits of the trade for the tax year 2018-19.

  • Step 2

    Deduct from the profits of the trade for the tax year 2017-18 so much of the deductible amount as has not been deducted under Step 1.

(8)This sub-paragraph explains how the deductions are to be made in any other case.

  • Step 1

    Deduct the deductible amount from the profits of the trade for the tax year 2019-20.

  • Step 2

    Deduct from the profits of the trade for the tax year 2018-19 so much of the deductible amount as has not been deducted under Step 1.

  • Step 3

    Deduct from the profits of the trade for the tax year 2017-18 so much of the deductible amount as has not been deducted under Step 1 or 2.

(9)The total amount that may be deducted in accordance with sub-paragraph (7), or in accordance with Steps 2 and 3 in sub-paragraph (8), is limited to £2,000,000.

(10)A claim for relief under this paragraph must be made on or before the first anniversary of the normal self-assessment filing date for the tax year 2020-21.

Relief for trade losses made in tax year 2021-22

2(1)A person who has made a loss in a trade in the tax year 2021-22 may make a claim for relief under this paragraph if—

(a)some or all of the loss (“the section 64 amount”) is an amount in respect of which the person is entitled to make a claim under section 64 of ITA 2007 (trade loss relief against general income) or would be so entitled were there sufficient income from which to deduct it, and

(b)condition A or B is met.

(2)Condition A is that the person makes a claim under section 64 of ITA 2007 for relief in respect of the section 64 amount for either or both of the tax years 2020-21 and 2021-22.

(3)Condition B is that the person’s total income for the tax years 2020-21 and 2021-22—

(a)is nil, or

(b)does not include any income from which a deduction could be made in pursuance of a claim under section 64 of ITA 2007 in respect of the section 64 amount.

(4)The amount of the loss that may be relieved under this paragraph (“the deductible amount”) is—

(a)if condition A is met, so much of the section 64 amount as cannot be relieved pursuant to the claim under section 64 of ITA 2007;

(b)if condition B is met, the whole of the section 64 amount.

But see sub-paragraph (9) (limit on total deductions under this paragraph).

(5)A claim for relief under this paragraph is for the deductible amount to be deducted (in accordance with whichever is applicable of sub-paragraphs (7) and (8)) in calculating the person’s net income for one or more of the tax years 2018-19, 2019-20 and 2020-21 at Step 2 of the calculation in section 23 of ITA 2007 (which applies as if this paragraph were a provision listed in section 24 of that Act).

(6)A deduction is to be made only from the profits of the trade (and accordingly subsection (2) of section 25 of ITA 2007 has effect as if this sub-paragraph were included in subsection (3) of that section).

(7)This sub-paragraph explains how the deductions are to be made in a case where the person makes a claim under section 64 of ITA 2007 for relief in respect of the section 64 amount for the tax year 2020-21.

  • Step 1

    Deduct the deductible amount from the profits of the trade for the tax year 2019-20.

  • Step 2

    Deduct from the profits of the trade for the tax year 2018-19 so much of the deductible amount as has not been deducted under Step 1.

(8)This sub-paragraph explains how the deductions are to be made in any other case.

  • Step 1

    Deduct the deductible amount from the profits of the trade for the tax year 2020-21.

  • Step 2

    Deduct from the profits of the trade for the tax year 2019-20 so much of the deductible amount as has not been deducted under Step 1.

  • Step 3

    Deduct from the profits of the trade for the tax year 2018-19 so much of the deductible amount as has not been deducted under Step 1 or 2.

(9)The total amount that may be deducted in accordance with sub-paragraph (7), or in accordance with Steps 2 and 3 in sub-paragraph (8), is limited to £2,000,000.

(10)A claim for relief under this paragraph must be made on or before the first anniversary of the normal self-assessment filing date for the tax year 2021-22.

Further provision about relief under paragraph 1 or 2

3(1)The following sections of ITA 2007 apply in relation to relief under paragraph 1 or 2 as they apply in relation to relief under section 64 of that Act—

(a)sections 66 to 70 (restrictions on relief under section 64),

(b)sections 74ZA to 74D (general restrictions on relief),

(c)section 74E (no relief where cash basis used to calculate losses),

(d)sections 75 to 79 (restrictions on relief under section 64 and early trade losses relief in relation to capital allowances), and

(e)section 80 (restrictions on those reliefs in relation to ring fence income).

(2)Paragraphs 1 and 2 apply to professions and vocations as they apply to trades.

(3)Paragraphs 1 and 2 are subject to paragraph 2 of Schedule 1B to TMA 1970 (claims to loss relief involving 2 or more years).

(4)Sections 61 to 63 of ITA 2007 (meaning of “making a loss in a tax year” etc and prohibition against double counting) have effect as if paragraphs 1 and 2 were included in Chapter 2 of Part 4 of that Act.

(5)The reference in paragraph 3(1) of Schedule 2 to the Social Security Contributions and Benefits Act 1992 and Social Security Contributions and Benefits (Northern Ireland) Act 1992 (levy of Class 4 contributions with income tax) to section 64 of ITA 2007 includes paragraphs 1 and 2.

PART 2Corporation tax

Relief for trade losses incurred in accounting periods ending in financial year 2020 or 2021

4(1)Sections 37(3)(b) and 38(1) and (3) of CTA 2010 (relief for trade losses against profits of same or earlier accounting period) have effect in relation to any loss to which this paragraph applies as if references to 12 months were references to 3 years (but subject as follows).

(2)This paragraph applies to any loss incurred by a company in a trade in a relevant accounting period.

(3)In this paragraph “relevant accounting period” means an accounting period that ends in the period beginning with 1 April 2020 and ending with 31 March 2022.

(4)Sub-paragraph (5) applies where—

(a)a loss incurred by a company in a relevant accounting period (“the relevant loss”) is, to any extent, relievable under section 37 of CTA 2010 by virtue of this paragraph, and

(b)some but not all of the relevant loss is also relievable under that section by virtue of section 40 of that Act (ring fence trades: extension of periods for which relief may be given).

(5)A claim for relief under section 37 of CTA 2010 by virtue of this paragraph in respect of the relevant loss is treated, so far as possible, as being made in respect of the part of the loss that is not relievable as mentioned in sub-paragraph (4)(b).

(6)Section 42 of CTA 2010 (ring fence trades: further extension of period of relief) has effect as if—

(a)in subsection (1)(b), the reference to section 39 or 40 of that Act included a reference to this paragraph;

(b)in subsection (8), in the definition of “3 year relief period”, the reference to section 39 or 40 of that Act included a reference to this paragraph.

Cap on claims by company that is not a member of a 2020 group or 2021 group

5(1)A 2020 claim may be made by a company that is not a member of a 2020 group only if the total amount of relief given as a result of the claim, when added to the total amount of relief given as a result of any other 2020 claims already made by the company, is under £2,000,000.

(2)A 2021 claim may be made by a company that is not a member of a 2021 group only if the total amount of relief given as a result of the claim, when added to the total amount of relief given as a result of any other 2021 claims already made by the company, is under £2,000,000.

Non-de minimis claims to be made after end of financial year

6(1)A non-de minimis 2020 claim may not be made by a company (whether or not it is a member of a 2020 group) at any time before 31 March 2021.

(2)A non-de minimis 2021 claim may not be made by a company (whether or not it is a member of a 2021 group) at any time before 31 March 2022.

Non-de minimis claims to be made in company tax return

7(1)A non-de minimis claim must be made in the company tax return (whether as originally made or by amendment) for the accounting period in which the loss in respect of which the claim is made is incurred.

(2)The company tax return for any earlier accounting period affected by the claim is treated as amended accordingly.

Meaning of “de minimis claim” etc

8(1)For the purposes of this Part of this Schedule, a 2020 claim is a “de minimis 2020 claim” if—

(a)the total amount of relief given as a result of the claim, when added to the total amount of relief given as a result of any other 2020 claims already made by the company, is under £200,000, and

(b)the condition in paragraph (a) would still be met on the assumptions in sub-paragraph (3).

(2)For the purposes of this Part of this Schedule, a 2021 claim is a “de minimis 2021 claim” if—

(a)the total amount of relief given as a result of the claim, when added to the total amount of relief given as a result of any other 2021 claims already made by the company, is under £200,000, and

(b)the condition in paragraph (a) would still be met on the assumptions in sub-paragraph (3).

(3)The assumptions are—

(a)that the company makes all claims available to it (if any) for allowances under CAA 2001, or any other provision of the Corporation Tax Acts, that would result in an increase in the amount of the loss in respect of which the claim in question is made;

(b)that the company does not surrender any amount under Part 5 of CTA 2010 (group relief);

(c)that the claim in question is for all of the relief available to the company under section 37 of CTA 2010 by virtue of paragraph 4 in relation to the loss in respect of which the claim is made.

(4)In this Part of this Schedule—

(a)“non-de minimis 2020 claim” means a 2020 claim that is not a de minimis 2020 claim;

(b)“non-de minimis 2021 claim” means a 2021 claim that is not a de minimis 2021 claim;

(c)“de minimis claim” means a 2020 de minimis claim or a 2021 de minimis claim;

(d)“non-de minimis claim” means a non-de minimis 2020 claim or a non-de minimis 2021 claim.

Cap on non-de minimis claims by company that is a member of a 2020 group or 2021 group

9(1)A non-de minimis 2020 claim may be made by a company that is a member of a 2020 group only if the total amount of relief given as a result of each of the following claims is, in aggregate, less than £2,000,000—

(a)the claim in question;

(b)any other 2020 claims made by the company (including any de minimis claims);

(c)any 2020 claims made by other members of the 2020 group (including any de minimis claims).

(2)A non-de minimis 2021 claim may be made by a company that is a member of a 2021 group only if the total amount of relief given as a result of each of the following claims is, in aggregate, less than £2,000,000—

(a)the claim in question;

(b)any other 2021 claims made by the company (including any de minimis claims);

(c)any 2021 claims made by other members of the 2021 group (including any de minimis claims).

Non-de minimis claims by group company to conform with statement

10(1)A non-de minimis 2020 claim may be made by a company that is a member of a 2020 group only if—

(a)a 2020 loss carry-back allocation statement has been submitted on behalf of the group in accordance with regulations under paragraph 11, and

(b)the claim is for an amount specified in that statement in accordance with those regulations.

(2)A non-de minimis 2021 claim may be made by a company that is a member of a 2021 group only if—

(a)a 2021 loss carry-back allocation statement has been submitted on behalf of the group in accordance with regulations under paragraph 11, and

(b)the claim is for an amount specified in that statement in accordance with those regulations.

Loss carry-back allocation statements

11(1)The Commissioners must by regulations make provision—

(a)requiring a statement (“a 2020 loss carry-back allocation statement”) to be submitted to HMRC on behalf of a 2020 group for the purpose of determining the non-de minimis 2020 claims that may be made by members of the group in compliance with paragraphs 9 and 10;

(b)requiring a statement (“a 2021 loss carry-back allocation statement”) to be submitted to HMRC on behalf of a 2021 group for the purpose of determining the non-de minimis 2021 claims that may be made by members of the group in compliance with paragraphs 9 and 10.

(2)The regulations may, in particular, include provision about—

(a)the nomination by members of a 2020 group or 2021 group of a member of the group to submit a loss carry-back allocation statement on behalf of the group;

(b)the contents of a loss carry-back allocation statement;

(c)when a loss carry-back allocation statement is to be submitted;

(d)when and how a loss carry-back allocation statement may or must be amended on behalf of a 2020 group or 2021 group;

(e)when and how a loss carry-back allocation statement may be amended by an officer of HMRC;

(f)the amendment of company tax returns in consequence of a loss carry-back allocation statement (including provision altering time limits that would otherwise apply);

(g)the recovery of overpaid relief (including provision allowing an assessment to tax to be made).

(3)The reference in sub-paragraph (2)(g) to overpaid relief is to an amount paid to a company by HMRC where—

(a)the payment is a repayment of tax made in consequence of a 2020 claim or 2021 claim,

(b)the loss carry-back allocation statement is amended in accordance with regulations under this paragraph, and

(c)as a result of the amendment, the claim no longer meets the condition in paragraph 10(1)(b) or (as the case may be) paragraph 10(2)(b) (claim to conform with loss carry-back allocation statement).

