Finance Act 2014
2014 c. 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.
[17th July 2014]

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 1 Income tax, corporation tax and capital gains tax

CHAPTER 1 Charge, rates etc

Income tax

1 Charge, rates, basic rate limit and personal allowance for 2014-15
(1) Income tax is charged for the tax year 2014-15.
(2) For that tax year—
(a) the basic rate is 20%,
(b) the higher rate is 40%, and
(c) the additional rate is 45%.
(3) For that tax year—
(a) the amount specified in section 10(5) of ITA 2007 (basic rate limit) is replaced with “ £31,865 ”, and
(b) the amount specified in section 35(1) of that Act (personal allowance for those born after 5 April 1948) is replaced with “ £10,000 ”.
(4) Accordingly for that tax year—
(a) section 21 of that Act (indexation of limits), so far as relating to the basic rate limit, does not apply, and
(b) section 57 of that Act (indexation of allowances), so far as relating to the amount specified in section 35(1) of that Act, does not apply.

2 Basic rate limit for 2015-16 and personal allowances from 2015
(1) For the tax year 2015-16—
(a) the amount specified in section 10(5) of ITA 2007 (basic rate limit) is replaced with “ £31,785 ”, and
(b) the amount specified in section 35(1) (personal allowance) is replaced with “ £10,500 ”.
(2) Accordingly, for that tax year—
(a) section 21 of that Act (indexation of limits), so far as relating to the basic rate limit, does not apply, and
(b) section 57 (indexation of allowances), so far as relating to the amount specified in section 35(1), does not apply.
(3) In section 34(1)(a) of that Act (introduction), omit “, 36”.
(4) In section 35 of that Act (personal allowance for those born after 5 April 1948)—
(a) in subsection (1)(a), for “1948” substitute “ 1938 ”, and
(b) in the heading, for “1948” substitute “ 1938 ”.
(5) Omit section 36 of that Act (personal allowance for those born after 5 April 1938 but before 6 April 1948).
(6) In section 45(4)(b) of that Act (marriages before 5 December 2005), omit “36(2) or”.
(7) In section 46(4)(b) of that Act (marriages and civil partnerships on or after 5 December 2005), omit “36(2) or”.
(8) In section 57 of that Act (indexation of allowances)—
(a) in subsection (1)(a), for “1948” substitute “ 1938 ”, and
(b) in subsection (4) omit “36(2),”.
(9) The amendments made by subsections (3) to (8) have effect for the tax year 2015-16 and subsequent tax years.

3 The starting rate for savings and the savings rate limit
(1) In section 7 of ITA 2007 (the starting rate for savings) for “10%” substitute “ 0% ”.
(2) For the tax year 2015-16 the amount specified in section 12(3) of that Act (starting rate limit for savings) is replaced with “ £5,000 ”.
(3) Accordingly section 21 of that Act (indexation of limits), so far as relating to the starting rate limit for savings, does not apply for that tax year.
(4) In section 852 of that Act (power to make regulations disapplying duty to deduct sums representing income tax), in subsection (2)(a), after “made” insert “ or is unlikely to be liable to pay any income tax on that person's savings income for that tax year ”.
(5) The amendments made by subsections (1) and (4) have effect for the tax year 2015-16 and subsequent tax years.

4 Indexation of limits and allowances under ITA 2007
(1) ITA 2007 is amended as follows.
(2) In section 21 (indexation of the basic rate limit and starting rate limit for savings)—
(a) in each of subsections (1), (3) and (3A), for “retail prices index” substitute “ consumer prices index ”, and
(b) after subsection (5) insert—

“(6) In this section “consumer prices index” means the all items consumer prices index published by the Statistics Board.”

(3) In section 57 (indexation of allowances)—
(a) in each of subsections (2), (3) and (4), for “retail prices index” substitute “ consumer prices index ”, and
(b) after subsection (6) insert—

“(7) In this section “consumer prices index” means the all items consumer prices index published by the Statistics Board.”

(4) The amendments made by subsections (2) and (3) have effect for the tax year 2015-16 and subsequent tax years.

Corporation tax

5 Charge for financial year 2015
Corporation tax is charged for the financial year 2015.

6 Small profits rate and fractions for financial year 2014
(1) For the financial year 2014 the small profits rate is—
(a) 20% on profits of companies other than ring fence profits, and
(b) 19% on ring fence profits of companies.
(2) For the purposes of Part 3 of CTA 2010, for that year—
(a) the standard fraction is 1/400th, and
(b) the ring fence fraction is 11/400ths.
(3) In subsection (1) “ring fence profits” has the same meaning as in Part 8 of that Act (see section 276 of that Act).

7 Rates for ring fence profits and abolition of small profits rate for non-ring fence profits
Schedule 1—
(a) sets the corporation tax rates for ring fence profits for the financial year 2015 and future years, and
(b) contains provision about the abolition of the small profits rate for profits other than ring fence profits.

Capital gains tax

8 Annual exempt amount for 2014-15
(1) For the tax year 2014-15 the amount specified in section 3(2) of TCGA 1992 (annual exempt amount) is replaced with “ £11,000 ”.
(2) Accordingly section 3(3) of that Act (indexation of annual exempt amount) does not apply for that tax year.

9 Annual exempt amount for 2015-16 onwards
(1) For the tax year 2015-16 and subsequent tax years the amount specified in section 3(2) of TCGA 1992 (annual exempt amount) is replaced with “ £11,100 ”.
(2) Section 3(3) of that Act (indexation of annual exempt amount) does not apply in relation to the tax year 2015-16 (but subsection (1) does not override section 3(3) of that Act for subsequent tax years).

Capital allowances

10 Temporary increase in annual investment allowance
(1) In relation to expenditure incurred during the period beginning with the start date and ending with 31 December 2015, section 51A of CAA 2001 (entitlement to annual investment allowance) has effect as if in subsection (5) the amount specified as the maximum allowance (which in the absence of this section would be £250,000 in relation to expenditure incurred before 1 January 2015 and £25,000 in relation to expenditure incurred on or after that date) were £500,000.
(2) Schedule 2 contains—
(a) provision about chargeable periods which straddle the start date or 1 January 2016, and
(b) amendments of FA 2013.
(3) In this section and that Schedule “the start date” means—
(a) for corporation tax purposes, 1 April 2014, and
(b) for income tax purposes, 6 April 2014.

CHAPTER 2 Income tax: general

Exemptions and reliefs

11 Tax relief for married couples and civil partners
(1) ITA 2007 is amended as set out in subsections (2) to (8).
(2) After section 55 insert—

“CHAPTER 3A Transferable tax allowance for married couples and civil partners

Introduction

55A Tax reduction under Chapter
(1) This Chapter contains provisions about the entitlement of a spouse or civil partner to a tax reduction in a case where the other party to the marriage or civil partnership has elected for a reduced personal allowance.
(2) A tax reduction under this Chapter is given effect at Step 6 of the calculation in section 23.
(3) For the effect of section 809B (claim for remittance basis to apply) applying to an individual for a tax year, see section 809G (no entitlement to tax reduction).

Tax reduction

55B Tax reduction: entitlement
(1) An individual is entitled to a tax reduction for a tax year of the appropriate percentage of the transferable amount if the conditions in subsection (2) are met.
(2) The conditions are that—
(a) the individual is married to, or in a civil partnership with, a person who makes an election under section 55C for the purposes of this section which is in force for the tax year (“the individual's spouse or civil partner”),
(b) the individual is not, for the tax year, liable to tax at a rate other than the basic rate, the dividend ordinary rate or the starting rate for savings,
(c) the individual meets the requirements of section 56 (residence) for the tax year, and
(d) neither the individual nor the individual's spouse or civil partner makes a claim for the tax year under section 45 (married couple's allowance: marriages before 5 December 2005) or section 46 (married couple's allowance: marriages and civil partnerships on or after 5 December 2005).
(3) “The appropriate percentage” is the basic rate at which the individual would be charged to income tax for the tax year to which the reduction relates.
(4) “The transferable amount”—
(a) for the tax year 2015-16, is £1,050, and
(b) for the tax year 2016-17 and subsequent tax years, is 10% of the amount of personal allowance specified in section 35(1) for the tax year to which the reduction relates.
(5) If the transferable amount calculated in accordance with subsection (4)(b) would otherwise not be a multiple of £10, it is to be rounded up to the nearest amount which is a multiple of £10.
(6) If an individual is entitled to a tax reduction under subsection (1), the personal allowance to which the individual's spouse or civil partner is entitled under section 35 or 37 is reduced for the tax year by the transferable amount.
(7) If an individual who is entitled to a tax reduction for a tax year under subsection (1) dies during that tax year, subsection (6) is to be ignored (but this does not affect the individual's entitlement to the tax reduction).

Election to reduce personal allowance

55C Election to reduce personal allowance
(1) An individual may make an election for the purposes of section 55B if—
(a) the individual is married to, or in a civil partnership with, the same person—
(i) for the whole or part of the tax year concerned, and
(ii) when the election is made,
(b) the individual is entitled to a personal allowance under section 35 or 37 for that tax year,
(c) assuming the individual's personal allowance was reduced as set out in section 55B(6), the individual would not for that year be liable to tax at a rate other than the basic rate, the dividend ordinary rate or the starting rate for savings, and
(d) where the individual meets the requirements of section 56 (residence) for the tax year by reason of meeting the condition in subsection (3) of that section, the individual meets the condition in subsection (2) of this section.
(2) The condition is that the individual's hypothetical net income for the tax year concerned is less than the amount of the personal allowance to which the individual is entitled for that tax year under section 35 or 37.
(3) For the purposes of subsection (2), an individual's “hypothetical net income” is the amount that would be that individual's net income calculated at Step 2 of section 23 if that individual's income tax liability were calculated on the basis that the individual—
(a) was UK resident for the tax year concerned (and the year was not a split year),
(b) was domiciled in the United Kingdom for that tax year,
(c) in that tax year, did not fall to be regarded as resident in a country outside the United Kingdom for the purposes of double taxation arrangements having effect at the time, and
(d) for that tax year, had made a claim for any available relief under section 6 of TIOPA 2010 (as required by subsection (6) of that section).
(4) An individual's hypothetical net income for a tax year is, to the extent that it is not sterling, to be calculated by reference to the average exchange rate for the year ending on 31 March in the tax year concerned.

55D Procedure for elections under section 55C
(1) An election under section 55C is to be made not more than 4 years after the end of the tax year to which it relates.
(2) If the conditions in paragraphs (a) to (d) of section 55C(1) continue to be met, an election continues in force in each subsequent tax year unless—
(a) subsection (3) applies,
(b) the election is withdrawn, or
(c) it ceases to have effect under subsection (5).
(3) Where an election is made after the end of the tax year to which it relates, the election has effect for the tax year to which it relates only (and accordingly does not continue in force for subsequent tax years under subsection (2)).
(4) An election may be withdrawn only by a notice given by the individual by whom the election was made.
(5) If an individual's spouse or civil partner does not obtain a tax reduction under section 55B in respect of a tax year in which an election is in force the election ceases to have effect for subsequent tax years; but this does not prevent an individual making a further election for the purposes of section 55B(2)(a) (whether or not in relation to the same marriage or civil partnership).
(6) The withdrawal of an election under subsection (4) does not, except in the cases dealt with by subsection (7), have effect until the tax year after the one in which the notice is given.
(7) The withdrawal of an election under subsection (4) has effect for the tax year in which the notice is given if—
(a) in a case where the individual concerned met the condition in section 55C(1)(a) by reason of being married, the marriage has come to an end in that tax year, or
(b) in a case where the individual concerned met the condition in section 55C(1)(a) by reason of being in a civil partnership, the civil partnership has come to an end in that tax year.
(8) For the purposes of subsection (7)(a), a marriage comes to an end if any of the following is made in respect of it—
(a) a decree absolute of divorce, a decree of nullity of marriage or a decree of judicial separation, or
(b) in Scotland, a decree of divorce, a declarator of nullity or a decree of separation.
(9) For the purposes of subsection (7)(b), a civil partnership comes to an end if any of the following is made in respect of it—
(a) a dissolution order or nullity order, which has been made final,
(b) a separation order, or
(c) in Scotland, a decree of dissolution, a declarator of nullity or a decree of separation.
(10) A notice under subsection (4) must—
(a) be given to an officer of Revenue and Customs, and
(b) must be in the form specified by the Commissioners for Her Majesty's Revenue and Customs.
(11) Paragraph 3(1)(b) of Schedule 1A to TMA 1970 (amendment of claims and elections) does not apply to an election under section 55C.

Supplementary

55E Limitation on number of tax reductions and elections
(1) An individual is not entitled to more than one tax reduction under section 55B for a tax year (regardless of whether the individual is a party to more than one marriage or civil partnership in the tax year).
(2) An individual is not entitled to have more than one election for the purposes of section 55B which operates for a tax year (regardless of whether the individual is a party to more than one marriage or civil partnership in the tax year).”

(3) In section 26 (tax reductions), in subsection (1)(a), after the entry relating to Chapter 3 of Part 3 insert— “ Chapter 3A of Part 3 of this Act (transferable tax allowance for married couples and civil partners), ”.
(4) In section 31 (total income: supplementary), in subsection (2), after “basic” insert “ rate ”.
(5) In section 33 (overview of Part)—
(a) in subsection (3), after “partners” insert “ where a party to the marriage or civil partnership is born before 6 April 1935 ”,
(b) after that subsection insert—

“(3A) Chapter 3A provides for a transferable tax allowance for married couples and civil partners.”

,
(c) in subsection (4), in the opening words, for “and 3” substitute “ , 3 and 3A ”,
(d) in subsection (4)(a), after “Chapter 3” insert “ or 3A ”, and
(e) in subsection (4)(b), for “those allowances and tax reductions” substitute “ the allowances under Chapter 2 and tax reductions under Chapter 3 ”.
(6) In the heading for Chapter 3 of Part 3 after “partners” insert “ : persons born before 6 April 1935 ”.
(7) In section 56 (residence), in subsection (1)(b), after “Chapter 3” insert “ or 3A ”.
(8) In section 809G (claim for remittance basis: effect on allowances), in subsection (2)—
(a) omit the “or” following paragraph (b), and
(b) after paragraph (b) insert—

“(ba) any tax reduction under Chapter 3A of that Part (transferable tax allowance for married couples and civil partners), or”

.
(9) TMA 1970 is amended as set out in subsections (10) and (11).
(10) In section 42 (procedure for making claims)—
(a) in subsection (10), after “above” insert “ and subject to subsection (10A) below ”, and
(b) after subsection (10) insert—

“(10A) Subsection (2) above does not apply in relation to an election under section 55C of ITA 2007 (election to transfer allowance to spouse or civil partner).”

(11) In section 43A (further assessments: claims etc), in subsection (2A) after paragraph (a) insert—

“(aa) section 55C of ITA 2007 (election to transfer allowance to spouse or civil partner),”

.
(12) The amendments made by this section have effect for the tax year 2015-16 and subsequent tax years.

12 Recommended medical treatment
(1) Part 4 of ITEPA 2003 (exemptions) is amended as follows.
(2) In Chapter 11 (miscellaneous exemptions), after section 320B insert—

“Recommended medical treatment

320C Recommended medical treatment
(1) No liability to income tax arises in respect of—
(a) the provision to an employee of recommended medical treatment, or
(b) the payment or reimbursement, to or in respect of an employee, of the cost of such treatment,
if that provision, payment or reimbursement is not pursuant to relevant salary sacrifice arrangements or relevant flexible remuneration arrangements.
(2) But subsection (1) does not apply in a tax year if, and to the extent that, the value of the exemption in that year exceeds £500.
(3) Medical treatment is “recommended” if it is provided to the employee in accordance with a recommendation which—
(a) is made to the employee as part of occupational health services provided to the employee by a service provided—
(i) under section 2 of the Employment and Training Act 1973 (arrangements for the purpose of assisting persons to retain employment etc), or
(ii) by, or in accordance with arrangements made by, the employer,
(b) is made for the purpose of assisting the employee to return to work after a period of absence due to injury or ill health, and
(c) meets any other requirements specified in regulations made by the Treasury.
(4) Regulations under subsection (3)(c) may, in particular, specify that the recommendation must be one given after the employee has been assessed as unfit for work—
(a) for at least the specified number of consecutive days, and
(b) in the specified manner by a person of a specified description.
(5) The Treasury may by order amend subsection (3)(a) so as to add, amend or remove a reference to any enactment.
(6) “The value of the exemption”, in a tax year, is an amount equal to the sum of—
(a) all earnings within section 62 (earnings), and
(b) all earnings which are treated as such under the benefits code,
in respect of which subsection (1) would prevent liability to income tax from arising in the tax year disregarding subsection (2).
(7) In this section—
“medical treatment” means all procedures for diagnosing or treating any physical or mental illness, infirmity or defect;
“relevant salary sacrifice arrangements” means arrangements (whenever made, whether before or after the employment began) under which the employee gives up the right to receive an amount of general earnings or specific employment income in return for the provision of recommended medical treatment or the payment or reimbursement of the cost of such treatment;
“relevant flexible remuneration arrangements” means arrangements (whenever made, whether before or after the employment began) under which the employee and employer agree that the employee is to be provided with recommended medical treatment or the cost of such treatment is to be paid or reimbursed, rather than the employee receiving some other description of employment income;
“specified” means specified in regulations under subsection (3)(c).”

(3) In section 266 (exemption of non-cash vouchers for exempt benefits), in subsection (1), omit the “or” at the end of paragraph (d) and after paragraph (e) insert

“, or
(f) section 320C (recommended medical treatment);”

.
(4) The amendments made by this section have effect in accordance with provision contained in an order made by the Treasury.
(5) Section 1014(4) of ITA 2007 (orders etc subject to annulment) does not apply in relation to an order under subsection (4).

13 Relief for loan interest: loan to buy interest in close company
(1) Chapter 1 of Part 8 of ITA 2007 (relief for interest payments) is amended as follows.
(2) In section 392 (loan to buy interest in close company), in subsection (4)—
(a) after “section 393—” insert—

““close company” includes a company which—
(a) is resident in an EEA state other than the United Kingdom, and
(b) if it were UK resident, would be a close company,”

, and
(b) in the definition of “close investment-holding company”, for “section 34 of CTA 2010” substitute “ section 393A ”.
(3) After section 393 insert—

“393A Close investment-holding companies
(1) For the purposes of sections 392 and 393, 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) the relative of the spouse or civil partner of a connected person, or
(iv) the spouse or civil partner of a relative of a 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 sections 392 and 393 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) and (b).
(7) In this section—
“accounting period” has the meaning given by section 1119 of CTA 2010,
“close company” includes a company which—
(a) is resident in an EEA state other than the United Kingdom, and
(b) if it were UK resident, would be a close company,
“control” has the meaning given by section 450 of CTA 2010, and
“relative” means brother, sister, ancestor or lineal descendant.”

(4) Accordingly—
(a) in section 383(2)(c), after “close company” insert “ etc ”,
(b) in the italic heading before section 392, after “close company” insert “ etc ”;
(c) in the heading of section 392, after “close company” insert “ etc ”.
(5) The amendments made by this section have effect in relation to interest paid in the tax year 2014-15 or any subsequent tax year.

14 Relief for loan interest: loan to buy interest in employee-controlled company
(1) In section 397 of ITA 2007 (eligibility requirements for interest on loans within section 396), for subsection (2)(a) substitute—

“(a) an unquoted company that is resident in the United Kingdom or another EEA state and is not resident outside the European Economic Area, and”

.
(2) The amendment made by this section has effect in relation to interest paid in the tax year 2014-15 or any subsequent tax year.

Other provisions

15 Restrictions on remittance basis
Schedule 3 makes provision in relation to the remittance basis.

16 Treatment of agency workers
(1) Chapter 7 of Part 2 of ITEPA 2003 (income tax treatment of agency workers) is amended as follows.
(2) For section 44 (treatment of workers supplied by agencies) substitute—

“44 Treatment of workers supplied by agencies
(1) This section applies if—
(a) an individual (“the worker”) personally provides services (which are not excluded services) to another person (“the client”),
(b) there is a contract between—
(i) the client or a person connected with the client, and
(ii) a person other than the worker, the client or a person connected with the client (“the agency”), and
(c) under or in consequence of that contract—
(i) the services are provided, or
(ii) the client or any person connected with the client pays, or otherwise provides consideration, for the services.
(2) But this section does not apply if—
(a) it is shown that the manner in which the worker provides the services is not subject to (or to the right of) supervision, direction or control by any person, or
(b) remuneration receivable by the worker in consequence of providing the services constitutes employment income of the worker apart from this Chapter.
(3) If this section applies—
(a) the worker is to be treated for income tax purposes as holding an employment with the agency, the duties of which consist of the services the worker provides to the client, and
(b) all remuneration receivable by the worker (from any person) in consequence of providing the services is to be treated for income tax purposes as earnings from that employment,
but this is subject to subsections (4) to (6).
(4) Subsection (5) applies if (whether before or after the worker begins to provide the services)—
(a) the client provides the agency with a fraudulent document which is intended to constitute evidence that, by virtue of subsection (2)(a), this section does not or will not apply, or
(b) a relevant person provides the agency with a fraudulent document which is intended to constitute evidence that, by virtue of subsection (2)(b), this section does not or will not apply.
(5) In relation to services the worker provides to the client after the fraudulent document is provided—
(a) subsection (3) does not apply,
(b) the worker is to be treated for income tax purposes as holding an employment with the client or (as the case may be) with the relevant person, the duties of which consist of the services, and
(c) all remuneration receivable by the worker (from any person) in consequence of providing the services is to be treated for income tax purposes as earnings from that employment.
(6) In subsections (4) and (5) “relevant person” means a person, other than the client, the worker or a person connected with the client or with the agency, who—
(a) is resident, or has a place of business, in the United Kingdom, and
(b) is party to a contract with the agency or a person connected with the agency, under or in consequence of which—
(i) the services are provided, or
(ii) the agency, or a person connected with the agency, makes payments in respect of the services.”

(3) In section 45 (arrangements with agencies)—
(a) in paragraph (a), omit “(“the agency”)”, and
(b) in paragraph (b), omit “with the agency”.
(4) In section 46 (cases involving unincorporated bodies etc)—
(a) in subsection (1)(a), omit “, or is under an obligation to personally provide,”, and
(b) in subsection (2), for the words from “under” to “contract” substitute “ in consequence of the worker providing the services ”.
(5) After section 46 insert—

“Anti-avoidance

46A Anti-avoidance
(1) This section applies if—
(a) an individual (“W”) personally provides services (which are not excluded services) to another person (“C”),
(b) a third person (“A”) enters into arrangements the main purpose, or one of the main purposes, of which is to secure that the services are not treated for income tax purposes under section 44 as duties of an employment held by W with A, and
(c) but for this section, section 44 would not apply in relation to the services.
(2) In subsection (1)(b) “arrangements” includes any scheme, transaction or series of transactions, agreement or understanding, whether or not legally enforceable, and any associated operations.
(3) Subject to subsection (2) of section 44, that section applies in relation to the services.
(4) For the purposes of subsection (3)—
(a) W is to be treated as being the worker,
(b) C is to be treated as being the client,
(c) A is to be treated as being the agency, and
(d) section 44 has effect as if subsections (4) to (6) of that section were omitted.”

(6) In section 47 (interpretation of Chapter 7), omit subsection (1).
(7) In Chapter 3 of Part 11 of that Act (PAYE: special types of payer or payee), section 688 (agency workers) is amended as follows.
(8) For subsection (1) substitute—

“(1) This section applies if the remuneration receivable by an individual in consequence of providing services falls to be treated under section 44 (agency workers) as earnings from an employment.
(1A) The relevant provisions have effect as if the individual held the employment with or under the deemed employer, subject to subsection (2).
(1B) For the purposes of sections 687, 689 and 689A, if—
(a) a person other than the deemed employer or an intermediary of the deemed employer makes a payment of, or on account of, PAYE income of the individual, and
(b) the payment is not within subsection (2),
the person is to be treated as making the payment as an intermediary of the deemed employer.”

(9) In subsection (2)—
(a) for paragraph (a) (and the “and” at the end of that paragraph) substitute—

“(a) the client is not the deemed employer, and”

, and
(b) for “agency” substitute “ deemed employer ”.
(10) In subsection (3), for the words from “subsections” to “44;” substitute

“this section—
the client” means the person who is the client for the purposes of section 44;
“the deemed employer” means the person with whom the individual is treated under section 44 as having an employment, the duties of which consist of the services;”

.
(11) The amendments made by this section are treated as having come into force on 6 April 2014.

17 Recovery under PAYE regulations from certain company officers
(1) In Part 4 of the Income Tax (Pay As You Earn) Regulations 2003 (S.I. 2003/2682) (payments, returns and information), after Chapter 3 (PAYE records) insert—

“CHAPTER 3A Certain debts of companies under Chapter 7 of Part 2 of ITEPA (agencies)

97ZA Interpretation of Chapter 3A
In this Chapter—
“company” includes a limited liability partnership;
“HMRC” means Her Majesty's Revenue and Customs;
“director” has the meaning given by section 67 of ITEPA;
“personal liability notice” has the meaning given by regulation 97ZB(2);
“relevant PAYE debt”, in relation to a company, means—
(a) any amount that the company is to deduct, or account for, in accordance with these Regulations by virtue of—
(i) section 44(4) to (6) of ITEPA (persons providing fraudulent documents), or
(ii) section 46A of that Act (anti-avoidance), and
(b) any interest or penalty, in respect of an amount within paragraph (a), for which the company is liable;
“the relevant date”, in relation to a relevant PAYE debt, means—
(a) in a case where the relevant PAYE debt is to be deducted or accounted for, or arises, by virtue of subsections (4) to (6) of section 44 of ITEPA, the date on which the fraudulent document was provided as mentioned in subsection (4) of that section, or
(b) in a case where the relevant PAYE debt is to be deducted or accounted for, or arises, by virtue of section 46A of ITEPA, the date the arrangements mentioned in subsection (1)(b) of that section were entered into;
“the specified amount” has the meaning given by regulation 97ZB(2)(a).

97ZB Liability of directors for relevant PAYE debts
(1) This regulation applies in relation to an amount of relevant PAYE debt of a company if the company does not deduct, account for or (as the case may be) pay that amount by the time by which the company is required to do so.
(2) HMRC may serve a notice (a “personal liability notice”) on any person who was, on the relevant date, a director of the company—
(a) specifying the amount of relevant PAYE debt in relation to which this regulation applies (“the specified amount”), and
(b) requiring the director to pay to HMRC—
(i) the specified amount, and
(ii) specified interest on that amount.
(3) The interest specified in the personal liability notice—
(a) is to be at the rate applicable under section 178 of the Finance Act 1989 for the purposes of section 86 of TMA, and
(b) is to run from the date the notice is served.
(4) A director who is served with a personal liability notice is liable to pay to HMRC the specified amount and the interest specified in the notice within 30 days beginning with the day the notice is served.
(5) If HMRC serve personal liability notices on more than one director of the company in respect of the same amount of relevant PAYE debt, the directors are jointly and severally liable to pay to HMRC the specified amount and the interest specified in the notices.

97ZC Appeals in relation to personal liability notices
(1) A person who is served with a personal liability notice in relation to an amount of relevant PAYE debt of a company may appeal against the notice.
(2) A notice of appeal must—
(a) be given to HMRC within 30 days beginning with the day the personal liability notice is served, and
(b) specify the grounds of the appeal.
(3) The grounds of appeal are —
(a) that all or part of the specified amount does not represent an amount of relevant PAYE debt, of the company, to which regulation 97ZB applies, or
(b) that the person was not a director of the company on the relevant date.
(4) But a person may not appeal on the ground mentioned in paragraph (3)(a) if it has already been determined, on an appeal by the company, that—
(a) the specified amount is a relevant PAYE debt of the company, and
(b) the company did not deduct, account for, or (as the case may be) pay the debt by the time by which the company was required to do so.
(5) Subject to paragraph (6), on an appeal that is notified to the tribunal, the tribunal is to uphold or quash the personal liability notice.
(6) In a case in which the ground of appeal mentioned in paragraph (3)(a) is raised, the tribunal may also reduce or increase the specified amount so that it does represent an amount of relevant PAYE debt, of the company, to which regulation 97ZB applies.

97ZD Withdrawal of personal liability notices
(1) A personal liability notice is withdrawn if the tribunal quashes it.
(2) An officer of Revenue and Customs may withdraw a personal liability notice if the officer considers it appropriate to do so.
(3) If a personal liability notice is withdrawn, HMRC must give notice of that fact to the person upon whom the notice was served.

97ZE Recovery of sums due under personal liability notice: application of Part 6 of TMA
(1) For the purposes of this Chapter, Part 6 of TMA (collection and recovery) applies as if—
(a) the personal liability notice were an assessment, and
(b) the specified amount, and any interest on that amount under regulation 97ZB(2)(b)(ii), were income tax charged on the director upon whom the notice is served,
and that Part of that Act applies with the modification in paragraph (2) and any other necessary modifications.
(2) Summary proceedings for the recovery of the specified amount, and any interest on that amount under regulation 97ZB(2)(b)(ii), may be brought in England and Wales or Northern Ireland at any time before the end of the period of 12 months beginning with the day after the day on which personal liability notice is served.

97ZF Repayment of surplus amounts
(1) This regulation applies if—
(a) one or more personal liability notices are served in respect of an amount of relevant PAYE debt of a company, and
(b) the amounts paid to HMRC (whether by directors upon whom notices are served or the company) exceed the aggregate of the specified amount and any interest on it under regulation 97ZB(2)(b)(ii).
(2) HMRC is to repay the difference on a just and equitable basis and without unreasonable delay.
(3) HMRC is to pay interest on any sum repaid.
(4) The interest—
(a) is to be at the rate applicable under section 178 of the Finance Act 1989 for the purposes of section 824 of ICTA, and
(b) is to run from the date the amounts paid to HMRC come to exceed the aggregate mentioned in subsection (1)(b).”

(2) In Chapter 3 of Part 11 of ITEPA 2003 (PAYE: special types of payer or payee), section 688 (agency workers) (as amended by section 16) is amended as follows.
(3) After subsection (2) insert—

“(2A) PAYE regulations may make provision for, or in connection with, the recovery from a director or officer of a company, in such circumstances as may be specified in the regulations, of—
(a) any amount the company is, by virtue of section 44(4) to (6) or 46A, to deduct, or account for, in accordance with PAYE regulations, and
(b) any interest or penalty, in respect of an amount within paragraph (a), for which the company is liable.”

(4) In subsection (3)—
(a) after the definition of “the client” insert—

““company” includes a limited liability partnership;”

, and
(b) after the definition of “the deemed employer” insert—

““director” has the meaning given by section 67;
“officer”, in relation to a company, means any manager, secretary or other similar officer of the company, or any person acting or purporting to act as such;”

.
(5) The amendment made by subsection (1) is to be treated as having been made by the Commissioners for Her Majesty's Revenue and Customs in exercise of the power conferred by subsection (2A) of section 688 of ITEPA 2003 (inserted by subsection (3)).
(6) Chapter 3A of Part 4 of the Income Tax (Pay As You Earn) Regulations 2003 (inserted by subsection (1)) has effect in relation to relevant PAYE debts that are to be deducted, accounted for or paid on or after 6 April 2014.

18 Employment intermediaries: information powers and related penalties
(1) After section 716A of ITEPA 2003 insert—

“Employment intermediaries: information powers

716B Employment intermediaries to keep, preserve and provide information etc
(1) For purposes connected with Chapter 7 of Part 2 (treatment of workers supplied by agencies) or Part 11 (PAYE), the Commissioners for Her Majesty's Revenue and Customs may by regulations make provision for, or in connection with, requiring a specified employment intermediary—
(a) to keep and preserve specified information, records or documents for a specified period;
(b) to provide Her Majesty's Revenue and Customs with specified information, records or documents within a specified period or at specified times.
(2) An “employment intermediary” is a person who makes arrangements under or in consequence of which—
(a) an individual works, or is to work, for a third person, or
(b) an individual is, or is to be, remunerated for work done for a third person.
(3) For the purposes of subsection (2), an individual works for a person if—
(a) the individual performs any duties of an employment for that person (whether or not the individual is employed by that person), or
(b) the individual provides, or is involved in the provision of, a service to that person.
(4) In subsection (1) “specified” means specified or described in regulations made under this section.
(5) Regulations under this section may—
(a) make different provision for different cases or different purposes, and
(b) make incidental, consequential, supplementary or transitional provision or savings.”

(2) Section 98 of TMA 1970 (penalties: special returns etc) is amended as follows.
(3) After subsection (4E) insert—

“(4F) If a person fails to furnish any information or produce any document or record in accordance with regulations under section 716B of ITEPA 2003, subsection (1) has effect as if—
(a) for “£300” there were substituted “ £3,000 ”, and
(b) for “£60” there were substituted “ £600 ”.”

(4) In the second column of the Table, at the appropriate place insert “ Regulations under section 716B of ITEPA 2003. ”.
(5) The amendments made subsections (2) to (4) have effect from such day as the Treasury may appoint by order made by statutory instrument.

19 Payments by employer on account of tax where deduction not possible
(1) In section 222 of ITEPA 2003 (payments by employer on account of tax where deduction not possible), in subsection (1)(c), for “beginning with the relevant date” substitute “ after the end of the tax year in which the relevant date falls ”.
(2) The amendment made by this section has effect in relation to payments of income treated as made on or after 6 April 2014.

20 PAYE obligations of UK intermediary in cases involving non-UK employer
(1) Section 689 of ITEPA 2003 (PAYE: employee of non-UK employer) is amended as follows.
(2) After subsection (1A) insert—

“(1B) Subsection (1C) applies if—
(a) the employee worked for the relevant person during the period under or in consequence of arrangements made between the relevant person and a third person,
(b) the third person did not make the payment of, or on account of, PAYE income of the employee, and
(c) PAYE regulations would apply to the third person if the third person were to make a payment of, or on account of, PAYE income of the employee.
(1C) The third person is to be treated, for the purposes of PAYE regulations, as making a payment of PAYE income of the employee of an amount equal to the amount given by subsection (3).”

(3) In subsection (2), for “The” substitute “ If subsection (1C) does not apply, the ”.
(4) The amendments made by this section are treated as having come into force on 6 April 2014.

21 Oil and gas workers on the continental shelf: operation of PAYE
(1) ITEPA 2003 is amended as follows.
(2) In section 222 (payments by employer on account of tax where deduction not possible)—
(a) in subsection (1)(a), after “689” insert “ , 689A ”, and
(b) in subsection (3), after “employer)” insert “ or section 689A(3) (deemed payments of PAYE income of continental shelf workers by person other than employer) ”.
(3) In section 421L (persons to whom certain duties to provide information and returns apply)—
(a) in subsection (3), after paragraph (b) insert—

“(ba) if the employee in question is a continental shelf worker and PAYE regulations do not apply to the employer in question, any person who is a relevant person in relation to the employee in question,”

, and
(b) after subsection (5) insert—

“(5A) In subsection (3)(ba) “continental shelf worker” and “relevant person” have the meaning given by section 689A(11) (PAYE: oil and gas workers on the continental shelf).”

(4) In section 689 (provision about PAYE for employees of non-UK employers), after subsection (1) insert—

“(1ZA) But this section does not apply if section 689A applies or would apply but for a certificate issued under regulations made under subsection (7) of that section.”

(5) After that section insert—

“689A Oil and gas workers on the continental shelf
(1) This section applies if—
(a) any payment of, or on account of, PAYE income of a continental shelf worker in respect of a period is made by a person who is the employer or an intermediary of the employer or of the relevant person,
(b) PAYE regulations do not apply to the person making the payment or, if that person makes the payment as an intermediary of the employer or of the relevant person, to the employer, and
(c) income tax and any relevant debts are not deducted, or not accounted for, in accordance with PAYE regulations by the person making the payment or, if that person makes the payment as an intermediary of the employer or of the relevant person, by the employer.
(2) Subject to subsection (5), subsection (1)(a) does not apply in relation to a payment so far as the sum paid is employment income under Chapter 2 of Part 7A.
(3) The relevant person is to be treated, for the purposes of PAYE regulations, as making a payment of PAYE income of the continental shelf worker of an amount equal to the amount given by subsection (4).
(4) The amount referred to is—
(a) if the amount of the payment actually made is an amount to which the recipient is entitled after deduction of income tax and any relevant debts under PAYE regulations, the aggregate of the amount of the payment and the amount of any income tax due and any relevant debts deductible, and
(b) in any other case, the amount of the payment.
(5) If, by virtue of any of sections 687A and 693 to 700, an employer would be treated for the purposes of PAYE regulations (if they applied to the employer) as making a payment of any amount to a continental shelf worker, this section has effect as if—
(a) the employer were also to be treated for the purposes of this section as making an actual payment of that amount, and
(b) paragraph (a) of subsection (4) were omitted.
(6) For the purposes of this section a payment of, or on account of, PAYE income of a continental shelf worker is made by an intermediary of the employer or of the relevant person if it is made—
(a) by a person acting on behalf of the employer or the relevant person and at the expense of the employer or the relevant person or a person connected with the employer or the relevant person, or
(b) by trustees holding property for any persons who include, or a class of persons which includes, the continental shelf worker.
(7) PAYE regulations may make provision for, or in connection with, the issue by Her Majesty's Revenue and Customs of a certificate to a relevant person in respect of one or more continental shelf workers—
(a) confirming that, in respect of payments of, or on account of, PAYE income of the continental shelf workers specified or described in the certificate, income tax and any relevant debts are being deducted, or accounted for, as mentioned in subsection (1)(c), and
(b) disapplying this section in relation to payments of, or on account of, PAYE income of those workers while the certificate is in force.
(8) Regulations under subsection (7) may, in particular, make provision about—
(a) applying for a certificate;
(b) the circumstances in which a certificate may, or must, be issued or cancelled;
(c) the form and content of a certificate;
(d) the effect of a certificate (including provision modifying the effect mentioned in subsection (7)(b) or specifying further effects);
(e) the effect of cancelling a certificate.
(9) Subsection (10) applies if—
(a) there is more than one relevant person in relation to a continental shelf worker, and
(b) in consequence of the same payment within subsection (1)(a), each of them is treated under subsection (3) as making a payment of PAYE income of the worker.
(10) If one of the relevant persons complies with section 710 (notional payments: accounting for tax) in respect of the payment that person is treated as making, the other relevant persons do not have to comply with that section in respect of the payments they are treated as making.
(11) In this section—
“continental shelf worker” means a person in an employment some or all of the duties of which are performed—
(a) in the UK sector of the continental shelf (as defined in section 41), and
(b) in connection with exploration or exploitation activities (as so defined);
“employer” means the employer of the continental shelf worker;
“relevant person”, in relation to a continental shelf worker, means—
(a) if the employer has an associated company (as defined in section 449 of CTA 2010) with a place of business or registered office in the United Kingdom, the associated company, or
(b) in any other case, the person who holds the licence under Part 1 of the Petroleum Act 1998 in respect of the area of the UK sector of the continental shelf where some or all of the duties of the continental shelf worker's employment are performed.”

(6) In section 690 (employee non-resident etc), in subsection (10)—
(a) after “689”, in the first place it appears, insert “ or 689A ”, and
(b) after “689”, in the second place it appears, insert “ or (as the case may be) 689A ”.
(7) In section 710 (notional payments: accounting for tax), in subsection (2)—
(a) in paragraph (a)—
(i) after “689” insert “ , 689A ”, and
(ii) for “or 689(3)(a)” substitute “ , 689(3)(a) or 689A(4)(a) ”, and
(b) in paragraph (b), after “689(2)” insert “ or 689A(3) ”.
(8) In section 689A (inserted by subsection (5)), at the end insert—

“(12) The Treasury may by regulations modify the definitions of “continental shelf worker” and “relevant person”, as the Treasury thinks appropriate.
(13) Regulations under subsection (12) may—
(a) make different provision for different cases or different purposes,
(b) make incidental, consequential, supplementary or transitional provision or savings, and
(c) amend this section.”

(9) The amendment made by subsection (5) is treated as having come into force—
(a) on 26 March 2014 for the purposes of making regulations under section 689A(7) of ITEPA 2003, and
(b) on 6 April 2014 for remaining purposes.
(10) The amendments made by subsections (2), (4), (6) and (7) are treated as having come into force on 6 April 2014.

22 Threshold for benefit of loan to be treated as earnings
(1) In section 180 of ITEPA 2003 (threshold for benefit of a loan to be treated as earnings), in subsections (1)(a) and (b), (2) and (3), for “£5,000” (wherever occurring) substitute “ £10,000 ”.
(2) The amendments made by this section have effect for the tax year 2014-15 and subsequent tax years (and apply to loans made at any time).

23 Taxable benefits: cars, vans and related benefits
(1) In section 114 of ITEPA 2003 (cars, vans and related benefits), omit subsection (3) (which prevents a charge by virtue of Chapter 6 of Part 3 of that Act where an amount constitutes earnings by virtue of any other provision).
(2) The amendment made by this section has effect for the tax year 2014-15 and subsequent tax years.

24 Cars: the appropriate percentage
(1) Chapter 6 of Part 3 of ITEPA 2003 (taxable benefits: cars, vans and related benefits) is amended as follows.
(2) In section 133 (how to determine the appropriate percentage), in subsection (2)—
(a) at the end of paragraph (a) insert “ or ”,
(b) omit paragraph (c) and the “or” before it, and
(c) for “to 141” substitute “ and 140 ”.
(3) Section 139 (cars with a CO2 figure: the appropriate percentage) is amended in accordance with subsections (4) to (6).
(4) In subsection (2) —
(a) in paragraph (a) for “5%” substitute “ 7% ”,
(b) in paragraph (aa) for “9%” substitute “ 11% ”, and
(c) in paragraph (b) for “13%” substitute “ 15% ”.
(5) In subsection (3), for “14%” substitute “ 16% ”.
(6) In subsection (7), omit paragraph (a) and the “and” after it.
(7) Section 140 (cars without a CO2 figure: the appropriate percentage) is amended in accordance with subsections (8) to (10).
(8) In subsection (2), in the Table —
(a) for “15%” substitute “ 16% ”, and
(b) for “25%” substitute “ 27% ”.
(9) In subsection (3)(a), for “5%” substitute “ 7% ”.
(10) In subsection (5), omit paragraph (a) and the “and” after it.
(11) Omit section 141 (diesel cars: the appropriate percentage).
(12) Section 142 (car first registered before 1st January 1998: the appropriate percentage) is amended in accordance with subsections (13) and (14).
(13) In subsection (2), in the Table —
(a) for “15%” substitute “ 16% ”,
(b) for “22%” substitute “ 27% ”, and
(c) for “32%” substitute “ 37% ”.
(14) In subsection (3), for “32%” substitute “ 37% ”.
(15) In section 170(4) (power to reduce value of appropriate percentage by regulations), for the words “to 141” substitute “ and 140 ”.
(16) In consequence, section 23(4) and (5)(b) of FA 2013 is omitted.
(17) The amendments made by this section have effect for the tax year 2016-17 and subsequent tax years.

25 Cars and vans: payments for private use
(1) In section 144 of ITEPA 2003 (deduction for payments for private use: cars), for subsection (1)(b) substitute—

“(b) pays that amount in that year.”

(2) In section 158 of that Act (reduction for payments for private use: vans), for subsection (1)(b) substitute—

“(b) pays that amount in that year.”

(3) The amendments made by this section have effect for the tax year 2014-15 and subsequent tax years.

CHAPTER 3 Corporation tax: general

26 Release of debts: stabilisation powers under Banking Act 2009
(1) Section 322 of CTA 2009 (release of debts: cases where credits not required to be brought into account) is amended as follows.
(2) In subsection (2), for “condition A, B or C” substitute “ any of conditions A to D ”.
(3) After subsection (5) insert—

“(5A) Condition D is that the liability is released in consequence of the exercise of a stabilisation power under Part 1 of the Banking Act 2009.”

(4) The amendments made by this section have effect in relation to releases of liabilities on or after 26 November 2013.

27 Holdings treated as rights under loan relationships
(1) CTA 2009 is amended as follows.
(2) In section 465(3) (list of provisions under which certain distributions are not excluded from Part 5) before paragraph (a) insert—

“(za) section 490(2) (holdings in OEICs, unit trusts and offshore funds treated as rights under creditor relationships),”

.
(3) In section 490 (holding in an OEIC, unit trust or offshore fund treated as rights under a creditor relationship) for subsection (2) substitute—

“(2) The Corporation Tax Acts have effect for the accounting period in accordance with subsection (3) as if—
(a) the relevant holding were rights under a creditor relationship of the company, and
(b) any distribution in respect of the relevant holding were not a distribution (and accordingly is within Part 5).”

(4) Omit section 490(4) and (5) (which are superseded by the new section 490(2)(b)).
(5) For section 492 (rules about tax calculations in avoidance cases where holding comes within section 490) substitute—

“492 Holding coming within section 490: calculation to undo avoidance
(1) Subsection (2) applies if—
(a) section 490 applies for an accounting period of a company to a relevant holding held by the company,
(b) a relevant fund enters into any arrangements, or arrangements are entered into that in whole or part relate to a relevant fund, and
(c) the main purpose or one of the main purposes of the arrangements is to obtain a tax advantage for a person.
(2) The company must make adjustments to counteract any tax advantage connected in any way with the relevant holding that would (ignoring this section) be obtained by the company, or any other person, directly or indirectly in consequence of the arrangements or their being entered into.
(3) The arrangements may be ones entered into at a time when the company does not hold the relevant holding; and any person referred to in subsection (1)(c) need not be identified when the arrangements are entered into.
(4) The adjustments required by subsection (2) are such as are just and reasonable.
(5) In this section—
“arrangements” includes any scheme, arrangement or understanding of any kind, whether or not legally enforceable, involving a single transaction or two or more transactions, and
“relevant fund” means—
(a) the open-ended investment company, unit trust scheme or offshore fund in which the relevant holding is held, or
(b) an open-ended investment company, unit trust scheme or offshore fund in which a relevant fund has a holding.”

(6) In section 495 (meaning of “qualifying holdings”)—
(a) in subsection (1)—
(i) for “would itself fail” substitute “ itself fails ”, and
(ii) omit “, even on the assumption in subsection (2)”, and
(b) omit subsection (2).
(7) The amendments made by this section have effect in relation to accounting periods beginning on or after 1 April 2014.
(8) For the purposes of subsection (7), an accounting period beginning before, and ending on or after, 1 April 2014 is to be treated as if so much of the period as falls before that date, and so much of the period as falls on or after that date, were separate accounting periods.
(9) An apportionment for the purposes of subsection (8) must be made in accordance with section 1172 of CTA 2010 (time basis) or, if that method produces a result that is unjust or unreasonable, on a just and reasonable basis.

28 De-grouping charges (loan relationships etc)
(1) CTA 2009 is amended as follows.
(2) In each of sections 345 and 346 (loan relationships: transferee leaving group)—
(a) in subsection (2), omit “If condition A or B is met,”, and
(b) omit subsections (3) to (5).
(3) In each of sections 631 and 632 (derivative contracts: transferee leaving group)—
(a) in subsection (2), omit “If condition A or B is met,”, and
(b) omit subsections (3) and (4).
(4) An amendment made by this section has effect where the cessation of membership of the relevant group occurs on or after 1 April 2014.

29 Disguised distribution arrangements involving derivative contracts
(1) In Chapter 11 of Part 7 of CTA 2009 (derivative contracts: tax avoidance), after section 695 (but before the following italic heading) insert—

“695A Disguised distribution arrangements involving derivative contracts
(1) This section applies if—
(a) a company (“A”) is a party to arrangements involving one or more derivative contracts (each of which is referred to in this section as a “specified contract”),
(b) another company (“B”) is also a party to the arrangements (whether or not at the same time as A),
(c) A and B are members of the same group,
(d) the arrangements result in what is, in substance, a payment (directly or indirectly) from A to B of all or a significant part of the profits of the business of A or of a company which is a member of the same group as A or B (or both) (“the profit transfer”), and
(e) the arrangements are not arrangements of a kind which companies carrying on the same kind of business as A would enter into in the ordinary course of that business.
(2) No debits in respect of a specified contract, which—
(a) relate to the profit transfer, and
(b) apart from this section, would be brought into account by A or B for the purposes of this Part,
are to be so brought into account.
(3) Where one or more debits in respect of a specified contract are not brought into account by virtue of subsection (2), credits arising from the same contract which—
(a) relate to the same profit transfer, and
(b) apart from this section, would be brought into account by A or B for the purposes of this Part,
are not to be so brought into account to the extent that the total of those credits does not exceed the total of those debits.
(4) Subsection (3) does not apply to any credit which arises directly or indirectly in consequence of, or otherwise in connection with, arrangements the main purpose of which, or one of the main purposes of which, is the securing of a tax advantage for any person.
(5) For the purposes of this section a company is a member of the same group as another company if it is (or has been) a member of the same group at a time when the arrangements mentioned in subsection (1) have effect.
(6) In this section—
“arrangements” includes any scheme, arrangement or understanding of any kind, whether or not legally enforceable, involving a single transaction or two or more transactions;
“group” has the meaning given by section 357GD of CTA 2010;
“tax advantage” has the meaning given by section 1139 of CTA 2010.”

(2) The amendment made by this section has effect in relation to accounting periods beginning on or after 5 December 2013.
This is subject to subsections (3) to (6).
(3) In the case of a company which has an accounting period beginning before 5 December 2013 and ending on or after that date (“the straddling period”), for the purposes of subsections (2) and (4) so much of the straddling period as falls before that date, and so much of that period as falls on or after that date, are treated as separate accounting periods.
(4) The amendment does not have effect in relation to debits, arising from a specified contract, which relate to the profit transfer and are or would be brought into account for an accounting period beginning on or after 5 December 2013 to the extent that the total of those debits does not exceed the amount (if any) by which—
(a) the total amount of credits arising from that contract which—
(i) relate to the profit transfer, and
(ii) are or would be brought into account for the purposes of Part 7 of CTA 2009 for any accounting period ending before 5 December 2013, exceeds
(b) the total amount of debits arising from that contract which relate to the profit transfer and are or would be brought into account as mentioned in paragraph (a)(ii).
(5) In the case of credits to which subsection (6) applies, section 695A of CTA 2009 has effect as if—
(a) subsection (2) of that section applied to credits in respect of a specified contract as it applies to debits in respect of a specified contract,
(b) subsection (3) of that section were omitted, and
(c) in subsection (4) the reference to subsection (3) were to subsection (2).
(6) This subsection applies to credits which, had A or B had an accounting period beginning with 5 December 2013 and ending with 22 January 2014, would have been brought into account for that period by A or (as the case may be) B for the purposes of Part 7 of that Act (ignoring section 695A of CTA 2009).

30 Avoidance schemes involving the transfer of corporate profits
(1) In Chapter 1 of Part 20 of CTA 2009 (general calculation rules: restriction on deductions), after section 1305 insert—

“1305A Avoidance schemes involving the transfer of corporate profits
(1) This section applies if—
(a) two companies (“A” and “B”) are party to any arrangements (whether or not at the same time),
(b) A and B are members of the same group,
(c) the arrangements result in what is, in substance, a payment (directly or indirectly) from A to B of all or a significant part of the profits of the business of A or of a company which is a member of the same group as A or B (or both) (“the profit transfer”), and
(d) the main purpose or one of the main purposes of the arrangements is to secure a tax advantage for any person involving the profit transfer (whether by circumventing section 695A (disguised distribution arrangements: derivative contracts) or otherwise).
(2) A's profits are to be calculated for corporation tax purposes as if the profit transfer had not occurred.
(3) Accordingly—
(a) if (apart from this section) an amount relating to the profit transfer would be brought into account by A as a deduction in that calculation, no deduction is allowed in respect of that amount, and
(b) A's profits are to be increased by so much of the amount of the profit transfer as is not an amount to which paragraph (a) applies (whether or not the profits transferred would be A's profits apart from the arrangements).
(4) For the purposes of this section a company is a member of the same group as another company if it is (or has been) a member of the same group at a time when the arrangements mentioned in subsection (1) have effect.
(5) Where in relation to arrangements involving one or more derivative contracts the requirements of section 695A(1)(a) to (e) are met, nothing in this section applies in relation to any debit in respect of any of those contracts.
(6) In this section—
“arrangements” includes any scheme, arrangement or understanding of any kind, whether or not legally enforceable, involving a single transaction or two or more transactions;
“group” has the meaning given by section 357GD of CTA 2010;
“tax advantage” has the meaning given by section 1139 of CTA 2010.”

(2) The amendment made by this section has effect in relation to payments made on or after 19 March 2014.

31 R&D tax credits for small or medium-sized enterprises
(1) In section 1058 of CTA 2009 (amount of tax credit), in subsection (1)(a), for “11%” substitute “ 14.5% ”.
(2) The amendment made by this section has effect in relation to expenditure incurred on or after 1 April 2014.

32 Film tax relief
(1) Chapter 3 of Part 15 of CTA 2009 (film tax relief) is amended as follows.
(2) In section 1198 (UK expenditure), in subsection (1), for “25%” substitute “ 10% ”.
S. 32(2)(3) in force at 1.4.2014 for the purposes of the amendments made by those sub-sections by S.I. 2014/2880, art. 2
(3) In section 1202 (surrendering of loss and amount of film tax credit), for subsections (2) and (3) substitute—

“(2) If the company surrenders the whole or part of that loss, the amount of the film tax credit to which it is entitled for the accounting period is the sum of—
(a) 25% of so much of the loss surrendered as does not exceed the unused 25% band, and
(b) 20% of the remainder of that loss (if any).
(3) “The unused 25% band” means £20 million reduced (but not below zero) by the total amount previously surrendered under subsection (1) (if any).”

(4) The amendments made by subsections (2) and (3) have effect in relation to films the principal photography of which is not completed before such day as the Treasury may specify by order.
(5) A different day may be specified in relation to the amendments made by each subsection.
(6) A specified day may be before the day on which the order is made, but may not be before 1 April 2014.
(7) The Treasury may by order amend sections 1198(1) and 1202(2) and (3) of CTA 2009 (as amended and inserted by this section) in connection with an application for State aid approval.
(8) In this section “State aid approval” means approval that the provision made by this section, to the extent that it constitutes the granting of aid to which any of the provisions of Article 107 or 108 of the Treaty on the Functioning of the European Union applies, is, or would be, compatible with the internal market, within the meaning of Article 107 of that Treaty.
(9) An order under subsection (7) may—
(a) make incidental, supplemental, consequential, transitional or saving provision;
(b) contain provision having effect in relation to films mentioned in subsection (4).

33 Television tax relief: activities to be treated as separate trade
(1) Part 15A of CTA 2009 (television production) is amended as follows.
(2) In section 1216A (overview), in subsection (3)(a), for “its” substitute “ each qualifying ”.
(3) In section 1216B (activities of television production company treated as a separate trade)—
(a) in subsection (1), after the second “a” insert “ qualifying ”;
(b) in subsection (2), for “television” substitute “ qualifying relevant ”;
(c) at the end insert—

“(5) In this section “qualifying relevant programme” means a relevant programme in relation to which the conditions for television tax relief are met (see section 1216C(2)).”

34 Video games development
(1) Part 15B of CTA 2009 (video games development) is amended as follows.
(2) In section 1217A (overview), in subsection (3)(a), for “its” substitute “ each qualifying ”.
(3) In section 1217AE—
(a) in the heading, for “UK” substitute “ EEA ”;
(b) for subsection (1) substitute—

“(1) In this Part, “EEA expenditure”, in relation to a video game, means expenditure on goods or services that are provided from within the European Economic Area.”

;
(c) in subsection (2), for “UK expenditure and non-UK expenditure” substitute “ EEA expenditure and non-EEA expenditure ”.
(4) In section 1217B (activities of video games development company treated as a separate trade)—
(a) in subsection (1), after the second “a” insert “ qualifying ”;
(b) in subsection (2), after the second “other” insert “ qualifying ”;
(c) at the end insert—

“(5) In this section “qualifying video game” means a video game in relation to which the conditions for video games tax relief are met (see section 1217C(2)).”

(5) In section 1217CF (additional deduction for qualifying expenditure)—
(a) after subsection (3) insert—

“(3A) But if the core expenditure on the video game includes sub-contractor payments which (in total) exceed £1 million, the excess is not “qualifying expenditure”.”

;
(b) in subsection (4)(a), for “subsection (3)” substitute “ subsections (3) and (3A) ”;
(c) at the end insert—

“(5) In this section, “sub-contractor payment” means a payment made by the company to another person in respect of work on design, production or testing of the video game that is contracted out by the company to the person.”

(6) In the following provisions, for “UK expenditure” substitute “ EEA expenditure ”
(a) section 1217C(2)(c);
(b) the heading above section 1217CE;
(c) the heading of section 1217CE;
(d) section 1217CE(1);
(e) section 1217CG(1)(a) and (2)(a);
(f) the heading of section 1217EB;
(g) section 1217EB(1)(a) and (b) and (3).
(7) In Schedule 4 to CTA 2009 (index of defined expressions)—
(a) omit the entry for “UK expenditure (in Part 15B)”;
(b) at the appropriate place insert—

“EEA expenditure (in Part 15B)	section 1217AE”

.
(8) The amendments made by this section have effect in relation to accounting periods beginning on or after the day specified in an order made by the Treasury under paragraph 3 of Schedule 17 to FA 2013 (and sub-paragraphs (3) and (4) of that paragraph apply accordingly).

35 Community amateur sports clubs
(1) Part 6 of CTA 2010 (charitable donations relief: payments to charity) is amended in accordance with subsections (2) to (7).
(2) In section 189 (relief for charitable donations), in subsection (5), after “subject to” insert “ Chapter 2A of this Part, ”.
(3) In section 192 (condition as to repayment), in subsection (6), omit the “and” at the end of paragraph (a) and after that paragraph insert—

“(aa) the repayment is not non-qualifying expenditure for the purposes of Chapter 9 of Part 13 (see section 661(5)), and”

.
(4) In section 200 (company wholly owned by a charity), after subsection (4) insert—

“(4A) In the case of a charity which is a registered club, ordinary share capital of a company is treated as owned by a charity if the charity beneficially owns that share capital.”

(5) In section 202 (meaning of “charity”), before paragraph (b) insert—

“(aa) a registered club,”

.
(6) After that section insert—

“202A “Registered club”
In this Chapter “registered club” has the meaning given by section 658(6) (clubs registered as community amateur sports clubs).”

(7) After Chapter 2 insert—

“CHAPTER 2A Payments to community amateur sports clubs: anti-abuse

202B Restriction on relief for payments to community amateur sports clubs
(1) Subsection (2) applies if—
(a) one or more qualifying payments are made by a company to a registered club (“the club”) in an accounting period (“the current period”),
(b) the company is wholly owned, or controlled, by the club or by a number of charities which include the club, for all or part of that period, and
(c) inflated member-related expenditure is incurred by the company in that period.
(2) For the purposes of section 189 (relief for qualifying charitable donations), the total amount of those qualifying payments is treated as reduced (but not below nil) by the total amount of that inflated member-related expenditure.
(3) Subsection (4) applies if—
(a) the total amount of that expenditure exceeds the total amount of those payments, and
(b) the company made one or more qualifying payments to the club in an earlier accounting period ending not more than 6 years before the end of the current period.
(4) For the purposes of section 189, the total amount of the qualifying payments made in the earlier accounting period is treated as reduced (but not below nil) by the amount of the excess.
(5) If subsection (3)(b) applies in relation to more than one earlier accounting period—
(a) subsection (4) applies to treat amounts paid in later accounting periods as reduced in priority to amounts paid in earlier ones (until the excess is exhausted or all amounts have been reduced to nil), and
(b) in applying subsection (4) in relation to an accounting period, the reference to the excess is to be read as a reference to so much of it as exceeds the total amount of qualifying payments which, under that subsection, have previously been reduced to nil by the excess.
(6) For the purposes of subsections (3) and (4), a reference to the total amount of qualifying payments made in an earlier accounting period is to the total amount of those payments after—
(a) any reduction under subsection (2), and
(b) any previous reduction under subsection (4).
(7) Such adjustments must be made (whether by way of the making of assessments or otherwise) as may be required in consequence of subsections (4) to (6).
(8) Section 200 (company wholly owned by a charity) applies for the purposes of this section.
(9) For the purposes of this section, the club controls the company if it has the power to secure—
(a) by means of the holding of shares or the possession of voting power in relation to the company or any other company, or
(b) as a result of any powers conferred by the articles of association or other document regulating the company or any other company,
that the affairs of the company are conducted in accordance with the club's wishes.
(10) For the purposes of this section two or more charities (including the club) control the company if, acting together, they have the power to secure, as mentioned in paragraph (a) or (b) of subsection (9), that the affairs of the company are conducted in accordance with the wishes of those charities.
(11) In this section—
“charity” has the same meaning as in Chapter 2,
“qualifying payment” means a qualifying payment for the purposes of Chapter 2, and
“registered club” has the same meaning as in Chapter 2,
and any reference to a member of the club includes a reference to a person connected with a member of the club.

202C “Inflated member-related expenditure”
(1) This section applies for the purposes of section 202B.
(2) “Inflated member-related expenditure” means—
(a) employment expenditure incurred in respect of the employment of a member of the club, by the company, where that employment is otherwise than on an arm's length basis, or
(b) expenditure incurred on a supply of goods and services to the club by—
(i) a member of the club, or
(ii) a member-controlled body,
otherwise than on an arm's length basis.
(3) But if the features of an employment or supply which cause it to be otherwise than on an arm's length basis, when taken together, are more advantageous to the company than if the employment or supply had been on an arm's length basis, any expenditure incurred in respect of the employment or on the supply is not inflated member-related expenditure.
(4) A company is “member-controlled” if a member of the club has (or two or more members acting together have) the power to secure—
(a) by means of the holding of shares or the possession of voting power in relation to that or any other body corporate, or
(b) as a result of any powers conferred by the articles of association or other document regulating that or any other body corporate,
that the affairs of the company are conducted in accordance with the wishes of the member (or, as the case may be, members).
(5) A partnership is “member-controlled” if a member of the club has (or two or more members acting together have) the right to a share of more than half the assets, or of more than half the income, of the partnership.
(6) In this section any reference to a member of the club includes a reference to a person connected with a member of the club.
(7) For the purposes of subsection (2)(a), the Treasury may by regulations specify—
(a) descriptions of expenditure which is to be treated as employment expenditure incurred in respect of the employment of a member of a club;
(b) descriptions of expenditure which is not to be so treated.
(8) Section 1171(4) (orders and regulations subject to negative resolution procedure) does not apply to any regulations made under subsection (7) if a draft of the statutory instrument containing them has been laid before, and approved by a resolution of, the House of Commons.”

(8) Chapter 9 of Part 13 of that Act (other special types of company: community amateur sports clubs) is amended in accordance with subsections (9) to (12).
(9) After section 661D (but before the italic heading) insert—

“661E Tax treatment of gifts of money from companies
If a registered club receives a gift of a sum of money from a company which is not a charity, the gift is treated as an amount in respect of which the registered club is chargeable to corporation tax, under the charge to corporation tax on income.”

(10) In section 664 (exemption for interest and gift aid income)—
(a) in subsection (1), omit the “and” after paragraph (a) and after paragraph (b) insert

“, and
(c) its company gift income for that period,”

,
(b) in that subsection, for “and gift aid income” substitute “ , gift aid income and company gift income ”, and
(c) in subsection (3), after “this section—” insert—

““company gift income”, in relation to a club, means gifts of money made to the club by companies which are not charities,”

.
(11) In section 665A (claims in relation to interest and gift aid income), in subsection (1)(b) for “and gift aid” substitute “ , gift aid and company gift ”.
(12) Accordingly—
(a) in the italic heading before section 661D, omit “qualifying for gift aid relief”,
(b) in the heading for section 664, for “and gift aid” substitute “ , gift aid and company gift ”
(c) in the heading for section 665A, for “and gift aid” substitute “ , gift aid and company gift ”.
(13) The amendments made by this section have effect in relation to payments made on or after 1 April 2014.
(14) But the amendments made by subsections (1) to (7) are to be ignored for the purposes of section 199 of CTA 2010 (payment attributed to earlier accounting period) if the claim mentioned in subsection (1)(c) of that section is in respect of an accounting period ending before 1 April 2014.
(15) The earlier accounting periods mentioned in section 202B(3) of CTA 2010 (see subsection (7) of this section) do not include any accounting period ending before 1 April 2014.

36 Tax relief for theatrical production
Schedule 4 contains provision about relief in respect of theatrical productions.

37 Changes in company ownership
(1) Part 14 of CTA 2010 (change in company ownership) is amended as follows.
(2) In section 688 (meaning of “significant increase in the amount of a company's capital”), in subsection (2), for paragraph (b) and the “or” before it substitute

“, and
(b) is at least 125% of amount A.”

(3) In section 723 (changes in indirect ownership), in subsection (1), after “section 724” insert “ or 724A ”.
(4) After section 724 insert—

“724A Disregard of change in parent company
(1) Where a new company (“N”) acquires all the issued share capital of another company (“C”), the resulting ownership change is disregarded for the purposes of Chapters 2 to 6 if, immediately after that acquisition (“the acquisition”), N—
(a) possesses all of the voting power in C,
(b) is beneficially entitled to 100% of any profits available for distribution to equity holders of C,
(c) would be beneficially entitled to 100% of any assets of C available for distribution to its equity holders in the event of a winding up of C or in any other circumstances, and
(d) meets the continuity requirements.
(2) “The resulting ownership change” means the change in the ownership of C by reason of Condition A in section 719 being met in relation to the acquisition.
(3) A company is “new” if, before the acquisition, it has neither—
(a) issued any shares other than subscriber shares, nor
(b) begun to carry on any trade or business.
(4) N meets the continuity requirements if, and only if—
(a) the consideration for the acquisition consists only of the issue of shares in N to the shareholders of C,
(b) immediately after the acquisition, each person who immediately before the acquisition was a shareholder of C is a shareholder of N,
(c) immediately after the acquisition, the shares in N are of the same classes as were the shares in C immediately before the acquisition,
(d) immediately after the acquisition, the number of shares of any particular class in N bears to all the shares in N the same proportion, or as nearly as may be the same proportion, as the number of shares of that class in C bore to all the shares in C immediately before the acquisition, and
(e) immediately after the acquisition, the proportion of shares of any particular class in N held by any particular shareholder is the same, or as nearly as may be the same, as the proportion of shares of that class in C held by that shareholder immediately before the acquisition.
(5) For the purposes of this section, N is treated as acquiring all the issued share capital of C for consideration consisting only of the issue of shares in N to the shareholders of C if, as a result of a scheme of reconstruction involving the cancellation of all shares in C and the issue of shares in N—
(a) N holds all the issued share capital of C by reason of that share capital being issued to N by C, and
(b) only shares in N are issued to the persons who were shareholders of C immediately before the shares in C were cancelled.
(6) In a case within subsection (5), subsection (4) applies as if any reference to immediately before the acquisition were a reference to immediately before the shares in C were cancelled.
(7) “Scheme of reconstruction” means a scheme carried out in pursuance of a compromise or arrangement—
(a) to which Part 26 of the Companies Act 2006 (arrangements and reconstructions) applies, or
(b) under any corresponding provision of the law of a country or territory outside the United Kingdom.
(8) Chapter 6 of Part 5 (equity holders and profits or assets available for distribution) applies for the purposes of subsection (1)(b) and (c) as it applies for the purposes of section 151(4).”

(5) In section 726 (interpretation of Chapter), after “acquisition” insert “ and shareholder ”.
(6) The amendments made by this section have effect in relation to any change of ownership which occurs on or after 1 April 2014.

38 Transfer of deductions: research and development allowances
(1) In section 730B(1) of CTA 2010 (interpretation of transfer of deductions provisions), in paragraph (a) of the definition of “deductible amount” after “trade,” insert “ other than an amount treated as such an expense by section 450(a) of CAA 2001 (research and development allowances treated as expenses in calculating profits of a trade), ”.
(2) The amendment made by this section has effect in relation to a qualifying change if the relevant day is on or after 1 April 2014.

39 Tax treatment of financing costs and income
(1) Chapter 10 of Part 7 of TIOPA 2010 (tax treatment of financing costs and income: interpretation) is amended as follows.
(2) In section 345 (meaning of “UK group company” and “relevant group company”), for subsection (7) substitute—

“(7) Chapter 6 of Part 5 of CTA 2010 (equity holders and profits or assets available for distribution) and Chapter 3 of Part 24 of that Act (subsidiaries) apply for the purposes of subsection (6), subject to subsections (8) and (9).
(8) Sections 169 to 182 of CTA 2010 do not apply.
(9) In applying the remaining provisions of those Chapters for the purposes of subsection (6), they are to be read with all modifications necessary to ensure that—
(a) they apply to a company or other body corporate which does not have share capital, and to holders of corresponding ordinary holdings in such a company or body, in a way which corresponds to the way they apply to companies with ordinary share capital and holders of ordinary shares in such companies,
(b) they apply in relation to ownership through an entity (other than a body corporate), or any trust or other arrangement, in a way which corresponds to the way they apply to ownership through a company or other body corporate, and
(c) for the purposes of achieving paragraphs (a) and (b), profits or assets are attributed to holders of corresponding ordinary holdings in entities, trusts or other arrangements in a manner which corresponds to the way profits or assets are attributed to holders of ordinary shares in a company.
(10) In this section “corresponding ordinary holding” in an entity, trust or other arrangement means a holding or interest which provides the holder with economic rights corresponding to those provided by a holding of ordinary shares in a company.”

(3) In section 353A (effect of Part 7 on parties to capital market arrangements), in subsection (4), before paragraph (a) insert—

“(za) the conditions that must be met for an election to be made;”

.
(4) The amendment made by subsection (2) has effect in relation to periods of account of the worldwide group starting on or after 5 December 2013.

40 Determination of beneficial entitlement for purposes of group relief
(1) CTA 2010 is amended as follows.
(2) In section 169 (interpretation of provisions to determine proportion of beneficial entitlement)—
(a) in subsection (2), for the definition of “arrangements” substitute—

““arrangements”—
(a) means arrangements of any kind (whether or not in writing), but
(b) does not include a condition or requirement imposed by, or agreed with, a Minister of the Crown, the Scottish Ministers, a Northern Ireland department or a statutory body,”

, and
(b) after that subsection insert—

“(3) In subsection (2) “statutory body” means a body (other than a company as defined by section 1(1) of the Companies Act 2006) established by or under a statutory provision for the purpose of carrying out functions conferred on it by or under a statutory provision, except that the Treasury may, by order, specify that a body is or is not to be a statutory body for this purpose.”

(3) In section 188 (other definitions for Part 5), in subsection (1), in the definition of “company” for “section 156(2A)” substitute “ sections 156(2A) and 169(3) ”.
(4) The amendments made by this section have effect in relation to accounting periods ending on or after 1 January 2015.

CHAPTER 4 Other provisions

Pensions

41 Pension flexibility: drawdown
(1) In section 165(1) of FA 2004 (rules about payment of pension by registered scheme to member) in pension rule 5 (payments of drawdown pension in a year not to exceed 120% of basis amount for year) for “120%” substitute “ 150% ”.
(2) In section 167(1) of FA 2004 (rules about payment of pension death benefits by registered scheme in respect of member) in pension death benefit rule 4 (payments of dependants' drawdown pension not to exceed 120% of basis amount for year) for “120%” substitute “ 150% ”.
(3) In paragraph 14A(2) of Schedule 28 to FA 2004 (amount of minimum income requirement for flexible drawdown by member) for “£20,000” substitute “ £12,000 ”.
(4) In paragraph 24C(2) of Schedule 28 to FA 2004 (amount of minimum income requirement for flexible drawdown by dependant) for “£20,000” substitute “ £12,000 ”.
(5) In consequence of subsections (1) and (2), in FA 2013 omit section 50(1) and (2).
(6) The amendments made by subsections (1), (2) and (5) have effect in relation to pension drawdown years beginning on or after 27 March 2014.
(7) The amendment made by subsection (3) has effect in relation to declarations made under section 165(3A) of FA 2004 on or after 27 March 2014.
(8) The amendment made by subsection (4) has effect in relation to declarations made under section 167(2A) of FA 2004 on or after 27 March 2014.

42 Pension flexibility: taking low-value pension rights as lump sum
(1) In paragraph 7(4) of Schedule 29 to FA 2004 (amount of commutation limit for purposes of trivial commutation lump sum) for “£18,000” substitute “ £30,000 ”.
(2) In paragraph 8 of Schedule 29 to FA 2004 (value of crystallised pension rights for trivial commutation purposes)—
(a) in sub-paragraph (1)(a) omit “, as adjusted under sub-paragraph (2)”,
(b) in sub-paragraph (1)(b) omit “, as adjusted under sub-paragraph (3)”, and
(c) omit sub-paragraphs (2) and (3), as originally enacted and as substituted by FA 2013.
(3) In consequence of subsection (1), in FA 2011 omit paragraph 4(2) of Schedule 18.
(4) In consequence of subsection (2)(c), in FA 2013 omit paragraph 8(4) of Schedule 22.
(5) In article 23C(4) of the Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572) (modifications of Schedule 29 to FA 2004) in the inserted paragraph 7A(1)(a) (limit at or below which additional sums can be trivial commutation lump sums) for “£2,000” substitute “ £10,000 ”.
(6) In the Registered Pension Schemes (Authorised Payments) Regulations 2009 (S.I. 2009/1171)—
(a) in each of regulations 6(1)(b), 8(1)(a), 11(1)(c), 11A(1)(b) and 12(1)(e) (limit at or below which certain payments by registered pension scheme can be authorised payments) for “£2,000” substitute “ £10,000 ”,
(b) in regulation 10(3)(b) (certain payments by registered pension scheme which can be authorised payments if value of member's pension rights is not more than £18,000) for “£18,000” substitute “ £30,000 ”,
(c) in regulation 11(1)(d) (upper limit on total value of member's benefits under the scheme which would make the payment and all related schemes) for “£2,000” substitute “ £10,000 ”,
(d) in regulation 11A(2) (may not be more than one previous payment under regulation 11A) for “one payment” substitute “ two payments ”, and
(e) in regulation 12(4) (certain payments by registered pension scheme can be authorised payments only if property held in respect of at least 20 members exceeds £2,000) for “£2,000” substitute “ £10,000 ”.
(7) In consequence of subsection (6)(b), in the Registered Pension Schemes (Miscellaneous Amendments) Regulations 2011 (S.I. 2011/1751) omit regulation 8(4).
(8) The amendments made by subsections (1) to (4) have effect for commutation periods beginning on or after 27 March 2014 and do so irrespective of whether the nominated date is before, on or after 27 March 2014.
(9) The amendment made by subsection (5)—
(a) has effect for lump sums paid on or after 27 March 2014, and
(b) is to be treated as having been made by the Treasury under the powers to make orders conferred by section 283(2) of FA 2004.
(10) The amendments made by subsections (6) and (7) have effect for payments made on or after 27 March 2014.
(11) The amendments made by subsection (6) are to be treated as having been made by the Commissioners for Her Majesty's Revenue and Customs under the powers to make regulations conferred by section 164(1)(f) and (2) of FA 2004.

43 Pension flexibility: further amendments
Schedule 5 makes further provision in connection with pension flexibility.

44 Transitional provision for new standard lifetime allowance for 2014-15 etc
Schedule 6 contains transitional provision in relation to the new standard lifetime allowance for the tax year 2014-15 etc.

45 Taxable specific income: effect on pension input amount for non-UK schemes
(1) Schedule 34 to FA 2004 (application of certain charges to non-UK pension schemes) is amended as follows.
(2) In paragraph 10 (pension input amount for cash balance and defined benefits arrangements), for sub-paragraph (2) substitute—

“(2) The appropriate fraction is—
TE + TSI EI
where—
EI is the total amount of employment income of the individual from any relevant employment or employments for the tax year, excluding any such income which is exempt income (within the meaning of section 8 of ITEPA 2003),
TE is so much of EI as constitutes taxable earnings from any such employment (within the meaning of section 10(2) of that Act), and
TSI is so much of EI as constitutes taxable specific income from any such employment (within the meaning of section 10(3) to (5) of that Act).”

(3) In paragraph 11 (pension input amount for other money purchase arrangements), for sub-paragraph (2) substitute—

“(2) The appropriate fraction is—
TE + TSI EI
where—
EI is the total amount of employment income of the individual from any employment or employments with the employer for the tax year, excluding any such income which is exempt income (within the meaning of section 8 of ITEPA 2003),
TE is so much of EI as constitutes taxable earnings from any such employment (within the meaning of section 10(2) of that Act), and
TSI is so much of EI as constitutes taxable specific income from any such employment (within the meaning of section 10(3) to (5) of that Act).”

(4) The amendments made by this section have effect for the tax year 2014-15 and subsequent tax years.

46 Pension schemes
Schedule 7 makes provision in relation to pension schemes.

Sporting events

47 Glasgow Grand Prix
(1) An accredited competitor who performs a Grand Prix activity is not liable to income tax in respect of any income arising from the activity if the non-residence condition is met.
(2) The following are Grand Prix activities—
(a) competing at the Glasgow Grand Prix, and
(b) any activity that is performed during the games period the main purpose of which is to support or promote the Glasgow Grand Prix.
(3) The non-residence condition is that—
(a) the accredited competitor is non-UK resident for the tax year 2014-15, or
(b) the accredited competitor is UK resident for the tax year 2014-15 but the year is a split year as respects the competitor and the activity is performed in the overseas part of the year.
(4) Section 966 of ITA 2007 (deduction of sums representing income tax) does not apply to any payment or transfer which gives rise to income benefiting from the exemption under subsection (1).
(5) In this section—
“accredited competitor” means a person to whom an accreditation card in the athletes' category has been issued by the company named UK Athletics Limited which was incorporated on 16 December 1998;
“the games period” means the period—
(a) beginning with 5 July 2014, and
(b) ending with 14 July 2014;
“the Glasgow Grand Prix” means the Glasgow Grand Prix athletics event held at Hampden Park Stadium in Glasgow in July 2014;
“income” means employment income or profits of a trade, profession or vocation (including profits treated as arising as a result of section 13 of ITTOIA 2005).
(6) This section is treated as having come into force on 6 April 2014.

48 Major sporting events: power to provide for tax exemptions
(1) Where a major sporting event is to be held in the United Kingdom, the Treasury may make regulations providing for exemption from income tax and corporation tax in relation to the event.
(2) The regulations may, in particular—
(a) exempt specified classes of person, income or activity from income tax;
(b) exempt specified classes of person, profit, income or activity from corporation tax;
(c) provide for specified classes of activity to be disregarded in determining for fiscal purposes whether a person has a permanent establishment in the United Kingdom;
(d) disapply a duty on a person to deduct a sum representing income tax before making a payment.
(3) The regulations may specify classes of person wholly or partly by reference to—
(a) residence outside the United Kingdom, determined in accordance with the regulations;
(b) documents issued or authority given by persons exercising functions in connection with the sporting event.
(4) Regulations under this section—
(a) may apply (with or without modifications) or disapply any enactment,
(b) may modify, amend, repeal or revoke any enactment,
(c) may make different provision for different purposes, and
(d) may include incidental, consequential, supplementary or transitional provision.
(5) Regulations under this section may not be made unless a draft of the instrument containing them has been laid before, and approved by a resolution of, the House of Commons.
(6) In this section, “enactment” includes an enactment contained in subordinate legislation (within the meaning of the Interpretation Act 1978), and includes an enactment whenever passed or made.

Employee share schemes

49 Share incentive plans: increases in maximum annual awards etc
(1) Schedule 2 to ITEPA 2003 (share incentive plans) is amended as follows.
(2) In paragraph 35(1) (free shares: maximum annual award) for “£3,000” substitute “ £3,600 ”.
(3) In paragraph 46(1) (partnership shares: maximum amount of deductions from employee's salary) for “£1,500” substitute “ £1,800 ”.
(4) The amendments made by this section are treated as having come into force on 6 April 2014.

50 Share incentive plans: power to adjust maximum annual awards etc
(1) Schedule 2 to ITEPA 2003 (share incentive plans) is amended as follows.
(2) In paragraph 35 (free shares: maximum annual award) after sub-paragraph (2) insert—

“(2A) The Treasury may by order amend sub-paragraph (1) by substituting for any amount for the time being specified there an amount specified in the order.”

(3) In paragraph 46 (partnership shares: maximum amount of deductions from employee's salary) after sub-paragraph (5) insert—

“(6) The Treasury may by order amend sub-paragraph (1) by substituting for any amount for the time being specified there an amount specified in the order.”

(4) In paragraph 60 (matching shares: maximum ratio of matching shares to partnership shares) after sub-paragraph (3) insert—

“(4) The Treasury may by order amend sub-paragraph (2) by substituting for any ratio for the time being specified there a ratio specified in the order.”

51 Employee share schemes
Schedule 8 makes provision in relation to employee share schemes.

52 Employment-related securities etc
Schedule 9 contains provision relating to employment-related securities.

Investment reliefs

53 Venture capital trusts
Schedule 10 contains provision about venture capital trusts.

54 Removing time limit on seed enterprise investment scheme relief
(1) Section 257A of ITA 2007 (meaning of “SEIS relief” and commencement) is amended as follows.
(2) For subsection (3) (which limits SEIS relief to shares issued on or after 6 April 2012 but before 6 April 2017) substitute—

“(3) This Part has effect in relation to shares issued on or after 6 April 2012 only.”

(3) Omit subsection (4) (which allows the Treasury to extend SEIS relief by order).

55 Removing time limit on CGT relief in respect of re-investment under SEIS
(1) In Schedule 5BB to TCGA 1992 (seed enterprise investment scheme: re-investment), in paragraph 1 (SEIS re-investment relief)—
(a) in sub-paragraph (2)(a), for “or the tax year 2013-14” substitute “ or any subsequent tax year ”, and
(b) in sub-paragraph (5A), in the definition of “the relevant percentage”, in paragraph (b), for “the tax year 2013-14” substitute “ any subsequent tax year ”.
(2) Accordingly, in section 150G of TCGA 1992 (which introduces Schedule 5BB), omit “in the tax years 2012-13 and 2013-14”.

56 Exclusion of incentivised electricity or heat generation activities
(1) ITA 2007 is amended as follows.
(2) In section 192 (EIS: meaning of “excluded activities”)—
(a) in subsection (1), omit the “and” at the end of paragraph (ka) and after that paragraph insert—

“(kb) the subsidised generation of heat or subsidised production of gas or fuel, and”

, and
(b) in subsection (2), omit the “and” at the end of paragraph (f) and after paragraph (g) insert

“, and
(h) section 198B (subsidised generation of heat and subsidised production of gas or fuel).”

(3) In section 198A (excluded activities: subsidised generation or export of electricity)—
(a) for subsection (3) substitute—

“(3) The generation of electricity is “subsidised” if—
(a) a person receives a FIT subsidy in respect of the electricity generated,
(b) a renewables obligation certificate is issued in connection with the generation of the electricity, or
(c) a scheme established in a territory outside the United Kingdom, and corresponding to that set out in a renewables obligation order under section 32 of the Electricity Act 1989, operates to incentivise the generation of the electricity.”

,
(b) in subsection (6), omit the “or” after paragraph (c) and after paragraph (d) insert

“, or
(e) an SCE formed in accordance with Council Regulation (EC) No 1435/2003 on the Statute for a European Cooperative Society.”

, and
(c) in subsection (9), at the end insert—

““renewables obligation certificate” means a certificate issued under section 32B of the Electricity Act 1989 or Article 54 of the Energy (Northern Ireland) Order 2003.”

(4) After that section insert—

“198B Excluded activities: subsidised generation of heat and subsidised production of gas or fuel
(1) This section supplements section 192(1)(kb).
(2) The generation of heat, or production of gas or fuel, is “subsidised” if a payment is made, or another incentive is given, under—
(a) a scheme established by regulations under section 100 of the Energy Act 2008 or section 113 of the Energy Act 2011 (renewable heat incentives), or
(b) a similar scheme established in a territory outside the United Kingdom,
in respect of the heat generated, or gas or fuel produced.
(3) But the generation of heat, or production of gas or fuel, is not to be taken to fall within section 192(1)(kb) if Condition A or B is met.
(4) Condition A is that the generation or production is carried on by—
(a) a community interest company,
(b) a co-operative society,
(c) a community benefit society,
(d) a NI industrial and provident society, or
(e) an SCE formed in accordance with Council Regulation (EC) No 1435/2003 on the Statute for a European Cooperative Society.
(5) Condition B is that the plant used for the generation of the heat, or production of the gas or fuel, relies wholly or mainly on anaerobic digestion.
(6) Section 198A(9) (definitions) applies for the purposes of this section as for the purposes of section 198A.”

(5) In section 303 (VCTs: meaning of “excluded activities”)—
(a) in subsection (1), omit the “and” at the end of paragraph (ka) and after that paragraph insert—

“(kb) the subsidised generation of heat or subsidised production of gas or fuel, and”

, and
(b) in subsection (2), omit the “and” at the end of paragraph (f) and after paragraph (g) insert

“, and
(h) section 309B (subsidised generation of heat and subsidised production of gas and fuel).”

(6) In section 309A (excluded activities: subsidised generation or export of electricity)—
(a) for subsection (3) substitute—

“(3) The generation of electricity is “subsidised” if—
(a) a person receives a FIT subsidy in respect of the electricity generated,
(b) a renewables obligation certificate is issued in connection with the generation of the electricity, or
(c) a scheme established in a territory outside the United Kingdom, and corresponding to that set out in a renewables obligation order under section 32 of the Electricity Act 1989, operates to incentivise the generation of the electricity.”

,
(b) in subsection (6), omit the “or” after paragraph (c) and after paragraph (d) insert

“, or
(e) an SCE formed in accordance with Council Regulation (EC) No 1435/2003 on the Statute for a European Cooperative Society.”

, and
(c) in subsection (9), at the end insert—

““renewables obligation certificate” means a certificate issued under section 32B of the Electricity Act 1989 or Article 54 of the Energy (Northern Ireland) Order 2003.”

(7) After that section insert—

“309B Excluded activities: subsidised generation of heat and subsidised production of gas or fuel
(1) This section supplements section 303(1)(kb).
(2) The generation of heat, or production of gas or fuel, is “subsidised” if a payment is made, or another incentive is given, under—
(a) a scheme established by regulations under section 100 of the Energy Act 2008 or section 113 of the Energy Act 2011 (renewable heat incentives), or
(b) a similar scheme established in a territory outside the United Kingdom,
in respect of the heat generated or gas or fuel produced.
(3) But the generation of heat, or production of gas or fuel, is not to be taken to fall within section 303(1)(kb) if Condition A or B is met.
(4) Condition A is that the generation or production is carried on by—
(a) a community interest company,
(b) a co-operative society,
(c) a community benefit society,
(d) a NI industrial and provident society, or
(e) an SCE formed in accordance with Council Regulation (EC) No 1435/2003 on the Statute for a European Cooperative Society.
(5) Condition B is that the plant used for the generation of the heat, or production of the gas or fuel, relies wholly or mainly on anaerobic digestion.
(6) Section 309A(9) (definitions) applies for the purposes of this section as for the purposes of section 309A.”

(8) The amendments made by subsections (2) to (4) have effect in relation to shares issued on or after the day on which this Act is passed.
(9) The amendments made by subsections (5) to (7) have effect in relation to a relevant holding issued on or after the day on which this Act is passed.

Social investment relief

57 Relief for investments in social enterprises
(1) Schedule 11 makes provision for and in connection with social investment tax relief.
(2) Schedule 12 makes provision for relief under TCGA 1992 in connection with investments in social enterprises.

Capital gains

58 Relief on disposal of private residence
(1) TCGA 1992 is amended as follows.
(2) In section 223 (relief on disposal of private residence: amount of relief)—
(a) in subsections (1) and (2)(a), for “36 months” substitute “ 18 months ”;
(b) omit subsections (5) and (6);
(c) in subsection (8), omit the “and” after paragraph (aa) and after that paragraph insert—

“(ab) section 225E (disposals by disabled persons or persons in care homes etc), and”

.
(3) After section 225D insert—

“225E Disposals by disabled persons or persons in care homes etc
(1) This section applies where a gain to which section 222 applies accrues to an individual and—
(a) the conditions in subsection (2) are met, or
(b) the conditions in subsection (3) are met.
(2) The conditions mentioned in subsection (1)(a) are that at the time of the disposal—
(a) the individual is a disabled person or a long-term resident in a care home, and
(b) the individual does not have any other relevant right in relation to a private residence.
(3) The conditions mentioned in subsection (1)(b) are that at the time of the disposal—
(a) the individual's spouse or civil partner is a disabled person or a long-term resident in a care home, and
(b) neither the individual nor the individual's spouse or civil partner has any other relevant right in relation to a private residence.
(4) Where this section applies, the references in section 223(1) and (2)(a) to 18 months are treated as references to 36 months.
(5) An individual is a “long-term resident” in a care home at the time of the disposal if at that time the individual —
(a) is resident there, and
(b) has been resident there, or can reasonably be expected to be resident there, for at least three months.
(6) An individual has “any other relevant right in relation to a private residence” at the time of the disposal if—
(a) at that time—
(i) the individual owns or holds an interest in a dwelling-house or part of a dwelling-house other than that in relation to which the gain accrued, or
(ii) the trustees of a settlement own or hold an interest in a dwelling-house or part of a dwelling-house other than that in relation to which the gain accrued, and the individual is entitled to occupy that dwelling-house or part under the terms of the settlement, and
(b) section 222 would have applied to any gain accruing to the individual or trustees on the disposal at that time of, or of that interest in, that dwelling house or part (or would have applied if a notice under subsection (5) of that section had been given).
(7) In the application of this section in relation to a gain to which section 222 applies by virtue of section 225 (private residence occupied under terms of settlement)—
(a) the reference in subsection (1) of this section to an individual is to the trustees of the settlement;
(b) the references in subsections (2) to (6) of this section to the individual are to the person entitled under the terms of the settlement, as mentioned in section 225.
(8) In this section—
“care home” means an establishment that provides accommodation together with nursing or personal care;
“disabled person” has the meaning given by Schedule 1A to FA 2005.”

(4) The amendments made by this section have effect in relation to disposals made on or after 6 April 2014.

59 Remittance basis and split year treatment
(1) Section 12 of TCGA 1992 (non-UK domiciled individuals to whom remittance basis applies) is amended as follows.
(2) After subsection (1) insert—

“(1A) But it does not apply to foreign chargeable gains accruing to an individual in the overseas part of a split year as respects that individual, regardless of the part of the year (the overseas part or the UK part) in which the foreign chargeable gains are remitted.”

(3) The amendment made by this section has effect in relation to gains accruing on or after 6 April 2013.

60 Termination of life interest and death of life tenant: disabled persons
(1) TCGA 1992 is amended as follows.
(2) In section 72 (termination of life interest on death of person entitled)—
(a) in subsection (1B)(a)(iii), for “within section 89B(1)(c) or (d)” substitute “ , within the meaning given by section 89B ”, and
(b) at the end insert—

“(6) An interest which is a disabled person's interest by virtue of section 89B(1)(a) or (b) of the Inheritance Tax Act 1984 is to be treated as an interest in possession for the purposes of this section.”

(3) In section 73(3) (death of life tenant: exclusion of chargeable gain), for “to (5)” substitute “ to (6) ”.
(4) The amendments made by this section have effect in relation to deaths occurring on or after 5 December 2013.

61 Capital gains roll-over relief: relevant classes of assets
(1) Section 155 of TCGA 1992 (relevant classes of assets) is amended as follows.
(2) After the heading “CLASS 7A” insert—

“Assets within heads A and B below.
Head A”

(3) Before the heading “CLASS 8” insert—

“Head B
Payment entitlements under the basic payment scheme (that is, the scheme of income support for farmers in pursuance of Regulation (EU) No 1307/2013 of the European Parliament and of the Council).”

(4) The amendments made by this section have effect where the disposal of the old assets (or an interest in them) or the acquisition of the new assets (or an interest in them) is on or after 20 December 2013.

62 Capital gains roll-over relief: intangible fixed assets
(1) In section 156ZB of TCGA 1992 (intangible fixed assets: interaction with relief under Chapter 7 of Part 8 of CTA 2009), in subsection (1), for “This section” substitute “ Subsection (2) ”.
(2) In Chapter 14 of Part 8 of CTA 2009 (intangible fixed assets: miscellaneous provisions), after section 870 insert—

“Roll-over relief under TCGA 1992

870A Claims for relief made under sections 152 and 153 of TCGA 1992
(1) Subsection (2) applies where—
(a) a company has made a claim for relief under section 152 or 153 of TCGA 1992 (roll-over relief) during the period beginning with 1 April 2009 and ending with 19 March 2014, and
(b) the relief claimed relates to disposal proceeds that are applied in acquiring an intangible fixed asset within the meaning of this Part.
(2) The company is treated for the purposes of this Part as if the cost of the asset recognised for tax purposes were reduced on 19 March 2014 by the amount in respect of which the relief under section 152 or 153 of TCGA 1992 is given.
(3) But the effect of subsection (2) must not be to reduce the tax written-down value of the asset to below nil.
(4) The references to adjustments in sections 742(3) and 743(3) (assets written down) include any adjustment required by subsection (2).”

(3) The amendment made by subsection (1) has effect in relation to claims for relief under section 152 or 153 of TCGA 1992 made on or after 19 March 2014.
(4) The amendment made by subsection (2) has effect in relation to accounting periods beginning on or after 19 March 2014.
(5) For the purposes of subsection (4), an accounting period beginning before, and ending on or after, 19 March 2014 is to be treated as if so much of the period as falls before that date, and so much of the period as falls on or after that date, were separate accounting periods.

63 Avoidance involving losses
(1) In section 184G of TCGA 1992 (avoidance involving losses: schemes converting income to capital)—
(a) for subsections (2) and (3) substitute—

“(2) Condition A is that a receipt or other amount arises to a company directly or indirectly in consequence of, or otherwise in connection with, any arrangements.
(3) Condition B is that—
(a) that amount falls to be taken into account in calculating a chargeable gain (the “relevant gain”) which accrues to a company (“the relevant company”), and
(b) losses accrue (or have accrued) to the relevant company (whether before or after or as part of the arrangements).”

, and
(b) in subsection (4), for “the receipt” substitute “ the amount mentioned in subsection (2) ”.
(2) In section 184H of that Act (avoidance involving losses: schemes securing deductions)—
(a) in subsection (2)(b), omit “on any disposal of any asset”,
(b) for subsection (3) substitute—

“(3) Condition B is that the relevant company, or a company connected with the relevant company, becomes entitled to an income deduction directly or indirectly in consequence of, or otherwise in connection with, the arrangements.”

,
(c) in subsection (4), for paragraph (a) substitute—

“(a) that income deduction, and”

, and
(d) in subsection (10), after the definition of “arrangements” insert—

““income deduction” means—
(a) a deduction in calculating income for corporation tax purposes, or
(b) a deduction from total profits,”

.
(3) The amendments made by this section have effect—
(a) in relation to arrangements entered into on or after 30 January 2014, and
(b) in relation to arrangements entered into before that date but only to the extent that any chargeable gain accrues on a disposal which occurs on or after that date.

Capital allowances

64 Extension of capital allowances
(1) Part 2 of CAA 2001 (plant and machinery allowances) is amended as follows.
(2) In section 45D (expenditure on cars with low carbon dioxide emissions), after subsection (1) insert—

“(1A) The Treasury may by order amend subsection (1)(a) so as to extend the period specified.”

(3) In section 45DA (expenditure on zero-emission goods vehicles), after subsection (1) insert—

“(1A) The Treasury may by order amend subsection (1)(a) so as to extend the period specified.”

(4) In section 45E (expenditure on plant or machinery for gas refuelling station), after subsection (1) insert—

“(1A) The Treasury may by order amend subsection (1)(a) so as to extend the period specified.”

(5) In section 45K (expenditure on plant and machinery for used in designated assisted areas)—
(a) in subsection (1), in paragraph (b) for “5 years” substitute “ 8 years ”, and
(b) after that subsection insert—

“(1A) The Treasury may by order amend subsection (1)(b) so as to extend the period specified.”

65 General Block Exemption Regulation
Schedule 13 makes provision in relation to Commission Regulation (EU) No 651/2014 (General block exemption Regulation).

66 Business premises renovation allowances
(1) Section 360B of CAA 2001 (business premises renovation allowances: meaning of “qualifying expenditure”) is amended in accordance with subsections (2) to (6).
(2) For subsection (1) substitute—

“(1) In this Part “qualifying expenditure” means capital expenditure incurred before the expiry date—
(a) in respect of which Conditions A and B are met, and
(b) which is not excluded by subsection (3), (3B) or (3D).”

(3) After subsection (2) insert—

“(2A) Condition A is that the expenditure is incurred on—
(a) the conversion of a qualifying building into qualifying business premises,
(b) the renovation of a qualifying building if it is or will be qualifying business premises, or
(c) repairs to a qualifying building or, where the building is part of a building, to the building of which the qualifying building forms part, to the extent that the repairs are incidental to expenditure within paragraph (a) or (b).
(2B) Condition B is that the expenditure is incurred on—
(a) building works,
(b) architectural or design services,
(c) surveying or engineering services,
(d) planning applications, or
(e) statutory fees or statutory permissions.
(2C) But Condition B is treated as met in respect of expenditure incurred on matters not mentioned in that Condition to the extent that that expenditure (in total) does not exceed 5% of the qualifying expenditure incurred on the matters mentioned in subsection (2B)(a) to (c).”

(4) In subsection (3)—
(a) for “not qualifying expenditure” substitute “ excluded ”, and
(b) in paragraph (d), for “as defined by section 173(1)” substitute “ (as defined by section 173(1)) and falls within subsection (3A) ”.
(5) After that subsection insert—

“(3A) The fixtures which fall within this subsection are—
(a) integral features within the meaning of section 33A (taking account of section 33A(6) and any provision for the time being made under section 33A(7)) or part of such a feature;
(b) automatic control systems for opening and closing doors, windows and vents;
(c) window cleaning installations;
(d) fitted cupboards and blinds;
(e) protective installations such as lightning protection, sprinkler and other equipment for containing or fighting fires, fire alarm systems and fire escapes;
(f) building management systems;
(g) cabling in connection with telephone, audio-visual data installations and computer networking facilities, which are incidental to the occupation of the building;
(h) sanitary appliances, and bathroom fittings which are hand driers, counters, partitions, mirrors or shower facilities;
(i) kitchen and catering facilities for producing and storing food and drink for the occupants of the building;
(j) signs;
(k) public address systems;
(l) intruder alarm systems.
(3B) Expenditure is excluded if, and to the extent that, it exceeds the market value amount for the works, services or other matters to which it relates.
(3C) “The market value amount” means the amount of expenditure which it would have been normal and reasonable to incur on the works, services or other matters—
(a) in the market conditions prevailing when the expenditure was incurred, and
(b) assuming the transaction as a result of which the expenditure was incurred was between persons dealing with each other at arm's length in the open market.
(3D) Expenditure is excluded if the qualifying building was used at any time during the period of 12 months ending with the day on which the expenditure is incurred.”

(6) In subsection (5), after “regulations” insert

“—
(a) amend this section so as to add a description of fixture to the list in subsection (3A), or vary or remove a description of fixture in that list;
(b)”

(7) After that section insert—

“360BA Expenditure not treated as qualifying expenditure if delay in carrying out works etc
(1) This section applies where—
(a) (ignoring this section) qualifying expenditure is incurred on works, services or other matters in a chargeable period, and
(b) those works, services or other matters are not completed or provided before the end of the period of 36 months beginning with the date the expenditure was incurred.
(2) To the extent that it relates to so much of those works, services or other matters as are not completed or provided before the end of that period, the expenditure is to be treated for the purposes of this Part as never having been incurred (unless and until subsection (6) applies).
(3) All such assessments and adjustments of assessments are to be made as are necessary to give effect to subsection (2).
(4) If a person who has made a tax 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.
(5) The notice 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.
(6) If, at any time after the end of the period mentioned in subsection (1)(b), those works, services or other matters are completed or provided, the expenditure to which subsection (2) applies is to be treated for the purposes of this Part as incurred at that time.”

(8) For section 360L of that Act (grants affecting entitlement to allowances) substitute—

“360L Grants affecting entitlement to allowances
(1) No initial allowance or writing-down allowance under this Part is to be made in respect of qualifying expenditure in respect of a qualifying building if a relevant grant or relevant payment is made towards—
(a) that expenditure, or
(b) any other expenditure which is incurred by any person in respect of the same building, and on the same single investment project as that expenditure.
(2) An initial allowance or writing-down allowance made in respect of qualifying expenditure is to be withdrawn if—
(a) after it is made, a relevant grant or relevant payment is made towards that expenditure, or
(b) within the period of 3 years beginning when that expenditure was incurred, a relevant grant or relevant payment is made towards any other expenditure which is incurred by any person in respect of the same building, and on the same single investment project, as that expenditure.
(3) All such assessments and adjustments of assessments are to be made as are necessary to give effect to subsection (2).
(4) 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, that person must give notice to an officer of Revenue and Customs specifying how the return needs to be amended.
(5) The notice 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.
(6) In this section—
“General Block Exemption Regulation” means Commission Regulation (EU) No 651/2014 (General block exemption Regulation);
“relevant grant or relevant payment” means a grant or payment which is—
(a) a State aid, other than an allowance under this Part, or
(b) a grant or subsidy, other than a State aid, which the Treasury by order declares to be relevant for the purposes of the withholding of allowances under this Part;
“single investment project” has the same meaning as in the General Block Exemption Regulation.
(7) Nothing in this section limits references to “State aid” to State aid which is required to be notified to and approved by the European Commission.
(8) The Treasury may by order amend this section to make provision consequential upon the General Block Exemption Regulation being replaced by another instrument.”

(9) In section 360M of that Act (when balancing adjustments are made), in subsection (4) for “7” substitute “ 5 ”.
(10) Subject to subsection (11), the amendments made by this section have effect for expenditure incurred on or after the specified day.
(11) Section 360L of CAA 2001 (inserted by subsection (8)) has effect—
(a) in relation to a relevant grant or relevant payment made at any time (whether before or on or after the specified day) towards expenditure incurred on or after that day, and
(b) in relation to a relevant grant or relevant payment made on or after the specified day towards expenditure incurred before that day.
(12) “The specified day” means—
(a) for income tax purposes, 6 April 2014, and
(b) for corporation tax purposes, 1 April 2014.
(13) In the application of section 360L of CAA 2001 in relation to expenditure incurred before the day on which this Act is passed, the definition of “General Block Exemption Regulation” in subsection (6) of that section is to be treated as referring to Commission Regulation (EC) No 800/2008.

67 Mineral extraction allowances: activities not within charge to tax
(1) CAA 2001 is amended as follows.
(2) In section 394(2) (meaning of mineral extraction trade), after “deposits” insert “ but to the extent only that the profits or gains from that trade are, or (if there were any) would be, chargeable to tax ”.
(3) In section 399 (expenditure excluded from being qualifying expenditure), after subsection (1) insert—

“(1A) Expenditure incurred by a person for the purposes of a mineral extraction trade is not qualifying expenditure if—
(a) when the expenditure is incurred, the person is carrying on the trade but the trade is not at that time a mineral extraction trade, or
(b) the person has not begun to carry on the trade when the expenditure is incurred and, when the person begins to carry on the trade, the trade is not a mineral extraction trade.
(1B) Section 577(2) (references to commencement etc of a trade) does not apply to subsection (1A).”

(4) In section 160 (expenditure treated as incurred for purposes of mineral extraction trade)—
(a) the existing text becomes subsection (1), and
(b) after that subsection insert—

“(2) Subsection (1) does not apply to expenditure if—
(a) when it is incurred, the person is carrying on the trade but the trade is not at that time a mineral extraction trade, or
(b) when it is incurred, the person has not begun to carry on the trade and, when the person begins to carry on the trade, the trade is not a mineral extraction trade.
(3) Section 577(2) (references to commencement etc of a trade) does not apply to subsection (2).”

(5) For section 161(4)(a) (pre-trading expenditure on plant or machinery for mineral exploration and access), substitute—

“(a) pre-trading expenditure” means capital expenditure incurred before the day on which a person begins to carry on a trade that is a mineral extraction trade, but only if there is no prior time when the person carried on that trade and the trade was not a mineral extraction trade,”

.
(6) After section 161(4) insert—

“(4A) Section 577(2) (references to commencement etc of a trade) does not apply to subsection (4)(a).”

(7) After section 431 (discontinuance of trade) insert—

“431A Foreign permanent establishment exemption
(1) Subsection (2) applies if—
(a) an election under section 18A of CTA 2009 has effect in relation to a company, and
(b) the company carries on any trade which consists of, or includes, the working of a source of mineral deposits.
(2) That trade so far as carried on through one or more permanent establishments outside the United Kingdom is treated for the purposes of this Part as a trade—
(a) separate from any other trade of the company, and
(b) all the profits and gains from which are not, or (if there were any) would not be, chargeable to tax.

431B Disposal value: no allowance/no charge cases
(1) If—
(a) an election under section 18A of CTA 2009 has effect in relation to a company, and
(b) the operation of sections 431A and 421(1)(b)(ii) and (2) requires the company to bring the disposal value of an asset into account,
the disposal value is such an amount as gives rise to neither a balancing allowance nor a balancing charge.
(2) Subsection (1) does not apply if—
(a) the company's qualifying expenditure in respect of the asset exceeds £5 million,
(b) the company has claimed any capital allowance in respect of any of that expenditure, and
(c) the company has, at any time in a relevant accounting period, used the asset otherwise than for the purposes of a permanent establishment outside the United Kingdom.
(3) In subsection (2)(c) “relevant accounting period” means an accounting period ending before, but ending not more than 6 years before, “the relevant day” as defined by section 18F of CTA 2009.

431C Notional allowances
(1) Subsection (2) applies if—
(a) an election under section 18A of CTA 2009 has effect in relation to a company, and
(b) but for section 18A of CTA 2009 and section 431A(2)(b), an allowance under this Part (“the notional allowance”) could be claimed under section 3(1) in respect of assets provided for the purposes of a permanent establishment outside the United Kingdom through which business is or has been carried on by the company.
(2) The notional allowance (and any charge in connection with it which would have arisen if the allowance had been claimed) is to be made automatically and reflected in any calculation, for any relevant accounting period of the company, of the profits or losses attributable to business carried on by the company through such a permanent establishment.
(3) Subsection (4) applies if, at the time an election under section 18A of CTA 2009 takes effect in relation to a company, the company is, by reason of sections 431A and 421(1)(b)(ii) and (2), required to bring into account the disposal value of any asset provided for the purposes of a foreign permanent establishment through which business is or has been carried on by the company.
(4) For the purposes of subsections (1) and (2), the company is treated as having incurred at that time, for the purposes of the trade mentioned in section 431A(2), qualifying expenditure of an amount equal to that disposal value.
(5) In subsection (2) “relevant accounting period”, in relation to a company by which an election under section 18A of CTA 2009 is made, means an accounting period of the company to which the election applies (as to which see section 18F of that Act).”

(8) The amendments made by subsections (1) to (6) of this section have effect—
(a) for the purposes of corporation tax, in relation to claims made on or after 1 April 2014, and
(b) for the purposes of income tax, in relation to claims made on or after 6 April 2014,
and in relation to those claims the amendments are treated as always having had effect.
(9) The amendment made by subsection (7) has effect in relation to elections under section 18A of CTA 2009 which start to have effect on or after 1 April 2014.

68 Mineral extraction allowances: expenditure on planning permission
(1) Part 5 of CAA 2001 (mineral extraction allowances) is amended as follows.
(2) In section 396 (meaning of “mineral exploration and access”), in subsection (2) for “if planning permission is not granted” substitute “ and not as expenditure on acquiring a mineral asset ”.
(3) In section 398 (relationship between main types of qualifying expenditure), after “Subject to” insert “ section 396(2) and ”.
(4) The amendments made by this section have effect in relation to expenditure incurred on or after the day on which this Act is passed.

Oil and gas

69 Extended ring fence expenditure supplement for onshore activities
Schedule 14 contains provision about an extended ring fence expenditure supplement in connection with onshore oil-related activities.

70 Supplementary charge: onshore allowance
Schedule 15 contains provision about the reduction of adjusted ring fence profits by means of an onshore allowance.

71 Oil and gas: reinvestment after pre-trading disposal
(1) In Chapter 2 of Part 6 of TCGA 1992 (oil and mineral industries), after section 198I insert—

“198J Oil and gas: reinvestment after pre-trading disposal
(1) This section applies if a company which is an E&A company makes a disposal of, or of the company's interest in, relevant E&A assets and that disposal is—
(a) a disposal of, or of an interest in, a UK licence which relates to an undeveloped area, or
(b) a disposal of an asset used in an area covered by a licence under Part 1 of the Petroleum Act 1998 or the Petroleum (Production) Act (Northern Ireland) 1964 which authorises the company to undertake E&A activities.
(2) If—
(a) the consideration which the company obtains for the disposal is applied by the company, within the permitted reinvestment period—
(i) on E&A expenditure at a time when the company is an E&A company, or
(ii) on oil assets taken into use, and used only, for the purposes of a ring fence trade carried on by it, and
(b) the company makes a claim under this subsection in relation to the disposal,
any gain accruing to the company on the disposal is not a chargeable gain.
(3) If part only of the amount or value of the consideration for the disposal is applied as described in subsection (2)(a)—
(a) subsection (2) does not apply, but
(b) subsection (4) applies if all of the amount or value of the consideration is so applied except for a part which is less than the amount of the gain (whether all chargeable gain or not) accruing on the disposal.
(4) If the company makes a claim under this subsection in relation to the disposal, the company is to be treated for the purposes of this Act as if the amount of the gain accruing on the disposal were reduced to the amount of the part mentioned in subsection (3)(b) (and, if not all chargeable gain, with a proportionate reduction in the amount of the chargeable gain).
(5) The incurring of expenditure is within “the permitted reinvestment period” if the expenditure is incurred in the period beginning 12 months before and ending 3 years after the disposal, or at such earlier or later time as the Commissioners for Her Majesty's Revenue and Customs may by notice allow.
(6) Subsections (6), (7), (10) and (11) of section 152 apply for the purposes of this section as they apply for the purposes of section 152, except that—
(a) in subsection (6) the reference to a trade is to be read as a reference to E&A activities or a ring fence trade,
(b) in subsection (7), the reference to the old assets is to be read as a reference to the assets disposed of as mentioned in subsection (1) of this section, and
(c) in subsection (7), the references to the trade are to be read as references to the E&A activities.
(7) In this section—
“E&A activities” means oil and gas exploration and appraisal in the United Kingdom or an area designated by Order in Council under section 1(7) of the Continental Shelf Act 1964;
“E&A company” means a company which carries on E&A activities and does not carry on a ring fence trade;
“E&A expenditure” means expenditure on E&A activities which is treated as such under generally accepted accounting practice;
“oil asset” has the same meaning as in section 198E, and section 198I applies for the purposes of this section as it applies for the purposes of section 198E;
“relevant E&A assets” means assets which—
(a) are used, and used only, for the purposes of E&A activities carried on by the company throughout the period of ownership, and
(b) are within the classes of assets listed in section 155 (with references to “the trade” in that section being read as references to the E&A activities);
“ring fence trade” has the meaning given by section 277 of CTA 2010;
“UK licence” means a licence within the meaning of Part 1 of the Oil Taxation Act 1975;
and a reference to a UK licence which relates to an undeveloped area has the same meaning as in section 194 (see section 196).

198K Provisional application of section 198J
(1) This section applies where a company for a consideration disposes of, or of an interest in, any assets at a time when it is an E&A company and declares, in the company's return for the chargeable period in which the disposal takes place—
(a) that the whole or any specified part of the consideration will be applied, within the permitted reinvestment period—
(i) on E&A expenditure at a time when the company is an E&A company, or
(ii) on expenditure on oil assets which are taken into use, and used only, for the purposes of the company's ring fence trade, and
(b) that the company intends to make a claim under section 198J(2) or (4) in relation to the disposal.
(2) Until the declaration ceases to have effect, section 198J applies as if the expenditure had been incurred and the person had made such a claim.
(3) The declaration ceases to have effect as follows—
(a) if and to the extent that it is withdrawn before the relevant day, or is superseded before that day by a valid claim under section 198J, on the day on which it is so withdrawn or superseded, and
(b) if and to the extent that it is not so withdrawn or superseded, on the relevant day.
(4) On the declaration ceasing to have effect in whole or in part, all necessary adjustments—
(a) are to be made by making or amending assessments or by repayment or discharge of tax, and
(b) are to be so made despite any limitation on the time within which assessments or amendments may be made.
(5) In this section “the relevant day” means the fourth anniversary of the last day of the accounting period in which the disposal took place.
(6) For the purposes of this section—
(a) sections (6), (10) and (11) of section 152 apply as they apply for the purposes of that section, except that in subsection (6) the reference to a trade is to be read as a reference to E&A activities or a ring fence trade, and
(b) terms used in this section which are defined in section 198J have the meaning given by that section.

198L Expenditure by member of same group
(1) Section 198J applies where—
(a) the disposal is by a company which, at the time of the disposal, is a member of a group of companies (within the meaning of section 170),
(b) the E&A expenditure or expenditure on oil assets is by another company which, at the time the expenditure is incurred, is a member of the same group, and
(c) the claim under section 198J is made by both companies,
as if both companies were the same person.
(2) “E&A company”, “E&A expenditure” and “oil assets” have the meaning given by section 198J.”

(2) The amendment made by this section has effect in relation to disposals made on or after 1 April 2014.

72 Substantial shareholder exemption: oil and gas
(1) In Schedule 7AC to TCGA 1992 (exemption for disposals by companies with substantial shareholding), in paragraph 15A (effect of transfer of trading assets within a group), after sub-paragraph (2) insert—

“(2A) For the purposes of sub-paragraph (2)(b) and (d), “trade” includes oil and gas exploration and appraisal.”

(2) The amendment made by this section has effect in relation to disposals made on or after 1 April 2014.

73 Oil contractor activities: ring-fence trade etc
Schedule 16 contains provision about the corporation tax treatment of oil contractor activities.

Partnerships

74 Partnerships
Schedule 17 makes provision in relation to partnerships.

Transfer pricing

75 Transfer pricing: restriction on claims for compensation adjustments
(1) Chapter 4 of Part 4 of TIOPA 2010 (transfer pricing: position of disadvantaged person) is amended as follows.
(2) In section 174 (claim by the affected person who is potentially advantaged), in subsection (3), before the entry for section 175 insert— “ section 174A (claim not allowed in some cases where the disadvantaged person is within the charge to income tax), ”.
(3) After that section insert—

“174A Claims under section 174 where disadvantaged person within charge to income tax
A claim under section 174 may not be made if—
(a) the disadvantaged person is a person (other than a company) within the charge to income tax in respect of profits arising from the relevant activities, and
(b) the advantaged person is a company.”

(4) After section 187 insert—

“Treatment of interest where claim prevented by section 174A

187A Excess interest treated as a qualifying distribution
(1) Subsection (2) applies if Conditions A to C in section 187 are met in circumstances where section 174A prevents a claim under section 174.
(2) The interest paid under the actual provision, so far as it exceeds ALINT, is treated for the purposes of the Income Tax Acts as a dividend paid by the company which paid the interest (and, accordingly, as a qualifying distribution).”

(5) The amendments made by this section have effect in relation to any amount arising on or after 25 October 2013, except pre-commencement interest.
(6) “Pre-commencement interest” means an amount of interest to the extent that it is, in accordance with generally accepted accounting practice, referable to a period before 25 October 2013.

PART 2 Excise duties and other taxes

Alcohol

76 Rates of alcoholic liquor duties
(1) ALDA 1979 is amended as follows.
(2) In section 36(1AA) (rates of general beer duty)—
(a) in paragraph (za) (rate of duty on lower strength beer), for “£9.17” substitute “ £8.62 ”, and
(b) in paragraph (a), (standard rate of duty on beer), for “£19.12” substitute “ £18.74 ”.
(3) In section 37(4) (rate of high strength beer duty), for “£5.09” substitute “ £5.29 ”.
(4) In section 62(1A) (rates of duty on cider), in paragraph (a) (rate of duty per hectolitre on sparkling cider of a strength exceeding 5.5%), for “£258.23” substitute “ £264.61 ”.
(5) For Part 1 of the table in Schedule 1 substitute—

“PART 1 Wine or made-wine of a strength not exceeding 22%
Description of wine or made-wine	Rates of duty per hectolitre £
Wine or made-wine of a strength not exceeding 4%	84.21
Wine or made-wine of a strength exceeding 4% but not exceeding 5.5%	115.80
Wine or made-wine of a strength exceeding 5.5% but not exceeding 15% and not being sparkling	273.31
Sparkling wine or sparkling made-wine of a strength exceeding 5.5% but less than 8.5%	264.61
Sparkling wine or sparkling made-wine of a strength of at least 8.5% but not exceeding 15%	350.07
Wine or made-wine of a strength exceeding 15% but not exceeding 22%	364.37”

.
(6) The amendments made by this section are treated as having come into force on 24 March 2014.

Tobacco

77 Rates of tobacco products duty
(1) For the table in Schedule 1 to TPDA 1979 substitute—

“TABLE
1. Cigarettes	An amount equal to 16.5% of the retail price plus £184.10 per thousand cigarettes
2. Cigars	£229.65 per kilogram
3. Hand-rolling tobacco	£180.46 per kilogram
4. Other smoking tobacco and chewing tobacco	£100.96 per kilogram”

.
(2) The amendment made by this section is treated as having come into force at 6 pm on 19 March 2014.

Air passenger duty

78 Air passenger duty: rates of duty from 1 April 2014
(1) Section 30 of FA 1994 (air passenger duty: rates of duty) is amended as follows.
(2) In subsection (3)—
(a) in paragraph (a), for “£67” substitute “ £69 ”, and
(b) in paragraph (b), for “£134” substitute “ £138 ”.
(3) In subsection (4)—
(a) in paragraph (a), for “£83” substitute “ £85 ”, and
(b) in paragraph (b), for “£166” substitute “ £170 ”.
(4) In subsection (4A)—
(a) in paragraph (a), for “£94” substitute “ £97 ”, and
(b) in paragraph (b), for “£188” substitute “ £194 ”.
(5) The amendments made by this section have effect in relation to the carriage of passengers beginning on or after 1 April 2014.

79 Air passenger duty: rates of duty from 1 April 2015
(1) Chapter 4 of Part 1 of FA 1994 (air passenger duty) is amended in accordance with subsections (2) to (10).
(2) Section 30 (rates of duty), as amended by section 78 of this Act, is amended as follows.
(3) Omit subsections (3) and (4).
(4) In subsection (4A)—
(a) in paragraph (a) for “£97” substitute “ £71 ”, and
(b) in paragraph (b) for “£194” substitute “ £142 ”.
(5) In subsection (4E)—
(a) in paragraph (a) for “twice the rate in subsection (2)(b)” substitute “ six times the rate in subsection (2)(a) ”,
(b) after paragraph (a) insert “ and ”,
(c) omit paragraph (b),
(d) omit paragraph (c) and the “and” after it, and
(e) in paragraph (d) for “twice the rate in subsection (4A)(b)” substitute “ six times the rate in subsection (4A)(a) ”.
(6) Section 30A (Northern Ireland long haul rates of duty) is amended as follows.
(7) Omit subsections (2) to (4).
(8) In subsection (5) for “If the passenger's journey ends at any other place” substitute “ Air passenger duty is chargeable on the carriage of the chargeable passenger at the rate determined as follows ”.
(9) In subsection (5A)—
(a) omit paragraph (a),
(b) omit paragraph (b) and the “and” after it, and
(c) in paragraph (c)—
(i) omit the words from the beginning to “(5)(a) or (b),”,
(ii) after “instead” insert “ of the rate set for the purposes of subsection (5)(a) or (b) ”, and
(iii) in sub-paragraph (ii) for “twice the rate set for the purposes of subsection (5)(b)” substitute “ six times the rate set for the purposes of subsection (5)(a) ”.
(10) In Schedule 5A (territories) omit Parts 2 and 3.
(11) Accordingly, in section 1 of the Air Passenger Duty (Setting of Rate) Act (Northern Ireland) 2012 (setting of rate of air passenger duty)—
(a) in subsection (1)—
(i) omit “(3)(a) and (b), (4)(a) and (b),”, and
(ii) for “(5A)(a), (b) and (c)” substitute “ (5A)(c) ”, and
(b) omit subsections (2) to (5), (8) and (9).
(12) The amendments made by this section have effect in relation to the carriage of passengers beginning on or after 1 April 2015.

80 Air passenger duty: adjustments to Part 3 of Schedule 5A to FA 1994
(1) In Part 3 of Schedule 5A to FA 1994 (air passenger duty: territories)—
(a) omit “Ascension Island”, “Netherlands Antilles” and “Saint Helena”, and
(b) at the appropriate places insert— “ Bonaire ”, “ Curaçao ”, “ Saba ”, “ Saint Helena, Ascension and Tristan da Cunha ”, “ Sint Eustatius ”, and “ Sint Maarten ”.
(2) The amendments made by this section have effect in relation to the carriage of passengers beginning on or after the day on which this Act is passed.

Vehicle excise duty

81 VED rates for light passenger vehicles, light goods vehicles, motorcycles etc
(1) Schedule 1 to VERA 1994 (annual rates of duty) is amended as follows.
(2) In paragraph 1 (general)—
(a) in sub-paragraph (2) (vehicle not covered elsewhere in Schedule otherwise than with engine cylinder capacity not exceeding 1,549cc), for “£225” substitute “ £230 ”, and
(b) in sub-paragraph (2A) (vehicle not covered elsewhere in Schedule with engine cylinder capacity not exceeding 1,549cc), for “£140” substitute “ £145 ”.
(3) In paragraph 1B (graduated rates of duty for light passenger vehicles)—
(a) for the tables substitute—

“Table 1 Rates payable on first vehicle licence for vehicle
CO2 emissions figure		Rate	
(1)	(2)	(3)	(4)
Exceeding	Not exceeding	Reduced rate	Standard rate
g/km	g/km	£	£
130	140	120	130
140	150	135	145
150	165	170	180
165	175	280	290
175	185	335	345
185	200	475	485
200	225	625	635
225	255	850	860
255		1080	1090

Table 2 Rates payable on any other vehicle licence for vehicle
CO2 emissions figure		Rate	
(1)	(2)	(3)	(4)
Exceeding	Not exceeding	Reduced rate	Standard rate
g/km	g/km	£	£
100	110	10	20
110	120	20	30
120	130	100	110
130	140	120	130
140	150	135	145
150	165	170	180
165	175	195	205
175	185	215	225
185	200	255	265
200	225	275	285
225	255	475	485
255		490	500”

;
(b) in the sentence immediately following the tables, for paragraphs (a) and (b) substitute—

“(a) in column (3), in the last two rows, “275” were substituted for “475” and “ 490 ”, and
(b) in column (4), in the last two rows, “285” were substituted for “485” and “ 500 ”.”

(4) In paragraph 1J (VED rates for light goods vehicles), in paragraph (a), for “£220” substitute “ £225 ”.
(5) In paragraph 2(1) (VED rates for motorcycles)—
(a) in paragraph (b), for “£37” substitute “ £38 ”,
(b) in paragraph (c), for “£57” substitute “ £58 ”, and
(c) in paragraph (d), for “£78” substitute “ £80 ”.
(6) The amendments made by this section have effect in relation to licences taken out on or after 1 April 2014.

82 VED rates: rigid goods vehicle with trailers
(1) For paragraph 10 of Schedule 1 to VERA 1994 (supplement to annual rate of duty for rigid goods vehicle with trailer), substitute—

“10
(1) This paragraph applies to relevant rigid goods vehicles.
(2) A “relevant rigid goods vehicle” is a rigid goods vehicle which—
(a) has a revenue weight exceeding 11,999 kgs,
(b) is not a vehicle falling within paragraph 9(2), and
(c) is used for drawing a trailer which has a plated gross weight exceeding 4,000 kgs and when so drawn is used for the conveyance of goods or burden.
(3) The annual rate of vehicle excise duty applicable to a relevant rigid goods vehicle is to be determined in accordance with the following tables by reference to—
(a) whether or not the vehicle has road-friendly suspension,
(b) the number of axles on the vehicle,
(c) the appropriate HGV road user levy band for the vehicle (see column (1) in the tables),
(d) the plated gross weight of the trailer (see columns (2) and (3) in the tables), and
(e) the total of the revenue weight for the vehicle and the plated gross weight of the trailer (the “total weight”) (see columns (4) and (5) in the tables).
(4) For the purposes of this paragraph a vehicle does not have road-friendly suspension if any driving axle of the vehicle has neither —
(a) an air suspension (that is, a suspension system in which at least 75% of the spring effect is caused by an air spring), nor
(b) a suspension which is regarded as being equivalent to an air suspension for the purposes under Annex II of Council Directive 96/53/EC.
(5) The “appropriate HGV road user levy band” in relation to a vehicle means the band into which the vehicle falls for the purposes of calculating the rate of HGV road user levy that is charged in respect of the vehicle (see Schedule 1 to the HGV Road User Levy Act 2013).
(6) The tables are arranged as follows—
(a) table 1 applies to relevant rigid goods vehicles with road-friendly suspension on which there are 2 axles;
(b) table 2 applies to relevant rigid goods vehicles with road-friendly suspension on which there are 3 axles;
(c) table 3 applies to relevant rigid goods vehicles with road-friendly suspension on which there are 4 or more axles;
(d) table 4 applies to relevant rigid goods vehicles which do not have road-friendly suspension and on which there are 2 axles;
(e) table 5 applies to relevant rigid goods vehicles which do not have road-friendly suspension and on which there are 3 axles;
(f) table 6 applies to relevant rigid goods vehicles which do not have road-friendly suspension and on which there are 4 or more axles.

Table 1 Vehicles with road-friendly suspension and 2 axles
Appropriate HGV road user levy band	Plated gross weight of trailer		Total weight		Rate
(1)	(2)	(3)	(4)	(5)	(6)
	Exceeding (kgs)	Not exceeding (kgs)	Exceeding (kgs)	Not exceeding (kgs)	£
B(T)	4,000	12,000	-	27,000	230
B(T)	12,000	-	-	33,000	295
B(T)	12,000	-	33,000	36,000	401
B(T)	12,000	-	36,000	38,000	319
B(T)	12,000	-	38,000	-	444
D(T)	4,000	12,000	-	30,000	365
D(T)	12,000	-	-	38,000	430
D(T)	12,000	-	38,000	-	444

Table 2 Vehicles with road-friendly suspension and 3 axles
Appropriate HGV road user levy band	Plated gross weight of trailer		Total weight		Rate
(1)	(2)	(3)	(4)	(5)	(6)
	Exceeding (kgs)	Not exceeding (kgs)	Exceeding (kgs)	Not exceeding (kgs)	£
B(T)	4,000	12,000	-	33,000	230
B(T)	12,000	-	-	38,000	295
B(T)	12,000	-	38,000	40,000	392
B(T)	12,000	-	40,000	-	295
C(T)	4,000	12,000	-	35,000	305
C(T)	12,000	-	-	38,000	370
C(T)	12,000	-	38,000	40,000	392
C(T)	12,000	-	40,000	-	370
D(T)	4,000	10,000	-	33,000	365
D(T)	4,000	10,000	33,000	36,000	401
D(T)	10,000	12,000	-	38,000	365
D(T)	12,000	-	-	-	430

Table 3 Vehicles with road-friendly suspension and 4 or more axles
Appropriate HGV road user levy band	Plated gross weight of trailer		Total weight		Rate
(1)	(2)	(3)	(4)	(5)	(6)
	Exceeding (kgs)	Not exceeding (kgs)	Exceeding (kgs)	Not exceeding (kgs)	£
B(T)	4,000	12,000	-	35,000	230
B(T)	12,000	-	-	-	295
C(T)	4,000	12,000	-	37,000	305
C(T)	12,000	-	-	-	370
D(T)	4,000	12,000	-	39,000	365
D(T)	12,000	-	-	-	430
E(T)	4,000	12,000	-	-	535
E(T)	12,000	-	-	-	600

Table 4 Vehicles without road-friendly suspension with 2 axles
Appropriate HGV road user levy band	Plated gross weight of trailer		Total weight		Rate
(1)	(2)	(3)	(4)	(5)	(6)
	Exceeding (kgs)	Not exceeding (kgs)	Exceeding (kgs)	Not exceeding (kgs)	£
B(T)	4,000	12,000	-	27,000	230
B(T)	12,000	-	-	31,000	295
B(T)	12,000	-	31,000	33,000	401
B(T)	12,000	-	33,000	36,000	609
B(T)	12,000	-	36,000	38,000	444
B(T)	12,000	-	38,000	-	604
D(T)	4,000	12,000	-	30,000	365
D(T)	12,000	-	-	33,000	430
D(T)	12,000	-	33,000	36,000	609
D(T)	12,000	-	36,000	38,000	444
D(T)	12,000	-	38,000	-	604

Table 5 Vehicles without road-friendly suspension with 3 axles
Appropriate HGV road user levy band	Plated gross weight of trailer		Total weight		Rate
(1)	(2)	(3)	(4)	(5)	(6)
	Exceeding (kgs)	Not exceeding (kgs)	Exceeding (kgs)	Not exceeding (kgs)	£
B(T)	4,000	10,000	-	29,000	230
B(T)	4,000	10,000	29,000	31,000	289
B(T)	10,000	12,000	-	33,000	230
B(T)	12,000	-	-	36,000	295
B(T)	12,000	-	36,000	38,000	392
B(T)	12,000	-	38,000	-	542
C(T)	4,000	10,000	-	31,000	305
C(T)	4,000	10,000	31,000	33,000	401
C(T)	10,000	12,000	-	35,000	305
C(T)	12,000	-	-	36,000	370
C(T)	12,000	-	36,000	38,000	392
C(T)	12,000	-	38,000	-	542
D(T)	4,000	10,000	-	31,000	365
D(T)	4,000	10,000	31,000	33,000	401
D(T)	4,000	10,000	33,000	35,000	609
D(T)	10,000	12,000	-	36,000	365
D(T)	10,000	12,000	36,000	37,000	392
D(T)	12,000	-	-	38,000	430
D(T)	12,000	-	38,000	-	542

Table 6 Vehicles without road-friendly suspension with 4 or more axles
Appropriate HGV road user levy band	Plated gross weight of trailer		Total weight		Rate
(1)	(2)	(3)	(4)	(5)	(6)
	Exceeding (kgs)	Not exceeding (kgs)	Exceeding (kgs)	Not exceeding (kgs)	£
B(T)	4,000	12,000	-	35,000	230
B(T)	12,000	-	-	-	295
C(T)	4,000	12,000	-	37,000	305
C(T)	12,000	-	-	-	370
D(T)	4,000	10,000	-	36,000	365
D(T)	4,000	10,000	36,000	37,000	444
D(T)	10,000	12,000	-	39,000	365
D(T)	12,000	-	-	-	430
E(T)	4,000	10,000	-	38,000	535
E(T)	4,000	10,000	38,000	-	604
E(T)	10,000	12,000	-	-	535
(7) The annual rate of vehicle excise duty for a relevant rigid goods vehicle which does not fall within any of tables 1 to 6 is £609.”

(2) In paragraph 2(2) of Schedule 1 to the HGV Road User Levy Act 2013, for “within paragraph 10” substitute “ which is a relevant rigid goods vehicle within the meaning of paragraph 10 ”.
(3) The amendment made by subsection (1) has effect in relation to licences taken out on or after 1 April 2014.
(4) The amendment made by subsection (2) is treated as having come into force on 1 April 2014.

83 VED rates: use for exceptional loads, rigid goods vehicles and tractive units
(1) Schedule 1 to VERA 1994 (annual rates of duty) is amended as follows.
(2) In paragraph 6(2A)(a) (vehicles used for exceptional loads which do not satisfy reduced pollution requirements), for “£2,585” substitute “ £1,585 ”.
(3) In paragraph 9 (rigid goods vehicles which do not satisfy reduced pollution requirements), for the table in sub-paragraph (1) substitute—

“Revenue weight of vehicle		Rate		
(1)	(2)	(3)	(4)	(5)
Exceeding	Not exceeding	Two axle vehicle	Three axle vehicle	Four or more axle vehicle
kgs	kgs	£	£	£
3,500	7,500	165	165	165
7,500	11,999	200	200	200
11,999	14,000	95	95	95
14,000	15,000	105	95	95
15,000	19,000	300	95	95
19,000	21,000	300	125	95
21,000	23,000	300	210	95
23,000	25,000	300	300	210
25,000	27,000	300	300	300
27,000	44,000	300	300	560”

(4) In paragraph 9(3) (rigid goods vehicles over 44,000 kgs which do not satisfy the reduced pollution requirements), for “£2,585” substitute “ £1,585 ”.
(5) For the italic heading immediately before paragraph 9 substitute “ Rigid goods vehicles exceeding 3,500 kgs revenue weight ”.
(6) In paragraph 11(1) (tractive units which do not satisfy reduced pollution requirements)—
(a) for “table” substitute “ tables ”, and
(b) for the table substitute—

“Table 1 Tractive unit with two axles
Revenue weight of vehicle		Rate		
(1)	(2)	(3)	(4)	(5)
Exceeding	Not exceeding	Any no of semi-trailer axles	2 or more semi-trailer axles	3 or more semi-trailer axles
kgs	kgs	£	£	£
3,500	11,999	165	165	165
11,999	22,000	80	80	80
22,000	23,000	84	80	80
23,000	25,000	151	80	80
25,000	26,000	265	100	80
26,000	28,000	265	146	80
28,000	31,000	300	300	80
31,000	33,000	560	560	210
33,000	34,000	560	609	210
34,000	38,000	690	690	560
38,000	44,000	850	850	850

Table 2 Tractive unit with three or more axles
Revenue weight of vehicle		Rate		
(1)	(2)	(3)	(4)	(5)
Exceeding	Not exceeding	Any no of semi-trailer axles	2 or more semi-trailer axles	3 or more semi-trailer axles
kgs	kgs	£	£	£
3,500	11,999	165	165	165
11,999	25,000	80	80	80
25,000	26,000	100	80	80
26,000	28,000	146	80	80
28,000	29,000	210	80	80
29,000	31,000	289	80	80
31,000	33,000	560	210	80
33,000	34,000	609	300	80
34,000	36,000	609	300	210
36,000	38,000	690	560	300
38,000	44,000	850	850	560”

(7) In paragraph 11(3) (tractive units above 44,000 kgs which do not satisfy reduced pollution requirements), for “£2,585” substitute “ £1,585 ”.
(8) In paragraph 11C(2) (tractive units: special cases)—
(a) omit “Subject to paragraph 11D,”, and
(b) in paragraph (a), for “£650” substitute “ £10 ”.
(9) Omit paragraph 11D (vehicles without road friendly suspension) and the italic heading before it.
(10) The amendments made by this section have effect in relation to licences taken out on or after 1 April 2014.

84 VED: extension of old vehicles exemption from 1 April 2014
(1) In Schedule 2 to VERA 1994 (exempt vehicles) in paragraph 1A(1) (exemption for old vehicles) for “1973” substitute “ 1974 ”.
(2) The amendment made by subsection (1) is treated as having come into force on 1 April 2014.
(3) While a vehicle licence is in force in respect of a vehicle which is an exempt vehicle by virtue of subsection (1)—
(a) nothing in that subsection has the effect that a nil licence is required to be in force in respect of the vehicle, but
(b) for the purposes of section 33 of VERA 1994 the vehicle is to be treated as one in respect of which vehicle excise duty is chargeable.

85 VED: extension of old vehicles exemption from 1 April 2015
(1) In Schedule 2 to VERA 1994 (exempt vehicles) in paragraph 1A(1) (exemption for old vehicles) for “1974” (as substituted by section 84) substitute “ 1975 ”.
(2) The amendment made by subsection (1) comes into force on 1 April 2015; but nothing in that subsection has the effect that a nil licence is required to be in force in respect of a vehicle while a vehicle licence is in force in respect of it.

86 Abolition of reduced VED rates for meeting reduced pollution requirements
Schedule 18 contains provision abolishing the reduced rates of vehicle excise duty for vehicles satisfying reduced pollution requirements.

87 Six month licence: tractive units
(1) In section 3 of VERA 1994 (duration of licences), for subsection (2) substitute—

“(2) A vehicle licence may be taken out for a vehicle for a period of six months running from the beginning of the month in which the licence first has effect if—
(a) the annual rate of vehicle excise duty in respect of the vehicle exceeds £50, or
(b) the vehicle is one to which the annual rate of vehicle excise duty specified in paragraph 11C(2)(a) of Schedule 1 applies (tractive units: special cases).”

(2) The amendment made by this section has effect in relation to licences taken out on or after 1 April 2014.

88 Vehicles subject to HGV road user levy: amount of 6 month licence
(1) Section 4 of VERA 1994 (amount of duty) is amended as follows.
(2) In subsection (2), for “Where” substitute “ Subject to subsection (2A), where ”.
(3) After subsection (2) insert—

“(2A) In the case of a vehicle which is charged to HGV road user levy, the reference in subsection (2) to fifty-five per cent is to be read as a reference to fifty per cent.”

(4) The amendments made by this section have effect in relation to licences taken out on or after 1 April 2014.

89 Payment of vehicle excise duty by direct debit
(1) VERA 1994 is amended as follows.
(2) In section 4 (amount of duty) for subsections (1) to (2A) substitute—

“(1) Where a vehicle licence for a vehicle of any description is taken out for a period of 12 months, vehicle excise duty is to be paid on the licence—
(a) at the annual rate of duty applicable to vehicles of that description, or
(b) if the duty is to be paid by more than one instalment pursuant to an agreement under section 19B, at a rate equal to 105% of that annual rate.
(2) Subject to subsection (2A), where a vehicle licence for a vehicle of any description is taken out for a period of 6 months, vehicle excise duty is to be paid on the licence—
(a) at a rate equal to 55% of the annual rate of duty applicable to vehicles of that description, or
(b) if the duty is to be paid by direct debit pursuant to an agreement under section 19B, at a rate equal to 52.5% of that annual rate.
(2A) In the case of a vehicle which is charged to HGV road user levy, the reference in subsection (2)(a) to 55% is to be read as a reference to 50%.”

(3) In section 13 (trade licences: duration and amount of duty)—
(a) in subsection (3), after “calendar year” insert “ (“the applicable annual rate”) ”,
(b) after subsection (3) insert—

“(3A) Where a trade licence is taken out for a calendar year and the duty is to be paid by more than one instalment pursuant to an agreement under section 19B, the rate of duty is 105% of the applicable annual rate.”

,
(c) for subsection (4) substitute—

“(4) The rate of duty applicable to a trade licence taken out for a period of 6 months is—
(a) 55% of the applicable annual rate for a corresponding trade licence taken out for a calendar year, or
(b) if the duty is to be paid by direct debit pursuant to an agreement under section 19B, 52.5% of that applicable annual rate.”

,
(d) in subsection (5)(a), for “rate applicable to the” substitute “ applicable annual rate for a ”, and
(e) in subsection (6), for “subsection (4)” substitute “ subsection (3A), (4) ”.
(4) In section 13 (trade licences: duration and amount of duty) as set out in paragraph 8(1) of Schedule 4 to VERA 1994 to have effect on and after a day appointed by order—
(a) in subsection (4), after “twelve months” insert “ (“the applicable annual rate”) ”,
(b) after subsection (4) insert—

“(4A) Where a trade licence is taken out for a period of 12 months and the duty is to be paid by more than one instalment pursuant to an agreement under section 19B, the rate of duty is 105% of the applicable annual rate.”

,
(c) for subsection (5) substitute—

“(5) The rate of duty applicable to a trade licence taken out for a period of 6 months is—
(a) 55% of the applicable annual rate for a corresponding trade licence taken out for 12 months, or
(b) if the duty is to be paid by direct debit pursuant to an agreement under section 19B, 52.5% of that applicable annual rate.”

, and
(d) in subsection (6), for “subsection (5)” substitute “ subsection (4A) or (5) ”.
(5) In section 19A (payment by cheque)—
(a) in subsection (2)(b) omit “by post”, and
(b) in subsection (3)(b) and (d) omit “by post”.
(6) In section 19B (issue of licences before payment of duty)—
(a) after subsection (1) insert—

“(1A) An agreement to pay the duty payable on a vehicle licence or a trade licence may provide—
(a) for the duty to be paid by instalments,
(b) that if any of the rebate conditions in section 19(3) is satisfied in relation to the vehicle for which the licence was issued, the licence is to cease to be in force from the time specified in the agreement and any instalments falling due after that time are no longer to be due, and
(c) for any instalments falling due after a request under section 14(2) is received by the Secretary of State no longer to be due.”

,
(b) in subsection (2)(c) omit “by post”,
(c) in subsection (3)(b) and (d) omit “by post”, and
(d) after subsection (3) insert—

“(4) But subsections (2) and (3) do not apply in a case where the agreement under subsection (1) provides for the duty payable to be paid by more than one instalment (and for this case see subsection (5)).
(5) In a case where—
(a) a vehicle licence or a trade licence is issued to a person in accordance with subsection (1),
(b) the duty payable on the licence is not received by the Secretary of State in accordance with the agreement,
(c) the agreement provides for the duty payable to be paid by more than one instalment,
(d) the Secretary of State sends a notice to the person requiring the person to secure that the duty payable on the licence (both in respect of instalments which have fallen due and in respect of future instalments) is paid within the period specified in the notice,
(e) the requirement in the notice is not complied with, and
(f) the Secretary of State sends a further notice to the person informing that person that the licence is void from the time specified in the notice,
the licence is to be void from the time specified.”

(7) In section 35A (dishonoured cheques)—
(a) in subsection (1)(a), for “or 19B(3)(d)” substitute “ , 19B(3)(d) or 19B(5)(f) ”,
(b) after subsection (7) insert—

“(8) In a case where a notice is sent as mentioned in section 19B(5)(f) the amounts specified in subsections (2)(b) and (4) are to be calculated on the basis of the rate described in section 4(1)(b) or 13(3A) (whichever is relevant).”

, and
(c) in the heading, for “Dishonoured cheques” substitute “ Failed payments ”.
(8) In section 36 (dishonoured cheques: additional liability)—
(a) after subsection (6) insert—

“(7) In a case where a notice is sent as mentioned in section 19B(5)(f) the amount specified in subsection (2) is to be calculated on the basis of the rate described in section 4(1)(b) or 13(3A) (whichever is relevant).”

, and
(b) in the heading, for “Dishonoured cheques” substitute “ Failed payments ”.
(9) In Schedule 4 (transitionals etc), after paragraph 8(3) insert—

“(4) In cases in which the provisions set out in sub-paragraph (1) have effect, sections 35A(8) and 36(7) are to be read as referring to section 13(4A) instead of section 13(3A).”

(10) The amendments made by this section come into force on 1 October 2014.

90 Definition of “revenue weight”
(1) VERA 1994 is amended as follows.
(2) In section 60A (revenue weight), in subsection (9)(b)—
(a) for “at which” substitute “ which must not be equalled or exceeded in order for ”, and
(b) for “may lawfully” substitute “ to lawfully ”.
(3) In section 61 (vehicle weights)—
(a) in subsection (1)(b), after “not be” insert “ equalled or ”, and
(b) in subsection (2), after “not be” insert “ equalled or ”.
(4) The amendments made by this section have effect in relation to licences taken out on or after 1 April 2014.

91 Vehicle excise and registration: other provisions
Schedule 19 contains other provisions relating to vehicle excise and registration.

HGV road user levy

92 HGV road user levy: rates tables
(1) Schedule 1 to the HGV Road User Levy Act 2013 (rates of HGV road user levy) is amended as follows.
(2) In paragraph 4, for “is Band G” substitute

“is—
(a) Band E(T), in the case of a rigid goods vehicle which is a relevant rigid goods vehicle within the meaning of paragraph 10 of Schedule 1 to the 1994 Act (rigid goods vehicles used for drawing trailers of more than 4,000 kilograms), and
(b) Band G, in all other cases.”

(3) For Tables 2 to 5 substitute—

“Table 2: rigid goods vehicle
Revenue weight of vehicle		2 axle vehicle	3 axle vehicle	4 or more axle vehicle
More than	Not more than			
kgs	kgs	Band	Band	Band
11,999	15,000	B	B	B
15,000	21,000	D	B	B
21,000	23,000	D	C	B
23,000	25,000	D	D	C
25,000	27,000	D	D	D
27,000	44,000	D	D	E

Table 3: rigid goods vehicle with trailer over 4,000 kgs
Revenue weight of vehicle		2 axle vehicle	3 axle vehicle	4 or more axle vehicle
More than	Not more than			
kgs	kgs	Band	Band	Band
11,999	15,000	B(T)	B(T)	B(T)
15,000	21,000	D(T)	B(T)	B(T)
21,000	23,000	E(T)	C(T)	B(T)
23,000	25,000	E(T)	D(T)	C(T)
25,000	27,000	E(T)	D(T)	D(T)
27,000	44,000	E(T)	E(T)	E(T)

Table 4: tractive units with two axles
Revenue weight of tractive vehicle		Any no of semi-trailer axles	2 or more semi-trailer axles	3 or more semi-trailer axles
More than	Not more than			
kgs	kgs	Band	Band	Band
11,999	25,000	A	A	A
25,000	28,000	C	A	A
28,000	31,000	D	D	A
31,000	34,000	E	E	C
34,000	38,000	F	F	E
38,000	44,000	G	G	G

Table 5: tractive unit with three or more axles
Revenue weight of tractive vehicle		Any no of semi-trailer axles	2 or more semi-trailer axles	3 or more semi-trailer axles
More than	Not more than			
kgs	kgs	Band	Band	Band
11,999	28,000	A	A	A
28,000	31,000	C	A	A
31,000	33,000	E	C	A
33,000	34,000	E	D	A
34,000	36,000	E	D	C
36,000	38,000	F	E	D
38,000	44,000	G	G	E”

(4) The amendments made by this section are treated as having come into force on 1 April 2014.

93 HGV road user levy: disclosure of information by HMRC
(1) After section 14 of the HGV Road User Levy Act 2013 insert—

“14A Disclosure of information by Revenue and Customs
(1) Information which is held as mentioned in section 18(1) of the Commissioners for Revenue and Customs Act 2005 (confidentiality) may be disclosed by or with the authority of the Commissioners for Her Majesty's Revenue and Customs to—
(a) the Secretary of State, or
(b) a person providing services to the Secretary of State,
for the purpose of enabling or assisting the exercise of any of the Secretary of State's functions under or by virtue of this Act.
(2) Information disclosed in accordance with subsection (1) may not be further disclosed except—
(a) to any other person to whom it could have been disclosed in accordance with that subsection, or
(b) with the consent of the Commissioners for Her Majesty's Revenue and Customs (which may be general or specific).
(3) If, in contravention of subsection (2), any revenue and customs information relating to a person is disclosed and the identity of the person—
(a) is specified in the disclosure, or
(b) can be deduced from it,
section 19 of the Commissioners for Revenue and Customs Act 2005 (offence of wrongful disclosure) applies as it applies in relation to a disclosure of such information in contravention of section 20(9) of that Act.
(4) In subsection (3) “revenue and customs information relating to a person” has the meaning given by section 19(2) of the Commissioners for Revenue and Customs Act 2005.
(5) Nothing in this section authorises the making of a disclosure which contravenes the Data Protection Act 1998.”

(2) In regulation 2 of the HGV Road User Levy (HMRC Information Gateway) Regulations 2013 (S.I. 2013/3186), omit paragraphs (1) and (2).

Aggregates levy

94 Aggregates levy: removal of certain exemptions
(1) FA 2001 is amended as follows.
(2) Section 17 (meaning of “aggregate” and “taxable aggregate”) is amended as follows.
(3) In subsection (3)—
(a) after paragraph (da) insert—

“(db) it consists wholly of the spoil or waste from, or other by-products of—
(i) any industrial combustion process, or
(ii) the smelting or refining of metal;”

, and
(b) omit paragraphs (e) and (f).
(4) In subsection (4), omit—
(a) paragraphs (a) and (c), and
(b) in paragraph (f), “clay”.
(5) Section 18 (exempt processes) is amended as follows.
(6) In subsection (1)—
(a) in paragraph (a), for the words from “references” to “but” substitute “references to—
(i) the spoil, waste, off-cuts and other by-products resulting from the application of any exempt process to any aggregate, and
(ii) any relevant substance extracted or otherwise separated as a result of the application of any exempt process within subsection (2)(b) to any aggregate; but”, and
(b) in paragraph (b), for “such” substitute “ exempt ”.
(7) In subsection (2), after paragraph (c) insert—

“(d) the use of clay or shale in the production of ceramic construction products;
(e) the use of gypsum or anhydrite in the production of plaster, plasterboard or related products.”

(8) Section 19 (commercial exploitation) is amended as follows.
(9) In subsection (1), after “aggregate” insert “ not falling within subsection (1B) ”.
(10) After that subsection insert—

“(1A) For the purposes of this Part a quantity of aggregate falling within subsection (1B) is subjected to exploitation if, and only if—
(a) it is removed from a site falling within subsection (2) in a case where the person removing it intends that it should be used (by any person) for construction purposes;
(b) it becomes subject to an agreement to supply it to a person who intends that it should be used (by any person) for construction purposes;
(c) it is used for construction purposes; or
(d) it is mixed, otherwise than in permitted circumstances, with any material other than water for the purpose of its use for construction purposes.
(1B) A quantity of aggregate falls within this subsection if—
(a) it consists wholly of a relevant substance listed in section 18(3) which results from the application to any aggregate of an exempt process within section 18(2)(b);
(b) it consists mainly of the spoil or waste from, or other by-products of—
(i) any industrial combustion process, or
(ii) the smelting or refining of metal; or
(c) it consists wholly or mainly of clay, coal, lignite, slate or shale.”

