Finance Act 2005

(15A) (1) A withdrawal notice (see paragraph 13(2A)) may be given— (a) in respect of a single company, or (b) in respect of a group, but only if the following conditions are met. (2) Condition 1 is that the notice is given during the period— (a) beginning with the day on which the Finance Act 2005 is passed, and (b) ending with 31st March 2006. (3) Condition 2 is that, for the whole of the period of three years ending with the day on which the Finance Act 2005 is passed, a tonnage tax election or a renewal election has been in force in respect of the company or group in respect of which the withdrawal notice is to be given. (4) A withdrawal notice must be given to the Inland Revenue— (a) in the case of a withdrawal notice in respect of a single company, by that company; (b) in the case of a withdrawal notice in respect of a group, jointly by all the qualifying companies in the group. (5) A withdrawal notice given in accordance with this paragraph takes effect at the end of the accounting period that precedes the first accounting period of the company to begin after 1st July 2005. (6) In the case of a withdrawal notice given in respect of a group, sub-paragraph (5) has effect in relation to each qualifying company in the group by reference to that company's accounting periods. (15B) (1) The Treasury may by order provide for further periods during which withdrawal notices under paragraph 15A may be given. (2) Any such order may provide for that paragraph to apply, with such consequential adaptations as appear to the Treasury to be appropriate, in relation to any such further period as it applies in relation to the period specified in sub-paragraph (2) of that paragraph. (3) The consequential adaptations that may be made include adaptations of the reference in sub-paragraph (3) of that paragraph to the period of three years ending with the day on which the Finance Act 2005 is passed.

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Qualifying ships

4

• (1) Paragraph 19 is amended as follows.

• (2) In sub-paragraph (1) (meaning of “qualifying ship”)—

• (a) in paragraph (a), after “carriage” insert “ by sea ”;

• (b) in paragraph (b), after “carriage” insert “ by sea ”;

• (c) in paragraph (c), after “assistance” insert “ carried out at sea ”;

• (d) in paragraph (d), after “transport” insert “ by sea ”.

• (3) In sub-paragraph (3) (other provisions to which sub-paragraph (1) is subject)—

• (a) after “subject to” insert—

(a)

;

• (b) at the end insert—

(b) paragraph 20A (qualifying dredgers and tugs); (c) paragraphs 22A to 22F (flagging).

.

• (4) After sub-paragraph (4) insert—

(5) For the purposes of sub-paragraph (1) “sea” does not include— (a) a port or harbour; (b) an estuary, a tidal or other river or an inland waterway.

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Vessels excluded from being qualifying ships

5

• (1) Paragraph 20 is amended as follows.

• (2) In sub-paragraph (1) (list of excluded vessels) for paragraph (f) (dredgers) substitute—

(f) dredgers other than qualifying dredgers.

.

• (3) After sub-paragraph (6) insert—

(7) In this Schedule “qualifying dredger” means a dredger which— (a) is self-propelled, and (b) is constructed or adapted for the carriage of cargo; (but see further paragraph 20A).

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Qualifying dredgers and tugs

6

After paragraph 20 insert—

(20A) (1) This paragraph applies where a company operates a ship in an accounting period and the ship— (a) is a qualifying dredger or a tug, and (b) would, apart from this paragraph, be a qualifying ship. (2) The ship shall not be regarded as a qualifying ship operated by the company in that accounting period unless it is used for one or more of the activities mentioned in paragraph 19(1)(a) to (d) for more than 50% of its operational time. (3) In this paragraph “operational time”, in relation to a ship operated by a company in an accounting period, means the time during that accounting period during which the ship is— (a) operated by the company, and (b) used for any activity. (4) For the purposes of sub-paragraph (2) assisting a self-propelled vessel into or out of a port or harbour is not to be regarded as use for an activity mentioned in paragraph 19(1)(c). (5) For the purposes of sub-paragraph (3) any waiting time spent by a tug for the purposes of a particular activity is to be treated as time during which the tug is used for that activity.

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Effect of change of use

7

• (1) Paragraph 22 is amended as follows.

• (2) In sub-paragraph (1) (qualifying ship beginning to be used as vessel of excluded kind ceases to be such ship when it begins to be so used) for “as a vessel of an excluded kind” substitute “ for non-qualifying purposes ”.

• (3) In sub-paragraph (2)(b) (use as vessel of excluded kind for up to 30 days in accounting period to be disregarded) for “as a vessel of an excluded kind” substitute “ for non-qualifying purposes ”.

• (4) In sub-paragraph (5) (meaning of references to use as vessel of excluded kind) for “as a vessel of an excluded kind are to” substitute

for non-qualifying purposes are to— (a) use for an activity other than any of the activities mentioned in paragraph 19(1)(a) to (d), or (b)

.

• (5) After that sub-paragraph insert—

(6) This paragraph does not apply for the purposes of sub-paragraphs (2) to (5) of paragraph 20A (qualifying dredgers and tugs).

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Flagging: rule for ships other than dredgers and tugs

