Legalize / United Kingdom / Public General Act

Finance Act 2007

Type Public General Act

Publication 2007-07-19

Last updated 2025-04-24

State In force

Department Statute Law Database

Source legislation.gov.uk

articles Not indexed

Reform history JSON API

(a) make different provision for different purposes, and

(b) make supplementary, incidental, consequential and transitional provision.

Repeal of section 107 of FA 2000

4

In FA 2000, omit section 107 (general insurance reserves).

Commencement

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(1) Paragraphs 1 to 3 have effect in relation to periods of account ending on or after the day on which this Act is passed.

(2) The repeal of section 107 of FA 2000 made by paragraph 4 has effect as follows.

(3) The repeal of—

(a) subsections (1) to (3) of that section (technical provisions made by a general insurer proving to be excessive or insufficient),

(b) subsections (5) to (8) and (10) of that section so far as relating to those subsections, and

has effect in relation to any amount that would otherwise have been treated as a receipt or an expense of a trade in computing for tax purposes the profits of the trade for any period of account ending on or after the day on which this Act is passed.

(4) The repeal of—

(a) subsection (4) of that section (election for any part of technical provisions not to be taken into account in a period of account),

(b) subsections (5) to (8) and (10) of that section so far as relating to that subsection, and

has effect so that no election may be made under that subsection in respect of technical provisions made by a general insurer for any period of account which begins on or after that day.

(5) There is a restriction in relation to any election made by a general insurer under that subsection in respect of technical provisions made by the general insurer for the final election period.

(6) The restriction is that the amount of the part of those provisions which the general insurer elects not to be taken into account in computing for tax purposes the profits of the general insurer's trade for that period must not exceed 10% of the total amount of those provisions.

(7) In sub-paragraph (5) “the final election period”, in relation to any general insurer, means the general insurer's first period of account ending on or after the day on which this Act is passed.

SCHEDULE 12

Exempt life or endowment business

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Other exempt business

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Commencement

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SCHEDULE 13

Purpose of Schedule

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(1) The purpose of this Schedule is to secure that in the case of an arrangement—

(a) which involves the sale of securities and the subsequent purchase of securities, and

(b) which equates, in substance, to a transaction for the lending of money at interest from or to a company (with the securities which were sold as collateral for the loan),

the charge to corporation tax in that case in respect of chargeable gains reflects the fact that the arrangement equates, in substance, to such a transaction.

(2) But this is not to be read as preventing the rules in this Schedule about corporation tax in respect of chargeable gains from having no effect in relation to debtor quasi-repos and creditor quasi-repos.

Meaning of debtor repo

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Meaning of debtor quasi-repo

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Ignoring effect on borrower of sale of securities: debtor repos, debtor quasi-repos and other arrangements

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Relief for borrower for finance charges in respect of the advance: debtor repos and debtor quasi-repos

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Ignoring sale and subsequent purchase for purposes of chargeable gains: debtor repos

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(1) This paragraph applies if—

(a) a company (“the borrower”) has a debtor repo, and

(b) the borrower (having sold the securities under the arrangement to the lender) is the only person with the right or obligation under the arrangement to buy those or similar securities at any subsequent time.

(2) The sale of the securities, and the subsequent purchase of those or similar securities, by the borrower under the arrangement are to be ignored for the purposes of corporation tax in respect of chargeable gains (but see sub-paragraph (5)).

(3) If at any time after the initial sale of the securities—

(a) it becomes apparent that the borrower will not subsequently buy those or similar securities under the arrangement, or

(b) the accounting condition ceases to be met,

the borrower is to be treated for the purposes of corporation tax in respect of chargeable gains as disposing of the securities at that time for a consideration equal to their market value at that time.

(4) The accounting condition ceases to be met if, in accordance with generally accepted accounting practice, the accounts of the borrower for any period after the one in which the advance is received do not record a financial liability in respect of the advance (except as a result of the subsequent purchase of the securities or similar securities).

(5) If sub-paragraph (3) applies because the accounting condition ceases to be met, any subsequent purchase of those or similar securities by the borrower under the arrangement is not to be ignored for the purposes of corporation tax in respect of chargeable gains as a result of this paragraph.

(6) For the purposes of this paragraph references to the borrower include a partnership of which the borrower is a member.

Meaning of creditor repo

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Meaning of creditor quasi-repo

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Ignoring effect on lender of sale of securities: creditor repos and creditor quasi-repos

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Charge on lender for finance return in respect of the advance: creditor repos and creditor quasi-repos

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Ignoring purchase and subsequent sale for purposes of chargeable gains: creditor repos

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(1) This paragraph applies if—

(a) a company (“the lender”) has a creditor repo, and

(b) the lender (having bought the securities under the arrangement from the borrower) is the only person with the right or obligation under the arrangement to sell those or similar securities at any subsequent time.

(2) The purchase of the securities, and the subsequent sale of those or similar securities, by the lender under the arrangement are to be ignored for the purposes of corporation tax in respect of chargeable gains (but see sub-paragraph (5)).

(3) If at any time after the initial purchase of the securities—

(a) it becomes apparent that the lender will not subsequently sell those or similar securities under the arrangement, or

(b) the accounting condition ceases to be met,

the lender is to be treated for the purposes of corporation tax in respect of chargeable gains as acquiring the securities at that time for a consideration equal to their market value at that time.

(4) The accounting condition ceases to be met if, in accordance with generally accepted accounting practice, the accounts of the lender for any period after the one in which the advance is made do not record a financial asset in respect of the advance (except as a result of the subsequent sale of the securities or similar securities).

(5) If sub-paragraph (3) applies because the accounting condition ceases to be met, any subsequent sale of those or similar securities by the lender under the arrangement is not to be ignored for the purposes of corporation tax in respect of chargeable gains as a result of this paragraph.

(6) For the purposes of this paragraph references to the lender include a partnership of which the lender is a member.

Repo under arrangement designed to produce quasi-interest: anti-avoidance

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Requirements to deduct tax from manufactured payments: creditor repos and debtor repos

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Interpretation etc

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(1) In this Schedule—

“arrangement” includes any agreement or understanding (whether or not legally enforceable),

“creditor quasi-repo” has the meaning given by section 544 of CTA 2009,

“creditor repo” has the meaning given by section 543 of CTA 2009,

“debtor quasi-repo” has the meaning given by section 549 of CTA 2009,

“debtor repo” has the meaning given by section 548 of CTA 2009,

“discharge”, in relation to a liability, means the discharge of the liability in whole or in part (and “discharged” is to be read accordingly),

“the loan relationship rules” means the provisions of Part 5 of CTA 2009,

“market value” has the same meaning as in TCGA 1992,

“overseas dividend”, in relation to overseas securities, means any interest, dividend or other annual payment payable in respect of the securities,

“overseas securities” means shares, stock or other securities issued by—a government or public or local authority of a territory outside the United Kingdom, orany other body of persons not resident in the United Kingdom,

“securities” (except in the definition of “overseas securities”) means shares, stock or other securities issued by—the government of the United Kingdom,any public or local authority in the United Kingdom, orany company or other body resident in the United Kingdom,or overseas securities, and

“tax advantage” has the meaning given by section 840ZA of ICTA.

(2) For the purposes of this Schedule references to a person's receiving any asset include the person's obtaining directly or indirectly the value of any asset or otherwise deriving directly or indirectly any benefit from it.

(3) For the purposes of this Schedule—

(a) in any case where a person buys securities (or has a right or obligation to buy securities) but the securities are (or are to be) held for another person's benefit, that other person is treated as buying (or having the right or obligation to buy) the securities, and

(b) in any case where a person sells securities but the proceeds of the sale are held for another person's benefit, that other person is treated as selling the securities.

(4) For the purposes of this Schedule securities are similar if they entitle their holders to—

(a) the same rights against the same persons as to capital, interest and dividends, and

(b) the same remedies for the enforcement of those rights,

in spite of any difference in the total nominal amounts of the respective securities or in the form in which they are held or the manner in which they can be transferred.