(4)In this paragraph—

  • “HMRC” means Her Majesty’s Revenue and Customs;

  • “a loss carry-back allocation statement” means a 2020 loss carry-back allocation statement or a 2021 loss carry-back allocation statement.

Anti-avoidance

12(1)A company may not make a 2020 claim if—

(a)at any time in the period beginning with 1 April 2020 and ending with 31 March 2021 the company is a member of a group,

(b)the company ceases to be a member of that group at any time in that period, and

(c)the main purpose, or one of the main purposes, of the company’s ceasing to be a member of the group is to increase the total amount of relief given as a result of a 2020 claim.

(2)A company may not make a 2021 claim if—

(a)at any time in the period beginning with 1 April 2021 and ending with 31 March 2022 the company is a member of a group,

(b)the company ceases to be a member of that group at any time in that period, and

(c)the main purpose, or one of the main purposes, of the company’s ceasing to be a member of the group is to increase the total amount of relief given as a result of a 2021 claim.

(3)In this paragraph “group” has the meaning given by section 269ZZB of CTA 2010 (meaning “group” in Part 7ZA of CTA 2010).

Interpretation

13(1)In this Part of this Schedule—

  • “2020 claim” means a claim for relief under section 37 of CTA 2010 by virtue of paragraph 4 that is made in respect of a loss incurred in an accounting period that ends in the period beginning with 1 April 2020 and ending with 31 March 2021;

  • “2021 claim” means a claim for relief under section 37 of CTA 2010 by virtue of paragraph 4 that is made in respect of a loss incurred in an accounting period that ends in the period beginning with 1 April 2021 and ending with 31 March 2022;

  • “2020 group” means two or more companies which, at the end of 31 March 2021, are a group within the meaning given by section 269ZZB of CTA 2010 (meaning of “group”);

  • “2021 group” means two or more companies which, at the end of 31 March 2022 are a group within the meaning given by section 269ZZB of CTA 2010 (meaning of “group”);

  • “a 2020 loss carry-back allocation statement” has the meaning given by paragraph 11(1)(a);

  • “a 2021 loss carry-back allocation statement” has the meaning given by paragraph 11(1)(b);

  • “the Commissioners” means the Commissioners for Her Majesty’s Revenue and Customs;

  • “de minimis claim” and related expressions have the meanings given by paragraph 8.

(2)A reference in this Part of this Schedule to the total amount of relief given as a result of a 2020 claim or 2021 claim—

(a)is to the amount of the deduction or (as the case may be) the total of the deductions made under section 37(3) of CTA 2010 as a result of the claim, but

(b)does not include a deduction that would have been made under that provision as a result of the claim if sections 37 and 38 of that Act applied disregarding the modifications made by paragraph 4.

Power to modify

14(1)The Commissioners may by regulations amend or otherwise modify the following provisions of this Part of this Schedule—

(a)paragraph 6 (non-de minimis claims to be made after financial year);

(b)paragraph 7 (non-de minimis claims to be made in tax return);

(c)paragraph 8(3) (assumptions in determining if claim is de minimis).

(2)Regulations under this paragraph may include supplementary, incidental, consequential or transitional provision (including provision amending or otherwise modifying a provision of this Part of this Schedule not mentioned in sub-paragraph (1)).

(3)Regulations under this paragraph are of no effect in relation to a 2020 claim or 2021 claim made before the regulations come into force.

(4)No regulations under this paragraph may be made after 31 March 2023.

Section 19

SCHEDULE 3R&D tax credits for SMEs

Introductory

1Chapter 2 of Part 13 of CTA 2009 (relief for cost of research and development incurred by small and medium-sized enterprises) is amended as follows.

Cap on amount of tax credit

2(1)Section 1058 (amount of tax credit) is amended as follows.

(2)In subsection (1)—

(a)in the words before paragraph (a), after “period is” insert “the lesser of”;

(b)at the end of paragraph (a) insert and

(aa)the amount given by subsection (1A).

(3)After subsection (1), insert—

(1A)The amount given by this subsection is the sum of—

(a)£20,000, and

(b)the amount produced by multiplying by three (“the multiplier”) the company’s relevant expenditure on workers for payment periods ending in the accounting period (see section 1058A).

(1B)If the accounting period is less than 12 months, the amount specified in subsection (1A)(a) is proportionately reduced.

(1C)Subsection (1)(aa) does not apply if section 1058D (exceptions to tax credit cap) applies in relation to the company for the accounting period.

(4)For subsection (2) substitute—

(2)The Treasury may by regulations—

(a)replace the percentage for the time being specified in subsection (1)(a) with a different percentage;

(b)replace the amount for the time being specified in subsection (1A)(a) with a different amount;

(c)replace the multiplier for the time being specified in subsection (1A)(b) with a different multiplier.

3After section 1058 insert—

1058ARelevant expenditure on workers

(1)For the purposes of section 1058, the amount of a company’s relevant expenditure on workers for a payment period is the sum of—

(a)the total amount of the company’s PAYE and NIC liabilities for the payment period (see section 1058B) less any amount deducted in accordance with section 1058C (avoiding double counting of PAYE and NIC liabilities),

(b)if the company is connected with another company and has incurred qualifying expenditure on externally provided workers (see section 1127), the relevant portion of any staffing costs for the payment period incurred by the connected company in providing any of those workers for the company (see subsection (2)), and

(c)if the company is connected with another company and has incurred qualifying expenditure on contracted out research and development (see section 1053), any staffing costs for the payment period incurred by the connected company in undertaking any of that contracted out research and development on behalf of the company (see subsection (3)).

(2)The relevant portion of any staffing costs for a payment period incurred by a connected company in providing externally provided workers for a company is the sum of the amounts to be determined in the case of each of those workers as follows—

  • Step 1

    Calculate the amount of expenditure that—

    (a)

    has been incurred by the connected company in providing the externally provided worker for the company,

    (b)

    has been incurred on staffing costs (see section 1123), and

    (c)

    forms part of the total amount of the connected company’s PAYE and NIC liabilities for the payment period.

  • Step 2

    Calculate the percentage (“the appropriate percentage”) given by—

    where—

    • R is the amount of the company’s qualifying expenditure on the externally provided worker that has been taken into account in calculating the amount of the company’s qualifying Chapter 2 expenditure (see section 1051) for the payment period, and

    • T is the total amount of the company’s qualifying expenditure on the externally provided worker (see section 1127) for the payment period.

  • Step 3

    The amount to be determined in the case of the externally provided worker is the appropriate percentage of the amount given by step 1.

(3)The staffing costs for a payment period incurred by a connected company in undertaking contracted out research and development on behalf of a company is the amount of expenditure that—

(a)has been incurred by the connected company in undertaking relevant research and development on behalf of the company,

(b)has been incurred on staffing costs (see section 1123), and

(c)forms part of the total amount of the connected company’s PAYE and NIC liabilities for the payment period.

(4)If, for the purposes of step 1(c) of subsection (2) or paragraph (c) of subsection (3), it is necessary to calculate the amount of a connected company’s PAYE and NIC liabilities for a payment period that falls within (but is shorter than) the connected company’s payment period, the total amount for the connected company’s payment period is proportionately reduced.

1058BTotal amount of company’s PAYE and NIC liabilities

(1)For the purposes of section 1058A, the total amount of a company’s PAYE and NIC liabilities for a payment period is the sum of—

(a)amount A, and

(b)amount B.

(2)Amount A is the amount of income tax for which the company is required to account to an officer of Revenue and Customs for the payment period under PAYE regulations.

(3)In calculating amount A disregard any deduction the company is authorised to make in respect of—

(a)child tax credit;

(b)working tax credit.

(4)Amount B is the amount of Class 1 national insurance contributions for which the company is required to account to an officer of Revenue and Customs for the payment period.

(5)In calculating amount B disregard any deduction the company is authorised to make in respect of—

(a)statutory maternity pay;

(b)statutory adoption pay;

(c)statutory paternity pay;

(d)statutory shared parental pay;

(e)statutory parental bereavement pay;

(f)child tax credit;

(g)working tax credit.

1058CAvoiding double counting of PAYE and NIC liabilities

When determining for the purposes of section 1058 a company’s relevant expenditure on workers for a payment period (see section 1058A), deduct the following from the total amount of the company’s PAYE and NIC liabilities for the payment period—

(a)the relevant portion of any staffing costs for the payment period incurred by the company in providing externally provided workers for a connected company (within the meaning given by section 1058A(2));

(b)any staffing costs for the payment period incurred by the company in undertaking contracted out research and development on behalf of a connected company (within the meaning given by section 1058A(3)).

1058DExceptions to tax credit cap

(1)This section applies (and accordingly, section 1058(1)(aa) does not apply) in relation to a company for an accounting period if the company meets conditions A and B.

(2)A company meets condition A for an accounting period if, during the period, the company is engaged in—

(a)taking, or preparing to take, steps in order that relevant intellectual property will be created by it,

(b)creating relevant intellectual property, or

(c)performing a significant amount of management activity in relation to relevant intellectual property it holds.

(3)For the purposes of subsection (2)

(a)a company is only engaged in an activity mentioned in paragraph (a), (b) or (c) of subsection (2) if the activity is wholly or mainly undertaken by employees of the company;

(b)intellectual property is “relevant” intellectual property in relation to a company if the whole or the greater part (in terms of value) of it is created by the company;

(c)intellectual property is created by a company if it is created in circumstances in which the right to exploit it vests in the company (whether alone or jointly with others).

(4)For the purposes of this section—

  • “intellectual property” means—

    (a)

    any patent, trade mark, registered design, copyright, design right or plant breeder’s right,

    (b)

    any rights under the law of a country or territory outside the United Kingdom which correspond or are similar to those falling within paragraph (a), or

    (c)

    any information or technique not protected by a right within paragraph (a) or (b) but having industrial, commercial or other economic value;

  • “management activity”, in relation to intellectual property, means formulating plans and making decisions in relation to the development or exploitation of the intellectual property.

(5)A company meets condition B for an accounting period if the amount given by subsection (6) (if any) does not exceed 15% of the company’s qualifying Chapter 2 expenditure (see section 1051) for the period.

(6)The amount given by this subsection is the sum of the following incurred by the company in the period—

(a)qualifying expenditure on externally provided workers (see section 1127), where the company, the staff provider and (if different) the staff controller (or staff controllers)—

(i)are all connected (see section 1129), or

(ii)have jointly elected (under section 1130) that section 1129 is to apply to them as if they were all connected;

(b)qualifying expenditure on contracted out research and development (see section 1053) where the company and the sub-contractor—

(i)are connected (see section 1134), or

(ii)have jointly elected (under section 1135) that section 1134 is to apply to them as if they were connected.

(7)The Treasury may by regulations replace the percentage for the time being specified in subsection (5) with a different percentage.

Commencement

4The amendments made by this Schedule have effect in relation to accounting periods beginning on or after 1 April 2021.

Section 19

SCHEDULE 4R&D tax credits for SMEs: Northern Ireland companies

Cap on amount of tax credit

1In Chapter 9 of Part 8B of CTA 2010 (research and development expenditure), section 357PD (amount of tax credit under section 1054 of CTA 2009) is amended in accordance with paragraphs 2 to 5.

2For subsection (2) substitute—

(2)The amount of the R&D tax credit to which the company is entitled for the accounting period is, where the company has a Northern Ireland Chapter 2 surrenderable loss but does not have a mainstream Chapter 2 surrenderable loss, the lesser of—

(a)the amount of the Northern Ireland Chapter 2 surrenderable loss multiplied by the relevant percentage, and

(b)the amount given by section 1058(1A) of CTA 2009.

(2A)Subsection (2)(b) does not apply if section 1058D of CTA 2009 (exceptions to tax credit cap) applies in relation to the company for the accounting period.