8

After paragraph 22 insert—

(22A) (1) This paragraph applies if the following conditions are satisfied in the case of a ship which— (a) is neither a qualifying dredger nor a tug, and (b) would, apart from this paragraph, be a qualifying ship. (2) Condition 1 is that, at a time after the later of the reference date (see paragraph 22B(1)) and 30th June 2005,— (a) in the case of a tonnage tax company which is a single company, the company begins, in a financial year which is not excepted (see paragraph 22B(2)), to operate the ship for the first time, or (b) in the case of a tonnage tax company which is a member of a tonnage tax group, the company begins, in a financial year which is not excepted, to operate the ship for the first time, the ship not having previously been operated by any other member of the group. (3) Condition 2 is that less than 60% of the company's total tonnage is Community-flagged (see paragraph 22B(3)) on average over the period— (a) beginning with the first day of the financial year mentioned in condition 1, and (b) ending with the day on which the company so begins to operate the ship. (4) Condition 3 is that— (a) the percentage of the company's total tonnage which is Community-flagged on average over the period mentioned in condition 2, is less than (b) the percentage of the company's total tonnage which was Community-flagged on the reference date. (5) Condition 4 is that, on the date on which the company so begins to operate the ship, the ship is not registered in one of the Member States' registers (see paragraph 22B(7)). (6) Where this paragraph applies in relation to the ship, the ship shall not, at any time on or after that date, be regarded as— (a) a qualifying ship operated by the company, or (b) if immediately before that date the company is a member of a tonnage tax group, a qualifying ship operated by any company that is or becomes a member of the group. (7) But sub-paragraph (6) does not apply if— (a) the ship has become registered in one of the Member States' registers by the end of the period of three months beginning with that date, or (b) the conditions in sub-paragraph (8) are satisfied. (8) Those conditions are that— (a) a substitute ship which was not registered in one of the Member States' registers has, during the period mentioned in sub-paragraph (7)(a), become so registered, and (b) no later than the end of that period— (i) if the company is a single company, the company makes an election under this sub-paragraph in relation to the substitute ship, or (ii) if the company is a member of a tonnage tax group, all the qualifying companies in the group jointly make such an election. (9) In sub-paragraph (8) a “substitute ship” means a qualifying ship— (a) the tonnage of which is no less than that of the ship mentioned in sub-paragraph (1), and (b) which was first operated by the company or, if the company is a member of a tonnage tax group, by any other member of the group more than three months before that date; and for this purpose the tonnage of a ship is to be determined on the same basis as it is under paragraph 22B(3). (10) An election under sub-paragraph (8) is made by notice to the Inland Revenue. (22B) (1) In paragraph 22A “the reference date” means 17th January 2004 or, if later,— (a) in the case of a single company, the date of the end of the accounting period in which the company became (or becomes) a tonnage tax company; (b) in the case of a member of a group, the date of the end of the accounting period in which the group became (or becomes) a tonnage tax group; but where the members of a group had (or have) different accounting periods at the time the group became (or becomes) a tonnage tax group, paragraph (b) has effect by reference to the first of those accounting periods. (2) For the purposes of sub-paragraph (2) of paragraph 22A a financial year is excepted if it is designated by an order made by the Treasury as a financial year in relation to which that paragraph is not to have effect (see further paragraph 22C(1) to (3)). (3) For the purposes of paragraph 22A the percentage of a company's total tonnage which is Community-flagged is— $$CFTTT×100$where—CFT is the aggregate tonnage of such of the relevant ships as are registered in one of the Member States' registers, andTT is the aggregate tonnage of all the relevant ships.$ (4) For the purposes of sub-paragraph (3) the ships which are the relevant ships are— (a) if the company is a single company, the ships operated by the company, or (b) if the company is a member of a tonnage tax group, the ships operated by each member of the group which is a qualifying company. (5) Sub-paragraphs (3) and (4) are subject to any regulations made under paragraph 22C(4). (6) A ship shall not be counted more than once in determining for the purposes of sub-paragraph (3) the aggregate tonnage of relevant ships. (7) In this Schedule “Member States' registers” has the meaning given by the Annex to Commission communication C(2004) 43 — Community guidelines on State aid to maritime transport (as from time to time amended or replaced). (22C) (1) An order under paragraph 22B(2) designating a financial year shall be made if— (a) the Treasury are satisfied, on the basis of the information available to them, that the percentage of the tonnage tax fleet which is Community-flagged has not decreased on average over a prescribed three year period, and (b) the order is made before the beginning of that financial year. (2) The Treasury may make provision by regulations for or in connection with— (a) specifying the meaning, for the purposes of sub-paragraph (1)(a), of the percentage of the tonnage tax fleet which is Community-flagged; (b) specifying the way in which an average is to be calculated for those purposes; (c) requiring any tonnage tax company or tonnage tax group to provide prescribed information for the purposes of enabling the Treasury to determine whether the condition in sub-paragraph (1)(a) is met; (d) imposing penalties in respect of a failure to comply with a provision of the regulations made by virtue of paragraph (c) (including, in prescribed cases or circumstances, the exclusion of a company or group from tonnage tax). (3) Section 828(3) of the Taxes Act 1988 shall not apply in relation to an order under paragraph 22B(2). (4) The Treasury may make provision by regulations as to the way in which the percentage of a company's total tonnage which is Community-flagged is to be calculated for the purposes of paragraph 22A. (5) The provision that may be made by regulations under sub-paragraph (4) includes provision for or in connection with— (a) determining the percentage of a company's total tonnage which is Community-flagged on average over a period; (b) specifying the basis on which the tonnage of a ship is to be determined; (c) treating ships which would, but for the regulations, be relevant ships for the purposes of paragraph 22B(3) as not being relevant ships for those purposes; (d) including in the calculation set out in paragraph 22B(3) only such proportion of the tonnage of a relevant ship as may be prescribed. (6) Regulations under this paragraph— (a) may make different provision for different cases or circumstances, and (b) may contain such supplementary, incidental, consequential and transitional provisions as appear to the Treasury to be necessary or expedient. (7) In this paragraph “prescribed” means— (a) specified in, or (b) determined in accordance with, regulations under this paragraph.

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Flagging: rules for dredgers and tugs

9

After paragraph 22C insert—

(22D) (1) This paragraph applies if— (a) a company begins to operate a ship which— (i) is a qualifying dredger or a tug, (ii) would, apart from this paragraph, be a qualifying ship, and (iii) has not previously been operated by the company or, if the company is a member of a group, by any member of the group, and (b) on the date on which the company so begins to operate the ship, the ship is not registered in one of the Member States' registers. (2) The ship shall not, at any time on or after that date, be regarded as— (a) a qualifying ship operated by the company, or (b) if immediately before that date the company is a member of a group, a qualifying ship operated by any company that is or becomes a member of the group. (3) But sub-paragraph (2) does not apply if the ship has become registered in one of the Member States' registers by the end of the period of three months beginning with that date. (22E) (1) This paragraph applies if— (a) a qualifying ship operated by a company ceases to be registered in any of the Member States' registers, and (b) the ship is a qualifying dredger or a tug. (2) The ship shall not, at any time on or after the date on which it ceases to be so registered, be regarded as— (a) a qualifying ship operated by the company, or (b) if immediately before that date the company is a member of a group, a qualifying ship operated by any company that is or becomes a member of the group.

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Flagging: restrictions where dredger or tug ceases to be qualifying ship under paragraph 22E

10

After paragraph 22E insert—

(22F) (1) This paragraph applies where a qualifying ship operated by a tonnage tax company ceases to be a qualifying ship by virtue of paragraph 22E. (2) No notice may be given under section 130 of the Capital Allowances Act 2001 for the postponement of all or part of a relevant allowance to which— (a) the company, or (b) if immediately before the date on which the ship so ceases to be a qualifying ship (“the cessation date”) the company is a member of a tonnage tax group, any company that is or becomes a member of the group, becomes entitled on or after the cessation date. (3) In sub-paragraph (2) “relevant allowance” means an allowance in respect of— (a) qualifying expenditure on the provision of the ship, or (b) qualifying expenditure which— (i) is incurred on the provision of the ship, and (ii) is allocated to a single ship pool. (4) No claim may be made under section 135 of that Act for deferment of all or part of a balancing charge— (a) to which the company or, if immediately before the cessation date the company is a member of a tonnage tax group, any company that is or becomes a member of the group becomes liable, and (b) which arises when there is a disposal event in respect of the ship on or after the cessation date. (5) Relief in respect of a relevant loss shall not be given under section 393A(1) of the Taxes Act 1988 (losses: set off against profits of the same, or an earlier, accounting period). (6) Group relief under Chapter 4 of Part 10 of that Act shall not be available in respect of a relevant loss. (7) Accordingly, relief in respect of a relevant loss shall be given only under section 393(1) of that Act (losses other than terminal losses). (8) In sub-paragraphs (5) to (7) “relevant loss” means a loss which is incurred in respect of the ship on or after the cessation date in the course of a trade carried on by— (a) the company, or (b) if immediately before the cessation date the company is a member of a tonnage tax group, any company that is or becomes a member of the group.