(5) For the purposes of this Schedule it does not matter whether or not provision of any arrangement conferring a right or imposing an obligation on any person to buy any securities is subject to any conditions.

(6) For the purposes of this Schedule an arrangement is in force from the time when the securities are initially sold until the earlier of—

(a) the time when the relevant repurchase takes place, and

(b) the time when it becomes apparent that that repurchase will not take place.

(7) For this purpose “the relevant repurchase” means—

(a) in the case of a debtor repo, the subsequent buying of the securities or similar securities,

(b) in the case of a debtor quasi-repo, the subsequent buying of the securities or other securities by the borrower, the receipt of the asset from the borrower or (as the case may be) the discharge of the liability to the borrower,

(d) in the case of a creditor quasi-repo, the subsequent sale of the securities or other securities by the lender, the receipt of the asset from the lender or (as the case may be) the discharge of the liability to the lender.

(8) Any reference in this Schedule to an amount being recognised in determining a company's profit or loss for a period is to an amount being recognised for accounting purposes—

(a) in the company's profit and loss account or income statement,

(b) in the company's statement of recognised gains and losses or statement of changes in equity, or

(c) in any other statement of items brought into account in calculating the company's profits and losses for that period.

(9) In determining for the purposes of this Schedule whether an amount is recorded as a financial asset or liability in respect of the advance it is to be assumed that the period of account in which the advance is received or made ended immediately after the receipt or making of the advance.

(10) For the purposes of paragraphs 6(4) and 11(4)—

(a) any period of account in which the advance is received or made is treated as if it ended immediately after the receipt or making of the advance, and

(b) a new period of account is treated as beginning immediately after the end of that period.

(11) If any person does not draw up accounts in accordance with generally accepted accounting practice, this Schedule applies as if the accounts had been drawn up by the person in accordance with that practice.

Power to modify Schedule

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(1) The Treasury may by regulations provide for all or any of the provisions of this Schedule to apply with modifications in relation to either or both of the following cases—

(a) non-standard repo cases (see sub-paragraphs (2) to (5)), and

(b) cases involving redemption arrangements (see sub-paragraph (6)).

(2) A case is a non-standard repo case if—

(a) a company has a repo,

(b) there has been a sale of the securities under the arrangement or arrangements by reference to which the company has the repo, and

(3) Condition A is that those securities, or similar or other securities, are not subsequently bought under the arrangement or arrangements.

(4) Condition B is that provision is made by or under an arrangement for different or additional securities to be treated as, or as included with, securities which, for the purposes of the subsequent purchase, are to represent those initially sold.

(5) Condition C is that provision is made by or under an arrangement for securities to be treated as not so included.

(6) A case involves redemption arrangements if—

(a) arrangements, corresponding to those made in cases where a company has a repo, are made in relation to securities that are to be redeemed in the period after their sale, and

(b) the arrangements are such that a person (instead of having the right or obligation to buy those securities, or similar or other securities, at any subsequent time) has a right or obligation in respect of the benefits that will result from the redemption.

(7) The regulations may—

(a) make different provision for different cases, and

(b) contain incidental, supplemental, consequential and transitional provision and savings.

(8) Regulations about paragraph 6 or 11 may, in particular, include modifications of TCGA 1992 in relation to cases where, as a result of the regulations, any acquisition or disposal is excluded from those which are to be ignored for the purposes of corporation tax in respect of chargeable gains.

(9) In this paragraph—

“modifications” include exceptions and omissions, and

“repo” means—a debtor repo or debtor quasi-repo, ora creditor repo or creditor quasi-repo (including anything treated, as a result of section 547 of CTA 2009, as a creditor repo for the purposes of section 546 of that Act).

SCHEDULE 14

Income and Corporation Taxes Act 1988 (c. 1)

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ICTA is amended as follows.

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Omit sections 730A and 730B (treatment of price differential on sale and repurchase of securities).

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Omit section 730BB (exchange gains and losses on sale and repurchase of securities).

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Omit sections 737A to 737C (sale and repurchase of securities: deemed manufactured payments).

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Omit section 737E (power to modify sections 730A, 730BB and 737A to 737C).

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Taxation of Chargeable Gains Act 1992 (c. 12)

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TCGA 1992 is amended as follows.

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(1) Section 263A (agreements for sale and repurchase of securities) is amended as follows.

(2) In subsection (1), for the words from the beginning to “were different” substitute “ Subject to subsections (3) and (4) below, in any case falling within section 607(1) of ITA 2007 (treatment of price differences under repos) ”.

(3) After that subsection insert—

(1A) If, at any time after the acquisition mentioned in subsection (1)(a) above, it becomes apparent that the interim holder will not dispose of the securities to the repurchaser, the interim holder shall be treated for the purposes of capital gains tax as acquiring them at that time for a consideration equal to their market value at that time. (1B) If, at any time after the disposal mentioned in subsection (1)(b) above, it becomes apparent that the original owner will not acquire the securities as the repurchaser, the original owner shall be treated for the purposes of capital gains tax as disposing of them at that time for a consideration equal to their market value at that time.

(4) Omit subsection (2).

(5) For subsections (5) and (6) substitute—

(5) Expressions used in this section and section 607 of ITA 2007 have the same meaning in this section as in that section. (6) This section does not apply for the purposes of corporation tax in respect of chargeable gains.

(6) The heading accordingly becomes “ Agreements for sale and repurchase of securities: capital gains tax ”.

13

(1) For paragraph 12 of Schedule 7AC substitute—

(12) (1) This paragraph applies where— (a) a company (“the borrower”) which holds shares in another company sells the shares under an arrangement by reference to which the borrower has a debtor repo, and (b) by virtue of paragraph 6 of Schedule 13 to the Finance Act 2007 (sale and repurchase of securities) the sale is ignored for the purposes of corporation tax in respect of chargeable gains. (2) For the period for which the arrangement is in force— (a) the borrower shall be treated for the purposes of this Part as continuing to hold the shares and accordingly as retaining its entitlement to any rights attaching to them, and (b) the lender shall be treated for those purposes as not holding the shares and as not becoming entitled to any such rights. This is subject to the following qualification. (3) If at any time before the end of that period the borrower, or another member of the same group as the borrower, becomes the holder— (a) of any of the shares, or (b) of any shares directly or indirectly representing any of them, sub-paragraph (2) does not apply after that time in relation to those shares or, as the case may be, the shares represented by them. (4) Expressions used in this paragraph and in Schedule 13 to the Finance Act 2007 have the same meaning in this paragraph as in that Schedule.

Finance Act 1996 (c. 8)

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Finance Act 1994 (c. 9)

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In section 229(1)(ca) of FA 1994 (Lloyd's corporate members: regulations), for sub-paragraph (ii) substitute—

(ii) arrangements involving repos (within the meaning of paragraph 15 of Schedule 13 to the Finance Act 2007) or redemption arrangements (within the meaning of that paragraph);

Finance Act 2006 (c. 25)

20

In section 139 of FA 2006 (Real Estate Investment Trusts: manufactured dividends), omit subsection (5).

Income Tax Act 2007 (c. 3)

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ITA 2007 is amended as follows.

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24

In section 886(2) (interest paid by recognised clearing houses etc), after “repos)” insert “ , or paragraph 5 of Schedule 13 to FA 2007 (relief for borrower for finance charges in case of debtor repos and debtor quasi-repos), ”.

SCHEDULE 15

Imputation of chargeable profits and creditable tax of controlled foreign companies

1

(1) Section 747 of ICTA (imputation of chargeable profits and creditable tax of controlled foreign companies) is amended as follows.

(2) After subsection (3) insert—

(3A) In the case of an apportionment to a company resident in the United Kingdom which has made an application under section 751A which has been granted, subsection (3) above has effect subject to that section.

(3) After subsection (5) insert—

(5A) Where the resident company has made an application under section 751A which has been granted, it shall be assumed for the purposes of subsection (5) above that— (a) each of the persons who are connected or associated with the resident company has made an application under that section to the same effect, and (b) all the applications have been granted.