3For subsection (3) substitute—

(3)The amount of the R&D tax credit to which the company is entitled for the accounting period is, where the company has a mainstream Chapter 2 surrenderable loss but does not have a Northern Ireland Chapter 2 surrenderable loss, the lesser of—

(a)the amount of the mainstream Chapter 2 surrenderable loss multiplied by the percentage specified in section 1058(1)(a) of CTA 2009, and

(b)the amount given by section 1058(1A) of CTA 2009.

(3A)Subsection (3)(b) does not apply if section 1058D of CTA 2009 (exceptions to tax credit cap) applies in relation to the company for the accounting period.

4In subsection (4), for the words from “sum of” to the end, substitute lesser of—

(a)the sum of—

(i)the amount of the Northern Ireland Chapter 2 surrenderable loss multiplied by the relevant percentage, and

(ii)the amount of the mainstream Chapter 2 surrenderable loss multiplied by the percentage specified in section 1058(1)(a) of CTA 2009, and

(b)the amount given by section 1058(1A) of CTA 2009.

5After subsection (4) insert—

(4A)Subsection (4)(b) does not apply if section 1058D of CTA 2009 (exceptions to tax credit cap) applies in relation to the company for the accounting period.

Commencement

6Section 5(4) to (6) of CT(NI)A 2015 (commencement) has effect as if references to Part 8B of CTA 2010 were to that Part as amended by this Schedule.

Section 29

SCHEDULE 5Pension schemes: collective money purchase benefits

PART 1Amendments of Part 4 of FA 2004

1Part 4 of FA 2004 is amended in accordance with paragraphs 2 to 23.

2(1)Section 152 (meaning of “arrangement”) is amended as follows.

(2)In subsection (2), after “cash balance benefits” insert “, collective money purchase benefits”.

(3)After subsection (3) insert—

(3A)For the purposes of this Part a money purchase arrangement is a “collective money purchase arrangement” at any time if, at that time, all the benefits that may be provided to or in respect of the member under the arrangement are collective money purchase benefits.

(4)After subsection (4) insert—

(4A)The reference in subsection (4) to an amount available for the provision of benefits to or in respect of the member includes, in relation to a collective money purchase arrangement, an amount available for the provision of benefits to or in respect of members collectively.

(5)In subsection (5)—

(a)the words after “means benefits” become paragraph (a);

(b)at the end of that paragraph insert “, and”;

(c)after that paragraph insert—

(b)that are not collective money purchase benefits.

(6)After that subsection insert—

(5A)In this Part “collective money purchase benefits” means benefits that are collective money purchase benefits within the meaning of Part 1 or 2 of the Pension Schemes Act 2021.

(7)In subsection (8), for the words from “two or three” to the end substitute “two, three or four of the varieties specified in subsection (10)”.

(8)In subsection (9)—

(a)for “those varieties of benefits” substitute “the varieties of benefits specified in subsection (10)”;

(b)for “two or three” (in both places those words occur) substitute “two, three or four”.

(9)After that subsection insert—

(10)The varieties of benefits mentioned in subsections (8) and (9) are—

(a)cash balance benefits,

(b)collective money purchase benefits,

(c)money purchase benefits that are neither cash balance benefits nor collective money purchase benefits, and

(d)defined benefits.

3(1)In section 165 (pension rules), subsection (1) is amended as follows.

(2)In pension rule 3, after “defined benefits arrangement” insert “or a collective money purchase arrangement”.

(3)In pension rule 4, after “money purchase arrangement” insert “that is not a collective money purchase arrangement”.

4(1)In section 167 (pension death benefit rules), subsection (1) is amended as follows.

(2)In pension death benefit rule 2, after “defined benefits arrangement” insert “or a collective money purchase arrangement”.

(3)In pension death benefit rule 3, after “money purchase arrangement” insert “that is not a collective money purchase arrangement”.

5(1)Section 172C (allocation of unallocated employer contributions) is amended as follows.

(2)In subsection (2)—

(a)in paragraph (a), after “cash balance arrangement” insert “or a collective money purchase arrangement”;

(b)in paragraph (b), for “other than cash balance benefits” substitute “that are not cash balance benefits or collective money purchase benefits”.

6(1)Section 182 (unauthorised borrowing: money purchase arrangements) is amended as follows.

(2)In the heading, at the end insert “other than collective money purchase arrangements”.

(3)In subsection (1), after “money purchase arrangement” insert “that is not a collective money purchase arrangement”.

(4)In subsection (8), after “defined benefits” insert “or collective money purchase benefits”.

7(1)Section 183 (effect of unauthorised borrowing: money purchase arrangements) is amended as follows.

(2)In the heading, at the end insert “other than collective money purchase arrangements”.

8(1)Section 184 (unauthorised borrowing: other arrangements) is amended as follows.

(2)In subsection (1), for “arrangement which is not a money purchase arrangement” substitute “relevant arrangement”.

(3)After subsection (1) insert—

(1A)In this section “relevant arrangement” means an arrangement that—

(a)is not a money purchase arrangement, or

(b)is a collective money purchase arrangement.

(4)In subsection (2), in the definition of APB, for “arrangements which are not money purchase arrangements” substitute “relevant arrangements”.

(5)In subsection (3), in paragraphs (a) and (b), for “not money purchase arrangements” substitute “relevant arrangements”.

9(1)Section 212 (valuation of uncrystallised rights for purposes of section 210) is amended as follows.

(2)In subsection (3)—

(a)in paragraph (b), for “other than a cash balance arrangement” substitute “that is neither a cash balance arrangement nor a collective money purchase arrangement”;

(b)in paragraph (c), after “defined benefits arrangement” insert “or a collective money purchase arrangement”.

(3)For subsections (7) to (10) substitute—

(7)If this subsection applies, the value of the member’s uncrystallised rights under the arrangement on the date (“the hybrid value”) is to be calculated by taking the following steps—

  • Step 1

    In relation to each relevant variety of benefits, calculate (in accordance with the preceding provisions of this section) the value of the member’s uncrystallised rights on the date, assuming that benefits of that variety are provided under the arrangement.

  • Step 2

    The hybrid value is the higher or highest of the amounts determined under step 1.”

(8)For the purposes of this section a variety of benefits is “relevant” in relation to a hybrid arrangement if, in any circumstances, benefits of that variety may be provided under the arrangement.

(9)In this section “variety of benefits” means a variety of benefits specified in section 152(10).

10(1)Section 216 (benefit crystallisation events and amounts crystallised) is amended as follows.

(2)In subsection (1), in the table, in column 1—

(a)in benefit crystallisation event 5, after “defined benefit arrangement” insert “, or a collective money purchase arrangement,”;

(b)in benefit crystallisation event 5B, after “money purchase arrangement” insert “, other than a collective money purchase arrangement,”.

11(1)Section 223 (non-residence: other arrangements) is amended as follows.

(2)In subsection (5)—

(a)after paragraph (a) insert—

(aa)what would be the other money purchase arrangement non-residence factor (under that section) if the arrangement were a collective money purchase arrangement,;

(b)in paragraph (b), for “any other sort of money purchase arrangement” substitute “a money purchase arrangement other than a cash balance arrangement or a collective money purchase arrangement”.

12(1)Section 226 (overseas scheme transfers: other arrangements) is amended as follows.

(2)In subsection (5)—

(a)after paragraph (a) insert—

(aa)what would be the other money purchase relevant relievable amount (under that section) if that arrangement had been a collective money purchase arrangement,;

(b)in paragraph (b), for “any other sort of money purchase arrangement” substitute “a money purchase arrangement other than a cash balance arrangement or a collective money purchase arrangement”.

13(1)Section 227B (the alternative chargeable amount) is amended as follows.

(2)In subsection (2), for “AA” (in both places it occurs) substitute “X”.

(3)In subsection (5), in paragraph (b)(i), after “A” insert “, AA”.

(4)In subsection (5), in paragraph (b)(ii)—

(a)after “greater” insert “or greatest”;

(b)after “A” insert “, AA”;

(c)for “both” substitute “at least two of those amounts”.

(5)In subsection (5), in the closing words—

(a)after “A” (in both places it occurs) insert “, AA”;

(b)after “greater” insert “or greatest”.

14(1)Section 227C (meaning of “money-purchase input sub-total”) is amended as follows.

(2)In subsection (1)(b)(ii), after “A” insert “, AA”.

15(1)Section 227D (pension input amounts in respect of certain hybrid arrangements) is amended as follows.

(2)In subsection (2)(a)—

(a)after “greater” insert “or greatest”;

(b)after “A” insert “, AA”.

16(1)Section 227F (pension input periods in which rights are first flexibly accessed) is amended as follows.

(2)In subsection (5)(b), after “input amount” insert “AA or”.

17(1)Section 227G (when pension rights are first flexibly accessed) is amended as follows.

(2)In subsection (9)(a), for “money purchase” substitute “relevant”.

(3)After subsection (9) insert—

(9A)In subsection (9), “relevant arrangement” means a money purchase arrangement that is not a collective money purchase arrangement.

18(1)Section 237 (hybrid arrangements) is amended as follows.

(2)In subsection (1), after “amounts A,” insert “AA,”.

(3)After subsection (3) insert—

(3A)Input amount AA is what would be the pension input amount under section 233 if the benefits provided to or in respect of the individual under the arrangement were collective money purchase benefits.

(4)In subsection (4), for “other money purchase benefits” substitute “money purchase benefits that are not cash balance benefits or collective money purchase benefits”.

19In section 280 (abbreviations and general index), in the table in subsection (2) insert at the appropriate places—

collective money purchase arrangementsection 152(3A)
collective money purchase benefitssection 152(5A).

20(1)Schedule 28 (authorised pensions: supplementary) is amended as follows.

(2)In paragraph 2 (scheme pension), after sub-paragraph (8) insert—

(9)Where, under a collective money purchase arrangement—

(a)a scheme pension has become payable to the member, and

(b)the member subsequently becomes entitled to income payable by virtue of section 36(7)(b) or 87(7)(b) of the Pension Schemes Act 2021 (periodic income paid while pursuing continuity option 1),

the income so payable is to be treated for the purposes of this Part as a continuation of the scheme pension.

(10)Where, under a collective money purchase arrangement—

(a)the member becomes entitled to income payable by virtue of section 36(7)(b) or 87(7)(b) of the Pension Schemes Act 2021 (periodic income paid while pursuing continuity option 1), and

(b)no scheme pension was previously payable to the member,

the income so payable is to be treated for the purposes of this Part as a scheme pension.

(3)In paragraph 2A (scheme pension), after sub-paragraph (3) insert—

(3A)But for the purposes of sub-paragraph (2)(b), no substantial reduction occurs in the rate of a pension if—

(a)the pension is payable in respect of a collective money purchase arrangement, and

(b)the reduction is in accordance with the rules of the scheme.

21(1)Schedule 29 (authorised lump sums - supplementary) is amended as follows.

(2)In paragraph 1 (pension commencement lump sum)—

(a)in sub-paragraph (1)(f), for “sub-paragraph (4)” substitute “sub-paragraphs (4) and (4A)”;

(b)after sub-paragraph (4) insert—

(4A)A lump sum is an excluded lump sum if—

(a)the pension in connection with which the member becomes entitled to it is income withdrawal, and

(b)the sums or assets designated as available for the payment of the pension were sums or assets out of which benefits were provided under a collective money purchase arrangement.

(3)In paragraph 2 (pension commencement lump sum), in sub-paragraph (6B), after “money purchase arrangement” insert “that is not a collective money purchase arrangement”.

(4)In paragraph 3 (pension commencement lump sum: definition of “the applicable amount” for the purposes of paragraph 2(5))—

(a)in sub-paragraph (6), after “defined benefits arrangement” insert “or a collective money purchase arrangement”;

(b)in sub-paragraph (7A), after “money purchase arrangement” insert “that is not a collective money purchase arrangement”.

(5)In paragraph 4A (uncrystallised funds pension lump sum), in sub-paragraph (1)(a), after “money purchase arrangement” insert “that is not a collective money purchase arrangement”.

