(This note is not part of the Regulations)
These Regulations provide for exemptions from capital gains tax and income tax for Horizon Shortfall Scheme top-up payments.
Schedule 15 to the Finance Act 2020 provides for exemptions and relief from tax in respect of qualifying payments. Under paragraph 2(5) of that Schedule the Treasury may by regulations specify compensation payments made by a public authority or by or on behalf of the United Kingdom government to be qualifying payments. Paragraph 3 of the Schedule provides for an exemption from income tax in respect of a receipt of a qualifying payment. Paragraph 4 of the Schedule provides for an exemption from capital gains tax on gains from a disposal arising as a result of a person forfeiting, surrendering or refraining from exercising rights in return for a qualifying payment, on a disposal of the right to receive the whole or any part of a qualifying payment, or on a disposal of any interest in such a right.
Regulation 3 specifies that Horizon Shortfall Scheme top-up payments are qualifying payments for the purposes of paragraphs 3 and 4 of Schedule 15 to the Finance Act 2020. This means that there is no liability to income tax arising from the receipt of these payments and no liability to capital gains tax arising from the transfer of rights in exchange for the payment, or their disposal of the right to receive such a payment.
A full impact assessment has not been produced for this instrument as no, or no significant, impact on the private, voluntary or public sector is foreseen.