Residence

2

In section 749 of ICTA (residence), insert at the end—

(10) For the purposes of subsection (8) and (9) above, the effect of any application under section 751A shall be disregarded.

Elections and designations under section 749: supplementary provisions

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In section 749A of ICTA (elections and designations under section 749: supplementary provisions), insert at the end—

(9) For the purposes of this section the effect of any application under section 751A shall be disregarded.

Territories with a lower level of taxation

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In section 750(3) of ICTA (territories with a lower level of taxation), after the “and” at the end of paragraph (a) insert—

(ab) there shall be disregarded the effect of any application under section 751A; and

Reduction in chargeable profits for certain activities of EEA business establishments

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In ICTA, after section 751 insert—

(751A) (1) This section applies if— (a) an apportionment under section 747(3) falls to be made as regards an accounting period (“the relevant accounting period”) of a controlled foreign company, (b) throughout that period the controlled foreign company has a business establishment in an EEA territory, (c) throughout that period there are individuals who work for the controlled foreign company in that territory, and (d) a company resident in the United Kingdom (“the UK resident company”) has a relevant interest in the controlled foreign company in that period. (2) The UK resident company may make an application to the Commissioners for Her Majesty's Revenue and Customs for the chargeable profits of the controlled foreign company for the relevant accounting period to be reduced by an amount (“the specified amount”) specified in the application (including to nil). (3) If the Commissioners grant the application— (a) those chargeable profits are treated as reduced by the specified amount, and (b) the controlled foreign company's creditable tax (if any) for that period is treated as reduced by so much of that tax as, on a just and reasonable basis, relates to the reduction in those chargeable profits, for the purpose of applying section 747(3) to (5) for determining the sum (if any) chargeable on the UK resident company under section 747(4)(a) (but for no other purpose). (4) The Commissioners may grant the application only if they are satisfied that the specified amount does not exceed the amount (if any) equal to so much of those chargeable profits as can reasonably be regarded as representing the net economic value which— (a) arises to the appropriate body of persons (taken as a whole), and (b) is created directly by qualifying work. (5) For the purposes of subsection (4) “net economic value” does not include any value which derives directly or indirectly from the reduction or elimination of any liability of any person to any tax or duty imposed under the law of any territory. (6) For the purposes of subsection (4) “the appropriate body of persons” means— (a) if the controlled foreign company is not a member of a group of companies, the controlled foreign company and the persons who have an interest in it at any time in the relevant accounting period, and (b) if the controlled foreign company is a member of a group of companies, all the persons falling within paragraph (a) and any other person who is a member of that group of companies, and for the purposes of this subsection “group of companies” means a company and any other companies of which it has control. (7) For the purposes of subsection (4) “qualifying work” means work which— (a) is done in any EEA territory in which the controlled foreign company has a business establishment throughout the relevant accounting period, and (b) is done in that territory by individuals working for the controlled foreign company there. (8) Any reference in this section to a business establishment of a controlled foreign company in an EEA territory is to be construed in accordance with paragraph 7 of Schedule 25 (but as if the reference in that paragraph to the territory in which the company is resident were to the EEA territory). (9) For the purposes of this section individuals are not to be regarded as working for a company in any territory unless— (a) they are employed by the company in the territory, or (b) they are otherwise directed by the company to perform duties on its behalf in the territory. (751B) (1) An application by a company under section 751A— (a) must be made in such form as the HMRC Commissioners may determine, (b) must be accompanied by such documents (or copies of documents) in the company's possession or power as those Commissioners may reasonably require for the purpose of determining whether to grant the application, and (c) must contain such information as those Commissioners may reasonably require for that purpose. (2) An application by a company under section 751A— (a) may be made at any time on or before the filing date (within the meaning of Schedule 18 to the Finance Act 1998) for the relevant company tax return of the company, and (b) may be amended or withdrawn at any time before the application is determined by those Commissioners. (3) If an application by a company under section 751A is granted after the company has delivered its relevant company tax return, it has 30 days beginning with the day on which the application is granted in which to amend that return to give effect to section 751A. (4) The time limits otherwise applicable to an amendment of a company tax return do not prevent an amendment being made under subsection (3). (5) If the HMRC Commissioners refuse an application by a company under section 751A, the company may appeal to the Special Commissioners against the refusal. (6) Notice of an appeal must be given in writing to the HMRC Commissioners within 30 days after the application is refused. (7) On an appeal— (a) if the Special Commissioners are satisfied that the relevant amount is a different amount from the amount specified in the application, they must direct the HMRC Commissioners to grant the application as if the amount specified in it were that different amount, (b) if the Special Commissioners are satisfied that the relevant amount is the amount specified in the application, they must direct the HMRC Commissioners to grant the application, and (c) in any other case, the Special Commissioners must confirm the refusal. (8) For the purposes of subsection (7) “the relevant amount” means the amount (if any) equal to so much of the chargeable profits mentioned in subsection (4) of section 751A as can reasonably be regarded as representing the value mentioned in that subsection. (9) Part 5 of the Management Act (appeals against assessments to tax), apart from section 50, applies in relation to an appeal under this section as it applies in relation to an appeal against an assessment to tax. (10) In this section “relevant company tax return”, in relation to a company, means the return for the accounting period for which— (a) any sum is chargeable on the company under section 747(4)(a), or (b) any sum would be so chargeable but for section 751A, in respect of the chargeable profits of the controlled foreign company for the accounting period mentioned in section 751A(1). (11) In this section “the HMRC Commissioners” means the Commissioners for Her Majesty's Revenue and Customs.

Interpretation

6

In section 756 of ICTA (interpretation and construction of Chapter 4 of Part 17), after subsection (1) insert—

(1A) In this Chapter “EEA territory”, in relation to any time, means a territory which is an EEA state at that time other than the United Kingdom. (1B) But a territory is not to be regarded for the purposes of subsection (1A) above as an EEA state at any time if— (a) it is not a member State at that time, and (b) there are no arrangements made in relation to the territory having effect by virtue of section 173 of the Finance Act 2006 (international tax enforcement arrangements) at that time.

Exempt activities test

7

(1) Part 2 of Schedule 25 to ICTA (supplementary provision in relation to cases where apportionment under section 747(3) does not apply: exempt activities) is amended as follows.

(2) In paragraph 5, after sub-paragraph (1) insert—

(1A) Except as provided in paragraph 8 below, the provisions of this Part of this Schedule apply in relation to a company which is resident in an EEA territory in the same way as they apply in relation to a company which is resident elsewhere.

(3) In paragraph 8, in sub-paragraph (1), after “fulfilled” insert “ in relation to a company which is not resident in an EEA territory ”.

(4) Insert at the end of that paragraph—

(5) The condition in paragraph 6(1)(b) above shall not be regarded as fulfilled in relation to a company which is resident in an EEA territory unless there are sufficient individuals working for the company in the territory who have the competence and authority to undertake all, or substantially all, of the company's business. (6) For the purposes of sub-paragraph (5) above, individuals are not to be regarded as working for a company in any territory unless— (a) they are employed by the company in the territory, or (b) they are otherwise directed by the company to perform duties on its behalf in the territory.

Abolition of public quotation exemption

8

(1) In section 748(1) of ICTA (cases where apportionment under section 747(3) does not apply), omit paragraph (c) (together with the “or” at the end of it).

(2) In Schedule 25 to ICTA (supplementary provision in relation to cases where apportionment under section 747(3) does not apply), omit Part 3 (the public quotation condition).

Discovery assessments

9

In paragraph 44(3) of Schedule 18 to FA 1998 (discovery assessment: situation not disclosed by return or related documents etc), in the definition of “relevant claim”, insert at the end “ or an application under section 751A of the Taxes Act 1988 made by or on behalf of the company which affects the company's tax return for the period in question ”.

Commencement

10

(1) The amendments made by this Schedule have effect in relation to accounting periods of controlled foreign companies beginning on or after 6th December 2006.

(2) In the case of an accounting period (a “straddling period”) of a controlled foreign company—

(a) beginning before 6th December 2006, and

(b) ending on or after that date,

the amendments made by this Schedule have effect as if, for the purposes of Chapter 4 of Part 17 of ICTA, so much of the straddling period as falls before that date, and so much of the straddling period as falls on or after that date, were separate accounting periods.