(6)In paragraph 7 (trivial commutation lump sum), in sub-paragraph (1)—

(a)in paragraph (aa)—

(i)after “defined benefits arrangement,” insert “or in respect of a collective money purchase arrangement,”;

(ii)after “under a money purchase arrangement” insert “that is not a collective money purchase arrangement”;

(iii)for “or partly in respect of the former and partly in respect of the latter” substitute “or in respect of any combination of such arrangements and scheme pensions”;

(b)in paragraph (d), after “defined benefits” insert “, and any entitlement to collective money purchase benefits,”.

22(1)Schedule 32 (benefit crystallisation events - supplementary) is amended as follows.

(2)Before paragraph 3 (but after the italic cross heading preceding it) insert—

2B(1)This paragraph applies for the purposes of benefit crystallisation event 1 where—

(a)the designation was in connection with the winding-up of the scheme, and

(b)the sums or assets designated were sums or assets out of which benefits were provided under a collective money purchase arrangement.

(2)The amount crystallised by the event is to be reduced by the amount (or an appropriate proportion of the amount) previously crystallised on the individual becoming entitled to a scheme pension under the collective money purchase arrangement.

(3)Omit paragraph 5 (benefit crystallisation events 1 and 5: hybrid arrangements) together with the italic cross heading preceding it.

(4)Paragraph 10 (benefit crystallisation event 3: excepted circumstances) is amended in accordance with sub-paragraphs (5) to (7).

(5)Before sub-paragraph (1) insert—

(A1)For the purposes of benefit crystallisation event 3 “excepted circumstances” exist if condition A or B is met.

(6)In sub-paragraph (1)—

(a)for the opening words substitute “Condition A is that—”;

(b)before paragraph (a) insert—

(za)the entitlement to payment of a scheme pension at an increased annual rate is under an arrangement that is not a collective money purchase arrangement,;

(c)in paragraph (a) omit “that”;

(d)in paragraph (b) omit “that” the first time it occurs.

(7)After sub-paragraph (4) insert—

(5)Condition B is that—

(a)the entitlement to payment of a scheme pension at an increased annual rate is under an arrangement that is a collective money purchase arrangement, and

(b)at the time when the annual rate of the individual’s pension is increased, all the scheme pensions being paid under collective money purchase arrangements are increased at the same rate.

(8)After paragraph 14 insert—

Benefit crystallisation events 5 and 5B: hybrid arrangements

14ZA(1)This paragraph applies where, immediately before the individual reaches the age of 75 (“the relevant time”), there is under any of the relevant pension schemes a hybrid arrangement relating to the individual.

(2)If defined benefits or collective money purchase benefits are a relevant variety of benefits, benefit crystallisation event 5 applies in relation to that variety of benefits as if, at the relevant time, circumstances were such that benefits of that variety were to be provided under the arrangement.

(3)If cash balance benefits, or money purchase benefits that are neither cash balance benefits nor collective money purchase benefits, are a relevant variety of benefits, benefit crystallisation event 5B applies in relation to that variety of benefits as if, at the relevant time, circumstances were such that benefits of that variety were to be provided under the arrangement.

(4)The amount crystallised on the individual reaching the age of 75 is the greater or (as the case may be) greatest of the amounts crystallised by the benefit crystallisation event or events applying by virtue of sub-paragraphs (2) and (3).

(5)For the purposes of this paragraph a variety of benefits is “relevant” in relation to a hybrid arrangement if, in any circumstances, benefits of that variety may be provided under the arrangement.

(6)In this paragraph “variety of benefits” means a variety of benefits specified in section 152(10).

(9)After paragraph 14ZA insert—

Benefit crystallisation event 5A: “amounts crystallised by benefit crystallisation event 1”

14ZBIn determining, for the purposes of benefit crystallisation event 5A, an amount crystallised by benefit crystallisation event 1 in relation to the arrangement and the individual, any reduction made for the purposes of that crystallisation event under paragraph 2B (prevention of overlap) is to be disregarded.

23(1)Schedule 36 (transitional provision and savings) is amended as follows.

(2)In paragraph 29 (lump sum rights exceeding £375,000: primary and enhanced protection), in sub-paragraph (3)—

(a)in the substitute paragraph 3(6) of Schedule 29, after “defined benefits arrangement” insert “or a collective money purchase arrangement”;

(b)in the substitute paragraph 3(7A) of Schedule 29, after “money purchase arrangement” insert “that is not a collective money purchase arrangement”.

(3)In paragraph 34 (entitlement to lump sums exceeding 25% of uncrystallised rights), in sub-paragraph (2), in the substitute paragraph 2(7AA) of Schedule 29, after “money purchase arrangement” insert “that is not a collective money purchase arrangement”.

24(1)In the Registered Pension Schemes (Transfer of Sums and Assets) Regulations 2006 (S.I. 2006/499), regulation 12 (member’s drawdown pension fund or flexi-access pension fund) is amended as follows.

(2)In Table 3, after the entry for section 216(1), benefit crystallisation event 1 insert—

Section 216(1), benefit crystallisation event 5A (benefit crystallisation event on individual reaching the age of 75, having sums or assets designated as available for the payment of a drawdown pension)To determine, for the purposes of benefit crystallisation event 5A, the aggregate of amounts crystallised by benefit crystallisation event 1 by reference to the old arrangement (so that, in an appropriate case, paragraph 14ZB of Schedule 32 applies).

PART 2Commencement

25(1)The amendments made by this Schedule come into force on such day as the Treasury may by regulations appoint.

(2)The Treasury may by regulations make transitional or saving provision in connection with the coming into force of any provision of this Schedule.

(3)Regulations under this paragraph are to be made by statutory instrument.

Section 30

SCHEDULE 6Construction industry scheme: amendments

Introductory

1Chapter 3 of Part 3 of FA 2004 (construction industry scheme) is amended as follows.

Contractors

2(1)Section 59 of FA 2004 (contractors) is amended as follows.

(2)In subsection (1), for paragraph (l) substitute—

(l)a person carrying on a business at any time if, in the period of one year ending with that time, the person’s expenditure on construction operations exceeds £3,000,000.

(3)For subsections (2) and (3) substitute—

(2)But this section only applies to a body or person falling within any of paragraphs (b) to (fa) or (h) to (k) of subsection (1) at any time if, in the period of one year ending with that time, the body or person’s expenditure on construction operations exceeds £3,000,000.

(3)Where the condition in subsection (1)(l) or (2) is met in relation to a body or person at any time, the body or person may elect for the condition to be treated as no longer being met if, at that time, the body or person is not expected to make any further expenditure on construction operations.

(3A)Where the condition in subsection (1)(l) or (2) ceases to be met in relation to a body or person at any time, the body or person may elect for the condition to be treated as continuing to be met until the body or person is not expected to make any further expenditure on construction operations.

(3B)Subsections (3) and (3A) do not prevent the condition in subsection (1)(l) or (2) from being met again in relation to the body or person.

3(1)This paragraph applies where—

(a)the condition in section 59(1)(l) or (2) of FA 2004 was met in relation to a body or person immediately before the amendments made by paragraph 2 come into force, and

(b)on the coming into force of those amendments, that condition would (but for sub-paragraph (2)) cease to be met in relation to the body or person.

(2)The condition in section 59(1)(l) or (2) of FA 2004 (as the case may be) is treated as continuing to be met in relation to the body or person until the body or person is not expected to make any further expenditure on construction operations (within the meaning given by section 74 of FA 2004).

Deductions for materials

4In section 61(1) of FA 2004 (deductions on account of tax from contract payments), for “any other person” substitute “the sub-contractor”.

Grace period

5In section 61 of FA 2004 (deductions on account of tax from contract payments), after subsection (3) insert—

(4)Subsection (5) applies where the contractor is a person falling within section 59(1)(l).

(5)An officer of Revenue and Customs may, if the officer considers it appropriate to do so, by notice in writing—

(a)exempt the contractor from the requirement to deduct sums from contract payments under subsection (1) for a specified period;

(b)treat the contractor as if such an exemption had applied in relation to—

(i)specified contract payments made before the date of the notice, or

(ii)contract payments made during a specified period before the date of the notice.

(6)The period referred to in subsection (5)(a)—

(a)must not exceed 90 days, but

(b)may be extended by one or more further notices under subsection (5).

(7)In subsection (5) “specified” means specified in the notice.

Restrictions on set-off

6(1)Section 62 of FA 2004 (treatment of sums deducted) is amended as follows.

(2)After subsection (3) insert—

(3A)Regulations under subsection (3) may include provision authorising an officer of Revenue and Customs to—

(a)correct an error or omission relating to a set-off claim;

(b)remove a set-off claim;

(c)prohibit a person from making a further set-off claim, for a specified period or indefinitely.

(3B)Regulations under subsection (3) that include provision of the kind mentioned in subsection (3A) may, for example, include provision—

(a)allowing the things mentioned in subsection (3A)(a) to (c) to be done by amending a return (including a return not made under the regulations) or otherwise;

(b)allowing a set-off claim to be removed where the claimant is not eligible to make the claim (including where the claimant is not a company, not a sub-contractor, or is registered for gross payment);

(c)requiring information to be given to the Commissioners of Revenue and Customs, at such times as may be specified in the regulations.

(3C)In subsections (3A) and (3B), “set-off claim” means a claim for treating a sum deducted under section 61 as paid on account of any relevant liabilities.

(3)In subsection (4), for “subsection (3)” substitute “this section”.

Penalties

7For section 72 of FA 2004 (penalties) substitute—

72Penalties

(1)This section applies in a case within subsection (2), (3) or (4).

(2)A case is within this subsection if a person (“A”)—

(a)makes a statement, or furnishes a document, which A knows to be false in a material particular, or

(b)recklessly makes a statement, or furnishes a document, which is false in a material particular,

for the purpose of becoming registered for gross payment or for payment under deduction.

(3)A case is within this subsection if a person (“A”) who exercises influence or control over another person (“B”) or is in a position to do so —

(a)makes a statement, or furnishes a document, which A knows to be false in a material particular, or

(b)recklessly makes a statement, or furnishes a document, which is false in a material particular,

for the purpose of enabling or facilitating B to become registered for gross payment or for payment under deduction.

(4)A case is within this subsection if a person (“A”) who exercises influence or control over another person (“B”) or is in a position to do so—

(a)encourages B to make a statement, or furnish a document, which A knows to be false in a material particular, or

(b)encourages B to make a statement or furnish a document—

(i)which is false in a material particular, and

(ii)where A is reckless as to whether the statement or document is false in a material particular,

for the purpose of enabling or facilitating B to become registered for gross payment or for payment under deduction.

(5)In a case where this section applies, A is liable to a penalty not exceeding £3,000.

Commencement

8(1)The amendments made by this Schedule have effect for the tax year 2021-22 and subsequent tax years.

(2)But the amendment made by paragraph 7 has no effect in relation to a statement made, or document furnished, before 6 April 2021.

Section 36

SCHEDULE 7Hybrid and other mismatches

PART 1Meaning of “tax”

1After section 259B(3) of TIOPA 2010 insert—

(3ZA)A tax is not within paragraph (a) or (b) of subsection (2) so far as it is charged on income that—

(a)has arisen to an entity that—

(i)is not subject to the tax (as regards that income), and

(ii)is, under the law of the territory referred to in that subsection, regarded as being a person for the purposes of the tax, but

(b)is to be brought into account for the purposes of that tax by a different entity.

PART 2Chapter 3 mismatches: relevant debt relief circumstances

2Part 6A of TIOPA is amended as follows.

3In section 259CB (hybrid or otherwise impermissible deduction/non-inclusion mismatches and their extent), for subsection (3) substitute—

(3)So far as the excess arises—

(a)by reason of a relevant debt relief provision, or

(b)in relevant debt relief circumstances,

it is to be taken not to arise by reason of the terms, or any other feature, of the financial instrument (whether or not it would have arisen by reason of the terms, or any other feature, of the financial instrument regardless).

4In section 259CC (interpretation of section 259CB), after subsection (3) insert—

(3A)To determine whether excess arises in “relevant debt relief circumstances” see sections 259NEB to 259NEF.