(11) In section 22 (responsibility for exploitation of aggregate), in subsection (1) for paragraphs (c) and (d) substitute—

“(c) in the case of the exploitation of a quantity of aggregate not falling within section 19(1B) by its being subjected, at a time when it is not on its originating site or a connected site, to any agreement, the person agreeing to supply it;
(ca) in the case of the exploitation of a quantity of aggregate falling within section 19(1B) by its being subjected, at a time when it is not on its originating site or a connected site, to any agreement, the person agreeing to supply it and the person to whom it is agreed to be supplied;
(cb) in the case of the exploitation of a quantity of aggregate by its being used, at a time when it is not on its originating site or a connected site, for construction purposes, the person using it for construction purposes;
(cc) in the case of the exploitation of a quantity of aggregate not falling within section 19(1B) by its being subjected, at a time when it is on its originating site or a connected site, to any agreement, the person mentioned in paragraph (c) and (if different) the operator of that site;
(cd) in the case of the exploitation of a quantity of aggregate falling within section 19(1B) by its being subjected, at a time when it is on its originating site or a connected site, to any agreement, the persons mentioned in paragraph (ca) and (if different) the operator of that site;
(ce) in the case of the exploitation of a quantity of aggregate by its being used, at a time when it is on its originating site or a connected site, for construction purposes, the person mentioned in paragraph (cb) and (if different) the operator of that site;”

.
(12) The amendments made by subsections (1) to (11) are treated as having come into force on 1 April 2014.

95 Aggregates levy: power to restore exemptions
(1) The Treasury may by order provide that Part 2 of FA 2001 (the aggregates levy) is to have effect subject to such amendments as the Treasury consider necessary to secure that any of the exemptions that are removed as a result of the amendments made by section 94 is to any extent restored.
(2) An order under this section—
(a) may provide for the restoration of an exemption to have effect in relation to commercial exploitation to which a quantity of aggregate is subjected on or after a day which is earlier than the day on which the order is made;
(b) may make such supplementary, incidental, consequential or transitional provision as the Treasury think fit.
(3) An order under this section is to be made by statutory instrument.
(4) A statutory instrument containing an order under this section is subject to annulment in pursuance of a resolution of the House of Commons.

Climate change levy

96 Climate change levy: main rates for 2015-16
(1) In paragraph 42(1) of Schedule 6 to FA 2000 (climate change levy: amount payable by way of levy) for the table substitute—

“TABLE
Taxable commodity supplied	Rate at which levy payable if supply is not a reduced-rate supply
Electricity	£0.00554 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	£0.00193 per kilowatt hour
Any petroleum gas, or other gaseous hydrocarbon, supplied in a liquid state	£0.01240 per kilogram
Any other taxable commodity	£0.01512 per kilogram”

(2) The amendment made by this section has effect in relation to supplies treated as taking place on or after 1 April 2015.

97 Climate change levy: carbon price support rates for 2014-15 and 2015-16
(1) Paragraph 42A of Schedule 6 to FA 2000 (climate change levy: carbon price support rates) is amended as follows.
(2) In the table in sub-paragraph (3), as substituted by paragraph 23 of Schedule 42 to FA 2013, for “ £0.85489 per gigajoule ” substitute “£0.81906 per gigajoule”.
(3) The amendment made by subsection (2) has effect in relation to supplies treated as taking place on or after 1 April 2014.
(4) In the table in sub-paragraph (3), as substituted by paragraph 24 of Schedule 42 to FA 2013, for “ £1.62534 per gigajoule ” substitute “£1.56860 per gigajoule”.
(5) The amendment made by subsection (4) has effect in relation to supplies treated as taking place on or after 1 April 2015.

98 Climate change levy: carbon price support rates for 2016-17
(1) In paragraph 42A of Schedule 6 to FA 2000 (climate change levy: carbon price support rates) for sub-paragraph (3) substitute—

“(3) The carbon price support rates are as follows.
Carbon price support rate commodity	Carbon price support rate
Any gas in a gaseous state that is of a kind supplied by a gas utility	£0.00331 per kilowatt hour
Any petroleum gas, or other gaseous hydrocarbon, in a liquid state	£0.05280 per kilogram
Any commodity falling within paragraph 3(1)(d) to (f)	£1.54790 per gigajoule”

(2) The amendment made by this section has effect in relation to supplies treated as taking place on or after 1 April 2016.

99 Climate change levy: exemptions: mineralogical & metallurgical processes etc
Schedule 20 makes provision in relation to climate change levy.

Landfill tax

100 Rates 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 “£80” substitute “ £82.60 ”.
(3) In subsection (2) (reduced rate for disposal of qualifying material)—
(a) for “£80” substitute “ £82.60 ”, and
(b) for “£2.50” substitute “ £2.60 ”.
(4) The amendments made by this section have effect in relation to disposals made (or treated as made) on or after 1 April 2015.

Excise and customs duties: general

101 Goods carried as stores
Schedule 21 contains provision about goods shipped or carried as stores on ships or aircraft.

102 Penalties under section 26 of FA 2003: extension to excise duty
(1) In this section—
“dutiable excise goods” means goods of a class or description subject to any duty of excise, whether or not those goods are in fact chargeable with that duty, and whether or not that duty has been paid on the goods;
“relevant excise rule” means any duty, obligation, requirement or condition imposed by section 78 of CEMA 1979 (customs and excise control of persons entering or leaving the United Kingdom), so far as that section relates to—
(a) dutiable excise goods a person has obtained outside the United Kingdom, or
(b) dutiable excise goods a person has obtained in the United Kingdom without payment of excise duty,
and in respect of which the person is not entitled to exemption from excise duty by virtue of any order under section 13 of the Customs and Excise Duties (General Reliefs) Act 1979 (personal reliefs).
(2) Sections 26 and 27 and 29 to 41 of FA 2003 (taxes and duties on importation and exportation: penalties) apply in relation to excise duty as they apply in relation to a relevant tax or duty (as defined by section 24(2) of that Act) except that, for this purpose, “relevant rule” in sections 26 and 33 means a relevant excise rule.

Value added tax

103 VAT: special schemes
Schedule 22 contains provision about the supply of electronic services, broadcasting services and telecommunication services.

104 VAT: place of belonging
(1) Section 9 of VATA 1994 (place where supplier or recipient of services belongs) is amended as follows.
(2) In subsection (3)(c), after “usual place of residence” insert “ or permanent address ”.
(3) In subsection (5), for the words from “belonging” to the end substitute

“belonging—
(a) in the country in which the person's usual place of residence or permanent address is (except in the case of a body corporate or other legal person);
(b) in the case of a body corporate or other legal person, in the country in which the place where it is established is.”

(4) For subsection (6) substitute—

“(6) The reference in subsection (5)(b) to the place where a body corporate or other legal person “is established” is to be read in accordance with Article 13a of Implementing Regulation (EU) No 282/2011 (which is inserted by Council Implementing Regulation (EU) No 1042/2013).”

(5) The amendments made by this section have effect in relation to supplies made on or after 1 January 2015.

105 VAT: place of supply orders: disapplication of transitional provision
(1) Section 97A of VATA 1994 (place of supply orders: transitional provision) is to be ignored for the purpose of giving effect to any new order under section 7A(6) of that Act which—
(a) is expressed as having effect in relation to supplies made on or after 1 January 2015, and
(b) makes provision about the place of supply of electronically supplied services, telecommunication services and radio and television broadcasting services.
(2) In subsection (1) “new order” means an order made on or after the day on which this Act is passed.
(3) Subsection (1) applies only so far as the order makes provision about supplies to which Article 2 of Council Implementing Regulation (EU) No 1042/2013 (transitional provision for changes in the law affecting electronically supplied, telecommunication and radio and television broadcasting services) applies.

106 VAT: supply of services through agents
(1) Section 47 of VATA 1994 (agents) is amended as follows.
(2) In subsection (3), after “services” insert “ , other than electronically supplied services and telecommunication services, ”.
(3) After subsection (3) insert—

“(4) Where electronically supplied services or telecommunication services are supplied through an agent, the supply is to be treated both as a supply to the agent and as a supply by the agent.
(5) For the purposes of subsection (4) “agent” means a person (“A”) who acts in A's own name but on behalf of another person within the meaning of Article 28 of Council Directive 2006/112/EC on the common system of value added tax.
(6) In this section “electronically supplied services” and “telecommunication services” have the same meaning as in Schedule 4A (see paragraph 9(3) and (4) and paragraph 8(2) of that Schedule).”

(4) The amendments made by this section have effect in relation to supplies made on or after 1 January 2015.

107 VAT: refunds to health service bodies
(1) In section 41(7) of VATA 1994 (application to the Crown: list of bodies regarded as Government departments) after “Excellence” insert “ , Health Education England (established by the Care Act 2014), and the Health Research Authority (also established by that Act), ”.
(2) In section 41(7) of VATA 1994 as amended by subsection (1)—
(a) for “above,” substitute

“—
(a)”

,
(b)

“for the “and” after “1990,” substitute—
(b)”

,
(c) after “1978” insert

“,
(c)”

,
(d) for the “and” after “foundation trust” substitute

“,
(d)”

,
(e) for the “and” after “Care Trust” substitute

“,
(e)”

,
(f) for the “and” after “Health Board” substitute

“,
(f)”

,
(g) after “group,” insert—

“(g)”

,
(h) after “Centre,” insert—

“(h)”

,
(i) for the “and” after “Commissioning Board” substitute

“,
(i)”

,
(j) before “Health Education England” insert—

“(j)”

,
(k) before “the Health Research Authority” insert—

“(k)”

,
(l) the words from “shall be regarded” to the end are to follow, rather than form part of, the paragraph (k) so formed, and
(m) in those words, for “shall” substitute “ are each to ”.

108 VAT: prompt payment discounts
(1) In Part 2 of Schedule 6 to VATA 1994 (valuation: special cases), for paragraph 4 (prompt payment discounts), substitute—

“4
(1) Sub-paragraph (2) applies where—
(a) goods or services are supplied for a consideration which is a price in money,
(b) the terms on which those goods or services are so supplied allow a discount for prompt payment of that price,
(c) payment of that price is not made by instalments, and
(d) payment of that price is made in accordance with those terms so that the discount is realised in relation to that payment.
(2) For the purposes of section 19 (value of supply of goods or services) the consideration is the discounted price paid.”

(2) The amendment made by this section has effect in relation to relevant supplies made on or after 1 May 2014.
(3) The Treasury may by order made by statutory instrument provide that the amendment has effect in relation to supplies of a description specified in the order made on or after a date so specified (being a date before 1 April 2015).
(4) Subject to that, the amendment has effect in relation to supplies made on or after 1 April 2015.
(5) In this section—
“relevant supply” means a supply of radio or television broadcasting services or telecommunication services made by a taxable person who is not required by or under any enactment to provide a VAT invoice to the person supplied;
“telecommunication services” has the same meaning as in paragraph 8(2) of Schedule 4A to VATA 1994.

Stamp duty land tax and annual tax on enveloped dwellings

109 ATED: reduction in threshold from 1 April 2015
(1) Part 3 of FA 2013 (annual tax on enveloped dwellings) is amended as follows.
(2) In section 94(2)(a) (charge to tax), for “£2 million” substitute “ £1 million ”.
(3) In section 99 (amount of tax chargeable), in the table in subsection (4), before the first entry insert—

“£7,000	More than £1 million but not more than £2 million.”

(4) The amendments made by subsections (1) to (3) have effect for chargeable periods beginning on or after 1 April 2015.
(5) In a case where tax is charged for the chargeable period beginning with 1 April 2015 with respect to a single-dwelling interest the taxable value of which on the relevant day (see section 99(5) of FA 2013) is not more than £2 million, sections 159 and 163 of FA 2013 have effect with the following modifications.
(6) Section 159 (annual tax on enveloped dwellings return) has effect as if for subsections (2) and (3) there were substituted—

“(2) A return under subsection (1) must be delivered by the end of 1 October 2015 if the days on which the person is within the charge with respect to the interest include 1 April 2015.
(3) If the days on which the person is within the charge with respect to the interest do not include 1 April 2015, the return must be delivered—
(a) by the end of 1 October 2015, or
(b) by the end of the period of 30 days beginning with the first day in the chargeable period on which the person is within the charge with respect to the interest,
whichever is the later.”

(7) Section 163 (payment of tax) has effect as if for subsection (1) there were substituted—

“(1) Tax charged on a person under section 99 with respect to a single-dwelling interest must be paid—
(a) by the end of 31 October 2015, or
(b) if later, by the end of the filing date for the return.”

110 ATED: further reduction in threshold from 1 April 2016
(1) Part 3 of FA 2013 (annual tax on enveloped dwellings) is amended as follows.
(2) In section 94(2)(a) (charge to tax), for “£1 million” substitute “ £500,000 ”.
(3) In section 99 (amount of tax chargeable), in the table in subsection (4), before the first entry insert—

“£3,500	More than £500,000 but not more than £1 million.”

(4) The amendments made by this section have effect for chargeable periods beginning on or after 1 April 2016.

111 SDLT: threshold for higher rate applying to certain transactions
(1) Schedule 4A to FA 2003 (SDLT: higher rate for certain transactions) is amended as follows.
(2) In paragraph 1(2) (meaning of “higher threshold interest”) for “£2,000,000” substitute “ £500,000 ”.
(3) In consequence of the amendment made by subsection (2), in the following provisions, for “£2,000,000” substitute “ £500,000 ”
(a) paragraph 4(1)(c);
(b) paragraph 6(2);
(c) paragraph 6(3)(b).
(4) The amendments made by this section have effect in relation to any chargeable transaction of which the effective date is on or after 20 March 2014.
(5) But the amendments do not have effect in relation to a transaction—
(a) effected in pursuance of a contract entered into and substantially performed before 20 March 2014,
(b) effected in pursuance of a contract entered into before that date and not excluded by subsection (6), or
(c) excepted by subsection (7).
(6) A transaction effected in pursuance of a contract entered into before 20 March 2014 is excluded by this subsection if—
(a) there is any variation of the contract, or assignment (or assignation) of rights under the contract, on or after 20 March 2014,
(b) the transaction is effected in consequence of the exercise on or after that date of any option, right of pre-emption or similar right, or
(c) on or after that date there is an assignment (or assignation), subsale or other transaction relating to the whole or part of the subject-matter of the contract as a result of which a person other than the purchaser under the contract becomes entitled to call for a conveyance.
(7) A transaction treated as occurring under paragraph 17(2) or 17A(4) of Schedule 15 to FA 2003 (partnerships) is excepted by this subsection if the effective date of the land transfer referred to in sub-paragraph (1)(a) of the paragraph concerned is before 20 March 2014.

112 SDLT: exercise of collective rights by tenants of flats
(1) In section 74 of FA 2003 (exercise of collective rights by tenants of flats), in subsection (1A) for “£2,000,000”, in each place it occurs, substitute “ £500,000 ”.
(2) The amendments made by this section have effect in relation to any chargeable transaction of which the effective date is on or after 1 July 2014.
(3) But the amendments do not have effect in relation to a transaction—
(a) effected in pursuance of a contract entered into and substantially performed before 20 March 2014, or
(b) effected in pursuance of a contract entered into before that date and not excluded by subsection (4).
(4) A transaction effected in pursuance of a contract entered into before 20 March 2014 is excluded by this subsection if—
(a) there is any variation of the contract, or assignment (or assignation) of rights under the contract, on or after 20 March 2014,
(b) the transaction is effected in consequence of the exercise on or after that date of any option, right of pre-emption or similar right, or
(c) on or after that date there is an assignment (or assignation), subsale or other transaction relating to the whole or part of the subject-matter of the contract as a result of which a person other than the purchaser under the contract becomes entitled to call for a conveyance.

113 SDLT: charities relief
Schedule 23 amends Schedule 8 to FA 2003 (stamp duty land tax: charities relief).

Stamp duty reserve tax and stamp duty

114 Abolition of SDRT on certain dealings in collective investment schemes
(1) Part 2 of Schedule 19 to FA 1999 (which provides for a charge to stamp duty reserve tax on certain dealings with units in unit trusts) is omitted.
(2) In section 90(1B) of FA 1986 (exception to charge to stamp duty reserve tax on certain agreements to transfer property from a unit trust)—
(a) after “unit trust scheme” insert “ if the unit holder is to receive only such part of each description of asset in the trust property as is proportionate to, or as nearly as practicable proportionate to, the unit holder's share. ”, and
(b) for the second sentence substitute “For these purposes there is a surrender of a unit where—

“(a) a person (“P”) authorises or requires the trustees or managers of a unit trust scheme to treat P as no longer interested in a unit under the scheme, or
(b) a unit under the unit trust scheme is transferred to the managers of the scheme,
and the unit is a chargeable security.”

(3) Accordingly—
(a) in FA 1999, in section 123(3), for “Parts I to III” substitute “ Parts I and III ”,
(b) in FA 2001, omit sections 93 and 94,
(c) in FA 2004, in Schedule 35, omit paragraph 46 and the italic heading before that paragraph,
(d) in FA 2005, omit section 97(3), (4) and (6), and
(e) in FA 2010, in Schedule 6, omit paragraph 15(2).
(4) The amendments made by this section have effect in relation to surrenders made or effected on or after 30 March 2014.
(5) Provision made by regulations under section 98 of FA 1986, section 152 of FA 1995 or section 17 of F(No.2)A 2005 in connection with the coming into force of this section may be made so as to have effect in relation to surrenders made or effected on or after 30 March 2014 (even if the regulations are made after that date).
(6) In subsections (4) and (5) a reference to surrenders is to be read in accordance with paragraph 2 of Schedule 19 to FA 1999.

115 Abolition of stamp duty and SDRT: securities on recognised growth markets
Schedule 24 contains provision abolishing stamp duty and stamp duty reserve tax on instruments and transfers of securities traded on recognised growth markets.

116 Temporary statutory effect of House of Commons resolution
(1) Section 50 of FA 1973 (temporary statutory effect of House of Commons resolution affecting stamp duties) is amended as follows.
(2) In subsection (2), for paragraph (c) (and the “and” after it) substitute—

“(c) the dissolution of Parliament;
(ca) the prorogation of Parliament in a case where subsection (2B) does not apply; and”

.
(3) In that subsection, in paragraph (d), for “six” substitute “ seven ”.
(4) After that subsection insert—

“(2A) Subsection (2B) applies where Parliament is prorogued at the end of a session if—
(a) during the session a Bill containing provisions to the same effect as the resolution is read a second time by the House or a Bill is amended (whether by the House or a Committee of the House or a Public Bill Committee) so as to include such provisions,
(b) the Standing Orders or Sessional Orders of the House provide, or during the session the House orders, that proceedings on the Bill not completed before the end of the session shall be resumed in the next session, and
(c) proceedings on the Bill are not completed during the session.
(2B) A resolution shall cease to have statutory effect under this section if, during the period of thirty sitting days beginning with the first sitting day of the next session, no Bill containing provisions to the same effect as the resolution is presented to the House.
(2C) In subsection (2B) “sitting day” means a day on which the House sits.
(2D) Where a Bill is amended as mentioned in subsection (2A)(a), it does not matter for the purposes of subsection (2A)(b) if the House orders as mentioned in subsection (2A)(b) before the amendment to the Bill is made.”

Inheritance tax

117 Inheritance tax
Schedule 25 contains provision about inheritance tax.

Estate duty

118 Gifts to the nation: estate duty
(1) In Schedule 14 to FA 2012 (gifts to the nation), before paragraph 33 insert—

“32A
(1) This paragraph applies where a person (“the donor”) makes a qualifying gift of an object in circumstances where, had the donor instead sold the object to an individual at market value, a charge to estate duty would have arisen under section 40 of FA 1930 on the proceeds of sale.
(2) At the time when the gift is made, estate duty becomes chargeable under that section as if the gift were such a sale (subject to any limitation imposed by paragraph 33(2)).
(3) In the application of this paragraph to Northern Ireland, the references to section 40 of FA 1930 are to be read as references to section 2 of the Finance Act (Northern Ireland) 1931.”

(2) Subsection (3) applies where a person (“the donor”) has, before the day on which this Act is passed, made a qualifying gift of an object in circumstances where, had the donor instead sold the object to an individual at market value, a charge to estate duty would have arisen under section 40 of FA 1930 on the proceeds of sale.
(3) No liability to estate duty under section 40 of FA 1930 arises in respect of the object on or after the day on which this Act is passed.
(4) In subsection (2) “qualifying gift” has the same meaning as in Schedule 14 to FA 2012.
(5) In the application of subsections (2) and (3) to Northern Ireland, the references to section 40 of FA 1930 are to be read as references to section 2 of the Finance Act (Northern Ireland) 1931.

Bank levy

119 Bank levy: rates from 1 January 2014
(1) Schedule 19 to FA 2011 (bank levy) is amended as follows.
(2) In paragraph 6 (steps for determining the amount of the bank levy), in sub-paragraph (2)—
(a) for “0.065%” substitute “ 0.078% ”, and
(b) for “0.130%” substitute “ 0.156% ”.
(3) In paragraph 7 (special provision for chargeable periods falling wholly or partly before 1 January 2013)—
(a) in sub-paragraph (1) for “2013” substitute “ 2014 ”,
(b) in sub-paragraph (2), in the first column of the table in the substituted Step 7, for “ Any time on or after 1 January 2013 ” substitute “1 January 2013 to 31 December 2013”, and
(c) at the end of that table add—

“Any time on or after 1 January 2014	0.078%	0.156%”

;
and in the italic heading immediately before paragraph 7, for “2013” substitute “ 2014 ”.
(4) Section 203 of FA 2013 (bank levy rates from 1 January 2014) is repealed.
(5) The amendments made by subsections (2) to (4) are treated as having come into force on 1 January 2014 (and accordingly the section repealed by subsection (4) is treated as never having come into force).
(6) Subsections (7) to (13) apply where—
(a) an amount of the bank levy is treated as if it were an amount of corporation tax chargeable on an entity (“E”) for an accounting period of E,
(b) the chargeable period in respect of which the amount of the bank levy is charged falls (or partly falls) on or after 1 January 2014, and
(c) under the Instalment Payment Regulations, one or more instalment payments, in respect of the total liability of E for the accounting period, were treated as becoming due and payable before the commencement date (“pre-commencement instalment payments”).
(7) Subsections (1) to (5) are to be ignored for the purpose of determining the amount of any pre-commencement instalment payment.
(8) If there is at least one instalment payment, in respect of the total liability of E for the accounting period, which under the Instalment Payment Regulations is treated as becoming due and payable on or after the commencement date (“post-commencement instalment payments”), the amount of that instalment payment, or the first of them, is to be increased by the adjustment amount.
(9) If there are no post-commencement instalment payments, a further instalment payment, in respect of the total liability of E for the accounting period, of an amount equal to the adjustment amount is to be treated as becoming due and payable at the end of the period of 30 days beginning with the commencement date.
(10) “The adjustment amount” is the difference between—
(a) the aggregate amount of the pre-commencement instalments determined in accordance with subsection (7), and
(b) the aggregate amount of those instalment payments determined ignoring subsection (7) (and so taking account of subsections (1) to (5)).
(11) In the Instalment Payment Regulations—
(a) in regulations 6(1)(a), 7(2), 8(1)(a) and (2)(a), 9(5), 10(1), 11(1) and 13, references to regulation 4A, 4B, 4C, 4D, 5, 5A or 5B of those Regulations are to be read as including a reference to subsections (6) to (10) (and in regulation 7(2) “the regulation in question”, and in regulation 8(2) “that regulation”, are to be read accordingly), and
(b) in regulation 9(3), the reference to those Regulations is to be read as including a reference to subsections (6) to (10).
(12) In section 59D of TMA 1970 (general rule as to when corporation tax is due and payable), in subsection (5), the reference to section 59E is to be read as including a reference to subsections (6) to (11).
(13) In this section—
“the chargeable period” is to be construed in accordance with paragraph 4 or (as the case may be) 5 of Schedule 19 to FA 2011;
“the commencement date” means the day on which this Act is passed;
“the Instalment Payment Regulations” means the Corporation Tax (Instalment Payments) Regulations 1998 (S.I. 1998/3175);
and references to the total liability of E for an accounting period are to be construed in accordance with regulation 2(3) of the Instalment Payment Regulations.

120 Bank levy: miscellaneous changes
Schedule 26 contains miscellaneous changes to the bank levy.

Gaming duty

121 Rates of gaming duty
(1) In section 11(2) of FA 1997 (rates of gaming duty) for the table substitute—

“TABLE
Part of gross gaming yield	Rate
The first £2,302,000	15 per cent
The next £1,587,000	20 per cent
The next £2,779,000	30 per cent
The next £5,865,500	40 per cent
The remainder	50 per cent”

(2) The amendment made by this section has effect in relation to accounting periods beginning on or after 1 April 2014.

Bingo duty

122 Rate of bingo duty
(1) In section 17(1)(b) of BGDA 1981 (bingo duty chargeable at 20 per cent of bingo promotion profits), for “20” substitute “ 10 ”.
(2) The amendment made by subsection (1) has effect in relation to accounting periods beginning on or after 30 June 2014.

123 Exemption from bingo duty: small-scale amusements provided commercially
(1) In paragraph 5(1) of Schedule 3 to BGDA 1981 (exemptions from bingo duty for small-scale amusements provided commercially), for paragraph (b) substitute—

“(b) on any premises if, for the time being—
(i) a machine in respect of which a person is liable for machine games duty is located on the premises, and
(ii) an adult gaming centre premises licence issued under Part 8 of the Gambling Act 2005 (see section 150(1)(c)) is in force in respect of the premises; or”

.
(2) The amendment made by this section has effect in relation to games of bingo which begin to be played on or after the day on which this Act is passed.

Machine games duty

124 Rates of machine games duty
(1) Schedule 24 to FA 2012 is amended as follows.
(2) For paragraph 5 substitute—

“5 Types of machine
(1) Machines are divided into three types for the purposes of machine games duty.
(2) A machine is a “type 1 machine” if it can be demonstrated that—
(a) the highest charge payable for playing a dutiable machine game on the machine does not exceed 20p, and
(b) the maximum amount of cash that can be won from playing a dutiable machine game on the machine does not exceed £10.
(3) A machine is a “type 2 machine” if—
(a) it is not a type 1 machine, and
(b) it can be demonstrated that the highest charge payable for playing a dutiable machine game on the machine does not exceed £5.
(4) Any other machine is a “type 3 machine”.
(5) The Treasury may by order substitute for a sum for the time being specified in sub-paragraph (2)(a) or (b) or (3)(b) such higher sum as may be specified in the order.”

(3) For paragraph 6(2) substitute—

“(2) The amount of the duty is found by—
(a) applying the lower rate to the person's total net takings in the accounting period for type 1 machines,
(b) applying the standard rate to the person's total net takings in the accounting period for type 2 machines,
(c) applying the higher rate to the person's total net takings in the accounting period for type 3 machines, and
(d) aggregating the results.”

(4) For paragraph 9 substitute—

“9 The rates
(1) The lower rate is 5%.
(2) The standard rate is 20%.
(3) The higher rate is 25%.
(4) If a rate changes during an accounting period—
(a) the old rate is to be applied to the person's total net takings in the part of the period before the change, and
(b) the new rate is to be applied to the person's total net takings in the part of the period after the change.
(5) If it is not possible to identify for the purposes of sub-paragraph (4) the part of the period to which an amount relates, it is to be apportioned on a just and reasonable basis.”

(5) The Machine Games Duty (Types of Machine) Order 2014 (S.I. 2014/47) is revoked.
(6) The amendments and revocation made by this section have effect in relation to the playing of machine games on or after 1 March 2015.

PART 3 General betting duty, pool betting duty and remote gaming duty

CHAPTER 1 General betting duty

The duty

125 General betting duty
A duty of excise, to be known as general betting duty, is charged in accordance with this Chapter.

General and spread bets

126 General bets
(1) A bet is a general bet for the purposes of this Part if—
(a) it is not an on-course bet,
(b) it is not a spread bet,
(c) it is not made by way of pool betting, and
(d) one or more of conditions A to C is met in relation to it.
(2) Condition A is that the person who makes the bet (whether as principal or agent) does so while present at a place in the United Kingdom where betting facilities are provided in the course of a business and the bet is made using those facilities.
(3) Condition B is that—
(a) the person who makes the bet as principal is a UK person, and
(b) the bet is not an excluded bet.
(4) Condition C is that—
(a) the person who makes the bet as principal is a body corporate not legally constituted in the United Kingdom,
(b) the bookmaker with whom the bet is made knows or has reasonable cause to believe that at least one potential beneficiary of any winnings from the bet is a UK person, and
(c) the bet is not an excluded bet.

127 General betting duty charge on general bets
(1) General betting duty is charged on a general bet made with a bookmaker.
(2) It is charged at the rate of 15% of the bookmaker's profits on general bets for an accounting period.
(3) The bookmaker's profits on general bets for an accounting period are the aggregate of—
(a) the amount of the bookmaker's ordinary profits for the period in respect of general bets (calculated in accordance with section 131), and
(b) the amount of the bookmaker's retained winnings profits for the period in respect of general bets (calculated in accordance with section 132).
(4) Where the calculation for an accounting period under subsection (3) produces a negative amount—
(a) the bookmaker's profits on general bets for the accounting period are treated as nil, and
(b) the amount produced by the calculation may be carried forward in reduction of the bookmaker's profits on general bets for one or more later accounting periods.

128 Spread bets
(1) A bet is a spread bet for the purposes of this Part if it constitutes a contract the making or accepting of which is a regulated activity within the meaning of section 22 of the Financial Services and Markets Act 2000.
(2) In this Part—
“financial spread bet” means a spread bet the subject of which is a financial matter, and
“non-financial spread bet” means any other spread bet.
(3) The Commissioners may by regulations provide that a specified matter—
(a) is to be treated as a financial matter for the purposes of subsection (2), or
(b) is not to be treated as a financial matter for those purposes.

129 General betting duty charge on financial spread bets
(1) General betting duty is charged on a financial spread bet made with a bookmaker who is in the United Kingdom.
(2) It is charged at the rate of 3% of the bookmaker's profits on financial spread bets for an accounting period.
(3) The bookmaker's profits on financial spread bets for an accounting period are the aggregate of—
(a) the amount of the bookmaker's ordinary profits for the period in respect of financial spread bets (calculated in accordance with section 131), and
(b) the amount of the bookmaker's retained winnings profits for the period in respect of financial spread bets (calculated in accordance with section 132).
(4) Where the calculation for an accounting period under subsection (3) produces a negative amount—
(a) the bookmaker's profits on financial spread bets for the accounting period are treated as nil, and
(b) the amount produced by the calculation may be carried forward in reduction of the bookmaker's profits on financial spread bets for one or more later accounting periods.

130 General betting duty charge on non-financial spread bets
(1) General betting duty is charged on a non-financial spread bet made with a bookmaker who is in the United Kingdom.
(2) It is charged at the rate of 10% of the bookmaker's profits on non-financial spread bets for an accounting period.
(3) The bookmaker's profits on non-financial spread bets for an accounting period are the aggregate of—
(a) the amount of the bookmaker's ordinary profits for the period in respect of non-financial spread bets (calculated in accordance with section 131), and
(b) the amount of the bookmaker's retained winnings profits for the period in respect of non-financial spread bets (calculated in accordance with section 132).
(4) Where the calculation for an accounting period under subsection (3) produces a negative amount—
(a) the bookmaker's profits on non-financial spread bets for the accounting period are treated as nil, and
(b) the amount produced by the calculation may be carried forward in reduction of the bookmaker's profits on non-financial spread bets for one or more later accounting periods.

131 Ordinary profits
Take the following steps to calculate the amount of a bookmaker's ordinary profits in respect of a class of bets for an accounting period.
Step 1 Calculate the aggregate of the stake money falling due to the bookmaker in the accounting period in respect of bets of that class made with the bookmaker.
Step 2 Calculate the aggregate of the amounts paid by the bookmaker in that period by way of winnings to persons who made bets of that class with the bookmaker (irrespective of when the bets were made or determined).
Step 3 Subtract the amount calculated under Step 2 from the amount calculated under Step 1.

132 Retained winnings profits
(1) The amount of a bookmaker's retained winnings profits in respect of a class of bets for an accounting period is the aggregate of amounts which cease to be qualifying amounts in the accounting period.
(2) An amount is a qualifying amount for the purposes of this section if, as a result of a person (“P”) being notified as mentioned in section 140(2)(b), it has been taken into account in calculating the bookmaker's ordinary profits for bets of that class in any accounting period.
(3) An amount ceases to be a qualifying amount for the purposes of this section if, otherwise than by virtue of being withdrawn by P as mentioned in section 140(2)(b), P ceases to be entitled to withdraw it.
(4) The Commissioners may by notice published by them direct that subsection (3) is not to apply in a specified case or class of cases.

133 Bet-brokers
(1) This section applies where—
(a) one person (the “bettor”) makes a bet with another person (the “bet-taker”) using facilities provided in the course of a business, other than a betting exchange business, by a third person (the “bet-broker”), or
(b) one person (the “bet-broker”) in the course of a business makes a bet with another person (the “bet-taker”) as the agent of a third person (the “bettor”) (whether the bettor is a disclosed principal or an undisclosed principal).
(2) For the purposes of sections 126 to 132—
(a) the bet is to be treated as if it were made separately by the bettor with the bet-broker and by the bet-broker with the bet-taker,
(b) the bet-broker is to be treated as a bookmaker in respect of the bet,
(c) the aggregate of amounts due to be paid by the bettor in respect of the bet is to be treated as being due separately to the bet-broker and to the bet-taker (and any amount due to be paid by the bet-broker to the bet-taker is to be disregarded), and
(d) a sum paid by the bet-taker by way of winnings in respect of the bet is to be treated as having been paid separately by the bet-taker and by the bet-broker at that time and for that purpose (and any sum paid by the bet-broker is to be disregarded).
(3) Where there is any doubt as to which of two persons is the bettor and which the bet-taker for the purposes of subsection (1)(a), whichever of the two was the first to use the facilities of the bet-broker to offer the bet is to be treated as the bet-taker.
(4) In this section “betting exchange business” means a business such as is mentioned in section 141(1).

Pool betting on horse and dog races

134 Chapter 1 pool bets
(1) A bet is a “Chapter 1 pool bet” for the purposes of this Part if—
(a) it relates only to horse racing or dog racing,
(b) it is not an on-course bet,
(c) it is made by way of pool betting, and
(d) one or more of conditions A to C is met in relation to it.
(2) Condition A is that the person who makes the bet (whether as principal or agent) does so while present at a place in the United Kingdom where betting facilities are provided in the course of a business and the bet is made using those facilities.
(3) Condition B is that—
(a) the person who makes the bet as principal is a UK person, and
(b) the bet is not an excluded bet.
(4) Condition C is that—
(a) the person who makes the bet as principal is a body corporate not legally constituted in the United Kingdom,
(b) the bookmaker with whom the bet is made knows or has reasonable cause to believe that at least one potential beneficiary of any winnings from the bet is a UK person, and
(c) the bet is not an excluded bet.
(5) A Chapter 1 pool bet is a “pooled stake Chapter 1 pool bet” for the purposes of this Part if all or any part of the stake money on the bet is assigned by or on behalf of the bookmaker with whom it is made to a fund (referred to in this Part as a “Chapter 1 stake fund”) from which winnings are to be paid in respect of pool betting.
(6) A Chapter 1 pool bet is an “ordinary Chapter 1 pool bet” for the purposes of this Part if it is not a pooled stake Chapter 1 pool bet.

135 General betting duty charge on Chapter 1 pool bets
(1) General betting duty is charged on a Chapter 1 pool bet made with a bookmaker.
(2) It is charged at the rate of 15% of the bookmaker's profits on Chapter 1 pool bets for an accounting period.
(3) The bookmaker's profits on Chapter 1 pool bets for an accounting period are the aggregate of—
(a) the amount of the bookmaker's profits for the period in respect of pooled stake Chapter 1 pool bets (calculated in accordance with section 136), and
(b) the amount of the bookmaker's profits for the period in respect of ordinary Chapter 1 pool bets (calculated in accordance with section 137), and
(c) the amount of the bookmaker's profits for the period in respect of retained winnings on Chapter 1 pool bets (calculated in accordance with section 138).
(4) Where the calculation for an accounting period under subsection (3) produces a negative amount—
(a) the bookmaker's profits on Chapter 1 pool bets for the accounting period are treated as nil, and
(b) the amount produced by the calculation may be carried forward in reduction of the bookmaker's profits on Chapter 1 pool bets for one or more later accounting periods.

136 Profits on pooled stake Chapter 1 pool bets
(1) Take the following steps to calculate the amount of a bookmaker's profits for an accounting period in respect of pooled stake Chapter 1 pool bets.
Step 1 Take the aggregate of the relevant stake money falling due to the bookmaker in the accounting period and deduct the aggregate of any of that stake money that is assigned by or on behalf of the bookmaker to Chapter 1 stake funds during the period.
Step 2 If in the accounting period any amount contained in a Chapter 1 stake fund to which relevant stake money has been assigned by or on behalf of the bookmaker is used otherwise than to provide winnings to persons who made bets by way of pool betting, multiply each amount so used in the accounting period by the relevant proportion that applies in relation to it.
Step 3 Add the aggregate of the amounts calculated under Step 2 to the amount calculated under Step 1.
Step 4 If in the accounting period any top-up payment is assigned to a Chapter 1 stake fund by the bookmaker, multiply the amount of each top-up payment so assigned in the accounting period by the appropriate proportion that applies in relation to it.
Step 5 Subtract the aggregate of the amounts calculated under Step 4 from the amount calculated under Step 3.
(2) For the purposes of Step 2 the relevant proportion, in relation to any amount which is used otherwise than to provide winnings, is—
(a) if the amount relates to bets on a specific event, the proportion of that amount that consists of relevant stake money that fell due to the bookmaker in respect of the bets,
(b) if the amount does not relate to bets on a specific event but relates to amounts assigned to the fund during a specific period, the proportion of that amount that consists of relevant stake money assigned to the fund by or on behalf of the bookmaker during that period, and
(c) in any other case, the proportion of the total amount contained in the fund immediately before the amount is so used which consists of relevant stake money assigned to the fund by or on behalf of the bookmaker.
(3) For the purposes of Step 4—
(a) a top-up payment is assigned to a Chapter 1 stake fund if the bookmaker assigns an amount (other than stake money on a bet) to the fund to satisfy a guarantee given by the bookmaker that a specified minimum amount of winnings will be available in respect of bets made with the bookmaker, and
(b) the appropriate proportion, in relation to such a payment, is the proportion determined in accordance with a notice published by the Commissioners.
(4) A notice under subsection (3)(b) may provide for top-up payments to be ignored for the purposes of Step 4 in a specified case or class of cases.
(5) In this section “relevant stake money” means stake money in respect of a pooled stake Chapter 1 pool bet.

137 Profits on ordinary Chapter 1 pool bets
To calculate the amount of a bookmaker's profits for an accounting period in respect of ordinary Chapter 1 pool bets—
(a) take the aggregate of the stake money falling due to the bookmaker in the accounting period in respect of such bets, and
(b) subtract the aggregate of the expenditure by or on behalf of the bookmaker for the period on winnings in respect of such bets.

138 Profits on retained winnings on Chapter 1 pool bets
(1) The amount of a bookmaker's profits for an accounting period in respect of retained winnings on Chapter 1 pool bets is the aggregate of the amounts which cease to be qualifying amounts in the accounting period.
(2) An amount is a qualifying amount for the purposes of this section if, as a result of a person (“P”) being notified as mentioned in section 140(2)(b), it has been taken into account in calculating the bookmaker's profits for any accounting period under section 136 or 137.
(3) An amount ceases to be a qualifying amount for the purposes of this section if, otherwise than by virtue of being withdrawn from the account by P as mentioned in section 140(2)(b), P ceases to be entitled to withdraw it.
(4) The Commissioners may by notice published by them direct that subsection (3) is not to apply in a specified case or class of cases.

Stake money and winnings

139 Chapter 1: stake money
(1) For the purposes of this Chapter the stake money on a bet is the aggregate of the amounts which fall due in respect of the bet.
(2) If the stake money falls due to a person other than the bookmaker with whom the bet is made, it is to be treated as falling due to the bookmaker.
(3) Where the bet is not a spread bet and the sum which the person who makes the bet will lose if unsuccessful is known when the bet is made, that sum is to be treated as falling due when the bet is made (irrespective of when it is actually paid or required to be paid).
(4) Where the person who makes the bet does so in pursuance of an offer which permits the person to pay nothing or less than the amount which the person would have been required to pay without the offer, the person is to be treated as being due to pay that amount—
(a) to the bookmaker with whom the bet is made, and
(b) at the time when the bet is made.
(5) All payments made—
(a) for or on account of or in connection with the bet,
(b) in addition to amounts falling due in respect of the bet, and
(c) by the person making the bet,
are to be treated as amounts due in respect of the bet except so far as the contrary is proved by the bookmaker whose profits on the bet are being calculated.
(6) In calculating any amount falling due in respect of the bet, no deduction is to be made in respect of—
(a) any other benefit secured by the person who makes the bet as a result of paying the money,
(b) a person's expenses, whether in paying duty or otherwise, or
(c) any other matter.

140 Chapter 1: winnings
(1) Only winnings in the form of money are to be taken into account when determining for the purposes of this Chapter what are winnings on a bet.
(2) For those purposes, winnings on a bet include—
(a) the return of a stake on the bet, and
(b) any winnings on the bet held in an account for a person (“P”) if P is notified that the amount is being held in the account and may be withdrawn by P on demand.
(3) The Commissioners may by regulations make provision as to when, for the purposes of any calculation under this Chapter—
(a) winnings are to be treated as paid or provided, and
(b) expenditure on winnings is to be treated as incurred.

Exchanges

141 General betting duty charge on betting exchanges
(1) This section applies where—
(a) one person makes a bet with another person using facilities provided by a third person in the course of a business, and
(b) that business is one that does not involve the provision of premises for use by persons making or taking bets.
(2) General betting duty is charged on the amounts (“commission charges”) that any party to the bet who is a UK person is charged, whether by deduction from winnings or otherwise, for using those facilities.
(3) No deductions are allowed from commission charges.
(4) The amount of duty charged under this section in respect of bets determined in an accounting period is 15% of the commission charges relating to those bets.
(5) Where a person arranges for facilities relating to a bet to be provided by another person, the facilities are to be treated for the purposes of this section and section 142(4) as provided by the person who makes the arrangements instead of by the person who provides the facilities.
(6) For the purposes of this section it does not matter—
(a) whether the bet is made in the United Kingdom or elsewhere;
(b) whether the facilities are in the United Kingdom or elsewhere.

Payment

142 Liability to pay
(1) All general betting duty chargeable in respect of—
(a) bets made in an accounting period, or
(b) in the case of duty chargeable under section 141, bets determined in an accounting period,
becomes due at the end of that period.
(2) In the case of bets made with a bookmaker in an accounting period the general betting duty is to be paid—
(a) when it becomes due, and
(b) by the bookmaker.
(3) But general betting duty which is due to be paid by a bookmaker in respect of bets may be recovered from the following persons as if they and the bookmaker were jointly and severally liable to pay the duty—
(a) the holder of any licence which authorises—
(i) the provision of facilities for betting by the business in the course of which the bets were made, or
(ii) betting at the place where the bets were made;
(b) a person responsible for the management of the business mentioned in paragraph (a)(i);
(c) where the bookmaker is a company, a director.
(4) In the case of bets made in an accounting period by means of facilities provided by a person as described in section 141 the general betting duty is to be paid—
(a) when it becomes due, and
(b) by the person who provides the facilities.

CHAPTER 2 Pool betting duty

143 Chapter 2 pool bets
(1) A bet is a Chapter 2 pool bet for the purposes of this Part if—
(a) it is not made wholly in relation to horse racing or dog racing,
(b) it is not made for community benefit,
(c) it does not constitute the taking of a ticket or chance in a lottery,
(d) it is made by way of pool betting, and
(e) one or more of conditions A to C is met in relation to it.
(2) Condition A is that the person who makes the bet (whether as principal or agent) does so while present at a place in the United Kingdom where betting facilities are provided in the course of a business and the bet is made using those facilities.
(3) Condition B is that—
(a) the person who makes the bet as principal is a UK person, and
(b) the bet is not an excluded bet.
(4) Condition C is that—
(a) the person who makes the bet as principal is a body corporate not legally constituted in the United Kingdom,
(b) the bookmaker with whom the bet is made knows or has reasonable cause to believe that at least one potential beneficiary of any winnings from the bet is a UK person, and
(c) the bet is not an excluded bet.
(5) A Chapter 2 pool bet is a “pooled stake Chapter 2 pool bet” for the purposes of this Part if all or any part of the stake money on the bet is assigned by or on behalf of the bookmaker with whom the bet is made to a fund (referred to in this Part as a “Chapter 2 stake fund”) from which winnings are to be paid in respect of pool betting.
(6) A Chapter 2 pool bet is an “ordinary Chapter 2 pool bet” for the purposes of this Part if it is not a pooled stake Chapter 2 pool bet.

144 Pool betting duty charge on Chapter 2 pool bets
(1) A duty of excise, to be known as pool betting duty, is charged on a Chapter 2 pool bet made with a bookmaker.
(2) It is charged at the rate of 15% of the bookmaker's profits on Chapter 2 pool bets for an accounting period.
(3) The bookmaker's profits on Chapter 2 pool bets for an accounting period are the aggregate of—
(a) the amount of the bookmaker's profits for the period in respect of pooled stake Chapter 2 pool bets (calculated in accordance with section 145),
(b) the amount of the bookmaker's profits for the period in respect of ordinary Chapter 2 pool bets (calculated in accordance with section 146), and
(c) the amount of the bookmaker's profits for the period in respect of retained winnings on Chapter 2 pool bets (calculated in accordance with section 147).
(4) Where the calculation for an accounting period under subsection (3) produces a negative amount—
(a) the bookmaker's profits on Chapter 2 pool bets for the accounting period are treated as nil, and
(b) the amount produced by the calculation may be carried forward in reduction of the bookmaker's profits on Chapter 2 pool bets for one or more later accounting periods.

145 Profits on pooled stake Chapter 2 pool bets
(1) Take the following steps to calculate the amount of a bookmaker's profits for an accounting period in respect of pooled stake Chapter 2 pool bets.
Step 1 Take the aggregate of the relevant stake money falling due to the bookmaker in the accounting period and deduct the aggregate of any of that stake money that is assigned by or on behalf of the bookmaker to Chapter 2 stake funds during the period.
Step 2 If in the accounting period any amount contained in a Chapter 2 stake fund to which relevant stake money has been assigned by or on behalf of the bookmaker is used otherwise than to provide winnings to persons who made bets by way of pool betting, multiply each amount so used in the accounting period by the relevant proportion that applies in relation to it.
Step 3 Add the aggregate of the amounts calculated under Step 2 to the amount calculated under Step 1.
Step 4 If in the accounting period any top-up payment is assigned to a Chapter 2 stake fund by the bookmaker, multiply the amount of each top-up payment so assigned in the accounting period by the appropriate proportion that applies in relation to it.
Step 5 Subtract the aggregate of the amounts calculated under Step 4 from the amount calculated under Step 3.
(2) For the purposes of Step 2 the relevant proportion, in relation to any amount which is used otherwise than to provide winnings, is—
(a) if the amount relates to bets on a specific event, the proportion of that amount that consists of relevant stake money that fell due to the bookmaker in respect of the bets,
(b) if the amount does not relate to bets on a specific event but relates to amounts assigned to the fund during a specific period, the proportion of that amount that consists of relevant stake money assigned to the fund by or on behalf of the bookmaker during that period, and
(c) in any other case, the proportion of the total amount contained in the fund immediately before the amount is so used which consists of relevant stake money assigned to the fund by or on behalf of the bookmaker.
(3) For the purposes of Step 4—
(a) a top-up payment is assigned to a Chapter 2 stake fund if the bookmaker assigns an amount (other than stake money on a bet) to the fund to satisfy a guarantee given by the bookmaker that a specified minimum amount of winnings will be available in respect of bets made with the bookmaker, and
(b) the appropriate proportion, in relation to such a payment, is the proportion determined in accordance with a notice published by the Commissioners.
(4) A notice under subsection (3)(b) may provide for top-up payments to be ignored for the purposes of Step 4 in a specified case or class of cases.
(5) In this section “relevant stake money” means stake money in respect of a pooled stake Chapter 2 pool bet.

146 Profits on ordinary Chapter 2 pool bets
To calculate the amount of a bookmaker's profits for an accounting period in respect of ordinary Chapter 2 pool bets—
(a) take the aggregate of the stake money falling due to the bookmaker in the accounting period in respect of such bets, and
(b) subtract the aggregate of the expenditure by or on behalf of the bookmaker for the period on winnings in respect of such bets.

147 Profits on retained winnings on Chapter 2 pool bets
(1) The amount of a bookmaker's profits for an accounting period in respect of retained winnings on Chapter 2 pool bets is the aggregate of the amounts which cease to be qualifying amounts during the accounting period.
(2) An amount is a qualifying amount for the purposes of this section if, as a result of a person (“P”) being notified as mentioned in section 149(2)(b), it has been taken into account in calculating the bookmaker's profits for any accounting period under section 145 or 146.
(3) An amount ceases to be a qualifying amount for the purposes of this section if, otherwise than by virtue of being withdrawn by P as mentioned in section 149(2)(b), P ceases to be entitled to withdraw it.
(4) The Commissioners may by notice published by them direct that subsection (3) is not to apply in a specified case or class of cases.

148 Chapter 2: stake money
(1) For the purposes of this Chapter the stake money on a bet is the aggregate of the amounts which fall due in respect of the bet.
(2) If the stake money falls due to a person other than the bookmaker with whom the bet is made, it is to be treated as falling due to the bookmaker.
(3) Any payment that entitles a person to make the bet is, if the person makes the bet, to be treated as an amount falling due in respect of the bet.
(4) All payments made—
(a) for or on account of or in connection with the bet,
(b) in addition to amounts falling due in respect of the bet, and
(c) by the person making the bet,
are to be treated as amounts due in respect of the bet except so far as the contrary is proved by the bookmaker whose profits on the bet are being calculated.
(5) Subsections (6) and (7) apply for the purposes of subsection (1) but have effect subject to any regulations under subsection (8).
(6) Where—
(a) a person makes a bet, and
(b) the bet relates to a single event, or to two or more events taking place on the same day,
any sum due to the bookmaker in respect of the bet is treated as falling due on the day on which the event or events take place.
(7) Where—
(a) a person makes a bet, and
(b) subsection (6) does not apply,
any sum due to the bookmaker in respect of the bet is treated as falling due when the bet is made.
(8) The Commissioners may by regulations make provision as to when any sum due to the bookmaker in respect of a bet is to be treated as falling due.
(9) Provision made by regulations under subsection (8) may not provide for a sum due to the bookmaker in respect of a bet to be treated as falling due—
(a) earlier than when the bet is made, or
(b) later than when the bet is determined.

149 Chapter 2: winnings
(1) Only winnings in the form of money are to be taken into account when determining for the purposes of this Chapter what are winnings on a bet.
(2) For those purposes, winnings on a bet include—
(a) the return of a stake on the bet, and
(b) any winnings on the bet held in an account for a person (“P”) if P is notified that the amount is being held in the account and may be withdrawn by P on demand.
(3) Winnings on a bet for which no stake money fell due are to be ignored for the purposes of any calculation under this Chapter.
(4) The Commissioners may by regulations make provision as to when, for the purposes of any calculation under this Chapter—
(a) winnings are to be treated as paid or provided, and
(b) expenditure on winnings is to be treated as incurred.

150 Payments treated as bets
(1) Where payments are made for the chance of winning any money or money's worth on terms under which the persons making the payments have a power of selection that may (directly or indirectly) determine the winner, those payments are (subject to section 183) to be treated as bets for the purposes of this Chapter even if the power is not exercised.
(2) Where any payment entitles a person to take part in a transaction that is, on the person's part only, not a bet made by way of pool betting by reason of the person not in fact making any stake as if the transaction were such a bet, the transaction is to be treated as such a bet for the purposes of this Chapter (and section 148(4) applies to any such payment).

151 Payment and recovery
(1) Pool betting duty charged on a bookmaker's profits on Chapter 2 pool bets for an accounting period—
(a) becomes due at the end of the period,
(b) is to be paid by the bookmaker, and
(c) is to be paid when it becomes due.
(2) Pool betting duty that is due to be paid may be recovered from the following persons as if they were jointly and severally liable to pay the duty—
(a) the bookmaker;
(b) a person responsible for the management of any business in the course of which any bets have been made that are Chapter 2 pool bets for the purposes of the calculation of the amount of the bookmaker's profits on Chapter 2 pool bets for any accounting period;
(c) a person responsible for the management of any totalisator used for the purposes of any such business;
(d) where a person within any of paragraphs (a) to (c) is a company, a director.

152 Notification of reliance on community benefit exemption
(1) Where a bookmaker relies for the purposes of pool betting duty on the fact that a bet is not a Chapter 2 pool bet by virtue of being made for community benefit, the bookmaker must inform the Commissioners of that fact.
(2) The Commissioners may by notice published by them—
(a) specify the manner in which, and the time at which, the Commissioners are to be informed as mentioned in subsection (1), and
(b) direct that subsection (1) is not to apply in a specified case or class of cases.

153 Bets made for community benefit
(1) For the purposes of this Part (but subject to any direction under subsection (3)), a bet is made “for community benefit” if—
(a) the promoter of the betting concerned is a community society or is bound to pay all benefits accruing from the betting to such a society, and
(b) the person making the bet knows, when making it, that the purpose of the betting is to benefit such a society.
(2) In the case of a bet made by means of a totalisator, the reference in subsection (1) to the promoter of the betting concerned is a reference to the operator.
(3) The Commissioners may direct that any bet specified by the direction, or of a description so specified, is not a bet made for community benefit.
(4) The power conferred by subsection (3) may not be exercised unless the Commissioners consider that an unreasonably large part of the amounts paid in respect of the bets concerned will, or may, be applied otherwise than—
(a) in the payment of winnings, or
(b) for the benefit of a community society.
(5) In this section “community society” means—
(a) a society established and conducted for charitable purposes only, or
(b) a society established and conducted wholly or mainly for the support of athletic sports or athletic games and not established or conducted for purposes of private or commercial gain.
(6) In this section “society” includes any club, institution, organisation or association of persons, by whatever name called.

CHAPTER 3 Remote gaming duty

154 Remote gaming
(1) For the purposes of this Part “remote gaming” is gaming in which persons participate by the use of—
(a) the internet,
(b) telephone,
(c) television,
(d) radio, or
(e) any other kind of electronic or other technology for facilitating communication.
(2) Remote gaming is “pooled prize gaming” for the purposes of this Part if all or any part of the gaming payment is assigned by or on behalf of the gaming provider to a fund (referred to in this Part as a “gaming prize fund”) from which prizes are to be provided to participants in the gaming.
(3) Remote gaming is “ordinary gaming” for the purposes of this Part if it is not pooled prize gaming.
(4) The Treasury may by regulations—
(a) amend the definition of “remote gaming” in subsection (1), and
(b) make such consequential amendments of section 17(2A) of BGDA 1981 (cases in which bingo duty is not charged on bingo played by means of remote communication) as appear to the Treasury to be necessary.
(5) Nothing in subsection (4)(b) affects the generality of section 194(1).

155 Remote gaming duty
(1) A duty of excise, to be known as remote gaming duty, is charged on a chargeable person's participation in remote gaming under arrangements (whether or not enforceable) between the chargeable person and another person (referred to in this Part as a “gaming provider”).
(2) In this Part “chargeable person” means—
(a) any UK person, and
(b) any body corporate not legally constituted in the United Kingdom if the person with whom the arrangements mentioned in subsection (1) are made knows, or has reasonable cause to believe, that at least one potential beneficiary of any prizes from remote gaming under the arrangements is a UK person.
(3) Remote gaming duty is chargeable at the rate of 15% of the gaming provider's profits on remote gaming for an accounting period.
(4) The gaming provider's profits on remote gaming for an accounting period are the aggregate of—
(a) the amount of the provider's profits for the period in respect of pooled prize gaming (calculated in accordance with section 156),
(b) the amount of the provider's profits for the period in respect of ordinary gaming (calculated in accordance with section 157), and
(c) the amount of the provider's profits for the period in respect of retained prizes (calculated in accordance with section 158).
(5) Where the calculation for an accounting period under subsection (4) produces a negative amount—
(a) the gaming provider's profits on remote gaming for the accounting period are treated as nil, and
(b) the amount produced by the calculation may be carried forward in reduction of the gaming provider's profits on remote gaming for one or more later accounting periods.

156 Profits on pooled prize gaming
(1) Take the following steps to calculate the amount of a gaming provider's profits for an accounting period in respect of pooled prize gaming.
Step 1 Take the aggregate of the relevant gaming payments made to the provider in the accounting period and deduct the aggregate of any of those payments that are assigned by or on behalf of the provider to gaming prize funds during the period.
Step 2 If in the accounting period any amount contained in a gaming prize fund to which relevant gaming payments have been assigned by or on behalf of the provider is used otherwise than to provide prizes to participators in pooled prize gaming, multiply each amount so used in the accounting period by the relevant proportion that applies in relation to it.
Step 3 Add the aggregate of the amounts calculated under Step 2 to the amount calculated under Step 1.
Step 4 If in the accounting period any top-up payment is assigned to a gaming prize fund by the gaming provider, multiply the amount of each top-up payment so assigned in the accounting period by the appropriate proportion that applies in relation to it.
Step 5 Subtract the aggregate of the amounts calculated under Step 4 from the amount calculated under Step 3.
(2) For the purposes of Step 2 the relevant proportion, in relation to any amount which is used otherwise than to provide prizes, is—
(a) if the amount relates to a specific game of chance, the proportion of that amount that consists of relevant gaming payments made to the provider in respect of that game,
(b) if the amount does not relate to a specific game of chance but relates to amounts assigned to the fund during a specific period, the proportion of that amount that consists of relevant gaming payments assigned to the fund by or on behalf of the provider during that period, and
(c) in any other case, the proportion of the total amount contained in the fund immediately before the amount is so used which consists of relevant gaming payments assigned to the fund by or on behalf of the provider.
(3) For the purposes of Step 4—
(a) a top-up payment is assigned to a gaming prize fund if the gaming provider assigns an amount (other than a gaming payment) to the fund to satisfy a guarantee given by the gaming provider that prizes of a specified minimum amount will be available in respect of gaming under arrangements made with the provider, and
(b) the appropriate proportion, in relation to such a top-up payment, is the proportion determined in accordance with a notice published by the Commissioners.
(4) A notice under subsection (3)(b) may provide for top-up payments to be ignored for the purposes of Step 4 in a specified case or class of cases.
(5) In this section “relevant gaming payment” means a gaming payment in respect of pooled prize gaming.

157 Profits on ordinary gaming
(1) To calculate the amount of a gaming provider's profits for an accounting period in respect of ordinary gaming—
(a) take the aggregate of the gaming payments made to the provider in the accounting period in respect of ordinary gaming, and
(b) subtract the amount of the provider's expenditure for the period on prizes in respect of such gaming.
(2) The amount of the gaming provider's expenditure on prizes for an accounting period in respect of ordinary gaming is the aggregate of the value of prizes provided by or on behalf of the provider in that period which have been won (at any time) by chargeable persons participating in ordinary gaming.

158 Profits on retained prizes
(1) The amount of a gaming provider's profits for an accounting period in respect of retained prizes is the aggregate of the amounts which cease to be qualifying amounts during the accounting period.
(2) An amount is a qualifying amount for the purposes of this section if, as a result of a person (“P”) being notified as mentioned in section 160(1), it has been taken into account in calculating the provider's profits for any accounting period under section 156 or 157.
(3) An amount ceases to be a qualifying amount for the purposes of this section if, otherwise than by virtue of being withdrawn by P as mentioned in section 160(1), P ceases to be entitled to withdraw it.
(4) The Commissioners may by notice published by them direct that subsection (3) is not to apply in a specified case or class of cases.

159 Gaming payments
(1) Where a chargeable person participates in remote gaming, the “gaming payment” for the purposes of this Chapter is the aggregate of—
(a) any amount that entitles the person to participate in the gaming, and
(b) any other amount payable for or on account of or in connection with the person's participation in the gaming.
(2) If the gaming payment is made to a person other than the gaming provider, it is to be treated for the purposes of this Chapter as made to the gaming provider.
(3) If the gaming payment has not been made at the time when the chargeable person begins to participate in the remote gaming to which it relates, it is to be treated for the purposes of this Chapter as being made at that time.
(4) The Treasury may by regulations provide that where a person relies on an offer which waives a gaming payment or permits payment of less than the amount which would have been required to be paid without the offer, the person is to be treated for the purposes of this Chapter as having paid that amount.

160 Prizes
(1) A reference in section 156 or 157 to providing a prize to a person includes a reference to crediting money to an account if the person is notified that—
(a) the money is being held in the account, and
(b) the person is entitled to withdraw it on demand.
(2) Where the account of a person participating in gaming is credited otherwise than as described in subsection (1), the credit is to be treated for the purposes of sections 156 and 157 as the provision of a prize; but the Commissioners may direct that this subsection is not to apply in a specified case or class of cases.
(3) The return of all or part of a gaming payment is to be treated for the purposes of sections 156 and 157 as the provision of a prize.
(4) Where a prize is obtained by or on behalf of a gaming provider from a person not connected with the person who obtains the prize, the cost to the person who obtains the prize is to be treated as the expenditure on the prize for the purposes of sections 156 and 157.
(5) Where a prize is a voucher which—
(a) may be used in place of money as whole or partial payment for benefits of a specified kind obtained from a specified person,
(b) specifies an amount as the sum or maximum sum in place of which the voucher may be used, and
(c) does not fall within subsection (4),
the specified amount is the value of the voucher for the purposes of sections 156 and 157.
(6) Where a prize is a voucher (whether or not it falls within subsection (4)) no expenditure is to be treated as having been incurred on the prize for the purposes of sections 156 and 157 if—
(a) it does not satisfy subsection (5)(a) and (b), or
(b) its use as described in subsection (5)(a) is subject to a specified restriction, condition or limitation which may make the value of the voucher to the recipient significantly less than the amount mentioned in subsection (5)(b).
(7) In the case of a prize which is neither money nor a voucher and which does not fall within subsection (4), the expenditure on the prize for the purposes of sections 156 and 157 is—
(a) the amount which the prize would cost if obtained from a person not connected with the person who provides it, or
(b) where no amount can reasonably be determined in accordance with paragraph (a), nil.
(8) For the purposes of this section—
(a) a reference to connection between two persons is to be construed in accordance with section 1122 of CTA 2010 (connected persons), and
(b) an amount paid by way of value added tax on the acquisition of a thing is to be treated as part of its cost (irrespective of whether or not the amount is taken into account for the purpose of a credit or refund).

161 Exemptions
(1) Remote gaming duty is not charged on participation by a chargeable person in remote gaming if—
(a) the arrangements between the chargeable person and the gaming provider are not entered into in or from the United Kingdom, and
(b) the facilities used to participate in the gaming are not capable of being used in or from the United Kingdom.
(2) Remote gaming duty is not charged on participation by a chargeable person in remote gaming so far as the remote gaming—
(a) is charged with another gambling tax, or
(b) would be charged with another gambling tax but for an express exception.
(3) Subsection (2)(b)—
(a) does not prevent remote gaming duty being charged where the remote gaming in question is the playing of bingo which is not licensed bingo (as to the meaning of which terms see section 20C of BGDA 1981), and
(b) does not apply in cases where the other gambling tax is machine games duty.
(4) In this section “gambling tax” means—
(a) machine games duty,
(b) bingo duty,
(c) gaming duty,
(d) general betting duty,
(e) lottery duty, and
(f) pool betting duty.
(5) The Treasury may by regulations—
(a) confer an exemption from remote gaming duty, or
(b) remove or vary (whether or not by textual amendment) an exemption under this section.
(6) In calculating a gaming provider's profits on remote gaming for an accounting period, no account is to be taken of gaming payments, assignments of amounts to a pool or expenditure on prizes so far as they relate to remote gaming to which an exemption applies as a result of this section or regulations under it.

162 Liability to pay
(1) A gaming provider is liable for any remote gaming duty charged on the provider's profits on remote gaming for an accounting period.
(2) If the gaming provider is a body corporate, the provider and the provider's directors are jointly and severally liable for any remote gaming duty charged on the provider's profits on remote gaming for an accounting period.
(3) Remote gaming duty which is charged on the gaming provider's profits on remote gaming for an accounting period may be recovered from the holder of a remote operating licence for the business in the course of which the gaming took place as if the holder of the licence and the provider were jointly and severally liable to pay the duty.

CHAPTER 4 General

Administration

163 Administration
(1) The Commissioners are responsible for the collection and management of general betting duty, pool betting duty and remote gaming duty.
(2) General betting duty, pool betting duty and remote gaming duty are to be accounted for by such persons, and accounted for and paid at such times and in such manner, as may be required by or under regulations made by the Commissioners.
(3) The Commissioners may make regulations providing for any matter for which provision appears to them to be necessary for the administration or enforcement of, or for the protection of the revenue from, general betting duty, pool betting duty and remote gaming duty.
(4) Nothing in sections 164 to 169 affects the generality of the powers conferred by this section.

164 Registration
(1) The Commissioners must maintain the following registers—
(a) a register of persons who, by virtue of being bookmakers, being treated by section 133 as bookmakers or providing facilities for making bets, are (or may become) liable to pay general betting duty,
(b) a register of persons who, by virtue of being bookmakers, are (or may become) liable to pay pool betting duty, and
(c) a register of persons who, by virtue of entering into arrangements for chargeable persons to participate in remote gaming, are (or may become) liable to pay remote gaming duty.
(2) A person falling within any paragraph of subsection (1) may not carry on an activity by virtue of which the person falls within that paragraph without being registered in the register maintained under that paragraph.
(3) The Commissioners may make regulations about registration; in particular, the regulations may include provision about—
(a) the procedure for applying for registration (including provision requiring applications to be made electronically);
(b) the timing of applications (including provision for applications to be made and determined before 1 December 2014);
(c) the information to be provided;
(d) notification of changes;
(e) de-registration;
(f) re-registration after a person ceases to be registered.
(4) The regulations may require a person registered under this section to give notice to the Commissioners before applying for a remote operating licence.
(5) The regulations may permit the Commissioners to impose conditions or requirements on persons registered under this section.
(6) The regulations may include provision for the registration of groups of persons; and may provide for the modification of provisions of this Part in their application to groups.
(7) The modifications may, for example, include a modification ensuring that each member of a group will be jointly and severally liable for the duty payable by any member of the group.
S. 164 partly in force; s. 164(1)(3)-(7) in force at Royal Assent; s. 164(2) in force at 1.12.2014, see s. 198(1)(2)

165 Accounting period
(1) For the purposes of this Part—
(a) a period of 3 consecutive months is an accounting period, but
(b) the Commissioners may by regulations provide for some other period specified in, or determined in accordance with, the regulations to be an accounting period.
(2) The first day of an accounting period is such day as the Commissioners may direct.
(3) The Commissioners may agree with a person to make either or both of the following changes for the purposes of that person's liability to general betting duty, pool betting duty or remote gaming duty—
(a) to treat specified periods (whether longer or shorter than 3 months) as accounting periods;
(b) to begin accounting periods on days other than those applying by virtue of subsection (2).
(4) The Commissioners may by direction make transitional arrangements for periods (whether of 3 months or otherwise) to be treated as accounting periods where—
(a) a person becomes or ceases to be registered, or
(b) an agreement under subsection (3) begins or ends.
(5) A direction under this section—
(a) may apply generally or only to a particular case or class of case, and
(b) must be published unless it applies only to a particular case.

166 Returns
(1) The Commissioners may make regulations requiring returns to be made to the Commissioners in respect of general betting duty, pool betting duty and remote gaming duty.
(2) The regulations may, in particular, make provision about—
(a) liability to make a return,
(b) timing,
(c) form,
(d) content,
(e) method of making (including provision requiring returns to be made electronically),
(f) declarations,
(g) authentication, and
(h) when a return is to be treated as made.

167 Payment
(1) The Commissioners may by regulations make provision about payment of general betting duty, pool betting duty and remote gaming duty.
(2) The regulations may, in particular, make provision about—
(a) timing (including provision requiring payments to be made on account),
(b) instalments,
(c) methods of payment (including provision requiring payments to be made electronically),
(d) when payment is to be treated as made, and
(e) the process and effect of assessments by the Commissioners of amounts due.
(3) Subject to regulations under section 163 and this section, section 12 of FA 1994 (assessment) applies in relation to liability to pay general betting duty, pool betting duty and remote gaming duty.

168 Information and records
The Commissioners may by regulations require the provision to such persons, or display in such manner, of such information or records as the regulations may specify—
(a) by persons engaging or proposing to engage in any activity by reason of which they are, or may be or become, liable for general betting duty, pool betting duty or remote gaming duty (or would be or might be or become liable to general betting duty if on-course bets were not excluded), and
(b) by persons providing facilities for another to engage in such an activity or entering into any transaction in the course of any such activity.

169 Stake funds and gaming prize funds
(1) The Treasury may by regulations make provision as to the circumstances in which—
(a) the stake money on a bet is, or is not, to be treated for the purposes of this Part as assigned to a Chapter 1 stake fund or a Chapter 2 stake fund,
(b) gaming payments are, or are not, to be treated for the purposes of this Part as assigned to a gaming prize fund,
(c) an amount contained in a Chapter 1 stake fund or a Chapter 2 stake fund is, or is not, to be treated for the purposes of this Part as being used otherwise than to provide winnings, and
(d) an amount contained in a gaming prize fund is, or is not, to be treated for the purposes of this Part as being used otherwise than to provide prizes.
(2) The Commissioners may by notice published by them make provision about Chapter 1 stake funds, Chapter 2 stake funds and gaming prize funds, and such a notice may (in particular) make provision as to how such funds are to be held.

Security and enforcement

170 Security for payment
(1) The Commissioners may by notice given to a registrable person require the person to give security, or further security, for the payment of any general betting duty, pool betting duty or remote gaming duty for which the person is or may become liable.
(2) The Commissioners may give such a notice only if they consider—
(a) that there is a serious risk that the duty will not be paid, or
(b) that the person usually lives in or, if a body corporate, is legally constituted in a country or territory with which the United Kingdom does not have satisfactory arrangements for the enforcement of liabilities.
(3) The notice must specify—
(a) the amount of security or further security to be given, and
(b) the manner in which, and the date by which, the security or further security is to be given.
(4) That date must not be less than 30 days after the date when the notice is given (and must not be before 1 December 2014).
(5) Any requirement imposed by the notice has no effect at any time when—
(a) the registrable person is entitled under Chapter 2 of Part 1 of FA 1994 to require a review of, or to bring an appeal against, the decision to give the notice,
(b) an appeal may ordinarily be brought against a decision on such a review or appeal, or
(c) proceedings on such a review, appeal or further appeal are in progress.
(6) A person is a “registrable person” for the purposes of this Part if the person—
(a) is, or is required to be, registered under section 164, or
(b) has applied for registration under that section.

171 Appointment of UK representative
(1) The Commissioners may by notice given to a registrable person require the person to appoint a United Kingdom representative.
(2) The representative must be a person approved by the Commissioners for the purposes of this section.
(3) The Commissioners may give such a notice only if they consider that the registrable person usually lives in or, if a body corporate, is legally constituted in a country or territory with which the United Kingdom does not have satisfactory arrangements for the enforcement of liabilities.
(4) The notice must specify the date by which the representative must be appointed.
(5) That date must not be less than 30 days after the date when the notice was given (and must not be before 1 December 2014).
(6) It is for the registrable person to decide whether the representative is to have responsibility—
(a) for making returns in respect of general betting duty, pool betting duty or remote gaming duty on behalf of the registrable person, or
(b) for making such returns and for discharging the registrable person's liability to general betting duty, pool betting duty or remote gaming duty.
(7) The notice may be combined with a notice under section 170, and in such a case any requirement contained in the notice under that section ceases to have effect if the registrable person appoints a representative with the responsibilities mentioned in subsection (6)(b).
(8) Any requirement imposed by the notice has no effect at any time when—
(a) the registrable person is entitled under Chapter 2 of Part 1 of FA 1994 to require a review of, or to bring an appeal against, the decision to give the notice,
(b) an appeal may ordinarily be brought against a decision on such a review or appeal, or
(c) proceedings on such a review, appeal or further appeal are in progress.

172 Security and representatives: review and appeal
(1) A decision to give a notice under section 170(1) or 171(1) is to be treated as a relevant decision for the purposes of sections 15A and 15C to 16 of FA 1994 (customs and excise reviews and appeals) and, accordingly, the notice must include an offer of a review of the decision under section 15A of FA 1994.
(2) Only the registrable person may bring an appeal under section 16 of FA 1994 as applied by subsection (1).
(3) The decision appealed against is to be treated for the purposes of that section as a decision as to an ancillary matter.
(4) Such amendments to the notice as are necessary to give effect to any decision on a review, appeal or further appeal must be made by whichever of the following is appropriate in the case in question—
(a) the Commissioners,
(b) the appeal tribunal, and
(c) the court which has determined an appeal from the appeal tribunal.
(5) An appeal under section 16 of FA 1994 as applied by subsection (1) may not be entertained unless any amount of general betting duty, pool betting duty or remote gaming duty (whether or not it is an amount to which the appeal relates) due from the registrable person at the date when the appeal is brought has been paid.
(6) But an appeal may be entertained despite subsection (5) if, on the application of the registrable person, the Commissioners are satisfied or (the Commissioners not being so satisfied) the appeal tribunal decides that the requirement to pay the duty for which the person is liable would cause the person to suffer hardship.
(7) Despite sections 11 and 13 of the Tribunals, Courts and Enforcement Act 2007 (rights of appeal), the decision of the appeal tribunal as to the issue of hardship is final.
(8) In this section “appeal tribunal” has the same meaning as in Chapter 2 of Part 1 of FA 1994.

173 Offence of failing to provide security or appoint representative
(1) A person who is, or is required to be, registered under section 164 is guilty of an offence if the person—
(a) is required to give security or further security by a notice under section 170 and does not comply with that requirement, or
(b) is required to appoint a representative by a notice under section 171 and does not comply with that requirement.
(2) A person guilty of an offence under this section is liable, on summary conviction, to—
(a) in England and Wales, a fine, or
(b) in Scotland or Northern Ireland, a fine not exceeding level 5 on the standard scale.
(3) The reference in subsection (2)(a) to a fine is to be read as a reference to a fine not exceeding level 5 on the standard scale in relation to an offence committed before section 85(1) of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 comes into force.

174 Fraudulent evasion
(1) A person commits an offence if the person is knowingly concerned in, or in taking steps with a view to, the fraudulent evasion of general betting duty, pool betting duty or remote gaming duty.
(2) A person guilty of an offence under subsection (1) is liable on summary conviction to—
(a) imprisonment for a term not exceeding 12 months,
(b) a fine not exceeding—
(i) in England and Wales, £20,000 or, if greater, three times the duty which is unpaid or the payment of which is sought to be avoided, or
(ii) in Scotland or Northern Ireland, the statutory maximum or, if greater, three times the duty which is unpaid or the payment of which is sought to be avoided, or
(c) both.
(3) A person guilty of an offence under subsection (1) is liable on conviction on indictment to—
(a) imprisonment for a term not exceeding 7 years,
(b) a fine, or
(c) both.
(4) The reference in subsection (2)(a) to 12 months is to be read as a reference to 6 months in relation to an offence committed—
(a) in England and Wales before the commencement of section 154(1) of the Criminal Justice Act 2003, or
(b) in Northern Ireland.
(5) Section 85(1) of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 does not apply in relation to the offence under subsection (1), but where such an offence is committed before section 85(1) comes into force the reference in subsection (2)(b)(i) to £20,000 is to be read as a reference to the statutory maximum.

175 Penalties under section 9 of FA 1994
(1) Where general betting duty, pool betting duty or remote gaming duty is payable by a person, the person's failure to pay attracts a penalty under section 9 of FA 1994, which is to be calculated by reference to the amount of duty payable.
(2) Any such failure to pay as is mentioned in subsection (1) also attracts daily penalties under that section.
(3) Subsection (4) applies to a contravention of—
(a) section 152 or a notice under that section,
(b) section 164 or regulations under that section,
(c) regulations under section 166,
(d) regulations under section 167,
(e) regulations under section 168,
(f) a notice under section 169, or
(g) a notice under section 186.
(4) Such a contravention—
(a) is conduct to which section 9 of FA 1994 applies (penalties), and
(b) attracts daily penalties under that section.

176 Interest
(1) This section applies if an order is made under section 104(3) of FA 2009 appointing a day on which sections 101 to 103 of that Act are to come into force for the purposes of general betting duty, pool betting duty or remote gaming duty.
(2) Interest charged under section 101 of that Act on an amount of such a duty (or an amount enforceable as if it were such a duty) may be enforced as if it were an amount of such a duty payable by the person liable for the amount on which the interest is charged.

177 Suspension and revocation of remote operating licences
Schedule 27 makes provision about the suspension and revocation of remote operating licences.

Offences and evidence

178 Offences by bodies corporate
Where an offence under this Part is committed by a body corporate, every person who at the date of the commission of the offence is a director, general manager, secretary or other similar officer of the body corporate (or purporting to act in such a capacity) is also guilty of the offence unless—
(a) the offence is committed without the person's consent or connivance, and
(b) the person has exercised all such diligence to prevent its commission as the person ought to have exercised, having regard to the nature of the person's functions in that capacity and to all the circumstances.

179 Protection of officers
Where an officer of Revenue and Customs takes any action in pursuance of instructions of the Commissioners given in connection with the enforcement of the enactments relating to general betting duty, pool betting duty or remote gaming duty and, apart from the provisions of this section, the officer would in taking that action be committing an offence under the enactments relating to betting or gaming, the officer is not guilty of that offence.

180 Evidence by certificate, etc
(1) A certificate of the Commissioners—
(a) that any notice required by or under this Part to be given to them had or had not been given at any date,
(b) that any registration required by or under this Part had or had not been effected at any date,
(c) that any return required by or under this Part had not been made at any date, or
(d) that any duty shown as due in any return made in pursuance of this Part or in any assessment made under section 12 of FA 1994 had not been paid at any date,
is sufficient evidence of that fact until the contrary is proved.
(2) A photograph of any document furnished to the Commissioners for the purposes of this Part and certified by them to be such a photograph is admissible in any proceedings, whether civil or criminal, to the same extent as the document itself.
(3) Any document purporting to be a certificate under subsection (1) or (2) is to be treated as being such a certificate until the contrary is proved.

181 Facilities capable of being used in United Kingdom: burden of proof
(1) This section applies where, in civil proceedings in any court or tribunal, it is necessary to determine whether the facilities used to make a bet or to participate in remote gaming were capable of being used in or from the United Kingdom.
(2) The burden of proof lies on any person claiming that the facilities were not capable of being so used.

Review and appeal

182 Review and appeal
(1) The decisions mentioned in subsection (2) are to be treated as if they were listed in subsection (2) of section 13A of FA 1994 (customs and excise decisions: meaning of “relevant decision”) and, accordingly, as if they were relevant decisions for the purposes mentioned in subsection (1) of that section.
(2) The decisions are—
(a) a decision consisting in the giving of a direction under section 153(3),
(b) a decision to direct that section 160(2) is not to apply in a specified case,
(c) a decision under regulations by virtue of section 164(3), and
(d) a decision to refuse an agreement relating to a person's liability to general betting duty, pool betting duty or remote gaming duty under section 165(3).
(3) A decision mentioned in subsection (2) is to be treated as an ancillary matter for the purposes of sections 14 to 16 of FA 1994.

Definitions

183 Bet
In this Part “bet” does not include any bet made or stake hazarded in the course of, or incidentally to, any gaming.

184 Pool betting
(1) For the purposes of this Part, a bet is to be treated as being made by way of pool betting unless it is a bet at fixed odds.
(2) In particular, bets are to be treated as being made by way of pool betting wherever a number of persons make bets—
(a) on terms that the winnings of such of those persons as are winners are to be, or to be a share of, or to be determined by reference to, the stake money paid or agreed to be paid by those persons, whether the bets are made by means of a totalisator, or by filling up and returning coupons or other printed or written forms, or in any other way,
(b) on terms that the winnings of such of those persons as are winners are to be, or are to include, an amount (not determined by reference to the stake money paid or agreed to be paid by those persons) which is divisible in any proportions among such of those persons as are winners, or
(c) on the basis that the winners or their winnings are, to any extent, to be at the discretion of the promoter or some other person.
(3) Where there is or has been issued any advertisement or other publication calculated to encourage in persons making bets of any description with or through a bookmaker a belief that such bets are made on the basis mentioned in subsection (2)(c), then any bets of that description subsequently made with or through the bookmaker are to be treated for the purposes of this section as being made on that basis.

185 Fixed odds
(1) A bet is at fixed odds for the purposes of this Part only if, when making the bet, each of the persons making it knows or can know the amount the person will win, except in so far as that amount is to depend on—
(a) the result of the event or events betted on,
(b) any such event taking place or producing a result,
(c) the numbers taking part in any such event,
(d) the starting prices or totalisator odds for any such event, or
(e) the time when the person's bet is received by any person with or through whom it is made.
(2) A bet made with or through a person carrying on a business of receiving or negotiating bets and made in the course of that business is not a bet at fixed odds for the purposes of this Part if the winnings of the person by whom it is made consist or may consist wholly or in part of something other than money.
(3) In this section—
“starting prices” means, in relation to any event, the odds ruling at the scene of the event immediately before the start, and
“totalisator odds” means the odds paid on bets made—
(a) by means of a totalisator, and
(b) at the scene of the event to which the bets relate.

186 UK person
(1) In this Part “UK person” means—
(a) an individual who usually lives in the United Kingdom, or
(b) a body corporate which is legally constituted in the United Kingdom.
(2) The Treasury may by regulations—
(a) amend the definition of “UK person” in subsection (1),
(b) make provision as to the cases in which a person is, or is not, a UK person for the purposes of this Part, and
(c) make provision about bets made, and arrangements to participate in remote gaming entered into, by bodies of persons unincorporate.
(3) The Commissioners may by notice published by them—
(a) specify steps that must be taken in order to determine whether a person making a bet or entering into arrangements to participate in remote gaming is a UK person,
(b) specify who must take those steps,
(c) specify circumstances in which a person making a bet or entering into arrangements to participate in remote gaming is to be treated as a UK person because of a failure to produce sufficient evidence to the contrary, and
(d) specify circumstances in which a person making a bet or entering into arrangements to participate in remote gaming is to be treated as not being a UK person on the basis of evidence of a description specified in the notice.

187 On-course betting and excluded betting
(1) A bet is an on-course bet for the purposes of this Part if it—
(a) is made by a person present at a horse or dog race meeting or by a bookmaker,
(b) is not made through an agent of an individual making the bet or through an intermediary, and
(c) is made—
(i) with a bookmaker present at the meeting, or
(ii) by means of a totalisator situated in the United Kingdom, using facilities provided at the meeting by or by arrangement with the person operating the totalisator.
(2) A bet is an excluded bet for the purposes of this Part if—
(a) it is not made in or from the United Kingdom, and
(b) the facilities used to receive or negotiate the bet or (in the case of pool betting) to conduct the pool betting operations are not capable of being used in or from the United Kingdom.
(3) The Treasury may by regulations amend subsection (2).

188 Gaming
(1) In this Part—
(a) “gaming” means playing a game of chance for a prize, and
(b) “game of chance” has the meaning given by section 6(2) of the Gambling Act 2005.
(2) For the purposes of subsection (1)—
(a) “playing a game of chance” is to be read in accordance with section 6(3) of the Gambling Act 2005, and
(b) “prize” does not include the opportunity to play the game again.

189 Other definitions
In this Part—
“betting facilities” means facilities for receiving or negotiating bets or conducting pool betting operations;
“bookmaker” means a person who—
(a) carries on the business of receiving or negotiating bets or conducting pool betting operations (whether as principal or agent and whether regularly or not), or
(b) holds himself or herself out or permits himself or herself to be held out, in the course of a business, as a person within paragraph (a);
“the Commissioners” means the Commissioners for Her Majesty's Revenue and Customs;
“operator”, in relation to bets made by means of a totalisator, means the person who, as principal, operates the totalisator;
“promoter”, in relation to any betting, means the person to whom the persons making the bets look for the payment of their winnings, if any;
“remote operating licence” has the same meaning as in the Gambling Act 2005 (see section 67 of that Act);
“winnings”, in relation to any betting, includes winnings of any kind, and references to amount and to payment in relation to winnings are to be read accordingly.

190 Index
The Table lists the places where some of the expressions used in this Part are defined or otherwise explained.
bet	section 183
bet at fixed odds	section 185
bet made for community benefit	section 153
betting facilities	section 189
bookmaker	section 189
Chapter 1 pool bet	section 134(1) to (4)
Chapter 2 pool bet	section 143(1) to (4)
Chapter 1 stake fund	section 134(5)
Chapter 2 stake fund	section 143(5)
chargeable person	section 155(2)
the Commissioners	section 189
excluded bet	section 187(2)
financial spread bet	section 128(2)
game of chance	section 188(1)(b)
gaming	section 188(1)(a)
gaming payment (in Chapter 3)	section 159
gaming prize fund	section 154(2)
gaming provider	section 155(1)
general bet	section 126
non-financial spread bet	section 128(2)
on-course bet	section 187(1)
operator	section 189
ordinary Chapter 1 pool bet	section 134(6)
ordinary Chapter 2 pool bet	section 143(6)
ordinary gaming	section 154(3)
pool betting	section 184
pooled prize gaming	section 154(2)
pooled stake Chapter 1 pool bet	section 134(5)
pooled stake Chapter 2 pool bet	section 143(5)
promoter	section 189
provision of, and expenditure on, a prize (in sections 156 and 157)	section 160
registrable person	section 170(6)
remote gaming	section 154(1)
remote operating licence	section 189
spread bet	section 128(1)
stake money (in Chapter 1)	section 139
stake money (in Chapter 2)	section 148
UK person	section 186
winnings (in Chapter 1)	sections 140 and 189
winnings (in Chapter 2)	sections 149 and 189

Supplementary

191 Amounts not in sterling
(1) If any amount of stake money, gaming payment, winnings or prize is in a currency or method of payment other than sterling, it is to be treated for the purposes of this Part as being the equivalent amount in sterling.
(2) The equivalent amount in sterling, in relation to any day, is to be determined by reference to—
(a) the London closing exchange rate for the previous day, or
(b) if no such rate exists, the rate specified in or determined in accordance with a notice published by the Commissioners.

192 Limited liability partnerships
(1) This Part applies to limited liability partnerships as it applies to companies.
(2) In its application to a limited liability partnership, references to a director of a company are references to a member of the limited liability partnership.

193 Effect of imposition of duties
The imposition by this Part of general betting duty, pool betting duty, or remote gaming duty does not make lawful anything which is unlawful apart from this Part.

194 Regulations
(1) Regulations under this Part—
(a) may make provision which applies generally or only for specified cases or purposes,
(b) may make different provision for different cases or purposes,
(c) may include incidental, consequential, transitional or transitory provision,
(d) may confer a discretion on the Commissioners, and
(e) may make provision by reference to things specified in a notice published by the Commissioners in accordance with the regulations (and not withdrawn by a subsequent notice).
(2) Regulations under this Part are to be made by statutory instrument.
(3) A statutory instrument containing regulations under this Part is subject to annulment in pursuance of a resolution of the House of Commons.
(4) But the following provisions of this section apply instead of subsection (3) in the case of—
(a) regulations under section 161(5) which have the effect of adding to the class of activities in respect of which remote gaming duty is chargeable;
(b) regulations under section 169(1) which have the effect of increasing the amount of duty that is chargeable in any case;
(c) regulations under section 186(2) which have the effect of adding to the class of persons falling within the definition of “UK person”;
(d) regulations under section 187(3).
(5) In such a case—
(a) the statutory instrument containing the regulations must be laid before the House of Commons, and
(b) the regulations cease to have effect at the end of the period of 28 days beginning with the day on which the instrument was made unless, before the end of that period, the instrument is approved by a resolution of the House of Commons.
(6) In reckoning the 28-day period, no account is to be taken of any time during which—
(a) Parliament is dissolved or prorogued, or
(b) the House of Commons is adjourned for more than 4 days.
(7) If regulations cease to have effect as a result of subsection (5), that does not—
(a) affect anything previously done under the regulations, or
(b) prevent the making of new regulations.

195 Notices
A notice published by the Commissioners under this Part may be revised or replaced by them.

196 Consequential amendments and repeals
Schedule 28 contains consequential amendments and repeals.

197 Transitional and saving provisions
Schedule 29 contains transitional and saving provisions.

198 Commencement and effect
(1) This Part (except sections 164(2), 173 and 196 and Schedule 28) comes into force on the day on which this Act is passed.
(2) The following provisions come into force on 1 December 2014—
(a) section 164(2),
(b) section 173, and
(c) paragraphs 1 to 27 and 31 of Schedule 28 (and section 196 so far as relating to those paragraphs).
(3) Paragraphs 28 to 30 of Schedule 28 (and section 196 so far as relating to those paragraphs) come into force on such day as the Treasury may by order made by statutory instrument appoint.
(4) An order under subsection (3)—
(a) may commence a provision generally or only for specified purposes, and
(b) may appoint different days for different provisions or for different purposes.
(5) Sections 125 to 182 have effect for the purposes of accounting periods beginning on or after 1 December 2014, and—
(a) the charges under sections 127(1), 129(1), 130(1), 135(1) and 144(1) are on bets made on or after that date,
(b) the charge under section 141(2) is in respect of bets determined on or after that date, and
(c) the charge under section 155(1) is on games of chance that begin to be played on or after that date.

PART 4 Follower notices and accelerated payments

CHAPTER 1 Introduction

Overview

199 Overview of Part 4
In this Part—
(a) sections 200 to 203 set out the main defined terms used in the Part,
(b) Chapter 2 makes provision for follower notices and for penalties if account is not taken of judicial rulings which lay down principles or give reasoning relevant to tax cases,
(c) Chapter 3 makes—
(i) provision for accelerated payments to be made on account of tax,
(ii) provision restricting the circumstances in which payments of tax can be postponed pending an appeal, and
(iii) provision to enable a court to prevent repayment of tax, for the purpose of protecting the public revenue.
(d) Chapter 4—
(i) makes special provision about the application of this Part in relation to stamp duty land tax and annual tax for enveloped dwellings,
(ii) confers a power to extend the provisions of this Part to other taxes, and
(iii) makes amendments consequential on this Part.

Main definitions

200 “Relevant tax”
In this Part, “relevant tax” means—
(a) income tax,
(b) capital gains tax,
(c) corporation tax, including any amount chargeable as if it were corporation tax or treated as if it were corporation tax,
(d) inheritance tax,
(e) stamp duty land tax, and
(f) annual tax on enveloped dwellings.

201 “Tax advantage” and “tax arrangements”
(1) This section applies for the purposes of this Part.
(2) “Tax advantage” includes—
(a) relief or increased relief from tax,
(b) repayment or increased repayment of tax,
(c) avoidance or reduction of a charge to tax or an assessment to tax,
(d) avoidance of a possible assessment to tax,
(e) deferral of a payment of tax or advancement of a repayment of tax, and
(f) avoidance of an obligation to deduct or account for tax.
(3) Arrangements are “tax arrangements” if, having regard to all the circumstances, it would be reasonable to conclude that the obtaining of a tax advantage was the main purpose, or one of the main purposes, of the arrangements.
(4) “Arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).

202 “Tax enquiry” and “return”
(1) This section applies for the purposes of this Part.
(2) “Tax enquiry” means—
(a) an enquiry under section 9A or 12AC of TMA 1970 (enquiries into self-assessment returns for income tax and capital gains tax), including an enquiry by virtue of notice being deemed to be given under section 9A of that Act by virtue of section 12AC(6) of that Act,
(b) an enquiry under paragraph 5 of Schedule 1A to that Act (enquiry into claims made otherwise than by being included in a return),
(c) an enquiry under paragraph 24 of Schedule 18 to FA 1998 (enquiry into company tax return for corporation tax etc), including an enquiry by virtue of notice being deemed to be given under that paragraph by virtue of section 12AC(6) of TMA 1970,
(d) an enquiry under paragraph 12 of Schedule 10 to FA 2003 (enquiries into SDLT returns),
(e) an enquiry under paragraph 8 of Schedule 33 to FA 2013 (enquiries into annual tax for enveloped dwellings returns), or
(f) a deemed enquiry under subsection (6).
(3) The period during which an enquiry is in progress—
(a) begins with the day on which notice of enquiry is given, and
(b) ends with the day on which the enquiry is completed.
(4) Subsection (3) is subject to subsection (6).
(5) In the case of inheritance tax, each of the following is to be treated as a return—
(a) an account delivered by a person under section 216 or 217 of IHTA 1984 (including an account delivered in accordance with regulations under section 256 of that Act);
(b) a statement or declaration which amends or is otherwise connected with such an account produced by the person who delivered the account;
(c) information or a document provided by a person in accordance with regulations under section 256 of that Act;
and such a return is to be treated as made by the person in question.
(6) An enquiry is deemed to be in progress, in relation to a return to which subsection (5) applies, during the period which—
(a) begins with the time the account is delivered or (as the case may be) the statement, declaration, information or document is produced, and
(b) ends when the person is issued with a certificate of discharge under section 239 of that Act, or is discharged by virtue of section 256(1)(b) of that Act, in respect of the return (at which point the enquiry is to be treated as completed).

203 “Tax appeal”
In this Part “tax appeal” means—
(a) an appeal under section 31 of TMA 1970 (income tax: appeals against amendments of self-assessment, amendments made by closure notices under section 28A or 28B of that Act, etc), including an appeal under that section by virtue of regulations under Part 11 of ITEPA 2003 (PAYE),
(b) an appeal under paragraph 9 of Schedule 1A to TMA 1970 (income tax: appeals against amendments made by closure notices under paragraph 7(2) of that Schedule, etc),
(c) an appeal under section 705 of ITA 2007 (income tax: appeals against counteraction notices),
(d) an appeal under paragraph 34(3) or 48 of Schedule 18 to FA 1998 (corporation tax: appeals against amendment of a company's return made by closure notice, assessments other than self-assessments, etc),
(e) an appeal under section 750 of CTA 2010 (corporation tax: appeals against counteraction notices),
(f) an appeal under section 222 of IHTA 1984 (appeals against HMRC determinations) other than an appeal made by a person against a determination in respect of a transfer of value at a time when a tax enquiry is in progress in respect of a return made by that person in respect of that transfer,
(g) an appeal under paragraph 35 of Schedule 10 to FA 2003 (stamp duty land tax: appeals against amendment of self-assessment, discovery assessments, etc),
(h) an appeal under paragraph 35 of Schedule 33 to FA 2013 (annual tax on enveloped dwellings: appeals against amendment of self-assessment, discovery assessments, etc), or
(i) an appeal against any determination of—
(i) an appeal within paragraphs (a) to (h), or
(ii) an appeal within this paragraph.

CHAPTER 2 Follower notices

Giving of follower notices

204 Circumstances in which a follower notice may be given
(1) HMRC may give a notice (a “follower notice”) to a person (“P”) if Conditions A to D are met.
(2) Condition A is that—
(a) a tax enquiry is in progress into a return or claim made by P in relation to a relevant tax, or
(b) P has made a tax appeal (by notifying HMRC or otherwise) in relation to a relevant tax, but that appeal has not yet been—
(i) determined by the tribunal or court to which it is addressed, or
(ii) abandoned or otherwise disposed of.
(3) Condition B is that the return or claim or, as the case may be, appeal is made on the basis that a particular tax advantage (“the asserted advantage”) results from particular tax arrangements (“the chosen arrangements”).
(4) Condition C is that HMRC is of the opinion that there is a judicial ruling which is relevant to the chosen arrangements.
(5) Condition D is that no previous follower notice has been given to the same person (and not withdrawn) by reference to the same tax advantage, tax arrangements, judicial ruling and tax period.
(6) A follower notice may not be given after the end of the period of 12 months beginning with the later of—
(a) the day on which the judicial ruling mentioned in Condition C is made, and
(b) the day the return or claim to which subsection (2)(a) refers was received by HMRC or (as the case may be) the day the tax appeal to which subsection (2)(b) refers was made.

205 “Judicial ruling” and circumstances in which a ruling is “relevant”
(1) This section applies for the purposes of this Chapter.
(2) “Judicial ruling” means a ruling of a court or tribunal on one or more issues.
(3) A judicial ruling is “relevant” to the chosen arrangements if—
(a) it relates to tax arrangements,
(b) the principles laid down, or reasoning given, in the ruling would, if applied to the chosen arrangements, deny the asserted advantage or a part of that advantage, and
(c) it is a final ruling.
(4) A judicial ruling is a “final ruling” if it is—
(a) a ruling of the Supreme Court, or
(b) a ruling of any other court or tribunal in circumstances where—
(i) no appeal may be made against the ruling,
(ii) if an appeal may be made against the ruling with permission, the time limit for applications has expired and either no application has been made or permission has been refused,
(iii) if such permission to appeal against the ruling has been granted or is not required, no appeal has been made within the time limit for appeals, or
(iv) if an appeal was made, it was abandoned or otherwise disposed of before it was determined by the court or tribunal to which it was addressed.
(5) Where a judicial ruling is final by virtue of sub-paragraph (ii), (iii) or (iv) of subsection (4)(b), the ruling is treated as made at the time when the sub-paragraph in question is first satisfied.

206 Content of a follower notice
A follower notice must—
(a) identify the judicial ruling in respect of which Condition C in section 204 is met,
(b) explain why HMRC considers that the ruling meets the requirements of section 205(3), and
(c) explain the effects of sections 207 to 210.

Representations

207 Representations about a follower notice
(1) Where a follower notice is given under section 204, P has 90 days beginning with the day that notice is given to send written representations to HMRC objecting to the notice on the grounds that—
(a) Condition A, B or D in section 204 was not met,
(b) the judicial ruling specified in the notice is not one which is relevant to the chosen arrangements, or
(c) the notice was not given within the period specified in subsection (6) of that section.
(2) HMRC must consider any representations made in accordance with subsection (1).
(3) Having considered the representations, HMRC must determine whether to—
(a) confirm the follower notice (with or without amendment), or
(b) withdraw the follower notice,
and notify P accordingly.

Penalties

208 Penalty if corrective action not taken in response to follower notice
(1) This section applies where a follower notice is given to P (and not withdrawn).
(2) P is liable to pay a penalty if the necessary corrective action is not taken in respect of the denied advantage (if any) before the specified time.
(3) In this Chapter “the denied advantage” means so much of the asserted advantage (see section 204(3)) as is denied by the application of the principles laid down, or reasoning given, in the judicial ruling identified in the follower notice under section 206(a).
(4) The necessary corrective action is taken in respect of the denied advantage if (and only if) P takes the steps set out in subsections (5) and (6).
(5) The first step is that—
(a) in the case of a follower notice given by virtue of section 204(2)(a), P amends a return or claim to counteract the denied advantage;
(b) in the case of a follower notice given by virtue of section 204(2)(b), P takes all necessary action to enter into an agreement with HMRC (in writing) for the purpose of relinquishing the denied advantage.
(6) The second step is that P notifies HMRC—
(a) that P has taken the first step, and
(b) of the denied advantage and (where different) the additional amount which has or will become due and payable in respect of tax by reason of the first step being taken.
(7) In determining the additional amount which has or will become due and payable in respect of tax for the purposes of subsection (6)(b), it is to be assumed that, where P takes the necessary action as mentioned in subsection (5)(b), the agreement is then entered into.
(8) In this Chapter—
“the specified time” means—
(a) if no representations objecting to the follower notice were made by P in accordance with subsection (1) of section 207, the end of the 90 day post-notice period;
(b) if such representations were made and the notice is confirmed under that section (with or without amendment), the later of—
(i) the end of the 90 day post-notice period, and
(ii) the end of the 30 day post-representations period;
“the 90 day post-notice period” means the period of 90 days beginning with the day on which the follower notice is given;
“the 30 day post-representations period” means the period of 30 days beginning with the day on which P is notified of HMRC's determination under section 207.
(9) No enactment limiting the time during which amendments may be made to returns or claims operates to prevent P taking the first step mentioned in subsection (5)(a) before the tax enquiry is closed (whether or not before the specified time).
(10) No appeal may be brought, by virtue of a provision mentioned in subsection (11), against an amendment made by a closure notice in respect of a tax enquiry to the extent that the amendment takes into account an amendment made by P to a return or claim in taking the first step mentioned in subsection (5)(a) (whether or not that amendment was made before the specified time).
(11) The provisions are—
(a) section 31(1)(b) or (c) of TMA 1970,
(b) paragraph 9 of Schedule 1A to TMA 1970,
(c) paragraph 34(3) of Schedule 18 to FA 1998,
(d) paragraph 35(1)(b) of Schedule 10 to FA 2003, and
(e) paragraph 35(1)(b) of Schedule 33 to FA 2013.

209 Amount of a section 208 penalty
(1) The penalty under section 208 is 50% of the value of the denied advantage.
(2) Schedule 30 contains provision about how the denied advantage is valued for the purposes of calculating penalties under this section.
(3) Where P before the specified time—
(a) amends a return or claim to counteract part of the denied advantage only, or
(b) takes all necessary action to enter into an agreement with HMRC (in writing) for the purposes of relinquishing part of the denied advantage only,
in subsections (1) and (2) the references to the denied advantage are to be read as references to the remainder of the denied advantage.

210 Reduction of a section 208 penalty for co-operation
(1) Where—
(a) P is liable to pay a penalty under section 208 of the amount specified in section 209(1),
(b) the penalty has not yet been assessed, and
(c) P has co-operated with HMRC,
HMRC may reduce the amount of that penalty to reflect the quality of that co-operation.
(2) In relation to co-operation, “quality” includes timing, nature and extent.
(3) P has co-operated with HMRC only if P has done one or more of the following—
(a) provided reasonable assistance to HMRC in quantifying the tax advantage;
(b) counteracted the denied advantage;
(c) provided HMRC with information enabling corrective action to be taken by HMRC;
(d) provided HMRC with information enabling HMRC to enter an agreement with P for the purpose of counteracting the denied advantage;
(e) allowed HMRC to access tax records for the purpose of ensuring that the denied advantage is fully counteracted.
(4) But nothing in this section permits HMRC to reduce a penalty to less than 10% of the value of the denied advantage.

211 Assessment of a section 208 penalty
(1) Where a person is liable for a penalty under section 208, HMRC may assess the penalty.
(2) Where HMRC assess the penalty, HMRC must—
(a) notify the person who is liable for the penalty, and
(b) state in the notice a tax period in respect of which the penalty is assessed.
(3) A penalty under section 208 must be paid before the end of the period of 30 days beginning with the day on which the person is notified of the penalty under subsection (2).
(4) An assessment—
(a) is to be treated for procedural purposes in the same way as an assessment to tax (except in respect of a matter expressly provided for by this Chapter),
(b) may be enforced as if it were an assessment to tax, and
(c) may be combined with an assessment to tax.
(5) No penalty under section 208 may be notified under subsection (2) later than—
(a) in the case of a follower notice given by virtue of section 204(2)(a) (tax enquiry in progress), the end of the period of 90 days beginning with the day the tax enquiry is completed, and
(b) in the case of a follower notice given by virtue of section 204(2)(b) (tax appeal pending), the end of the period of 90 days beginning with the earliest of—
(i) the day on which P takes the necessary corrective action (within the meaning of section 208(4)),
(ii) the day on which a ruling is made on the tax appeal by P, or any further appeal in that case, which is a final ruling (see section 205(4)), and
(iii) the day on which that appeal, or any further appeal, is abandoned or otherwise disposed of before it is determined by the court or tribunal to which it is addressed.
(6) In this section a reference to an assessment to tax, in relation to inheritance tax, is to a determination.

212 Aggregate penalties
(1) Subsection (2) applies where—
(a) two or more penalties are incurred by the same person and fall to be determined by reference to an amount of tax to which that person is chargeable,
(b) one of those penalties is incurred under section 208, and
(c) one or more of the other penalties are incurred under a relevant penalty provision.
(2) The aggregate of the amounts of the penalties mentioned in subsection (1)(b) and (c), so far as determined by reference to that amount of tax, must not exceed—
(a) the relevant percentage of that amount, or
(b) in a case where at least one of the penalties is under paragraph 5(2)(b) or 6(3)(b), (4)(b) or (5)(b) of Schedule 55 to FA 2009, £300 (if greater).
(3) In the application of section 97A of TMA 1970 (multiple penalties), no account is to be taken of a penalty under section 208.
(4) “Relevant penalty provision” means—
(a) Schedule 24 to FA 2007 (penalties for errors),
(b) Schedule 41 to FA 2008 (penalties: failure to notify etc), or
(c) Schedule 55 to FA 2009 (penalties for failure to make returns etc).
(5) “The relevant percentage” means—
(a) 200% in a case where at least one of the penalties is determined by reference to the percentage in—
(i) paragraph 4(4)(c) of Schedule 24 to FA 2007,
(ii) paragraph 6(4)(a) of Schedule 41 to FA 2008, or
(iii) paragraph 6(3A)(c) of Schedule 55 to FA 2009,
(b) 150% in a case where paragraph (a) does not apply and at least one of the penalties is determined by reference to the percentage in—
(i) paragraph 4(3)(c) of Schedule 24 to FA 2007,
(ii) paragraph 6(3)(a) of Schedule 41 to FA 2008, or
(iii) paragraph 6(3A)(b) of Schedule 55 to FA 2009,
(c) 140% in a case where neither paragraph (a) nor paragraph (b) applies and at least one the penalties is determined by reference to the percentage in—
(i) paragraph 4(4)(b) of Schedule 24 to FA 2007,
(ii) paragraph 6(4)(b) of Schedule 41 to FA 2008,
(iii) paragraph 6(4A)(c) of Schedule 55 to FA 2009,
(d) 105% in a case where none of paragraphs (a), (b) and (c) applies and at least one of the penalties is determined by reference to the percentage in—
(i) paragraph 4(3)(b) of Schedule 24 to FA 2007,
(ii) paragraph 6(3)(b) of Schedule 41 to FA 2008,
(iii) paragraph 6(4A)(b) of Schedule 55 to FA 2009, and
(e) in any other case, 100%.

213 Alteration of assessment of a section 208 penalty
(1) After notification of an assessment has been given to a person under section 211(2), the assessment may not be altered except in accordance with this section or on appeal.
(2) A supplementary assessment may be made in respect of a penalty if an earlier assessment operated by reference to an underestimate of the value of the denied advantage.
(3) An assessment or supplementary assessment may be revised as necessary if it operated by reference to an overestimate of the denied advantage; and, where more than the resulting assessed penalty has already been paid by the person to HMRC, the excess must be repaid.

214 Appeal against a section 208 penalty
(1) P may appeal against a decision of HMRC that a penalty is payable by P under section 208.
(2) P may appeal against a decision of HMRC as to the amount of a penalty payable by P under section 208.
(3) The grounds on which an appeal under subsection (1) may be made include in particular—
(a) that Condition A, B or D in section 204 was not met in relation to the follower notice,
(b) that the judicial ruling specified in the notice is not one which is relevant to the chosen arrangements,
(c) that the notice was not given within the period specified in subsection (6) of that section, or
(d) that it was reasonable in all the circumstances for P not to have taken the necessary corrective action (see section 208(4)) in respect of the denied advantage.
(4) An appeal under this section must be made within the period of 30 days beginning with the day on which notification of the penalty is given under section 211.
(5) An appeal under this section is to be treated in the same way as an appeal against an assessment to the tax concerned (including by the application of any provision about bringing the appeal by notice to HMRC, about HMRC's review of the decision or about determination of the appeal by the First-tier Tribunal or Upper Tribunal).
(6) Subsection (5) does not apply—
(a) so as to require a person to pay a penalty before an appeal against the assessment of the penalty is determined, or
(b) in respect of any other matter expressly provided for by this Part.
(7) In this section a reference to an assessment to tax, in relation to inheritance tax, is to a determination.
(8) On an appeal under subsection (1), the tribunal may affirm or cancel HMRC's decision.
(9) On an appeal under subsection (2), the tribunal may—
(a) affirm HMRC's decision, or
(b) substitute for HMRC's decision another decision that HMRC had power to make.
(10) The cancellation under subsection (8) of HMRC's decision on the ground specified in subsection (3)(d) does not affect the validity of the follower notice, or of any accelerated payment notice or partner payment notice under Chapter 3 related to the follower notice.
(11) In this section “tribunal” means the First-tier Tribunal or Upper Tribunal (as appropriate by virtue of subsection (5)).

Partners and partnerships

215 Follower notices: treatment of partners and partnerships
Schedule 31 makes provision about the application of this Chapter in relation to partners and partnerships.

Appeals out of time

216 Late appeal against final judicial ruling
(1) This section applies where a final judicial ruling (“the original ruling”) is the subject of an appeal by reason of a court or tribunal granting leave to appeal out of time.
(2) If a follower notice has been given identifying the original ruling under section 206(a), the notice is suspended until such time as HMRC notify P that—
(a) the appeal has resulted in a judicial ruling which is a final ruling, or
(b) the appeal has been abandoned or otherwise disposed of (before it was determined).
(3) Accordingly the period during which the notice is suspended does not count towards the periods mentioned in section 208(8).
(4) When a follower notice is suspended under subsection (2), HMRC must notify P as soon as reasonably practicable.
(5) If the new final ruling resulting from the appeal is not a judicial ruling which is relevant to the chosen arrangements (see section 205), the follower notice ceases to have effect at the end of the period of suspension.
(6) In any other case, the follower notice continues to have effect after the end of the period of suspension and, in a case within subsection (2)(a), is treated as if it were in respect of the new final ruling resulting from the appeal.
(7) The notice given under subsection (2) must—
(a) state whether subsection (5) or (6) applies, and
(b) where subsection (6) applies in a case within subsection (2)(a), make any amendments to the follower notice required to reflect the new final ruling.
(8) No new follower notice may be given in respect of the original ruling unless the appeal has been abandoned or otherwise disposed of before it is determined by the court or tribunal to which it is addressed.
(9) Nothing in this section prevents a follower notice being given in respect of a new final ruling resulting from the appeal.
(10) Where the appeal is abandoned or otherwise disposed of before it is determined by the court or tribunal to which it is addressed, for the purposes of the original ruling the period beginning when leave to appeal out of time was granted, and ending when the appeal is disposed of, does not count towards the period of 12 months mentioned in section 204(6).

Transitional provision

217 Transitional provision
(1) In the case of judicial rulings made before the day on which this Act is passed, this Chapter has effect as if for section 204(6) there were substituted—

“(6) A follower notice may not be given after—
(a) the end of the period of 24 months beginning with the day on which this Act is passed, or
(b) the end of the period of 12 months beginning with the day the return or claim to which subsection (2)(a) refers was received by HMRC or (as the case may be) with the day the tax appeal to which subsection (2)(b) refers was made,
whichever is later.”

(2) Accordingly, the reference in section 216(10) to the period of 12 months includes a reference to the period of 24 months mentioned in the version of section 204(6) set out in subsection (1) above.

Defined terms

218 Defined terms used in Chapter 2
For the purposes of this Chapter—
“arrangements” has the meaning given by section 201(4);
“the asserted advantage” has the meaning given by section 204(3);
“the chosen arrangements” has the meaning given by section 204(3);
“the denied advantage” has the meaning given by section 208(3);
“follower notice” has the meaning given by section 204(1);
“HMRC” means Her Majesty's Revenue and Customs;
“judicial ruling”, and “relevant” in relation to a judicial ruling and the chosen arrangements, have the meaning given by section 205;
“relevant tax” has the meaning given by section 200;
“the specified time” has the meaning given by section 208(8);
“tax advantage” has the meaning given by section 201(2);
“tax appeal” has the meaning given by section 203;
“tax arrangements” has the meaning given by section 201(3);
“tax enquiry” has the meaning given by section 202(2);
“tax period” means a tax year, accounting period or other period in respect of which tax is charged;
“P” has the meaning given by section 204(1);
“the 30 day post-representations period” has the meaning given by section 208(8);
“the 90 day post-notice period” has the meaning given by section 208(8).

CHAPTER 3 Accelerated payment

Accelerated payment notices

219 Circumstances in which an accelerated payment notice may be given
(1) HMRC may give a notice (an “accelerated payment notice”) to a person (“P”) if Conditions A to C are met.
(2) Condition A is that—
(a) a tax enquiry is in progress into a return or claim made by P in relation to a relevant tax, or
(b) P has made a tax appeal (by notifying HMRC or otherwise) in relation to a relevant tax but that appeal has not yet been—
(i) determined by the tribunal or court to which it is addressed, or
(ii) abandoned or otherwise disposed of.
(3) Condition B is that the return or claim or, as the case may be, appeal is made on the basis that a particular tax advantage (“the asserted advantage”) results from particular arrangements (“the chosen arrangements”).
(4) Condition C is that one or more of the following requirements are met—
(a) HMRC has given (or, at the same time as giving the accelerated payment notice, gives) P a follower notice under Chapter 2—
(i) in relation to the same return or claim or, as the case may be, appeal, and
(ii) by reason of the same tax advantage and the chosen arrangements;
(b) the chosen arrangements are DOTAS arrangements;
(c) a GAAR counteraction notice has been given in relation to the asserted advantage or part of it and the chosen arrangements (or is so given at the same time as the accelerated payment notice) in a case where the stated opinion of at least two of the members of the sub-panel of the GAAR Advisory Panel which considered the matter under paragraph 10 of Schedule 43 to FA 2013 was as set out in paragraph 11(3)(b) of that Schedule (entering into tax arrangements not reasonable course of action etc).
(5) “DOTAS arrangements” means—
(a) notifiable arrangements to which HMRC has allocated a reference number under section 311 of FA 2004,
(b) notifiable arrangements implementing a notifiable proposal where HMRC has allocated a reference number under that section to the proposed notifiable arrangements, or
(c) arrangements in respect of which the promoter must provide prescribed information under section 312(2) of that Act by reason of the arrangements being substantially the same as notifiable arrangements within paragraph (a) or (b).
(6) But the notifiable arrangements within subsection (5) do not include arrangements in relation to which HMRC has given notice under section 312(6) of FA 2004 (notice that promoters not under duty imposed to notify client of reference number).
(7) “GAAR counteraction notice” means a notice under paragraph 12 of Schedule 43 to FA 2013 (notice of final decision to counteract under the general anti-abuse rule).

220 Content of notice given while a tax enquiry is in progress
(1) This section applies where an accelerated payment notice is given by virtue of section 219(2)(a) (notice given while a tax enquiry is in progress).
(2) The notice must—
(a) specify the paragraph or paragraphs of section 219(4) by virtue of which the notice is given,
(b) specify the payment required to be made under section 223 and the requirements of that section, and
(c) explain the effect of sections 222 and 226, and of the amendments made by sections 224 and 225 (so far as relating to the relevant tax in relation to which the accelerated payment notice is given).
(3) The payment required to be made under section 223 is an amount equal to the amount which a designated HMRC officer determines, to the best of that officer's information and belief, as the understated tax.
(4) “The understated tax” means the additional amount that would be due and payable in respect of tax if—
(a) in the case of a notice given by virtue of section 219(4)(a) (cases where a follower notice is given)—
(i) it were assumed that the explanation given in the follower notice in question under section 206(b) is correct, and
(ii) the necessary corrective action were taken under section 208 in respect of what the designated HMRC officer determines, to the best of that officer's information and belief, as the denied advantage;
(b) in the case of a notice given by virtue of section 219(4)(b) (cases where the DOTAS requirements are met), such adjustments were made as are required to counteract what the designated HMRC officer determines, to the best of that officer's information and belief, as the denied advantage;
(c) in the case of a notice given by virtue of section 219(4)(c) (cases involving counteraction under the general anti-abuse rule), such of the adjustments set out in the GAAR counteraction notice as have effect to counteract the denied advantage were made.
(5) “The denied advantage”—
(a) in the case of a notice given by virtue of section 219(4)(a), has the meaning given by section 208(3),
(b) in the case of a notice given by virtue of section 219(4)(b), means so much of the asserted advantage as is not a tax advantage which results from the chosen arrangements or otherwise, and
(c) in the case of a notice given by virtue of section 219(4)(c), means so much of the asserted advantage as would be counteracted by making the adjustments set out in the GAAR counteraction notice.
(6) If a notice is given by reason of two or all of the requirements in section 219(4) being met, the payment specified under subsection (2)(b) is to be determined as if the notice were given by virtue of such one of them as is stated in the notice as being used for this purpose.
(7) “The GAAR counteraction notice” means the notice under paragraph 12 of Schedule 43 to FA 2013 (notice of final decision to counteract under the general anti-abuse rule).

221 Content of notice given pending an appeal
(1) This section applies where an accelerated payment notice is given by virtue of section 219(2)(b) (notice given pending an appeal).
(2) The notice must—
(a) specify the paragraph or paragraphs of section 219(4) by virtue of which the notice is given,
(b) specify the disputed tax, and
(c) explain the effect of section 222 and of the amendments made by sections 224 and 225 so far as relating to the relevant tax in relation to which the accelerated payment notice is given.
(3) “The disputed tax” means so much of the amount of the charge to tax arising in consequence of—
(a) the amendment or assessment to tax appealed against, or
(b) where the appeal is against a conclusion stated by a closure notice, that conclusion,
as a designated HMRC officer determines, to the best of the officer's information and belief, as the amount required to ensure the counteraction of what that officer so determines as the denied advantage.
(4) “The denied advantage” has the same meaning as in section 220(5).
(5) If a notice is given by reason of two or all of the requirements in section 219(4) being met, the denied advantage is to be determined as if the notice were given by virtue of such one of them as is stated in the notice as being used for this purpose.
(6) In this section a reference to an assessment to tax, in relation to inheritance tax, is to a determination.

222 Representations about a notice
(1) This section applies where an accelerated payment notice has been given under section 219 (and not withdrawn).
(2) P has 90 days beginning with the day that notice is given to send written representations to HMRC—
(a) objecting to the notice on the grounds that Condition A, B or C in section 219 was not met, or
(b) objecting to the amount specified in the notice under section 220(2)(b) or section 221(2)(b).
(3) HMRC must consider any representations made in accordance with subsection (2).
(4) Having considered the representations, HMRC must—
(a) if representations were made under subsection (2)(a), determine whether—
(i) to confirm the accelerated payment notice (with or without amendment), or
(ii) to withdraw the accelerated payment notice, and
(b) if representations were made under subsection (2)(b) (and the notice is not withdrawn under paragraph (a)), determine whether a different amount ought to have been specified under section 220(2)(b) or section 221(2)(b), and then—
(i) confirm the amount specified in the notice, or
(ii) amend the notice to specify a different amount,
and notify P accordingly.

Forms of accelerated payment

223 Effect of notice given while tax enquiry is in progress
(1) This section applies where an accelerated payment notice is given by virtue of section 219(2)(a) (notice given while a tax enquiry is in progress) (and not withdrawn).
(2) P must make a payment (“the accelerated payment”) to HMRC of the amount specified in the notice in accordance with section 220(2)(b).
(3) The accelerated payment is to be treated as a payment on account of the understated tax (see section 220).
(4) The accelerated payment must be made before the end of the payment period.
(5) “The payment period” means—
(a) if P made no representations under section 222, the period of 90 days beginning with the day on which the accelerated payment notice is given, and
(b) if P made such representations, whichever of the following periods ends later—
(i) the 90 day period mentioned in paragraph (a);
(ii) the period of 30 days beginning with the day on which P is notified under section 222 of HMRC's determination.
(6) But where the understated tax would be payable by instalments by virtue of an election made under section 227 of IHTA 1984, to the extent that the accelerated payment relates to tax payable by an instalment which falls to be paid at a time after the payment period, the accelerated payment must be made no later than that time.
(7) If P pays any part of the understated tax before the accelerated payment in respect of it, the accelerated payment is treated to that extent as having been paid at the same time.
(8) Any tax enactment which relates to the recovery of a relevant tax applies to an amount to be paid on account of the relevant tax under this section in the same manner as it applies to an amount of the relevant tax.
(9) “Tax enactment” means provisions of or made under—
(a) the Tax Acts,
(b) any enactment relating to capital gains tax,
(c) IHTA 1984 or any other enactment relating to inheritance tax,
(d) Part 4 of FA 2003 or any other enactment relating to stamp duty land tax, or
(e) Part 3 of FA 2013 or any other enactment relating to annual tax on enveloped dwellings.

224 Restriction on powers to postpone tax payments pending initial appeal
(1) In section 55 of TMA 1970 (recovery of tax not postponed), after subsection (8A) insert—

“(8B) Subsections (8C) and (8D) apply where a person has been given an accelerated payment notice or partner payment notice under Chapter 3 of Part 4 of the Finance Act 2014 and that notice has not been withdrawn.
(8C) Nothing in this section enables the postponement of the payment of (as the case may be)—
(a) the understated tax to which the payment specified in the notice under section 220(2)(b) of that Act relates,
(b) the disputed tax specified in the notice under section 221(2)(b) of that Act, or
(c) the understated partner tax to which the payment specified in the notice under paragraph 4(1)(b) of Schedule 32 to that Act relates.
(8D) Accordingly, if the payment of an amount of tax within subsection (8C)(b) is postponed by virtue of this section immediately before the accelerated payment notice is given, it ceases to be so postponed with effect from the time that notice is given, and the tax is due and payable—
(a) if no representations were made under section 222 of that Act in respect of the notice, on or before the last day of the period of 90 days beginning with the day the notice or partner payment notice is given, and
(b) if representations were so made, on or before whichever is later of—
(i) the last day of the 90 day period mentioned in paragraph (a), and
(ii) the last day of the period of 30 days beginning with the day on which HMRC's determination in respect of those representations is notified under section 222 of that Act.”

(2) In section 242 of IHTA 1984 (recovery of tax), after subsection (3) insert—

“(4) Where a person has been given an accelerated payment notice under Chapter 3 of Part 4 of the Finance Act 2014 and that notice has not been withdrawn, nothing in this section prevents legal proceedings being taken for the recovery of (as the case may be)—
(a) the understated tax to which the payment specified in the notice under section 220(2)(b) of that Act relates, or
(b) the disputed tax specified in the notice under section 221(2)(b) of that Act.”

(3) In Schedule 10 to FA 2003 (SDLT: returns, enquiries, assessments and appeals), in paragraph 39 (direction by the tribunal to postpone payment), after sub-paragraph (8) insert—

“(9) Sub-paragraphs (10) and (11) apply where a person has been given an accelerated payment notice under Chapter 3 of Part 4 of the Finance Act 2014 and that notice has not been withdrawn.
(10) Nothing in this paragraph enables the postponement of the payment of (as the case may be)—
(a) the understated tax to which the payment specified in the notice under section 220(2)(b) of that Act relates, or
(b) the disputed tax specified in the notice under section 221(2)(b) of that Act.
(11) Accordingly, if the payment of an amount of tax within sub-paragraph (10)(b) is postponed by virtue of this paragraph immediately before the accelerated payment notice is given, it ceases to be so postponed with effect from the time that notice is given, and the tax is due and payable—
(a) if no representations were made under section 222 of that Act in respect of the notice, on or before the last day of the period of 90 days beginning with the day the notice is given, and
(b) if representations were so made, on or before whichever is later of—
(i) the last day of the 90 day period mentioned in paragraph (a), and
(ii) the last day of the period of 30 days beginning with the day on which HMRC's determination in respect of those representations is notified under section 222 of that Act.”

(4) In paragraph 40 of that Schedule (agreement to postpone payment of tax), after sub-paragraph (3) insert—

“(4) Sub-paragraphs (9) to (11) of paragraph 39 apply for the purposes of this paragraph as they apply for the purposes of paragraph 39.”

(5) In Schedule 33 to FA 2013 (annual tax on enveloped dwellings: returns, enquiries, assessments and appeals), in paragraph 48 (application for payment of tax to be postponed), after sub-paragraph (8) insert—

“(8A) Sub-paragraphs (8B) and (8C) apply where a person has been given an accelerated payment notice under Chapter 3 of Part 4 of FA 2014 and that notice has not been withdrawn.
(8B) Nothing in this paragraph enables the postponement of the payment of (as the case may be)—
(a) the understated tax to which the payment specified in the notice under section 220(2)(b) of that Act relates, or
(b) the disputed tax specified in the notice under section 221(2)(b) of that Act.
(8C) Accordingly, if the payment of an amount of tax within sub-paragraph (8B)(b) is postponed by virtue of this paragraph immediately before the accelerated payment notice is given, it ceases to be so postponed with effect from the time that notice is given, and the tax is due and payable—
(a) if no representations were made under section 222 of that Act in respect of the notice, on or before the last day of the period of 90 days beginning with the day the notice is given, and
(b) if representations were so made, on or before whichever is later of—
(i) the last day of the 90 day period mentioned in paragraph (a), and
(ii) the last day of the period of 30 days beginning with the day on which HMRC's determination in respect of those representations is notified under section 222 of that Act.”

(6) In paragraph 49 of that Schedule (agreement to postpone payment of tax), after sub-paragraph (3) insert—

“(4) Sub-paragraphs (8A) to (8C) of paragraph 48 apply for the purposes of this paragraph as they apply for the purposes of paragraph 48.”

225 Protection of the revenue pending further appeals
(1) In section 56 of TMA 1970 (payment of tax where there is a further appeal), after subsection (3) insert—

“(4) Subsection (5) applies where—
(a) an accelerated payment notice or partner payment notice has been given to a party to the appeal under Chapter 3 of Part 4 of the Finance Act 2014 (and not withdrawn), and
(b) the assessment has effect, or partly has effect, to counteract the whole or part of the asserted advantage (within the meaning of section 219(3) of that Act) by reason of which the notice was given.
(5) If, on the application of HMRC, the relevant court or tribunal considers it necessary for the protection of the revenue, it may direct that subsection (2) does not apply so far as the tax relates to the counteraction of the whole or part of the asserted advantage, and—
(a) give permission to withhold all or part of any repayment, or
(b) require the provision of adequate security before repayment is made.
(6) “Relevant court or tribunal” means the tribunal or court from which permission or leave to appeal is sought.”

(2) In Schedule 10 to FA 2003 (SDLT: returns, enquiries, assessments and appeals), in paragraph 43 (payment of stamp duty land tax where there is a further appeal), after sub-paragraph (2) insert—

“(3) Sub-paragraph (4) applies where—
(a) an accelerated payment notice has been given to a party to the appeal under Chapter 3 of Part 4 of the Finance Act 2014 (and not withdrawn), and
(b) the assessment to which the appeal relates has effect, or partly has effect, to counteract the whole or part of the asserted advantage (within the meaning of section 219(3) of that Act) by reason of which the notice was given.
(4) If, on the application of HMRC, the relevant court or tribunal considers it necessary for the protection of the revenue, it may direct that sub-paragraph (1) does not apply so far as the stamp duty land tax relates to the counteraction of the whole or part of the asserted advantage, and—
(a) give permission to withhold all or part of any repayment, or
(b) require the provision of adequate security before repayment is made.
(5) “Relevant court or tribunal” means the tribunal or court from which permission or leave to appeal is sought.”

(3) In Schedule 33 to FA 2013 (annual tax on enveloped dwellings: returns, enquiries, assessments and appeals), in paragraph 53 (payment of tax where there is a further appeal), after sub-paragraph (2) insert—

“(3) Sub-paragraph (4) applies where—
(a) an accelerated payment notice has been given to a party to the appeal under Chapter 3 of Part 4 of FA 2014 (and not withdrawn), and
(b) the assessment to which the appeal relates has effect, or partly has effect, to counteract the whole or part of the asserted advantage (within the meaning of section 219(3) of that Act) by reason of which the notice was given.
(4) If, on the application of HMRC, the relevant court or tribunal considers it necessary for the protection of the revenue, it may direct that sub-paragraph (1) does not apply so far as the tax relates to the counteraction of the whole or part of the asserted advantage, and—
(a) give permission to withhold all or part of any repayment, or
(b) require the provision of adequate security before repayment is made.
(5) “Relevant court or tribunal” means the tribunal or court from which permission or leave to appeal is sought.”

Penalties

226 Penalty for failure to pay accelerated payment
(1) This section applies where an accelerated payment notice is given by virtue of section 219(2)(a) (notice given while tax enquiry is in progress) (and not withdrawn).
(2) If any amount of the accelerated payment is unpaid at the end of the payment period, P is liable to a penalty of 5% of that amount.
(3) If any amount of the accelerated payment is unpaid after the end of the period of 5 months beginning with the penalty day, P is liable to a penalty of 5% of that amount.
(4) If any amount of the accelerated payment is unpaid after the end of the period of 11 months beginning with the penalty day, P is liable to a penalty of 5% of that amount.
(5) “The penalty day” means the day immediately following the end of the payment period.
(6) Where section 223(6) (accelerated payment payable by instalments when it relates to inheritance tax payable by instalments) applies to require an amount of the accelerated payment to be paid before a later time than the end of the payment period, references in subsections (2) and (5) to the end of that period are to be read, in relation to that amount, as references to that later time.
(7) Paragraphs 9 to 18 (other than paragraph 11(5)) of Schedule 56 to FA 2009 (provisions which apply to penalties for failures to make payments of tax on time) apply, with any necessary modifications, to a penalty under this section in relation to a failure by P to pay an amount of the accelerated payment as they apply to a penalty under that Schedule in relation to a failure by a person to pay an amount of tax.

Withdrawal etc of accelerated payment notice

227 Withdrawal, modification or suspension of accelerated payment notice
(1) In this section a “Condition C requirement” means one of the requirements set out in Condition C in section 219.
(2) Where an accelerated payment notice has been given, HMRC may, at any time, by notice given to P—
(a) withdraw the notice,
(b) where the notice is given by virtue of more than one Condition C requirement being met, withdraw it to the extent it is given by virtue of one of those requirements (leaving the notice effective to the extent that it was also given by virtue of any other Condition C requirement and has not been withdrawn), or
(c) reduce the amount specified in the accelerated payment notice under section 220(2)(b) or 221(2)(b).
(3) Where—
(a) an accelerated payment notice is given by virtue of the Condition C requirement in section 219(4)(a), and
(b) the follower notice to which it relates is withdrawn,
HMRC must withdraw the accelerated payment notice to the extent it was given by virtue of that requirement.
(4) Where—
(a) an accelerated payment notice is given by virtue of the Condition C requirement in section 219(4)(a), and
(b) the follower notice to which it relates is amended under section 216(7)(b) (cases where there is a new relevant final judicial ruling following a late appeal),
HMRC may by notice given to P make consequential amendments (whether under subsection (2)(c) or otherwise) to the accelerated payment notice.
(5) Where—
(a) an accelerated payment notice is given by virtue of the Condition C requirement in section 219(4)(b), and
(b) HMRC give notice under section 312(6) of FA 2004 with the result that promoters are no longer under the duty in section 312(2) of that Act in relation to the chosen arrangements,
HMRC must withdraw the notice to the extent it was given by virtue of that requirement.
(6) Subsection (7) applies where—
(a) an accelerated payment notice is withdrawn to the extent that it was given by virtue of a Condition C requirement,
(b) that requirement is the one stated in the notice for the purposes of section 220(6) or 221(5) (calculation of amount of the accelerated payment or of the denied advantage), and
(c) the notice remains effective to the extent that it was also given by virtue of any other Condition C requirement.
(7) HMRC must, by notice given to P—
(a) modify the accelerated payment notice so as to state the remaining, or one of the remaining, Condition C requirements for the purposes of section 220(6) or 221(5), and
(b) if the amount of the accelerated payment or (as the case may be) the amount of the disputed tax determined on the basis of the substituted Condition C requirement is less than the amount specified in the notice, amend that notice under subsection (2)(c) to substitute the lower amount.
(8) If a follower notice is suspended under section 216 (appeals against final rulings made out of time) for any period, an accelerated payment notice in respect of the follower notice is also suspended for that period.
(9) Accordingly, the period during which the accelerated payment notice is suspended does not count towards the periods mentioned in the following provisions—
(a) section 223;
(b) section 55(8D) of TMA 1970;
(c) paragraph 39(11) of Schedule 10 to FA 2003;
(d) paragraph 48(8C) of Schedule 33 to FA 2013.
(10) But the accelerated payment notice is not suspended under subsection (8) if it was also given by virtue of section 219(4)(b) or (c) and has not, to that extent, been withdrawn.
(11) In a case within subsection (10), subsections (6) and (7) apply as they would apply were the notice withdrawn to the extent that it was given by virtue of section 219(4)(a), except that any change made to the notice under subsection (7) has effect during the period of suspension only.
(12) Where an accelerated payment notice is withdrawn, it is to be treated as never having had effect (and any accelerated payment made in accordance with, or penalties paid by virtue of, the notice are to be repaid).
(13) If, as a result of a modification made under subsection (2)(c), more than the resulting amount of the accelerated payment has already been paid by P, the excess must be repaid.

Partners and partnerships

228 Accelerated partner payments
Schedule 32 makes provision for accelerated partner payments and modifies this Chapter in relation to partnerships.

Defined terms

229 Defined terms used in Chapter 3
In this Chapter—
“the accelerated payment” has the meaning given by section 223(2);
“accelerated payment notice” has the meaning given by section 219(1);
“arrangements” has the meaning given by section 201(4);
“the asserted advantage” has the meaning given by section 219(3);
“the chosen arrangements” has the meaning given by section 219(3), except in Schedule 32 where it has the meaning given by paragraph 3(3) of that Schedule;
“the denied advantage” has the meaning given by section 220(5), except in paragraph 4 of Schedule 32 where it has the meaning given by paragraph 4(4) of that Schedule;
“designated HMRC officer” means an officer of Revenue and Customs who has been designated by the Commissioners for the purposes of this Part;
“follower notice” has the meaning given by section 204(1);
“HMRC” means Her Majesty's Revenue and Customs;
“P” has the meaning given by section 219(1);
“partner payment notice” has the meaning given by paragraph 3 of Schedule 32;
“relevant tax” has the meaning given by section 200;
“tax advantage” has the meaning given by section 201(2);
“tax appeal” has the meaning given by section 203;
“tax enquiry” has the meaning given by section 202(2).

CHAPTER 4 Miscellaneous and general provision

Stamp duty land tax and annual tax on enveloped dwellings

230 Special case: stamp duty land tax
(1) This section applies to modify the application of this Part in the case of—
(a) a return or claim in respect of stamp duty land tax, or
(b) a tax appeal within section 203(g), or any appeal within section 203(i) which derives from such an appeal.
(2) If two or more persons acting jointly are the purchasers in respect of the land transaction—
(a) anything required or authorised by this Part to be done in relation to P must be done in relation to all of those persons, and
(b) any liability of P in respect of an accelerated payment, or a penalty under this Part, is a joint and several liability of all of those persons.
(3) Subsection (2) is subject to subsections (4) to (8).
(4) If the land transaction was entered into by or on behalf of the members of a partnership—
(a) anything required or authorised to be done under this Part in relation to P is required or authorised to be done in relation to all the responsible partners, and
(b) any liability of P in respect of an accelerated payment, or a penalty under this Part, is a joint and several liability of the responsible partners.
(5) But nothing in subsection (4) enables—
(a) an accelerated payment to be recovered from a person who did not become a responsible partner until after the effective date of the transaction in respect of which the tax to which the accelerated payment relates is payable, or
(b) a penalty under this Part to be recovered from a person who did not become a responsible partner until after the time when the omission occurred that caused the penalty to become payable.
(6) Where the trustees of a settlement are liable to pay an accelerated payment or a penalty under this Part, the payment or penalty may be recovered (but only once) from any one or more of the responsible trustees.
(7) But nothing in subsection (6) enables a penalty to be recovered from a person who did not become a responsible trustee until after the time when the omission occurred that caused the penalty to become payable.
(8) Where a follower notice or accelerated payment notice is given to more than one person, the power conferred on P by section 207 or 222 is exercisable by each of those persons separately or by two or more of them jointly.
(9) In this section—
“the accelerated payment” has the meaning given by section 223(2);
“accelerated payment notice” has the meaning given by section 219(1);
“effective date”, in relation to a land transaction, has the meaning given by section 119 of FA 2003;
“follower notice” has the meaning given by section 204(1);
“the responsible partners”, in relation to a land transaction, has the meaning given by paragraph 6(2) of Schedule 15 to that Act;
“the responsible trustees” has the meaning given by paragraph 5(3) of Schedule 16 to that Act;
“P”—
(a) in relation to Chapter 2, has the meaning given by section 204(1);
(b) in relation to Chapter 3, has the meaning given by section 219.

231 Special case: annual tax on enveloped dwellings
(1) This section applies to modify the application of this Part in the case of—
(a) a return or claim in respect of annual tax on enveloped dwellings, or
(b) a tax appeal within section 203(h), or any appeal within section 203(i) which derives from such an appeal.
(2) If the responsible partners of a partnership are the chargeable person in relation to the tax to which the return or claim or appeal relates—
(a) anything required or authorised by this Part to be done in relation to P must be done in relation to all of those partners, and
(b) any liability of P in respect of an accelerated payment, or a penalty under this Part, is a joint and several liability of all of those persons.
(3) Where—
(a) a follower notice is given by virtue of a tax enquiry into the return or claim or the appeal, and
(b) by virtue of section 97 or 98 of FA 2013, two or more persons would have been jointly and severally liable for an additional amount of tax had the necessary corrective action been taken before the specified time for the purposes of section 208,
any liability of P in respect of a penalty under that section is a joint and several liability of all of them.
(4) Where—
(a) an accelerated payment notice is given by virtue of a tax enquiry into the return or claim or the appeal, and
(b) two or more persons would, by virtue of section 97 or 98 of FA 2013, be jointly and severally liable for the understated tax relating to the accelerated payment specified in the notice or (as the case may be) the disputed tax specified in the notice,
any liability of P in respect of the accelerated payment or a penalty under section 226 is a joint and several liability of all of them.
(5) Accordingly—
(a) where a follower notice is given in a case where subsection (3) applies, or
(b) an accelerated payment notice is given in a case to which subsection (4) applies,
HMRC must also give a copy of the notice to any other person who would be jointly and severally liable for a penalty or payment, in relation to the notice, by virtue of this section.
(6) Where a follower notice or accelerated payment notice is given to more than one person, the power conferred on P by section 207 or 222 is exercisable by each of those persons separately or by two or more of them jointly.
(7) In this section—
“the accelerated payment” has the meaning given by section 223(2);
“accelerated payment notice” has the meaning given by section 219(1);
“the chargeable person” has the same meaning as in Part 3 of FA 2013 (annual tax on enveloped dwellings);
“follower notice” has the same meaning as in Chapter 2;
“P”—
(a) in relation to Chapter 2, has the meaning given by section 204(1);
(b) in relation to Chapter 3, has the meaning given by section 219;
“the responsible partners” has the same meaning as in Part 3 of FA 2013 (annual tax on enveloped dwellings).

Extension of Part by order

232 Extension of this Part by order
(1) The Treasury may by order amend section 200 (definition of “relevant tax”) so as to extend this Part to any other tax.
(2) An order under this section may include—
(a) provision in respect of that other tax corresponding to the provision made by sections 224 and 225,
(b) consequential and supplemental provision, and
(c) transitional and transitory provision and savings.
(3) For the purposes of subsection (1) or (2) an order under this section may amend this Part (other than this section) or any other enactment whenever passed or made.
(4) The power to make orders under this section is exercisable by statutory instrument.
(5) An order under this section may only be made if a draft of the instrument containing the order has been laid before and approved by a resolution of the House of Commons.
(6) In this section “tax” includes duty.

Consequential amendments

233 Consequential amendments
Schedule 33 contains consequential amendments.
Pt. 4 applied (with modifications) (retrospective) by 1970 c. 9, s. 12ABZAA(4) (as inserted (17.7.2014) by 2020 c. 14, s. 104(1)(2) (with s. 104(3)))

PART 5 Promoters of tax avoidance schemes

Introduction

234 Meaning of “relevant proposal” and “relevant arrangements”
(1) “Relevant proposal” means a proposal for arrangements which (if entered into) would be relevant arrangements (whether the proposal relates to a particular person or to any person who may seek to take advantage of it).
(2) Arrangements are “relevant arrangements” if—
(a) they enable, or might be expected to enable, any person to obtain a tax advantage, and
(b) the main benefit, or one of the main benefits, that might be expected to arise from the arrangements is the obtaining of that advantage.
(3) “Tax advantage” includes—
(a) relief or increased relief from tax,
(b) repayment or increased repayment of tax,
(c) avoidance or reduction of a charge to tax or an assessment to tax,
(d) avoidance of a possible assessment to tax,
(e) deferral of a payment of tax or advancement of a repayment of tax, and
(f) avoidance of an obligation to deduct or account for tax.
(4) “Arrangements” includes any agreement, scheme, arrangement or understanding of any kind, whether or not legally enforceable, involving a single transaction or two or more transactions.

235 Carrying on a business “as a promoter”
(1) A person carrying on a business in the course of which the person is, or has been, a promoter in relation to a relevant proposal or relevant arrangements carries on that business “as a promoter”.
(2) A person is a “promoter” in relation to a relevant proposal if the person—
(a) is to any extent responsible for the design of the proposed arrangements,
(b) makes a firm approach to another person in relation to the relevant proposal with a view to making the proposal available for implementation by that person or any other person, or
(c) makes the relevant proposal available for implementation by other persons.
(3) A person is a “promoter” in relation to relevant arrangements if the person—
(a) is by virtue of subsection (2)(b) or (c), a promoter in relation to a relevant proposal which is implemented by the arrangements, or
(b) is responsible to any extent for the design, organisation or management of the arrangements.
(4) For the purposes of this Part a person makes a firm approach to another person in relation to a relevant proposal if—
(a) the person communicates information about the relevant proposal to the other person at a time when the proposed arrangements have been substantially designed,
(b) the communication is made with a view to that other person or any other person entering into transactions forming part of the proposed arrangements, and
(c) the information communicated includes an explanation of the tax advantage that might be expected to be obtained from the proposed arrangements.
(5) For the purposes of subsection (4) proposed arrangements have been substantially designed at any time if by that time the nature of the transactions to form them (or part of them) has been sufficiently developed for it to be reasonable to believe that a person who wished to obtain the tax advantage mentioned in subsection (4)(c) might enter into—
(a) transactions of the nature developed, or
(b) transactions not substantially different from transactions of that nature.
(6) A person is not a promoter in relation to a relevant proposal or relevant arrangements by reason of anything done in prescribed circumstances.
(7) Regulations under subsection (6) may contain provision having retrospective effect.

236 Meaning of “intermediary”
For the purposes of this Part a person (“A”) is an intermediary in relation to a relevant proposal if—
(a) A communicates information about the relevant proposal to another person in the course of a business,
(b) the communication is made with a view to that other person, or any other person, entering into transactions forming part of the proposed arrangements, and
(c) A is not a promoter in relation to the relevant proposal.

Conduct notices

237 Duty to give conduct notice
(1) Subsections (5) to (9) apply if an authorised officer becomes aware at any time that a person ( “ P ”) who is carrying on a business as a promoter—
(a) has, in the period of 3 years ending with that time, met one or more threshold conditions, and
(b) was carrying on a business as a promoter when P met that condition.
(2) Part 1 of Schedule 34 sets out the threshold conditions and describes how they are met.
(3) Part 2 of that Schedule contains provision about the meeting of threshold conditions by bodies corporate.
(4) See also Schedule 36 (which contains provision about the meeting of threshold conditions and other conditions by partnerships).
(5) The authorised officer must determine whether or not P's meeting of the condition mentioned in subsection (1)(a) (or, as the case requires, P's meeting of all those conditions, taken together) should be regarded as significant in view of the purposes of this Part.
(6) Subsection (5) does not apply if a conduct notice or a monitoring notice already has effect in relation to P.
(7) If the authorised officer determines under subsection (5) that P's meeting of the condition or conditions in question should be regarded as significant, the officer must give P a conduct notice, unless subsection (8) applies.
(8) This subsection applies if the authorised officer determines that, having regard to the extent of the impact that P's activities as a promoter are likely to have on the collection of tax, it is inappropriate to give P a conduct notice.
(9) The authorised officer must determine under subsection (5) that the meeting of the condition (or all the conditions) mentioned in subsection (1)(a) should be regarded as significant if the condition (or any of the conditions) is in any of the following paragraphs of Schedule 34—
(a) paragraph 2 (deliberate tax defaulters);
(b) paragraph 3 (breach of Banking Code of Practice);
(c) paragraph 4 (dishonest tax agents);
(d) paragraph 6 (persons charged with certain offences);
(e) paragraph 7 (opinion notice of GAAR Advisory Panel).

238 Contents of a conduct notice
(1) A conduct notice is a notice requiring the person to whom it has been given (“the recipient”) to comply with conditions specified in the notice.
(2) Before deciding on the terms of a conduct notice, the authorised officer must give the person to whom the notice is to be given an opportunity to comment on the proposed terms of the notice.
(3) A notice may include only conditions that it is reasonable to impose for any of the following purposes—
(a) to ensure that the recipient provides adequate information to its clients about relevant proposals, and relevant arrangements, in relation to which the recipient is a promoter;
(b) to ensure that the recipient provides adequate information about relevant proposals in relation to which it is a promoter to persons who are intermediaries in relation to those proposals;
(c) to ensure that the recipient does not fail to comply with any duty under a specified disclosure provision;
(d) to ensure that the recipient does not discourage others from complying with any obligation to disclose to HMRC information of a description specified in the notice;
(e) to ensure that the recipient does not enter into an agreement with another person (“C”) which relates to a relevant proposal or relevant arrangements in relation to which the recipient is a promoter, on terms which—
(i) impose a contractual obligation on C which falls within paragraph 11(2) or (3) of Schedule 34 (contractual terms restricting disclosure), or
(ii) impose on C obligations within both paragraph 11(4) and (5) of that Schedule (contractual terms requiring contribution to fighting funds and restricting settlement of proceedings);
(f) to ensure that the recipient does not promote relevant proposals or relevant arrangements which rely on, or involve a proposal to rely on, one or more contrived or abnormal steps to produce a tax advantage;
(g) to ensure that the recipient does not fail to comply with any stop notice which has effect under paragraph 12 of Schedule 34.
(4) References in subsection (3) to ensuring that adequate information is provided about proposals or arrangements include—
(a) ensuring the adequacy of the description of the arrangements or proposed arrangements;
(b) ensuring that the information includes an adequate assessment of the risk that the arrangements or proposed arrangements will fail;
(c) ensuring that the information does not falsely state, and is not likely to create a false impression, that HMRC have (formally or informally) considered, approved or expressed a particular opinion in relation to the proposal or arrangements.
(5) In subsection (3)(c) “specified disclosure provision” means a disclosure provision that is specified in the notice; and for this purpose “disclosure provision” means any of the following—
(a) section 308 of FA 2004 (disclosure of tax avoidance schemes: duties of promoter);
(b) section 312 of FA 2004 (duty of promoter to notify client of number);
(c) sections 313ZA and 313ZB of FA 2004 (duties to provide details of clients and certain others);
(d) Part 1 of Schedule 36 to FA 2008 (duties to provide information and produce documents).
(6) In subsection (4)(b) “fail”, in relation to arrangements or proposed arrangements, means not result in a tax advantage which the arrangements or (as the case may be) proposed arrangements might be expected to result in.
(7) The Treasury may by regulations amend the definition of “disclosure provision” in subsection (5).

239 Section 238: supplementary
(1) In section 238 the following expressions are to be interpreted as follows.
(2) “Adequate” means adequate having regard to what it might be reasonable for a client or (as the case may be) an intermediary to expect; and “adequacy” is to be interpreted accordingly.
(3) A person (“C”) is a “client” of a promoter, if at any time when a conduct notice has effect, the promoter—
(a) makes a firm approach to C in relation to a relevant proposal with a view to the promoter making the proposal available for implementation by C or another person;
(b) makes a relevant proposal available for implementation by C;
(c) takes part in the organisation or management of relevant arrangements entered into by C.
(4) The recipient of a conduct notice “promotes” a relevant proposal if it—
(a) takes part in designing the proposal,
(b) makes a firm approach to a person in relation to the proposal with a view to making the proposal available for implementation by that person or another person, or
(c) makes the proposal available for implementation by persons (other than the recipient).
(5) The recipient of a conduct notice “promotes” relevant arrangements if it takes part in designing, organising or managing the arrangements.

240 Amendment or withdrawal of conduct notice
(1) This section applies where a conduct notice has been given to a person.
(2) An authorised officer may at any time amend the notice.
(3) An authorised officer—
(a) may withdraw the notice if the officer thinks it is not necessary for it to continue to have effect, and
(b) in considering whether or not that is necessary must take into account the person's record of compliance, or failure to comply, with the conditions in the notice.

241 Duration of conduct notice
(1) A conduct notice has effect from the date specified in it as its commencement date.
(2) A conduct notice ceases to have effect—
(a) at the end of the period of two years beginning with its commencement date, or
(b) if an earlier date is specified in it as its termination date, at the end of that day.
(3) A conduct notice ceases to have effect if withdrawn by an authorised officer under section 240.
(4) A conduct notice ceases to have effect in relation to a person when a monitoring notice takes effect in relation to that person.

Monitoring notices: procedure and publication

242 Monitoring notices: duty to apply to tribunal
(1) If—
(a) a conduct notice has effect in relation to a person who is carrying on a business as a promoter, and
(b) an authorised officer determines that the person has failed to comply with one or more conditions in the notice,
the authorised officer must apply to the tribunal for approval to give the person a monitoring notice.
(2) An application under subsection (1) must include a draft of the monitoring notice.
(3) Subsection (1) does not apply if—
(a) the condition (or all the conditions) mentioned in subsection (1)(b) were imposed under subsection (3)(a), (b) or (c) of section 238, and
(b) the authorised officer considers that the failure to comply with the condition (or all the conditions, taken together) is such a minor matter that it should be disregarded for the purposes of this section.
(4) Where an authorised officer makes an application to the tribunal under subsection (1), the officer must at the same time give notice to the person to whom the application relates.
(5) The notice under subsection (4) must state which condition (or conditions) the authorised officer has determined under subsection (1)(b) that the person has failed to comply with and the reasons for that determination.