(3) The company's chargeable profits for the straddling period, and its creditable tax (if any) for that period, are to be apportioned to the two separate accounting periods on a just and reasonable basis.

(4) Each of the following expressions—

“accounting period”,

“chargeable profits”,

“controlled foreign company”, and

“creditable tax”,

has the same meaning in this paragraph as in Chapter 4 of Part 17 of ICTA.

SCHEDULE 16

Part 1 — Limit on number of employees of company in which investment is made

Corporate venturing scheme

1

(1) Part 3 of Schedule 15 to FA 2000 (requirements as to issuing company) is amended as follows.

(2) In paragraph 15 (introduction to Part) after paragraph (f) insert—

(fa) number of employees (see paragraph 22A); and

(3) After paragraph 22 insert—

(22A) (1) If the issuing company is a single company, the full-time equivalent employee number for it must be less than 50 when the relevant shares are issued. (2) If the issuing company is a parent company, the sum of— (a) the full-time equivalent employee number for it, and (b) the full-time equivalent employee numbers for each of its qualifying subsidiaries, must be less than 50 when the relevant shares are issued. (3) The full-time equivalent employee number for a company is calculated as follows— Step 1 Find the number of full-time employees of the company. Step 2 Add, for each employee of the company who is not a full-time employee, such fraction as is just and reasonable. The result is the full-time equivalent employee number. (4) In this paragraph references to an employee— (a) include a director, but (b) do not include— (i) an employee on maternity or paternity leave, or (ii) a student on vocational training.

(4) The amendments made by this paragraph do not have effect in relation to shares issued before the day on which this Act is passed.

Enterprise investment scheme

2

(1) Chapter 4 of Part 5 of ITA 2007 (the issuing company) is amended as follows.

(2) In section 180 (overview of Chapter 4), after paragraph (e) insert—

(ea) number of employees (see section 186A),

(3) After section 186 insert—

(186A) (1) If the issuing company is a single company, the full-time equivalent employee number for it must be less than 50 when the relevant shares are issued. (2) If the issuing company is a parent company, the sum of— (a) the full-time equivalent employee number for it, and (b) the full-time equivalent employee numbers for each of its qualifying subsidiaries, must be less than 50 when the relevant shares are issued. (3) The full-time equivalent employee number for a company is calculated as follows— Step 1 Find the number of full-time employees of the company. Step 2 Add, for each employee of the company who is not a full-time employee, such fraction as is just and reasonable. The result is the full-time equivalent employee number. (4) In this section references to an employee— (a) include a director, but (b) do not include— (i) an employee on maternity or paternity leave, or (ii) a student on vocational training.

(4) The amendments made by this paragraph do not have effect in relation to—

(a) shares issued before the day on which this Act is passed, or

(b) shares issued to the managers of an approved fund which closed before that day.

(5) For the purposes of sub-paragraph (4)(b)—

(a) “the managers of an approved fund” has the same meaning as in section 251 of ITA 2007, and

(b) the reference to shares issued to the managers of an approved fund is to shares issued to those managers as nominee for an individual who has invested in the fund.

Venture capital trusts

3

(1) Part 6 of ITA 2007 is amended as follows.

(2) In section 286(3) (qualifying holdings: introduction) after paragraph (j) insert—

(ja) number of employees (see section 297A),

(3) After section 297 insert—

(297A) (1) If the relevant company is a single company, the full-time equivalent employee number for it must be less than 50 when the relevant holding is issued. (2) If the relevant company is a parent company, the sum of— (a) the full-time equivalent employee number for it, and (b) the full-time equivalent employee numbers for each of its qualifying subsidiaries, must be less than 50 when the relevant holding is issued. (3) The full-time equivalent employee number for a company is calculated as follows— Step 1 Find the number of full-time employees of the company. Step 2 Add, for each employee of the company who is not a full-time employee, such fraction as is just and reasonable. The result is the full-time equivalent employee number. (4) In this section references to an employee— (a) include a director, but (b) do not include— (i) an employee on maternity or paternity leave, or (ii) a student on vocational training.

(4) In section 327 (certain requirements of Chapter 4 to be treated as met)—

(a) in subsection (1), at the end insert “ , and section 297A (the number of employees requirement). ”;

(b) in subsection (4)(b) for “and 297” substitute “ , 297 and 297A ”.

(5) This paragraph is deemed to have come into force on 6th April 2007.

(6) The amendments made by this paragraph do not have effect in relation to—

(a) a relevant holding issued before that date, or

(b) a relevant holding acquired by a company (“the investing company”) before 6 April 2018 by means of the investment of protected money.

(7) For the purposes of sub-paragraph (6)(b), “protected money” is—

(a) money raised by the issue before 6th April 2007 of shares in or securities of the investing company, or

(b) money derived from the investment of such money.

Part 2 — Limit on amount raised annually by company through risk capital schemes

Corporate venturing scheme

4

(1) Schedule 15 to FA 2000 is amended as follows.

(2) In paragraph 34 (introduction to Part) after sub-paragraph (a) insert—

(aa) the maximum amount raised annually through risk capital schemes (see paragraph 35A);

(3) After paragraph 35 insert—

(35A) (1) The total amount of relevant investments made in the issuing company in the year ending with the date the relevant shares are issued must not exceed £2 million. (2) In sub-paragraph (1), the reference to relevant investments made in the issuing company includes relevant investments made in any company that is, or has at any time in the year mentioned there been, a subsidiary of the issuing company (whether or not it was such a subsidiary when the investment was made). (3) A “relevant investment” is made in a company if— (a) an investment (of any kind) in the company is made by a VCT, or (b) the company issues shares (money having been subscribed for them), and (at any time) the company provides— (i) a compliance statement under paragraph 42, or (ii) a compliance statement under section 205 of ITA 2007 (enterprise investment scheme), in respect of the shares. (4) An investment within sub-paragraph (3)(b) is regarded as made when the shares are issued.

(4) In paragraph 63(1)(a) (withdrawal of relief: interest), after sub-paragraph (i) insert—

(ia) paragraph 35A (maximum amount raised annually through risk capital schemes);

Enterprise investment scheme

5

(1) Part 5 of ITA 2007 is amended as follows.

(2) In section 172 (overview of Chapter), after paragraph (a) insert—

(aa) the maximum amount raised annually through risk capital schemes (see section 173A),

(3) After section 173 insert—

(173A) (1) The total amount of relevant investments made in the issuing company in the year ending with the date the relevant shares are issued must not exceed £2 million. (2) In subsection (1), the reference to relevant investments made in the issuing company includes relevant investments made in any company that is, or has at any time in the year mentioned there been, a subsidiary of the issuing company (whether or not it was such a subsidiary when the investment was made). (3) A “relevant investment” is made in a company if— (a) an investment (of any kind) in the company is made by a VCT, or (b) the company issues shares (money having been subscribed for them), and (at any time) the company provides— (i) a compliance statement under section 205, or (ii) a compliance statement under paragraph 42 of Schedule 15 to FA 2000 (corporate venturing scheme), in respect of the shares. (4) An investment within subsection (3)(b) is regarded as made when the shares are issued.

(4) In section 239(1) (withdrawal etc of relief: date from which interest is chargeable), in column 1 of the Table, after “163,” insert “ ;173A ”.

(5) The amendments made by this paragraph do not have effect in relation to shares issued to the managers of an approved fund which closed before the day on which this Act is passed.

(6) Paragraph 2(5) (meaning of “the managers of an approved fund” etc) applies for the purposes of sub-paragraph (5).

Venture capital trusts

6

(1) Chapter 4 of Part 6 of ITA 2007 (qualifying holdings) is amended as follows.