5After section 259NEA insert—

Relevant debt relief circumstances

259NEBRelevant debt relief circumstances: introductory

(1)This section applies for the purposes of section 259CB(3).

(2)Excess arises in “relevant debt relief circumstances” if (and only if)—

(a)the payment or quasi-payment mentioned in section 259CB(2) comprises the release of a liability to pay an amount under a debtor relationship (within the meaning given by section 302(6) of CTA 2009), and

(b)the circumstances in section 259NEC, 259NED, 259NEE, or 259NEF apply.

(3)For the purposes of those sections references to—

(a)“the relevant release” means the release of liability mentioned in subsection (2)(a),

(b)“loan relationship” is to be construed in accordance with section 302 of CTA 2009,

(c)“amortised cost basis of accounting” is to be construed in accordance with section 313(4) and (4A) of that Act,

(d)“connected companies relationship” is to be construed in accordance with section 348 of that Act, and

(e)“deemed release” and “relevant rights” are to be construed in accordance with section 358(3) to (4A) of that Act.

259NECRelease of debts

(1)This section is to be read with section 259NEB (relevant debt relief circumstances: introductory).

(2)The circumstances in this section are—

(a)the relevant release takes place in an accounting period for which an amortised cost basis of accounting is used in respect of the debtor relationship, and

(b)condition A, B, C, D or E is met.

(3)Condition A is that the release is part of a statutory insolvency arrangement (within the meaning of section 1319 of CTA 2009).

(4)Condition B is that the release is not a release of relevant rights and is—

(a)in consideration of shares forming part of the ordinary share capital of a payee, or

(b)in consideration of any entitlement to such shares.

(5)Condition C is that—

(a)a payee meets one of the insolvency conditions (see subsection (8)), and

(b)the debtor relationship is not a connected companies relationship.

(6)Condition D is that the release is in consequence of the making of a mandatory reduction instrument or a third country instrument or the exercise of a stabilisation power under Part 1 of the Banking Act 2009.

(7)Condition E is that—

(a)the release is neither a deemed release nor a release of relevant rights, and

(b)immediately before the release, it is reasonable to assume that, without the release and any arrangements of which the release forms part, there would be a material risk that at some time within the next 12 months a payee would be unable to pay its debts.

(8)For the purposes of this section a company meets the insolvency conditions if—

(a)it is in insolvent liquidation,

(b)it is in insolvent administration,

(c)it is in insolvent administrative receivership,

(d)an appointment of a provisional liquidator is in force in relation to the company under section 135 of the Insolvency Act 1986 or Article 115 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)), or

(e)under the law of a country or territory outside the United Kingdom circumstances corresponding to those mentioned in paragraph (a), (b), (c) or (d) exist.

(9)Section 323(A1) of CTA 2009 applies for the interpretation of subsection (7)(b); and the rest of that section applies for the interpretation of subsection (8).

259NEDRelease of connected companies debts

(1)This section is to be read with section 259NEB (relevant debt relief circumstances: introductory).

(2)The circumstances in this section are—

(a)the relevant release takes place in an accounting period for which—

(i)an amortised cost basis of accounting is used in respect of the debtor relationship, and

(ii)the debtor relationship is a connected companies relationship, and

(b)the release is neither—

(i)a deemed release, nor

(ii)a release of relevant rights.

259NEERelease of connected companies debts during creditor’s insolvency

(1)This section is to be read with section 259NEB (relevant debt relief circumstances: introductory).

(2)The circumstances in this section are—

(a)the relevant release takes place in an accounting period for which an amortised cost basis of accounting is used in respect of the debtor relationship,

(b)condition A, B, C, D or E in section 357 of CTA 2009 is met in relation to the payer,

(c)immediately before the time when any of those conditions was first met the debtor relationship was a connected companies relationship, and

(d)immediately after that time it was not such a relationship.

259NEFCorporate rescue: debt released shortly after connection arises

(1)This section is to be read with section 259NEB (relevant debt relief circumstances: introductory).

(2)The circumstances in this section are—

(a)the relevant release takes place within 60 days of the payer and a payee becoming connected with one another (within the meaning of section 363 of CTA 2009), and

(b)the corporate rescue conditions are met.

(3)The corporate rescue conditions are—

(a)that the payer and the payee became connected as a result of an arm’s length transaction, and

(b)immediately before the payer and the payee became connected it was reasonable to assume that, without the connection and any arrangements of which the connection forms part, there would be a material risk that at some point within the next 12 months the payee would have been unable to pay its debts.

(4)For the purposes of subsection (3)(b), a payee is unable to pay its debts if—

(a)it is unable to pay its debts as they fall due, or

(b)the value of its assets is less than the amount of its liabilities, taking into account its contingent and prospective liabilities.

PART 3Chapter 3 mismatches: Investment trusts

6Chapter 3 of Part 6A of TIOPA is amended as follows.

7In section 259CB (hybrid or otherwise impermissible deduction/non-inclusion mismatches and their extent)—

(a)after subsection (3) (as substituted by paragraph 3) insert—

(3A)So far as the excess arises by reason of an interest distribution designation, it is to be taken not to arise by reason of the terms, or any other feature, of the financial instrument (whether or not it would have arisen by reason of the terms, or any other feature, of the financial instrument regardless of that designation)., and

(b)in subsection (4), in the opening words, for “that and subsection” substitute “subsections (3), (3A) and”.

8In section 259CC (interpretation of section 259CB), after subsection (3A) (as inserted by paragraph 4) insert—

(3B)An “interest distribution designation” means a designation made under regulation 5(2) of the Investment Trusts (Dividends) (Optional Treatment as Interest Distributions) Regulations 2009 (S.I. 2009/2034).

PART 4Deemed dual inclusion income

9Part 6A of TIOPA 2010 (hybrid and other mismatches) is amended as follows.

10(1)Chapter 5 (hybrid payer deduction/non-inclusion mismatches) is amended as follows.

(2)In section 259EC (counteraction where the hybrid payer is within the charge to corporation tax for the payment period), in subsection (4) omit “arises in connection with the arrangement mentioned in section 259EA(2) and”.

(3)After subsection (5) insert—

(6)For the purposes of subsection (4)(b) the reference to ordinary income of an investor in the payer for a permitted taxable period for the purposes of any tax charged under the law of an investor jurisdiction is taken to include a reference to an amount that meets the following requirements.

(7)The requirements are that—

(a)the amount may not be deducted under the law of any territory from the income of any person for the purposes of calculating taxable profits for a relevant taxable period;

(b)in the case of a person resident for tax purposes in a zero-tax territory, the amount could not be deducted from the income of the person for the purposes of calculating taxable profits for a relevant taxable period if the person were resident in the United Kingdom for tax purposes; and

(c)under the law of the investor jurisdiction, the amount could be deducted from the income of the investor in the hybrid payer for the purposes of calculating the investor’s taxable profits for a relevant taxable period if the following assumptions were made.

(8)The assumptions are that, for the purposes of identifying the recipient of the amount for tax purposes in the investor jurisdiction—

(a)condition B in section 259BE(3) was not met by the hybrid payer as respects the investor jurisdiction, and

(b)as a result of that, the hybrid payer was not a hybrid entity as respects the investor jurisdiction.

(9)In subsection (7), “zero-tax territory”, in relation to a person, means a territory in which the person—

(a)is not within the charge to tax, or

(b)is within the charge to tax at a nil rate.

(10)Section 259B(5) (determination of residence where no concept of residence for tax purposes exists) applies to the reference in subsection (7)(b) to a person’s residence for tax purposes in a zero-tax territory as it applies to references to a person’s residence for tax purposes in Chapter 8 or 11.

(11)A taxable period of an investor or another person is “relevant” for the purposes of subsection (7) if—

(a)the period begins before the end of 12 months after the end of the accounting period mentioned in subsection (4)(a), or

(b)where the period begins after that, it is just and reasonable for the question of whether the amount concerned may or could be deducted in calculating taxable profits to be determined by reference to that taxable period rather than an earlier period.

(4)In section 259ED(9) (counteraction where a payee is within the charge to corporation tax) omit “arises in connection with the arrangement mentioned in section 259EA(2) and”.

11(1)Chapter 6 (deduction/non-inclusion mismatches relating to transfers by permanent establishments) is amended as follows.

(2)In section 259FB (counteraction of the excessive PE deduction), after subsection (4) insert—

(5)For the purposes of subsection (3)(b) the reference to ordinary income of the company for a permitted taxable period for the purposes of a tax charged under the law of the parent jurisdiction is taken to include a reference to excessive PE inclusion income of the company.

(6)Section 259FC defines “excessive PE inclusion income” of the company for this purpose.

(3)After section 259FB insert—

259FCMeaning of excessive PE inclusion income

(1)In section 259FB(5), “excessive PE inclusion income” of the company means—

(a)where paragraph (a) of subsection (4) applies, the PE inclusion income of the company, or

(b)where paragraph (b) of that subsection applies, the PE inclusion income of the company so far as it is reasonable to suppose that it exceeds the aggregate effect on taxable profits.

(2)For this purpose, “PE inclusion income” of the company means an amount in respect of which conditions A and B are met.

(3)Condition A is that the amount is in respect of a transfer of money or money’s worth from the company in the parent jurisdiction to the company in the United Kingdom that—

(a)is actually made, or

(b)is (in substance) treated as being made for corporation tax purposes.

(4)Condition B is that it is reasonable to suppose that—

(a)the circumstances giving rise to the amount will not result in—

(i)a reduction in the taxable profits of the company for a relevant taxable period, or

(ii)an increase in a loss made by the company for a relevant taxable period,

for the purposes of a tax charged under the law of the parent jurisdiction, or

(b)those circumstances will result in such a reduction or increase for one or more relevant taxable periods, but the amount exceeds the aggregate effect on taxable profits.

(5)“The aggregate effect on taxable profits” is the sum of—

(a)any reductions, resulting from the circumstances giving rise to the amount, in the taxable profits of the company, for a relevant taxable period, for the purposes of a tax charged under the law of the parent jurisdiction, and

(b)any amounts by which a loss made by the company, for a relevant taxable period, for the purposes of a tax charged under the law of the parent jurisdiction, is increased as a result of the circumstances giving rise to the amount.

(6)For the purposes of subsections (4) and (5), any reduction in taxable profits or increase of losses is to be ignored in any case where tax is charged at a nil rate under the law of the parent jurisdiction.

(7)A taxable period of the company is “relevant” for the purposes of subsections (4) and (5) if—

(a)the period begins before the end of 12 months after the end of the accounting period mentioned in section 259FB(3)(a), or

(b)where the period begins after that, it is just and reasonable for the question of whether the circumstances giving rise to the amount will result in a reduction in taxable profits or an increase in a loss to be determined by reference to that taxable period rather than an earlier period.

12(1)Chapter 9 (hybrid entity double deduction mismatches) is amended as follows.

(2)In section 259IC (counteraction where the hybrid entity is within the charge to corporation tax), in subsection (4), for the words from “unless” to the end substitute “unless it is deducted from dual inclusion income for that period.”

(3)After section 259IC insert—

259ICADeemed dual inclusion income for the purposes of section 259IC

(1)For the purposes of section 259IC(10)(b) the reference to ordinary income of an investor in the hybrid entity for a permitted taxable period for the purposes of any tax charged under the law of an investor jurisdiction is taken to include a reference to an amount that meets the following requirements.

(2)The requirements are that—

(a)the amount may not be deducted under the law of any territory from the income of any person for the purposes of calculating taxable profits for a relevant taxable period;

(b)in the case of a person resident for tax purposes in a zero-tax territory, the amount could not be deducted from the income of the person for the purposes of calculating taxable profits for a relevant taxable period if the person were resident in the United Kingdom for tax purposes; and

(c)under the law of the investor jurisdiction, the amount could be deducted from the income of the investor in the hybrid entity for the purposes of calculating the investor’s taxable profits for a relevant taxable period if the following assumptions were made.