243 Monitoring notices: tribunal approval
(1) On an application under section 242, the tribunal may approve the giving of a monitoring notice only if—
(a) the tribunal is satisfied that, in the circumstances, the authorised officer would be justified in giving the monitoring notice, and
(b) the person to whom the monitoring notice is to be given (“the affected person”) has been given a reasonable opportunity to make representations to the tribunal.
(2) The tribunal may amend the draft notice included with the application under section 242.
(3) If the representations that the affected person makes to the tribunal include a statement that in the affected person's view it was not reasonable to include the condition mentioned in section 242(1)(b) in the conduct notice, the tribunal must refuse to approve the giving of the monitoring notice if it is satisfied that it was not reasonable to include that condition (but see subsection (4)).
(4) If the representations made to the tribunal include the statement described in subsection (3) and the determination under section 242(1)(b) is a determination that there has been a failure to comply with more than one condition in the conduct notice—
(a) subsection (3) does not apply, but
(b) in deciding whether or not to approve the giving of the monitoring notice, the tribunal is to assume, in the case of any condition that the tribunal considers it was not reasonable to include in the conduct notice, that there has been no failure to comply with that condition.

244 Monitoring notices: content and issuing
(1) Where the tribunal has approved the giving of a monitoring notice, the authorised officer must give the notice to the person to whom it relates.
(2) A monitoring notice given under subsection (1) or paragraph 9 or 10 of Schedule 36 must—
(a) explain the effect of the monitoring notice and specify the date from which it takes effect;
(b) inform the recipient of the right to request the withdrawal of the monitoring notice under section 245.
(3) In addition, a monitoring notice must—
(a) if given under subsection (1), state which condition (or conditions) it has been determined the person has failed to comply with and the reasons for that determination;
(b) if given under paragraph 9 or 10 of Schedule 36, state the date of the original monitoring notice and name the partnership to which that notice was given.
(4) The date specified under subsection (2)(a) must not be earlier than the date on which the monitoring notice is given.
(5) In this Part, a person in relation to whom a monitoring notice has effect is called a “monitored promoter”.

245 Withdrawal of monitoring notice
(1) A person in relation to whom a monitoring notice has effect may, at any time after the end of the period of 12 months beginning with the end of the appeal period, request that the notice should cease to have effect.
(2) The “appeal period” means—
(a) the period during which an appeal could be brought against the approval by the tribunal of the giving of the monitoring notice, or
(b) where an appeal mentioned in paragraph (a) has been brought, the period during which that appeal has not been finally determined, withdrawn or otherwise disposed of.
(3) A request under this section is to be made in writing to an authorised officer.
(4) Where a request is made under this section, an authorised officer must within 30 days beginning with the day on which the request is received determine either—
(a) that the monitoring notice is to cease to have effect, or
(b) that the request is to be refused.
(5) The matters to be taken into account by an authorised officer in making a determination under subsection (4) include—
(a) whether or not the person subject to the monitoring notice has, since the time when the notice took effect, engaged in behaviour of a sort that conditions included in a conduct notice in accordance with section 238(3) could be used to regulate;
(b) whether or not it appears likely that the person will in the future engage in such behaviour;
(c) the person's record of compliance, or failure to comply, with obligations imposed on it under this Part, since the time when the monitoring notice took effect.
(6) An authorised officer—
(a) may withdraw a monitoring notice if the officer thinks it is not necessary for it to continue to have effect, and
(b) in considering whether or not that is necessary, the officer must take into account the matters in paragraphs (a) to (c) of subsection (5).
(7) If the authorised officer makes a determination under subsection (4)(a), or decides to withdraw a monitoring notice under subsection (6), the officer must also determine that the person is, or is not, to be given a follow-on conduct notice.
(8) “Follow-on conduct notice” means a conduct notice taking effect immediately after the monitoring notice ceases to have effect.
(9) Where the monitoring notice mentioned in subsection (1) is a replacement monitoring notice—
(a) in subsection (1) the reference to the end of the appeal period is to be read as a reference to whichever is the later of the end of the appeal period for the original monitoring notice and the date the replacement monitoring notice takes effect, and
(b) in subsection (5)(a) and (c) the time referred to is to be read as the time when the original monitoring notice (see paragraph 11(2) of Schedule 36) took effect.

246 Notification of determination under section 245
(1) Where an authorised officer makes a determination under section 245(4), that officer, or an officer of Revenue and Customs with that officer's approval, must notify the person who made the request of the determination.
(2) If the determination is that the monitoring notice is to cease to have effect, the notice must—
(a) specify the date from which the monitoring notice is to cease to have effect, and
(b) inform the person of the determination made under section 245(7).
(3) If the determination is that the request is to be refused, the notice must inform the person who made the request—
(a) of the reasons for the refusal, and
(b) of the right to appeal under section 247.

247 Appeal against refusal to withdraw monitoring notice
(1) A person may appeal against a refusal by an authorised officer of a request that a monitoring notice should cease to have effect.
(2) Notice of appeal must be given—
(a) in writing to the officer who gave the notice of the refusal under section 245, and
(b) within the period of 30 days beginning with the day on which notice of the refusal was given.
(3) The notice of appeal must state the grounds of appeal.
(4) On an appeal that is notified to the tribunal, the tribunal may—
(a) confirm the refusal, or
(b) direct that the monitoring notice is to cease to have effect.
(5) Subject to this section, the provisions of Part 5 of TMA 1970 relating to appeals have effect in relation to an appeal under this section.

248 Publication by HMRC
(1) An authorised officer may publish the fact that a person is a monitored promoter.
(2) Publication under subsection (1) may also include the following information about the monitored promoter—
(a) its name;
(b) its business address or registered office;
(c) the nature of the business mentioned in section 242(1)(a);
(d) any other information that the authorised officer considers it appropriate to publish in order to make clear the monitored promoter's identity.
(3) The reference in subsection (2)(a) to the monitored promoter's name includes any name under which it carries on a business as a promoter and any previous name or pseudonym.
(4) Publication under subsection (1) may also include a statement of which of the conditions in a conduct notice it has been determined that the person (or, in the case of a replacement monitoring notice, the person to whom the original monitoring notice was given) has failed to comply with.
(5) Publication may not take place before the end of the appeal period (or, in the case of a replacement monitoring notice, the appeal period for the original monitoring notice).
(6) The “appeal period”, in relation to a monitoring notice, means—
(a) the period during which an appeal could be brought against the approval by the tribunal of the giving of the notice, or
(b) where an appeal mentioned in paragraph (a) has been brought, the period during which that appeal has not been finally determined, withdrawn or otherwise disposed of.
(7) Publication under this section is to be in such manner as the authorised officer thinks fit; but see subsection (8).
(8) If an authorised officer publishes the fact that a person is a monitored promoter and the monitoring notice is withdrawn, the officer must publish the fact of the withdrawal in the same way as the officer published the fact that the person was a monitored promoter.

249 Publication by monitored promoter
(1) A person who is given a monitoring notice (“the monitored promoter”) must give the persons mentioned in subsection (6) a notice stating—
(a) that it is a monitored promoter, and
(b) which of the conditions in a conduct notice it has been determined that it (or, if the monitoring notice is a replacement monitoring notice, the person to whom that notice was given) has failed to comply with.
(2) If the monitoring notice is a replacement monitoring notice, the notice under subsection (1) must also identify the original monitoring notice.
(3) If regulations made by the Commissioners so require, the monitored promoter must publish on the internet—
(a) the information mentioned in paragraph (a) and (b) of subsection (1), and
(b) its promoter reference number (see section 250).
(4) Subsection (1) and any duty imposed under subsection (3) or (10) do not apply until the end of the period of 10 days beginning with the end of the appeal period (and also see subsection (9)).
(5) The “appeal period” means—
(a) the period during which an appeal could be brought against the approval by the tribunal of the giving of the monitoring notice, or
(b) where an appeal mentioned in paragraph (a) has been brought, the period during which that appeal has not been finally determined, withdrawn or otherwise disposed of.
(6) The notice under subsection (1) must be given—
(a) to any person who becomes a client of the monitored promoter while the monitoring notice has effect, and
(b) (except in a case where the monitoring notice is a replacement monitoring notice) any person who is a client of the monitored promoter at the time the monitoring notice takes effect.
(7) A person (“C”) is a client of a monitored promoter at the time a monitoring notice takes effect if during the period beginning with the date the conduct notice mentioned in subsection (1)(b) takes effect and ending with that time the promoter—
(a) made a firm approach to C in relation to a relevant proposal with a view to the promoter making the proposal available for implementation by C or another person;
(b) made a relevant proposal available for implementation by C;
(c) took part in the organisation or management of relevant arrangements entered into by C.
(8) A person becomes a client of a monitored promoter if the promoter does any of the things mentioned in paragraph (a) to (c) of subsection (7) in relation to that person.
(9) In the case of a person falling within subsection (6)(a), notice under subsection (1) may be given within the period of 10 days beginning with the day on which the person first became a client of the monitored promoter if that period would expire at a later date than the date on which notification would otherwise be required by virtue of subsection (4).
(10) A monitored promoter must also include in any prescribed publication or prescribed correspondence—
(a) the information mentioned in paragraph (a) and (b) of subsection (1), and
(b) its promoter reference number (see section 250).
(11) Notification under subsection (1), publication under subsection (3) or inclusion of the information required by subsection (10) is to be in such form and manner as is prescribed.
(12) Where the monitoring notice mentioned in subsection (1) is a replacement monitoring notice, the reference in subsection (4) to the end of the appeal period is to be read as a reference to whichever is the later of the end of the appeal period for the original monitoring notice and the date the replacement monitoring notice takes effect.

Allocation and distribution of promoter reference number

250 Allocation of promoter reference number
(1) Where a monitoring notice is given to a person (“the monitored promoter”) HMRC must as soon as practicable after the end of the appeal period—
(a) allocate the monitored promoter a reference number, and
(b) notify the relevant persons of that number.
(2) “Relevant persons” means—
(a) the monitored promoter, and
(b) if the monitored promoter is resident outside the United Kingdom, any person who HMRC know is an intermediary in relation to a relevant proposal of the monitored promoter.
(3) The “appeal period” means—
(a) the period during which an appeal could be brought against the approval by the tribunal of the giving of the monitoring notice, or
(b) where an appeal mentioned in paragraph (a) has been brought, the period during which that appeal has not been finally determined, withdrawn or otherwise disposed of.
(4) The duty in subsection (1) does not apply if the monitoring notice is set aside following an appeal.
(5) A number allocated to a person under this section is referred to in this Part as a “promoter reference number”.
(6) Where the monitoring notice mentioned in subsection (1) is a replacement monitoring notice—
(a) in subsection (1) the reference to the end of the appeal period is to be read as a reference to whichever is the later of the end of the appeal period for the original monitoring notice and the date the replacement monitoring notice takes effect, and
(b) in subsection (4) the reference to the monitoring notice is to be read as a reference to the original monitoring notice.

251 Duty of monitored promoter to notify clients and intermediaries of number
(1) This section applies where a person who is a monitored promoter (“the monitored promoter”) is notified under section 250 of a promoter reference number.
(2) The monitored promoter must, within the relevant period, notify the promoter reference number to—
(a) any person who has become its client at any time in the period beginning with the day on which the monitoring notice in relation to the monitored promoter took effect and ending with the day on which the monitored promoter was notified of that number,
(b) any person who becomes its client after the end of the period mentioned in paragraph (a) but while the monitoring notice has effect,
(c) any person who the monitored promoter could reasonably be expected to know falls within subsection (4), and
(d) any person who the monitored promoter could reasonably be expected to know is a relevant intermediary in relation to a relevant proposal of the monitored promoter.
(3) A person (“C”) becomes a client of a monitored promoter if the promoter does any of the following in relation to C—
(a) makes a firm approach to C in relation to a relevant proposal with a view to the promoter making the proposal available for implementation by C or another person;
(b) makes a relevant proposal available for implementation by C;
(c) takes part in the organisation or management of relevant arrangements entered into by C.
(4) A person falls within this subsection if during the period beginning with the date the conduct notice took effect and ending with the date on which the monitoring notice took effect the person has entered into transactions forming part of relevant arrangements and those arrangements—
(a) enable, or are likely to enable, the person to obtain a tax advantage during the time a monitoring notice has effect, and
(b) are either relevant arrangements in relation to which the monitored promoter is or was a promoter or implement a relevant proposal in relation to which the monitored promoter was a promoter.
(5) A person is a relevant intermediary in relation to a relevant proposal of a monitored promoter if the person meets the conditions in section 236(a) to (c) (meaning of “intermediary”) at any time while the monitoring notice in relation to the monitored promoter has effect.
(6) The “relevant period” means—
(a) in the case of a person falling within subsection (2)(a), the period of 30 days beginning with the day of the notification mentioned in subsection (1),
(b) in the case of a person falling within subsection (2)(b), the period of 30 days beginning with the day on which the person first became a client in relation to the monitored promoter,
(c) in the case of a person falling within subsection (2)(c), the period of 30 days beginning with the later of the day of the notification mentioned in subsection (1) and the first day on which the monitored promoter could reasonably be expected to know that the person fell within subsection (4), and
(d) in the case of a person falling within subsection (2)(d), the period of 30 days beginning with the later of the day of the notification mentioned in subsection (1) and the first day on which the monitored promoter could reasonably be expected to know that the person was a relevant intermediary in relation to a relevant proposal of the monitored promoter.
(7) In this section “the conduct notice” means the conduct notice that the monitored promoter failed to comply with which resulted in the monitoring notice being given to the monitored promoter.
(8) Subsection (2)(c) is to be ignored in a case where the monitoring notice is a replacement monitoring notice.

252 Duty of those notified to notify others of promoter's number
(1) In this section “notified client” means—
(a) a person who is notified of a promoter reference number under section 250 by reason of being a person falling within subsection (2)(b) of that section, and
(b) a person who is notified of a promoter reference number under section 251.
(2) A notified client must, within 30 days of being notified as described in subsection (1), provide the promoter reference number to any other person who the notified client might reasonably be expected to know has become, or is likely to have become, a client in relation to the monitored promoter concerned at a time when the monitoring notice in relation to that monitored promoter had effect.
(3) A person (“C”) becomes a client of a monitored promoter if the promoter does any of the following in relation to C—
(a) makes a firm approach to C in relation to a relevant proposal with a view to the promoter making the proposal available for implementation by C or another person;
(b) makes a relevant proposal available for implementation by C;
(c) takes part in the organisation or management of relevant arrangements entered into by C.
(4) Where the notified client is an intermediary in relation to a relevant proposal of the monitored promoter concerned, the notified client must also, within 30 days, provide the promoter reference number to—
(a) any person to whom the notified client has, since the monitoring notice in relation to the monitored promoter concerned took effect, communicated in the course of a business information about a relevant proposal of the monitored promoter, and
(b) any person who the notified client might reasonably be expected to know has, since that monitoring notice took effect, entered into, or is likely to enter into, transactions forming part of relevant arrangements in relation to which that monitored promoter is a promoter.
(5) Subsection (2) or (4) does not impose a duty on a notified client to notify a person of a promoter reference number if the notified client reasonably believes that the person has already been notified of the promoter reference number (whether as a result of a duty under this section or as a result of any of the other provision of this Part).

253 Duty of persons to notify the Commissioners
(1) If a person (“N”) is notified of a promoter reference number under section 250, 251 or 252, N must report the number to the Commissioners if N expects to obtain a tax advantage from relevant arrangements in relation to which the monitored promoter to whom the reference number relates (whether that is N or another person) is the promoter.
(2) A report under this section—
(a) must be made in (or, if prescribed circumstances exist, submitted with) each tax return made by N for a period that is or includes a period for which the arrangements enable N to obtain a tax advantage (whether in relation to the tax to which the return relates or another tax);
(b) if no tax return falls within paragraph (a), or in the case mentioned in subsection (3), must contain such information, and be made in such form and manner and within such time, as is prescribed.
(3) The case is that the tax return in which the report would (apart from this subsection) have been made is not submitted—
(a) by the filing date, or
(b) if there is no filing date in relation to the tax return concerned, by such other time that the tax return is required to be submitted by or under any enactment.
(4) Where N expects to obtain the tax advantage referred to in subsection (1) in respect of inheritance tax, stamp duty land tax, stamp duty reserve tax or petroleum revenue tax—
(a) subsection (2) does not apply in relation to that tax advantage, and
(b) a report under this section in respect of that tax must be in such form and manner and contain such information and be made within such time as is prescribed.
(5) Where the relevant arrangements referred to in subsection (1) give rise to N making a claim under section 261B of TCGA 1992 (treating trade loss as CGT loss) or for loss relief under Part 4 of ITA 2007 and that claim is not contained in a tax return, a report under this section must also be made in that claim.
(6) In this section “tax return” means any of the following—
(a) a return under section 8 of TMA 1970 (income tax and capital gains tax: personal return);
(b) a return under section 8A of TMA 1970 (income tax and capital gains tax: trustee's return);
(c) a return under section 12AA of TMA 1970 (income tax and corporation tax: partnership return);
(d) a company tax return under paragraph 3 of Schedule 18 to the FA 1998 (company tax return);
(e) a return under section 159 or 160 of FA 2013 (returns and further returns for annual tax on enveloped dwellings).

Obtaining information and documents

254 Meaning of “monitored proposal” and “monitored arrangements”
(1) For the purposes of this Part a relevant proposal in relation to which a person (“P”) is a promoter is a “monitored proposal” in relation to P if any of the following dates fell on or after the date on which a monitoring notice took effect—
(a) the date on which P first made a firm approach to another person in relation to the relevant proposal;
(b) the date on which P first made the relevant proposal available for implementation by any other person;
(c) the date on which P first became aware of any transaction forming part of the proposed arrangements being entered into by any person.
(2) For the purposes of this Part relevant arrangements in relation to which a person (“P”) is a promoter are “monitored arrangements” in relation to P if—
(a) P was by virtue of section 235(2)(b) or (c) a promoter in relation to a relevant proposal which was implemented by the arrangements and any of the following fell on or after the date on which the monitoring notice took effect—
(i) the date on which P first made a firm approach to another person in relation to the relevant proposal;
(ii) the date on which P first made the relevant proposal available for implementation by any other person;
(iii) the date on which P first became aware of any transaction forming part of the proposed arrangements being entered into by any person,
(b) the date on which P first took part in designing, organising or managing the arrangements fell on or after the date on which a monitoring notice took effect, or
(c) the arrangements enable, or are likely to enable, the person who has entered into transactions forming them to obtain the tax advantage by reason of which they are relevant arrangements, at any time on or after the date on which a monitoring notice took effect.

255 Power to obtain information and documents
(1) An authorised officer, or an officer of Revenue and Customs with the approval of an authorised officer, may by notice in writing require any person (“P”) to whom this section applies—
(a) to provide information, or
(b) to produce a document,
if the information or document is reasonably required by the officer for any of the purposes in subsection (3).
(2) This section applies to—
(a) any person who is a monitored promoter, and
(b) any person who is a relevant intermediary in relation to a monitored proposal of a monitored promoter,
and in either case that monitored promoter is referred to below as “the relevant monitored promoter”.
(3) The purposes mentioned in subsection (1) are—
(a) considering the possible consequences of implementing a monitored proposal of the relevant monitored promoter for the tax position of persons implementing the proposal,
(b) checking the tax position of any person who the officer reasonably believes has implemented a monitored proposal of the relevant monitored promoter, or
(c) checking the tax position of any person who the officer reasonably believes has entered into transactions forming monitored arrangements of the relevant monitored promoter.
(4) A person is a “relevant intermediary” in relation to a monitored proposal if the person meets the conditions in section 236(a) to (c) (meaning of “intermediary”) in relation to the proposal at any time after the person has been notified of a promoter reference number of a person who is a promoter in relation to the proposal.
(5) In this section “checking” includes carrying out an investigation or enquiry of any kind.
(6) In this section “tax position”, in relation to a person, means the person's position as regards any tax, including the person's position as regards—
(a) past, present and future liability to pay any tax,
(b) penalties and other amounts that have been paid, or are or may be payable, by or to the person in connection with any tax,
(c) claims, elections, applications and notices that have been or may be made or given in connection with the person's liability to pay any tax,
(d) deductions or repayments of tax, or of sums representing tax, that the person is required to make—
(i) under PAYE regulations, or
(ii) by or under any other provision of the Taxes Acts, and
(e) the withholding by the person of another person's PAYE income (as defined in section 683 of ITEPA 2003).
(7) In this section the reference to the tax position of a person—
(a) includes the tax position of a company that has ceased to exist and an individual who has died, and
(b) is to the person's tax position at any time or in relation to any period.
(8) A notice under subsection (1) which is given for the purpose of checking the tax position of a person mentioned in subsection (3)(b) or (c) may not be given more than 4 years after the person's death.
(9) A notice under subsection (1) may specify or describe the information or documents to be provided or produced.
(10) Information or a document required as a result of a notice under subsection (1) must be provided or produced within—
(a) the period of 10 days beginning with the day on which the notice was given, or
(b) such longer period as the officer who gives the notice may direct.

256 Tribunal approval for certain uses of power under section 255
(1) An officer of Revenue and Customs may not, without the approval of the tribunal, give a notice under section 255 requiring a person (“A”) to provide information or produce a document which relates (in whole or in part) to a person who is neither A nor an undertaking in relation to which A is a parent undertaking.
(2) An officer of Revenue and Customs may apply to the tribunal for the approval required by subsection (1); and an application for approval may be made without notice.
(3) The tribunal may approve the giving of the notice only if—
(a) the application for approval is made by, or with the agreement of, an authorised officer,
(b) the tribunal is satisfied that, in the circumstances, the officer giving the notice is justified in doing so,
(c) the person to whom the notice is to be given has been informed that the information or documents referred to in the notice are required and given a reasonable opportunity to make representations to an officer of Revenue and Customs, and
(d) the tribunal has been given a summary of any representations made by that person.
(4) Where a notice is given under section 255 with the approval of the tribunal, it must state that it is given with that approval.
(5) Paragraphs (c) and (d) of subsection (3) do not apply to the extent that the tribunal is satisfied that taking the action specified in those paragraphs might prejudice the assessment or collection of tax.
(6) In subsection (1) “parent undertaking” and “undertaking” have the same meaning as in the Companies Acts (see section 1161 and 1162 of, and Schedule 7 to, the Companies Act 2006).
(7) A decision of the tribunal under this section is final (despite the provisions of sections 11 and 13 of the Tribunals, Courts and Enforcement Act 2007).

257 Ongoing duty to provide information following HMRC notice
(1) An authorised officer, or an officer of Revenue and Customs with the approval of an authorised officer, may give a notice to a person (“P”) in relation to whom a monitoring notice has effect.
(2) A person to whom a notice is given under subsection (1) must provide prescribed information and produce prescribed documents relating to—
(a) all the monitored proposals and all the monitored arrangements in relation to which the person is a promoter at the time of the notice, and
(b) all the monitored proposals and all the monitored arrangements in relation to which the person becomes a promoter after that time.
(3) The duty under subsection (2)(b) does not apply in relation to any proposals or arrangements in relation to which the person first becomes a promoter after the monitoring notice ceases to have effect.
(4) A notice under subsection (1) must specify the time within which information must be provided or a document produced and different times may be specified for different cases.

258 Duty of person dealing with non-resident monitored promoter
(1) This section applies where a monitored promoter who is resident outside the United Kingdom has failed to comply with a duty under section 255 or 257 to provide information about a monitored proposal or monitored arrangements.
(2) An authorised officer, or an officer of Revenue and Customs with the approval of an authorised officer, may give a notice to a relevant person which—
(a) specifies or describes the information which the monitored promoter has failed to provide, and
(b) requires the person to provide the information.
(3) A “relevant person” means—
(a) any person who is an intermediary in relation to the monitored proposal concerned, and
(b) any person (“A”) to whom the monitored promoter has made a firm approach in relation to the monitored proposal concerned with a view to making the proposal available for implementation by a person other than A.
(4) If an authorised officer is not aware of any person to whom a notice could be given under subsection (2) the authorised officer, or an officer of Revenue and Customs with the approval of the authorised officer, may give a notice to any person who has implemented the proposal which—
(a) specifies or describes the information which the monitored promoter has failed to provide, and
(b) requires the person to provide the information.
(5) If the duty mentioned in subsection (1) relates to monitored arrangements an authorised officer, or an officer of Revenue and Customs with the approval of an authorised officer, may give a notice to any person who has entered into any transaction forming part of the monitored arrangements concerned which—
(a) specifies or describes the information which the monitored promoter has failed to provide, and
(b) requires the person to provide the information.
(6) A notice under this section may be given only if the officer giving the notice reasonably believes that the person to whom the notice is given is able to provide the information requested.
(7) Information required as a result of a notice under this section must be provided within—
(a) the period of 10 days beginning with the day on which the notice was given, or
(b) such longer period as the officer who gives the notice may direct.

259 Monitored promoters: duty to provide information about clients
(1) An authorised officer, or an officer of Revenue and Customs with the approval of an authorised officer, may give notice to a person in relation to whom a monitoring notice has effect (“the monitored promoter”).
(2) A person to whom a notice is given under subsection (1) must, for each relevant period, give the officer who gave the notice the information set out in subsection (9) in respect of each person who was its client with reference to that relevant period (see subsections (5) to (8)).
(3) Each of the following is a “relevant period”—
(a) the calendar quarter in which the notice under subsection (1) was given but not including any time before the monitoring notice takes effect,
(b) the period (if any) beginning with the date the monitoring notice takes effect and ending immediately before the beginning of the period described in paragraph (a), and
(c) each calendar quarter after the period described in paragraph (a) but not including any time after the monitoring notice ceases to have effect.
(4) Information required as a result of a notice under subsection (1) must be given—
(a) within the period of 30 days beginning with the end of the relevant period concerned, or
(b) in the case of a relevant period within subsection (3)(b), within the period of 30 days beginning with the day on which the notice under subsection (1) was given if that period would expire at a later time than the period given by paragraph (a).
(5) A person (“C”) is a client of the monitored promoter with reference to a relevant period if—
(a) the promoter did any of the things mentioned in subsection (6) in relation to C at any time during that period, or
(b) the person falls within subsection (7).
(6) Those things are that the monitored promoter—
(a) made a firm approach to C in relation to a relevant proposal with a view to the promoter making the proposal available for implementation by C or another person;
(b) made a relevant proposal available for implementation by C;
(c) took part in the organisation or management of relevant arrangements entered into by C.
(7) A person falls within this subsection if the person has entered into transactions forming part of relevant arrangements and those arrangements—
(a) enable the person to obtain a tax advantage either in that relevant period or a later relevant period, and
(b) are either relevant arrangements in relation to which the monitored promoter is or was a promoter, or implement a relevant proposal in relation to which the monitored promoter was a promoter.
(8) But a person is not a client of the monitored promoter with reference to a relevant period if—
(a) the person has previously been a client of the monitored promoter with reference to a different relevant period,
(b) the promoter complied with the duty in subsection (2) in respect of the person for that relevant period, and
(c) the information provided as a result of complying with that duty remains accurate.
(9) The information mentioned in subsection (2) is—
(a) the person's name and address, and
(b) such other information about the person as may be prescribed.
(10) Where the monitoring notice mentioned in subsection (1) is a replacement monitoring notice, subsection (5)(b) does not impose a duty on the monitored promoter concerned to provide information about a person who has entered into transactions forming part of relevant arrangements (as described in subsection (7)) if the monitored promoter reasonably believes that information about that person has, in relation to those arrangements, already been provided under the original monitoring notice.

260 Intermediaries: duty to provide information about clients
(1) An authorised officer, or an officer of Revenue and Customs with the approval of an authorised officer, may give notice to a person (“the intermediary”) who is an intermediary in relation to a relevant proposal which is a monitored proposal of a person in relation to whom a monitoring notice has effect (“the monitored promoter”).
(2) A person to whom a notice is given under subsection (1) must, for each relevant period, give the officer who gave the notice the information set out in subsection (7) in respect of each person who was its client with reference to that relevant period (see subsections (5) to (6)).
(3) Each of the following is a “relevant period”—
(a) the calendar quarter in which the notice under subsection (1) was given but not including any time before the intermediary was first notified under section 250, 251 or 252 of the promoter reference number of the monitored promoter,
(b) the period (if any) beginning with the date of the notification under section 250, 251 or 252 and ending immediately before the beginning of the period described in paragraph (a), and
(c) each calendar quarter after the period described in paragraph (a) but not including any time after the monitoring notice mentioned in subsection (1) ceases to have effect.
(4) Information required as a result of a notice under subsection (1) must be given—
(a) within the period of 30 days beginning with the end of the relevant period concerned, or
(b) in the case of a relevant period within subsection (3)(b), within the period of 30 days beginning with the day on which the notice under subsection (1) was given if that period would expire at a later time than the period given by paragraph (a).
(5) A person (“C”) is a client of the intermediary with reference to a relevant period if during that period—
(a) the intermediary communicated information to C about a monitored proposal in the course of a business, and
(b) the communication was made with a view to C, or any other person, entering into transactions forming part of the proposed arrangements.
(6) But a person is not a client of the intermediary with reference to a relevant period if—
(a) the person has previously been a client of the intermediary with reference to a different relevant period,
(b) the intermediary complied with the duty in subsection (2) in respect of the person for that relevant period, and
(c) the information provided as a result of complying with that duty remains accurate.
(7) The information mentioned in subsection (2) is—
(a) the person's name and address, and
(b) such other information about the person as may be prescribed.

261 Enquiry following provision of client information
(1) This section applies where—
(a) a person (“the notifying person”) has provided information under section 259 or 260 about a person who was a client of the notifying person with reference to a relevant period (within the meaning of the section concerned) in connection with a particular relevant proposal or particular relevant arrangements, and
(b) an authorised officer suspects that a person in respect of whom information has not been provided under section 259 or 260—
(i) has at any time been, or is likely to be, a party to transactions implementing the proposal, or
(ii) is a party to a transaction forming (in whole or in part) particular relevant arrangements.
(2) The authorised officer may by notice in writing require the notifying person to provide prescribed information in relation to any person whom the notifying person might reasonably be expected to know—
(a) has been, or is likely to be, a party to transactions implementing the proposal, or
(b) is a party to a transaction forming (in whole or in part) the relevant arrangements.
(3) But a notice under subsection (2) does not impose a requirement on the notifying person to provide information which the notifying person has already provided to an authorised officer under section 259 or 260.
(4) The notifying person must comply with a requirement under subsection (2) within—
(a) 10 days of the notice, or
(b) such longer period as the authorised officer may direct.

262 Information required for monitoring compliance with conduct notice
(1) This section applies where a conduct notice has effect in relation to a person.
(2) An authorised officer, or an officer of Revenue and Customs with the approval of an authorised officer, may (as often as is necessary for the purpose mentioned below) by notice in writing require the person—
(a) to provide information, or
(b) to produce a document,
if the information or document is reasonably required for the purpose of monitoring whether and to what extent the person is complying with the conditions in the conduct notice.

263 Duty to notify HMRC of address
If, on the last day of a calendar quarter, a monitoring notice has effect in relation to a person (“the monitored promoter”) the monitored promoter must within 30 days of the end of the calendar quarter inform an authorised officer of its current address.

264 Failure to provide information: application to tribunal
(1) This section applies where—
(a) a person (“P”) has provided information or produced a document in purported compliance with section 255, 257, 258, 259, 260, 261 or 262, but
(b) an authorised officer suspects that P has not provided all the information or produced all the documents required under the section concerned.
(2) The authorised officer, or an officer of Revenue and Customs with the approval of the authorised officer, may apply to the tribunal for an order requiring P to—
(a) provide specified information about persons who are its clients for the purposes of the section to which the application relates,
(b) provide specified information, or information of a specified description, about a monitored proposal or monitored arrangements,
(c) produce specified documents relating to a monitored proposal or monitored arrangements.
(3) The tribunal may make an order under subsection (2) in respect of information or documents only if satisfied that the officer has reasonable grounds for suspecting that the information or documents—
(a) are required under section 255, 257, 258, 259, 260, 261 or 262 (as the case may be), or
(b) will support or explain information required under the section concerned.
(4) A requirement by virtue of an order under subsection (2) is to be treated as part of P's duty under section 255, 257, 258, 259, 260, 261 or 262 (as the case may be).
(5) Information or a document required as a result of subsection (2) must be provided, or the document produced, within the period of 10 days beginning with the day on which the order under subsection (2) was made.
(6) An authorised officer may, by direction, extend the 10 day period mentioned in subsection (5).

265 Duty to provide information to monitored promoter
(1) This section applies where a person has been notified of a promoter reference number—
(a) under section 250 by reason of being a person falling within subsection (2)(b) of that section, or
(b) under section 251 or 252.
(2) The person notified (“C”) must within 10 days notify the person whose promoter reference number it is of—
(a) C's national insurance number (if C has one), and
(b) C's unique tax reference number (if C has one).
(3) If C has neither a national insurance number nor a unique tax reference number, C must within 10 days inform the person whose promoter reference number it is of that fact.
(4) A unique tax reference number is an identification number allocated to a person by HMRC.
(5) Subsection (2) or (3) does not impose a duty on C to provide information which C has already provided to the person whose promoter reference number it is.

Obtaining information and documents: appeals

266 Appeals against notices imposing information etc requirements
(1) This section applies where a person is given a notice under section 255, 257, 258, 259, 260, 261 or 262.
(2) The person to whom the notice is given may appeal against the notice or any requirement under the notice.
(3) Subsection (2) does not apply—
(a) to a requirement to provide any information or produce any document that forms part of the person's statutory records, or
(b) if the tribunal has approved the giving of the notice under section 256.
(4) For the purposes of this section, information or a document forms part of a person's statutory records if it is information or a document which the person is required to keep and preserve under or by virtue of—
(a) the Taxes Acts, or
(b) any other enactment relating to a tax.
(5) Information and documents cease to form part of a person's statutory records when the period for which they are required to be preserved by the enactments mentioned in subsection (4) has expired.
(6) Notice of appeal must be given—
(a) in writing to the officer who gave the notice, and
(b) within the period of 30 days beginning with the day on which the notice was given.
(7) The notice of appeal must state the grounds of the appeal.
(8) On an appeal that is notified to the tribunal, the tribunal may—
(a) confirm the notice or a requirement under the notice,
(b) vary the notice or such a requirement, or
(c) set aside the notice or such a requirement.
(9) Where the tribunal confirms or varies the notice or a requirement, the person to whom the notice was given must comply with the notice or requirement—
(a) within such period as is specified by the tribunal, or
(b) if the tribunal does not specify a period, within such period as is reasonably specified in writing by an officer of Revenue and Customs following the tribunal's decision.
(10) A decision of the tribunal on an appeal under this section is final (despite the provisions of sections 11 and 13 of the Tribunals, Courts and Enforcement Act 2007).
(11) Subject to this section, the provisions of Part 5 of TMA 1970 relating to appeals have effect in relation to an appeal under this section.

Obtaining information and documents: supplementary

267 Form and manner of providing information
(1) The Commissioners may specify the form and manner in which information required to be provided or documents required to be produced by sections 255 to 264 must be provided or produced if the provision is to be complied with.
(2) The Commissioners may specify that a document must be produced for inspection—
(a) at a place agreed between the person and an officer of Revenue and Customs, or
(b) at such place (which must not be a place used solely as a dwelling) as an officer of Revenue and Customs may reasonably specify.
(3) The production of a document in compliance with a notice under this Part is not to be regarded as breaking any lien claimed on the document.

268 Production of documents: compliance
(1) Where the effect of a notice under section 255, 257 or 262 is to require a person to produce a document, the person may comply with the requirement by producing a copy of the document, subject to any conditions or exceptions that may be prescribed.
(2) Subsection (1) does not apply where—
(a) the effect of the notice is to require the person to produce the original document, or
(b) an authorised officer, or an officer of Revenue and Customs with the approval of an authorised officer, subsequently makes a request in writing to the person for the original document.
(3) Where an officer requests a document under subsection (2)(b), the person to whom the request is made must produce the document—
(a) within such period, and
(b) at such time and by such means,
as is reasonably requested by the officer.

269 Exception for certain documents or information
(1) Nothing in this Part requires a person to provide or produce—
(a) information that relates to the conduct of a pending appeal relating to tax or any part of a document containing such information,
(b) journalistic material (as defined in section 13 of the Police and Criminal Evidence Act 1984) or information contained in such material, or
(c) personal records (as defined in section 12 of the Police and Criminal Evidence Act 1984) or information contained in such records (but see subsection (2)).
(2) A notice under this Part may require a person—
(a) to produce documents, or copies of documents, that are personal records, omitting any information whose inclusion (whether alone or with other information) makes the original documents personal records (“personal information”), and
(b) to provide any information contained in such records that is not personal information.

270 Limitation on duty to produce documents
Nothing in this Part requires a person to produce a document—
(a) which is not in the possession or power of that person, or
(b) if the whole of the document originates more than 6 years before the requirement to produce it would, if it were not for this section, arise.

271 Legal professional privilege
(1) Nothing in this Part requires any person to disclose to HMRC any privileged information.
(2) “Privileged information” means information with respect to which a claim to legal professional privilege by the person who would (ignoring the effect of this section) be required to disclose it, could be maintained in legal proceedings.
(3) In the case of legal proceedings in Scotland, the reference in subsection (2) to legal professional privilege is to be read as a reference to confidentiality of communications.

272 Tax advisers
(1) This section applies where a notice is given under section 258(4) or (5) and the person to whom the notice is given is a tax adviser.
(2) The notice does not require a tax adviser—
(a) to provide information about relevant communications, or
(b) to produce documents which are the tax adviser's property and consist of relevant communications.
(3) Subsection (2) does not have effect in relation to—
(a) information explaining any information or document which the person to whom the notice is given has, as tax accountant, assisted any person in preparing for, or delivering to, HMRC, or
(b) a document which contains such information.
(4) But subsection (2) is not disapplied by subsection (3) if the information in question has already been provided, or a document containing the information has already been produced, to an officer of Revenue and Customs.
(5) In this section—
“relevant communications” means communications between the tax adviser and—
(a) a person in relation to whose tax affairs the tax adviser has been appointed, or
(b) any other tax adviser of such a person,
the purpose of which is the giving or obtaining of advice about any of those tax affairs, and
“tax adviser” means a person appointed to give advice about the tax affairs of another person (whether appointed directly by that person or by another tax adviser of that person).

273 Confidentiality
(1) No duty of confidentiality or other restriction on disclosure (however imposed) prevents the voluntary disclosure by a relevant client or a relevant intermediary to HMRC of information or documents about—
(a) a monitored promoter, or
(b) relevant proposals or relevant arrangements in relation to which a monitored promoter is a promoter.
(2) “Relevant client” means a person in relation to whom the monitored promoter mentioned in subsection (1)(a) or (b)—
(a) has made a firm approach in relation to a relevant proposal with a view to making the proposal available for implementation by that person or another person;
(b) has made a relevant proposal available for implementation by that person;
(c) took part in the organisation or management of relevant arrangements entered into by that person.
(3) “Relevant intermediary” means a person who is an intermediary in relation to a relevant proposal in relation to which the monitored promoter mentioned in subsection (1)(a) or (b) is a promoter.
(4) The relevant proposal or relevant arrangements mentioned in subsection (2) or (3) need not be the relevant proposals or relevant arrangements to which the disclosure relates.

Penalties

274 Penalties
Schedule 35 contains provision about penalties for failure to comply with provisions of this Part.

275 Failure to comply with Part 7 of the Finance Act 2004
In section 98C of TMA 1970 (notification under Part 7 of FA 2004), after subsection (2E) insert—

“(2EA) Where a person fails to comply with—
(a) section 309 of that Act and the promoter for the purposes of that section is a monitored promoter for the purposes of Part 5 of the Finance Act 2014, or
(b) section 310 of that Act and the arrangements for the purposes of that section are arrangements of such a monitored promoter,
then for the purposes of section 118(2) of this Act legal advice which the person took into account is to be disregarded in determining whether the person had a reasonable excuse, if the advice was given or procured by that monitored promoter.
(2EB) In determining for the purpose of section 118(2) of this Act whether or not a person who is a monitored promoter within the meaning of Part 5 of the Finance Act 2014 had a reasonable excuse for a failure to do anything required to be done under a provision mentioned in subsection (2), reliance on legal advice is to be taken automatically not to constitute a reasonable excuse if either—
(a) the advice was not based on a full and accurate description of the facts, or
(b) the conclusions in the advice that the person relied on were unreasonable.”

276 Limitation of defence of reasonable care
(1) Subsection (2) applies where—
(a) a person gives HMRC a document of a kind listed in the Table in paragraph 1 of Schedule 24 to FA 2007 (penalties for providing inaccurate documents to HMRC), and
(b) the document contains an inaccuracy.
(2) In determining whether or not the inaccuracy was careless for the purposes of paragraph 3(1)(a) of Schedule 24 to FA 2007, reliance by the person on legal advice relating to relevant arrangements in relation to which a monitored promoter is a promoter is to be disregarded if the advice was given or procured by a person who was a monitored promoter in relation to the arrangements.

277 Extended time limit for assessment
(1) In section 36 of TMA 1970 (loss of tax brought about carelessly or deliberately), in subsection (1A)—
(a) omit the “or” following paragraph (b), and
(b) at the end of paragraph (c) insert

“or
(d) attributable to arrangements which were expected to give rise to a tax advantage in respect of which the person was under an obligation to notify the Commissioners for Her Majesty's Revenue and Customs under section 253 of the Finance Act 2014 (duty to notify Commissioners of promoter reference number) but failed to do so,”

.
(2) In paragraph 12B of Schedule 2 to OTA 1975 (extended time limits for assessment of petroleum revenue tax)—
(a) in sub-paragraph (1), after “sub-paragraph (2)” insert “ and (2A) ”,
(b) after sub-paragraph (2) insert—

“(2A) In a case involving a relevant situation brought about by arrangements which were expected to give rise to a tax advantage in respect of which a participator (or a person acting on behalf of a participator) was under an obligation to notify the Board under section 253 of the Finance Act 2014 (duty to notify Commissioners of promoter reference number) but failed to do so, an assessment (or an amendment of an assessment) on the participator may be made at any time not more than 20 years after the end of the relevant chargeable period.”

,
(c) in sub-paragraph (5), for “or (2)” substitute “ , (2) or (2A) ”, and
(d) in sub-paragraph (6), for “or (2)” substitute “ , (2) or (2A) ”.
(3) In section 240 of IHTA 1984 (underpayments)—
(a) in subsection (3) for “and (5)” substitute “ to (5A) ”,
(b) in subsection (5), for “those dates” substitute “ the dates in subsection (2)(a) and (b) ”,
(c) after subsection (5) insert—

“(5A) Proceedings in a case involving a loss of tax attributable to arrangements which were expected to give rise to a tax advantage in respect of which a person liable for the tax was under an obligation to make a report under section 253 of the Finance Act 2014 (duty to notify Commissioners of promoter reference number) but failed to do so, may be brought at any time not more than 20 years after the later of the dates in subsection (2)(a) and (b).”

, and
(d) in subsection (8), for “, (5) and (6)” substitute “ to (6) ”.
(4) In paragraph 46 of Schedule 18 to FA 1998 (general time limits for assessments to corporation tax), in sub-paragraph (2A)—
(a) omit the “or” following paragraph (b), and
(b) at the end of paragraph (c) insert

“or
(d) attributable to arrangements which were expected to give rise to a tax advantage in respect of which the company was under an obligation to notify the Commissioners for Her Majesty's Revenue and Customs under section 253 of the Finance Act 2014 (duty to notify Commissioners of promoter reference number) but failed to do so,”

.
(5) In paragraph 31 of Schedule 10 to FA 2003 (time limit for assessment of stamp duty land tax), in sub-paragraph (2A)—
(a) omit the “or” following paragraph (b), and
(b) at the end of paragraph (c) insert

“or
(d) attributable to arrangements which were expected to give rise to a tax advantage in respect of which the person was under an obligation to notify the Commissioners for Her Majesty's Revenue and Customs under section 253 of the Finance Act 2014 (duty to notify Commissioners of promoter reference number) but failed to do so,”

.
(6) In paragraph 25 of Schedule 33 to FA 2013 (time limit for assessment: annual tax on enveloped dwellings), in sub-paragraph (4)—
(a) omit the “or” following paragraph (b), and
(b) at the end of paragraph (c) insert

“, or
(d) attributable to arrangements which were expected to give rise to a tax advantage in respect of which the person was under an obligation to notify the Commissioners for Her Majesty's Revenue and Customs under section 253 of FA 2014 (duty to notify Commissioners of promoter reference number) but failed to do so.”

Offences

278 Offence of concealing etc documents
(1) A person is guilty of an offence if—
(a) the person is required to produce a document by a notice given under section 255,
(b) the tribunal approved the giving of the notice under section 256, and
(c) the person conceals, destroys or otherwise disposes of, or arranges for the concealment, destruction or disposal of, that document.
(2) Subsection (1) does not apply if the person acts after the document has been produced to an officer of Revenue and Customs in accordance with section 255, unless the officer has notified the person in writing that the document must continue to be available for inspection (and has not withdrawn the notification).
(3) Subsection (1) does not apply, in a case to which section 268(1) applies, if the person acts after the end of the expiry of 6 months beginning with the day on which a copy of the document was produced in accordance with that section unless, before the expiry of that period, an officer of Revenue and Customs makes a request for the original document under section 268(2)(b).

279 Offence of concealing etc documents following informal notification
(1) A person is guilty of an offence if the person conceals, destroys or otherwise disposes of, or arranges for the concealment, destruction or disposal of, a document after an officer of Revenue and Customs has informed the person in writing that—
(a) the document is, or is likely, to be the subject of a notice under section 255, and
(b) the officer of Revenue and Customs intends to seek the approval of the tribunal to the giving of the notice.
(2) A person is not guilty of an offence under this section if the person acts after—
(a) at least 6 months has expired since the person was, or was last, informed as described in subsection (1), or
(b) a notice has been given to the person under section 255, requiring the document to be produced.

280 Penalties for offences
(1) A person who is guilty of an offence under section 278 or 279 is liable—
(a) on summary conviction, to—
(i) in England and Wales, a fine, or
(ii) in Scotland or Northern Ireland, a fine not exceeding the statutory maximum, or
(b) on conviction on indictment, to imprisonment for a term not exceeding 2 years or to a fine or both.
(2) In relation to an offence committed before section 85(1) of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 comes into force, subsection (1)(a)(i) has effect as if the reference to “a fine” were a reference to “a fine not exceeding the statutory maximum”.

Supplemental

281 Partnerships
Schedule 36 contains provision about the application of this Part to partnerships.

282 Regulations under this Part
(1) Regulations under this Part are to be made by statutory instrument.
(2) Apart from an instrument to which subsection (3) applies, a statutory instrument containing regulations made under this Part is subject to annulment in pursuance of a resolution of the House of Commons.
(3) A statutory instrument containing (whether alone or with other provision) regulations made under—
(a) section 238(7),
(b) paragraph 14 of Schedule 34,
(c) paragraph 5(1) of Schedule 35, or
(d) paragraph 21 of Schedule 36,
may not be made unless a draft of the instrument has been laid before and approved by a resolution of the House of Commons.
(4) Regulations under this Part—
(a) may make different provision for different purposes;
(b) may include transitional provision and savings.

283 Interpretation of this Part
(1) In this Part—
“arrangements” has the meaning given by section 234(4);
“the Commissioners” means the Commissioners for Her Majesty's Revenue and Customs;
“calendar quarter” means a period of 3 months beginning with 1 January, 1 April, 1 July or 1 October;
“conduct notice” means a notice of the description in section 238 that is given under—
(a) section 237(7),
(b) section 245(7), or
(c) paragraph 8(2) or (3) or 10(3)(a) or (4)(a) of Schedule 36;
“HMRC” means Her Majesty's Revenue and Customs;
“firm approach” has the meaning given by section 235(4);
“monitored promoter” has the meaning given by section 244(5);
“monitored proposal” and “monitored arrangements” have the meaning given by section 254;
“monitoring notice” means a notice given under section 244(1) or paragraph 9(2) or (3) or 10(3)(b) or (4)(b) of Schedule 36;
“the original monitoring notice” has the meaning given by paragraph 11(2) of Schedule 36;
“prescribed” means prescribed, or of a description prescribed, in regulations made by the Commissioners;
“promoter reference number” has the meaning given by section 250(5);
“relevant arrangements” has the meaning given by section 234(2);
“relevant proposal” has the meaning given by section 234(1);
“replacement conduct notice” has the meaning given by paragraph 11(1) of Schedule 36;
“replacement monitoring notice” has the meaning given by paragraph 11(1) of Schedule 36;
“tax” means—
(a) income tax,
(b) capital gains tax,
(c) corporation tax,
(d) petroleum revenue tax,
(e) inheritance tax,
(f) stamp duty land tax,
(g) stamp duty reserve tax, or
(h) annual tax on enveloped dwellings;
“tax advantage” has the meaning given by section 234(3);
“Taxes Acts” has the same meaning as in TMA 1970 (see section 118(1) of that Act);
“the tribunal” means the First-tier Tribunal or, where determined by or under Tribunal Procedure Rules, the Upper Tribunal.
(2) A reference in a provision of this Part to an authorised officer is to an officer of Revenue and Customs who is, or is a member of a class of officers who are, authorised by the Commissioners for the purposes of that provision.
(3) A reference in a provision of this Part to meeting a threshold condition is to meeting one of the conditions described in paragraphs 2 to 12 of Schedule 34.

PART 6 Other provisions

Anti-avoidance

284 Disclosure of tax avoidance schemes: information powers
(1) Part 7 of FA 2004 (disclosure of tax avoidance schemes) is amended as set out in subsections (2) to (4).
(2) After section 310 insert—

“310A Duty to provide further information requested by HMRC
(1) This section applies where—
(a) a person has provided the prescribed information about notifiable proposals or arrangements in compliance with section 308, 309 or 310, or
(b) a person has provided information in purported compliance with section 309 or 310 but HMRC believe that the person has not provided all the prescribed information.
(2) HMRC may require the person to provide—
(a) further specified information about the notifiable proposals or arrangements (in addition to the prescribed information under section 308, 309 or 310);
(b) documents relating to the notifiable proposals or arrangements.
(3) Where HMRC impose a requirement on a person under this section, the person must comply with the requirement within—
(a) the period of 10 working days beginning with the day on which HMRC imposed the requirement, or
(b) such longer period as HMRC may direct.

310B Failure to provide information under section 310A: application to the Tribunal
(1) This section applies where HMRC—
(a) have required a person to provide information or documents under section 310A, but
(b) believe that the person has failed to provide the information or documents required.
(2) HMRC may apply to the tribunal for an order requiring the person to provide the information or documents required.
(3) The tribunal may make an order under subsection (2) only if satisfied that HMRC have reasonable grounds for suspecting that the information or documents will assist HMRC in considering the notifiable proposals or arrangements.
(4) Where the tribunal makes an order under subsection (2), the person must comply with it within—
(a) the period of 10 working days beginning with the day on which the tribunal made the order, or
(b) such longer period as HMRC may direct.”

(3) In section 316(2) (meaning of the “information provisions”), after “310,” insert “ 310A, ”.
(4) In section 318(1) (interpretation of Part 7), at the end insert—

““working day” means a day which is not a Saturday or a Sunday, Christmas Day, Good Friday or a bank holiday under the Banking and Financial Dealings Act 1971 in any part of the United Kingdom.”

(5) Section 98C of TMA 1970 (notification under Part 7 of FA 2004) is amended as set out in subsections (6) to (10).
(6) In subsection (1)(a)(i), for “or (c)” substitute “ , (c) or (ca) ”.
(7) In subsection (2), after paragraph (c) insert—

“(ca) section 310A (duty to provide further information requested by HMRC),”

.
(8) In subsection (2ZA), at the end of the table add—

“A failure to comply with section 310A	The first day after the end of the period within which the person must comply with section 310A.”

(9) In subsection (2ZB)—
(a) in paragraph (a)—
(i) for “person's” substitute “promoter's”;
(ii) after “(3)” insert “ or section 310A ”;
(iii) for “person” substitute “ promoter ”;
(b) in paragraph (b)—
(i) before “person's” insert “ relevant ”;
(ii) for “or 310” substitute “ , 310 or 310A ”;
(iii) before “person” insert “ relevant ”.
(10) After subsection (2ZB) insert—

“(2ZBA) In subsection (2ZB)—
(a) “promoter” has the same meaning as in Part 7 of the Finance Act 2004, and
(b) “relevant person” means a person who enters into any transaction forming part of notifiable arrangements within the meaning of that Part.”

(11) Section 310A of FA 2004 applies to a person who provides the prescribed information about notifiable proposals or arrangements in compliance or purported compliance with section 308, 309 or 310 on or after the day on which this Act is passed.

Code of Practice on Taxation for Banks

285 The Code of Practice on Taxation for Banks: HMRC to publish reports
(1) No later than the end of the calendar year in which a reporting period ends, the Commissioners for Her Majesty's Revenue and Customs must publish a report on the operation during the period of the Code of Practice on Taxation for Banks as published by the Commissioners on 31 May 2013 (“the Code”).
(2) If the Commissioners determine that a group or entity which was a participating group or entity (see section 286) during some or all of a reporting period breached the Code at a time during the period, the Commissioners may name the group or entity in a report under this section.
This subsection is subject to section 287.
(3) If—
(a) the Commissioners determine that there has been a breach of the Code, but
(b) it was not reasonably practicable for information relating to the breach to be included in the report for the reporting period in which the breach occurred,
the information may be included in the first subsequent report in which it is reasonably practicable for the information to be included.
(4) The report for a reporting period must list—
(a) the groups or entities which were participating groups or entities during some or all of the reporting period,
(b) the groups or entities appearing to the Commissioners—
(i) not to be covered by paragraph (a), and
(ii) to be groups or entities in relation to which the bank levy is charged in a case where the chargeable period ends in the reporting period (or would be charged in such a case if it is assumed that any period of account beginning before or in, but ending after, the reporting period ends at the end of the reporting period instead), and
(c) the entities appearing to the Commissioners—
(i) not to be covered by paragraph (a) or (b), and
(ii) to be entities which fell within subsection (2)(b) or (c) of section 991 of ITA 2007 (subject to subsection (3) of that section) during some or all of the reporting period.
(5) In a case where the bank levy is (or would be) charged in relation to a relevant non-banking group (as defined in paragraph 11 of Schedule 19 to FA 2011), any list prepared under subsection (4)(b) is to refer to the group only so far as it consists (or would consist) of—
(a) relevant UK banking sub-groups (as defined in paragraph 19(5) of that Schedule), and
(b) so far as not covered by paragraph (a)—
(i) UK resident banks (as defined in paragraph 80 of that Schedule), and
(ii) relevant foreign banks (as defined in paragraph 78 of that Schedule).
(6) For the purposes of subsection (4)(b)(ii) it does not matter if the amount of the bank levy is (or would be) nil in the case of a group or entity.
(7) The first “reporting period” is the period beginning with 5 December 2013 and ending with 31 March 2015.
(8) After that, each year beginning with 1 April is a “reporting period”.
(9) The report for the first reporting period must list the groups or entities which were participating groups or entities on 5 December 2013.
(10) Subsection (9) does not require the inclusion in the report of any information which has previously been published by the Commissioners, so long as the report makes reference to the previous publication.
(11) If, on or after 31 May 2013, the Commissioners publish a document which states that only Part 1 of the Code is to apply in the case of a group or entity of a specified description, in the case of such a group or entity references to the Code are to be read as references to Part 1 of the Code.

286 The Code of Practice on Taxation for Banks: “participating” groups or entities
(1) This section applies for the purposes of section 285.
(2) A group or entity becomes a “ participating ” group or entity if, on or after 31 May 2013, it notifies the Commissioners in writing that it is unconditionally committed to complying with the Code.
(3) A group or entity ceases to be a “participating” group or entity if it notifies the Commissioners in writing that it is no longer unconditionally committed to complying with the Code.
(4) A group or entity which ceases to be a “participating” group or entity in accordance with subsection (3) becomes a “ participating ” group or entity again if it gives a further written notice of the kind mentioned in subsection (2) (subject to what follows).
(5) Subsections (6) and (7) apply if a group or entity is named in a report under section 285 under subsection (2) of that section.
(6) If the group or entity is a “participating” group or entity immediately before the publication of the report, it ceases to be so on the publication of the report.
(7) In any case, the group or entity cannot be a “participating” group or entity after the publication of the report unless and until—
(a) it gives the Commissioners a further written notice of the kind mentioned in subsection (2), and
(b) the Commissioners are satisfied that it is unconditionally committed to complying with the Code.

287 The Code of Practice on Taxation for Banks: operation & breaches of the Code
(1) The Commissioners must—
(a) publish a protocol, to be called “the Governance Protocol”, setting out how the Commissioners are going to operate the Code and section 285(2), and
(b) follow the Governance Protocol when operating the Code and section 285(2).
(2) The Governance Protocol must require the Commissioners, before determining for the purposes of section 285(2) whether a group or entity has breached the Code at a time during a reporting period, to commission a person (an “independent reviewer”) who is independent of the Commissioners and the group or entity to report on—
(a) whether the group or entity has breached the Code, and
(b) whether the group or entity should be named in a report under section 285 were the Commissioners to determine that the group or entity has breached the Code.
(3) The independent reviewer—
(a) must give the group or entity a reasonable opportunity to make representations about the matters being considered by the independent reviewer,
(b) subject to subsection (8), must have regard to the group or entity's representations and may have regard to any other matter which the independent reviewer considers to be relevant,
(c) must give the group or entity a copy of the independent reviewer's report, and
(d) must otherwise follow the Governance Protocol but only so far as it is relevant to the independent reviewer's functions.
(4) The Governance Protocol may provide that, in the case of any conduct of a group or entity to which subsection (5) applies, the independent reviewer is to assume that the conduct constitutes a breach of the Code and, accordingly, is to report only on the matter mentioned in subsection (2)(b).
(5) This subsection applies to any conduct—
(a) in relation to which there has been given—
(i) an opinion notice under paragraph 11(3)(b) of Schedule 43 to FA 2013 (GAAR advisory panel: opinion that conduct unreasonable) stating the joint opinion of all the members of a sub-panel arranged under paragraph 10 of that Schedule, or
(ii) one or more such notices stating the opinions of at least two members of such a sub-panel, and
(b) in relation to which there has been given a notice under paragraph 12 of that Schedule (HMRC final decision on tax advantage) stating that a tax advantage is to be counteracted.
(6) The Governance Protocol must make provision—
(a) for the Commissioners, in determining whether a group or entity has breached the Code or should be named in a report under section 285—
(i) to have regard to the independent reviewer's report, and
(ii) to give the group or entity a reasonable opportunity to make representations about the matters being considered by the Commissioners,
(b) for the Commissioners to notify the group or entity in writing of their determination,
(c) if the Commissioners' determination is different from the independent reviewer's determination, for the Commissioners to include in the notification of their determination to the group or entity their reasons for making a different determination, and
(d) if the Commissioners determine that the group or entity should be named in a report under section 285, for the Commissioners to hold off including in a report under that section any information relating to the breach of the Code—
(i) until the notification of the determination is given to the group or entity, and
(ii) for at least 90 days after the day on which that notification is given.
(7) The Governance Protocol must make provision for the independent reviewer and the Commissioners, in determining whether a group or entity should be named in a report under section 285, to have regard to—
(a) any action taken by the group or entity to remedy the breach of the Code or otherwise to mitigate its effect, and
(b) any exceptional circumstances which might justify not naming the group or entity.
(8) In determining whether a group or entity has breached the Code or should be named in a report under section 285, the independent reviewer and the Commissioners—
(a) may have regard to any conduct of the group or entity occurring on or after 5 December 2013, but
(b) must not have regard to any conduct of the group or entity occurring before that date or at a time when the group or entity is not a participating group or entity.
(9) Subsection (10) applies if the independent reviewer determines—
(a) that a group or entity has not breached the Code, or
(b) that a group or entity should not be named in a report under section 285.
(10) The Commissioners may make a determination which is different from the independent reviewer's determination only if—
(a) the independent reviewer's determination is flawed when considered in the light of the principles applicable in proceedings for judicial review, or
(b) there are other compelling reasons for making a different determination.
(11) If the Commissioners make a different determination in a case where subsection (10) applies—
(a) their reasons notified under subsection (6)(c) must set out (in particular) why the independent reviewer's determination is flawed or (as the case may be) the other compelling reasons,
(b) in any proceedings in which an issue arises as to whether it was lawful for them to make the different determination it is for them to show that it was lawful for them to make the different determination, and
(c) subsection (12) applies in relation to any proceedings for judicial review of the different determination instituted by a member of the group or by the entity.
(12) If the proceedings are instituted no later than the end of the 90 day period mentioned in subsection (6)(d)(ii)—
(a) they are to be treated as having been instituted within any applicable time limit (if that would not otherwise be the case),
(b) the court must give permission or leave for the proceedings to proceed (if the court's permission or leave is required), unless that would lead to multiple proceedings dealing with the same issues, and
(c) any hearing (including any hearing on appeal) must be held in private, unless (having regard to the risk that holding the hearing in public might undermine to any extent the purpose of the instituting of the proceedings) the court is satisfied that there are exceptional circumstances requiring the hearing to be held in public.
(13) If a determination of the Commissioners is different from the independent reviewer's determination, they must mention that fact—
(a) in the report under section 285 for the reporting period in question, or
(b) if it was not reasonably practicable for that fact to be mentioned in that report, in the first subsequent report under section 285 in which it is reasonably practicable for that fact to be mentioned.
(14) In determining for the purposes of section 285(3) or subsection (13)(b) of this section when it is reasonably practicable for any information to be included in a report under section 285, regard must be had (in particular) to the requirements of subsections (1) to (12) of this section.
(15) The Commissioners must disclose to an independent reviewer such information held by them as they consider appropriate to enable the independent reviewer to carry out the independent reviewer's functions.
(16) If the Commissioners disclose information to an independent reviewer under subsection (15), section 18 of CRCA 2005 (confidentiality) applies in relation to the independent reviewer's holding and use of the information as if the independent reviewer were an officer of Revenue and Customs and the independent reviewer's functions were functions of the independent reviewer as such an officer.

288 The Code of Practice on Taxation for Banks: documents relating to the Code
(1) The Commissioners may publish a relevant document, or revoke or modify a relevant document previously published by them, only after—
(a) consultation with such persons as they consider appropriate, and
(b) consideration of any representations made to them in the course of the consultation.
(2) When publishing a relevant document or a modified relevant document or when revoking a relevant document, the Commissioners must also publish—
(a) an account of the representations mentioned in subsection (1)(b), and
(b) their responses to those representations.
(3) In this section “relevant document” means—
(a) the Governance Protocol, or
(b) any document of the kind mentioned in section 285(11).
(4) This section does not apply in relation to the first publication of the Governance Protocol.
(5) This section does not affect any document of the kind mentioned in section 285(11) published before the passing of this Act except where it is to be revoked or modified after the passing of this Act.

Offshore funds

289 Undertakings for collective investment in transferable securities and alternative investment funds
(1) Section 363A of TIOPA 2010 (residence of offshore funds which are undertakings for collective investment in transferable securities) is amended as follows.
(2) For subsections (1) and (2) substitute—

“(1) This section applies to—
(a) a UCITS which is authorised in a foreign country or territory pursuant to Article 5 of the UCITS Directive, and
(b) an AIF which is authorised or registered in a foreign country or territory, or is not authorised or registered but has its registered office in a foreign country or territory,
unless the UCITS or AIF is an excluded entity.
(2) If the UCITS or AIF is a body corporate which (apart from this section) would be treated as resident in the United Kingdom for the purposes of any enactment (within the meaning of section 354) relating to income tax, corporation tax or capital gains tax, the body corporate is instead to be treated as if it were not resident in the United Kingdom.
(2A) A UCITS or AIF is “an excluded entity” if it—
(a) is a unit trust scheme the trustees of which are UK resident,
(b) is resident in the United Kingdom by virtue of section 14 of CTA 2009,
(c) is, or has been, an investment trust with respect to an accounting period, or
(d) is or has been—
(i) a company UK REIT in relation to an accounting period, or
(ii) a member of a group of companies at a time when the group is or was a group UK REIT in relation to an accounting period.
(2B) The Treasury may, by regulations, modify this section so as to—
(a) add a description of UCITS or AIF as an excluded entity,
(b) provide that a description of UCITS or AIF is no longer an excluded entity, or
(c) vary a description of an excluded entity.”

(3) In subsection (3), for “offshore fund” substitute “ UCITS or AIF ”.
(4) In subsection (4), for the words after “section” substitute

“—
AIF” has the meaning given in regulation 3 of the Alternative Investment Fund Managers Regulations 2013,
“foreign country or territory” means a country or territory outside the United Kingdom,
“investment trust with respect to an accounting period” is to be construed in accordance with section 1158 of CTA 2010,
“UCITS” means an undertaking for collective investment in transferable securities,
“the UCITS Directive” means Directive 2009/65/EC of the European Parliament and of the Council,
“company UK REIT in relation to an accounting period” and “group UK REIT in relation to an accounting period” are to be construed in accordance with section 527 of CTA 2010.”

(5) Accordingly, in TIOPA 2010—
(a) in section 1 (overview of Act), in subsection (1)(e) after “funds” insert “ etc ”,
(b) in the heading for Part 8, after “FUNDS” insert “ ETC ”, and
(c) for the heading of section 363A substitute “ Residence of undertakings for collective investment in transferable securities and alterative investment funds ”.
(6) The amendments made by this section are treated as having come into force on 5 December 2013.

Employee-ownership trusts

290 Companies owned by employee-ownership trusts
Schedule 37 contains provision about tax reliefs in connection with companies owned by employee-ownership trusts.

Trusts

291 Trusts with vulnerable beneficiary: meaning of “disabled person”
(1) Schedule 1A to FA 2005 (meaning of “disabled person”) is amended as follows.
(2) In paragraph 1—
(a) for paragraph (c) substitute—

“(c) a person in receipt of a disability living allowance by virtue of entitlement to—
(i) the care component at the highest or middle rate, or
(ii) the mobility component at the higher rate,”, and”

(b) in paragraph (d), omit “by virtue of entitlement to the daily living component”.
(3) In paragraph 3, after “rate” insert “ , or to the mobility component at the higher rate, ”.
(4) In paragraph 4, omit “by virtue of entitlement to the daily living component”.
(5) The amendments made by this section have effect—
(a) for the purposes of sections 89, 89A and 89B of IHTA 1984, in relation to property transferred into settlement on or after 6 April 2014, and
(b) for all other purposes, for the tax year 2014-15 and subsequent tax years.

International matters

292 Amounts allowed by way of double taxation relief
(1) TIOPA 2010 is amended as follows.
(2) For section 34(1)(b) (reduction in credit: payment by reference to foreign tax) substitute—

“(b) a tax authority makes a payment by reference to that tax, and that payment—
(i) is made to P or a person connected with P, or
(ii) is made to some other person directly or indirectly in consequence of a scheme that has been entered into.”

(3) In section 34, after subsection (3) insert—

“(4) In subsection (1)(b)(ii) “scheme” includes any scheme, arrangement or understanding of any kind, whether or not legally enforceable, involving a single transaction or two or more transactions.”

(4) For section 112(3)(b) (deduction from income for foreign tax (instead of credit against UK tax)) substitute—

“(b) a tax authority makes a payment by reference to that tax, and that payment—
(i) is made to P or a person connected with P, or
(ii) is made to some other person directly or indirectly in consequence of a scheme that has been entered into,”

.
(5) In section 112, after subsection (7) insert—

“(8) In subsection (3)(b)(ii) “scheme” includes any scheme, arrangement or understanding of any kind, whether or not legally enforceable, involving a single transaction or two or more transactions.”

(6) In section 42(4) (provisions relating to the limit imposed by section 42(2) on credit against corporation tax) for the “and” after “(as defined in section 44),” substitute— “ section 49B, which requires subsection (2) to be applied separately to certain non-trading credits, and ”.
(7) After section 49A insert—

“49B Applying section 42(2) to non-trading credits from loan relationships etc
(1) Subsection (2) applies for the purposes of section 42(2) if—
(a) the company has a non-trading credit relating to an item, and
(b) there is in respect of that item an amount of foreign tax for which, under the arrangements, credit is allowable against United Kingdom tax.
(2) Credit for the foreign tax in respect of that item must not exceed—
R × ( NTC – D )
where—
R has the same meaning as in section 42(2),
NTC is the amount of the non-trading credit, and
D is the amount given by subsection (3).
(3) D in the formula in subsection (2) is calculated as follows—
Step 1 Calculate the total amount (“TNTD”) of the non-trading debits which are to be brought into account by the company—
(a) in the same accounting period, and
(b) in respect of the same loan relationship, derivative contract or intangible fixed asset,
as the non-trading credit.
Step 2 Calculate the total (“A”) of the amounts which, as amount D, have already been deducted under subsection (2) from other non-trading credits which are to be brought into account in the same period and in respect of the same relationship, contract or asset.
Step 3 Calculate the amount given by—
TNTD – A
Step 4 If the amount calculated at step 3 is greater than or equal to NTC, then D equals NTC. Otherwise, D is the amount calculated at step 3.
(4) In this section—
“intangible fixed asset” has the same meaning as in Part 8 of CTA 2009,
“non-trading credit” means—
(a) a non-trading credit for the purposes of Part 5 of CTA 2009 (which is about loan relationships but also has application in relation to deemed loan relationships and derivative contracts), or
(b) a non-trading credit for the purposes of Part 8 of CTA 2009 (intangible fixed assets), and
“non-trading debit” means—
(a) a non-trading debit for the purposes of Part 5 of CTA 2009, or
(b) a non-trading debit for the purposes of Part 8 of CTA 2009.”

(8) The amendments made by subsections (2), (3), (4) and (5) have effect in relation to payments made by a tax authority on or after 5 December 2013.
(9) The amendments made by subsections (6) and (7) have effect in relation to accounting periods beginning on or after 5 December 2013.
(10) For the purposes of subsection (9), an accounting period beginning before, and ending on or after, 5 December 2013 is to be treated as if so much of the period as falls before that date, and so much of the period as falls on or after that date, were separate accounting periods.

293 Controlled foreign companies: qualifying loan relationships (1)
(1) In Chapter 9 of Part 9A of TIOPA 2010 (controlled foreign companies: qualifying loan relationships) in section 371IH (exclusions from definition of “qualifying loan relationship”) after subsection (9) insert—

“(9A) Subsection (9B) applies to a creditor relationship of a CFC if—
(a) a creditor relationship (“the UK creditor relationship”) of a UK connected company is made where the debtor is a non-UK resident company connected with the UK connected company,
(b) subsequently, an arrangement (“the relevant arrangement”) is made directly or indirectly in connection with the UK creditor relationship, and
(c) the main purpose, or one of the main purposes, of the relevant arrangement is to secure that—
(i) the relevant UK credits of a UK connected company for a corporation tax accounting period of the company are lower than they would be if the relevant arrangement had not been made, or
(ii) the relevant UK debits of a UK connected company for a corporation tax accounting period of the company are greater than they would be if the relevant arrangement had not been made.
(9B) The CFC's creditor relationship cannot be a qualifying loan relationship if it is, or is connected (directly or indirectly) to, the relevant arrangement.
(9C) Subsection (9D) applies for the purposes of subsection (9A)(c)(i) and (ii) in determining what the relevant UK credits or debits of a UK connected company for a corporation tax accounting period would be if the relevant arrangement had not been made.
(9D) Assume that, at all times after the relevant time, the UK creditor relationship remains in place on the same terms as it had at the relevant time.
(9E) In subsections (9A) to (9D)—
“corporation tax accounting period” means an accounting period for corporation tax purposes,
“the relevant time” means the time immediately before—
(a) the time when the relevant arrangement is made, or
(b) if earlier, the time when the UK creditor relationship ends,
“relevant UK credits”, in relation to a UK connected company, means credits which the company has under Part 5 or 7 of CTA 2009,
“relevant UK debits”, in relation to a UK connected company, means debits which the company has under Part 5 or 7 of CTA 2009, and
“UK connected company” means a UK resident company which—
(a) is connected with the CFC, or
(b) was connected with a company with which the CFC is connected.”

(2) The amendment made by this section has effect for cases in which the relevant arrangement is made on or after 5 December 2013.

294 Controlled foreign companies: qualifying loan relationships (2)
(1) In Chapter 9 of Part 9A of TIOPA 2010 (controlled foreign companies: qualifying loan relationships) in section 371IH (exclusions from definition of “qualifying loan relationship”) in subsection (10)(c) for “wholly or mainly used” substitute “ used to any extent (other than a negligible one) ”.
(2) The amendment made by this section has effect for accounting periods of CFCs beginning on or after 5 December 2013.
(3) The following subsections apply in relation to a qualifying loan relationship of a CFC if—
(a) profits of the qualifying loan relationship (“the relevant profits”) would, apart from those subsections, be included in the CFC's qualifying loan relationship profits for an accounting period of the CFC (“the straddling period”) which begins before 5 December 2013 but ends on or after that date, and
(b) the creditor relationship in question would not be a qualifying loan relationship for the straddling period were the amendment made by this section to have effect for accounting periods of CFCs beginning before 5 December 2013.
(4) Apportion the relevant profits between the part of the straddling period falling before 5 December 2013 and the part falling on or after that date—
(a) in accordance with section 1172 of CTA 2010 (time basis), or
(b) if that method produces a result that is unjust or unreasonable, on a just and reasonable basis.
(5) The relevant profits are to be excluded from the CFC's qualifying loan relationship profits for the straddling period so far as they are apportioned to the part of the straddling period falling on or after 5 December 2013.

Financial sector regulation

295 Tax consequences of financial sector regulation
(1) Section 221 of FA 2012 (tax consequences of financial sector regulation) is amended as follows.
(2) In subsection (1) after “imposed” insert “ , or which appears to the Treasury likely to be imposed, ”.
(3) After subsection (4) insert—

“(4A) Where regulations under this section make provision about the tax consequences of any regulatory requirement which appears to the Treasury likely to be imposed by any EU legislation or enactment—
(a) the regulations may be made (and, accordingly, may have effect) before the proposed legislation or enactment is adopted, passed or made, and
(b) failure after the regulations are made to adopt, pass or make the proposed legislation or enactment does not affect the validity of the regulations.”

Scotland

296 Scottish basic, higher and additional rates of income tax
Schedule 38 contains provision about the Scottish basic, higher and additional rates of income tax.

297 Report on administration of the Scottish rate of income tax
(1) In Chapter 2 of Part 4A of the Scotland Act 1998, after section 80H insert—

“80HA Report by the Comptroller and Auditor General
(1) The Comptroller and Auditor General must for each financial year prepare a report on the matters set out in subsection (2).
(2) Those matters are—
(a) the adequacy of any of HMRC's rules and procedures put in place, in consequence of the Scottish rate provisions, for the purpose of ensuring the proper assessment and collection of income tax charged at rates determined under those provisions,
(b) whether the rules and procedures described in paragraph (a) are being complied with,
(c) the correctness of the sums brought to account by HMRC which relate to income tax which is attributable to a Scottish rate resolution, and
(d) the accuracy and fairness of the amounts which are reimbursed to HMRC under section 80H (having been identified by it as administrative expenses incurred as a result of the charging of income tax as mentioned in paragraph (a)).
(3) The “Scottish rate provisions” are—
(a) any provision made by or under this Chapter, and
(b) any provision made by or under the Income Tax Acts relating to the Scottish basic rate, the Scottish higher rate or the Scottish additional rate.
(4) A report under this section may also include an assessment of the economy, efficiency and effectiveness with which HMRC has used its resources in carrying out relevant functions.
(5) “Relevant functions” are functions of HMRC in the performance of which HMRC incurs administrative expenses which are reimbursed to HMRC under section 80H (having been identified by it as administrative expenses incurred as a result of the charging of income tax as mentioned in subsection (2)(a)).
(6) HMRC must give the Comptroller and Auditor General such information as the Comptroller and Auditor General may reasonably require for the purposes of preparing a report under this section.
(7) A report prepared under this section must be laid before the Scottish Parliament not later than 31 January of the financial year following that to which the report relates.
(8) In this section “HMRC” means Her Majesty's Revenue and Customs.”

(2) The amendment made by this section has effect in relation to the financial year ending on 31 March 2015 and subsequent financial years.

Co-operative societies etc

298 Co-operative societies etc
Schedule 39 makes provision about the tax treatment of co-operative, community benefit and industrial and provident societies and credit unions.

Limitation periods

299 Removal of limitation period restriction for EU cases
(1) In section 107 of FA 2007 (limitation period in old actions for mistake of law relating to direct tax), after subsection (5) insert—

“(5A) Subsection (1) also does not have effect in relation to an action, or so much of an action as relates to a cause of action, if the consequences of a mistake of law to which the action, or cause of action, relates is the charging of tax contrary to EU law.”

(2) The amendment made by this section has effect in relation to actions brought, and causes of action arising, before, on or after the day on which this Act is passed.

Local loans

300 Increase in limit for local loans
(1) In section 4(1) of the National Loans Act 1968 (local loans granted by the Public Works Loan Commissioners)—
(a) for “£55,000 million” substitute “ £85 billion ”, and
(b) for “£70,000 million” substitute “ £95 billion ”.
(2) The Local Loans (Increase of Limit) Order 2008 (S.I. 2008/3004) is revoked.
(3) This section comes into force on such day as the Treasury may by order made by statutory instrument appoint.

PART 7 Final provisions

301 Power to update indexes of defined terms
(1) The Treasury may by order amend any index of defined expressions contained in an Act relating to taxation, so as to make amendments consequential on any enactment.
(2) In this section—
“enactment” means any provision made by or under an Act (whether before or after the passing of this Act);
“index of defined expressions” means a provision contained in an Act relating to taxation which lists where expressions used in the Act, or in a particular part of the Act, are defined or otherwise explained.
(3) The power to make an order under this section is exercisable by statutory instrument.
(4) An order under this section is subject to annulment in pursuance of a resolution of the House of Commons.

302 Interpretation
(1) In this Act—
“ALDA 1979” means the Alcoholic Liquor Duties Act 1979,
“BGDA 1981” means the Betting and Gaming Duties Act 1981,
“CAA 2001” means the Capital Allowances Act 2001,
“CEMA 1979” means the Customs and Excise Management Act 1979,
“CRCA 2005” means the Commissioners for Revenue and Customs Act 2005,
“CTA 2009” means the Corporation Tax Act 2009,
“CTA 2010” means the Corporation Tax Act 2010,
“F(No.3)A 2010” means the Finance (No. 3) Act 2010,
“IHTA 1984” means the Inheritance Tax Act 1984,
“ITA 2007” means the Income Tax Act 2007,
“ITEPA 2003” means the Income Tax (Earnings and Pensions) Act 2003,
“ITTOIA 2005” means the Income Tax (Trading and Other Income) Act 2005,
“OTA 1975” means the Oil Taxation Act 1975,
“TCGA 1992” means the Taxation of Chargeable Gains Act 1992,
“TIOPA 2010” means the Taxation (International and Other Provisions) Act 2010,
“TMA 1970” means the Taxes Management Act 1970,
“TPDA 1979” means the Tobacco Products Duty Act 1979,
“VATA 1994” means the Value Added Tax Act 1994, and
“VERA 1994” means the Vehicle Excise and Registration Act 1994.
(2) In this Act—
“FA”, followed by a year, means the Finance Act of that year, and
“F(No.2)A”, followed by a year, means the Finance (No. 2) Act of that year.

303 Short title
This Act may be cited as the Finance Act 2014.

SCHEDULES

SCHEDULE 1 Corporation tax rates
Section 7

PART 1 Abolition of small profits rate for non-ring fence profits
1 CTA 2010 is amended as follows.
2 In section 1 (overview of Act), in subsection (2)—
(a) for “Parts 3” substitute “ Parts 4 ”, and
(b) omit paragraph (a).
3 For section 3 (corporation tax rates) substitute—

“3 Corporation tax rates
(1) Corporation tax is charged at the rate set by Parliament for the financial year as the main rate.
(2) Subsection (1) is subject to any provision of the Corporation Tax Acts which provides for corporation tax to be charged at a different rate.”

4 Omit Part 3 (companies with small profits).
5 (1) Part 8 (oil activities) is amended as follows.
(2) In section 270 (overview of Part 8), after subsection (3) insert—

“(3A) Chapter 3A makes provision about the rates at which corporation tax is charged on ring fence profits.”

(3) After Chapter 3 insert—

“CHAPTER 3A Rates at which corporation tax is charged on ring fence profits

The rates

279A Corporation tax rates on ring fence profits
(1) Corporation tax is charged on ring fence profits at the main ring fence profits rate.
(2) But subsection (3) provides for tax to be charged at the small ring fence profits rate instead of the main ring fence profits rate in certain circumstances.
(3) Corporation tax is charged at the small ring fence profits rate on a company's ring fence profits of an accounting period if—
(a) the company is UK resident in the accounting period, and
(b) its augmented profits of the accounting period do not exceed the lower limit.
(4) In this Act—
“the main ring fence profits rate” means 30%, and
“the small ring fence profits rate” means 19%.

Marginal relief

279B Company with only ring fence profits
(1) This section applies if—
(a) a company is UK resident in an accounting period,
(b) its augmented profits of the accounting period—
(i) exceed the lower limit, but
(ii) do not exceed the upper limit, and
(c) its augmented profits of that period consist exclusively of 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—
R × ( U − A ) × ( N A )
where—
R is the 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 Chapter “the marginal relief fraction” means 11/400ths.

279C Company with ring fence profits and other profits
(1) This section applies if—
(a) a company is UK resident in an accounting period,
(b) its augmented profits of the accounting period—
(i) exceed the lower limit, but
(ii) do not exceed the upper limit, and
(c) its augmented profits of that period consist of both ring fence profits and other profits.
(2) The corporation tax charged on the company's taxable total profits of the accounting period is reduced by the sum equal to the marginal relief fraction of the ring fence amount.

279D The ring fence amount
(1) In section 279C “the ring fence amount” means the amount given by the formula—
( UR − AR ) × ( NR AR )
(2) In this section—
AR A
UR is the amount given by multiplying the upper limit by—
AR is the total amount of any ring fence profits that form part of the augmented profits of the accounting period,
NR is the total amount of any 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.

The lower limit and the upper limit

279E The lower limit and the upper limit
(1) This section gives the meaning in this Chapter of “the lower limit” and “the upper limit” in relation to an accounting period of a company (“A”).
(2) If no company is a related 51% group company of A in the accounting period—
(a) the lower limit is £300,000, and
(b) the upper limit is £1,500,000.
(3) If one or more companies are related 51% group companies of A in the accounting period—
(a) the lower limit is—
£ 300,000 ( 1 + N )
and
(b) the upper limit is—
£ 1, 500,000 ( 1 + N )
where N is the number of those related 51% group companies.
(4) For an accounting period of less than 12 months the lower limit and the upper limit are proportionately reduced.

Related 51% group companies

279F “Related 51% group company”
(1) For the purposes of this Chapter a company (“B”) is a related 51% group company of another company (“A”) in an accounting period if for any part of the accounting period—
(a) A is a 51% subsidiary of B,
(b) B is a 51% subsidiary of A, or
(c) both A and B are 51% subsidiaries of the same company.
(2) The rule in subsection (1) applies to each of two or more related 51% group companies even if they are related 51% group companies for different parts of the accounting period.
(3) But a related 51% group company is ignored for the purposes of section 279E if—
(a) it has not carried on a trade or business at any time in the accounting period, or
(b) it was a related 51% group 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) Subsection (3) is subject to subsections (5) to (9).
(5) Subsection (6) 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.
(6) The company is treated for the purposes of subsection (3) as not carrying on a business at any time in the accounting period.
(7) 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 (8)), and
(ii) the dividends are franked investment income received by it,
(d) no chargeable gains accrue to it in that period,
(e) no expenses of management of the business mentioned in subsection (5) are referable to that period, and
(f) no qualifying charitable donations are deductible from the company's total profits of that period.
(8) 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.
(9) If income arises to a company in an accounting period in the form of a dividend and the requirement in subsection (7)(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 (7)(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 (7)(a) in that period or any earlier accounting period.

Augmented profits

279G “Augmented profits”
(1) For the purposes of this Chapter a company's augmented profits of an accounting period are—
(a) the company's adjusted taxable total profits of that period, plus
(b) any franked investment income received by the company that is not excluded by subsection (3).
(2) A company's “adjusted taxable total profits” of a period are what would have been the company's taxable total profits of the period in the absence of sections 1(2A), 2B and 8(4A) of TCGA 1992 and section 2(2A) of CTA 2009 (certain gains on relevant high value disposals by companies etc chargeable to capital gains tax not corporation tax).
(3) This subsection excludes any franked investment income which the company (“the receiving company”) receives from a company which is—
(a) a 51% subsidiary of—
(i) the receiving company, or
(ii) a company of which the receiving company is a 51% subsidiary, or
(b) a trading company or relevant holding company that is a quasi-subsidiary of the receiving company.
(4) For the purposes of subsection (3)(b) a company is a quasi-subsidiary of the receiving company if—
(a) it is owned by a consortium of which the receiving company 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 by virtue of which it could become a 75% subsidiary of any company.

279H Interpretation of section 279G(3) and (4)
(1) For the purposes of section 279G(3)(a), 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.
(2) The requirement in subsection (1) is in addition to the requirements of section 1154(2) (meaning of 51% subsidiary).
(3) In determining for the purposes of section 279G(3)(a) whether or not a company is a 51% subsidiary of another company (“C”), C is treated as not being the owner of 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) In section 279G(3)(b) and this section—
“trading company” means a company whose business consists wholly or mainly of carrying on a trade or trades, and
“relevant holding company” means a company whose business consists wholly or mainly of holding shares in or securities of trading companies that are its 90% subsidiaries.
(5) For the purposes of section 279G(4), 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.
(6) The companies meeting those conditions are called the members of the consortium.
(7) Chapter 6 of Part 5 (equity holders and profits or assets available for distribution) applies for the purposes of subsections (1) and (5) as it applies for the purposes of section 151(4)(a) and (b).”

PART 2 Amendments consequential on Part 1 of this Schedule

Finance Act 1998
6 In Schedule 18 to FA 1998 (company tax returns, assessments and related matters), in paragraph 8 (calculation of tax payable), in subsection (1), for “section 19, 20 or 21 of the Corporation Tax Act 2010 (marginal relief for companies with small profits)” substitute “ Chapter 3A of Part 8 of the Corporation Tax Act 2010 (marginal relief for companies with small ring fence profits etc) ”.

Finance Act 2000
7 In Schedule 22 to FA 2000 (tonnage tax), in paragraph 57 (exclusion of relief or set-off against tax liability), in sub-paragraph (6), for paragraph (a) substitute—

“(a) any reduction under Chapter 3A of Part 8 of CTA 2010 (marginal relief for companies with small ring fence profits), or”

.

Capital Allowances Act 2001
8 In section 99 of CAA 2001 (long-life assets: the monetary limit)—
(a) in subsection (4)—
(i) for “If, in a chargeable period, a company has one or more associated companies” substitute “ In the case of a company (“C”), if, in a chargeable period, one or more companies are related 51% group companies of C ”, and
(ii) for “number of associated” substitute “ number of related 51% group ”, and
(b) omit subsection (5).
9 In Part 2 of Schedule 1 to that Act (defined expressions), at the appropriate place insert—

“related 51% group company	section 279F of CTA 2010 (as applied by 1119 of that Act).”

Corporation Tax Act 2009
10 In section 104N of CTA 2009 (payment of R&D expenditure credit) in subsection (3), in the definition of “Amount A”, in paragraph (b), after “main rate” insert “ (or, in the case of ring fence profits, the main ring fence profits rate) ”.
11 In section 1114 of that Act (calculation of total R&D aid for the purposes of the cap), after “aid is calculated” insert “ (or, in the case of a ring fence trade (within the meaning of section 277 of CTA 2010) the main ring fence profits rate at that time) ”.
12 In Schedule 4 to that Act (index of defined expressions), at the appropriate place, insert—

“main ring fence profits rate	section 279A(4) (as applied by 1119 of CTA 2010)”

.

Corporation Tax Act 2010
13 (1) Chapter 3 of Part 8A of CTA 2010 (profits arising from the exploitation of patents etc: relevant IP profits) is amended as follows.
(2) In section 357CL (companies eligible to elect for small claims treatment)—
(a) in subsection (5) for “the company has no associated company” substitute “ no other company is a related 51% group company of the company ”,
(b) in subsection (6)—
(i) for “the company has one or more associated companies” substitute “ one or more other companies are related 51% group companies of the company, ” and
(ii) for “those associated” substitute “ those related 51% group ”, and
(c) omit subsection (9).
(3) In section 357CM (small claims amount)—
(a) in subsection (5) for “the company has no associated company” substitute “ no other company is a related 51% group company of the company ”,
(b) in subsection (6)—
(i) for “the company has one or more associated companies” substitute “ one or more other companies are related 51% group companies of the company, ” and
(ii) for “those associated” substitute “ those related 51% group ”, and
(c) omit subsection (8).
14 (1) Part 12 of CTA 2010 (real estate investment trusts) is amended as follows.
(2) In section 534 (tax treatment of profits), omit subsection (3).
(3) In section 535 (tax treatment of gains), omit subsection (6).
(4) In section 543 (profit: financing-cost ratio), omit subsection (5).
(5) In section 551 (tax consequences of distribution to holder of excessive rights), omit subsection (6).
(6) In section 552 (“the section 552 amount”), in subsection (2), for “rate of corporation tax mentioned in section 534(3) (rate determined without reference to sections 18 to 23)” substitute “ main rate of corporation tax ”.
(7) In section 564 (breach of condition as to distribution of profits), omit subsection (4).
15 (1) Part 13 of CTA 2010 (other special types of company etc) is amended as follows.
(2) In section 614 (open-ended investment companies: applicable corporation tax rate), omit “(and sections 18 and 19 (relief for companies with small profits) do not apply)”.
(3) In section 618 (authorised unit trusts: applicable corporation tax rate), omit “(and sections 18 and 19 (relief for companies with small profits) do not apply)”.
(4) In section 627 (companies in liquidation etc: meaning of “rate of corporation tax” in case of companies with small profits)—
(a) for subsections (1) and (2) substitute—

“(1) This section applies if corporation tax is chargeable on ring fence profits of a company for a financial year.
(2) References in this Chapter to the “main rate of corporation tax”, so far as relating to those profits, are to be taken—
(a) if corporation tax is to be charged on those profits at the main ring fence profits rate, as references to that rate;
(b) if corporation tax is to be charged on those profits at the small ring fence profits rate, as references to that rate;
(c) if corporation tax on those profits is to be reduced by reference to the marginal relief fraction within the meaning of Chapter 3A of Part 8 (see sections 279B and 279C), as including references to the marginal relief fraction (and with references to a rate being “fixed” or “proposed” read accordingly as references to the marginal relief fraction concerned being fixed or proposed).”

(b) accordingly, in the heading for the section, for “small profits” substitute “ ring fence profits ”.
(5) In section 628 (company in liquidation: corporation tax rates), for “the rate of corporation tax” (in each place it occurs) substitute “ the main rate of corporation tax ”.
(6) In section 630 (company in administration: corporation tax rates), for “the rate of corporation tax” (in each place it occurs) substitute “ the main rate of corporation tax ”.
16 In section 1119 of CTA 2010 (Corporation Tax Acts definitions), at the appropriate places insert—

““main ring fence profits rate” has the meaning given by section 279A(4),”

, and

““ “related 51% group company” is to be read in accordance with section 279F,”

.
17 (1) Schedule 4 to CTA 2010 (index of defined expressions) is amended as follows.
(2) Insert the following entries at the appropriate places—

“the main ring fence profits rate	section 279A(4) (as applied by section 1119)”

“the marginal relief fraction (in Chapter 3A of Part 8)	section 279B(3)”

“related 51% group company	section 279F (as applied by section 1119)”

“the small ring fence profits rate	section 279A(4)”

(3) Omit the entries for—
“associated company (in Part 3)”;
“close investment holding company (in Part 3)”;
“the ring fence fraction (in Part 3)”;
“the small profits rate”;
“the standard fraction (in Part 3)”.
(4) In the entry for “augmented profits (in Part 3)”—
(a) in the first column for “Part 3” substitute “ Chapter 3A of Part 8 ”, and
(b) in the second column, for “32” substitute “ 279G ”.
(5) In the entry for “the lower limit (in Part 3)”—
(a) in the first column for “Part 3” substitute “ Chapter 3A of Part 8 ”, and
(b) in the second column for “24” substitute “ 279E ”.
(6) In the entry for “the upper limit (in Part 3)”—
(a) in the first column for “Part 3” substitute “ Chapter 3A of Part 8 ”, and
(b) in the second column for “24” substitute “ 279E ”.

Finance Act 2012
18 In section 102 of FA 2012 (policy holders' rate of tax on policyholders' share of I-E profit), omit subsection (5).

Finance Act 2013
19 In section 6 of FA 2013 (main rate for financial year 2015)—
(a) in subsection (1) for “the rate” substitute “ the main rate ”,
(b) in that subsection, omit “on profits of companies other than ring fence profits”, and
(c) omit subsection (2).
20 In Schedule 25 to that Act (charge on certain high value disposals by companies etc), omit paragraph 19.

PART 3 Commencement and transitional provision
21 (1) The amendments made by paragraphs 8, 9 and 13 have effect in relation to accounting periods beginning on or after 1 April 2015.
(2) Accordingly—
(a) despite the repeal of Part 3 of CTA 2010 by paragraph 4 of this Schedule, sections 25 to 30 of that Act (interpretation of references to associated companies) continue to apply for the purposes of section 99 of CAA 2001, and sections 357CL and 357CM of CTA 2010, in relation to accounting periods beginning before but ending on or after 1 April 2015, and
(b) in relation to the application of sections 25 to 30 of CTA 2010 for those purposes, paragraph 22(2) of this Schedule is to be ignored.
22 (1) The other amendments made by this Schedule have effect for the financial year 2015 and subsequent financial years.
(2) In the case of an accounting period (a “straddling period”)—
(a) beginning before 1 April 2015, and
(b) ending on or after that date,
the repealed small profit provisions and the new ring fence small profit provisions apply as if the different parts of the straddling period falling in the different financial years were separate accounting periods.
(3) For this purpose—
“the repealed small profit provisions” means Part 3 of CTA 2010,
“the new ring fence small profit provisions” means sections 279A(3) and 279B to 279H”.
(4) For the purposes of sub-paragraph (2) all necessary apportionments are to be made between the two separate accounting periods.

SCHEDULE 2 Annual investment allowance: transitional provisions etc
Section 10

PART 1 Transitional provisions

Chargeable periods which straddle start date
1 (1) This paragraph applies in relation to a chargeable period which begins before the start date and ends on or after that date (“the first straddling period”).
For “the start date”, see section 10(3).
(2) The maximum allowance under section 51A of CAA 2001 for the first straddling period is the sum of each maximum allowance that would be found if—
(a) so much (if any) of the first straddling period as falls before 1 January 2013,
(b) so much of the first straddling period as falls on or after that date but before the start date, and
(c) so much of the first straddling period as falls on or after the start date,
were each treated as separate chargeable periods.
(3) But this is subject to paragraphs 2 and 3.

First straddling period beginning before 1 January 2013
2 (1) This paragraph applies where the first straddling period begins before 1 January 2013.
(2) So far as concerns expenditure incurred before 1 January 2013, the maximum allowance under section 51A of CAA 2001 for the first straddling period is what would have been the maximum allowance for that period if neither the amendment made by section 7(1) of FA 2013 nor the amendment made by section 10(1) had been made.
(3) So far as concerns expenditure incurred before the start date, the maximum allowance under section 51A of CAA 2001 for the first straddling period is what would have been the maximum allowance for that period if neither the amendment made by section 10(1) nor the amendments made by Part 2 of this Schedule had been made.

First straddling period beginning on or after 1 January 2013
3 (1) This paragraph applies where no part of the first straddling period falls before 1 January 2013.
(2) So far as concerns expenditure incurred before the start date, the maximum allowance under section 51A of CAA 2001 for the first straddling period is what would have been the maximum allowance for that period if the amendment made by section 10(1) had not been made.

Chargeable periods which straddle 1 January 2016
4 (1) This paragraph applies in relation to a chargeable period (“the second straddling period”) which begins before 1 January 2016 and ends on or after that date.
(2) The maximum allowance under section 51A of CAA 2001 for the second straddling period is the sum of each maximum allowance that would be found if—
(a) the period beginning with the first day of the chargeable period and ending with 31 December 2015, and
(b) the period beginning with 1 January 2016 and ending with the last day of the chargeable period,
were treated as separate chargeable periods.
(3) But, so far as concerns expenditure incurred on or after 1 January 2016, the maximum allowance under section 51A of CAA 2001 for the second straddling period is the maximum allowance, calculated in accordance with sub-paragraph (2), for the period mentioned in paragraph (b) of that sub-paragraph.

Operation of annual investment allowance where restrictions apply
5 (1) Paragraphs 1 to 4 also apply for the purpose of determining the maximum allowance under section 51K of CAA 2001 (operation of annual investment allowance where restrictions apply) in a case where one or more chargeable periods in which the relevant AIA qualifying expenditure is incurred are chargeable periods within paragraph 1(1) or 4(1).
(2) There is to be taken into account for the purpose mentioned in sub-paragraph (1) only chargeable periods of one year or less (whether or not they are chargeable periods within paragraph 1(1) or 4(1)), and, if there is more than one such period, only that period which gives rise to the greatest maximum allowance.
(3) For the purposes of sub-paragraph (2) any chargeable period which—
(a) is longer than a year, and
(b) ends in the tax year 2013-14, 2014-15, 2015-16, 2016-17 or 2017-18,
is to be treated as being a chargeable period of one year ending at the same time as it actually ends.
(4) Nothing in this paragraph affects the operation of sections 51M and 51N of CAA 2001.

PART 2 Amendments of FA 2013
6 (1) Section 7 of FA 2013 (temporary increase in annual investment allowance) is amended as follows.
(2) In subsection (1), for “of two years beginning with 1 January 2013” substitute “ beginning with 1 January 2013 and ending with the specified date ”.
(3) After subsection (1) insert—

“(1A) The specified date is —
(a) for the purposes of corporation tax, 31 March 2014, and
(b) for the purposes of income tax, 5 April 2014.”

(4) In subsection (2), omit “or 1 January 2015”.
7 (1) Schedule 1 to FA 2013 (annual investment allowance) is amended as follows.
(2) In paragraph 1 (chargeable periods which straddle 1 January 2013)—
(a) in sub-paragraph (1), after “that date” insert “ but not later than the specified date ”, and
(b) after sub-paragraph (1) insert—

“(1A) The specified date” means—
(a) for the purposes of corporation tax, 31 March 2014, and
(b) for the purposes of income tax, 5 April 2014.”

(3) Omit paragraph 4 (chargeable periods which straddle 1 January 2015).
(4) In paragraph 5 (operation of annual investment allowance where restrictions apply)—
(a) in sub-paragraph (1)—
(i) for “to 4” substitute “ to 3 ”, and
(ii) omit “or 4(1)”, and
(b) in sub-paragraph (2), omit “or 4(1)”,
(c) in sub-paragraph (3)(b), for “, 2014-15, 2015-16 or 2016-17” substitute “ or 2014-15 ”.

SCHEDULE 3 Restrictions on remittance basis
Section 15
1 ITEPA 2003 is amended as follows.
2 In section 23 (taxable earnings: calculation of “chargeable overseas earnings”) after subsection (1) insert—

“(1A) But none of an employee's general earnings from an employment for a tax year are to be “chargeable overseas earnings” if section 24A applies in relation to the employment for the tax year.”

3 After section 24 insert—

“24A Restrictions on remittance basis
(1) This section applies in relation to an employment (“the relevant employment”) for a tax year (“the relevant tax year”) if—
(a) one or more of the paragraphs in subsection (5) applies,
(b) conditions 1 to 4 are met, and
(c) condition 5 is not met.
(2) The consequences of this section applying are set out in sections 23(1A), 41C(4A), 41H(5) and 554Z9(1A).
(3) But, for the purpose of determining if, and the extent to which, any provision of Part 11 (PAYE), or of PAYE regulations, applies in relation to any income, the application of any provision mentioned in subsection (2) in relation to the income is to be ignored.
(4) In this section—
(a) “the relevant employee” means the employee in respect of the relevant employment,
(b) “the relevant employer” means the employer in respect of the relevant employment, and
(c) “UK employment” means an employment the duties of which are not performed wholly outside the United Kingdom and “UK employer” is to be read accordingly,
and the rules in section 24(5) (“associated” persons) apply for the purposes of this section.
(5) The paragraphs referred to in subsection (1)(a) are—
(a) general earnings from the relevant employment which are for the relevant tax year would, apart from section 23(1A) and step 3 in section 23(3), be “chargeable overseas earnings” under section 23(3);
(b) employment income in respect of the relevant employment which is treated as accruing in the relevant tax year under section 41C(2) would, apart from sections 41C(4A), 41D and 41E, be “foreign” under section 41C(3);
(c) employment income in respect of the relevant employment which is treated as accruing in the relevant tax year under section 41H(2) would, apart from sections 41H(5), 41I and 41L, be “chargeable foreign securities income” under section 41H(3);
(d) section 554Z9(2) would, apart from section 554Z9(1A) and (4) and (5), apply to employment income in respect of the relevant employment which corresponds to the value of a relevant step, or a part of the value of a relevant step, which is “for” the relevant tax year as determined under section 554Z4.
(6) Condition 1 is that the relevant employee holds a UK employment—
(a) at a time in the relevant tax year when the relevant employee also holds the relevant employment, or
(b) if the relevant tax year is a split year as respects the relevant employee, at a time in the UK part of the relevant tax year when the relevant employee also holds the relevant employment.
(7) Condition 2 is that the UK employer is the same as, or is associated with, the relevant employer.
(8) Condition 3 is that the UK employment and the relevant employment are related to each other.
(9) Without prejudice to the generality of subsection (8), the UK employment and the relevant employment are to be assumed to be related to each other if one or more of the following paragraphs applies—
(a) it is reasonable to suppose that—
(i) the relevant employee would not hold one employment without holding the other employment, or
(ii) the employments will cease at the same time or one employment will cease in consequence of the other employment ceasing;
(b) the terms of one employment operate to any extent by reference to the other employment;
(c) the performance of duties of one employment is (wholly or partly) dependent upon, or otherwise linked (directly or indirectly) to, the performance of duties of the other employment;
(d) the duties of the employments are wholly or mainly of the same type (ignoring the fact that they may be performed (wholly or partly) in different locations);
(e) the duties of the employments involve (wholly or partly) the provision of goods or services to the same customers or clients;
(f) the relevant employee is—
(i) a director (as defined in section 67) of the UK employer or the relevant employer who has a material interest (as defined in section 68) in the UK employer or the relevant employer,
(ii) a senior employee of the UK employer or the relevant employer, or
(iii) one of the employees of the UK employer or the relevant employer who receives the higher or highest levels of remuneration.
(10) In subsection (9)(f) references to the UK employer or the relevant employer include references to—
(a) any person with which the UK employer or the relevant employer (as the case may be) is associated, and
(b) if the UK employer or the relevant employer (as the case may be) is a company, the following companies taken together as if they were one company—
(i) the UK employer or the relevant employer (as the case may be), and
(ii) all the companies with which the UK employer or the relevant employer (as the case may be) is associated.
(11) The Treasury may by regulations amend this section so as to add to, reduce or modify the cases in which the UK employment and the relevant employment are to be assumed to be related to each other.
(12) A statutory instrument containing regulations under subsection (11) may not be made unless a draft has been laid before, and approved by a resolution of, the House of Commons.
(13) Condition 4 is that X% is less than Y%.
(14) “X%” is given by the following formula—
C I × 100 %
See section 24B for the definitions of “C” and “I”.
(15) “Y%” is 65% of the additional rate for the relevant tax year.
(16) The Treasury may by regulations amend this section so as to amend the definition of “Y%”.
(17) Condition 5 is that—
(a) were the duties of the relevant employment to be duties of the UK employment instead, all or substantially all of them could not lawfully be performed in the relevant territory (whether on the meeting of any condition or otherwise) by virtue of any regulatory requirements imposed by or under the law of that territory, and
(b) were the UK duties of the UK employment to be duties of the relevant employment instead, all or substantially all of them could not lawfully be performed in the part of the United Kingdom in which they are performed (whether on the meeting of any condition or otherwise) by virtue of any regulatory requirements imposed by or under the law of that part of the United Kingdom.
(18) In subsection (17)—
“the relevant territory” means the territory in which the duties of the relevant employment are performed, and
“UK duties” means duties performed in the United Kingdom.

24B Definitions of “C” and “I” for the purposes of section 24A(14)
(1) This section applies for the purposes of section 24A(14).
(2) “C” is the total amount of credit which would be allowed under section 18(2) of TIOPA 2010 (double taxation relief by way of credit) against income tax in respect of all the employment income falling within section 24A(5)(a) to (d) were none of that income to be, as relevant—
(a) “chargeable overseas earnings”,
(b) “foreign”,
(c) “chargeable foreign securities income”, or
(d) income to which section 554Z9(2) applies.
(3) For this purpose, assume—
(a) that all relief is claimed within the applicable time limit given by section 19 of TIOPA 2010, and
(b) that all reasonable steps are taken to minimise any amounts of tax payable as mentioned in section 33 of that Act.
(4) “I” is the total amount of all the employment income falling within section 24A(5)(a) to (d).”

4 (1) Section 41C (taxable specific income from employment-related securities etc: foreign securities income) is amended as follows.
(2) After subsection (4) insert—

“(4A) But subsection (4) does not apply to a tax year if section 24A applies in relation to the employment for the tax year.”

(3) After subsection (8) insert—

“(9) If subsection (4) does not apply to a tax year by virtue of subsection (4A), it is to be assumed for the purposes of section 41E that it is just and reasonable for none of the securities income treated as accruing in the tax year to be “foreign”.”

5 In section 554Z9 (employment income provided through third parties: remittance basis) after subsection (1) insert—

“(1A) But subsection (2) does not apply if section 24A applies in relation to A's employment with B for the relevant tax year.”

6 In section 717 (orders and regulations) in subsection (4) after “under” insert “ section 24A(11) (assumptions about related employments), ”.
7 (1) Section 23(1A) of ITEPA 2003 (as inserted by paragraph 2) has effect in relation to general earnings which are general earnings from an employment for the tax year 2014-15 or any subsequent tax year.
(2) Section 41C(4A) of ITEPA 2003 (as inserted by paragraph 4(2)) has effect for cases where the tax year in question is the tax year 2014-15 or any subsequent tax year.
(3) Section 41H(5) of ITEPA 2003 (as inserted by Part 1 of Schedule 9 to this Act) has effect for cases where the tax year in question is the tax year 2014-15 or any subsequent tax year.
(4) Section 554Z9(1A) of ITEPA 2003 (as inserted by paragraph 5) has effect for cases where the relevant tax year (see section 554Z9(1)(a) of that Act) is the tax year 2014-15 or any subsequent tax year.

SCHEDULE 4 Tax relief for theatrical production
Section 36

PART 1 Amendments of CTA 2009
1 Before Part 16 of CTA 2009 insert—

“PART 15C Theatrical Productions

Introduction

1217F Overview
(1) This Part contains provision about tax relief for production companies in respect of their theatrical productions.
(2) Sections 1217FA to 1217FC define “production company” and “theatrical production”.
(3) Section 1217G sets out the conditions a production company must meet to qualify for relief in relation to its theatrical production.
(4) Section 1217H provides for relief by way of additional deductions in respect of certain expenditure (and section 1217J is about the amount of the additional deduction).
(5) This Part also contains provision—
(a) for a company that claims relief to be treated as carrying on a separate trade relating to the theatrical production (see section 1217H(3)), and
(b) about the calculation of the profits and losses of that trade (see sections 1217I to 1217IF).
(6) Sections 1217K to 1217KC—
(a) provide for relief by way of payments (called “theatre tax credits”) to be made on the company's surrender of certain losses of that trade, and
(b) set out an upper limit on relief, in connection with State aid legislation.
(7) Sections 1217LA and 1217LB are about certain cases involving tax avoidance arrangements or arrangements entered into otherwise than for genuine commercial reasons.
(8) Sections 1217M to 1217MC contain provision about the use of losses of the separate trade (including provision about relief for terminal losses).
(9) Sections 1217N and 1217NA are concerned with the provisional nature of relief given for periods preceding the period in which the company ceases to carry on the separate theatrical trade.

1217FA “Theatrical production”
(1) In this Part “theatrical production” means a dramatic production or a ballet (and any ballet is therefore a theatrical production, whether or not it is also a dramatic production).
But see section 1217FB.
(2) “Dramatic production” means a production of a play, opera, musical, or other dramatic piece (whether or not involving improvisation) in relation to which the following conditions are met—
(a) the actors, singers, dancers or other performers are to give their performances wholly or mainly through the playing of roles,
(b) each performance in the proposed run of performances is to be live, and
(c) the presentation of live performances is the main object, or one of the main objects, of the company's activities in relation to the production.
(3) “Dramatic piece” may also include, for example, a show that is to be performed by a circus.
(4) For the purposes of this section a performance is “live” if it is to an audience before whom the performers are actually present.

1217FB Productions not regarded as theatrical
(1) A dramatic production or ballet is not regarded as a theatrical production if—
(a) the main purpose, or one of the main purposes, for which it is made is to advertise or promote any goods or services,
(b) the performances are to consist of or include a competition or contest,
(c) a wild animal is to be used in any performance,
(d) the production is of a sexual nature (see subsection (3)), or
(e) the making of a relevant recording is the main object, or one of the main objects, of the company's activities in relation to the production.
(2) For the purposes of subsection (1)(c) an animal is used in a performance if the animal performs, or is shown, in the course of the performance.
(3) A production is of a sexual nature for the purposes of subsection (1)(d) if the performances are to include any content the nature of which is such that, ignoring financial gain, it would be reasonable to assume the content to be included solely or principally for the purpose of sexually stimulating any member of the audience (whether by verbal or other means).
(4) “Relevant recording” means a recording of a performance—
(a) as a film (or part of a film) for exhibition to the paying general public at the commercial cinema, or
(b) for broadcast to the general public.
(5) In this section—
“broadcast” means broadcast by any means (including television, radio or the internet);
“film” has the same meaning as in Part 15 (see section 1181);
“wild animal” means an animal of a kind which is not commonly domesticated in the British Islands (and in this definition “animal” has the meaning given by section 1(1) of the Animal Welfare Act 2006).

1217FC “Production company”
(1) A company is the production company in relation to a theatrical production if the company (acting otherwise than in partnership)—
(a) is responsible for producing, running and closing the theatrical production,
(b) is actively engaged in decision-making during the production, running and closing phases,
(c) makes an effective creative, technical and artistic contribution to the production, and
(d) directly negotiates for, contracts for and pays for rights, goods and services in relation to the production.
(2) No more than one company can be the production company in relation to a theatrical production.
(3) If more than one company meets the conditions in subsection (1) in relation to a theatrical production, the company that is most directly engaged in the activities mentioned in subsection (1) is the production company.
(4) If there is no company meeting the conditions in subsection (1), there is no production company in relation to the production.

Companies qualifying for relief

1217G How a company qualifies for relief
(1) A company qualifies for relief in relation to a theatrical production if—
(a) it is the production company in relation to the production, and
(b) the commercial purpose condition (see section 1217GA) and the EEA expenditure condition (see section 1217GB) are met.
(2) There is further provision relating to subsection (1) in section 1217LA (tax avoidance arrangements).

1217GA The commercial purpose condition
(1) The “commercial purpose condition” is that at the beginning of the production phase the company intends that all, or a high proportion of, the live performances that it proposes to run will be—
(a) to paying members of the general public, or
(b) provided for educational purposes.
(2) The reference in subsection (1) to “live performances” is to be read in accordance with section 1217FA(4).
(3) A performance is not regarded as provided for educational purposes if the production company is, or is associated with, a person who—
(a) has responsibility for the beneficiaries, or
(b) is otherwise connected with the beneficiaries (for instance, by being their employer).
(4) For the purposes of subsection (3), a production company is associated with a person (“P”) if—
(a) P controls the production company, or
(b) P is a company which is controlled by the production company or by a person who also controls the production company.
(5) In this section—
“the beneficiaries” means persons for whose benefit the performance will or may be provided;
“control” has the same meaning as in Part 10 of CTA 2010 (see section 450 of that Act).

1217GB The EEA expenditure condition
(1) The “EEA expenditure condition” is that at least 25% of the core expenditure on the theatrical production incurred by the company is EEA expenditure.
(2) In this Part “EEA expenditure” means expenditure on goods or services that are provided from within the European Economic Area.
(3) Any apportionment of expenditure as between EEA and non-EEA expenditure for the purposes of this Part is to be made on a just and reasonable basis.
(4) The Treasury may by regulations—
(a) amend the percentage specified in subsection (1);
(b) amend subsection (2).
(5) See also sections 1217N and 1217NA (which are about the giving of relief provisionally on the basis that the EEA expenditure condition will be met).

1217GC “Core expenditure”
(1) In this Part “core expenditure”, in relation to a theatrical production, means expenditure on the activities involved in—
(a) producing the production, and
(b) closing the production.
(2) The reference in subsection (1)(a) to “expenditure on the activities involved in producing the production”—
(a) does not include expenditure on any matters not directly involved in producing the production (for instance, financing, marketing, legal services or storage);
(b) does not include expenditure on the ordinary running of the production; but expenditure incurred on or after the date of the first performance of the production to the paying general public may fall within subsection (1)(a) (for instance, if it is incurred in connection with a substantial recasting or a substantial redesign of the set).

Claim for additional deduction

1217H Claim for additional deduction
(1) A company which qualifies for relief in relation to a theatrical production may claim an additional deduction in relation to the production.
(2) A claim under subsection (1) is made with respect to an accounting period.
(See Schedule 18 to FA 1998, and in particular Part 9D, for provision about the procedure for making claims.)
(3) Where a company has made a claim under subsection (1)—
(a) the company's activities in relation to the theatrical production are treated for corporation tax purposes as a trade separate from any other activities of the company (including activities in relation to any other theatrical production), and
(b) the company is entitled to make an additional deduction, in accordance with section 1217J, in calculating the profit or loss of the separate trade for the accounting period concerned.
(4) The company is treated as beginning to carry on the separate trade—
(a) when the production phase begins, or
(b) if earlier, at the time of the first receipt by the company of any income from the theatrical production.
(5) Where the company tax return in which a claim under subsection (1) is made is for an accounting period later than that in which the company begins to carry on the separate trade, the company must make any amendments of company tax returns for earlier periods that may be necessary.
(6) Any amendment or assessment necessary to give effect to subsection (5) may be made despite any limitation on the time within which an amendment or assessment may normally be made.
(7) If the company ceases at any time to meet the conditions in section 1217FC(1) (meaning of “production company”) in relation to the production, it is treated as ceasing to carry on the separate trade at that time.

The separate theatrical trade

1217I Introduction to sections 1217IA to 1217IF
Where a company is treated under section 1217H(3)(a) as carrying on a separate trade (“the separate theatrical trade”), the profits or losses of the trade are calculated for corporation tax purposes in accordance with sections 1217IA to 1217IF.

1217IA Calculation of profits or losses of separate theatrical trade
(1) For the first period of account during which the separate theatrical trade is carried on, the following are brought into account—
(a) as a debit, the costs of the theatrical production incurred (and represented in work done) to date;
(b) as a credit, the proportion of the estimated total income from the production treated as earned at the end of that period.
(2) For subsequent periods of account the following are brought into account—
(a) as a debit, the difference between the amount (“C”) of the costs of the theatrical production incurred (and represented in work done) to date and the amount corresponding to C for the previous period, and
(b) as a credit, the difference between the proportion (“PI”) of the estimated total income from the production treated as earned at the end of that period and the amount corresponding to PI for the previous period.
(3) The proportion of the estimated total income treated as earned at the end of a period of account is—
C T × I
where—
C is the total to date of costs incurred (and represented in work done);
T is the estimated total cost of the theatrical production;
I is the estimated total income from the theatrical production.

1217IB Income from the production
(1) References in this Part to income from a theatrical production are to any receipts by the company in connection with the making or exploitation of the production.
(2) This includes—
(a) receipts from the sale of tickets or of rights in the theatrical production;
(b) royalties or other payments for use of aspects of the theatrical production (for example, characters or music);
(c) payments for rights to produce merchandise;
(d) receipts by the company by way of a profit share agreement.
(3) Receipts that (apart from this subsection) would be regarded as being of a capital nature are treated as being of a revenue nature.

1217IC Costs of the production
(1) References in this Part to the costs of a theatrical production are to expenditure incurred by the company on—
(a) the activities involved in developing, producing, running and closing the production, or
(b) activities with a view to exploiting the production.
(2) This is subject to any provision of the Corporation Tax Acts prohibiting the making of a deduction, or restricting the extent to which a deduction is allowed, in calculating the profits of a trade.
(3) Expenditure which, apart from this subsection, would be regarded as being of a capital nature only because it is incurred on the creation of an asset (i.e. the theatrical production) is treated as being of a revenue nature.

1217ID When costs are taken to be incurred
(1) For the purposes of this Part, the costs that have been incurred on a theatrical production at a given time—
(a) are those costs of the production that are represented in the state of completion of the work in progress, but
(b) do not include any amount that has not been paid unless it is the subject of an unconditional obligation to pay.
(2) In accordance with subsection (1)(a)—
(a) payments in advance of work to be done are ignored until the work has been carried out;
(b) deferred payments are recognised to the extent that the goods or services in question are represented in the state of completion of the work in progress (but this is subject to subsection (1)(b)).
(3) Where an obligation to pay an amount is linked to income being earned from the theatrical production, the obligation is not treated as having become unconditional unless an appropriate amount of income is or has been brought into account under section 1217IA.
(4) In determining for the purposes of this Part the amount of costs incurred on a theatrical production at the end of a period of account, any amount that has not been paid 4 months after the end of that period is to be ignored.

1217IE Pre-trading expenditure
(1) This section applies if, before the company begins to carry on the separate theatrical trade, it incurs expenditure on activities falling within section 1217IC(1)(a).
(2) The expenditure may be treated as expenditure of the separate theatrical trade and as if incurred immediately after the company begins to carry on that trade.
(3) If expenditure so treated has previously been taken into account for other tax purposes, the company must amend any relevant company tax return accordingly.
(4) Any amendment or assessment necessary to give effect to subsection (3) may be made despite any limitation on the time within which an amendment or assessment may normally be made.

1217IF Estimates
Estimates for the purposes of section 1217IA must be made as at the balance sheet date for each period of account, on a just and reasonable basis taking into consideration all relevant circumstances.

Amount of additional deduction

1217J Amount of additional deduction
(1) The amount of an additional deduction to which a company is entitled as a result of a claim under section 1217H is calculated as follows.
(2) For the first period of account during which the separate theatrical trade is carried on, the amount of the additional deduction is E, where—
E is—
(a) so much of the qualifying expenditure incurred to date as is EEA expenditure, or
(b) if less, 80% of the total amount of qualifying expenditure incurred to date.
(3) For any period of account after the first, the amount of the additional deduction is—
E−P
where—
E is—
(a) so much of the qualifying expenditure incurred to date as is EEA expenditure, or
(b) if less, 80% of the total amount of qualifying expenditure incurred to date, and
P is the total amount of the additional deductions given for previous periods.
(4) The Treasury may by regulations amend the percentage specified in subsection (2) or (3).

1217JA “Qualifying expenditure”
(1) In this Part “qualifying expenditure”, in relation to a theatrical production, means core expenditure (see section 1217GC) on the theatrical production that—
(a) falls to be taken into account under sections 1217IA to 1217IF in calculating the profit or loss of the separate theatrical trade for tax purposes, and
(b) is not excluded by subsection (2).
(2) The following expenditure is excluded—
(a) expenditure in respect of which the company is entitled to an R&D expenditure credit under Chapter 6A of Part 3;
(b) expenditure in respect of which the company has obtained relief under Part 13 (additional relief for expenditure on research and development).

Theatre tax credits

1217K Theatre tax credit claimable if company has surrenderable loss
(1) A company which—
(a) is treated under section 1217H(3) as carrying on a separate trade during the whole or part of an accounting period, and
(b) has a surrenderable loss in that period,
may claim a theatre tax credit for that accounting period.
(2) Section 1217KA sets out how to calculate the amount of any surrenderable loss that the company has in the accounting period.
(3) A company making a claim may surrender the whole or part of its surrenderable loss in the accounting period.
(4) The amount of the theatre tax credit to which a company making a claim is entitled for the accounting period is—
(a) 25% of the amount of the loss surrendered if the theatrical production is a touring production, or
(b) 20% of the amount of the loss surrendered if the theatrical production is not a touring production.
(5) The company's available loss for the accounting period (see section 1217KA(2)) is reduced by the amount surrendered.
(6) A theatrical production is a “touring production” only if the company intends at the beginning of the production phase—
(a) that it will present performances of the production in 6 or more separate premises, or
(b) that it will present performances of the production in at least two separate premises and that the number of performances will be at least 14.
(7) See Schedule 18 to FA 1998 (in particular, Part 9D) for provision about the procedure for making claims under subsection (1).

1217KA Amount of surrenderable loss
(1) The company's surrenderable loss in the accounting period is—
(a) the company's available loss for the period in the separate theatrical trade (see subsections (2) and (3)), or
(b) if less, the available qualifying expenditure for the period (see subsections (4) and (5)).
(2) The company's available loss for an accounting period is—
L+RUL
where—
L is the amount of the company's loss for the period in the separate theatrical trade, and
RUL is the amount of any relevant unused loss of the company (see subsection (3)).
(3) The “relevant unused loss” of a company is so much of any available loss of the company for the previous accounting period as has not been—
(a) surrendered under section 1217K, or
(b) carried forward under section 45 of CTA 2010 and set against profits of the separate theatrical trade.
(4) For the first period of account during which the separate theatrical trade is carried on, the available qualifying expenditure is the amount that is E for that period for the purposes of section 1217J(2).
(5) For any period of account after the first, the available qualifying expenditure is—
E−S
where—
E is the amount that is E for that period for the purposes of section 1217J(3), and
S is the total amount previously surrendered under section 1217K.
(6) If a period of account of the separate theatrical trade does not coincide with an accounting period, any necessary apportionments are to be made by reference to the number of days in the periods concerned.

1217KB Payment in respect of theatre tax credit
(1) If a company—
(a) is entitled to a theatre tax credit for an accounting period, and
(b) makes a claim,
the Commissioners for Her Majesty's Revenue and Customs (“the Commissioners”) must pay the amount of the credit to the company.
(2) An amount payable in respect of—
(a) a theatre tax credit, or
(b) interest on a theatre tax credit under section 826 of ICTA,
may be applied in discharging any liability of the company to pay corporation tax.
To the extent that it is so applied the Commissioners' liability under subsection (1) is discharged.
(3) If the company's company tax return for the accounting period is enquired into by the Commissioners, no payment in respect of a theatre tax credit for that period need be made before the Commissioners' enquiries are completed (see paragraph 32 of Schedule 18 to FA 1998).
In those circumstances the Commissioners may make a payment on a provisional basis of such amount as they consider appropriate.
(4) No payment need be made in respect of a theatre tax credit for an accounting period before the company has paid to the Commissioners any amount that it is required to pay for payment periods ending in that accounting period—
(a) under PAYE regulations,
(b) under section 966 of ITA 2007 (visiting performers), or
(c) in respect of Class 1 national insurance contributions under Part 1 of the Social Security Contributions and Benefits Act 1992 or Part 1 of the Social Security Contributions and Benefits (Northern Ireland) Act 1992.
(5) A payment in respect of a theatre tax credit is not income of the company for any tax purpose.

1217KC Limit on State aid
(1) The total amount of any theatre tax credits payable under section 1217KB in the case of any undertaking is not to exceed 50 million euros per year.
(2) In this section “undertaking” has the same meaning as in the General Block Exemption Regulation.
(3) In this section “the General Block Exemption Regulation” means any regulation that—
(a) is for the time being in force under Article 1 of Council Regulation (EC) No 994/98, and
(b) makes, in relation to aid in favour of culture and heritage conservation, the declaration provided for by that Article.

Anti-avoidance etc

1217LA Tax avoidance arrangements
(1) A company does not qualify for relief in relation to a theatrical production if there are any tax avoidance arrangements relating to the production.
(2) Arrangements are “tax avoidance arrangements” if their main purpose, or one of their main purposes, is the obtaining of a tax advantage.
(3) In this section—
“arrangements” includes any scheme, agreement or understanding, whether or not legally enforceable;
“tax advantage” has the meaning given by section 1139 of CTA 2010.

1217LB Transactions not entered into for genuine commercial reasons
(1) A transaction is to be ignored for the purpose of determining a relief mentioned in subsection (2) so far as the transaction is attributable to arrangements (other than tax avoidance arrangements) entered into otherwise than for genuine commercial reasons.
(2) The reliefs mentioned in subsection (1) are—
(a) any additional deduction which a company may make under this Part, and
(b) any theatre tax credit to be given to a company.
(3) In this section “arrangements” and “tax avoidance arrangements” have the same meaning as in section 1217LA.

Use of losses

1217M Application of sections 1217MA to 1217MC
(1) Sections 1217MA to 1217MC apply to a company that is treated under section 1217H(3) as carrying on a separate trade in relation to a theatrical production.
(2) In those sections—
“the completion period” means the accounting period in which the company ceases to carry on the separate theatrical trade;
“loss relief” includes any means by which a loss might be used to reduce the amount in respect of which a company, or any other person, is chargeable to tax.

1217MA Restriction on use of losses before completion period
(1) Subsection (2) applies if a loss is made by the company in the separate theatrical trade in an accounting period preceding the completion period.
(2) The loss is not available for loss relief, except to the extent that the loss may be carried forward under section 45 of CTA 2010 to be set against profits of the separate theatrical trade in a subsequent period.

1217MB Use of losses in the completion period
(1) Subsection (2) applies if a loss made in the separate theatrical trade is carried forward under section 45 of CTA 2010 to the completion period.
(2) So much (if any) of the loss as is not attributable to relief under section 1217H (see subsection (4)) may be treated for the purposes of loss relief as if it were a loss made in the completion period.
(3) If a loss is made in the separate theatrical trade in the completion period, the amount of the loss that may be—
(a) deducted from total profits of the same or an earlier period under section 37 of CTA 2010, or
(b) surrendered as group relief under Part 5 of that Act,
is restricted to the amount (if any) that is not attributable to relief under section 1217H.
(4) The amount of a loss in any period that is attributable to relief under section 1217H is found by—
(a) calculating what the amount of the loss would have been if there had been no additional deduction under that section in that or any earlier period, and
(b) deducting that amount from the total amount of the loss.
(5) This section does not apply to loss surrendered, or treated as carried forward, under section 1217MC (terminal losses).

1217MC Terminal losses
(1) This section applies if—
(a) the company ceases to carry on the separate theatrical trade, and
(b) if the company had not ceased to carry on the separate theatrical trade, it could have carried forward an amount under section 45 of CTA 2010 to be set against profits of that trade in a later period (“the terminal loss”).
Below in this section the company is referred to as “company A” and the separate theatrical trade is referred to as “trade 1”.
(2) If company A—
(a) is treated under section 1217H(3) as carrying on a separate theatrical trade in relation to another theatrical production (“trade 2”), and
(b) is carrying on trade 2 when it ceases to carry on trade 1,
company A may (on making a claim) elect to transfer the terminal loss (or a part of it) to trade 2.
(3) If company A makes an election under subsection (2), the terminal loss (or part of the loss) is treated as if it were a loss brought forward under section 45 of CTA 2010 to be set against the profits of trade 2 of the first accounting period beginning after the cessation and so on.
(4) Subsection (5) applies if—
(a) another company (“company B”) is treated under section 1217H(3) as carrying on a separate theatrical trade (“company B's trade”) in relation to another theatrical production,
(b) company B is carrying on that trade when company A ceases to carry on trade 1, and
(c) company B is in the same group as company A for the purposes of Part 5 of CTA 2010 (group relief).
(5) Company A may surrender the loss (or part of it) to company B.
(6) On the making of a claim by company B the amount surrendered is treated as if it were a loss brought forward by company B under section 45 of CTA 2010 to be set against the profits of company B's trade of the first accounting period beginning after the cessation and so on.
(7) The Treasury may by regulations make administrative provision in relation to the surrender of a loss under subsection (5) and the resulting claim under subsection (6).
(8) “Administrative provision” means provision corresponding, subject to such adaptations or other modifications as appear to the Treasury to be appropriate, to that made by Part 8 of Schedule 18 to FA 1998 (company tax returns: claims for group relief).

Provisional entitlement to relief

1217N Provisional entitlement to relief
(1) In relation to a company that has made a claim under section 1217H in relation to a theatrical production, “interim accounting period” means any accounting period that—
(a) is one in which the company carries on the separate theatrical trade, and
(b) precedes the accounting period in which it ceases to do so.
(2) A company is not entitled to relief under any of the relieving provisions for an interim accounting period unless—
(a) its company tax return for the period states the amount of planned core expenditure on the theatrical production that is EEA expenditure, and
(b) that amount is such as to indicate that the EEA expenditure condition (see section 1217GB) will be met in relation to the production.
If those requirements are met, the company is provisionally treated in relation to that period as if the EEA expenditure condition were met.
(3) In this section “the relieving provisions” means—
(a) section 1217H (additional deduction),
(b) section 1217K (theatre tax credits), and
(c) section 1217MC (terminal losses).

1217NA Clawback of provisional relief
(1) If a statement is made under section 1217N(2) but it subsequently appears that the EEA expenditure condition will not be met on the company's ceasing to carry on the separate theatrical trade, the company—
(a) is not entitled to relief under any of the relieving provisions for any period for which its entitlement depended on such a statement, and
(b) must amend its company tax return for any such period accordingly.
(2) When a company which has made a claim under section 1217H ceases to carry on the separate theatrical trade, the company's company tax return for the period in which that cessation occurs must—
(a) state that the company has ceased to carry on the separate theatrical trade, and
(b) be accompanied by a final statement of the amount of the core expenditure on the theatrical production that is EEA expenditure.
(3) If that statement shows that the EEA expenditure condition is not met—
(a) the company is not entitled to relief under any of the relieving provisions for any period,
(b) the company is treated for corporation tax purposes as if section 1217H(3)(a) (treatment as a separate trade) did not apply in relation to the theatrical production for any period, and
(c) accordingly, sections 1217MA and 1217MB (provisions about use of losses) do not apply in relation to the theatrical production for any period.
(4) Where subsection (3) applies, the company must amend its company tax return for any period in which (or in any part of which) it was treated as carrying on a separate trade relating to the theatrical production.
(5) Any amendment or assessment necessary to give effect to this section may be made despite any limitation on the time within which an amendment or assessment may normally be made.
(6) In this section “the relieving provisions” has the same meaning as in section 1217N.

Interpretation

1217O Activities involved in developing, producing, running or closing a production
The Treasury may by regulations amend section 1217GC (core expenditure) or 1217IC (costs of production) for the purpose of providing that activities of a specified description are, or are not, to be regarded as activities involved in developing or (as the case may be) producing, running or closing—
(a) a theatrical production, or
(b) a theatrical production of a specified description.

1217OA “Company tax return”
In this Part “company tax return” has the same meaning as in Schedule 18 to FA 1998 (see paragraph 3(1) of that Schedule).

1217OB Index
In this Part—
“commercial purpose condition” has the meaning given by section 1217GA;
“company tax return” has the meaning given by section 1217OA;
“core expenditure” has the meaning given by section 1217GC;
“costs”, in relation to a theatrical production, has the meaning given by section 1217IC;
“EEA expenditure” has the meaning given by section 1217GB;
“EEA expenditure condition” has the meaning given by section 1217GB;
references to “income from a theatrical production” are to be read in accordance with section 1217IB;
“production company” has the meaning given by section 1217FC;
“qualifying expenditure” has the meaning given by section 1217JA;
references to the “separate theatrical trade” are to be read in accordance with section 1217I;
“theatrical production” has the meaning given by section 1217FA (read with section 1217FB).”

Sch. 4 para. 1 partly in force at Royal Assent; sch. 4 para. 1 in force at Royal Assent for specified purposes, see Sch. 4 para. 16

PART 2 Consequential amendments

ICTA
2 (1) Section 826 of the Income and Corporation Taxes Act 1988 (interest on tax overpaid) is amended as follows.
(2) In subsection (1), after paragraph (fb) insert—

“(fc) a payment of theatre tax credit falls to be made to a company; or”

.
(3) In subsection (3C), for “or video game tax credit” substitute “ , video game tax credit or theatre tax credit ”.
(4) In subsection (8A)—
(a) in paragraph (a) for “or (f)” substitute “ (f), (fa), (fb) or (fc) ”, and
(b) in paragraph (b)(ii), after “video game tax credit” insert “ or theatre tax credit ”.
(5) In subsection (8BA), after “video game tax credit” (in both places) insert “ or theatre tax credit ”.

FA 1998
3 Schedule 18 to FA 1998 (company tax returns, assessments and related matters) is amended as follows.
4 In paragraph 10 (other claims and elections to be included in return), in sub-paragraph (4)—
(a) before “claims” insert “ certain ”;
(b) for “or 15B” substitute “ , 15B or 15C ”.
5 (1) Paragraph 52 (recovery of excessive overpayments etc) is amended as follows.
(2) In sub-paragraph (2), after paragraph (bf) insert—

“(bg) theatre tax credit under Part 15C of that Act,”

.
(3) In sub-paragraph (5)—
(a) after paragraph (ah) insert—

“(ai) an amount of theatre tax credit paid to a company for an accounting period,”

;
(b) in the words after paragraph (b), after “(ah)” insert “ , (ai) ”.
6 (1) Part 9D (certain claims for tax relief) is amended as follows.
(2) In paragraph 83S (introduction), after paragraph (c) insert—

“(d) an additional deduction under Part 15C of CTA 2009,
(e) a theatre tax credit under that Part of that Act.”

(3) The heading of that Part becomes “ Claims for tax relief under Part 15, 15A, 15B or 15C of the Corporation Tax Act 2009 ”.

CAA 2001
7 In Schedule A1 to CAA 2001 (first-year tax credits), in paragraph 11(4), omit the “and” at the end of paragraph (d) and after paragraph (e) insert

“, and
(f) section 1217K of that Act (theatre tax credits).”

FA 2007
8 In Schedule 24 to FA 2007 (penalties for errors), in paragraph 28(fa) (meaning of “corporation tax credit”), omit the “or” at the end of sub-paragraph (ivb) and after that sub-paragraph insert—

“(ivc) a theatre tax credit under section 1217K of that Act, or”

.

CTA 2009
9 In section 104BA of CTA 2009 (R&D expenditure credits: restrictions on claiming other tax reliefs), after subsection (3) insert—

“(4) For provision prohibiting an R&D expenditure credit being given under this Chapter and relief being given under section 1217H or 1217K (theatrical productions: additional deduction or theatre tax credit), see section 1217JA(2).”

10 In Part 8 of CTA 2009 (intangible fixed assets), in Chapter 10 (excluded assets), before section 809 insert—

“808C Assets representing expenditure incurred in course of separate theatrical trade
(1) This Part does not apply to an intangible fixed asset held by a theatrical production company so far as the asset represents expenditure on a theatrical production that is treated under Part 15C as expenditure of a separate trade (see particularly sections 1217H and 1217IE).
(2) In this section—
“theatrical production” has the same meaning as in Part 15C (see section 1217FA);
“theatrical production company” means a company which, for the purposes of that Part, is the production company in relation to a theatrical production (see section 1217FC).”

11 In section 1040ZA of CTA 2009 (additional relief for expenditure on research and development), after subsection (3) insert—

“(4) For provision prohibiting relief being given under this Part and under section 1217H or 1217K (theatrical productions: additional deduction or theatre tax credit), see section 1217JA(2).”

12 In section 1310 of CTA 2009 (orders and regulations), in subsection (4), after paragraph (ej) insert—

“(ek) section 1217GB(4) (EEA expenditure condition),
(el) section 1217J(4) (amount of additional deduction),
(em) section 1217O (activities involved in developing, producing, running or closing a production),”

.
13 In Schedule 4 to CTA 2009 (index of defined expressions) at the appropriate place insert—

“commercial purpose condition (in Part 15C)	section 1217OB”

;

“company tax return (in Part 15C)	section 1217OA”

;

“core expenditure (in Part 15C)	section 1217GC”

;

“costs of a theatrical production (in Part 15C)	section 1217IC”

;

“EEA expenditure (in Part 15C)	section 1217GB”

;

“EEA expenditure condition (in Part 15C)	section 1217OB”

;

“income from a theatrical production (in Part 15C)	section 1217IB”

;

“production company (in Part 15C)	section 1217FC”

;

“qualifying expenditure (in Part 15C)	section 1217JA”

;

“the separate theatrical trade (in Part 15C)	section 1217OB”

;

“theatrical production (in Part 15C)	section 1217FA”

.

FA 2009
14 In Schedule 54A to FA 2009 (which is prospectively inserted by F(No. 3)A 2010 and contains provision about the recovery of certain amounts of interest paid by HMRC), in paragraph 2—
(a) in sub-paragraph (2), omit the “or” at the end of paragraph (f) and after paragraph (g) insert

“, or
(h) a payment of theatre tax credit under section 1217K of CTA 2009 for an accounting period.”

;
(b) in sub-paragraph (4), for “(e)” substitute “ (h) ”.

CTA 2010
15 (1) Section 357CG of CTA 2010 (profits arising from the exploitation of patents etc: adjustments in calculating profits of trade) is amended as follows.
(2) In subsection (3), omit the “and” at the end of paragraph (c) and after paragraph (d) insert

“, and
(e) the amount of any additional deduction for the accounting period obtained by the company under Part 15C of CTA 2009 in respect of qualifying expenditure on a theatrical production.”

(3) In subsection (6)—
(a) in the definition of “qualifying expenditure”, omit the “and” at the end of paragraph (a) and after paragraph (b) insert

“, and
(c) in relation to a company that is the production company (as defined in section 1217FC of that Act) in relation to a theatrical production, has the same meaning as in Part 15C of that Act,”

;
(b) omit the “and” at the end of the definition of “television production company” and after that definition insert—

““theatrical production” has the same meaning as in Part 15C of CTA 2009 (see section 1217FA of that Act), and”

.

PART 3 Commencement
16 (1) Any power to make regulations conferred on the Treasury by virtue of this Schedule comes into force on the day on which this Act is passed.
(2) So far as not already brought into force by sub-paragraph (1), the amendments made by this Schedule come into force in accordance with provision contained in an order made by the Treasury.
(3) An order under sub-paragraph (2) may make different provision for different purposes.
17 (1) The amendments made by this Schedule have effect in relation to accounting periods beginning on or after 1 September 2014.
(2) Sub-paragraph (3) applies where a company has an accounting period beginning before 1 September 2014 and ending on or after that date (“the straddling period”).
(3) For the purposes of Part 15C of CTA 2009—
(a) so much of the straddling period as falls before 1 September 2014, and so much of that period as falls on or after that date, are treated as separate accounting periods, and
(b) any amounts brought into account for the purposes of calculating for corporation tax purposes the profits of a trade for the straddling period are apportioned to the two separate accounting periods on such basis as is just and reasonable.

SCHEDULE 5 Pension flexibility: further amendments
Section 43

Temporary extension of period by which commencement lump sum may precede pension
1 In Schedule 29 to FA 2004 (authorised lump sums under registered pension schemes) after paragraph 1 (conditions for a lump sum to be a pension commencement lump sum) insert—

“1A (1) Paragraph 1(1)(c) is to be omitted when deciding whether a lump sum to which this paragraph applies is a pension commencement lump sum.
(2) This paragraph applies to a lump sum if—
(a) the sum is paid in respect of a money purchase arrangement,
(b) the sum is paid before the member becomes entitled to the sum,
(c) either—
(i) the sum is paid on or after 19 September 2013 but before 6 April 2015, or
(ii) the sum is paid before 19 September 2013, a contract for a lifetime annuity is entered into to provide the pension in connection with which the sum is paid, and on or after 19 March 2014 the contract is cancelled, and
(d) the member becomes entitled to the sum before 6 October 2015.
(3) Where—
(a) a lump sum to which this paragraph applies is a pension commencement lump sum but would not be a pension commencement lump sum if sub-paragraph (1) were omitted, and
(b) the lump sum is paid to the member in connection with a pension under the scheme to which it is expected that the member will become entitled (“the expected pension”),
no lump sum paid to the member out of the expected-pension fund is a pension commencement lump sum; and here “the expected-pension fund” means the sums and assets that from time to time represent the sums and assets that, when the lump sum mentioned in paragraph (a) was paid, were held for the purpose of providing the expected pension.
(4) For the purposes of sub-paragraph (2), if the circumstances are as described in sub-paragraph (2)(c)(ii), the member is treated as not having become entitled to the arranged pension as a result of the cancelled contract having been entered into; and here “the arranged pension” means the pension that would have been provided by that contract had it not been cancelled.”

Temporary relaxation to allow transfer of pension rights after lump sum paid
2 (1) In Schedule 29 to FA 2004 after paragraph 1A insert—

“1B (1) When deciding whether a lump sum to which this paragraph applies is a pension commencement lump sum—
(a) paragraph 1(1)(aa) and (c) and (3) are to be omitted,
(b) paragraph 1(4) is to be treated as referring to the actual pension (see sub-paragraph (2)(h) of this paragraph), and
(c) paragraph 2(2) is to be treated as referring to the arrangement under which the member was expected to become entitled to the expected pension (see sub-paragraph (2)(b) of this paragraph).
(2) This paragraph applies to a lump sum if—
(a) the sum is paid in respect of a money purchase arrangement,
(b) the sum is paid to the member in connection with a pension under a registered pension scheme to which it is expected that the member will become entitled (“the expected pension”),
(c) the expected pension is income withdrawal, a lifetime annuity or a scheme pension,
(d) the sum is paid before the member becomes entitled to the expected pension,
(e) either—
(i) the sum is paid on or after 19 September 2013 but before 6 April 2015, or
(ii) the sum is paid before 19 September 2013, a contract for a lifetime annuity is entered into to provide the expected pension, and on or after 19 March 2014 the contract is cancelled,
(f) the sum is not repaid at any time before 6 October 2015,
(g) before the member becomes entitled to the expected pension, there is a recognised transfer of the sums and assets that immediately before the transfer represent the sums and assets that when the sum was paid were held for the purpose of providing the expected pension,
(h) the member becomes entitled before 6 October 2015 to a pension under the scheme to which the recognised transfer is made ( “ the actual pension ”),
(i) the actual pension is income withdrawal, a lifetime annuity or a scheme pension, or some combination of them, and
(j) all of the sums and assets that represent the sums and assets transferred by the recognised transfer are used to provide the actual pension.
(3) If a lump sum to which this paragraph applies is a pension commencement lump sum, any lump sum paid—
(a) to the member,
(b) by the scheme to which the recognised transfer mentioned in sub-paragraph (2)(g) is made or by any other registered pension scheme (including the scheme from which the transfer was made), and
(c) in connection with the member's becoming entitled to the actual pension,
is not a pension commencement lump sum.
(4) For the purposes of sub-paragraph (2), if the circumstances are as described in sub-paragraph (2)(e)(ii), the member is treated as not having become entitled to the expected pension as a result of the cancelled contract having been entered into.”

(2) In section 166(2) of FA 2004 (time at which a person becomes entitled to a lump sum)—
(a) before paragraph (a) insert—

“(za) in the case of a pension commencement lump sum to which paragraph 1B of Schedule 29 applies (certain sums paid before 6 April 2015), immediately before the person becomes entitled to the actual pension (see paragraph 1B(2)(h) of that Schedule),”

, and
(b) in paragraph (a) for “of a” substitute “ of any other ”.

Temporary relaxation to allow lump sum to be repaid to pension scheme that paid it
3 In Chapter 3 of Part 4 of FA 2004 (payments by registered pension schemes) after section 185I insert—

“Repayments of lump sums

185J Effect of repayment of certain pre-6 April 2015 lump sums
(1) For the purposes of this Part—
(a) a lump sum to which this section applies is treated as never having been paid, and
(b) the payment by which it is repaid is treated as not being a payment.
(2) This section applies to a lump sum if—
(a) the sum is paid by a registered pension scheme to a member of the scheme in respect of a money purchase arrangement,
(b) the sum is paid to the member in connection with a pension under the scheme to which it is expected that the member will become entitled (“the expected pension”),
(c) the expected pension is income withdrawal, a lifetime annuity or a scheme pension,
(d) the sum is paid before the member becomes entitled to the expected pension,
(e) either—
(i) the sum is paid on or after 19 September 2013 but before 6 April 2015, or
(ii) the sum is paid before 19 September 2013, a contract for a lifetime annuity is entered into to provide the expected pension, and on or after 19 March 2014 the contract is cancelled,
(f) before the member becomes entitled to the expected pension, the member repays the sum to the pension scheme that paid it, and
(g) the repayment is made before 6 October 2015.
(3) For the purposes of subsection (2), if the circumstances are as described in subsection (2)(e)(ii), the member is treated as not having become entitled to the expected pension as a result of the cancelled contract having been entered into.”

Calculation of “applicable amount” in certain cases
4 In paragraph 3 of Schedule 29 to FA 2004 (pension commencement lump sums: applicable amount) after sub-paragraph (8) insert—

“(8A) Sub-paragraphs (1) to (8) have effect subject to the following—
(a) if—
(i) paragraph 1A or 1B applies to the lump sum,
(ii) the lump sum is paid more than 6 months before the day on which the member becomes entitled to it,
(iii) a contract for a lifetime annuity is entered into to provide the pension in connection with which the lump sum is paid, and
(iv) on or after 19 March 2014 the contract is cancelled,
the applicable amount is one third of the annuity purchase price that would have been given by sub-paragraphs (4) to (5) in the case of that annuity had the contract not been cancelled, and
(b) if—
(i) paragraph 1A or 1B applies to the lump sum,
(ii) the lump sum is paid more than 6 months before the day on which the member becomes entitled to it, and
(iii) paragraph (a) does not apply,
the applicable amount is one third of the sums, plus one third of the then market value of the assets, held at the time the lump sum is paid for the purpose of providing the pension at that time expected to be the pension in connection with which the lump sum is paid.
(8B) For the purposes of sub-paragraph (8A)(a)(ii), the member is treated as not having become entitled to a pension as a result of the cancelled contract having been entered into.”

Expected pension commencement lump sums treated as trivial commutation lump sums
5 (1) In section 166(1) of FA 2004, in the lump sum rule, omit the “or” after paragraph (f), and after paragraph (g) insert

“, or
(h) a transitional 2013/14 lump sum.”

(2) In Schedule 29 to FA 2004, after paragraph 11 insert—

“Transitional 2013/14 lump sum, and its related trivial commutation lump sum
11A (1) A lump sum is a transitional 2013/14 lump sum for the purposes of this Part if—
(a) the sum (“the earlier sum”) is paid to the member in connection with a pension under a registered pension scheme to which it is expected that the member will become entitled (“the expected pension”),
(b) the earlier sum is paid before the member becomes entitled to the expected pension,
(c) either—
(i) the earlier sum is paid on or after 19 September 2013 but before 27 March 2014, or
(ii) the earlier sum is paid before 19 September 2013, a contract for a lifetime annuity is entered into to provide the expected pension, and on or after 19 March 2014 the contract is cancelled,
(d) all of the sums and assets for the time being representing the sums and assets that when the earlier sum was paid were held for the purpose of providing the expected pension are, before the member becomes entitled to the expected pension, used in paying a further lump sum to the member ( “ the further sum ”),
(e) the further sum is paid on or after 6 July 2014 but before 6 April 2015, and
(f) the further sum is a trivial commutation lump sum (see sub-paragraph (2)).
(2) Sub-paragraph (4) applies when deciding under paragraph 7 whether the further sum is a trivial commutation lump sum in a case where the earlier sum is paid before the nominated date (see paragraph 7(3) for the meaning of “the nominated date”).
(3) If the earlier sum is a transitional 2013/14 lump sum, and the earlier sum and the further sum are not the only lump sums paid under registered pension schemes to the member, sub-paragraph (4) applies when deciding under paragraph 7 whether any other lump sum paid under a registered pension scheme to the member is a trivial commutation lump sum.
(4) If this sub-paragraph applies, the payment of the earlier sum is to be treated for the purposes of paragraph 8(1)(b) as a benefit crystallisation event—
(a) which occurs when the earlier sum is paid, and
(b) on which the amount crystallised is the amount of the earlier sum.
(5) If the earlier sum is a transitional 2013/14 lump sum, and only the sums and assets mentioned in sub-paragraph (1)(d) are used in paying the further sum, section 636B of ITEPA 2003 applies in relation to the further sum with the omission of its subsection (3).
(6) If the earlier sum is a transitional 2013/14 lump sum, and the sums and assets mentioned in sub-paragraph (1)(d) are used together with other sums and assets in paying the further sum—
(a) section 636B of ITEPA 2003 applies in relation to the further sum as if instead of the further sum there were two separate trivial commutation lump sums as follows—
(i) one (“the first part of the further sum”) consisting of so much of the further sum as is attributable to the sums and assets mentioned in sub-paragraph (1)(d), and
(ii) another consisting of the remainder of the further sum,
(b) the first part of the further sum is to be treated for the purposes of section 636B of ITEPA 2003 as having been paid immediately before the remainder of the further sum,
(c) section 636B of ITEPA 2003 applies in relation to the first part of the further sum with the omission of its subsection (3), and
(d) for the purposes of applying section 636B(3) of ITEPA 2003 in relation to the remainder of the further sum, the rights to which the first part of the further sum relates are to be treated as rights that are not uncrystallised rights immediately before the remainder of the further sum is paid.
(7) For the purposes of sub-paragraph (1), if the circumstances are as described in sub-paragraph (1)(c)(ii), the member is treated as not having become entitled to the expected pension as a result of the cancelled contract having been entered into.”