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Requirement to prove compliance with safety etc standards

11

After paragraph 43 insert—

(43A) (1) The Secretary of State may make provision by regulations for or in connection with requiring qualifying companies or qualifying groups to provide evidence of compliance with prescribed standards relating to— (a) health and safety in connection with qualifying ships which are not registered in any of the Member States' registers; (b) environmental performance of such ships; (c) working conditions on such ships. (2) The provision that may be made by regulations under this paragraph includes provision for or in connection with— (a) requiring returns to be made at prescribed intervals; (b) authorising the Secretary of State to require persons to provide prescribed information in prescribed cases or circumstances; (c) enabling audits to be carried out on behalf of the Secretary of State; (d) authorising the Secretary of State to issue certificates of non-compliance in prescribed cases or circumstances; (e) the effect of such a certificate (including preventing the making of a renewal election when such a certificate is in force); (f) enabling persons to apply to the Secretary of State for the cancellation of such a certificate; (g) requiring or enabling the Secretary of State to revoke a tonnage tax election after a prescribed period of non-compliance; (h) the making of appeals; (i) authorising the disclosure of information between the Secretary of State and the Inland Revenue. (3) Regulations under this paragraph may create criminal offences in respect of failures to comply with requirements imposed by the regulations. (4) Regulations under this paragraph shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of the House of Commons. (5) Regulations under this paragraph— (a) may make different provision for different cases, and (b) may contain such supplementary, incidental and transitional provisions as appear to the Secretary of State to be necessary or expedient. (6) In this paragraph “prescribed” means prescribed by regulations under this paragraph.

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The ring fence: capital allowances: general: introduction

12

• (1) Paragraph 68 is amended as follows.

• (2) In sub-paragraph (2) (description of general scheme of Part 9 of Schedule 22) for paragraph (c) substitute—

(c) on leaving tonnage tax— (i) a company is treated as having incurred qualifying expenditure on its tonnage tax plant and machinery assets of an amount equal to the lower of cost and market value, where it leaves tonnage tax on expiry of an election or on the taking effect of a withdrawal notice, but (ii) otherwise, a company is put broadly in the position it would have been in if it had never been subject to tonnage tax.

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The ring fence: capital allowances: exit: plant and machinery

13

• (1) Paragraph 85 is amended as follows.

• (2) After sub-paragraph (1) insert—

(1A) Sub-paragraph (1C) applies where the company leaves tonnage tax— (a) on the expiry of a tonnage tax election, or (b) on a tonnage tax election ceasing to be in force under paragraph 13(2A) (taking effect of withdrawal notice under paragraph 15A). (1B) In any other case, sub-paragraph (2) applies. (1C) Where this sub-paragraph applies, the amount of qualifying expenditure in respect of each asset used by the company for the purposes of its tonnage tax activities and held by the company when it leaves tonnage tax shall be taken to be— (a) the market value of the asset at the time the company leaves tonnage tax, or (b) if less, the amount of expenditure incurred on the provision of the asset that would have been qualifying expenditure if the company had not been subject to tonnage tax.

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• (3) In sub-paragraph (2) (amount of qualifying expenditure to be determined by reference to tax written down value of assets) at the beginning insert “ Where this sub-paragraph applies, ”.

The ring fence: capital allowances: ship leasing: sale and lease-back arrangements

14

• (1) Paragraph 92 is amended as follows.

• (2) In sub-paragraph (2) (meaning of “sale and lease-back arrangements”) for “subject to sub-paragraph (3)” substitute “ subject to sub-paragraphs (3) and (3A) ”.

• (3) After sub-paragraph (3) insert—

(3A) This paragraph does not apply if— (a) expenditure is incurred on enhancing the ship or on converting it to another use, (b) the amount of that expenditure— (i) is greater than 33% of the market value of the ship immediately after completion of the enhancement or conversion, and (ii) is equal to or greater than the market value of the interest in the ship which is the subject of the transaction mentioned in Step Two in sub-paragraph (2), and (c) that transaction is effected not more than four months after the first occasion following completion of the enhancement or conversion on which the ship is brought into use by any person for any purpose.

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Meaning of “offshore activities”

15

• (1) Paragraph 104 is amended as follows.

• (2) After sub-paragraph (1) (meaning of “offshore activities”) insert—

(1A) But none of the following activities is to be regarded as an offshore activity— (a) offshore supply services; (b) towage, salvage or other marine assistance; (c) anchor handling; (d) carriage of liquids or gases; (e) safety or rescue services; (f) the carriage of cargo in connection with dredging. (1B) The Treasury may make provision by order amending sub-paragraph (1A) by— (a) adding, or (b) varying, any description of activity.

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Vessels to which the special rules for offshore activities do not apply

16

Omit paragraph 105.

Index of defined expressions

17

• (1) Paragraph 147 is amended as follows.

• (2) Insert each of the following at the appropriate place—

qualifying dredger	paragraph 20(7)

;

Member States' registers	paragraph 22B(7)

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Part 2 — Commencement and transitional provision

Commencement

18

• (1) Subject to paragraphs 19 to 21, paragraphs 4 to 6, 8 to 10 and 15 to 17 (and paragraph 1 so far as relating to those paragraphs) shall come into force on 1st July 2005.

• (2) This Part of this Schedule, and the other provisions of Part 1 of this Schedule, shall come into force on the day on which this Act is passed.

Transitional provision: qualifying activities

19

• (1) If a withdrawal notice is given on or before 31st March 2006 under paragraph 15A of Schedule 22 to FA 2000 in respect of a single company or a group, the amendments made by—

• (a) paragraph 4, and

• (b) so far as relating to tugs, paragraph 6,

shall not have effect in relation to that company or group until the day on which the relevant accounting period begins.

• (2) In sub-paragraph (1) “the relevant accounting period” means the first accounting period of the company to begin after 1st July 2005.