(2) In section 286(3) (introduction) after paragraph (e) insert—

(ea) the maximum amount raised annually through risk capital schemes (see section 292A),

(3) After section 292 insert—

(292A) (1) The total amount of relevant investments made in the relevant company in the year ending with the date the relevant holding is issued must not exceed £2 million. (2) In subsection (1), the reference to relevant investments made in the relevant company includes relevant investments made in any company that is, or has at any time in the year mentioned there been, a subsidiary of the relevant company (whether or not it was such a subsidiary when the investment was made). (3) A “relevant investment” is made in a company if— (a) an investment (of any kind) in the company is made by a VCT, or (b) the company issues shares (money having been subscribed for them), and (at any time) the company provides— (i) a compliance statement under section 205 (enterprise investment scheme), or (ii) a compliance statement under paragraph 42 of Schedule 15 to FA 2000 (corporate venturing scheme), in respect of the shares. (4) For the purposes of subsections (1) and (2), an investment within subsection (3)(b) is regarded as made when the shares are issued. (5) Subsection (6) applies if, by virtue of the provision of a compliance statement under section 205 above or paragraph 42 of Schedule 15 to FA 2000, the requirement of this section is not met. (6) The requirement is to be treated as having been met throughout the period— (a) beginning with the time the relevant holding was issued, and (b) ending with the time the compliance statement was provided.

(4) This paragraph is deemed to have come into force on 6th April 2007.

(5) The amendments made by this paragraph do not have effect in relation to an investment made by a VCT of protected money.

(6) “Protected money” means—

(a) money raised by the issue on or before 5th April 2007 of shares in or securities of the VCT, and

(b) money derived from the investment of such money.

Enterprise investment scheme: reinvestment

7

(1) Schedule 5B to TCGA 1992 is amended as follows.

(2) In paragraph 1 (application of Schedule)—

(a) in sub-paragraph (2), after paragraph (d) insert—

(da) the total amount of relevant investments made in the company in the year ending with the date the shares are issued does not exceed £2 million,

, and

(b) after sub-paragraph (5) insert—

(6) Section 173A(3) and (4) of ITA 2007 (meaning of “relevant investment”) apply for the purposes of sub-paragraph (2)(da). (7) In sub-paragraph (2)(da), the reference to relevant investments made in the company includes relevant investments made in a company that is, or has at any time in the year mentioned there been, a subsidiary of the company (whether or not it was such a subsidiary when the investment was made).

(3) In paragraph 1A(1) (failure of conditions of application), after “(2)(b)” insert “ ;or (2)(da) ”.

Transitional provision

8

(1) This paragraph applies for the purposes of—

(a) paragraph 35A of Schedule 15 to FA 2000,

(b) section 173A of ITA 2007 (including that section as applied by paragraph 1(6) of Schedule 5B to TCGA 1992), and

(2) References to investments made by a VCT do not include—

(a) investments made on or before 5th April 2007,

(b) investments of protected money (as defined by paragraph 6(6)).

(3) References to shares in respect of which compliance statements are provided do not include—

(a) shares issued before the day on which this Act is passed, or

(b) shares issued to the managers of an approved fund which closed before that day.

(4) Paragraph 2(5) (meaning of “the managers of an approved fund” etc) applies for the purposes of sub-paragraph (3)(b) above.

Part 3 — Excluded activities: receipt of royalties and licence fees

Corporate venturing scheme

9

(1) Paragraph 29 of Schedule 15 to FA 2000 is amended as follows.

(2) In sub-paragraph (3), for paragraphs (a) and (b) substitute—

(a) by the issuing company, or (b) by a company which was a qualifying subsidiary of the issuing company throughout a period during which it created the whole or greater part (in terms of value) of the intangible asset.

(3) After sub-paragraph (6) insert—

(7) If— (a) the issuing company acquired all the shares (“old shares”) in another company (“the old company”) at a time when the only shares issued in the issuing company were subscriber shares, and (b) the consideration for the old shares consisted wholly of the issue of shares in the issuing company, references in sub-paragraph (3) to the issuing company include the old company.

10

In paragraph 86(2) (substitution of new shares for old shares), after “Schedule”, in the first place it occurs, insert “ ;(except paragraph 29(7)) ”.

Enterprise investment scheme

11

(1) In section 297 of ICTA (qualifying trades)—

(a) in subsection (5), for paragraphs (a) and (b) substitute—

(a) by the company mentioned in section 293(1), or (b) by a company which was a subsidiary of that company throughout a period during which it created the whole or greater part (in terms of value) of the intangible asset.

(b) in subsection (5A), omit paragraphs (b) and (c) and the words after paragraph (c), and

(5D) If— (a) the company mentioned in section 293(1) (“the issuing company”) acquired all the shares (“old shares”) in another company (“the old company”) at a time when the only shares issued in the issuing company were subscriber shares, and (b) the consideration for the old shares consisted wholly of the issue of shares in the issuing company, references in subsection (5) above to the company mentioned in section 293(1) include the old company.

(2) In section 304A of that Act (acquisition of share capital by new company)—

(a) in subsection (3), after “Chapter” insert “ ;(except section 297(5D)) ”, and

(b) in subsection (4), after “Chapter” insert “ ;(except section 297(5D)) ”.

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

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

(5) In section 137 of ITA 2007 (share loss relief: trading requirement for shares to which EIS relief not attributable), after subsection (8) insert—

(9) In section 195 as applied by subsection (7) for the purposes mentioned in subsection (8), references to the issuing company are to be read as references to the company mentioned in subsection (1).

(6) In section 146 of that Act (share loss relief: substitution of new shares for old), after subsection (2) insert—

(3) Nothing in subsection (2) applies in relation to section 195(7) as applied by section 137(7) for the purposes mentioned in section 137(8).

(7) In section 195 of ITA 2007 (EIS: excluded activities: receipt of royalties and licence fees)—

(a) in subsection (4), for paragraphs (a) and (b) substitute—

(a) by the issuing company, or (b) by a company which was a qualifying subsidiary of the issuing company throughout a period during which it created the whole or greater part (in terms of value) of the intangible asset.

(b) in subsection (6), omit the definition of “holding company”, and

(7) If— (a) the issuing company acquired all the shares (“old shares”) in another company (“the old company”) at a time when the only shares issued in the issuing company were subscriber shares, and (b) the consideration for the old shares consisted wholly of the issue of shares in the issuing company, references in subsection (4) to the issuing company include the old company.

(8) In section 249 of that Act (substitution of new shares for old shares)—

(a) in subsection (2), after “Part” insert “ ;(except section 195(7)) ”, and

(b) in subsection (4), after “Part” insert “ ;(except section 195(7)) ”.

Venture capital trusts

12

(1) Section 306 of ITA 2007 (qualifying holdings) is amended as follows.

(2) In subsection (4), for paragraphs (a) and (b) substitute—

(a) by the relevant company, or (b) by a company which was a qualifying subsidiary of the relevant company throughout a period during which it created the whole or greater part (in terms of value) of the intangible asset.

(3) In subsection (6), omit the definition of “holding company”.

(4) After that subsection insert—

(7) If— (a) the relevant company acquired all the shares (“old shares”) in another company (“the old company”) at a time when the only shares issued in the relevant company were subscriber shares, and (b) the consideration for the old shares consisted wholly of the issue of shares in the relevant company, references in subsection (4) to the relevant company include the old company.

Commencement

13

This Part of this Schedule is deemed to have come into force on 6th April 2007.

Transitional provision

14

(1) This paragraph applies if—

(a) shares in or securities of a company (“the company”) were issued before 6th April 2007,

(b) immediately before that date—

(i) the right to exploit an intangible asset (“the asset”) was vested in the company or a subsidiary of it (in either case, whether alone or jointly with others), and

(ii) the asset was a relevant intangible asset,

(c) at any time on or after that date, an activity carried on by the company or a subsidiary of it would be an excluded activity by reason only of the receipt of royalties or licence fees attributable to the exploitation of the asset, and

(d) the activity would not be an excluded activity if the amendments made by this Part of this Schedule had not been made.

(2) The activity is to be treated, in relation to those shares or securities, as not being an excluded activity at that time.