(3) In section 636A of ITEPA 2003 (income tax exemption for certain lump sums)—
(a) in subsection (1) after paragraph (c) insert—

“(ca) a transitional 2013/14 lump sum,”

, and
(b) in subsection (6) (definitions) omit the “and”, and after “ “short service refund lump sum”,” insert

“and
"transitional 2013/14 lump sum",”

.
(4) In section 280(2) of FA 2004 (index of expressions) at the appropriate place insert—

“transitional 2013/14 lump sum	paragraph 11A of Schedule 29”

Small pot lump sums
6 (1) In the Registered Pension Schemes (Authorised Payments) Regulations 2009 (S.I. 2009/1171) after regulation 3 insert—

“3A 1 This regulation applies to a lump sum if—
(a) the sum (“the earlier sum”) is paid under a registered pension scheme to a member of the scheme,
(b) the earlier sum is paid to the member in connection with a pension under a registered pension scheme to which it is expected that the member will become entitled (“the expected pension”),
(c) the earlier sum is paid before the member becomes entitled to the expected pension,
(d) either—
(i) the earlier sum is paid on or after 19 September 2013 but before 27 March 2014, or
(ii) the earlier sum is paid before 19 September 2013, a contract for a lifetime annuity is entered into to provide the expected pension, and on or after 19 March 2014 the contract is cancelled,
(e) all of the sums and assets for the time being representing the sums and assets that when the earlier sum was paid were held for the purpose of providing the expected pension are, before the member becomes entitled to the expected pension, used in paying a further lump sum to the member ( “ the further sum ”),
(f) the further sum is paid on or after 6 July 2014 but before 6 April 2015, and
(g) either—
(i) the payment of the further sum is a payment described in regulation 11, 11A or 12, or
(ii) the further sum is a trivial commutation lump sum within paragraph 7A of Schedule 29 and the earlier sum is the pension commencement lump sum in connection with which the further sum is paid.
2 If this regulation applies to the earlier sum, and the payment of the further sum is a payment described in regulation 11, 11A or 12—
(a) the payment of the earlier sum is a payment of a prescribed description for the purposes of section 164(1)(f), and
(b) section 636A of ITEPA 2003 (exemption from income tax for certain lump sums) applies in relation to the earlier sum as if the earlier sum were a pension commencement lump sum.
3 When deciding for the purposes of this regulation whether the further sum is a trivial commutation lump sum within paragraph 7A of Schedule 29, sub-paragraph (2)(c) of that paragraph is to be omitted.
4 If this regulation applies to the earlier sum, and only the sums and assets mentioned in paragraph (1)(e) are used in paying the further sum, section 636B of ITEPA 2003 applies in relation to the further sum with the omission of its subsection (3).
5 If this regulation applies to the earlier sum, and the sums and assets mentioned in paragraph (1)(e) are used together with other sums and assets in paying the further sum—
(a) section 636B of ITEPA 2003 applies in relation to the further sum as if instead of the further sum there were two separate trivial commutation lump sums as follows—
(i) one (“the first part of the further sum”) consisting of so much of the further sum as is attributable to the sums and assets mentioned in paragraph (1)(e), and
(ii) another consisting of the remainder of the further sum,
(b) the first part of the further sum is to be treated for the purposes of section 636B of ITEPA 2003 as having been paid immediately before the remainder of the further sum,
(c) section 636B of ITEPA 2003 applies in relation to the first part of the further sum with the omission of its subsection (3), and
(d) for the purposes of applying section 636B(3) of ITEPA 2003 in relation to the remainder of the further sum, the rights to which the first part of the further sum relates are to be treated as rights that are not uncrystallised rights immediately before the remainder of the further sum is paid.
6 For the purposes of paragraph (1), if the circumstances are as described in paragraph (1)(d)(ii), the member is treated as not having become entitled to the expected pension as a result of the cancelled contract having been entered into.”

(2) The amendment made by sub-paragraph (1) is to be treated as having been made by the Commissioners for Her Majesty's Revenue and Customs under the powers to make regulations conferred by section 164(1)(f) and (2) of FA 2004.

Preservation of protected pension age following certain transfers of pension rights
7 (1) In paragraph 22 of Schedule 36 to FA 2004 (protection of rights to take benefit before normal minimum pension age) after sub-paragraph (6) insert—

“(6A) A transfer is also a block transfer if—
(a) it involves the transfer in a single transaction of all the sums and assets held for the purposes of, or representing accrued rights under, the arrangements under the pension scheme from which the transfer is made which relate to the member,
(b) the transfer takes place—
(i) on or after 19 March 2014, and
(ii) before 6 April 2015, and
(c) the date mentioned in sub-paragraph (7)(a) is before 6 October 2015.”

(2) In paragraph 23(6) of Schedule 36 to FA 2004 (meaning of “block transfer”) after “22(6)” insert “ and (6A), but for this purpose paragraph 22(6A)(c) is to be read as if its reference to paragraph 22(7)(a) were a reference to sub-paragraph (7) of this paragraph ”.

Operation of enhanced protection of pre-6 April 2006 rights to take lump sums
8 In paragraph 29 of Schedule 36 to FA 2004 (modifications of paragraph 3 of Schedule 29 to FA 2004 for cases where there is enhanced protection) after sub-paragraph (3) insert—

“(4) Paragraph 3 applies as if in sub-paragraph (8A)(a) for “is one third of” there were substituted “is—
VULSR VUR × ( LS + CAPP )
where VULSR, VUR and LS have the same meaning as in sub-paragraph (1), and CAPP is”.
(5) Paragraph 3 applies as if in sub-paragraph (8A)(b) for “is one third of the sums, plus one third of” there were substituted “is—
VULSR VUR × ( LS + EP )
where VULSR, VUR and LS have the same meaning as in sub-paragraph (1), and EP is the total of the sums, and”.”

Protected lump sum entitlement following certain transfers of pension rights
9 In paragraph 31(8) of Schedule 36 to FA 2004 (“block transfer” has meaning given by paragraph 22(6) of Schedule 36 to FA 2004)—
(a) after “22(6)” insert “ and (6A) ”, and
(b) at the end insert “ , and reading paragraph 22(6A)(c) as if its reference to paragraph 22(7)(a) were a reference to sub-paragraph (3) of this paragraph. ”
10 (1) In paragraph 34(2) of Schedule 36 to FA 2004 (modifications required by paragraph 31 in cases involving protected entitlements to lump sums) the sub-paragraphs treated as substituted in paragraph 2 of Schedule 29 to FA 2004 are amended as follows.
(2) In the substituted sub-paragraph (7A), in the definition of AC, for “(7AA) and (7B))” substitute “ (7AA) to (7B)) ”.
(3) After the substituted sub-paragraph (7AA) insert—

“(7AB) Where paragraph 1A applies to the lump sum, AC is the total of—
(a) the sums held, at the time the lump sum is paid, for the purpose of providing the pension at that time expected to be the pension in connection with which the lump sum is paid, and
(b) the market value at that time of the assets held at that time for that purpose.
(7AC) Where paragraph 1B applies to the lump sum, AC is the total of—
(a) the sums held, at the time the lump sum is paid, for the purpose of providing the expected pension (see paragraph 1B(2)(b)), and
(b) the market value at that time of the assets held at that time for that purpose.”

Reporting obligations
11 (1) In the Registered Pension Schemes (Provision of Information) Regulations 2006 (S.I. 2006/567) after regulation 18 insert—

“Modified operation of these Regulations in the case of certain pre-6 April 2015 lump sums

19 Lump sums to which paragraph 1B of Schedule 29 applies
1 Regulations 3 to 18 have effect subject to the following provisions of this regulation.
2 Paragraphs (3) to (8) apply if—
(a) a lump sum is paid by a registered pension scheme (“the paying scheme”) to a member of the scheme,
(b) paragraph 1B of Schedule 29 applies to the lump sum, and
(c) the member's becoming entitled to the actual pension mentioned in paragraph 1B(2)(h) of Schedule 29 has the effect that—
(i) the member also becomes entitled to the lump sum, and
(ii) the member's becoming entitled to the lump sum is a benefit crystallisation event.
3 For the purposes of—
(a) reportable event 6,
(b) regulation 3 so far as applying by virtue of that event, and
(c) obligations under regulation 14(1),
the benefit crystallisation event mentioned in paragraph (2)(c)(ii) is treated as occurring—
(i) in respect of the scheme to which the transfer mentioned in paragraph 1B(2)(g) of Schedule 29 was made (“the receiving scheme”) and not in respect of the paying scheme, and
(ii) when the member becomes entitled to the actual pension or, if later, on 5 August 2014.
4 For the purposes of regulations 15(2)(a) and 17(5)(a)(i) and (7)(a)(i), that benefit crystallisation event is treated as occurring in respect of the receiving scheme and not in respect of the paying scheme.
5 For the purposes of—
(a) reportable event 7 (but not its definition of “the entitlement amount”),
(b) reportable event 8, and
(c) regulation 3 so far as applying by virtue of either of those events,
the lump sum is treated as having been paid—
(i) by the receiving scheme and not by the paying scheme, and
(ii) when the member becomes entitled to the actual pension or, if later, on 5 August 2014.
6 For the purposes of reportable event 7 “the entitlement amount” is the total of—
(a) the sums held, at the time the lump sum is actually paid, for the purpose of providing the expected pension mentioned in paragraph 1B(2)(b) of Schedule 29, and
(b) the market value at that time of the assets held at that time for that purpose.
7 The scheme administrator of the paying scheme is to provide the scheme administrator of the receiving scheme with the following information—
(a) the date the lump sum was paid,
(b) the amount of the lump sum,
(c) the total of—
(i) the sums held, at the time lump sum is paid, for the purpose of providing the expected pension mentioned in paragraph 1B(2)(b) of Schedule 29, and
(ii) the market value at that time of the assets held at that time for that purpose, and
(d) a statement that no further pension commencement lump sum may be paid in connection with that expected pension.
8 The scheme administrator of the paying scheme is to comply with its obligations under paragraph (7) before—
(a) the end of 30 days beginning with the date of the transfer mentioned in paragraph 1B(2)(g) of Schedule 29, or
(b) if later, the end of 3 September 2014.

Lump sums to which paragraph 1B of Schedule 29 fails to apply
20 1 Regulations 3 to 18 have effect subject to the following provisions of this regulation.
2 Paragraph (3) applies if—
(a) a lump sum is paid by a registered pension scheme (“the paying scheme”) to a member of the scheme,
(b) paragraph 1B of Schedule 29 does not apply to the lump sum, but the conditions in paragraph 1B(2)(a) to (g) are met in the case of the lump sum, and
(c) as at the end of 5 October 2015 it is the case that the lump sum is to be taken as having been an unauthorised member payment.
3 For the purposes of reportable event 1, and regulation 3 so far as applying by virtue of that event, the lump sum is treated as having been paid—
(a) by the receiving scheme and not by the paying scheme, and
(b) on 6 October 2015.”

(2) The amendment made by sub-paragraph (1) is to be treated as having been made by the Commissioners for Her Majesty's Revenue and Customs under such of the powers cited in the instrument containing the Regulations as are applicable.

Scheme sanction charges
12 (1) In section 239(3) of FA 2004 (cases where person other than scheme administrator is liable for a scheme sanction charge)—
(a) after “But” insert

“—
(a)”

, and
(b) at the end insert

“, and
(b) in the case of a payment of a lump sum to a member where the conditions in paragraphs 1(1)(b) and (d) and 1B(2)(a) to (g) of Schedule 29 are met, the person liable to the scheme sanction charge so far as relating to any part of the lump sum within the permitted maximum is the scheme administrator of the registered pension scheme to which the transfer mentioned in paragraph 1B(2)(g) of Schedule 29 is made.”

(2) In section 239 of FA 2004 (scheme sanction charges) after subsection (3) insert—

“(3A) For the purposes of subsection (3)(b) “the permitted maximum”, in the case of a lump sum paid to an individual, is the amount that in accordance with paragraph 2 of Schedule 29 would be the permitted maximum for that lump sum if the individual became entitled at the time the lump sum is paid to the pension at that time expected to be the pension in connection with which the lump sum is paid.”

(3) In section 268 of FA 2004 (discharge of liability to scheme sanction charges etc) after subsection (7) insert—

“(7A) Subsection (7) applies with the omission of its paragraph (a) if the scheme chargeable payment is a payment of a lump sum where the conditions in paragraph 1B(2)(a) to (g) of Schedule 29 are met.”

(4) In the Taxation of Pension Schemes (Transitional Provisions) Order 2006 (S.I. 2006/572) in article 18 (which provides for paragraph 1(1)(b) of Schedule 29 to FA 2004 to be omitted in certain cases) at the end insert “ , and section 239 has effect in the case of a lump sum paid to that individual as if its subsection (3)(b) did not include a reference to paragraph 1(1)(b) of Schedule 29 ”.
(5) The amendment made by sub-paragraph (4) is to be treated as made by the Treasury under the powers to make orders conferred by section 283(2) of FA 2004.

Power to make further adjustments
13 In section 166 of FA 2004 (payments by registered pension schemes: the lump sum rule) after subsection (4) insert—

“(5) The Commissioners for Her Majesty's Revenue and Customs may by regulations amend Part 1 of Schedule 29, or Part 3 of Schedule 36, in connection with cases involving a lump sum within subsection (6).
(6) A lump sum is within this subsection if—
(a) the sum is paid on or after 19 September 2013 and before 6 April 2015, or
(b) the sum is paid before 19 September 2013, a contract for a lifetime annuity is entered into to provide the pension in connection with which the sum is paid, and on or after 19 March 2014 the contract is cancelled.
(7) The provision that may be made under subsection (5) includes provision altering the effect of amendments made by the Finance Act 2014.”

14 In section 282(1) and (2) of FA 2004 (making of regulations and orders) for “Board of Inland Revenue” substitute “ Commissioners for Her Majesty's Revenue and Customs ”.

Commencement
15 The amendments made by paragraphs 1 to 5, 6(1), 7 to 10, 11(1) and 12(1) to (4) of this Schedule are to be treated as having come into force on 19 March 2014.

SCHEDULE 6 Transitional provision relating to new standard lifetime allowance for the tax year 2014-15 etc
Section 44

PART 1 “Individual protection 2014”

The protection
1 (1) Sub-paragraph (2) applies on and after 6 April 2014 in the case of an individual—
(a) who, on 5 April 2014, has one or more relevant arrangements (see sub-paragraph (4)),
(b) whose relevant amount is greater than £1,250,000 (see sub-paragraph (5)), and
(c) in relation to whom paragraph 7 of Schedule 36 to FA 2004 (primary protection) does not make provision for a lifetime allowance enhancement factor,
if notice of intention to rely on it is given to an officer of Revenue and Customs before 6 April 2017.
(2) Part 4 of FA 2004 has effect in relation to the individual as if the standard lifetime allowance were—
(a) if the individual's relevant amount is greater than £1,500,000, the greater of the standard lifetime allowance and £1,500,000, or
(b) otherwise, the greater of the standard lifetime allowance and the individual's relevant amount.
(3) But sub-paragraph (2) does not apply at any time when any of the following provisions applies in the case of the individual—
(a) paragraph 12 of Schedule 36 to FA 2004 (enhanced protection);
(b) paragraph 14 of Schedule 18 to FA 2011 (fixed protection 2012);
(c) paragraph 1 of Schedule 22 to FA 2013 (fixed protection 2014).
(4) “Relevant arrangement”, in relation to an individual, means an arrangement relating to the individual under—
(a) a registered pension scheme of which the individual is a member, or
(b) a relieved non-UK pension scheme of which the individual is a relieved member.
(5) An individual's “relevant amount” is the sum of amounts A, B, C and D (see paragraphs 2 to 5).
(6) Sub-paragraphs (7) and (8) apply if rights of an individual under a relevant arrangement become subject to a pension debit where the transfer day falls on or after 6 April 2014.
(7) For the purpose of applying sub-paragraph (2) in the case of the individual on and after the transfer day, the individual's relevant amount is reduced (or further reduced) by the following amount—
X – ( Y × Z )
where—
X is the appropriate amount,
Y is 5% of X, and
Z is the number of tax years beginning after 5 April 2014 but ending on or before the transfer day.
(If the formula gives a negative amount, it is to be taken to be nil.)
(8) But if the individual's relevant amount would be reduced (or further reduced) to £1,250,000 or less, sub-paragraph (2) is not to apply at all in the case of the individual on and after the transfer day.
(9) In sub-paragraphs (6) to (8) “appropriate amount” and “transfer day”, in relation to a pension debit, have the same meaning as in section 29 of WRPA 1999 or Article 26 of WRP(NI)O 1999 (as the case may be).

Amount A (pre-6 April 2006 pensions in payment)
2 (1) To determine amount A—
(a) apply sub-paragraph (2) if a benefit crystallisation event has occurred in relation to the individual during the period comprising the tax year 2006-07 and all subsequent tax years up to (and including) the tax year 2013-14;
(b) otherwise, apply sub-paragraph (6).
(2) If this sub-paragraph is to be applied, amount A is—
25 × ARP × 1,500,000 SLT
where—
ARP is (subject to sub-paragraph (3)) an amount equal to—
(a) the annual rate at which any relevant existing pension was payable to the individual at the time immediately before the benefit crystallisation event occurred, or
(b) if more than one relevant existing pension was payable to the individual at that time, the sum of the annual rates at which each of the relevant existing pensions was so payable, and
SLT is an amount equal to what the standard lifetime allowance was at the time the benefit crystallisation event occurred.
(3) Paragraph 20(4) of Schedule 36 to FA 2004 applies for the purposes of the definition of “ARP” in sub-paragraph (2) (and, for this purpose, in paragraph 20(4) any reference to “the time” is to be read as a reference to the time immediately before the benefit crystallisation event occurred).
(4) If the time immediately before the benefit crystallisation event occurred falls before 6 April 2011, in sub-paragraph (3) references to paragraph 20(4) are to be read as references to that provision as it stood at the time immediately before the benefit crystallisation event occurred.
(5) If more than one benefit crystallisation event has occurred, in sub-paragraphs (2) to (4) references to the benefit crystallisation event are to be read as references to the first benefit crystallisation event.
(6) If this sub-paragraph is to be applied, amount A is—
25 × ARP
where ARP is (subject to sub-paragraph (7)) an amount equal to—
(a) the annual rate at which any relevant existing pension is payable to the individual at the end of 5 April 2014, or
(b) if more than one relevant existing pension is payable to the individual at the end of 5 April 2014, the sum of the annual rates at which each of the relevant existing pensions is so payable.
(7) Paragraph 20(4) of Schedule 36 to FA 2004 applies for the purposes of the definition of “ARP” in sub-paragraph (6) (and, for this purpose, in paragraph 20(4) any reference to “the time” is to be read as a reference to 5 April 2014).
(8) In this paragraph “relevant existing pension” means (subject to sub-paragraph (9)) a pension, annuity or right—
(a) which was, at the end of 5 April 2006, a “relevant existing pension” as defined by paragraph 10(2) and (3) of Schedule 36 to FA 2004, and
(b) the payment of which the individual had, at the end of 5 April 2006, an actual (rather than a prospective) right to.
(9) If—
(a) before 6 April 2014, there was a recognised transfer of sums or assets representing a relevant existing pension, and
(b) those sums or assets were, after the transfer, applied towards the provision of a scheme pension (“the new scheme pension”),
the new scheme pension is also to be a “relevant existing pension” (including for the purposes of this sub-paragraph).

Amount B (pre-6 April 2014 benefit crystallisation events)
3 (1) To determine amount B—
(a) identify each benefit crystallisation event that has occurred in relation to the individual during the period comprising the tax year 2006-07 and all subsequent tax years up to (and including) the tax year 2013-14,
(b) determine the amount which was crystallised by each of those benefit crystallisation events (applying paragraph 14 of Schedule 34 to FA 2004 if relevant), and
(c) multiply each crystallised amount by the following fraction—
1,500,000 SLT
where SLT is an amount equal to what the standard lifetime allowance was at the time the benefit crystallisation event in question occurred.
(2) Amount B is the sum of the crystallised amounts determined under sub-paragraph (1)(b) as adjusted under sub-paragraph (1)(c).

Amount C (uncrystallised rights at end of 5 April 2014 under registered pension schemes)
4 Amount C is the total value of the individual's uncrystallised rights at the end of 5 April 2014 under arrangements relating to the individual under registered pension schemes of which the individual is a member as determined in accordance with section 212 of FA 2004.

Amount D (uncrystallised rights at end of 5 April 2014 under relieved non-UK pension schemes)
5 (1) To determine amount D—
(a) identify each relieved non-UK pension scheme of which the individual is a relieved member at the end of 5 April 2014, and
(b) in relation to each such scheme—
(i) assume that a benefit crystallisation event occurs in relation to the individual at the end of 5 April 2014, and
(ii) in accordance with paragraph 14 of Schedule 34 to FA 2004, determine what the untested portion of the relevant relieved amount would be immediately before the assumed benefit crystallisation event.
(2) Amount D is the sum of the untested portions determined under sub-paragraph (1)(b)(ii).

Interpretation
6 (1) Expressions used in this Part of this Schedule and Part 4 of FA 2004 have the same meaning in this Part as in that Part.
(2) In particular, references to a relieved non-UK pension scheme or a relieved member of such a scheme are to be read in accordance with paragraphs 13(3) and (4) and 18 of Schedule 34 to FA 2004.

PART 2 Regulations
7 (1) The Commissioners for Her Majesty's Revenue and Customs may by regulations amend Part 1 of this Schedule.
(2) Regulations under this paragraph may (for example) add to the cases in which paragraph 1(2) is to apply.
(3) Regulations under this paragraph must not increase any person's liability to tax.
(4) Regulations under this paragraph may include provision having effect in relation to a time before the regulations are made; but the time must be no earlier than 6 April 2014.
8 (1) The Commissioners for Her Majesty's Revenue and Customs may by regulations make provision specifying how any notice required to be given to an officer of Revenue and Customs under Part 1 of this Schedule is to be given.
(2) In sub-paragraph (1) the reference to Part 1 of this Schedule is to that Part as amended from time to time by regulations under paragraph 7.
9 (1) Regulations under paragraph 7 or 8 may include supplementary or incidental provision.
(2) The powers to make regulations under paragraphs 7 and 8 are exercisable by statutory instrument.
(3) A statutory instrument containing regulations under paragraph 7 or 8 is subject to annulment in pursuance of a resolution of the House of Commons.

PART 3 Other provision

Amendment of section 219(5A) of FA 2004
10 (1) In section 219 of FA 2004 (availability of individual's lifetime allowance) in subsection (5A) after “effect” insert “ where the previous benefit crystallisation event occurred before 6 April 2014 ”.
(2) The amendment made by this paragraph is treated as having come into force on 6 April 2014.

Amendment of section 98 of TMA 1970
11 (1) Column 2 of the Table at the end of section 98 of TMA 1970 (special returns: penalties) is amended as follows.
(2) After the entry for section 228 of TIOPA 2010 insert—

“Regulations under paragraph 16 of Schedule 18 to the Finance Act 2011.”

(3) After the entry for regulations under section 61(5) of FA 2012 insert—

“Regulations under paragraph 3 of Schedule 22 to the Finance Act 2013.
Regulations under paragraph 8 of Schedule 6 to the Finance Act 2014.”

SCHEDULE 7 Pension schemes
Section 46

Introduction
1 Part 4 of FA 2004 (pension schemes etc) is amended as follows.

Registration of pension schemes
2 (1) Section 153 (applications for registration) is amended as follows.
(2) In subsection (4) for “On” substitute “ Following ”.
(3) In subsection (5) for paragraphs (a) and (b) substitute—

“(a) any information falling within subsection (5A) is inaccurate in a material respect,
(b) any document falling within subsection (5B) contains a material inaccuracy,
(c) any declaration accompanying the application is false,
(d) the scheme administrator has failed to comply with an information notice under section 153A given in connection with the application (including any declaration accompanying it),
(e) the scheme administrator has deliberately obstructed an officer of Revenue and Customs in the course of an inspection under section 153B carried out in connection with the application (including any declaration accompanying it) where the inspection has been approved by the tribunal,
(f) the pension scheme has not been established, or is not being maintained, wholly or mainly for the purpose of making payments falling within section 164(1)(a) or (b) (authorised payments of pensions and lump sums), or
(g) the person who is, or any of the persons who are, the scheme administrator is not a fit and proper person to be, as the case may be—
(i) the scheme administrator, or
(ii) one of the persons who are the scheme administrator.”

(4) After subsection (5) insert—

“(5A) The information falling within this subsection is any information—
(a) contained in the application, or
(b) otherwise provided to an officer of Revenue and Customs by the scheme administrator (whether under section 153A or otherwise) in connection with the application (including any declaration accompanying it).
(5B) The documents falling within this subsection are any documents produced to an officer of Revenue and Customs by the scheme administrator (whether under section 153A or otherwise) in connection with the application (including any declaration accompanying it).
(5C) The reference in subsection (5)(d) to the scheme administrator having failed to comply with an information notice under section 153A includes a case where the scheme administrator has concealed, destroyed or otherwise disposed of, or has arranged for the concealment, destruction or disposal of, a document in breach of paragraph 42 or 43 of Schedule 36 to the Finance Act 2008 as applied by section 153A(3).”

3 After section 153 insert—

“153A Power to require information or documents in relation to applications for registration
(1) This section applies where an application for a pension scheme to be registered is made.
(2) An officer of Revenue and Customs may by notice (an “information notice”) require the scheme administrator or any other person—
(a) to provide the officer with any information, or
(b) to produce a document to the officer,
if the officer reasonably requires the information or document in connection with the application (including any declaration accompanying it).
(3) Paragraphs 6(2), 7, 8, 15, 16, 18 to 20, 23 to 27, 42 and 43 of Schedule 36 to the Finance Act 2008 (information notices etc) apply in relation to information notices under this section as they apply in relation to information notices under that Schedule.
(4) Where an information notice under this section is given to a person other than the scheme administrator, an officer of Revenue and Customs must give a copy of the notice to the scheme administrator.
(5) A person, other than the scheme administrator, who is given an information notice under this section may appeal against the notice or any requirement in the notice.
(6) Paragraph 32 of Schedule 36 to the Finance Act 2008 (procedures for appeals against information notices) applies for the purposes of an appeal under subsection (5) as it applies for the purposes of an appeal under Part 5 of that Schedule.

153B Power to inspect documents in relation to applications for registration
(1) This section applies where an application for a pension scheme to be registered is made.
(2) An officer of Revenue and Customs may—
(a) enter any business premises of the scheme administrator or any other person, and
(b) inspect documents that are on the premises,
if the officer reasonably requires to inspect the documents in connection with the application (including any declaration accompanying it).
(3) In subsection (2)(a) “business premises” has the meaning given by paragraph 10(3) of Schedule 36 to the Finance Act 2008 (power to inspect business premises etc).
(4) Paragraphs 10(2), 12, 15 and 16 of Schedule 36 to the Finance Act 2008 apply in relation to the power of inspection conferred by this section as they apply in relation to the power of inspection conferred by paragraph 10 of that Schedule.
(5) An officer of Revenue and Customs may not inspect a document under this section if or to the extent that, by virtue of a provision of Part 4 of Schedule 36 to the Finance Act 2008 (restrictions on powers) applied by section 153A(3), an information notice under section 153A given at the time of the inspection to the occupier of the premises could not require the occupier to produce the document.
(6) An officer of Revenue and Customs may ask the tribunal to approve an inspection under this section.
(7) Paragraph 13(1A), (2) and (3) of Schedule 36 to the Finance Act 2008 (approval of tribunal for inspections) applies in relation to an application under subsection (6) as it applies in relation to an application under paragraph 13 of that Schedule in relation to an inspection under paragraph 10 of that Schedule.

153C Penalties for failure to comply with information notices etc
(1) This section applies where a person other than the scheme administrator—
(a) fails to comply with an information notice under section 153A, or
(b) deliberately obstructs an officer of Revenue and Customs in the course of an inspection under section 153B that has been approved by the tribunal.
(2) The reference in subsection (1)(a) to a person who fails to comply with an information notice includes a person who conceals, destroys or otherwise disposes of, or arranges for the concealment, destruction or disposal of, a document in breach of paragraph 42 or 43 of Schedule 36 to the Finance Act 2008 as applied by section 153A(3).
(3) Paragraphs 39(2), 40 and 44 to 49 of Schedule 36 to the Finance Act 2008 (penalties for failure to comply with information notice etc) apply in relation to the failure or obstruction as they apply in relation to a failure or obstruction mentioned in paragraph 39(1) of that Schedule.

153D Penalties for inaccurate information in applications
(1) This section applies where—
(a) an application under section 153 contains information which is inaccurate,
(b) the inaccuracy is material, and
(c) condition A, B or C is met.
(2) Condition A is that the inaccuracy is careless or deliberate.
(3) An inaccuracy is careless if it is due to a failure by the scheme administrator to take reasonable care.
(4) Condition B is that the scheme administrator knows of the inaccuracy at the time the application is made but does not inform an officer of Revenue and Customs at that time.
(5) Condition C is that the scheme administrator—
(a) discovers the inaccuracy some time later, and
(b) fails to take reasonable steps to inform an officer of Revenue and Customs.
(6) The scheme administrator is liable to a penalty not exceeding the maximum penalty for which the scheme administrator could have been liable under paragraph 40A of Schedule 36 to the Finance Act 2008 (penalties for inaccurate information and documents) had that paragraph applied in relation to the inaccuracy.
(7) Where the information contains more than one material inaccuracy, a penalty is payable for each inaccuracy.
(8) Paragraphs 46 to 49 of Schedule 36 to the Finance Act 2008 (assessment of penalties etc) apply in relation to a penalty under this section as they apply in relation to a penalty under paragraph 40A of that Schedule.

153E Penalties for inaccurate information or documents provided under information notice
(1) This section applies where—
(a) in complying with an information notice under section 153A, a person provides inaccurate information or produces a document that contains an inaccuracy, and
(b) the inaccuracy is material.
(2) Paragraphs 40A and 46 to 49 of Schedule 36 to the Finance Act 2008 (penalties for inaccurate information and documents) apply in relation to the inaccuracy as they apply in relation to an inaccuracy connected with an information notice under that Schedule.

153F Penalties for false declarations
(1) This section applies where—
(a) a declaration accompanying an application under section 153 is false, and
(b) at least one of conditions A to C in section 153D is met (reading references to an inaccuracy as references to a falsehood and references to the scheme administrator as references to the person who made the declaration).
(2) The person who made the declaration is liable to a penalty not exceeding the maximum penalty for which the person could have been liable under paragraph 40A of Schedule 36 to the Finance Act 2008 (penalties for inaccurate information and documents) had that paragraph applied in relation to the falsehood.
(3) Where the declaration contains more than one falsehood, a penalty is payable in relation to each falsehood.
(4) Paragraphs 46 to 49 of Schedule 36 to the Finance Act 2008 (assessment of penalties etc) apply in relation to a penalty under this section as they apply in relation to a penalty under paragraph 40A of that Schedule.”

4 After section 156 insert—

“156A Cases where application for registration not decided within 6 months
(1) This section applies where—
(a) an application for a pension scheme to be registered is made, but
(b) the scheme administrator is not notified under section 153(6) within the period of 6 months after the day on which the application is made.
(2) The scheme administrator may appeal to the tribunal as if, at the end of that period of 6 months, the scheme administrator had been notified under section 153(6) of a decision not to register the scheme; and section 156(5) to (8) applies accordingly.”

5 (1) The amendments made by paragraphs 2 to 4 are treated as having come into force on 20 March 2014 and have effect in relation to applications made on or after that date.
(2) In relation to an application made before 1 September 2014, section 153(5) of FA 2004 (as amended by paragraph 2(3)) has effect with the omission of paragraph (g).

De-registration of pension schemes
6 (1) Section 158 (grounds for de-registration) is amended as follows.
(2) In subsection (1)—
(a) before paragraph (a) insert—

“(za) that the pension scheme has not been established, or is not being maintained, wholly or mainly for the purpose of making payments falling within section 164(1)(a) or (b) (authorised payments of pensions and lump sums),”

,
(b) in paragraph (d) for “incorrect” substitute “ inaccurate ”,
(c) after paragraph (d) insert—

“(da) that the scheme administrator fails to produce any document required to be produced to an officer of Revenue and Customs by virtue of this Part or Part 1 of Schedule 36 to the Finance Act 2008,
(db) that any document produced to an officer of Revenue and Customs by the scheme administrator contains a material inaccuracy in relation to which at least one of conditions A to C in subsections (7) to (10) is met,”, and”

(d) for paragraph (e) substitute—

“(e) that any declaration accompanying the application to register the pension scheme, or otherwise made to an officer of Revenue and Customs in connection with the pension scheme, is false in a material particular,
(ea) that the scheme administrator has deliberately obstructed an officer of Revenue and Customs in the course of an inspection under Part 2 of Schedule 36 to the Finance Act 2008 that has been approved by the tribunal, or”

.
(3) In subsection (1) (as amended by sub-paragraph (2) above)—
(a) after paragraph (za) insert—

“(zb) that the person who is, or any of the persons who are, the scheme administrator is not a fit and proper person to be, as the case may be—
(i) the scheme administrator, or
(ii) one of the persons who are the scheme administrator,”

, and
(b) in paragraph (ea) after “under” insert “ section 159B or ”.
(4) After subsection (5) insert—

“(6) Subsections (7) to (10) apply for the purposes of subsection (1)(db).
(7) Condition A is that the inaccuracy is careless or deliberate.
(8) An inaccuracy is careless if it is due to a failure by the scheme administrator to take reasonable care.
(9) Condition B is that the scheme administrator knows of the inaccuracy at the time the document is produced to an officer of Revenue and Customs but does not inform such an officer at that time.
(10) Condition C is that the scheme administrator—
(a) discovers the inaccuracy some time later, and
(b) fails to take reasonable steps to inform an officer of Revenue and Customs.”

7 In Chapter 2, after section 159 insert—

“159A Power to require information or documents for purpose of considering if scheme administrator is fit and proper
(1) An officer of Revenue and Customs may by notice (an “information notice”) require the scheme administrator of a registered pension scheme or any other person—
(a) to provide the officer with any information, or
(b) to produce a document to the officer,
if the officer reasonably requires the information or document for the purpose of considering whether the person who is, or any of the persons who are, the scheme administrator is a fit and proper person to be the scheme administrator or one of those persons (as the case may be).
(2) Paragraphs 6(2), 7, 8, 15, 16, 18 to 20, 23 to 27, 42 and 43 of Schedule 36 to the Finance Act 2008 (information notices etc) apply in relation to information notices under this section as they apply in relation to information notices under that Schedule.
(3) Where an information notice under this section is given to a person other than the scheme administrator, an officer of Revenue and Customs must give a copy of the notice to the scheme administrator.
(4) A person who is given an information notice under this section may appeal against the notice or any requirement in the notice.
(5) Paragraph 32 of Schedule 36 to the Finance Act 2008 (procedures for appeals against information notices) applies for the purposes of an appeal under subsection (4) as it applies for the purposes of an appeal under Part 5 of that Schedule.

159B Power to inspect documents for purpose of considering if scheme administrator is fit and proper
(1) An officer of Revenue and Customs may—
(a) enter any business premises of the scheme administrator of a registered pension scheme or of any other person, and
(b) inspect documents that are on the premises,
if the officer reasonably requires to inspect the documents for the purpose of considering whether the person who is, or any of the persons who are, the scheme administrator is a fit and proper person to be the scheme administrator or one of those persons (as the case may be).
(2) In subsection (1)(a) “business premises” has the meaning given by paragraph 10(3) of Schedule 36 to the Finance Act 2008 (power to inspect business premises etc).
(3) Paragraphs 10(2), 12, 15 and 16 of Schedule 36 to the Finance Act 2008 apply in relation to the power of inspection conferred by this section as they apply in relation to the power of inspection conferred by paragraph 10 of that Schedule.
(4) An officer of Revenue and Customs may not inspect a document under this section if or to the extent that, by virtue of a provision of Part 4 of Schedule 36 to the Finance Act 2008 (restrictions on powers) applied by section 159A(2), an information notice under section 159A given at the time of the inspection to the occupier of the premises could not require the occupier to produce the document.
(5) An officer of Revenue and Customs may ask the tribunal to approve an inspection under this section.
(6) Paragraph 13(1A), (2) and (3) of Schedule 36 to the Finance Act 2008 (approval of tribunal for inspections) applies in relation to an application under subsection (5) as it applies in relation to an application under paragraph 13 of that Schedule in relation to an inspection under paragraph 10 of that Schedule.

159C Penalties for failure to comply with information notices etc
(1) This section applies where a person—
(a) fails to comply with an information notice under section 159A, or
(b) deliberately obstructs an officer of Revenue and Customs in the course of an inspection under section 159B that has been approved by the tribunal.
(2) The reference in subsection (1)(a) to a person who fails to comply with an information notice includes a person who conceals, destroys or otherwise disposes of, or arranges for the concealment, destruction or disposal of, a document in breach of paragraph 42 or 43 of Schedule 36 to the Finance Act 2008 as applied by section 159A(2).
(3) Paragraphs 39(2), 40 and 44 to 49 of Schedule 36 to the Finance Act 2008 (penalties for failure to comply with information notice etc) apply in relation to the failure or obstruction as they apply in relation to a failure or obstruction mentioned in paragraph 39(1) of that Schedule.

159D Penalties for inaccurate information or documents provided under information notice
(1) This section applies where—
(a) in complying with an information notice under section 159A, a person provides inaccurate information or produces a document that contains an inaccuracy, and
(b) the inaccuracy is material.
(2) Paragraphs 40A and 46 to 49 of Schedule 36 to the Finance Act 2008 (penalties for inaccurate information and documents) apply in relation to the inaccuracy as they apply in relation to an inaccuracy connected with an information notice under that Schedule.”

8 (1) The amendments made by paragraphs 6 and 7 have effect in relation to pension schemes whenever registered (including schemes registered by virtue of paragraph 1 of Schedule 36 to FA 2004 (deemed registration of existing schemes)).
(2) The amendments made by paragraph 6(2) and (4) are treated as having come into force on 20 March 2014.
(3) The amendments made by paragraphs 6(3) and 7 come into force on 1 September 2014 or, if later, the day after the day on which this Act is passed.

Declarations required from person who is to be a scheme administrator
9 (1) In section 270 (meaning of “scheme administrator”) in subsection (2)—
(a) after paragraph (a) omit “and”, and
(b) after paragraph (b) insert

“, and
(c) has made to an officer of Revenue and Customs any other declarations which are reasonably required by Her Majesty's Revenue and Customs.”

(2) The amendments made by this paragraph have effect in relation to appointments on or after 1 September 2014.

Payments by registered pension schemes: surrender
10 (1) Section 172A (payments by registered pension schemes: surrender) is amended as follows.
(2) In subsection (5) omit paragraph (d).
(3) After subsection (5) insert—

“(5A) Subsection (5)(b) applies only if the entitlement is held (or is to be held) by the dependant under an arrangement under the pension scheme relating to the member or dependant.”

11 In section 207 (authorised surplus payments charge) after subsection (6) insert—

“(6A) Subsection (1) does not apply to an authorised surplus payment to the extent that the payment is funded (directly or indirectly) by a surrender of (or an agreement to surrender) benefits or rights which results in the registered pension scheme being treated as making an unauthorised payment under section 172A.
(6B) Terms used in subsection (6A) which are defined in section 172A have the same meaning as they have in that section.”

12 The amendments made by paragraphs 10 and 11 have effect in relation to surrenders (or agreements to surrender) made on or after 20 March 2014.

Orders for money etc to be restored to pension schemes
13 (1) Section 188 (relief for members' contributions) is amended as follows.
(2) In subsection (2) after “(3)” insert “ or (3A) ”.
(3) After subsection (3) insert—

“(3A) This subsection applies to a contribution if the contribution results from the transfer of property or money, or the payment of a sum, towards the pension scheme pursuant to a relevant order in a case where—
(a) section 266A (members' liability in respect of unauthorised member payments) applies, and
(b) relief is claimed under that section in respect of the liability mentioned in subsection (1)(a) of that section.
(3B) In the case of a contribution which is greater than UMP (see section 266A(5)), subsection (3A) does not apply to the contribution so far as it is greater than UMP.
(3C) In subsection (3A) “relevant order” means an order under any of the following—
(a) section 16(1), 19(4) or 21(2)(a) of the Pensions Act 2004 (orders for money etc to be restored to pension schemes), or
(b) Article 12(1), 15(4) or 17(2)(a) of the Pensions (Northern Ireland) Order 2005 (corresponding provision for Northern Ireland).”

14 (1) Section 266A (member's liability) is amended as follows.
(2) In subsection (1)(b) for the words from “an order” to “Regulator)” substitute “ a relevant order ”.
(3) In subsection (5), in the definition of “ASO”—
(a) before the first “order” insert “ relevant ”, and
(b) for the words from the second “order” to “2005” substitute “ relevant order ”.
(4) After subsection (6) insert—

“(6A) In this section “relevant order” means an order under any of the following—
(a) section 16(1), 19(4) or 21(2)(a) of the Pensions Act 2004 (orders for money etc to be restored to pension schemes), or
(b) Article 12(1), 15(4) or 17(2)(a) of the Pensions (Northern Ireland) Order 2005 (corresponding provision for Northern Ireland).”

15 (1) Section 266B (scheme's liability) is amended as follows.
(2) In subsection (1)(b) for the words from “an order” to “Regulator)” substitute “ a relevant order ”.
(3) In subsection (3), in the definition of “ASO”—
(a) before the first “order” insert “ relevant ”, and
(b) for the words from the second “order” to “2005” substitute “ relevant order ”.
(4) After subsection (4) insert—

“(5) In this section “relevant order” means an order under any of the following—
(a) section 16(1), 19(4) or 21(2)(a) of the Pensions Act 2004 (orders for money etc to be restored to pension schemes), or
(b) Article 12(1), 15(4) or 17(2)(a) of the Pensions (Northern Ireland) Order 2005 (corresponding provision for Northern Ireland).”

16 The amendments made by paragraphs 13 to 15 have effect in relation to orders made on or after 1 September 2014.

Liabilities of trustees appointed by Pensions Regulator etc
17 In section 255 (assessments under Part) in subsection (1) after paragraph (e) insert—

“(ea) liability under section 272C (former scheme administrator to retain liability in cases involving independent trustees etc),”

.
18 In section 272 (trustees etc liable as scheme administrator) in subsection (4) after “applying in relation to the pension scheme” insert “ or by reason of section 272C(7) applying in relation to a liability ”.
19 After section 272 insert—

“272A Liabilities of independent trustee
(1) This section applies in relation to a person (“P”) who is an independent trustee of a registered pension scheme.
(2) For the purposes of this section and section 272B an “independent trustee” is a trustee of a pension scheme—
(a) who is appointed by, or otherwise pursuant to, an order made—
(i) by the Pensions Regulator under section 7 of the Pensions Act 1995 or Article 7 of the Pensions (Northern Ireland) Order 1995 (appointment of trustees by the Pensions Regulator), or
(ii) by a court on an application made by the Pensions Regulator, and
(b) who is not a trustee of the pension scheme at any time before—
(i) the day on which the trustee's appointment as mentioned in paragraph (a) takes effect, or
(ii) if the trustee is appointed as mentioned in paragraph (a) on more than one occasion, the day on which the first appointment takes effect.
(3) In this section “the relevant day” means—
(a) the day on which P's appointment as trustee of the pension scheme as mentioned in subsection (2)(a) takes effect, or
(b) if P is appointed as trustee of the pension scheme as mentioned in subsection (2)(a) on more than one occasion, the day on which P's first appointment takes effect.
(4) If P is, or is one of the persons who are, the scheme administrator, P does not assume any liability falling within subsection (7) which P would otherwise assume (including by reason of section 272C(3) or (4)).
(5) Subsection (4) does not apply if P is, or is one of the persons who are, the scheme administrator at any time before the relevant day.
(6) In relation to any liability falling within subsection (7), in section 272(4) references to trustees or to persons who control the management of the pension scheme do not include P.
(7) The liabilities falling within this subsection are—
(a) liabilities for the following in respect of payments made (or treated as having been made) by the pension scheme on or before the relevant day—
(i) the short service refund lump sum charge;
(ii) the serious ill-health lump sum charge;
(iii) the special lump sum death benefits charge;
(iv) the authorised surplus payments charge;
(v) the scheme sanction charge in respect of scheme chargeable payments falling within section 241(1)(a) or (b);
(b) liabilities for the lifetime allowance charge in respect of benefit crystallisation events occurring on or before the relevant day;
(c) liabilities for the scheme sanction charge in respect of scheme chargeable payments treated under section 185A or 185F as having been made by the pension scheme in tax years earlier than the one in which the relevant day falls;
(d) any liability for the scheme sanction charge in respect of the relevant fraction of any scheme chargeable payment treated under section 185A as having been made by the pension scheme in the tax year in which the relevant day falls;
(e) where the pension scheme is treated under section 185F as having made a scheme chargeable payment in the tax year in which the relevant day falls and there is a relevant net gain, any liability for the scheme sanction charge in respect of the relevant amount;
(f) any liability to pay interest in respect of a liability mentioned in paragraphs (a) to (e) arising at any time.
(8) For the purposes of subsection (7)(d) “the relevant fraction” is—
A B
where—
A is the number of days in the tax year up to (and including) the relevant day, and
B is the number of days in the tax year.
(9) For the purposes of subsection (7)(e)—
(a) there is a “relevant net gain” if—
(i) the total amount of any gains treated under section 185F as accruing in the tax year on or before the relevant day, exceeds
(ii) the total amount of any losses treated under section 185F as so accruing, and
(b) “the relevant amount” is—
(i) the scheme chargeable payment, or
(ii) if that payment is greater than the excess of gains over losses mentioned in paragraph (a), the amount of that excess.
(10) Subsection (11) applies if—
(a) apart from that subsection, losses in relation to which section 185G(10) applies would be included in the total amount mentioned in subsection (9)(a)(ii), and
(b) the losses exceed the gains—
(i) which are included in the total amount mentioned in subsection (9)(a)(i), and
(ii) from which the losses can be deducted in accordance with section 185G(10).
(11) The losses are not to be included in the total amount mentioned in subsection (9)(a)(ii) so far as they exceed the gains.

272B Liabilities of scheme administrator appointed by independent trustee etc
(1) This section applies in relation to a person (“Q”) who is, or is one of the persons who are, the scheme administrator of a registered pension scheme where Q's appointment as such takes effect at a time when the pension scheme has one or more independent trustees.
(2) Q does not assume any liability falling within section 272A(7) which Q would otherwise assume.
(3) In relation to any liability falling within section 272A(7), in section 272(4) references to persons who control the management of the pension scheme do not include Q.
(4) Subsections (2) and (3) do not apply if Q is, or is one of the persons who are, the scheme administrator at any time before the relevant day.
(5) In this section, and in section 272A as it applies for the purposes of this section, “the relevant day” means the first day on which the pension scheme has an independent trustee (whether or not there are days between that day and the day on which Q's appointment takes effect on which the pension scheme has no independent trustees).

272C Former scheme administrator etc to retain liability
(1) This section applies in relation to a liability which, by reason of section 272A(4), is not assumed by P (in which case “the relevant day” is to be read in accordance with section 272A(3)).
(2) This section also applies in relation to a liability which, by reason of section 272B(2), is not assumed by Q (in which case “the relevant day” is to be read in accordance with section 272B(5)).
(3) The liability is to be retained or assumed by the person who is, or the persons who are, the scheme administrator immediately before the relevant day (unless dead or having ceased to exist).
(4) If there is no scheme administrator immediately before the relevant day, the liability is to be retained or assumed by the person who was, or the persons who were, the scheme administrator when there last was a scheme administrator before the relevant day (unless dead or having ceased to exist).
(5) Nothing in section 271 prevents a person from having (and continuing to have) the liability by reason of subsection (3) or (4).
(6) Subsection (7) applies if—
(a) no-one has the liability by reason of subsection (3) or (4),
(b) no-one who has the liability by reason of subsection (3) or (4) can be traced, or
(c) the person who has, or all the persons who have, the liability by reason of subsection (3) or (4) are in serious default (as determined in accordance with section 272(6)).
(7) The liability is to be assumed by the person or persons determined in accordance with section 272(4).
(8) Section 272(5) applies in relation to a person who assumes the liability by reason of subsection (7) as it applies in relation to a person who assumes a liability by reason of section 272.
(9) Nothing in this section prevents any person from being subject to the liability apart from this section (in addition to any person who is subject to the liability by reason of this section), and in particular the liability continues to be a liability of the scheme administrator for the purposes of section 271(2).
(10) If a person assumes the liability under section 271(2) at a time after P or Q's appointment as, or as one of the persons who are, the scheme administrator has ceased, the person who has, or the persons who have, the liability by reason of subsection (3) or (4) is, or are, released from the liability.
(11) A person who has, or persons who have, the liability by reason of subsection (3) or (4) may apply to an officer of Revenue and Customs to be released from the liability.
(12) Section 271(6) to (13) applies in relation to an application under subsection (11) as it applies in relation to an application under section 271(5).”

20 In section 273 (members liable as scheme administrator) after subsection (1) insert—

“(1A) This section also applies in relation to a registered pension scheme if—
(a) a person has, or persons have, by reason of section 272C(7) assumed a liability to pay tax (or interest on tax) by virtue of section 239 (scheme sanction charge) in respect of the whole or a part of a scheme chargeable payment falling within section 241(1)(b) or (c) made (or treated as having been made) by the pension scheme,
(b) that person, or each of those persons, has failed (in whole or in part) to satisfy the liability, and
(c) that person, or each of those persons, has either died or ceased to exist or is a person in whose case an officer of Revenue and Customs considers the person's failure to satisfy the liability to be of a serious nature.”

21 (1) Section 274 (supplementary) is amended as follows.
(2) In subsection (1)—
(a) after “(trustees etc)” insert “ , section 272C(7) ”, and
(b) in paragraph (b) after “administrator)” insert “ , section 272C(3) or (4) ”.
(3) In subsection (3)(b) after “272” insert “ , 272C ”.
22 Sections 272A to 272C (as inserted by paragraph 19) have effect for cases where the relevant day falls on or after 1 September 2014.

Other provision
23 In the following provisions (which relate to the giving of information etc) for “incorrect” (in all places) substitute “ inaccurate ”
(a) section 169(5)(a)(ii);
(b) section 257(4)(a) and (b);
(c) section 261(1)(a);
(d) section 264(2)(a).

SCHEDULE 8 Employee share schemes
Section 51

PART 1 Share incentive plans

Amendments to Chapter 6 of Part 7 of ITEPA 2003
1 Chapter 6 of Part 7 of ITEPA 2003 (employment income: income and exemptions relating to securities: share incentive plans) is amended as follows.
2 In the title omit “Approved”.
3 (1) Section 488 (introduction to share incentive plans) is amended as follows.
(2) In the heading omit “Approved”.
(3) In subsection (1)—
(a) omit paragraph (a), and
(b) in paragraph (b) for “those plans” substitute “ share incentive plans (“SIPs”) which are Schedule 2 SIPs ”.
(4) Omit subsection (2).
(5) In subsection (4)—
(a) omit the definitions of “approved” and “approval”, and
(b) after the definition of “PAYE deduction” insert—

““Schedule 2 SIP” is to be read in accordance with paragraph 1 and Part 10 of Schedule 2;”

.
4 (1) Section 489 (operation of tax advantages) is amended as follows.
(2) In the heading for “approved” substitute “ Schedule 2 ”.
(3) In subsection (1) for “an approved” substitute “ a Schedule 2 ”.
5 In section 498 (no charge on shares ceasing to be subject to plan in certain circumstances) in subsection (9)(b) for “an approved” substitute “ a Schedule 2 ”.
6 (1) Section 500 (operation of tax charges) is amended as follows.
(2) In the heading for “approved” substitute “ Schedule 2 ”.
(3) In subsection (1) for “an approved” substitute “ a Schedule 2 ”.
7 In section 503 (charge on partnership share money) in subsection (2), in the entry for paragraph 56, for “withdrawal of plan approval” substitute “ plan ceasing to be a Schedule 2 SIP ”.
8 (1) Section 506 (charge on partnership shares ceasing to be subject to plan) is amended as follows.
(2) In subsection (2) for “market value of the shares at the exit date” substitute “ relevant amount ”.
(3) After subsection (2) insert—

“(2A) Subject to subsection (2B), in subsection (2) “the relevant amount” means the market value of the shares at the exit date.
(2B) If the shares cease to be subject to the plan by virtue of a provision of the kind mentioned in paragraph 43(2B) of Schedule 2 (provision requiring partnership shares to be offered for sale), in subsection (2) “the relevant amount” means the lesser of—
(a) the amount of partnership share money used to acquire the shares, and
(b) the market value of the shares at the time they are offered for sale.
(2C) Paragraph 92(2) of Schedule 2 (market value of shares subject to a restriction) applies for the purposes of subsection (2B)(b).”

(4) After subsection (3) insert—

“(3A) If the shares cease to be subject to the plan by virtue of a provision of the kind mentioned in paragraph 43(2B) of Schedule 2, in subsection (3)(b) the reference to the market value of the shares at the exit date is to be read as a reference to the market value of the shares at the time they are offered for sale (as determined in accordance with paragraph 92(2) of Schedule 2 if relevant).”

9 In section 509 (modification of section 696) in subsection (1)(a) for “an approved” substitute “ a Schedule 2 ”.
10 In section 510 (payments by trustees) in subsection (1) for “an approved” substitute “ a Schedule 2 ”.
11 In section 511 (deductions to be made by trustees) in subsection (1) for “an approved” substitute “ a Schedule 2 ”.
12 In section 515 (tax advantages and charges under other Acts) in subsection (2)(a) and (d) for “an approved” substitute “ a Schedule 2 ”.
13 Schedule 2 is amended as follows.
14 In the title omit “Approved”.
15 In the cross-heading before paragraph 1 for “Approval of” substitute “ Introduction to Schedule 2 ”.
16 (1) Paragraph 1 (introduction) is amended as follows.
(2) For sub-paragraphs (1) and (2) substitute—

“A1 For the purposes of the SIP code a share incentive plan (a “SIP”) is a Schedule 2 SIP if the requirements of Parts 2 to 9 of this Schedule are met in relation to the SIP.”

(3) For sub-paragraph (4) substitute—

“(4) Sub-paragraph (A1) is subject to Part 10 of this Schedule which—
(a) requires notice of a plan to be given to Her Majesty's Revenue and Customs (“HMRC”) in order for the plan to be a Schedule 2 SIP (see paragraph 81A(1)),
(b) provides for a plan in relation to which such notice is given to be a Schedule 2 SIP (see paragraph 81A(4)), and
(c) gives power to HMRC to enquire into a plan and to decide that the plan should not be a Schedule 2 SIP (see paragraphs 81F to 81I).”

17 In the cross-heading before paragraph 6 omit “for approval”.
18 (1) Paragraph 6 (general requirements for SIPs) is amended as follows.
(2) Make the existing text sub-paragraph (1).
(3) After the new sub-paragraph (1) insert—

“(2) The requirements of this Part are also to be taken to include the requirements of paragraphs 89 and 90 (plan termination notices etc).”

19 (1) Paragraph 7 (the purpose of the plan) is amended as follows.
(2) In sub-paragraph (1)—
(a) after “provide” insert “ , in accordance with this Schedule, ”, and
(b) for “nature” substitute “ form ”.
(3) After sub-paragraph (1) insert—

“(1A) The plan must not provide benefits to employees otherwise than in accordance with this Schedule.
(1B) For example, the plan must not provide cash to employees as an alternative to shares.
(1C) Sub-paragraph (1A) does not prohibit an employee receiving a benefit from a company as a result of any shares in that company being held on the employee's behalf under the plan where the employee would have received the same benefit from the company had the shares been acquired by the employee otherwise than by virtue of the plan.”

(4) Omit sub-paragraph (2).
20 In paragraph 18 (requirement not to participate in other SIPs) in sub-paragraph (1) for “approved” substitute “ Schedule 2 ”.
21 In paragraph 18A (participation in more than one connected SIP) in sub-paragraph (1) for “approved” substitute “ Schedule 2 ”.
22 In paragraph 37 (holding period: power of participant to direct trustees) in sub-paragraph (3)(b) for “an approved” substitute “ a Schedule 2 ”.
23 In paragraph 43 (partnership shares: introduction) after sub-paragraph (2A) insert—

“(2B) Partnership shares may (notwithstanding sub-paragraph (2A) if relevant) be subject to provision requiring partnership shares acquired on behalf of an employee to be offered for sale but only if the requirement of sub-paragraph (2C) is met.
(2C) The consideration at which the shares are required to be offered for sale must be at least equal to—
(a) the amount of partnership share money applied in acquiring the shares on behalf of the employee, or
(b) if lower, the market value of the shares at the time they are offered for sale.”

24 In the cross-heading before paragraph 56 for “withdrawal of approval” substitute “ plan ceasing to be a Schedule 2 SIP ”.
25 (1) Paragraph 56 (repayment of partnership share money) is amended as follows.
(2) In sub-paragraph (1) for “approval of the plan is withdrawn (see paragraph 83)” substitute “ plan is not to be a Schedule 2 SIP by virtue of paragraph 81H or 81I ”.
(3) In sub-paragraph (2) for the words from “notice” to the end substitute “ the relevant day ”.
(4) After sub-paragraph (2) insert—

“(2A) If the plan is not to be a Schedule 2 SIP by virtue of paragraph 81H, in sub-paragraph (2) “the relevant day” means—
(a) the last day of the period in which notice of an appeal under paragraph 81K(2)(a) may be given, or
(b) if notice of such an appeal is given, the day on which the appeal is determined or withdrawn.
(2B) If the plan is not to be a Schedule 2 SIP by virtue of paragraph 81I, in sub-paragraph (2) “the relevant day” means—
(a) the last day of the period in which notice of an appeal under paragraph 81K(3) may be given, or
(b) if notice of such an appeal is given, the day on which the appeal is determined or withdrawn.”

26 (1) Paragraph 65 (general requirements as to dividend shares) is amended as follows.
(2) Make the existing text sub-paragraph (1).
(3) After the new sub-paragraph (1) insert—

“(2) Dividend shares may (notwithstanding sub-paragraph (1)(b) if relevant) be subject to provision requiring dividend shares acquired on behalf of an employee to be offered for sale but only if the requirement of sub-paragraph (3) is met.
(3) The consideration at which the shares are required to be offered for sale must be at least equal to—
(a) the amount of the cash dividends applied in acquiring the shares on behalf of the employee, or
(b) if lower, the market value of the shares at the time they are offered for sale.”

27 In paragraph 71A (duty to monitor participants) for “approved” substitute “ Schedule 2 ”.
28 For Part 10 substitute—

“PART 10 Notification of plans, annual returns and enquiries

Notice of SIP to be given to HMRC
81A (1) For a SIP to be a Schedule 2 SIP, notice of the SIP must be given to Her Majesty's Revenue and Customs (“HMRC”).
(2) The notice must—
(a) be given by the company,
(b) contain, or be accompanied by, such information as HMRC may require, and
(c) contain a declaration within sub-paragraph (3) made by such persons as HMRC may require.
(3) A declaration within this sub-paragraph is a declaration—
(a) that the requirements of Parts 2 to 9 of this Schedule are met in relation to the SIP, and
(b) if the declaration is made after the first date on which awards of shares are made under the SIP (“the first award date”), that those requirements—
(i) were met in relation to those awards of shares, and
(ii) have otherwise been met in relation to the SIP at all times on or after the first award date when shares appropriated to, or acquired on behalf of, individuals under the SIP have been held under the SIP.
(4) If notice is given under this paragraph in relation to a SIP, for the purposes of the SIP code the SIP is to be a Schedule 2 SIP at all times on and after the relevant date (but not before that date).
(5) But if the notice is given after the initial notification deadline, the SIP is to be a Schedule 2 SIP only from the beginning of the relevant tax year.
(6) For the purposes of this Part—
“the initial notification deadline” is 6 July in the tax year following that in which the first award date falls,
“the relevant date” is—
(a) the date on which the declaration within sub-paragraph (3) is made, or
(b) if that declaration is made after the first award date, the first award date, and
“the relevant tax year” is—
(a) the tax year in which the notice under this paragraph is given, or
(b) if that notice is given on or before 6 July in that tax year, the preceding tax year.
(7) Sub-paragraph (4) is subject to the following paragraphs of this Part.

Annual returns
81B (1) This paragraph applies if notice is given in relation to a SIP under paragraph 81A.
(2) The company must give to HMRC a return for the tax year in which the relevant date falls and for each subsequent tax year (subject to sub-paragraph (9)).
(3) If paragraph 81A(5) applies in relation to the SIP, in sub-paragraph (2) the reference to the tax year in which the relevant date falls is to be read as a reference to the relevant tax year.
(4) A return for a tax year must—
(a) contain, or be accompanied by, such information as HMRC may require, and
(b) be given on or before 6 July in the following tax year.
(5) The information which may be required under sub-paragraph (4)(a) includes (in particular) information to enable HMRC to determine the liability to tax, including capital gains tax, of—
(a) any person who has participated in the SIP, or
(b) any other person whose liability to tax the operation of the SIP is relevant to.
(6) If during a tax year an alteration is made in a key feature of—
(a) the SIP, or
(b) the plan trust,
the return for the tax year must contain a declaration within sub-paragraph (7) made by such persons as HMRC may require.
(7) A declaration within this sub-paragraph is a declaration that the alteration has not caused the requirements of Parts 2 to 9 of this Schedule not to be met in relation to the SIP.
(8) For the purposes of sub-paragraph (6) a “key feature” of a SIP or plan trust is a provision of the SIP or plan trust which is necessary in order for the requirements of Parts 2 to 9 of this Schedule to be met in relation to the SIP.
(9) A return is not required for any tax year following that in which the termination condition is met in relation to the SIP.
(10) For the purposes of this Part “the termination condition” is met in relation to a SIP when—
(a) a plan termination notice has been issued in relation to it under paragraph 89, and
(b) all the requirements under paragraphs 56(3), 68(4)(c) and 90 have been met by the trustees.
(11) If the company becomes aware that—
(a) anything which should have been included in, or should have accompanied, a return for a tax year was not included in, or did not accompany, the return,
(b) anything which should not have been included in, or should not have accompanied, a return for a tax year was included in, or accompanied, the return, or
(c) any other error or inaccuracy has occurred in relation to a return for a tax year,
the company must give an amended return correcting the position to HMRC without delay.
81C (1) This paragraph applies if the company fails to give a return for a tax year (containing, or accompanied by, all required information and declarations) on or before the date mentioned in paragraph 81B(4)(b) (“the date for delivery”).
(2) The company is liable for a penalty of £100.
(3) If the company's failure continues after the end of the period of 3 months beginning with the date for delivery, the company is liable for a further penalty of £300.
(4) If the company's failure continues after the end of the period of 6 months beginning with the date for delivery, the company is liable for a further penalty of £300.
(5) The company is liable for a further penalty under this sub-paragraph if—
(a) the company's failure continues after the end of the period of 9 months beginning with the date for delivery,
(b) HMRC decide that such a penalty should be payable, and
(c) HMRC give notice to the company specifying the period in respect of which the penalty is payable.
(The company may be liable for more than one penalty under this sub-paragraph.)
(6) The penalty under sub-paragraph (5) is £10 for each day that the failure continues during the period specified in the notice under sub-paragraph (5)(c).
(7) The period specified in the notice under sub-paragraph (5)(c)—
(a) may begin earlier than the date on which the notice is given, but
(b) may not begin until after the end of the period mentioned in sub-paragraph (5)(a) or, if relevant, the end of any period specified in any previous notice under sub-paragraph (5)(c) given in relation to the failure.
(8) Liability for a penalty under this paragraph does not arise if the company satisfies HMRC (or, on an appeal under paragraph 81K, the tribunal) that there is a reasonable excuse for its failure.
(9) For the purposes of sub-paragraph (8)—
(a) an insufficiency of funds is not a reasonable excuse, unless attributable to events outside the company's control,
(b) where the company relies on any other person to do anything, that is not a reasonable excuse unless the company took reasonable care to avoid the failure, and
(c) where the company had a reasonable excuse for the failure but the excuse ceased, the company is to be treated as having continued to have the excuse if the failure is remedied without unreasonable delay after the excuse ceased.

Notices and returns to be given electronically etc
81D (1) A notice under paragraph 81A, and any information accompanying the notice, must be given electronically.
(2) A return under paragraph 81B, and any information accompanying the return, must be given electronically.
(3) But, if HMRC consider it appropriate to do so, HMRC may allow the company to give a notice or return or any accompanying information in another way; and, if HMRC do so, the notice, return or information must be given in that other way.
(4) The Commissioners for Her Majesty's Revenue and Customs—
(a) must prescribe how notices, returns and accompanying information are to be given electronically;
(b) may make different provision for different cases or circumstances.
81E (1) This paragraph applies if a return under paragraph 81B, or any information accompanying such a return—
(a) is given otherwise than in accordance with paragraph 81D, or
(b) contains a material inaccuracy—
(i) which is careless or deliberate, or
(ii) which is not corrected as required by paragraph 81B(11).
(2) The company is liable for a penalty of an amount decided by HMRC.
(3) The penalty must not exceed £5,000.
(4) For the purposes of sub-paragraph (1)(b)(i) an inaccuracy is careless if it is due to a failure by the company to take reasonable care.

Enquiries
81F (1) This paragraph applies if notice is given in relation to a SIP under paragraph 81A.
(2) HMRC may enquire into the SIP if HMRC give notice to the company of HMRC's intention to do so no later than—
(a) 6 July in the tax year following the tax year in which the initial notification deadline falls, or
(b) if the notice under paragraph 81A is given after the initial notification deadline, 6 July in the second tax year following the relevant tax year.
(3) HMRC may enquire into the SIP if HMRC give notice to the company of HMRC's intention to do so no later than 12 months after the date on which a declaration within paragraph 81B(7) is given to HMRC.
(4) Sub-paragraph (5) applies if (at any time) HMRC have reasonable grounds for believing that requirements of Parts 2 to 9 of this Schedule—
(a) are not met in relation to the SIP, or
(b) have not been met in relation to the SIP.
(5) HMRC may enquire into the SIP if HMRC give notice to the company of HMRC's intention to do so.
(6) Notice may be given, and an enquiry may be conducted, under sub-paragraph (2), (3) or (5) even though the termination condition has been met in relation to the SIP.
81G (1) An enquiry under paragraph 81F(2), (3) or (5) is completed when HMRC give the company a notice (a “closure notice”) stating—
(a) that HMRC have completed the enquiry, and
(b) that—
(i) paragraph 81H is to apply,
(ii) paragraph 81I is to apply, or
(iii) neither paragraph 81H nor paragraph 81I is to apply.
(2) If the company receives notice under paragraph 81F(2), (3) or (5), the company may make an application to the tribunal for a direction requiring a closure notice for the enquiry to be given within a specified period.
(3) The application is to be subject to the relevant provisions of Part 5 of TMA 1970 (see, in particular, section 48(2)(b) of that Act).
(4) The tribunal must give a direction unless satisfied that HMRC have reasonable grounds for not giving the closure notice within the specified period.
81H (1) This paragraph applies if HMRC decide—
(a) that requirements of Parts 2 to 9 of this Schedule—
(i) are not met in relation to the SIP, or
(ii) have not been met in relation to the SIP, and
(b) that the situation is, or was, so serious that this paragraph should apply.
(2) If this paragraph applies—
(a) the SIP is not to be a Schedule 2 SIP with effect from—
(i) such relevant time as is specified in the closure notice, or
(ii) if no relevant time is specified, the time of the giving of the closure notice, and
(b) the company is liable for a penalty of an amount decided by HMRC.
(3) Sub-paragraph (2)(a) does not affect the operation of the SIP code in relation to shares appropriated to, or acquired on behalf of, an individual under the SIP before the time mentioned in sub-paragraph (2)(a)(i) or (ii) (as the case may be).
(4) In particular, if the SIP was a Schedule 2 SIP when the shares were appropriated to, or acquired on behalf of, the individual, the SIP is to continue to be a Schedule 2 SIP in relation to those shares.
(5) The penalty under sub-paragraph (2)(b) must not exceed an amount equal to twice HMRC's reasonable estimate of—
(a) the total income tax for which participants in the SIP have not been liable, or will not be liable in the future, and
(b) the total contributions under Part 1 of SSCBA 1992 or SSCB(NI)A 1992 for which any persons have not been liable, or will not be liable in the future,
in consequence of the SIP having been a Schedule 2 SIP at any relevant time before the time mentioned in sub-paragraph (2)(a)(i) or (ii) (as the case may be).
(6) The liabilities covered by sub-paragraph (5) include liabilities for income tax or contributions which a person has not had, or will not have, in consequence of sub-paragraphs (3) and (4).
(7) In this paragraph “relevant time” means any time before the giving of the closure notice when requirements of Parts 2 to 9 of this Schedule were not met in relation to the SIP.
81I (1) This paragraph applies if HMRC decide—
(a) that requirements of Parts 2 to 9 of this Schedule—
(i) are not met in relation to the SIP, or
(ii) have not been met in relation to the SIP, but
(b) that the situation is not, or was not, so serious that paragraph 81H should apply.
(2) If this paragraph applies, the company—
(a) is liable for a penalty of an amount decided by HMRC, and
(b) must, no later than 90 days after the relevant day, secure that the requirements of Parts 2 to 9 of this Schedule are met in relation to the SIP.
(3) The penalty under sub-paragraph (2)(a) must not exceed £5,000.
(4) In sub-paragraph (2)(b) “the relevant day” means—
(a) the last day of the period in which notice of an appeal under paragraph 81K(2)(b) may be given, or
(b) if notice of such an appeal is given, the day on which the appeal is determined or withdrawn.
(5) Sub-paragraph (2)(b) does not apply if the termination condition was met in relation to the SIP before the giving of the closure notice or is met before the end of the 90 day period mentioned in sub-paragraph (2)(b).
(6) If the company fails to comply with sub-paragraph (2)(b), HMRC may give the company a notice stating that that is the case (a “default notice”).
(7) If the company is given a default notice—
(a) the SIP is not to be a Schedule 2 SIP with effect from—
(i) such relevant time as is specified in the default notice, or
(ii) if no relevant time is specified, the time of the giving of the default notice, and
(b) the company is liable for a further penalty of an amount decided by HMRC.
(8) Sub-paragraph (7)(a) does not affect the operation of the SIP code in relation to shares appropriated to, or acquired on behalf of, an individual under the SIP before the time mentioned in sub-paragraph (7)(a)(i) or (ii) (as the case may be).
(9) In particular, if the SIP was a Schedule 2 SIP when the shares were appropriated to, or acquired on behalf of, the individual, the SIP is to continue to be a Schedule 2 SIP in relation to those shares.
(10) The penalty under sub-paragraph (7)(b) must not exceed an amount equal to twice HMRC's reasonable estimate of—
(a) the total income tax for which participants in the SIP have not been liable, or will not be liable in the future, and
(b) the total contributions under Part 1 of SSCBA 1992 or SSCB(NI)A 1992 for which any persons have not been liable, or will not be liable in the future,
in consequence of the SIP having been a Schedule 2 SIP at any relevant time before the time mentioned in sub-paragraph (7)(a)(i) or (ii) (as the case may be).
(11) The liabilities covered by sub-paragraph (10) include liabilities for income tax or contributions which a person has not had, or will not have, in consequence of sub-paragraphs (8) and (9).
(12) In this paragraph “relevant time” means any time before the giving of the default notice when requirements of Parts 2 to 9 of this Schedule were not met in relation to the SIP.

Assessment of penalties
81J (1) This paragraph applies if the company is liable for a penalty under this Part.
(2) HMRC must assess the penalty and notify the company of the assessment.
(3) Subject to sub-paragraphs (4) and (5), the assessment must be made no later than 12 months after the date on which the company becomes liable for the penalty.
(4) In the case of a penalty under paragraph 81E(1)(b), the assessment must be made no later than—
(a) 12 months after the date on which HMRC become aware of the inaccuracy, and
(b) 6 years after the date on which the company becomes liable for the penalty.
(5) In the case of a penalty under paragraph 81H(2)(b) or 81I(2)(a) or (7)(b) where notice of appeal is given under paragraph 81K(2) or (3), the assessment must be made no later than 12 months after the date on which the appeal is determined or withdrawn.
(6) A penalty payable under this Part must be paid—
(a) no later than 30 days after the date on which the notice under sub-paragraph (2) is given to the company, or
(b) if notice of appeal is given against the penalty under paragraph 81K(1) or (4), no later than 30 days after the date on which the appeal is determined or withdrawn.
(7) The penalty may be enforced as if it were corporation tax or, if the company is not within the charge to corporation tax, income tax charged in an assessment and due and payable.
(8) Sections 100 to 103 of TMA 1970 do not apply to a penalty under this Part.

Appeals
81K (1) The company may appeal against a decision of HMRC that the company is liable for a penalty under paragraph 81C or 81E.
(2) The company may appeal against—
(a) a decision of HMRC mentioned in paragraph 81H(1) or a decision of HMRC to specify, or not to specify, a relevant time in the closure notice;
(b) a decision of HMRC mentioned in paragraph 81I(1).
(3) The company may appeal against a decision of HMRC—
(a) to give the company a default notice under paragraph 81I;
(b) to specify, or not to specify, a relevant time in the default notice.
(4) The company may appeal against a decision of HMRC as to the amount of a penalty payable by the company under this Part.
(5) The company may appeal against a decision of an officer of Revenue and Customs to give a direction under section 998 of CTA 2009 (withdrawal of corporation tax deductions in relation to a Schedule 2 SIP).
(6) Notice of appeal must be given to HMRC no later than 30 days after the date on which—
(a) in the case of an appeal under sub-paragraph (1) or (4), the notice under paragraph 81J(2) is given to the company;
(b) in the case of an appeal under sub-paragraph (2), the closure notice is given;
(c) in the case of an appeal under sub-paragraph (3), the default notice is given;
(d) in the case of an appeal under sub-paragraph (5), notice of the officer's decision is given to the company.
(7) On an appeal under sub-paragraph (1), (3)(a) or (5) which is notified to the tribunal, the tribunal may affirm or cancel the decision.
(8) On an appeal under sub-paragraph (2) or (3)(b) which is notified to the tribunal, the tribunal may—
(a) affirm or cancel the decision, or
(b) substitute for the decision another decision which HMRC had power to make.
(9) On an appeal under sub-paragraph (4) which is notified to the tribunal, the tribunal may—
(a) affirm the amount of the penalty decided, or
(b) substitute another amount for that amount.
(10) Subject to this paragraph and paragraph 81J, the provisions of Part 5 of TMA 1970 relating to appeals have effect in relation to an appeal under this paragraph as they have effect in relation to an appeal against an assessment to corporation tax or, if the company is not within the charge to corporation tax, income tax.”

29 In paragraph 89 (termination of plan) in sub-paragraph (2) omit paragraph (a).
30 In paragraph 90 (effect of plan termination notice) in sub-paragraph (2) for “awarded to” substitute “ appropriated to, or acquired on behalf of, ”.
31 (1) Paragraph 93 (power to require information) is amended as follows.
(2) For sub-paragraph (1) substitute—

“(1) An officer of Revenue and Customs may by notice require a person to provide the officer with any information—
(a) which the officer reasonably requires for the performance of any functions of Her Majesty's Revenue and Customs or an officer of Revenue and Customs under the SIP code, and
(b) which the person to whom the notice is addressed has or can reasonably obtain.”

(3) In sub-paragraph (2)(a)—
(a) for sub-paragraph (i) substitute—

“(i) to check anything contained in a notice under paragraph 81A or a return under paragraph 81B or to check any information accompanying such a notice or return, or”, and”

(b) in sub-paragraph (ii) after “plan” insert “ or any other person whose liability to tax the operation of a plan is relevant to ”.
32 In paragraph 100 (index of defined expressions)—
(a) omit the entries for “approval” and “approved”, and
(b) at the appropriate place insert—

“Schedule 2 SIP	paragraph 1 and Part 10 of this Schedule”

.

Other amendments: TCGA 1992
33 TCGA 1992 is amended as follows.
34 In section 236A (relief for transfers to share incentive plans) for “an approved” substitute “ a Schedule 2 ”.
35 (1) Section 238A (share schemes and share incentives) is amended as follows.
(2) In the heading omit “Approved”.
(3) In subsection (1) omit “approved”.
(4) In subsection (2)(a) for “approved” substitute “ Schedule 2 ”.
36 Schedule 7C (relief for transfers to share plans) is amended as follows.
37 In the title for “approved” substitute “ Schedule 2 ”.
38 In paragraph 2 (conditions relating to disposal) in sub-paragraph (1) for “approved” substitute “ a Schedule 2 SIP ”.
39 Schedule 7D (share schemes and share incentives) is amended as follows.
40 In the title omit “Approved”.
41 In the title of Part 1 for “Approved” substitute “ Schedule 2 ”.
42 (1) Paragraph 1 (introduction to Part 1) is amended as follows.
(2) In sub-paragraph (1) for “an approved” substitute “ a Schedule 2 ”.
(3) In sub-paragraphs (2) and (3) omit “approved”.
43 In paragraph 2 (gains accruing to trustees) in sub-paragraph (1)(a) omit “approved”.

Other amendments: ITEPA 2003 and Part 4 of FA 2004
44 ITEPA 2003 is amended as follows.
45 In section 227 (scope of Part 4) in subsection (4)(c) omit “approved”.
46 In section 417 (scope of Part 7) in subsection (2), in the entry for Chapter 6, omit “approved”.
47 (1) Section 431A (provision relating to restricted securities) is amended as follows.
(2) In the heading for “approved” substitute “ tax advantaged ”.
(3) In subsection (2)(a) for “an approved” substitute “ a Schedule 2 ”.
48 In section 549 (application of Chapter 11 of Part 7) in subsection (2)(a) omit “approved”.
49 (1) Section 554E (exclusions under Part 7A) is amended as follows.
(2) In subsections (1)(a) and (3)(a)(i) and (b)(i) for “an approved” substitute “ a Schedule 2 ”.
(3) In subsection (4)(a) and (b) for the first “approved” substitute “ Schedule 2 ”.
50 In paragraph 11 of Schedule 4 (CSOP schemes: material interest) in sub-paragraph (5)(a) for “approved” substitute “ Schedule 2 ”.
51 In paragraph 30 of Schedule 5 (enterprise management incentives: material interest) in sub-paragraph (7)(a) for “share incentive plan approved under Schedule 2 (SIPs)” substitute “ Schedule 2 SIP (see Schedule 2) ”.
52 In section 195 of FA 2004 (pensions: transfer of certain shares to be treated as payment of contribution) in subsection (5), in the definition of “share incentive plan”, omit “approved”.

Other amendments: ITTOIA 2005
53 Chapter 3 of Part 4 of ITTOIA 2005 (savings and investment income: dividends etc from UK resident companies) is amended as follows.
54 In section 382 (contents of Chapter 3) in subsection (1)(c) for “an approved” substitute “ a Schedule 2 ”.
55 In the cross-heading before section 392 for “approved” substitute “ Schedule 2 ”.
56 In section 392 (SIP shares: introduction) in subsection (1) for “an approved” substitute “ a Schedule 2 ”.
57 (1) Section 394 (distribution when dividend shares cease to be subject to SIP) is amended as follows.
(2) In subsection (1) for “an approved” substitute “ a Schedule 2 ”.
(3) After subsection (3) insert—

“(3A) But if the shares cease to be subject to the plan by virtue of a provision of the kind mentioned in paragraph 65(2) of Schedule 2 to ITEPA 2003 (provision requiring dividend shares to be offered for sale), the amount of the distribution treated as made is the amount equal to the relevant fraction of the market value of the shares at the time they are offered for sale if that amount is less than the amount given by subsection (3).
(3B) For the purposes of subsection (3A) “the relevant fraction” is—
A B
where—
A is so much of the amount of the cash dividend applied to acquire the shares on the participant's behalf as represents a cash dividend paid in respect of plan shares in a UK resident company, and
B is the amount of the cash dividend applied to acquire the shares on the participant's behalf.
(3C) Paragraph 92(2) of Schedule 2 to ITEPA 2003 (market value of shares subject to a restriction) applies for the purposes of subsection (3A).”

(4) In subsection (7) for “approved” substitute “ Schedule 2 ”.
58 In section 395 (reduction in tax due in cases within section 394) in subsections (1)(b) and (4) for “approved” substitute “ Schedule 2 ”.
59 In section 396 (interpretation) in subsections (1) and (2) omit “approved”.
60 Chapter 4 of Part 4 of ITTOIA 2005 (savings and investment income: dividends etc from non-UK resident companies) is amended as follows.
61 In the cross-heading before section 405 for “approved” substitute “ Schedule 2 ”.
62 (1) Section 405 (SIP shares: introduction) is amended as follows.
(2) In subsection (1) for “an approved” substitute “ a Schedule 2 ”.
(3) In subsections (3) and (4) omit “approved”.
63 (1) Section 407 (dividend payment when dividend shares cease to be subject to SIP) is amended as follows.
(2) In subsection (1) for “an approved” substitute “ a Schedule 2 ”.
(3) After subsection (3) insert—

“(3A) But if the shares cease to be subject to the plan by virtue of a provision of the kind mentioned in paragraph 65(2) of Schedule 2 to ITEPA 2003 (provision requiring dividend shares to be offered for sale), the amount of the dividend treated as paid is the amount equal to the relevant fraction of the market value of the shares at the time they are offered for sale if that amount is less than the amount given by subsection (3).
(3B) For the purposes of subsection (3A) “the relevant fraction” is—
A B
where—
A is so much of the amount of the cash dividend applied to acquire the shares on the participant's behalf as represents a cash dividend paid in respect of plan shares in a non-UK resident company, and
B is the amount of the cash dividend applied to acquire the shares on the participant's behalf.
(3C) Paragraph 92(2) of Schedule 2 to ITEPA 2003 (market value of shares subject to a restriction) applies for the purposes of subsection (3A).”

(4) In subsection (5) for “approved” substitute “ Schedule 2 ”.
64 In section 408 (reduction in tax due in cases within section 407) in subsections (1)(b) and (3) for “approved” substitute “ Schedule 2 ”.
65 Chapter 9 of Part 6 of ITTOIA 2005 (exempt income) is amended as follows.
66 In the cross-heading before section 770 for “Approved” substitute “ Schedule 2 ”.
67 (1) Section 770 (amounts applied by SIP trustees) is amended as follows.
(2) In subsection (1)(a) for “an approved” substitute “ a Schedule 2 ”.
(3) In subsections (5) and (6) omit “approved”.

Other amendments: Part 9 of ITA 2007
68 Part 9 of ITA 2007 (special rules about settlements and trusts) is amended as follows.
69 In section 462 (overview of Part) in subsection (5) for “an approved” substitute “ a Schedule 2 ”.
70 In section 479 (trustees' accumulated or discretionary income charged at special rates) in subsection (5) for “approved” substitute “ Schedule 2 ”.
71 (1) Section 488 (application of section 479 to trustees of SIP) is amended as follows.
(2) In the heading for “approved” substitute “ Schedule 2 ”.
(3) In subsection (1)—
(a) in paragraph (a) for “an approved” substitute “ a Schedule 2 ”, and
(b) in paragraph (b) omit “approved”.
72 In section 489 (“the applicable period”) in subsection (8)(a) for “approved” substitute “ Schedule 2 ”.
73 In section 490 (interpretation of Chapter 5) in subsection (1) omit “approved”.

Other amendments: Chapter 1 of Part 11 of CTA 2009
74 Chapter 1 of Part 11 of CTA 2009 (relief for employee share acquisition schemes: share incentive plans) is amended as follows.
75 (1) Section 983 (overview of Chapter) is amended as follows.
(2) In subsection (1) for “approved” substitute “ Schedule 2 ”.
(3) In subsection (7) for “approval for a plan is withdrawn” substitute “ a plan ceases to be a Schedule 2 share incentive plan ”.
76 (1) Section 987 (deduction for cost of setting up plan) is amended as follows.
(2) In the heading for “an approved” substitute “ a Schedule 2 ”.
(3) In subsection (1) for “approved by an officer of Revenue and Customs” substitute “ a Schedule 2 share incentive plan ”.
(4) Omit subsection (3).
(5) In subsection (4) for “approval is given” (in both places) substitute “ relevant date falls ”.
(6) After subsection (4) insert—

“(4A) In subsection (4) “the relevant date”, in relation to a share incentive plan, has the meaning given in paragraph 81A(6) of Schedule 2 to ITEPA 2003.”

77 (1) Section 988 (deductions for running expenses) is amended as follows.
(2) In the heading for “an approved” substitute “ a Schedule 2 ”.
(3) In subsections (1) and (3) for “an approved” substitute “ a Schedule 2 ”.
78 In section 989 (deduction for contribution to plan trust) in subsection (1)(a) for “an approved” substitute “ a Schedule 2 ”.
79 In section 994 (deduction for providing free or matching shares) in subsection (1) for “an approved” substitute “ a Schedule 2 ”.
80 In section 995 (deduction for additional expense in providing partnership shares) in subsection (1)(a) for “an approved” substitute “ a Schedule 2 ”.
81 In section 997 (no deduction for expenses in providing dividend shares) in subsection (1) for “an approved” substitute “ a Schedule 2 ”.
82 For the cross-heading before section 998 substitute “ Plan ceasing to be a Schedule 2 SIP ”.
83 (1) Section 998 (withdrawal of deductions) is amended as follows.
(2) In the heading for “approval for share incentive plan withdrawn” substitute “ share incentive plan ceases to be a Schedule 2 share incentive plan ”.
(3) In subsection (1)—
(a) in paragraph (a)—
(i) after “section” insert “ 987, ”, and
(ii) for “an approved” substitute “ a Schedule 2 ”, and
(b) for paragraph (b) substitute—

“(b) by virtue of paragraph 81H or 81I of Schedule 2 to ITEPA 2003 the plan is not to be a Schedule 2 share incentive plan.”

Other amendments: Individual Savings Account Regulations 1998 (S.I. 1998/1870)
84 The Individual Savings Account Regulations 1998 are amended as follows.
85 In regulation 2 (interpretation) in paragraph (1)(a)—
(a) omit the definition of “approved SIP”,
(b) in the definitions of “ceasing to be subject to the plan”, “participant” and “plan shares” for “an approved” substitute “ a Schedule 2 ”, and
(c) at the appropriate place insert—

““Schedule 2 SIP” shall be construed in accordance with the SIP code (see section 488(3) of ITEPA 2003);”

.
86 In regulation 7 (qualifying investments) in paragraph (2)(h)(iii) for “an approved” substitute “ a Schedule 2 ”.
87 In regulation 34 (capital gains tax: adaptation of enactments) in paragraph (2)(a)—
(a) in the inserted subsections (12)(b)(iii) and (13)(d) for “an approved” substitute “ a Schedule 2 ”, and
(b) in the inserted subsection (13)(c) for “approved” substitute “ Schedule 2 ”.

Revocation of Employee Share Schemes (Electronic Communication of Returns and Information) Regulations 2007 (S.I. 2007/792)
88 The Employee Share Schemes (Electronic Communication of Returns and Information) Regulations 2007 are revoked.

Commencement and transitional provision
89 This Part is treated as having come into force on 6 April 2014.
90 Paragraphs 91 to 96 below apply in relation to a SIP established before 6 April 2014.
91 (1) If the SIP was an approved SIP immediately before 6 April 2014, this paragraph applies to any provision which the SIP contains immediately before that date and which requires the approval or agreement of Her Majesty's Revenue and Customs or an officer of Revenue and Customs to be obtained in relation to any matter.
(2) On and after 6 April 2014, the provision is to have effect without the requirement for the approval or agreement, unless the requirement reflects a requirement for approval or agreement set out in Schedule 2 to ITEPA 2003 (as amended by this Part).
92 (1) If the SIP was an approved SIP immediately before 6 April 2014, the amendments made by paragraph 19 above have effect in relation to the SIP only if, and when, there is an alteration in a key feature of the SIP or plan trust on or after that date.
(2) In sub-paragraph (1) “key feature” has the meaning given in paragraph 81B(8) of Schedule 2 to ITEPA 2003 (as inserted by paragraph 28 above).
93 If the SIP was an approved SIP immediately before 6 April 2014, on and after that date the SIP and the plan trust have effect with any modifications needed to reflect the amendments made by paragraphs 20 to 22, 25, 27, 29 and 30 above.
94 (1) Paragraph 81A of Schedule 2 to ITEPA 2003 (as inserted by paragraph 28 above) has effect in relation to the SIP—
(a) as if, at the end of sub-paragraph (1), the words “on or before 6 July 2015” were inserted,
(b) if the first date on which awards of shares are made under the SIP falls before 6 April 2014—
(i) as if, in sub-paragraph (3)(b), the reference to that date were a reference to 6 April 2014 and, accordingly, as if all references in paragraph 81A to the first award date were references to 6 April 2014,
(ii) as if sub-paragraph (3)(b)(i) were omitted, and
(iii) as if, in sub-paragraph (3)(b)(ii), “otherwise” were omitted,
(c) as if sub-paragraph (5) were omitted, and
(d) as if, in sub-paragraph (6), the definitions of “the initial notification deadline” and “the relevant tax year” were omitted.
(2) But the SIP cannot be a Schedule 2 SIP if, before 6 April 2014, an application for its approval was refused or an officer of Revenue and Customs decided to withdraw its approval.
(3) Sub-paragraph (2) is without prejudice to the outcome of any appeal under paragraph 82 or 85 of Schedule 2 to ITEPA 2003 against the refusal or decision to withdraw approval.
(4) The amendments made by this Part do not affect any right of appeal under paragraph 82 or 85 of Schedule 2 to ITEPA 2003 against a refusal or decision made before 6 April 2014 in relation to the SIP.
(5) Sub-paragraphs (6) and (7) apply if shares (“the relevant shares”) were appropriated to, or acquired on behalf of, an individual before 6 April 2014 under the SIP at a time when the SIP was an approved SIP.
(6) On and after 6 April 2014, the SIP code operates in relation to the relevant shares—
(a) as if the relevant shares were appropriated to, or acquired on behalf of, the individual under the SIP at a time when the SIP was a Schedule 2 SIP, and
(b) if no notice under paragraph 81A of Schedule 2 to ITEPA 2003 is given in relation to the SIP or if the SIP cannot be a Schedule 2 SIP because of sub-paragraph (2) of this paragraph, as if the SIP were a Schedule 2 SIP despite no notice being given or despite sub-paragraph (2).
(7) If no notice under paragraph 81A of Schedule 2 to ITEPA 2003 is given in relation to the SIP, paragraph 81B of that Schedule (as inserted by paragraph 28 above) is to apply in relation to the SIP despite no notice being given; and, for this purpose, the relevant date is to be taken to be 6 April 2014.
(8) In relation to the SIP—
(a) paragraph 81F of Schedule 2 to ITEPA 2003 (as inserted by paragraph 28 above) has effect as if for sub-paragraph (2) there were substituted—

“(2) HMRC may enquire into the SIP if HMRC give notice to the company of HMRC's intention to do so no later than 6 July 2016.”

, and
(b) the cases covered by paragraphs 81F(4)(b), 81H(1)(a)(ii) and 81I(1)(a)(ii) of Schedule 2 to ITEPA 2003 (as inserted by paragraph 28 above) include cases in which requirements of Parts 2 to 9 of that Schedule were not met before 6 April 2014.
95 If the SIP was an approved SIP before 6 April 2014, the amendments made by this Part do not affect the deductions which may be made in relation to the SIP under section 987 of CTA 2009 (deduction for costs of setting up SIP) if they would otherwise do so; and the amendment made by paragraph 83(3)(a)(i) above has no effect in relation to such deductions.
96 The amendments made by paragraph 31 above do not affect a notice given in relation to the SIP under paragraph 93 of Schedule 2 to ITEPA 2003 before 6 April 2014.

PART 2 SAYE option schemes

Amendments to Chapter 7 of Part 7 of ITEPA 2003
97 Chapter 7 of Part 7 of ITEPA 2003 (employment income: income and exemptions relating to securities: SAYE option schemes) is amended as follows.
98 In the title omit “Approved”.
99 (1) Section 516 (introduction to SAYE option schemes) is amended as follows.
(2) In the heading omit “Approved”.
(3) In subsection (1)—
(a) omit paragraph (a) and the “and” after it, and
(b) in paragraph (b) for “those” substitute “ SAYE option schemes which are Schedule 3 SAYE option ”.
(4) Omit subsection (2).
(5) In subsection (3)(c) for “approved” substitute “ Schedule 3 ”.
(6) In subsection (4)—
(a) omit the definition of “approved”, and
(b) after the definition of “SAYE option scheme” insert—

““Schedule 3 SAYE option scheme” is to be read in accordance with paragraph 1 and Part 8 of Schedule 3;”

.
100 In section 517 (share options to which Chapter applies) in subsection (1)(a) for “an approved” substitute “ a Schedule 3 ”.
101 (1) Section 519 (no charge in respect of exercise of option) is amended as follows.
(2) In subsection (1)(a) for “approved” substitute “ a Schedule 3 SAYE option scheme ”.
(3) In subsection (3A)—
(a) in paragraph (a) for “approved” substitute “ a Schedule 3 SAYE option scheme ”,
(b) in paragraph (b)(i) for “or (4)” substitute “ , (4) or (4A) ”,
(c) in paragraphs (c), (d) and (f) after sub-paragraph (ii) omit “or” and insert—

“(iia) the non-UK company reorganisation arrangement, or”

, and
(d) in paragraph (e) after sub-paragraph (ii) omit “or” and insert—

“(iia) the making of any non-UK company reorganisation arrangement which would fall within subsection (3H), or”

.
(4) In subsection (3H)—
(a) after “arrangement” insert “ or a non-UK company reorganisation arrangement ”, and
(b) in paragraph (b) for “an approved” substitute “ a Schedule 3 ”.
(5) In subsection (5)(b)—
(a) for “paragraph 42(3) provides” substitute “ paragraphs 40H(4) and 40I(9) provide ”,
(b) for “approved” substitute “ a Schedule 3 SAYE option scheme ”, and
(c) for “approval of the scheme has been previously withdrawn” substitute “ the scheme is not a Schedule 3 SAYE option scheme ”.
102 Schedule 3 is amended as follows.
103 In the title omit “Approved”.
104 In the cross-heading before paragraph 1 for “Approval of” substitute “ Introduction to Schedule 3 ”.
105 (1) Paragraph 1 (introduction) is amended as follows.
(2) For sub-paragraphs (1) and (2) substitute—

“A1 For the purposes of the SAYE code an SAYE option scheme is a Schedule 3 SAYE option scheme if the requirements of Parts 2 to 7 of this Schedule are met in relation to the scheme.”

(3) For sub-paragraph (4) substitute—

“(4) Sub-paragraph (A1) is subject to Part 8 of this Schedule which—
(a) requires notice of a scheme to be given to Her Majesty's Revenue and Customs (“HMRC”) in order for the scheme to be a Schedule 3 SAYE option scheme (see paragraph 40A(1)),
(b) provides for a scheme in relation to which such notice is given to be a Schedule 3 SAYE option scheme (see paragraph 40A(4)), and
(c) gives power to HMRC to enquire into a scheme and to decide that the scheme should not be a Schedule 3 SAYE option scheme (see paragraphs 40F to 40I).”

106 In the title of Part 2 omit “for approval”.
107 In the cross-heading before paragraph 4 omit “for approval”.
108 For paragraph 5 (general restriction on contents of scheme) substitute—

“5 (1) The purpose of the scheme must be to provide, in accordance with this Schedule, benefits for employees and directors in the form of share options.
(2) The scheme must not provide benefits to employees or directors otherwise than in accordance with this Schedule.
(3) For example, the scheme must not provide cash as an alternative to share options or shares which might otherwise be acquired by the exercise of share options.”

109 In paragraph 17 (requirements relating to shares that may be subject to share options) after sub-paragraph (1) insert—

“(1A) Sub-paragraph (1) and the other paragraphs of this Part are subject to paragraph 37(6B).”

110 In paragraph 25 (requirements as to contributions to savings arrangements) in sub-paragraph (3)(a) for “approved” substitute “ Schedule 3 ”.
111 (1) Paragraph 28 (requirements as to price for acquisition of shares) is amended as follows.
(2) After sub-paragraph (3) insert—

“(3A) If the scheme makes provision under sub-paragraph (3), the variation or variations made under that provision to take account of a variation in any share capital must (in particular) secure—
(a) that the total market value of the shares which may be acquired by the exercise of the share option is immediately after the variation or variations substantially the same as what it was immediately before the variation or variations, and
(b) that the total price at which those shares may be acquired is immediately after the variation or variations substantially the same as what it was immediately before the variation or variations.
(3B) Sub-paragraph (3) does not authorise any variation which would result in the requirements of the other paragraphs of this Schedule not being met in relation to the share option.”

(3) Omit sub-paragraph (4).
112 In paragraph 32 (exercise of options: death) after “exercised” insert “ at any time ”.
113 In paragraph 34 (exercise of options: scheme-related employment ends) in sub-paragraph (5)—
(a) omit paragraph (a) and the “or” after it, and
(b) in paragraph (b) after “organiser” insert “ where the transfer is not a relevant transfer within the meaning of the Transfer of Undertakings (Protection of Employment) Regulations 2006 ”.
114 (1) Paragraph 37 (exercise of options: company events) is amended as follows.
(2) In sub-paragraph (1) after “(4)” insert “ , (4A) ”.
(3) In sub-paragraph (4)(b) for “an approved” substitute “ a Schedule 3 ”.
(4) After sub-paragraph (4) insert—

“(4A) The relevant date for the purposes of this sub-paragraph is the date on which a non-UK company reorganisation arrangement applicable to or affecting—
(a) all the ordinary share capital of the company or all the shares of the same class as the shares to which the option relates, or
(b) all the shares, or all the shares of that same class, which are held by a class of shareholders identified otherwise than by reference to their employments or directorships or their participation in a Schedule 3 SAYE option scheme,
becomes binding on the shareholders covered by it.”

(5) After sub-paragraph (6) insert—

“(6A) Sub-paragraphs (6B) to (6F) apply if the scheme makes provision under sub-paragraph (1) or (6).
(6B) The scheme may provide that if, in consequence of a relevant event, shares in the company to which a share option relates no longer meet the requirements of Part 4 of this Schedule, the share option may be exercised under the provision made under sub-paragraph (1) or (6) (as the case may be) no later than 20 days after the day on which the relevant event occurs, notwithstanding that the shares no longer meet the requirements of Part 4 of this Schedule.
(6C) In sub-paragraph (6B) “relevant event” means—
(a) a person obtaining control of the company as mentioned in sub-paragraph (2)(a);
(b) a person obtaining control of the company as a result of a compromise or arrangement sanctioned by the court as mentioned in sub-paragraph (4);
(c) a person obtaining control of the company as a result of a non-UK company reorganisation arrangement which has become binding on the shareholders covered by it as mentioned in sub-paragraph (4A);
(d) a person who is bound or entitled to acquire shares in the company as mentioned in sub-paragraph (6) obtaining control of the company.
(6D) Provision made under sub-paragraph (6B) may not authorise the exercise of a share option, as the case may be—
(a) at a time outside the 6 month period mentioned in sub-paragraph (1), or
(b) at a time not covered by sub-paragraph (6).
(6E) The scheme may provide that a share option relating to shares in a company which is exercised during the period of 20 days ending with—
(a) the relevant date for the purposes of sub-paragraph (2), (4) or (4A), or
(b) the date on which any person becomes bound or entitled to acquire shares in the company as mentioned in sub-paragraph (6),
is to be treated as if it had been exercised in accordance with the provision made under sub-paragraph (1) or (6) (as the case may be).
(6F) If the scheme makes provision under sub-paragraph (6E) it must also provide that if—
(a) a share option is exercised in reliance on that provision in anticipation of—
(i) an event mentioned in sub-paragraph (2), (4) or (4A) occurring, or
(ii) a person becoming bound or entitled to acquire shares in the company as mentioned in sub-paragraph (6), but
(b) as the case may be—
(i) the relevant date for the purposes of sub-paragraph (2), (4) or (4A) does not fall during the period of 20 days beginning with the date on which the share option is exercised, or
(ii) the person does not become bound or entitled to acquire shares in the company by the end of the period of 20 days beginning with the date on which the share option is exercised,
the exercise of the share option is to be treated as having had no effect.”

115 (1) Paragraph 38 (exchanges of options on company reorganisation) is amended as follows.
(2) In sub-paragraph (2) after paragraph (b) omit “or” and insert—

“(ba) obtains control of the scheme company as a result of a non-UK company reorganisation arrangement which has become binding on the shareholders covered by it; or”

.
(3) In sub-paragraph (3) after paragraph (b) omit “and” and insert—

“(ba) where control is obtained in the way set out in sub-paragraph (2)(ba), within the period of 6 months beginning with the date on which the non-UK company reorganisation arrangement becomes binding on the shareholders covered by it, and”

.
116 (1) Paragraph 39 (requirements about share options granted in exchange) is amended as follows.
(2) In sub-paragraph (4)—
(a) in paragraph (c) for “equal” substitute “ be substantially the same as ”, and
(b) in paragraph (d) for “equal to” substitute “ substantially the same as ”.
(3) After sub-paragraph (7) insert—

“(8) For the purposes of this paragraph the market value of any shares is to be determined using a methodology agreed by Her Majesty's Revenue and Customs.”

117 For Part 8 substitute—

“PART 8 Notification of schemes, annual returns and enquiries

40A Notice of scheme to be given to HMRC
(1) For an SAYE option scheme to be a Schedule 3 SAYE option scheme, notice of the scheme must be given to Her Majesty's Revenue and Customs (“HMRC”).
(2) The notice must—
(a) be given by the scheme organiser,
(b) contain, or be accompanied by, such information as HMRC may require, and
(c) contain a declaration within sub-paragraph (3) made by such persons as HMRC may require.
(3) A declaration within this sub-paragraph is a declaration—
(a) that the requirements of Parts 2 to 7 of this Schedule are met in relation to the scheme, and
(b) if the declaration is made after the first date on which share options are granted under the scheme (“the first grant date”), that those requirements—
(i) were met in relation to those grants of share options, and
(ii) have otherwise been met in relation to the scheme at all times on or after the first grant date when share options granted under the scheme are outstanding.
(4) If notice is given under this paragraph in relation to an SAYE option scheme, for the purposes of the SAYE code the scheme is to be a Schedule 3 SAYE option scheme at all times on and after the relevant date (but not before that date).
(5) But if the notice is given after the initial notification deadline, the scheme is to be a Schedule 3 SAYE option scheme only from the beginning of the relevant tax year.
(6) For the purposes of this Part—
“the initial notification deadline” is 6 July in the tax year following that in which the first grant date falls,
“outstanding”, in relation to a share option, means that the option—
(a) has not been exercised, but
(b) is capable of being exercised in accordance with the scheme (whether on the meeting of any condition or otherwise),
“the relevant date” is—
(a) the date on which the declaration within sub-paragraph (3) is made, or
(b) if that declaration is made after the first grant date, the first grant date, and
“the relevant tax year” is—
(a) the tax year in which the notice under this paragraph is given, or
(b) if that notice is given on or before 6 July in that tax year, the preceding tax year.
(7) Sub-paragraph (4) is subject to the following paragraphs of this Part.

40B Annual returns
(1) This paragraph applies if notice is given in relation to an SAYE option scheme under paragraph 40A.
(2) The scheme organiser must give to HMRC a return for the tax year in which the relevant date falls and for each subsequent tax year (subject to sub-paragraph (9)).
(3) If paragraph 40A(5) applies in relation to the scheme, in sub-paragraph (2) the reference to the tax year in which the relevant date falls is to be read as a reference to the relevant tax year.
(4) A return for a tax year must—
(a) contain, or be accompanied by, such information as HMRC may require, and
(b) be given on or before 6 July in the following tax year.
(5) The information which may be required under sub-paragraph (4)(a) includes (in particular) information to enable HMRC to determine the liability to tax, including capital gains tax, of—
(a) any person who has participated in the scheme, or
(b) any other person whose liability to tax the operation of the scheme is relevant to.
(6) If during a tax year—
(a) an alteration is made in a key feature of the scheme, or
(b) variations are made under a provision made under paragraph 28(3) to take account of a variation in any share capital,
the return for the tax year must contain a declaration within sub-paragraph (7) made by such persons as HMRC may require.
(7) A declaration within this sub-paragraph is a declaration, as the case may be—
(a) that the alteration has, or
(b) that the variations have,
not caused the requirements of Parts 2 to 7 of this Schedule not to be met in relation to the scheme.
(8) For the purposes of sub-paragraph (6)(a) a “key feature” of a scheme is a provision of the scheme which is necessary in order for the requirements of Parts 2 to 7 of this Schedule to be met in relation to the scheme.
(9) A return is not required for any tax year following that in which the termination condition is met in relation to the scheme.
(10) For the purposes of this Part “the termination condition” is met in relation to a scheme when—
(a) all share options granted under the scheme—
(i) have been exercised, or
(ii) are no longer capable of being exercised in accordance with the scheme (because, for example, they have lapsed or been cancelled), and
(b) no more share options will be granted under the scheme.
(11) If the scheme organiser becomes aware that—
(a) anything which should have been included in, or should have accompanied, a return for a tax year was not included in, or did not accompany, the return,
(b) anything which should not have been included in, or should not have accompanied, a return for a tax year was included in, or accompanied, the return, or
(c) any other error or inaccuracy has occurred in relation to a return for a tax year,
the scheme organiser must give an amended return correcting the position to HMRC without delay.
40C (1) This paragraph applies if the scheme organiser fails to give a return for a tax year (containing, or accompanied by, all required information and declarations) on or before the date mentioned in paragraph 40B(4)(b) (“the date for delivery”).
(2) The scheme organiser is liable for a penalty of £100.
(3) If the scheme organiser's failure continues after the end of the period of 3 months beginning with the date for delivery, the scheme organiser is liable for a further penalty of £300.
(4) If the scheme organiser's failure continues after the end of the period of 6 months beginning with the date for delivery, the scheme organiser is liable for a further penalty of £300.
(5) The scheme organiser is liable for a further penalty under this sub-paragraph if—
(a) the scheme organiser's failure continues after the end of the period of 9 months beginning with the date for delivery,
(b) HMRC decide that such a penalty should be payable, and
(c) HMRC give notice to the scheme organiser specifying the period in respect of which the penalty is payable.
(The scheme organiser may be liable for more than one penalty under this sub-paragraph.)
(6) The penalty under sub-paragraph (5) is £10 for each day that the failure continues during the period specified in the notice under sub-paragraph (5)(c).
(7) The period specified in the notice under sub-paragraph (5)(c)—
(a) may begin earlier than the date on which the notice is given, but
(b) may not begin until after the end of the period mentioned in sub-paragraph (5)(a) or, if relevant, the end of any period specified in any previous notice under sub-paragraph (5)(c) given in relation to the failure.
(8) Liability for a penalty under this paragraph does not arise if the scheme organiser satisfies HMRC (or, on an appeal under paragraph 40K, the tribunal) that there is a reasonable excuse for its failure.
(9) For the purposes of sub-paragraph (8)—
(a) an insufficiency of funds is not a reasonable excuse, unless attributable to events outside the scheme organiser's control,
(b) where the scheme organiser relies on any other person to do anything, that is not a reasonable excuse unless the scheme organiser took reasonable care to avoid the failure, and
(c) where the scheme organiser had a reasonable excuse for the failure but the excuse ceased, the scheme organiser is to be treated as having continued to have the excuse if the failure is remedied without unreasonable delay after the excuse ceased.

40D Notices and returns to be given electronically etc
(1) A notice under paragraph 40A, and any information accompanying the notice, must be given electronically.
(2) A return under paragraph 40B, and any information accompanying the return, must be given electronically.
(3) But, if HMRC consider it appropriate to do so, HMRC may allow the scheme organiser to give a notice or return or any accompanying information in another way; and, if HMRC do so, the notice, return or information must be given in that other way.
(4) The Commissioners for Her Majesty's Revenue and Customs—
(a) must prescribe how notices, returns and accompanying information are to be given electronically;
(b) may make different provision for different cases or circumstances.
40E (1) This paragraph applies if a return under paragraph 40B, or any information accompanying such a return—
(a) is given otherwise than in accordance with paragraph 40D, or
(b) contains a material inaccuracy—
(i) which is careless or deliberate, or
(ii) which is not corrected as required by paragraph 40B(11).
(2) The scheme organiser is liable for a penalty of an amount decided by HMRC.
(3) The penalty must not exceed £5,000.
(4) For the purposes of sub-paragraph (1)(b)(i) an inaccuracy is careless if it is due to a failure by the scheme organiser to take reasonable care.

40F Enquiries
(1) This paragraph applies if notice is given in relation to an SAYE option scheme under paragraph 40A.
(2) HMRC may enquire into the scheme if HMRC give notice to the scheme organiser of HMRC's intention to do so no later than—
(a) 6 July in the tax year following the tax year in which the initial notification deadline falls, or
(b) if the notice under paragraph 40A is given after the initial notification deadline, 6 July in the second tax year following the relevant tax year.
(3) HMRC may enquire into the scheme if HMRC give notice to the scheme organiser of HMRC's intention to do so no later than 12 months after the date on which a declaration within paragraph 40B(7) is given to HMRC.
(4) Sub-paragraph (5) applies if (at any time) HMRC have reasonable grounds for believing that requirements of Parts 2 to 7 of this Schedule—
(a) are not met in relation to the scheme, or
(b) have not been met in relation to the scheme.
(5) HMRC may enquire into the scheme if HMRC give notice to the scheme organiser of HMRC's intention to do so.
(6) Notice may be given, and an enquiry may be conducted, under sub-paragraph (2), (3) or (5) even though the termination condition is met in relation to the scheme.
40G (1) An enquiry under paragraph 40F(2), (3) or (5) is completed when HMRC give the scheme organiser a notice (a “closure notice”) stating—
(a) that HMRC have completed the enquiry, and
(b) that—
(i) paragraph 40H is to apply,
(ii) paragraph 40I is to apply, or
(iii) neither paragraph 40H nor paragraph 40I is to apply.
(2) If the scheme organiser receives notice under paragraph 40F(2), (3) or (5), the scheme organiser may make an application to the tribunal for a direction requiring a closure notice for the enquiry to be given within a specified period.
(3) The application is to be subject to the relevant provisions of Part 5 of TMA 1970 (see, in particular, section 48(2)(b) of that Act).
(4) The tribunal must give a direction unless satisfied that HMRC have reasonable grounds for not giving the closure notice within the specified period.
40H (1) This paragraph applies if HMRC decide—
(a) that requirements of Parts 2 to 7 of this Schedule—
(i) are not met in relation to the scheme, or
(ii) have not been met in relation to the scheme, and
(b) that the situation is, or was, so serious that this paragraph should apply.
(2) If this paragraph applies—
(a) the scheme is not to be a Schedule 3 SAYE option scheme with effect from—
(i) such relevant time as is specified in the closure notice, or
(ii) if no relevant time is specified, the time of the giving of the closure notice, and
(b) the scheme organiser is liable for a penalty of an amount decided by HMRC.
(3) Sub-paragraph (4) applies in relation to a share option granted under the scheme if the option—
(a) is granted at a time before that mentioned in sub-paragraph (2)(a)(i) or (ii) (as the case may be) when the scheme is a Schedule 3 SAYE option scheme, but
(b) is exercised at or after the time mentioned in sub-paragraph (2)(a)(i) or (ii) (as the case may be).
(4) For the purposes of section 519 (exemption in respect of exercise of share option) in its application to the option, the scheme is to be taken still to be a Schedule 3 SAYE option scheme at the time of the exercise of the option.
(5) The penalty under sub-paragraph (2)(b) must not exceed an amount equal to twice HMRC's reasonable estimate of—
(a) the total income tax for which persons who have been granted share options under the scheme have not been liable, or will not be liable in the future, and
(b) the total contributions under Part 1 of SSCBA 1992 or SSCB(NI)A 1992 for which any persons have not been liable, or will not be liable in the future,
in consequence of the scheme having been a Schedule 3 SAYE option scheme at any relevant time before the time mentioned in sub-paragraph (2)(a)(i) or (ii) (as the case may be).
(6) The liabilities covered by sub-paragraph (5) include liabilities for income tax or contributions which a person has not had, or will not have, in consequence of sub-paragraph (4).
(7) In this paragraph “relevant time” means any time before the giving of the closure notice when requirements of Parts 2 to 7 of this Schedule were not met in relation to the scheme.
40I (1) This paragraph applies if HMRC decide—
(a) that requirements of Parts 2 to 7 of this Schedule—
(i) are not met in relation to the scheme, or
(ii) have not been met in relation to the scheme, but
(b) that the situation is not, or was not, so serious that paragraph 40H should apply.
(2) If this paragraph applies, the scheme organiser—
(a) is liable for a penalty of an amount decided by HMRC, and
(b) must, no later than 90 days after the relevant day, secure that the requirements of Parts 2 to 7 of this Schedule are met in relation to the scheme.
(3) The penalty under sub-paragraph (2)(a) must not exceed £5,000.
(4) In sub-paragraph (2)(b) “the relevant day” means—
(a) the last day of the period in which notice of an appeal under paragraph 40K(2)(b) may be given, or
(b) if notice of such an appeal is given, the day on which the appeal is determined or withdrawn.
(5) Sub-paragraph (2)(b) does not apply if the termination condition was met in relation to the scheme before the closure notice was given or is met before the end of the 90 day period mentioned in sub-paragraph (2)(b).
(6) If the scheme organiser fails to comply with sub-paragraph (2)(b), HMRC may give the scheme organiser a notice stating that that is the case (a “default notice”).
(7) If the scheme organiser is given a default notice—
(a) the scheme is not to be a Schedule 3 SAYE option scheme with effect from—
(i) such relevant time as is specified in the default notice, or
(ii) if no relevant time is specified, the time of the giving of the default notice, and
(b) the scheme organiser is liable for a further penalty of an amount decided by HMRC.
(8) Sub-paragraph (9) applies in relation to a share option granted under the scheme if the option—
(a) is granted at a time before that mentioned in sub-paragraph (7)(a)(i) or (ii) (as the case may be) when the scheme is a Schedule 3 SAYE option scheme, but
(b) is exercised at or after the time mentioned in sub-paragraph (7)(a)(i) or (ii) (as the case may be).
(9) For the purposes of section 519 (exemption in respect of exercise of share option) in its application to the option, the scheme is to be taken still to be a Schedule 3 SAYE option scheme at the time of the exercise of the option.
(10) The penalty under sub-paragraph (7)(b) must not exceed an amount equal to twice HMRC's reasonable estimate of—
(a) the total income tax for which persons who have been granted share options under the scheme have not been liable, or will not be liable in the future, and
(b) the total contributions under Part 1 of SSCBA 1992 or SSCB(NI)A 1992 for which any persons have not been liable, or will not be liable in the future,
in consequence of the scheme having been a Schedule 3 SAYE option scheme at any relevant time before the time mentioned in sub-paragraph (7)(a)(i) or (ii) (as the case may be).
(11) The liabilities covered by sub-paragraph (10) include liabilities for income tax or contributions which a person has not had, or will not have, in consequence of sub-paragraph (9).
(12) In this paragraph “relevant time” means any time before the giving of the default notice when requirements of Parts 2 to 7 of this Schedule were not met in relation to the scheme.

40J Assessment of penalties
(1) This paragraph applies if the scheme organiser is liable for a penalty under this Part.
(2) HMRC must assess the penalty and notify the scheme organiser of the assessment.
(3) Subject to sub-paragraphs (4) and (5), the assessment must be made no later than 12 months after the date on which the scheme organiser becomes liable for the penalty.
(4) In the case of a penalty under paragraph 40E(1)(b), the assessment must be made no later than—
(a) 12 months after the date on which HMRC become aware of the inaccuracy, and
(b) 6 years after the date on which the scheme organiser becomes liable for the penalty.
(5) In the case of a penalty under paragraph 40H(2)(b) or 40I(2)(a) or (7)(b) where notice of appeal is given under paragraph 40K(2) or (3), the assessment must be made no later than 12 months after the date on which the appeal is determined or withdrawn.
(6) A penalty payable under this Part must be paid—
(a) no later than 30 days after the date on which the notice under sub-paragraph (2) is given to the scheme organiser, or
(b) if notice of appeal is given against the penalty under paragraph 40K(1) or (4), no later than 30 days after the date on which the appeal is determined or withdrawn.
(7) The penalty may be enforced as if it were corporation tax or, if the scheme organiser is not within the charge to corporation tax, income tax charged in an assessment and due and payable.
(8) Sections 100 to 103 of TMA 1970 do not apply to a penalty under this Part.

40K Appeals
(1) The scheme organiser may appeal against a decision of HMRC that the scheme organiser is liable for a penalty under paragraph 40C or 40E.
(2) The scheme organiser may appeal against—
(a) a decision of HMRC mentioned in paragraph 40H(1) or a decision of HMRC to specify, or not to specify, a relevant time in the closure notice;
(b) a decision of HMRC mentioned in paragraph 40I(1).
(3) The scheme organiser may appeal against a decision of HMRC—
(a) to give the scheme organiser a default notice under paragraph 40I;
(b) to specify, or not to specify, a relevant time in the default notice.
(4) The scheme organiser may appeal against a decision of HMRC as to the amount of a penalty payable by the scheme organiser under this Part.
(5) Notice of appeal must be given to HMRC no later than 30 days after the date on which—
(a) in the case of an appeal under sub-paragraph (1) or (4), the notice under paragraph 40J(2) is given to the scheme organiser;
(b) in the case of an appeal under sub-paragraph (2), the closure notice is given;
(c) in the case of an appeal under sub-paragraph (3), the default notice is given.
(6) On an appeal under sub-paragraph (1) or (3)(a) which is notified to the tribunal, the tribunal may affirm or cancel the decision.
(7) On an appeal under sub-paragraph (2) or (3)(b) which is notified to the tribunal, the tribunal may—
(a) affirm or cancel the decision, or
(b) substitute for the decision another decision which HMRC had power to make.
(8) On an appeal under sub-paragraph (4) which is notified to the tribunal, the tribunal may—
(a) affirm the amount of the penalty decided, or
(b) substitute another amount for that amount.
(9) Subject to this paragraph and paragraph 40J, the provisions of Part 5 of TMA 1970 relating to appeals have effect in relation to an appeal under this paragraph as they have effect in relation to an appeal against an assessment to corporation tax or, if the scheme organiser is not within the charge to corporation tax, income tax.”

118 (1) Paragraph 45 (power to require information) is amended as follows.
(2) For sub-paragraph (1) substitute—

“(1) An officer of Revenue and Customs may by notice require a person to provide the officer with any information—
(a) which the officer reasonably requires for the performance of any functions of Her Majesty's Revenue and Customs or an officer of Revenue and Customs under the SAYE code, and
(b) which the person to whom the notice is addressed has or can reasonably obtain.”

(3) In sub-paragraph (2)(a)—
(a) for sub-paragraph (i) substitute—

“(i) to check anything contained in a notice under paragraph 40A or a return under paragraph 40B or to check any information accompanying such a notice or return, or”, and”

(b) in sub-paragraph (ii) after “scheme” insert “ or any other person whose liability to tax the operation of a scheme is relevant to ”.
119 After paragraph 47 insert—

“Non-UK company reorganisation arrangements
47A (1) For the purposes of the SAYE code a “non-UK company reorganisation arrangement” is an arrangement made in relation to a company under the law of a territory outside the United Kingdom—
(a) which gives effect to a reorganisation of the company's share capital by the consolidation of shares of different classes, or by the division of shares into shares of different classes, or by both of those methods, and
(b) which is approved by a resolution of members of the company.
(2) A resolution does not count for the purposes of sub-paragraph (1)(b) unless the members who vote in favour of approving the arrangement represent more than 50% of the total voting rights of all the members having the right to vote on the issue.”

120 In paragraph 49 (index of defined expressions)—
(a) omit the entry for “approved”, and
(b) at the appropriate places insert—

“non-UK company reorganisation arrangement	paragraph 47A”

“Schedule 3 SAYE option scheme	paragraph 1 and Part 8 of this Schedule”

.

Other amendments: TCGA 1992
121 TCGA 1992 is amended as follows.
122 (1) Section 105A (shares acquired on same day: election for alternative treatment) is amended as follows.
(2) For “approved-scheme” (in all places) substitute “ tax-advantaged-scheme ”.
(3) In subsection (1)(b)(ii) omit “approved”.
123 In section 105B (provision supplementary to section 105A) in subsections (7) and (8) for “approved-scheme” substitute “ tax-advantaged-scheme ”.
124 In section 238A (share schemes and share incentives) in subsection (2)(b) for “approved” substitute “ Schedule 3 ”.
125 Part 2 of Schedule 7D (SAYE option schemes) is amended as follows.
126 In the title for “Approved” substitute “ Schedule 3 ”.
127 In paragraph 9 (introduction) in sub-paragraphs (1) and (2) omit “approved”.
128 (1) Paragraph 10 (market value rule not to apply) is amended as follows.
(2) In sub-paragraph (1)—
(a) in paragraph (a)(i) for “an approved” substitute “ a Schedule 3 ”, and
(b) in paragraph (b) for “approved” substitute “ a Schedule 3 SAYE option scheme ”.
(3) For sub-paragraph (3) substitute—

“(3) Sub-paragraph (3A) applies for the purposes of sub-paragraph (1)(b) if—
(a) the SAYE option scheme is not to be a Schedule 3 SAYE option scheme by virtue of paragraph 40H or 40I of Schedule 3 to ITEPA 2003, and
(b) the option was granted before, but exercised at or after, the time mentioned in paragraph 40H(2)(a)(i) or (ii) or 40I(7)(a)(i) or (ii) of that Schedule (as the case may be).
(3A) The scheme is to be taken still to be a Schedule 3 SAYE option scheme when the option is exercised.”

Other amendments: ITEPA 2003, Part 4 of FA 2004, ITTOIA 2005 and CTA 2009
129 ITEPA 2003 is amended as follows.
130 In section 227 (scope of Part 4) in subsection (4)(e) omit “approved”.
131 In section 417 (scope of Part 7) in subsection (2), in the entry for Chapter 7, omit “approved”.
132 In section 431A (provision relating to restricted securities) in subsection (2)(b) for “an approved” substitute “ a Schedule 3 ”.
133 In section 473 (introduction to taxation of securities options) in subsection (4)(a) for “approved” substitute “ Schedule 3 ”.
134 In section 476 (charge on occurrence of chargeable event) in subsection (6), in the entry for section 519, omit “approved”.
135 In section 549 (application of Chapter 11 of Part 7) in subsection (2)(b) omit “approved”.
136 (1) Section 554E (exclusions under Part 7A) is amended as follows.
(2) In subsection (1)(b) for “an approved” substitute “ a Schedule 3 ”.
(3) In subsection (3)(a)(ii) and (b)(ii) for the first “an approved” substitute “ a Schedule 3 ”.
(4) In subsection (4)(a) and (b) for the second “approved” substitute “ Schedule 3 ”.
137 In section 697 (PAYE: enhancing the value of an asset) in subsection (4)—
(a) in paragraph (a) omit the words from “Schedule 3” to the second “or”,
(b) after paragraph (a) insert—

“(aa) any shares acquired by the employee under a scheme which is a Schedule 3 SAYE option scheme (see Schedule 3),”

, and
(c) in paragraph (b) for “such a scheme” substitute “ a scheme mentioned in any of the preceding paragraphs ”.
138 In section 701 (PAYE: meaning of “asset”) in subsection (2)(c)—
(a) in sub-paragraph (i) omit “Schedule 3 (approved SAYE option schemes) or”, and
(b) after sub-paragraph (i) insert—

“(iza) any shares acquired by the employee under a scheme which is a Schedule 3 SAYE option scheme (see Schedule 3),”

.
139 In section 195 of FA 2004 (pensions: transfer of certain shares to be treated as payment of contribution) in subsection (5), in the definition of “SAYE option scheme”, omit “approved”.
140 (1) Section 94A of ITTOIA 2005 (costs of setting up SAYE option scheme or CSOP scheme) is amended as follows.
(2) In subsection (1)—
(a) in paragraph (a) omit “that is approved by an officer of Revenue and Customs”, and
(b) omit paragraph (b) and the “and” before it.
(3) In subsection (2)—
(a) at the beginning of paragraph (a) insert “ Schedule 3 ”,
(b) at the beginning of paragraph (b) insert “ Schedule 4 ”, and
(c) omit the final sentence.
(4) In subsection (4) for “approval is given” (in both places) substitute “ relevant date falls ”.
(5) After subsection (4) insert—

“(4A) In subsection (4) “the relevant date”—
(a) in relation to a Schedule 3 SAYE option scheme, has the meaning given in paragraph 40A(6) of Schedule 3 to ITEPA 2003, and
(b) in relation to a Schedule 4 CSOP scheme, has the meaning given in paragraph 28A(6) of Schedule 4 to ITEPA 2003.”

141 (1) Section 703 of ITTOIA 2005 (SAYE interest: meaning of “certified SAYE savings arrangement”) is amended as follows.
(2) In subsection (2)(b) for “an approved” substitute “ a Schedule 3 ”.
(3) In subsection (3) for the definition of “SAYE option scheme” substitute—

““Schedule 3 SAYE option scheme” has the meaning given in Schedule 3 to ITEPA 2003.”

142 (1) Section 999 of CTA 2009 (deduction for costs of setting up SAYE option scheme etc) is amended as follows.
(2) In subsection (1)—
(a) in paragraph (a) omit “that is approved by an officer of Revenue and Customs”, and
(b) omit paragraph (b) and the “and” before it.
(3) In subsection (2)—
(a) at the beginning of paragraph (a) insert “ Schedule 3 ”,
(b) at the beginning of paragraph (b) insert “ Schedule 4 ”, and
(c) omit the final sentence.
(4) In subsection (6) for “approval is given” (in all places) substitute “ relevant date falls ”.
(5) After subsection (6) insert—

“(6A) In subsection (6) “the relevant date”—
(a) in relation to a Schedule 3 SAYE option scheme, has the meaning given in paragraph 40A(6) of Schedule 3 to ITEPA 2003, and
(b) in relation to a Schedule 4 CSOP scheme, has the meaning given in paragraph 28A(6) of Schedule 4 to ITEPA 2003.”

Other amendments: Individual Savings Account Regulations 1998 (S.I. 1998/1870)
143 The Individual Savings Account Regulations 1998 are amended as follows.
144 In regulation 2 (interpretation) in paragraph (1)(a)—
(a) omit the definition of “approved SAYE option scheme”, and
(b) at the appropriate place insert—

““Schedule 3 SAYE option scheme” shall be construed in accordance with the SAYE code (see section 516(3) of ITEPA 2003);”

.
145 In regulation 7 (qualifying investments) in paragraphs (2)(h)(i) and (10)(a) for “an approved” substitute “ a Schedule 3 ”.

Commencement and transitional provision
146 This Part is treated as having come into force on 6 April 2014.
147 Paragraphs 148 to 157 below apply in relation to an SAYE option scheme established before 6 April 2014.
148 (1) If the scheme was an approved SAYE option scheme immediately before 6 April 2014, this paragraph applies to any provision which the scheme contains immediately before that date and which requires the approval or agreement of Her Majesty's Revenue and Customs or an officer of Revenue and Customs to be obtained in relation to any matter.
(2) On and after 6 April 2014, the provision is to have effect without the requirement for the approval or agreement, unless the requirement reflects a requirement for approval or agreement set out in Schedule 3 to ITEPA 2003 (as amended by this Part).
149 (1) If the scheme was an approved SAYE option scheme immediately before 6 April 2014, the amendment made by paragraph 108 above has effect in relation to the scheme only if, and when, there is an alteration in a key feature of the scheme on or after that date.
(2) In sub-paragraph (1) “key feature” has the meaning given in paragraph 40B(8) of Schedule 3 to ITEPA 2003 (as inserted by paragraph 117 above).
150 If the scheme was an approved SAYE option scheme immediately before 6 April 2014, on and after that date the scheme has effect with any modifications needed to reflect the amendment made by paragraph 110 above.
151 (1) This paragraph applies if, immediately before 6 April 2014, the scheme was an approved SAYE option scheme which contains provision authorised by paragraph 28(3) of Schedule 3 to ITEPA 2003.
(2) On and after 6 April 2014, the scheme has effect with any modifications needed to reflect the amendments made by paragraph 111 above.
152 (1) The amendment made by paragraph 112 above has no effect in relation to share options granted before 6 April 2014 under the scheme.
(2) If the scheme was an approved SAYE option scheme immediately before 6 April 2014, on and after that date the scheme has effect with any modifications needed to reflect the amendment made by paragraph 112 above (subject to sub-paragraph (1) of this paragraph).
153 (1) The amendments made by paragraph 113 above have no effect in a case where P ceases to hold the scheme-related employment before 6 April 2014.
(2) If immediately before 6 April 2014 the scheme was an approved SAYE option scheme which contains provision authorised by paragraph 34(5) of Schedule 3 to ITEPA 2003, on and after that date the scheme has effect with any modifications needed to reflect the amendments made by paragraph 113 above (subject to sub-paragraph (1) of this paragraph).
154 (1) This paragraph applies if, immediately before 6 April 2014, the scheme was an approved SAYE option scheme which contains provision authorised by paragraph 37(1) of Schedule 3 to ITEPA 2003.
(2) On and after 6 April 2014, the scheme has effect with any modifications needed to reflect the amendment made by paragraph 114(3) above.
155 (1) Paragraph 40A of Schedule 3 to ITEPA 2003 (as inserted by paragraph 117 above) has effect in relation to the scheme—
(a) as if, at the end of sub-paragraph (1), the words “on or before 6 July 2015” were inserted,
(b) if the first date on which share options are granted under the scheme falls before 6 April 2014—
(i) as if, in sub-paragraph (3)(b), the reference to that date were a reference to 6 April 2014 and, accordingly, as if all references in paragraph 40A to the first grant date were references to 6 April 2014,
(ii) as if sub-paragraph (3)(b)(i) were omitted, and
(iii) as if, in sub-paragraph (3)(b)(ii), “otherwise” were omitted,
(c) as if sub-paragraph (5) were omitted, and
(d) as if, in sub-paragraph (6), the definitions of “the initial notification deadline” and “the relevant tax year” were omitted.
(2) But the scheme cannot be a Schedule 3 SAYE option scheme if, before 6 April 2014, an application for its approval was refused or an officer of Revenue and Customs decided to withdraw its approval.
(3) Sub-paragraph (2) is without prejudice to the outcome of any appeal under paragraph 41 or 44 of Schedule 3 to ITEPA 2003 against the refusal or decision to withdraw approval.
(4) The amendments made by this Part do not affect any right of appeal under paragraph 41 or 44 of Schedule 3 to ITEPA 2003 against a refusal or decision made before 6 April 2014 in relation to the scheme.
(5) Sub-paragraphs (6) and (7) apply if a share option was granted before 6 April 2014 under the scheme at a time when the scheme was an approved SAYE option scheme.
(6) On and after 6 April 2014, the SAYE code has effect in relation to the option as if it were granted under the scheme at a time when the scheme was a Schedule 3 SAYE option scheme (even if no notice is given under paragraph 40A of Schedule 3 to ITEPA 2003 in relation to the scheme or the scheme cannot be a Schedule 3 SAYE option scheme because of sub-paragraph (2) of this paragraph).
(7) If no notice is given under paragraph 40A of Schedule 3 to ITEPA 2003 in relation to the scheme, paragraph 40B of that Schedule (as inserted by paragraph 117 above) is to apply in relation to the scheme despite no notice being given; and, for this purpose, the relevant date is to be taken to be 6 April 2014.
(8) Sub-paragraph (9) applies in relation to a share option granted before 6 April 2014 under the scheme at a time when the scheme was an approved SAYE option scheme if—
(a) no notice is given under paragraph 40A of Schedule 3 to ITEPA 2003 in relation to the scheme or the scheme cannot be a Schedule 3 SAYE option scheme because of sub-paragraph (2) of this paragraph, and
(b) the option is exercised on or after 6 April 2014.
(9) The scheme is to be taken to be a Schedule 3 SAYE option scheme at the time of the exercise of the option for the purposes of the following provisions in their application to the option—
(a) section 519 of ITEPA 2003 (exemption in respect of exercise of share option), and
(b) paragraph 10(1)(b) of Schedule 7D to TCGA 1992 (market value rule not to apply).
(10) In relation to the scheme—
(a) paragraph 40F of Schedule 3 to ITEPA 2003 (as inserted by paragraph 117 above) has effect as if for sub-paragraph (2) there were substituted—

“(2) HMRC may enquire into the scheme if HMRC give notice to the scheme organiser of HMRC's intention to do so no later than 6 July 2016.”

, and
(b) the cases covered by paragraphs 40F(4)(b), 40H(1)(a)(ii) and 40I(1)(a)(ii) of Schedule 3 to ITEPA 2003 (as inserted by paragraph 117 above) include cases in which requirements of Parts 2 to 7 of that Schedule were not met before 6 April 2014.
156 If the scheme was an approved SAYE option scheme before 6 April 2014, the amendments made by this Part do not affect the deductions which may be made in relation to the scheme under section 94A of ITTOIA 2005 or section 999 of CTA 2009 (deduction for costs of setting up scheme) if they would otherwise do so.
157 The amendments made by paragraph 118 above do not affect a notice given in relation to the scheme under paragraph 45 of Schedule 3 to ITEPA 2003 before 6 April 2014.

PART 3 CSOP schemes

Amendments to Chapter 8 of Part 7 of ITEPA 2003
158 Chapter 8 of Part 7 of ITEPA 2003 (employment income: income and exemptions relating to securities: CSOP schemes) is amended as follows.
159 In the title omit “Approved”.
160 (1) Section 521 (introduction to CSOP schemes) is amended as follows.
(2) In the heading omit “Approved”.
(3) In subsection (1)—
(a) omit paragraph (a), and
(b) in paragraph (b) for “those” substitute “ CSOP schemes which are Schedule 4 CSOP ”.
(4) Omit subsection (2).
(5) In subsection (3)(c) for “approved” substitute “ Schedule 4 ”.
(6) In subsection (4)—
(a) omit the definition of “approved”, and
(b) after the definition of “CSOP scheme” insert—

““Schedule 4 CSOP scheme” is to be read in accordance with paragraph 1 and Part 7 of Schedule 4;”

.
161 In section 522 (share options to which Chapter applies) in subsection (1)(a) for “an approved” substitute “ a Schedule 4 ”.
162 (1) Section 524 (no charge in respect of exercise of option) is amended as follows.
(2) In subsection (1)(a) for “approved” substitute “ a Schedule 4 CSOP scheme ”.
(3) In subsection (2E)—
(a) in paragraph (a) for “approved” substitute “ a Schedule 4 CSOP scheme ”,
(b) in paragraphs (c), (d) and (f) after sub-paragraph (ii) omit “or” and insert—

“(iia) the non-UK company reorganisation arrangement, or”

, and
(c) in paragraph (e) after sub-paragraph (ii) omit “or” and insert—

“(iia) the making of any non-UK company reorganisation arrangement which would fall within subsection (2L), or”

.
(4) In subsection (2L)—
(a) after “arrangement” insert “ or a non-UK company reorganisation arrangement ”, and
(b) in paragraph (b) for “an approved” substitute “ a Schedule 4 ”.
163 Schedule 4 is amended as follows.
164 In the title omit “Approved”.
165 In the cross-heading before paragraph 1 for “Approval of” substitute “ Introduction to Schedule 4 ”.
166 (1) Paragraph 1 (introduction) is amended as follows.
(2) For sub-paragraphs (1) and (2) substitute—

“A1 For the purposes of the CSOP code a CSOP scheme is a Schedule 4 CSOP scheme if the requirements of Parts 2 to 6 of this Schedule are met in relation to the scheme.”

(3) For sub-paragraph (4) substitute—

“(4) Sub-paragraph (A1) is subject to Part 7 of this Schedule which—
(a) requires notice of a scheme to be given to Her Majesty's Revenue and Customs (“HMRC”) in order for the scheme to be a Schedule 4 CSOP scheme (see paragraph 28A(1)),
(b) provides for a scheme in relation to which such notice is given to be a Schedule 4 CSOP scheme (see paragraph 28A(4)), and
(c) gives power to HMRC to enquire into a scheme and to decide that the scheme should not be a Schedule 4 CSOP scheme (see paragraphs 28F to 28I).”

167 In the title for Part 2 omit “for approval”.
168 In the cross-heading before paragraph 4 omit “for approval”.
169 For paragraph 5 (general restriction on contents of scheme) substitute—

“5 (1) The purpose of the scheme must be to provide, in accordance with this Schedule, benefits for employees and directors in the form of share options.
(2) The scheme must not provide benefits to employees or directors otherwise than in accordance with this Schedule.
(3) For example, the scheme must not provide cash as an alternative to share options or shares which might otherwise be acquired by the exercise of share options.”

170 In paragraph 6 (limit on value of shares subject to options) in sub-paragraph (1)(b) for “approved” substitute “ Schedule 4 ”.
171 In paragraph 15 (requirements relating to shares that may be subject to share options) after sub-paragraph (1) insert—

“(1A) Sub-paragraph (1) and the other paragraphs of this Part are subject to paragraph 25A(7B).”

172 In paragraph 21 (requirements relating to share options) in sub-paragraph (1) before the entry for paragraph 22 insert— “ paragraph 21A (general requirements as to terms of option), ”.
173 After paragraph 21 insert—

“General requirements as to terms of option
21A (1) The following terms of a share option which is granted under the scheme must be stated at the time the option is granted—
(a) the price at which shares may be acquired by the exercise of the option,
(b) the number and description of the shares which may be acquired by the exercise of the option,
(c) the restrictions to which those shares may be subject,
(d) the times at which the option may be exercised (in whole or in part), and
(e) the circumstances under which the option will lapse or be cancelled (in whole or in part), including any conditions to which the exercise of the option is subject (in whole or in part).
(2) Terms stated as required by sub-paragraph (1) may be varied after the grant of the option, but—
(a) in the case of the price, only as provided for in paragraph 22,
(b) in the case of the number or description of shares, only as provided for in paragraph 22 or by way of a mechanism which is stated at the time the option is granted, and
(c) in any other case, only by way of a mechanism which is stated at the time the option is granted.
(3) Any mechanism stated for the purposes of sub-paragraph (2)(b) or (c) must be applied in a way that is fair and reasonable.
(4) Terms stated as required by sub-paragraph (1), and any mechanism stated for the purposes of sub-paragraph (2)(b) or (c), must be notified to the participant as soon as practicable after the grant of the option.”

174 (1) Paragraph 22 (requirements as to price for acquisition of shares etc) is amended as follows.
(2) In sub-paragraph (1)—
(a) omit paragraph (a) and the “and” after it, and
(b) in paragraph (b) for “that time” substitute “ the time when the option is granted ”.
(3) After sub-paragraph (3) insert—

“(3A) If the scheme makes provision under sub-paragraph (3), the variation or variations made under that provision to take account of a variation in any share capital must (in particular) secure—
(a) that the total market value of the shares which may be acquired by the exercise of the share option is immediately after the variation or variations substantially the same as what it was immediately before the variation or variations, and
(b) that the total price at which those shares may be acquired is immediately after the variation or variations substantially the same as what it was immediately before the variation or variations.
(3B) Sub-paragraph (3) does not authorise any variation which would result in the requirements of the other paragraphs of this Schedule not being met in relation to the share option.”

(4) Omit sub-paragraph (4).
(5) Omit sub-paragraph (5).
175 (1) Paragraph 25 (exercise of options: death) is amended as follows.
(2) Make the existing text sub-paragraph (1).
(3) In the new sub-paragraph (1) omit “but not later than 12 months after that date”.
(4) After the new sub-paragraph (1) insert—

“(2) Provision made under sub-paragraph (1) must permit the exercise of the options at any time on or after the date of death but not later than 12 months after that date.”

176 (1) Paragraph 25A (exercise of options: company events) is amended as follows.
(2) In sub-paragraph (1) for “or (6)” substitute “ , (6) or (6A) ”.
(3) In sub-paragraph (6)(b) for “an approved” substitute “ a Schedule 4 ”.
(4) After sub-paragraph (6) insert—

“(6A) The relevant date for the purposes of this sub-paragraph is the date on which a non-UK company reorganisation arrangement applicable to or affecting—
(a) all the ordinary share capital of the company or all the shares of the same class as the shares to which the option relates, or
(b) all the shares, or all the shares of that same class, which are held by a class of shareholders identified otherwise than by reference to their employments or directorships or their participation in a Schedule 4 CSOP scheme,
becomes binding on the shareholders covered by it.”

(5) After sub-paragraph (7) insert—

“(7A) Sub-paragraphs (7B) to (7F) apply if the scheme makes provision under sub-paragraph (1) or (7).
(7B) The scheme may provide that if, in consequence of a relevant event, shares in the company to which a share option relates no longer meet the requirements of Part 4 of this Schedule, the share option may be exercised under the provision made under sub-paragraph (1) or (7) (as the case may be) no later than 20 days after the day on which the relevant event occurs, notwithstanding that the shares no longer meet the requirements of Part 4 of this Schedule.
(7C) In sub-paragraph (7B) “relevant event” means—
(a) a person obtaining control of the company as mentioned in sub-paragraph (2)(a);
(b) a person obtaining control of the company as a result of a compromise or arrangement sanctioned by the court as mentioned in sub-paragraph (6);
(c) a person obtaining control of the company as a result of a non-UK company reorganisation arrangement which has become binding on the shareholders covered by it as mentioned in sub-paragraph (6A);
(d) a person who is bound or entitled to acquire shares in the company as mentioned in sub-paragraph (7) obtaining control of the company.
(7D) Provision made under sub-paragraph (7B) may not authorise the exercise of a share option, as the case may be—
(a) at a time outside the 6 month period mentioned in sub-paragraph (1), or
(b) at a time not covered by sub-paragraph (7).
(7E) The scheme may provide that a share option relating to shares in a company which is exercised during the period of 20 days ending with—
(a) the relevant date for the purposes of sub-paragraph (2), (6) or (6A), or
(b) the date on which any person becomes bound or entitled to acquire shares in the company as mentioned in sub-paragraph (7),
is to be treated as if it had been exercised in accordance with the provision made under sub-paragraph (1) or (7) (as the case may be).
(7F) If the scheme makes provision under sub-paragraph (7E) it must also provide that if—
(a) a share option is exercised in reliance on that provision in anticipation of—
(i) an event mentioned in sub-paragraph (2), (6) or (6A) occurring, or
(ii) a person becoming bound or entitled to acquire shares in the company as mentioned in sub-paragraph (7), but
(b) as the case may be—
(i) the relevant date for the purposes of sub-paragraph (2), (6) or (6A) does not fall during the period of 20 days beginning with the date on which the share option is exercised, or
(ii) the person does not become bound or entitled to acquire shares in the company by the end of the period of 20 days beginning with the date on which the share option is exercised,
the exercise of the share option is to be treated as having had no effect.”

177 (1) Paragraph 26 (exchanges of options on company reorganisation) is amended as follows.
(2) In sub-paragraph (2) after paragraph (b) insert—

“(ba) obtains control of the scheme company as a result of a non-UK company reorganisation arrangement which has become binding on the shareholders covered by it; or”

.
(3) In sub-paragraph (3) after paragraph (b) omit “and” and insert—

“(ba) where control is obtained in the way set out in sub-paragraph (2)(ba), within the period of 6 months beginning with the date on which the non-UK company reorganisation arrangement becomes binding on the shareholders covered by it, and”

.
178 (1) Paragraph 27 (requirements about share options granted in exchange) is amended as follows.
(2) In sub-paragraph (4)—
(a) in paragraph (c) for “equal” substitute “ be substantially the same as ”, and
(b) in paragraph (d) for “equal to” substitute “ substantially the same as ”.
(3) After sub-paragraph (7) insert—

“(8) For the purposes of this paragraph the market value of any shares is to be determined using a methodology agreed by Her Majesty's Revenue and Customs.”

179 For Part 7 substitute—

“PART 7 Notification of schemes, annual returns and enquiries

Notice of scheme to be given to HMRC
28A (1) For a CSOP scheme to be a Schedule 4 CSOP scheme, notice of the scheme must be given to Her Majesty's Revenue and Customs (“HMRC”).
(2) The notice must—
(a) be given by the scheme organiser,
(b) contain, or be accompanied by, such information as HMRC may require, and
(c) contain a declaration within sub-paragraph (3) made by such persons as HMRC may require.
(3) A declaration within this sub-paragraph is a declaration—
(a) that the requirements of Parts 2 to 6 of this Schedule are met in relation to the scheme, and
(b) if the declaration is made after the first date on which share options are granted under the scheme (“the first grant date”), that those requirements—
(i) were met in relation to those grants of share options, and
(ii) have otherwise been met in relation to the scheme at all times on or after the first grant date when share options granted under the scheme are outstanding.
(4) If notice is given under this paragraph in relation to a CSOP scheme, for the purposes of the CSOP code the scheme is to be a Schedule 4 CSOP scheme at all times on and after the relevant date (but not before that date).
(5) But if the notice is given after the initial notification deadline, the scheme is to be a Schedule 4 CSOP scheme only from the beginning of the relevant tax year.
(6) For the purposes of this Part—
“the initial notification deadline” is 6 July in the tax year following that in which the first grant date falls,
“outstanding”, in relation to a share option, means that the option—
(a) has not been exercised, but
(b) is capable of being exercised in accordance with the scheme (whether on the meeting of any condition or otherwise),
“the relevant date” is—
(a) the date on which the declaration within sub-paragraph (3) is made, or
(b) if that declaration is made after the first grant date, the first grant date, and
“the relevant tax year” is—
(a) the tax year in which the notice under this paragraph is given, or
(b) if that notice is given on or before 6 July in that tax year, the preceding tax year.
(7) Sub-paragraph (4) is subject to the following paragraphs of this Part.

Annual returns
28B (1) This paragraph applies if notice is given in relation to a CSOP scheme under paragraph 28A.
(2) The scheme organiser must give to HMRC a return for the tax year in which the relevant date falls and for each subsequent tax year (subject to sub-paragraph (9)).
(3) If paragraph 28A(5) applies in relation to the scheme, in sub-paragraph (2) the reference to the tax year in which the relevant date falls is to be read as a reference to the relevant tax year.
(4) A return for a tax year must—
(a) contain, or be accompanied by, such information as HMRC may require, and
(b) be given on or before 6 July in the following tax year.
(5) The information which may be required under sub-paragraph (4)(a) includes (in particular) information to enable HMRC to determine the liability to tax, including capital gains tax, of—
(a) any person who has participated in the scheme, or
(b) any other person whose liability to tax the operation of the scheme is relevant to.
(6) If during a tax year—
(a) an alteration is made in a key feature of the scheme, or
(b) variations are made under a provision made under paragraph 22(3) to take account of a variation in any share capital,
the return for the tax year must contain a declaration within sub-paragraph (7) made by such persons as HMRC may require.
(7) A declaration within this sub-paragraph is a declaration, as the case may be—
(a) that the alteration has, or
(b) that the variations have,
not caused the requirements of Parts 2 to 6 of this Schedule not to be met in relation to the scheme.
(8) For the purposes of sub-paragraph (6)(a) a “key feature” of a scheme is a provision of the scheme which is necessary in order for the requirements of Parts 2 to 6 of this Schedule to be met in relation to the scheme.
(9) A return is not required for any tax year following that in which the termination condition is met in relation to the scheme.
(10) For the purposes of this Part “the termination condition” is met in relation to a scheme when—
(a) all share options granted under the scheme—
(i) have been exercised, or
(ii) are no longer capable of being exercised in accordance with the scheme (because, for example, they have lapsed or been cancelled), and
(b) no more share options will be granted under the scheme.
(11) If the scheme organiser becomes aware that—
(a) anything which should have been included in, or should have accompanied, a return for a tax year was not included in, or did not accompany, the return,
(b) anything which should not have been included in, or should not have accompanied, a return for a tax year was included in, or accompanied, the return, or
(c) any other error or inaccuracy has occurred in relation to a return for a tax year,
the scheme organiser must give an amended return correcting the position to HMRC without delay.
28C (1) This paragraph applies if the scheme organiser fails to give a return for a tax year (containing, or accompanied by, all required information and declarations) on or before the date mentioned in paragraph 28B(4)(b) (“the date for delivery”).
(2) The scheme organiser is liable for a penalty of £100.
(3) If the scheme organiser's failure continues after the end of the period of 3 months beginning with the date for delivery, the scheme organiser is liable for a further penalty of £300.
(4) If the scheme organiser's failure continues after the end of the period of 6 months beginning with the date for delivery, the scheme organiser is liable for a further penalty of £300.
(5) The scheme organiser is liable for a further penalty under this sub-paragraph if—
(a) the scheme organiser's failure continues after the end of the period of 9 months beginning with the date for delivery,
(b) HMRC decide that such a penalty should be payable, and
(c) HMRC give notice to the scheme organiser specifying the period in respect of which the penalty is payable.
(The scheme organiser may be liable for more than one penalty under this sub-paragraph.)
(6) The penalty under sub-paragraph (5) is £10 for each day that the failure continues during the period specified in the notice under sub-paragraph (5)(c).
(7) The period specified in the notice under sub-paragraph (5)(c)—
(a) may begin earlier than the date on which the notice is given, but
(b) may not begin until after the end of the period mentioned in sub-paragraph (5)(a) or, if relevant, the end of any period specified in any previous notice under sub-paragraph (5)(c) given in relation to the failure.
(8) Liability for a penalty under this paragraph does not arise if the scheme organiser satisfies HMRC (or, on an appeal under paragraph 28K, the tribunal) that there is a reasonable excuse for its failure.
(9) For the purposes of sub-paragraph (8)—
(a) an insufficiency of funds is not a reasonable excuse, unless attributable to events outside the scheme organiser's control,
(b) where the scheme organiser relies on any other person to do anything, that is not a reasonable excuse unless the scheme organiser took reasonable care to avoid the failure, and
(c) where the scheme organiser had a reasonable excuse for the failure but the excuse ceased, the scheme organiser is to be treated as having continued to have the excuse if the failure is remedied without unreasonable delay after the excuse ceased.