(3)The assumptions are that, for the purposes of identifying the recipient of the amount for tax purposes in the investor jurisdiction, it is assumed that—

(a)condition B in section 259BE(3) was not met by the hybrid entity as respects the investor jurisdiction, and

(b)as a result of that, the hybrid entity was not a hybrid entity as respects the investor jurisdiction.

(4)In subsection (2), “zero-tax territory”, in relation to a person, means a territory in which the person—

(a)is not within the charge to tax, or

(b)is within the charge to tax at a nil rate.

(5)Section 259B(5) (determination of residence where no concept of residence for tax purposes exists) applies to the reference in subsection (2)(b) to a person’s residence for tax purposes in a zero-tax territory as it applies to references to a person’s residence for tax purposes in Chapter 8 or 11.

(6)A taxable period of an investor or another person is “relevant” for the purposes of subsection (2) if—

(a)the period begins before the end of 12 months after the end of the accounting period mentioned in section 259IC(10)(a), or

(b)where the period begins after that, it is just and reasonable for the question of whether the amount concerned may or could be deducted in calculating taxable profits to be determined by reference to that taxable period rather than an earlier period.

(4)Omit section 259ID (section 259ID income for the purposes of section 259IC).

13(1)Chapter 10 (dual territory double deduction cases) is amended as follows.

(2)In section 259JD (counteraction where mismatch arises because of a relevant multinational and is not counteracted in the parent jurisdiction), after subsection (9) insert—

(10)For the purposes of subsection (8)(b) the reference to ordinary income of the company for a permitted taxable period for the purposes of a tax charged under the law of a territory outside the United Kingdom is taken to include a reference to excessive PE inclusion income of the company.

(11)Section 259JE defines “excessive PE inclusion income” of the company for this purpose.

(3)After section 259JD insert—

259JEMeaning of excessive PE inclusion income

(“1)In section 259JD(10), “excessive PE inclusion income” of the company means—

(a)where paragraph (a) of subsection (4) applies, the PE inclusion income of the company, or

(b)where paragraph (b) of that subsection applies, the PE inclusion income of the company so far as it is reasonable to suppose that it exceeds the aggregate effect on taxable profits.

(2)For this purpose, “PE inclusion income” of a company for an accounting period means an amount in respect of which conditions A and B are met.

(3)Condition A is that the amount is in respect of a transfer of money or money’s worth from the company in the parent jurisdiction to the company in the United Kingdom that—

(a)is actually made, or

(b)is (in substance) treated as being made for corporation tax purposes.

(4)Condition B is that it is reasonable to suppose that—

(a)the circumstances giving rise to the amount will not result in—

(i)a reduction in the taxable profits of the company for a relevant taxable period, or

(ii)an increase in a loss made by the company for a relevant taxable period,

for the purposes of a tax charged under the law of the parent jurisdiction, or

(b)those circumstances will result in such a reduction or increase for one or more relevant taxable periods, but the amount exceeds the aggregate effect on taxable profits.

(5)“The aggregate effect on taxable profits” is the sum of—

(a)any reductions, resulting from the circumstances giving rise to the amount, in the taxable profits of the company, for a relevant taxable period, for the purposes of a tax charged under the law of the parent jurisdiction, and

(b)any amounts by which a loss made by the company, for a relevant taxable period, for the purposes of a tax charged under the law of the parent jurisdiction, is increased as a result of the circumstances giving rise to the amount.

(6)For the purposes of subsections (4) and (5), any reduction in taxable profits or increase of losses is to be ignored in any case where tax is charged at a nil rate under the law of the parent jurisdiction.

(7)A taxable period of the company is “relevant” for the purposes of subsections (4) and (5) if—

(a)the period begins before the end of 12 months after the end of the accounting period mentioned in section 259JD(8)(a), or

(b)where the period begins after that, it is just and reasonable for the question of whether the circumstances giving rise to the amount will result in a reduction in taxable profits or an increase in a loss to be determined by reference to that taxable period rather than an earlier period.

PART 5Deemed dual inclusion income: anti-avoidance

14In Chapter 13 of Part 6A of TIOPA 2010 (hybrid and other mismatches: anti-avoidance), in section 259M(4) (countering the effect of avoidance arrangements), omit the “or” after paragraph (a) and after paragraph (b) insert , or

(c)the person does anything which, to any extent, results in an amount being treated as dual inclusion income of that person under any provision of this Part.

PART 6Allocation of dual inclusion income within group

15(1)Part 6A of TIOPA 2010 is amended as follows.

(2)In section 259A (overview of Part), after subsection (16) insert—

(16A)Chapter 12A contains provision allowing surplus dual inclusion income to be allocated within a group of companies.

(3)After Chapter 12 insert—

CHAPTER 12AAllocation of dual inclusion income within group

Introduction
259ZMOverview of Chapter

(1)This Chapter contains provision that allows surplus dual inclusion income to be allocated within a group of companies.

(2)Section 259ZMA contains the conditions that must be met for this Chapter to apply.

(3)Subsection (2) of that section defines “the DII surplus” and subsection (3) of that section defines “the DII shortfall”.

(4)Sections 259ZMB to 259ZMD contain provision allowing the unused part of the DII surplus of one company to be treated as dual inclusion income of another company in the same group, where it can be matched against the unused part of the DII shortfall of the other company.

(5)Section 259ZME identifies when companies are in the same group.

Application of Chapter
259ZMACircumstances in which Chapter applies

(1)This Chapter applies if conditions A to E are met.

(2)Condition A is that, for an accounting period (“the surplus period”), the dual inclusion income of a company (“company A”) exceeds its counteraction amount.

In this Chapter, the amount of the excess is referred to as “the DII surplus”.

(3)Condition B is that, for an accounting period (“the shortfall period”), the counteraction amount of another company (“company B”) exceeds its dual inclusion income.

In this Chapter, the amount of the excess is referred to as “the DII shortfall”.

(4)See section 259ZMF for the meanings of “dual inclusion income” and “counteraction amount”.

(5)Condition C is that there is a period (“the overlapping period”) that is common to both the surplus period and the shortfall period (and see subsections (8) and (9)).

(6)Condition D is that there is a time during the overlapping period when both company A and company B are within the charge to corporation tax.

(7)Condition E is that there is a time during the overlapping period when company A and company B are members of the same group of companies (see section 259ZME).

(8)Subsection (9) applies if, during any part of the overlapping period—

(a)either company A or company B is not within the charge to corporation tax, or

(b)company A and company B are not members of the same group of companies.

(9)That part is treated as not forming part of the overlapping period but instead as—

(a)forming part of the surplus period that is not included in the overlapping period, and

(b)forming part of the shortfall period that is not included in the overlapping period.

Allocation of DII surplus
259ZMBClaims for allocation of DII surplus

(1)Company B may make a claim (an “allocation claim”) for all or part of the unused part of the DII surplus of company A for the overlapping period (see section 259ZMC) to be allocated to company B for the shortfall period, if the following requirements are met.

  • Requirement 1

    Company A consents to the allocation claim.

  • Requirement 2

    The allocation claim identifies the amount of the DII surplus to which it relates.

  • Requirement 3

    Company B has an amount of ordinary income for the shortfall period (“matchable income”) that—

    (a)

    is not dual inclusion income, and

    (b)

    is equal to or exceeds the amount of the DII surplus to which the allocation claim relates.

  • Requirement 4

    The allocation claim identifies the amount of matchable income to which the claim relates.

  • Requirement 5

    The amount of matchable income to which the claim relates—

    (a)

    is equal to the amount of the DII surplus to which the claim relates, and

    (b)

    does not exceed the unused part of the DII shortfall of company B for the shortfall period (see section 259ZMD).

(2)If company B makes an allocation claim—

(a)the amount of company A’s dual inclusion income for the surplus period is reduced by the amount of matchable income to which the claim relates, and

(b)the amount of matchable income to which the claim relates is treated in relation to company B as if the following assumptions were made.

(3)The assumptions are that—

(a)things done by or to company A in relation to that amount are treated as done by or to company B, and

(b)all other factual circumstances (or circumstances treated as existing as a result of any provision made by this Part) in relation to that amount are unchanged.

259ZMCThe unused part of the DII surplus

(1)This section identifies the unused part of the DII surplus of company A for the overlapping period, for the purposes of an allocation claim made by company B (“the current allocation claim”).

(2)The unused part of the DII surplus of company A for the overlapping period is the amount equal to—

(a)the DII surplus for the overlapping period (see subsection (3)), less

(b)the amount of prior allocations for that period (see subsections (4) to (7)).

(3)To determine the DII surplus for the overlapping period—

(a)take the proportion of the surplus period included in the overlapping period, and

(b)apply that proportion to the DII surplus for the surplus period.

The DII surplus for the overlapping period is the amount given as a result of paragraph (b).

(4)To determine the amount of prior allocations for the overlapping period—

(a)identify any prior allocation claims for the purposes of this section (see subsection (5)), and

(b)take the steps set out in subsection (6) in relation to each such claim.

The amount of prior allocations for the overlapping period is the total of the previously used amounts given at Step 3 in subsection (6) for all the prior allocation claims.

(5)An allocation claim is a prior allocation claim for the purposes of this section if—

(a)it is an allocation claim made by a company in respect of all or part of the DII surplus of company A for the surplus period,

(b)it is made before the current allocation claim, and

(c)it has not been withdrawn.

(6)These are the steps referred to in subsection (4)(b) to be taken in relation to each prior allocation claim.

  • Step 1

    Identify the overlapping period for the prior allocation claim.

  • Step 2

    Identify any period that is common to the overlapping period for the current allocation claim and the overlapping period for the prior allocation claim.

    If there is a common period, go to Step 3.

    If there is no common period, there is no previously allocated amount in relation to the prior allocation claim (and ignore Step 3).

  • Step 3

    Determine the previously allocated amount of the DII surplus in relation to the prior allocation claim (see subsection (7)).

(7)To determine the previously allocated amount of the DII surplus in relation to the prior allocation claim—

(a)take the proportion of the overlapping period for the prior allocation claim that is included in the common period identified at Step 2 in subsection (6) in relation to that claim, and

(b)apply that proportion to the amount of the DII surplus allocated on the prior allocation claim.

The previously allocated amount of the DII surplus in relation to the prior allocation claim is the amount given as a result of paragraph (b).

(8)If two or more allocation claims are made at the same time, for the purposes of this section treat the claims as made—

(a)in such order as the companies making them may jointly elect, or

(b)if no such election is made, in such order as an officer of Revenue and Customs may direct.

(9)For the purposes of Step 3 in subsection (6), the amount of the DII surplus allocated on a prior allocation claim is determined on the basis that an amount is allocated on the claim before it is allocated on a later claim.

(10)If the use of the proportion mentioned in subsection (3) or (7) would, in the circumstances of a particular case, produce a result that is unjust or unreasonable, the proportion is to be modified so far as necessary to produce a result that is just and reasonable.

259ZMDThe unused part of the DII shortfall

(1)This section identifies the unused part of the DII shortfall of company B for the shortfall period, for the purposes of an allocation claim made by company B (“the current allocation claim”).

(2)The unused part of the DII shortfall of company B for the shortfall period is the amount equal to—

(a)the DII shortfall for the shortfall period, less

(b)the amount of prior matches for the shortfall period (see subsections (3) to (5)).

(3)To determine the amount of prior matches for the shortfall period—

(a)identify any prior allocation claims for the purposes of this section (see subsection (4)), and

(b)determine the previously matched amount of the DII shortfall in relation to each prior allocation claim (see subsection (5)).

The amount of prior matches for the shortfall period is the total of the previously matched amounts of the DII shortfall in relation to all the prior allocation claims.

(4)An allocation claim is a prior allocation claim for the purposes of this section if—

(a)it is an allocation claim made by company B for the shortfall period,

(b)it is made before the current allocation claim, and

(c)it has not been withdrawn.

(5)The previously matched amount of the DII shortfall in relation to a prior allocation claim is the amount that is treated as dual inclusion income of company B for the shortfall period as a result of the claim (see section 259ZMB(3)(a)).

