Finance Act 2007

(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

• (c) section 292A of ITA 2007.

• (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

• (c) after subsection (5C) insert—

(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

• (c) after that subsection 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 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

• (c) in paragraph (d) omit “for Her Majesty's Revenue and Customs”.

• (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

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

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

• (c) rights under the policy became held for the purposes of the pension scheme before that date.

• (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,

• (c) rights under the policy became held for the purposes of the 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

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

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

• (c) rights under the policy became held for the purposes of the pension scheme before that date.

• (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,

• (c) rights under the policy became held for the purposes of the 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

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21

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22

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23

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24

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25

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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—

(da) a surrender made as part of a retirement-benefit activities compliance exercise, (db) a surrender of a prospective entitlement to pension death benefits within section 167(1) or lump sum death benefits within section 168(1) (or both) made in order to comply with the Employment Equality (Age) Regulations 2006 or Employment Equality (Age) Regulations (Northern Ireland) 2006 (or any regulations amending or replacing them),

.

• (3) In subsection (10), for “An” substitute “ For the purposes of this section an ”.

• (4) After that subsection insert—

(10A) For the purposes of this section a surrender relating to an arrangement under the pension scheme (“the old arrangement”) is made as part of a retirement-benefit activities compliance exercise if— (a) it is made in connection with the making of an arrangement under another pension scheme relating to the member (“the new arrangement”), (b) the old arrangement and the new arrangement relate to the same employment, (c) both the rights surrendered and the rights conferred under the new arrangement consist of or include a prospective entitlement to pension death benefits within section 167(1) or lump sum death benefits within section 168(1) (or both), (d) the surrender and the making of the new arrangement constitute or form part of a transaction the purpose of which is to secure that the activities of the pension scheme are limited to retirement-benefit activities within the meaning of section 255 of the Pensions Act 2004 or Article 232 of the Pensions (Northern Ireland) Order 2005, and (e) the rights surrendered and the rights conferred under the new arrangement are not significantly different.

Scheme pensions where ill-health condition met

7

• (1) Schedule 28 (pension rules) is amended as follows.

• (2) In paragraph 2(4) (scheme pensions: cases where cessation or reduction of pension is permitted), for paragraph (a) substitute—

(a) the reduction of the pension if the member became entitled to it by reason of the ill-health condition being met,

.

• (3) In paragraph 2A(2) (certain reductions not permitted if part of avoidance arrangements), for “the rate of which is reduced in accordance with paragraph (b) of sub-paragraph (4) of paragraph 2 but” substitute “ which is reduced in accordance with paragraph (a) of sub-paragraph (4) of paragraph 2, or the rate of which is reduced in accordance with paragraph (b) of that sub-paragraph, and ”.

Unsecured and dependants' unsecured pensions: reference periods

8

• (1) Schedule 28 (pension rules) is amended as follows.

• (2) In paragraph 10 (reference periods for unsecured pensions), for sub-paragraph (1) substitute—

(1) Subject as follows, the period of five unsecured pension years beginning with the first unsecured pension year, and each succeeding period of five unsecured pension years, is a “reference period”. (1A) Sub-paragraph (1B) applies if, at any time during a reference period (“the current reference period”), the member notifies the scheme administrator that the member wishes a new reference period to begin on the next day that is an anniversary of the reference date in relation to the current reference period. (1B) The scheme administrator may determine— (a) that the current reference period is to end immediately before that day (so that sub-paragraph (1) no longer applies), and (b) that (subject to any further operation of this sub-paragraph) the period of five unsecured pension years beginning with that day, and each succeeding period of five unsecured pension years, is to be a reference period. (1C) The first day of each reference period is, in relation to that period, “the reference date”.