Notices and returns to be given electronically etc
28D (1) A notice under paragraph 28A, and any information accompanying the notice, must be given electronically.
(2) A return under paragraph 28B, and any information accompanying the return, must be given electronically.
(3) But, if HMRC consider it appropriate to do so, HMRC may allow the scheme organiser to give a notice or return or any accompanying information in another way; and, if HMRC do so, the notice, return or information must be given in that other way.
(4) The Commissioners for Her Majesty's Revenue and Customs—
(a) must prescribe how notices, returns and accompanying information are to be given electronically;
(b) may make different provision for different cases or circumstances.
28E (1) This paragraph applies if a return under paragraph 28B, or any information accompanying such a return—
(a) is given otherwise than in accordance with paragraph 28D, or
(b) contains a material inaccuracy—
(i) which is careless or deliberate, or
(ii) which is not corrected as required by paragraph 28B(11).
(2) The scheme organiser is liable for a penalty of an amount decided by HMRC.
(3) The penalty must not exceed £5,000.
(4) For the purposes of sub-paragraph (1)(b)(i) an inaccuracy is careless if it is due to a failure by the scheme organiser to take reasonable care.

Enquiries
28F (1) This paragraph applies if notice is given in relation to a CSOP scheme under paragraph 28A.
(2) HMRC may enquire into the scheme if HMRC give notice to the scheme organiser of HMRC's intention to do so no later than—
(a) 6 July in the tax year following that in which the initial notification deadline falls, or
(b) if the notice under paragraph 28A is given after the initial notification deadline, 6 July in the second tax year following the relevant tax year.
(3) HMRC may enquire into the scheme if HMRC give notice to the scheme organiser of HMRC's intention to do so no later than 12 months after the date on which a declaration within paragraph 28B(7) is given to HMRC.
(4) Sub-paragraph (5) applies if (at any time) HMRC have reasonable grounds for believing that requirements of Parts 2 to 6 of this Schedule—
(a) are not met in relation to the scheme, or
(b) have not been met in relation to the scheme.
(5) HMRC may enquire into the scheme if HMRC give notice to the scheme organiser of HMRC's intention to do so.
(6) Notice may be given, and an enquiry may be conducted, under sub-paragraph (2), (3) or (5) even though the termination condition is met in relation to the scheme.
28G (1) An enquiry under paragraph 28F(2), (3) or (5) is completed when HMRC give the scheme organiser a notice (a “closure notice”) stating—
(a) that HMRC have completed the enquiry, and
(b) that—
(i) paragraph 28H is to apply,
(ii) paragraph 28I is to apply, or
(iii) neither paragraph 28H nor paragraph 28I is to apply.
(2) If the scheme organiser receives notice under paragraph 28F(2), (3) or (5), the scheme organiser may make an application to the tribunal for a direction requiring a closure notice for the enquiry to be given within a specified period.
(3) The application is to be subject to the relevant provisions of Part 5 of TMA 1970 (see, in particular, section 48(2)(b) of that Act).
(4) The tribunal must give a direction unless satisfied that HMRC have reasonable grounds for not giving the closure notice within the specified period.
28H (1) This paragraph applies if HMRC decide—
(a) that requirements of Parts 2 to 6 of this Schedule—
(i) are not met in relation to the scheme, or
(ii) have not been met in relation to the scheme, and
(b) that the situation is, or was, so serious that this paragraph should apply.
(2) If this paragraph applies—
(a) the scheme is not to be a Schedule 4 CSOP scheme with effect from—
(i) such relevant time as is specified in the closure notice, or
(ii) if no relevant time is specified, the time of the giving of the closure notice, and
(b) the scheme organiser is liable for a penalty of an amount decided by HMRC.
(3) The penalty under sub-paragraph (2)(b) must not exceed an amount equal to twice HMRC's reasonable estimate of—
(a) the total income tax for which persons who have been granted share options under the scheme have not been liable, or will not be liable in the future, and
(b) the total contributions under Part 1 of SSCBA 1992 or SSCB(NI)A 1992 for which any persons have not been liable, or will not be liable in the future,
in consequence of the scheme having been a Schedule 4 CSOP scheme at any relevant time before the time mentioned in sub-paragraph (2)(a)(i) or (ii) (as the case may be).
(4) In this paragraph “relevant time” means any time before the giving of the closure notice when requirements of Parts 2 to 6 of this Schedule were not met in relation to the scheme.
28I (1) This paragraph applies if HMRC decide—
(a) that requirements of Parts 2 to 6 of this Schedule—
(i) are not met in relation to the scheme, or
(ii) have not been met in relation to the scheme, but
(b) that the situation is not, or was not, so serious that paragraph 28H should apply.
(2) If this paragraph applies, the scheme organiser—
(a) is liable for a penalty of an amount decided by HMRC, and
(b) must, no later than 90 days after the relevant day, secure that the requirements of Parts 2 to 6 of this Schedule are met in relation to the scheme.
(3) The penalty under sub-paragraph (2)(a) must not exceed £5,000.
(4) In sub-paragraph (2)(b) “the relevant day” means—
(a) the last day of the period in which notice of an appeal under paragraph 28K(2)(b) may be given, or
(b) if notice of such an appeal is given, the day on which the appeal is determined or withdrawn.
(5) Sub-paragraph (2)(b) does not apply if the termination condition was met in relation to the scheme before the closure notice was given or is met before the end of the 90 day period mentioned in sub-paragraph (2)(b).
(6) If the scheme organiser fails to comply with sub-paragraph (2)(b), HMRC may give the scheme organiser a notice stating that that is the case (a “default notice”).
(7) If the scheme organiser is given a default notice—
(a) the scheme is not to be a Schedule 4 CSOP scheme with effect from—
(i) such relevant time as is specified in the default notice, or
(ii) if no relevant time is specified, the time of the giving of the default notice, and
(b) the scheme organiser is liable for a further penalty of an amount decided by HMRC.
(8) The penalty under sub-paragraph (7)(b) must not exceed an amount equal to twice HMRC's reasonable estimate of—
(a) the total income tax for which persons who have been granted share options under the scheme have not been liable, or will not be liable in the future, and
(b) the total contributions under Part 1 of SSCBA 1992 or SSCB(NI)A 1992 for which any persons have not been liable, or will not be liable in the future,
in consequence of the scheme having been a Schedule 4 CSOP scheme at any relevant time before the time mentioned in sub-paragraph (7)(a)(i) or (ii) (as the case may be).
(9) In this paragraph “relevant time” means any time before the giving of the default notice when requirements of Parts 2 to 6 of this Schedule were not met in relation to the scheme.

Assessment of penalties
28J (1) This paragraph applies if the scheme organiser is liable for a penalty under this Part.
(2) HMRC must assess the penalty and notify the scheme organiser of the assessment.
(3) Subject to sub-paragraphs (4) and (5), the assessment must be made no later than 12 months after the date on which the scheme organiser becomes liable for the penalty.
(4) In the case of a penalty under paragraph 28E(1)(b), the assessment must be made no later than—
(a) 12 months after the date on which HMRC become aware of the inaccuracy, and
(b) 6 years after the date on which the scheme organiser becomes liable for the penalty.
(5) In the case of a penalty under paragraph 28H(2)(b) or 28I(2)(a) or (7)(b) where notice of appeal is given under paragraph 28K(2) or (3), the assessment must be made no later than 12 months after the date on which the appeal is determined or withdrawn.
(6) A penalty payable under this Part must be paid—
(a) no later than 30 days after the date on which the notice under sub-paragraph (2) is given to the scheme organiser, or
(b) if notice of appeal is given against the penalty under paragraph 28K(1) or (4), no later than 30 days after the date on which the appeal is determined or withdrawn.
(7) The penalty may be enforced as if it were corporation tax or, if the scheme organiser is not within the charge to corporation tax, income tax charged in an assessment and due and payable.
(8) Sections 100 to 103 of TMA 1970 do not apply to a penalty under this Part.

Appeals
28K (1) The scheme organiser may appeal against a decision of HMRC that the scheme organiser is liable for a penalty under paragraph 28C or 28E.
(2) The scheme organiser may appeal against—
(a) a decision of HMRC mentioned in paragraph 28H(1) or a decision of HMRC to specify, or not to specify, a relevant time in the closure notice;
(b) a decision of HMRC mentioned in paragraph 28I(1).
(3) The scheme organiser may appeal against a decision of HMRC—
(a) to give the scheme organiser a default notice under paragraph 28I;
(b) to specify, or not to specify, a relevant time in the default notice.
(4) The scheme organiser may appeal against a decision of HMRC as to the amount of a penalty payable by the scheme organiser under this Part.
(5) Notice of appeal must be given to HMRC no later than 30 days after the date on which—
(a) in the case of an appeal under sub-paragraph (1) or (4), the notice under paragraph 28J(2) is given to the scheme organiser;
(b) in the case of an appeal under sub-paragraph (2), the closure notice is given;
(c) in the case of an appeal under sub-paragraph (3), the default notice is given.
(6) On an appeal under sub-paragraph (1) or (3)(a) which is notified to the tribunal, the tribunal may affirm or cancel the decision.
(7) On an appeal under sub-paragraph (2) or (3)(b) which is notified to the tribunal, the tribunal may—
(a) affirm or cancel the decision, or
(b) substitute for the decision another decision which HMRC had power to make.
(8) On an appeal under sub-paragraph (4) which is notified to the tribunal, the tribunal may—
(a) affirm the amount of the penalty decided, or
(b) substitute another amount for that amount.
(9) Subject to this paragraph and paragraph 28J, the provisions of Part 5 of TMA 1970 relating to appeals have effect in relation to an appeal under this paragraph as they have effect in relation to an appeal against an assessment to corporation tax or, if the scheme organiser is not within the charge to corporation tax, income tax.”

180 (1) Paragraph 33 (power to require information) is amended as follows.
(2) For sub-paragraph (1) substitute—

“(1) An officer of Revenue and Customs may by notice require a person to provide the officer with any information—
(a) which the officer reasonably requires for the performance of any functions of Her Majesty's Revenue and Customs or an officer of Revenue and Customs under the CSOP code, and
(b) which the person to whom the notice is addressed has or can reasonably obtain.”

(3) In sub-paragraph (2)(a)—
(a) for sub-paragraph (i) substitute—

“(i) to check anything contained in a notice under paragraph 28A or a return under paragraph 28B or to check any information accompanying such a notice or return, or”, and”

(b) in sub-paragraph (ii) after “scheme” insert “ or any other person whose liability to tax the operation of a scheme is relevant to ”.
181 After paragraph 35 insert—

“Non-UK company reorganisation arrangements
35ZA (1) For the purposes of the CSOP code a “non-UK company reorganisation arrangement” is an arrangement made in relation to a company under the law of a territory outside the United Kingdom—
(a) which gives effect to a reorganisation of the company's share capital by the consolidation of shares of different classes, or by the division of shares into shares of different classes, or by both of those methods, and
(b) which is approved by a resolution of members of the company.
(2) A resolution does not count for the purposes of sub-paragraph (1)(b) unless the members who vote in favour of approving the arrangement represent more than 50% of the total voting rights of all the members having the right to vote on the issue.”

182 In paragraph 37 (index of defined expressions)—
(a) omit the entry for “approved”, and
(b) at the appropriate places insert—

“non-UK company reorganisation arrangement	paragraph 35ZA”

“Schedule 4 CSOP scheme	paragraph 1 and Part 7 of this Schedule”

.

Other amendments: TCGA 1992
183 TCGA 1992 is amended as follows.
184 In section 238A (share schemes and share incentives) in subsection (2)(c) for “approved” substitute “ Schedule 4 ”.
185 Part 3 of Schedule 7D (CSOP schemes) is amended as follows.
186 In the title for “Approved” substitute “ Schedule 4 ”.
187 (1) Paragraph 11 (introduction) is amended as follows.
(2) In sub-paragraphs (1) and (2) omit “approved”.
(3) In sub-paragraph (3)(a)(i) for “an approved” substitute “ a Schedule 4 ”.
188 In paragraph 12 (relief where income tax charged in respect of grant of option) in sub-paragraph (4)(b) for “approved” substitute “ a Schedule 4 CSOP scheme ”.
189 In paragraph 13 (market value rule not to apply) in sub-paragraphs (1)(a) and (3) for “approved” substitute “ a Schedule 4 CSOP scheme ”.

Other amendments: ITEPA 2003
190 ITEPA 2003 is amended as follows.
191 In section 227 (scope of Part 4) in subsection (4)(g) omit “approved”.
192 In section 417 (scope of Part 7) in subsection (2), in the entry for Chapter 8, omit “approved”.
193 In section 431A (which makes provision relating to restricted securities etc) in subsection (2)(c) for “an approved” substitute “ a Schedule 4 ”.
194 In section 473 (introduction to taxation of securities options) in subsection (4)(b) for “approved” substitute “ Schedule 4 ”.
195 In section 475 (no charge in respect of acquisition of option) in subsection (2) omit “approved”.
196 In section 476 (charge on occurrence of chargeable event) in subsection (6), in the entry for section 524, omit “approved”.
197 In section 480 (deductible amounts) in subsection (4) omit “approved”.
198 In section 539 (CSOP and other options relevant for purposes of section 536) in subsection (4) for “approved under Schedule 4 (CSOP schemes)” substitute “ which is a Schedule 4 CSOP scheme (see Schedule 4) ”.
199 In section 549 (application of Chapter 11 of Part 7) in subsection (2)(c) omit “approved”.
200 (1) Section 554E (exclusions under Part 7A) is amended as follows.
(2) In subsection (1)(c) for “an approved” substitute “ a Schedule 4 ”.
(3) In subsection (3)(a)(ii) and (b)(ii) for the second “an approved” substitute “ a Schedule 4 ”.
(4) In subsection (4)(a) and (b) for the third “approved” substitute “ Schedule 4 ”.
201 In section 697 (PAYE: enhancing the value of an asset) in subsection (4) before paragraph (b) insert—

“(ab) any shares acquired by the employee under a scheme which is a Schedule 4 CSOP scheme (see Schedule 4),”

.
202 In section 701 (PAYE: meaning of “asset”) in subsection (2)(c)(ia) for “approved under Schedule 4 (approved CSOP schemes)” substitute “ which is a Schedule 4 CSOP scheme (see Schedule 4) ”.
203 In paragraph 5 of Schedule 5 (enterprise management incentives: maximum entitlement of employee) in sub-paragraph (5) for “approved under Schedule 4 (CSOP schemes)” substitute “ which is a Schedule 4 CSOP scheme (see Schedule 4) ”.

Commencement and transitional provision
204 This Part is treated as having come into force on 6 April 2014.
205 Paragraphs 206 to 215 below apply in relation to a CSOP scheme established before 6 April 2014.
206 (1) If the scheme was an approved CSOP scheme immediately before 6 April 2014, this paragraph applies to any provision which the scheme contains immediately before that date and which requires the approval or agreement of Her Majesty's Revenue and Customs or an officer of Revenue and Customs to be obtained in relation to any matter.
(2) On and after 6 April 2014, the provision is to have effect without the requirement for the approval or agreement, unless the requirement reflects a requirement for approval or agreement set out in Schedule 4 to ITEPA 2003 (as amended by this Part).
207 (1) If the scheme was an approved CSOP scheme immediately before 6 April 2014, the amendment made by paragraph 169 above has effect in relation to the scheme only if, and when, there is an alteration in a key feature of the scheme on or after that date.
(2) In sub-paragraph (1) “key feature” has the meaning given in paragraph 28B(8) of Schedule 4 to ITEPA 2003 (as inserted by paragraph 179 above).
208 If the scheme was an approved CSOP scheme immediately before 6 April 2014, on and after that date the scheme has effect with any modifications needed to reflect the amendment made by paragraph 170 above.
209 (1) The amendments made by paragraphs 172, 173 and 174(2) and (5) above have no effect in relation to share options granted under the scheme before 6 April 2014.
(2) If the scheme was an approved CSOP scheme immediately before 6 April 2014, on and after that date the scheme has effect with any modifications needed to reflect the amendments made by paragraphs 172, 173 and 174(2) and (5) above (subject to sub-paragraph (1) of this paragraph).
210 (1) This paragraph applies if, immediately before 6 April 2014 the scheme was an approved CSOP scheme which contains provision authorised by paragraph 22(3) of Schedule 4 to ITEPA 2003.
(2) On and after 6 April 2014, the scheme has effect with any modifications needed to reflect the amendments made by paragraph 174(3) and (4) above.
211 (1) The amendments made by paragraph 175 above have no effect in relation to share options granted before 6 April 2014 under the scheme.
(2) If immediately before 6 April 2014 the scheme was an approved CSOP scheme which contains provision authorised by paragraph 25 of Schedule 4 to ITEPA 2003, on and after that date the scheme has effect with any modifications needed to reflect the amendments made by paragraph 175 above (subject to sub-paragraph (1) of this paragraph).
212 (1) This paragraph applies if immediately before 6 April 2014 the scheme was an approved CSOP scheme which contains provision authorised by paragraph 25A(1) of Schedule 4 to ITEPA 2003.
(2) On and after 6 April 2014, the scheme has effect with any modifications needed to reflect the amendment made by paragraph 176(3) above.
213 (1) Paragraph 28A of Schedule 4 to ITEPA 2003 (as inserted by paragraph 179 above) has effect in relation to the scheme—
(a) as if, at the end of sub-paragraph (1), the words “on or before 6 July 2015” were inserted,
(b) if the first date on which share options are granted under the scheme falls before 6 April 2014—
(i) as if, in sub-paragraph (3)(b), the reference to that date were a reference to 6 April 2014 and, accordingly, as if all references in paragraph 28A to the first grant date were references to 6 April 2014,
(ii) as if sub-paragraph (3)(b)(i) were omitted, and
(iii) as if, in sub-paragraph (3)(b)(ii), “otherwise” were omitted,
(c) as if sub-paragraph (5) were omitted, and
(d) as if, in sub-paragraph (6), the definitions of “the initial notification deadline” and “the relevant tax year” were omitted.
(2) But the scheme cannot be a Schedule 4 CSOP scheme if, before 6 April 2014, an application for its approval was refused or an officer of Revenue and Customs decided to withdraw its approval.
(3) Sub-paragraph (2) is without prejudice to the outcome of any appeal under paragraph 29 or 32 of Schedule 4 to ITEPA 2003 against the refusal or decision to withdraw approval.
(4) The amendments made by this Part do not affect any right of appeal under paragraph 29 or 32 of Schedule 4 to ITEPA 2003 against a refusal or decision made before 6 April 2014 in relation to the scheme.
(5) Sub-paragraph (6) applies if a share option was granted before 6 April 2014 under the scheme at a time when the scheme was an approved CSOP scheme.
(6) On and after 6 April 2014, the CSOP code has effect in relation to the option as if it were granted under the scheme at a time when the scheme was a Schedule 4 CSOP scheme (but not if no notice under paragraph 28A of Schedule 4 to ITEPA 2003 is given in relation to the scheme or if the scheme cannot be a Schedule 4 CSOP scheme because of sub-paragraph (2) of this paragraph).
(7) In relation to the scheme—
(a) paragraph 28F of Schedule 4 to ITEPA 2003 (as inserted by paragraph 179 above) has effect as if for sub-paragraph (2) there were substituted—

“(2) HMRC may enquire into the scheme if HMRC give notice to the scheme organiser of HMRC's intention to do so no later than 6 July 2016.”

, and
(b) the cases covered by paragraphs 28F(4)(b), 28H(1)(a)(ii) and 28I(1)(a)(ii) of Schedule 4 to ITEPA 2003 (as inserted by paragraph 179 above) include cases in which requirements of Parts 2 to 6 of that Schedule were not met before 6 April 2014.
214 If the scheme was an approved CSOP scheme before 6 April 2014, the amendments made by this Part and paragraphs 140 and 142 above do not affect the deductions which may be made in relation to the scheme under section 94A of ITTOIA 2005 or section 999 of CTA 2009 (deduction for costs of setting up scheme) if they would otherwise do so.
215 The amendments made by paragraph 180 above do not affect a notice given in relation to the scheme under paragraph 33 of Schedule 4 to ITEPA 2003 before 6 April 2014.

PART 4 Enterprise management incentives

Amendments to Schedule 5 to ITEPA 2003
216 Schedule 5 to ITEPA 2003 (enterprise management incentives) is amended as follows.
217 (1) Paragraph 44 (notice of option to be given to HMRC) is amended as follows.
(2) In sub-paragraph (2) omit paragraph (b) and the “and” before it.
(3) In sub-paragraph (4) for “each of sub-paragraphs (5) and (6)” substitute “ sub-paragraph (5) ”.
(4) In sub-paragraph (5)—
(a) after paragraph (a) omit “and”, and
(b) after paragraph (b) insert

“, and
(c) that the individual to whom the option has been granted has made and signed a written declaration within sub-paragraph (6) and that the declaration is held by the employer company”

.
(5) After sub-paragraph (5) insert—

“(5A) The employer company must—
(a) retain the declaration mentioned in sub-paragraph (5)(c) and, if requested to do so by an officer of Revenue and Customs, produce it to such an officer before the end of the period of 7 days after the day on which the request is made, and
(b) give a copy of that declaration to the individual before the end of the period of 7 days after the day on which the declaration is signed by the individual.”

(6) After sub-paragraph (7) insert—

“(8) The notice, and any information supporting it, must be given electronically.
(9) But, if an officer of Revenue and Customs considers it appropriate to do so, the officer may allow the employer company to give the notice or any supporting information in another way; and, if the officer does so, the notice or information must be given in that other way.
(10) The Commissioners for Her Majesty's Revenue and Customs—
(a) must prescribe how notices and supporting information are to be given electronically;
(b) may make different provision for different cases or circumstances.”

218 For paragraph 52 (annual returns) substitute—

“52 (1) This paragraph applies in relation to a company whose shares are (or have been) subject to qualifying options.
(2) The company must give to Her Majesty's Revenue and Customs (“HMRC”) a return for each tax year falling (wholly or partly) in the company's qualifying option period.
(3) The company's “qualifying option period” is the period—
(a) beginning when the first qualifying option to which the company's shares are subject is granted, and
(b) ending when the termination condition is met.
(4) “The termination condition” is met when the company's shares—
(a) are no longer subject to qualifying options, and
(b) will no longer become subject to qualifying options.
(5) The return for a tax year must—
(a) contain, or be accompanied by, such information as HMRC may require, and
(b) be given on or before 6 July in the following tax year.
(6) The information which may be required under sub-paragraph (5)(a) includes (in particular) information to enable HMRC to determine the liability to tax, including capital gains tax, of any person who has been granted a qualifying option to which the company's shares are subject.
(7) If the company becomes aware that—
(a) anything which should have been included in, or should have accompanied, a return for a tax year was not included in, or did not accompany, the return,
(b) anything which should not have been included in, or should not have accompanied, a return for a tax year was included in, or accompanied, the return, or
(c) any other error or inaccuracy has occurred in relation to a return for a tax year,
the company must give an amended return correcting the position to HMRC without delay.
52A (1) A return under paragraph 52, and any information accompanying the return, must be given electronically.
(2) But, if HMRC consider it appropriate to do so, HMRC may allow a company to give a return or any accompanying information in another way; and, if HMRC do so, the return or information must be given in that other way.
(3) The Commissioners for Her Majesty's Revenue and Customs—
(a) must prescribe how returns and accompanying information are to be given electronically;
(b) may make different provision for different cases or circumstances.”

219 (1) Paragraph 53 (compliance with time limits) is amended as follows.
(2) In sub-paragraph (1)—
(a) after “a person” insert “ (“P”) ”, and
(b) in paragraphs (a) and (b) for “the person” substitute “ P ”.
(3) After sub-paragraph (2) insert—

“(3) For the purposes of sub-paragraph (1)—
(a) an insufficiency of funds is not a reasonable excuse, unless attributable to events outside P's control, and
(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.”

220 After paragraph 57 insert—

“Penalties
57A A company is liable for a penalty of £500 if the company fails—
(a) to produce a declaration to an officer of Revenue and Customs as required by paragraph 44(5A)(a) before the end of the period mentioned in that provision, or
(b) to provide a copy of a declaration to an individual as required by paragraph 44(5A)(b) before the end of the period mentioned in that provision,
and Her Majesty's Revenue and Customs (“HMRC”) decide that such a penalty should be payable.
57B (1) This paragraph applies if a company fails to give a return for a tax year (containing, or accompanied by, all required information) on or before the date mentioned in paragraph 52(5)(b) (“the date for delivery”).
(2) The company is liable for a penalty of £100.
(3) If the company's failure continues after the end of the period of 3 months beginning with the date for delivery, the company is liable for a further penalty of £300.
(4) If the company's failure continues after the end of the period of 6 months beginning with the date for delivery, the company is liable for a further penalty of £300.
(5) The company is liable for a further penalty under this sub-paragraph if—
(a) the company's failure continues after the end of the period of 9 months beginning with the date for delivery,
(b) HMRC decide that such a penalty should be payable, and
(c) HMRC give notice to the company specifying the period in respect of which the penalty is payable.
(The company may be liable for more than one penalty under this sub-paragraph.)
(6) The penalty under sub-paragraph (5) is £10 for each day that the failure continues during the period specified in the notice under sub-paragraph (5)(c).
(7) The period specified in the notice under sub-paragraph (5)(c)—
(a) may begin earlier than the date on which the notice is given, but
(b) may not begin until after the end of the period mentioned in sub-paragraph (5)(a) or, if relevant, the end of any period specified in any previous notice under sub-paragraph (5)(c) given in relation to the failure.
57C (1) This paragraph applies if a return under paragraph 52, or any information accompanying such a return—
(a) is given otherwise than in accordance with paragraph 52A, or
(b) contains a material inaccuracy—
(i) which is careless or deliberate, or
(ii) which is not corrected as required by paragraph 52(7).
(2) The company is liable for a penalty of an amount decided by HMRC.
(3) The penalty must not exceed £5,000.
(4) For the purposes of sub-paragraph (1)(b)(i) an inaccuracy is careless if it is due to a failure by the company to take reasonable care.
57D (1) This paragraph applies if a company is liable for a penalty under this Part.
(2) HMRC must assess the penalty and notify the company of the assessment.
(3) Subject to sub-paragraph (4), the assessment must be made no later than 12 months after the date on which the company becomes liable for the penalty.
(4) In the case of a penalty under paragraph 57C(1)(b), the assessment must be made no later than—
(a) 12 months after the date on which HMRC become aware of the inaccuracy, and
(b) 6 years after the date on which the company becomes liable for the penalty.
(5) A penalty payable under this Part must be paid—
(a) no later than 30 days after the date on which the notice under sub-paragraph (2) is given to the company, or
(b) if notice of appeal is given against the penalty under paragraph 57E(1) or (2), no later than 30 days after the date on which the appeal is determined or withdrawn.
(6) The penalty may be enforced as if it were corporation tax or, if the company is not within the charge to corporation tax, income tax charged in an assessment and due and payable.
(7) Sections 100 to 103 of TMA 1970 do not apply to a penalty under this Part.
57E (1) A company may appeal against a decision of HMRC that the company is liable for a penalty under this Part.
(2) A company may appeal against a decision of HMRC as to the amount of a penalty payable by the company under this Part.
(3) Notice of appeal must be given to HMRC no later than 30 days after the date on which the notice under paragraph 57D(2) is given to the company.
(4) On an appeal under sub-paragraph (1) which is notified to the tribunal, the tribunal may affirm or cancel the decision.
(5) On an appeal under sub-paragraph (2) which is notified to the tribunal, the tribunal may—
(a) affirm the amount of the penalty decided, or
(b) substitute another amount for that amount.
(6) Subject to this paragraph and paragraph 57D, the provisions of Part 5 of TMA 1970 relating to appeals have effect in relation to an appeal under this paragraph as they have effect in relation to an appeal against an assessment to corporation tax or, if the company is not within the charge to corporation tax, income tax.”

Other amendment: section 98 of TMA 1970
221 In the second column of the Table in section 98 of TMA 1970 (special returns etc) omit the entry for paragraph 52 of Schedule 5 to ITEPA 2003.

Commencement and transitional provision
222 This Part is treated as having come into force on 6 April 2014.
223 The amendments made by paragraph 217 above have no effect in relation to options granted before 6 April 2014.
224 (1) The amendment made by paragraph 218 above has effect so as to require returns for the tax year 2014-15 and subsequent tax years.
(2) It has effect in relation to companies whose qualifying option periods begin before 6 April 2014 (as well as those whose qualifying option periods begin on or after that date).
(3) It does not affect the duty of a company to deliver a return for a tax year earlier than the tax year 2014-15 in accordance with paragraph 52 of Schedule 5 to ITEPA 2003 as that paragraph stood before its substitution; and the effect of the amendment made by paragraph 221 above is limited accordingly.
(4) In paragraphs 57B(1) and 57C(1) of Schedule 5 to ITEPA 2003 (as inserted by paragraph 220 above) the reference to a return is to a return under paragraph 52 of that Schedule as substituted.
225 The amendment made by paragraph 219(3) above does not affect a reasonable excuse which began before 6 April 2014.

PART 5 Other employee share schemes

Amendments to Chapter 1 of Part 7 of ITEPA 2003
226 Chapter 1 of Part 7 of ITEPA 2003 (employment income: income and exemptions relating to securities: general) is amended as follows.
227 (1) Section 421J (duty to provide information) is amended as follows.
(2) Omit subsections (3), (7), (8), (11) and (12).
(3) In subsection (10) for “by, or by a notice under,” substitute “ by a notice under ”.
228 After section 421J insert—

“421JA Annual returns
(1) This section applies in relation to a person who is (or has been) a responsible person (see section 421L) in relation to reportable events (see section 421K).
(2) The person must give to Her Majesty's Revenue and Customs (“HMRC”) a return for each tax year falling (wholly or partly) in the person's reportable event period.
(3) The person's “reportable event period” is the period—
(a) beginning when the first reportable event occurs in relation to which the person is a responsible person, and
(b) ending when the person will no longer be a responsible person in relation to reportable events.
(4) The return for a tax year must—
(a) contain, or be accompanied by, such information as HMRC may require, and
(b) be given on or before 6 July in the following tax year.
(5) The information which may be required under subsection (4)(a) includes (in particular) information to enable HMRC to determine the liability to tax, including capital gains tax, of any employee.
(6) If the person becomes aware that—
(a) anything which should have been included in, or should have accompanied, a return for a tax year was not included in, or did not accompany, the return,
(b) anything which should not have been included in, or should not have accompanied, a return for a tax year was included in, or accompanied, the return, or
(c) any other error or inaccuracy has occurred in relation to a return for a tax year,
the person must give an amended return correcting the position to HMRC without delay.
(7) A person's return for a tax year under this section need not contain, or be accompanied by, duplicate information and a person is not required to give a return for a tax year under this section if it would only contain, or be accompanied by, duplicate information.
(8) “Duplicate information” means information which is contained in or accompanies—
(a) a return which another person gives for the tax year under this section, or
(b) a return which any person gives for the tax year under any of the following provisions—
(i) paragraph 81B of Schedule 2 (annual return for Schedule 2 SIP);
(ii) paragraph 40B of Schedule 3 (annual return for Schedule 3 SAYE option scheme);
(iii) paragraph 28B of Schedule 4 (annual return for Schedule 4 CSOP scheme);
(iv) paragraph 52 of Schedule 5 (annual return for company whose shares are subject to qualifying options under the EMI code).

421JB Returns to be given electronically
(1) A return under section 421JA, and any information accompanying the return, must be given electronically.
(2) But, if HMRC consider it appropriate to do so, HMRC may allow a person to give a return or any accompanying information in another way; and, if HMRC do so, the return or information must be given in that other way.
(3) The Commissioners for Her Majesty's Revenue and Customs—
(a) must prescribe how returns and accompanying information are to be given electronically;
(b) may make different provision for different cases or circumstances.

421JC Penalties for late returns
(1) This section applies if a person fails to give a return under section 421JA for a tax year (containing, or accompanied by, all required information) on or before the date mentioned in section 421JA(4)(b) (“the date for delivery”).
(2) The person is liable for a penalty of £100.
(3) If the person's failure continues after the end of the period of 3 months beginning with the date for delivery, the person is liable for a further penalty of £300.
(4) If the person's failure continues after the end of the period of 6 months beginning with the date for delivery, the person is liable for a further penalty of £300.
(5) The person is liable for a further penalty under this subsection if—
(a) the person's failure continues after the end of the period of 9 months beginning with the date for delivery,
(b) HMRC decide that such a penalty should be payable, and
(c) HMRC give notice to the person specifying the period in respect of which the penalty is payable.
(The person may be liable for more than one penalty under this subsection.)
(6) The penalty under subsection (5) is £10 for each day that the failure continues during the period specified in the notice under subsection (5)(c).
(7) The period specified in the notice under subsection (5)(c)—
(a) may begin earlier than the date on which the notice is given, but
(b) may not begin until after the end of the period mentioned in subsection (5)(a) or, if relevant, the end of any period specified in any previous notice under subsection (5)(c) given in relation to the failure.
(8) Liability for a penalty under this section does not arise if the person satisfies HMRC (or, on an appeal under section 421JF, the tribunal) that there is a reasonable excuse for the person's failure.
(9) For the purposes of subsection (8)—
(a) an insufficiency of funds is not a reasonable excuse, unless attributable to events outside the person's control,
(b) where the person relies on any other person to do anything, that is not a reasonable excuse unless the (first mentioned) person took reasonable care to avoid the failure, and
(c) where the person had a reasonable excuse for the failure but the excuse ceased, the person is to be treated as having continued to have the excuse if the failure is remedied without unreasonable delay after the excuse ceased.

421JD Penalty if information not given correctly
(1) This section applies if a return under section 421JA, or any information accompanying such a return—
(a) is given otherwise than in accordance with section 421JB, or
(b) contains a material inaccuracy—
(i) which is careless or deliberate, or
(ii) which is not corrected as required by section 421JA(6).
(2) The person in question is liable for a penalty of an amount decided by HMRC.
(3) The penalty must not exceed £5,000.
(4) For the purposes of subsection (1)(b)(i) an inaccuracy is careless if it is due to a failure by the person in question to take reasonable care.

421JE Assessment of penalties
(1) This section applies if a person is liable for a penalty under section 421JC or 421JD.
(2) HMRC must assess the penalty and notify the person of the assessment.
(3) Subject to subsection (4), the assessment must be made no later than 12 months after the date on which the person becomes liable for the penalty.
(4) In the case of a penalty under section 421JD(1)(b), the assessment must be made no later than—
(a) 12 months after the date on which HMRC become aware of the inaccuracy, and
(b) 6 years after the date on which the person becomes liable for the penalty.
(5) A penalty payable under this Part must be paid—
(a) no later than 30 days after the date on which the notice under subsection (2) is given to the person, or
(b) if notice of appeal is given against the penalty under section 421JF(1) or (2), no later than 30 days after the date on which the appeal is determined or withdrawn.
(6) The penalty may be enforced as if it were income tax or, if the person is a company within the charge to corporation tax, corporation tax charged in an assessment and due and payable.
(7) Sections 100 to 103 of TMA 1970 do not apply to a penalty under section 421JC or 421JD.

421JF Appeals
(1) A person may appeal against a decision of HMRC that the person is liable for a penalty under section 421JC or 421JD.
(2) A person may appeal against a decision of HMRC as to the amount of a penalty payable by the person under section 421JC or 421JD.
(3) Notice of appeal must be given to HMRC no later than 30 days after the date on which the notice under section 421JE(2) is given to the person.
(4) On an appeal under subsection (1) which is notified to the tribunal, the tribunal may affirm or cancel the decision.
(5) On an appeal under subsection (2) which is notified to the tribunal, the tribunal may—
(a) affirm the amount of the penalty decided, or
(b) substitute another amount for that amount.
(6) Subject to this section and section 421JE, the provisions of Part 5 of TMA 1970 relating to appeals have effect in relation to an appeal under this section as they have effect in relation to an appeal against an assessment to income tax or, if the person is a company within the charge to corporation tax, corporation tax.”

229 In section 421K (reportable events) in subsection (1) for “section 421J (duty to provide information)” substitute “ sections 421J and 421JA (duties to provide information and annual returns) ”.
230 In section 421L (responsible persons) in subsection (1) for “section 421J (duty to provide information)” substitute “ sections 421J and 421JA (duties to provide information and annual returns) ”.

Other amendment: section 98 of TMA 1970
231 In the second column of the Table in section 98 of TMA 1970 (special returns etc) omit the entry for section 421J(3) of ITEPA 2003.

Commencement and transitional provision
232 This Part is treated as having come into force on 6 April 2014.
233 The amendments made by paragraphs 227 and 231 above have no effect in relation to reportable events occurring before 6 April 2014.
234 (1) Section 421JA of ITEPA 2003 (as inserted by paragraph 228 above) has effect so as to require returns for the tax year 2014-15 and subsequent tax years.
(2) That section has effect in relation to persons whose reportable event periods begin before 6 April 2014 (as well as those whose reportable event periods begin on or after that date).

SCHEDULE 9 Employment-related securities etc
Section 52

PART 1 Internationally mobile employees

ITEPA 2003
1 ITEPA 2003 is amended as follows.
2 Part 2 (employment income: charge to tax) is amended as follows.
3 In section 6 (nature of charge to tax on employment income), in subsection (3A), for “Chapter 5A” substitute “ Chapter 5B ”.
4 In section 10 (meaning of “taxable earnings” and “taxable specific income”), in subsection (4), for the words from “Chapter 5A” to the end substitute “ Chapter 5B (taxable specific income from employment-related securities etc: internationally mobile employees) ”.
5 For Chapter 5A (taxable specific income: effect of remittance basis) substitute—

“CHAPTER 5B Taxable specific income from employment-related securities etc: internationally mobile employees

41F Taxable specific income: internationally mobile employees etc
(1) This section applies if—
(a) an amount counts under Chapters 2 to 5 of Part 7 (employment-related securities etc) as employment income of an individual for a tax year (“the securities income”) in respect of an employment (“the relevant employment”), and
(b) one or more of the international mobility conditions is met in relation to the individual (see subsection (2)).
(2) The “international mobility conditions” are—
(a) that any part of the relevant period (see section 41G) is within a tax year for which section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to the individual;
(b) that any part of the relevant period is within a tax year for which the individual is not UK resident;
(c) that any part of the relevant period is within the overseas part of a tax year that is a split year with respect to the individual.
(3) An amount equal to—
SI − FSI
is an amount of “taxable specific income” from the relevant employment for the tax year mentioned in subsection (1)(a).
(4) In subsection (3)—
(a) SI is the amount of the securities income, and
(b) FSI is the amount of the securities income that is “foreign”.
(5) The amount of the securities income that is “foreign” is the sum of any chargeable foreign securities income and any unchargeable foreign securities income (see sections 41H to 41L).
(6) The full amount of any chargeable foreign securities income which is remitted to the United Kingdom in a tax year is an amount of “taxable specific income” from the relevant employment for that year.
(7) Subsection (6) applies whether or not the relevant employment is held when the chargeable foreign securities income is remitted.
(8) For the purposes of Chapter A1 of Part 14 of ITA 2007 (remittance basis), treat the relevant securities or relevant securities option as deriving from the chargeable foreign securities income.
(9) But where—
(a) the chargeable event is the disposal of the relevant securities or the assignment or release of the relevant securities option, and
(b) the individual receives consideration for the disposal, assignment or release of an amount equal to or exceeding the market value of the relevant securities or relevant securities option,
for the purposes of that Chapter treat the consideration (and not the relevant securities or relevant securities option) as deriving from the chargeable foreign securities income.
(10) See Chapter A1 of Part 14 of ITA 2007 for the meaning of “remitted to the United Kingdom”.
(11) In this section and section 41G—
“the chargeable event” means the event giving rise to the securities income, and
“the relevant securities” or “the relevant securities option” means the employment-related securities or employment-related securities option by virtue of which the amount mentioned in subsection (1)(a) counts as employment income.

41G Section 41F: the relevant period
(1) “The relevant period” is to be determined as follows.
(2) In the case of an amount that counts as employment income by virtue of Chapter 2 of Part 7 (restricted securities) (other than where subsection (4) applies) or Chapter 3 of that Part (convertible securities), the relevant period—
(a) begins with the day of the acquisition, and
(b) ends with the day of the chargeable event.
(3) In the case of an amount that counts as employment income by virtue of section 446B (securities with artificially depressed market value: charge on acquisition), the relevant period is the tax year in which the acquisition occurs.
(4) In a case within subsection (1)(aa) or (b) of section 446E (securities with artificially depressed market value: charge on restricted securities) where an amount counts as employment income by virtue of that section, the relevant period—
(a) begins at the beginning of the tax year in which the chargeable event is treated as occurring, and
(b) ends with the day on which the chargeable event is treated as occurring.
(5) In the case of an amount that counts as employment income by virtue of section 446L (securities with artificially enhanced market value), the relevant period—
(a) begins at the beginning of the tax year in which the valuation date (within the meaning of that section) falls, and
(b) ends with the valuation date.
(6) In the case of an amount that counts as employment income by virtue of section 446U (securities acquired for less than market value: discharge of notional loan) or 446UA (avoidance cases in respect of such securities)—
(a) if the relevant securities were acquired by virtue of the exercise of a securities option (“the option”), the relevant period—
(i) begins with the day of the acquisition of the option, and
(ii) ends with the day the option vests, and
(b) otherwise, the relevant period is—
(i) the tax year in which the notional loan (within the meaning of Chapter 3C of Part 7) is treated as made, or
(ii) if the chargeable event occurs in that year, the period beginning at the beginning of that year and ending with the day of that event.
(7) In the case of an amount that counts as employment income by virtue of—
(a) Chapter 3D of Part 7 (securities disposed of for more than market value), or
(b) Chapter 4 of that Part (post-acquisition benefits from securities),
the relevant period is the tax year in which the chargeable event occurs.
(8) In the case of an amount that counts as employment income by virtue of Chapter 5 of Part 7 (employment-related securities options), the relevant period—
(a) begins with the day of the acquisition, and
(b) ends with the day of the chargeable event or, if earlier, the day the relevant securities option vests.
(9) If the relevant period determined in accordance with subsections (2) to (8) would not, in all the circumstances, be just and reasonable, the relevant period is to be such period as is just and reasonable.
(10) In this section “the acquisition” has the same meaning as in Chapters 2 to 4 or Chapter 5 of Part 7 (see section 421B or 471).
(11) For the purposes of this section an option “vests”—
(a) when it becomes exercisable, or
(b) if earlier, when it becomes exercisable subject only to a period of time expiring.
(12) See section 41F(11) for the definitions of “the chargeable event”, “the relevant securities” and “the relevant securities option”.

41H Section 41F: chargeable and unchargeable foreign securities income
(1) The extent to which the securities income is “chargeable foreign securities income” or “unchargeable foreign securities income” is to be determined as follows.
(2) Treat an equal amount of the securities income as accruing on each day of the relevant period.
(3) If any part of the relevant period is within a tax year to which subsection (4) applies, the securities income treated as accruing in that part of the relevant period is “chargeable foreign securities income”.
This is subject to subsection (9) and section 41I (limit where duties of associated employment performed in UK).
(4) This subsection applies to a tax year if—
(a) section 809B, 809D or 809E of ITA 2007 applies to the individual for the year,
(b) the individual does not meet the requirement of section 26A for the year (reading references there to the employee as references to the individual),
(c) the relevant employment is with a foreign employer, and
(d) the duties of the relevant employment are performed wholly outside the United Kingdom in the year.
(5) But subsection (4) does not apply to a tax year if section 24A applies in relation to the relevant employment for the tax year.
(6) If any part of the relevant period is within a tax year to which subsection (7) applies—
(a) if the duties of the relevant employment are performed wholly outside the United Kingdom, the securities income treated as accruing in that part of the relevant period is “chargeable foreign securities income”, and
(b) if some, but not all, of those duties are performed outside the United Kingdom—
(i) the securities income mentioned in paragraph (a) is to be apportioned (on a just and reasonable basis) between duties performed in the United Kingdom and duties performed outside the United Kingdom, and
(ii) the income apportioned in respect of duties performed outside the United Kingdom is “chargeable foreign securities income”.
This is subject to subsection (9).
(7) This subsection applies to a tax year if—
(a) section 809B, 809D or 809E of ITA 2007 applies to the individual for the year,
(b) the individual meets the requirement of section 26A for the year (reading references there to the employee as references to the individual), and
(c) some or all of the duties of the relevant employment are performed outside the United Kingdom in the year.
(8) If any part of the relevant period is within a tax year for which the individual is not UK resident—
(a) if the duties of the relevant employment are performed wholly outside the United Kingdom in that year, the securities income treated as accruing in that part of the relevant period is “unchargeable foreign securities income”, or
(b) if some, but not all, of those duties are performed outside the United Kingdom in that year—
(i) the securities income mentioned in paragraph (a) is to be apportioned (on a just and reasonable basis) between duties performed in the United Kingdom and duties performed outside the United Kingdom, and
(ii) the income apportioned in respect of duties performed outside the United Kingdom is “unchargeable foreign securities income”.
(9) If any part of the relevant period is within the overseas part of a tax year that is a split year with respect to the individual—
(a) if the duties of the relevant employment are performed wholly outside the United Kingdom in that overseas part, the securities income treated as accruing in that part of the relevant period is “unchargeable foreign securities income”, or
(b) if some, but not all, of those duties are performed outside the United Kingdom in that overseas part—
(i) the securities income mentioned in paragraph (a) is to be apportioned (on a just and reasonable basis) between duties performed in the United Kingdom and duties performed outside the United Kingdom, and
(ii) the income apportioned in respect of duties performed outside the United Kingdom is “unchargeable foreign securities income”.
(10) If subsection (4) does not apply to a tax year by virtue of subsection (5), it is to be assumed for the purposes of section 41L that it is just and reasonable for none of the securities income treated as accruing in the tax year to be “chargeable foreign securities income”.
(11) See section 41J for further provision about the location of employment duties.
(12) This section is subject to—
(a) section 41K (securities income from overseas Crown employment), and
(b) section 41L (chargeable and unchargeable foreign securities income: just and reasonable apportionment).

41I Limit on “chargeable foreign securities income” where duties of associated employment performed in UK
(1) This section imposes a limit on the extent to which section 41H(3) applies in relation to a period when—
(a) the individual holds associated employments as well as the relevant employment, and
(b) the duties of the associated employments are not performed wholly outside the United Kingdom.
(2) The amount of the securities income for the period that is to be regarded as “chargeable foreign securities income” is limited to such amount as is just and reasonable, having regard to—
(a) the employment income for the period from all the employments mentioned in subsection (1)(a),
(b) the proportion of that income that is general earnings to which section 22 applies (chargeable overseas earnings),
(c) the nature of, and time devoted to, the duties performed outside the United Kingdom, and those performed in the United Kingdom, in the period, and
(d) all other relevant circumstances.
(3) In this section “associated employments” means employments with the same employer or with associated employers.
(4) Section 24(5) and (6) (meaning of “associated employer”) applies for the purposes of this section.

41J Location of employment duties
(1) The following provisions apply for the purposes of this Chapter—
(a) section 39(1) and (2), and
(b) section 40 (but as if in subsections (3) and (4) of that section references to section 24(1)(b) were to section 41I(1)(b)).
(2) Duties of an employment performed in the UK sector of the continental shelf in connection with exploration or exploitation activities are to be treated for the purposes of this Chapter as being performed in the United Kingdom.
(3) In subsection (2) “the UK sector of the continental shelf” and “exploration or exploitation activities” have the same meaning as in section 41 (treatment of general earnings from employment in the UK sector of the continental shelf).

41K Securities income from overseas Crown employment
(1) If securities income is from overseas Crown employment subject to United Kingdom tax, it is (notwithstanding any other provision of this Chapter) not “foreign”.
(2) “Securities income from overseas Crown employment” means securities income from Crown employment (within the meaning given by section 28(2)) in respect of duties performed outside the United Kingdom.
(3) Such securities income is to be taken as being “subject to United Kingdom tax” unless, by virtue of subsection (4), it falls within an exception contained in an order under section 28(5).
(4) Subject to any provision made in an order under section 28(5) for the purposes of this section, provisions made in an order under that section for the purposes of excepting general earnings from overseas Crown employment from the operation of section 27(2) also have effect for the purposes of excepting securities income from such employment from the operation of subsection (1).
(5) For the purposes of this section, if securities income is partly from overseas Crown employment subject to United Kingdom tax, a just and reasonable proportion of the securities income is to be taken to be from such employment.

41L Chargeable and unchargeable foreign securities income: just and reasonable apportionment
(1) This section applies if the proportion of the securities income that would otherwise be regarded as “chargeable foreign securities income” or “unchargeable foreign securities income” is not, having regard to all the circumstances, just and reasonable.
(2) The amounts of the securities income that are “chargeable foreign securities income” and “unchargeable foreign securities income” are such amounts as are just and reasonable (rather than the amounts calculated in accordance with section 41H).”

6 Part 7 (employment income: income and exemptions relating to securities) is amended as follows.
7 In section 418 (other related provisions), before subsection (1) insert—

“A1 This Part needs to be read with Chapter 5B of Part 2 (taxable specific income from employment-related securities etc: internationally mobile employees).”

8 Omit section 421E (employment-related securities: exclusions, residence etc).
9 In section 425 (no charge in respect of acquisition in certain cases), after subsection (5) insert—

“(6) No election may be made under subsection (3) unless, at the time of the acquisition, the earnings from the employment are (or would be if there were any) general earnings to which any of the charging provisions of Chapters 4 and 5 of Part 2 applies.”

10 (1) Section 428 (restricted securities: amount of charge) is amended as follows.
(2) In subsection (7), after paragraph (ba) insert—

“(bb) any amount that was charged to non-UK income tax in respect of the acquisition of the employment-related securities, but only so far as that amount exceeds any amount within paragraph (b) or (ba),”

.
(3) After subsection (7) insert—

“(7A) In subsection (7)(b) and (ba) the references to an amount of exempt income, in a case in which the amount that constituted, or was treated as, earnings in respect of the acquisition was not an amount of general earnings to which any of the charging provisions of Chapters 4 and 5 of Part 2 applied, includes any amount that would have been an amount of exempt income if any of those charging provisions had applied.
(7B) In subsection (7)(bb) “non-UK income tax” means a tax chargeable on income under the law of a territory outside the United Kingdom that corresponds to United Kingdom income tax.
(7C) A tax is not outside the scope of subsection (7B) by reason only that it—
(a) is chargeable under the law of a province, state or other part of a country, or
(b) is levied by or on behalf of a municipality or other local body.”

11 In section 430 (election for outstanding restrictions to be ignored), after subsection (3) insert—

“(4) No election may be made under this section unless, at the time of the chargeable event, the earnings from the employment are (or would be if there were any) general earnings to which any of the charging provisions of Chapters 4 and 5 of Part 2 applies.”

12 In section 431 (election for full or partial disapplication of Chapter 2 of Part 7 of ITEPA 2003), after subsection (5) insert—

“(6) No election may be made under this section unless, at the time of the acquisition, the earnings from the employment are (or would be if there were any) general earnings to which any of the charging provisions of Chapters 4 and 5 of Part 2 applies.”

13 In section 446T (securities acquired for less than market value: amount of notional loan), after subsection (3) insert—

“(3A) In subsection (3)(b) and (ba) the references to an amount of exempt income, in a case in which the amount that constitutes, or is treated as, earnings in respect of the acquisition is not an amount of general earnings to which any of the charging provisions of Chapters 4 and 5 of Part 2 applies, includes any amount that would be an amount of exempt income if any of those charging provisions were to apply.”

14 Omit section 474 (cases where Chapter 5 of Part 7 of ITEPA 2003 (employment-related securities options) does not apply).
15 In section 480 (securities options: deductible amounts), after subsection (5) insert—

“(5A) In subsection (5)(a) the reference to an amount of exempt income, in a case in which the amount that constituted earnings in respect of the acquisition was not an amount of general earnings to which any of the charging provisions of Chapters 4 and 5 of Part 2 applied, includes any amount that would have been an amount of exempt income if any of those charging provisions had applied.”

16 (1) Section 540 (no charge on acquisition of shares as taxable benefit) is amended as follows.
(2) In subsection (1), omit “In its application in relation to a UK resident employee,”.
(3) Omit subsection (2).
17 Part 7A (employment income provided through third parties) is amended as follows.
18 In section 554L (exclusions: earmarking for employee share schemes (3)), in subsection (10)(c)(i), for “section 474” substitute “ Chapter 5B of Part 2 ”.
19 (1) Section 554M (exclusions: earmarking for employee share schemes (4)) is amended as follows.
(2) In subsection (9)(b)(i), for “section 474” substitute “ Chapter 5B of Part 2 ”.
(3) In subsection (10)(b)(i), for “section 474” substitute “ Chapter 5B of Part 2 ”.
20 (1) Section 554N (exclusions: other cases involving employment-related securities etc) is amended as follows.
(2) In subsection (1)(b), omit “, or would apply apart from section 421E(1),”.
(3) In subsection (2)(b), omit “, or would apply apart from section 474(1),”.
(4) In subsection (6)—
(a) omit “421E(1),”, and
(b) omit “, 474(1)”.
(5) In subsection (10)—
(a) in paragraph (b), omit “, but ignoring section 474(1)”, and
(b) in paragraph (c), omit “or would be a chargeable event apart from section 474(1)”.
(6) In subsection (13)(c)(i), for “section 474” substitute “ Chapter 5B of Part 2 ”.
21 In Chapter 4 of Part 11 (PAYE: special types of income), in section 700A (employment-related securities etc: remittance basis), in subsection (3), for “41A” substitute “ 41F ”.

Consequential amendments to other Acts
22 TCGA 1992 is amended as follows.
23 In section 119A (increase in expenditure by reference to tax charged in relation to employment-related securities), in subsection (5A), for “unremitted foreign securities income” substitute “ unchargeable, and unremitted chargeable, foreign securities income ”.
24 (1) Section 119B (section 119A: unremitted foreign securities income) is amended as follows.
(2) In the heading, for “unremitted foreign securities income” substitute “ unchargeable, and unremitted chargeable, foreign securities income ”.
(3) In subsection (1), for the words from “unremitted” to the end substitute

“—
(a) unchargeable foreign securities income, or
(b) unremitted chargeable foreign securities income.”

(4) After subsection (1) insert—

“(1A) In this section “unchargeable foreign securities income” means unchargeable foreign securities income for the purposes of section 41F of ITEPA 2003 (taxable specific income: internationally mobile employees etc) (see sections 41H to 41L of that Act).”

(5) In subsection (2)—
(a) after “unremitted” insert “ chargeable ”, and
(b) for paragraph (a) substitute—

“(a) is chargeable foreign securities income for the purposes of section 41F of ITEPA 2003, and”

.
(6) In subsection (3), after “unremitted” insert “ chargeable ”.
25 In section 144ZB (exception to rule in section 144ZA), in subsection (2)(a), omit “or would, apart from section 474 of that Act, apply”.
26 In section 149A (employment-related securities options), in subsection (1)(b), omit “or would, apart from section 474 of that Act, apply”.
27 In section 149AA (restricted and convertible employment-related securities and employee shareholder shares), in subsection (7)—
(a) after “include” insert

“—
(a)”

, and
(b) at the end insert

“, or
(b) in a case in which the amount that constituted, or was treated as, earnings was not an amount of general earnings to which any of the charging provisions of Chapters 4 and 5 of Part 2 of ITEPA 2003 applied, any amount that would have been an amount of such exempt income if any of those charging provisions had applied.”

28 In section 288 (interpretation), in subsection (1A), omit “or would, apart from section 474 of that Act, apply”.
29 In section 809K of ITA 2007 (remittance of income and gains: introduction), in subsection (1), for paragraph (c) substitute—

“(c) Chapter 5B of Part 2 of that Act (taxable specific income from employment-related securities etc: internationally mobile employees),”

.
30 CTA 2009 is amended as follows.
31 In section 1017 (condition relating to employee's income tax position for CT relief following acquisition of shares pursuant to option), omit subsections (2) to (4).
32 In section 1025 (additional CT relief available if shares are restricted shares), omit subsections (3) to (5).
33 In section 1032 (meaning of “chargeable event” for the purposes of additional CT relief in cases involving convertible securities), omit subsections (3) to (5).

PART 2 Restricted securities and securities acquired for less than market value: replacement and additional securities and rollover relief etc
34 ITEPA 2003 is amended as follows.
35 (1) In Chapter 1 of Part 7 (income and exemptions relating to securities: general), section 421D (replacement and additional securities and changes in interests) is amended as follows.
(2) In subsection (3), insert at the end “ and for the purposes of Chapter 3C as a payment made for their acquisition at or before the time of the acquisition ”.
(3) In subsection (4), insert at the end “ or a payment was made for their acquisition at or before the time of the acquisition ”.
36 In Chapter 2 of Part 7 (restricted securities), before section 431 (election for full or partial disapplication of Chapter 2) but after the heading before that section (supplementary) insert—

“430A Application of this Chapter where securities exchanged for further securities
(1) This section applies if—
(a) an associated person disposes of the employment-related securities (“the old securities”) for consideration, otherwise than to another associated person,
(b) the whole or part of the consideration consists of, or includes, other securities which are restricted securities (“the new securities”) being acquired by an associated person,
(c) the value of the consideration determined in accordance with subsection (2) is no more than what would have been the market value of the old securities immediately before the disposal but for any restrictions, and
(d) the avoidance of tax or national insurance contributions is not the main purpose (or one of the main purposes) of the disposal.
(2) The value of the consideration is the sum of—
(a) what would have been the market value of the new securities immediately before the disposal but for any restrictions, and
(b) the value of the rest of the consideration (if any).
(3) If the consideration consists partly of the new securities and partly of other consideration, the disposal is to be treated for the purposes of this Chapter as being two separate disposals as follows—
(a) a disposal, that is a chargeable event within section 427(3)(c), of the appropriate amount of the old securities (see subsection (4)) for such of the consideration as does not consist of the new securities, and
(b) a disposal, to which this section applies, of the remaining old securities for consideration consisting wholly of the new securities.
(4) In subsection (3)(a) the appropriate amount of the old securities is—
OS × OC TC
where—
OS is the total number of the old securities,
OC is the value of such of the consideration as does not consist of the new securities, and
TC is value of the consideration determined in accordance with subsection (2).
(5) If the consideration consists wholly of the new securities—
(a) neither the disposal of the old securities, nor the acquisition of the new securities, gives rise to any liability to income tax,
(b) the disposal is not a chargeable event within section 427(3)(c), and
(c) this Chapter applies to the new securities as it applies to the old securities, subject to subsections (6) to (17).
(6) Sections 425 and 431 do not apply in relation to the new securities.
(7) If, at the time of the disposal, sections 426 to 429 do not apply to the old securities by virtue of—
(a) an election made under section 430(1) or 431(1) in relation to the old securities, or
(b) this subsection,
sections 426 to 430 do not apply to the new securities.
(8) If there is a chargeable event for the purposes of section 426 in relation to any of the new securities, for the purposes of section 428 (amount of charge)—
(a) IUP (see subsection (3) of that section) is to be determined in accordance with subsection (9), and
(b) PCP (see subsection (4) of that section) is to be determined in accordance with subsection (10).
(9) IUP is equal to what IUP was, for the purposes of determining the taxable amount for the purposes of section 426, in relation to chargeable events relating to the old securities that occurred before the disposal (or what it would have been had there been any such chargeable events).
(10) PCP is the aggregate of—
(a) PCP determined in accordance with section 428(4), and
(b) what PCP would have been, for the purposes of determining the taxable amount for the purposes of section 426, if a chargeable event relating to the old securities had occurred immediately before the disposal but after any chargeable events relating to the old securities that actually did occur before the disposal.
(11) Subsections (12) to (14) apply if—
(a) section 425(2) (no liability to income tax on acquisition of certain securities subject to forfeiture etc) applied in relation to the old securities, and
(b) at the time of the disposal, there is still a restriction relating to those securities such that they are restricted securities by virtue of section 423(2) (provision for forfeiture etc).
(12) This Chapter has effect in relation to any of the new securities that are not restricted securities by virtue of section 423(2) as if—
(a) there were a restriction relating to them (“the deemed restriction”) corresponding to the restriction relating to the old securities mentioned in subsection (11)(b), and
(b) immediately after their acquisition, the deemed restriction were removed.
(13) Subsection (14) applies if—
(a) there is a restriction by virtue of which some or all of the new securities are, at the time of the disposal, restricted securities, by virtue of subsection (2) of section 423, and
(b) within 5 years after the acquisition of the old securities, the restriction is not removed or varied such that the new securities to which it relates cease to be restricted securities by virtue of that subsection.
(14) For the purposes of this Chapter the restriction mentioned in subsection (13) is to be treated as being removed 5 years after the acquisition of the old securities.
(15) Subsection (16) applies if, at the time of the disposal—
(a) there is a restriction relating to the old securities such that they are restricted securities by virtue of section 423(2), and
(b) subsections (13) and (14) apply in relation to the old securities (including by virtue of subsection (16)).
(16) Subsections (12) to (14) apply in relation to the new securities, but—
(a) the reference in subsection (12)(a) to the restriction mentioned in subsection (11)(b) is to be read as a reference to the restriction mentioned in subsection (15)(a), and
(b) the references in subsections (13)(b) and (14) to the acquisition of the old securities are to be read as references to the acquisition of the original forfeitable securities.
(17) In subsection (16) “original forfeitable securities” means the restricted securities by virtue of the application to which of section 425(2) subsections (13) and (14) apply to the old securities.
(18) In this section references to restricted securities include a restricted interest in securities.”

37 (1) In Chapter 3C of Part 7 (securities acquired for less than market value), section 446U (discharge of notional loan) is amended as follows.
(2) In subsection (1), omit the “or” at the end of paragraph (a) and for paragraph (b) substitute—

“(b) if there is an outstanding or contingent liability to pay for the employment-related securities, that liability is released, extinguished, transferred or adjusted so as no longer to bind any associated person (except in circumstances in which subsection (4)(aa) applies), or”

.
(3) After that subsection insert—

“(1A) Subsection (1)(a) does not apply if, at the time of the acquisition, there was an actual or contingent liability to make one or more further payments equal to the amount initially outstanding for the employment-related securities.”

(4) In subsection (4), omit the “or” at the end of paragraph (a) and after that paragraph insert—

“(aa) the employment-related securities, together with the liability to make such further payment or payments, are disposed of otherwise than to an associated person and for consideration of an amount that reflects the transfer of the liability, or”

.
38 In section 554N (exclusions from Chapter 2 of Part 7A: other cases involving employment related securities etc), in subsection (6), after “429,” insert “ 430A(5)(b), ”.

PART 3 Corporation tax relief for employee share acquisitions
39 Part 12 of CTA 2009 (other relief for employee share acquisitions) is amended as follows.
40 In Chapter 1 (introduction), in section 1002 (“employment”), after subsection (4) insert—

“(5) See also sections 1007A(2), 1015B(2), 1025B(2) and 1030B(2) (deemed employment for the purposes of Chapters 2, 3, 4 and 5 of certain employees of overseas companies who work for companies in the UK).”

41 In section 1005 (other definitions)—
(a) at the end of the definition of “the employee” insert “ (see also sections 1025A(7) and 1030A(8)) ”, and
(b) in the definition of “the qualifying business”, for “or 1015(1)(b)” substitute “ , 1015(1)(b), 1025A(1)(d)(i) or 1030A(1)(d)(ii) ”.
42 In Chapter 2 (corporation tax relief if shares are acquired by employee or other person), after section 1007 insert—

“1007A Application of Chapter in relation to employees of overseas companies who work for companies in the UK
(1) This section applies if—
(a) a person has an employment (“the actual employment”) with a non-UK resident company not within the charge to corporation tax (“the overseas employer”),
(b) in performing any of the duties of the actual employment, the person works in the United Kingdom for, but is not employed by, another company (“the host employer”), and
(c) the host employer is—
(i) a UK resident company, or
(ii) a non-UK resident company within the charge to corporation tax.
(2) For the purposes of this Chapter, the person is to be treated as having an employment with the host employer (“the deemed employment”), the duties of which consist of the work the person does for the host employer.
(3) Subsection (4) applies if—
(a) shares (“relevant shares”) are acquired because of the actual employment, and
(b) because of the work the person does for the host employer, an amount of employment income of the person is charged to tax under ITEPA 2003 in relation to the acquisition of the relevant shares.
(4) For the purposes of section 1007(1)(c) (requirement that shares are acquired because of employment) the relevant shares are (regardless of when the acquisition takes place) to be treated, so far as would not otherwise be the case, as if they are acquired because of the deemed employment.
(5) In section 1008 (conditions relating to the shares acquired) references to the employing company are to be read as including references to the overseas employer.
(6) If, in relation to an acquisition of shares, the amount of relief would otherwise be more than the total amount of employment income of the person charged to tax under ITEPA 2003, the amount of relief is (notwithstanding any other provision of this Chapter) limited to the total amount of that income so charged.
(7) If relief is available to more than one company in respect of the same acquisition of shares, relief may only be given to one of them in respect of that acquisition.
(8) For the purposes of this section a person works for another person if the person provides, and is obliged to provide, personal service to the other person.”

43 In Chapter 3 (corporation tax relief if employee or other person obtains option to acquire shares), after section 1015 insert—

“1015A Application of Chapter: employees of overseas companies who take up employment with a UK company
(1) This section applies if—
(a) a person (“E”) has, or had, an employment with a non-UK resident company not within the charge to corporation tax (“the overseas employment”),
(b) E or another person obtains an option to acquire shares because of the overseas employment,
(c) E has an employment (“the UK employment”) with a company that is a UK resident company or a non-UK resident company within the charge to corporation tax,
(d) the person who obtained the option acquires shares pursuant to it, and
(e) subsection (2) applies.
(2) This subsection applies if—
(a) an amount of employment income of E is charged to tax under ITEPA 2003 in relation to the acquisition because of the UK employment, or
(b) it is because of the UK employment that E or another person is able to acquire the shares pursuant to the option.
(3) For the purposes of section 1015(1)(c) (requirement that option is obtained because of employment), the option is (regardless of when it is obtained) to be treated as if it is obtained because of the UK employment.
(4) In section 1016 (conditions relating to the shares acquired) references to the employing company are to be read as including references to the company mentioned in subsection (1)(a).
(5) If, in relation to the acquisition, an amount of relief would otherwise be available that is more than the total amount of employment income of E charged to tax under ITEPA 2003, the amount of relief is (notwithstanding any other provision of this Chapter) limited to the total amount of that income so charged.
(6) If relief is available to more than one company in respect of the same acquisition of shares pursuant to an option, relief may only be given to one of them in respect of that acquisition.

1015B Application of Chapter in relation to employees of overseas companies who work for companies in the UK
(1) This section applies if—
(a) a person has an employment (“the actual employment”) with a non-UK resident company not within the charge to corporation tax (“the overseas employer”),
(b) in performing any of the duties of the actual employment, the person works in the United Kingdom for, but is not employed by, another company (“the host employer”), and
(c) the host employer is—
(i) a UK resident company, or
(ii) a non-UK resident company within the charge to corporation tax.
(2) For the purposes of this Chapter, the person is to be treated as having an employment (“the deemed employment”) with the host employer, the duties of which consist of the work the person does for the host employer.
(3) Subsection (4) applies if—
(a) an option to acquire shares (“the relevant option”) is obtained because of the actual employment,
(b) shares are acquired pursuant to the relevant option, and
(c) because of the work the person does for the host employer, an amount of employment income of the person is charged to tax under ITEPA 2003 in relation to the acquisition of the shares.
(4) For the purposes of section 1015(1)(c) (requirement that option is obtained because of employment), the relevant option is (regardless of when it is obtained) to be treated, so far as would not otherwise be the case, as if it is obtained because of the deemed employment.
(5) In section 1016 (conditions relating to the shares acquired) references to the employing company are to be read as including references to the overseas employer.
(6) If, in relation to an acquisition of shares pursuant to an option, the amount of relief would otherwise be more than the total amount of employment income of the person charged to tax under ITEPA 2003, the amount of relief is (notwithstanding any other provision of this Chapter) limited to the total amount of that income so charged.
(7) If relief is available to more than one company in respect of the same acquisition of shares pursuant to an option, relief may only be given to one of them in respect of that acquisition.
(8) For the purposes of this section a person works for another person if the person provides, and is obliged to provide, personal service to the other person.”

44 (1) Section 1016 (conditions relating to shares acquired) is amended as follows.
(2) In subsection (1), omit the “or” at the end of paragraph (b) of Condition 2 and after paragraph (c) of that Condition insert

“, or
(d) shares within subsection (1A)”

.
(3) After subsection (1) insert—

“(1A) Shares are within this subsection if—
(a) after the option is obtained, the company in which the shares are to be acquired (“the relevant company”) comes to be controlled by another company (“the takeover”),
(b) immediately before the takeover, the shares were within any of paragraphs (a) to (c) of Condition 2,
(c) as a result of the takeover, the shares cease to be within any of those paragraphs,
(d) the shares are acquired pursuant to the option within the period of 90 days beginning with the day of the takeover, and
(e) the avoidance of tax is not the main purpose (or one of the main purposes) of the takeover.”

45 In Chapter 4 (additional corporation tax relief in cases involving restricted shares), after section 1025 insert—

“1025A Application of Chapter: employees of overseas companies who take up employment with, or work for, a UK company
(1) This section applies if—
(a) a person (“E”) has, or had, an employment (“the overseas employment”) with a non-UK resident company not within the charge to corporation tax (“the overseas company”),
(b) E or another person acquired restricted shares because of the overseas employment (whether or not pursuant to an option),
(c) the case is not within section 1025(1)(a),
(d) relief under Chapter 2 or 3 would have been available to the overseas company in relation to the acquisition if, at all material times—
(i) the overseas company had carried on a business within subsection (2) (“a qualifying business”), and
(ii) the overseas employment had related to that business,
(e) E has a UK employment with a UK company (see subsections (3) and (4)),
(f) the UK employment is in relation to a qualifying business carried on by the UK company,
(g) an event occurs that is a chargeable event in relation to the restricted shares for the purposes of section 426 of ITEPA 2003, and
(h) because of the UK employment, an amount of employment income of E is charged to tax under ITEPA 2003 in relation to the chargeable event.
For the purposes of paragraph (d) it does not matter if the amount of the relief would have been calculated as nil.
(2) A business is within this subsection so far as—
(a) it is carried on by a company, and
(b) the company is within the charge to corporation tax in relation to the profits of the business or would be but for section 18A.
(3) A company is a “UK company” if it is a UK resident company or a non-UK resident company within the charge to corporation tax.
(4) E has a “UK employment” with a UK company if—
(a) E is employed by the UK company, or
(b) E is not employed by the UK company but provides, and is obliged to provide, personal service to the UK company, in the course of performing the duties of the overseas employment (in which case, references to the UK employment are to the personal service E provides).
(5) Relief under this Chapter is available to the UK company as a result of the chargeable event.
(6) References in this Chapter to the original relief (other than in section 1025B) are to be treated as references to the relief that would have been available as mentioned in subsection (1)(d).
(7) In section 1026(3) (amount of relief on occurrence of chargeable event), the reference to the employee is to be read as a reference to E.
(8) For the purposes of section 1028(2) (giving relief), as that provision has effect by virtue of subsection (6), in section 1013(2) to (5) or (as the case may be) 1021(2) to (5)—
(a) references to the employing company are to be treated as references to the UK company,
(b) the reference to the relevant employment is to be treated as a reference to the UK employment, and
(c) references to a business within section 1007(2) or (as the case may be) 1015(2) are to be treated as references to a business within subsection (2).
(9) If, in relation to the chargeable event, the amount of relief available would otherwise be more than the total amount of employment income of E charged to tax under ITEPA 2003, the amount of relief is (notwithstanding any other provision of this Chapter) limited to the total amount of that income so charged.
(10) If relief is available to more than one company as a result of the same chargeable event, relief may only be given to one of them in respect of that event.

1025B Application of Chapter where original relief a consequence of section 1007A, 1015A or 1015B
(1) This section applies if the original relief is available under—
(a) Chapter 2 as a consequence of section 1007A, or
(b) Chapter 3 as a consequence of section 1015A or 1015B.
(2) If the original relief is available as a consequence of section 1007A or 1015B, subsection (2) of the section concerned applies for the purposes of this Chapter.
(3) If, in relation to a chargeable event, the amount of relief available would otherwise be more than the total amount of employment income of the employee charged to tax under ITEPA 2003, the amount of relief is (notwithstanding any other provision of this Chapter) limited to the total amount of that income so charged.
(4) If relief is available to more than one company as a result of the same chargeable event, relief may only be given to one of them in respect of that event.
(5) No relief is available as a result of the employee's death.”

46 In Chapter 5 (additional corporation tax relief in cases involving convertible securities), after section 1030 insert—

“1030A Application of Chapter: employees of overseas companies who take up employment with, or work for, a UK company
(1) This section applies if—
(a) a person (“E”) has, or had, an employment (“the overseas employment”) with a non-UK resident company not within the charge to corporation tax (“the overseas company”),
(b) E or another person acquired convertible securities because of the overseas employment (whether or not pursuant to an option),
(c) the case is not within section 1030(1) or (2),
(d) relief under Chapter 2 or 3 would have been available to the overseas company in relation to the acquisition if—
(i) in a case in which the convertible securities were not shares, they had been shares in relation to which the conditions set out in section 1008 or (as the case may be) 1016 were met, and
(ii) at all material times, the overseas company had carried on a business within subsection (2) (“a qualifying business”) and the overseas employment had related to that business,
(e) E has a UK employment with a UK company (see subsections (3) and (4)),
(f) the UK employment is in relation to a qualifying business carried on by the UK company,
(g) an event occurs that is a chargeable event (within the meaning given by section 1032 modified in accordance with subsections (6) and (7)) in relation to the convertible securities, and
(h) because of the UK employment, an amount of employment income of E is charged to tax under ITEPA 2003 in relation to the chargeable event.
For the purposes of paragraph (d) it does not matter if the amount of the relief would have been calculated as nil.
(2) A business is within this subsection so far as—
(a) it is carried on by a company, and
(b) the company is within the charge to corporation tax in relation to the profits of the business or would be but for section 18A.
(3) A company is a “UK company” if it is a UK resident company or a non-UK resident company within the charge to corporation tax.
(4) E has a “UK employment” with a UK company if—
(a) E is employed by the UK company, or
(b) E is not employed by the UK company but provides, and is obliged to provide, personal service to the UK company, in the course of performing the duties of the overseas employment (in which case, references to the UK employment are to the personal service E provides).
(5) Relief under this Chapter is available to the UK company as a result of the chargeable event.
(6) References in this Chapter to the original relief (other than in section 1030B) are to be treated as references to the relief that would have been available as mentioned in subsection (1)(d).
(7) For the purposes of section 1032(2), references to the employing company in the conditions set out in section 1008 or (as the case may be) 1016 are to be read as references to the overseas company or the UK company.
(8) In section 1033(3) (amount of relief available on occurrence of chargeable event), the reference to the employee is to be read as a reference to E.
(9) For the purposes of section 1035(2) (giving relief), as that provision has effect by virtue of subsection (6), in section 1013(2) to (5) or (as the case may be) 1021(2) to (5)—
(a) references to the employing company are to be treated as references to the UK company,
(b) the reference to the relevant employment is to be treated as a reference to the UK employment, and
(c) references to a business within section 1007(2) or (as the case may be) 1015(2) are to be treated as references to a business within subsection (2).
(10) If, in relation to the chargeable event, the amount of relief available would otherwise be more than the total amount of employment income of E charged to tax under ITEPA 2003, the amount of relief is (notwithstanding any other provision of this Chapter) limited to the total amount of that income so charged.
(11) If relief is available to more than one company as a result of the same chargeable event, relief may only be given to one of them in respect of that event.

1030B Application of Chapter where original relief a consequence of section 1007A, 1015A or 1015B
(1) This section applies if the original relief is, or would have been, available under—
(a) Chapter 2 as a consequence of section 1007A, or
(b) Chapter 3 as a consequence of section 1015A or 1015B.
(2) If the original relief is, or would have been, available as a consequence of section 1007A or 1015B, subsection (2) of the section concerned applies for the purposes of this Chapter.
(3) Section 1007A(5), 1015A(4) or (as the case may be) 1015B(5) applies for the purposes of section 1032(2).
(4) If, in relation to a chargeable event, the amount of relief available would otherwise be more than the total amount of employment income of the employee charged to tax under ITEPA 2003, the amount of relief is (notwithstanding any other provision of this Chapter) limited to the total amount of that income so charged.
(5) If relief is available to more than one company as a result of the same chargeable event, relief may only be given to one of them in respect of that event.
(6) No relief is available as a result of the employee's death.”

PART 4 Commencement etc
47 Part 1 and paragraphs 40 to 43, 45 and 46 of Part 3 of this Schedule come into force on 6 April 2015.
48 The amendments made by Part 1 have effect on and after that date in relation to employment-related securities and employment-related securities options irrespective of the date of the acquisition.
49 The Treasury may by regulations—
(a) make transitional provision or savings in connection with the coming into force of any of the provisions mentioned in paragraph 47;
(b) make consequential, incidental or supplementary provision in connection with any of those provisions.
50 (1) Regulations made under paragraph 49 may—
(a) modify any provision made by or under an Act (including paragraph 48 of this Schedule), as the Treasury think appropriate;
(b) make different provision for different cases or different circumstances.
(2) In sub-paragraph (1)(a) “modify” includes amend, repeal or revoke.

SCHEDULE 10 Venture capital trusts
Section 53

Time limits for making assessments
1 (1) In section 270 of ITA 2007 (assessment on withdrawal or reduction of relief), in subsection (1), after “obtained” insert “ , and may be made at any time not more than 6 years after the end of that tax year ”.
(2) The amendment made by this paragraph has effect in relation to assessments made on or after 6 April 2014 (including those made for tax years ending before that date).

Linked sales
2 (1) After section 264 of ITA 2007 insert—

“264A Restricting relief where there is a linked sale
(1) This section applies where—
(a) an individual subscribes for shares (“the relevant shares”) in a VCT (“the VCT”), and
(b) there is at least one linked sale of other shares by the individual.
(2) For the purposes of this Part, the amount the individual subscribes for the shares is to be treated as reduced (but not below nil) by the total consideration given for the linked sales of other shares.
This is subject to subsection (3).
(3) If a sale is linked in relation to more than one subscription for shares—
(a) the consideration for it is to be applied to reduce subscriptions under subsection (2) in the order in which the subscriptions are made, and
(b) accordingly, to the extent that any consideration has been used to reduce an earlier subscription, it is not available to reduce a later one.
(4) A sale of shares (“the sold shares”) is “linked” if conditions A and B are met.
(5) Condition A is that the sold shares are in—
(a) the VCT, or
(b) a company which is (or later becomes) a successor or predecessor of the VCT.
(6) Condition B is that—
(a) the individual subscribes for the relevant shares in circumstances where—
(i) the purchase of the sold shares from the individual was conditional upon the individual subscribing for shares in the VCT, or
(ii) the individual's subscription for shares in the VCT was conditional upon that purchase, or
(b) the subscription for the relevant shares and the sale of the sold shares are within 6 months of each other (irrespective of which came first).
(7) A company (“company X”) is a “successor or predecessor of the VCT” if—
(a) there is a merger of two or more companies for the purposes of Chapter 5 (see section 323) and—
(i) the VCT is one of the merged companies and company X is “the successor company” (as defined by that section), or
(ii) the VCT is “the successor company” and company X is one of the merged companies, or
(b) section 327 (effect of restructuring of VCT) applies and—
(i) the VCT is “the old company” and company X is “the new company” for the purposes of that section, or
(ii) company X is “the old company” and the VCT is “the new company” for those purposes.
(8) This section does not apply if, or to the extent that, the subscription for the relevant shares is a result of the individual electing to reinvest dividends payable to the individual on shares in the VCT, in acquiring further shares in the VCT.”

(2) The amendment made by this paragraph has effect in relation to claims for relief by reference to shares issued on or after 6 April 2014.

Approval of VCT: return of capital
3 (1) Section 281 of ITA 2007 (withdrawal of VCT approval of a company) is amended as follows.
(2) In subsection (1), omit the “or” at the end of paragraph (d) and after paragraph (e) insert—

“(f) that, while it has been a VCT, the company has issued shares and, before the end of the restricted period, the company, other than for the purpose of redeeming or repurchasing any of those shares, has—
(i) made a payment to all or any of its shareholders of an amount representing (directly or indirectly) a repayment of its share capital, whether that payment was made out of a reserve arising from a reduction of share capital or otherwise,
(ii) where the shares were issued at a premium, made a payment to all or any of its shareholders of an amount representing (directly or indirectly) that premium or any part of it, whether that payment was made out of a share premium reserve or otherwise, or
(iii) used an amount which represents (directly or indirectly) the company's share capital or an amount by which that share capital has been diminished, or, where the shares were issued at a premium, that premium (or any part of it), to pay up new shares to be allotted to all or any of its shareholders.”

(3) After that subsection insert—

“(1A) In subsection (1)(f)—
“payment”—
(a) does not include any distribution of assets made in connection with the winding up of the company, but
(b) does include every other description of distribution of the company's assets to its members,
and for this purpose “distribution” includes (but is not limited to) a distribution within the meaning of section 989,
“reduction of share capital” has the same meaning as in section 1027A(2) of CTA 2010, and
“the restricted period” means the period of 3 years beginning at the end of the accounting period of the company in which the shares were issued.”

(4) The amendments made by this paragraph have effect in relation to shares issued on or after 6 April 2014.
(5) In section 281(1)(f)(i) or (iii) of ITA 2007 references to a company's share capital do not include so much (if any) of its share capital as consists of shares issued before 6 April 2014.
4 In section 322 of ITA 2007 (power to facilitate mergers of VCTs: provision that may be made by regulations), after subsection (5) insert—

“(5A) Provision for section 281(1)(f) (withdrawal of VCT approval where company has made a repayment of share capital etc) not to apply, or to apply subject to modifications, to the successor company or any of the merging companies, in relation to payments made, or amounts used to pay up new shares, in connection with or after the merger.”

Nominees
5 (1) After section 330 of ITA 2007 insert—

“Nominees

330A Nominees
Shares subscribed for, issued to, held by or disposed of for an individual by a nominee are treated for the purposes of this Part as subscribed for, issued to, held by or disposed of by the individual.”

(2) In section 284 of that Act (power to make regulations as to procedure), in subsection (1)(d), after “persons” include “(including nominees)”.

SCHEDULE 11 Tax relief for social investments
Section 57

PART 1 New Part 5B of ITA 2007
1 In ITA 2007, after Part 5A (seed enterprise investment scheme) insert—

“PART 5B Tax relief for social investments

CHAPTER 1 Introduction

257J Meaning of “SI relief” and “social enterprise”
(1) This Part provides for income tax relief for social investments (“SI relief”), that is, entitlement to tax reductions in respect of amounts invested in social enterprises by individuals.
(2) In this Part “social enterprise” means—
(a) a community interest company,
(b) a community benefit society (see section 257JB) that is not a charity,
(c) a charity,
(d) an accredited social impact contractor (see section 257JD), or
(e) any other body prescribed, or of a description prescribed, by an order made by the Treasury.
(3) An order under subsection (2)(e) may make provision as to the bodies which are social enterprises for the purposes of this Part at times before the order comes into force or FA 2014 is passed but, where a body is a social enterprise for the purposes of this Part as a result of an order under subsection (2)(e) that has come into force, no subsequent order under subsection (2)(e) may undo that result in respect of times before the subsequent order comes into force.

257JA Form and amount of relief
(1) If an individual—
(a) is eligible for SI relief in respect of any amount, and
(b) makes a claim in respect of all or some of the amount,
the individual is entitled to a tax reduction for the tax year in which the amount was invested.
This is subject to the provisions of this Part.
(2) The amount of the reduction to which an individual is entitled under this Part for any particular tax year is the amount equal to tax, at the SI rate for that year, on—
(a) the amount or, as the case may be, the sum of the amounts invested in that year in respect of which the individual is eligible for and claims SI relief, or
(b) if less, £1 million.
(3) The tax reduction is given effect at Step 6 in section 23.
(4) If an individual—
(a) is eligible for and claims SI relief in respect of an amount, and
(b) makes a claim for part of that amount to be treated for the purposes of subsections (1) and (2) as if it had been invested not in the tax year in which it was actually invested but in the preceding tax year,
those subsections apply, and the individual's liability to tax for both tax years is determined, in accordance with the claim.
(5) In this Part “the SI rate” means 30%.

257JB Meaning of “community benefit society”
(1) In this Part “community benefit society” means a body that—
(a) is registered as a community benefit society under the 2014 Act,
(b) is a pre-commencement society (within the meaning of the 2014 Act) that meets the condition in section 2(2)(a)(ii) of the 2014 Act, or
(c) is a society registered, or treated as registered, under section 1 of the Industrial and Provident Societies Act (Northern Ireland) 1969 in the case of which the condition in section 1(2)(b) of that Act is fulfilled,
and in respect of which the condition in subsection (2) is met.
(2) The condition is that—
(a) the body is of a kind prescribed by regulation 5 of, and
(b) the body's rules include a rule in the terms set out in Schedule 1 to,
the Community Benefit Societies (Restriction on Use of Assets) Regulations 2006 (S.I. 2006/264) or the Community Benefit Societies (Restriction on Use of Assets) Regulations (Northern Ireland) 2006 (S.R. 2006/258).
(3) The Treasury may by order amend this section for the purpose of—
(a) replacing—
(i) the condition in subsection (2), or
(ii) the condition, or all or any of the conditions, for the time being replacing the condition in subsection (2),
with one or more other conditions;
(b) varying—
(i) the condition in subsection (2), or
(ii) the condition, or any of the conditions, for the time being replacing the condition in subsection (2);
(c) dispensing with—
(i) the condition in subsection (2), or
(ii) the condition, or all or any of the conditions, for the time being replacing the condition in subsection (2).
(4) In this section—
“the 2014 Act” means the Co-operative and Community Benefit Societies Act 2014;
“the 2010 Act” means the Co-operative and Community Benefit Societies and Credit Unions Act 2010.
(5) While neither the 2014 Act, nor section 1 of the 2010 Act, is in force, subsection (1) of this section has effect as if for paragraphs (a) and (b) of that subsection there were substituted—

“(a) is a society registered, or treated as registered, under section 1 of the Industrial and Provident Societies Act 1965 in the case of which the condition in section 1(2)(b) of that Act is fulfilled, or”

.
(6) If section 1 of the 2010 Act (registration of societies) comes into force before the 2014 Act comes into force then, with effect from the coming into force of that section and until the coming into force of the 2014 Act, subsection (1) of this section has effect as if for paragraphs (a) and (b) of that subsection there were substituted—

“(a) is registered as a community benefit society under section 1 of the Industrial and Provident Societies Act 1965 (“the 1965 Act”),
(b) is a pre-2010 Act society (as defined by section 4A(1) of the 1965 Act) that meets the condition in section 1(3) of the 1965 Act, or”

.
(7) In the event that section 2 of the 2010 Act (renaming of the 1965 Act) is brought into force before its repeal by the 2014 Act takes effect then, with effect from the coming into force of that section, subsections (5) and (6) of this section have effect as if, in the provisions which they substitute, the references to the Industrial and Provident Societies Act 1965 were references to the Co-operative and Community Benefit Societies and Credit Unions Act 1965.

257JC Charities that are trusts
In this Part (except section 257JD), a reference to a company includes a reference to a charity that is a trust.

257JD Accreditation as a social impact contractor
(1) In this Part “accredited social impact contractor” means a company limited by shares that is accredited under this section as a social impact contractor.
(2) Applications for accreditation as a social impact contractor must be made to a Minister of the Crown in the form and manner specified by a Minister of the Crown.
(3) A Minister of the Crown is to accredit a company if, but only if, that Minister is satisfied that—
(a) the company has entered into a social impact contract (see section 257JE),
(b) the company is, and at all times since its incorporation has been, established—
(i) for the purpose of entering into and carrying out a social impact contract, or for that purpose and purposes incidental to it, but
(ii) for no other purpose, and
(c) the activities of the company in carrying out that contract will not consist wholly, or as to a substantial part, in excluded activities (see section 257MQ).
(4) If a Minister of the Crown is satisfied that the condition in subsection (3)(b) or (c) has ceased to be met in relation to a company that is an accredited social impact contractor, that Minister is to withdraw the company's accreditation with effect from the time the condition ceased to be met or a later time.

257JE Meaning of “social impact contract”
(1) In this Part “social impact contract” means a contract that meets such criteria as may be specified in regulations made by the Treasury.
(2) The criteria which may be specified under subsection (1) include, in particular, criteria as to a party to the contract other than the company seeking accreditation.
(3) Criteria may be specified in regulations under subsection (1) by reference to material published by, or on behalf of, a Minister of the Crown after the making of the regulations (as well as by reference to material published before the making of the regulations).
(4) Regulations under subsection (1) may make different provision for different cases or circumstances or in relation to different areas.

257JF Accreditations: supplementary provisions
(1) An accreditation must be made so as to be conditional on compliance with—
(a) any requirements imposed by or under regulations, and
(b) any other requirements considered appropriate by the Minister of the Crown who is accrediting the company concerned.
(2) The requirements that may be imposed by virtue of subsection (1) include requirements relating to the provision of information.
(3) Regulations may—
(a) make further provision about applications for accreditation,
(b) make provision for the variation of an accreditation (including its provisions as to its duration),
(c) make provision which, in a case where a company is or has been an accredited social impact contractor, imposes or authorises the imposition of requirements on the company, or on any other party to the social impact contract concerned, to provide information,
(d) make provision about the consequences of a failure to comply with any requirement of an accreditation imposed by virtue of subsection (1) or with any requirement imposed by virtue of paragraph (c), including in particular—
(i) provision for the withdrawal of the accreditation concerned with effect from the time of the failure or a later time, and
(ii) provision for the imposition of penalties,
(e) make provision for publication of information about an accreditation or accredited social impact contractor, and
(f) make provision for reviews of, or for appeals to the tribunal against, any of the following—
(i) a refusal to grant or vary an accreditation,
(ii) the imposition of a requirement under subsection (1)(b),
(iii) the withdrawal of an accreditation (whether under section 257JD(4) or by virtue of provision made under paragraph (d)(i)), and
(iv) the imposition or amount of a penalty imposed by virtue of provision made under paragraph (d)(ii).
(4) Regulations under subsection (1) or (3) may—
(a) make provision for the making of decisions by a Minister of the Crown as to any matter required to be decided for the purposes of the regulations,
(b) be framed by reference to material published by, or on behalf of, a Minister of the Crown after the making of the regulations (as well as by reference to material published before the making of the regulations),
(c) make different provision for different cases or circumstances or in relation to different areas, and
(d) contain incidental, supplemental, consequential and transitional provision and savings.
(5) In this section—
“accreditation” means accreditation under section 257JD, and
“regulations” means regulations made by the Treasury.

257JG Period of accreditation as a social impact contractor
(1) An accreditation under section 257JD has effect for a period—
(a) beginning with the day specified in the accreditation, and
(b) of a length specified in, or determined in accordance with, the accreditation.
(2) The day specified under subsection (1)(a) in an accreditation may not be earlier than 6 April 2014 but subject to that—
(a) may be, or be earlier than, the day it is decided to grant the accreditation (and in particular may be, or be earlier than, the day the application for the accreditation is made), and
(b) may be earlier than the day section 257JD comes into force.
(3) This section has effect subject to sections 257JD(4) and 257JF(3)(d)(i) (withdrawal of accreditations).

257JH Functions of Ministers of the Crown under sections 257JD to 257JG
(1) A Minister of the Crown may delegate any function given to a Minister of the Crown by or under sections 257JD to 257JG other than a power of the Treasury to make regulations.
(2) In those sections and this section “Minister of Crown” has the meaning given by section 8(1) of the Ministers of the Crown Act 1975.

CHAPTER 2 Eligibility for relief: basic rule and key definitions

Eligibility

257K Eligibility for SI relief
(1) An individual (“the investor”) who invests in a social enterprise is eligible for SI relief in respect of the amount invested if—
(a) the investment is made—
(i) by the investor on the investor's own behalf,
(ii) on or after 6 April 2014, and
(iii) before 6 April 2019 (but see subsection (5)), and
(b) the conditions set out in Chapters 3 and 4 are met.
(2) Subsection (1)(b) is subject to the provisions in sections 257LB and 257MJ to 257MN which provide for conditions set out in those sections not to apply where the social enterprise is an accredited social impact contractor.
(3) The investor is not eligible for SI relief in respect of the amount invested if—
(a) the investor has obtained in respect of that amount, or any part of it, relief under—
(i) Part 5 (enterprise investment scheme),
(ii) Part 5A (seed enterprise investment scheme), or
(iii) Part 7 (community investment tax relief), or
(b) that amount, or any part of it, has under Schedule 5B to TCGA 1992 (enterprise investment scheme: re-investment) been set against a chargeable gain.
(4) Investments made by, subscribed for, issued to, held by or disposed of for an individual by a nominee are treated for the purposes of this Part as made by, subscribed for, issued to, held by or disposed of by the individual.
(5) The Treasury may by order substitute a later date for the date for time being specified in subsection (1)(a)(iii).

Key definitions

257KA Key to reading the rest of the Part
In the following provisions of this Part (except section 257N), a reference to—
“the amount invested”,
“the investment”,
“the investor”, or
“the social enterprise”,
is to be read in accordance with section 257K(1).

257KB When investment is made, and “investment date”
(1) For the purposes of this Part “the investment date” means the date on which the investment is made.
(2) So far as the investment is in shares, for the purposes of this Part it is made when the shares are issued to the investor by the social enterprise.
(3) If the investment, so far as it is in qualifying debt investments (see section 257L), involves making the only advance covered by the debenture or debentures concerned, for the purposes of this Part it is made—
(a) when the social enterprise issues the debenture or debentures to the investor, or
(b) in a case where there is to be no such issuing, when the debenture or debentures, so far as relating to the advance, take effect between the social enterprise and the investor.
(4) If the investment, so far as it is in qualifying debt investments, involves making the first of multiple advances covered by the debenture or debentures concerned, for the purposes of this Part it is made—
(a) when the social enterprise issues the debenture or debentures to the investor, or
(b) in a case where there is to be no such issuing, when the debenture or debentures, so far as relating to all of those advances, take effect between the social enterprise and the investor.
(5) If the investment, so far as it is in qualifying debt investments, involves making the second of multiple advances covered by the debenture or debentures concerned, or a subsequent one of those advances, for the purposes of this Part it is made—
(a) when the amount of that advance is fully advanced in cash, or
(b) if later—
(i) when the social enterprise issues the debenture or debentures to the investor, or
(ii) in a case where there is to be no such issuing, when the debenture or debentures, so far as relating to all of those advances, takes effect between the social enterprise and the investor.
(6) For the purposes of subsections (3) to (5) “debenture” includes any instrument creating or acknowledging indebtedness.

257KC “Shorter applicable period” and “longer applicable period”
(1) In this Part “the shorter applicable period” and “the longer applicable period” have the meaning given by this section.
(2) The shorter applicable period begins with the investment date.
(3) The longer applicable period begins with—
(a) the day on which the social enterprise is—
(i) incorporated (if it is a body corporate), or
(ii) established (in any other case), or
(b) if later, the day whose first anniversary is the investment date.
(4) Each of the periods ends with the third anniversary of the investment date.

CHAPTER 3 Eligibility: conditions relating to the investor and the investment

257L Investment to be in new shares or new qualifying debt investments
(1) At all times during the shorter applicable period, the investment must be in—
(a) shares that meet conditions A and B and are issued to the investor by the social enterprise in return for the amount invested, or
(b) qualifying debt investments of which the investor is the holder in return for advancing the amount invested to the social enterprise.
(2) Condition A is that the shares must carry none of the following—
(a) a right to a return which, or any part of which, is a fixed amount;
(b) a right to a return which, or any part of which, is at a fixed rate;
(c) a right to a return which, or any part of which, is otherwise fixed by reference to the amount invested;
(d) a right to a return which, or any part of which, is fixed by reference to some other factor that is not contingent on successful financial performance by the social enterprise;
(e) a right to a return at a rate greater than a reasonable commercial rate.
(3) Condition B is that, for the purpose of determining the amounts due in respect of the shares to their holder in the event of the winding-up of the social enterprise—
(a) those amounts rank after all debts of the social enterprise except any due to holders of qualifying debt investments in the social enterprise in respect of their qualifying debt investments, and
(b) the shares do not rank above any other shares in the social enterprise.
(4) In this Part “qualifying debt investments”, in relation to the social enterprise, means any debentures of the social enterprise in respect of which the following conditions are met—
(a) neither the principal of the debt concerned, nor any return on that, is charged on any assets,
(b) the rate of any such return is not greater than a reasonable commercial rate of return, and
(c) in the event of the winding-up of the social enterprise and so far as the law allows, any sums due in respect of the debt (whether principal or return)—
(i) are subordinated to all other debts of the social enterprise except sums due in the case of other unsecured debentures of the social enterprise which rank equally,
(ii) rank equally, if there are shares in the social enterprise and they all rank equally among themselves, with amounts due to share-holders in respect of their shares, and
(iii) rank equally, if there are shares in the social enterprise and they do not all rank equally, with amounts due in respect of their shares to the holders of shares that do not rank above any other shares.
(5) The condition in subsection (3)(a) or (4)(c)(i) is met even if the sums concerned do not rank after debts which are postponed—
(a) by rules under section 411 of the Insolvency Act 1986, or
(b) by or under any other enactment.
(6) For the purposes of subsection (4) “debenture” includes any instrument creating or acknowledging indebtedness.

257LA Condition that the amount invested must have been paid over
(1) So far as the investment is in shares—
(a) the shares must be subscribed for wholly in cash, and
(b) must be fully paid up at the time they are issued.
(2) If the investment, so far as it is in qualifying debt investments, involves making—
(a) the only advance covered by the debenture or debentures concerned, or
(b) one of multiple advances covered by the debenture or debentures concerned,
the full amount of that advance must have been advanced wholly in cash by the time the investment is made.
(3) For the purposes of this section—
(a) shares are not fully paid up, or
(b) the full nominal amount of qualifying debt investments has not been advanced,
if there is any undertaking to pay cash to any person at a future time in respect of the acquisition of the shares or investments.
(4) For the purposes of subsection (2) “debenture” includes any instrument creating or acknowledging indebtedness.

257LB The no pre-arranged exits requirements
(1) There must not at any time in the shorter applicable period be any arrangements in existence for the investment to be redeemed, repaid, repurchased, exchanged or otherwise disposed of in that period.
(2) The issuing arrangements for the investment must not include—
(a) arrangements for or with a view to the cessation of any trade which is being or is to be or may be carried on by the social enterprise or a person connected with the social enterprise, or
(b) arrangements for the disposal of, or of a substantial amount (in terms of value) of, the assets of the social enterprise or of a person connected with the social enterprise.
(3) The arrangements referred to in subsection (2)(a) and (b) do not include any arrangements applicable only on the winding-up of a company except in a case where—
(a) the issuing arrangements include arrangements for the company to be wound up, or
(b) the arrangements are applicable on the winding-up of the company otherwise than for genuine commercial reasons.
(4) In this section “the issuing arrangements” means—
(a) the arrangements under which the investor makes the investment, and
(b) any arrangements made before, and in relation to or in connection with, the making of the investment by the investor.
(5) Subsections (2) to (4) do not apply if the social enterprise is an accredited social impact contractor.

257LC The no risk avoidance requirement
(1) There must not at any time in the shorter applicable period be any arrangements in existence the main purpose or one of the main purposes of which is (by means of any insurance, indemnity, guarantee, hedging of risk or otherwise) to provide partial or complete protection for the investor against what would otherwise be the risks attached to making the investment.
(2) The arrangements referred to in subsection (1) do not include any arrangements which are confined to the provision—
(a) for the social enterprise itself, or
(b) if the social enterprise is a parent company that meets the trading requirement in section 257MJ(2)(c) or is a parent company that is an accredited social impact contractor—
(i) for the social enterprise itself,
(ii) for the social enterprise itself and one or more of its subsidiaries, or
(iii) for one or more of the subsidiaries of the social enterprise,
of any such protection against the risks arising in the course of carrying on its business as might reasonably be expected to be provided in normal commercial circumstances.

257LD The no linked loans requirement
(1) No linked loan is to be made by any person, at any time in the longer applicable period, to the investor or an associate of the investor.
(2) In this section “linked loan” means any loan which—
(a) would not have been made, or
(b) would not have been made on the same terms,
if the investor had not made the investment, or had not been proposing to do so.
(3) References in this section to the making by any person of a loan to the investor or an associate of the investor include—
(a) references to the giving by that person of any credit to the investor or any associate of the investor, and
(b) references to the assignment to that person of a debt due from the investor or any associate of the investor.

257LE The no tax avoidance requirement
The investment must not be made as part of any arrangements the main purpose or one of the main purposes of which is the avoidance of tax.

257LF Restrictions on being an employee, partner or paid director
(1) This section applies—
(a) to the investor, and
(b) to any individual who is an associate of the investor.
(2) An individual to whom this section applies must not at any time in the longer applicable period be—
(a) an employee of—
(i) the social enterprise,
(ii) any subsidiary of the social enterprise,
(iii) a partner of the social enterprise, or
(iv) a partner of any subsidiary of the social enterprise,
(b) a partner of—
(i) the social enterprise, or
(ii) any subsidiary of the social enterprise,
(c) a trustee of—
(i) the social enterprise, or
(ii) any subsidiary of the social enterprise, or
(d) a remunerated director of—
(i) the social enterprise, or
(ii) a linked company.
(3) In this section—
“linked company” means—
(a) a subsidiary of the social enterprise,
(b) a company which is a partner of the social enterprise, or
(c) a company which is a partner of a subsidiary of the social enterprise;
“related person” means—
(a) the social enterprise,
(b) a person connected with the social enterprise,
(c) a linked company of which the individual is a director, or
(d) a person connected with such a company;
“subsidiary”, in relation to the social enterprise, means a company which at any time in the longer applicable period is a 51% subsidiary of the social enterprise (and such a company is therefore a subsidiary of the social enterprise for the purposes of this section even at times when it is not a 51% subsidiary of the social enterprise).
(4) For the purposes of subsection (2)(d), an individual who is a director of the social enterprise or a linked company is “remunerated” if the individual (or a partnership of which the individual is a member)—
(a) receives at any time in the longer applicable period a payment from a related person, or
(b) is entitled to receive a payment from a related person in respect of any time in the longer applicable period.
(5) For the purposes of subsection (4) the following are ignored—
(a) any payment or reimbursement of travelling or other expenses wholly, exclusively and necessarily incurred by the individual in the performance of the individual's duties as a director,
(b) any interest which represents no more than a reasonable commercial return on money lent to a related person,
(c) any dividend or other distribution which does not exceed a normal return on the investment,
(d) any payment for the supply of goods which does not exceed their market value,
(e) any payment of rent for any property occupied by a related person which does not exceed a reasonable and commercial rent for the property,
(f) any necessary and reasonable remuneration which—
(i) is paid for services, rendered to a related person in the course of a trade or profession, that are not secretarial services and are not managerial services and are not services of a kind provided by the person to whom they are rendered, and
(ii) is taken into account in calculating for tax purposes the profits of that trade or profession, and
(g) if condition A is met and (where applicable) condition B is also met, any other reasonable remuneration (including any benefit or facility) received by the individual, or to which the individual is entitled, for services rendered by the individual—
(i) to the company (whether the social enterprise or a linked company) of which the individual is a director, and
(ii) in the individual's capacity as a director of that company.
(6) Condition A is that the investor made the investment, or previously made another investment meeting the requirement in section 257L(1), at a time (“the qualifying time”) when—
(a) the requirements of this section and sections 257LG and 257LH (even if the three sections were not then in force) would have been met even if each other reference in the three sections to any time in the longer applicable period were a reference to any time before the qualifying time, and
(b) the investor had never been involved in carrying on (whether on the investor's own account or as a partner, director or employee) the whole or any part of the trade, business or profession carried on by the social enterprise or a subsidiary of the social enterprise.
(7) Condition B is that—
(a) the investment did not meet condition A (but a previous investment did), and
(b) the investment was made before the third anniversary of the date when the investor last made an investment in the social enterprise which met condition A.
(8) References in this section to an individual in the individual's capacity as a director of a company include, if the individual is both a director and an employee of the company, references to the individual in the individual's capacity as an employee of the company but, apart from that, an individual who is both a director and an employee of a company is treated for the purposes of this section as a director, and not an employee, of the company.
(9) In subsections (2), (4) and (5) “director” does not include a trustee of a charity that is a trust.

257LG The requirement not to be interested in capital etc of social enterprise
(1) This section applies—
(a) to the investor, and
(b) to any individual who is an associate of the investor.
(2) In this section “related company” means—
(a) the social enterprise, or
(b) a company which at any time in the longer applicable period is a 51% subsidiary of the social enterprise (and such a company is therefore a related company for the purposes of this section even at times when it is not a 51% subsidiary of the social enterprise).
(3) There must not be any time in the longer applicable period when an individual to whom this section applies has control of a related company.
(4) There must not be any time in the longer applicable period when an individual to whom this section applies directly or indirectly possesses or is entitled to acquire—
(a) more than 30% of the ordinary share capital of a related company,
(b) more than 30% of the loan capital of a related company, or
(c) more than 30% of the voting power in a related company.
(5) For the purposes of subsections (3) and (4) ignore any shares in a related company held by the individual, or by an associate of the individual, at a time when that company—
(a) has not issued any shares other than subscriber shares, and
(b) has not begun to carry on, or make preparations for carrying on, any trade or business.
(6) For the purposes of this section, the loan capital of a company—
(a) is treated as including any debt incurred by the company—
(i) for any money borrowed or capital assets acquired by the company,
(ii) for any right to receive income created in favour of the company, or
(iii) for consideration the value of which to the company was (at the time when the debt was incurred) substantially less than the amount of the debt (including any premium on it), and
(b) is treated as not including any debt incurred by the company by overdrawing an account with a person carrying on a business of banking if the debt arose in the ordinary course of that business.
(7) For the purposes of this section—
(a) an individual is treated as entitled to acquire anything which the individual is entitled to acquire at a future date or will at a future date be entitled to acquire, and
(b) there is attributed to any individual any rights or powers of any other person who is an associate of the individual.

257LH Requirement for no collusion with a non-qualifying investor
There must not at any time in the longer applicable period be any arrangements—
(a) as part of which—
(i) the investor makes the investment, or
(ii) the investor, or an individual who is an associate of the investor, makes any other investment in the social enterprise,
(b) which provide for a person to make an investment in a company other than the social enterprise, where that person is not the individual (“A”) who invests as mentioned in paragraph (a), and
(c) to which there is a party (whether or not A) who is an individual in relation to whom not all of the requirements in sections 257LF and 257LG would be met if—
(i) references in those sections to the investor were read as references to that individual, and
(ii) references in those sections to the social enterprise were read as references to the company mentioned in paragraph (b).

CHAPTER 4 Eligibility: conditions relating to the social enterprise

Conditions relating to the social enterprise

257M The continuing to be a social enterprise requirement
The social enterprise must be a social enterprise throughout the shorter applicable period.

257MA The amount raised from investments potentially eligible for relief
(1) The amount invested must not be more than the amount given by—
( [euro] 200,000 – M RCG + RSI ) − T
where—
T is the total of any scheme investments made in the aid period,
M is the total of any de minimis aid, other than scheme investments, that is granted during the aid period—
(a) to the social enterprise, or
(b) to a qualifying subsidiary of the social enterprise at a time when it is such a subsidiary,
RCG is the highest rate at which capital gains tax is charged in the aid period, and
RSI is the highest SI rate in the aid period.
(2) In subsection (1) “the aid period” is the 3 years—
(a) ending with the day on which the investment is made, but
(b) in the case of that day, including only the part of the day before the investment is made.
(3) In this section “de minimis aid” means de minimis aid which fulfils the conditions laid down—
(a) in Commission Regulation (EU) No. 1407/2013 (de minimis aid) as amended from time to time, or
(b) in any EU instrument from time to time replacing the whole or any part of that Regulation.
(4) For the purposes of subsection (1), the amount of any de minimis aid is the amount of the grant or, if the aid is not in the form of a grant, the gross grant equivalent amount within the meaning of that Regulation as amended from time to time.
(5) For the purposes of this section—
(a) a scheme investment is an investment in respect of which the social enterprise (at any time) provides a compliance statement, and
(b) section 257KB applies for the purpose of determining when a scheme investment is made, but as if references in that section to this Part, the investment and the investor were (respectively) to this section, the scheme investment and the person making the scheme investment.
(6) For the purposes of subsection (1), if—
(a) the investment or any scheme investment is made, or
(b) any aid is granted,
in sterling or any other currency that is not the euro, its amount is to be converted into euros at an appropriate spot rate of exchange for the date on which the investment is made or the aid is paid.

257MB Power to amend limits on amounts raised
(1) The Treasury may by order amend this Part for the purpose of—
(a) altering any limit for the time being imposed by this Part on amounts that a social enterprise may raise through investments eligible for SI relief;
(b) complying with any undertakings given to the European Commission, or any conditions imposed by the Commission, in connection with an application for State aid approval.
(2) In subsection (1) “State aid approval” means approval that the provision made by this Part, so far as it constitutes the granting of aid to which any of the provisions of Article 107 or 108 of the Treaty on the Functioning of the European Union applies, is or would be compatible with the internal market, within the meaning of Article 107 of that Treaty.
(3) An order under this section may make incidental, supplemental, consequential, transitional or saving provision.
(4) An order under this section may not be made unless a draft of the instrument containing it has been laid before, and approved by a resolution of, the House of Commons.

257MC The gross assets requirement
(1) If the social enterprise is a single company, the value of its assets—
(a) must not exceed £15 million immediately before the investment is made, and
(b) must not exceed £16 million immediately after the investment is made.
(2) If the social enterprise is a parent company, the value of the group assets—
(a) must not exceed £15 million immediately before the investment is made, and
(b) must not exceed £16 million immediately after the investment is made.
(3) For the purposes of subsection (2), the value of the group assets is the sum of the values of the gross assets of each of the members of the group, ignoring any assets that consist in rights against, or shares in or securities of, another member of the group.

257MD The unquoted status requirement
(1) At the beginning of the shorter applicable period—
(a) the social enterprise must not be a quoted company,
(b) there must be no arrangements in existence for the social enterprise to become a quoted company, and
(c) there must be no arrangements in existence for the social enterprise to become a subsidiary of a company (“the new company”) by virtue of an exchange of shares, or shares and securities, if arrangements have been made with a view to the new company becoming a quoted company.
(2) For the purpose of this section, a company is a “quoted company” if any shares, stocks, debentures or other securities of the company are—
(a) listed on a recognised stock exchange,
(b) listed on a designated exchange in a country outside the United Kingdom, or
(c) dealt in outside the United Kingdom by such means as may be designated.
(3) In subsection (2)(b) and (c) “designated” means designated by an order made by the Commissioners for Her Majesty's Revenue and Customs for the purposes of that provision.
(4) An order made for the purposes of subsection (2)(b) may designate an exchange by name, or by reference to any class or description of exchanges, including a class or description framed by reference to any authority or approval given in a country outside the United Kingdom.
(5) The arrangements referred to in subsection (1)(b), and the second arrangements referred to in subsection (1)(c), do not include arrangements in consequence of which any shares, stocks, debentures or other securities of the social enterprise or the new company (as the case may be) are at any subsequent time—
(a) listed on a stock exchange that is a recognised stock exchange by virtue of an order under section 1005(1)(b), or
(b) listed on an exchange, or dealt in by any means, designated by an order made for the purposes of subsection (2)(b) or (c),
if the order was made after the beginning of the shorter applicable period.

257ME The control and independence requirements
(1) The social enterprise must not at any time in the shorter applicable period control (whether on its own or together with any person connected with it) any company which is not a qualifying subsidiary of the social enterprise.
(2) The social enterprise must not at any time in the shorter applicable period—
(a) be a 51% subsidiary of a company, or
(b) be under the control of a company, or under the control of a company and a person connected with that company, without being a 51% subsidiary of the company.
(3) No arrangements must be in existence at any time in the shorter applicable period by virtue of which the social enterprise could fail to meet either or both of subsections (1) and (2) (whether during that period or otherwise).

257MF The qualifying subsidiaries requirement
Any subsidiary that the social enterprise has at any time in the shorter applicable period must be a qualifying subsidiary of the social enterprise.

257MG The property-managing subsidiaries requirement
(1) Any property-managing subsidiary that the social enterprise has at any time in the shorter applicable period must be a 90% social subsidiary of the social enterprise.
(2) In subsection (1) “property-managing subsidiary” means a subsidiary of the social enterprise whose business consists wholly or mainly in the holding or managing of land or any property deriving its value (directly or indirectly) from land.

257MH The number of employees requirement
(1) If the social enterprise is a single company, the full-time equivalent employee number for it must be less than 500 when the investment is made.
(2) If the social enterprise is a parent company, the sum of—
(a) the full-time equivalent employee number for it, and
(b) the full-time equivalent employee number for each of its qualifying subsidiaries,
must be less than 500 when the investment is made.
(3) The full-time equivalent employee number for a company is calculated by taking the number of full-time employees of the company and adding, for each employee of the company who is not a full-time employee, such fraction as is just and reasonable.
(4) In this section “employee”—
(a) includes a director, but
(b) does not include—
(i) an employee on maternity or paternity leave, or
(ii) a student on vocational training.

257MI The no partnership requirement
(1) The requirements in this section apply during the shorter applicable period.
(2) The social enterprise must not be a member of any partnership.
(3) Each 90% social subsidiary of the social enterprise must not be a member of a partnership.

257MJ The trading requirement
(1) The social enterprise must meet the trading requirement throughout the shorter applicable period, but this does not apply if the social enterprise is an accredited social impact contractor.
(2) The trading requirement is that—
(a) the social enterprise is a charity,
(b) the social enterprise is a single company that is not a charity, and its business—
(i) does not, if things done for incidental purposes are ignored, consist to any extent in the carrying-on of non-trade activities, and
(ii) does not consist wholly, or as to a substantial part, in the carrying-on of excluded activities, or
(c) the social enterprise is a parent company that is not a charity, and the business of the group does not consist wholly, or as to a substantial part, in the carrying-on of non-qualifying activities.
(3) If the social enterprise intends that one or more companies should become its qualifying subsidiaries with a view to their carrying on one or more qualifying trades—
(a) the social enterprise is treated as a parent company for the purposes of subsection (2)(b) and (c), and
(b) the reference in subsection (2)(c) to the group includes the social enterprise and any existing or future company that will be its qualifying subsidiary after the intention in question is carried out,
but this subsection does not apply at any time after the abandonment of that intention.
(4) For the purposes of subsection (2)(c) “the business of the group” means what would be the business of the group if the activities of the group companies taken together were regarded as one business.
(5) For the purposes of determining the business of a group, activities of a group company are ignored so far as they are activities carried on by a mainly trading subsidiary otherwise than for its main purpose.
(6) For the purposes of determining the business of a group, activities of a group company are ignored so far as they consist in—
(a) the holding of shares in or securities of a qualifying subsidiary of the parent company,
(b) the making of loans to another group company, or
(c) the holding and managing of property used by a group company for the purpose of one or more qualifying trades carried on by a group company.
(7) In this section—
“incidental purposes” means purposes having no significant effect (other than in relation to incidental matters) on the extent of the activities of the body in question,
“mainly trading subsidiary” means a qualifying subsidiary which, apart from incidental purposes, exists wholly for the purpose of carrying on one or more qualifying trades, and any reference to the main purpose of such a subsidiary is to be read accordingly,
“non-qualifying activities” means—
(a) excluded activities, and
(b) activities, other than activities carried on by a charity, that are carried on otherwise than in the course of a trade, and
“non-trade activities” means activities which are neither of the following—
(a) activities carried on in the course of a trade, and
(b) activities carried on in the course of preparing to carry on a trade.

257MK Ceasing to meet trading requirement: administration or receivership
(1) The social enterprise is not regarded as ceasing to meet the trading requirement merely because of anything done in consequence of the social enterprise or any of its subsidiaries being in administration or receivership, but this is subject to subsections (2) and (3).
(2) Subsection (1) applies only if—
(a) the entry into administration or receivership, and
(b) everything done as a result of the company concerned being in administration or receivership,
is for genuine commercial reasons, and is not part of any arrangements the main purpose or one of the main purposes of which is the avoidance of tax.
(3) The social enterprise ceases to meet the trading requirement if before the end of the shorter applicable period—
(a) a resolution is passed, or an order is made, for the winding-up of the social enterprise or any of its subsidiaries (or, in the case of a winding-up otherwise than under the Insolvency Act 1986 or the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)), any other act is done for the like purpose), or
(b) the company or any of its subsidiaries is dissolved without winding-up,
but this is subject to subsection (4).
(4) Subsection (3) does not apply if the winding-up or dissolution is for genuine commercial reasons, and is not part of any arrangements the main purpose or one of the main purposes of which is the avoidance of tax.

257ML The issue must be to raise money for chosen trade or preparing for it
(1) The social enterprise must be a party to the making of the investment (so far as not in bonus shares) in order to raise money for the carrying-on, by the social enterprise or a 90% social subsidiary of the social enterprise, of—
(a) a qualifying trade which on the investment date is carried on by the social enterprise or a 90% social subsidiary of the social enterprise, or
(b) the activity of preparing to carry on (or preparing to carry on and then carrying on) a qualifying trade—
(i) which on the investment date is intended to be carried on by the social enterprise or a 90% social subsidiary of the social enterprise, and
(ii) which is begun to be carried by the social enterprise or such a subsidiary within 2 years after that date.
(2) In this Chapter—
(a) the purpose within subsection (1) for which money is raised is referred to as “the funded purpose”,
(b) the qualifying trade mentioned in subsection (1)(a) or (b) is referred to as “the chosen trade”, and
(c) if the funded purpose is the carrying-on of the activity mentioned in subsection (1)(b), “relevant preparation work” means preparations that form the whole or part of the activity.
(3) In determining for the purposes of subsection (1)(b) when a qualifying trade is begun to be carried on by a 90% social subsidiary of the social enterprise, any carrying-on of the trade by it before it became such a subsidiary is ignored.
(4) The reference in subsection (1)(b)(i) to a 90% social subsidiary of the social enterprise includes a reference to any existing or future body which will be such a subsidiary at any future time.
(5) This section does not apply if the social enterprise is an accredited social impact contractor.

257MM Requirement to use money raised and to trade for minimum period
(1) All of the money raised by the social enterprise from the making of the investment must, no later than the end of 28 months beginning with the investment date, be employed wholly for the funded purpose.
(2) The chosen trade must have been carried on for a period of at least 4 months ending at or after the time the investment is made and, throughout that period, the trade—
(a) must have been carried on by the social enterprise or a 90% social subsidiary of the social enterprise, and
(b) must not have been carried on by any other person.
(3) Employing money on the acquisition of shares or stock in a body does not of itself amount to employing the money for the funded purpose.
(4) Subsection (1) does not fail to be met merely because an amount of money which is not significant is employed for other purposes.
(5) If—
(a) merely because of the social enterprise or any other company being wound up, or dissolved without winding-up, the qualifying trade is carried on as mentioned in subsection (2) for a period shorter than 4 months, and
(b) the winding-up or dissolution—
(i) is for genuine commercial reasons, and
(ii) is not part of any arrangements the main purpose or one of the main purposes of which is the avoidance of tax,
subsection (2) has effect as if it referred to that shorter period.
(6) If—
(a) merely because of anything done as a result of the social enterprise or any other company being in administration or receivership, the chosen trade is carried on as mentioned in subsection (2) for a period shorter than 4 months, and
(b) the entry into administration or receivership, and everything done as a result of the company concerned being in administration or receivership—
(i) is for genuine commercial reasons, and
(ii) is not part of any arrangements the main purpose or one of the main purposes of which is the avoidance of tax,
subsection (2) has effect as if it referred to that shorter period.
(7) If the social enterprise is an accredited social impact contractor, the preceding provisions of this section apply with the following modifications—
(a) in subsection (1), for “28 months” substitute “ 24 months ”,
(b) in that subsection, for “the funded purpose” substitute “ the carrying out of the social impact contract concerned ”, and
(c) omit subsections (2), (3), (5) and (6).

257MN The social enterprise must carry on the chosen trade
(1) There must not be a time in the shorter applicable period when—
(a) the chosen trade, or
(b) relevant preparation work,
is carried on by a person who is neither the social enterprise nor a 90% social subsidiary of the social enterprise.
(2) If relevant preparation work is carried out in the shorter applicable period by the social enterprise or a 90% social subsidiary of the social enterprise then, for the purposes of determining whether the requirement in subsection (1) is met, ignore any carrying-on of the chosen trade that takes place in that period before the trade begins to be carried on by a person who is the social enterprise or a 90% social subsidiary of the social enterprise.
(3) The requirement in subsection (1) is not regarded as failing to be met if, merely because of any act or event within subsection (4), the chosen trade—
(a) ceases to be carried on in the shorter applicable period by the social enterprise or any 90% social subsidiary of the social enterprise, and
(b) it is subsequently carried on in that period by a person who is not any time in the longer applicable period connected with the social enterprise.
(4) The acts and events within this subsection are—
(a) anything done as a consequence of the social enterprise or any other company being in administration or receivership, and
(b) the social enterprise or any other company being wound up, or dissolved without being wound up.
(5) Subsection (4) applies only if—
(a) the entry into administration or receivership, and everything done as a consequence of the company concerned being in administration or receivership, or
(b) the winding-up or dissolution,
is for genuine commercial reasons, and is not part of any arrangements the main purpose or one of the main purposes of which is the avoidance of tax.
(6) This section does not apply if the social enterprise is an accredited social impact contractor.

Interpretation of conditions relating to the social enterprise

257MP Meaning of “qualifying trade”
(1) For the purposes of this Chapter, a trade is a qualifying trade if—
(a) it is conducted on a commercial basis and with a view to the realisation of profits, and
(b) it does not at any time in the shorter applicable period consist wholly or as to a substantial part in the carrying-on of excluded activities.
(2) References in this section and sections 257MQ to 257MT (excluded activities) to a trade are to be read without regard to the definition of “trade” in section 989.

257MQ Meaning of “excluded activity”
(1) The following are excluded activities for the purposes of sections 257JD, 257MJ and 257MP—
(a) dealing in land, in commodities or futures or in shares, securities or other financial instruments,
(b) banking, insurance, money-lending, debt-factoring, hire-purchase financing or other financial activities (but see subsection (2)),
(c) property development (see section 257MR),
(d) activities in the fishery and aquaculture sector that is covered by Council Regulation (EC) No. 104/2000 of 17 December 1999 on the common organisation of the markets in fishery and aquaculture products,
(e) the primary production of products listed in Annex I to the Treaty on the Functioning of the European Union (agricultural etc products), with the exception of products covered by Council Regulation (EC) No. 104/2000 (fishery and aquaculture products),
(f) the subsidised generation or export of electricity (see section 257MS),
(g) road freight transport for hire or reward, and
(h) providing services or facilities for a business carried on by another person (other than a company of which the provider of the services or facilities is a qualifying subsidiary) if—
(i) the business consists wholly or as to a substantial part of activities falling within any of paragraphs (a) to (g), and
(ii) a controlling interest (see section 257MT) in the business is held by a person who also has a controlling interest in the business carried on by the provider of the services or facilities.
(2) The activity of lending money to a social enterprise is not an excluded activity for the purposes of sections 257MJ and 257MP.

257MR Excluded activities: property development
(1) For the purposes of section 257MQ(1)(c) “property development” means the development of land—
(a) by a company which has, or at any time has had, an interest in the land, and
(b) with the sole or main object of realising a gain from the disposal of an interest in the land when it is developed.
(2) For the purposes of subsection (1) “interest in land” means (subject to subsection (3))—
(a) any estate, interest or right in or over land, including any right affecting the use or disposition of land, or
(b) any right to obtain such an estate, interest or right from another which is conditional on the other's ability to grant it.
(3) References in this section to an interest in land do not include—
(a) the interest of a creditor (other than a creditor in respect of a rentcharge) whose debt is secured by way of mortgage, an agreement for a mortgage or a charge of any kind over land, or
(b) in the case of land in Scotland, the interest of a creditor in a charge or security of any kind over land.

257MS Excluded activity: subsidised generation or export of electricity
(1) This section supplements section 257MQ(1)(f).
(2) Electricity is exported if it is exported onto a distribution system or transmission system (within the meaning of section 4 of the Electricity Act 1989).
(3) The generation of electricity is subsidised if a person receives a FIT subsidy in respect of the electricity generated.
(4) The export of electricity is subsidised if a person receives a FIT subsidy in respect of the electricity exported.
(5) In this section—
“FIT subsidy” means—
(a) a financial incentive under a scheme established by virtue of section 41 of the Energy Act 2008 (powers to amend licence conditions etc: feed-in tariffs) to encourage small-scale low-carbon generation of electricity, or
(b) a financial incentive under a similar scheme established in Northern Ireland, or in a territory outside the United Kingdom, to encourage small-scale low-carbon generation of electricity;
“small-scale low-carbon generation of electricity” has the meaning given by section 41(4) of the Energy Act 2008.

257MT Excluded activity: providing services or facilities for another business
(1) This section explains what is meant by a controlling interest in a business for the purposes of section 257MQ(1)(h).
(2) In the case of a business carried on by a company, a person (“A”) has a controlling interest in the business if—
(a) A controls the company,
(b) the company is a close company and A, or an associate of A, is a director of the company and either—
(i) is the beneficial owner of more than 30% of the ordinary share capital of the company, or
(ii) is able, directly or through the medium of other companies or by any other indirect means, to control more than 30% of that share capital, or
(c) at least half of the business could, in accordance with section 942 of CTA 2010, be regarded as belonging to A for the purposes of section 941 of CTA 2010 (company reconstructions without a change of ownership).
(3) In any other case, a person has a controlling interest in a business if the person is entitled to at least half of the assets used for, or of the income arising from, the business.
(4) For the purposes of this section—
(a) any rights or powers of a person who is an associate of another are to be attributed to that other person, and
(b) “business” includes any trade, profession or vocation.

257MU Meaning of “qualifying subsidiary”
(1) For the purposes of this Part, a company (“the subsidiary”) is a qualifying subsidiary of another company (“the parent”) if—
(a) the subsidiary is a 51% subsidiary of the parent,
(b) no person other than the parent, or another of its subsidiaries, has control of the subsidiary, and
(c) no arrangements are in existence as a result of which either of the conditions in paragraphs (a) and (b) would cease to be met.
(2) The conditions in subsection (1)(a) to (c) do not cease to be met merely because the subsidiary or any other company is wound up, or dissolved without winding up, if the winding-up or dissolution—
(a) is for genuine commercial reasons, and
(b) is not part of any arrangements the main purpose or one of the main purposes of which is the avoidance of tax.
(3) The conditions in subsection (1)(a) to (c) do not cease to be met merely because of anything done as a consequence of the subsidiary or another company being in administration, or receivership, if—
(a) the entry into administration or receivership, and
(b) everything done as a consequence of the company concerned being in administration or receivership,
is for genuine commercial reasons, and is not part of any arrangements the main purpose or one of the main purposes of which is the avoidance of tax.
(4) The conditions in subsection (1)(a) to (c) do not cease to be met merely because arrangements are in existence for the disposal by the parent or (as the case may be) by another subsidiary of all its interest in the subsidiary if the disposal—
(a) is to be for genuine commercial reasons, and
(b) is not to be part of any arrangements the main purpose or one of the main purposes of which is the avoidance of tax.

257MV Meaning of “90% social subsidiary” of a social enterprise
(1) For the purposes of this Chapter, a company (“the subsidiary”) is a 90% social subsidiary of another company (“the parent”) if—
(a) the subsidiary is a social enterprise,
(b) the parent possesses at least 90% of the issued share capital of, and at least 90% of the voting power in, the subsidiary,
(c) the parent would—
(i) in the event of a winding-up of the subsidiary, or
(ii) in any other circumstances,
be beneficially entitled to receive at least 90% of the assets of the subsidiary which would then be available for distribution to equity holders of the subsidiary,
(d) the parent is beneficially entitled to receive at least 90% of any profits of the subsidiary which are available for distribution to equity holders of the subsidiary,
(e) no person other than the parent has control of the subsidiary, and
(f) no arrangements are in existence as a result of which any of the conditions in paragraphs (a) to (e) would cease to be met.
(2) For the purposes of this Chapter, a company (“company A”) which is a subsidiary of another company (“company B”) is a 90% social subsidiary of a third company (“company C”) if—
(a) company A is a 90% social subsidiary of company B, and company B is a 100% social subsidiary of company C, or
(b) company A is a 100% social subsidiary of company B, and company B is a 90% social subsidiary of company C.
(3) For the purposes of subsection (2) no account is to be taken of any control company C may have of company A.
(4) For the purposes of subsection (2), a company (“company X”) is a 100% social subsidiary of another company (“company Y”) at any time when the conditions in subsection (1)(a) to (f) would be met if—
(a) company X were the subsidiary,
(b) company Y were the parent, and
(c) in subsection (1) for “at least 90%” there were substituted “ 100% ”.
(5) The conditions in subsection (1)(a) to (f) do not cease to be met merely because of anything done as a consequence of the subsidiary or any other company being wound up, or dissolved without being wound up, if the winding-up or dissolution—
(a) is for genuine commercial reasons, and
(b) is not part of any arrangements the main purpose or one of the main purposes of which is the avoidance of tax.
(6) The conditions in subsection (1)(a) to (f) do not cease to be met merely because of anything done as a consequence of the subsidiary or any other company being in administration, or receivership, if—
(a) the entry into administration or receivership, and
(b) everything done as a consequence of the company concerned being in administration or receivership,
is for genuine commercial reasons, and is not part of any arrangements the main purpose or one of the main purposes of which is the avoidance of tax.
(7) The conditions in subsection (1)(a) to (f) do not cease to be met merely because any arrangements are in existence for the disposal by the parent of all its interest in the subsidiary if the disposal—
(a) is to be for genuine commercial reasons, and
(b) is not to be part of any arrangements the main purpose or one of the main purposes of which is the avoidance of tax.
(8) For the purposes of subsection (1)—
(a) the persons who are equity holders of the subsidiary, and
(b) the percentage of the assets of the subsidiary to which an equity holder would be entitled,
are to be determined in accordance with Chapter 6 of Part 5 of CTA 2010.
(9) In making that determination—
(a) references in section 166 of that Act to company A are to be read as references to an equity holder, and
(b) references in that section to winding up are to be read as including references to any other circumstances in which assets of the subsidiary are available for distribution to its equity holders.

CHAPTER 5 Attribution of relief

257N Attribution of SI relief to investments
(1) References in this Part, in relation to any individual, to the SI relief attributable to any investment are to be read as references to any reduction made in the individual's liability to income tax that is attributed to that investment in accordance with this section.
This is subject to the provisions of this Part providing for the withdrawal or reduction of SI relief.
(2) If an individual's liability to income tax is reduced under this Part in any tax year, then—
(a) if the reduction is obtained because of a single distinct investment, the amount of the reduction is attributed to that investment, and
(b) if the reduction is obtained because of two or more distinct investments, the amount of the reduction—
(i) is apportioned between the distinct investments in the same proportions as the amounts claimed by the individual in respect of each of those investments, and
(ii) is attributed to those investments accordingly.
(3) In this section “distinct investment” means an investment, made on a single day, in—
(a) a single share or single qualifying debt investment, or
(b) two or more shares, or two or more qualifying debt investments, where the shares or qualifying debt investments are in the same social enterprise and of the same class.
(4) If under this section an amount of any reduction in income tax is attributed to a distinct investment—
(a) in the case of a distinct investment of the kind mentioned in subsection (3)(a), that amount is attributed to the share, or qualifying debt investment, concerned, and
(b) in the case of a distinct investment of the kind mentioned in subsection (3)(b), a proportionate part of that amount is attributed to each of the shares, or qualifying debt investments, concerned.
(5) If corresponding bonus shares are issued to an individual in respect of any shares (“the original shares”) to which SI relief is attributed—
(a) a proportionate part of the total amount attributed to the original shares immediately before the bonus shares are issued is attributed to each of the shares in the holding comprising the original shares and the bonus shares, and
(b) after the issue of the bonus shares, this Part applies as if those shares had been issued to the individual on the same day as the original shares.
(6) In subsection (5) “corresponding bonus shares” means bonus shares which are in the same company, of the same class, and carry the same rights, as the original shares.
(7) If section 257JA(1) and (2) apply in the case of any investment as if part of the amount invested had been invested in a previous tax year, this section has effect as if that part and the remainder had been invested by separate investments (and that part had been invested by an investment made on a day in the previous tax year).
(8) For the purposes of this section, shares or other investments in a company are not treated as being of the same class unless they would be so treated if dealt in on a recognised stock exchange.

CHAPTER 6 Claims for relief

257P Time for making claims for SI relief
(1) A claim for SI relief in respect of the amount invested may be made—
(a) not earlier than the time the requirement in section 257MM(2) (chosen trade must have been carried on for 4 months) is first met, and
(b) not later than the fifth anniversary of the normal self-assessment filing date for the tax year in which the investment is made.
(2) If the social enterprise is an accredited social impact contractor, subsection (1) applies with the omission of its paragraph (a).
(3) If section 257JA(1) and (2) apply as if part of the amount invested had been invested in a previous tax year, subsection (1) has effect as if that part and the remainder had been invested by separate investments (and that part had been invested by an investment made on a day in the previous tax year).

257PA Entitlement to claim
(1) The investor is entitled to make a claim for SI relief in respect of the amount invested if the investor has received from the social enterprise a compliance certificate in respect of that amount.
(2) For the purposes of PAYE regulations, no regard is to be had to SI relief unless a claim for it has been duly made.
(3) No application may be under section 55(3) or (4) of TMA 1970 (application for postponement of payment of tax pending appeal) on the ground that the investor is entitled to SI relief unless a claim for the relief has been duly made by the investor.

257PB Compliance statements
(1) For the purposes of this Part, a “compliance statement” in respect of the investment is a statement by the social enterprise to the effect that, except so far as they fall to be met by or in relation to the individual, the requirements for SI relief—
(a) are for the time being met in relation to the investment (or in relation to investments that include the investment), and
(b) have been so met at all times since the investment was made.
(2) A compliance statement must be in such form as the Commissioners for Her Majesty's Revenue and Customs may direct and must contain—
(a) such additional information as the Commissioners may reasonably require, including in particular information relating to the persons who have requested the issue of compliance certificates,
(b) a declaration that the statement is correct to the best of the social enterprise's knowledge and belief, and
(c) such other declarations as the Commissioners may reasonably require.
(3) The social enterprise may not provide an officer of Revenue and Customs with a compliance statement in respect of the investment—
(a) before the requirement in section 257MM(2) (trade must have been carried for 4 months) is met, or
(b) later than 2 years after the end of the tax year in which the investment is made or, if that requirement is first met after the end of that tax year, later than 2 years after the requirement is first met.
(4) If the social enterprise is an accredited social impact contractor, subsection (3) applies with the omission of its paragraph (a).

257PC Compliance certificates
(1) For the purposes of this Chapter, a “compliance certificate” is a certificate which—
(a) is issued by the social enterprise in respect of the investment,
(b) states that, except so far as they fall to be met by or in relation to the individual, the requirements for SI relief are for the time being met in relation to the investment, and
(c) is in such form as the Commissioners for Her Majesty's Revenue and Customs may direct.
(2) Before issuing a compliance certificate, the social enterprise must provide an officer of Revenue and Customs with a compliance statement in respect of the investment.
(3) The social enterprise must not issue a compliance certificate without the authority of an officer of Revenue and Customs.
(4) If the social enterprise, or a person connected with the social enterprise, has under section 257SF given a notice to an officer of Revenue and Customs that relates (whether or not exclusively) to the investment, a compliance certificate must not be issued unless the authority mentioned in subsection (3) of this section is given or renewed after receipt of the notice.
(5) If—
(a) an officer of Revenue and Customs has been requested to give or renew an authority to issue a compliance certificate, and
(b) an officer of Revenue and Customs has decided whether or not to do so,
an officer of Revenue and Customs must give notice of the decision to the social enterprise.
(6) For the purposes of the provisions of TMA 1970 relating to appeals, the refusal of an officer of Revenue and Customs to authorise the issue of a compliance certificate is taken to be a decision disallowing a claim by the social enterprise.
(7) In the case of requirements that cannot be met until a future time, references in this section to requirements being met for the time being are to nothing having occurred to prevent their being met.

257PD Penalties for fraudulent certificate or statement etc
The social enterprise is liable to a penalty not exceeding £3,000 if—
(a) it issues a compliance certificate, or provides a compliance statement, which is made fraudulently or negligently, or
(b) it issues a compliance certificate in contravention of section 257PC(3) or (4).

257PE Power to amend Chapter
(1) The Treasury may by order amend this Chapter.
(2) An order under this section may include consequential, incidental or transitional provision or savings, including consequential amendments, repeals or revocations of provision made by or under an enactment (including this Act) whenever passed or made.
(3) An order under this section may make different provision for different cases or purposes.
(4) An order under this section may, in particular, make provision for persons to be liable to penalties whose amount, or maximum amount, does not exceed £3,000.

CHAPTER 7 Withdrawal or reduction of SI relief

Value received by the investor

257Q Effect of the investor receiving value from the social enterprise
(1) If the investor receives any value from the social enterprise at any time in the longer applicable period, any SI relief given in respect of the investment must—
(a) if it is greater than the amount given by the formula set out in subsection (2), be reduced by that amount, and
(b) in any other case, be withdrawn.
(2) The formula is—
V × R
where—
V is the amount of the value received, and
R is the SI rate for the tax year for which the SI relief was given.
(3) Subsections (1) and (2) are subject to—
(a) section 257QA (value received: insignificant receipts),
(b) section 257QB (value received where there is more than one issue of investments),
(c) section 257QC (value received where part of investment treated as made in previous tax year),
(d) section 257QD (cases where maximum SI relief not obtained),
(e) section 257QG (receipts of value by and from connected persons etc), and
(f) section 257QH (receipt of replacement value).
(4) Sections 257QB to 257QD are to be applied in the order in which they appear in this Part.
(5) Value received is to be ignored, for the purposes of this section, so far as SI relief attributable to the investment has already been withdrawn or reduced on its account.
(6) For the purposes of this section and sections 257QA to 257QI, an individual—
(a) who acquires any part of the investment, and
(b) who does so on such a transfer as is mentioned in section 257T (spouses or civil partners),
is treated as the investor.

257QA Value received: insignificant receipts
(1) In this section “insignificant receipt” means a receipt whose amount—
(a) is not more than £1,000, or
(b) is more than £1,000 but is insignificant in relation to the amount invested.
(2) Section 257Q(1) does not apply to an insignificant receipt, subject as follows.
(3) Section 257Q(1) applies to all receipts within the longer applicable period if, at any time on the investment date or in the preceding 12 months, arrangements are in existence providing for the investor to receive, or to be entitled to receive, value from the social enterprise at any time in the longer applicable period.
(4) Once section 257Q(1) has applied to a receipt, it applies also to all other receipts within the longer applicable period except any earlier insignificant receipts.
(5) The amount of the first receipt to which section 257Q(1) applies is treated as increased by the total amount of any earlier insignificant receipts.
(6) In subsection (3)—
(a) the reference to the investor includes any person who at any time in the longer applicable period is an associate of the investor (whether or not an associate at the material time), and
(b) the reference to the social enterprise includes any person who at any time in the longer applicable period is connected with the social enterprise (whether or not connected at the material time).

257QB Value received where there is more than one issue of investments
(1) Subsection (3) applies if—
(a) a time in the longer applicable period when the investor receives value from the social enterprise is within the period that for the purposes of this Part is the longer applicable period in relation to another investment in the social enterprise, and
(b) that other investment is one for which the investor has SI relief.
(2) That other investment is an “overlapping investment” for the purposes of subsection (3).
(3) Section 257Q(2) has effect in relation to the investment as if the amount V were reduced by multiplying it by—
I T
where—
I is the amount on which the investor has SI relief in the case of the investment, and
T is the total of that amount and the corresponding amount for each overlapping investment.

257QC Value received where part of investment treated as made in previous tax year
(1) Subsection (2) applies if—
(a) section 257Q(1) applies to a receipt, and
(b) section 257JA(1) and (2) apply as if part of the amount invested had been invested in a previous tax year.
(2) The calculation under section 257Q(2) in relation to that receipt is to be made as follows—
Step 1 Apportion the amount referred to as “V” between the tax year in which the investment was made and the preceding tax year by multiplying that amount by—
A B
where—
A is the part of the amount invested on which the investor obtains SI relief for the tax year in question, and
B is the sum of—
(a) that part, and
(b) the part of the amount invested on which the investor obtains SI relief for the other tax year.
Step 2 In relation to each of the amounts (“V1” and “V2”) so apportioned to the two tax years, calculate the amounts (“X1” and “X2”) that would be given by the formula if separate investments had been made in those tax years. In calculating amounts X1 and X2, apply section 257QD if appropriate but do not apply section 257QB.
Step 3 Add amounts X1 and X2 together. The result is the required amount.

257QD Cases where maximum SI relief not obtained
(1) If the investor's liability to income tax is reduced for any tax year in respect of the investment and—
(a) the amount of the reduction (“A”), is less than
(b) the amount (“B”) which is equal to income tax at the SI rate for that tax year on the amount on which the investor has SI relief in the case of the investment,
section 257Q(2) has effect in relation to any value received as if the amount referred to as “V” were reduced by multiplying it by—
A B
(2) If the amount of SI relief attributable to the investment has been reduced before the SI relief was obtained, the amount referred to in subsection (1) as “A” is to be treated for the purposes of that subsection as the amount that it would have been without that reduction.
(3) Subsection (2) does not apply to a reduction of SI relief as a result of section 257N(5) (attribution of SI relief where there is a corresponding issue of bonus shares).

257QE When value is received
(1) This section applies for the purposes of sections 257Q and 257QB.
(2) The investor receives value from the social enterprise at any time when the social enterprise—
(a) repays, redeems or repurchases any investments in the social enterprise which belong to the investor, or makes any payment to the investor for giving up the investor's right to investments in the social enterprise on their cancellation or extinguishment,
(b) repays, in pursuance of any arrangements for or in connection with the making of the investment, any debt owed to the investor other than a debt which was incurred by the social enterprise—
(i) on or after the investment date, and
(ii) otherwise than in consideration of the extinguishment of a debt incurred before that date,
(c) makes to the investor any payment for giving up on its extinguishment the investor's right to any debt, other than—
(i) a debt in respect of a repayment of the kind mentioned in section 257LF(5)(a) or (f), or
(ii) an ordinary trade debt,
(d) releases or waives any liability of the investor to the social enterprise or discharges or undertakes to discharge any liability of the investor to a third person,
(e) makes a loan or advance to the investor which has not been repaid in full before the investment is made,
(f) provides a benefit or facility for the investor by providing, at a price less than the arm's-length price or free of charge, goods or services for whose provision the social enterprise ordinarily makes a charge,
(g) otherwise provides any benefit or facility for the investor,
(h) transfers an asset to the investor for no consideration or for consideration less than its market value or acquires an asset from the investor for consideration greater than its market value, or
(i) makes to the investor any other payment except—
(i) a payment of a kind mentioned in section 257LF(5), or
(ii) a payment in discharge of an ordinary trade debt.
(3) For the purposes of subsection (2)(d), the social enterprise is treated as having released or waived a liability if the liability is not discharged within 12 months of the time when it ought to have been discharged.
(4) For the purposes of subsection (2)(e), each of the following is treated as a loan made by the social enterprise to the investor—
(a) the amount of any debt, other than an ordinary trade debt, incurred by the investor to the social enterprise, and
(b) the amount of any debt due from the investor to a third party which has been assigned to the social enterprise.
(5) The investor also receives value from the social enterprise if—
(a) in respect of ordinary shares, or qualifying debt investments, held by the investor any payment or asset is received in a winding-up or dissolution of the social enterprise, and
(b) the winding-up or dissolution is for genuine commercial reasons, and is not part of any arrangements the main purpose or one of the main purposes of which is the avoidance of tax.
(6) The investor also receives value from the social enterprise if—
(a) a person—
(i) purchases any investments in the social enterprise which belong to the investor, or
(ii) makes any payment to the investor for giving up any right in relation to any investments in the social enterprise, and
(b) that person is an individual in relation to whom not all of the requirements in sections 257LF and 257LG would be met if references in those sections to the investor were read as references to that person.
(7) If, because of the investor's disposal of investments in the social enterprise, any SI relief attributable to those investments is withdrawn or reduced under section 257R, the investor is not to be treated as receiving value from the social enterprise in respect of the disposal.
(8) If the investor is a director of the social enterprise, the investor is not to be treated as receiving value from the social enterprise merely because of the payment to the investor of reasonable remuneration (including any benefit or facility) for any services rendered to the social enterprise as a director or employee.
(9) In this section “ordinary trade debt” means any debt for goods or services supplied in the ordinary course of a trade or business if any credit given—
(a) is for not more than 6 months, and
(b) is not for longer than that normally given to customers of the person carrying on the trade or business.

257QF The amount of value received
In a case falling within a provision listed in column 1 of the following table, the amount of value received for the purposes of sections 257Q and 257QB is given by the corresponding entry in column 2 of the table.
Provision	The amount of value received
Section 257QE(2)(a), (b) or (c)	The amount received by the investor or, if greater, the market value of the investments or debt
Section 257QE(2)(d)	The amount of the liability
Section 257QE(2)(e)	The amount of the loan or advance, less the amount of any repayment made before the investment is made
Section 257QE(2)(f)	The arm's-length price for the goods or services, less any amount paid for them by the investor
Section 257QE(2)(g)	The cost to the social enterprise of providing the benefit or facility, less any consideration given for it by the investor
Section 257QE(2)(h)	The difference between the market value of the asset and the consideration (if any) given for it
Section 257QE(2)(i)	The amount of the payment
Section 257QE(5)	The amount of the payment or the market value of the asset
Section 257QE(6)	The amount received by the investor or, if greater, the market value of the investments

257QG Receipts of value by and from connected persons etc
In sections 257Q, 257QA, 257QB, 257QE and 257QF—
(a) any reference to a payment or transfer to the investor includes a reference to a payment or transfer made to the investor indirectly or to the investor's order or for the investor's benefit,
(b) any reference to the investor includes a reference to an associate of the investor, and
(c) any reference to the social enterprise includes a reference to a person who at any time in the longer applicable period is connected with the social enterprise (whether or not that person is so connected at the material time).

257QH Receipt of replacement value
(1) If—
(a) any SI relief attributable to the investment would, in the absence of this section, be reduced or withdrawn under section 257Q because of a receipt of value within section 257QE(2) or (6) (“the original value”),
(b) the original supplier receives value (“the replacement value”) from the original recipient and the receipt is a qualifying receipt, and
(c) the amount of the replacement value is at least the amount of the original value,
section 257Q does not, because of the receipt of the original value, have effect to withdraw or reduce the SI relief.
This is subject to section 257QI(1) and (2).
(2) For the purposes of this section—
“the original recipient” means the person who receives the original value, and
“the original supplier” means the person from whom that value was received.
(3) If the amount of the original value is, by virtue of section 257QB, treated as reduced for the purposes of section 257Q(2) as it applies in relation to the investment, the reference in subsection (1)(c) to the amount of the original value is to be read as a reference to the amount of that value ignoring the reduction.
(4) A receipt of the replacement value is a qualifying receipt for the purposes of subsection (1) if it arises—
(a) because of the original recipient doing one or more of the following—
(i) making a payment to the original supplier, other than a payment within paragraph (c) or a payment to which subsection (5) applies,
(ii) acquiring any asset from the original supplier for a consideration the amount or value of which is more than the market value of the asset, and
(iii) disposing of any asset to the original supplier for no consideration or for a consideration the amount or value of which is less than the market value of the asset,
(b) if the receipt of the original value was within section 257QE(2)(d), because of an event the effect of which is to reverse the event which constituted the receipt of the original value, or
(c) if the receipt of the original value was within section 257QE(6), because of the original recipient repurchasing the investments in question, or (as the case may be) re-acquiring the right in question, for a consideration the amount or value of which is at least the amount of the original value.
(5) This subsection applies to—
(a) any payment for any goods, services or facilities, provided (whether in the course of trade or otherwise) by—
(i) the original supplier, or
(ii) any other person who at any time in the longer applicable period is an associate of, or is connected with, the original supplier (whether or not the person is such an associate, or is so connected, at the material time),
which is reasonable in relation to the market value of those goods, services or facilities,
(b) any payment of any interest which represents no more than a reasonable commercial return on any money lent to—
(i) the original recipient, or
(ii) any other person who at any time in the longer applicable period is an associate of the original recipient (whether or not the person is such an associate at the material time),
(c) any payment for the acquisition of an asset which does not exceed its market value,
(d) any payment, as rent for any property occupied by—
(i) the original recipient, or
(ii) any person who at any time in the longer applicable period is an associate of the original recipient (whether or not the person is such an associate at the material time),
of an amount not exceeding a reasonable and commercial rent for the property,
(e) any payment in discharge of an ordinary trade debt, and
(f) any payment for shares in or securities of any company in circumstances that do not fall within subsection (4)(a)(ii).
(6) For the purposes of this section, the amount of the replacement value is—
(a) in a case within paragraph (a) of subsection (4), the sum of—
(i) the amount of any payment within sub-paragraph (i) of that paragraph, and
(ii) the difference between the market value of any asset to which sub-paragraph (ii) or (iii) of that paragraph applies and the amount or value of the consideration (if any) received for it,
(b) in a case within subsection (4)(b), the same as the amount of the original value, and
(c) in a case within subsection (4)(c), the amount or value of the consideration received by the original supplier.
Section 257QF applies for the purpose of determining the amount of the original value.
(7) In this section—
(a) any reference to a payment to a person (however expressed) includes a reference to a payment made to the person indirectly or to the person's order or for the person's benefit, and
(b) “ordinary trade debt” has the meaning given by section 257QE(9).