• (3) In the case of a withdrawal notice given in respect of a group, this paragraph has effect in relation to each qualifying company in the group by reference to that company's accounting periods.

Transitional provision: flagging: order designating financial year 2005

20

In relation to the financial year 2005, Schedule 22 to FA 2000 shall have effect with the omission of paragraph 22C(1).

Transitional provision: flagging

21

Where a company (whether or not a member of a group) has operated a qualifying dredger or a tug at any time before 1st July 2005, the company is to be treated, for the purposes of paragraph 22D of Schedule 22 to FA 2000, as not having operated the qualifying dredger or tug before that date.

SCHEDULE 8

Introduction

1

Part 4 of FA 2003 is amended in accordance with this Schedule.

Alternative property finance: England and Wales and Northern Ireland

2

After section 71 insert—

(71A) (1) This section applies where arrangements are entered into between an individual and a financial institution under which— (a) the institution purchases a major interest in land or an undivided share of a major interest in land (“the first transaction”), (b) where the interest purchased is an undivided share, the major interest is held on trust for the institution and the individual as beneficial tenants in common, (c) the institution (or the person holding the land on trust as mentioned in paragraph (b)) grants to the individual out of the major interest a lease (if the major interest is freehold) or a sub-lease (if the major interest is leasehold) (“the second transaction”), and (d) the institution and the individual enter into an agreement under which the individual has a right to require the institution or its successor in title to transfer to the individual (in one transaction or a series of transactions) the whole interest purchased by the institution under the first transaction. (2) The first transaction is exempt from charge if the vendor is— (a) the individual, or (b) another financial institution by whom the interest was acquired under arrangements of the kind mentioned in subsection (1) entered into between it and the individual. (3) The second transaction is exempt from charge if the provisions of this Part relating to the first transaction are complied with (including the payment of any tax chargeable). (4) Any transfer to the individual that results from the exercise of the right mentioned in subsection (1)(d) (“a further transaction”) is exempt from charge if— (a) the provisions of this Part relating to the first and second transactions are complied with, and (b) at all times between the second transaction and the further transaction— (i) the interest purchased under the first transaction is held by a financial institution so far as not transferred by a previous further transaction, and (ii) the lease or sub-lease granted under the second transaction is held by the individual. (5) The agreement mentioned in subsection (1)(d) is not to be treated— (a) as substantially performed unless and until the whole interest purchased by the institution under the first transaction has been transferred (and accordingly section 44(5) does not apply), or (b) as a distinct land transaction by virtue of section 46 (options and rights of pre-emption). (6) The requirements of subsection (1), or (4)(b)(ii), are not met if— (a) the individual enters into the arrangement, or holds the lease or sub-lease, as trustee and any beneficiary of the trust is not an individual, or (b) the individual enters into the arrangements, or holds the lease or sub-lease, as partner and any of the other partners is not an individual. (7) A further transaction that is exempt from charge by virtue of subsection (4) is not a notifiable transaction unless the transaction involves the transfer to the individual of the whole interest purchased by the institution under the first transaction, so far as not transferred by a previous further transaction. (8) In this section “financial institution” means— (a) a bank within the meaning of section 840A of the Taxes Act 1988, (b) a building society within the meaning of the Building Societies Act 1986, or (c) a wholly-owned subsidiary of a bank within paragraph (a) or a building society within paragraph (b). For the purposes of paragraph (c) a company is a wholly-owned subsidiary of a bank or building society if it has no members except the parent and the parent's wholly-owned subsidiaries or persons acting on behalf of the parent or the parent's wholly-owned subsidiaries. (9) References in this section to an individual shall be read, in relation to times after the death of the individual concerned, as references to his personal representatives. (10) This section does not apply in relation to land in Scotland.

Alternative property finance: Scotland

3

• (1) Section 72 (alternative property finance: land sold to financial institution and leased to individual) is amended as follows.

• (2) In subsection (1)—

• (a) in paragraph (b)—

• (i) for “freehold” substitute “ the interest of the owner ”, and

• (ii) for “leasehold” substitute “ the tenant's right over or interest in a property subject to a lease ”;, and

• (b) in paragraph (c), omit “or its successor in title”.

• (3) For subsection (7) substitute—

(7) In this section “financial institution” has the same meaning as in section 71A.

• (4) Omit subsection (8).

• (5) After subsection (9) insert—

(10) This section applies only in relation to land in Scotland.

• (6) In the heading, after “finance” insert “ in Scotland ”.

4

After section 72 insert—

(72A) (1) This section applies where arrangements are entered into between an individual and a financial institution under which— (a) the institution and the individual purchase a major interest in land as owners in common (“the first transaction”), (b) the institution and the individual enter into an agreement under which the individual has a right to occupy the land exclusively ( “the second transaction”), and (c) the institution and the individual enter into an agreement under which the individual has a right to require the institution to transfer to the individual (in one transaction or a series of transactions) the whole interest purchased under the first transaction. (2) The first transaction is exempt from charge if the vendor is— (a) the individual, or (b) another financial institution by whom the interest was acquired under arrangements of the kind mentioned in subsection (1) entered into between it and the individual. (3) The second transaction is exempt from charge if the provisions of this Part relating to the first transaction are complied with (including the payment of any tax chargeable). (4) Any transfer to the individual that results from the exercise of the right mentioned in subsection (1)(c) (“a further transaction”) is exempt from charge if— (a) the provisions of this Part relating to the first transaction are complied with, and (b) at all times between the first and the further transaction— (i) the interest purchased under the first transaction is held by a financial institution and the individual as owners in common, and (ii) the land is occupied by the individual under the agreement mentioned in subsection (1)(b). (5) The agreement mentioned in subsection (1)(c) is not to be treated— (a) as substantially performed unless and until the whole interest purchased by the institution under the first transaction has been transferred (and accordingly section 44(5) does not apply), or (b) as a distinct land transaction by virtue of section 46 (options and rights of pre-emption). (6) The requirements of subsection (1), or (4)(b)(ii), are not met if the individual enters into the arrangements, or occupies the land, as partner and any of the other partners is not an individual. (7) A further transaction that is exempt from charge by virtue of subsection (4) is not a notifiable transaction unless the transaction involves the transfer to the individual of the whole interest purchased by the institution under the first transaction, so far as not transferred by a previous further transaction. (8) In this section “financial institution” has the same meaning as in section 71A. (9) References in this section to an individual shall be read, in relation to times after the death of the individual concerned, as references to his personal representatives. (10) This section applies only in relation to land in Scotland.

Consequential amendments

5

• (1) Section 73 (alternative property finance: land sold to individual and re-sold to individual) is amended as follows.