• (3) In paragraph 24 (reference periods for dependants' unsecured pensions), for sub-paragraph (1) substitute—

(1) Subject as follows, the period of five unsecured pension years beginning with the first unsecured pension year, and each succeeding period of five unsecured pension years, is a “reference period”. (1A) Sub-paragraph (1B) applies if, at any time during a reference period (“the current reference period”), the dependant notifies the scheme administrator that the dependant wishes a new reference period to begin on the next day that is an anniversary of the reference date in relation to the current reference period. (1B) The scheme administrator may determine— (a) that the current reference period is to end immediately before that day (so that sub-paragraph (1) no longer applies), and (b) that (subject to any further operation of this sub-paragraph) the period of five unsecured pension years beginning with that day, and each succeeding period of five unsecured pension years, is to be a reference period. (1C) The first day of each reference period is, in relation to that period, “the reference date”.

Pension commencement lump sums

9

In section 166(2)(a) (when person becomes entitled to pension commencement lump sum), after “paid” insert “ (or, if the person dies before becoming entitled to the pension in connection with which it was anticipated it would be paid, immediately before death) ”.

10

In section 219(7) (multiple benefit crystallisation events occurring by reason of payment of lump sum death benefits treated as occurring immediately before death), insert at the end “ but immediately after any benefit crystallisation event occurring immediately before the individual's death by virtue of section 166(2). ”

11

• (1) Schedule 29 (authorised lump sums) is amended as follows.

• (2) In paragraph 1(1) (conditions to be met if lump sum is to be pension commencement lump sum)—

• (a) for paragraph (a) substitute—

(a) the member becomes entitled to it before reaching the age of 75, (aa) the member becomes entitled to it in connection with becoming entitled to a relevant pension (or dies after becoming entitled to it but before becoming entitled to the relevant pension in connection with which it was anticipated that the member would become entitled to it)

,

• (b) in paragraph (c), for “of three months beginning with” substitute “ beginning six months before, and ending one year after, ”, and

• (c) omit paragraph (e)(but not including the “and” at the end).

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

• (4) In paragraph 2 (“permitted maximum”), after sub-paragraph (5) insert—

(5A) But if the member dies before becoming entitled to the relevant pension in connection with which it was anticipated that the member would become entitled to the lump sum, the permitted maximum is the available portion of the member's lump sum allowance.

Winding-up lump sums

12

• (1) Paragraph 10 of Schedule 29 (winding-up lump sums) is amended as follows.

• (2) In sub-paragraph (1)(c), for “the member's employer” substitute “ any person by whom the member is employed at the time when the lump sum is paid, and who has made contributions under the pension scheme in respect of the member within the period of five years ending with the day on which it is paid, ”.

• (3) In sub-paragraph (3)—

• (a) for “are that the employer” substitute “ referred to in paragraph (c) of sub-paragraph (1) are that the person mentioned in that paragraph ”, and

• (b) omit paragraph (a).

Lump sum death benefits

13

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

Taxable property held by investment-regulated pension schemes: indirect holdings in REITs

14

• (1) Schedule 29A (taxable property held by investment-regulated pension schemes) is amended as follows.

• (2) In paragraph 20(1)(b) (indirect holdings: introduction to exception for REITs), for “paragraph 22 makes” substitute “ paragraphs 22, 24 and 25 make ”.

• (3) In paragraph 22 (REITs)—

• (a) in sub-paragraph (1), after paragraph (b) insert— “ and paragraph 24 applies to the pension scheme's interest in the vehicle. ”, and

• (b) omit sub-paragraph (2).

• (4) In paragraph 24(1) (conditions applying for paragraph 23), for “paragraph 23” substitute “ paragraphs 22 and 23 ”.

• (5) In paragraph 25(2) (provisions supplementing paragraph 24), for “23(1)” substitute “ 22 or 23 ”.

Transitional provision: primary protection

15

In paragraph 11D of Schedule 36 (lump sum death benefits to be taken into account as part of individual's pre-commencement rights only if paid under policy not significantly varied since 5th April 2006), after sub-paragraph (2) insert—