(6)If two or more allocation claims are made at the same time, for the purposes of this section treat the claims as made—

(a)in such order as company B may elect, or

(b)if no such election is made, in such order as an officer of Revenue and Customs may direct.

(7)For the purposes of subsection (3)(b), the amount of the DII shortfall matched in relation to a prior allocation claim is determined on the basis that an amount is matched on the claim before it is matched on a later claim.

Groups
259ZMEGroups of companies

(1)For the purposes of this Chapter, company A and company B are members of the same group of companies if—

(a)one is a 75% subsidiary of the other, or

(b)both are 75% subsidiaries of a third company.

(2)In subsection (1), “75% subsidiary” has the same meaning as in Part 5 of CTA 2010 (group relief) (see section 151 of that Act).

(3)Sections 154, 155A, 155B and 156 of CTA 2010 (members of group of companies: arrangements for transfers of companies) apply for the purposes of this Chapter as they apply for the purposes of Part 5 of CTA 2010, but as if references to a surrenderable amount were to the DII surplus.

“Dual inclusion income” and “counteraction amount”
259ZMFMeaning of “dual inclusion income” and “counteraction amount”

(1)This section applies for the purposes of this Chapter.

(2)The “dual inclusion income” of a company for an accounting period means the amount of any income that is dual inclusion income of the company for that period for the purposes of any provision of this Part.

(3)An amount of income that is dual inclusion income of a company for the purposes of more than one provision of this Part is not counted more than once for the purposes of subsection (2).

(4)The “counteraction amount” of a company for an accounting period means the total of all the following amounts that are applicable to the company for that period—

(a)the restricted deduction, within the meaning given by section 259EC(2);

(b)where section 259ED applies and there is only one payee, the relevant amount, within the meaning given by section 259ED(3);

(c)where section 259ED applies and there is more than one payee, the payee’s share of the relevant amount, within the meaning given by section 259ED(3) and (6);

(d)the excessive PE deduction, within the meaning given by section 259FA(8);

(e)where section 259IB applies, the hybrid entity double deduction amount, within the meaning given by section 259IA(4);

(f)where section 259IC applies, the restricted deduction, within the meaning given by section 259IC(3);

(g)the dual territory double deduction amount, within the meaning given by section 259JA(5), reduced by the amount of the impermissible overseas deduction (if any), within the meaning given by section 259JC(2);

(h)a dual territory double deduction, within the meaning given by section 259KB(2);

(i)an excessive PE deduction, within the meaning given by section 259KB(3) to (5).

16In Schedule 18 to FA 1998 (company tax returns, assessments and related matters), after Part 8 insert—

PART 8AClaims for allocation of surplus dual inclusion income

Introduction

77B(1)This Part of this Schedule applies to allocation claims under Chapter 12A of Part 6A of TIOPA 2010 (hybrid and other mismatches: allocation of dual inclusion income within group).

(2)Expressions used in this Part of this Schedule and in that Chapter have the same meaning in this Part of this Schedule as they have in that Chapter.

Claims to be included in company tax return

77C(1)An allocation claim must be made by being included in the company tax return of the claimant company (“company B”) for the shortfall period.

(2)It may be included in the return originally made or by amendment.

Consent to allocation claim

77D(1)In accordance with Requirement 1 in section 259ZMB of TIOPA 2010, an allocation claim in respect of all or part of the DII surplus of a company (“company A”) requires the company’s consent.

(2)The necessary consent must be given—

(a)by notice in writing,

(b)to an officer of Revenue and Customs,

(c)at or before the time the allocation claim is made.

Otherwise the allocation claim is ineffective.

(3)An allocation claim by company B is ineffective unless it is accompanied by a copy of the notice of consent to the allocation claim given by company A.

Notice of consent

77E(1)Notice of consent to an allocation claim given by company A must contain all the following details—

(a)the name of company A;

(b)the name of company B;

(c)the amount of the DII surplus to be allocated to company B;

(d)the accounting period of company A which is the surplus period.

(2)Notice of consent may not be amended, but it may be withdrawn and replaced by another notice of consent.

(3)Notice of consent may be withdrawn by notice to an officer of Revenue and Customs.

(4)Except where the consent is withdrawn under paragraph 77I (withdrawal in consequence of reduction of DII surplus), the notice of withdrawal must be accompanied by a notice signifying the consent of company B to the withdrawal.

Otherwise the notice of withdrawal is ineffective.

(5)Company B must, so far as it may do so, amend its company tax return for the accounting period for which the allocation claim was made so as to reflect the withdrawal of consent.

Notice of consent requiring amendment of return

77F(1)Where company A gives notice of consent to an allocation claim in respect of all or part of an accounting period after filing its company tax return for the accounting period, company A must amend its company tax return for the accounting period so as to reflect the notice of consent.

(2)The time limits otherwise applicable to amendment of a company tax return do not prevent an amendment being made under sub-paragraph (1).

(3)If company A fails to comply with sub-paragraph (1), the notice of consent is ineffective.

Withdrawal or amendment of allocation claim

77G(1)An allocation claim may be withdrawn by company B only by amending its company tax return.

(2)An allocation claim may not be amended, but must be withdrawn and replaced by another allocation claim.

Time limit for allocation claims

77H(1)An allocation claim may be made or withdrawn at any time up to whichever is the last of the following dates—

(a)the first anniversary of the filing date for the company tax return of company B for the accounting period for which the claim is made;

(b)if notice of enquiry is given into that return, 30 days after the enquiry is completed;

(c)if after such an enquiry an officer of Revenue and Customs amends the return under paragraph 34(2), 30 days after notice of the amendment is issued;

(d)if an appeal is brought against such an amendment, 30 days after the date on which the appeal is finally determined.

(2)An allocation claim may be made or withdrawn at a later time if an officer of Revenue and Customs allows it.

(3)The time limits otherwise applicable to amendment of a company tax return do not apply to an amendment to the extent that it makes or withdraws an allocation claim within the time allowed by or under this paragraph,

(4)The references in sub-paragraph (1) to an enquiry into a company tax return do not include an enquiry restricted to a previous amendment making or withdrawing a claim.

(5)An enquiry is so restricted if—

(a)the scope of the enquiry is limited as mentioned in paragraph 25(2), and

(b)the amendment giving rise to the enquiry consisted of the making or withdrawing of an allocation claim.

Reduction in DII surplus

77I(1)This paragraph applies if, after company A has given one or more notices of consent to an allocation claim or claims, the unused part of the DII surplus of company A is reduced to less than the amount stated in the notice of consent, or the total of the amounts stated in the notices of consent.

(2)Company A must within 30 days withdraw the notice of consent, or as many of the notices of consent as is necessary to bring the total amount of the DII surplus to which the claim or claims relate within the new unused part of the DII surplus of company A.

(3)Company A may give one or more new notices of consent.

(4)Company A must give notice in writing of the withdrawal of consent, and send a copy of any new notice of consent—

(a)to each of the companies affected, and

(b)to an officer of Revenue and Customs.

(5)If company A fails to act in accordance with sub-paragraph (2), an officer of Revenue and Customs may by notice to company A give such directions as the officer thinks fit as to which notice or notices are to be ineffective or are to have effect in a lesser amount.

(6)The power in sub-paragraph (5) must not be exercised to any greater extent than is necessary to secure that the total amount stated in the notice or notices is consistent with the unused part of the DII surplus of company A.

(7)An officer of Revenue and Customs must at the same time send a copy of the notice to each company affected by the exercise of the power.

(8)A company which receives—

(a)notice of the withdrawal of consent, or a copy of a new notice of consent, under sub-paragraph (4), or

(b)a copy of a notice containing directions by an officer of Revenue and Customs under sub-paragraph (7),

must, so far as it may do so, amend its company tax return for the accounting period for which the claim is made so that it is consistent with the new position with regard to consent to an allocation claim.

(9)An appeal may be brought by company A against any directions given by an officer of Revenue and Customs under sub-paragraph (5).

(10)Notice of appeal must be given—

(a)in writing,

(b)within 30 days after the notice containing the directions was issued, and

(c)to the officer of Revenue and Customs by whom the notice was given.

Assessments on other companies

77J(1)This paragraph applies where, after company A has given notice of consent to an allocation claim, company B has become liable to tax in consequence of receiving—

(a)notice of the withdrawal of consent, or a copy of a new notice of consent, under paragraph 77I(4), or

(b)a copy of a notice containing directions by an officer of Revenue and Customs under paragraph 77I(7).

(2)If any of the tax is unpaid 6 months after company B’s time limit for allocation claims, an officer of Revenue and Customs may make an assessment to tax in the name of company B on any other company that has benefited as a result of the consent given by company A.

(3)The assessment may not be made more than two years after that time limit.

(4)The amount of the assessment must not exceed—

(a)the amount of the unpaid tax, or

(b)if less, the amount of tax which the other company saves by virtue of the consent.

(5)A company assessed to an amount of tax under sub-paragraph (2) is entitled to recover from company B—

(a)a sum equal to that amount, and

(b)any interest on that amount which it has paid under section 87A of the Taxes Management Act 1970 (interest on unpaid corporation tax).

(6)For the purposes of this paragraph, company B’s time limit for allocation claims is the last of the dates mentioned in paragraph 77H(1) on which company B could make or withdraw an allocation claim for the accounting period for which the claim in question is made.

Assessment to recover excessive amount claimed

77K(1)If an officer of Revenue and Customs discovers that any amount which is the subject of an allocation claim is or has become excessive, the officer may make an assessment to tax in the amount which in the officer’s opinion ought to be charged.

(2)This power is without prejudice to—

(a)the power to make a discovery assessment under paragraph 41(1);

(b)the making of all such adjustments by way of discharge or repayment of tax or otherwise as may be required where an amount claimed by company B on an allocation claim is excessive or company A has given consent to an allocation claim in respect of a corresponding amount.

(3)If an assessment under this paragraph is made because company B fails, or is unable, to amend its company tax return under paragraph 77I(8), the assessment is not out of time if it is made within one year from—

(a)the date on which company A gives notice of the withdrawal of consent, or (if later) sends a copy of a new notice of consent, to company B under paragraph 77I(4), or

(b)the date on which an officer of Revenue and Customs sends company B a copy of a notice containing the officer’s direction under paragraph 77I(7).

Joint amended returns

77L(1)The Treasury may by regulations make provision for arrangements under which—

(a)an allocation claim may be made without being accompanied by a copy of the notice of consent to the claim given by company A, provided authority for the claim being so made is given by a company which is authorised in relation to company B as mentioned in paragraph (b), and

(b)one company may be authorised to act on behalf of two or more companies in the same group in amending their company tax returns for the purpose of making an allocation claim or giving consent to an allocation claim or revising the amount to which an allocation claim or consent relates.

(2)Regulations under this paragraph may add to, exclude or modify the operation of any provisions of this Part of this Schedule to such extent as the Treasury think necessary or expedient for the purpose of, or in connection with, such arrangements.

(3)Provision may in particular be made—

(a)altering the conditions for making and withdrawing allocation claims, and

(b)giving an officer of revenue and Customs power to recover from the authorised company or another company in the group any amount which might be recovered from company B by an assessment under paragraph 77K.

PART 7Financing cost of loan capital

17(1)Chapter 6 of Part 6A of TIOPA 2010 (hybrid and other mismatches: deduction/non-inclusion mismatches relating to transfers by permanent establishments) is amended in accordance with sub-paragraph (2).

(2)In section 259FA(4) (circumstances in which the Chapter applies), omit the “and” after paragraph (a) and after paragraph (b) insert , and

(c)is not in respect of the financing cost of loan capital which the permanent establishment is assumed to have by virtue of section 21(2) of CTA 2009 for the purpose of applying subsection (1) of that section (the separate enterprise principle).

PART 8Chapters 9 and 10: carry forward of illegitimate overseas deduction

18(1)Part 6A of TIOPA is amended as follows.

(2)In section 259IC (counteraction where hybrid entity is within charge to corporation tax), in subsection (8), after “person” insert “other than an investor in the hybrid entity”.