257QI Section 257QH: supplementary
(1) The receipt of the replacement value by the original supplier is ignored for the purposes of section 257QH(1) to the extent to which it has previously been set under section 257QH against a receipt of value to prevent any reduction or withdrawal of SI relief under section 257Q.
(2) The receipt of the replacement value by the original supplier (“the event”) is ignored for the purposes of section 257QH if—
(a) the event occurs before the longer applicable period,
(b) where the event occurs after the time the original recipient receives the original value, it does not occur as soon after that time as is reasonably practicable in the circumstances, or
(c) where an appeal has been brought by the investor against an assessment to withdraw or reduce any SI relief attributable to the investment because of the receipt of the original value, the event occurs more than 60 days after the day on which the amount of the relief which falls to be withdrawn has been finally determined.
But nothing in section 257QH or this section requires the replacement value to be received after the original value.
(3) This subsection applies if—
(a) the receipt of the replacement value by the original supplier is a qualifying receipt for the purposes of section 257QH(1), and
(b) in consequence of the receipt, any receipts of value are ignored for the purposes of section 257Q as that section applies in relation to the investment or any other investments made by the investor, and
(c) the event which gives rise to the receipt is (or includes) the making of an investment by—
(i) the investor, or
(ii) any person who at any time in the longer applicable period is an associate of the investor (whether or not the person is such an associate at the material time).
(4) If subsection (3) applies, the person who makes the investment concerned is not to be eligible for SI relief in relation to the investment concerned or any other investments in the same issue.
(5) In this section “the original recipient”, “the original supplier” and “replacement value” have the same meaning as in section 257QH.

Repayments etc of investments to other persons

257QJ Repayments etc of share capital to other persons
(1) This section applies if any SI relief is attributable to the whole or any part of the investment and, at any time in the longer applicable period, the social enterprise or any subsidiary—
(a) repays, redeems or repurchases any of its share capital which belongs to any member other than—
(i) the investor, or
(ii) a person who falls within subsection (5), or
(b) makes any payment to any such member for giving up the member's right to any of the share capital of the social enterprise or subsidiary on its cancellation or extinguishment.
(2) The SI relief must—
(a) if it is greater than the amount given by the formula set out in subsection (3), be reduced by that amount, and
(b) in any other case, be withdrawn.
(3) The formula is—
A × R
where—
A is the amount received by the member, and
R is the SI rate for the tax year for which the SI relief was given.
(4) This section is subject to sections 257QK to 257QP; and sections 257QL to 257QO are to be applied in the order in which they appear in this Part.
(5) A person falls within this subsection if the repayment causes any SI relief attributable to that person's shares in the social enterprise to be withdrawn or reduced by virtue of—
(a) section 257QE(2)(a) (receipt of value by virtue of repayment of investments etc), or
(b) section 257R (disposal of whole or part of the investment).
(6) A repayment is treated as having the effect mentioned in subsection (5)(a) if it would have that effect were it not an insignificant receipt; and here “insignificant receipt” is to be read in accordance with section 257QA(1).
(7) A repayment is to be ignored, for the purposes of this section, to the extent to which SI relief attributable to any shares has already been withdrawn or reduced on its account.
(8) In this section and sections 257QK to 257QP—
(a) “repayment” means a repayment, redemption, repurchase or payment mentioned in subsection (1)(a) or (b), and
(b) references to a subsidiary of the social enterprise are references to a company which at any time in the longer applicable period is a 51% subsidiary of the social enterprise (whether or not it is such a subsidiary at the time of the repayment).

257QK Insignificant payments ignored for the purposes of section 257QJ
(1) A repayment is ignored for the purposes of section 257QJ if both—
(a) the market value of the shares to which it relates (“the target shares”) immediately before the event occurs, and
(b) the amount received by the member in question,
are insignificant in relation to the market value of the remaining issued share capital of the social enterprise, or (as the case may be) the subsidiary, immediately after the event occurs.
This is subject to subsection (3).
(2) For the purposes of subsection (1) it is to be assumed that the target shares are cancelled at the time the repayment is made.
(3) Subsection (1) does not apply if repayment arrangements are in existence at any time in the period—
(a) beginning 12 months before the investment date, and
(b) ending at the end of the investment date.
(4) For this purpose “repayment arrangements” means arrangements which provide—
(a) for a repayment by the social enterprise or any subsidiary of the social enterprise (whether or not it is such a subsidiary at the time the arrangements are made), or
(b) for anyone to be entitled to such a repayment,
at any time in the longer applicable period.

257QL Amount of repayments etc if there is more than one issue of shares
(1) This section applies if, in relation to the same repayment, section 257QJ(2) applies to SI relief attributable to two or more issues of shares.
(2) Section 257QJ(3) has effect in relation to the shares included in each of those issues as if the amount referred to as A were reduced by multiplying it by the fraction—
I T
where—
I is the amount on which SI relief was obtained by individuals in respect of shares which are included in the issue and to which SI relief is or, but for section 257QJ(2)(b), would be attributable, and
T is the total of that amount and the corresponding amount or amounts in respect of the other issue or issues.

257QM Single issue affecting more than one individual
(1) This section applies if, in relation to the same repayment, section 257QJ(2) applies to SI relief attributable to shares held by two or more individuals.
(2) Section 257QJ(3) has effect in relation to each individual as if the amount referred to as A were reduced by multiplying it by the fraction—
I T
where—
I is the amount on which the individual obtains SI relief in respect of the shares to which SI relief is or, but for section 257QJ(2)(b), would be attributable, and
T is the total of that amount and the corresponding amount or amounts on which the other individual or individuals obtain SI relief in respect of such shares.

257QN Single issue treated as made partly in previous tax year
(1) This section applies if—
(a) section 257QJ(2) applies to SI relief attributable to shares held by an individual, and
(b) part of the issue of shares has been treated as issued to the individual in a previous tax year for the purposes of section 257JA(1) and (2).
(2) This subsection explains how the calculation under section 257QJ(3) is to be made.
Step 1 Apportion the amount referred to as A between the tax year in which the shares were issued and the previous tax year by multiplying that amount by the fraction—
I T
where—
I is the amount on which the individual obtains SI relief in respect of the shares treated as issued in the tax year in question, and
T is the total of that amount and the corresponding amount in respect of the shares treated as issued in the other tax year.
Step 2 In relation to each of the amounts (“A1” and “A2”) so apportioned to the two tax years, calculate the amounts (“X1” and “X2”) that would be given by the formula if there were separate issues of shares in those tax years. In calculating amounts X1 and X2, apply section 257QO if appropriate but do not apply section 257QL or 257QM.
Step 3 Add amounts X1 and X2 together. The result is the required amount.

257QO Maximum relief not obtained for share issue
(1) This section applies if section 257QJ(2) applies to SI relief attributable to shares held by the investor and—
(a) the amount of the reduction (“D”) in the investor's liability to income tax for any tax year in respect of the shares, is less than
(b) the amount given by—
I × R
where—
I is the amount on which the investor claims SI relief in respect of the investment, and
R is the SI rate for the tax year for which the SI relief was given.
(2) Section 257QJ(3) has effect as if the amount referred to as A were reduced by multiplying it by the fraction—
D I × R
(3) If the amount of SI relief attributable to any of the shares has been reduced before the SI relief was obtained, the amount referred to in subsections (1) and (2) as D is to be treated for the purposes of those subsections as the amount it would have been without that reduction.
(4) Subsection (3) does not apply to a reduction of SI relief by virtue of section 257N(5) (attribution of SI relief where there is a corresponding issue of bonus shares).

257QP Repayment of authorised minimum within 12 months
(1) This section applies if—
(a) a company issues share capital (“the original shares”) of nominal value equal to the authorised minimum (within the meaning of the Companies Act 2006) for the purposes of complying with section 761 of that Act (public company: requirement as to minimum share capital), and
(b) the registrar of companies issues the company with a certificate under that section.
(2) Section 257QJ(2) does not apply in relation to any redemption of the original shares within 12 months of the date on which they were issued.

Miscellaneous

257QQ Acquisition of a trade or trading assets
(1) Any SI relief attributable to the investment is withdrawn if—
(a) at any time in the longer applicable period, the social enterprise or any qualifying subsidiary—
(i) begins to carry on as its trade, or as part of its trade, a trade which was previously carried on at any time in that period otherwise than by the social enterprise or any qualifying subsidiary, or
(ii) acquires the whole, or the greater part, of the assets used for the purposes of a trade previously so carried on, and
(b) the investor is a person, or one of a group of persons, to whom subsection (2) or (3) applies.
(2) This subsection applies to any person or group of persons—
(a) to whom an interest amounting in total to more than a half share in the trade (as previously carried on) belonged at any time in the longer applicable period, and
(b) who is or are a person or group of persons to whom such an interest in the trade carried on by the social enterprise belongs or has, at any such time, belonged.
(3) This subsection applies to any person or group of persons who—
(a) control or, at any time in the longer applicable period, have controlled the social enterprise, and
(b) is or are a person or group of persons who, at any such time, controlled another company which previously carried on the trade.
(4) For the purposes of subsection (2)—
(a) for the purpose of determining the person to whom a trade belongs and, if a trade belongs to two or more persons, their respective shares in that trade—
(i) apply section 941(6) of CTA 2010, and
(ii) an interest in a trade belonging to a company may be treated in accordance with any of the options set out in section 942 of that Act, and
(b) any interest, rights or powers of a person who is an associate of another person are treated as those of that other person.
(5) If the investor—
(a) is a director of, or of a company which is a partner of, the social enterprise or any qualifying subsidiary, and
(b) is in receipt of, or entitled to receive, remuneration as such a director falling within section 257LF(5)(g) (reasonable remuneration for services),
then, in determining whether any SI relief attributable to the investment is to be withdrawn, the reference in subsection (3)(b), and (so far as relating to that provision) the reference in subsection (1)(a)(i), to any time in the longer applicable period are to be read as references to any time before the end of the longer applicable period.
(6) Section 257LF(8) (director also an employee) applies for the purposes of subsection (5) as it applies for the purposes of section 257LF, and in subsection (5) “remuneration” includes any benefit or facility.
(7) In this section “trade” includes any business or profession, and references to a trade previously carried on include references to part of such a trade.

257QR Acquisition of share capital
(1) Any SI relief attributable to the investment is withdrawn if—
(a) the social enterprise comes to acquire all of the issued share capital of another company at any time in the longer applicable period, and
(b) the investor is a person, or one of a group of persons, to whom subsection (2) applies.
(2) This subsection applies to any person or group of persons who—
(a) control or have, at any time in the longer applicable period, controlled the social enterprise, and
(b) is or are a person or group of persons who, at any such time, controlled the other company.
(3) If the investor—
(a) is a director of, or of a company which is a partner of, the social enterprise or any qualifying subsidiary, and
(b) is in receipt of, or entitled to receive, remuneration as such a director falling within section 257LF(5)(g) (reasonable remuneration for services),
then, in determining whether any SI relief attributable to the investment is to be withdrawn, the reference in subsection (2)(b) to any time in the longer applicable period is to be read as a reference to any time before the end of the longer applicable period.
(4) Section 257LF(8) (director also an employee) applies for the purposes of subsection (3) as it applies for the purposes of section 257LF, and in subsection (3) “remuneration” includes any benefit or facility.

257QS Relief subsequently found not to have been due
(1) Any SI relief obtained by the investor which is subsequently found not to have been due must be withdrawn.
(2) SI relief obtained by the investor in respect of the investment may not be withdrawn on the ground that the requirements of Chapter 4 are not met unless the requirements of subsection (3) are met.
(3) The requirements of this subsection are met if either—
(a) the social enterprise has given notice under section 257SF in relation to the investment (information to be provided by the social enterprise etc), or
(b) an officer of Revenue and Customs has given notice to the social enterprise stating the officer's opinion that, because of the ground in question, the whole or any part of the SI relief attributable to the investment (whether alone or with other SI relief) was not due.

Disposals

257R Disposal of whole or part of the investment
(1) This section applies if—
(a) the investor disposes of the whole or part of the investment,
(b) the disposal takes place before the shorter applicable period ends,
(c) SI relief is attributable to the shares, or qualifying debt investments, disposed of,
(d) the disposal is not to an individual who—
(i) is the spouse, or civil partner, of the investor, and
(ii) is living together with the investor at the time of the disposal, and
(e) the disposal does not occur as a result of the investor's death.
(2) If the disposal is not made by way of a bargain at arm's length, the SI relief attributable to those shares, or qualifying debt investments, must be withdrawn.
(3) If the disposal is made by way of a bargain at arm's length, the SI relief attributable to those shares or qualifying debt investments must—
(a) if it is greater than the amount given by the formula set out in subsection (4), be reduced by that amount, and
(b) in any other case, be withdrawn.
(4) The formula is—
C × R
where—
C is the amount or value of the consideration received by the investor for the shares or qualifying debt investments, and
R is the SI rate for the tax year for which the SI relief was given.

257RA Cases where maximum relief not obtained
(1) Subsection (2) applies if the investor's liability to income tax for any tax year is reduced under this Part in respect of the investment and—
(a) the amount of the reduction (“D”), is less than
(b) the amount given by—
A × R
where—
A is the amount on which the investor claims SI relief in respect of the investment, and
R is the SI rate for that tax year.
(2) Section 257R(3) and (4) have effect as if the amount or value referred to as C were reduced by multiplying it by the fraction—
D A × R
(3) If section 257JA(1) and (2) apply in the case of the investment as if part of it had been made in a previous tax year, subsections (1) and (2) of this section have effect as if that part and the remainder had been invested by separate investments (and that part had been invested by an investment made on a day in the previous tax year).
(4) If the amount of SI relief attributable to the investment or any part of it has been reduced before SI relief was obtained, the amount referred to in subsections (1) and (2) as D is to be treated for the purposes of those subsections as the amount that it would have been without that reduction.
(5) Subsection (4) does not apply to a reduction of SI relief by virtue of section 257N(5) (attribution of SI relief if there is a corresponding issue of bonus shares).

257RB Call options
(1) This section applies if the investor grants an option which, if exercised, would bind the investor to sell the whole or part of investment.
(2) The grant of the option is treated for the purposes of section 257R as a disposal—
(a) of the investment, or
(b) (as the case may be) of the part of the investment to which the option relates.
(3) Nothing in this section prejudices section 257LB (no pre-arranged exits).

257RC Put options
(1) This section applies if, at any time in the longer applicable period, a person grants the investor an option which, if exercised, would bind the grantor to purchase the whole or part of the investment.
(2) Any SI relief—
(a) attributable to the investment, or
(b) (as the case may be) attributable to the part of the investment to which the option relates,
must be withdrawn.
(3) For the purposes of subsection (2)(b), the part of the investment to which an option relates is the part which, if—
(a) the option were exercised immediately after the grant, and
(b) any investments made in the social enterprise by the investor after the grant were disposed of immediately after being made,
would be treated for the purposes of section 257R as disposed of in pursuance of the option.

CHAPTER 8 Withdrawal or reduction of SI relief: procedure

Assessments and appeals

257S Assessments for the withdrawal or reduction of SI relief
If any SI relief which has been obtained falls to be withdrawn or reduced under Chapter 7, it must be withdrawn or reduced by the making of an assessment to income tax for the tax year for which the relief was obtained.

257SA Appeals against section 257QS(3)(b) notices
For the purposes of the provisions of TMA 1970 relating to appeals, the giving of notice by an officer of Revenue and Customs under section 257QS(3)(b) is taken to be a decision disallowing a claim by the social enterprise.

257SB Time limits for assessments
(1) An officer of Revenue and Customs may—
(a) make an assessment for withdrawing or reducing the SI relief attributable to whole or any part of the investment, or
(b) give a notice under section 257QS(3)(b),
at any time not more than 6 years after the end of the relevant tax year.
(2) In subsection (1) “the relevant tax year” means—
(a) the tax year containing the end of the 28 months beginning with the investment date, or
(b) if later, the tax year in which occurs the event which causes the SI relief to be withdrawn or reduced.
(3) Subsection (1) is without prejudice to section 36(1A) of TMA 1970 (loss of tax brought about deliberately etc).

257SC Cases where assessment not to be made
(1) No assessment for withdrawing or reducing SI relief in respect of the investment may be made because of an event occurring after the investor's death.
(2) Subsection (3) applies if the investor has, by a disposal or disposals to which section 257R(3) applies, disposed of all investments which—
(a) have been made by the investor in the social enterprise, and
(b) are investments—
(i) to which SI relief is attributable, or
(ii) have not been held by the investor until the end of the third anniversary of the date on which they were made.
(3) No assessment for withdrawing or reducing SI relief in respect of those investments may be made because of any subsequent event unless the event occurs at a time when the requirements of sections 257LF, 257LG and 257LH are not met in relation to the investor by reference to any of those investments.

Interest

257SD Date from which interest is chargeable
(1) In its application to an assessment made by virtue of section 257S in the case of relief withdrawn or reduced by virtue of a provision listed in subsection (2), section 86 of TMA 1970 (interest on overdue income tax) has effect as if the relevant date were 31 January next following the tax year for which the assessment is made.
(2) The provisions are—
section 257LD,
any of sections 257LF to 257LH,
any of sections 257M to 257MJ,
section 257MN,
section 257Q,
section 257QJ,
section 257QQ,
section 257QR
section 257R, and
section 257RC.

Information

257SE Information to be provided by the investor
(1) This section applies if the investor has obtained SI relief in respect of the investment, and an event occurs as a result of which—
(a) the SI relief falls to be withdrawn or reduced by virtue of any of sections 257LD, 257LF, 257LG and 257LH,
(b) the SI relief falls to be withdrawn or reduced under section 257Q (receipt of value), or would fall to be so withdrawn or reduced but for section 257QH (receipt of replacement value), or
(c) the SI relief falls to be withdrawn or reduced under any of sections 257R, 257RB and 257RC (disposals and options).
(2) The investor must within 60 days of coming to know of the event give a notice to an officer of Revenue and Customs containing particulars of the event.
(3) If the investor—
(a) is required under this section to give notice of a receipt of value which is within section 257Q, or would be within that section but for section 257QH, and
(b) has knowledge of any replacement value received (or expected to be received) because of a qualifying receipt,
the notice must include particulars of that receipt (or expected receipt).
(4) In subsection (3) “qualifying receipt” and “replacement value” are to be read in accordance with section 257QH.

257SF Information to be provided by the social enterprise etc
(1) This section applies if the social enterprise has provided an officer of Revenue and Customs with a compliance statement in respect of the investment and an event occurs as a result of which—
(a) any of the requirements in sections 257M, 257MC to 257MK, 257MM(1) and 257MN is not met in respect of the investment, or
(b) any of sections 257Q, 257QJ, 257QQ and 257QR has effect to cause any SI relief attributable to the investment to be withdrawn or reduced, or—
(i) would have such an effect if SI relief had been obtained in respect of the investment, or
(ii) in the case of section 257Q, would have such an effect but for section 257QH (receipt of replacement value).
(2) If this section applies—
(a) the social enterprise, and
(b) any person connected with the social enterprise who has knowledge of the matters mentioned in subsection (1),
must give a notice to an officer of Revenue and Customs containing particulars of the event.
(3) Any notice required to be given by the social enterprise under subsection (2)(a) must be given—
(a) within 60 days of the event, or
(b) if the event is a receipt of value within section 257QE(2) from a person connected with the social enterprise (see section 257QG), within 60 days of the social enterprise coming to know of the event.
(4) Any notice required to be given by a person under subsection (2)(b) must be given within 60 days of the person coming to know of the event.
(5) If a person—
(a) is required under this section to give notice of a receipt of value which is within section 257Q, or would be within that section but for section 257QH, and
(b) has knowledge of any replacement value received (or expected to be received) because of a qualifying receipt,
the notice must include particulars of that receipt of replacement value (or expected receipt).
(6) In subsection (5) “qualifying receipt” and “replacement value” are to be read in accordance with section 257QH.
(7) If the event mentioned in subsection (1) is one whose occurrence results in the requirement in section 257M not being met in respect of the investment, the references in subsections (2) and (3) to the social enterprise are to—
(a) the body concerned even though it has ceased to be a social enterprise, or
(b) the body into which the social enterprise has been converted.

257SG Power to require information in section 257SE or 257SF cases
(1) This section applies if an officer of Revenue and Customs has reason to believe that a person—
(a) has not given a notice which the person is required to give under section 257SE or 257SF in respect of any event,
(b) has given or received value within the meaning of section 257QE(2) or (6) which, but for the fact that the amount given or received was an insignificant receipt, would have triggered a requirement to give such a notice, or
(c) has made or received any repayment within the meaning given by section 257QJ(8) which, but for the fact that it falls to be ignored for the purposes of section 257QJ by virtue of section 257QK(1), would have triggered a requirement to give a notice under section 257SF.
(2) The officer may by notice require the person concerned to supply the officer, within such time as the officer may specify in the notice, with such information relating to the event as the officer may reasonably require for the purposes of this Part.
(3) The period specified in a notice under subsection (2) must be at least 60 days.
(4) In subsection (1)(b) the reference to an insignificant receipt is to be read in accordance with section 257QA(1).

257SH Power to require information in other cases
(1) Subsection (2) applies if SI relief is claimed in respect of the investment, and an officer of Revenue and Customs has reason to believe that it may not be due because of any such arrangements as are mentioned in section 257LB(1), 257LC, 257LE, 257LH, 257ME(3), 257MK(2) or (4), 257MM(5) or (6), 257MN(5), 257MU or 257MV(1), (5), (6) or (7).
(2) The officer may by notice require any person concerned to supply the officer within such time as may be specified in the notice with—
(a) a declaration in writing stating whether or not, according to the information which that person has or can reasonably obtain, any such arrangements exist or have existed, and
(b) such other information as the officer may reasonably require for the purposes of the provision in question and as that person has or can reasonably obtain.
(3) The period specified in a notice under subsection (2) must be at least 60 days.
(4) For the purposes of subsection (2), in the case of a provision listed in column 1 of the following table, the person concerned is given by the corresponding entry in column 2 of the table.
Provision	The person concerned
Section 257LB(1) or 257LC	The investor, the social enterprise and any person connected with the social enterprise
Section 257LE or 257MK(2) or (4)	The investor, the social enterprise and any person controlling the social enterprise
Section 257LH	The investor
Section 257ME(3), 257MU(1) or 257MV(1)	The social enterprise and any person controlling the social enterprise
Section 257MM(5) or (6), 257MN(5), 257MU(2), (3) or (4) or 257MV(5), (6) or (7)	The investor, the social enterprise, any other company in question, and any person controlling the social enterprise or any other company in question
References in the table to the investor include references to any person to whom the investor appears to have made such a transfer as is mentioned in section 257T (spouses or civil partners) of the whole or part of the investment.
(5) If SI relief has been obtained in respect of the investment—
(a) any person who receives from the social enterprise any payment or asset which may constitute value received (by the person or another) for the purposes of section 257Q, and
(b) any person on whose behalf such a payment or asset is received,
must, if so required by an officer of Revenue and Customs, state whether the payment or asset so received is received on behalf of any other person and, if so, the name and address of that other person.
(6) If SI relief has been claimed in respect of the investment—
(a) any person who holds or has held investments in the social enterprise, and
(b) any person on whose behalf any such investments are or were held,
must, if so required by an officer of Revenue and Customs, state whether the investments so held are or were held on behalf of any other person and, if so, the name and address of that other person.

257SI Confidentiality
(1) Section 18(1) of the Commissioners for Revenue and Customs Act 2005 does not prevent an officer of Revenue and Customs from disclosing to the social enterprise that SI relief has been obtained or claimed in respect of a particular number or proportion of any investments in it.
(2) Section 18(1) of the Commissioners for Revenue and Customs Act 2005 does not prevent—
(a) disclosure to the Regulator of Community Interest Companies for the purposes of the Regulator's functions,
(b) disclosure to a Minister of the Crown for the purposes of functions of a Minister of the Crown under sections 257JD to 257JG, or
(c) disclosure to a person for the purposes of functions delegated to the person under section 257JH(1).
(3) Information disclosed in reliance on subsection (2) may not be further disclosed except—
(a) with the consent of the Commissioners for Her Majesty's Revenue and Customs, or
(b) if the disclosure is required by an enactment.
(4) Information originally disclosed in reliance on subsection (2)(a) may be disclosed in reliance on subsection (3)(a) only for the purposes of the Regulator's functions.
(5) Information originally disclosed in reliance on subsection (2)(b) or (c) may be disclosed in reliance on subsection (3)(a) only for the purposes of—
(a) functions of a Minister of the Crown under sections 257JD to 257JG, or
(b) functions delegated to a person under section 257JH(1).
(6) If, in contravention of subsections (3) to (5), any revenue and customs information relating to a person is disclosed and the identity of the person—
(a) is specified in the disclosure, or
(b) can be deduced from it,
section 19 of the Commissioners for Revenue and Customs Act 2005 (offence of wrongful disclosure) applies as it applies in relation to a disclosure of such information in contravention of section 20(9) of that Act.
(7) In subsection (6) “revenue and customs information relating to a person” has the meaning given by section 19(2) of that Act.
(8) Subject to subsections (3) and (5), no obligation as to confidentiality or other restriction on disclosure, whether imposed by an enactment or otherwise, prevents disclosure of relevant information—
(a) to a Minister of the Crown for the purposes of functions of a Minister of the Crown under sections 257JD to 257JG,
(b) to a person for the purposes of functions delegated to the person under section 257JH(1), or
(c) to an officer of Revenue and Customs for the purpose of assisting Her Majesty's Revenue and Customs to discharge their functions under the Income Tax Acts so far as relating to matters arising under this Part.
(9) In subsection (8) “relevant information” means information obtained—
(a) by a Minister of the Crown, or
(b) by a person to whom functions have been delegated under section 257JH(1),
in the course of discharging functions under sections 257JD to 257JG.
(10) In this section “Minister of the Crown” has the meaning given by section 8(1) of the Ministers of the Crown Act 1975.

CHAPTER 9 Miscellaneous and supplementary provisions

257T Transfers between spouses or civil partners
(1) This section applies if—
(a) the investor transfers the whole or part of the investment to another individual (“B”) during their lives,
(b) the investor was married to, or was the civil partner of, B at the time of the transfer, and
(c) section 257R does not apply to the transfer.
(2) This Part (including subsection (1)) has effect, in relation to any subsequent disposal or other event, as if—
(a) B were the investor as respects the transferred stake,
(b) B's liability to income tax had been reduced in respect of the transferred stake for the same tax year as that for which the investor's was so reduced,
(c) the amount by which B's liability to income tax had been reduced in respect of the transferred stake were the same as that by which the investor's liability had been so reduced, and
(d) the same amount of SI relief had continued to be attributable to the transferred stake despite the transfer.
(3) If the amount of SI relief attributable to the transferred stake had been reduced before the relief was obtained by the investor—
(a) this Part has effect, in relation to any subsequent disposal or other event, as if the amount of SI relief attributable to the transferred stake had been correspondingly reduced before the relief was obtained by B, and
(b) section 257QD(2), 257QO(3) and 257RA(4) apply in relation to B as they would have applied in relation to the investor.
(4) If, because of any such disposal or other event, an assessment for reducing or withdrawing SI relief is to be made, the assessment is to be made on B.

257TA Identification of investments on a disposal
(1) The rules in subsections (2) and (3) are for determining which investments of any class are treated as disposed of for the purposes of—
(a) section 257R (disposal of the investment), or
(b) section 257T (spouses or civil partners),
if the investor disposes of some but not all of the investments of that class which the investor holds in the social enterprise.
(2) Investments made on an earlier day are treated as disposed of before investments made on a later day.
(3) Investments made on the same day are treated as disposed of in the following order—
(a) first, any to which neither SI relief nor hold-over relief is attributable,
(b) next, any to which hold-over relief, but not SI relief, is attributable,
(c) next, any to which SI relief, but not hold-over relief, is attributable, and
(d) finally, any to which both SI relief and hold-over relief are attributable.
(4) Any investments within paragraph (c) or (d) of subsection (3) which are treated by section 257N(7) as issued on an earlier day are treated as disposed of before any other investments falling within that paragraph of subsection (3).
(5) The following—
(a) any investments to which SI relief is attributable and which were transferred to an individual as mentioned in section 257T, and
(b) any investments to which hold-over relief, but not SI relief, is attributable and which were acquired by an individual on a disposal to which section 58 of TCGA 1992 applies,
are treated for the purposes of subsections (2) and (3) as acquired by the individual on the day on which they were made.
(6) In a case to which section 127 of TCGA 1992 applies (including the case where that section applies by virtue of an enactment relating to chargeable gains), shares included in the new holding are treated for the purposes of subsections (2) and (3) as acquired when the original shares were acquired.
(7) In this section—
“hold-over relief” means relief under Schedule 8B to TCGA 1992;
“new holding” and “original shares” have the same meaning as in section 127 of TCGA 1992 (or, as the case may be, that section as applied by the enactment concerned).

257TB Meaning of a company being “in administration” or “in receivership”
(1) References in this Part to a company being “in administration” or “in receivership” are to be read as follows.
(2) A company is “in administration” if—
(a) it is in administration within the meaning of Schedule B1 to the Insolvency Act 1986 or Schedule B1 to the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)), or
(b) there is in force in relation to it under the law of a country or territory outside the United Kingdom any appointment corresponding to an appointment of an administrator under either of those Schedules.
(3) A company is “in receivership” if there is in force in relation to it—
(a) an order for the appointment of an administrative receiver, a receiver and manager or a receiver under Chapter 1 or 2 of Part 3 of the Insolvency Act 1986 or Part 4 of the Insolvency (Northern Ireland) Order 1989, or
(b) any corresponding order under the law of a country or territory outside the United Kingdom.

257TC Meaning of “associate”
(1) In this Part “associate”, in relation to a person, means—
(a) any relative or partner of the person,
(b) the trustee or trustees of any settlement in relation to which the person, or any relative of the person (living or dead), is or was a settlor, and
(c) if the person has an interest in any shares or obligations of a company which are subject to any trust or are part of the estate of a deceased person—
(i) the trustee or trustees of the settlement concerned or, as the case may be, the personal representatives of the deceased, and
(ii) if the person is a company, any other company which has an interest in those shares or obligations.
(2) In this section “relative” means spouse, civil partner, ancestor or lineal descendant.

257TD Meaning of “control”
(1) In this Part “control” is to be read in accordance with sections 450 and 451 of CTA 2010 but as if “company” in those sections included a charity that is a trust.
(2) For the purposes of this Part, a charity that is a trust has “control” of another person if, as a result of the operation of subsection (1), the trustees (in their capacity as trustees of the trust) have, or any of them has, control of the person.
(3) A person has “control” of a charity that is a trust if—
(a) the person is a trustee of the charity and some or all of the powers of the trustees of the charity could be exercised by—
(i) the person acting alone, or
(ii) by the person acting together with any other persons who are trustees of the charity and who are connected with the person,
(b) the person, alone or together with other persons, has power to appoint or remove a trustee of the charity, or
(c) the person, alone or together with other persons, has any power of approval or direction in relation to the carrying-out by the trustees of any of their functions.
(4) Subsection (3) is in addition to, and does not limit, subsection (1); and both of those subsections are subject to subsection (5).
(5) For the purposes of this Part, a regulator is to be treated as not having control of any company regulated by the regulator.
(6) Section 995 of this Act (control) does not apply for the purposes of this Part.

257TE Minor definitions etc
(1) In this Part—
“arrangements” (except as used, in sections 257LB and 257QK, in the expressions “issuing arrangements” and “repayment arrangements”) includes any scheme, arrangement or understanding of any kind, whether or not legally enforceable, involving a single transaction or two or more transactions,
“bonus shares” means shares which are issued otherwise than for payment (whether in cash or otherwise),
“compliance statement” has the meaning given by section 257PB,
“director”—
(a) is read in accordance with section 452 of CTA 2010 but as if “company” in that section included a charity that is a trust, and
(b) in relation to a charity that is a trust (but subject to section 257LF(9)), includes (in particular) each trustee of the trust,
“disposal”, in relation to any shares or other investments, includes disposal of an interest or right in or over them,
“group” means a parent company and its qualifying subsidiaries,
“group company”, in relation to a group, means the parent company or any of its qualifying subsidiaries,
“ordinary shares” means shares forming part of a company's ordinary share capital,
“parent company” means a company that has one or more qualifying subsidiaries,
“qualifying subsidiary” has the meaning given by section 257MU, and
“single company” means a company that does not have any qualifying subsidiaries.
(2) For the purposes of this Part, the market value at any time of any asset is the price which it might reasonably be expected to fetch on a sale at that time in the open market free from any interest or right which exists by way of security in or over it.”

PART 2 Consequential amendments
2 (1) Section 98 of TMA 1970 (penalties) is amended as follows.
(2) In column 1 of the Table, after the entry for sections 257GG and 257GH(1) and (2) of ITA 2007, insert—

“sections 257SG and 257SH(1) and (2) of ITA 2007;	”

(3) In column 2 of the Table, after the entry for sections 257GE and 257GF of ITA 2007, insert—

	“sections 257SE and 257SF of ITA 2007;”

3 ITA 2007 is amended as follows.
4 In section 2 (overview of Act) after subsection (5A) insert—

“(5B) Part 5B is about relief for social investments.”

5 In section 24A(7)(d) (share loss relief on the disposal of certain investments not subject to the limit on deductions imposed by section 24A) after sub-paragraph (ii) insert

“, or
(iii) where SI relief is attributable to the shares in question as determined in accordance with Part 5B (income tax relief for social investments).”

6 In section 26(1)(a) (provisions giving rise to deductions at Step 6 of the calculation in section 23) after the entry for Chapter 1 of Part 5A of ITA 2007 insert— “ Chapter 1 of Part 5B (relief for social investments), ”.
7 In section 27(5) (order in which certain tax reductions are to be made) after the entry for Chapter 1 of Part 5A of ITA 2007 insert— “ Chapter 1 of Part 5B (relief for social investments), ”.
8 In section 29(4B) (limit on certain tax reductions) after the entry for Chapter 1 of Part 5 of ITA 2007 insert— “ Chapter 1 of Part 5B (relief for social investments), ”.
9 In section 32 (liabilities to income tax not dealt with in the calculation under Chapter 3 of Part 2) after the entry for section 257G of ITA 2007 insert— “ under section 257S (withdrawal or reduction of relief for social investments), ”.
10 In section 392 (loan to buy interest in close company) after subsection (3) insert—

“(3A) Subsection (2) does not apply if at any time the individual by whom the shares are acquired or the money is lent, or that individual's spouse or civil partner, makes—
(a) a claim under Part 5B of this Act for relief in respect of the amount invested in acquiring the shares or (as the case may be) in return for the debentures in respect of the money lent, or
(b) a claim in respect of the amount under Schedule 8B to TCGA 1992 (hold-over relief for gains re-invested in social enterprises).
(3B) For the purposes of subsection (3A)(a) “debenture” includes any instrument creating or acknowledging indebtedness.”

11 In section 416 (gift aid: meaning of “qualifying donation”) after subsection (6) insert—

“(6A) Condition EA is that the payment is not by way of, and does not amount in substance to, waiver by the individual of entitlement to sums (whether of principal or return) due to the individual from the charity in respect of an amount—
(a) advanced to the charity, and
(b) in respect of which a person, whether or not the individual, has obtained relief under Part 5B (relief for social investments).”

12 In section 1014(5)(b) (orders and regulations not subject to negative procedure) after sub-paragraph (iii) insert—

“(iiia) section 257MB (amendment of Part 5B: amounts that may be raised from social investments; and State aid),”

.
13 In section 1022 (meaning of “debenture”) after subsection (1) insert—

“(1A) For the meaning of “debenture” in sections 257KB(3) to (5), 257L(4), 257LA(2) and 392(3A)(a), see also sections 257KB(6), 257L(6), 257LA(4) and 392(3B).”

SCHEDULE 12 Investments in social enterprises: capital gains
Section 57
1 TCGA 1992 is amended as follows.
2 After section 255 insert—

“Investments in social enterprises

255A Hold-over relief for gains re-invested in social enterprises
Schedule 8B to this Act (which provides relief in respect of gains re-invested in social enterprises) has effect.

255B Gains and losses on investments in social enterprises
(1) For the purpose of determining the gain or loss on any disposal of an asset by an individual where—
(a) an amount of SI relief is attributable to the asset, and
(b) apart from this subsection there would be a loss,
treat the consideration given by the individual for the acquisition of the asset as reduced by the amount of the SI relief.
(2) If—
(a) an individual disposes of an asset,
(b) an amount of SI relief is attributable to the asset,
(c) the disposal takes place after the end of the 3 years beginning with the day when the individual acquired the asset, and
(d) apart from this subsection, there would be a gain on the disposal,
the gain is not a chargeable gain, subject to section 255C.
(3) Despite section 16(2), subsection (2) above does not apply to a disposal on which a loss accrues.
(4) Any question as to—
(a) which of any assets acquired by an individual at different times a disposal relates to, being assets to which SI relief is attributable, or
(b) whether a disposal relates to assets to which SI relief is attributable or to other assets,
is to be determined for the purposes of capital gains tax as provided by section 257TA of ITA 2007.
(5) Chapter 1 of this Part has effect subject to subsection (4).
(6) Sections 104, 105 and 106A do not apply to assets to which SI relief is attributable.
(7) There are to be made all such adjustments of capital gains tax, whether by way of assessment or by way of discharge or repayment of tax, as may be required in consequence of SI relief being given or withdrawn.
(8) In this section and sections 255C to 255E “SI relief” means relief under Part 5B of ITA 2007 (income tax relief for investments in social enterprises).
(9) That Part applies for the purposes of this section and sections 255C to 255E to determine whether SI relief is attributable to any asset and, if so, the amount of SI relief so attributable.

255C Application of section 255B(2) where maximum SI relief not obtained
(1) Subsection (2) applies if—
(a) an individual's liability to income tax has been reduced (or treated by virtue of section 257T of ITA 2007 (spouses or civil partners) as reduced) for any tax year under section 257JA of ITA 2007 (SI relief) in respect of the acquisition of an asset,
(b) the amount of the reduction (“D”) is less than the amount given by—
I × R
where—
I is the amount on which the individual has SI relief in the case of the asset, and
R is the SI rate for the tax year for which the SI relief was obtained, and
(c) D is not within paragraph (b) solely by virtue of section 29(2) and (3) of ITA 2007.
(2) If the individual disposes of the asset and there is a gain on the disposal, section 255B(2) has effect in relation to the gain as if it were reduced by multiplying it by—
D I × R
(3) In this section “SI rate” has the meaning given by section 257JA(5) of ITA 2007.

255D Application of section 255B(2) where SI relief has been reduced
(1) Subsection (2) applies if before a disposal of an asset—
(a) value is received in circumstances where SI relief attributable to the asset is reduced by an amount under section 257Q(1)(a) of ITA 2007, or
(b) there is a repayment, redemption, repurchase or payment in circumstances where SI relief attributable to the asset is reduced by an amount under section 257QJ(2)(a) of ITA 2007, or
(c) paragraphs (a) and (b) both apply.
(2) If section 255B(2) applies on the disposal but section 255C does not, section 255B(2) applies only to so much of the gain as remains after deducting so much of it as is found by multiplying it by the fraction—
A B
where—
A is equal to the amount by which the SI relief given in respect of the asset is reduced as mentioned in subsection (1) above, and
B is equal to the amount of the SI relief given in respect of the asset.
(3) If sections 255B(2) and 255C apply on the disposal, section 255B(2) applies only to so much of the gain as is found by—
(a) taking the part of the gain found under section 255C, and
(b) deducting from that part so much of it as is found by multiplying it by the fraction mentioned in subsection (2).
(4) If the SI relief given in respect of the asset is reduced as mentioned in subsection (1) by more than one amount, the amount referred to as A in subsection (2) is to be taken to be equal to the aggregate of those amounts.
(5) The amount referred to in subsection (2) as B is to be found without regard to any reduction mentioned in subsection (1).

255E Reorganisations involving shares to which SI relief is attributable
(1) Subsection (2) applies if an individual holds shares which form part of the ordinary share capital of a company and include shares of more than one of the following kinds—
(a) shares to which SI relief is attributable and to which subsection (3) applies,
(b) shares to which SI relief is attributable and to which subsection (3) does not apply, and
(c) shares to which SI relief is not attributable and to which subsection (3) does not apply.
(2) If there is a reorganisation within the meaning of section 126 affecting the shares listed in subsection (1), section 127 applies separately to those shares so that shares of each kind are treated as a separate holding of original shares and identified with a separate new holding.
(3) This subsection applies to any shares if—
(a) expenditure on the shares has been set under Schedule 8B to this Act against the whole or part of any gain, and
(b) in relation to the shares there has been no chargeable event for the purposes of that Schedule.
(4) If—
(a) an individual holds shares (“the existing holding”) which form part of the ordinary share capital of a company,
(b) there is, by virtue of any such allotment for payment as is mentioned in section 126(2)(a), a reorganisation affecting the existing holding, and
(c) immediately following the reorganisation, SI relief is attributable to the existing holding or the allotted shares,
sections 127 to 130 do not apply in relation to the existing holding.
(5) Subject to subsection (6), sections 135 and 136 do not apply in respect of shares to which SI relief is attributable.
(6) Subsection (5) does not have effect to disapply section 135 or 136 in a case where the original shares are shares to which SI relief is attributable if—
(a) the new holding consists of new ordinary shares which meet conditions A and B of section 257L of ITA 2007,
(b) the new shares are issued after the end of three years beginning with the day on which the original shares were acquired,
(c) before issuing the new shares, the company had issued shares which met conditions A and B of section 257L of ITA 2007, and
(d) the company issued a compliance certificate in relation to those earlier shares for the purposes of section 257PA(1) of ITA 2007 and in accordance with sections 257PB and 257PC of ITA 2007.
(7) In subsection (6) “new holding” is to be construed in accordance with sections 126, 127, 135 and 136.
(8) In this section—
“ordinary share capital” has the meaning given in section 989 of ITA 2007;
“ordinary shares”, in relation to a company, means shares forming part of its ordinary share capital.”

3 Before Schedule 9 insert—

“SCHEDULE 8B Hold-over relief for gains re-invested in social enterprises
Section 255A

When does the Schedule apply?
1 (1) This Schedule applies if—
(a) a chargeable gain accrues to an individual (“the investor”),
(b) the investor acquires one or more assets (“the social holding”),
(c) the investor is eligible for SI relief under Part 5B of ITA 2007 in respect of the consideration given for the social holding, and
(d) conditions A, B, C, D and E are met.
(2) Condition A is that the gain is one that accrues—
(a) on the disposal by the investor of an asset,
(b) in accordance with section 169N (but see sub-paragraph (7)), or
(c) as a result of the operation of paragraph 5 in connection with a chargeable event within paragraph 6(1)(c) or (d).
(3) Condition B is that the gain is one that accrues—
(a) on or after 6 April 2014, and
(b) before 6 April 2019 (but see sub-paragraph (8)).
(4) Condition C is that the investor is resident in the United Kingdom—
(a) when the gain accrues, and
(b) when the social holding is acquired.
(5) Condition D is that the social holding is acquired by the investor on the investor's own behalf.
(6) Condition E is that the social holding is acquired—
(a) in the 3 years beginning with the day when the gain accrues, or
(b) in the year that ends at the beginning of that day.
(7) The reference in sub-paragraph (2)(b) to a gain accruing in accordance with section 169N does not include such a gain so far as it is chargeable to capital gains tax at the rate in section 169N(3) (rate where entrepreneurs' relief is available).
(8) The Treasury may by order substitute a later date for the date for the time being specified in sub-paragraph (3)(b).
2 (1) This Schedule also applies if—
(a) a chargeable gain accrues to an individual (“the investor”),
(b) the gain accrues as a result of the operation of paragraph 5 in connection with a chargeable event within paragraph 6(1)(a), (b) or (c),
(c) the chargeable event is either—
(i) a disposal to a social enterprise of shares in or debentures of the social enterprise, or
(ii) the cancellation, extinguishment, redemption or repayment by a social enterprise of shares in or debentures of the social enterprise,
(d) as part of the chargeable event or in connection with it, and in place of the shares or debentures, the investor acquires one or more assets (“the social holding”) from the social enterprise,
(e) other than the investor's ceasing to hold the shares or debentures, no detriment is suffered in return for the acquisition of the social holding,
(f) the asset acquired, or each of the assets acquired, is a share in or debenture of the social enterprise,
(g) but for section 257LA of ITA 2007 (consideration for acquisition must be wholly in cash and fully paid) the investor would be eligible for SI relief under Part 5B of ITA 2007 in respect of the consideration given for the social holding, and
(h) conditions F, G, H and J are met.
(2) Condition F is that the gain is one that accrues—
(a) on or after 6 April 2014, and
(b) before 6 April 2019 (but see sub-paragraph (6)).
(3) Condition G is that the investor is resident in the United Kingdom—
(a) when the gain accrues, and
(b) when the social holding is acquired.
(4) Condition H is that the social holding is acquired by the investor on the investor's own behalf.
(5) Condition J is that the social holding is acquired—
(a) in the 3 years beginning with the day when the gain accrues, or
(b) in the year that ends at the beginning of that day.
(6) The Treasury may by order substitute a later date for the date for the time being specified in sub-paragraph (2)(b).
(7) In this paragraph “debenture” includes any instrument creating or acknowledging indebtedness.
(8) A reference in this paragraph to a social enterprise is a reference to a body that is a social enterprise for the purposes of Part 5B of ITA 2007 (see section 257J of that Act).

Interpretation of Schedule
3 (1) In the following provisions of this Schedule—
“the amount invested” means, in a case where this Schedule applies because of paragraph 1, the consideration mentioned in paragraph 1(1)(c),
“the investor” means the individual mentioned in paragraph 1(1)(a) or, as the case may be, paragraph 2(1)(a),
“the original gain” means the chargeable gain mentioned in paragraph 1(1)(a) or, as the case may be, paragraph 2(1)(a), and
“the social holding” means the asset or assets mentioned in paragraph 1(1)(b) or, as the case may be, paragraph 2(1)(d).
(2) In this Schedule, a “disposal within marriage or civil partnership” is a disposal to which section 58 (certain disposals between spouses or civil partners) applies.

Claim to hold gain over while invested in a social enterprise
4 (1) The investor may make a claim for the original gain to be reduced—
(a) in a case within paragraph 1, by the amount invested, or by a part of that amount specified in the claim, or
(b) in a case within paragraph 2, to the extent specified in the claim,
but, in either case, subject as follows.
(2) The reduction may not be more than the original gain or, if the original gain has already been reduced under one or more of the listed provisions, the reduction may not be more than the reduced gain.
(3) In a case within paragraph 1, the claim may not relate to any part of the amount invested that under any of the listed provisions has already been set against a chargeable gain.
(4) The “listed provisions” are—
(a) sub-paragraph (1),
(b) Schedule 5B, and
(c) paragraph 1(5) of Schedule 5BB.
(5) The total of all reductions claimed by the investor under sub-paragraph (1) in any tax year must not be more than £1,000,000.
(6) If there is relief by way of a reduction under sub-paragraph (1) then, for the purposes of this Schedule, that relief—
(a) is attributable to the asset or assets that form the social holding, but
(b) ceases to be attributable to any particular asset, or to any particular part of a particular asset, when—
(i) a chargeable event occurs in relation to that asset or part, or
(ii) the person holding the asset or part dies.

Held-over gain treated as accruing on disposal etc of the qualifying investment
5 (1) This paragraph applies if there has been a reduction under paragraph 4(1).
(2) A chargeable gain equal to the amount of the reduction is treated as accruing when a chargeable event occurs in relation to the social holding without any chargeable event having previously occurred in relation to any of the holding.
(3) When a chargeable event occurs in relation to part only of the social holding without any chargeable event having previously occurred in relation to any of that part, a chargeable gain calculated in accordance with sub-paragraph (4) is treated as accruing.
(4) The calculation is—
Step 1 Subtract from the amount of the reduction any chargeable gains previously treated as accruing as a result of the operation of sub-paragraph (3).
Step 2 Attribute a proportionate part of the amount calculated at Step 1 to each part of the social holding held, immediately before the occurrence of the chargeable event in question, by the investor or a person who has acquired any part of the holding from the investor on a disposal within marriage or civil partnership.
Step 3 The amount attributed at Step 2 to the part of the social holding in relation to which that chargeable event occurs is the chargeable gain treated as accruing as a result of the operation of subparagraph (3) on the occurrence of that event.

Chargeable events
6 (1) A chargeable event occurs in relation to an asset that forms the whole or any part of the social holding if (after the acquisition of the holding)—
(a) the investor disposes of the asset otherwise than by way of a disposal within marriage or civil partnership,
(b) the asset is disposed of, otherwise than by way of a disposal to the investor, by a person who acquired the asset on a disposal made within marriage or civil partnership,
(c) the asset is cancelled, extinguished, redeemed or repaid, or
(d) any of the conditions in Chapters 3 and 4 of Part 5B of ITA 2007 for the investor's eligibility for SI relief under that Part in respect of the amount invested fails to be met.
In this sub-paragraph “asset” includes part of an asset.
(2) In the event of the death of—
(a) the investor, or
(b) a person who, on a disposal within marriage or civil partnership, has acquired the whole or any part of the social holding,
nothing which occurs at or after the time of death is a chargeable event in relation to any part of the holding held by the deceased person immediately before the time of death.
(3) If a person makes a disposal of assets of a particular class while retaining other assets of that class—
(a) assets of that class acquired by the person on an earlier day are treated for the purposes of this Schedule as disposed of before assets of that class acquired by the person on a later day, and
(b) assets of that class acquired by the person on the same day are treated for the purposes of this Schedule as disposed of in the following order—
(i) first, any to which neither relief under this Schedule, nor SI relief under Part 5B of ITA 2007, is attributable,
(ii) next, any to which relief under this Schedule, but not SI relief under that Part, is attributable,
(iii) next, any to which SI relief under that Part, but not relief under this Schedule, is attributable, and
(iv) finally, any to which both SI relief under that Part, and relief under this Schedule, are attributable.
(4) For the purposes of sub-paragraph (3), assets—
(a) to which relief under this Schedule is attributable, and
(b) which have not been held continuously by the investor since the social holding was acquired,
are treated as having been acquired when the social holding was acquired if SI relief under Part 5B of ITA 2007 is not also attributable to them.
(5) For the purposes of sub-paragraph (3), assets—
(a) to which SI relief under Part 5B of ITA 2007 is attributable, and
(b) which were transferred to an individual as mentioned in section 257T of ITA 2007 (transfers between spouses or civil partners),
are treated as having been acquired when the social holding was acquired.
(6) Chapter 1 of Part 4 of this Act has effect subject to sub-paragraphs (3) to (5).
(7) Sections 104, 105 and 106A do not apply to assets to which relief under this Schedule is attributable if SI relief under Part 5B of ITA 2007 is not also attributable to them.
(8) Where, at the time of a chargeable event, an asset that formed the whole or any part of the social holding is treated for the purposes of this Act as represented by assets which consist of or include assets other than that asset—
(a) so much of the original gain as is attributable to the asset is treated, in determining for the purposes of this paragraph the amount of the original gain to be treated as attributable to each of those assets, as apportioned in such manner as may be just and reasonable between those assets, and
(b) as between different assets treated as representing the same asset, sub-paragraphs (3) to (5) apply with the necessary modifications in relation to those assets as they would apply in relation to the asset.
(9) In order to determine, for the purposes of sub-paragraph (8), the amount of the original gain attributable to any asset, a proportionate part of the amount of the original gain is to be attributed to each asset that forms the whole or any part of so much of the social holding as is held, immediately before the occurrence of the chargeable event in question, by the investor or a person who has acquired any part of the social holding from the investor on a disposal within marriage or civil partnership.
(10) In subsections (8) and (9) references to the original gain are to so much of the original gain as remains after deduction from it of the amount of any chargeable gain treated as accruing as a result of the previous operation of paragraph 5.

Person to whom held-over gain is treated as accruing
7 (1) This paragraph applies where a chargeable gain is treated as accruing as a result of the operation of paragraph 5.
(2) If the chargeable event is a disposal, that chargeable gain is treated as accruing to the person who makes the disposal.
(3) If the chargeable event occurs—
(a) when an asset, or part of an asset, is cancelled, extinguished, redeemed or repaid, or
(b) when a condition, for eligibility for relief in respect of the consideration given for the acquisition of an asset, fails to be met,
that chargeable gain is treated as accruing to the person who holds the asset, or part, when the chargeable event occurs.

Claims: procedure
8 (1) Sections 257P(1), 257PA(1) and 257PB to 257PD of ITA 2007—
(a) apply in relation to a claim under this Schedule in respect of the social holding as they apply in relation to a claim under Part 5B to ITA 2007 in respect of an investment, and
(b) as they so apply, have effect as if any reference to the requirements for relief under that Part were a reference to the conditions for the application of this Schedule.
(2) In section 257PE(2) of ITA 2007 (power to make consequential amendments etc when amending provision about claims for SI relief) “enactment” includes (in particular) sub-paragraph (1).”

SCHEDULE 13 General Block Exemption Regulation
Section 65
1 CAA 2001 is amended as follows.
2 (1) Section 45DB (exclusions from allowances under section 45DA) is amended as follows.
(2) In subsection (3)(a), for “a firm in difficulty for the purposes of the Community Guidelines on State Aid for Rescuing and Restructuring Firms in Difficulty (2004/C 244/02)” substitute “ an undertaking in difficulty for the purposes of the General Block Exemption Regulation ”.
(3) In subsection (4)(a), for “Council Regulation (EC) No 104/2000” substitute “ Regulation (EU) No 1379/2013 of the European Parliament and of the Council ”.
(4) In subsection (11), in the definition of “General Block Exemption Regulation”, for “(EC) No 800/2008” substitute “ (EU) No 651/2014 ”.
(5) In subsection (12), for paragraph (c) substitute—

“(c) Regulation (EU) No 1379/2013 of the European Parliament and of the Council,”

.
3 In section 45K (expenditure on plant and machinery for use in designated assisted areas), after subsection (8) insert—

“(8A) Condition C is met by virtue of subsection (8)(c) only if the amount of the expenditure exceeds the amount by which the relevant plant or machinery is depreciated in the period of 3 years ending immediately before the beginning of the chargeable period in which the expenditure is incurred.
(8B) “Relevant plant or machinery” means the plant or machinery being used at the end of the period of 3 years mentioned in subsection (8A) for the purposes of the product, process or service mentioned in subsection (8)(c).”

4 (1) Section 45M (exemptions from allowances under section 45K) is amended as follows.
(2) In subsection (1), for “(6) or (7)” substitute “ (7) or (7A) ”.
(3) In subsection (3)(a), for “a firm in difficulty for the purposes of the Community Guidelines on State Aid for Rescuing and Restructuring Firms in Difficulty (2004/C 244/02)” substitute “ an undertaking in difficulty for the purposes of the General Block Exemption Regulation ”.
(4) In subsection (4)—
(a) in paragraph (a), for “Council Regulation (EC) No 104/2000” substitute “ Regulation (EU) No 1379/2013 of the European Parliament and of the Council ”, and
(b) after paragraph (b) insert—

“(ba) in the transport sector or related infrastructure,
(bb) relating to energy generation, distribution or infrastructure,
(bc) relating to the development of broadband networks,”

.
(5) After that subsection insert—

“(4A) Expressions used in subsection (4)(b), (ba), (bb) or (bc) and in the General Block Exemption Regulation have the same meaning as in that Regulation.”

(6) Omit subsection (6).
(7) After subsection (7) insert—

“(7A) Expenditure is within this subsection if—
(a) the area by reference to which the condition in section 45K(1)(a) is met is not an area which falls within Article 107(3)(a) of the Treaty on the Functioning of the European Union,
(b) the condition in section 45K(8)(a) is not met in relation to the expenditure, and
(c) at the time the expenditure is incurred the company is not an SME for the purposes of the General Block Exemption Regulation.”

(8) In subsection (12)—
(a) in the first definition, for the words from “ “coal” to “have” substitute “has”, and
(b) in the definition of “General Block Exemption Regulation”, for “(EC) No 800/2008” substitute “ (EU) No 651/2014 ”.
(9) In subsection (15), for paragraph (c) substitute—

“(c) Regulation (EU) No 1379/2013 of the European Parliament and of the Council,”

.
5 (1) Section 45N (effect of plant or machinery subsequently being primarily for use outside designated assisted areas) is amended as follows.
(2) In subsection (1)—
(a) for “designated assisted area within the meaning of section 45K” substitute “ relevant area ”, and
(b) for “such a designated assisted” substitute “ a relevant ”.
(3) After subsection (3) insert—

“(3A) Relevant area” means—
(a) in relation to expenditure which would be within subsection (7A) of section 45M if paragraph (a) of that subsection were omitted, a designated assisted area within the meaning of section 45K which falls within Article 107(3)(a) of the Treaty on the Functioning of the European Union, and
(b) in relation to any other expenditure, a designated assisted area within the meaning of section 45K.”

6 In section 212T(6) (cap on first-year allowances: zero-emission goods vehicles), in the definition of “undertaking”, for “(EC) No 800/2008” substitute “ (EU) No 651/2014 ”.
7 In section 212U(5) (cap on first-year allowances: expenditure on plant and machinery for use in designated assisted areas), in the definition of “single investment project”, for “(EC) No 800/2008” substitute “ (EU) No 651/2014 ”.”
8 The amendments made by this Schedule have effect in relation to expenditure incurred on or after the day on which this Act is passed.

SCHEDULE 14 Extended ring fence expenditure supplement for onshore activities
Section 69
1 In Part 8 of CTA 2010 (oil activities), after Chapter 5 insert—

“CHAPTER 5A Extended ring fence expenditure supplement for onshore activities

Introduction

329A Overview of Chapter
(1) This Chapter entitles a company carrying on a ring fence trade, on making a claim in respect of an accounting period, to an additional supplement in respect of—
(a) qualifying pre-commencement onshore expenditure incurred before the date the trade is set up and commenced,
(b) losses incurred in the trade which relate to onshore oil-related activities,
(c) some or all of the supplement allowed in respect of earlier periods under Chapter 5, and
(d) the additional supplement allowed in respect of earlier periods under this Chapter.
(2) Sections 329B to 329H make provision about the application and interpretation of this Chapter.
(3) Sections 329I to 329M make provision about additional supplement in relation to expenditure incurred by the company—
(a) with a view to carrying on a ring fence trade, but
(b) in an accounting period before the company sets up and commences that trade.
(4) Sections 329N to 329T make provision about additional supplement in relation to losses incurred in carrying on the ring fence trade.
(5) There is a limit (of 4) on the number of accounting periods in respect of which a company may claim additional supplement.
(6) In determining the amount of additional supplement allowable, reductions fall to be made in respect of—
(a) disposal receipts in respect of any asset representing qualifying pre-commencement onshore expenditure,
(b) onshore ring fence losses that could be deducted under section 37 (relief for trade losses against total profits) or section 42 (ring fence trades: further extension of period for relief) from ring fence profits of earlier periods,
(c) onshore ring fence losses incurred in earlier periods that fall to be used under section 45 (carry forward of trade loss against subsequent trade profits) to reduce profits of succeeding periods, and
(d) unrelieved group ring fence profits.

Application and interpretation

329B Qualifying companies
(1) This Chapter applies in relation to any company which—
(a) carries on a ring fence trade, or
(b) is engaged in any activities with a view to carrying on a ring fence trade.
(2) In this Chapter such a company is referred to as a “qualifying company”.

329C Onshore and offshore oil-related activities
(1) This section applies for the purposes of this Chapter.
(2) “Onshore oil-related activities” has the same meaning as in Chapter 8 (supplementary charge: onshore allowance) (see section 356BA).
(3) “Offshore oil-related activities” means oil-related activities that are not onshore oil-related activities.

329D Accounting periods and straddling periods
(1) In this Chapter, in the case of a qualifying company—
“the commencement period” means the accounting period in which the company sets up and commences its ring fence trade,
“post-commencement period” means an accounting period ending on or after 5 December 2013—
(a) which is the commencement period, or
(b) which ends after the commencement period, and
“pre-commencement period” means an accounting period ending—
(a) on or after 5 December 2013, and
(b) before the commencement period.
(2) For the purposes of this Chapter, a company not within the charge to corporation tax which incurs any expenditure is to be treated as having such accounting periods as it would have if—
(a) it carried on a trade consisting of the activities in respect of which the expenditure is incurred, and
(b) it had started to carry on that trade when it started to carry on the activities in the course of which the expenditure is incurred.
(3) In this Chapter, “straddling period” means an accounting period beginning before and ending on or after 5 December 2013.

329E The relevant percentage
(1) For the purposes of this Chapter, the relevant percentage for an accounting period is 10%.
(2) The Treasury may by order vary the percentage for the time being specified in subsection (1) for such accounting periods as may be specified in the order.

329F Restrictions on accounting periods for which additional supplement may be claimed
(1) A company may claim additional supplement under this Chapter in respect of no more than 4 accounting periods.
(2) The accounting periods in respect of which claims are made need not be consecutive.
(3) The additional supplement under this Chapter—
(a) is additional to any supplement allowed under Chapter 5, but
(b) may only be claimed for accounting periods which fall after 6 accounting periods for which supplement is allowed as a result of claims by the company under Chapter 5.

329G Qualifying pre-commencement onshore expenditure
(1) For the purposes of this Chapter, expenditure is “qualifying pre-commencement onshore expenditure” if it meets Conditions A to D.
(2) Condition A is that the expenditure is incurred on or after 5 December 2013.
(3) Condition B is that the expenditure is incurred in the course of oil extraction activities which are onshore oil-related activities.
(4) Condition C is that the expenditure is incurred by a company with a view to carrying on a ring fence trade, but before the company sets up and commences that ring fence trade.
(5) Condition D is that the expenditure—
(a) is subsequently allowable as a deduction in calculating the profits of the ring fence trade for the commencement period (whether or not any part of it is so allowable for any post-commencement period), or
(b) is relevant R&D expenditure incurred by an SME.
(6) For the purposes of this section, expenditure incurred by a company is “relevant R&D expenditure incurred by an SME” if—
(a) the company makes an election under section 1045 of CTA 2009 (alternative treatment for pre-trading expenditure: deemed trading loss) in respect of that expenditure, but
(b) the company does not make a claim for an R&D tax credit under section 1054 of that Act in respect of that expenditure.
(7) In the case of any qualifying pre-commencement onshore expenditure which is relevant R&D expenditure incurred by an SME, the amount of that expenditure is treated for the purposes of this Chapter as being equal to 150% of its actual amount.
(8) In the case of any qualifying pre-commencement onshore expenditure which is relevant R&D expenditure incurred by a large company, the amount of that expenditure is treated for the purposes of this Chapter as being equal to 125% of its actual amount.
(9) In subsection (8) “relevant R&D expenditure incurred by a large company” means qualifying Chapter 5 expenditure, as defined in section 1076 of CTA 2009.

329H Unrelieved group ring fence profits
In this Chapter “unrelieved group ring fence profits” has the same meaning as in Chapter 5 (see sections 313 and 314).

Pre-commencement additional supplement

329I Additional supplement in respect of a pre-commencement accounting period
(1) If—
(a) a qualifying company incurs qualifying pre-commencement onshore expenditure in respect of a ring fence trade, and
(b) the expenditure is incurred before the commencement period,
the company may claim additional supplement under this section (“pre-commencement additional supplement”) in respect of one or more pre-commencement periods.
This is subject to section 329F(3)(b).
(2) Any pre-commencement additional supplement allowed on a claim in respect of a pre-commencement period is to be treated as expenditure—
(a) which is incurred by the company in the commencement period, and
(b) which is allowable as a deduction in calculating the profits of the ring fence trade for that period.
(3) The amount of the additional supplement for any pre-commencement period in respect of which a claim under this section is made is the relevant percentage for that period of the reference amount for that period.
(4) Sections 329J to 329M have effect for the purpose of determining the reference amount for a pre-commencement period.
(5) If a pre-commencement period is a period of less than 12 months, the amount of the additional supplement for the period (apart from this subsection) is to be reduced proportionally.
(6) Any claim for pre-commencement additional supplement in respect of a pre-commencement period must be made as a claim for the commencement period.
(7) Paragraph 74 of Schedule 18 to FA 1998 (company tax returns etc: time limit for claims for group relief) applies in relation to a claim for pre-commencement additional supplement as it applies in relation to a claim for group relief.

329J The mixed pool of qualifying pre-commencement onshore expenditure and supplement previously allowed
(1) For the purpose of determining the amount of any pre-commencement additional supplement, a qualifying company is to be taken to have had, at all times in the pre-commencement periods of the company, a continuing mixed pool of—
(a) qualifying pre-commencement onshore expenditure,
(b) pre-commencement supplement under Chapter 5, and
(c) pre-commencement additional supplement under this Chapter.
(2) The pool is to be taken to have consisted of—
(a) the company's qualifying pre-commencement onshore expenditure, allocated to the pool for each pre-commencement period in accordance with subsection (3),
(b) the company's pre-commencement supplement allowed under Chapter 5, allocated to the pool in accordance with subsections (4) to (7), and
(c) the company's pre-commencement additional supplement allowed under this Chapter, allocated to the pool in accordance with subsection (8).
(3) To allocate qualifying pre-commencement onshore expenditure to the pool for any pre-commencement period, take the following steps—
Step 1 Count as eligible expenditure for that period so much of the qualifying pre-commencement onshore expenditure mentioned in section 329I(1) as was incurred in that period.
Step 2 Find the total of all the eligible expenditure for that period (amount E).
Step 3 If section 329K (reduction in respect of disposal receipts under CAA 2001) applies, reduce amount E in accordance with that section.
Step 4 If section 329L (reduction in respect of unrelieved group ring fence profits) applies, reduce (or, as the case may be, further reduce) amount E in accordance with that section. And so much of amount E as remains after making those reductions is to be taken to have been added to the pool in that period.
(4) If any pre-commencement supplement is allowed on a claim under Chapter 5 in respect of a pre-commencement period, the appropriate proportion of that supplement is to be taken to have been added to the pool in that period.
(5) “The appropriate proportion” means—
(a) if, before the end of the pre-commencement period, the company has incurred qualifying pre-commencement expenditure (within the meaning of section 312) on offshore oil-related activities, such proportion of the pre-commencement supplement under Chapter 5 as it is just and reasonable to attribute (directly or indirectly) to the company's qualifying pre-commencement onshore expenditure, and
(b) in any other case, 100%.
(6) In the case of a straddling period—
(a) the appropriate proportion of the pre-commencement supplement allowed on a claim under Chapter 5 in respect of the period is apportioned between so much of that period as falls before 5 December 2013 and so much of it as falls on or after that date, on the basis of the number of days in each part, and
(b) only so much of the appropriate proportion of the supplement as is apportioned to the later period is taken to have been added to the pool under subsection (4).
(7) But if the basis of the apportionment in subsection (6)(a) would work unjustly or unreasonably in the company's case, the company may elect for the apportionment to be made on another basis that is just and reasonable and specified in the election.
(8) If any pre-commencement additional supplement is allowed on a claim under this Chapter in respect of a pre-commencement period, the amount of that supplement is to be taken to have been added to the pool in that period.

329K Reduction in respect of disposal receipts under CAA 2001
(1) This section applies in the case of the qualifying company if—
(a) it incurs qualifying pre-commencement onshore expenditure in respect of a ring fence trade in any pre-commencement period,
(b) it would, on the relevant assumption, be entitled to an allowance under any provision of CAA 2001 in respect of that expenditure,
(c) an event occurs in relation to any asset representing the expenditure in any pre-commencement period, and
(d) the event would, on the relevant assumption, require a disposal value to be brought into account under any provision of CAA 2001 for any pre-commencement period.
(2) The relevant assumption is that the company was carrying on the ring fence trade—
(a) when the expenditure was incurred, and
(b) when the event giving rise to the disposal value occurred.
(3) For the purpose of allocating qualifying pre-commencement onshore expenditure to the pool for each pre-commencement period—
(a) find the total amount of the disposal values in the case of all such events (amount D), and
(b) taking later periods before earlier periods, reduce (but not below nil) amount E for any pre-commencement period by setting against it so much of amount D as does not fall to be set against amount E for a later pre-commencement period.
(4) Where the asset represented by the qualifying pre-commencement onshore expenditure is a mixed-activities asset, subsection (3) applies as if the disposal value required to be brought into account as mentioned in subsection (1)(d) were such proportion of the actual disposal value as is just and reasonable having regard to that expenditure.
(5) The asset is a “mixed-activities asset” if it also represents expenditure on offshore oil-related activities which is incurred by the company in a pre-commencement period and in respect of which the company would, on the relevant assumption, be entitled to an allowance under any provision of CAA 2001.

329L Reduction in respect of unrelieved group ring fence profits
(1) This section applies if there is an amount of unrelieved group ring fence profits for a pre-commencement period.
(2) For the purpose of allocating qualifying pre-commencement onshore expenditure to the pool for that period—
(a) find so much (if any) of amount E for that period as remains after any reduction falling to be made under section 329K (“the amount of the net onshore expenditure”), and
(b) reduce the amount of the net onshore expenditure (but not below nil) by setting against it a sum equal to the aggregate of the amounts of unrelieved group ring fence profits for the period.
(3) If the pre-commencement period is a straddling period, the unrelieved group ring fence profits for that period are to be determined as if the period began on 5 December 2013 and ended at the same time as the straddling period.
(4) Subsection (5) applies where in the pre-commencement period the company carries on both onshore oil-related activities and offshore oil related activities.
(5) The sum to be set against the net onshore expenditure under subsection (2)(b) is first to be reduced (but not below nil) by the amount of the company's net offshore expenditure for the period.
(6) “The net offshore expenditure” of the company for the period is determined as follows—
Step 1 Determine the amount of the company's total pre-commencement offshore expenditure incurred in the period.
Step 2 Make any reduction in that amount required by subsection (9).
So much as remains is the net offshore expenditure of the company for the period.
(7) “Pre-commencement offshore expenditure” means expenditure which—
(a) is incurred in the course of oil extraction activities which are offshore oil-related activities, and
(b) meets Conditions A, C and D in section 329G.
(8) Subsection (9) applies if—
(a) the qualifying company incurs pre-commencement offshore expenditure in respect of a ring fence trade in any pre-commencement period,
(b) it would, on the relevant assumption in section 329K, be entitled to an allowance under any provision of CAA 2001 in respect of that expenditure,
(c) an event occurs in relation to any asset representing the expenditure in any pre-commencement period, and
(d) the event would, on that assumption, require a disposal value to be brought into account under any provision of CAA 2001 for any pre-commencement period.
(9) For the purposes of Step 2 in subsection (6)—
(a) find the total amount of the disposal values in the case of all such events (amount D), and
(b) taking later periods before earlier periods, reduce (but not below nil) the amount of pre-commencement offshore expenditure for any pre-commencement period by setting against it so much of amount D as does not fall to be set against that total for a later pre-commencement period.
(10) Where the asset represented by the pre-commencement offshore expenditure is a mixed-activities asset, subsection (9) applies as if the disposal value required to be brought into account as mentioned in subsection (8)(d) were such proportion of the actual disposal value as is just and reasonable having regard to that expenditure.
(11) The asset is a “mixed-activities asset” if it also represents expenditure on onshore oil-related activities which is incurred by the company in a pre-commencement period and in respect of which the company would, on the relevant assumption in section 329K, be entitled to an allowance under any provision of CAA 2001.

329M The reference amount for a pre-commencement period
For the purposes of section 329I, the reference amount for a pre-commencement period is the amount in the pool at the end of the period—
(a) after the addition to the pool of any qualifying pre-commencement onshore expenditure allocated to the pool for that period in accordance with section 329J(3), but
(b) before determining, and adding to the pool, the amount of any pre-commencement additional supplement claimed in respect of the period under this Chapter.

Post-commencement additional supplement

329N Supplement in respect of post-commencement period
(1) A qualifying company which incurs an onshore ring fence loss (see section 329P) in any post-commencement period may claim supplement under this section (“post-commencement additional supplement”) in respect of—
(a) that period, or
(b) any subsequent accounting period in which it carries on its ring fence trade.
(2) Any post-commencement additional supplement allowed on a claim in respect of a post-commencement period is to be treated for the purposes of the Corporation Tax Acts (other than the post-commencement additional supplement provisions) as if it were a loss—
(a) which is incurred in carrying on the ring fence trade in that period, and
(b) which falls in whole to be used under section 45 (carry forward of trade loss against subsequent trade profits) to reduce trading income from the ring fence trade in succeeding accounting periods.
(3) Paragraph 74 of Schedule 18 to FA 1998 (company tax returns etc: time limit for claims for group relief) applies in relation to a claim for post-commencement additional supplement as it applies in relation to a claim for group relief.
(4) In this Chapter “the post-commencement additional supplement provisions” means this section and sections 329O to 329T.

329O Amount of post-commencement additional supplement for a post-commencement period
(1) The amount of the post-commencement additional supplement for any post-commencement period in respect of which a claim under section 329N is made is the relevant percentage for that period of the reference amount for that period.
(2) Sections 329P to 329T have effect for the purpose of determining the reference amount for a post-commencement period.
(3) If the post-commencement period is a period of less than 12 months, the amount of the post-commencement additional supplement for the period (apart from this subsection) is to be reduced proportionally.

329P Onshore ring fence losses
(1) If—
(a) in a post-commencement period (“the period of the loss”) a qualifying company carrying on a ring fence trade consisting solely of onshore oil-related activities incurs a loss in the trade, and
(b) some or all of the loss falls to be used under section 45 (carry forward of trade loss against subsequent profits) to reduce trading income from the trade in succeeding accounting periods,
so much of the loss as falls to be so used is an “onshore ring fence loss” of the company.
This is subject to subsection (4).
(2) If—
(a) in a post-commencement period (“the period of the loss”) a qualifying company carrying on a ring fence trade consisting of both onshore oil-related activities and offshore oil-related activities incurs a loss in the trade, and
(b) some or all of the loss falls to be used under section 45 (carry forward of trade loss against subsequent profits) to reduce trading income from the trade in succeeding accounting periods,
the appropriate proportion of so much of the loss as falls to be so used is an “onshore ring fence loss” of the company.
This is subject to subsection (4).
(3) “The appropriate proportion” means such proportion as it is just and reasonable to attribute to the company's onshore oil-related activities carried out in the course of its ring fence trade.
(4) In the case of a straddling period—
(a) the amount of the onshore ring fence loss determined under subsection (1) or (2) in respect of the period is apportioned between so much of that period as falls before 5 December 2013 and so much of it as falls on or after that date, on the basis of the number of days in each part, and
(b) only so much of the loss as is apportioned to the later part of the period is an onshore ring fence loss of the company for the straddling period.
(5) But if the basis of the apportionment in subsection (4)(a) would work unjustly or unreasonably in the company's case, the company may elect for the apportionment to be made on another basis that is just and reasonable and specified in the election.
(6) In determining for the purposes of the post-commencement additional supplement provisions how much of a loss incurred in a ring fence trade falls to be used as mentioned in subsection (1)(b) or (2)(b), the following assumptions are to be made.
(7) The first assumption is that every claim is made that could be made by the company under section 37 (relief for trade losses against total profits) to deduct losses incurred in the ring fence trade from ring fence profits of post-commencement periods which are earlier than the period of the loss.
(8) The second assumption is that (where appropriate) section 42 (ring fence trades: further extension of period for relief) applies in relation to every such claim under section 37.
(9) This section has effect for the purposes of the post-commencement additional supplement provisions.

329Q The onshore ring fence pool
(1) For the purpose of determining the amount of any post-commencement additional supplement, a qualifying company is to be taken at all times in its post-commencement periods to have a continuing mixed pool (the “onshore ring fence pool”) of—
(a) the company's onshore ring fence losses,
(b) post-commencement supplement under Chapter 5,
(c) post-commencement additional supplement under this Chapter.
(2) The onshore ring fence pool continues even if the amount in it is nil.
(3) The onshore ring fence pool consists of—
(a) the company's onshore ring fence losses, allocated to the pool in accordance with subsection (4)(a),
(b) the company's post-commencement supplement allowed under Chapter 5, allocated to the pool in accordance with subsections (4)(b) and (5) to (7), and
(c) the company's post-commencement additional supplement allowed under this Chapter, allocated to the pool in accordance with subsection (4)(c).
(4) The allocation to the pool is made as follows—
(a) the amount of an onshore ring fence loss is added to the pool in the period of the loss,
(b) if any post-commencement supplement is allowed on a claim under Chapter 5 in respect of a post-commencement period, the appropriate proportion of the amount of that supplement is added to the pool in that period, and
(c) if any post-commencement additional supplement is allowed on a claim under this Chapter in respect of a post-commencement period, the amount of that supplement is added to the pool in that period.
(5) “The appropriate proportion” is—
(a) if the ring fence trade carried on by the company includes, or has at any time included, offshore oil-related activities, such proportion of the supplement as it is just and reasonable to attribute (directly or indirectly) to the company's onshore oil-related activities carried on in the period for which the supplement is allowed or an earlier post-commencement period, and
(b) in any other case, 100%.
(6) In the case of a straddling period—
(a) the appropriate proportion of the post-commencement supplement allowed on a claim under Chapter 5 in respect of the period is apportioned between so much of that period as falls before 5 December 2013 and so much of it as falls on or after that date, on the basis of the number of days in each part, and
(b) only so much of the appropriate proportion of the supplement as is apportioned to the later period is added to the pool under subsection (4)(b).
(7) But if the basis of the apportionment in subsection (6)(a) would work unjustly or unreasonably in the company's case, the company may elect for the apportionment to be made on another basis that is just and reasonable and specified in the election
(8) The amount in the onshore ring fence pool is subject to reductions in accordance with the following provisions of this Chapter.
(9) If a reduction in the amount in the onshore ring fence pool falls to be made in any accounting period, the reduction is made—
(a) after the addition to the pool of—
(i) the amount of any onshore ring fence losses allocated to the pool in that period in accordance with subsection (4)(a), and
(ii) any amount of post-commencement supplement under Chapter 5 claimed in respect of the period and allocated to the pool in accordance with subsection (4)(b), but
(b) before determining and adding to the pool under subsection (4)(c) the amount of any post-commencement additional supplement under this Chapter claimed in respect of the period,
and references to the amount in the pool are to be read accordingly.

329R Reductions in respect of utilised onshore ring fence losses
(1) If one or more losses incurred by a qualifying company in its ring fence trade in a post-commencement period are used under section 45 (carry forward of trade loss against subsequent trade profits) to reduce any profits of a post-commencement period, a reduction is to be made in that period in accordance with this section.
(2) To the extent that the losses used as mentioned in subsection (1) are onshore ring fence losses, the amount in the onshore ring fence pool is to be reduced (but not below nil) by setting against it a sum equal to such amount of those onshore ring fence losses as is so used.
(3) For the purposes of determining the extent to which losses used as mentioned in subsection (1) are onshore ring fence losses, relevant offshore losses are to be treated as so used in priority to onshore ring fence losses.
(4) For this purpose “relevant offshore loss” means so much (if any) of a loss used as mentioned in subsection (1) as is given by—
X − Y
where—
X is the amount of the loss so used, and
Y is so much of that loss as (ignoring section 329P(4)) is an onshore ring fence loss.
(5) In the case of a loss incurred in a straddling period—
(a) the amount of the relevant offshore loss is apportioned between so much of that period as falls before 5 December 2013 and so much of it as falls on or after that date, on the basis of the number of days in each part, and
(b) only so much of the loss as is apportioned to the later part of the period is a relevant offshore loss of the company for the straddling period.
(6) But if the basis of the apportionment in subsection (5)(a) would work unjustly or unreasonably in the company's case, the company may elect for the apportionment to be made on another basis that is just and reasonable and specified in the election.

329S Reductions in respect of unrelieved group ring fence profits
(1) If there is an amount of unrelieved group ring fence profits for a post-commencement period, reductions are to be made in that period in accordance with this section.
(2) After making any reductions that fall to be made in accordance with section 329R, the remaining amount in the onshore ring fence pool is to be reduced (but not below nil) by setting against it a sum equal to the aggregate of the amounts of unrelieved group ring fence profits for the period.
This is subject to subsection (4).
(3) If the post-commencement period is a straddling period, the unrelieved group ring fence profits for that period are to be determined as if the period began on 5 December 2013 and ended at the same time as the straddling period.
(4) If the ring fence trade carried on by the company includes, or has at any time included, offshore oil-related activities, the sum to be set against the onshore ring fence pool under subsection (2) is first to be reduced by the notional offshore loss pool.
(5) “The notional offshore loss pool” means—
(a) the sum of the relevant offshore losses (see section 329R(4)) for the post-commencement period mentioned in subsection (1) and earlier post-commencement periods, less
(b) the sum of—
(i) so much of those losses as is to be treated (see section 329R(3)) as used as mentioned in section 329R, and
(ii) any reductions previously made under subsection (2) of this section.

329T The reference amount for a post-commencement period
For the purposes of section 329O the reference amount for a post-commencement period is so much of the amount in the onshore ring fence pool as remains after making any reductions required by sections 329R and 329S.”

2 In section 270 of CTA 2010 (overview of Part 8), after subsection (5) insert—

“(5A) Chapter 5A makes provision about onshore additional ring fence expenditure supplement.”

3 In Schedule 4 to CTA 2010 (index of defined expressions), at the appropriate place insert—

“the commencement period (in Chapter 5A of Part 8)	section 329D(1)”;”

;

“offshore oil-related activities (in Chapter 5A of Part 8)	section 329C(3)”

;

“onshore oil-related activities (in Chapter 5A of Part 8)	section 329C(2)”

;

“onshore ring fence loss (in Chapter 5A of Part 8)	section 329P”

;

“the onshore ring fence pool (in Chapter 5A of Part 8)	section 329Q”

;

“the period of the loss (in Chapter 5A of Part 8)	section 329P”

;

“post-commencement additional supplement (in Chapter 5A of Part 8)	section 329N(1)”

;

“the post-commencement additional supplement provisions (in Chapter 5A of Part 8)	section 329N(4)”

;

“post-commencement period (in Chapter 5A of Part 8)	section 329D(1)”

;

“pre-commencement additional supplement (in Chapter 5A of Part 8)	section 329I(1)”

;

“pre-commencement period (in Chapter 5A of Part 8)	section 329D(1)”

;

“qualifying company (in Chapter 5A of Part 8)	section 329B”

;

“qualifying pre-commencement onshore expenditure (in Chapter 5A of Part 8)	section 329G”

;

“the relevant percentage (in Chapter 5A of Part 8)	section 329E”

;

“straddling period (in Chapter 5A of Part 8)	section 329D(3)”

;

“unrelieved group ring fence profits (in Chapter 5A of Part 8)	section 329H”

.
4 The amendments made by this Schedule have effect in relation to accounting periods ending on or after 5 December 2013.

SCHEDULE 15 Supplementary charge: onshore allowance
Section 70

PART 1 Amendments of Part 8 of CTA 2010
1 Part 8 of CTA 2010 (oil activities) is amended as follows.

Onshore allowance
2 Section 357 (other definitions) is renumbered as section 356AA.
3 After Chapter 7 insert—

“CHAPTER 8 Supplementary charge: onshore allowance

Introduction

356B Overview
This Chapter sets out how relief for certain capital expenditure incurred for the purposes of onshore oil-related activities is given by way of reduction of a company's adjusted ring fence profits, and includes provision about—
(a) the need for allowance held for a site to be activated by relevant income from the same site in order for the allowance to be available for reducing adjusted ring fence profits,
(b) elections by a company to transfer allowance between different sites in which it is a licensee (see section 356F), and
(c) mandatory transfers of allowance where shares in the equity in a licensed area are disposed of (see sections 356H to 356HB and the related provisions in sections 356G to 356GD).

356BA “Onshore oil-related activities”
(1) In this Chapter “onshore oil-related activities” means activities of a company which are carried on onshore and—
(a) fall within any of subsections (1) to (4) of section 356BB, or
(b) consist of the acquisition, enjoyment or exploitation of oil rights.
(2) Activities of a company are carried on “onshore” if they are authorised—
(a) under a landward licence under Part 1 of the Petroleum Act 1998 or the Petroleum (Production) Act 1934, or
(b) under a licence under the Petroleum (Production) Act (Northern Ireland) 1964.
(3) In subsection (2)(a) “landward licence” means a licence in respect of an area which falls within the definition of “landward area” in the regulations pursuant to which the licence was applied for.

356BB The activities
(1) Activities of a company in searching for oil or causing such searching to be carried out for the company.
(2) Activities of a company in extracting oil, or causing oil to be extracted for it, under rights which—
(a) authorise the extraction, and
(b) are held by it or by a company associated with it.
(3) Activities of a company in transporting, or causing to be transported for it, oil extracted under rights which—
(a) authorise the extraction, and
(b) are held as mentioned in subsection (2)(b),
but only if the transportation meets the condition in subsection (5).
(4) Activities of the company in effecting, or causing to be effected for it, the initial treatment or initial storage of oil won from any site under rights which—
(a) authorise its extraction, and
(b) are held as mentioned in subsection (2)(b).
(5) The condition mentioned in subsection (3) is that the transportation is to a place at which the seller in a sale at arm's length could reasonably be expected to deliver it (or, if there is more than one such place, the one nearest to the place of extraction).
(6) In this section “initial storage”—
(a) means, in relation to oil won from a site, the storage of a quantity of oil won from the site not exceeding 10 times the relevant share of the maximum daily production rate of oil for the site as planned or achieved (whichever is greater), but
(b) does not include the matters excluded by paragraphs (a) to (c) of the definition of “initial storage” in section 12(1) of OTA 1975;
and in this subsection “the relevant share” means a share proportionate to the company's share of oil won from the site concerned.
(7) In this section “initial treatment” has the meaning given by section 12(1) of OTA 1975; but for this purpose that definition is to be read as if the references in it to an oil field were to a site.

356BC “Site”
In this Chapter “site” (except in the expression “drilling and extraction site”) means—
(a) a drilling and extraction site that is not used in connection with any oil field, or
(b) an oil field (whether or not one or more drilling and extraction sites are used in connection with it).

Onshore allowance

356C Generation of onshore allowance
(1) Subsection (2) applies where a company incurs any relievable capital expenditure in relation to a qualifying site.
(2) The company is to hold an amount of allowance equal to 75% of the amount of the expenditure.
(3) “Qualifying site” means a site whose development (in whole or in part) is authorised for the first time on or after 5 December 2013.
(4) Capital expenditure incurred by a company is “relievable” only if, and so far as—
(a) it is incurred for the purposes of onshore oil-related activities (see section 356BA), and
(b) neither of the disqualifying conditions is met at the beginning of the day on which the expenditure is incurred (see section 356CA).
(5) Allowance held under this Chapter is called “onshore allowance”.
(6) Onshore allowance is said in this Chapter to be “generated” at the time when the capital expenditure is incurred (see section 356JA).
(7) Onshore allowance is referred to in this Chapter as being generated—
(a) “by” the company concerned,
(b) “at” the site concerned.
(8) Where capital expenditure is incurred only partly for the purposes of onshore oil-related activities, or the onshore oil-related activities for the purposes of which capital expenditure is incurred are carried on only partly in relation to a particular site, the expenditure is to be attributed to the site concerned on a just and reasonable basis.
(9) In this section, references to authorisation of development of a site—
(a) in the case of a site which is an oil field, are to be read in accordance with section 351;
(b) in the case of a drilling and extraction site, are to be read in accordance with section 356J.

356CA Disqualifying conditions for section 356C(4)(b)
(1) The first disqualifying condition is that production from the site is expected to exceed 7,000,000 tonnes.
(2) The second disqualifying condition is that production from the site has exceeded 7,000,000 tonnes.
(3) For the purposes of this section 1,100 cubic metres of gas at a temperature of 15 degrees celsius and pressure of one atmosphere is to be counted as equivalent to one tonne.

356CB Expenditure not related to an established site
(1) A company may make an election under this section in relation to capital expenditure incurred by it for the purposes of onshore oil-related activities if the appropriate condition is met.
(2) The appropriate condition is that at the time of the election no site can be identified as a site in relation to which the expenditure has been incurred.
(3) An election may not be made before the beginning of the third accounting period of the company after that in which the expenditure is incurred.
(4) An election must specify—
(a) the expenditure in question,
(b) a site (“the specified site”) every part of which is, or is part of, an area in which the company is a licensee, and
(c) an accounting period of the company (“the specified accounting period”).
(5) The specified accounting period must not be earlier than the accounting period in which the election is made.
(6) Where a company makes an election under this section in relation to an amount of expenditure, that amount is treated for the purposes of this Chapter as incurred by the company—
(a) in relation to the specified site, and
(b) at the beginning of the specified accounting period.

Reduction of adjusted ring fence profits

356D Reduction of adjusted ring fence profits
(1) A company's adjusted ring fence profits for an accounting period are to be reduced by the cumulative total amount of activated allowance for the accounting period (but are not to be reduced below zero).
(2) In relation to a company and an accounting period, the “cumulative total amount of activated allowance” is—
A + C
where—
A is the total of any amounts of activated allowance the company has, for any sites, for the accounting period (see section 356E(2)) or for reference periods within the accounting period (see section 356GB(1)), and
C is any amount carried forward to the period under section 356DA.

356DA Carrying forward of activated allowance
(1) This section applies where, in the case of a company and an accounting period—
(a) the cumulative total amount of activated allowance (see section 356D(2)), is greater than
(b) the adjusted ring fence profits.
(2) The difference is carried forward to the next accounting period.

356DB Companies with both field allowances and onshore allowance
(1) This section applies where a company's adjusted ring fence profits for an accounting period are reducible both—
(a) under section 333(1) (by the amount of the company's pool of field allowances for the period), and
(b) under section 356D(1) (by the cumulative total amount of activated allowance for the period).
(2) The company may choose the order in which the different allowances are to be used.
(3) If the company chooses to apply section 333(1) first, then—
(a) Chapter 7 and this Chapter are to be ignored in calculating the “adjusted ring fence profits” in accordance with section 356AA, and
(b) if section 356D(1) is also applied: this Chapter, but not Chapter 7, is to be ignored in calculating the adjusted ring fence profits in accordance with section 356JB.
(4) If the company chooses to apply section 356D(1) first, then—
(a) this Chapter and Chapter 7 are to be ignored in calculating the adjusted ring fence profits in accordance with section 356JB, and
(b) if section 333(1) is also applied: Chapter 7, but not this Chapter, is to be ignored in calculating the “adjusted ring fence profits” in accordance with section 356AA.

Activated and unactivated allowance: basic calculation rules

356E Activation of allowance: no change of equity share
(1) This section applies where—
(a) a company is a licensee in a licensed area for the whole or part (“the licensed part”) of an accounting period,
(b) the company's share of the equity in the site is the same throughout the accounting period or, as the case requires, throughout the licensed part of the accounting period,
(c) the licensed area is or contains a site,
(d) the company holds, for the accounting period and the site, a closing balance of unactivated allowance (see section 356EA) that is greater than zero, and
(e) the company has relevant income from the site for the accounting period.
(2) The amount of activated allowance the company has for that accounting period and that site is the smaller of—
(a) the closing balance of unactivated allowance held for the accounting period and the site;
(b) the company's relevant income for that accounting period from that site.
(3) In this Chapter “relevant income”, in relation to a site and an accounting period of a company, means production income of the company from any oil extraction activities carried on at the site that is taken into account in calculating the company's adjusted ring fence profits for the accounting period.

356EA The closing balance of unactivated allowance for an accounting period
The closing balance of unactivated allowance held by a company for an accounting period and a site is—
P + Q − R
where—
P is the amount of onshore allowance generated by the company in the accounting period at the site (including any amount treated under section 356F(7) or 356HB(1) as generated by the company in that accounting period at that site);
Q is any amount carried forward from an immediately preceding accounting period under section 356EB(2) or from an immediately preceding reference period under section 356GC;
R is any amount deducted in accordance with section 356GD(1) (reduction of allowance if equity disposed of).

356EB Carrying forward of unactivated allowance
(1) This section applies where X is greater than Y in the case of an accounting period of a company and a site, where—
X is the closing balance of unactivated allowance for the accounting period and the site;
Y is the company's relevant income for the accounting period from that site.
(2) An amount equal to the difference between X and Y is treated as onshore allowance held by the company for that site for the next accounting period (and is treated as held with effect from the beginning of that period).

Transfer of allowances between sites

356F Transfer of allowances between sites
(1) This section applies if a company has, with respect to a site, an amount (“N”) of onshore allowance available to carry forward to an accounting period—
(a) under section 356EB(2), or
(b) by virtue of section 356GC(3).
(2) The company may elect to transfer the whole or part of that amount to another site (“site B”), if the appropriate conditions are met.
(3) The appropriate conditions are that—
(a) every part of site B is, or is part of, an area in which the company is a licensee, and
(b) the election is made no earlier than the beginning of the third accounting period of the company after that in which the allowance was generated.
(4) For the purposes of subsection (3)(b), a company may regard an amount of onshore allowance held by it for a site as generated in a particular accounting period if the amount does not exceed—
A − T
where—
A is the amount of onshore allowance generated in that accounting period for that site;
T is the total amount of onshore allowance generated in that period for that site that has already been transferred under this section.
(5) An election must specify—
(a) the amount of onshore allowance to be transferred;
(b) the site at which it was generated;
(c) the site to which it is transferred;
(d) the accounting period in which it was generated.
(6) Where a company makes an election under subsection (2), then—
(a) if the company elects to transfer the whole of N, no amount is available to be carried forward under section 356EB(2) or (as the case may be) by virtue of section 356GC(3);
(b) if the company elects to transfer only part of N, the amount available to be carried forward as mentioned in subsection (1) is reduced by the amount transferred.
(7) Where an amount of onshore allowance is transferred to a site as a result of an election, this Chapter has effect as if the allowance is generated at that site at the beginning of the accounting period in which the election is made.

Changes in equity share: activation of allowance

356G Introduction to sections 356GA to 356GD
(1) Sections 356GA to 356GD apply to a company in respect of an accounting period and a licensed area that is or contains a site, if the following conditions are met—
(a) the company is a licensee in the licensed area for the whole, or for part, of the accounting period;
(b) the company has different shares (greater than zero) of the equity in the licensed area at different times during the accounting period.
(2) In a case where a company has three or more different shares of the equity in a licensed area during a particular day, sections 356GA to 356GD (in particular, provisions relating to the beginning or end of a day) have effect subject to the necessary modifications.

356GA Reference periods
(1) For the purposes of sections 356GB to 356GD, the accounting period, or (if the company is not a licensee for the whole of the accounting period) the part or parts of the accounting period for which the company is a licensee, are to be divided into reference periods (each of which “belongs to” the site concerned).
(2) A reference period is a period of consecutive days that meets the following conditions—
(a) at the beginning of each day in the period, the company is a licensee in the licensed area;
(b) at the beginning of each day in the period, the company's share of the equity in the licensed area is the same;
(c) each day in the period falls within the accounting period.

356GB Activation of allowance: reference periods
(1) The amount (if any) of activated allowance that a company has with respect to a site for a reference period is the smaller of the following—
(a) the company's relevant income from the site in the reference period;
(b) the total amount of unactivated allowance that is attributable to the reference period and the site (see section 356GD).
(2) The company's relevant income from the site in the reference period is—
I × R L
where—
I is the company's relevant income from the site in the whole of the accounting period;
R is the number of days in the reference period;
L is the number of days in the accounting period for which the company is a licensee in the licensed area concerned.

356GC Carry-forward of unactivated allowance from a reference period
(1) If, in the case of a reference period (“RP1”) of a company, the amount mentioned in subsection (1)(b) of section 356GB exceeds the amount mentioned in subsection (1)(a) of that section, an amount equal to the difference between those amounts is treated as onshore allowance held by the company for the site concerned for the next period.
(2) If RP1 is immediately followed by another reference period of the company (belonging to the same site), “the next period” means that reference period.
(3) If subsection (2) does not apply, “the next period” means the next accounting period of the company.

356GD Unactivated amounts attributable to a reference period
(1) For the purposes of section 356GB(1)(b), the total amount of unactivated allowance attributable to a reference period and a site is—
P + Q − R
where—
P is the amount of allowance generated by the company in the reference period at the site (including any amount treated under section 356F(7) or 356HB(1) as generated by the company in that accounting period at that site);
Q is the amount given by subsection (2) or (3);
R is any amount to be deducted under section 356HA(1) in respect of a disposal of the whole or part of the company's share of the equity in a licensed area that is or contains the site.
(2) Where the reference period is not immediately preceded by another reference period but is preceded by an accounting period of the company, Q is equal to the amount (if any) that is to be carried forward from that preceding accounting period under section 356EB(2).
(3) Where the reference period is immediately preceded by another reference period, Q is equal to the amount carried forward by virtue of section 356GC(2).

Transfers of allowance on disposal of equity share

356H Introduction to sections 356HA and 356HB
(1) Sections 356HA and 356HB apply where a company (“the transferor”)—
(a) disposes of the whole or part of its share of the equity in a licensed area that is or contains a site;
(b) immediately before the disposal holds (unactivated) onshore allowance for the site concerned.
(2) Each company to which a share of the equity is disposed of is referred to in section 356HB as “a transferee”.

356HA Reduction of allowance if equity disposed of
(1) The following amount is to be deducted, in accordance with section 356GD(1), in calculating the total amount of unactivated allowance attributable to a reference period and a site—
F × E1 − E2 E1
where—
F is the pre-transfer total of unactivated allowance for the reference period that ends with the day on which the disposal is made;
E1 is the transferor's share of the equity in the licensed area immediately before the disposal;
E2 is the transferor's share of the equity in the licensed area immediately after the disposal.
(2) The “pre-transfer total of unactivated allowance” for a reference period is—
P + Q
where P and Q are the same as in section 356GD.

356HB Acquisition of allowance if equity acquired
(1) A transferee is treated as generating at the site concerned, at the beginning of the reference period or accounting period of the transferee that begins with, or because of, the disposal, onshore allowance of the amount given by subsection (2).
(2) The amount is—
R × E3 E1 − E2
where—
R is the amount determined for the purposes of the deduction under section 356HA(1);
E3 is the share of equity in the licensed area that the transferee has acquired from the transferor;
E1 and E2 are the same as in section 356HA.

Miscellaneous

356I Adjustments
(1) This section applies if there is any alteration in a company's adjusted ring fence profits for an accounting period after this Chapter has effect in relation to the profits.
(2) Any necessary adjustments to the operation of this Chapter (whether in relation to the profits or otherwise) are to be made (including any necessary adjustments to the effect of section 356D on the profits or to the calculation of the amount to be carried forward under section 356DA).

356IA Orders
(1) The Treasury may by order substitute a different percentage for the percentage that is at any time specified in section 356C(2) (calculation of allowance as a percentage of capital expenditure).
(2) The Treasury may by order amend the number that is at any time specified in section 356CA(1) or (2) (cap on production, or estimated production, at a site for the purposes of onshore allowance).
(3) An order under subsection (1) or (2) may include transitional provision.

Interpretation

356J “Authorisation of development”: drilling and extraction sites
(1) References in this Chapter to authorisation of development of a site are to be interpreted as follows in relation to a drilling and extraction site that is situated in, or used in connection with, a licensed area.
(2) The references are to be read as references to a national authority—
(a) granting a licensee consent for development of the licensed area,
(b) serving on a licensee a programme of development for the licensed area, or
(c) approving a programme of development for the licensed area.
(3) References in subsection (2) to a “licensee” are to a licensee in the licensed area mentioned in subsection (1).
(4) In this section—
“consent for development”, in relation to a licensed area, does not include consent which is limited to the purpose of testing the characteristics of an oil-bearing area;
“development”, in relation to a licensed area, means winning oil from the licensed area otherwise than in the course of searching for oil or drilling wells;
“national authority” means—
(a) the Secretary of State, or
(b) a Northern Ireland Department.

356JA When capital expenditure is incurred
Section 5 of CAA 2001 (when capital expenditure is incurred) applies for the purposes of this Chapter as for the purposes of that Act.

356JB Other definitions
In this Chapter (except where otherwise specified)—
“adjusted ring fence profits”, in relation to a company and an accounting period, means the adjusted ring fence profits that would (if this Chapter were ignored) be taken into account in calculating the supplementary charge on the company under section 330(1) for the accounting period (but see also section 356DB);
“cumulative total amount of activated allowance” has the meaning given by section 356D(2);
“licence” has the same meaning as in Part 1 of OTA 1975 (see section 12(1) of that Act);
“licensed area” has the same meaning as in Part 1 of OTA 1975;
“licensee” has the same meaning as in Part 1 of OTA 1975;
“onshore allowance” has the meaning given by section 356C(5);
“relevant income”, in relation to an onshore site and an accounting period, has the meaning given by section 356E(3);
“site” has the meaning given by section 356BC.”

Restriction of field allowance to offshore fields
4 (1) Section 352 (meaning of “qualifying oil field”) is amended as follows.
(2) Renumber section 352 as subsection (1) of section 352.
(3) In section 352(1) (as renumbered), after “an oil field” insert “ , other than an onshore field, ”.
(4) After subsection (1) insert—

“(2) An oil field is an “onshore field” for the purposes of subsection (1) if—
(a) the authorisation day is on or after 5 December 2013, and
(b) on the authorisation day every part of the oil field is, or is part of, an onshore licensed area;
but see the transitional provisions in paragraph 7 of Schedule 15 to FA 2014.
(3) A licensed area is an “onshore licensed area” if it falls within the definition of “landward area” in the regulations pursuant to which the application for the licence was made.”

PART 2 Minor and consequential amendments
5 (1) CTA 2010 is amended as follows.
(2) In section 270 (overview of Part)—
(a) after subsection (7) insert—

“(7A) Chapter 8 makes provision about the reduction of supplementary charge by an allowance for capital expenditure incurred for the purposes of onshore oil-related activities.”

;
(b) in subsection (8)(c), for “357” substitute “ 356AA ”.
(3) In section 333 (reduction of adjusted ring fence profits)—
(a) in subsection (1), after “reduced” insert “ (but not below zero) ”;
(b) omit subsection (2).
(4) In section 356AA (as renumbered by paragraph 2)(definitions for Chapter 7), in the definition of “adjusted ring fence profits”, at the end insert “ ; but see also section 356DB (companies with allowances under Chapter 8 as well as this Chapter) ”.
(5) In Schedule 4 (index of defined expressions)—
(a) at the appropriate places insert—

“adjusted ring fence profits (in Chapter 8 of Part 8)	section 356JB”

;

“cumulative total amount of activated allowance (in Chapter 8 of Part 8)	section 356JB”

;

“onshore allowance (in Chapter 8 of Part 8)	section 356JB”

;

“onshore oil-related activities (in Chapter 8 of Part 8)	section 356BA”

;

“relevant income (in Chapter 8 of Part 8)	section 356E(3)”

;

“site (in Chapter 8 of Part 8)	section 356BC”

;
(b) in the entries for “adjusted ring fence profits”, “authorisation day”, “eligible oil field”, “licensee” and “relevant income” (in each case, as those expressions are defined for Chapter 7 of Part 8 of CTA 2010), for “357” substitute “ 356AA ”.

PART 3 Commencement and transitional provision

Commencement of onshore allowance
6 (1) The amendments made by paragraphs 3 and 5(1), (2)(a), (3) and (4) have effect in relation to capital expenditure incurred on or after 5 December 2013.
(2) The amendments made by paragraph 4 have effect in relation to any accounting period of a company in which a post-commencement authorisation day falls.
(3) In sub-paragraph (2) “post-commencement authorisation day” means an authorisation day (as defined for Chapter 7 of Part 8 of CTA 2010) that is 5 December 2013 or a later day.
(4) Section 5 of CAA 2001 (when capital expenditure is incurred) applies for the purposes of this paragraph as for the purposes of that Act.

Option to defer commencement
7 (1) This paragraph applies in relation to any oil field whose development (in whole or in part) is authorised for the first time on or after 5 December 2013 but before 1 January 2015.
(2) At any time before 1 January 2015, the companies that are licensees in the oil field may jointly elect that the law is to have effect in relation to each of those companies as if the date specified in—
(a) section 352(2)(a) of CTA 2010 (as inserted by paragraph 4(4) of this Schedule),
(b) section 356C(3) of CTA 2010 (as inserted by paragraph 3 of this Schedule), and
(c) paragraph 6(3),
were 1 January 2015.
(3) Expressions used in this paragraph and in Chapter 7 of Part 8 of CTA 2010 have the same meaning in this paragraph as in that Chapter.

Straddling accounting periods
8 (1) Paragraphs 9 and 10 apply where a company has an accounting period (the “straddling accounting period”) that begins before and ends on or after commencement day.
(2) In paragraphs 9 and 10 “commencement day” means—
(a) 5 December 2013 (except where paragraph (b) applies);
(b) 1 January 2015, in relation to a company that makes an election under paragraph 7.
(3) Expressions used in paragraph 9 or 10 and in Chapter 8 of Part 8 of CTA 2010 (as inserted by paragraph 3) have the same meaning in the paragraph concerned as in that Chapter.
9 (1) The amount (if any) by which the company's adjusted ring fence profits for the straddling accounting period are reduced under section 356D of CTA 2010 (as inserted by paragraph 3) cannot exceed the appropriate proportion of those profits.
(2) Section 356DA of CTA 2010 (carrying forward of activated allowance) applies in relation to the company and the accounting period as if the reference in subsection (1)(b) of that section to the adjusted ring fence profits were to the appropriate proportion of those profits.
(3) The “appropriate proportion” of the company's adjusted ring fence profits for the straddling accounting period is—
D Y × N
where—
D is the number of days in the straddling accounting period that fall on or after commencement day;
Y is the number of days in the straddling accounting period;
N is the amount of the company's adjusted ring fence profits for the accounting period.
(4) If the basis of apportionment in sub-paragraph (3) would work unjustly or unreasonably in the company's case, the company may elect for its adjusted ring fence profits to be apportioned on another basis that is just and reasonable and specified in the election.
10 (1) For the purpose of determining the amount of activated allowance the company has with respect to any site—
(a) for the straddling accounting period (see section 356E of CTA 2010, as inserted by paragraph 3), or
(b) for a reference period that is part of the straddling accounting period (see section 356GB of CTA 2010, as so inserted),
the company's relevant income from the site in the straddling accounting period is taken to be the appropriate proportion of the actual amount of that relevant income.
(2) Accordingly, in relation to the company, the straddling accounting period and the site in question, section 356EB of CTA 2010 (carrying forward of unactivated allowance) has effect as if Y in subsection (1) of that section were defined as the appropriate proportion of the company's relevant income for the straddling accounting period from that site.
(3) The “appropriate proportion” of the company's relevant income from a site in the straddling accounting period is—
D Y × I
D is the number of days in the straddling accounting period that fall on or after commencement day;
Y is the number of days in the straddling accounting period;
I is the amount of the company's relevant income from the site in the straddling accounting period.
(4) If the basis of apportionment in sub-paragraph (3) would work unjustly or unreasonably in the company's case, the company may elect for its adjusted ring fence profits to be apportioned on another basis that is just and reasonable and specified in the election.

SCHEDULE 16 Oil contractors: ring-fence trade etc
Section 73

CTA 2010
1 CTA 2010 is amended as follows.
2 In section 1 (overview of Act), in subsection (3), after paragraph (a) insert—

“(aa) oil contractor activities (see Part 8ZA),
(ab) profits arising from the exploitation of patents etc (see Part 8A),”

.
3 In Chapter 4 of Part 8 (oil activities: calculation of profits), after section 285 insert—

“Hire of relevant assets

285A Restriction on hire etc of relevant assets to be brought into account
(1) This section applies if—
(a) oil contractor activities are, or are to be, carried out, and
(b) a company that carries on a ring fence trade makes, or is to make, one or more payments under a lease of a relevant asset, or part of a relevant asset, which is, or is to be, provided, operated or used in the relevant offshore service in question.
(2) The total amount that may be brought into account in respect of the payments for the purposes of calculating the company's ring fence profits in an accounting period is limited to the hire cap.
(3) The “hire cap” is an amount equal to the relevant percentage of TC for the accounting period, subject to subsection (4).
(4) If payments in relation to which subsection (2) or section 356N(2) (restriction on hire for oil contractors under Part 8ZA) applies are also made, or to be made, by one or more other companies in respect of the relevant asset or part, the “hire cap” is to be such proportion of the amount mentioned in subsection (3) as is just and reasonable, having regard (in particular) to the amounts of the payments made, or to be made, by each company.
(5) The “relevant percentage” and TC are to be determined in accordance with section 356N(5) to (16).
(6) To the extent that, by virtue of this section, payments within subsection (1)(b) cannot be brought into account for the purposes of calculating the company's ring fence profits in an accounting period, the payments may be—
(a) allowed as a deduction from the company's total profits for the accounting period, or
(b) treated as a surrenderable amount of the company for the accounting period for the purposes of Part 5 (group relief) (see section 99(7)) as if they were a trading loss,
but this is subject to subsection (7).
(7) No deduction may be made by virtue of subsection (6) from total profits so far as they are ring fence profits or contractor's ring fence profits.
(8) If the company or an associated person enters into arrangements the main purpose or one of the main purposes of which is to secure that subsection (2) does not apply in relation to one or more payments to any extent, that subsection applies in relation to the payments to the extent that it would not otherwise do so.
(9) In subsection (8) “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).
(10) In this section—
“associated person” has the meaning given by section 356LB;
“contractor's ring fence profits” has the meaning given by section 356LD;
“oil contractor activities” and “relevant offshore service” have the meaning given by section 356L;
“relevant asset” has the meaning given by section 356LA;
“lease” has the meaning given by section 868.”

4 After Part 8 (oil activities) insert—

“PART 8ZA Oil contractors

CHAPTER 1 Introduction

356K Overview of Part
(1) This Part is about the corporation tax treatment of oil contractor activities.
(2) Chapter 2 contains basic definitions used in this Part.
(3) Chapter 3 treats oil contractor activities as a separate trade.
(4) Chapter 4 makes provision about the calculation of profits from oil contractor activities.
(5) For the meaning of oil contractor activities, see section 356L.

CHAPTER 2 Basic definitions

356L “Oil contractor activities” etc
(1) The definitions in this section have effect for the purposes of this Part.
(2) “Oil contractor activities” means activities carried on by a company (“the contractor”), which are not oil-related activities (within the meaning of section 274), but are—
(a) exploration or exploitation activities in, or in connection with, which the contractor provides, operates or uses a relevant asset (see section 356LA) in a relevant offshore service, or
(b) otherwise carried on in, or in connection with, the provision by the contractor of a relevant offshore service.
(3) The contractor provides a “relevant offshore service” if the contractor provides, operates or uses a relevant asset in, or in connection with, the carrying on of exploration or exploitation activities in a relevant offshore area by the contractor or any other associated person.
(4) “Exploration or exploitation activities” means activities carried on in connection with the exploration or exploitation of the seabed and subsoil and their natural resources.
(5) “Relevant offshore area” means—
(a) the territorial sea of the United Kingdom;
(b) the areas designated by Order in Council under section 1(7) of the Continental Shelf Act 1964.

356LA “Relevant asset”
(1) In this Part “relevant asset” means an asset within subsection (2) in respect of which conditions A and B are met.
(2) An asset is within this subsection if it is a structure that—
(a) can be moved from place to place (whether or not under its own power) without major dismantling or modification, and
(b) can be used to—
(i) drill for the purposes of searching for, or extracting, oil, or
(ii) provide accommodation for individuals who work on or from another structure used in a relevant offshore area for, or in connection with, exploration or exploitation activities (“offshore workers”).
(3) But an asset is not within subsection (2)(b)(ii) if it is reasonable to suppose that its use to provide accommodation for offshore workers is unlikely to be more than incidental to another use, or other uses, to which the asset is likely to be put.
(4) In subsection (2)—
“oil” means any substance capable of being won under the authority of a licence granted under Part 1 of the Petroleum Act 1998 or the Petroleum (Production) Act (Northern Ireland) 1964;
“structure” includes a ship or other vessel.
(5) Condition A is that the asset, or any part of the asset, is leased (whether by the contractor or not) from an associated person other than the contractor.
(6) Condition B is that the asset is of the requisite value.
(7) The asset is of the “requisite value” if its market value is £2,000,000 or more.
(8) The Treasury may by regulations modify the meaning of “requisite value”.
(9) Regulations under subsection (8) may—
(a) amend this section,
(b) make different provision for different cases or different purposes, and
(c) make incidental, consequential, supplementary or transitional provision or savings.

356LB “Associated person”
(1) For the purposes of this Part each of the following is an “associated person”—
(a) the contractor,
(b) any person who is, or has been, connected with the contractor,
(c) any person who has acted, acts or is to act, together with the contractor to provide a service, and
(d) any person who is connected with a person falling within paragraph (b) or (c).
(2) A person does not act together with the contractor to provide a service by reason only of leasing an asset, to any person, which is provided, operated or used in the service.

356LC “Lease”
In this Part “lease” has the meaning given by section 868 and “leased” and “leasing” are to be construed accordingly.

356LD “Contractor's ring fence profits”
In this Part the “contractor's ring fence profits”, in relation to an accounting period, means the contractor's income arising from oil contractor activities for that period.

CHAPTER 3 Deemed separate trade

356M Oil contractor activities treated as separate trade
If the contractor carries on oil contractor activities as part of a trade, those activities are treated for the purposes of the charge to corporation tax on income as a separate trade, distinct from all other activities carried on by the contractor as part of the trade.

CHAPTER 4 Calculation of profits

Hire of relevant assets

356N Restriction on hire etc of relevant assets to be brought into account
(1) This section applies if the contractor makes, or is to make, one or more payments under a lease of—
(a) a relevant asset, or
(b) part of a relevant asset.
(2) The total amount that may be brought into account in respect of the payments for the purposes of calculating the contractor's ring fence profits in an accounting period is limited to the hire cap.
(3) The “hire cap” is an amount equal to the relevant percentage of TC for the accounting period, subject to subsection (4).
(4) If payments in relation to which subsection (2) or section 285A(2) (restriction on hire for company carrying on a ring fence trade under Part 8) applies are also made, or to be made, by one or more other companies in respect of the relevant asset or part, the “hire cap” is to be such proportion of the amount mentioned in subsection (3) as is just and reasonable, having regard (in particular) to the amounts of the payments made, or to be made, by the contractor and each other company.
(5) Subject to subsection (7), the “relevant percentage” is—
UROS TU × 7.5 %
where—
UROS is the number of days in the accounting period that the relevant asset is provided, operated or used in a relevant offshore service, and
TU is the number of days in the accounting period that the relevant asset is provided, operated or used (whether or not in a relevant offshore service).
(6) Accordingly, the relevant percentage is zero if the relevant asset is not provided, operated or used in the accounting period.
(7) If the accounting period is less than 12 months, the relevant percentage is to be proportionally reduced.
(8) TC is—
OC + CE
(9) Unless subsection (11) applies, OC is the sum of—
(a) any consideration given for the acquisition of the relevant asset or part when it was first acquired by an associated person, and
(b) any expenses incurred by an associated person in connection with that acquisition (other than the costs of financing the acquisition).
This is subject to subsections (12) and (13).
(10) Subsection (11) applies if the relevant asset or part—
(a) is leased by an associated person from a person who is not an associated person, and
(b) has never been owned by an associated person.
(11) OC is the sum of—
(a) the consideration that it is reasonable to suppose would have been given for the acquisition of the relevant asset or part, if it had been acquired by an associated person by way of a bargain at arm's length at the time it was first leased as mentioned in subsection (10)(a), and
(b) the expenses (other than the costs of financing the acquisition) that it is reasonable to suppose would have been incurred by an associated person in connection with such an acquisition.
This is subject to subsections (12) and (13).
(12) If the relevant asset or part was first acquired by an associated person, or (as the case may be) first leased as mentioned in subsection (10)(a), before the beginning of the accounting period, OC does not include any part of the consideration mentioned in subsection (9)(a) or (as the case may be) (11)(a) that it is reasonable to attribute to anything that no longer forms part of the relevant asset or part at the beginning of the accounting period.
(13) If the relevant asset or part was first acquired by an associated person, or (as the case may be) first leased as mentioned in subsection (10)(a), in the accounting period, OC for the accounting period is—
OC × D − DBA D
where—
D is the total number of days in the accounting period,
DBA is the number of days in the accounting period before the day on which the relevant asset or part was first acquired or first leased, and
OC is the amount given by subsection (9) or (as the case may be) (11).
(14) CE is capital expenditure on the relevant asset or part (other than capital expenditure in respect of its acquisition or the acquisition of a lease of it) incurred by an associated person—
(a) after it was first acquired by an associated person or (as the case may be) was first leased as mentioned in subsection (10)(a), and
(b) before the end of the accounting period.
This is subject to subsections (15) and (16).
(15) CE does not include any capital expenditure mentioned in subsection (14) that is—
(a) incurred before the beginning of the accounting period, and
(b) not reflected in the state or nature of the relevant asset or part at the beginning of the accounting period.
(16) If any capital expenditure mentioned in subsection (14) is incurred on a day in the accounting period, the amount of CE for the accounting period in respect of that capital expenditure is—
CEA × D − DBI D
where—
D is the total number of days in the accounting period,
DBI is the number of days in the accounting period before the day on which that capital expenditure is incurred, and
CEA is the amount of that capital expenditure.

356NA Restriction on hire: further provision
(1) The Treasury may by regulations modify the “relevant percentage” for the purposes of section 356N or 285A.
(2) Regulations under subsection (1) may—
(a) amend section 356N or section 285A,
(b) make different provision for different cases or different purposes, and
(c) make incidental, consequential, supplementary or transitional provision or savings.
(3) To the extent that, by virtue of section 356N, payments within subsection (1) of that section cannot be brought into account for the purposes of calculating the contractor's ring fence profits in an accounting period, the payments may be—
(a) allowed as a deduction from the contractor's total profits for the accounting period, or
(b) treated as a surrenderable amount of the contractor for the accounting period for the purposes of Part 5 (group relief) (see section 99(7)) as if they were a trading loss,
subject to subsection (4).
(4) No deduction may be made by virtue of subsection (3) from total profits so far as they are contractor's ring fence profits or ring fence profits for the purposes of Part 8.
(5) If an associated person enters into arrangements the main purpose or one of the main purposes of which is to secure that section 356N(2) does not apply in relation to one or more payments to any extent, that provision applies in relation to the payments to the extent it would not otherwise do so.
(6) In subsection (5) “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).

Loan relationships

356NB Restriction on debits to be brought into account
(1) Debits may not be brought into account for the purposes of Part 5 of CTA 2009 (loan relationships) in respect of the contractor's loan relationships in any way that results in a reduction of what would otherwise be the contractor's ring fence profits, but this is subject to subsections (2) to (4).
(2) Subsection (1) does not apply so far as a loan relationship is in respect of money borrowed by the contractor which has been—
(a) used to meet expenditure incurred by the contractor in carrying on oil contractor activities, or
(b) appropriated to meeting expenditure to be so incurred by the contractor.
(3) Subsection (1) does not apply, in the case of debits falling to be brought into account as a result of section 329 of CTA 2009 (pre-loan relationship and abortive expenses) in respect of a loan relationship that has not been entered into, so far as the relationship would have been one entered into for the purpose of borrowing money to be used or appropriated as mentioned in subsection (2).
(4) Subsection (1) does not apply, in the case of debits in respect of a loan relationship to which Chapter 2 of Part 6 of CTA 2009 (relevant non-lending relationships) applies, so far as—
(a) the payment of interest under the relationship is expenditure incurred as mentioned in subsection (2)(a), or
(b) the exchange loss arising from the relationship is in respect of a money debt on which the interest payable (if any) is, or would be, such expenditure.
(5) If a debit—
(a) falls to be brought into account for the purposes of Part 5 of CTA 2009 in respect of a loan relationship of the contractor, but
(b) as a result of this section cannot be brought into account in a way that results in any reduction of what would otherwise be the contractor's ring fence profits,
the debit is to be brought into account for those purposes as a non-trading debit despite anything in section 297 of that Act.
(6) References in this section to a loan relationship, in relation to the borrowing of money, do not include a relationship to which Chapter 2 of Part 6 of CTA 2009 (relevant non-lending relationships) applies.

356NC Restriction on credits to be brought into account
(1) Credits in respect of exchange gains from the contractor's loan relationships may not be brought into account for the purposes of Part 5 of CTA 2009 (loan relationships) in any way that results in an increase of what would otherwise be the contractor's ring fence profits, but this is subject to subsections (2) to (4).
(2) Subsection (1) does not apply so far as a loan relationship is in respect of money borrowed by the contractor which has been—
(a) used to meet expenditure incurred by the contractor in carrying on oil contractor activities, or
(b) appropriated to meeting expenditure to be so incurred by the contractor.
(3) Subsection (1) does not apply, in the case of credits falling to be brought into account as a result of section 329 of CTA 2009 (pre-loan relationship and abortive expenses) in respect of a loan relationship that has not been entered into, so far as the relationship would have been one entered into for the purpose of borrowing money to be used or appropriated as mentioned in subsection (2).
(4) Subsection (1) does not apply, in the case of credits in respect of a loan relationship to which Chapter 2 of Part 6 of CTA 2009 (relevant non-lending relationships) applies, so far as—
(a) the payment of interest under the relationship is expenditure incurred as mentioned in subsection (2)(a), or
(b) the exchange gain arising from the relationship is in respect of a money debt on which the interest payable (if any) is, or would be, such expenditure.
(5) If a credit—
(a) falls to be brought into account for the purposes of Part 5 of CTA 2009 in respect of a loan relationship of the contractor, but
(b) as a result of this section cannot be brought into account in a way that results in any increase of what would otherwise be the contractor's ring fence profits,
the credit is to be brought into account for those purposes as a non-trading credit despite anything in section 297 of that Act.
(6) Section 356NB(6) applies for the purposes of this section.

Relief

356ND Management expenses
No deduction under section 1219 of CTA 2009 (expenses of management of a company's investment business) is to be allowed from the contractor's ring fence profits.

356NE Losses
Relief in respect of a loss incurred by the contractor may not be given under section 37 (relief for trade losses against total profits) against the contractor's ring fence profits except so far as the loss arises from oil contractor activities.

356NF Group relief
(1) On a claim for group relief made by a claimant company in relation to a surrendering company, group relief may not be allowed against the claimant company's contractor's ring fence profits except so far as the claim relates to losses incurred by the surrendering company that arose from oil contractor activities.
(2) In section 105 (restriction on surrender of losses etc within section 99(1)(d) to (g)) the references to the surrendering company's gross profits of the surrender period do not include the company's relevant contractor's ring fence profits for that period.
(3) The company's “relevant contractor's ring fence profits” for that period are—
(a) if for that period there are no qualifying charitable donations made by the company that are allowable under Part 6 (charitable donations relief), the company's contractor's ring fence profits for that period, or
(b) otherwise, so much of the contractor's ring fence profits of the company for that period as exceeds the amount of the qualifying charitable donations made by the company that are allowable under section 189 for that period.
(4) In this section “claimant company” and “surrendering company” are to be read in accordance with Part 5 (group relief) (see section 188).

356NG Capital allowances
A capital allowance may not to any extent be given effect under section 259 or 260 of CAA 2001 (special leasing) by deduction from the contractor's ring fence profits.”

5 In Schedule 4 (index of defined expressions), insert the following entries at the appropriate places—

“associated person (in Part 8ZA)	section 356LB”

“contractor (in Part 8ZA)	section 356L(2)”

“contractor's ring fence profits (in Part 8ZA)	section 356LD”

“exploration or exploitation activities (in Part 8ZA)	section 356L(4)”

“lease (in Part 8ZA)	section 356LC”

“oil contractor activities (in Part 8ZA)	section 356L(2)”

“relevant asset (in Part 8ZA)	section 356LA”

“relevant offshore area (in Part 8ZA)	section 356L(5)”

“relevant offshore service (in Part 8ZA)	section 356L(3)”

Commencement etc
6 This Schedule is to be treated as having come into force on 1 April 2014 (“the commencement date”).
7 Section 356L of CTA 2010 has effect in relation to activities carried out on or after the commencement date.
8 (1) If, on the commencement date, a company was carrying on a trade that consisted of, or included, carrying out oil contractor activities, an accounting period ends (if it would not otherwise do so) with 31 March 2014.
(2) Sub-paragraph (3) applies if—
(a) but for sub-paragraph (1), a company would have had an accounting period that began before the commencement date and ended on or after that date (“the split accounting period”), and
(b) the company's accounting period beginning with 1 April 2014 ends when the split accounting period would have ended but for that sub-paragraph.
(3) For the purposes of Chapter 4 of Part 22 of CTA 2010 (surrender of tax refund within group)—
(a) the company is to be treated as having the split accounting period,
(b) any tax refund due to the company for—
(i) the accounting period ending with 31 March 2014, or
(ii) the accounting period beginning with 1 April 2014,
is to be treated as if it were a tax refund due to the company for the split accounting period, and
(c) if the company surrenders a tax refund that is so treated (or part of such a refund), the references in section 964(6) of CTA 2010 to the date on which corporation tax became due and payable are to be treated as references to the date on which corporation tax would have become due and payable had the company had the split accounting period.
9 (1) A company may be given relief under section 45 of CTA 2010 (carry forward of trade loss against subsequent trade profits) for a loss made in an accounting period ending before the commencement date against profits of a ring fence trade so far as (and only so far as) the loss would have been a loss of the ring fence trade had section 356L of that Act had effect in relation to activities carried out before the commencement date and Part 8ZA therefore applied.
(2) In sub-paragraph (1) “ring fence trade” means oil contractor activities that constitute a separate trade (whether by virtue of section 356M of that Act or otherwise).

SCHEDULE 17 Partnerships
Section 74

PART 1 Limited liability partnerships: treatment of salaried members

Main provision
1 In Part 9 of ITTOIA 2005 (partnerships) after section 863 (limited liability partnerships) insert—

“863A Limited liability partnerships: salaried members
(1) Subsection (2) applies at any time when conditions A to C in sections 863B to 863D are met in the case of an individual (“M”) who is a member of a limited liability partnership in relation to which section 863(1) applies.
(2) For the purposes of the Income Tax Acts—
(a) M is to be treated as being employed by the limited liability partnership under a contract of service instead of being a member of the partnership, and
(b) accordingly, M's rights and duties as a member of the limited liability partnership are to be treated as rights and duties under that contract of service.
(3) This section needs to be read with section 863G (anti-avoidance).

863B Condition A
(1) The question of whether condition A is met is to be determined at the following times—
(a) if relevant arrangements are in place—
(i) at the beginning of the tax year 2014-15, or
(ii) if later, when M becomes a member of the limited liability partnership,
at the time mentioned in sub-paragraph (i) or (ii) (as the case may be);
(b) at any subsequent time when relevant arrangements are put in place or modified;
(c) where—
(i) the question has previously been determined, and
(ii) the relevant arrangements which were in place at the time of the previous determination do not end, and are not modified, by the end of the period which was the relevant period for the purposes of the previous determination (see step 1 in subsection (3)),
immediately after the end of that period.
(2) “Relevant arrangements” means arrangements under which amounts are to be, or may be, payable by the limited liability partnership in respect of M's performance of services for the partnership in M's capacity as a member of the partnership.
(3) Take the following steps to determine whether condition A is met at a time (“the relevant time”).
Step 1 Identify the relevant period by reference to the relevant arrangements which are in place at the relevant time.“The relevant period” means the period—
(a) beginning with the relevant time, and
(b) ending at the time when, as at the relevant time, it is reasonable to expect that the relevant arrangements will end or be modified.
Step 2 Condition A is met if, at the relevant time, it is reasonable to expect that at least 80% of the total amount payable by the limited liability partnership in respect of M's performance during the relevant period of services for the partnership in M's capacity as a member of the partnership will be disguised salary. An amount within the total amount is “disguised salary” if it—
(a) is fixed,
(b) is variable, but is varied without reference to the overall amount of the profits or losses of the limited liability partnership, or
(c) is not, in practice, affected by the overall amount of those profits or losses.
(4) If condition A is determined to be met, or not to be met, at a time, the condition is to be treated as met, or as not met, at all subsequent times until the question is required to be re-determined under subsection (1)(b) or (c).
(5) In this section “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).

863C Condition B
Condition B is that the mutual rights and duties of the members of the limited liability partnership, and of the partnership and its members, do not give M significant influence over the affairs of the partnership.

863D Condition C
(1) Condition C is that, at the time at which it is being determined whether the condition is met (“the relevant time”), M's contribution to the limited liability partnership (see sections 863E and 863F) is less than 25% of the amount given by subsection (2) (subject to subsection (7)).
(2) That amount is the total amount of the disguised salary which, at the relevant time, it is reasonable to expect will be payable by the limited liability partnership in respect of M's performance during the relevant tax year of services for the partnership in M's capacity as a member of the partnership.
In this section “the relevant tax year” means the tax year in which the relevant time falls and an amount is “disguised salary” if it falls within any of paragraphs (a) to (c) at step 2 in section 863B(3).
(3) The question of whether condition C is met is to be determined—
(a) at the beginning of the tax year 2014-15 or, if later, the time at which M becomes a member of the limited liability partnership;
(b) after that, at the beginning of each tax year.
(4) If in a tax year—
(a) there is a change in M's contribution to the limited liability partnership, or
(b) there is otherwise a change of circumstances which might affect the question of whether condition C is met,
the question of whether the condition is met is to be re-determined at the time of the change.
This subsection is subject to section 863F(3).
(5) If condition C is determined to be met (including by virtue of subsection (7)), or not to be met, at the relevant time, the condition is to be treated as met, or as not met, at all subsequent times until the question is required to be re-determined under subsection (3)(b) or (4).
(6) Subsection (7) applies if—
(a) the relevant time coincides with an increase in M's contribution to the limited liability partnership, and
(b) apart from subsection (7), that increase would cause condition C not to be met at the relevant time.
(7) Condition C is to be treated as met at the relevant time unless, at that time, it is reasonable to expect that condition C will not be met for the remainder of the relevant tax year (ignoring this subsection).
(8) If there are any excluded days in the relevant tax year (see subsections (9) to (11)), in subsection (1) the reference to M's contribution to the limited liability partnership is to be read as a reference to that contribution multiplied by the following fraction—
D – E D
where—
D is the number of days in the relevant tax year, and
E is the number of excluded days in the relevant tax year.
(9) Any day in the relevant tax year—
(a) which is before the day on which the relevant time falls, and
(b) on which M is not a member of the limited liability partnership,
is an “excluded” day for the purposes of subsection (8).
(10) If, at the relevant time, it is reasonable to expect that M will not be a member of the limited liability partnership for the remainder of the relevant tax year, any day in the relevant tax year—
(a) which is after the day on which the relevant time falls, and
(b) on which it is reasonable to expect that M will not be a member of the limited liability partnership,
is an “excluded” day for the purposes of subsection (8).
(11) If the relevant time coincides with an increase in M's contribution to the limited liability partnership, any day in the relevant tax year—
(a) which is before the day on which the relevant time falls, and
(b) on which condition C is met,
is an “excluded” day for the purposes of subsection (8).
(12) In subsections (6) and (11) references to an increase in M's contribution to the limited liability partnership include (in particular)—
(a) the making of M's first contribution to the capital of the limited liability partnership, and
(b) M being treated as having made a contribution by section 863F(2).

863E M's contribution to the limited liability partnership: the basic calculation
(1) For the purposes of condition C in section 863D M's contribution to the limited liability partnership at a time is amount A.
(2) Amount A is the total amount which M has contributed to the limited liability partnership as capital less so much of that amount (if any) as is within subsection (6).
(3) In particular, M's share of any profits of the limited liability partnership is to be included in the amount which M has contributed to the partnership as capital so far as that share has been added to the partnership's capital.
(4) In subsection (3) the reference to profits is to profits calculated in accordance with generally accepted accounting practice (before any adjustment required or authorised by law in calculating profits for income tax purposes).
(5) Subsection (3) applies as well for the purpose of construing references to contributions to the capital of the limited liability partnership in sections 863D(12)(a) and 863F.
(6) An amount of capital is within this subsection if it is an amount which—
(a) M has previously drawn out or received back,
(b) M is or may be entitled to draw out or receive back at any time when M is a member of the limited liability partnership, or
(c) M is or may be entitled to require another person to reimburse to M.
(7) In subsection (6) any reference to drawing out or receiving back an amount is to doing so directly or indirectly.

863F M's contribution to the limited liability partnership: deemed contributions
(1) This section applies if—
(a) by the time mentioned in section 863D(3)(a), M has given an undertaking (whether or not legally enforceable) to make a contribution to the capital of the limited liability partnership but has not made the contribution,
(b) the undertaking requires M to make the contribution by the end of—
(i) the period of 3 months ending with 5 July 2014, or
(ii) if it ends after that date, the period of 2 months beginning with the date on which M becomes a member of the limited liability partnership, and
(c) when it is made, the contribution will be included in amount A under section 863E.
In the following subsections “the relevant period” means the period mentioned in paragraph (b)(i) or (ii) (as the case may be).
(2) For the purpose of determining whether condition C in section 863D is met—
(a) at the time mentioned in section 863D(3)(a), or
(b) at any subsequent time during the relevant period,
M is to be treated as having made the contribution at the time mentioned in section 863D(3)(a) (so far as M has not (actually) made the contribution at the time at which it is being determined whether condition C is met).
(3) If M (actually) makes the contribution (in whole or in part) during the relevant period, the question of whether condition C is met is not to be re-determined under section 863D(4) just because of the making of the contribution (in whole or in part).
(4) If M does not (actually) make the contribution (in whole or in part) by the end of the relevant period, any determination in relation to which subsection (2) applied is to be made again (as at the time at which it was originally made).
(5) In making a determination again—
(a) if it is the whole of the contribution which M does not make by the end of the relevant period, subsection (2) is to be ignored;
(b) if M makes part of the contribution by the end of the relevant period, in subsection (2) references to the contribution are to be read as references to that part of it.

863G Anti-avoidance
(1) In determining whether section 863A(2) applies in the case of an individual who is a member of a limited liability partnership, no regard is to be had to any arrangements the main purpose, or one of the main purposes, of which is to secure that section 863A(2) does not apply in the case of—
(a) the individual, or
(b) the individual and one or more other individuals.
(2) Subsection (4) applies if—
(a) an individual (“X”) personally performs services for a limited liability partnership at a time when X is not a member of the partnership,
(b) X performs the services under arrangements involving a member of the limited liability partnership (“Y”) who is not an individual,
(c) the main purpose, or one of the main purposes, of those arrangements is to secure that section 863A(2) does not apply in the case of X or in the case of X and one or more other individuals, and
(d) in relation to X's performance of the services, an amount falling within subsection (3) arises to Y in respect of Y's membership of the limited liability partnership.
(3) An amount falls within this subsection if—
(a) were X performing the services under a contract of service by which X were employed by the limited liability partnership, and
(b) were the amount to arise to X directly from the limited liability partnership,
the amount would be employment income of X in respect of the employment.
(4) If this subsection applies, in relation to X's performance of the services, X is to be treated on the following basis—
(a) X is a member of the limited liability partnership in whose case section 863A(2) applies,
(b) the amount arising to Y arises instead to X directly from the limited liability partnership,
(c) that amount is employment income of X in respect of the employment under section 863A(2) accordingly, and
(d) neither that amount, nor any amount representing that amount, is to be income of X for income tax purposes on any other basis.
(4A) Section 863A(2) does not apply in the case of a member of a limited liability partnership if, apart from this subsection, it would apply in consequence of arrangements the main purpose, or one of the main purposes, of which is to secure that section 850C does not apply for one or more periods of account in relation to—
(a) the member, or
(b) the member and one or more other members of the limited liability partnership.
(5) In this section “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).”

2 In Part 17 of CTA 2009 (partnerships) after section 1273 (limited liability partnerships) insert—

“1273A Limited liability partnerships: salaried members
(1) Subsection (2) applies at any time when section 863A(2) of ITTOIA 2005 (limited liability partnerships: salaried members) applies in the case of an individual (“M”) who is a member of a limited liability partnership in relation to which section 1273(1) applies.
(2) In relation to the charge to corporation tax on income, for the purposes of the Corporation Tax Acts—
(a) M is to be treated as being employed by the limited liability partnership under a contract of service instead of being a member of the partnership, and
(b) accordingly, M's rights and duties as a member of the limited liability partnership are to be treated as rights and duties under that contract of service.”

Supplementary provision: deductions
3 (1) ITTOIA 2005 is amended as follows.
(2) At the end of Chapter 5 of Part 2 (trade profits: rules allowing deductions) insert—

“Limited liability partnerships: salaried members

94AA Deductions in relation to salaried members
(1) This section applies in relation to a limited liability partnership if section 863A(2) (limited liability partnerships: salaried members) applies in the case of a member of the partnership (“M”).
(2) In calculating for a period of account under section 849 (calculation of firm's profits and losses) the profits of a trade carried on by the limited liability partnership, a deduction is allowed for expenses paid by the partnership in respect of M's employment under section 863A(2) if no deduction would otherwise be allowed for the payment.
(3) This section is subject to section 33 (capital expenditure), section 34 (expenses not wholly and exclusively for trade etc), section 45 (business entertainment and gifts) and section 53 (social security contributions).”

(3) In Chapter 3 of Part 3 (profits of property businesses: basic rules), in the table in section 272(2) (application of trading income rules), after the entry for section 94A insert—

“section 94AA	deductions in relation to salaried members of limited liability partnerships”

.
4 (1) CTA 2009 is amended as follows.
(2) At the end of Chapter 5 of Part 3 (trade profits: rules allowing deductions) insert—

“Limited liability partnerships: salaried members

92A Deductions in relation to salaried members
(1) This section applies in relation to a limited liability partnership if section 1273A(2) (limited liability partnerships: salaried members) applies in the case of a member of the partnership (“M”).
(2) In calculating for an accounting period under section 1259 (calculation of firm's profits and losses) the profits of a trade carried on by the limited liability partnership, a deduction is allowed for expenses paid by the partnership in respect of M's employment under section 1273A(2) if no deduction would otherwise be allowed for the payment.
(3) This section is subject to—
(a) section 53 (capital expenditure),
(b) section 54 (expenses not wholly and exclusively for trade etc),
(c) section 1298 (business entertainment and gifts), and
(d) section 1302 (social security contributions).”

(3) In Chapter 3 of Part 4 (profits of property businesses: basic rules), in the table in section 210(2) (application of trading income rules), after the entry for section 92 insert—

“section 92A	deductions in relation to salaried members of limited liability partnerships”

.
(4) In Chapter 2 of Part 16 (companies with investment business: management expenses)—
(a) in section 1224(1) (accounting period to which expenses are referable) for “1227” substitute “ 1227A ”, and
(b) after section 1227 insert—

“1227A Management expenses in relation to salaried members of limited liability partnerships
(1) This section applies in relation to a company if—
(a) as a member of a limited liability partnership, the company is a company with investment business,
(b) section 1273A(2) (limited liability partnerships: salaried members) applies in the case of a member of the partnership (“M”), and
(c) expenses of management of the company's investment business are paid in respect of M's employment under section 1273A(2) but are not referable to any accounting period under sections 1225 to 1227.
(2) The expenses are to be treated as referable to the accounting period in which they are paid.”

Supplementary provision: arrangements made by intermediaries
5 In Chapter 8 of Part 2 of ITEPA 2003 (application of provisions to workers under arrangements made by intermediaries) in section 54 (deemed employment payment) after subsection (1) insert—

“(1A) For the purposes of step 1 of subsection (1), any payment or benefit which is employment income of the worker by virtue of section 863G(4) of ITTOIA 2005 (salaried members of limited liability partnerships: anti-avoidance) is to be ignored.”

Commencement
6 (1) Subject to what follows, the amendments made by this Part are treated as having come into force on 6 April 2014.
(2) Section 863G(4A) of ITTOIA 2005 (as inserted by paragraph 1) comes into force on the day after the day on which this Act is passed.

PART 2 Partnerships with mixed membership

Main provision
7 (1) Part 9 of ITTOIA 2005 (partnerships) is amended as follows.
(2) In section 850 (allocation of firm's profits and losses between partners) in subsection (1) for “and 850B” substitute “ to 850D ”.
(3) After section 850B insert—

“850C Excess profit allocation to non-individual partners
(1) Subsections (4) and (5) apply if—
(a) for a period of account (“the relevant period of account”)—
(i) the calculation under section 849 in relation to an individual partner (“A”) (see subsection (6)) produces a profit for the firm, and
(ii) A's share of that profit determined under section 850 or 850A (“A's profit share”) is a profit or is neither a profit nor a loss,
(b) a non-individual partner (“B”) (see subsection (6)) has a share of the profit for the firm mentioned in paragraph (a)(i) (“B's profit share”) which is a profit (see subsection (7)), and
(c) condition X or Y is met.
(2) Condition X is that it is reasonable to suppose that—
(a) amounts representing A's deferred profit (see subsection (8)) are included in B's profit share, and
(b) in consequence, both A's profit share and the relevant tax amount (see subsection (9)) are lower than they would otherwise have been.
(3) Condition Y is that—
(a) B's profit share exceeds the appropriate notional profit (see subsections (10) to (17)),
(b) A has the power to enjoy B's profit share (“A's power to enjoy”) (see subsections (18) to (21)), and
(c) it is reasonable to suppose that—
(i) the whole or any part of B's profit share is attributable to A's power to enjoy, and
(ii) both A's profit share and the relevant tax amount (see subsection (9)) are lower than they would have been in the absence of A's power to enjoy.
(4) A's profit share is increased by so much of the amount of B's profit share as, it is reasonable to suppose, is attributable to—
(a) A's deferred profit, or
(b) A's power to enjoy,
as determined on a just and reasonable basis.
But any increase by virtue of paragraph (b) is not to exceed the amount of the excess mentioned in subsection (3)(a) after deducting from that amount any increase by virtue of paragraph (a).
(5) If B is chargeable to income tax, in applying sections 850 to 850B in relation to B for the relevant period of account, such adjustments are to be made as are just and reasonable to take account of the increase in A's profit share under subsection (4).
(This subsection does not apply for the purposes of subsection (7) or section 850D(7).)
(6) A partner in a firm is an “individual partner” if the partner is an individual and “non-individual partner” is to be read accordingly; but “non-individual partner” does not include the firm itself where it is treated as a partner under section 863I (allocation of profit to AIFM firm).
(7) B's profit share is to be determined by applying section 850 and, if relevant, section 850A in relation to B for the relevant period of account (whether or not B is chargeable to income tax) on the assumption that the calculation under section 849 in relation to B produces the profit for the firm mentioned in subsection (1)(a)(i).
(8) “A's deferred profit”—
(a) is any remuneration or other benefits or returns the provision of which to A has been deferred (whether pending the meeting of any conditions (including conditions which may never be met) or otherwise), and
(b) includes A's share (as determined on a just and reasonable basis) of any remuneration or other benefits or returns the provision of which to A and one or more other persons, taken together, has been deferred (whether pending the meeting of any conditions (including conditions which may never be met) or otherwise).
(9) “The relevant tax amount” is the total amount of tax which, apart from this section, would be chargeable in respect of A and B's income as partners in the firm.
(10) “The appropriate notional profit” is the sum of the appropriate notional return on capital and the appropriate notional consideration for services.
(11) “The appropriate notional return on capital” is—
(a) the return which B would receive for the relevant period of account in respect of B's contribution to the firm were the return to be calculated on the basis mentioned in subsection (12), less
(b) any return actually received for the relevant period of account in respect of B's contribution to the firm which is not included in B's profit share.
(12) The return mentioned in subsection (11)(a) is to be calculated on the basis that it is a return which is—
(a) by reference to the time value of an amount of money equal to B's contribution to the firm, and
(b) at a rate which (in all the circumstances) is a commercial rate of interest.
(13) For the purposes of subsections (11) and (12) B's contribution to the firm is amount A determined under section 108 of ITA 2007 (meaning of “contribution to the LLP”).
(14) That section is to be applied—
(a) reading references to the individual as references to B and references to the LLP as references to the firm, and
(b) with the omission of—
(i) subsections (5)(b) and (9), and
(ii) in subsection (6) the words from “but” to the end.
(15) “The appropriate notional consideration for services” is—
(a) the amount which B would receive in consideration for any services provided to the firm by B during the relevant period of account were the consideration to be calculated on the basis mentioned in subsection (16), less
(b) any amount actually received in consideration for any such services which is not included in B's profit share.
(16) The consideration mentioned in subsection (15)(a) is to be calculated on the basis that B is not a partner in the firm and is acting at arm's length from the firm.
(17) Any services, the provision of which involves any partner in the firm in addition to B, are to be ignored for the purposes of subsection (15).
(18) A has the power to enjoy B's profit share if—
(a) A is connected with B by virtue of a provision of section 993 of ITA 2007 (meaning of “connected” persons) other than subsection (4) of that section,
(b) A is a party to arrangements the main purpose, or one of the main purposes, of which is to secure that an amount included in B's profit share—
(i) is charged to corporation tax rather than income tax, or
(ii) is otherwise subject to the provisions of the Corporation Tax Acts rather than the provisions of the Income Tax Acts, or
(c) any of the enjoyment conditions (see subsection (20)) is met in relation to B's profit share or any part of B's profit share.
(19) In subsection (18)(b) “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).
(20) The enjoyment conditions are—
(a) B's profit share, or the part, is in fact so dealt with by any person as to be calculated at some time to enure for the benefit of A, whether in the form of income or not;
(b) the receipt or accrual of B's profit share, or the part, by or to B operates to increase the value to A of any assets held by, or for the benefit of, A;
(c) A receives or is entitled to receive at any time any benefit provided or to be provided (directly or indirectly) out of B's profit share or the part;
(d) A may become entitled to the beneficial enjoyment of B's profit share, or the part, if one or more powers are exercised or successively exercised by any person;
(e) A is able in any manner to control (directly or indirectly) the application of B's profit share or the part.
(21) In subsection (20) references to A include any person connected with A apart from B.
(22) Subsection (23) applies if—
(a) the increase under subsection (4), or any part of it, is allocated by A to the firm itself under section 863I (allocation of profit to AIFM firm), and
(b) B makes a payment to the firm representing any income tax for which the firm is liable by virtue of section 863I in respect of the amount of the increase allocated to it.
(23) For income tax purposes, the payment—
(a) is not to be income of any partner in the firm, and
(b) is not to be taken into account in calculating any profits or losses of B or otherwise deducted from any income of B.

850D Excess profit allocation: cases involving individuals who are not partners
(1) Subsections (4) and (5) apply if—
(a) at a time during a period of account (“the relevant period of account”) in respect of a firm, an individual (“A”) personally performs services for the firm,
(b) if A had been a partner in the firm throughout the relevant period of account, the calculation under section 849 in relation to A for the relevant period of account would have produced a profit for the firm,
(c) a non-individual partner (“B”) in the firm (see subsection (6)) has a share of that profit (“B's profit share”) which is a profit (see subsection (7)),
(d) it is reasonable to suppose that A would have been a partner in the firm at a time during the relevant period of account or any earlier period of account but for the provision contained in section 850C (see also subsections (8) to (10)), and
(e) condition X or Y is met.
(2) Condition X is that it is reasonable to suppose that amounts representing A's deferred profit (see subsection (11)) are included in B's profit share.
(3) Condition Y is that—
(a) B's profit share exceeds the appropriate notional profit (see subsection (12)),
(b) A has the power to enjoy B's profit share (“A's power to enjoy”) (see subsection (13)), and
(c) it is reasonable to suppose that the whole or any part of B's profit share is attributable to A's power to enjoy.
(4) A is to be treated on the following basis—
(a) A is a partner in the firm throughout the relevant period of account (but not for the purposes of section 863I (allocation of profit to AIFM firm)),
(b) A's share of the firm's profit for the relevant period of account is so much of the amount of B's profit share as, it is reasonable to suppose, is attributable to—
(i) A's deferred profit, or
(ii) A's power to enjoy,
as determined on a just and reasonable basis, and
(c) A's share of the firm's profit is chargeable to income tax under the applicable provisions of the Income Tax Acts for the tax year in which the relevant period of account ends.
But A's share of the firm's profit by virtue of paragraph (b)(ii) is not to exceed the amount of the excess mentioned in subsection (3)(a) after deducting from that amount A's share of the firm's profit (if any) by virtue of paragraph (b)(i).
(5) If B is chargeable to income tax, in applying sections 850 to 850B in relation to B for the relevant period of account, such adjustments are to be made as are just and reasonable to take account of A's share of the firm's profit under subsection (4).
(This subsection does not apply for the purposes of subsection (7) or section 850C(7).)
(6) “Non-individual partner” is to be read in accordance with section 850C(6).
(7) B's profit share is to be determined by applying section 850 and, if relevant, section 850A in relation to B for the relevant period of account (whether or not B is chargeable to income tax) on the assumption that the calculation under section 849 in relation to B produces the profit for the firm mentioned in subsection (1)(b).
(8) The requirement of subsection (1)(d) is to be assumed to be met if, at a time during the relevant period of account, A is a member of a partnership which is associated with the firm.
(9) A partnership is “associated” with the firm if—
(a) it is a member of the firm, or
(b) it is a member of a partnership which is associated with the firm (whether by virtue of paragraph (a) or this paragraph).
(10) In subsections (8) and (9) “partnership” includes a limited liability partnership whether or not section 863(1) applies in relation to it.
(11) “A's deferred profit” is to be read in accordance with section 850C(8).
(12) Section 850C(10) to (17) applies for the purpose of determining “the appropriate notional profit”; and A is to be treated as a partner in the firm for the purposes of section 850C(17).
(13) Section 850C(18) to (21) applies for the purpose of determining if A has the power to enjoy B's profit share.