(3) In sub-paragraphs (1) and (2), references to an excluded activity are to be read—

(a) for the purposes of Chapter 3 of Part 7 of ICTA (including any provision of that Chapter as applied by any other provision), as references to—

(i) an activity within section 293(3B)(a) of ICTA, or

(ii) an activity within subsection (2) of section 297 of ICTA which causes a trade to fail to comply with that section,

(b) for the purposes of Schedule 15 to FA 2000, as references to an excluded activity other than the receiving of royalties or licence fees within paragraph 29 of that Schedule in circumstances where the requirements of sub-paragraph (2) of that paragraph are met.

Part 4 — Meaning of “qualifying 90% subsidiary”

Corporate venturing scheme

15

(1) Schedule 15 to FA 2000 is amended as follows.

(2) In paragraph 23 (trading activities requirement), omit sub-paragraphs (10) and (11).

(3) After that paragraph insert—

(23A) (1) For the purposes of this Schedule, a company (“the subsidiary”) is a qualifying 90% subsidiary of the issuing company if the following conditions are met— (a) the issuing company possesses not less than 90% of the issued share capital of, and not less than 90% of the voting power in, the subsidiary; (b) the issuing company would— (i) in the event of a winding up of the subsidiary, or (ii) in any other circumstances, be beneficially entitled to receive not less than 90% of the assets of the subsidiary which would then be available for distribution to the shareholders of the subsidiary; (c) the issuing company is beneficially entitled to not less than 90% of any profits of the subsidiary which are available for distribution to the shareholders of the subsidiary; (d) no person other than the issuing company has control of the subsidiary within the meaning of section 840 of the Taxes Act 1988; (e) no arrangements are in existence by virtue of which any of the conditions in paragraphs (a) to (d) would cease to be met. (2) Paragraph 21(3) and (4) (effect of receivership etc) apply in relation to the conditions in sub-paragraph (1) as they apply in relation to the conditions in paragraph 21(2). (3) If— (a) arrangements are in existence for the disposal by the issuing company of all its interest in the subsidiary, and (b) the disposal is to be for commercial reasons and is not to be part of a scheme or arrangement the main purpose of which, or one of the main purposes of which, is the avoidance of tax, the subsidiary is not to be regarded as having ceased on that account to be a qualifying 90% subsidiary of the issuing company. (4) For the purposes of this Schedule, a company (“company A”) which is a subsidiary of a company that is not the issuing company (“company B”) is a qualifying 90% subsidiary of the issuing company if— (a) company A would be a qualifying 90% subsidiary of company B (if company B were the issuing company), and company B is a qualifying 100% subsidiary of the issuing company; or (b) company A is a qualifying 100% subsidiary of company B, and company B is a qualifying 90% subsidiary of the issuing company. (5) For the purposes of sub-paragraph (4), no account is to be taken of any control the issuing company may have of company A. (6) For those purposes, a company (“company X”) is a qualifying 100% subsidiary of another company (“company Y”) at any time when the conditions in sub-paragraph (1) would be met if— (a) company X were the subsidiary; (b) company Y were the issuing company; and (c) in sub-paragraph (1) for “not less than 90%” in each place there were substituted “100%”.

(4) In paragraph 103 (index of defined expressions), in the entry relating to the definition of “qualifying 90% subsidiary”, for “paragraph 23(10) and (11)” substitute “ ;paragraph 23A ”.

Enterprise investment scheme etc

16

(1) In Chapter 3 of Part 7 of ICTA—

(a) in section 289 (eligibility for relief), for subsections (9) to (13) substitute—

(9) Section 190 of ITA 2007 (meaning of “qualifying 90% subsidiary”) applies for the purposes of this Chapter.

;

(b) in section 312(1) (interpretation of Chapter), in the definition of “qualifying 90% subsidiary”, omit “to (13)”.

(2) In section 190 of ITA 2007 (EIS: meaning of “qualifying 90% subsidiary”), after subsection (1) insert—

(1A) For the purposes of this Part, a company (“company A”) which is a subsidiary of another company (“company B”) is a qualifying 90% subsidiary of a third company (“company C”) if— (a) company A is a qualifying 90% subsidiary of company B, and company B is a qualifying 100% subsidiary of company C, or (b) company A is a qualifying 100% subsidiary of company B, and company B is a qualifying 90% subsidiary of company C. (1B) For the purposes of subsection (1A), no account is to be taken of any control company C may have of company A. (1C) For those purposes, a company (“company X”) is a qualifying 100% subsidiary of another company (“company Y”) at any time when the conditions in subsection (1)(a) to (e) would be met if— (a) company X were the subsidiary, (b) company Y were the relevant company, and (c) in subsection (1) for “at least 90%” in each place there were substituted “ ;100% ”.

Venture capital trusts

17

In section 301 of ITA 2007, after subsection (1) insert—

(1A) For the purposes of this Chapter, a company (“company A”) which is a subsidiary of a company that is not the relevant company (“company B”) is a qualifying 90% subsidiary of the relevant company if— (a) company A would be a qualifying 90% subsidiary of company B (if company B were the relevant company), and company B is a qualifying 100% subsidiary of the relevant company, or (b) company A is a qualifying 100% subsidiary of company B, and company B is a qualifying 90% subsidiary of the relevant company. (1B) For the purposes of subsection (1A), no account is to be taken of any control the relevant company may have of company A. (1C) For those purposes, a company (“company X”) is a qualifying 100% subsidiary of another company (“company Y”) at any time when the conditions in subsection (1)(a) to (e) would be met if— (a) company X were the subsidiary, (b) company Y were the relevant company, and (c) in subsection (1) for “at least 90%” in each place there were substituted “ ;100% ”.

Commencement

18

This Part of this Schedule is deemed to have come into force on 6th April 2007.

Part 5 — Other amendments

EIS: approved investment funds

19

(1) In Part 5 of ITA 2007 (enterprise investment scheme), in section 251(1)(c) (approved investment fund as nominee), for “6” substitute “ ;12 ”.

(2) The amendment made by this paragraph has effect in relation to approved funds which closed or close on or after 7 October 2006.

VCTs: disposal of holding

20

(1) Chapter 3 of Part 6 of ITA 2007 (VCT approvals) is amended as follows.

(2) In section 274(3) (requirements for the giving of approval), at the end of paragraph (d) insert

, and (e) the 70% qualifying holdings condition by section 280A

(3) After section 280 insert—

(280A) (1) This section applies if— (a) a company which is a VCT disposes of shares or securities (“the holding”), (b) the consideration for the disposal does not consist wholly of new qualifying holdings, and (c) the holding was comprised in the company's qualifying holdings throughout the 6 months ending immediately before the disposal. (2) For the purpose of determining whether the 70% qualifying holdings condition is, has been or will be met— (a) the company is to be treated as if it continued to hold the holding for the period of 6 months beginning with the disposal (but see subsection (4)), and (b) the value of the company's investments in that period is to be treated as reduced by the amount of any monetary consideration for the disposal. (3) The value of the holding in the period mentioned in subsection (2)(a) is to be treated as equal to its value (determined in accordance with this Chapter) immediately before the disposal. (4) If the consideration for the disposal includes new qualifying holdings, subsection (2)(a) has effect as if the reference to the holding were to the appropriate proportion of the holding (the value of which is that proportion of the value of the holding, determined in accordance with subsection (3)). (5) The appropriate proportion is— $$TC-NQHTC$where—TC is the market value (at the time of the disposal) of the total consideration for the disposal, andNQH is the market value (at that time) of the new qualifying holdings.$ (6) If at any time the value of the company's investments would by virtue of subsection (2)(b) be reduced to an amount less than the value of its qualifying holdings, the value of its investments at that time is to be treated as equal to the value of its qualifying holdings. (7) “New qualifying holdings” means shares or securities which (on transfer to the company) are comprised in the company's qualifying holdings. (8) If (and to the extent that) the holding was acquired with money the use of which is at any time ignored by virtue of section 280(2), subsections (2) to (6) do not apply in relation to that time. (9) Nothing in this section applies in relation to disposals between companies that are merging (within the meaning of section 323).

(4) This paragraph is deemed to have come into force on 6th April 2007.