(3)In section 259JB (counteraction where mismatch arises because of a dual resident company), in subsection (6), after “person” insert “other than the company”.

(4)In section 259JD (counteraction where mismatch arises because of a relevant multinational and is not counteracted in the parent jurisdiction), in subsection (6), after “person” insert “other than the company”.

PART 9Imported mismatches

19Chapter 11 of Part 6A of TIOPA (imported mismatches) is amended as follows.

20In section 259K (overview of chapter), after subsection (4A) insert—

(4B)Section 259KE sets a limit on reductions under section 259KC.

21(1)Section 259KA (circumstances in which Chapter) is amended as follows.

(2)For subsection (7) substitute—

(7)Condition E is that it is reasonable to suppose that the relevant mismatch is not capable of counteraction.

(7A)A relevant mismatch is capable of counteraction to the extent it is capable of being considered, for the purposes of determining the tax treatment of a person, other than P, under the law of a territory that is OECD mismatch compliant.

(7B)If a proportion of the relevant mismatch is not capable of being so considered under the law of any such territory—

(a)Condition E is met in relation to that proportion, and

(b)the remainder of the relevant mismatch is to be ignored for the purposes of this Part.

(7C)A determination about the extent to which a relevant mismatch is capable of being so considered is to be made on a just and reasonable basis.

(7D)A territory is OECD mismatch compliant if under the law of that territory effect is given to the Final Report on Neutralising the Effects of Hybrid Mismatch Arrangements published by the Organisation for Economic Cooperation and Development on 5 October 2015 or any replacement or supplementary publication (within the meaning of section 259BA(3)).

(3)Omit subsection (8).

(4)After subsection (9)(a) for “as the payer, or a payee” substitute “as a payee”.

22In section 259KC(2A), at the end insert “and section 259KE (limit on reduction under section 259KC)”.

23After section 259KD insert—

259KELimit on reduction under section 259KC

(1)This section applies where, in relation to the imported mismatch payment, the relevant deduction that may be deducted from P’s income for a payment period is to be reduced under section 259KC.

(2)The reduction is not to exceed the amount that the relevant mismatch would have been if the amount of the mismatch payment had been equal to the amount of the imported mismatch payment.

PART 10Meaning of “act together”

24(1)Section 259ND of TIOPA 2010 (meaning of “50% investment” and “25% investment”) is amended as follows.

(2)For subsection (7) substitute—

(7)P is to be taken to “act together” with T in relation to U if (and only if) subsection (7A) or (7B) applies.

(7A)This subsection applies if—

(a)P and T are party to a partnership agreement that—

(i)it is reasonable to suppose is designed to affect the value of any of T’s rights or interest in relation to U, or

(ii)relates to the exercise of any of T’s rights in relation to U, or

(b)the same person manages—

(i)some or all of P’s rights or interests in relation to U, and

(ii)some or all of T’s rights or interests in relation to U.

(7B)This subsection applies if P has a relevant investment in U and—

(a)P and T are connected (within the meaning given by section 163),

(b)for the purposes of influencing the conduct of U’s affairs—

(i)P is able to secure that T acts in accordance with P’s wishes,

(ii)T can reasonably be expected to act, or typically acts, in accordance with P’s wishes,

(iii)T is able to secure that P acts in accordance with T’s wishes, or

(iv)P can reasonably be expected to act, or typically acts, in accordance with T’s wishes, or

(c)P and T are party to any arrangement that—

(i)it is reasonable to suppose is designed to affect the value of any of T’s rights or interests in relation to U, or

(ii)relates to the exercise of any of T’s rights in relation to U.

(7C)To determine whether P has a “relevant investment” in U at a particular time, subsections (3) and (4) apply but as if—

(a)for “an X%”, in both places, there were substituted “a relevant”, and

(b)for “X% or more”, in each place, there were substituted “greater than 5%”.

(7D)For that purpose—

(a)subsection (6) is to be ignored, and

(b)P’s rights and interests are to be aggregated with the rights and interests of persons connected to P (within the meaning given by section 1122 of CTA 2010, ignoring subsection (4) of that section).

(3)In subsection (8)—

(a)omit “But”, and

(b)for “paragraph (d) of subsection (7)” substitute “paragraph (b) of subsection (7A)”.

PART 11Exempt investors in hybrid entities

25Part 6A of TIOPA 2010 is amended as follows.

26In section 259BC (the basic rules), after subsection (8) insert—

(8A)Income is to be treated as “ordinary income” if it would fall to be brought into account for the purpose of calculating taxable profits of a person but for the fact that the person is a qualifying institutional investor (and, if the person is based in a territory under the law of which there is no relevant tax on income of the kind in question, if the territory had such a tax).

For the meaning of “qualifying institutional investor” see section 259NDA.

27(1)Section 259EB (hybrid payer deduction/non-inclusion mismatches and their extent) is amended in accordance with sub-paragraphs (2) and (3).

(2)In subsection (3), at the beginning insert “Subject to subsections (4A) to (4C)”.

(3)After subsection (4), insert—

(4A)No excess is to be taken to arise by reason of a hybrid payer being a hybrid entity for the purposes of subsection (1)(b) so far as it is attributable to a qualifying institutional investor based in a territory under the law of which—

(a)the income or profits of the hybrid entity are treated as income and profits of the investor, or

(b)the hybrid entity is not regarded as a distinct and separate person to the investor.

(4B)Excess is attributable to such a qualifying institutional investor to the extent that ordinary income (arising by reason of the payment or quasi-payment) would fall to be brought into account by the investor if—

(a)where subsection (4A)(a) applies, under the law of the territory the income or profits of the hybrid entity were not treated as income and profits of the investor, and

(b)where subsection (4A)(b) applies, under the law of the territory the hybrid entity were regarded as a distinct and separate person to the investor.

(4C)To determine if a “qualifying institutional investor” is “based” in a particular territory for the purposes of subsections (4A) and (4B) see section 259NDA.

28In section 259GB (hybrid payee deduction/non-inclusion mismatches and their extent), after subsection (2) insert—

(2A)No excess is to be taken to arise by reason of a hybrid payee being a hybrid entity for the purposes of subsection (1)(b) so far as it is attributable to a qualifying institutional investor based in a territory under the law of which—

(a)the income or profits of the hybrid entity are not treated as income or profits of the investor, or

(b)the hybrid entity is regarded as a distinct and separate person to the investor.

(2B)Excess is attributable to such a qualifying institutional investor to the extent that ordinary income (arising by reason of the payment or quasi-payment) would fall to be brought into account by the investor if—

(a)where subsection (2A)(a) applies, under the law of the territory the income or profits of the hybrid entity were treated as income or profits of the investor, and

(b)where subsection (2A)(b) applies, under the law of the territory the hybrid entity were not regarded as a distinct and separate person to the investor.

(2C)To determine if a “qualifying institutional investor” is “based” in a particular territory for the purposes of subsections (2A) and (2B) see section 259NDA.

29After section 259ND insert—

Qualifying institutional investors etc

259NDAMeaning of “qualifying institutional investor” etc

(1)This section has effect for the purposes of this Part.

(2)References to “qualifying institutional investor” have the meaning given by paragraph 30A of Schedule 7AC to TCGA 1992.

(3)A qualifying institutional investor is “based” in a territory—

(a)if it is resident for tax purposes in the territory, or

(b)where it is not resident anywhere for tax purposes, if it is established in the territory.

PART 12Interaction with Part 4 of TIOPA 2010

30TIOPA 2010 is amended as follows.

31In Part 4 (transfer pricing), after section 192 insert—

192AProvision for cases within Part 6A

(1)Subsection (2) applies to the extent that—

(a)there is an amount to be deducted in respect of a payment by the issuing company under the security,

(b)that amount is required to be reduced (whether or not to nil) under section 147(3) or (5),

(c)the guarantor company makes a claim under section 192(1) in respect of that reduction, and

(d)as regards the payment, provision in Part 6A would, but for the reduction, apply in relation to the tax treatment of the issuing company (“the relevant tax treatment”).

(2)The relevant tax treatment is to apply in relation to the guarantor company.

32In Chapter 11 of Part 6A (imported mismatches), in section 259K (overview of chapter), after subsection (4B) (as inserted by paragraph 20) insert—

(4C)Section 259KF contains provision for cases also falling within Part 4 (transfer pricing).

33After section 259KE (as inserted by paragraph 23) insert—

259KFProvision for cases within Part 4

(1)This section applies where, in calculating the profits and losses of P for tax purposes, the amount to be deducted in respect of the imported mismatch payment is required to be reduced (whether or not to nil) under section 147(3) or (5) (tax calculations to be based on arm’s length, not actual, provision).

(2)For the purposes of section 259KC(2), the amount of the relevant mismatch is to be determined as if the mismatch payment was reduced by the same proportion as the reduction mentioned in subsection (1).

(3)For the purposes of section 259KC(3)—

(a)the amount of the relevant mismatch is taken to be the amount it would have been had the arm’s length provision been made or imposed instead of the actual provision in relation to the imported mismatch payment (making such assumptions as to the amount of the mismatch payment as are reasonable in the circumstances), and

(b)P’s share of the relevant mismatch is to be determined accordingly.

(4)In subsection (3) “the arm’s length provision” and “the actual provision” are to be construed in accordance with section 147(1).

PART 13Securitisation companies

34After section 259NE of TIOPA 2010 insert—

Securitisation companies

259NEZASecuritisation companies

(1)If the tax treatment of a securitisation company would (apart from this section) fall to be adjusted by virtue of provision in this Part, the provision is to be treated as of no effect as regards that company (and accordingly, no such adjustment may be made).

(2)In this section—

  • “securitisation company” means a company to which specified regulations apply;

  • “specified regulations” has the meaning given by regulation 2 of the Taxation of Securitisation Companies Regulations 2006 (S.I. 2006/3296).

PART 14Transparent funds

35(1)Part 6A of TIOPA 2010 is amended as follows.

(2)In section 259A (overview of Part), after subsection (17) insert—

(17A)Chapter 13A makes provision about the application of Chapters 3, 4, 5, 7, 9 and 11 in cases involving transparent funds (within the meaning of that Chapter).

(3)After Chapter 13 insert—

CHAPTER 13ASpecial provision concerning transparent funds

259MAMeaning of “transparent fund”

(1)In this Chapter “transparent fund” means a collective investment scheme, or an AIF (that is not a collective investment scheme), if—

(a)were all of the profits or income of the fund to arise from sources inside the United Kingdom and

(b)were all of its participants within the charge to income tax,

its profits or income would be profits or income of its participants for the purposes of that tax.

(2)In this section—

  • “AIF” has the meaning given by regulation 3 of the Alternative Investment Fund Managers Regulations 2013 (S.I. 2013/1773);

  • “collective investment scheme” has the meaning given by section 235 of the Financial Services and Markets Act 2000;

  • “participant”, in relation to a transparent fund, means a person who—

    (a)

    takes part in the arrangements constituting the fund, whether by becoming the owner of, or of any part of, the property that is the subject of the arrangements or otherwise, and

    (b)

    does not have day-to-day control over the management of the property, whether or not they have the right to be consulted or to give directions.

259MBApplication of Chapters 3, 4, 5 and 7

(1)This section applies where—

(a)Chapter 3, 4, 5 or 7 applies in respect of a payment or quasi-payment,

(b)the relevant structured arrangement condition is not met, and

(c)it is reasonable to suppose that a proportion of the payment or quasi-payment is attributable to a person as a result of that person’s interest (direct or indirect) in a transparent fund that is the primary fund in relation to that person.

(2)For the purposes of this section, a proportion of a payment or quasi-payment is attributable to a person if, as a result of that payment or quasi-payment—

(a)ordinary income arises to that person, or

(b)would arise if the person were resident for tax purposes in the United Kingdom.

(3)The primary fund in relation to a person is—

(a)where the income arises or would arise because of an indirect interest the person has in a transparent fund as a result of another transparent fund, or a series of transparent funds, having an interest in that first fund, that first fund, or

(b)where the income arises or would arise because of a direct or indirect interest the person has in a single transparent fund, that fund.

(4)