850E Payments by B out of the excess part of B's profit share
(1) Subsection (2) applies in a case in which section 850C(4) or section 850D(4) applies if—
(a) there is an agreement in place in relation to the excess part of B's profit share,
(b) as a result of the agreement, B makes a payment to another person out of the excess part of B's profit share, and
(c) the payment is not made under any arrangements the main purpose, or one of the main purposes, of which is the obtaining of a tax advantage for any person.
(2) For income tax purposes, the payment—
(a) is not to be income of the recipient,
(b) is not to be taken into account in calculating any profits or losses of B or otherwise deducted from any income of B, and
(c) is not to be regarded as a distribution.
(3) In this section—
“arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable),
“B's profit share” has the same meaning as in section 850C or 850D (as the case may be),
“the excess part of B's profit share” means so much of the amount of B's profit share as is represented by the amount of, as the case may be—
(a) the increase under section 850C(4), or
(b) A's share of the firm's profit under section 850D(4), and
“tax advantage” has the meaning given by section 1139 of CTA 2010.”

8 (1) Chapter 3 of Part 4 of ITA 2007 (trade loss relief: restrictions for certain partners) is amended as follows.
(2) In section 102 (overview of Chapter) after subsection (2) insert—

“(2A) This Chapter also provides for no relief to be given for a loss made by an individual in a trade carried on by the individual as a partner in a firm in certain cases where some or all of the loss is allocated to the individual rather than a person who is not an individual (see section 116A).”

(3) At the end insert—

“Partnerships with mixed membership etc

116A Excess loss allocation to partners who are individuals
(1) Subsection (2) applies if—
(a) in a tax year, an individual (“A”) makes a loss in a trade as a partner in a firm, and
(b) A's loss arises, wholly or partly—
(i) directly or indirectly in consequence of, or
(ii) otherwise in connection with,
relevant tax avoidance arrangements.
(2) No relevant loss relief may be given to A for A's loss.
(3) In subsection (1)(b) “relevant tax avoidance arrangements” means arrangements—
(a) to which A is party, and
(b) the main purpose, or one of the main purposes, of which is to secure that losses of a trade are allocated, or otherwise arise, in whole or in part to A, rather than a person who is not an individual, with a view to A obtaining relevant loss relief.
(4) In subsection (3)(b) references to A include references to A and other individuals.
(5) For the purposes of subsection (3)(b) it does not matter if the person who is not an individual is not a partner in the firm or is unknown or does not exist.
(6) In this section—
“arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable), and
“relevant loss relief” means—
(a) sideways relief,
(b) relief under section 83 (carry-forward trade loss relief),
(c) relief under section 89 (terminal trade loss relief), or
(d) capital gains relief.
(7) This section applies to professions as it applies to trades.”

9 (1) Chapter 4 of Part 4 of ITA 2007 (losses from property businesses) is amended as follows.
(2) In section 117 (overview of Chapter) in subsection (3) for “and 127B” substitute “ to 127C ”.
(3) After section 127B insert—

“127C Excess loss allocation to partners who are individuals
(1) Subsection (2) applies if—
(a) in a tax year, an individual (“A”) makes a loss in a UK property business or an overseas property business as a partner in a firm, and
(b) A's loss arises, wholly or partly—
(i) directly or indirectly in consequence of, or
(ii) otherwise in connection with,
relevant tax avoidance arrangements.
(2) No relevant loss relief may be given to A for A's loss.
(3) In subsection (1)(b) “relevant tax avoidance arrangements” means arrangements—
(a) to which A is party, and
(b) the main purpose, or one of the main purposes, of which is to secure that losses of a UK property business or an overseas property business are allocated, or otherwise arise, in whole or in part to A, rather than a person who is not an individual, with a view to A obtaining relevant loss relief.
(4) In subsection (3)(b) references to A include references to A and other individuals.
(5) For the purposes of subsection (3)(b) it does not matter if the person who is not an individual is not a partner in the firm or is unknown or does not exist.
(6) In this section—
“arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable), and
“relevant loss relief” means relief under section 118 (carry-forward property loss relief) or section 120 (property loss relief against general income).”

10 (1) Part 17 of CTA 2009 (partnerships) is amended as follows.
(2) In section 1262 (allocation of firm's profits and losses between partners) in subsection (1) for “and 1264” substitute “ to 1264A ”.
(3) After section 1264 insert—

“1264A Excess profit allocation to non-individual partners etc
(1) Subsection (2) applies in a case in which—
(a) section 850C(4) or 850D(4) of ITTOIA 2005 applies for a period of account (“the relevant period of account”), and
(b) the partner who is “B” for the purposes of section 850C or 850D of that Act (as the case may be) is a company.
(2) In applying sections 1262 to 1264 in relation to the company—
(a) for the accounting period of the firm which coincides with the relevant period of account, or
(b) if no accounting period of the firm coincides with the relevant period of account, for accounting periods of the firm in which the relevant period of account falls,
such adjustments are to be made as are just and reasonable to take account of the increase under section 850C(4) of ITTOIA 2005 or A's share of the firm's profit under section 850D(4) of that Act.
(3) Sections 850C(23) and 850E(2) of ITTOIA 2005 apply for corporation tax purposes as they apply for income tax purposes.”

Commencement
11 (1) Subject to sub-paragraph (2), the amendments made by paragraphs 7 and 10 are treated as having come into force on 5 December 2013 and have effect in accordance with paragraphs 12 and 13.
(2) Section 850C(8)(b), (18)(b) and (19) of ITTOIA 2005 is treated as having come into force on 6 April 2014.
12 (1) Section 850C of ITTOIA 2005 has effect for periods of account beginning on or after 6 April 2014 (and section 850E of ITTOIA 2005 and section 1264A of CTA 2009 have effect accordingly).
(2) Sub-paragraphs (3) and (4) apply in relation to a firm where a period of account (“the straddling period”) begins before 6 April 2014 but ends on or after that date.
(3) Assume that the part of the straddling period falling on or after 6 April 2014 is a separate period of account.
(4) If section 850C(4) of ITTOIA 2005 would apply in relation to one or more partners in the firm for the assumed separate period of account, Part 9 of that Act has effect as if that part of the straddling period were a separate period of account.
13 (1) Section 850D of ITTOIA 2005 has effect for periods of account beginning on or after 6 April 2014 (and section 850E of ITTOIA 2005 and section 1264A of CTA 2009 have effect accordingly).
(2) Sub-paragraphs (3) and (4) apply in relation to a firm where a period of account (“the straddling period”) begins before 6 April 2014 but ends on or after that date.
(3) Assume that the part of the straddling period falling on or after 6 April 2014 is a separate period of account.
(4) If section 850D(4) of ITTOIA 2005 would apply in relation to one or more individuals for the assumed separate period of account, Part 9 of that Act has effect as if that part of the straddling period were a separate period of account.
14 (1) The amendments made by paragraphs 8 and 9 have effect in relation to losses made in the tax year 2014-15 and subsequent tax years.
(2) Sub-paragraphs (3) and (4) apply for the purposes of section 116A or 127C of ITA 2007 if a loss made by an individual as a partner in a firm arises in a period of account (“the straddling period”) which begins before 6 April 2014 but ends on or after that date.
(3) The loss is to be apportioned between the part of the straddling period falling before 6 April 2014 and the part falling on or after that date—
(a) on a time basis according to the respective lengths of those parts of the straddling period, or
(b) if that method produces a result that is unjust or unreasonable, on a just and reasonable basis.
(4) Section 116A or 127C of ITA 2007 does not apply in relation to the loss so far as it is apportioned to the part of the straddling period falling before 6 April 2014.

PART 3 Alternative investment fund managers: deferred remuneration etc

Main provision
15 At the end of Part 9 of ITTOIA 2005 (partnerships) insert—

“Alternative investment fund managers

863H Election for special provision for alternative investment fund managers to apply
(1) Section 863I applies in relation to an AIFM trade of an AIFM firm if the AIFM firm elects for that section to apply.
(2) An election under this section must be made within 6 months after the end of the first period of account for which the election is to have effect.
(3) An “AIFM firm” is a firm—
(a) the regular business of which is managing one or more AIFs, or
(b) which carries out one or more functions of managing one or more AIFs—
(i) as the delegate of, or
(ii) as the sub-delegate of a delegate of,
a person whose regular business is managing one or more AIFs.
(4) An “AIFM trade” is a trade of an AIFM firm which involves the firm's activities mentioned in subsection (3)(a) or (b).
(5) Subsection (3)(a) and (b) is to be construed as if it were contained in regulation 4 of the Alternative Investment Fund Managers Regulations 2013 (S.I. 2013/1773).

863I Allocation of profit to the AIFM firm
(1) This section applies for a period of account of the AIFM trade if—
(a) the calculation under section 849 in relation to a partner (“P”) in the AIFM firm produces a profit, and
(b) P's share of that profit determined under section 850, 850A or 850C would, apart from this section, be a profit consisting (wholly or partly) of relevant restricted profit (see subsections (6) to (9)) chargeable to income tax under Chapter 2 of Part 2.
(2) P may allocate all or a part of the relevant restricted profit (“the allocated profit”) to the AIFM firm itself.
(3) If P does so—
(a) the allocated profit is to be excluded from P's share of the AIFM firm's profit mentioned in subsection (1)(b),
(b) the AIFM firm is to be treated in accordance with subsection (4) as if it were itself a person who is a partner in the AIFM firm (and for this purpose, in the case of a limited liability partnership, it is the body corporate which is to be treated as that person), and
(c) all enactments applying generally to income tax are to apply accordingly with any necessary modifications (subject to subsection (5)).
(4) The AIFM firm is treated on the following basis—
(a) the calculation under section 849 in relation to the AIFM firm for the period of account produces the profit mentioned in subsection (1)(a),
(b) the AIFM firm's share of that profit determined under section 850 is the allocated profit (and sections 850A and 850C are to be ignored),
(c) that share is chargeable to tax under Chapter 2 of Part 2 for the tax year in which the period of account ends (with the person liable for the tax charged being the AIFM firm), and
(d) the tax is charged at the additional rate.
(5) The Commissioners for Her Majesty's Revenue and Customs may make regulations modifying any of the following enactments applying to income tax as they apply by virtue of this section in relation to the AIFM firm—
(a) those relating to returns of information and supply of accounts, statements and reports,
(b) those relating to the assessing, collecting and receiving of income tax,
(c) those conferring or regulating a right of appeal, and
(d) those concerning administration, penalties, interest on unpaid tax and priority of tax in cases of insolvency under the law of any part of the United Kingdom.
(6) P's profit determined under section 850, 850A or 850C is “relevant restricted profit” so far as it represents variable remuneration awarded to P—
(a) as deferred remuneration (including deferred remuneration which, if it vests in P, will vest in the form of instruments), or
(b) as upfront remuneration which vests in P in the form of instruments with a retention period of at least 6 months.
(7) In order for any variable remuneration to count for the purposes of subsection (6) it must be awarded to P in accordance with arrangements which are consistent with the AIFMD remuneration guidelines (see section 863L).
(8) In the case of a firm which is an AIFM firm by virtue of section 863H(3)(b) only, this section applies only in relation to partners who fall within a category of staff which is classified as identified staff.
(9) Terms used in subsections (6) to (8) have the same meaning as in the AIFMD remuneration guidelines.

863J Vesting of remuneration represented by the allocated profit
(1) Subsection (2) applies if all or a part of the variable remuneration represented by the allocated profit vests in P at a time when P is carrying on the AIFM trade (whether as a partner in the AIFM firm or otherwise).
(2) The amount given by subsection (5) is treated as a profit of the relevant tax year (see subsection (7)) made by P in the AIFM trade chargeable to income tax under Chapter 2 of Part 2.
(3) Subsection (4) applies if all or a part of the variable remuneration represented by the allocated profit vests in P at a time when P is no longer carrying on the AIFM trade (whether as a partner in the AIFM firm or otherwise).
(4) If this subsection applies—
(a) P is treated as receiving, in the relevant tax year (see subsection (7)), income of the amount given by subsection (5),
(b) income tax is charged under this subsection on that income, and
(c) P is the person liable for that tax.
(5) The amount to be treated as a profit or as income received by P is—
(a) the amount of the allocated profit, or the part of it representing the part of the variable remuneration, net of the income tax for which the AIFM firm is liable by virtue of section 863I in respect of the allocated profit or the part of it, plus
(b) an amount equal to—
(i) so much of the income tax mentioned in paragraph (a) as is paid by the AIFM firm by the time the vesting occurs, or
(ii) if the vesting occurs in the tax year for which the allocated profit is chargeable to tax under Chapter 2 of Part 2 by virtue of section 863I, so much of the income tax mentioned in paragraph (a) as is paid by the AIFM firm.
(6) Further—
(a) P is treated as paying, when the vesting occurs, an amount of income tax equal to the amount given by subsection (5)(b), and
(b) that amount is accordingly to be taken into account in determining the income tax payable by, or repayable to, P.
(7) “The relevant tax year” is—
(a) if the variable remuneration or the part of it is deferred remuneration, the tax year in which the vesting occurs, or
(b) if the variable remuneration or the part of it is upfront remuneration, the tax year for which the allocated profit would have been chargeable to income tax under Chapter 2 of Part 2 as mentioned in section 863I(1)(b).
(8) Terms used in this section have the same meaning as in the AIFMD remuneration guidelines (see section 863L).
(9) Section 850E (payment from B to other persons after application of section 850C(4) or 850D(4)) is to be ignored for the purposes of this section.

863K Vesting statements
(1) This section applies if all or a part of the variable remuneration represented by the allocated profit vests in P.
(2) If P requests it in writing, the AIFM firm must provide P with a statement showing—
(a) the amount of the allocated profit, or the part of it representing the part of the variable remuneration, gross of the income tax for which the AIFM firm is liable by virtue of section 863I in respect of the allocated profit or the part of it,
(b) the amount of the income tax for which the AIFM firm is liable, and
(c) so much of that amount of income tax as is paid by the AIFM firm by the time the vesting occurs or, if section 863J(5)(b)(ii) applies, as is paid by the AIFM firm.
(3) The duty to comply with a request under this section is enforceable by P.
(4) In the case of a limited liability partnership, the duty is enforceable against the body corporate.

863L The AIFMD remuneration guidelines
In sections 863I to 863K “the AIFMD remuneration guidelines” means the “Guidelines on Sound Remuneration Policies under the AIFMD” issued by the European Securities and Markets Authority on 3 July 2013 (ESMA/2013/232).”

Supplementary provision
16 (1) TMA 1970 is amended as follows.
(2) In Part 2 (returns of income and gains) after section 12AD insert—

“12ADA AIFM firms
(1) An officer of Revenue and Customs may by notice require a partnership which has made an election under section 863H of ITTOIA 2005 (whether or not the election has been revoked) to provide the officer with such information as the officer may reasonably require for purposes connected with the operation of sections 863H to 863K of ITTOIA 2005.
(2) The information must be provided within such reasonable time as the officer may specify in the notice.”

(3) In column 2 of the Table in section 98 (special returns etc), at the appropriate place, insert “ section 12ADA of this Act ”.
17 In Part 3 of TCGA 1992 (which makes special provision about partnerships etc) after section 59A insert—

“59B Alternative investment fund managers (1)
(1) Subsection (2) applies if—
(a) under section 863I of ITTOIA 2005, a partner (“P”) in a partnership allocates to the partnership an amount of profit (“the allocated profit”) representing variable remuneration which, if it vests in P, will vest in the form of instruments,
(b) there is a disposal to P of instruments which are partnership assets of the partnership for the purposes of section 59, and
(c) by virtue of that disposal the variable remuneration vests in P.
(2) Both the persons making the disposal and P are to be treated as if the instruments were acquired by P from those persons for a consideration of an amount equal to the allocated profit net of the income tax for which the partnership is liable by virtue of section 863I of ITTOIA 2005 in respect of the allocated profit.
(3) Terms used in this section which are also used in section 863I or 863J of ITTOIA 2005 have the same meaning as in that section.

59C Alternative investment managers (2)
(1) Subsection (2) applies if—
(a) under section 863I of ITTOIA 2005, a partner (“P”) in a partnership allocates to the partnership an amount of profit (“the allocated profit”) representing variable remuneration which, if it vests in P, will vest in the form of instruments,
(b) there is a disposal to P of instruments by a company which is a partner in the partnership,
(c) by virtue of that disposal the variable remuneration vests in P, and
(d) the company would, as a partner in the partnership, have been charged to tax on the allocated profit but for adjustments made in the case of the company under section 1264A(2) of CTA 2009 or section 850C(5) of ITTOIA 2005.
(2) Both the company and P are to be treated as if the instruments were acquired by P from the company for a consideration of an amount equal to the allocated profit net of the income tax for which the partnership is liable by virtue of section 863I of ITTOIA 2005 in respect of the allocated profit.
(3) Terms used in this section which are also used in section 863I or 863J of ITTOIA 2005 have the same meaning as in that section.”

18 In Part 4 of FA 2004 (pensions) in section 189 (relevant UK individual) after subsection (2A) insert—

“(2B) The income covered by subsection (2)(b) includes—
(a) an amount treated as a profit under section 863J(2) of ITTOIA 2005, and
(b) income treated as received under section 863J(4) of that Act.”

19 In section 23 of ITA 2007 (calculation of income tax liability) at the end of Step 4 insert— “ See also section 863I of ITTOIA 2005 which provides for certain partnership profits to be charged at the additional rate. ”

Power to apply amendments to other types of firms carrying on regulated activities
20 (1) The Commissioners for Her Majesty's Revenue and Customs may by regulations amend any Act—
(a) so as to apply (with or without modifications), in relation to regulated firms of a specified description, the provision made by the amendments made by this Part, or
(b) so as to make, in relation to regulated firms of a specified description, provision corresponding to the provision made by the amendments made by this Part.
(2) “Regulated firm” means a firm carrying on a regulated activity within the meaning of the Financial Services and Markets Act 2000 (see section 22 of that Act); and “firm” has the same meaning as in ITTOIA 2005 (see section 847 of that Act) (and includes a limited liability partnership in relation to which section 863(1) of that Act applies).
(3) Regulations under this paragraph may—
(a) make different provision for different cases or different purposes;
(b) make incidental, consequential, supplementary and transitional provision and savings.

Commencement
21 The amendments made by this Part have effect for the tax year 2014-15 and subsequent tax years.

PART 4 Disposals of assets through partnerships

Income tax
22 Part 13 of ITA 2007 (tax avoidance) is amended as follows.
23 (1) In Chapter 5A (transfers of income streams) section 809AZF (partnership shares) is amended as follows.
(2) In subsection (1) omit “if condition A or B is met”.
(3) Omit subsections (2) and (3).
(4) The amendments made by this paragraph have effect for cases where the transfer of a right to relevant receipts occurs on or after 6 April 2014.
24 (1) After Chapter 5A insert—

“Chapter 5AA Disposals of income streams through partnerships

809AAZA Application of Chapter
(1) This Chapter applies (subject to subsection (2)) if directly or indirectly in consequence of, or otherwise in connection with, arrangements involving a person within the charge to income tax (“the transferor”) and another person (“the transferee”)—
(a) there is, or is in substance, a disposal of a right to relevant receipts by the transferor to the transferee,
(b) the disposal is effected (wholly or partly) by or through a partnership (“the relevant partnership”),
(c) at any time—
(i) the transferor is a member of the relevant partnership or of a partnership associated with the relevant partnership, and
(ii) the transferee is a member of the relevant partnership or of a partnership associated with the relevant partnership, and
(d) the main purpose, or one of the main purposes, of one or more steps taken in effecting the disposal is the obtaining of a tax advantage for any person.
(2) This Chapter does not apply if—
(a) the transferor is the spouse or civil partner of the transferee and they are living together, or
(b) the transferor is a brother, sister, ancestor or lineal descendant of the transferee.
(3) In subsection (1)(a) the reference to a disposal of a right to relevant receipts includes anything constituting a disposal of such a right for the purposes of TCGA 1992.
(4) For the purposes of subsection (1)(b) the disposal might, in particular, be effected by an acquisition or disposal of, or an increase or decrease in, an interest in the relevant partnership (including a share of the profits or assets of the relevant partnership or an interest in such a share).
(5) For the purposes of subsection (1)(c) it does not matter if the transferor and the transferee are not members of a partnership as mentioned at the same time.
(6) For the purposes of subsection (1)(c) a partnership is “associated” with the relevant partnership if—
(a) it is a member of the relevant partnership, or
(b) it is a member of a partnership which is associated with the relevant partnership (whether by virtue of paragraph (a) or this paragraph).
(7) In subsections (1)(c) and (5) references to the transferor include a person connected with the transferor and references to the transferee include a person connected with the transferee.
(8) In this Chapter—
“arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable),
“partnership” includes a limited liability partnership whether or not section 863(1) of ITTOIA 2005 applies in relation to it,
“relevant receipts” means any income—
(a) which (but for the disposal) would be charged to income tax as income of the transferor (whether directly or as a member of a partnership), or
(b) which (but for the disposal) would be brought into account as income in calculating profits of the transferor (whether directly or as a member of a partnership) for income tax purposes, and
“tax advantage” means a tax advantage, as defined in section 1139 of CTA 2010, in relation to income tax or the charge to corporation tax on income.

809AAZB Relevant amount to be treated as income
(1) The relevant amount is to be treated as income of the transferor chargeable to income tax in the same way and to the same extent as that in which the relevant receipts—
(a) would have been chargeable to income tax as income of the transferor, or
(b) would have been brought into account as income in calculating profits of the transferor for income tax purposes,
but for the disposal.
(2) In subsection (1) “the relevant amount” is to be read in accordance with section 809AZB(2) and section 809AZB(3) to (6) applies for the purpose of determining when income under subsection (1) is treated as arising.
(3) For this purpose, in section 809AZB(2) to (6) references to the transfer of the right are to be read as references to the disposal of the right.
(4) If, apart from this subsection and section 809DZB(3)—
(a) both this Chapter and Chapter 5D would apply in relation to the disposal, and
(b) Chapter 5D would give a greater amount of income of the transferor chargeable to income tax,
this Chapter is not to apply in relation to the disposal.”

(2) The amendment made by this paragraph has effect for cases where the arrangements mentioned in section 809AAZA(1) of ITA 2007 are made on or after 6 April 2014.
25 (1) After Chapter 5C insert—

“Chapter 5D Disposals of assets through partnerships

809DZA Application of Chapter
(1) This Chapter applies if conditions A and B are met.
(2) Condition A is (subject to subsection (3)) that directly or indirectly in consequence of, or otherwise in connection with, arrangements involving a person within the charge to income tax (“the transferor”) and another person (“the transferee”)—
(a) there is, or is in substance, a disposal of an asset (“the transferred asset”) by the transferor to the transferee,
(b) the disposal is effected (wholly or partly) by or through a partnership (“the relevant partnership”),
(c) at any time—
(i) the transferor is a member of the relevant partnership or of a partnership associated with the relevant partnership, and
(ii) the transferee is a member of the relevant partnership or of a partnership associated with the relevant partnership, and
(d) the main purpose, or one of the main purposes, of one or more steps taken in effecting the disposal is the obtaining of a tax advantage for any person.
(3) Condition A is not met if—
(a) the transferor is the spouse or civil partner of the transferee and they are living together, or
(b) the transferor is a brother, sister, ancestor or lineal descendant of the transferee.
(4) In subsection (2)(a) the reference to a disposal of an asset includes anything constituting a disposal of an asset for the purposes of TCGA 1992.
(5) For the purposes of subsection (2)(b) the disposal might, in particular, be effected by an acquisition or disposal of, or an increase or decrease in, an interest in the relevant partnership (including a share of the profits or assets of the relevant partnership or an interest in such a share).
(6) For the purposes of subsection (2)(c) it does not matter if the transferor and the transferee are not members of a partnership as mentioned at the same time.
(7) For the purposes of subsection (2)(c) a partnership is “associated” with the relevant partnership if—
(a) it is a member of the relevant partnership, or
(b) it is a member of a partnership which is associated with the relevant partnership (whether by virtue of paragraph (a) or this paragraph).
(8) In subsections (2)(c) and (6) references to the transferor include a person connected with the transferor and references to the transferee include a person connected with the transferee.
(9) Condition B is that it is reasonable to assume that, had the transferred asset instead been disposed of directly by the transferor to the transferee, the relevant amount (or any part of it)—
(a) would have been chargeable to income tax as income of the transferor, or
(b) would have been brought into account as income in calculating profits of the transferor for income tax purposes.
(10) In this Chapter “the relevant amount” means the amount of the consideration received by the transferor for the disposal.
(11) If the transferor receives—
(a) no consideration for the disposal, or
(b) consideration which is substantially less than the market value of the transferred asset,
assume for the purposes of subsection (10) that the transferor receives consideration of an amount equal to the market value of the transferred asset.
(12) In subsection (11) references to the market value of the transferred asset are to that value at the time of the disposal.
(13) In this Chapter—
“arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable),
“partnership” includes a limited liability partnership whether or not section 863(1) of ITTOIA 2005 applies in relation to it, and
“tax advantage” means a tax advantage, as defined in section 1139 of CTA 2010, in relation to income tax or the charge to corporation tax on income.

809DZB Relevant amount to be treated as income
(1) The relevant amount is to be treated as income of the transferor chargeable to income tax in the same way and to the same extent as that in which it—
(a) would have been chargeable to income tax as income of the transferor, or
(b) would have been brought into account as income in calculating profits of the transferor for income tax purposes,
as mentioned in section 809DZA(9).
(2) Section 809AZB(3) to (6) applies for the purpose of determining when income under subsection (1) is treated as arising (reading references to the transfer of the right as references to the disposal of the transferred asset).
(3) If, apart from this subsection and section 809AAZB(4)—
(a) both this Chapter and Chapter 5AA would apply in relation to the disposal, and
(b) Chapter 5AA would give the same amount, or a greater amount, of income of the transferor chargeable to income tax,
this Chapter is not to apply in relation to the disposal.”

(2) The amendment made by this paragraph has effect for cases where the arrangements mentioned in section 809DZA(2) of ITA 2007 are made on or after 6 April 2014.

Corporation tax
26 Part 16 of CTA 2010 (factoring of income etc) is amended as follows.
27 (1) In Chapter 1 (transfers of income streams) section 756 (partnership shares) is amended as follows.
(2) In subsection (1) omit “if condition A or B is met”.
(3) Omit subsections (2) and (3).
(4) The amendments made by this paragraph have effect for cases where the transfer of a right to relevant receipts occurs on or after 1 April 2014.
28 (1) After Chapter 1 insert—

“Chapter 1A Disposals of income streams through partnerships

757A Application of Chapter
(1) This Chapter applies if directly or indirectly in consequence of, or otherwise in connection with, arrangements involving a company within the charge to corporation tax (“the transferor”) and another person (“the transferee”)—
(a) there is, or is in substance, a disposal of a right to relevant receipts by the transferor to the transferee,
(b) the disposal is effected (wholly or partly) by or through a partnership (“the relevant partnership”),
(c) at any time—
(i) the transferor is a member of the relevant partnership or of a partnership associated with the relevant partnership, and
(ii) the transferee is a member of the relevant partnership or of a partnership associated with the relevant partnership, and
(d) the main purpose, or one of the main purposes, of one or more steps taken in effecting the disposal is the obtaining of a tax advantage for any person.
(2) In subsection (1)(a) the reference to a disposal of a right to relevant receipts includes anything constituting a disposal of such a right for the purposes of TCGA 1992.
(3) For the purposes of subsection (1)(b) the disposal might, in particular, be effected by an acquisition or disposal of, or an increase or decrease in, an interest in the relevant partnership (including a share of the profits or assets of the relevant partnership or an interest in such a share).
(4) For the purposes of subsection (1)(c) it does not matter if the transferor and the transferee are not members of a partnership as mentioned at the same time.
(5) For the purposes of subsection (1)(c) a partnership is “associated” with the relevant partnership if—
(a) it is a member of the relevant partnership, or
(b) it is a member of a partnership which is associated with the relevant partnership (whether by virtue of paragraph (a) or this paragraph).
(6) In subsections (1)(c) and (4) references to the transferor include a person connected with the transferor and references to the transferee include a person connected with the transferee.
(7) In this Chapter—
“arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable),
“partnership” includes a limited liability partnership whether or not section 1273(1) of CTA 2009 applies in relation to it,
“relevant receipts” means any income—
(a) which (but for the disposal) would be charged to corporation tax as income of the transferor (whether directly or as a member of a partnership), or
(b) which (but for the disposal) would be brought into account as income in calculating profits of the transferor (whether directly or as a member of a partnership) for corporation tax purposes, and
“tax advantage” means a tax advantage, as defined in section 1139, in relation to income tax or the charge to corporation tax on income.

757B Relevant amount to be treated as income
(1) The relevant amount is to be treated as income of the transferor chargeable to corporation tax in the same way and to the same extent as that in which the relevant receipts—
(a) would have been chargeable to corporation tax as income of the transferor, or
(b) would have been brought into account as income in calculating profits of the transferor for corporation tax purposes,
but for the disposal.
(2) In subsection (1) “the relevant amount” is to be read in accordance with section 753(2) and section 753(3) and (4) applies for the purpose of determining when income under subsection (1) is treated as arising.
(3) For this purpose, in section 753(2) to (4) references to the transfer of the right are to be read as references to the disposal of the right.
(4) If, apart from this subsection and section 779B(3)—
(a) both this Chapter and Chapter 4 would apply in relation to the disposal, and
(b) Chapter 4 would give a greater amount of income of the transferor chargeable to corporation tax,
this Chapter is not to apply in relation to the disposal.”

(2) The amendment made by this paragraph has effect for cases where the arrangements mentioned in section 757A(1) of CTA 2010 are made on or after 1 April 2014.
29 (1) After Chapter 3 insert—

“Chapter 4 Disposals of assets through partnerships

779A Application of Chapter
(1) This Chapter applies if conditions A and B are met.
(2) Condition A is that directly or indirectly in consequence of, or otherwise in connection with, arrangements involving a company within the charge to corporation tax (“the transferor”) and another person (“the transferee”)—
(a) there is, or is in substance, a disposal of an asset (“the transferred asset”) by the transferor to the transferee,
(b) the disposal is effected (wholly or partly) by or through a partnership (“the relevant partnership”),
(c) at any time—
(i) the transferor is a member of the relevant partnership or of a partnership associated with the relevant partnership, and
(ii) the transferee is a member of the relevant partnership or of a partnership associated with the relevant partnership, and
(d) the main purpose, or one of the main purposes, of one or more steps taken in effecting the disposal is the obtaining of a tax advantage for any person.
(3) In subsection (2)(a) the reference to a disposal of an asset includes anything constituting a disposal of an asset for the purposes of TCGA 1992.
(4) For the purposes of subsection (2)(b) the disposal might, in particular, be effected by an acquisition or disposal of, or an increase or decrease in, an interest in the relevant partnership (including a share of the profits or assets of the relevant partnership or an interest in such a share).
(5) For the purposes of subsection (2)(c) it does not matter if the transferor and the transferee are not members of a partnership as mentioned at the same time.
(6) For the purposes of subsection (2)(c) a partnership is “associated” with the relevant partnership if—
(a) it is a member of the relevant partnership, or
(b) it is a member of a partnership which is associated with the relevant partnership (whether by virtue of paragraph (a) or this paragraph).
(7) In subsections (2)(c) and (5) references to the transferor include a person connected with the transferor and references to the transferee include a person connected with the transferee.
(8) Condition B is that it is reasonable to assume that, had the transferred asset instead been disposed of directly by the transferor to the transferee, the relevant amount (or any part of it)—
(a) would have been chargeable to corporation tax as income of the transferor, or
(b) would have been brought into account as income in calculating profits of the transferor for corporation tax purposes.
(9) In this Chapter “the relevant amount” means the amount of the consideration received by the transferor for the disposal.
(10) If the transferor receives—
(a) no consideration for the disposal, or
(b) consideration which is substantially less than the market value of the transferred asset,
assume for the purposes of subsection (9) that the transferor receives consideration of an amount equal to the market value of the transferred asset.
(11) In subsection (10) references to the market value of the transferred asset are to that value at the time of the disposal.
(12) In this Chapter—
“arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable),
“partnership” includes a limited liability partnership whether or not section 1273(1) of CTA 2009 applies in relation to it, and
“tax advantage” means a tax advantage, as defined in section 1139, in relation to income tax or the charge to corporation tax on income.

779B Relevant amount to be treated as income
(1) The relevant amount is to be treated as income of the transferor chargeable to corporation tax in the same way and to the same extent as that in which it—
(a) would have been chargeable to corporation tax as income of the transferor, or
(b) would have been brought into account as income in calculating profits of the transferor for corporation tax purposes,
as mentioned in section 779A(8).
(2) Section 753(3) and (4) applies for the purpose of determining when income under subsection (1) is treated as arising (reading references to the transfer of the right as references to the disposal of the transferred asset).
(3) If, apart from this subsection and section 757B(4)—
(a) both this Chapter and Chapter 1A would apply in relation to the disposal, and
(b) Chapter 1A would give the same amount, or a greater amount, of income of the transferor chargeable to corporation tax,
this Chapter is not to apply in relation to the disposal.”

(2) The amendment made by this paragraph has effect for cases where the arrangements mentioned in section 779A(2) of CTA 2010 are made on or after 1 April 2014.

SCHEDULE 18 Abolition of reduced rates for vehicles satisfying reduced pollution requirements
Section 86

PART 1 Amendments of the Vehicle Excise and Registration Act 1994
1 VERA 1994 is amended as follows.
2 Omit section 61B (certificates as to reduced pollution).
3 In consequence of the amendment made by paragraph 2—
(a) in section 45 (false declarations etc), in subsections (3A) and (3B) omit “or 61B”,
(b) in Schedule 1 (annual rates of duty)—
(i) in paragraph 3(6) omit paragraph (a) and the “and” following it,
(ii) in paragraph 4(7) omit paragraph (a) and the “and” following it,
(iii) in paragraph 5(6) omit paragraph (a) and the “and” following it, and
(iv) in paragraph 7(3) omit paragraph (a) and the “and” following it, and
(c) in paragraph 22 of Schedule 2 (exempt vehicles: vehicle testing etc)—
(i) in sub-paragraph (1)(a) for “, a vehicle weight test or a reduced pollution test” substitute “ or a vehicle weight test ”,
(ii) in sub-paragraph (2) omit “a reduced pollution test or”,
(iii) in sub-paragraph (2A), in both places it occurs, omit “or a reduced pollution test”,
(iv) in sub-paragraph (3) omit “, or a reduced pollution test,”,
(v) omit sub-paragraph (6AA),
(vi) in sub-paragraph (6B) for “, a vehicle weight test or a reduced pollution test” substitute “ or a vehicle weight test ”, and
(vii) in sub-paragraphs (8) and (9) omit paragraph (d) and the “or” following paragraph (c).
4 In paragraph 3 of Schedule 1 (annual rates of duty: buses)—
(a) in sub-paragraph (1) omit “with respect to which the reduced pollution requirements are not satisfied”, and
(b) omit sub-paragraph (1A).
5 In paragraph 6 of Schedule 1 (annual rates of duty: vehicles used for exceptional loads), in sub-paragraph (2A)—
(a) in paragraph (a) omit “in the case of a vehicle with respect to which the reduced pollution requirements are not satisfied,”,
(b) omit the “and” following paragraph (a), and
(c) omit paragraph (b).
6 In paragraph 7 of Schedule 1 (annual rates of duty: haulage vehicles), for sub-paragraph (3A) substitute—

“(3A) The rate referred to in sub-paragraph (1)(b) is £350.”

7 Omit paragraphs 9A and 9B of Schedule 1.
8 Omit paragraphs 11A and 11B of Schedule 1.
9 In paragraph 11C of Schedule 1 (annual rates of duty: tractive units), in sub-paragraph (2)—
(a) in paragraph (a) omit “in the case of a vehicle with respect to which the reduced pollution requirements are not satisfied,”, and
(b) omit paragraph (b).
10 In consequence of the amendments made by paragraphs 4 to 9—
(a) in section 13 (trade licences: duration and amount of duty) omit subsection (7)(a) and the “and” following it,
(b) in section 13 (trade licences: duration and amount of duty) as set out in paragraph 8(1) of Schedule 4 to VERA 1994 which is to have effect on and after a day appointed by order, omit subsection (7)(a) and the “and” following it,
(c) in section 15 (vehicles becoming chargeable to duty at a higher rate), omit subsection (2A),
(d) in paragraph 9 of Schedule 1 (annual rates of duty: rigid goods vehicles)—
(i) in sub-paragraph (1), omit “is not a vehicle with respect to which the reduced pollution requirements are satisfied and which”,
(ii) omit sub-paragraph (3)(a), and
(iii) in sub-paragraph (4), omit paragraph (a) and the “and” following it, and
(e) in paragraph 11 of Schedule 1 (annual rates of duty: tractive units)—
(i) in sub-paragraph (1), omit “is not a vehicle with respect to which the reduced pollution requirements are satisfied and which”,
(ii) omit sub-paragraph (3)(a), and
(iii) in sub-paragraph (4), omit paragraph (a) and the “and” following it.

PART 2 Commencement

Introduction
11 This Part of this Schedule makes provision for the coming into force of the amendments made by Part 1.

Licences taken out on or after 1 April 2014
12 In the case of an exceptional load vehicle—
(a) which is charged to HGV road user levy, and
(b) which satisfies the reduced pollution requirements for the purposes of VERA 1994,
the amendments made by paragraphs 5 and 10 have effect in relation to licences taken out on or after 1 April 2014.
13 In the case of a rigid goods vehicle or tractive unit—
(a) which has a revenue weight of not less than 12,000 kgs, and
(b) which satisfies the reduced pollution requirements for the purposes of VERA 1994,
the amendments made by paragraphs 7 to 10 have effect in relation to licences taken out on or after 1 April 2014.

Licences taken out on or after 1 April 2016
14 In the case of the vehicles described in paragraph 15 the amendments made by paragraphs 4 to 10 have effect in relation to licences taken out on or after 1 April 2016.
15 Those vehicles are—
(a) a bus, light exceptional load vehicle or haulage vehicle which satisfies the reduced pollution requirements for the purposes of VERA 1994 because paragraph 4 of Schedule 2 to the Regulations applies to the vehicle as result of it falling within item 1 or 2 of Table 1 or any of items 1 to 3 of Table 2 in that paragraph (or being taken to be a vehicle falling within item 1 of Table 1 or Table 2 as a result of paragraph 5 of that Schedule), and
(b) a rigid goods vehicle or tractive unit—
(i) which has a revenue weight below 12,000 kgs, and
(ii) which satisfies the reduced pollution requirements for the purposes of VERA 1994 because paragraph 4 of Schedule 2 to the Regulations applies to the vehicle as result of it falling within item 1 or 2 of Table 1 or any of items 1 to 3 of Table 2 in that paragraph (or being taken to be a vehicle falling within item 1 of Table 1 or Table 2 as a result of paragraph 5 of that Schedule).

Licences taken out on or after 1 January 2017
16 In the case of the vehicles described in paragraphs 17 and 18 the amendments made by paragraphs 4 to 10 have effect in relation to licences taken out on or after 1 January 2017.
17 A bus, light exceptional load vehicle or haulage vehicle which satisfies the reduced pollution requirements for the purposes of VERA 1994 because—
(a) paragraph 4 of Schedule 2 to the Regulations applies to the vehicle as result of it falling within item 3 or 4 of Table 1 or item 4 of Table 2 in that paragraph,
(b) paragraph 4A of Schedule 2 to the Regulations applies to the vehicle as result of it meeting the requirements of paragraph 4B of that Schedule, or
(c) paragraph 4C of Schedule 2 to the Regulations applies to the vehicle as result of it meeting the requirements of paragraph 4D of that Schedule.
18 (1) A rigid goods vehicle or tractive unit—
(a) which has a revenue weight below 12,000 kgs, and
(b) which satisfies the reduced pollution requirements for the purposes of VERA 1994 for any of the reasons in sub-paragraph (2).
(2) Those reasons are—
(a) paragraph 4 of Schedule 2 to the Regulations applies to the vehicle as result of it falling within item 3 or 4 of Table 1 or item 4 of Table 2 in that paragraph,
(b) paragraph 4A of Schedule 2 to the Regulations applies to the vehicle as result of it meeting the requirements of paragraph 4B of that Schedule, or
(c) paragraph 4C of Schedule 2 to the Regulations applies to the vehicle as result of it meeting the requirements of paragraph 4D of that Schedule.

I January 2017
19 The amendments made by paragraphs 2 and 3 come into force on 1 January 2017.

Interpretation
20 In this Schedule—
“bus” has the same meaning as in paragraph 3(2) of Schedule 1 to VERA 1994;
“exceptional load vehicle” is a vehicle to which paragraph 6 of Schedule 1 to VERA 1994 applies by reason of falling within sub-paragraph (1) of that paragraph;
“haulage vehicle” has the same meaning as in paragraph 7(2) of Schedule 1 to VERA 1994;
“light exceptional load vehicle” means an exceptional load vehicle which is not charged to HGV road user levy;
“the Regulations” means the Road Vehicles (Registration and Licensing) Regulations 2002 (S.I. 2002/2742);
“rigid goods vehicle” and “tractive unit” have the same meaning as in VERA 1994.

SCHEDULE 19 Other amendments about vehicle excise duty
Section 91

PART 1 Amendments of the Vehicle Excise and Registration Act 1994
1 VERA 1994 is amended as follows.
2 In section 7 (issue of vehicle licences), omit subsections (6) and (7).
3 (1) Section 7A (supplement payable on vehicle ceasing to be appropriately covered) is amended as follows.
(2) In subsection (1B)—
(a) omit “or in respect of”, and
(b) omit the words from “unless” to the end.
(3) Omit subsection (1C).
4 Omit section 10 (transfer of vehicle licences).
5 In section 14 (trade licences: supplementary)—
(a) in subsection (2), for the words from “surrender” to the end substitute “ request that the Secretary of State cancel the licence ”, and
(b) omit subsection (4).
6 (1) Section 19 (rebates) is amended as follows.
(2) In subsection (1), for the words from the beginning to “receive” substitute “ If any of the rebate conditions is satisfied in relation to a vehicle in respect of which a vehicle licence is in force, the relevant person is entitled to receive (by way of rebate of duty paid on the licence) ”.
(3) For subsection (3) substitute—

“(3) The rebate conditions are as follows—
(a) the vehicle has been stolen and the Secretary of State has been notified of that by the relevant person,
(b) the vehicle has been destroyed and the Secretary of State has been notified of that by the relevant person,
(c) a nil licence for the vehicle has been issued in accordance with regulations under section 22,
(d) a qualifying application for a vehicle licence for the vehicle has been received by the Secretary of State,
(e) the vehicle is neither used nor kept on a public road and the particulars and declaration required to be furnished and made by regulations under section 22(1D) have been furnished and made in relation to it in accordance with the regulations,
(f) the vehicle has been sold or disposed of and the particulars prescribed by regulations under section 22(1)(d) have been furnished in relation to it in accordance with the regulations, or
(g) the vehicle has been removed from the United Kingdom with a view to its remaining permanently outside the United Kingdom and the Secretary of State has been notified of that by the relevant person.”

(4) In subsection (3ZA), for “(3)(ca)” substitute “ (3)(d) ”.
(5) In subsection (3A), for “when the application is made” substitute “ when the rebate condition is satisfied ”.
(6) In subsection (3B), for paragraph (b) (and the “and” following it) substitute—

“(b) the rebate condition in question is that in subsection (3)(e), (f) or (g), and”

.
(7) For subsection (4) substitute—

“(4) In subsections (1) and (3) “the relevant person” means the person in whose name the vehicle is registered immediately before the rebate condition is satisfied.”

(8) For subsections (5) and (6) substitute—

“(5) The Secretary of State may specify requirements which must be complied with before a rebate condition can be satisfied.
(5A) The requirements that may be specified include (in particular)—
(a) a requirement that particulars which are required to be furnished to the Secretary of State are transmitted to the Secretary of State by such electronic means as may be specified, and
(b) in a case within subsection (3)(a), requirements relating to the reporting to the police that the vehicle has been stolen.”

(9) For subsection (7) substitute—

“(7) Where any of the rebate conditions is satisfied in relation to a licence, the licence ceases to be in force.”

(10) In subsection (8)—
(a) for “trade licence is surrendered to the Secretary of State” substitute “ request is made ”,
(b) for “holder of the licence” substitute “ holder of the trade licence ”, and
(c) for “of the surrender” substitute “ the request is received by the Secretary of State ”.
7 In section 22 (registration regulations)—
(a) omit subsection (2A)(c), and
(b) omit subsection (4).
8 In section 29 (penalty for keeping unlicensed vehicle)—
(a) in subsection (4) omit the words from “unless” to the end, and
(b) omit subsection (5).
9 In section 31 (relevant period for purposes of section 30), in subsection (7)(a), omit “surrender or”.
10 In section 31A (offence by registered keeper where vehicle unlicensed)—
(a) in subsection (4) omit the words from “unless” to the end, and
(b) omit subsection (5).
11 In section 31B (exceptions to section 31A), in subsection (9)(a)(i), omit “surrender or”.
12 In section 31C (penalties for offences under section 31A), in subsection (7)(a) omit “surrender or”.
13 Omit section 33 (offence of not exhibiting licence).
14 Omit section 33A (not exhibiting licence: period of grace).
15 Omit section 35 (failure to return licence).
16 (1) Section 35A (dishonoured cheques) is amended as follows.
(2) In subsection (1)—
(a) in paragraph (a), for “contains a relevant requirement” substitute “ requires a person to pay the amount specified in subsection (4) within such reasonable period as is specified in the notice ”, and
(b) in paragraph (b), for “contained in the notice” substitute “ within that period ”.
(3) Omit subsection (3).
(4) In subsection (4), for “subsection (3)(b)” substitute “ subsection (1)(a) ”.
(5) For subsection (7) substitute—

“(7) In the case of a requirement in a notice relating to a vehicle licence, those times are—
(a) the end of the month in which the notice under section 19A(2)(b) or 19B(2)(c) or the further notice under section 19A(3)(d), 19B(3)(d) or 19B(5)(f) was sent,
(b) the date on which the licence was due to expire, and
(c) the end of the month preceding that in which there first had effect a new vehicle licence for the vehicle in question;
and, in a case of a requirement in a notice relating to a trade licence, those times are the times specified in paragraphs (a) and (b).”

17 (1) Section 36 (dishonoured cheques: additional liability) is amended as follows.
(2) For subsection (4A) substitute—

“(4A) In the case of a vehicle licence, those times are—
(a) the end of the month in which the relevant notice was sent,
(b) the date on which the licence was due to expire, and
(c) the end of the month preceding that in which there first had effect a new licence for the vehicle in question;
and, in the case of a trade licence, those times are the times specified in paragraphs (a) and (b).
(4B) In subsection (4A)(a), the “relevant notice” is the notice under section 19A(2)(b) or 19B(2)(c) or the further notice under section 19A(3)(d), 19B(3)(d) or 19B(5)(f) which contained the requirement which was not complied with, resulting in the conviction of an offence under section 35A.”

(3) In subsection (6)(b), for “section 35A(3)(b)” substitute “ section 35A(1)(a) ”.
18 In section 44 (forgery and fraud), in subsection (2), omit paragraphs (a) to (c).
19 In section 58 (fees prescribed by regulations) omit “7(6)(b),”.
20 In section 62 (definitions), in the definition of “nil licence”, for the words from “document” to “and is” substitute “ licence ”.

PART 2 Amendments of other enactments
21 In Schedule 3 to the Road Traffic Offenders Act 1988 (fixed penalty offences) omit the entry relating to section 33 of VERA 1994.

PART 3 Commencement
22 The amendments made by this Schedule come into force on 1 October 2014.

SCHEDULE 20 Climate change levy: exemptions for mineralogical and metallurgical processes etc
Section 99

PART 1 The exemptions
1 Schedule 6 to FA 2000 (climate change levy) is amended as follows.
2 After paragraph 12 insert—

“Exemption: mineralogical and metallurgical processes
12A (1) A supply of a taxable commodity to a person is exempt from the levy if the commodity is to be used by the person in a mineralogical or metallurgical process.
(2) “Mineralogical process” has the same meaning as in Article 2(4)(b) of Council Directive 2003/96/EC of 27 October 2003 (which relates to the taxation of energy products and electricity).
(3) “Metallurgical process” means a process of any of the following descriptions.
(4) The descriptions are—
(a) a process falling within Division 24 of NACE Rev 2, excluding Class 24.46;
(b) a process falling within Group 25.5 of NACE Rev 2;
(c) a process falling within Class 25.61 of NACE Rev 2 which is—
(i) plating, anodising etc of metals;
(ii) heat treatment of metals;
(iii) deburring, sandblasting, tumbling and cleaning of metals where carried out in conjunction with a process mentioned in paragraph (a) or (b).
In this sub-paragraph “NACE Rev 2” is as set out in Annex I to Regulation (EC) No 1893/2006 of the European Parliament and of the Council of 20 December 2006 (relating to the statistical classification of economic activities).”

3 (1) Paragraph 42 (amount payable by way of levy) is amended as follows.
(2) In sub-paragraph (1)—
(a) in paragraph (a) omit “or a supply for use in scrap metal recycling”,
(b) omit paragraph (d), and
(c) in the Table, in the heading for column 2, omit “or a supply for use in scrap metal recycling”.
(3) Omit sub-paragraph (1ZA).
4 Omit paragraph 43A (supplies for use in scrap metal recycling) and the cross-heading before it.
5 In paragraph 43B (supplies for use in scrap metal recycling etc: deemed supply) in sub-paragraph (1)(b) omit sub-paragraph (i).
6 In paragraph 62 (tax credits) in sub-paragraph (1) omit paragraphs (ca) and (cb).
7 In paragraph 101 (civil penalties: incorrect certificates) in sub-paragraph (2)(a)—
(a) in sub-paragraph (ii) after “12,” insert “ 12A, ”,
(b) after sub-paragraph (ii) insert “ or ”, and
(c) omit sub-paragraph (iiia) and the “or” after it.
8 (1) The Climate Change Levy (General) Regulations 2001 (S.I. 2001/838) are amended as follows.
(2) In regulation 2 (general interpretation) in paragraph (1) omit “, recycling lower-rate part”, “a recycling lower-rate supply or” and the definition of “recycling lower-rate supply”.
(3) In regulation 8 (records which a registrable person is obliged to keep) in paragraph (c)(ii) omit “recycling lower-rate supply or a”.
(4) In regulation 11 (other tax credits: entitlement) in paragraph (1)—
(a) in sub-paragraph (c) omit “a recycling lower-rate supply or” (in both places), and
(b) omit sub-paragraph (ca).
(5) In regulation 12 (tax credits: general) in paragraph (1) omit “, recycling lower-rate supplies”.
(6) In regulation 33 (special rules for certain supplies)—
(a) in the heading omit “, recycling lower-rate supplies”, and
(b) in the text omit “, recycling lower-rate supplies”.
(7) In the title of Part 3 omit “, recycling lower-rate”.
(8) In regulation 34 (supplier certificates) in paragraph (1)(a) after “12 (transport),” insert “ 12A (mineralogical and metallurgical processes), ”.
(9) In regulation 35 (supplier certificates)—
(a) in paragraph (1) omit “a recycling lower-rate or”,
(b) in paragraph (2)(a) omit paragraph (ii) and the “or” before it, and
(c) in paragraph (3) omit “or is for use in scrap metal recycling”.
(10) Schedule 1 (certification etc) is amended as follows.
(11) In the title omit “, recycling lower-rate”.
(12) In paragraph 2—
(a) in the formula omit “+0.8L”,
(b) in the definition of “M”, after paragraph (b) insert—

“(ba) paragraph 12A—mineralogical and metallurgical processes;”

, and
(c) omit the definition of “0.8L”.
(13) In paragraph 3(1) omit “recycling lower-rate and”.
(14) In paragraph 5(7) omit “Supplies for use in scrap metal recycling and”.
(15) In paragraph 6(1)—
(a) in paragraph (c) omit “a recycling lower-rate supply or” (in both places), and
(b) omit paragraph (ca).
(16) The amendments made by sub-paragraphs (8) and (12)(b) are to be treated as having been made by the Commissioners for Her Majesty's Revenue and Customs in exercise of the power conferred by paragraph 22 of Schedule 6 to FA 2000 (regulations giving effect to exemptions).
9 (1) Schedule 1 to the Climate Change Levy (Fuel Use and Recycling Processes) Regulations 2005 (S.I. 2005/1715) is amended as follows.
(2) In paragraph 1 omit “Aluminium” and “Copper”.
(3) In paragraph 2 for the words from “Gold” to “platinum group metal alloys and” substitute “ The electrolytic dissolution of ”.
(4) Omit paragraphs 18 to 24, 26, 27, 28, 32, 34, 36 and 37.
(5) The amendments made by this paragraph are to be treated as having been made by the Treasury in exercise of the power conferred by paragraph 18(2) of Schedule 6 to FA 2000 (exemption for supply not used as fuel).
10 (1) The amendments made by this Part are treated as having come into force on 1 April 2014 and have effect as follows.
(2) In relation to supplies of gas or electricity, they have effect in relation to gas or electricity actually supplied on or after 1 April 2014.
(3) In relation to any other supplies, they have effect in relation to supplies treated as taking place on or after 1 April 2014.

PART 2 Other provision
11 Schedule 6 to FA 2000 (climate change levy) is amended as follows.
12 In paragraph 12A (as inserted by paragraph 2 above) after sub-paragraph (4) insert—

“(5) The Treasury may by regulations amend this paragraph so as to amend the definition of “mineralogical process”.
(6) The Treasury may by regulations amend sub-paragraph (4) so as to add, remove or modify a description.”

13 In paragraph 13A (power to make provision amending paragraph 13) in sub-paragraph (3) omit “Parliament”.
14 (1) Paragraph 146 (regulations and orders) is amended as follows.
(2) In sub-paragraphs (2)(b) and (3) omit “Parliament”.
(3) After sub-paragraph (3) insert—

“(3A) A statutory instrument that contains (whether alone or with other provision) regulations under paragraph 12A(5) that remove a process (in whole or in part) from the scope of the definition of “mineralogical process” shall not be made unless a draft of the statutory instrument containing the regulations has been laid before and approved by a resolution of the House of Commons.
(3B) A statutory instrument that contains (whether alone or with other provision) regulations under paragraph 12A(6) that—
(a) remove a description, or
(b) modify a description so as to narrow its scope,
shall not be made unless a draft of the statutory instrument containing the regulations has been laid before and approved by a resolution of the House of Commons.”

SCHEDULE 21 Goods shipped or carried as stores on ships or aircraft
Section 101

Meaning of “stores”
1 (1) Section 1 of CEMA 1979 (interpretation) is amended as follows.
(2) In subsection (4)(a)(i), for “relevant journey” substitute “ journey made by the ship or aircraft ”.
(3) Omit subsection (4A).

Surplus stores
2 In section 39 of CEMA 1979 (entry of surplus stores), for subsection (1) substitute—

“(1) Surplus stores of any ship or aircraft—
(a) may remain on board the ship or aircraft without payment of duty; or
(b) may be entered for warehousing, notwithstanding that they could not lawfully be imported as merchandise.
This is subject to subsection (2) below.”

Power to make regulations about stores
3 In CEMA 1979, after section 60 insert—

“60A Power to make regulations about stores
(1) The Commissioners may by regulations make provision in relation to goods for use on a ship or aircraft as stores.
(2) The provision that may be made by regulations under subsection (1) includes—
(a) provision permitting, in specified circumstances, goods to be shipped or carried as stores without payment of duty or on drawback;
(b) provision requiring authorisation to be obtained, in specified circumstances, for goods to be shipped or carried as stores as mentioned in paragraph (a) above;
(c) provision about obtaining such authorisation;
(d) provision enabling such authorisation to be withdrawn in specified circumstances;
(e) provision for the supply, shipping or carriage of goods as stores as mentioned in paragraph (a) above to be subject to specified conditions or restrictions;
(f) provision as to any procedure to be followed in supplying goods to be shipped or carried as stores as mentioned in paragraph (a) above.
(3) Regulations made by virtue of subsection (2)(a) may include—
(a) provision requiring duty to be paid on goods shipped or carried as stores without payment of duty or on drawback where those goods are—
(i) consumed on a journey of a specified description; or
(ii) consumed in specified circumstances in port;
(b) provision as to the persons by whom such duty is payable;
(c) provision about the way in which, and the time at which, such duty is to be paid; and
(d) provision for goods, in specified circumstances, to be treated as having been consumed on a journey or in port.
(4) The provision that may be made by regulations under this section includes—
(a) different provision for different cases; and
(b) incidental, supplemental, consequential or transitional provision or savings.
(5) In this section “specified” means—
(a) specified in regulations made under this section; or
(b) specified by the Commissioners under such regulations.”

Sch. 21 para. 3 partly in force; Sch. 21 para. 3 in force for specified purposes at Royal Assent, see Sch. 21 para. 10
4 (1) Section 61 of CEMA 1979 (provisions as to stores) is amended as follows.
(2) Omit subsections (1) to (4).
(3) In subsection (5), for the words from “for use on a voyage” to “duty” substitute “ without payment of duty ”.
(4) After subsection (5) insert—

“(5A) But subsection (5) above does not apply where the goods are entered for warehousing in accordance with section 39.”

(5) In subsection (6), omit “for use”.
(6) The heading of section 61 becomes “ Supplementary provision relating to stores ”.
5 In consequence of the provision made by paragraph 4, in section 103 of F(No.2)A 1987 (consumption in port of goods transhipped for use as stores etc), omit subsections (1), (2) and (4) to (7).

Penalties and enforcement
6 In CEMA 1979, after section 60A (inserted by paragraph 3 above) insert—

“60B Failure to comply with regulations under section 60A
(1) This section applies if a person fails to comply with—
(a) any provision made by or under regulations under section 60A; or
(b) any condition or restriction imposed under such regulations.
(2) The person's failure to comply shall attract a penalty under section 9 of the Finance Act 1994 (civil penalties) (but see subsection (4)).
(3) Any goods in respect of which the person fails to comply with the provision, condition or restriction are liable to forfeiture.
(4) Subsection (2) does not apply if, as a result of the failure, the person is liable to pay a penalty under Schedule 55 to the Finance Act 2009 (penalty for failure to make returns etc) or Schedule 56 to that Act (penalty for failure to make payments on time).”

7 In Schedule 55 to FA 2009 (penalty for failure to make returns etc), in the Table in paragraph 1, after item 20 insert—

“20A	Excise duties	Return under regulations under section 60A of the Customs and Excise Management Act 1979”

.
8 In Schedule 56 to FA 2009 (penalty for failure to make payments on time), in the Table in paragraph 1, after item 11G insert—

“11GA	Excise duties	Amount payable under regulations under section 60A of the Customs and Excise Management Act 1979 (except an amount falling within item 17A, 23 or 24).	The date determined by or under regulations under section 60A of the Customs and Excise Management Act 1979 as the date by which the amount must be paid”

.

Review and appeal
9 In paragraph 2 of Schedule 5 to FA 1994 (decisions under CEMA 1979 subject to review and appeal), after sub-paragraph (3) insert—

“(3A) Any decision which is made under or for the purposes of any regulations under section 60A of the Management Act (power to make regulations about stores) and is a decision about granting or withdrawing authorisation for goods to be shipped or carried as stores without payment of duty or on drawback.”

Commencement
10 (1) Any power to make regulations conferred by virtue of this Schedule comes into force on the day on which this Act is passed.
(2) So far as not already brought into force by virtue of sub-paragraph (1), the amendments made by this Schedule come into force in accordance with provision contained in an order made by statutory instrument by the Commissioners for Her Majesty's Revenue and Customs.
11 (1) Schedule 55 to FA 2009 (including the amendments of that Schedule made by Schedule 10 to F(No.3)A 2010) is taken to have come into force for the purposes of section 60A of CEMA 1979 on the date on which paragraph 7 of this Schedule comes into force.
(2) Schedule 56 to FA 2009 (including the amendments of that Schedule made by Schedule 11 to F(No.3)A 2010) is taken to have come into force for the purposes of section 60A of CEMA 1979 on the date on which paragraph 8 of this Schedule comes into force.

SCHEDULE 22 Supplies of electronic, broadcasting and telecommunication services: special accounting schemes
Section 103

PART 1 Union scheme

New Union scheme for accounting for VAT on certain supplies
1 After Schedule 3B to VATA 1994 insert—

“SCHEDULE 3BA Electronic, telecommunication and broadcasting services: Union scheme

PART 1 Introduction

Overview
1 In this Schedule—
(a) Parts 2 and 3 establish a special accounting scheme (called the “Union scheme”) which may be used by certain persons established in the United Kingdom who make supplies of electronically supplied, telecommunication or broadcasting services that are treated as made in other member States;
(b) Part 4 is about persons participating in schemes in other member States that correspond to the Union scheme;
(c) Part 5 is about appeals;
(d) Part 6 contains definitions for the Schedule.

Meaning of “scheme services”
2 (1) In this Schedule “scheme services” means electronically supplied services, broadcasting services or telecommunication services.
(2) In sub-paragraph (1)—
“broadcasting services” means radio and television broadcasting services;
“electronically supplied services” has the same meaning as in Schedule 4A (see paragraph 9(3) and (4) of that Schedule);
“telecommunication services” has the same meaning as in Schedule 4A (see paragraph 8(2) of that Schedule).

PART 2 Union scheme: registration

The register
3 Persons registered under the scheme provided for by this Schedule (“the Union scheme”) are to be registered in a single register kept by the Commissioners for the purposes of the scheme.

Persons who may be registered
4 (1) A person may register under the Union scheme if all the following conditions are met—
(a) the person makes or intends to make one or more qualifying supplies of scheme services in the course of a business that the person carries on;
(b) either the person's business is established in the United Kingdom or (if the person's business is not established in any member State) the person has a fixed establishment in the United Kingdom;
(c) the person is not barred from registering by sub-paragraph (3), by the second paragraph of Article 369a(2) of Directive 2006/112/EC or by any provision of the Implementing Regulation;
(d) the person is registered under Schedule 1.
(2) A supply of scheme services is a “qualifying supply of scheme services” if the following conditions are met.
1 The recipient of the services must belong in a member State other than the United Kingdom and must not be a relevant business person.
2 The person making the supply must not have a fixed establishment in the member State in which the recipient belongs.
(3) A person may not be registered under the Union scheme if the person is a participant in a non-UK special scheme (see paragraph 38(1)).

Becoming registered
5 (1) The Commissioners must register under the Union scheme any person who—
(a) satisfies them that the requirements for registration are met, and
(b) makes a request in accordance with this paragraph (a “registration request”).
(2) A registration request made by a person must state the person's—
(a) name and postal address, and
(b) electronic addresses (including any websites).
(3) A registration request made by a person must also state—
(a) whether or not the person has begun to make qualifying supplies of scheme services, and
(b) (if applicable) the date on which the person began to do so.
(4) A registration request made by a person must also state—
(a) whether or not the person has previously been identified under a non-UK special scheme, and
(b) (if applicable) the date on which the person was first identified under the scheme concerned.
(5) A registration request—
(a) must contain any further information, and any declaration about its contents, that the Commissioners may by regulations require;
(b) must be made by such electronic means, and in such manner, as the Commissioners may direct or may by regulations require.

Notification of changes etc
6 (1) A person registered under the Union scheme must inform the Commissioners of the date when the person first makes qualifying supplies of scheme services (unless the person has already given the Commissioners the information mentioned in paragraph 5(3)(b)).
(2) That information, and any information a person is required to give under Article 57h of the Implementing Regulation (notification of certain changes), must be communicated by such electronic means, and in such manner, as the Commissioners may direct or may by regulations require.

Cancellation of registration
7 The Commissioners must cancel the registration under the Union scheme of a person if—
(a) the person has ceased to make, or no longer intends to make, supplies of scheme services and has notified them of that fact;
(b) they otherwise determine that the person has ceased to make, or no longer intends to make, supplies of scheme services;
(c) the person has ceased to satisfy any of the other conditions for registration in paragraph 4(1) and has notified them of that fact,
(d) they otherwise determine that the person has ceased to satisfy any of those conditions, or
(e) they determine that the person has persistently failed to comply with the person's obligations under this Schedule or the Implementing Regulation.

PART 3 Union scheme: liability, returns, payment etc

Liability to pay non-UK VAT to Commissioners
8 (1) This paragraph applies where a person—
(a) makes a qualifying supply of scheme services, and
(b) is registered under the Union scheme when the supply is made.
(2) The person is liable to pay to the Commissioners the gross amount of VAT on the supply.
(3) The reference in sub-paragraph (2) to the gross amount of VAT on the supply is to the amount of VAT charged on the supply in accordance with the law of the member State in which the supply is treated as made, without any deduction of VAT pursuant to Article 168 of Directive 2006/112/EC.

Union scheme returns
9 (1) A person who is or has been registered under the Union scheme must submit a return (a “Union scheme return”) to the Commissioners for each reporting period.
(2) Each quarter for the whole or part of which a person is registered under the Union scheme is a “reporting period” for that person.

Union scheme returns: further requirements
10 (1) A Union scheme return is to be made out in sterling.
(2) Any conversion from one currency into another for the purposes of sub-paragraph (1) is to be made using the exchange rates published by the European Central Bank—
(a) for the last day of the reporting period to which the Union scheme return relates, or
(b) if no such rate is published for that day, for the next day for which such a rate is published.
(3) A Union scheme return—
(a) must be submitted to the Commissioners within the 20 days after the last day of the reporting period to which it relates;
(b) must be submitted by such electronic means, and in such manner, as the Commissioners may direct or may by regulations require.

Payment
11 (1) A person who is required to submit a Union scheme return must pay, by the deadline for submitting the return, the amounts required in accordance with paragraph 8 in respect of qualifying supplies of scheme services made in the reporting period to which the return relates.
(2) A payment under this paragraph must be made in such manner as the Commissioners may direct or may by regulations require.

Availability of records
12 (1) A person who is registered under the Union scheme must make available to the Commissioners, on request, any obligatory records the person is keeping of transactions entered into by the person while registered under the scheme.
(2) The records must be made available by electronic means.
(3) In sub-paragraph (1) “obligatory records” means records kept in accordance with an obligation imposed in accordance with Article 369k of Directive 2006/112/EC.

Amounts required to be paid to other member States
13 Section 44 of the Commissioners for Revenue and Customs Act 2005 (requirement to pay receipts into the Consolidated Fund) does not apply to any money received for or on account of VAT that is required to be paid to another member State under Article 46 of Council Regulation (EU) No 904/2010.

PART 4 Persons registered under non-UK special schemes

Meaning of “non-UK special scheme”
14 (1) In this Schedule “non-UK special scheme” means any provision of the law of a member State other than the United Kingdom which implements Section 3 of Chapter 6 of Title XII of Directive 2006/112/EC.
(2) In relation to a non-UK special scheme, references to the “administering member State” are to the member State under whose law the scheme is established.

Exemption from requirement to register under this Act
15 (1) A participant in a non-UK special scheme is not required to be registered under this Act by virtue of making supplies of scheme services in respect of which the participant is required to make returns under that scheme.
(2) Sub-paragraph (1) overrides any contrary provision in this Act.
(3) Where a participant in a non-UK special scheme who is not registered under this Act (“the unregistered person”) makes relevant supplies, it is to be assumed for all purposes of this Act relating to the determination of—
(a) whether or not VAT is chargeable under this Act on those supplies,
(b) how much VAT is chargeable under this Act on those supplies,
(c) the time at which those supplies are treated as taking place, and
(d) any other matter that the Commissioners may specify by regulations,
that the unregistered person is registered under this Act.
(4) Supplies of scheme services made by the unregistered person are “relevant supplies” if—
(a) the value of the supplies must be accounted for in a return required to be made by the unregistered person under the non-UK special scheme, and
(b) the supplies are treated as made in the United Kingdom.

De-registration
16 (1) Sub-paragraph (2) applies where a person who is registered under Schedule 1A—
(a) satisfies the Commissioners that the person intends to apply for identification under a non-UK special scheme, and
(b) asks the Commissioners to cancel the person's registration under Schedule 1A.
(2) The Commissioners may cancel the person's registration under Schedule 1A with effect from—
(a) the day on which the request is made, or
(b) a later date agreed between the person and the Commissioners.

Scheme participants who are also registered under this Act
17 (1) A person who—
(a) is a participant in a non-UK special scheme, and
(b) is also registered, or required to be registered, under this Act,
is not required to discharge any obligation placed on the person as a taxable person, so far as the obligation relates to relevant supplies.
(2) The reference in sub-paragraph (1) to an obligation placed on the person as a taxable person is to an obligation—
(a) to which the person is subject under or by virtue of this Act, and
(b) to which the person would not be subject if the person were neither registered nor required to be registered under this Act.
(3) A supply made by a participant in a non-UK special scheme is a “relevant supply” if—
(a) the value of the supply must be accounted for in a return required to be made by the participant under the non-UK special scheme, and
(b) the supply is treated as made in the United Kingdom.
(4) The Commissioners may by regulations specify cases in relation to which sub-paragraph (1) is not to apply.
(5) In section 25(2) (deduction of input tax from output tax by taxable person) the reference to output tax that is due from the taxable person does not include any VAT that the taxable person is liable under a non-UK special scheme to pay to the tax authorities for the administering member State.

Value of supplies to connected persons
18 In paragraph 1 of Schedule 6 (valuation: supply to connected person at less than market value) the reference to a supply made by a taxable person is to be read as including a supply of scheme services that is made by a participant in a non-UK special scheme (and is treated as made in the United Kingdom).

Refund of VAT on supplies of goods and services supplied to scheme participant
19 The power of the Commissioners to make regulations under section 39 (repayment of VAT to those in business overseas) includes power to make provision for giving effect to the second sentence of Article 369j of Directive 2006/112/EC (which provides for VAT on certain supplies to participants in special accounting schemes to be refunded in accordance with Directive 2008/9/EC).

Assessments: general modifications of section 73
20 (1) For the purposes of this Schedule, section 73 (assessments: incorrect returns etc) is to be read as if—
(a) the reference in subsection (1) of that section to returns required under this Act included relevant non-UK returns, and
(b) references in that section to a prescribed accounting period included a tax period.
(2) See also the modifications in paragraph 21.
(3) In this Schedule “relevant non-UK return” means a non-UK return (see paragraph 38(1)) that is required to be made (wholly or partly) in respect of supplies of scheme services that are treated as made in the United Kingdom.

Assessment in connection with increase in consideration
21 (1) Sub-paragraphs (2) to (4) make modifications of sections 73 and 76 which—
(a) have effect for the purposes of this Schedule, and
(b) are in addition to any other modifications of those sections made by this Schedule.
(2) Section 73 has effect as if the following were inserted after subsection (3) of that section—

“(3A) Where a person has failed to make an amendment or notification that the person is required to make under paragraph 31 of Schedule 3BA in respect of an increase in the consideration for a UK supply (as defined in paragraph 31(7)), the Commissioners may assess the amount of VAT due from the person as a result of the increase to the best of their judgement and notify it to the person.
(3B) An assessment under subsection (3A)—
(a) is of VAT due for the tax period mentioned in paragraph 31(1)(a) of Schedule 3BA;
(b) must be made within the time limits provided for in section 77, and must not be made after the later of—
(i) 2 years after the end of the tax period referred to in paragraph 31(1)(a);
(ii) one year after evidence of facts sufficient in the opinion of the Commissioners to justify making the assessment comes to their knowledge.
(3C) Subject to section 77, where further evidence such as is mentioned in subsection (3B)(b)(ii) comes to the Commissioners' knowledge after they have made an assessment under subsection (3A), another assessment may be made under that subsection, in addition to any earlier assessment.”

(3) The reference in section 73(9) to subsection (1) of that section is taken to include a reference to section 73(3A) (as inserted by sub-paragraph (2)).
(4) Section 76 (assessment of amounts due by way of interest etc) is to be read as if the reference in subsection (5) of that section to section 73(1) included a reference to section 73(3A) (as inserted by sub-paragraph (2)).

Assessments: consequential modifications
22 References to prescribed accounting periods in the following provisions are to be read in accordance with the modifications made by paragraphs 20 and 21—
(a) section 74 (interest on VAT recovered or recoverable by assessment);
(b) section 76 (assessment of amounts due by way of penalty, interest or surcharge);
(c) section 77 (assessment: time limits).

Deemed amendments of relevant non-UK returns
23 (1) Where a person who has made a relevant non-UK return makes a claim under paragraph 29(7)(b) (overpayments) in relation to an error in the return, the relevant non-UK return is taken for the purposes of this Act to have been amended by the information in the claim.
(2) Where a person who has made a relevant non-UK return gives the Commissioners a notice relating to the return under paragraph 31(2)(b) (increase or decrease in consideration), the relevant non-UK return is taken for the purposes of this Act to have been amended by that information.
(3) Where (in a case not falling within sub-paragraph (1) or (2)) a person who has made a relevant non-UK return notifies the Commissioners (after the expiry of the period during which the non-UK return may be amended under Article 61 of the Implementing Regulation) of a change that needs to be made to the return to correct an error, or rectify an omission, in it, the relevant non-UK return is taken for the purposes of this Act to have been amended by that information.
(4) The Commissioners may by regulations—
(a) specify within what period and in what form and manner notice is to be given under sub-paragraph (3);
(b) require notices to be supported by documentary evidence described in the regulations.

Interest on VAT: “reckonable date”
24 (1) Sub-paragraph (2) states the “reckonable date” for the purposes of section 74(1) and (2) for any case where an amount carrying interest under that section—
(a) is an amount assessed under section 73(2) (refunds etc) in reliance on paragraph 20, or that could have been so assessed, and
(b) was correctly paid or credited to the person, but would not have been paid or credited to the person had the facts been as they later turn out to be.
(2) The “reckonable date” is the first day after the end of the tax period in which the events occurred as a result of which the Commissioners were authorised to make the assessment (that was or could have been made) under section 73(2).
(3) Sub-paragraph (4) states the “reckonable date” for any other case where an amount carrying interest under section 74 is assessed under section 74(1) or (2) in reliance on paragraph 20, or could have been so assessed.
(4) The “reckonable date” is taken to be the latest date by which a non-UK return was required to be made for the tax period to which the amount assessed relates.
(5) Where section 74(1) or (2) (interest on VAT recovered or recoverable by assessment) applies in relation to an amount assessed under section 73(3A) (as inserted by paragraph 21(2)), the “reckonable date” for the purposes of section 74(1) or (2) is taken to be the day after the end of the tax period referred to in paragraph 31(2).

Default surcharge: notice of special surcharge period
25 (1) A person who is required to make a relevant non-UK return for a tax period is regarded for the purposes of this paragraph and paragraph 26 as being in default in respect of that period if either—
(a) conditions 1A and 2A are met, or
(b) conditions 1B and 2B are met;
(but see also paragraph 27).
(2) For the purposes of sub-paragraph (1)(a)—
(a) condition 1A is that the tax authorities for the administering member State have not received the return by the deadline for submitting it;
(b) condition 2A is that those tax authorities have, in accordance with Article 60a of the Implementing Regulation, issued a reminder of the obligation to submit the return.
(3) For the purposes of sub-paragraph (1)(b)—
(a) condition 1B is that, by the deadline for submitting the return, the tax authorities for the administering member State have received the return but have not received the amount of VAT shown on the return as payable by the person in respect of the tax period;
(b) condition 2B is that those tax authorities have, in accordance with Article 60a of the Implementing Regulation, issued a reminder of the VAT outstanding.
(4) The Commissioners may serve on a person who is in default in respect of a tax period a notice (a “special surcharge liability notice”) specifying a period—
(a) ending on the first anniversary of the last day of that tax period, and
(b) beginning on the date of the notice.
(5) A period specified under sub-paragraph (4) is a “special surcharge period”.
(6) If a special surcharge liability notice is served in respect of a tax period which ends at or before the end of an existing special surcharge period, the special surcharge period specified in that notice must be expressed as a continuation of the existing special surcharge period (so that the existing period and its extension are regarded as a single special surcharge period).

Further default after service of notice
26 (1) If a person on whom a special surcharge liability notice has been served—
(a) is in default in respect of a tax period ending within the special surcharge period specified in (or extended by) that notice, and
(b) has outstanding special scheme VAT for that tax period,
the person is to be liable to a surcharge of the amount given by sub-paragraph (2).
(2) The surcharge is equal to whichever is the greater of—
(a) £30, and
(b) the specified percentage of the person's outstanding special scheme VAT for the tax period.
(3) The specified percentage depends on whether the tax period is the first, second or third etc in the default period in respect of which the person is in default and has outstanding special scheme VAT, and is—
(a) for the first such tax period, 2%;
(b) for the second such tax period, 5%;
(c) for the third such tax period, 10%;
(d) for each such tax period after the third, 15%.
(4) “Special scheme VAT”, in relation to a person, means VAT that the person is liable to pay to the tax authorities for the administering member State under a non-UK special scheme in respect of supplies of scheme services treated as made in the United Kingdom.
(5) A person has “outstanding special scheme VAT” for a tax period if some or all of the special scheme VAT for which the person is liable in respect of that period has not been paid by the deadline for the person to submit a non-UK return for that period (and the amount unpaid is referred to in sub-paragraph (2)(b) as “the person's outstanding special scheme VAT” for the tax period).

Default surcharge: exceptions for reasonable excuse etc
27 (1) A person who would otherwise have been liable to a surcharge under paragraph 26(1) is not to be liable to the surcharge if the person satisfies the Commissioners or, on appeal, the tribunal that, in the case of a default which is material to the surcharge—
(a) the non-UK return or, as the case may be, the VAT shown on that return, was despatched at such a time and in such manner that it was reasonable to expect that it would be received by the tax authorities for the administering member State within the appropriate time limit, or
(b) there is a reasonable excuse for the return or the VAT not having been so despatched.
(2) Where sub-paragraph (1) applies to a person—
(a) the person is treated as not having been in default in respect of the tax period in question, and
(b) accordingly, any special surcharge liability notice the service of which depended on that default is regarded as not having been served.
(3) A default is “material” to a surcharge if—
(a) it is the default which gives rise to the surcharge, under paragraph 26(1), or
(b) it is a default which was taken into account in the service of the special surcharge liability notice on which the surcharge depends and the person concerned has not previously been liable to a surcharge in respect of a tax period ending within the special surcharge period specified in or extended by that notice.
(4) A default is left out of account for the purposes of paragraphs 25(4) and 26(1) if—
(a) the conduct by virtue of which the person is in default is also conduct falling within section 69(1) (breaches of regulatory provisions), and
(b) by reason of that conduct the person concerned is assessed to a penalty under that section.
(5) If the Commissioners, after consultation with the Treasury, so direct, a default in respect of a tax period specified in the direction is to be left out of account for the purposes of paragraphs 25(4) and 26(1).
(6) Section 71(1) (meaning of “reasonable excuse”) applies for the purposes of this paragraph as it applies for the purposes of sections 59 to 70.

Interest in certain cases of official error
28 (1) Section 78 (interest in certain cases of official error) applies as follows in relation to a case where, due to an error on the part of the Commissioners—
(a) a person has accounted under a non-UK special scheme for an amount by way of UKVAT that was not UKVAT due from the person, and as a result the Commissioners are liable under paragraph 29 to pay (or repay) an amount to the person, or
(b) (in a case not falling within paragraph (a)), a person has paid, in accordance with an obligation under a non-UK special scheme, an amount by way of UKVAT that was not UKVAT due from the person and which the Commissioners are in consequence liable to repay to the person.
(2) Section 78 has effect as if the condition in section 78(1)(a) were met in relation to that person.
(3) In the application of section 78 as a result of this paragraph, section 78(12)(b) is read as providing that any reference in that section to a return is to a return required to be made under a non-UK special scheme.
(4) In section 78, as it applies as a result of this section, “output tax” has the meaning that that expression would have if the reference in section 24(2) to a “taxable person” were to a “person”.

Overpayments
29 (1) A person may make a claim if the person—
(a) has made a non-UK return for a tax period relating wholly or partly to supplies of scheme services treated as made in the United Kingdom,
(b) has accounted to the tax authorities for the administering member State for VAT in respect of those supplies, and
(c) in doing so has brought into account as UKVAT due to those authorities an amount (“the overpaid amount”) that was not UKVAT due to them.
(2) A person may make a claim if the person has, as a participant in a non-UK special scheme, paid (to the tax authorities for the administering member State or to the Commissioners) an amount by way of UKVAT that was not UKVAT due (“the overpaid amount”), otherwise than in the circumstances mentioned in sub-paragraph (1)(c).
(3) A person who is or has been a participant in a non-UK special scheme may make a claim if the Commissioners—
(a) have assessed the person to VAT for a tax period, and
(b) in doing so, have brought into account as VAT an amount (“the amount not due”) that was not VAT due.
(4) Where a person makes a claim under sub-paragraph (1) or (2), the Commissioners must repay the overpaid amount to the person.
(5) Where a person makes a claim under sub-paragraph (3), the Commissioners must credit the person with the amount not due.
(6) Where—
(a) as a result of a claim under sub-paragraph (3) an amount is to be credited to a person, and
(b) after setting any sums against that amount under or by virtue of this Act, some or all of the amount remains to the person's credit,
the Commissioners must pay (or repay) to the person so much of the amount as remains to the person's credit.
(7) The reference in sub-paragraph (1) to a claim is to a claim made—
(a) by correcting, in accordance with Article 61 of the Implementing Regulation, the error in the non-UK return mentioned in sub-paragraph (1)(a), or
(b) (after the expiry of the period during which the non-UK return may be amended under Article 61) to the Commissioners.
(8) Sub-paragraphs (1) and (2) do not require any amount to be repaid except so far as that is required by Article 63 of the Implementing Regulation.

Overpayments: supplementary
30 (1) In section 80—
(a) subsections (3) to (3C) (unjust enrichment), and
(b) subsections (4A), (4C) and (6) (recovery by assessment of amounts wrongly credited),
have effect as if a claim under paragraph 29(1) were a claim under section 80(1), a claim under paragraph 29(2) were a claim under section 80(1B) and a claim under paragraph 29(3) were a claim under section 80(1A).
(2) In section 80(3) to (3C), (4A), (4C) and (6), as applied by sub-paragraph (1)—
(a) references to the crediting of amounts are to be read as including the payment of amounts;
(b) references to a prescribed accounting period include a tax period.
(3) The Commissioners are not liable to repay the overpaid amount on a claim made—
(a) under paragraph 29(2),or
(b) as mentioned in paragraph 29(7)(b),
if the claim is made more than 4 years after the relevant date.
(4) On a claim made under paragraph 29(3), the Commissioners are not liable to credit the amount not due if the claim is made more than 4 years after the relevant date.
(5) The “relevant date” is—
(a) in the case of a claim under paragraph 29(1), the end of the tax period mentioned in paragraph 29(1)(a), except in the case of a claim resulting from an incorrect disclosure;
(b) in the case of a claim under paragraph 29(1) resulting from an incorrect disclosure, the end of the tax period in which the disclosure was made;
(c) in the case of a claim under paragraph 29(2), the date on which the payment was made;
(d) in the case of a claim under paragraph 29(3), the end of the quarter in which the assessment was made.
(6) A person makes an “incorrect disclosure” where—
(a) the person discloses to the tax authorities in question (whether the Commissioners or the tax authorities for the administering member State) that the person has not brought into account for a tax period an amount of UKVAT due for the period (“the disclosed amount”),
(b) the disclosure is made in a later tax period, and
(c) some or all of the disclosed amount is not in fact VAT due.

Increase or decrease in consideration for a supply
31 (1) This paragraph applies where—
(a) a person makes a non-UK return for a tax period (“the affected tax period”) relating (wholly or partly) to a UK supply, and
(b) after the return has been made the amount of the consideration for the UK supply increases or decreases.
(2) The person must, in the tax period in which the increase or decrease is accounted for in the person's business accounts—
(a) amend the non-UK return to take account of the increase or decrease, or
(b) (if the period during which the person is entitled under Article 61 of the Implementing Regulation to amend the non-UK return has expired) notify the Commissioners of the adjustment needed to the figures in the non-UK return because of the increase or decrease.
(3) Where the change to which an amendment or notice under sub-paragraph (2) relates is an increase in the consideration for a UK supply, the person must pay to the tax authorities for the administering member State (in accordance with Article 62 of the Implementing Regulation) or, in a case falling within sub-paragraph (2)(b), the Commissioners, the difference between—
(a) the amount of VAT that was chargeable on the supply before the increase in consideration, and
(b) the amount of VAT that is chargeable in respect of the whole of the increased consideration for the supply.
(4) Where the change to which an amendment or notice under sub-paragraph (2) relates is a decrease in the consideration for a UK supply, the amendment or notice has effect as a claim; and where a claim is made the Commissioners must repay any VAT paid by the person that would not have been VAT due from the person had the consideration for the supply always been the decreased amount.
(5) The Commissioners may by regulations specify—
(a) the latest time by which, and the form and manner in which, a claim or other notice under sub-paragraph (2)(b) must be given;
(b) the latest time by which, and the form in which, a payment under sub-paragraph (3) must be made in a case within sub-paragraph (2)(b).
(6) A payment made under sub-paragraph (3) in a case within sub-paragraph (2)(a) must be made before the end of the tax period referred to in sub-paragraph (2).
(7) In this paragraph “UK supply” means a supply of scheme services that is treated as made in the United Kingdom.

Bad debts
32 Where a participant in a non-UK special scheme—
(a) has submitted a non-UK return to the tax authorities for the administering member State, and
(b) amends the return to take account of the writing-off as a bad debt of the whole or part of the consideration for a supply of scheme services that is treated as made in the United Kingdom,
the amending of the return may be treated as the making of a claim to the Commissioners for the purposes of section 36(2) (bad debts: claim for refund of VAT).

Records relating to supplies in UK
33 (1) A person who is a participant in a non-UK special scheme must keep records of the transactions which the person enters into for the purposes of, or in connection with, relevant supplies.
(2) A supply made by a participant in a non-UK special scheme is a “relevant supply” if—
(a) the value of the supply must be accounted for in a return required to be made by the participant under the non-UK special scheme, and
(b) the supply is treated as made in the United Kingdom.
(3) The records must be sufficiently detailed to enable the Commissioners to determine whether any special scheme return submitted in respect of the supplies is correct.
(4) The records must be made available on request to the Commissioners by electronic means.
(5) Records must be kept for 10 years beginning with the 1 January following the date on which the transaction was entered into.

Penalties for errors: disclosure
34 Where a person corrects a non-UK return in a way that constitutes telling the tax authorities for the administering member State about—
(a) an inaccuracy in the return,
(b) a supply of false information, or
(c) a withholding of information,
the person is regarded as telling HMRC about that for the purposes of paragraph 9 of Schedule 24 to the Finance Act 2007.

Set-offs
35 Where a participant in a non-UK special scheme is liable to pay UKVAT to the tax authorities for the administering member State in accordance with the scheme, the UKVAT is regarded for the purposes of section 130(6) of the Finance Act 2008 (set-off: England, Wales and Northern Ireland) as payable to the Commissioners.

PART 5 Appeals
36 (1) An appeal lies to the tribunal with respect to any of the following—
(a) a refusal to register a person under the Union scheme;
(b) the cancellation of the registration of any person under the Union scheme;
(c) a refusal to make a repayment under paragraph 29 (overpayments), or a decision by the Commissioners as to the amount of the repayment due under that provision;
(d) a refusal to make a repayment under paragraph 31(4) (decrease in consideration);
(e) any liability to a surcharge under paragraph 26 (default surcharge).
(2) Part 5 of this Act (appeals), and any order or regulations under that Part, have effect as if an appeal under this paragraph were an appeal which lies to the tribunal under section 83(1) (but not under any particular paragraph of that subsection).
37 Where the Commissioners have made an assessment under section 73 in reliance on paragraph 20 or 21—
(a) section 83(1)(p)(i): (appeals against assessments under section 73(1) etc) applies as if the relevant non-UK return were a return under this Act, and
(b) the references in section 84(3) and (5) to the matters mentioned in section 83(1)(p) are to be read accordingly.

PART 6 Interpretation of Schedule
38 (1) In this Schedule—
“administering member State”, in relation to a non-UK special scheme, has the meaning given by paragraph 14(2);
“the Implementing Regulation” means Council Implementing Regulation (EU) No 282/2011;
“non-UK return” means a return required to be made, for a tax period, under a non-UK special scheme;
“non-UK special scheme” has the meaning given by paragraph 14(1);
“participant”, in relation to a non-UK special scheme, means a person who is identified under that scheme;
“qualifying supply of scheme services” has the meaning given by paragraph 4(2);
“relevant non-UK return” has the meaning given by paragraph 20(3);
“reporting period” is to be read in accordance with paragraph 9(2);
“scheme services” has the meaning given by paragraph 2;
“tax period” means a period for which a person is required to make a return under a non-UK special scheme;
“UKVAT” means VAT in respect of supplies of scheme services treated as made in the United Kingdom;
“Union scheme” has the meaning given by paragraph 3;
“Union scheme return” has the meaning given by paragraph 9(1).
(2) In relation to a non-UK special scheme (or a non-UK return), references in this Schedule to “the tax authorities” are to the tax authorities for the member State under whose law the non-UK special scheme is established.
(3) References in this Schedule to a supply of scheme services being “treated as made” in the United Kingdom are to its being treated as made in the United Kingdom by paragraph 15 of Schedule 4A.”

Power to amend provisions about the Union scheme
2 In section 3A of VATA 1994 (supply of electronic services in member States: special accounting scheme)—
(a) in subsection (2), after “3B” insert “ or 3BA ”;
(b) in subsection (3), for “Schedule 3B” substitute “ Schedules 3B and 3BA ”.

PART 2 Non-Union scheme: amendments of Schedule 3B to VATA 1994

Introduction
3 Schedule 3B to VATA 1994 (supply of electronic services in member States: special accounting scheme) is amended in accordance with paragraphs 4 to 10.

Extension of non-Union scheme to broadcasting and telecommunication services
4 For paragraph 3 (qualifying supplies) substitute—

“3 (1) In this Schedule “qualifying supply” means a supply of electronically supplied services, telecommunication services or broadcasting services to a person who—
(a) belongs in the United Kingdom or another member State, and
(b) is not a relevant business person.
(2) In sub-paragraph (1)—
“broadcasting services” means radio and television broadcasting services;
“electronically supplied services” has the same meaning as in Schedule 4A (see paragraph 9(3) and (4) of that Schedule);
“telecommunication services” has the same meaning as in Schedule 4A (see paragraph 8(2) of that Schedule).”

5 For the title of the Schedule substitute— “ ELECTRONIC, TELECOMMUNICATION AND BROADCASTING SERVICES: NON-UNION SCHEME ”.

Consequential and other amendments
6 (1) Part 1 of the Schedule (registration) is amended as follows.
(2) In paragraph 2 (persons who may be registered)—
(a) in sub-paragraph (6) for “Article 26c” substitute “ Section 2 of Chapter 6 of Title XII of the VAT Directive ”;
(b) for sub-paragraph (7) substitute—

“(7) In this Schedule “the VAT Directive” means Directive 2006/112/EC (Title XII of which is amended by Council Directive 2008/8/EC).”

(3) In paragraph 4 (registration request)—
(a) in sub-paragraph (2) for “paragraph 9 below” substitute “ Article 58b of Implementing Regulation (EU) No 282/2011 ”;
(b) for sub-paragraph (5) substitute—

“(5) A registration request—
(a) must contain any further information, and any declaration about its contents, that the Commissioners may by regulations require;
(b) must be made by such electronic means, and in such manner, as the Commissioners may direct or may by regulations require.”

(4) Omit paragraph 5 (date on which registration takes effect) and the heading before it.
(5) In paragraph 7 (obligation to notify changes)—
(a) omit sub-paragraphs (1) and (2);
(b) in sub-paragraph (3), for “this paragraph” substitute “ Article 57h of Implementing Regulation (EU) No 282/2011 ”.
(6) In paragraph 8 (cancellation of registration)—
(a) in sub-paragraph (1)(e), after “this Schedule” insert “ or Implementing Regulation (EU) No 282/2011 ”;
(b) omit sub-paragraphs (2) and (3).
(7) Omit paragraph 9 (registration after cancellation for persistent default) and the heading before it.
(8) For the title substitute— “ NON-UNION SCHEME: REGISTRATION ”.
7 (1) Part 2 of the Schedule (obligations following registration, etc) is amended as follows.
(2) In paragraph 10 (liability for VAT)—
(a) in sub-paragraph (2), at the end insert “ (and the VAT is to be paid without any deduction of VAT pursuant to Article 168 of Directive 2006/112/EC) ”;
(b) in sub-paragraph (3), omit “that would have been” and for the words from “if the person” to the end substitute “ (see paragraph 17(2)) ”;
(c) in sub-paragraph (4), omit “that would have been” and the words from “if the person” to the end;
(d) in sub-paragraph (5) omit paragraph (b) and the “and” before it.
(3) In paragraph 11 (obligation to submit special accounting returns)—
(a) in sub-paragraph (1), for “Controller” substitute “ Commissioners ”;
(b) omit sub-paragraphs (3) to (7).
(4) In paragraph 12 (further obligations with respect to special accounting returns)—
(a) in sub-paragraph (1), for the words from “must” to the end substitute “ is to be made out in sterling ”;
(b) in sub-paragraph (3), for “Controller” substitute “ Commissioners ”.
(5) In paragraph 13 (payment of VAT), in sub-paragraph (1), for the words from “at” to “respect of” substitute “ by the deadline for submitting the return, pay to the Commissioners the amount of VAT that the person is liable, in accordance with paragraph 10, to pay on qualifying supplies treated as made by the person in ”.
(6) In paragraph 15 (Commissioners' power to request production of records), in sub-paragraph (2)(b), for “Article 26c” substitute “ Section 2 of Chapter 6 of Title XII of the VAT Directive ”.
(7) After paragraph 15 insert—

“15A Section 44 of the Commissioners for Revenue and Customs Act 2005 (requirement to pay receipts into the Consolidated Fund) does not apply to any money received for or on account of VAT that is required to be paid to another member State under Article 46 of Council Regulation (EU) No 904/2010.”

(8) For the title substitute— “ NON-UNION SCHEME: LIABILITY, RETURNS, PAYMENT ETC ”.
8 For Part 3 of the Schedule (understatements and overstatements of UKVAT) substitute—

“PART 3 Special schemes: collection etc of UKVAT

Assessments: general modifications of section 73
16 (1) For the purposes of this Schedule, section 73 (assessments: incorrect returns etc) is to be read as if—
(a) the reference in subsection (1) of that section to returns required under this Act included relevant special scheme returns, and
(b) references in that section to a prescribed accounting period included a tax period.
(2) See also the modifications in paragraph 16A.
(3) In this Schedule “relevant special scheme return” means a special scheme return that is required to be made (wholly or partly) in respect of supplies of scheme services that are treated as made in the United Kingdom.

Assessment in connection with increase in consideration
16A (1) Sub-paragraphs (2) to (4) make modifications of sections 73 and 76 which—
(a) have effect for the purposes of this Schedule, and
(b) are in addition to any other modifications of those sections made by this Schedule.
(2) Section 73 has effect as if the following were inserted after subsection (3) of that section—

“(3A) Where a person has failed to make an amendment or notification that the person is required to make under paragraph 16K of Schedule 3B in respect of an increase in the consideration for a UK supply (as defined in paragraph 16K(7)), the Commissioners may assess the amount of VAT due from the person as a result of the increase to the best of their judgement and notify it to the person.
(3B) An assessment under subsection (3A)—
(a) is of VAT due for the tax period mentioned in paragraph 16K(1)(a) of Schedule 3B;
(b) must be made within the time limits provided for in section 77, and must not be made after the later of—
(i) 2 years after the end of the tax period referred to in paragraph 16K(1)(a);
(ii) one year after evidence of facts sufficient in the opinion of the Commissioners to justify making the assessment comes to their knowledge.
(3C) Subject to section 77, where further evidence such as is mentioned in subsection (3B)(b)(ii) comes to the Commissioners' knowledge after they have made an assessment under subsection (3A), another assessment may be made under that subsection, in addition to any earlier assessment.”

(3) The reference in section 73(9) to subsection (1) of that section is taken to include a reference to section 73(3A) (as inserted by sub-paragraph (2)).
(4) Section 76 (assessment of amounts due by way of interest etc) is to be read as if the reference in subsection (5) of that section to section 73(1) included a reference to section 73(3A) (as inserted by sub-paragraph (2)).

Assessments: consequential modifications
16B References to prescribed accounting periods in the following provisions are to be read in accordance with the modifications made by paragraphs 16 and 16A—
(a) section 74 (interest on VAT recovered or recoverable by assessment);
(b) section 76 (assessment of amounts due by way of penalty, interest or surcharge);
(c) section 77 (assessment: time limits).

Deemed amendments of relevant special scheme returns
16C (1) Where a person who has made a relevant special scheme return makes a claim under paragraph 16I(7)(b) (overpayments) in relation to an error in the return, the relevant special scheme return is taken for the purposes of this Act to have been amended by the information in the claim.
(2) Where a person who has made a relevant special scheme return gives the Commissioners a notice relating to the return under paragraph 16K(2)(b) (increase or decrease in consideration), the relevant special scheme return is taken for the purposes of this Act to have been amended by that information.
(3) Where (in a case not falling within sub-paragraph (1) or (2)) a person who has made a relevant special scheme return notifies the Commissioners (after the expiry of the period during which the non-UK return may be amended under Article 61 of the Implementing Regulation) of a change that needs to be made to the return to correct an error, or rectify an omission, in it, the relevant special scheme return is taken for the purposes of this Act to have been amended by that information.
(4) The Commissioners may by regulations—
(a) specify within what period and in what form and manner notice may be given under sub-paragraph (3);
(b) require notices to be supported by documentary evidence described in the regulations.

Interest on VAT: “reckonable date”
16D (1) Sub-paragraph (2) states the “reckonable date” for the purposes of section 74(1) and (2) for any case where an amount carrying interest under that section—
(a) is an amount assessed under section 73(2) (refunds etc) in reliance on paragraph 16, or that could have been so assessed, and
(b) was correctly paid or credited to the person, but would not have been paid or credited to the person had the facts been as they later turn out to be.
(2) The “reckonable date” is the first day after the end of the tax period in which the events occurred as a result of which the Commissioners were authorised to make the assessment (that was or could have been made) under section 73(2).
(3) Sub-paragraph (4) states the “reckonable date”, for any other case where an amount carrying interest under section 74 is assessed under section 74(1) or (2) in reliance on paragraph 16, or could have been so assessed.
(4) The “reckonable date” is taken to be the latest date by which a non-UK return was required to be made for the tax period to which the amount assessed relates.
(5) Where section 74(1) or (2) (interest on VAT recovered or recoverable by assessment) applies in relation to an amount assessed under section 73(3A) (as inserted by paragraph 16A(2)), the “reckonable date” for the purposes of section 74(1) or (2) is taken to be the day after the end of the tax period referred to in paragraph 16K(2).

Default surcharge: notice of special surcharge period
16E (1) A person who is required to make a relevant special scheme return for a tax period is regarded for the purposes of this paragraph and paragraph 16F as being in default in respect of that period if either—
(a) conditions 1A and 2A are met, or
(b) conditions 1B and 2B are met;
(but see also paragraph 16G).
(2) For the purposes of sub-paragraph (1)(a)—
(a) condition 1A is that the tax authorities for the administering member State have not received the return by the deadline for submitting it;
(b) condition 2A is that those tax authorities have, in accordance with Article 60a of the Implementing Regulation, issued a reminder of the obligation to submit the return.
(3) For the purposes of sub-paragraph (1)(b)—
(a) condition 1B is that, by the deadline for submitting the return, the tax authorities for the administering member State have received the return but have not received the amount of VAT shown on the return as payable by the person in respect of the tax period;
(b) condition 2B is that those tax authorities have, in accordance with Article 60a of the Implementing Regulation, issued a reminder of the VAT outstanding.
(4) The Commissioners may serve on a person who is in default in respect of a tax period a notice (a “special surcharge liability notice”) specifying a period—
(a) ending on the first anniversary of the last day of that tax period, and
(b) beginning on the date of the notice.
(5) A period specified under sub-paragraph (4) is a “special surcharge period”.
(6) If a special surcharge liability notice is served in respect of a tax period which ends at or before the end of an existing special surcharge period, the special surcharge period specified in that notice must be expressed as a continuation of the existing special surcharge period (so that the existing period and its extension are regarded as a single special surcharge period).

Further default after service of notice
16F (1) If a person on whom a special surcharge liability notice has been served—
(a) is in default in respect of a tax period ending within the special surcharge period specified in (or extended by) that notice, and
(b) has outstanding special scheme VAT for that tax period,
the person is to be liable to a surcharge of the amount given by sub-paragraph (2).
(2) The surcharge is equal to whichever is the greater of—
(a) £30, and
(b) the specified percentage of the person's outstanding special scheme VAT for the tax period.
(3) The specified percentage depends on whether the tax period is the first, second or third etc in the default period in respect of which the person is in default and has outstanding special scheme VAT, and is—
(a) for the first such tax period, 2%;
(b) for the second such tax period, 5%;
(c) for the third such tax period, 10%;
(d) for each such tax period after the third, 15%.
(4) “Special scheme VAT”, in relation to a person, means VAT that the person is liable to pay to the tax authorities for the administering member State under a special scheme in respect of supplies of scheme services treated as made in the United Kingdom.
(5) A person has “outstanding special scheme VAT” for a tax period if some or all of the special scheme VAT for which the person is liable in respect of that period has not been paid by the deadline for the person to submit a special scheme return for that period (and the amount unpaid is referred to in sub-paragraph (2)(b) as “the person's outstanding special scheme VAT” for the tax period).

Default surcharge: exceptions for reasonable excuse etc
16G (1) A person who would otherwise have been liable to a surcharge under paragraph 16F(1) is not to be liable to the surcharge if the person satisfies the Commissioners or, on appeal, the tribunal that, in the case of a default which is material to the surcharge—
(a) the special scheme return or, as the case may be, the VAT shown on that return, was despatched at such a time and in such manner that it was reasonable to expect that it would be received by the tax authorities for the administering member State within the appropriate time limit, or
(b) there is a reasonable excuse for the return or the VAT not having been so despatched.
(2) Where sub-paragraph (1) applies to a person—
(a) the person is treated as not having been in default in respect of the tax period in question, and
(b) accordingly, any special surcharge liability notice the service of which depended on that default is regarded as not having been served.
(3) A default is “material” to a surcharge if—
(a) it is the default which gives rise to the surcharge, under paragraph 16F(1), or
(b) it is a default which was taken into account in the service of the special surcharge liability notice on which the surcharge depends and the person concerned has not previously been liable to a surcharge in respect of a tax period ending within the special surcharge period specified in or extended by that notice.
(4) A default is left out of account for the purposes of paragraphs 16E(4) and 16F(1) if—
(a) the conduct by virtue of which the person is in default is also conduct falling within section 69(1) (breaches of regulatory provisions), and
(b) by reason of that conduct the person concerned is assessed to a penalty under that section.
(5) If the Commissioners, after consultation with the Treasury, so direct, a default in respect of a tax period specified in the direction is to be left out of account for the purposes of paragraphs 16E(4) and 16F(1).
(6) Section 71(1) (meaning of “reasonable excuse”) applies for the purposes of this paragraph as it applies for the purposes of sections 59 to 70.

Interest in certain cases of official error
16H (1) Section 78 (interest in certain cases of official error) applies as follows in relation to a case where, due to an error on the part of the Commissioners—
(a) a person has accounted, under a special scheme, for an amount by way of UKVAT that was not UKVAT due from the person, and as a result the Commissioners are liable under paragraph 16I to pay (or repay) an amount to the person, or
(b) (in a case not falling within paragraph (a)), a person has paid, in accordance with an obligation under a special scheme, an amount by way of UKVAT that was not UKVAT due from the person and which the Commissioners are in consequence liable to repay to the person.
(2) Section 78 has effect as if the condition in section 78(1)(a) were met in relation to that person.
(3) In the application of section 78 as a result of this paragraph, section 78(12)(b) is read as providing that any reference in that section to a return is to a return required to be made under a special scheme.
(4) In section 78 in its application as a result of this section, “output tax” has the meaning that that expression would have if the reference in section 24(2) to a “taxable person” were to a “person”.

Overpayments
16I (1) A person may make a claim if the person—
(a) has made a special scheme return for a tax period relating wholly or partly to supplies of scheme services treated as made in the United Kingdom,
(b) has accounted to the tax authorities for the administering member State (whether that is the United Kingdom or another member State) for VAT in respect of those supplies, and
(c) in doing so has brought into account as UKVAT due to those authorities an amount (“the overpaid amount”) that was not UKVAT due to them.
(2) A person may make a claim if the person has, as a participant in a special scheme, paid (to the tax authorities for the administering member State or to the Commissioners) an amount by way of UKVAT that was not UKVAT due (“the overpaid amount”), otherwise than in the circumstances mentioned in sub-paragraph (1)(c).
(3) A person who is or has been a participant in a special scheme may make a claim if the Commissioners—
(a) have assessed the person to VAT for a tax period, and
(b) in doing so, have brought into account as VAT an amount (“the amount not due”) that was not VAT due.
(4) Where a person makes a claim under sub-paragraph (1) or (2), the Commissioners must repay the overpaid amount to the person.
(5) Where a person makes a claim under sub-paragraph (3), the Commissioners must credit the person with the amount not due.
(6) Where—
(a) as a result of a claim under sub-paragraph (3) an amount is to be credited to a person, and
(b) after setting any sums against that amount under or by virtue of this Act, some or all of the amount remains to the person's credit,
the Commissioners must pay (or repay) to the person so much of the amount as remains to the person's credit.
(7) The reference in sub-paragraph (1) to a claim is to a claim made—
(a) by correcting, in accordance with Article 61 of the Implementing Regulation, the error in the non-UK return mentioned in sub-paragraph (1)(a), or
(b) (after the expiry of the period during which the non-UK return may be amended under Article 61) to the Commissioners.
(8) Sub-paragraphs (1) and (2) do not require any amount to be repaid except so far as that is required by Article 63 of the Implementing Regulation.

Overpayments: supplementary
16J (1) In section 80—
(a) subsections (3) to (3C) (unjust enrichment), and
(b) subsections (4A), (4C) and (6) (recovery by assessment of amounts wrongly credited),
have effect as if a claim under paragraph 16I(1) were a claim under section 80(1), a claim under paragraph 16I(2) were a claim under section 80(1B) and a claim under paragraph 16I(3) were a claim under section 80(1A).
(2) In section 80(3) to (3C), (4A), (4C) and (6), as applied by sub-paragraph (1)—
(a) references to the crediting of amounts are to be read as including the payment of amounts;
(b) references to a prescribed accounting period include a tax period.
(3) The Commissioners are not liable to repay the overpaid amount on a claim made—
(a) under paragraph 16I(2),or
(b) as mentioned in paragraph 16I(7)(b),
if the claim is made more than 4 years after the relevant date.
(4) On a claim made under paragraph 16I(3), the Commissioners are not liable to credit the amount not due if the claim is made more than 4 years after the relevant date.
(5) The “relevant date” is—
(a) in the case of a claim under paragraph 16I(1), the end of the tax period mentioned in paragraph 16I(1)(a), except in the case of a claim resulting from an incorrect disclosure;
(b) in the case of a claim under paragraph 16I(1) resulting from an incorrect disclosure, the end of the tax period in which the disclosure was made;
(c) in the case of a claim under paragraph 16I(2), the date on which the payment was made;
(d) in the case of a claim under paragraph 16I(3), the end of the quarter in which the assessment was made.
(6) A person makes an “incorrect disclosure” where—
(a) the person discloses to the tax authorities in question (whether the Commissioners or the tax authorities for the administering member State) that the person has not brought into account for a tax period an amount of UKVAT due for the period (“the disclosed amount”),
(b) the disclosure is made in a later tax period, and
(c) some or all of the disclosed amount is not in fact VAT due.

Increase or decrease in consideration for a supply
16K (1) This paragraph applies where—
(a) a person makes a special scheme return for a tax period (“the affected tax period”) relating (wholly or partly) to a UK supply, and
(b) after the return has been made the amount of the consideration for the UK supply increases or decreases.
(2) The person must, in the tax period in which the increase or decrease is accounted for in the person's business accounts—
(a) amend the special scheme return to take account of the increase or decrease, or
(b) (if the period during which the person is entitled under Article 61 of the Implementing Regulation to amend the special scheme return has expired) notify the Commissioners of the adjustment needed to the figures in the special scheme return because of the increase or decrease.
(3) Where the change to which an amendment or notice under sub-paragraph (2) relates is an increase in the consideration for a UK supply, the person must pay to the tax authorities for the administering member State (in accordance with Article 62 of the Implementing Regulation) or, in a case falling within sub-paragraph (2)(b), the Commissioners, the difference between—
(a) the amount of VAT that was chargeable on the supply before the increase in consideration, and
(b) the amount of VAT that is chargeable in respect of the whole of the increased consideration for the supply.
(4) Where the change to which an amendment or notice under sub-paragraph (2) relates is a decrease in the consideration for a UK supply, the amendment or notice has effect as a claim; and where a claim is made the Commissioners must repay any VAT paid by the person that would not have been VAT due from the person had the consideration for the supply always been the decreased amount.
(5) The Commissioners may by regulations specify—
(a) the latest time by which, and the form and manner in which, a claim or other notice under sub-paragraph (2)(b) must be given;
(b) the latest time by which, and the form in which, a payment under sub-paragraph (3) must be made in a case within sub-paragraph (2)(b).
(6) A payment made under sub-paragraph (3) in a case within sub-paragraph (2)(a) must be made before the end of the tax period referred to in sub-paragraph (2).
(7) In this paragraph “UK supply” means a supply of scheme services that is treated as made in the United Kingdom.

Bad debts
16L Where a participant in a special scheme—
(a) has submitted a special scheme return to the tax authorities for the administering member State, and
(b) amends the return to take account of the writing-off as a bad debt of the whole or part of the consideration for a supply of scheme services that is treated as made in the United Kingdom,
the amending of the return may be treated as the making of a claim to the Commissioners for the purposes of section 36(2) (bad debts: claim for refund of VAT).

Penalties for errors: disclosure
16M Where a person corrects a special scheme return in a way that constitutes telling the tax authorities for the administering member State about—
(a) an inaccuracy in the return,
(b) a supply of false information, or
(c) a withholding of information,
the person is regarded as telling HMRC about that for the purposes of paragraph 9 of Schedule 24 to the Finance Act 2007.

Set-offs
16N Where a participant in a special scheme is liable to pay UKVAT to the tax authorities for the administering member State in accordance with the scheme, the UKVAT is regarded for the purposes of section 130(6) of the Finance Act 2008 (set-off: England, Wales and Northern Ireland) as payable to the Commissioners.”

9 (1) Part 4 of the Schedule (application of provisions relating to VAT) is amended as follows.
(2) Paragraph 17 (registration under VATA 1994) is renumbered as sub-paragraph (1) of that paragraph.
(3) In that paragraph, after sub-paragraph (1) (as renumbered), insert—

“(2) Where a participant in the special scheme (“the scheme participant”) makes relevant supplies, it is to be assumed for all purposes of this Act relating to the determination of—
(a) whether or not VAT is chargeable under this Act on those supplies,
(b) how much VAT is chargeable under this Act on those supplies,
(c) the time at which those supplies are treated as taking place, and
(d) any other matter that the Commissioners may specify by regulations,
that the scheme participant is registered under this Act.
(3) Supplies of scheme services made by the scheme participant are “relevant supplies” if—
(a) the value of the supplies must be accounted for in a special scheme return, and
(b) the supplies are treated as made in the United Kingdom.”

(4) In paragraph 18 (de-registration), in paragraph (b), for “Article 26c,” substitute “ Section 2 of Chapter 6 of Title XII of the VAT Directive, ”.
(5) After paragraph 18 insert—

“Value of supplies to connected persons
18A In paragraph 1 of Schedule 6 (valuation: supply to connected person at less than market value) the reference to a supply made by a taxable person is to be read as including a supply of scheme services that is made by a participant in the special scheme (and is treated as made in the United Kingdom).”

(6) In paragraph 20 (appeals)—
(a) in sub-paragraph (1), for paragraphs (b) and (c) substitute—

“(b) a refusal to make a repayment under paragraph 16I (overpayments), or a decision by the Commissioners as to the amount of the repayment due under that provision;
(c) a refusal to make a repayment under paragraph 16K(4) (decrease in consideration);
(d) any liability to a surcharge under paragraph 16F (default surcharge).”

(b) after sub-paragraph (2) insert—

“(3) Where the Commissioners have made an assessment under section 73 in reliance on paragraph 16 or 16A—
(a) section 83(1)(p)(i): (appeals against assessments under section 73(1) etc) applies as if the relevant special scheme return were a return under this Act, and
(b) the references in section 84(3) and (5) to the matters mentioned in section 83(1)(p) are to be read accordingly.”

(7) Omit paragraph 21 (payments on account of non-UK VAT to other member States) and the heading before it (but see paragraph 7(7) of this Schedule).
(8) For the title substitute— “ OTHER PROVISIONS ABOUT SPECIAL SCHEMES ”
10 (1) In Part 5 of the Schedule (supplementary), paragraph 23 (interpretation) is amended as follows.
(2) In sub-paragraph (1)—
(a) for the words from “ “Article 26c” to the end of the definition of “the Controller” substitute—

““administering member State”, in relation to a special scheme, means the member State under whose law the scheme is established (whether that is the United Kingdom or another member State);
“the Implementing Regulation” means Implementing Regulation (EU) No 282/2011;”

(b) for the definition of “participant in the special scheme”, substitute—

““participant in the special scheme” means a person who—
(a) is registered under this Schedule, or
(b) is identified under any provision of the law of another member State which implements Section 2 of Chapter 6 of Title XII of the VAT Directive;”

(c) after the definition of “registration request” insert—

““relevant special scheme return” has the meaning given by paragraph 16(3);”

(d) after the definition of “reporting period” insert—

““scheme services” means electronically supplied services, broadcasting services or telecommunication services (and in this definition “electronically supplied services”, “broadcasting services” and “telecommunication services” have the meaning given by paragraph 3(2));”

(e) after the definition of “special accounting return” insert—

““special scheme” means—
(a) the accounting scheme under this Schedule, or
(b) any other scheme, under the law of another member State, implementing Section 2 of Title XII of Directive 2006/112/EC;
“special scheme return” means—
(a) a special accounting return, or
(b) a value added tax return submitted to the tax authorities of another member State;
“tax period” means—
(a) a reporting period (under the accounting scheme under this Schedule), or
(b) any other period for which a person is required to make a return under a special scheme;
“UKVAT” means VAT which a person is liable to pay (whether in the United Kingdom or another member State) in respect of qualifying supplies treated as made in the United Kingdom at a time when the person is or was a participant in the special scheme;
“value added tax return”, in relation to another member State, means any value added tax return required to be submitted under any provision of the law of that member State which implements Article 364 of the VAT Directive (as substituted by Article 5(11) of Council Directive 2008/8/EC);
“the VAT Directive” has the meaning given by paragraph 2(7);”

.
(3) In sub-paragraph (2)(a), for the words from “virtue” to “2002 VAT Directive),” substitute “ paragraph 15 of Schedule 4A (place of supply of electronic, telecommunication and broadcasting services), ”.
(4) Omit sub-paragraph (3).

PART 3 Other amendments: Union and non-Union schemes
11 VATA 1994 is amended in accordance with paragraphs 12 to 16.
12 (1) Section 3A (supply of electronic services in member States: special accounting scheme) is amended as follows.
(2) In subsection (1), after “services” insert “ , telecommunication services or broadcasting services ”.
(3) After subsection (1) insert—

“(1A) Schedule 3BA—
(a) establishes a special accounting scheme for use by persons established in the UK and supplying electronically supplied services, telecommunication services or broadcasting services in other member States, and
(b) makes provision about corresponding schemes in other member States.”

(4) For the heading substitute “ Supplies of electronic, telecommunication and broadcasting services: special accounting schemes. ”
13 In section 76 (assessment of amounts due by way of penalty, interest or surcharge)—
(a) in subsection (1)(a), for “or 59A,” substitute “ , section 59A, paragraph 16F of Schedule 3B or paragraph 26 of Schedule 3BA, ”;
(b) after subsection (3) insert—

“(3A) In the case of a surcharge under paragraph 16F of Schedule 3B or paragraph 26 of Schedule 3BA, the assessment under this section is of an amount due in respect of “the relevant period”, that is to say, the tax period (see section 76A) in respect of which the person is in default and in respect of which the surcharge arises.”

;
(c) in subsection (5), after each “(3)” insert “ or (3A) ”.
14 After section 76 insert—

“76A Section 76: cases involving special accounting schemes
(1) References in section 76 to a prescribed accounting period are to be read as including a tax period so far as that is necessary for the purposes of the references in section 76(1)(a) to paragraph 16F of Schedule 3B and paragraph 26 of Schedule 3BA (assessment of surcharge in certain cases involving special accounting schemes).
(2) References in section 77 to a prescribed accounting period are to be read accordingly.
(3) In this section and section 76 “tax period” means a tax period as defined in paragraph 23(1) of Schedule 3B or paragraph 38(1) of Schedule 3BA, as the case requires.”

15 In section 77 (assessment: time limits and supplementary assessments)—
(a) in subsection (2), after “subsection (3)” insert “ or (3A) ”;
(b) in subsection (3) after “subsection (3)” insert “ or (3A) ”.
16 In section 80 (repayment of overpaid VATetc), in subsection (7), after “this section” insert “ (and paragraph 16I of Schedule 3B and paragraph 29 of Schedule 3BA) ”.
17 In section 84(6) (appeals: variation of amounts assessed by way of surcharge etc), after “70,” insert “ or (as the case requires) paragraph 26 of Schedule 3BA or paragraph 16F of Schedule 3B ”.
18 In paragraph 12 of Schedule 1A to VATA 1994 (cancellation of registration under that Schedule)—
(a) after “Schedule 3B” insert “ and paragraph 16 of Schedule 3BA ”;
(b) for “that Schedule etc” substitute “ the Schedule concerned ”.
19 (1) Paragraph 1 of Schedule 24 to FA 2007 (penalties for errors) is amended as follows.
(2) In the Table, after the second entry relating to VAT insert—

“VAT	Return under a special scheme.”

(3) Before sub-paragraph (5) insert—

“(4A) In this paragraph “return under a special scheme” means any of the following, so far as relating to supplies of services treated as made in the United Kingdom—
(a) a special accounting return under paragraph 11 of Schedule 3B;
(b) a value added tax return submitted under any provision of the law of a member State other than the United Kingdom which implements Article 364 of the VAT Directive (as substituted by Article 5(11) of the Amending Directive);
(c) a value added tax return submitted under any provision of the law of a member State other than the United Kingdom which implements Article 369f of the VAT Directive (as inserted by Article 5(15) of the Amending Directive).
(4B) A value added tax return mentioned in paragraph (b) or (c) of sub-paragraph (4A) is regarded for the purposes of sub-paragraph (1) as given to HMRC when it is submitted to the authority to whom it is required to be submitted.
(4C) In sub-paragraph (4A)—
“the VAT Directive” means Directive 2006/112/EC;
“the Amending Directive” means Council Directive 2008/8/EC.”

20 (1) FA 2009 is amended as follows.
(2) In section 101 (late payment interest on sums due to HMRC), after subsection (9) insert—

“(10) The reference in subsection (1) to amounts payable to HMRC includes—
(a) amounts of UKVAT payable under a non-UK special scheme;
(b) amounts of UKVAT payable under a special scheme;
and references in Schedule 53 to amounts due or payable to HMRC are to be read accordingly.
(11) In subsection (10)—
(a) expressions used in paragraph (a) have the meaning given by paragraph 23(1) of Schedule 3B to VATA 1994 (non-Union scheme);
(b) expressions used in paragraph (b) have the meaning given by paragraph 38(1) of Schedule 3BA to VATA 1994 (Union scheme).”

(3) In section 108 (suspension of penalties during currency of agreement for deferred payment), in the Table in subsection (5), in the entry relating to value added tax, in the second column, after “1994” insert, “ or under paragraph 16F of Schedule 3B, or paragraph 26 of Schedule 3BA, to that Act ”.
21 (1) Schedule 10 to F(No.3)A 2010 (which prospectively amends Schedule 55 to FA 2009, which provides for penalties for failure to make returns) is amended as follows.
(2) In paragraph 2—
(a) after sub-paragraph (2) insert—

“(2A) In sub-paragraph (4), in the definition of “filing date”, at the end insert “ (or, in the case of a return mentioned in item 7AA or 7AB of the Table, to the tax authorities to whom the return is required to be delivered) ”.”

;
(b) in the words inserted by sub-paragraph (4), after item 7A, insert—

“7AA	Value added tax	Relevant non-UK return (as defined in paragraph 20(3) of Schedule 3BA to VATA 1994)
7AB	Value added tax	Relevant special scheme return (as defined in paragraph 16(3) of Schedule 3B to VATA 1994)”

.
(3) In paragraph 7, in the inserted paragraph 13A(1), for “7A, 7B” substitute “ 7A to 7B ”.
22 (1) Schedule 11 to F(No.3)A 2010 (which prospectively amends Schedule 56 to FA 2009, which provides for penalties for failure to make payments) is amended as follows.
(2) In paragraph 2(7), in the inserted words, after item 6B insert—

“6BA	Value added tax	Amount payable under relevant special scheme return (as defined in paragraph 16(3) of Schedule 3B to VATA 1994) (except an amount falling within item 13A, 13AA, 13AB, 23 or 24)	The date by which the amount must be paid under the law of the member State which has established the special scheme
6BB	Value added tax	Amount payable under relevant non-UK return (as defined in paragraph 20(3) of Schedule 3BA to VATA 1994) (except an amount falling within item 13A, 13AA, 13AB, 23 or 24)	The date by which the amount must be paid under the law of the member State which has established the non-UK special scheme”

(3) In paragraph 2(9), in the inserted words, after item 13A insert—

“13AA	Value added tax	Amount assessed under section 73(1) of VATA 1994, by virtue of paragraph 16 of Schedule 3B to that Act, in the absence of a value added tax return (as defined in paragraph 23(1) of that Schedule)	The date by which the amount would have been required to be paid under the law of the member State under whose law the return was required
13AB	Value added tax	Amount assessed under section 73(1) of VATA 1994, by virtue of paragraph 20 of Schedule 3BA to that Act, in the absence of a relevant non-UK return (as defined in paragraph 38(1) of that Schedule)	The date by which the amount would have been required to be paid under the law of the member State under whose law the return was required”

(4) In paragraph 2(13)(a), in the substituted words, after “6A,” insert “ 6BA, 6BB, ”.
(5) In paragraph 2(14)(a), in the substituted words, after “6A,” insert “ 6BA, 6BB, ”.
(6) In paragraph 7, in the inserted paragraph 8A(1), after “6A,” insert “ 6BA, 6BB, ”.

PART 4 Commencement
23 (1) The amendments made by this Schedule (except the amendments made by paragraphs 20(2), 21 and 22) have effect in relation to supplies made on or after 1 January 2015 (but see also paragraphs 24 and 25).
(2) Sub-paragraph (1) does not apply in relation to—
(a) the amendment made by paragraph 6(3)(b);
(b) any amendment so far as it confers power to make regulations.
24 (1) No registration under Schedule 3BA (inserted by paragraph 1) may take effect before 1 January 2015.
(2) A request for registration under Schedule 3BA that is made before 1 October 2014 is to be treated for the purposes of Article 57d of Implementing Regulation (EU) No 282/2011 (as amended by Council Regulation (EU) No 967/2012) (registration to have effect from first day of subsequent quarter) as if it were made on that date.
25 (1) No registration under Schedule 3B that is to be made in reliance on the amendments made by paragraph 4 may take effect before 1 January 2015.
(2) A request for registration under Schedule 3B that is made before 1 October 2014 in reliance on the amendments made by paragraph 4 is to be treated for the purposes of Article 57d of Implementing Regulation (EU) No 282/2011 (as amended by Council Regulation (EU) No 967/2012) as if it were made on that date.

SCHEDULE 23 SDLT: charities relief
Section 113
1 Schedule 8 to FA 2003 (stamp duty land tax: charities relief) is amended as follows.
2 In paragraph 1 (conditions for charities relief)—
(a) in sub-paragraph (2), omit the words from “that is” to the end;
(b) in sub-paragraph (3), for “not been” substitute “ been ”;
(c) after sub-paragraph (3) insert—

“(3A) For the purposes of this Schedule, a charity (“C”) holds a chargeable interest for qualifying charitable purposes if it holds it—
(a) for use in furtherance of the charitable purposes of C or another charity, or
(b) as an investment from which the profits are applied to the charitable purposes of C.”

3 After paragraph 3 insert—

“Joint purchasers: partial relief
3A (1) Sub-paragraphs (3) to (5) apply in any case where—
(a) there are two or more purchasers under a land transaction,
(b) the purchasers acquire the subject-matter of the transaction as tenants in common (or, in Scotland, as owners in common),
(c) at least one of them is, and at least one of them is not, a qualifying charity, and
(d) no purchaser enters into the transaction for the purpose of the avoidance of tax under this Part (whether by that purchaser or another person).
(2) A charity (“C”) that is a purchaser under a land transaction is a “qualifying charity” in relation to the transaction if C intends to hold its undivided share of the subject-matter of the transaction for qualifying charitable purposes.
(3) The tax chargeable in respect of the transaction is reduced by the amount of the relief under sub-paragraph (4).
(4) The relief is equal to the relevant proportion of the tax that would have been chargeable in respect of the transaction without this Schedule.
(5) The “relevant proportion”, in the case of a qualifying charity, is the lower of P1 and P2, where—
P1 is the proportion of the subject-matter of the transaction that is acquired by all the qualifying charities that are purchasers under the transaction (in aggregate);
P2 is the proportion of the chargeable consideration for the transaction that is given by all the qualifying charities that are purchasers under the transaction (in aggregate).

Withdrawal of relief given under paragraph 3A
3B (1) This paragraph applies where—
(a) relief has been given under paragraph 3A in respect of a transaction (“the relevant transaction”),
(b) a disqualifying event occurs in relation to a qualifying charity (“C”) which was a purchaser under the transaction, and
(c) the disqualifying event occurs in the circumstances required by sub-paragraphs (2) and (3).
(2) The disqualifying event must occur—
(a) before the end of the period of 3 years beginning with the effective date of the transaction, or
(b) in pursuance of, or in connection with, arrangements made before the end of that period.
(3) At the time of the disqualifying event C must hold a chargeable interest that—
(a) was acquired by C under the relevant transaction, or
(b) is derived from an interest so acquired.
(4) There is a “disqualifying event” in relation to C if —
(a) C ceases to be established for charitable purposes only, or
(b) the chargeable interest acquired by C under the transaction, or any interest or right derived from that interest, is used or held by C otherwise than for qualifying charitable purposes.
(5) C's portion of the relief mentioned in sub-paragraph (1)(a), or an appropriate proportion of C's portion of that relief, is withdrawn and tax is chargeable in accordance with this paragraph.
(6) The amount chargeable is equal to C's portion of the relief or, as the case may be, the appropriate proportion of C's portion of the relief.
(7) C's portion of the relief depends on whether P1 or P2 was lower in the calculation under paragraph 3A(5).
(8) If P1 was lower, C's portion of the relief is equal to—
p1 P1 × R
where—
p1 is the proportion of the subject-matter of the transaction that was acquired by C under the transaction;
P1 has the same meaning as in paragraph 3A(5);
(9) If P2 was lower, C's portion of the relief is equal to—
p2 P2 × R
where—
p2 is the proportion of chargeable consideration for the transaction that was given by C;
P2 has the same meaning as in paragraph 3A(5);
(10) In sub-paragraphs (5) and (6) “appropriate proportion” means an appropriate proportion having regard to—
(a) what was acquired by C under the relevant transaction and what is held by C at the time of the disqualifying event, and
(b) the extent to which what is held by C at that time becomes used or held for purposes other than qualifying charitable purposes.

Partial relief: charity not fully meeting the “qualifying charity” condition
3C (1) This paragraph applies where—
(a) a charity (“C”) is one of two or more purchasers acquiring the subject-matter of a land transaction (“the relevant transaction”) as tenants in common (or, in Scotland, as owners in common),
(b) C is not a qualifying charity in relation to the transaction,
(c) paragraph 3A(3) to (5) would apply if C were a qualifying charity, and
(d) C intends to hold the greater part of its undivided share of the subject-matter of the transaction for qualifying charitable purposes.
(2) In such a case—
(a) paragraph 3A has effect as if C were a qualifying charity, but
(b) for the purposes of paragraph 3B (withdrawal of relief under paragraph 3A) “disqualifying event” includes any additional disqualifying transaction.
(3) The following are “additional disqualifying transactions” if they are not made in furtherance of the charitable purposes of C—
(a) any transfer by C of a major interest in the whole or any part of the chargeable interest acquired by C under the relevant transaction;
(b) any grant by C at a premium of a low-rental lease of the whole or any part of that chargeable interest.
(4) Paragraph 3(3) (meaning of “at a premium” and “low-rental”) applies for the purposes of sub-paragraph (3)(b) as it applies for the purposes of paragraph 3(2)(b)(ii).
(5) In relation to a transaction that, by virtue of this paragraph, is a disqualifying event for the purposes of paragraph 3B—
(a) the date of the event for those purposes is the effective date of the transaction;
(b) paragraph 3B has effect with the modifications in sub-paragraph (6).
(6) The modifications to paragraph 3B are—
(a) in sub-paragraph (3), for “At the time of” substitute “ Immediately before ”;
(b) in sub-paragraph (10)(a), for “at the time of” substitute “ immediately before and immediately after ”;
(c) omit sub-paragraph (10)(b).”

4 In paragraph 4(3) (charitable trusts)—
(a) in paragraph (a), for the words from “references” to “are to” substitute “ references in paragraph 1(3A) to the charitable purposes of C are to those of ”;
(b) in paragraph (b), for “reference” substitute “ references ” and for “is” substitute “ , and to C in paragraph 3B(4)(a), are ”;
(c) in paragraph (c), for the words from “reference” to “is” substitute “ references in paragraphs 3(2)(b) and 3C(3) to the charitable purposes of C are ”.
5 The amendments made by this section have effect in relation to any transaction of which the effective date (within the meaning of Part 4 of FA 2003) is on or after the day on which this Act is passed.

SCHEDULE 24 Abolition of stamp duty and SDRT: securities on recognised growth markets
Section 115

PART 1 Stamp duty reserve tax

“Chargeable securities”
1 Part 4 of FA 1986 (stamp duty reserve tax) is amended as follows.
2 In section 99 (interpretation), after subsection (4A) insert—

“(4B) Chargeable securities” does not include securities falling within paragraph (a), (b) or (c) of subsection (3) which are admitted to trading on a recognised growth market but not listed on that or any other market.
(4C) In subsection (4B), “listed” and “recognised growth market” are to be construed in accordance with section 99A.”

3 After that section insert—

“99A Section 99(4B): “listed” and “recognised growth market”
(1) This section applies for the purposes of section 99(4B).
(2) Section 1005(3) to (5) of the Income Tax Act 2007 (meaning of “listed” etc) applies as it applies in relation to the Income Tax Acts.
(3) “Recognised growth market” means a market recognised as a growth market by the Commissioners for Her Majesty's Revenue and Customs.
(4) On an application made by a market, the market is to be recognised by the Commissioners as a growth market if, and only if, the Commissioners are satisfied, on the basis of evidence provided by the market, that the market qualifies for recognition.
(5) A market qualifies for recognition at any time (“the relevant time”) if it is a recognised stock exchange which meets one or both of the following conditions—
(a) a majority of the companies whose stock or marketable securities are admitted to trading on the market are companies with market capitalisations of less than £170 million;
(b) the Commissioners are satisfied that the admission requirements of the market include provision requiring companies to demonstrate compounded annual growth in gross revenue or employment of at least 20% over the last three periods of account preceding admission (“the pre-admission periods”).
(6) In subsection (5)—
“period of account” of a company means a period for which the company draws up accounts;
“recognised stock exchange” has the meaning given by section 1005(1) of the Income Tax Act 2007.
(7) For the purposes of subsection (5)(a) a company's market capitalisation at the relevant time is the average of the closing market capitalisations of the company on the last trading day of each calendar month (or part of a calendar month) in the qualifying period.
(8) “The qualifying period” means whichever is the shorter of—
(a) the last three calendar years preceding the relevant time, or
(b) the period beginning with the day on which the company is admitted to trading on the market and ending at the end of the last calendar year preceding the relevant time.
(9) For the purposes of subsection (5)(a), a company is to be disregarded if it is admitted to trading on the market in the calendar year in which the relevant time falls.
(10) In the case of a company with a market capitalisation in a currency other than sterling, the closing market capitalisation for the last trading day of any calendar month is to be taken, for the purposes of subsection (7), to be the sterling equivalent of that capitalisation (calculated by reference to the spot rate of exchange for that last trading day).
(11) For the purposes of subsection (5)(b), the percentage of the compounded annual growth in gross revenue over the pre-admission periods is calculated by applying the formula—
( ( EV BV ) 1/3 - 1 ) × 100
where—
“EV” is the company's gross revenue for the last of the pre-admission periods,
“BV” is the company's gross revenue for the period of account immediately preceding the pre-admission periods.
(12) For those purposes, the percentage of the compounded annual growth in employment over the pre-admission periods is calculated by applying the formula—
( ( EV BV ) 1/3 - 1 ) × 100
where—
“EV” is the number of employees of the company at the end of the last of the pre-admission periods,
“BV” is the number of employees of the company at the end of the period of account immediately preceding the pre-admission periods.
(13) The Treasury may by regulations—
(a) make provision for the revocation by the Commissioners of a recognition under this section and about the consequences of a revocation;
(b) amend this section so as to add, remove or alter a condition which must be met in relation to a market for it to be recognised by the Commissioners under this section.
(14) Regulations under this section may contain incidental, supplemental, consequential and transitional provision and savings.
(15) The power to make regulations under this section is exercisable by statutory instrument, and any statutory instrument containing such regulations is subject to annulment in pursuance of a resolution of the House of Commons.
(16) This section is to be construed as one with the Stamp Act 1891.”

Commencement of Part 1 and transitional provision
4 (1) The amendment made by paragraph 2 has effect in relation to any agreement to transfer securities—
(a) where the agreement is conditional, if the condition is satisfied on or after 28 April 2014, and
(b) in any other case, if the agreement is made on or after that date.
(2) Subject to sub-paragraph (3), the amendment made by paragraph 3 is treated as having come into force on 28 April 2014.
(3) The following provisions of section 99A of FA 1986 (inserted by paragraph 3) come into force on the day on which this Act is passed—
(a) paragraph (b) of subsection (13), and
(b) subsections (14) and (15) so far as relating to that paragraph.
(4) Where, having been satisfied as mentioned in subsection (4) of section 99A of FA 1986, the Commissioners for Her Majesty's Revenue and Customs have recognised a market as a growth market in anticipation of the coming into force of that section, that recognition has effect on and after 28 April 2014 as if it were a recognition under that section.

PART 2 Stamp duty

Main charge
5 Stamp duty is not chargeable under Schedule 13 to FA 1999 (transfers on sale) on instruments relating to stock or marketable securities admitted to trading on a recognised growth market but not listed on any market.

Charge in relation to the purchase by a company of its own shares
6 Stamp duty is not chargeable by virtue of section 66(2) of FA 1986 (return relating to company's purchase of own shares treated as instrument of transfer on sale) on returns relating to shares admitted to trading on a recognised growth market but not listed on any market.

Charge in relation to property vested by Act or purchased under statutory power
7 Section 12 of FA 1895 (collection of stamp duty in cases of property vested by Act or purchased under statutory powers) does not apply to stock or marketable securities admitted to trading on a recognised growth market but not listed on any market.

Interpretation of paragraphs 5 to 7
8 In paragraphs 5 to 7 “listed” and “recognised growth market” are to be construed in accordance with section 99A of FA 1986 (inserted by paragraph 3 of this Schedule).

Depositary receipts: charge
9 In section 67 of FA 1986 (depositary receipts), after subsection (8) insert—

“(8A) Where an instrument transfers shares or stock or marketable securities admitted to trading on a recognised growth market but not listed on any market, subsections (2) to (5) do not apply and stamp duty is not chargeable on the instrument.
(8B) In subsection (8A) “listed” and “recognised growth market” are to be construed in accordance with section 99A below.”

Clearance services: charge
10 In section 70 of that Act (clearance services), after subsection (8) insert—

“(8A) Where an instrument transfers shares or stock or marketable securities admitted to trading on a recognised growth market but not listed on any market, subsections (2) to (5) do not apply and stamp duty is not chargeable on the instrument.
(8B) In subsection (8A) “listed” and “recognised growth market” are to be construed in accordance with section 99A below.”

Charge on transfers of partnership interests
11 (1) Schedule 15 to FA 2003 (SDLT: partnerships) is amended as follows.
(2) In paragraph 31(1) (stamp duty on transfers of partnership interests: continued application), after “that section)” insert “ or in Schedule 24 to the Finance Act 2014 (abolition of stamp duty in relation to certain securities) ”.
(3) In paragraph 33—
(a) in sub-paragraph (1A), for “stock or marketable” substitute “ relevant ”,
(b) in sub-paragraph (3), for “stock or marketable” substitute “ relevant ”,
(c) in that sub-paragraph omit “that stock and” (in both places),
(d) in sub-paragraph (6), for “stock or” (in each place) substitute “ relevant ”,
(e) in sub-paragraph (7), for “stock or” (in both places) substitute “ relevant ”, and
(f) after sub-paragraph (8) insert—

“(8A) In this paragraph “relevant securities” means stock or marketable securities other than any stock or marketable securities admitted to trading on a recognised growth market but not listed on any market.”

Commencement of Part 2
12 (1) Paragraph 6 has effect in relation to any purchase of shares by a company on or after 28 April 2014.
(2) Paragraph 7 has effect in relation to—
(a) any Act passed on or after 28 April 2014, and
(b) any instrument of transfer pursuant to such an Act executed on or after that date.
(3) Paragraph 8 is treated as having come into force on 28 April 2014.
(4) Subject to that, this Part of this Schedule has effect in relation to—
(a) any instrument which is executed on or after 28 April 2014 in pursuance of—
(i) an agreement made on or after that date, or
(ii) a conditional agreement made before that date where the condition is satisfied on or after that date, and
(b) any instrument which is not executed in pursuance of a contract and is executed on or after that date.

SCHEDULE 25 Inheritance tax
Section 117

Introductory
1 IHTA 1984 is amended as follows.

Rate bands for tax years 2015-16, 2016-17 and 2017-18
2 Section 8 (indexation) does not have effect by virtue of any difference between the consumer prices index for the month of September in 2014, 2015 or 2016 and the previous September.

Treatment of certain liabilities
3 (1) After section 162A (liabilities attributable to financing excluded property) insert—

“162AA Liabilities attributable to financing non-residents' foreign currency accounts
(1) This section applies if—
(a) in determining the value of a person's estate immediately before death, a balance on any qualifying foreign currency account (“the relevant balance”) is to be left out of account under section 157 (non-residents' bank accounts), and
(b) the person has a liability which is attributable, in whole or in part, to financing (directly or indirectly) the relevant balance.
(2) To the extent that the liability is attributable as mentioned in subsection (1)(b), it may only be taken into account in determining the value of the person's estate immediately before death so far as permitted by subsection (3).
(3) If the amount of the liability that is attributable as mentioned in subsection (1)(b) exceeds the value of the relevant balance, the excess may be taken into account, but only so far as the excess does not arise for either of the reasons mentioned in subsection (4).
(4) The reasons are—
(a) arrangements the main purpose, or one of the main purposes, of which is to secure a tax advantage, or
(b) an increase in the amount of the liability (whether due to the accrual of interest or otherwise).
(5) In subsection (4)(a)—
“arrangements” includes any scheme, transaction or series of transactions, agreement or understanding, whether or not legally enforceable, and any associated operations;
“tax advantage” means—
(a) the avoidance or reduction of a charge to tax, or
(b) the avoidance of a possible determination in respect of tax.”

(2) Section 162C (sections 162A and 162B: supplementary provision) is amended as follows.
(3) In the heading, after “162A” insert “ , 162AA ”.
(4) In subsection (1), after “162A(1) or (5)” insert “ , 162AA(1) ”.
(5) After subsection (1) insert—

“(1A) In a case in which the value of a person's estate immediately before death is to be determined, where a liability was discharged in part before that time—
(a) any part of the liability that, at the time of discharge, was not attributable as mentioned in subsection (1) is, so far as possible, to be taken to have been discharged first,
(b) any part of the liability that, at the time of discharge, was attributable as mentioned in section 162B(1)(b), (3)(b) or (5)(c) is, so far as possible, only to be taken to have been discharged after any part of the liability within paragraph (a) was discharged,
(c) any part of the liability that, at the time of discharge, was attributable as mentioned in section 162AA(1) is, so far as possible, only to be taken to have been discharged after any parts of the liability within paragraph (a) or (b) were discharged, and
(d) any part of the liability that, at the time of discharge, was attributable as mentioned in section 162A(1) or (5) is, so far as possible, only to be taken to have been discharged after any parts of the liability within paragraphs (a) to (c) were discharged.”

(6) In subsection (2)—
(a) for “Where” substitute “ In any other case, where ”, and
(b) in paragraph (a), for “subsection (1)” substitute “ section 162A(1) or (5) or 162B(1)(b), (3)(b) or (5)(c) ”.
(7) In section 175A (discharge of liabilities after death), in subsection (7)—
(a) after paragraph (a) insert—

“(aa) any part of the liability that is attributable as mentioned in section 162AA(1) is, so far as possible, taken to be discharged only after any part of the liability within paragraph (a) is discharged,”

,
(b) in paragraph (b)—
(i) for “part”, in the second place it appears, substitute “ parts ”, and
(ii) for “(a) is” substitute “ (a) or (aa) are ”,
(c) in paragraph (c)—
(i) for “paragraph (a) or (b)” substitute “ any of paragraphs (a) to (b) ”, and
(ii) for “either” substitute “ any ”.
(8) The amendments made by this paragraph have effect in relation to transfers of value made, or treated as made, on or after the day on which this Act is passed.

Ten-year anniversary charge
4 (1) In section 64 (charge at ten-year anniversary), after subsection (1) insert—

“(1A) For the purposes of subsection (1) above, property held by the trustees of a settlement immediately before a ten-year anniversary is to be regarded as relevant property comprised in the settlement at that time if—
(a) it is income of the settlement,
(b) the income arose before the start of the five years ending immediately before the ten-year anniversary,
(c) the income arose (directly or indirectly) from property comprised in the settlement that, when the income arose, was relevant property, and
(d) when the income arose, no person was beneficially entitled to an interest in possession in the property from which the income arose.
(1B) Where the settlor of a settlement was not domiciled in the United Kingdom at the time the settlement was made, income of the settlement is not to be regarded as relevant property comprised in the settlement as a result of subsection (1A) above so far as the income—
(a) is situated outside the United Kingdom, or
(b) is represented by a holding in an authorised unit trust or a share in an open-ended investment company.
(1C) Income of the settlement is not to be regarded as relevant property comprised in the settlement as a result of subsection (1A) above so far as the income—
(a) is represented by securities issued by the Treasury subject to a condition of the kind mentioned in subsection (2) of section 6 above, and
(b) it is shown that all known persons for whose benefit the settled property or income from it has been or might be applied, or who are or might become beneficially entitled to an interest in possession in it, are persons of a description specified in the condition in question.”

(2) In section 66 (rate of ten-yearly charge), after subsection (2) insert—

“(2A) Subsection (2) above does not apply to property which is regarded as relevant property as a result of section 64(1A) (and accordingly that property is charged to tax at the rate given by subsection (1) above).”

(3) The amendments made by this paragraph have effect in relation to occasions on which tax falls to be charged under section 64 of IHTA 1984 on or after 6 April 2014.

Delivery of account and payment of tax
5 (1) In section 216(6) (time for delivery of accounts), before paragraph (b) insert—

“(ad) in the case of an account to be delivered by a person within subsection (1)(c) above, before the expiration of the period of six months from the end of the month in which the occasion concerned occurs;”

.
(2) In section 226 (payment of tax: general rules), after subsection (3B) insert—

“(3C) Tax chargeable under Chapter 3 of Part 3 of this Act on the value transferred by a chargeable transfer, other than any for which the due date is given by subsection (3B) above, is due six months after the end of the month in which the chargeable transfer is made.”

(3) In section 233 (interest on unpaid tax)—
(a) in subsection (1)(a), after “transfer” insert “ not within paragraph (aa) below and ”,
(b) after subsection (1)(a) insert—

“(aa) an amount of tax charged under Chapter 3 of Part 3 of this Act on the value transferred by a chargeable transfer remains unpaid after the end of the period of six months beginning with the end of the month in which the chargeable transfer was made, or”

, and
(c) in subsection (1)(b), for “any other chargeable transfer” substitute “ a chargeable transfer not within paragraph (a) or (aa) above ”.
(4) The amendments made by this paragraph have effect in relation to chargeable transfers made on or after 6 April 2014.

SCHEDULE 26 The bank levy: miscellaneous changes
Section 120

Introduction
1 Schedule 19 to FA 2011 (the bank levy) is amended in accordance with this Schedule.

High quality liquid assets etc
2 In paragraph 15 (chargeable equity and liabilities of a UK banking group or a building society group)—
(a) in sub-paragraph (2)(c), for “finally,” substitute “ finally (subject to sub-paragraph (6)) ”, and
(b) for sub-paragraph (6) substitute—

“(6) Where any amount (“A”) within sub-paragraph (2)(c) is used to reduce short term liabilities, the amount of the reduction is determined as if A were an amount equal to half of A.”

3 In paragraph 17 (chargeable equity and liabilities of foreign banking groups)—
(a) in sub-paragraph (6)(c), for “finally,” substitute “ finally (subject to sub-paragraph (16)) ”,
(b) in sub-paragraph (12)(c), for “finally,” substitute “ finally (subject to sub-paragraph (16)) ”, and
(c) for sub-paragraph (16) substitute—

“(16) Where any amount (“A”) within sub-paragraph (6)(c) or (12)(c) is used to reduce short term liabilities, the amount of the reduction is determined as if A were an amount equal to half of A.”

4 In paragraph 19 (chargeable equity and liabilities of non-banking groups)—
(a) in sub-paragraph (6)(c), for “finally,” substitute “ finally (subject to sub-paragraph (16)) ”,
(b) in sub-paragraph (12)(c), for “finally,” substitute “ finally (subject to sub-paragraph (16)) ”, and
(c) for sub-paragraph (16) substitute—

“(16) Where an amount (“A”) within sub-paragraph (6)(c) or (12)(c) is used to reduce short term liabilities, the amount of the reduction is determined as if A were an amount equal to half of A.”

5 In paragraph 21 (chargeable equity and liabilities of UK resident banks and building societies which are not members of groups)—
(a) in sub-paragraph (2)(c), for “finally,” substitute “ finally (subject to sub-paragraph (6)) ”, and
(b) for sub-paragraph (6) substitute—

“(6) Where an amount (“A”) within sub-paragraph (2)(c) is used to reduce short term liabilities, the amount of the reduction is determined as if A were an amount equal to half of A.”

6 In paragraph 27 (determination of foreign bank's chargeable equity and liabilities)—
(a) in sub-paragraph (2)(c), for “finally,” substitute “ finally (subject to sub-paragraph (6)) ”, and
(b) for sub-paragraph (6) substitute—

“(6) Where an amount (“A”) within sub-paragraph (2)(c) is used to reduce short term liabilities, the amount of the reduction is determined as if A were an amount equal to half of A.”

7 The amendments made by paragraphs 2 to 6 have effect in relation to chargeable periods ending on or after 1 January 2015.

Protected deposits
8 (1) Paragraph 29 (“excluded” equity and liabilities: protected deposits) is amended as follows.
(2) Omit sub-paragraphs (4) to (6).
(3) In sub-paragraph (8) omit “, and sub-paragraphs (4), (5) and (6) so far as relating to a scheme within sub-paragraph (2),”.
(4) In sub-paragraph (9) omit “, and sub-paragraphs (4), (5) and (6) so far as relating to a scheme within sub-paragraph (3),”.
(5) The amendments made by this paragraph have effect for chargeable periods ending on or after 1 January 2015.

Tier one capital equity and liabilities
9 (1) Paragraph 30 (“excluded” equity and liabilities: tier one capital equity and liabilities) is amended as follows.
(2) For sub-paragraph (2) substitute—

“(2) Tier one capital equity and liabilities” means, in relation to an entity or group of entities, so much of the entity or group's equity and liabilities as is tier one capital within the meaning of Article 25 of the Capital Requirements Regulation (taking account of the transitional provisions in Part Ten of that Regulation).
(3) For the purposes of sub-paragraph (2), the Capital Requirements Regulation is to be treated as applying, in relation to all entities and groups of entities, as if—
(a) to the extent it would not otherwise be the case, the Prudential Regulation Authority were the competent authority in relation to those entities and groups,
(b) the only determinations made, and discretions exercised, by the Prudential Regulation Authority for the purposes of the Capital Requirement Regulation were those published by it in accordance with that Regulation, and
(c) those entities and groups (to the extent that it would not otherwise be the case) were subject to the provisions of the PRA Handbook immediately before 1 January 2014.
(4) “The Capital Requirements Regulation” means Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms.”

(3) The amendment made by this paragraph has effect in relation to chargeable periods ending on or after 1 January 2014.