• (2) In subsection (2)(b), for “section 72(1)” substitute “ section 71A(1), 72(1) or 72A(1) ”.

• (3) In subsection (5)(a), for “section 72” substitute “ section 71A ”.

6

In section 122 (index of defined expressions), in the entry for “notifiable (in relation to a land transaction)” at the end insert “ (see too sections 71A(7) and 72A(7)) ”.

Commencement

7

• (1) Paragraphs 2 and 3, and paragraphs 5 and 6 so far as relating to section 71A of FA 2003, have effect in any case where the effective date of the first transaction, within the meaning of section 71A of FA 2003 (as inserted by paragraph 2), falls on or after the day on which this Act is passed.

• (2) Paragraph 4, and paragraphs 5 and 6 so far as relating to section 72A of FA 2003, have effect in any case where the effective date of the first transaction, within the meaning of section 72A of FA 2003 (as inserted by paragraph 4), falls on or after the day on which this Act is passed.

• (3) In this paragraph “the effective date” has the same meaning as in Part 4 of FA 2003.

SCHEDULE 9

Stamp duty land tax

1

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Stamp duty

2

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commencement and transitional provisions

4

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5

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SCHEDULE 10

Introduction

1

Part 4 of FA 2004 (pension schemes etc.) is amended in accordance with paragraphs 2 to 58.

Deferred annuities

2

In section 153(8) (deferred annuity contract to be registered pension scheme), after “contract” insert “ made with an insurance company ”.

Orders for return of unauthorised payments

3

In section 153 (registration of pension schemes), after subsection (8) insert—

(8A) Where an order has been made under section 19(4) or 21(2)(a) of the Pensions Act 2004 or Article 15(4) or 17(2)(a) of the Pensions (Northern Ireland) Order 2005 (restitution by order of court or Pensions Regulator) that property or money be transferred, or a sum be paid, towards an annuity contract made with an insurance company, the annuity contract is to be treated as having become a registered pension scheme on the day on which it is made.

4

After section 266 insert—

(266A) (1) This section applies where— (a) a liability to the unauthorised payments charge, or to both the unauthorised payments charge and the unauthorised payments surcharge, has arisen in respect of an unauthorised member payment, and (b) property or money is transferred, or a sum paid, towards a registered pension scheme pursuant to an order under section 19(4) or 21(2)(a) of the Pensions Act 2004 or Article 15(4) or 17(2)(a) of the Pensions (Northern Ireland) Order 2005 (restitution by order of court or Pensions Regulator) as a result of the unauthorised member payment. (2) The member of the registered pension scheme to or in respect of whom the unauthorised member payment was made (or, if it was paid after his death, the recipient) may claim relief from— (a) the relevant proportion of the unauthorised payments charge, and (b) if a liability to the unauthorised payments surcharge has arisen and subsection (4) is satisfied, the relevant proportion of the unauthorised payments surcharge. (3) The claim must be made within the period of one year beginning with the day on which the property or money is transferred, or the sum paid. (4) This subsection is satisfied if no part of the unauthorised member payment and no asset or sum representing it— (a) has been received by (or on behalf of) the member or a person connected with the member, or (b) has been held for more than 180 days by a person or succession of persons, other than the member or a person connected with the member, involved in any transaction by which the unauthorised member payment was made. (5) The relevant proportion of the unauthorised payments charge or the unauthorised payments surcharge is— $$ASOUMP$where—ASO is the amount subject to the order, that is the aggregate of the market value of any property and the amount of any money transferred, or the amount of the sum paid, towards a registered pension scheme pursuant to the order under section 19(4) or 21(2)(a) of the Pensions Act 2004 or Article 15(4) or 17(2)(a) of the Pensions (Northern Ireland) Order 2005 in respect of the unauthorised member payment, andUMP is the amount of the unauthorised member payment.$ (6) But if ASO is greater than UMP, the relevant proportion of the unauthorised payments charge or the unauthorised payments surcharge is the whole of it. (7) Section 839 of ICTA (connected persons) applies for the purposes of this section. (266B) (1) This section applies where— (a) the scheme administrator of a registered pension scheme has become liable to the scheme sanction charge in respect of an unauthorised member payment, and (b) property or money is transferred, or a sum paid, towards a registered pension scheme pursuant to an order under section 19(4) or 21(2)(a) of the Pensions Act 2004 or Article 15(4) or 17(2)(a) of the Pensions (Northern Ireland) Order 2005 (restitution by order of court or Pensions Regulator) as a result of the unauthorised member payment. (2) The scheme administrator may, within the period of one year beginning with the day on which the property or money is transferred, or the sum paid, claim relief from the relevant proportion of the scheme sanction charge. (3) The relevant proportion of the scheme sanction charge is— $$ASOUMP$where—ASO is the amount subject to the order, that is the aggregate of the market value of any property and the amount of any money transferred, or the amount of the sum paid, towards a registered pension scheme pursuant to the order under section 19(4) or 21(2)(a) of the Pensions Act 2004 or Article 15(4) or 17(2)(a) of the Pensions (Northern Ireland) Order 2005 in respect of the unauthorised member payment, andUMP is the amount of the unauthorised member payment.$ (4) But if ASO is greater than UMP, the relevant proportion of the scheme sanction charge is the whole of it.

Unauthorised member payments

5

In section 161(5) (payment made to person who is connected with member, or was connected with member at his death, to be treated as made in respect of member), after “scheme to” insert “ or in respect of ”.

Unauthorised payments: loans to person connected with member or sponsoring employer

6

• (1) Section 162 (meaning of “loan”) is amended as follows.

• (2) In subsection (3) (guarantee of loan to or in respect of member or sponsoring employer to be treated as loan), after “scheme” insert “ , or to or in respect of a person who is connected with a member or sponsoring employer of a registered pension scheme but is not a member or sponsoring employer of the pension scheme, ”.

• (3) In subsection (4) (debt of member or sponsoring employer not required to be repaid at normal time to be treated as loan), after “registered pension scheme” insert “ or a person who is connected with a member or sponsoring employer of a registered pension scheme but is not a member or sponsoring employer of the pension scheme ”.

• (4) After subsection (5) insert—

(6) Section 839 of ICTA (connected persons) applies for the purposes of this section.

Abatement of public service pensions

7

In section 165(3) (when a person becomes entitled to a pension), insert at the end (not as part of paragraph (b)) “ and, for this purpose, the abatement of a scheme pension under a public service pension scheme is not to be taken to affect the right to receive it. ”

8

• (1) Schedule 32 (benefit crystallisation events: supplementary) is amended as follows.