(5) The amendments made by this paragraph have effect in relation to disposals made on or after that date.

VCTs: power to make regulations as to breaches of conditions

21

(1) In section 284 of ITA 2007 (power to make regulations as to procedure), in the existing provision (which becomes subsection (1))—

(a) after paragraph (a) insert—

(aa) for and in connection with the making by a company of an application to the Commissioners for Her Majesty's Revenue and Customs (“the Commissioners”) for relief in respect of a breach (including a future breach) of the conditions for its VCT approval to continue in force,

(b) in paragraph (c), for the words from “that the conditions” to the end substitute—

(i) that the conditions for its VCT approval to continue in force are no longer met, or (ii) that it is likely that those conditions will cease to be met,

, and

(2) After subsection (1) insert—

(2) In subsection (1)(aa), the reference to relief in respect of a breach of the conditions mentioned there is to a determination by the Commissioners that they will not exercise their power to withdraw the company's VCT approval by reason of the breach for such period as they may determine (and subject to such conditions as they may determine). (3) The provision that may be made by virtue of subsection (1)(aa) includes— (a) provision as to the procedure to be followed in relation to applications and determinations, (b) provision as to the grounds on which applications may be made or determined, and (c) provision conferring a discretion to be exercised by the Commissioners.

SCHEDULE 17

1

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2

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3

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4

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5

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6

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7

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8

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9

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10

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11

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12

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13

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14

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15

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16

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17

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18

In section 531 of ITA 2007 (charities: exemptions)—

(a) after subsection (2) insert—

(2A) Distributions to which section 121 of FA 2006 (Real Estate Investment Trusts: distributions) applies and which are chargeable to income tax under Part 2 or Part 3 of ITTOIA 2005 are not taken into account in calculating total income so far as they arise in respect of shares vested in a person in trust for a charitable trust or for charitable purposes.

, and

(b) in subsection (3), for “and (2)” substitute “ to (2A) ”.

SCHEDULE 18

Introduction

1

Part 4 of FA 2004 (pension schemes etc) is amended as follows.

Life assurance premium contributions not to be relievable pension contributions

2

In section 188(3) (relief for members' contributions: contributions which are not relievable pension contributions), after paragraph (a) insert—

(aa) any contributions which are life assurance premium contributions (see section 195A),

Life assurance premium contributions

3

After section 195 insert—

(195A) (1) Contributions paid by or on behalf of an individual under a registered pension scheme are life assurance premium contributions for the purposes of section 188(3)(aa) if— (a) rights under a non-group life policy (see subsection (2)) are (or later become) held for the purposes of the pension scheme, and (b) the contributions are treated by this section as paid in respect of premiums under the non-group life policy (see subsections (3) to (5)). (2) For the purposes of this section a “non-group life policy” is a policy of insurance under which the only benefits which may become payable are benefits payable in consequence, or in anticipation, of— (a) the death of the individual or one of a group of individuals which includes the individual, or (b) the deaths of more than one of a group of individuals— (i) which includes the individual, and (ii) the other members of which are connected with the individual. (3) Contributions paid by or on behalf of the individual under the pension scheme are treated as paid in respect of premiums under the non-group life policy if— (a) the payment of the contributions constitutes the payment of premiums under the policy, or (b) the person by whom the contributions are paid intends the contributions (or an amount equivalent to them) to be applied towards paying premiums under the policy. (4) Where the amount of the premiums under the policy in a tax year exceeds the amount of any contributions treated as paid in respect of the premiums by subsection (3), other contributions paid by or on behalf of the individual under the pension scheme in the tax year are treated as paid in respect of premiums under the policy to the extent that their amount does not exceed the difference between the amount of the premiums and the amount of any contributions treated as paid in respect of the premiums by subsection (3). (5) But where— (a) the benefits under the policy relate to the death of one or more of a group of individuals, and (b) contributions are also paid under the pension scheme in the tax year by or on behalf of another member or other members of the group, the amount of the contributions paid by or on behalf of the individual which are treated as paid in respect of premiums under the policy by subsection (4) does not exceed what is just and reasonable having regard to the operation of section 188(3)(aa) in relation to the contributions paid by or on behalf of another member or other members of the group. (6) The Commissioners for Her Majesty's Revenue and Customs may by regulations amend subsections (2) to (5). (7) Regulations under subsection (6) which limit— (a) the policies of insurance which are non-group life assurance policies for the purposes of this section, or (b) the contributions which are treated by this section as paid in respect of premiums under such policies, may be made so as to have effect in relation to times before they are made. (8) For the purposes of this section an individual (“A”) is connected with another individual (“B”) if— (a) A is B's spouse or civil partner, (b) A is a relative of B, (c) A is the spouse or civil partner of a relative of B, (d) A is a relative of B's spouse or civil partner, or (e) A is the spouse or civil partner of a relative of B's spouse or civil partner; and for the purposes of this subsection “relative” means brother, sister, ancestor or lineal descendant.

Commencement: schemes other than occupational pension schemes

4

(1) In relation to contributions under any pension scheme that is not an occupational pension scheme, the amendments made by this Schedule have effect in relation to contributions paid on or after 6th April 2007.

(2) But they do not have effect in relation to such contributions paid at any time if the contributions are treated as paid in respect of premiums under a policy of insurance which at that time is a protected policy (see paragraph 5).

5

(1) This paragraph specifies when a policy of insurance is a protected policy in a case where the rights under it are held for the purposes of a pension scheme that is not an occupational pension scheme.

(2) A policy of insurance within sub-paragraph (3) or (4) is a protected policy but only until a relevant event occurs (see sub-paragraphs (5) and (6)).

(3) A policy of insurance is within this sub-paragraph if—

(a) it is issued in respect of insurances made before 6th December 2006,

(b) the pension scheme became a registered pension scheme before that date, and

(4) A policy of insurance is within this sub-paragraph if—

(a) it is issued in respect of insurances made before 1st August 2007,

(b) the pension scheme became a registered pension scheme before that date,

(d) the policy was issued in pursuance of a proposal made in writing (by whatever means) and received by or on behalf of the insurer before the appropriate date,

(e) the amount of the benefits payable under the policy (at the latest of the time when the insurances were made, the pension scheme was registered or rights under the policy became held for the purposes of the pension scheme) is no more than the amount applied for in the proposal,

(f) the period for which benefits are so payable (at the latest of those times) is no longer than the period specified in the proposal, and

(g) the policy is not a protected policy by virtue of sub-paragraph (3).

(5) In sub-paragraph (4)(d) “the appropriate date” means—

(a) 13th April 2007, in any case where, on the day of the making of the insurances in respect of which the policy of insurance was issued, the rights of the individual under the pension scheme included an actual or prospective entitlement to a pension, and

(b) 14th December 2006, in any other case.

(6) For the purposes of sub-paragraph (2) a “relevant event” occurs if, after the relevant time, the terms of the policy are varied so as to—

(a) increase the benefits payable under the policy, or

(b) extend the period during which benefits are so payable.

(7) But where, on the day of the variation, the rights of the individual under the pension scheme included an actual or prospective entitlement to a pension, a relevant event does not occur by virtue of the variation if it was made in pursuance of a proposal made in writing (by whatever means) and received by or on behalf of the insurer before 13th April 2007.

(8) “The relevant time”—

(a) in the case of a policy of insurance within sub-paragraph (3) which is issued in respect of insurances made before 6th April 2006, is 20th March 2007,

(b) in the case of any other policy of insurance within sub-paragraph (3), is 5th December 2006, and

Commencement: occupational pension schemes

6

(1) In relation to contributions under any occupational pension scheme, the amendments made by this Schedule have effect in relation to contributions paid on or after 1st August 2007.

(2) But they do not have effect in relation to such contributions paid at any time if the contributions are treated as paid in respect of premiums under a policy of insurance which at that time is a protected policy (see paragraph 7).

7

(1) This paragraph specifies when a policy of insurance is a protected policy in a case where the rights under it are held for the purposes of an occupational pension scheme.

(2) A policy of insurance within sub-paragraph (3) or (4) is a protected policy but only until a relevant event occurs (see sub-paragraphs (5) to (7)).