Liabilities representing QCP margin in relation to trades executed under clearing agreements
10 (1) After paragraph 38 insert—

“38A (1) Liabilities are excluded if they represent cash collateral provided as QCP margin in relation to a trade executed or to be executed under a client clearing agreement.
(2) Cash collateral is provided as “QCP margin” if, and to the extent that—
(a) it exceeds the fair value of the instrument to which the trade relates, and
(b) it corresponds to either—
(i) an asset held in respect of the qualifying central counterparty which represents cash collateral provided to that qualifying central counterparty, or
(ii) cash collateral provided to the qualifying central counterparty which has the effect of reducing a liability of the clearing member to the qualifying central counterparty.
(3) In this paragraph—
“clearing member”, in relation to a recognised central counterparty, has the meaning given by Article 2(14) of the EMIR Regulation,
“client” has the meaning given by Article 2(15) of the EMIR Regulation,
“client clearing agreement” means a contract between a clearing member of a qualifying central counterparty and a client, relating to the clearing of transactions with the qualifying central counterparty,
“derivative contract” has the meaning given by international accounting standards,
“the EMIR Regulation” means Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories,
“qualifying central counterparty” means a central counterparty that has been either authorised or recognised under the EMIR Regulation,
“trade” means a transaction relating to the sale and purchase of a financial instrument or to the entering into of a derivative contract.”

(2) The amendment made by this paragraph has effect in relation to chargeable periods ending on or after 1 January 2014.

Certain liabilities deemed short term liabilities
11 (1) After paragraph 76 insert—

“76A (1) Liabilities under derivative contracts are never “long term” (and are therefore always short term).
(2) In this paragraph “derivative contract” has the meaning given by international accounting standards.”

(2) In paragraph 75 (liabilities not required to be repaid within 12 months etc are long term liabilities), after sub-paragraph (2) insert—

“(3) This paragraph is subject to paragraph 76A.”

(3) In paragraph 77 (which relates to the calculation of “UK allocated equity and liabilities”), for “76” substitute “ 76A ”.
(4) The amendments made by this paragraph have effect for chargeable periods ending on or after 1 January 2015.

Amendments consequential on regulatory changes
12 In paragraph 81 (power to make consequential amendments), in sub-paragraph (1), omit the “or” at the end of paragraph (b), and after paragraph (c) insert

“, or
(d) any regulatory requirement, or change to any regulatory requirement, imposed by EU legislation, or by or under any Act (whenever adopted, enacted or made).”

Transitional provision
13 (1) This paragraph applies where—
(a) an amount of the bank levy is treated as if it were an amount of corporation tax chargeable on an entity (“E”) for an accounting period of E,
(b) the chargeable period in respect of which the amount of the bank levy is charged falls (or partly falls) on or after 1 January 2014, and
(c) under the Instalment Payment Regulations, one or more instalment payments, in respect of the total liability of E for the accounting period, were treated as becoming due and payable before the commencement date (“pre-commencement instalment payments”).
(2) Paragraphs 9 and 10 of this Schedule are to be ignored for the purpose of determining the amount of any pre-commencement instalment payment.
(3) If there is at least one instalment payment, in respect of the total liability of E for the accounting period, which under the Instalment Payment Regulations is treated as becoming due and payable on or after the commencement date (“post-commencement instalment payments”), the amount of that instalment payment, or the first of them, is to be increased by the adjustment amount.
(4) If there are no post-commencement instalment payments, a further instalment payment, in respect of the total liability of E for the accounting period, of an amount equal to the adjustment amount is to be treated as becoming due and payable at the end of the period of 30 days beginning with the commencement date.
(5) “The adjustment amount” is the difference between—
(a) the aggregate amount of the pre-commencement instalments determined in accordance with sub-paragraph (2), and
(b) the aggregate amount of those instalment payments determined ignoring sub-paragraph (2) (and so taking account of paragraphs 9 and 10).
(6) In the Instalment Payment Regulations—
(a) in regulations 6(1)(a), 7(2), 8(1)(a) and (2)(a), 9(5), 10(1), 11(1) and 13, references to regulation 4A, 4B, 4C, 4D, 5, 5A or 5B of those Regulations are to be read as including a reference to sub-paragraphs (1) to (5) above (and in regulation 7(2) “the regulation in question”, and in regulation 8(2) “that regulation”, are to be read accordingly), and
(b) in regulation 9(3), the reference to those Regulations is to be read as including a reference to sub-paragraphs (1) to (5) above.
(7) In section 59D of TMA 1970 (general rule as to when corporation tax is due and payable), in subsection (5), the reference to section 59E is to be read as including a reference to sub-paragraphs (1) to (6) above.
(8) In this paragraph—
“the chargeable period” is to be construed in accordance with paragraph 4 or (as the case may be) 5 of Schedule 19 to FA 2011;
“the commencement date” means the day on which this Act is passed;
“the Instalment Payment Regulations” means the Corporation Tax (Instalment Payments) Regulations 1998 (S.I. 1998/3175);
and references to the total liability of E for an accounting period are to be construed in accordance with regulation 2(3) of the Instalment Payment Regulations.

SCHEDULE 27 Suspension and revocation of remote operating licences
Section 177

Breach notice
1 (1) The Commissioners may give a breach notice to the holder of a remote operating licence if it appears to them that there has been a breach of—
(a) a requirement to be registered under this Part in respect of an activity authorised by the licence,
(b) any conditions or requirements relating to registration under this Part in respect of such an activity,
(c) a requirement to pay general betting duty, pool betting duty or remote gaming duty in respect of such an activity, or
(d) a requirement imposed in respect of such an activity by a notice given under section 170 (requirement to provide security or further security) or 171 (requirement to appoint UK representative).
(2) The breach notice must specify—
(a) the breach,
(b) the action that must be taken in order to remedy the breach, and
(c) the period (which must be at least 90 days) within which the action must be taken.
(3) The Commissioners may by regulations—
(a) make provision as to cases in which a breach notice may or may not be given (including provision amending this paragraph);
(b) amend sub-paragraph (2)(c) by substituting for the period for the time being specified there a different period.

Final notice
2 (1) If it appears to the Commissioners that the breach has not been remedied in full within the period specified in the breach notice, they may give the holder of the remote operating licence a final notice.
(2) The final notice must—
(a) specify the breach and the extent to which it has not been remedied since the breach notice was given,
(b) specify the period within which a review may be required or appeal brought, and
(c) state that (unless the breach is remedied and subject to the outcome of any review, appeal or further appeal) the Commissioners will direct the Gambling Commission to suspend the remote operating licence after the end of the period.
(3) The decision to give the final notice is to be treated as a relevant decision for the purposes of sections 15A and 15C to 16 of FA 1994 (customs and excise reviews and appeals) and, accordingly, the final notice must include an offer of a review of the decision under section 15A of that Act.
(4) Only the holder of the remote operating licence may bring an appeal under section 16 of FA 1994 as applied by sub-paragraph (3).

Direction to suspend remote operating licence
3 (1) After the review request period has ended, the Commissioners may direct the Gambling Commission to suspend the remote operating licence if the breach specified in the final notice has not been remedied in full to the satisfaction of the Commissioners.
(2) But if the Commissioners have been required to review the decision, or an appeal has been brought against the decision, a direction may be given under sub-paragraph (1) only if—
(a) the decision to give the final notice has been upheld (in whole or in part) and the period within which any appeal or further appeal may ordinarily be brought has ended,
(b) the proceedings on the review, appeal or any further appeal have been abandoned, withdrawn or discontinued, or
(c) the proceedings on the review, appeal or any further appeal are in progress and—
(i) the Commissioners consider that the holder of the remote operating licence usually lives in or, if a body corporate, is legally constituted in a country or territory with which the United Kingdom does not have satisfactory arrangements for the enforcement of liabilities,
(ii) the breach was a failure to pay an amount of general betting duty, pool betting duty or remote gaming duty, and
(iii) the holder of the licence has not given to the Commissioners such security as appears to them adequate for the payment of the amount of duty that remains due.
(3) A direction under this paragraph may include provision directing the Gambling Commission as to how it is to exercise its powers under section 118(4) of the Gambling Act 2005 (time and duration of suspension and saving and transitional provision).
(4) In this paragraph “the review request period” means the period of 30 days beginning with the date of the final notice, subject to any extension given under section 15D of FA 1994.

Reinstatement of remote operating licence
4 (1) The Commissioners may direct the Gambling Commission to reinstate a remote operating licence suspended pursuant to a direction under paragraph 3 if the Commissioners are satisfied that—
(a) the breach specified in the final notice has been remedied in full,
(b) there are no other grounds on which a breach notice could be given in respect of the licence, and
(c) the holder of the licence has given to the Commissioners any security requested by them for the payment of amounts of general betting duty, pool betting duty and remote gaming duty likely to be due in future in respect of any activity authorised by the licence.
(2) Where the holder of a suspended licence requests the Commissioners to give a direction under this paragraph and the Commissioners refuse to give the direction, they must notify the holder of their decision.
(3) That decision is to be treated as a relevant decision for the purposes of sections 15A and 15C to 16 of FA 1994 (customs and excise reviews and appeals) and, accordingly, the notice under sub-paragraph (2) must include an offer of a review of the decision under section 15A of that Act.
(4) Only the holder of the suspended licence may bring an appeal under section 16 of FA 1994 as applied by sub-paragraph (3).
5 (1) An appeal tribunal may direct the Gambling Commission to reinstate a remote operating licence suspended pursuant to a direction under paragraph 3 if the tribunal gives permission to appeal against a decision to give a final notice under section 16(1F) of FA 1994 (appeal out of time).
(2) The reinstatement of a remote operating licence pursuant to a direction given under sub-paragraph (1) does not prevent the Commissioners from giving a further direction under paragraph 3(1) in reliance on the final notice if—
(a) the decision to give the notice is upheld (in whole or in part) in the proceedings on the appeal or any further appeal, or the proceedings on the appeal or any further appeal have been abandoned, withdrawn or discontinued, and
(b) the period during which any further appeal may ordinarily be brought has ended without an appeal being brought.
(3) In this paragraph “appeal tribunal” has the same meaning as in Chapter 2 of Part 1 of FA 1994.

Revocation of remote operating licence
6 (1) The Commissioners may direct the Gambling Commission to revoke a remote operating licence suspended pursuant to a direction under paragraph 3 if the breach specified in the final notice has not been remedied in full to the satisfaction of the Commissioners within the period of 6 months beginning with the day on which the direction under paragraph 3 was given.
(2) A direction under this paragraph may include provision directing the Gambling Commission as to how it is to exercise its powers under section 119(4) of the Gambling Act 2005 (time of revocation and saving and transitional provision).
(3) The Commissioners must notify the holder of the suspended licence of their decision to give the direction.
(4) That decision is to be treated as a relevant decision for the purposes of sections 15A and 15C to 16 of FA 1994 (customs and excise reviews and appeals) and, accordingly, the notice must include an offer of a review of the decision under section 15A of that Act.
(5) Only the holder of the suspended licence may bring an appeal under section 16 of FA 1994 as applied by sub-paragraph (4).

Consent requirement for grant of new remote operating licence
7 (1) The Gambling Commission requires the consent of the Commissioners to issue a remote operating licence to the holder of a licence—
(a) which is suspended pursuant to a direction under paragraph 3, or
(b) which has been revoked pursuant to a direction under paragraph 6.
(2) The Commissioners must notify the holder of the suspended or revoked licence of any decision—
(a) not to give their consent under this paragraph, or
(b) to give it subject to conditions.
(3) That decision is to be treated as a relevant decision for the purposes of sections 15A and 15C to 16 of FA 1994 (customs and excise reviews and appeals) and, accordingly, the notice under sub-paragraph (2) must include an offer of a review of the decision under section 15A of that Act.
(4) Only the holder of the suspended or revoked licence may bring an appeal under section 16 of FA 1994 as applied by sub-paragraph (3).

Supplementary
8 (1) A notice under this Schedule—
(a) must be in writing, and
(b) may specify more than one breach.
(2) The fact that a breach notice specifying one or more breaches has been given to the holder of a remote operating licence does not prevent a breach notice specifying other breaches being given to the holder of the licence.
9 References in this Schedule to the holder of a remote operating licence are to the person to whom the licence is or was issued.

SCHEDULE 28 Part 3: consequential amendments and repeals
Section 196

PART 1 Betting and Gaming Duties Act 1981
1 BGDA 1981 is amended as follows.
2 Omit sections 1 to 12 (general betting duty and pool betting duty).
3 In section 17 (bingo duty) for subsection (2A) substitute—

“(2A) Bingo duty is not charged on the playing of a game of bingo which is not licensed bingo if every person playing the game participates by the use of—
(a) the internet,
(b) telephone,
(c) television,
(d) radio, or
(e) any other kind of electronic or other technology for facilitating communication.”

4 Omit sections 26A to 26M (remote gaming duty).
5 In section 27 (offences by bodies corporate), omit “paragraph 13(1) or (3) or 14(1) of Schedule 1 or”.
6 In section 31 (protection of officers), for “general betting duty, bingo duty or remote gaming duty” substitute “ bingo duty ”.
7 Omit Schedule A1 (general betting duty and pool betting duty: double taxation relief).
8 Omit Schedule 1 (administration of general betting duty and pool betting duty).
9 Omit Schedule 4B (remote gaming duty: double taxation relief).

PART 2 Other amendments and repeals

Customs and Excise Management Act 1979
10 CEMA 1979 is amended as follows
11 (1) Section 1(1) (interpretation) is amended as follows.
(2) In the definition of “the revenue trade provisions of the customs and excise Acts”, after paragraph (f) insert—

“(g) the provisions of Part 3 of the Finance Act 2014;”

.
(3) In the definition of “revenue trader”—
(a) in paragraph (a)(ic), for “gaming within the meaning of the Betting and Gaming Duties Act 1981 (see section 33(1))” substitute “ any activity that constitutes betting or gaming for the purposes of Part 3 of the Finance Act 2014 (see sections 150, 183 and 188) ”,
(b) after paragraph (a)(id) insert—

“(ie) the management or administration of any Chapter 1 stake fund, Chapter 2 stake fund or gaming prize fund within the meaning of Part 3 of the Finance Act 2014 (see sections 134, 143 and 154);”

, and
(c) in paragraph (a)(ii) for “or (id)” substitute “ , (id) or (ie) ”.
12 After section 118BC insert—

“118BCA Inspection powers: betting duties and remote gaming duty
(1) Subsection (2) applies to premises if an officer has reasonable cause to believe that—
(a) betting facilities are being provided, have been provided or are to be provided there,
(b) a totalisator is being operated, has been operated or is to be operated there, or
(c) any business in respect of which a person is or may become liable to remote gaming duty is being carried on, has been carried on or is to be carried on there.
(2) The officer may at any reasonable time enter and inspect the premises and inspect—
(a) accounts, records and other documents in the custody or control of a relevant person, and
(b) any relevant equipment.
(3) Subsection (1) does not permit an officer to enter or inspect a particular part of premises if—
(a) the officer has no reasonable cause to believe that paragraph (a), (b) or (as the case may be) (c) of that subsection is satisfied with respect to that particular part, and
(b) that part is used only as a dwelling.
(4) An officer may at any reasonable time (whether or not as part of an inspection under subsection (2)) require a relevant person or anyone acting on such a person's behalf—
(a) to open any relevant equipment, and
(b) to carry out any other operation that may be necessary to enable the officer to ascertain whether any general betting duty, pool betting duty or remote gaming duty is payable in respect of it and, if so, how much.
(5) A “relevant person” is a person—
(a) who by virtue of being a bookmaker, being treated by section 133 of the Finance Act 2014 as a bookmaker or providing facilities for making bets is liable to general betting duty,
(b) who by virtue of being a bookmaker is liable to pool betting duty,
(c) who by virtue of entering into arrangements for chargeable persons to participate in remote gaming is liable to remote gaming duty, or
(d) who is reasonably suspected by the officer of being, having been or being about to become liable as mentioned in paragraph (a), (b) or (c).
(6) “Relevant equipment” is equipment that is being, or that the officer reasonably suspects of having been or of being intended to be, used on the premises for or in connection with any activity that constitutes betting or gaming for the purposes of Part 3 of the Finance Act 2014 (see sections 150, 183 and 188).
(7) Expressions used in this section and Part 3 of the Finance Act 2014 have the same meanings in this section as in that Part.”

13 (1) Section 118BD (inspection powers: supplementary provision) is amended as follows.
(2) In subsections (1) and (2), for “or 118BC,” substitute “ , 118BC or 118BCA, ”.
(3) In subsection (3), for “and 118BC” substitute “ , 118BC and 118BCA ”.
14 In section 118G(1) (offence of failing comply with requirements imposed under Part 9A), for “or 118BC(4)” substitute “ , 118BC(4) or 118BCA(4) ”.

Finance Act 1994
15 FA 1994 is amended as follows.
16 In section 12 (assessments to excise duty), in subsection (2)(c)—
(a) omit “1 or”, and
(b) after “2012” insert “ or Part 3 of the Finance Act 2014 ”.
17 Omit section 13A(2)(ga) (relevant decision: double taxation relief repayment).
18 (1) Paragraph 6 of Schedule 5 (decisions subject to review and appeal) is amended as follows.
(2) Omit sub-paragraph (1)(a).
(3) In sub-paragraph (2)—
(a) omit paragraph (a), and
(b) in paragraph (b), for “that Act” substitute “ the Betting and Gaming Duties Act 1981 ”.
(4) Omit sub-paragraph (3).

Value Added Tax Act 1994
19 (1) Section 23A (meaning of “relevant machine game”) of VATA 1994 is amended as follows.
(2) In subsection (2)(f), for “section 26A of the Betting and Gaming Duties Act 1981 (remote gaming duty: interpretation)” substitute “ section 154(1) of the Finance Act 2014 (meaning of remote gaming) ”.
(3) In subsection (3), in the definition of “real game of chance”, for “the Betting and Gaming Duties Act 1981” substitute “ Part 3 of the Finance Act 2014 (see section 188(1)(b)) ”.

Finance Act 1997
20 (1) Schedule 1 to FA 1997 (gaming duty: administration and enforcement) is amended as follows.
(2) In paragraph 12(4), for “the offences” substitute “ the offence ”.
(3) In paragraph 16, for “general betting duty” substitute “ bingo duty ”.

Criminal Justice and Police Act 2001
21 Omit paragraph 27 of Schedule 1 to the Criminal Justice and Police Act 2001 (application of section 50 to power of seizure under paragraph 16(2) of Schedule 1 to BGDA 1981).

Gambling Act 2005
22 The Gambling Act 2005 is amended as follows.
23 In section 67 (remote operating licence), at the end insert—

“(4) The power of the Commission to issue a remote operating licence to the holder of a licence suspended or revoked pursuant to a direction given under Schedule 27 to the Finance Act 2014 is subject to paragraph 7 of that Schedule (requirement for HMRC's consent).”

24 In section 118 (suspension of operating licence), after subsection (3) insert—

“(3A) The Commission must suspend an operating licence if directed to do so under paragraph 3 of Schedule 27 to the Finance Act 2014.”

25 After that section insert—

“118A Reinstatement
(1) If an operating licence has been suspended in accordance with section 118(3A), the Commission must reinstate the licence if directed to do so under paragraph 4 or 5 of Schedule 27 to the Finance Act 2014.
(2) Where the Commission reinstate an operating licence it—
(a) must specify the time when the reinstatement takes effect, and
(b) may make the reinstatement subject to conditions.”

26 In section 119 (revocation of operating licence), after subsection (3) insert—

“(3A) The Commission must revoke an operating licence if directed to do so under paragraph 6 of Schedule 27 to the Finance Act 2014.”

Finance Act 2008
27 (1) The Table in paragraph 1 of Schedule 41 to FA 2008 (penalties: failure to notify and certain VAT and excise wrongdoing) is amended as follows.
(2) For the entries relating to general betting duty and pool betting duty substitute—

“General betting duty	Obligation to register under section 164(2) of FA 2014 (registration of persons liable etc for general betting duty).
Pool betting duty	Obligation to register under section 164(2) of FA 2014 (registration of persons liable etc for pool betting duty).”

(3) For the entry relating to remote gaming duty substitute—

“Remote gaming duty	Obligation to register under section 164(2) of FA 2014 (registration of persons liable etc for remote gaming duty).”

Finance Act 2009
28 FA 2009 is amended as follows.
29 The Table in paragraph 1 of Schedule 55 (penalty for failure to make returns etc) is amended as follows—
(a) in item 23 (general betting duty), for “paragraph 2 of Schedule 1 to BGDA 1981” substitute “ section 166 of FA 2014 ”,
(b) in item 24 (pool betting duty), for “paragraph 2A of Schedule 1 to BGDA 1981” substitute “ section 166 of FA 2014 ”, and
(c) in item 28 (remote gaming duty), for “26K of BGDA 1981” substitute “ 166 of FA 2014 ”.
30 (1) The Table in paragraph 1 of Schedule 56 (penalty for failure to make payments on time) is amended as follows.
(2) For items 11H and 11I substitute—

“11H	General betting duty	Amount payable under section 142 of FA 2014	The date determined— (a) under section 142 of FA 2014, or (b) by or under regulations under section 163 or 167 of that Act, as the date by which the amount must be paid
11I	Pool betting duty	Amount payable under section 151 of FA 2014	The date determined— (a) under section 151 of FA 2014, or (b) by or under regulations under section 163 or 167 of that Act, as the date by which the amount must be paid”

(3) For item 11M substitute—

“11M	Remote gaming duty	Amount payable under section 162 of FA 2014	The date determined by or under regulations under section 163 or 167 of FA 2014 as the date by which the amount must be paid”

Finance Act 2012
31 (1) Schedule 24 to FA 2012 (machine games duty) is amended as follows.
(2) In paragraph 3(2), for “BGDA 1981” substitute “ Part 3 of FA 2014 ”.
(3) In paragraph 37(5), for “the offences” substitute “ the offence ”.
(4) In paragraph 38, for “remote gaming duty” substitute “ bingo duty ”.

SCHEDULE 29 Part 3: transitional and saving provisions
Section 197

Final accounting periods under BGDA 1981
1 (1) The final accounting period for the purposes of a person's liability to general betting duty, pool betting duty or remote gaming duty under BGDA 1981 ends with 30 November 2014 (whether or not it would otherwise have ended with that day).
(2) The Commissioners may by direction make transitional arrangements for the purposes of the final accounting period, and those arrangements may (in particular)—
(a) make provision about the date on which the period begins, and
(b) combine what would otherwise be more than one accounting period.
(3) A direction under this paragraph—
(a) may apply generally or only to a particular case or class of case, and
(b) must be published unless it applies only to a particular case.

Withdrawal of double taxation relief
2 (1) The final reconciliation period for the purposes of a person's entitlement to a credit under section 5E, 8ZA or 26IA of BGDA 1981 (double taxation relief) ends with 30 November 2014 (whether or not it would otherwise have ended with that day).
(2) The Commissioners are not required to entertain a claim for a repayment made under section 5E, 8ZA or 26IA of BGDA 1981 after 30 November 2015.

Post-commencement receipts etc from pre-commencement general or pool betting
3 (1) In this paragraph “new accounting period” means an accounting period beginning on or after 1 December 2014.
(2) Where a bet to which section 2(1) of BGDA 1981 (general bets with bookmaker in the United Kingdom) applies is made with a bookmaker before 1 December 2014, amounts in respect of the bet which fall due to the bookmaker in a new accounting period are to be included among the amounts aggregated at Step 1 in section 131 of this Act in calculating the bookmaker's ordinary profits in respect of general bets for that period.
(3) Where—
(a) a bet to which section 3(1) of BGDA 1981 (spread bets with bookmaker in the United Kingdom) applies is made with a bookmaker before 1 December 2014, and
(b) the bet is a financial spread bet for the purposes of section 3 of BGDA 1981,
amounts in respect of the bet which fall due to the bookmaker in a new accounting period are to be included among the amounts aggregated at Step 1 in section 131 of this Act in calculating the bookmaker's ordinary profits in respect of financial spread bets for that period.
(4) Where—
(a) a bet to which section 3(1) of BGDA 1981 (spread bets with bookmaker in the United Kingdom) applies is made with a bookmaker before 1 December 2014, and
(b) the bet is not a financial spread bet for the purposes of section 3 of BGDA 1981,
amounts in respect of the bet which fall due to the bookmaker in a new accounting period are to be included among the amounts aggregated at Step 1 in section 131 of this Act in calculating the bookmaker's ordinary profits in respect of non-financial spread bets for that period.
(5) Where a bet by way of pool betting to which section 4(1) of BGDA 1981 applies is made before 1 December 2014 by means of facilities provided by a person, amounts in respect of the bet which fall due to the person in a new accounting period are to be included among the amounts aggregated under section 137(a) of this Act in calculating the person's profits for that period in respect of ordinary Chapter 1 pool bets.
(6) Where a dutiable pool bet (as defined by section 7B of BGDA 1981) is made before 1 December 2014, amounts in respect of the bet which in accordance with section 7D of BGDA 1981 fall due—
(a) to the operator of the totalisator by means of which the bet is made, or
(b) to the promoter,
in a new accounting period are to be included among the amounts aggregated under section 146(a) of this Act in calculating that person's profits for that period in respect of ordinary Chapter 2 pool bets.
(7) Section 5(2), (4) and (5) of BGDA 1981 (amounts due: timing and calculation) apply for the purposes of sub-paragraphs (2) to (5).

Post-commencement winnings paid on pre-commencement general or pool betting
4 (1) In this paragraph “transitional accounting period” means an accounting period—
(a) beginning on or after 1 December 2014, and
(b) ending on or before 30 November 2018.
(2) Where a bet to which section 2(1) of BGDA 1981 (general bets with bookmaker in the United Kingdom) applies is made with a bookmaker before 1 December 2014, amounts paid by the bookmaker in a transitional accounting period by way of winnings to the person who made the bet are to be included among the amounts aggregated at Step 2 in section 131 of this Act in calculating the bookmaker's ordinary profits in respect of general bets for that period.
(3) Where—
(a) a bet to which section 3(1) of BGDA 1981 (spread bets with bookmaker in the United Kingdom) applies is made with a bookmaker before 1 December 2014, and
(b) the bet is a financial spread bet for the purposes of section 3 of BGDA 1981,
amounts paid by the bookmaker in a transitional accounting period by way of winnings to the person who made the bet are to be included among the amounts aggregated at Step 2 in section 131 of this Act in calculating the bookmaker's ordinary profits in respect of financial spread bets for that period.
(4) Where—
(a) a bet to which section 3(1) of BGDA 1981 (spread bets with bookmaker in the United Kingdom) applies is made with a bookmaker before 1 December 2014, and
(b) the bet is not a financial spread bet for the purposes of section 3 of BGDA 1981,
amounts paid by the bookmaker in a transitional accounting period by way of winnings to the person who made the bet are to be included among the amounts aggregated at Step 2 in section 131 of this Act in calculating the bookmaker's ordinary profits in respect of non-financial spread bets for that period.
(5) Where a bet by way of pool betting to which section 4(1) of BGDA 1981 applies is made before 1 December 2014 by means of facilities provided by a person (“the provider”), amounts paid by the provider in a transitional accounting period by way of winnings to the person who made the bet are to be included among the amounts aggregated under section 137(b) of this Act in calculating the provider's profits for that period in respect of ordinary Chapter 1 pool bets.
(6) Where a dutiable pool bet (as defined by section 7B of BGDA 1981) is made before 1 December 2014, amounts paid—
(a) by the operator of the totalisator by means of which the bet is made, or
(b) by the promoter,
in a transitional accounting period by way of winnings to the person who made the bet are to be included among the amounts aggregated under section 146(b) of this Act in calculating the profits of the operator, or (as the case may be) the promoter, for that period in respect of ordinary Chapter 2 pool bets.
(7) Section 5(6) of BGDA 1981 (meaning of “paid”) applies for the purposes of sub-paragraphs (2) to (5).
(8) Section 7F of BGDA 1981 (meaning of “paid”) applies for the purposes of sub-paragraph (6).

Post-commencement receipts & winnings etc in the case of pre-commencement remote gaming
5 (1) This paragraph applies where—
(a) a person (“the provider”) provides facilities for playing a game of chance,
(b) the playing of the game is remote gaming for the purposes of remote gaming duty charged by BGDA 1981,
(c) the provision of the facilities by the provider is not exempt by virtue of section 26H of BGDA 1981, and
(d) the game is begun to be played before 1 December 2014.
(2) In this paragraph—
“new accounting period” means any accounting period beginning on or after 1 December 2014;
“transitional accounting period” means an accounting period—
(a) beginning on or after 1 December 2014, and
(b) ending on or before 30 November 2018.
(3) Amounts due to the provider in a new accounting period in respect of entitlement to use the facilities to play the game are to be included among the amounts aggregated under section 157(1)(a) of this Act in calculating the provider's profits in respect of ordinary gaming.
(4) Amounts in respect of the game that—
(a) are within section 26E(1)(b) of BGDA 1981 as it applies in relation to the provider, and
(b) are staked, or fall due to be paid, in a new accounting period,
are also to be included among the amounts aggregated under section 157(1)(a) of this Act in calculating the provider's profits in respect of ordinary gaming.
(5) In the case of each prize in the game that is a prize—
(a) provided in a transitional accounting period by the provider, and
(b) won by a person using the facilities to play the game,
the value of the prize is to be included among the amounts aggregated under section 157(2) of this Act in calculating the provider's profits for the period in respect of ordinary gaming.
(6) Section 26F(2) to (7) of BGDA 1981 (provision and value of prizes) apply for the purposes of sub-paragraph (5).

Post-commencement relief for unrelieved pre-commencement losses
6 (1) In this paragraph “new accounting period” means an accounting period beginning on or after 1 December 2014.
(2) Where under section 5 or 5AA(3) of BGDA 1981 a person has a negative amount of net stake receipts for an accounting period ending on 30 November 2014 in respect of bets to which section 2(1) of BGDA 1981 applies, the amount may be carried forward in reduction of the person's profits on general bets for one or more new accounting periods.
(3) Where under section 5 or 5AA(3) of BGDA 1981 a person has a negative amount of net stake receipts for an accounting period ending on 30 November 2014 in respect of bets—
(a) to which section 3(1) of BGDA 1981 applies, and
(b) which are financial spread bets for the purposes of section 3 of BGDA 1981,
the amount may be carried forward in reduction of the person's profits on financial spread bets for one or more new accounting periods.
(4) Where under section 5 or 5AA(3) of BGDA 1981 a person has a negative amount of net stake receipts for an accounting period ending on 30 November 2014 in respect of bets—
(a) to which section 3(1) of BGDA 1981 applies, and
(b) which are not financial spread bets for the purposes of section 3 of BGDA 1981,
the amount may be carried forward in reduction of the person's profits on non-financial spread bets for one or more new accounting periods.
(5) Where under section 5 or 5AA(3) of BGDA 1981 a person has a negative amount of net stake receipts for an accounting period ending on 30 November 2014 in respect of bets by way of pool betting to which section 4(1) of BGDA 1981 applies, the amount may be carried forward in reduction of the person's profits on Chapter 1 pool bets for one or more new accounting periods.
(6) Where under section 7ZA(3) or 7A of BGDA 1981 a person has a negative amount of net pool betting receipts for an accounting period ending on 30 November 2014, the amount may be carried forward in reduction of the person's profits on Chapter 2 pool bets for one or more new accounting periods.
(7) Where the amount of a person's remote gaming profits (see section 26C(2) of BGDA 1981) for an accounting period ending on or before 30 November 2014 is a negative amount then that amount, so far as it has not been carried forward under section 26G of BGDA 1981 in reduction of the profits of one or more later accounting periods ending on or before 30 November 2014, may be carried forward in reduction of the person's profits on remote gaming (see section 155(4) of this Act) for one or more new accounting periods.

Post-commencement winnings on non-dutiable pre-commencement general or pool betting
7 (1) In this paragraph “transitional accounting period” means an accounting period—
(a) beginning on or after 1 December 2014, and
(b) ending on or before 30 November 2018.
(2) For the purposes of this paragraph, a bet is “non-dutiable” if—
(a) neither of sections 2(1) and 3(1) of BGDA 1981 applies to it,
(b) it is not a bet by way of pool betting on which general betting duty is charged under section 4(1) of BGDA 1981, and
(c) it is not a dutiable pool bet as defined by section 7B of BGDA 1981.
(3) Where—
(a) a non-dutiable bet is made with a bookmaker before 1 December 2014, and
(b) the bet is a general bet as defined by section 126 of this Act,
amounts paid by the bookmaker in a transitional accounting period by way of winnings to the person who made the bet may be included among the amounts aggregated at Step 2 in section 131 of this Act in calculating the bookmaker's ordinary profits in respect of general bets for that period.
(4) Where—
(a) a non-dutiable bet is made with a bookmaker before 1 December 2014, and
(b) the bet is a financial spread bet as defined by section 128 of this Act,
amounts paid by the bookmaker in a transitional accounting period by way of winnings to the person who made the bet may be included among the amounts aggregated at Step 2 in section 131 of this Act in calculating the bookmaker's ordinary profits in respect of financial spread bets for that period.
(5) Where—
(a) a non-dutiable bet is made with a bookmaker before 1 December 2014, and
(b) the bet is a non-financial spread bet as defined by section 128 of this Act,
amounts paid by the bookmaker in a transitional accounting period by way of winnings to the person who made the bet may be included among the amounts aggregated at Step 2 in section 131 of this Act in calculating the bookmaker's ordinary profits in respect of non-financial spread bets for that period.
(6) Where—
(a) a non-dutiable bet is made with a bookmaker before 1 December 2014, and
(b) the bet is a Chapter 1 pool bet as defined by section 134 of this Act,
amounts paid by the bookmaker in a transitional accounting period by way of winnings in respect of the bet may be included among the amounts aggregated under section 137(b) of this Act in calculating the bookmaker's profits for that period in respect of ordinary Chapter 1 pool bets.
(7) Where—
(a) a non-dutiable bet is made with a bookmaker before 1 December 2014, and
(b) the bet is a Chapter 2 pool bet as defined by section 143 of this Act,
amounts paid by or on behalf of the bookmaker in a transitional accounting period by way of winnings in respect of the bet may be included among the amounts aggregated under section 146(b) of this Act in calculating the bookmaker's profits for that period in respect of ordinary Chapter 2 pool bets.
(8) Section 140 of this Act (meaning of “winnings”) applies for the purposes of sub-paragraphs (3) to (6).
(9) Section 149 of this Act (meaning of “winnings”) applies for the purposes of sub-paragraph (7).

Post-commencement winnings on non-dutiable pre-commencement remote gaming
8 (1) In this paragraph “transitional accounting period” means an accounting period—
(a) beginning on or after 1 December 2014, and
(b) ending on or before 30 November 2018.
(2) Sub-paragraph (3) applies where—
(a) under arrangements between a chargeable person (as defined by section 155(2)) and another person (“the provider”), the chargeable person participates in playing a game of chance,
(b) the game is begun to be played before 1 December 2014,
(c) the chargeable person's participation in playing the game under the arrangements is remote gaming (as defined by section 154(1)) which is ordinary gaming (as defined by section 154(3)),
(d) remote gaming duty under section 26B of BGDA 1981 is not charged on the provision of any facilities—
(i) used by the chargeable person to play the game, and
(ii) provided by the provider, and
(e) the condition in paragraph (d) is not met only by virtue of section 26H of BGDA 1981 (exemptions).
(3) The value of any prize—
(a) provided by or on behalf of the provider in a transitional accounting period, and
(b) won by the chargeable person as a result of participating in playing the game under the arrangements,
may be included among the values aggregated under section 157(2) in calculating the provider's expenditure for the period on prizes in respect of ordinary gaming.
(4) Section 160 (provision and value of prizes) applies for the purposes of sub-paragraph (3).

Saving for amendments and repeals made by Schedule 28
9 (1) The amendments and repeals made by Schedule 28 do not affect—
(a) the operation on and after 1 December 2014 of any enactment amended or repealed by that Schedule, as the enactment stood immediately before that date, for the purposes of accounting periods for general betting duty, pool betting duty or remote gaming duty that end before that date, or for the purposes of entitlement to double taxation relief for such accounting periods,
(b) the operation on and after that date of any regulations or orders made, directions given or notices published under BGDA 1981 before that date so far as they relate to any of those duties (but see paragraph (c)),
(c) the exercise on and after that date of any power of the Commissioners or the Treasury under BGDA 1981 as saved by paragraph (a), including (in particular) any such power to make, amend, revoke, publish, revise or replace regulations, orders, directions or notices,
(d) the charges under sections 2(1), 3(1) and 4(1) of BGDA 1981 on bets made before that date,
(e) the charge under section 5AB of BGDA 1981 so far as relating to bets determined before that date,
(f) the charge under section 7 of BGDA 1981 so far as relating to net pool betting receipts for accounting periods ending before that date, or
(g) the charges under sections 17 and 26B of BGDA 1981 so far as relating to games of chance that began to be played before that date.
(2) Sub-paragraph (1)—
(a) has effect subject to the preceding provisions of this Schedule, and
(b) does not prejudice the generality of section 16(1) of the Interpretation Act 1978.

SCHEDULE 30 Section 208 penalty: value of the denied advantage
Section 209

Introduction
1 This Schedule applies for the purposes of calculating penalties under section 209.

Value of denied advantage: normal rule
2 (1) The value of the denied advantage is the additional amount due or payable in respect of tax as a result of counteracting the denied advantage.
(2) The reference in sub-paragraph (1) to the additional amount due or payable includes a reference to—
(a) an amount payable to HMRC having erroneously been paid by way of repayment of tax, and
(b) an amount which would be repayable by HMRC if the denied advantage were not counteracted.
(3) The following are ignored in calculating the value of the denied advantage—
(a) group relief, and
(b) any relief under section 458 of CTA 2010 (relief in respect of repayment etc of loan) which is deferred under subsection (5) of that section.
(4) This paragraph is subject to paragraphs 3 and 4.

Value of denied advantage: losses
3 (1) To the extent that the denied advantage has the result that a loss is wrongly recorded for purposes of direct tax and the loss has been wholly used to reduce the amount due or payable in respect of tax, the value of the denied advantage is determined in accordance with paragraph 2.
(2) To the extent that the denied advantage has the result that a loss is wrongly recorded for purposes of direct tax and the loss has not been wholly used to reduce the amount due or payable in respect of tax, the value of the denied advantage is—
(a) the value under paragraph 2 of so much of the denied advantage as results from the part (if any) of the loss which is used to reduce the amount due or payable in respect of tax, plus
(b) 10% of the part of the loss not so used.
(3) Sub-paragraphs (1) and (2) apply both—
(a) to a case where no loss would have been recorded but for the denied advantage, and
(b) to a case where a loss of a different amount would have been recorded (but in that case sub-paragraphs (1) and (2) apply only to the difference between the amount recorded and the true amount).
(4) To the extent that a denied advantage creates or increases an aggregate loss recorded for a group of companies—
(a) the value of the denied advantage is calculated in accordance with this paragraph, and
(b) in applying paragraph 2 in accordance with sub-paragraphs (1) and (2), group relief may be taken into account (despite paragraph 2(3)).
(5) To the extent that the denied advantage results in a loss, the value of it is nil where, because of the nature of the loss or P's circumstances, there is no reasonable prospect of the loss being used to support a claim to reduce a tax liability (of any person).

Value of denied advantage: deferred tax
4 (1) To the extent that the denied advantage is a deferral of tax, the value of that advantage is—
(a) 25% of the amount of the deferred tax for each year of the deferral, or
(b) a percentage of the amount of the deferred tax, for each separate period of deferral of less than a year, equating to 25% per year,
or, if less, 100% of the amount of the deferred tax.
(2) This paragraph does not apply to a case to the extent that paragraph 3 applies.

SCHEDULE 31 Follower notices and partnerships
Section 215

Introduction
1 This Schedule makes special provision about the application of Chapter 2 to partners and partnerships.

Interpretation
2 (1) This paragraph applies for the purposes of this Schedule.
(2) “Partnership follower notice” means a follower notice given by reason of—
(a) a tax enquiry being in progress into a partnership return, or
(b) an appeal having been made in relation to an amendment of a partnership return or against a conclusion stated by a closure notice in relation to a tax enquiry into a partnership return.
(3) “Partnership return” means a return in pursuance of a notice under section 12AA(2) or (3) of TMA 1970.
(4) “The representative partner”, in relation to a partnership return, means the person who was required by a notice served under or for the purposes of section 12AA(2) or (3) of TMA 1970 to deliver the return.
(5) “Relevant partner”, in relation to a partnership return, means a person who was a partner in the partnership to which the return relates at any time during the period in respect of which the return was required.
(6) References to a “successor”, in relation to the representative partner are to be construed in accordance with section 12AA(11) of TMA 1970.

Giving of follower notices in relation to partnership returns
3 (1) If the representative partner in relation to a partnership return is no longer available, then, for the purposes of section 204 the return, or an appeal in respect of the return, is to be regarded as made by the person who is for the time being the successor of that partner (if that would not otherwise be the case).
(2) Where, at any time after a partnership follower notice is given to P, P is no longer available, any reference in this Chapter (other than section 204 and this sub-paragraph) to P is to be read as a reference to the person who is, for the time being, the successor of the representative partner.
(3) For the purposes of Condition B in section 204 a partnership return, or appeal in respect of a partnership return, is made on the basis that a particular tax advantage results from particular tax arrangements if—
(a) it is made on the basis that an increase or reduction in one or more of the amounts mentioned in section 12AB(1) of TMA 1970 (amounts in the partnership statement in a partnership return) results from those tax arrangements, and
(b) that increase or reduction results in that tax advantage for one or more of the relevant partners.
(4) For the purposes of Condition D in section 204—
(a) a notice given to a person in the person's capacity as the representative partner of a partnership, or a successor of that partner, and a notice given to that person otherwise than in that capacity are not to be treated as given to the same person, and
(b) all notices given to the representative partner and successors of that partner, in that capacity, are to be treated as given to the same person.
(5) In this paragraph references to a person being “no longer available” have the same meaning as in section 12AA(11) of TMA 1970.

Penalty if corrective action not taken in response to partnership follower notice
4 (1) Section 208 applies, in relation to a partnership follower notice, in accordance with this paragraph.
(2) Subsection (2) applies as if the reference to P were to each relevant partner.
(3) References to the denied advantage are to be read as references to the increase or reduction in an amount in the partnership statement mentioned in paragraph 3(3) which is denied by the application of the principles laid down or the reasoning given in the judicial ruling identified in the partnership follower notice under section 206(a) or, if only part of any increase or reduction is so denied, that part.
(4) In subsection (6)(b) the words from “and (where different)” to the end are to be ignored, and accordingly subsection (7) does not apply.

Calculation of penalty etc
5 (1) This paragraph applies in relation to a partnership follower notice.
(2) Section 209 applies subject to the following modifications—
(a) the total amount of the penalties under section 208(2) for which the relevant partners are liable is 20% of the value of the denied advantage,
(b) the amount of the penalty for which each relevant partner is liable is that partner's appropriate share of that total amount, and
(c) the value of the denied advantage for the purposes of calculating the total amount of the penalties is—
(i) in the case of a notice given under section 204(2)(a), the net amount of the amendments required to be made to the partnership return to counteract the denied advantage, and
(ii) in the case of a notice given under section 204(2)(b), the net amount of the amendments that have been made to the partnership return to counteract the denied advantage,
(and, accordingly, Schedule 30 does not apply).
(3) For the purposes of sub-paragraph (2), a relevant partner's appropriate share is—
(a) the same share as the share in which any profits or loss for the period to which the return relates would be apportioned to that partner in accordance with the firm's profit-sharing arrangements, or
(b) if HMRC do not have sufficient information from P to establish that share, such share as is determined for the purposes of this paragraph by an officer of HMRC.
(4) Where—
(a) the relevant partners are liable to pay a penalty under section 208(2) (as modified by this paragraph),
(b) the penalties have not yet been assessed, and
(c) P has co-operated with HMRC,
section 210(1) does not apply, but HMRC may reduce the total amount of the penalties determined in accordance with sub-paragraph (2)(a) to reflect the quality of that co-operation.
(5) Nothing in sub-paragraph (4) permits HMRC to reduce the total amount of the penalties to less than 4% of the value of the denied advantage (as determined in accordance with sub-paragraph (2)(c)).
(6) For the purposes of section 212, a penalty imposed on a relevant partner by virtue of paragraph 4(2) is to be treated as if it were determined by reference to such additional amount of tax as is due and payable by the relevant partner as a result of the counteraction of the denied advantage.
(7) The right of appeal under section 214 extends to—
(a) a decision that penalties are payable by the relevant partners by virtue of this paragraph, and
(b) a decision as to the total amount of those penalties payable by those partners,
but not to a decision as to the appropriate share of, or the amount of a penalty payable by, a relevant partner.
(8) Section 214(3) applies to an appeal by virtue of sub-paragraph (7)(a) as it applies to an appeal under section 214(1).
(9) Section 214(8) applies to an appeal by virtue of sub-paragraph (7)(a), and section 214(9) to an appeal by virtue of sub-paragraph (7)(b).
(10) An appeal by virtue of sub-paragraph (7) may be brought only by the representative partner or, if that partner is no longer available, the person who is for the time being the successor of that partner.
(11) The Treasury may by order made by statutory instrument vary the rates for the time being specified in sub-paragraphs (2)(a) and (5).
(12) Any statutory instrument containing an order under sub-paragraph (10) is subject to annulment in pursuance of a resolution of the House of Commons.

SCHEDULE 32 Accelerated payments and partnerships
Section 228

Interpretation
1 (1) This paragraph applies for the purposes of this Schedule.
(2) “Partnership return” means a return in pursuance of a notice under section 12AA(2) or (3) of TMA 1970.
(3) “The representative partner”, in relation to a partnership return, means the person who was required by a notice served under or for the purposes of section 12AA(2) or (3) of TMA 1970 to deliver the return.
(4) “Relevant partner”, in relation to a partnership return, means a person who was a partner in the partnership to which the return relates at any time during the period in respect of which the return was required.
(5) References to a “successor”, in relation to the representative partner, are to be construed in accordance with section 12AA(11) of TMA 1970.

Restriction on circumstances when accelerated payment notices can be given
2 (1) This paragraph applies where—
(a) a tax enquiry is in progress in relation to a partnership return, or
(b) an appeal has been made in relation to an amendment of such a return or against a conclusion stated by a closure notice in relation to a tax enquiry into such a return.
(2) No accelerated payment notice may be given to the representative partner of the partnership, or a successor of that partner, by reason of that enquiry or appeal.
(3) But this Schedule makes provision for partner payment notices and accelerated partner payments in such cases.

Circumstances in which partner payment notices may be given
3 (1) Where a partnership return has been made in respect of a partnership, HMRC may give a notice (a “partner payment notice”) to each relevant partner of the partnership if Conditions A to C are met.
(2) Condition A is that—
(a) a tax enquiry is in progress in relation to the partnership return, or
(b) an appeal has been made in relation to an amendment of the return or against a conclusion stated by a closure notice in relation to a tax enquiry into the return.
(3) Condition B is that the return or, as the case may be, appeal is made on the basis that a particular tax advantage (“the asserted advantage”) results from particular arrangements (“the chosen arrangements”).
(4) Paragraph 3(3) of Schedule 31 applies for the purposes of sub-paragraph (3) as it applies for the purposes of Condition B in section 204(3).
(5) Condition C is that one or more of the following requirements are met—
(a) HMRC has given (or, at the same time as giving the partner payment notice, gives) the representative partner, or a successor of that partner, a follower notice under Chapter 2—
(i) in relation to the same return or, as the case may be, appeal, and
(ii) by reason of the same tax advantage and the chosen arrangements;
(b) the chosen arrangements are DOTAS arrangements (within the meaning of section 219(5) and (6));
(c) the relevant partner in question has been given a GAAR counteraction notice in respect of any tax advantage resulting from the asserted advantage or part of it and the chosen arrangements (or is given such a notice at the same time as the partner payment notice) in a case where the stated opinion of at least two of the members of the sub-panel of the GAAR Advisory Panel which considered the matter under paragraph 10 of Schedule 43 to FA 2013 was as set out in paragraph 11(3)(b) of that Schedule (entering into tax arrangements not reasonable course of action etc).
(6) “GAAR counteraction notice” has the meaning given by section 219(7).

Content of partner payment notices
4 (1) The partner payment notice given to a relevant partner must—
(a) specify the paragraph or paragraphs of paragraph 3(5) by virtue of which the notice is given,
(b) specify the payment required to be made under paragraph 6, and
(c) explain the effect of paragraphs 5 and 6, and of the amendments made by sections 224 and 225 (so far as relating to the relevant tax in relation to which the partner payment notice is given).
(2) The payment required to be made under paragraph 6 is an amount equal to the amount which a designated HMRC officer determines, to the best of the officer's information and belief, as the understated partner tax.
(3) “The understated partner tax” means the additional amount that would become due and payable by the relevant partner in respect of tax if—
(a) in the case of a notice given by virtue of paragraph 3(5)(a) (case where a partnership follower notice is given)—
(i) it were assumed that the explanation given in the follower notice in question under section 206(b) is correct, and
(ii) what the officer may determine to the best of the officer's information and belief as the denied advantage is counteracted to the extent that it is reflected in a return or claim of the relevant partner;
(b) in the case of a notice given by virtue of paragraph 3(5)(b) (cases where the DOTAS arrangements are met), such adjustments were made as are required to counteract so much of what the designated HMRC officer so determines as the denied advantage as is reflected in a return or claim of the relevant partner;
(c) in the case of a notice given by virtue of paragraph 3(5)(c) (cases involving counteraction under the general anti-abuse rule), such of the adjustments set out in the GAAR counteraction notice are made as have effect to counteract so much of the denied advantage as is reflected in a return or claim of the relevant partner.
(4) “The denied advantage”—
(a) in the case of the notice given by virtue of paragraph 3(5)(a), has the meaning given by paragraph 4(3) of Schedule 31,
(b) in the case of a notice given by virtue of paragraph 3(5)(b), means so much of the asserted advantage as is not a tax advantage which results from the chosen arrangements or otherwise, and
(c) in the case of a notice given by virtue of paragraph 3(5)(c), means so much of the asserted advantage as would be counteracted by making the adjustments set out in the GAAR counteraction notice.
(5) If a notice is given by reason of two or all of the requirements of paragraph 3(5) being met, the payment specified under sub-paragraph (1)(b) is to be determined as if the notice were given by virtue of such one of them as is stated in the notice as being used for this purpose.

Representations about a partner payment notice
5 (1) This paragraph applies where a partner payment notice has been given to a relevant partner under paragraph 3 (and not withdrawn).
(2) The relevant partner has 90 days beginning with the day that notice is given to send written representations to HMRC—
(a) objecting to the notice on the grounds that Condition A, B or C in that paragraph was not met, or
(b) objecting to the amount specified in the notice under paragraph 4(1)(b).
(3) HMRC must consider any representations made in accordance with sub-paragraph (2).
(4) Having considered the representations, HMRC must—
(a) if representations were made under sub-paragraph (2)(a), determine whether—
(i) to confirm the partner payment notice (with or without amendment), or
(ii) to withdraw the partner payment notice, and
(b) if representations were made under sub-paragraph (2)(b) (and the notice is not withdrawn under paragraph (a)), determine whether a different amount ought to have been specified as the understated partner tax, and then—
(i) confirm the amount specified in the notice, or
(ii) amend the notice to specify a different amount,
and notify P accordingly.

Effect of partner payment notice
6 (1) This paragraph applies where a partner payment notice has been given to a relevant partner (and not withdrawn).
(2) The relevant partner must make a payment (“the accelerated partner payment”) to HMRC of the amount specified in the notice in accordance with paragraph 4(1)(b).
(3) The accelerated partner payment is to be treated as a payment on account of the understated partner tax (see paragraph 4).
(4) The accelerated partner payment must be made before the end of the payment period.
(5) “The payment period” means—
(a) if the relevant partner made no representations under paragraph 5, the period of 90 days beginning with the day on which the partner payment notice is given;
(b) if the relevant partner made such representations, whichever of the following ends later—
(i) the 90 day period mentioned in paragraph (a);
(ii) the period of 30 days beginning with the day on which the relevant partner is notified under paragraph 5 of HMRC's determination.
(6) If the relevant partner pays any part of the understated partner tax before the accelerated partner payment in respect of it, the accelerated partner payment is treated to that extent as having been paid at the same time.
(7) Subsections (8) and (9) of section 223 apply in relation to a payment under this paragraph as they apply to a payment under that section.

Penalty for failure to comply with partner payment notice
7 Section 226 (penalty for failure to make accelerated payment on time) applies to accelerated partner payments as if—
(a) references in that section to the accelerated payment were to the accelerated partner payment,
(b) references to P were to the relevant partner, and
(c) “the payment period” had the meaning given by paragraph 6(5).

Withdrawal, suspension or modification of partner payment notices
8 (1) Section 227 (withdrawal, modification or suspension of accelerated payment notice) applies in relation to a relevant partner, a partner payment notice, Condition C in paragraph 3 and an accelerated partner payment as it applies in relation to P, an accelerated payment notice, Condition C in section 219 and an accelerated payment.
(2) Accordingly, for this purpose—
(a) section 227(6)(b) and (7)(a) has effect as if the references to section 220(6) were to paragraph 4(5) of this Schedule, and
(b) the provisions listed in section 227(9) are to be read as including paragraph 6(5) of this Schedule.

SCHEDULE 33 Part 4: consequential amendments
Section 233

Taxes Management Act 1970
1 In section 9B of TMA 1970 (amendment of return by relevant person during enquiry), in subsection (1), after “taxpayer)” insert “ , or in accordance with Chapter 2 of Part 4 of the Finance Act 2014 (amendment of return after follower notice), ”.
2 In section 103ZA of that Act (disapplication of sections 100 to 103 (penalty provisions) in the case of certain penalties)—
(a) omit “or” at the end of paragraph (f), and
(b) at the end of paragraph (g) insert

“, or
(h) Part 4 of the Finance Act 2014 (follower notices and accelerated payments).”

Finance Act 2007
3 In paragraph 12 of Schedule 24 to FA 2007 (penalties for errors: interaction with other penalties), after sub-paragraph (2) insert—

“(2A) In sub-paragraph (2) “any other penalty” does not include a penalty under Part 4 of FA 2014 (penalty where corrective action not taken after follower notice etc).”

Finance Act 2008
4 In paragraph 15 of Schedule 41 to FA 2008 (penalties: failure to notify: interaction with other penalties), after sub-paragraph (1) insert—

“(1A) In sub-paragraph (1) “any other penalty” does not include a penalty under Part 4 of FA 2014 (penalty where corrective action not taken after follower notice etc).”

Finance Act 2009
5 In paragraph 17 of Schedule 55 to FA 2009 (penalty for failure to make returns etc: interaction with other penalties), after sub-paragraph (2)(b) insert

“, or
(c) a penalty under Part 4 of FA 2014 (penalty where corrective action not taken after follower notice etc).”

SCHEDULE 34 Promoters of tax avoidance schemes: threshold conditions
Section 237

PART 1 Meeting the threshold conditions: general

Meaning of “threshold condition”
1 Each of the conditions described in paragraphs 2 to 12 is a “threshold condition”.

Deliberate tax defaulters
2 A person meets this condition if the Commissioners publish information about the person in reliance on section 94 of FA 2009 (publishing details of deliberate tax defaulters).

Breach of the Banking Code of Practice
3 A person meets this condition if the person is named in a report under section 285 as a result of the Commissioners determining that the person breached the Code of Practice on Taxation for Banks by reason of promoting arrangements which the person cannot have reasonably believed achieved a tax result which was intended by Parliament.

Dishonest tax agents
4 A person meets this condition if the person is given a conduct notice under paragraph 4 of Schedule 38 to FA 2012 (tax agents: dishonest conduct) and either—
(a) the time period during which a notice of appeal may be given in relation to the notice has expired, or
(b) an appeal against the notice has been made and the tribunal has confirmed the determination referred to in sub-paragraph (1) of paragraph 4 of that Schedule.

Non-compliance with Part 7 of FA 2004
5 (1) A person meets this condition if the person fails to comply with any of the following provisions of Part 7 of FA 2004 (disclosure of tax avoidance schemes)—
(a) section 308(1) and (3) (duty of promoter in relation to notifiable proposals and notifiable arrangements);
(b) section 309(1) (duty of person dealing with promoter outside the United Kingdom);
(c) section 310 (duty of parties to notifiable arrangements not involving promoter);
(d) section 313ZA (duty of promoter to provide details of clients).
(2) For the purposes of sub-paragraph (1), failure to comply includes cases (despite section 118(2) of TMA 1970) where a person had a reasonable excuse for not doing the thing required to be done.

Criminal offences
6 (1) A person meets this condition if the person is charged with a relevant offence.
(2) The fact that a person has been charged with an offence is disregarded for the purposes of this paragraph if—
(a) the person has been acquitted of the offence, or
(b) the charge has been dismissed or the proceedings have been discontinued.
(3) An acquittal is not taken into account for the purposes of sub-paragraph (2) if an appeal has been brought against the acquittal and has not yet been disposed of.
(4) “Relevant offence” means any of the following—
(a) an offence at common law of cheating in relation to the public revenue;
(b) in Scotland, an offence at common law of—
(i) fraud;
(ii) uttering;
(c) an offence under section 17(1) of the Theft Act 1968 or section 17 of the Theft Act (Northern Ireland) 1969 (c. 16 (N.I.)) (false accounting);
(d) an offence under section 106A of TMA 1970 (fraudulent evasion of income tax);
(e) an offence under section 107 of TMA 1970 (false statements: Scotland);
(f) an offence under any of the following provisions of CEMA 1979—
(i) section 50(2) (improper importation of goods with intent to defraud or evade duty);
(ii) section 167 (untrue declarations etc);
(iii) section 168 (counterfeiting documents etc);
(iv) section 170 (fraudulent evasion of duty);
(v) section 170B (taking steps for the fraudulent evasion of duty);
(g) an offence under any of the following provisions of VATA 1994—
(i) section 72(1) (being knowingly concerned in the evasion of VAT);
(ii) section 72(3) (false statement etc);
(iii) section 72(8) (conduct involving commission of other offence under section 72);
(h) an offence under section 1 of the Fraud Act 2006 (fraud);
(i) an offence under any of the following provisions of CRCA 2005—
(i) section 30 (impersonating a Commissioner or officer of Revenue and Customs);
(ii) section 31 (obstruction of officer of Revenue and Customs etc);
(iii) section 32 (assault of officer of Revenue and Customs);
(j) an offence under regulation 45(1) of the Money Laundering Regulations 2007 (S.I. 2007/2157);
(k) an offence under section 49(1) of the Criminal Justice and Licensing (Scotland) Act 2010 (asp 13) (possession of articles for use in fraud).

Opinion notice of GAAR Advisory Panel
7 A person meets this condition if—
(a) arrangements in relation to which the person is a promoter have been referred to the GAAR Advisory Panel under Schedule 43 to FA 2013,
(b) one or more opinion notices are given in relation to the arrangements under paragraph 11(3)(b) of that Schedule (opinion of sub-panel of GAAR Advisory Panel that arrangements are not reasonable), and
(c) the notice, or the notices taken together, either—
(i) state the joint opinion of all the members of the sub-panel arranged under paragraph 10 of that Schedule, or
(ii) state the opinion of two or more members of that sub-panel.

Disciplinary action by a professional body
8 (1) A person meets this condition if a professional body—
(a) determines that the person is guilty of misconduct of a kind prescribed for the purposes of this paragraph, and
(b) takes in relation to that misconduct action of a kind so prescribed, and
(c) imposes on the person a penalty of a kind so prescribed.
(2) Misconduct may only be prescribed for the purposes of sub-paragraph (1)(a) if it is misconduct other than misconduct in matters (such as the payment of fees) that relate solely or mainly to the person's relationship with the professional body.
(3) A “professional body” means—
(a) the Institute of Chartered Accountants in England and Wales;
(b) the Institute of Chartered Accountants of Scotland;
(c) the General Council of the Bar;
(d) the Faculty of Advocates;
(e) the General Council of the Bar of Northern Ireland;
(f) the Law Society;
(g) the Law Society of Scotland;
(h) the Law Society for Northern Ireland;
(i) the Association of Accounting Technicians;
(j) the Association of Chartered Certified Accountants;
(k) the Association of Taxation Technicians;
(l) any other prescribed body with functions relating to the regulation of a trade or profession.

Disciplinary action by a regulatory authority
9 (1) A person meets this condition if a regulatory authority imposes a relevant sanction on the person.
(2) A “relevant sanction” is a sanction which is—
(a) imposed in relation to misconduct other than misconduct in matters (such as the payment of fees) that relate solely or mainly to the person's relationship with the regulatory authority, and
(b) prescribed.
(3) The following are regulatory authorities for the purposes of this paragraph—
(a) the Financial Conduct Authority;
(b) the Financial Services Authority;
(c) any other authority that may be prescribed.
(4) Only authorities that have functions relating to the regulation of financial institutions may be prescribed under sub-paragraph (3)(c).

Exercise of information powers
10 (1) A person meets this condition if the person fails to comply with an information notice given under any of paragraphs 1, 2, 5 and 5A of Schedule 36 to FA 2008.
(2) For the purposes of section 237, the failure to comply is taken to occur when the period within which the person is required to comply with the notice expires (without the person having complied with it).

Restrictive contractual terms
11 (1) A person (“P”) meets this condition if P enters into an agreement with another person (“C”) which relates to a relevant proposal or relevant arrangements in relation to which P is a promoter, on terms which—
(a) impose a contractual obligation on C which falls within sub-paragraph (2) or (3), or
(b) impose on C both obligations within sub-paragraph (4) and obligations within sub-paragraph (5).
(2) A contractual obligation falls within this sub-paragraph if it prevents or restricts the disclosure by C to HMRC of information relating to the proposals or arrangements, whether or not by referring to a wider class of persons.
(3) A contractual obligation falls within this sub-paragraph if it requires C to impose on any tax adviser to whom C discloses information relating to the proposals or arrangements a contractual obligation which prevents or restricts the disclosure of that information to HMRC by the adviser.
(4) A contractual obligation falls within this sub-paragraph if it requires C to—
(a) meet (in whole or in part) the costs of, or contribute to a fund to be used to meet the costs of, any proceedings relating to arrangements in relation to which P is a promoter (whether or not implemented by C), or
(b) take out an insurance policy which insures against the risk of having to meet the costs connected with proceedings relating to arrangements which C has implemented and in relation to which P is a promoter.
(5) A contractual obligation falls within this paragraph if it requires C to obtain the consent of P before—
(a) entering into any agreement with HMRC regarding arrangements which C has implemented and in relation to which P is a promoter, or
(b) withdrawing or discontinuing any appeal against any decision regarding such arrangements.
(6) In sub-paragraph (5)(b), the reference to withdrawing or discontinuing an appeal includes any action or inaction which results in an appeal being discontinued.
(7) In this paragraph—
“proceedings” includes any sort of proceedings for resolving disputes (and not just proceedings in court), whether commenced or contemplated;
“tax adviser” means a person appointed to give advice about the tax affairs of another person (whether appointed directly by that person or by another tax adviser of that person).

Continuing to promote certain arrangements
12 (1) A person (“P”) meets this condition if P has been given a stop notice and after the end of the notice period P—
(a) makes a firm approach to another person (“C”) in relation to an affected proposal with a view to making the affected proposal available for implementation by C or another person, or
(b) makes an affected proposal available for implementation by other persons.
(2) “Affected proposal” means a relevant proposal that is in substance the same as the relevant proposal specified in the stop notice in accordance with sub-paragraph (4)(c).
(3) An authorised officer may give a person (“P”) a notice (a “stop notice”) if each of these conditions is met—
(a) a person has been given a follower notice under section 204 (circumstances in which a follower notice may be given) in relation to particular relevant arrangements;
(b) P is a promoter in relation to a relevant proposal that is implemented by those arrangements;
(c) 90 days have elapsed since the follower notice was given and—
(i) the follower notice has not been withdrawn, and
(ii) if representations objecting to the follower notice were made under section 207 (representations about a follower notice), HMRC have confirmed the follower notice.
(4) A stop notice must—
(a) specify the arrangements which are the subject of the follower notice mentioned in sub-paragraph (3)(a),
(b) specify the judicial ruling identified in that follower notice,
(c) specify a relevant proposal in relation to which the condition in sub-paragraph (3)(b) is met, and
(d) explain the effect of the stop notice.
(5) An authorised officer may determine that a stop notice given to a person is to cease to have effect.
(6) If an authorised officer makes a determination under sub-paragraph (5) the officer must give the person written notice of the determination.
(7) The notice must specify the date from which it takes effect, which may be earlier than the date on which the notice is given.
(8) In this paragraph—
“the notice period” means the period of 30 days beginning with the day on which a stop notice is given;
“judicial ruling” means a ruling of a court or tribunal.

PART 2 Meeting the threshold conditions: bodies corporate
13 (1) Sub-paragraph (2) applies where—
(a) a relevant threshold condition is met by a person (“P”) at a time (“the earlier time”) when P has control of a body corporate,
(b) a determination under section 237 is made at a later time in relation to the body corporate, and
(c) P has control of the body corporate at the time of the determination.
(2) The body corporate is regarded as having met the threshold condition at the earlier time.
(3) “Relevant threshold condition” means a threshold condition specified in any of the following paragraphs of this Schedule—
(a) paragraph 2 (deliberate tax defaulters);
(b) paragraph 4 (dishonest tax agents);
(c) paragraph 6 (criminal offences);
(d) paragraph 7 (opinion notice of GAAR advisory panel);
(e) paragraph 8 (disciplinary action by professional body);
(f) paragraph 9 (disciplinary action by regulatory authority);
(g) paragraph 10 (failure to comply with information notice).
(4) For the purposes of this paragraph a person (“P”) has control of a body corporate (“B”) if P has power to secure—
(a) by means of the holding of shares or the possession of voting power in relation to B or any other body corporate, or
(b) as a result of any powers conferred by the articles of association or other document regulating B or any other body corporate,
that the affairs of B are conducted in accordance with P's wishes.

PART 3 Power to amend
14 (1) The Treasury may by regulations amend this Schedule.
(2) An amendment made by virtue of sub-paragraph (1) may, in particular—
(a) vary or remove any of the conditions set out in paragraphs 2 to 12;
(b) add new conditions.
(3) Regulations under sub-paragraph (1) may include any amendment of this Part of this Act that is appropriate in consequence of an amendment made by virtue of sub-paragraph (1).

SCHEDULE 35 Promoters of tax avoidance schemes: penalties
Section 274

Introduction
1 In this Schedule a reference to an “information duty” is to a duty arising under any of the following provisions to provide information or produce a document—
(a) section 255 (duty to provide information or produce document);
(b) section 257 (ongoing duty to provide information);
(c) section 258 (duty of person dealing with non-resident promoter);
(d) section 259 (monitored promoter: duty to provide information about clients);
(e) section 260 (intermediaries: duty to provide information about clients);
(f) section 261 (duty to provide information about clients following enquiry);
(g) section 262 (information required for monitoring compliance with conduct notice);
(h) section 263 (information about monitored promoter's address).

Penalties for failure to comply
2 (1) A person who fails to comply with a duty imposed by or under this Part mentioned in column 1 of the Table is liable to a penalty not exceeding the amount shown in relation to that provision in column 2 of the Table.

Table
Column 1	Column 2
Provision	Maximum penalty (£)
Section 249(1) (duty to notify clients of monitoring notice)	5,000
Section 249(3) (duty to publicise monitoring notice)	1,000,000
Section 249(10) (duty to include information on correspondence etc)	1,000,000
Section 251 (duty of promoter to notify clients and intermediaries of reference number)	5,000
Section 252 (duty of those notified to notify others of promoter's number)	5,000
Section 253 (duty to notify HMRC of reference number)	the relevant amount (see sub-paragraph (3))
Section 255 (duty to provide information or produce document)	1,000,000
Section 257 (ongoing duty to provide information or produce document)	1,000,000
Section 258 (duty of person dealing with non-resident promoter)	1,000,000
Section 259 (monitored promoter: duty to provide information about clients)	5,000
Section 260 (intermediaries: duty to provide information about clients)	5,000
Section 261 (duty to provide information about clients following an enquiry)	10,000
Section 262 (duty to provide information required to monitor compliance with conduct notice)	5,000
Section 263 (duty to provide information about address)	5,000
Section 265 (duty to provide information to promoter)	5,000
(2) In relation to a failure to comply with section 249(1), 251, 252, 259 or 260 the maximum penalty specified in column 2 of the Table is a maximum penalty which may be imposed in respect of each person to whom the failure relates.
(3) In relation to a failure to comply with section 253, the “relevant amount” is—
(a) £5,000, unless paragraph (b) or (c) applies;
(b) £7,500, where a person has previously failed to comply with section 253 on one (and only one) occasion during the period of 36 months ending with the date on which the current failure occurred;
(c) £10,000, where a person has previously failed to comply with section 253 on two or more occasions during the period mentioned in paragraph (b).
(4) The amount of a penalty imposed under sub-paragraph (1) is to be arrived at after taking account of all relevant considerations, including the desirability of setting it at a level which appears appropriate for deterring the person, or other persons, from similar failures to comply on future occasions having regard (in particular)—
(a) in the case of a penalty imposed for a failure to comply with section 255 or 257, to the amount of fees received, or likely to have been received, by the person in connection with the monitored proposal, arrangements implementing the monitored proposal or monitored arrangements to which the information or document required as a result of section 255 or 257 relates;
(b) in the case of a penalty imposed in relation to a failure to comply with section 258(4) or (5), to the amount of any tax advantage gained, or sought to be gained, by the person in relation to the monitored arrangements or the arrangements implementing the monitored proposal.

Daily default penalties for failure to comply
3 (1) If the failure to comply with an information duty continues after a penalty is imposed under paragraph 2(1), the person is liable to a further penalty or penalties not exceeding the relevant sum for each day on which the failure continues after the day on which the penalty under paragraph 2(1) was imposed.
(2) In sub-paragraph (1) “the relevant sum” means—
(a) £10,000, in a case where the maximum penalty which could have been imposed for the failure was £1,000,000;
(b) £600, in cases not falling within paragraph (a).

Penalties for inaccurate information and documents
4 (1) If—
(a) in complying with an information duty, a person provides inaccurate information or produces a document that contains an inaccuracy, and
(b) condition A, B or C is met,
the person is liable to a penalty not exceeding the relevant sum.
(2) Condition A is that the inaccuracy is careless or deliberate.
(3) An inaccuracy is careless if it is due to a failure by the person to take reasonable care.
(4) For the purpose of determining whether or not a person who is a monitored promoter took reasonable care, reliance on legal advice is to be disregarded if either—
(a) the advice was not based on a full and accurate description of the facts, or
(b) the conclusions in the advice that the person relied on were unreasonable.
(5) For the purpose of determining whether or not a person who complies with a duty under section 258 took reasonable care, reliance on legal advice is to be disregarded if the advice was given or procured by the monitored promoter mentioned in subsection (1) of that section.
(6) Condition B is that the person knows of the inaccuracy at the time the information is provided or the document produced but does not inform HMRC at that time.
(7) Condition C is that the person—
(a) discovers the inaccuracy some time later, and
(b) fails to take reasonable steps to inform HMRC.
(8) The “relevant sum” means—
(a) £1,000,000, where the information is provided or document produced in compliance with a duty under section 255, 257 or 258;
(b) £10,000, where the information is provided in compliance with a duty under section 261;
(c) £5,000, where the information is provided or document produced in compliance with a duty under section 259, 260, 262 or 263.
(9) If the information or document contains more than one inaccuracy, one penalty is payable under this paragraph whatever the number of inaccuracies.

Power to change amount of penalties
5 (1) If it appears to the Treasury that there has been a change in the value of money since the last relevant date, they may by regulations substitute for the sums for the time being specified in paragraph 2, 3 or 4 such other sums as appear to them to be justified by the change.
(2) Regulations under sub-paragraph (1) may include any amendment of paragraph 10(b) that is appropriate in consequence of an amendment made by virtue of sub-paragraph (1).
(3) The “relevant date”, in relation to a specified sum, means—
(a) the date on which this Act is passed, and
(b) each date on which the power conferred by sub-paragraph (1) has been exercised in relation to that sum.

Concealing, destroying etc documents following imposition of a duty to provide information
6 (1) A person must not conceal, destroy or otherwise dispose of, or arrange for the concealment, destruction or disposal of, a document which is subject to a duty under section 255, 257 or 262.
(2) Sub-paragraph (1) does not apply if the person acts after the document has been produced to an officer of Revenue and Customs in accordance with the duty, unless the officer has notified the person in writing that the document must continue to be available for inspection (and has not withdrawn the notification).
(3) Sub-paragraph (1) does not apply, in a case to which section 268(1) applies, if the person acts after the expiry of the period of 6 months beginning with the day on which a copy of the document was produced in accordance with that section unless, before the expiry of that period, an officer of Revenue and Customs makes a request for the original document under section 268(2)(b).
(4) A person who conceals, destroys or otherwise disposes of, or arranges for the concealment, destruction or disposal of, a document in breach of sub-paragraph (1), is taken to have failed to comply with the duty to produce the document under the provision concerned (but see sub-paragraph (5)).
(5) If a person conceals, destroys or otherwise disposes of, or arranges for the concealment, destruction or disposal of, a document which is subject to a duty under more than one of the provisions mentioned in sub-paragraph (1) then—
(a) in a case where a duty under section 255 applies, the person will be taken to have failed to comply only with that provision, or
(b) in a case where a duty under section 255 does not apply, the person will be taken to have failed to comply only with section 257.

Concealing, destroying etc documents following informal notification
7 (1) A person must not conceal, destroy or otherwise dispose of, or arrange for the concealment, destruction or disposal of, a document if an officer of Revenue and Customs has informed the person in writing that the person is, or is likely, to be given a notice under 255, 257 or 262 the effect of which will, or is likely to, require the production of the document.
(2) Sub-paragraph (1) does not apply if the person acts—
(a) at least 6 months after the person was, or was last, informed as described in sub-paragraph (1), or
(b) after the person becomes subject to a duty under 255, 257 or 262 which requires the document to be produced.
(3) A person who conceals, destroys or otherwise disposes of, or arranges for the concealment, destruction or disposal of, a document in breach of sub-paragraph (1), is taken to have failed to comply with the duty to produce the document under the provision concerned (but see sub-paragraph (4)).
(4) If a person conceals, destroys or otherwise disposes of, or arranges for the concealment, destruction or disposal of, a document which is subject to a duty under more than one of the provisions mentioned in sub-paragraph (1) then—
(a) in a case where a duty under section 255 applies, the person will be taken to have failed to comply only with that provision, or
(b) in a case where a duty under section 255 does not apply, the person will be taken to have failed to comply only with section 257.

Failure to comply with time limit
8 A failure to do anything required to be done within a limited period of time does not give rise to liability to a penalty under this Schedule if the person did it within such further time, if any, as an officer of Revenue and Customs or the tribunal may have allowed.

Reasonable excuse
9 (1) Liability to a penalty under this Schedule does not arise if there is a reasonable excuse for the failure.
(2) For the purposes of this paragraph—
(a) an insufficiency of funds is not a reasonable excuse unless attributable to events outside the person's control,
(b) if the person relies on any other person to do anything, that is not a reasonable excuse unless the first person took reasonable care to avoid the failure,
(c) if the person had a reasonable excuse for the failure but the excuse has ceased, the person is to be treated as having continued to have the excuse if the failure is remedied without unreasonable delay after the excuse ceased,
(d) reliance on legal advice is to be taken automatically not to constitute a reasonable excuse where the person is a monitored promoter if either—
(i) the advice was not based on a full and accurate description of the facts, or
(ii) the conclusions in the advice that the person relied on were unreasonable, and
(e) reliance on legal advice is to be taken automatically not to constitute a reasonable excuse in the case of a penalty for failure to comply with section 258, if the advice was given or procured by the monitored promoter mentioned in subsection (1) of that section.

Assessment of penalty and appeals
10 Part 10 of TMA 1970 (penalties, etc) has effect as if—
(a) the reference in section 100(1) to the Taxes Acts were read as a reference to the Taxes Acts and this Schedule,
(b) in subsection (2) of section 100, there were inserted a reference to a penalty under this Schedule, other than a penalty under paragraph 3 of this Schedule in respect of which the relevant sum is £600.

Interest on penalties
11 (1) A penalty under this Schedule is to carry interest at the rate applicable under section 178 of FA 1989 from the date it is determined until payment.
(2) In section 178 of FA 1989 (setting of rates of interest), in subsection (2) at the end of paragraph (t) insert

“, and
(u) paragraph 11 of Schedule 35 to the Finance Act 2014.”

Double jeopardy
12 A person is not liable to a penalty under this Schedule in respect of anything in respect of which the person has been convicted of an offence.

Overlapping penalties
13 A person is not liable to a penalty under—
(a) Schedule 24 to the FA 2007 (penalties for errors),
(b) Part 7 of FA 2004, or
(c) any other provision which is prescribed,
by reason of any failure to include in any return or account a reference number required by section 253.

SCHEDULE 36 Promoters of tax avoidance schemes: partnerships
Section 281

PART 1 Partnerships as persons

“Person” includes a partnership
1 (1) Persons carrying on a business in partnership—
(a) are regarded as a person for the purposes of this Part of this Act;
(b) are referred to in this Part as a “partnership”.
(2) But in this Part of this Act “partnership” does not include a body of persons forming a legal person that is distinct from themselves (and paragraphs 2 to 21 may accordingly be disregarded in applying this Part of this Act to such a body of persons).
(3) In the references in this Part to carrying on a business in partnership, “partnership” has the same meaning as in the Partnership Act 1890.

Continuity of partnerships
2 A partnership is regarded for the purposes of this Part of this Act as continuing to be the same partnership (and the same person) regardless of a change in membership, provided that a person who was a member before the change remains a member after the change.

Meeting of conditions
3 (1) Accordingly, for the purposes of this Part of this Act a partnership is taken—
(a) to have done any act that bound the members, and
(b) to have failed to comply with any obligation of the firm which the members failed to comply with;
but see sub-paragraph (3).
(2) In sub-paragraph (1), “the members” means those who were the members of the partnership or (in the case of a limited partnership) the general partners of the partnership at the time when the act was done or the failure to comply occurred.
(3) Where a member of a partnership (“M”) has done, or failed to do, an act at any time (“the earlier time”), the partnership is not treated at any later time as having done, or failed to do, that act unless—
(a) M, or
(b) another person who was a member of the partnership at the earlier time,
is a member of the partnership at the later time.
(4) In this paragraph “firm” has the same meaning as in the Partnership Act 1890.

Threshold conditions: actions of partners in a personal capacity
4 (1) Sub-paragraph (2) applies where—
(a) a relevant threshold condition is met by a person (“P”) at a time (“the earlier time”) when P is a controlling member, or managing partner, of a partnership,
(b) a determination under section 237 is made at a later time in relation to the partnership, and
(c) P is a controlling member, or managing partner, of the partnership at the time of the determination.
(2) The partnership is regarded as having met the threshold condition at the earlier time (regardless of whether or not the partnership was bound by the act or omission as a result of which P met the threshold condition).
(3) “Relevant threshold condition” means a threshold condition specified in any of the following paragraphs of Schedule 34—
(a) paragraph 2 (deliberate tax defaulters);
(b) paragraph 4 (dishonest tax agents);
(c) paragraph 6 (criminal offences);
(d) paragraph 7 (opinion notice of GAAR advisory panel);
(e) paragraph 8 (disciplinary action by a professional body);
(f) paragraph 9 (disciplinary action by a regulatory authority);
(g) paragraph 10 (failure to comply with information notice).

PART 2 Conduct notices and monitoring notices

Conduct notices
5 (1) A conduct notice that is given to a partnership must state that it is a partnership conduct notice.
(2) In accordance with paragraphs 1 and 2, where the person to whom a conduct notice is given is a partnership, section 238 authorises the imposition of conditions relating to—
(a) the persons who are members of the partnership when the conduct notice is given, and
(b) any person who becomes a member of the partnership after the conduct notice is given.

Monitoring notices
6 A monitoring notice that is given to a partnership must state that it is a partnership monitoring notice.

Person continuing to carry on partnership business as a sole trader
7 (1) This paragraph applies where—
(a) a person or persons have ceased to be members of a partnership,
(b) immediately before the cessation, a conduct notice or monitoring notice had effect in relation to the partnership, and
(c) immediately after the cessation, a person who was a member of the partnership immediately before the cessation is carrying on the business of the partnership, but not in partnership.
(2) Where this paragraph applies, the conduct notice or monitoring notice continues (despite paragraphs 1 and 2) to have effect in relation to the person mentioned in sub-paragraph (1)(c) (but, in relation to times when the business is not being carried on in partnership, the notice is not regarded for the purposes of this Part of this Act as a notice that has been given to a partnership.)

Persons leaving a partnership: conduct notices
8 (1) Sub-paragraphs (2) and (3) apply where—
(a) a person (“P”) who was a controlling member of a partnership at the time when a conduct notice (“the original notice”) was given to the partnership has ceased to be a member of the partnership,
(b) the conduct notice had effect in relation to the partnership at the time of that cessation, and
(c) P is carrying on a business as a promoter.
(2) An authorised officer may give P a conduct notice.
(3) If P is carrying on a business as a promoter in partnership with one or more other persons and is a controlling member of that partnership (“the new partnership”), an authorised officer may give a conduct notice to the new partnership.
(4) A conduct notice given under sub-paragraph (3) ceases to have effect if P ceases to be a member of the new partnership.
(5) A notice under sub-paragraph (2) or (3) may not be given after the termination date of the original notice (under section 241(2)(a) or (b)).

Persons leaving a partnership: monitoring notices
9 (1) Sub-paragraphs (2) and (3) apply where—
(a) a person (“P”) who was a controlling member of a partnership at the time when a monitoring notice was given to the partnership has ceased to be a member of the partnership,
(b) the monitoring notice had effect in relation to the partnership at the time of that cessation, and
(c) P is carrying on a business as a promoter.
(2) An authorised officer may give P a monitoring notice.
(3) If P is carrying on a business as a promoter in partnership with one or more other persons, and is a controlling member of that partnership (“the new partnership”), an authorised officer may give a monitoring notice to the new partnership.
(4) A monitoring notice given under sub-paragraph (3) ceases to have effect if P ceases to be a member of the new partnership.

Division of partnership business
10 (1) This paragraph applies if—
(a) a person (“a departing partner”) who has been carrying on a business in partnership ceases to carry on the business in partnership,
(b) a conduct notice or a monitoring notice had effect in relation to the partnership immediately before the departing partner ceased to carry on the business in partnership, and
(c) the departing partner is continuing to carry on part (but not the whole) of the business (“the transferred part”).
(2) The notice mentioned in sub-paragraph (1)(b) is referred to in this paragraph as “the original notice”.
(3) An authorised officer may give the departing partner—
(a) a conduct notice (if the original notice is a conduct notice);
(b) a monitoring notice (if the original notice is a monitoring notice).
(4) If the departing partner is itself carrying on the transferred part of the business in partnership, the authorised officer may give that partnership (“the new partnership”)—
(a) a conduct notice (if the original notice is a conduct notice);
(b) a monitoring notice (if the original notice is a monitoring notice).
(5) A notice given under sub-paragraph (4) ceases to have effect if the departing partner ceases to be a member of the new partnership.
(6) A notice under sub-paragraph (3)(a) or (4)(a) may not be given after the termination date of the original notice (under section 241(2)(a) or (b)).
(7) It does not matter whether one, some or all of the persons who were carrying on the business in partnership are departing partners by virtue of sub-paragraph (1).

Notices under paragraphs 8 to 10: general
11 (1) In this Part of this Act—
“replacement conduct notice” means a notice under paragraph 8(2) or (3) or 10(3)(a) or (4)(a);
“replacement monitoring notice” means a notice given under paragraph 9(2) or (3) or 10(3)(b) or (4)(b).
(2) In this Part of this Act, “the original monitoring notice” means—
(a) in relation to a replacement monitoring notice given under paragraph 9(2), the monitoring notice mentioned in paragraph 9(1), and
(b) in relation to a replacement monitoring notice given under paragraph 10(3)(b) or (4)(b), the monitoring notice mentioned in paragraph 10(2),
and that original monitoring notice is also the “original monitoring notice” in relation to any monitoring notice that (under paragraph 9(2) or (3) or 10(3)(b) or (4)(b)) replaces a replacement monitoring notice.
12 A notice under paragraph 8(2) or (3) or 10(3)(a) or (4)(a)—
(a) has no effect after the termination date of the original notice;
(b) must state that that date is its termination date.
13 An authorised officer may not give a replacement conduct notice or replacement monitoring notice to a person if a conduct notice or monitoring notice previously given to the person still has effect in relation to the person.

Publication under section 248
14 Where the monitored promoter referred to in section 248(2) is a partnership, paragraphs (a), (b) and (d) of that subsection are to be read as referring to details of the partnership (for instance, the name under which the business of the partnership is carried on), not to details of particular partners.

PART 3 Responsibility of partners

Responsibility of partners
15 (1) A notice given to a partnership under this Part of this Act has effect, at any time, in relation to the persons who are members of the partnership at that time (“the responsible partners”).
(2) Sub-paragraph (1) does not affect any liability of a person who has ceased to be a member of a partnership in respect of things that the responsible partners did or failed to do before that person ceased to be a member of the partnership.
(3) Anything required to be done by the responsible partners under or by virtue of a provision of this Part of this Act is required to be done by all the responsible partners (but see paragraph 18).
(4) In relation to any right (such as a right of appeal) conferred by this Part of this Act references to a person have the meaning that is appropriate in consequence of sub-paragraphs (1) to (3).

Joint and several liability of responsible partners
16 (1) Where the responsible partners are liable to a penalty under this Part of this Act, or to interest on such a penalty, their liability is joint and several.
(2) No amount may be recovered under sub-paragraph (1) from a person who did not become a responsible partner until after the relevant time.
(3) “The relevant time” means—
(a) in relation to so much of the penalty as is payable in respect of any day, or to interest on so much of a penalty as is so payable, the beginning of that day;
(b) in relation to any other penalty, or interest on such a penalty, the time when the act or omission occurred that caused the penalty to become payable.

Service of notices
17 (1) Any notice given to a partnership by an officer of Revenue and Customs under this Part of this Act must be served either—
(a) on all the persons who are members of the partnership when the notice is given, or
(b) on a representative partner.
(2) “Representative partner” means—
(a) a nominated partner, or
(b) if no partner has been nominated under paragraph 18(2), a partner designated by an authorised officer as a representative partner.
(3) A designation under sub-paragraph (2), or the revocation of such a designation, has effect only when notice of the designation, or revocation, has been given to the partnership by an authorised officer.

Nominated partners
18 (1) Anything required to be done by the responsible partners under this Part of this Act may instead be done by any nominated partner.
(2) “Nominated partner” means a partner nominated by a majority of the partners to act as the representative of the partnership for the purposes of this Part of this Act.
(3) A nomination under sub-paragraph (2), or the revocation of such a nomination, has effect only after notice of the nomination, or revocation, has been given to an authorised officer.

PART 4 Interpretation

Meaning of “controlling member”
19 (1) For the purposes of this Schedule a person (“P”) is a “controlling member” of a partnership at any time when the person has a right to a share of more than half the assets, or of more than half the income, of the partnership.
(2) For that purpose there are to be attributed to P any interests or rights of—
(a) any individual who is connected with P (if P is an individual), and
(b) any body corporate that P controls.
(3) An individual is “connected” with P if the individual is—
(a) P's spouse or civil partner;
(b) a relative of P;
(c) the spouse or civil partner of a relative of P;
(d) a relative of P's spouse or civil partner, or
(e) the spouse or civil partner of a relative of P's spouse or civil partner.
(4) In sub-paragraph (3) “relative” means brother, sister, ancestor or lineal descendant.
(5) P controls a body corporate (“B”) if P has power to secure—
(a) by means of the holding of shares or the possession of voting power in relation to B or any other body corporate, or
(b) as a result of any powers conferred by the articles of association or other document regulating that or any other body corporate,
that the affairs of B are conducted in accordance with P's wishes.

Meaning of “managing partner”
20 In this Schedule “managing partner”, in relation to a partnership, means a member of the partnership who directs or is on a day-to-day level in control of, the management of the business of the partnership.

Power to amend definitions
21 (1) The Treasury may by regulations amend paragraph 19 or 20.
(2) Regulations under sub-paragraph (1) may include any amendment of this Schedule that is necessary in consequence of any amendment made by virtue of sub-paragraph (1).

SCHEDULE 37 Companies owned by employee-ownership trusts
Section 290

PART 1 Capital gains tax relief

Relief on disposals to employee-ownership trusts
1 In Part 7 of TCGA 1992 (other property, businesses, investments etc), after section 236G insert—

“Employee-ownership trusts

236H Disposals to employee-ownership trusts
(1) This section applies where—
(a) a person other than a company (“P”) disposes of any ordinary share capital of a company (“C”) to the trustees of a settlement,
(b) the relief requirements are met, and
(c) P makes a claim under this section.
(2) Section 17(1) (disposals and acquisitions treated as made at market value) does not apply to the disposal.
(3) The disposal, and the acquisition by the trustees, are to be treated for the purposes of this Act as being made for such consideration as to secure that neither a gain nor a loss accrues on the disposal.
(4) “The relief requirements” are—
(a) that C meets the trading requirement (see section 236I) at the time of the disposal and continues to meet that requirement for the remainder of the tax year in which that time falls,
(b) that the settlement meets the all-employee benefit requirement at the time of the disposal and continues to meet that requirement for the remainder of the tax year in which that time falls (see sections 236J to 236L and subsection (5) of this section),
(c) that the settlement does not meet the controlling interest requirement (see section 236M) immediately before the beginning of the tax year in which the disposal occurs, but—
(i) it meets that requirement at the end of that tax year, and
(ii) if it met the requirement at an earlier time in that tax year (whether before or after the time of the disposal) it continued to meet it throughout the remainder of that tax year,
(d) that the limited participation requirement is met (see section 236N), and
(e) that this section does not apply in relation to any related disposal by P or a person connected with P which occurs in an earlier tax year.
(5) For the purposes of subsection (4)(b)—
(a) unless the settlement met the all-employee benefit requirement by virtue of section 236L (cases in which all-employee benefit requirement treated as met) at the time of the disposal, that section does not apply for the purposes of determining whether the settlement continues to meet that requirement after the disposal, and
(b) if, at the time of the disposal, the settlement met that requirement by virtue of section 236L and later continues to meet it otherwise than by virtue of that section, it may not again meet the requirement by virtue of that section.
(6) A disposal in an earlier tax year is “related” to the disposal in question if—
(a) both disposals are of ordinary share capital of the same company, or
(b) the disposal in the earlier tax year is of ordinary share capital of a company which is, or at the time of that disposal was, a member of the same group as the company whose ordinary share capital is the subject of the disposal in question.
(7) A claim under this section must include—
(a) information to identify the settlement,
(b) C's name and the address of its registered office, and
(c) the date of the disposal and the number of shares disposed of.
(8) Section 236O makes provision about events which prevent a claim being made under this section and circumstances in which a claim is revoked.

236I Trading requirement
(1) C meets the trading requirement if C is—
(a) a trading company which is not a member of a group, or
(b) the principal company of a trading group.
(2) “Trading company” means a company carrying on trading activities whose activities do not include to a substantial extent activities other than trading activities.
(3) “Trading group” means a group—
(a) one or more of whose members carry on trading group activities, and
(b) the activities of whose members, taken together, do not include to a substantial extent activities other than trading group activities.
(4) In this section—
“trading activities” means activities carried on by the company in the course of, or for the purposes of, a trade being carried on by it;
“trading group activities” means activities carried on by a member of the group in the course of, or for the purposes of, a trade being carried on by any member of the group.
(5) For the purposes of determining whether C is a trading company or the principal company of a trading group—
(a) the activities of the members of a group are to be treated as one business (with the result that activities are disregarded to the extent that they are intra-group activities), and
(b) a business carried on by a company in partnership with one or more other persons is to be treated as not being a trading activity or a trading group activity.

236J All-employee benefit requirement
(1) A settlement meets the all-employee benefit requirement if the trusts of the settlement—
(a) do not permit any of the settled property to be applied, at any time, otherwise than for the benefit of all the eligible employees on the same terms,
(b) do not permit the trustees at any time to apply any of the settled property—
(i) by creating a trust, or
(ii) by transferring property to the trustees of any settlement other than by an authorised transfer,
(c) do not permit the trustees at any time to make loans to beneficiaries of the trusts, and
(d) do not permit the trustees or any other person at any time to amend the trusts in a way such that the amended trusts would not comply with one or more of paragraphs (a) to (c).
(2) Section 236K makes provision about the requirement in subsection (1)(a).
(3) “Eligible employee” means—
(a) if C meets the trading requirement by virtue of section 236I(1)(a), any individual who is employed by, or is an office-holder of, C, and
(b) if C meets the trading requirement by virtue of section 236I(1)(b), any individual who is employed by, or is an office-holder of, a relevant group company,
but does not include an excluded participator.
(4) But where—
(a) C has ceased to meet the trading requirement or the trustees have ceased to hold any shares in C (or both), and
(b) a person was an eligible employee at any time during the period of two years ending immediately before that event (or, where both have occurred, the earlier of them),
that person continues to be an “eligible employee”.
(5) “Excluded participator” means—
(a) a person who is a participator in C, or, where C meets the trading requirement by virtue of section 236I(1)(b), in any relevant group company,
(b) any other person who is a participator in any close company that has made a disposition whereby property became comprised in the same settlement, being a disposition which but for section 13 or 13A of the Inheritance Tax Act 1984 (dispositions by close companies for benefit of employees or to employee-ownership trusts) would have been a transfer of value for the purposes of inheritance tax,
(c) any other person who has been a participator in any company mentioned in paragraph (a) or (b) at any time on or after the look-back date, or
(d) any person who is connected with any person within paragraph (a), (b) or (c).
(6) The participators in a company who are referred to in subsection (5) do not include any participator who—
(a) is not beneficially entitled to, or to rights entitling the participator to acquire, 5% or more of, or of any class of the shares comprised in, the company's share capital, and
(b) on a winding-up of the company would not be entitled to 5% or more of its assets.
(7) In this section—
“authorised transfer” means a transfer of property consisting of or including any ordinary share capital of a company (“the transferred company”) where—
(a) the transferred company meets the trading requirement, and
(b) the transfer is made to the trustees of a settlement which—
(i) meets the controlling interest requirement with respect to the transferred company immediately after the transfer, and
(ii) meets the all-employee benefit requirement with respect to the transferred company (ignoring section 236L),
and for this purpose references to “C” in sections 236I, 236M and 236T and this section are to be read as references to the transferred company,
“close company” and “participator” have the same meaning as in Part 4 of the Inheritance Tax Act 1984 (see section 102 of that Act), and references to a participator in a company are, in the case of a company which is not a close company, to be construed as references to a person who would be a participator in the company if it were a close company,
“the look-back date” means the first day of the period of 10 years ending with whichever is later of—
(a) 10 December 2013, and
(b) the day on which any property first became comprised in the settlement, and
“relevant group company” means C or any other company which is a member of the group of which C is the principal company.
(8) In this section references to the settled property include references to any income arising from it.
(9) See section 236L for cases where the all-employee benefit requirement is treated as met.

236K Further provision about the equality requirement
(1) The requirement in section 236J(1)(a) (“the equality requirement”) is not infringed by the trusts by reason only that they—
(a) permit the settled property to be applied, where an eligible employee has died, as if a surviving spouse, civil partner or dependant of the deceased person were the eligible employee (and continued to be employed) for a period of 12 months, or such shorter period as the trusts may provide, starting with the time of death,
(b) prevent the settled property being applied for the benefit of persons who have not been eligible employees for a continuous period of 12 months or such shorter period as the trusts may provide,
(c) permit the trustees to comply with a written request from a person that the trustees do not apply any of the settled property for the benefit of that person, or
(d) prevent the settled property being applied for the benefit of all persons who are eligible employees by reason only that they are office-holders.
(2) The equality requirement is not infringed by the trusts by reason only that, in addition to requiring the settled property to be applied for the benefit of all the eligible employees on the same terms, they also permit the settled property to be applied for charitable purposes.
(3) Subject to subsections (1) and (2), the equality requirement is infringed by the trusts if they permit the settled property to be applied by reference to factors other than those mentioned in subsection (4).
(4) The equality requirement is not infringed by the trusts by reason only that they permit the settled property to be applied for the benefit of all the eligible employees by reference to—
(a) an eligible employee's remuneration,
(b) an eligible employee's length of service, or
(c) hours worked by an eligible employee;
but this is subject to subsections (5) and (6).
(5) The equality requirement is infringed by the trusts if they permit any of the settled property to be applied on terms such that some (but not all) eligible employees receive no benefits (other than by virtue of subsection (1)(b), (c) and (d)).
(6) If any of the settled property is applied by reference to more than one of the factors mentioned in subsection (4), the equality requirement is infringed unless—
(a) each factor gives rise to a separate entitlement related to the level of remuneration, length of service or (as the case may be) hours worked, and
(b) the total entitlement is the sum of those separate entitlements.
(7) “Eligible employee” has the same meaning as in section 236J.
(8) In this section, references to the settled property include references to any income arising from it.

236L Cases in which all-employee benefit requirement treated as met
(1) A settlement which would not otherwise meet the all-employee benefit requirement at any time is treated as meeting that requirement at that time if—
(a) the settlement was created before 10 December 2013,
(b) on that date—
(i) section 86 of the Inheritance Tax Act 1984 (trusts for the benefit of employees) applied to the settled property,
(ii) the trustees held a significant interest in C, and
(iii) the settlement did not meet the all-employee benefit requirement (ignoring this section), and
(c) the trustees of the settlement do not, during the period of 12 months ending with the time in question, do any of the following—
(i) apply any of the settled property otherwise than for the benefit of all eligible employees on the same terms,
(ii) apply any of the settled property by creating a trust,
(iii) apply any of the settled property by transferring property to the trustees of any settlement other than by an authorised transfer, or
(iv) make loans to beneficiaries of the trusts of the settlement.
(2) The trustees held a significant interest in C on 10 December 2013 if on that date—
(a) they—
(i) held 10% or more of the ordinary share capital of C, and
(ii) had powers of voting on all questions affecting C as a whole which, if exercised, would have yielded 10% or more of the votes capable of being exercised on them,
(b) they were entitled to 10% or more of the profits available for distribution to the equity holders of C,
(c) they would have been entitled, on a winding up of C, to 10% or more of the assets of C available for distribution to equity holders, and
(d) there were no provisions in any agreement or instrument affecting C's constitution or management or its shares or securities whereby the condition in paragraph (a), (b) or (c) could cease to be satisfied without the consent of the trustees.
See section 236T for further provision relating to the holding of a significant interest.
(3) Subsections (3) to (8) of section 236J apply for the purposes of this section.
(4) The requirement in subsection (1)(c)(i) (“the behaviour requirement”) is not infringed by reason only that the trustees of the settlement—
(a) apply any of the settled property, where an eligible employee has died, as if a surviving spouse, civil partner or dependant of the deceased person were the eligible employee (and continued to be employed) for a period of 12 months, or such shorter period as the trustees may determine, starting with the time of death,
(b) only apply the settled property for the benefit of persons who have been eligible employees for a continuous period of 12 months or such shorter period as the trustees may determine,
(c) comply with a written request from a person that the trustees do not apply any of the settled property for the benefit of that person, or
(d) have complied with the terms of the trusts of the settlement which prevent the settled property being applied for the benefit of some or all of the persons who are eligible employees by reason only that they are office-holders.
(5) The behaviour requirement is not infringed by reason only that, in addition to applying any of the settled property for the benefit of all the eligible employees on the same terms, the trustees also apply any of it for charitable purposes.
(6) Subject to subsections (4) and (5), the behaviour requirement is infringed by the trustees if they apply the settled property by reference to factors other than those mentioned in subsection (7).
(7) The behaviour requirement is not infringed by the trustees applying the settled property for the benefit of all the eligible employees by reference to—
(a) an eligible employee's remuneration,
(b) an eligible employee's length of service, or
(c) hours worked by an eligible employee;
but this is subject to subsections (8) and (9).
(8) The behaviour requirement is infringed if any of the settled property is applied by the trustees on terms such that some (but not all) eligible employees receive no benefits (other than as mentioned in subsection (4)(b), (c) and (d)).
(9) If the trustees apply any of the settled property by reference to more than one of the factors mentioned in subsection (7), the behaviour requirement is infringed unless—
(a) each factor gives rise to a separate entitlement related to the level of remuneration, length of service or (as the case may be) hours worked, and
(b) the total entitlement is the sum of those separate entitlements.

236M Controlling interest requirement
(1) A settlement meets the controlling interest requirement if—
(a) the trustees—
(i) hold more than 50% of the ordinary share capital of C, and
(ii) have powers of voting on all questions affecting C as a whole which, if exercised, would yield a majority of the votes capable of being exercised on them,
(b) the trustees are entitled to more than 50% of the profits available for distribution to the equity holders of C,
(c) the trustees would be entitled, on a winding up of C, to more than 50% of the assets of C available for distribution to equity holders, and
(d) there are no provisions in any agreement or instrument affecting C's constitution or management or its shares or securities whereby the condition in paragraph (a), (b) or (c) can cease to be satisfied without the consent of the trustees.
(2) See section 236T for further provision relating to the controlling interest requirement.

236N Limited participation requirement
(1) The limited participation requirement is met if Conditions A and B are met.
(2) Condition A is that there was no time in the period of 12 months ending immediately after the disposal mentioned in section 236H(1) when—
(a) P was a participator in C, and
(b) the participator fraction exceeded 2/5.
(3) Condition B is that the participator fraction does not exceed 2/5 at any time in the period beginning with that disposal and ending at the end of the tax year in which it occurs.
(4) But a time which falls in a period during which the participator fraction exceeded 2/5 is to be disregarded for the purposes of subsection (2)(b) and (3) if—
(a) that period lasts no more than 6 months, and
(b) the fraction exceeded 2/5 during that period by reason of events outside the reasonable control of the trustees.
(5) “The participator fraction” means—
NP NE
where—
NP is the sum of—
(a) the number of persons who at the time in question are both—
(i) participators in C, and
(ii) employees of, or office-holders in, C, and
(b) the number of other persons who at that time are both—
(i) employees of, or office-holders in, C or, if C is the principal company of a trading group, any member of the group, and
(ii) connected with persons within paragraph (a);
NE is the number of persons who at that time are employees of C or, if C is the principal company of a trading group, any member of the group.
(6) The participators in C who are referred to in subsections (2) and (5) do not include any participator who—
(a) is not beneficially entitled to, or to rights entitling the participator to acquire, 5% or more of, or of any class of the shares comprised in, C's share capital, and
(b) on a winding-up of C would not be entitled to 5% or more of its assets.
(7) In this section—
(a) “participator” has the meaning given by section 454 of CTA 2010, and
(b) references to a participator in a company are, in the case of a company which is not a close company (within the meaning of Chapter 2 of Part 10 of that Act), to be construed as references to a person who would be a participator in the company if it were a close company.

236O No section 236H relief if disqualifying event in next tax year
(1) This section applies where—
(a) a disposal is made in circumstances where paragraphs (a) and (b) of section 236H(1) are satisfied, and
(b) one or more disqualifying events occur in relation to the disposal in the tax year following the tax year in which the disposal occurs.
(2) A “disqualifying event” occurs in relation to the disposal if and when—
(a) C ceases to meet the trading requirement,
(b) the settlement ceases to meet the all-employee benefit requirement,
(c) the settlement ceases to meet the controlling interest requirement,
(d) the participator fraction exceeds 2/5, or
(e) the trustees act in a way which the trusts, as required by the all-employee benefit requirement, do not permit.
(3) No claim for relief under section 236H may be made in respect of the disposal on or after the day on which the disqualifying event (or, if more than one, the first of them) occurs.
(4) Any claim for relief under section 236H made in respect of the disposal before that day is revoked, and the chargeable gains and allowable losses of any person for any chargeable period are to be calculated as if that claim had never been made.
(5) Such adjustments must be made in relation to any person, whether by the making of assessments or otherwise, as are required to give effect to subsection (4) (regardless of any limitation on the time within which any adjustment may be made).
(6) Section 236H(5) (restrictions on application of section 236L) applies for the purposes of subsection (2)(b).
(7) Section 236N(4) applies for the purposes of subsection (2)(d) as it applies in relation to section 236N(2)(b) and (3).

236P Events which trigger deemed disposal and reacquisition by trustees
(1) Where the trustees of a settlement acquire any ordinary share capital in a tax year in circumstances where section 236H applies, subsection (3) applies on the first occasion, after the end of the tax year following the tax year in which the acquisition occurs, when a disqualifying event occurs in relation to the acquisition.
(2) A “disqualifying event” occurs in relation to the acquisition if and when—
(a) C ceases to meet the trading requirement,
(b) the settlement ceases to meet the all-employee benefit requirement,
(c) the settlement ceases to meet the controlling interest requirement,
(d) the participator fraction exceeds 2/5, or
(e) the trustees act in a way which the trusts, as required by the all-employee benefit requirement, do not permit.
(3) The trustees are treated as having, immediately before the disqualifying event—
(a) disposed of any ordinary share capital of C held by the trustees which comprises shares acquired in circumstances where section 236H applied (and not subsequently disposed of and reacquired), and
(b) immediately reacquired that ordinary share capital,
at its market value at that time.
(4) For the purposes of subsection (2)(b)—
(a) unless the settlement met the all-employee benefit requirement at the time of the acquisition by virtue of section 236L, that section does not apply for the purposes of determining whether the settlement continues to meet that requirement after the acquisition, and
(b) if, at the time of the acquisition, the settlement met that requirement by virtue of section 236L and later continues to meet it otherwise than by virtue of that section, it may not again meet the requirement by virtue of that section.
(5) Section 236N(4) applies for the purposes of subsection (2)(d) as it applies in relation to section 236N(2)(b) and (3).

236Q Relief for deemed disposals under section 71
(1) This section applies where—
(a) a deemed disposal arises under section 71(1) by reason of the trustees of a settlement (“the acquiring settlement”) becoming absolutely entitled to settled property as against the trustee of that settled property (“the transferring trustee”),
(b) that settled property consists of ordinary share capital of a company,
(c) the relief requirements in section 236H(4)(a) to (d) are met, and
(d) the transferring trustee makes a claim under this section.
(2) Section 17(1) (disposals and acquisitions treated as made at market value) does not apply to the disposal.
(3) The deemed disposal and acquisition by the transferring trustee under section 71(1) are to be treated for the purposes of this Act as being made for such consideration as to secure that neither a gain nor a loss accrues on the disposal.
(4) For the purposes of section 236P the trustees of the acquiring settlement are treated as acquiring the ordinary share capital from the transferring trustee, at the time of the deemed disposal, in circumstances where section 236H applies.
(5) In applying sections 236H(4), 236I to 236P and 236T for the purposes of this section—
(a) references in those provisions to the settlement are to be read as references to the acquiring settlement, and
(b) references in those provisions to C are to be read as references to the company mentioned in subsection (1)(b).
(6) A claim under this section must include—
(a) information to identify the acquiring settlement,
(b) the name of the company mentioned in subsection (1)(b) and the address of its registered office, and
(c) the date of the deemed disposal and the number of shares deemed to have been disposed of.
(7) Section 236R makes provision about events which prevent a claim being made under this section and circumstances in which a claim is revoked.

236R No section 236Q relief if disqualifying event in next tax year
(1) This section applies where—
(a) a deemed disposal arises in circumstances where paragraphs (a) to (c) of section 236Q(1) are satisfied, and
(b) one or more disqualifying events occur in relation to the disposal in the tax year following the tax year in which the deemed disposal arises.
(2) No claim for relief under section 236Q may be made in respect of the deemed disposal on or after the day on which the disqualifying event (or, if more than one, the first of them) occurs.
(3) Any claim for relief under section 236Q made in respect of the deemed disposal before that day is revoked, and the chargeable gains and allowable losses of any person for any chargeable period are to be calculated as if that claim had never been made.
(4) Such adjustments must be made in relation to any person, whether by the making of assessments or otherwise, as are required to give effect to subsection (3) (regardless of any limitation on the time within which any adjustment may be made).
(5) “Disqualifying event” is to be construed in accordance with subsections (2), (6) and (7) of section 236O except that—
(a) references in those subsections to the disposal are to be read as references to the deemed disposal, and
(b) in applying sections 236I to 236P and 236T for this purpose—
(i) references in those provisions to the settlement are to be read as references to the acquiring settlement (within the meaning of section 236Q(1)), and
(ii) references in those provisions to C are to be read as references to the company mentioned in section 236Q(1)(b).

236S Identification of shares where section 236H or 236Q applies
(1) This section applies where the trustees of a settlement hold—
(a) shares which were—
(i) acquired in circumstances where section 236H applied, or
(ii) the subject of a deemed acquisition under section 71(1) in circumstances where section 236Q applied,
and not subsequently disposed of and reacquired (“EOT exempt shares”), and
(b) other shares which, but for section 104(4A), would be shares of the same class as those shares.
(2) If the trustees dispose of some, but not all, of the shares so held, they may determine what proportion of the shares disposed of are EOT exempt shares (up to the number of such shares held).
(3) For the purposes of this section shares in a company are not to be treated as being of the same class unless they are so treated by the practice of a recognised stock exchange or would be so treated if dealt with on a recognised stock exchange.
(4) Nothing in subsection (2) applies in relation to a disposal by virtue of section 236P(3).

236T Further provision about significant and controlling interests
(1) This section applies for the purposes of—
(a) section 236L(2) (trustees hold a significant interest in C), and
(b) section 236M (controlling interest requirement).
(2) Chapter 6 of Part 5 of CTA 2010 (group relief: equity holders and profits or assets available for distribution) applies as it applies for the purposes of the provisions mentioned in section 157(1) of that Act.
(3) The trustees are to be treated, for the purposes of section 236L(2)(b) or 236M(1)(b), as entitled to dividends on shares even if the trustees are required, or permitted, by the trusts of the settlement to waive their entitlement to those dividends.
(4) In determining whether section 236L(2)(d) or 236M(1)(d) applies, ignore any provision of—
(a) a mortgage or charge (or, in Scotland, a charge or security) granted by the trustees to a third party to secure any debt, or
(b) an agreement in respect of a loan made to the trustees by a third party,
which confers any entitlement on the third party in the event of a default by the trustees in performing their obligations in relation to that debt or loan.
(5) In this section—
“third party” means a person other than—
(a) C or a member of a group of which C is the principal company,
(b) a person who is, or has at any time in the preceding 12 months been, a participator in C or in a member of such a group, or
(c) a person connected with a person within paragraph (b);
“close company” and “participator” have the same meaning as in Part 4 of the Inheritance Tax Act 1984 (see section 102 of that Act), and a reference to a participator in a company is, in the case of a company which is not a close company, to be construed as a reference to a person who would be a participator in the company if it were a close company.

236U Interpretation of sections 236H to 236U
(1) In sections 236H to 236T and this section—
“company” has the meaning given by section 170(9);
“ordinary share capital” has the meaning given by section 1119 of CTA 2010;
“trade” means any trade which is conducted on a commercial basis and with a view to the realisation of profits.
(2) In those sections—
(a) references to a group, to membership of a group or to the principal company of a group, are to be construed in accordance with section 170, and
(b) references to a group are to be construed with any necessary modifications where applied to a company incorporated under the law of a country or territory outside the United Kingdom.
(3) In determining whether a person is connected with another for the purposes of those sections, section 286 applies as if subsection (8) of that section also mentioned uncle, aunt, nephew and niece.”

Commencement and transitional provision
2 Subject to paragraph 3, the amendment made by paragraph 1 has effect in relation to disposals made on or after 6 April 2014.
3 In relation to disposals made on or after 6 April 2014 but before 26 June 2014, TCGA 1992 has effect as if—
(a) in section 236H—
(i) in subsection (4)(b), for the words from “at the time of the disposal” to the end there were substituted “ (see sections 236J to 236L) ”,
(ii) subsection (4)(c)(ii) (and the “and” before it) were omitted, and
(iii) subsections (5) and (8) were omitted,
(b) in section 236N—
(i) in subsection (1), for “Conditions A and B are” there were substituted “ Condition A is ”, and
(ii) subsection (3) were omitted,
(c) section 236O were omitted,
(d) in section 236P—
(i) in subsection (1) the words “, after the end of the tax year following the tax year in which the acquisition occurs, when” were omitted,
(ii) for subsection (2) there were substituted—

“(2) A “disqualifying event” occurs in relation to the acquisition if and when—
(a) at any time after that tax year—
(i) C ceases to meet the trading requirement, or
(ii) the settlement ceases to meet the controlling interest requirement, or
(b) at any time after the acquisition—
(i) the settlement ceases to meet the all-employee benefit requirement,
(ii) the participator fraction exceeds 2/5, or
(iii) the trustees act in a way which the trusts, as required by the all-employee benefit requirement, do not permit.”

, and
(iii) in subsection (3) for “before” there were substituted “ after ”,
(e) section 236Q(7) were omitted, and
(f) section 236R were omitted.
4 (1) For the purposes of determining if the requirement of section 236L(1)(c) of TCGA 1992 (requirement as to conduct of trustees for 12 months) is met, anything done by the trustees before 10 December 2013 is to be disregarded.
(2) But sub-paragraph (1) does not apply in relation to section 236L of TCGA 1992 as applied by section 312E(3) of ITEPA 2003 (rules determining whether payment is a qualifying bonus payment for the purposes of Chapter 10A of Part 4 of ITEPA 2003).

PART 2 Employment income exemption
5 In Part 4 of ITEPA 2003 (employment income: exemptions), after Chapter 10 insert—

“CHAPTER 10A Exemptions: bonus payments by certain employers

312A Limited exemption for qualifying bonus payments
(1) This section applies in relation to qualifying bonus payments made, in a tax year (“the tax year”), by an employer which is a company to an employee or former employee of the employer.
(2) No liability to income tax arises in respect of the qualifying bonus payments if, or to the extent that, the total chargeable amount in respect of those payments does not exceed £3,600 (“the exempt amount”).
(3) If qualifying bonus payments are made to the same person by two or more employers in the tax year, subsection (2) applies separately in relation to the total payments made by each employer, unless subsection (4) applies.
(4) If two or more employers are members of the same group at the time each of them first makes a qualifying bonus payment to the employee or former employee in the tax year, subsection (2) applies as if the reference to the qualifying bonus payments were to all the qualifying bonus payments made by those employers to the employee or former employee in that tax year.
(5) If, in a tax year—
(a) an employer makes a payment when it is a member of a group, and
(b) later in that tax year the employer ceases to be a member of that group,
the employer is treated for the purposes of this section as remaining a member of that group for the remainder of the tax year (without prejudice to it also being a member of any other group).
(6) In applying subsection (2)—
(a) the exempt amount is set against payments in the order in which they are made, and
(b) if two or more payments are made on the same day, which together take the total payments made in the tax year over the exempt amount, subsection (7) applies to determine the amount of each of those payments which is exempt.
(7) In a case within subsection (6)(b), the amount of a payment which is exempt is given by the formula—
P SP × REA
where—
P is the amount of the payment,
SP is the sum of that payment and the other payments made on the same day, and
REA is so much of the exempt amount as remains after taking account of any qualifying bonus payments previously made in the tax year.
(8) Where subsection (2) applies separately to different payments by virtue of subsection (3), subsections (6) and (7) also apply to those payments separately.
(9) The Treasury may by order increase or reduce the sum of money specified in subsection (2).
(10) A statutory instrument containing an order under this section which reduces the sum of money specified may not be made unless a draft of it has been laid before and approved by a resolution of the House of Commons.
(11) In this section “chargeable amount”, in respect of a qualifying bonus payment, means the amount of employment income which would be charged to tax in respect of that qualifying bonus payment, apart from this section.

312B “Qualifying bonus payments”
(1) A payment made by an employer (“E”) to an employee or former employee is a qualifying bonus payment if—
(a) it does not consist of regular salary or wages,
(b) it is awarded under a scheme which meets the participation requirement and the equality requirement (see section 312C),
(c) E meets the trading requirement (see section 312D) throughout the qualifying period,
(d) E meets the indirect employee-ownership requirement (see section 312E) throughout the qualifying period,
(e) E meets the office-holder requirement (see section 312F) at the time the payment is made and on at least the requisite number of days in the qualifying period (whether or not those days are consecutive),
(f) E is not a service company (see section 312G),
(g) the payment is not excluded (see section 312H), and
(h) where it is a payment to a former employee, it is made in the period of 12 months beginning with the day the employment ceased.
(2) In this section “the qualifying period”, in relation to a payment, means the period of 12 months ending with the day on which the payment is made.
(3) But in a case where E meets the indirect employee-ownership requirement on the day on which the payment is made—
(a) if the controlling interest requirement was first met during that 12 month period, the qualifying period does not include any time before it was met, and
(b) if the all-employee benefit requirement was first met during that 12 month period, the qualifying period does not include any time before that requirement was met.
(4) In this section “the requisite number of days” means—
(a) if the qualifying period is 12 months, the number of days in that period reduced by 90, and
(b) if the qualifying period is a shorter period by virtue of subsection (3), the number of days in that period reduced by the corresponding fraction of 90 days.

312C Section 312B: the participation and equality requirements
(1) For the purposes of section 312B—
(a) the participation requirement is that all persons in relevant employment when the award is determined must be eligible to participate in that and any other award under the scheme, and
(b) the equality requirement is that every employee who participates in an award under the scheme must do so on the same terms.
(2) A person is in “relevant employment” if—
(a) where E is a member of a group, the person is employed by any company which is a member of the group, and
(b) in any other case, the person is employed by E.
(3) The participation requirement is not infringed by reason of a person in relevant employment being excluded from participating in an award because, at the time the award is determined, the person has less than the minimum period of continuous service in relevant employment required by E.
But the minimum period required by E for this purpose must not exceed 12 months.
(4) The participation requirement is not infringed—
(a) by reason of a person being excluded from participating in an award where—
(i) disciplinary proceedings have been taken against the person by E which have resulted in a finding of gross misconduct against the person, and
(ii) that finding was made in the period of 12 months immediately before the time the award is determined,
(b) by reason of a person's eligibility to participate in an award being conditional, in a case where the person is at the time of the award subject to disciplinary proceedings taken by E, upon those proceedings being concluded and no finding of gross misconduct being made against that person, or
(c) by a person being treated as never having been eligible to participate in an award where, after the award was made but before the payment is made—
(i) a finding of gross misconduct is made against that person in disciplinary proceedings taken by E after the award was made, or
(ii) that person is summarily dismissed from the employment.
(5) The equality requirement is infringed if the amount of an award to an employee under the scheme is determined by reference to factors other than those mentioned in subsection (6).
(6) The equality requirement is not infringed by reason of the amount of an award under the scheme to employees participating in the award being determined by reference to—
(a) an employee's remuneration,
(b) an employee's length of service, or
(c) hours worked by an employee;
but this is subject to subsections (7) and (8).
(7) The equality requirement is infringed if an award is made on terms such that some (but not all) of the employees participating in the award receive nothing.
(8) If the amount of an award is determined by reference to more than one of the factors mentioned in subsection (6), the equality requirement is infringed unless—
(a) each factor gives rise to a separate entitlement related to the level of remuneration, length of service or (as the case may be) hours worked, and
(b) the total entitlement is the sum of those separate entitlements.
(9) Subject to subsection (6), the equality requirement is infringed if any feature of the scheme has, or is likely to have, the effect of conferring benefits wholly or mainly on those participating in the award who are—
(a) directors or former directors, or
(b) employees receiving the higher or highest levels of remuneration, or
(c) employees who—
(i) are employed in a particular part of the business carried on by E or, if E is a member of a group, the group, or
(ii) carry on particular kinds of activities.
(10) In subsections (1)(b), (5), (6), (7) and (9) references to an employee include a former employee, so, when applying those subsections in relation to a former employee, any reference to remuneration, length of service, hours worked, being employed in a particular part of a business or carrying on particular activities is to be read as relating to that former employment.

312D Section 312B: the trading requirement
(1) For the purposes of section 312B, a company meets the trading requirement if—
(a) it is a trading company which is not a member of a group, or
(b) it is a member of a trading group.
(2) “Trading company” means a company carrying on trading activities whose activities do not include to a substantial extent activities other than trading activities.
(3) “Trading group” means a group—
(a) one or more of whose members carry on trading group activities, and
(b) the activities of whose members, taken together, do not include to a substantial extent activities other than trading group activities.
(4) In this section—
“trading activities” means activities carried on by the company in the course of, or for the purposes of, a trade being carried on by it;
“trading group activities” means activities carried on by a member of the group in the course of, or for the purposes of, a trade being carried on by any member of the group.
(5) For the purposes of determining whether a company is a trading company or a member of a trading group—
(a) the activities of the members of a group are to be treated as one business (with the result that activities are disregarded to the extent that they are intra-group activities), and
(b) a business carried on by a company in partnership with one or more other persons is to be treated as not being a trading activity.

312E Section 312B: the indirect employee-ownership requirement
(1) For the purposes of section 312B, a company meets the indirect employee-ownership requirement if—
(a) a settlement meets the controlling interest requirement in respect of—
(i) the company, or
(ii) if the company is a member of a trading group, but not the principal company, that principal company, and
(b) the settlement meets the all-employee benefit requirement.
(2) For this purpose—
(a) section 236M of TCGA 1992 applies to determine if a settlement meets the controlling interest requirement in respect of the company mentioned in subsection (1)(a)(i) or (ii) (as the case may be), and
(b) sections 236J and 236K of that Act apply to determine if the settlement meets the all-employee benefit requirement (but see subsection (3)).
(3) If a settlement would not otherwise meet the all-employee benefit requirement at any time during the qualifying period, section 236L of TCGA 1992 applies for the purposes of subsection (1)(b), unless the all-employee benefit requirement has (ignoring that section) previously been met at any time in the period—
(a) beginning with 10 December 2013, and
(b) ending immediately before that time.
(4) For the purposes of subsections (2) and (3)—
(a) in sections 236I to 236M of TCGA 1992 references to C are to be read as references to the company in respect of which the settlement is required to meet the controlling interest requirement (see subsection (1)(a)), and
(b) section 236L of that Act applies as if the reference in subsection (1)(c) of that section to the period of 12 months ending with the time in question were a reference to the period of 12 months ending with the date the payment is made (even if the qualifying period is a period of less than 12 months by virtue of section 312B(3)).

312F Section 312B: the office-holder requirement
(1) For the purposes of section 312B, a company meets the officer-holder requirement if the appropriate fraction does not exceed 2/5.
(2) “The appropriate fraction” means—
ND NE
where—
ND is the number of persons who are one or both of the following—
(a) a director or other office-holder of the company;
(b) an employee of the company connected with a person within paragraph (a);
NE is the number of persons who are employees (or office-holders) of the company.

312G “Service company”
(1) For the purposes of section 312B, “service company” means—
(a) a managed service company within the meaning of section 61B, or
(b) a company (“SC”) in respect of which Conditions A and B are met.
(2) Condition A is that the business carried on by SC consists substantially of the provision of the services of persons employed by it.
(3) Condition B is that the majority of those services are provided to persons—
(a) to whom subsection (4) applies, but
(b) who are not members of the same group as the company which makes the payment.
(4) This subsection applies to—
(a) a person who controls or has controlled, or two or more persons who together control or have controlled, SC or any company of which SC is a 51% subsidiary at the time the payment is made,
(b) a person who, or two or more persons who together, at any time before the time the payment is made—
(i) employed all or a majority of the employees of SC, or
(ii) employed all or a majority of the employees of SC and other companies which are members of the same group as SC at the time the payment is made (taken together), and
(c) any company which is a 51% subsidiary of, controlled by or connected or associated with, any person within paragraph (a) or (b).
(5) For the purposes of subsection (4)—
(a) a partnership is to be treated as a single person, and
(b) where a partner (alone or together with others) has control of a company, the partnership is to be treated as having (in the same way) control of that company.
(6) The following provisions apply for the purposes of this section—
(a) section 449 of CTA 2010 (“associated company”);
(b) section 995 of ITA 2007 (meaning of “control”);
(c) section 286 of TCGA 1992 (connected persons: interpretation).

312H Excluded payments
(1) For the purposes of section 312B, a payment is “excluded” if the employee is a party to arrangements (whether made before or after the beginning of the employee's employment) under which—
(a) the employee gives up the right to receive an amount of general earnings or specific employment income in return for the provision of the payment, or
(b) the employee and employer agree that the employee is to receive the payment rather than receive some other description of employment income.
(2) In this section references to an employee include a former employee.

312I Interpretation of Chapter 10A
(1) In this Chapter—
“company” has the meaning given by section 170(9) of TCGA 1992;
“trade” means any trade which is conducted on a commercial basis and with a view to the realisation of profits.
(2) In this Chapter—
(a) references to a group, to membership of a group, to the principal company of a group or to being members of the same group, are to be construed in accordance with section 170 of TCGA 1992, and
(b) references to a group are to be construed with any necessary modifications where applied to a company incorporated under the law of a country or territory outside the United Kingdom.
(3) For the purposes of this Chapter, a payment is treated as made when it would be treated as received for the purposes of Chapter 4 of Part 2 if it were not a qualifying bonus payment (see section 18).
(4) In this Chapter references to a payment to an employee or former employee include a payment to the personal representatives of an employee or former employee who has died if the payment is made within the period of 12 months beginning with the date of death.”

6 In section 717 (orders and regulations made by Treasury etc), in subsection (4) (instruments not subject to negative resolution procedure), after “to which” insert “ section 312A(10) (reduction of tax-exempt amount in respect of certain bonus payments) or ”.
7 In Part 2 of Schedule 1 (index of defined expressions), at the appropriate places insert—

“company (in Chapter 10A of Part 4)	section 312I”

;

“trade (in Chapter 10A of Part 4)	section 312I”

.
8 The amendment made by paragraph 5 has effect in relation to payments received on or after 1 October 2014.

PART 3 Inheritance tax relief
9 IHTA 1984 is amended as follows.
10 (1) After section 13 insert—

“13A Dispositions by close companies to employee-ownership trusts
(1) A disposition of property made to trustees by a close company (“C”) whereby the property is to be held on trusts of the description specified in section 86(1) is not a transfer of value if—
(a) C meets the trading requirement,
(b) the trusts are of a settlement which meets the all-employee benefit requirement, and
(c) the settlement does not meet the controlling interest requirement immediately before the beginning of the tax year in which the disposition of property occurs but does meet it at the end of that year.
(2) Sections 236I, 236J, 236K, 236M and 236T (but not 236L) of the 1992 Act apply to determine whether—
(a) C meets the trading requirement;
(b) the settlement meets the all-employee benefit requirement;
(c) the settlement meets the controlling interest requirement;
with references in those sections to “C” being read accordingly.
(3) In this section—
“close company” has the same meaning as in Part 4 of this Act;
“tax year” means a year beginning on 6 April and ending on the following 5 April.”

(2) The amendment made by this paragraph has effect in relation to dispositions of property made on or after 6 April 2014.
11 (1) After section 28 insert—

“28A Employee-ownership trusts
(1) A transfer of value made by an individual who is beneficially entitled to shares in a company (“C”) is an exempt transfer to the extent that the value transferred is attributable to shares in or securities of C which become comprised in a settlement if—
(a) C meets the trading requirement,
(b) the settlement meets the all-employee benefit requirement, and
(c) the settlement does not meet the controlling interest requirement immediately before the beginning of the tax year in which the transfer of value is made but does meet it at the end of that year.
(2) Sections 236I, 236J, 236K, 236M and 236T (but not 236L) of the 1992 Act apply to determine whether—
(a) C meets the trading requirement;
(b) the settlement meets the all-employee benefit requirement;
(c) the settlement meets the controlling interest requirement;
with references in those sections to “C” being read accordingly.
(3) In this section “tax year” means a year beginning on 6 April and ending on the following 5 April.”

(2) The amendment made by this paragraph has effect in relation to transfers of value made on or after 6 April 2014.
12 (1) In section 29A (abatement of exemption where claim settled out of beneficiary's own resources), in subsection (6)—
(a) for “to 28” substitute “ to 28A ”, and
(b) for “or 28” substitute “ , 28 or 28A ”.
(2) The amendment made by this paragraph has effect in relation to transfers of value made on or after 6 April 2014.
13 (1) Section 72 (property leaving employee trusts and newspaper trusts) is amended as follows.
(2) In subsection (2), after “Subject to subsections” insert “ (3A), ”.
(3) After subsection (3) insert—

“(3A) Where settled property ceases to be property to which this section applies because paragraph (d) of section 86(3) no longer applies, tax is not chargeable under this section by virtue of subsection (2)(a) if the only reason that paragraph no longer applies is that one or both of the trading requirement and the controlling interest requirement mentioned in that paragraph are no longer met with respect to the company so mentioned.”

(4) The amendments made by this paragraph are treated as having come into force on 6 April 2014.
14 (1) After section 75 insert—

“75A Property becoming subject to employee-ownership trust
(1) Tax is not charged under section 65 in respect of shares in or securities of a company (“C”) which cease to be relevant property on becoming held on trusts of the description specified in section 86(1) if the conditions in subsection (2) are satisfied.
(2) The conditions referred to in subsection (1) are—
(a) that C meets the trading requirement,
(b) that the trusts are of a settlement which meets the all-employee benefit requirement, and
(c) that the settlement does not meet the controlling interest requirement immediately before the beginning of the tax year in which the shares or securities cease to be relevant property but does meet it at the end of that year.
(3) Sections 236I, 236J, 236K, 236M and 236T (but not 236L) of the 1992 Act apply to determine whether—
(a) C meets the trading requirement;
(b) the settlement meets the all-employee benefit requirement;
(c) the settlement meets the controlling interest requirement;
with references in those sections to “C” being read accordingly.
(4) In this section “tax year” means a year beginning on 6 April and ending on the following 5 April.”

(2) The amendment made by this paragraph is treated as having come into force on 6 April 2014.
15 (1) Section 86 (trusts for benefit of employees) is amended as follows.
(2) In subsection (3), after paragraph (c) insert

“, or
(d) the settled property consists of or includes ordinary share capital of a company which meets the trading requirement and the trusts on which the settled property is held are those of a settlement which—
(i) meets the controlling interest requirement with respect to the company, and
(ii) meets the all-employee benefit requirement with respect to the company.”

(3) After that subsection insert—

“(3A) For the purpose of determining whether subsection (3)(d) is satisfied in relation to settled property which consists of or includes ordinary share capital of a company—
(a) section 236I of the 1992 Act applies to determine whether the company meets the trading requirement (with references to “C” being read as references to that company),
(b) sections 236J, 236K, 236M and 236T (but not 236L) of the 1992 Act apply to determine whether the settlement meets the all-employee benefit requirement and the controlling interest requirement (with references in those sections to “C” being read as references to that company), and
(c) “ordinary share capital” has the meaning given by section 1119 of the Corporation Tax Act 2010.”

(4) The amendments made by this paragraph are treated as having come into force on 6 April 2014.
16 (1) In section 144 (distribution etc from property settled by will), in subsection (1)(b), after “section 75” insert “ , 75A ”.
(2) The amendment made by this section is treated as having come into force on 6 April 2014.

PART 4 Miscellaneous amendments

Finance Act 1986
17 (1) In section 102 of FA 1986 (gifts with reservation), in subsection (5) omit the “and” after paragraph (h) and after paragraph (i) insert

“; and
(j) section 28A (employee-ownership trusts).”

(2) The amendment made by this paragraph has effect in relation to disposals made on or after 6 April 2014.

Taxation of Chargeable Gains Act 1992
18 (1) In section 104 of TCGA 1992 (share pooling: general interpretative provisions), after subsection (4) insert—

“(4A) For the purposes of this Chapter, securities of a company which are held by the trustees of a settlement, having been last acquired or deemed to be acquired by them in circumstances where section 236H or 236Q applied, shall (notwithstanding that they would otherwise fall to be treated as of the same class) be treated as of a different class from any other securities of the company acquired by those trustees.”

(2) The amendment made by this paragraph has effect in relation to any disposal on or after 6 April 2014 of any securities (whenever acquired).

Income Tax (Earnings and Pensions) Act 2003
19 (1) Paragraph 27 of Schedule 2 to ITEPA 2003 (share incentive plans: requirement as to listing etc) is amended as follows.
(2) In sub-paragraph (1), omit the “or” at the end of paragraph (b) and after that paragraph insert—

“(ba) shares in a company which is subject to an employee-ownership trust, or”

.
(3) After sub-paragraph (2) insert—

“(3) But a company is not a close company for the purposes of sub-paragraph (2) if it is subject to an employee-ownership trust.
(4) A company (“C”) is “subject to an employee-ownership trust” if—
(a) C meets the trading requirement set out in section 312D,
(b) C meets the indirect employee-ownership requirement,
(c) neither C, nor any other company which is a member of the same group of companies as C, is a service company, and
(d) C is not under the control of another company (ignoring for this purpose another company acting in its capacity as the trustee of the settlement by virtue of which C meets the indirect employee-ownership requirement).
(5) Section 312E (the indirect employee-ownership requirement) applies for the purposes of sub-paragraph (4), subject to the following modifications—
(a) subsection (3) of that section has effect as if—
(i) the words “during the qualifying period” were omitted, and
(ii) in paragraph (a) for “10 December 2013” there were substituted “ 1 October 2014 ”, and
(b) subsection (4) has effect as if for paragraph (b) there were substituted—

“(b) section 236L of that Act applies as if the reference in subsection (1)(c) of that section to the period of 12 months ending with the time in question were a reference to any time on or after 1 October 2014.”

(6) Section 312G (meaning of “service company”) applies for the purposes of sub-paragraph (4)(c), subject to the following modifications—
(a) in subsection (3)(b), the reference to the company which makes the payment is to be read as a reference to C,
(b) in subsection (4)(a), the reference to the time the payment is made is to be read as a reference to any time, and
(c) in subsection (4)(b), the reference to any time before the time the payment is made is to be read as a reference to any time.”

(4) The amendments made by this paragraph come into force on 1 October 2014.
20 (1) Paragraph 19 of Schedule 3 to ITEPA 2003 (SAYE option schemes: requirements as to listing) is amended as follows.
(2) In sub-paragraph (1), omit the “or” at the end of paragraph (b) and after that paragraph insert—

“(ba) shares in a company which is subject to an employee-ownership trust (within the meaning of paragraph 27(4) to (6) of Schedule 2), or”

.
(3) After sub-paragraph (2) insert—

“(3) But a company is not a close company for the purposes of sub-paragraph (2) if it is subject to an employee-ownership trust (within the meaning of paragraph 27(4) to (6) of Schedule 2).”

(4) The amendments made by this paragraph come into force on 1 October 2014.
21 (1) In paragraph 17 of Schedule 4 to ITEPA 2003 (CSOP schemes: requirements as to eligible shares), in sub-paragraph (1), omit the “or” after paragraph (a) and after paragraph (b) insert

“, or
(ba) shares in a company which is subject to an employee-ownership trust (within the meaning of paragraph 27(4) to (6) of Schedule 2).”

(2) The amendment made by this paragraph come into force on 1 October 2014.
22 (1) In paragraph 9 of Schedule 5 to ITEPA 2003 (enterprise management incentives: the independence requirement), after sub-paragraph (4) insert—

“(5) But the independence requirement is treated as met if the company is subject to an employee-ownership trust (within the meaning of paragraph 27(4) to (6) of Schedule 2).”

(2) The amendment made by this paragraph comes into force in accordance with provision contained in an order made by the Treasury.
(3) Section 1014(4) of ITA 2007 (orders etc subject to annulment) does not apply in relation to an order under sub-paragraph (2).

Corporation Tax Act 2009
23 (1) In section 1292 of CTA 2009 (employee benefit contributions: provision of qualifying benefits), after subsection (6A) insert—

“(6B) For those purposes qualifying benefits are also provided, where a payment of money is made to a person, if and to the extent that the payment is exempt from income tax by virtue of section 312A of ITEPA 2003.”

(2) The amendment made by this paragraph has effect in relation to payments made on or after 1 October 2014.

SCHEDULE 38 Scottish basic, higher and additional rates of income tax
Section 296

PART 1 Amendments of ITA 2007
1 ITA 2007 is amended as follows.
2 In section 6 (the basic rate, higher rate and additional rate)—
(a) omit subsections (2A) to (2C), and
(b) in subsection (3), after “see—” insert—

“(za) section 6A (Scottish basic, higher and additional rates),”

.
3 After section 6 insert—

“6A The Scottish basic, higher and additional rates
(1) The Scottish basic rate, the Scottish higher rate and the Scottish additional rate for a tax year are calculated as follows.
Step 1 Take the basic rate, higher rate or additional rate.
Step 2 Deduct 10 percentage points.
Step 3 Add the Scottish rate (if any) set by the Scottish Parliament for that year.
(2) For provision about the setting of the Scottish rate, see Chapter 2 of Part 4A of the Scotland Act 1998.”

4 In section 10 (income charged at the basic, higher and additional rates: individuals)—
(a) omit subsections (3B) and (3C), and
(b) in subsection (4), at the appropriate place, insert—

“section 11A (income charged at the Scottish basic, higher and additional rates),”

.
5 After section 11 insert—

“11A Income charged at the Scottish basic, higher and additional rates
(1) Income tax is charged at the Scottish basic rate on the income of a Scottish taxpayer which—
(a) is non-savings income, and
(b) would otherwise be charged at the basic rate.
(2) Income tax is charged at the Scottish higher rate on the income of a Scottish taxpayer which—
(a) is non-savings income, and
(b) would otherwise be charged at the higher rate.
(3) Income tax is charged at the Scottish additional rate on the income of a Scottish taxpayer which—
(a) is non-savings income, and
(b) would otherwise be charged at the additional rate.
(4) For the purposes of this section, “non-savings income” means income which is not savings income.
(5) This section is subject to—
section 13 (income charged at the dividend ordinary, upper and additional rates: individuals), and
any provisions of the Income Tax Acts (apart from section 10) which provide for income of an individual to be charged at different rates of income tax in some circumstances.
(6) Section 16 has effect for determining the extent to which the non-savings income of a Scottish taxpayer would otherwise be charged at the basic, higher or additional rate.”

6 In section 13 (income charged at the dividend ordinary, upper and additional rates)—
(a) in subsection (1)(b), after “the basic rate,” insert “ or the Scottish basic rate, ”,
(b) in subsection (2)(b), after “the higher rate,” insert “ or the Scottish higher rate, ”,
(c) in subsection (2A)(b), after “the additional rate,” insert “ or the Scottish additional rate, ”,
(d) in subsection (3), after “section 10” insert “ or 11A ”, and
(e) in subsection (4), after “the basic, higher or additional rate” insert “ or the Scottish basic, higher or additional rate ”.
7 In section 16 (savings and dividend income to be treated as highest part of total income), in subsection (1), for paragraph (za) substitute—

“(za) the rate at which income tax would be charged on the non-savings income of a Scottish taxpayer apart from section 11A,”

.
8 In section 809H (charge on nominated income of long-term UK resident), for subsection (3A) substitute—

“(3A) If the individual is a Scottish taxpayer for the relevant tax year, the individual is to be treated for the purpose of calculating income tax charged by virtue of subsection (2) as if the individual were not a Scottish taxpayer for that year.”

9 In section 828B (conditions to be met for exemption where individual resident but not domiciled in the UK), in subsection (5), after “the basic rate” insert “ , the Scottish basic rate ”.
10 In section 989 (definitions for the purposes of the Income Tax Acts)—
(a) in the definitions of “additional rate”, “basic rate” and “higher rate”, omit “or (2B)”, and
(b) at the appropriate place, insert—

““Scottish additional rate” means the rate of income tax of that name calculated in accordance with section 6A,”

,

““Scottish basic rate” means the rate of income tax of that name calculated in accordance with section 6A,”

,

““Scottish higher rate” means the rate of income tax of that name calculated in accordance with section 6A,”

,

““Scottish taxpayer” has the same meaning as in Chapter 2 of Part 4A of the Scotland Act 1998”

.
11 In Schedule 4 (index of defined expressions), at the appropriate place, insert—

“Scottish additional rate	section 6A (as applied by section 989)””

“Scottish basic rate	section 6A (as applied by section 989)”

“Scottish higher rate	section 6A (as applied by section 989)”

“Scottish taxpayer	section 989”

12 The amendments made by this Part have effect in relation to the tax year appointed by the Treasury under section 25(5) of the Scotland Act 2012 and subsequent tax years.

PART 2 Consequential amendments
13 In section 1 of the Provisional Collection of Taxes Act 1968 (temporary statutory effect of resolutions of House of Commons), omit subsection (3A).
14 (1) In section 7 of TMA 1970 (notice of liability to income tax and capital gains tax), in subsection (6), after “the basic rate,” insert “ the Scottish basic rate, ”.
(2) The amendment made by sub-paragraph (1) has effect in relation to the tax year appointed by the Treasury under section 25(5) of the Scotland Act 2012 and subsequent tax years.
15 (1) TCGA 1992 is amended as follows.
(2) In section 4 (rates of capital gains tax), in subsections (4) and (5), after “the higher rate” insert “ , the Scottish higher rate ”.
(3) In section 4A (section 4: special cases), in subsection (5), after “at the higher rate” insert “ , the Scottish higher rate ”.
(4) The amendments made by this paragraph have effect in relation to the tax year appointed by the Treasury under section 25(5) of the Scotland Act 2012 and subsequent tax years.
16 (1) The Scotland Act 1998 is amended as follows.
(2) In section 80C (power to set Scottish rate for Scottish taxpayers), for subsection (2) substitute—

“(2) See section 6A of the Income Tax Act 2007 for provision about the calculation of those rates and section 11A of that Act for provision about the income charged at those rates.”

(3) Section 80G (supplemental powers to modify enactments) is amended in accordance with sub-paragraphs (4) to (8).
(4) For subsection (1) substitute—

“(1) The Treasury may by order modify section 11A of the Income Tax Act 2007 (income charged at the Scottish basic, higher and additional rates) for the purpose of altering—
(a) the definition of the income which is charged to income tax at the rates provided for under the section, or
(b) the application of the section in relation to a particular class of income which is so charged.
(1A) The Treasury may by order modify any enactment not contained in Chapter 2 of Part 2 of the Income Tax Act 2007 (rates at which income tax is charged) so that it makes provision, in relation to a Scottish taxpayer, by reference to the Scottish basic rate, the Scottish higher rate or the Scottish additional rate, instead of the basic rate, the higher rate or the additional rate.
(1B) If the Treasury consider it necessary or expedient to do so, they may by order provide that—
(a) the Scottish rate set by the Parliament for a tax year, or
(b) the fact that the Scottish rate has not been so set for a tax year,
does not require any change in the amounts repayable or deductible under PAYE regulations between the beginning of that year and such later date as may be specified in the order.”

(5) In subsection (2), for the words from “with—” to the end substitute “ with an order under subsection (1), (1A) or (1B) ”.
(6) Omit subsection (3).
(7) After subsection (4) insert—

“(5) The power under subsection (1) does not include power to provide that any income which is—
(a) savings income, or
(b) dividend income which would otherwise be charged to income tax at a rate provided for under section 13 of the Income Tax Act 2007,
is income which is charged to income tax at a rate provided for under section 11A of that Act.”

(8) In section 110 (Scottish taxpayers for social security purposes), in subsection (2)—
(a) for “basic rate” substitute “ Scottish basic rate, Scottish higher rate or Scottish additional rate (within the meaning of the Income Tax Acts) ”, and
(b) omit the words from “(instead of” to the end.
(9) Schedule 7 (procedure for subordinate legislation) is amended in accordance with sub-paragraphs (10) and (11).
(10) In paragraph 1(2)—
(a) omit the entry for section 79, and
(b) at the appropriate place insert—

“Section 80G(1), (1A) or (2)	Type E
Section 80G(1B)	Type K”

.
(11) At the end of paragraph 1, omit the Note relating to the entry for section 79.
(12) Sub-paragraph (8) comes into force on such day as the Secretary of State may by order made by statutory instrument appoint.
(13) Sub-paragraphs (10)(a) and (11) come into force on such day as the Treasury may by order appoint.
Sch. 38 para. 16 partly in force; sch. 38 para. 16(1)-(7)(9)(10)(b)(12)(13) in force at Royal Assent, see sch. 38 para. 16(12)(13)
17 In consequence of the amendments made by this Schedule, in the Scotland Act 2012 omit—
(a) section 26 (income tax for Scottish taxpayers),
(b) paragraph 1(2)(a) and (b) of Schedule 2 (amendments to section 110(2) of the Scotland Act 1998), and
(c) paragraph 1(4) of that Schedule (amendments to Schedule 7 to the Scotland Act 1998 relating to section 80G of that Act).

SCHEDULE 39 Taxation of co-operative societies etc
Section 298

Taxation of Chargeable Gains Act 1992 (c. 12)
1 In section 217D of TCGA 1992 (disposal of assets on union, amalgamation or transfer of engagements), in subsection (3), after paragraph (a) insert—

“(aa) a society registered as a credit union under the Credit Unions (Northern Ireland) Order 1985 (S.I. 1985/1205 (N.I. 12)),”

.

Co-operative and Community Benefit Societies Act 2014 (c. 14)
2 Schedule 4 to the Co-operative and Community Benefit Societies Act 2014 (consequential amendments) is amended as follows.
3 In paragraph 47 (which amends section 140E of TCGA 1992)—
(a) in sub-paragraph (2), after “Co-operative and Community Benefit Societies Act 2014” insert “ or a society registered or treated as registered under the Industrial and Provident Societies Act (Northern Ireland) 1969 ”, and
(b) in sub-paragraph (3), after “Co-operative and Community Benefit Societies Act 2014” insert “ , a society registered or treated as registered under the Industrial and Provident Societies Act (Northern Ireland) 1969 ”.
4 In paragraph 48 (which amends section 140F of TCGA 1992) after “Co-operative and Community Benefit Societies Act 2014” insert “ or a society registered or treated as registered under the Industrial and Provident Societies Act (Northern Ireland) 1969 ”.
5 In paragraph 49 (which amends section 140G of TCGA 1992) after “Co-operative and Community Benefit Societies Act 2014” insert “ or a society registered or treated as registered under the Industrial and Provident Societies Act (Northern Ireland) 1969 ”.
6 In paragraph 50 (which amends section 170 of TCGA 1992)—
(a) in sub-paragraph (2), for “within the meaning of the Co-operative and Community Benefits Societies Act 2014” substitute “ (see section 1119 of that Act) ”, and
(b) in sub-paragraph (3), for “within the meaning of the Co-operative and Community Benefits Societies Act 2014” substitute “ (see section 1119 of CTA 2010) ”.
7 In paragraph 53 (which amends Schedule 7AC of TCGA 1992) for “within the meaning of the Co-operative and Community Benefits Societies Act 2014” substitute “ (see section 1119 of that Act) ”.
8 In paragraph 82 (which amends paragraph 28 of Schedule 2 to ITEPA 2003), in the sub-paragraph (5) substituted by sub-paragraph (3)—
(a) omit the “or” following paragraph (b), and
(b) at the end of paragraph (c) insert

“, or
(d) an SCE formed in accordance with Council Regulation (EC) No 1435/2003 on the Statute for a European Cooperative Society.”

9 In paragraph 94 (which amends section 379 of ITTOIA 2005), in the definition of “registered society” inserted by sub-paragraph (4)—
(a) omit the “or” following paragraph (a), and
(b) after paragraph (b) insert—

“(c) a society registered as a credit union under the Credit Unions (Northern Ireland) Order 1985 (S.I. 1985/1205 (N.I. 12)), or
(d) an SCE formed in accordance with Council Regulation (EC) No 1435/2003 on the Statute for a European Cooperative Society,”

.
10 In paragraph 105 (which amends section 151 of ITA 2007), in the definition of “registered society” inserted by sub-paragraph (3)—
(a) omit the “or” following paragraph (a), and
(b) at the end of paragraph (b) insert

“or
(c) an SCE formed in accordance with Council Regulation (EC) No 1435/2003 on the Statute for a European Cooperative Society,”

.
11 In paragraph 110 (which amends section 887 of ITA 2007), in the subsection (5) substituted by sub-paragraph (5)—
(a) omit the “or” following paragraph (a), and
(b) after paragraph (b) insert—

“(c) a society registered as a credit union under the Credit Unions (Northern Ireland) Order 1985 (S.I. 1985/1205 (N.I. 12)), or
(d) an SCE formed in accordance with Council Regulation (EC) No 1435/2003 on the Statute for a European Cooperative Society.”

12 In paragraph 158 (which amends section 90 of CTA 2010), in the definition of “registered society” inserted by sub-paragraph (3)—
(a) omit the “or” following paragraph (a), and
(b) at the end of paragraph (b) insert

“or
(c) an SCE formed in accordance with Council Regulation (EC) No 1435/2003 on the Statute for a European Cooperative Society,”

.
13 In paragraph 168 (which amends section 1119 of CTA 2010), in the definition of “registered society” inserted by sub-paragraph (3), for paragraph (c) and the “or” before it substitute—

“(c) a society registered as a credit union under the Credit Unions (Northern Ireland) Order 1985 (S.I. 1985/1205 (N.I. 12)), or
(d) an SCE formed in accordance with Council Regulation (EC) No 1435/2003 on the Statute for a European Cooperative Society,”

.
14 In paragraph 171 (which amends section 118 of TIOPA 2010)—
(a) in sub-paragraph (2), after “Co-operative and Community Benefit Societies Act 2014” insert “ or a society registered or treated as registered under the Industrial and Provident Societies Act (Northern Ireland) 1969 ”, and
(b) in sub-paragraph (3), after “Co-operative and Community Benefit Societies Act 2014” insert “ , a society registered or treated as registered under the Industrial and Provident Societies Act (Northern Ireland) 1969 ”.

Commencement
15 The amendments made by this Schedule come into force on 1 August 2014.