• (2) In paragraph 9 (benefit crystallisation event 2: meaning of “P”), after sub-paragraph (1) insert—

(1A) If the pension is under a public service pension scheme, any abatement of the pension is to be left out of account in determining the amount of the pension which will be payable for the purposes of sub-paragraph (1).

• (3) After that paragraph insert—

(9A) For the purposes of benefit crystallisation event 3, any abatement of the scheme pension is to be left out of account in determining for the purposes of column 1— (a) the increased annual rate of the pension, and (b) the rate at which it was payable on the day on which the individual became entitled to it.

• (4) In paragraph 11 (benefit crystallisation event 3: permitted margin in case of post-5th April 2006 pension), after sub-paragraph (7) insert—

(8) If the pension is under a public service pension scheme, any abatement of the pension is to be left out of account in determining for the purposes of this paragraph the annual amount of the pension at the rate at which it was payable on the day on which the individual became entitled to it.

• (5) In paragraph 12 (benefit crystallisation event 3: permitted margin in case of pre-5th April 2006 pension), after sub-paragraph (3) insert—

(4) If the pension is under a public service pension scheme, any abatement of the pension is to be left out of account in determining for the purposes of this paragraph the annual amount of the pension at the rate at which it was payable on the day on which the individual became entitled to it.

• (6) In paragraph 13 (benefit crystallisation event 3: meaning of “XP”), after sub-paragraph (2) insert—

(3) If the pension is under a public service pension scheme, any abatement of the pension is to be left out of account in determining for the purposes of sub-paragraph (1)— (a) the increased annual rate of the pension, and (b) the rate at which it was payable on the day on which the individual became entitled to it.

9

In section 279(1) (definitions), before the definition of “the Board of Inland Revenue” insert—

“abatement”, in relation to a scheme pension under a public service pension scheme, means the reduction of the pension (including its reduction to nil) in accordance with the rules of the pension scheme by reason of re-employment in public service,

.

10

In the table in section 280(2) (index of defined expressions), insert at the appropriate place—

abatement	section 279(1)

.

Scheme pensions

11

• (1) Paragraph 2 of Schedule 28 (scheme pensions) is amended as follows.

• (2) Omit sub-paragraph (1) (special provisions for pension scheme with fewer than 50 members).

• (3) In sub-paragraph (2) (pension scheme with 50 or more members), for “In the case of a pension scheme with 50 or more members, a” substitute “ A ”.

• (4) In sub-paragraph (3)(b) (no reduction in rate of pension)—

• (a) for “in respect of any” substitute “ at any time during any ”, and

• (b) for “in respect of the previous 12 month period” substitute “ at the relevant time ”.

• (5) After that sub-paragraph insert—

(3A) “The relevant time” is— (a) in the case of the first relevant 12 month period, the day on which the member becomes entitled to the pension, and (b) in the case of any other relevant 12 month period, immediately before the beginning of that period.

• (6) In sub-paragraph (4) (things not preventing condition in sub-paragraph (3) being satisfied), omit “or” at the end of paragraph (b) and insert at the end—

(d) the reduction of the pension in consequence of a pension sharing order or provision, (e) forfeiture of entitlement to the pension in circumstances prescribed by regulations made by the Board of Inland Revenue, (f) the reduction of the pension in consequence of an order of a court, (g) if the pension is under a public service pension scheme, its reduction by abatement, or (h) the reduction of the pension in any other circumstances prescribed by regulations made by the Board of Inland Revenue.

• (7) After that sub-paragraph insert—

(4A) In sub-paragraph (4) references to the reduction of a pension include its ceasing to be payable (whether temporarily or permanently).

• (8) After sub-paragraph (6) insert—

(6A) The Board of Inland Revenue may by regulations provide that if— (a) a scheme pension payable by an insurance company selected by the scheme administrator of a registered pension scheme (“the original scheme pension”) ceases to be payable, and (b) in consequence of the transfer of sums or assets (or both) from the insurance company to another insurance company in connection with the original scheme pension ceasing to be payable, another scheme pension becomes payable by the other insurance company (“the new scheme pension”), the new scheme pension is to be treated, to such extent as is prescribed by the regulations and for such of the purposes of this Part as are so prescribed, as if it were the original scheme pension.

• (9) Insert at the end—

(8) Regulations under sub-paragraph (4)(e) and (h) may include provision having effect in relation to times before they are made.

12

In Schedule 28 (authorised pensions), after paragraph 2 insert—

(2A) (1) Where this paragraph applies in relation to a pension payable to the member, the pension scheme is to be treated as making an unauthorised payment to the member of the appropriate amount. (2) This paragraph applies to a pension if it fails to satisfy the condition in sub-paragraph (3) of paragraph 2— (a) by reason of not complying with paragraph (a) of that sub-paragraph, or (b) by reason of not complying with paragraph (b) of that sub-paragraph because a substantial reduction occurs in the rate of the pension, or if it is a pension the rate of which is reduced in accordance with paragraph (b) of sub-paragraph (4) of paragraph 2 but the reduction is part of avoidance arrangements. (3) For the purposes of sub-paragraph (2)(b) a substantial reduction occurs in the rate of a pension if the rate at which the pension is payable at any time during any relevant 12 month period (within the meaning of paragraph 2(7)) is less than 80% of the rate payable when the member became entitled to the pension. (4) For the purposes of sub-paragraph (2) “avoidance arrangements” includes schemes, arrangements and understandings of any kind (whether or not legally enforceable) the main purpose, or one of the main purposes, of which is to increase the member's entitlement to a lump sum on which there is no liability to income tax. (5) “The appropriate amount”, in relation to the pension, is the amount of any lump sum on which there is no liability to tax to which the member became entitled in connection with the pension. (6) Once this paragraph has applied in relation to the pension, it does not apply in relation to it again. (7) The application of this paragraph in relation to the pension does not prevent any payments of the pension themselves being unauthorised member payments.

Annuities

13

• (1) Paragraph 3 of Schedule 28 (lifetime annuity) is amended as follows.

• (2) For sub-paragraph (1)(d) (lifetime annuity to be level annuity, increasing annuity or relevant linked annuity) substitute—

(d) its amount either cannot decrease or falls to be determined in any manner prescribed by regulations made by the Board of Inland Revenue.

