Valid from 07/04/2005
87Schemes and arrangements designed to increase reliefU.K.
(1)After section 804 of ICTA insert—
“804ZASchemes and arrangements designed to increase relief
(1)If the Board consider, on reasonable grounds, that conditions A to D are or may be satisfied in relation to any income or chargeable gain taken or to be taken into account for the purposes of determining a person's liability to tax in a chargeable period, they may give the person a notice under this section.
(2)Condition A is that, in the case of the person, there is in respect of the income or gain an amount of foreign tax for which, under any arrangements, credit is allowable against United Kingdom tax for that chargeable period.
(3)Condition B is that there is a scheme or arrangement the main purpose, or one of the main purposes, of which is to cause an amount of foreign tax to be taken into account in the case of the person for that chargeable period.
(4)Condition C is that the scheme or arrangement is a prescribed scheme or arrangement.
(5)Condition D is that the amount referred to in subsection (6) is more than a minimal amount.
(6)The amount is the aggregate of—
(a)the aggregate amount of the claims for credit that the person has made, or is in a position to make, for the chargeable period; and
(b)for all the persons connected to that person, the aggregate amount of the claims for credit that the connected person has made, or is in a position to make, for a corresponding chargeable period.
(7)A chargeable period of a person (“A”) corresponds to a chargeable period of another person (“B”) if at least one day of A's chargeable period falls within B's chargeable period.
(8)A notice under this section is a notice—
(a)informing the person of the Board's view under subsection (1),
(b)specifying the chargeable period in relation to which the Board formed that view,
(c)if the amount of foreign tax considered by the Board to satisfy condition B is an amount of underlying tax, specifying the body corporate resident in a territory outside the United Kingdom whose payment of foreign tax is relevant to that underlying tax, and
(d)informing the person that as a consequence section 804ZB has effect in relation to him.
(9)A notice under this section may specify the adjustments of a person's tax return that, in the view of the Board, fall to be made by him under section 804ZB(2).
(10)The adjustments specified may, in a case where the notice given to a person specifies a body corporate resident outside the United Kingdom, include treating the body corporate as having paid or being liable to pay only so much foreign tax as would have been allowed to it as a credit if it were resident in the United Kingdom and a notice under this section had been given to it as regards an amount of foreign tax.
(11)Schedule 28AB makes provision about what constitutes a prescribed scheme or arrangement.
(12)In this section and sections 804ZB and 804ZC “tax return” means—
(a)a return under section 8, 8A or 12AA of the Management Act, or
(b)a company tax return;
and “company tax return” means the return required to be delivered pursuant to a notice under paragraph 3 of Schedule 18 to the Finance Act 1998, as read with paragraph 4 of that Schedule.
804ZBEffect of notice under section 804ZA
(1)This section applies in relation to a person if—
(a)a notice under section 804ZA has been given to the person in respect of a chargeable period specified in the notice, and
(b)the chargeable period specified is a chargeable period in relation to which conditions A to D of section 804ZA are satisfied.
(2)The person must in his tax return for the period make (or must amend his return for the period so as to make) such adjustments as are necessary for counteracting the effects of the scheme or arrangement in that period that are referable to the purpose referred to in condition B of section 804ZA.
804ZCNotices under section 804ZA: further provision
(1)Subsection (2) applies if the Board give a notice to a person under section 804ZA before the person has made his tax return for the chargeable period specified in the notice.
(2)If the person makes a tax return for that period before the end of the period of 90 days beginning with the day on which the notice is given, he may—
(a)make a tax return that disregards the notice, and
(b)at any time after making the return and before the end of the period of 90 days, amend the return for the purpose of complying with the notice.
(3)If a person has made a tax return for a chargeable period, the Board may only give him a notice under section 804ZA in relation to that period if a notice of enquiry has been given to him in respect of his tax return for that period.
(4)After any enquiries into the person's tax return for that period have been completed, the Board may only give him a notice under section 804ZA in relation to that period if the requirements in subsections (5) and (7) are satisfied.
(5)The first requirement is that at the time the enquiries were completed, the Board could not have been reasonably expected, on the basis of the information made available to them or to an officer of theirs before that time, to have been aware that the circumstances were such that a notice under section 804ZA could have been given to the person in relation to that period.
(6)For the purposes of subsection (5)—
(a)section 29(6) and (7) of the Management Act (information made available) applies as it applies for the purposes of section 29(5), and
(b)paragraph 44(2) and (3) of Schedule 18 to the Finance Act 1998 applies as it applies for the purposes of paragraph 44(1).
(7)The second requirement is that—
(a)the person was requested to produce, provide or furnish information during an enquiry into the return for that period, and
(b)if the person had duly complied with the request, the Board could have been reasonably expected to give the person a notice under section 804ZA in relation to that period.
(8)If a person is given a notice under section 804ZA in relation to a chargeable period after having made a tax return for that period, the person may amend the return for the purpose of complying with the notice at any time before the end of the period of 90 days beginning with the day on which the notice is given.
(9)If the notice under section 804ZA is given to the person after he has been given a notice of enquiry in respect of his tax return for the period, no closure notice may be given in relation to his tax return until—
(a)the end of the period of 90 days beginning with the day on which the notice under section 804ZA is given, or
(b)the earlier amendment of the return for the purpose of complying with the notice.
(10)If the notice under section 804ZA is given to the person after any enquiries into the return for the period are completed, no discovery assessment may be made as regards the income or chargeable gain to which the notice relates until—
(a)the end of the period of 90 days beginning with the day on which the notice under section 804ZA is given, or
(b)the earlier amendment of the return for the purpose of complying with the notice.
(11)Subsections (2)(b) and (8) do not prevent a person's tax return for a chargeable period becoming incorrect if—
(a)a notice under section 804ZA is given to the person in relation to that period,
(b)the return is not amended in accordance with subsection (2)(b) or (8) for the purpose of complying with the notice, and
(c)the return ought to have been so amended.
(12)In this section—
“closure notice” means a notice under—
(a)section 28A or 28B of the Management Act, or
(b)paragraph 32 of Schedule 18 to the Finance Act 1998;
“discovery assessment” means an assessment under—
(a)section 29 of the Management Act, or
(b)paragraph 41 of Schedule 18 to the Finance Act 1998;
“notice of enquiry” means a notice under—
(a)section 9A or 12AC of the Management Act, or
(b)paragraph 24 of Schedule 18 to the Finance Act 1998.”
(2)Schedule 5 (which contains a Schedule to be inserted after Schedule 28AA to ICTA) has effect.
(3)This section and Schedule 5 have effect in relation to a credit for foreign tax which relates to—
(a)a payment of foreign tax on or after the commencement date, or
(b)income received on or after the commencement date in respect of which foreign tax has been deducted at source.
(4)In subsection (3) a reference to tax deducted at source is a reference to tax deducted or treated as deducted from income, or treated as paid in respect of income.
(5)In subsection (3) “the commencement date” means—
(a)so far as the amount of the credit for foreign tax is affected by a scheme or arrangement to which paragraph 5 of Schedule 28AB to ICTA (as inserted by Schedule 5) applies, 10th February 2005, and
(b)so far as the amount of the credit for foreign tax is affected by any other prescribed scheme or arrangement (within the meaning of Schedule 28AB), 16th March 2005.