Finance (No. 2) Act 2017

Application of sections 23A to 23H of ITTOIA 2005 in relation to loans etc. outstanding on 5 April 2019 U.K.

1 (1) A loan or quasi-loan in relation to which sub-paragraph (2) applies is to be treated [F1 for the purposes of sections 23A to 23H of ITTOIA 2005 as a relevant benefit that arises immediately before the end of 5 April 2019.] U.K.

(2) This sub-paragraph applies in relation to a loan or a quasi-loan if—

(a) the loan or quasi-loan was made—

(i) on or after [F2 9 December 2010], and

(ii) before 6 April 2017, and

(b) an amount of the loan or quasi-loan is outstanding immediately before the end of 5 April 2019.

(3) Where section 23E of ITTOIA 2005 applies [F3 and T has not made an election for the purposes of sub-paragraph (3A)] in relation to a relevant benefit which is a loan or quasi-loan in relation to which sub-paragraph (2) applies, section 23E has effect—

(a) as if the “relevant benefit amount” were the amount of the loan or quasi-loan that is outstanding [F4 at the time the relevant benefit is treated as arising, and]

[F5 (b) where T ceases to carry on the relevant trade before the tax year in which the relevant benefit is treated as arising, as if section 23E(1)(b) were omitted and as if section 23E(1) provided that the relevant benefit amount is treated for income tax purposes as a post-cessation receipt of the trade received in that tax year.]

[F6 (3A) Where section 23E of ITTOIA 2005 applies in relation to a relevant benefit which is a loan or quasi-loan in relation to which sub-paragraph (2) applies and T has made an election for the purposes of this sub-paragraph, section 23E has effect—

(a) as if the “relevant benefit amount” were one third of the amount of the loan or quasi-loan that is outstanding at the time the relevant benefit is treated as arising,

(b) as if section 23E(1)(a) specified the tax year in which the relevant benefit is treated as arising and each of the two subsequent tax years, and

(c) where T ceases to carry on the relevant trade before any tax year so specified in section 23E(1)(a), as if section 23E(1)(b) were omitted and as if section 23E(1) provided that the relevant benefit amount is to be treated for income tax purposes as a post-cessation receipt of the trade received in that tax year.

(3B) An election for the purposes of sub-paragraph (3A)—

(a) may be made at any time before 1 October 2020, and

(b) may be made at a later time if an officer of Revenue and Customs allows it.

(3C) But a person who is under a duty imposed by paragraph 22 of this Schedule or paragraph 35C of Schedule 11 may not make an election for the purposes of sub-paragraph (3A) until that duty has been complied with.

(3D) An election for the purposes of sub-paragraph (3A) may not be revoked.

(3E) A person who has made an election for the purposes of paragraph 1A of Schedule 11 is to be treated as having made an election for the purposes of sub-paragraph (3A) of this paragraph.

(3F) The Commissioners for Her Majesty’s Revenue and Customs may by regulations provide that sub-paragraph (3B)(a) applies to a specified class of persons as if the reference to 1 October 2020 were to such later date as is specified.

(3G) In sub-paragraph (3F) “specified” means specified in the regulations.]

(4) This paragraph is subject to paragraphs 19 and 20 (accelerated payments).

(5) For the purposes of this paragraph, whether an amount of a loan or quasi-loan is outstanding at a particular time—

(a) is to be determined in accordance with the following provisions of this Schedule, and

(b) does not depend on the loan or quasi-loan subsisting at that time.

Textual Amendments

F1 Words in Sch. 12 para. 1(1) substituted (22.7.2020) by Finance Act 2020 (c. 14), s. 16(5)(a)

F2 Words in Sch. 12 para. 1(2)(a) substituted (22.7.2020) by Finance Act 2020 (c. 14), s. 15(2)

F3 Words in Sch. 12 para. 1(3) inserted (22.7.2020) by Finance Act 2020 (c. 14), s. 16(5)(b)(i)

F4 Words in Sch. 12 para. 1(3)(a) substituted (22.7.2020) by Finance Act 2020 (c. 14), s. 16(5)(b)(ii)

F5 Sch. 12 para. 1(3)(b) substituted for Sch. 12 para. 1(3)(b)(c) (22.7.2020) by Finance Act 2020 (c. 14), s. 16(5)(b)(iii)

F6 Sch. 12 para. 1(3A)-(3G) inserted (22.7.2020) by Finance Act 2020 (c. 14), s. 16(5)(c)

[F7 1A (1) This paragraph applies where— U.K.

(a) a loan or quasi-loan is to be treated for the purposes of sections 23A to 23H of ITTOIA 2005 as a relevant benefit by reason of paragraph 1,

(b) a reasonable case could have been made that for a qualifying tax year (“the relevant year”) T was chargeable to income tax on an amount that was referable to the loan or quasi-loan,

(c) at a time when an officer of Revenue and Customs had power to recover (from T or any other person) income tax for the relevant year in respect of that amount, a qualifying tax return or two or more qualifying tax returns taken together contained a reasonable disclosure of the loan or quasi-loan, and

(d) as at 6 April 2019 an officer of Revenue and Customs had not taken steps to recover (from T or any other person) income tax for the relevant year in respect of that amount.

(2) But this paragraph does not apply if—

(a) a reasonable case could have been made that for a tax year other than the relevant year (“the alternative year”) T was chargeable to income tax on an amount within sub-paragraph (3), and

(b) it is the case that—

(i) on or before 5 April 2019 an officer of Revenue and Customs took steps to recover (from T or any other person) income tax for the alternative year in respect of that amount, or

(ii) the alternative year is not a qualifying tax year.

(3) An amount is within this sub-paragraph if—

(a) it is the same amount as is mentioned in sub-paragraph (1),

(b) it is part of the amount mentioned in sub-paragraph (1), or

(c) it is derived from or represents the whole or part of the amount mentioned in sub-paragraph (1).

(4) Where this paragraph applies, then for the purposes of paragraph 1(3)(a) and (3A)(a) the amount of the loan or quasi-loan that is outstanding is to be taken to be reduced (but not below nil) by the amount mentioned in sub-paragraph (1).

(5) For the purposes of sub-paragraph (1)(c) a qualifying tax return, or two or more qualifying tax returns taken together, contained a reasonable disclosure of the loan or quasi-loan if the return or returns taken together—

(a) identified the loan or quasi-loan,

(b) identified the person to whom the loan or quasi-loan was made in a case where the loan or quasi-loan was made to a person other than T,

(c) identified the relevant arrangements in pursuance of which or in connection with which the loan or quasi-loan was made, and

(d) provided such other information as was sufficient for it to be apparent that a reasonable case could be made that for the relevant year T was chargeable to income tax on an amount that was referable to the loan or quasi-loan.

(6) In this paragraph—

• “qualifying tax year” means the tax year 2015-16 and any earlier tax year, and

• “qualifying tax return” means a return made by T under section 8 of TMA 1970 for a qualifying tax year, and any accompanying accounts, statements or documents.]

Textual Amendments

F7 Sch. 12 para. 1A inserted (22.7.2020) by Finance Act 2020 (c. 14), s. 17(2)