• (3) After sub-paragraph (2) insert—

(2A) An annuity does not fail to satisfy sub-paragraph (1)(d) by reason of the operation of a pension sharing order or provision. (2B) The Board of Inland Revenue may by regulations make provision in relation to cases in which a lifetime annuity payable by an insurance company (“the original lifetime annuity”) ceases to be payable and in consequence of that— (a) sums or assets (or both) are transferred from the insurance company to another insurance company and are applied towards the provision of either another lifetime annuity (a “new lifetime annuity”) or a scheme pension, short-term annuity, dependants' scheme pension, dependants' annuity or dependants' short-term annuity by the other insurance company, or (b) sums or assets are transferred to the relevant registered pension scheme. (2C) The regulations may provide that— (a) in a case where a new lifetime annuity becomes payable, the new lifetime annuity is to be treated, to such extent as is prescribed by the regulations and for such of the purposes of this Part as are so prescribed, as if it were the original lifetime annuity, and (b) in any other case, the relevant registered pension scheme is to be treated as making an unauthorised payment to the member of an amount equal to the aggregate of the amount of the sums, and the market value of the assets, transferred. (2D) For the purposes of sub-paragraphs (2B) and (2C) a registered pension scheme is the relevant registered pension scheme if the original lifetime annuity was acquired using sums or assets held for the purposes of the pension scheme.

• (4) Omit sub-paragraphs (3) to (6) (which define level annuity, increasing annuity and relevant linked annuity).

14

• (1) Paragraph 6 of Schedule 28 (short-term annuity) is amended as follows.

• (2) In sub-paragraph (1) (meaning of “short-term annuity”), for “An” substitute “ For the purposes of this Part an ”.

• (3) For paragraph (e) of that sub-paragraph (short-term annuity to be level annuity, increasing annuity or relevant linked annuity) substitute—

(e) its amount either cannot decrease or falls to be determined in any manner prescribed by regulations made by the Board of Inland Revenue.

• (4) After that sub-paragraph insert—

(1A) An annuity does not fail to satisfy sub-paragraph (1)(e) by reason of the operation of a pension sharing order or provision. (1B) The Board of Inland Revenue may by regulations make provision in relation to cases in which a short-term annuity payable by an insurance company (“the original short-term annuity”) ceases to be payable and in consequence of that— (a) sums or assets (or both) are transferred from the insurance company to another insurance company and are applied towards the provision of either another short-term annuity (a “new short-term annuity”) or a scheme pension, lifetime annuity, dependants' scheme pension, dependants' annuity or dependants' short-term annuity by the other insurance company, or (b) sums or assets are transferred to the relevant registered pension scheme. (1C) The regulations may provide that— (a) in a case where a new short-term annuity becomes payable, the new short-term annuity is to be treated, to such extent as is prescribed by the regulations and for such of the purposes of this Part as are so prescribed, as if it were the original short-term annuity, and (b) in any other case, the relevant registered pension scheme is to be treated as making an unauthorised payment to the member of an amount equal to the aggregate of the amount of the sums, and the market value of the assets, transferred. (1D) For the purposes of sub-paragraphs (1B) and (1C) a registered pension scheme is the relevant registered pension scheme if the original short-term annuity was acquired using sums or assets held for the purposes of the pension scheme.

• (5) Omit sub-paragraph (2) (which defines level annuity, increasing annuity and relevant linked annuity).

15

• (1) Paragraph 17 of Schedule 28 (dependants' annuity) is amended as follows.

• (2) In sub-paragraph (1) (meaning of “dependants' annuity”), for “An” substitute “ For the purposes of this Part an ”.

• (3) For paragraph (c) of that sub-paragraph (dependants' annuity to be level annuity, increasing annuity or relevant linked annuity) substitute—

(c) its amount either cannot decrease or falls to be determined in any manner prescribed by regulations made by the Board of Inland Revenue,

.

• (4) For sub-paragraph (2) (which defines level annuity, increasing annuity and relevant linked annuity) substitute—

(2) An annuity does not fail to satisfy sub-paragraph (1)(c) by reason of the operation of a pension sharing order or provision. (3) The Board of Inland Revenue may by regulations make provision in relation to cases in which a dependants' annuity payable to a person (“the original dependants' annuity”) ceases to be payable and in consequence of that— (a) sums or assets (or both) are transferred from the insurance company to another insurance company and are applied towards the provision of either another dependants' annuity (a “new dependants' annuity”) or a scheme pension, lifetime annuity, short-term annuity, dependants' scheme pension or dependants' short-term annuity by the other insurance company, or (b) sums or assets are transferred to the relevant registered pension scheme. (4) The regulations may provide that— (a) in a case where a new dependants' annuity becomes payable, the new dependants' annuity is to be treated, to such extent as is prescribed by the regulations and for such of the purposes of this Part as are so prescribed, as if it were the original dependants' annuity, and (b) in any other case, the relevant registered pension scheme is to be treated as making an unauthorised payment in respect of the member of an amount equal to the aggregate of the amount of the sums, and the market value of the assets, transferred. (5) For the purposes of sub-paragraphs (3) and (4) a registered pension scheme is the relevant registered pension scheme if the original dependants' annuity was acquired using sums or assets held for the purposes of the pension scheme.

16

• (1) Paragraph 20 of Schedule 28 (dependants' short-term annuity) is amended as follows.

• (2) In sub-paragraph (1) (meaning of “dependants' short-term annuity”), for “An” substitute “ For the purposes of this Part an ”.

• (3) For paragraph (e) of that sub-paragraph (dependants' short-term annuity to be level annuity, increasing annuity or relevant linked annuity) substitute—

(e) its amount either cannot decrease or falls to be determined in any manner prescribed by regulations made by the Board of Inland Revenue.

• (4) After that sub-paragraph insert—

(1A) An annuity does not fail to satisfy sub-paragraph (1)(e) by reason of the operation of a pension sharing order or provision. (1B) The Board of Inland Revenue may by regulations make provision in relation to cases in which a dependants' short-term annuity payable to a person (“the original dependants' short-term annuity”) ceases to be payable and in consequence of that— (a) sums or assets (or both) are transferred from the insurance company to another insurance company and are applied towards the provision of either another dependants' short-term annuity (a “new dependants' short-term annuity”) or a scheme pension, lifetime annuity, short-term annuity, dependants' scheme pension or dependants' annuity by the other insurance company, or (b) sums or assets are transferred to the relevant registered pension scheme. (1C) The regulations may provide that— (a) in a case where a new dependants' short-term annuity becomes payable, the new dependants' short-term annuity is to be treated, to such extent as is prescribed by the regulations and for such of the purposes of this Part as are so prescribed, as if it were the original dependants' short-term annuity, and (b) in any other case, the relevant registered pension scheme is to be treated as making an unauthorised payment in respect of the member of an amount equal to the aggregate of the amount of the sums, and the market value of the assets, transferred. (1D) For the purposes of sub-paragraphs (1B) and (1C) a registered pension scheme is the relevant registered pension scheme if the original dependants' short-term annuity was acquired using sums or assets held for the purposes of the pension scheme.