(3) A policy of insurance is within this sub-paragraph if—

(a) it is issued in respect of insurances made before 21st March 2007,

(b) the pension scheme became a registered pension scheme before that date, and

(4) A policy of insurance is within this sub-paragraph if—

(a) it is issued in respect of insurances made before 1st August 2007,

(b) the pension scheme became a registered pension scheme before that date,

(d) the policy was issued in pursuance of a proposal made in writing (by whatever means) and received by or on behalf of the insurer before 29th March 2007,

(e) the amount of the benefits payable under the policy (at the latest of the time when the insurances were made, the pension scheme was registered or rights under the policy became held for the purposes of the pension scheme) is no more than the amount applied for in the proposal,

(f) the period for which benefits are so payable (at the latest of those times) is no longer than the period specified in the proposal, and

(g) the policy is not a protected policy by virtue of sub-paragraph (3).

(5) For the purposes of sub-paragraph (2) a “relevant event” occurs if, after the relevant time, the terms of the policy are varied so as to—

(a) increase the benefits payable under the policy, or

(b) extend the period during which benefits are so payable.

(6) “The relevant time”—

(a) in the case of a policy of insurance within sub-paragraph (3), is 20th March 2007, and

(b) in the case of a policy of insurance within sub-paragraph (4), is the time when it became a protected policy.

(7) A variation of the terms of a policy made in order to comply with the Equality Act 2010, so far as relating to age, or Employment Equality (Age) Regulations (Northern Ireland) 2006 (S.R. 2006/261) (or any regulations amending or replacing those Regulations) is to be ignored for the purposes of sub-paragraph (5).

Power to amend commencement provisions

8

(1) The Commissioners for Her Majesty's Revenue and Customs may by regulations amend paragraphs 4 to 7.

(2) Regulations under sub-paragraph (1) having the effect of limiting the contributions which are life assurance premium contributions may be made so as to have effect in relation to times before they are made.

SCHEDULE 19

Introduction

1

Part 4 of FA 2004 (pension schemes etc) is amended as follows.

Alternatively secured pension: guaranteed pension and maximum

2

(1) In section 165(1) (pension rules) is amended as follows.

(2) In pension rule 2 (guaranteed pensions)—

(a) for “, an annuity or alternatively secured pension” substitute “ or an annuity ”, and

(b) for “, annuity or alternatively secured pension” substitute “ or annuity ”.

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

3

In paragraph 12 of Schedule 28 (pension rules: alternatively secured pension year), omit sub-paragraphs (3) and (4) (guaranteed pensions).

Maximum dependants' alternatively secured pension

4

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

Abolition of transfer lump sum death benefit

5

In section 168(1) (lump sum death benefit rule), omit paragraph (g) (transfer lump sum death benefit).

6

Omit section 172B(5)(a) (reduction for transfer lump sum death benefit).

7

In section 188(5) (amounts not to be treated as contributions), omit paragraph (b) and the word “and” before it.

8

In section 280(2) (index), omit the entry relating to transfer lump sum death benefit.

9

In Schedule 29, omit paragraph 19 (transfer lump sum death benefit).

10

In paragraph 17A of Schedule 36 (“enhanced protection”)—

(a) in sub-paragraph (1), insert “ or ” after paragraph (a) and omit paragraph (c) and the word “or” before it, and

(b) in sub-paragraph (2), omit “, or to a transfer lump sum death benefit being paid,”.

Untraceable members

11

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

Increase in rights on death

12

(1) Section 172B (increase in rights of connected person on death) is amended as follows.

(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) In subsection (4), for “(6)” substitute “ (5) ”.

(4) In subsection (7)(a), after “there” insert “ are ”.

(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13

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

Minimum alternatively secured pension and dependants' alternatively secured pension

14

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

15

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

Charity lump sum death benefit

16

(1) Paragraph 18 of Schedule 29 (charity lump sum death benefit) is amended as follows.

(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

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

(5) In sub-paragraph (2)(e), for “(or, if the member made no nomination, by the dependant).” substitute “ or, if the member made no nomination, by the dependant (or, if neither the member nor the dependant made a nomination, selected by the scheme administrator). ”

(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Discharge of liability to scheme chargeable payment

17

In section 268(6) (unauthorised payments surcharge and scheme chargeable payments), for “(assignment)” substitute “ , 172A, 172B, 172BA, 172C or 172D or arises under section 181A ”.

Non-UK schemes

18

(1) Schedule 34 (non-UK schemes application of certain charges) is amended as follows.

(2) In paragraph 1(6), omit the words from “but also” to the end.

(3) In paragraph 4(3), omit the words from “but also” to the end.

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

Inheritance tax

19

IHTA 1984 is amended as follows.

20

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

21

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

22

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

23

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

24

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

25

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

26

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

27

In Schedule 2 (provisions applying on reduction of tax), omit paragraph 6A.

Consequential amendment

28

(1) Section 636A of ITEPA 2003 (exemption for certain lump sums under registered pension schemes) is amended as follows.

(2) In subsection (1)—

(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) omit paragraph (f) and the word “or” before it.

(3) In subsection (7), omit “ “transfer lump sum death benefit”,”.

Commencement

29

(1) The amendments made by paragraphs 2(2) and 3 have effect in relation to deaths of members of registered pension schemes occurring on or after 6th April 2007.

(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) The amendments made by paragraphs 5 to 10, 18(2) and (3) and 28 have effect in relation to lump sum death benefits paid in respect of members of schemes whose deaths occur on or after 6th April 2007.

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

(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) The amendments made by paragraph 16(3) and (5) have effect in relation to charity lump sum death benefits paid on or after 6th April 2007.

(7) The amendment made by paragraph 17 is deemed to have come into force on 6th April 2007.

(8) The amendments made by paragraphs 19 to 27 have effect in relation to deaths, cases where scheme administrators become aware of deaths and cessations of dependency occurring on or after 6th April 2007.

SCHEDULE 20

Introduction

1

Part 4 of FA 2004 (pension schemes etc) is amended as follows.

Persons by whom registered pension schemes may be established

2

(1) Section 154 (persons by whom registered pension scheme may be established) is amended as follows.

(2) For subsection (1) substitute—

(1) An application to register a pension scheme may be made only if the pension scheme— (a) is an occupational pension scheme, or (b) has been established by a person with permission under FISMA 2000 to establish in the United Kingdom a personal pension scheme or a stakeholder pension scheme.

(3) After subsection (2) insert—

(2A) Subsection (1) is to be construed in accordance with section 22 of FISMA 2000, any relevant order under that section and Schedule 2 to that Act.

(4) Omit subsection (3).

(5) In subsection (4), omit “and section 155”.

3

Omit section 155 (persons by whom scheme may be established: supplementary).

4

In section 273 (members liable as scheme administrator)—

(a) in subsection (5)(a), omit “was established by a person or body specified in section 154(1)(a) to (g) (insurance companies etc) and”, and

(b) in subsection (7), omit “was established by a person or body specified in section 154(1)(a) to (g) and”.

Unauthorised payments reduced by amount of scheme sanction charge

5

In section 160 (unauthorised payments), after subsection (4) insert—

(4A) If an unauthorised member payment or unauthorised employer payment made to or in respect of a person would have been greater but for a reduction made in respect of the whole, or any proportion, of the amount which the scheme administrator considers may be the amount of the liability to the scheme sanction charge in respect of it, it is to be regarded for the purposes of this Part as increased by the amount of the reduction. (4B) But if the amount, or that proportion of the amount, of that liability is in fact less than the amount of the reduction, a subsequent payment of an amount not exceeding the difference between that amount and the amount of the reduction made— (a) to or in respect of the same person, and (b) before the end of the period of two years beginning with the date on which the unauthorised member payment or unauthorised employer payment was made, is not to be regarded for the purposes of this Part as an unauthorised member payment or unauthorised employer payment.

Surrenders

6

(1) Section 172A (surrender) is amended as follows.

(2) In subsection (5), after paragraph (d) insert—

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