• (5) Omit sub-paragraph (2) (which defines level annuity, increasing annuity and relevant linked annuity).

17

In the table in section 280(2) (index of defined expressions), insert at the appropriate place—

dependants' annuity	paragraph 17 of Schedule 28
dependants'short-term annuity	paragraph 20 of Schedule 28
---	---
short-term annuity	paragraph 6 of Schedule 28
---	---

.

Unsecured pension funds and alternatively secured pension funds

18

• (1) Paragraph 8 of Schedule 28 (member's unsecured pension fund) is amended as follows.

• (2) In sub-paragraph (1) (sums and assets designated as available for the payment of unsecured pension), for the words after “of the arrangement” substitute “as are member-designated funds.”

• (3) After that sub-paragraph insert—

(1A) For the purposes of this Part sums or assets held for the purposes of an arrangement are member-designated funds if they— (a) have been designated at any time under the arrangement as available for the payment of unsecured pension, or (b) arise, or (directly or indirectly) derive, from sums or assets which have been so designated or which so arise or derive, and have not been applied towards the provision of a scheme pension.

• (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• (5) After that sub-paragraph insert—

(4) If any sums or assets representing the member's unsecured pension fund in respect of an arrangement under the pension scheme would (apart from this sub-paragraph) come to be taken to represent another unsecured pension fund of his under the pension scheme, or a dependant's unsecured pension fund of his under the pension scheme, they are to be treated as not doing so.

19

• (1) Paragraph 10 of Schedule 28 (“unsecured pension years” etc.) is amended as follows.

• (2) In sub-paragraph (4)(“basis amount”)—

• (a) in paragraph (a), for “or recent additional fund designation” substitute “ , recent additional fund designation or recent pension sharing event ”, and

• (b) in paragraph (b), for “or additional fund designation” substitute “ , additional fund designation or pension sharing event ”.

• (3) After sub-paragraph (8) insert—

(8A) “Pension sharing event” means the coming into operation of a pension sharing order or provision relating to the sums and assets representing the member's unsecured pension fund.

• (4) In sub-paragraph (9) (“recent”), for “or additional fund designation” substitute “ , additional fund designation or pension sharing event ”.

20

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

21

• (1) Paragraph 22 of Schedule 28 (dependant's unsecured pension fund) is amended as follows.

• (2) In sub-paragraph (1) (sums and assets designated as available for the payment of dependants' unsecured pension), for paragraphs (a) and (b) substitute—

(a) as are dependant-designated funds, and (b) have not been applied towards the provision of a dependants' scheme pension.

• (3) After that sub-paragraph insert—

(2) For the purposes of this Part sums or assets held for the purposes of an arrangement are dependant-designated funds if they— (a) have been designated at any time under the arrangement as available for the payment of dependant's unsecured pension to the dependant, or (b) arise, or (directly or indirectly) derive, from sums or assets which have been so designated or which so arise or derive. (3) If any sums or assets representing a dependant's unsecured pension fund in respect of an arrangement under the pension scheme would (apart from this sub-paragraph)— (a) come to be taken to represent another dependant's unsecured pension fund of his under the pension scheme, or an unsecured pension fund of his under the pension scheme, or (b) are applied towards the provision of a scheme pension or a lifetime annuity, they are to be treated as not doing so.

22

• (1) Paragraph 24 of Schedule 28 (“unsecured pension years” etc.) is amended as follows.

• (2) In sub-paragraph (4) (“basis amount”)—

• (a) in paragraph (a), for “or recent additional fund designation” substitute “ , recent additional fund designation or recent pension sharing event ”, and

• (b) in paragraph (b), for “or additional fund designation” substitute “ , additional fund designation or pension sharing event ”.

• (3) After sub-paragraph (8) insert—

(8A) “Pension sharing event” means the coming into operation of a pension sharing order or provision relating to the sums and assets representing the dependant's unsecured pension fund.

• (4) In sub-paragraph (9) (“recent”), for “or additional fund designation” substitute “ , additional fund designation or pension sharing event ”.

23

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

24

In paragraph 3(8) of Schedule 29 (pension commencement lump sum: deduction from applicable amount in case of scheme pension), for “surrender” substitute “ application ”.

25

• (1) Schedule 32 (benefit crystallisation events: supplementary) is amended as follows.

• (2) In paragraph 3(1) (benefit crystallisation events 1, 2 and 4: prevention of overlap), for “surrender” substitute “application”.

• (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Meaning of “dependant”

26

In paragraph 15 of Schedule 28 (meaning of “dependant”), after sub-paragraph (1) insert—

(1A) If the rules of the pension scheme so provide, a person who was married to the member when the member first became entitled to a pension under the pension scheme is a dependant of the member.

Dependants' scheme pensions

27

• (1) Paragraph 16 of Schedule 28 (dependants' scheme pension) is amended as follows.

• (2) Omit sub-paragraph (1) (special provisions for pension scheme with fewer than 50 members).

• (3) In sub-paragraph (2) (pension scheme with 50 or more members)—

• (a) for “In the case of a pension scheme with 50 or more members, a” substitute “ A ”, and

• (b) omit sub-paragraph (2)(b) and the word “and” before it.

• (4) After that sub-paragraph insert—

(2A) The Board of Inland Revenue may by regulations make provision in relation to cases in which a dependants' scheme pension payable to a dependant of a member of a registered pension scheme by an insurance company (“the original dependants' scheme pension”) ceases to be payable and in consequence of that— (a) sums or assets (or both) are transferred from the insurance company to another insurance company and are applied towards the provision of either another dependants' scheme pension (a “new dependants' scheme pension”) or a scheme pension, lifetime annuity, short-term annuity, dependants' annuity or dependants' short-term annuity by the other insurance company, or (b) sums or assets are transferred to the relevant registered pension scheme. (2B) The regulations may provide that— (a) in a case where a new dependants' scheme pension becomes payable, the new dependants' scheme pension is to be treated, to such extent as is prescribed by the regulations and for such of the purposes of this Part as are so prescribed, as if it were the original dependants' scheme pension, and (b) in any other case, the relevant registered pension scheme is to be treated as making an unauthorised payment in respect of the member of an amount equal to the aggregate of the amount of the sums, and the market value of the assets, transferred. (2C) For the purposes of sub-paragraphs (2A) and (2B) a registered pension scheme is the relevant registered pension scheme if the original dependants' scheme pension was acquired using sums or assets held for the purposes of the pension scheme.

• (5) Omit sub-paragraphs (3) to (6) (condition to be satisfied).

28

In Schedule 28 (authorised pensions), after paragraph 16 insert—