Legalize / United Kingdom / Public General Act

Finance Act 2009

Type Public General Act

Publication 2009-07-21

Last updated 2025-09-01

State In force

Department Statute Law Database

Source legislation.gov.uk

articles Not indexed

Reform history JSON API

(2) But if, in a tax year, the settlor is not UK resident, references in this Chapter to income arising under a settlement do not include income arising under the settlement in that tax year in respect of which the settlor, if actually entitled to it, would not be chargeable to income tax by deduction or otherwise because of not being UK resident. (3) And if, for a tax year, section 809B, 809D or 809E of ITA 2007 (remittance basis) applies to the settlor, references in this Chapter to income arising under a settlement include in relation to any relevant foreign income arising under the settlement in that tax year only such of it as is remitted to the United Kingdom (in that tax year or any subsequent tax year) in circumstances such that, if the settlor remitted it, the settlor would be chargeable to income tax. (4) See Chapter A1 of Part 14 of ITA 2007 for the meaning of “remitted to the United Kingdom” etc. (5) Where subsection (3) applies the remitted income is treated for the purposes of this Chapter as arising under the settlement in the tax year in which it is remitted.

FA 2008

14

In paragraph 86 of Schedule 7 to FA 2008 (remittance basis: transitional provisions), after sub-paragraph (4) insert—

(4A) For the purposes of sub-paragraph (4), section 648(2) to (5) of ITTOIA 2005 (and corresponding earlier enactments) do not apply (so that relevant foreign income which arose under a settlement in the tax year 2007-08 or any earlier tax year is to be treated as income for the tax year in which it arose).

Part 3 — Commencement

15

(1) The amendments made by paragraphs 2 to 5, 10, 11(2) and 14 have effect for the tax year 2008-09 and subsequent tax years.

(2) The other amendments made by this Schedule come into force on 22 April 2009.

SCHEDULE 28

Introduction

1

Chapter 6 of Part 3 of ITEPA 2003 (taxable benefits: cars) is amended as follows.

Abolition of “price cap”

2

(1) Section 121(1) (method of calculating cash equivalent of benefit of car) is amended as follows.

(2) In step 3, insert at the end— “ The resulting amount is the interim sum. ”

(3) Omit step 4 (interim sum to be £80,000 if step 3 amount exceeds £80,000).

3

In section 145(5) (modifications of provisions where car temporarily replaced), for “step 4” substitute “ step 3 ”.

4

In section 147(1) and (2) (classic cars), for “amount carried forward from” substitute “ interim sum calculated under ”.

5

In section 170(1) (Treasury orders increasing various amounts), omit paragraph (a) (amount in step 4 of section 121(1)).

Cars with CO2 emissions figures: the appropriate percentage

6

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Electrically propelled cars: the appropriate percentage

7

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8

In section 142 (special provision for cars registered before 1998)—

(a) in subsection (3) (cars without internal combustion engine with reciprocating pistons), for the words after “year is” substitute “ 32% ”, and

(b) omit subsection (4) (definition of electrically propelled car).

Consequential repeal

9

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Commencement

10

(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) The other amendments made by this Schedule have effect for the tax year 2011-12 and subsequent tax years.

SCHEDULE 29

Repos

1

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Stock lending

2

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Commencement

3

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SCHEDULE 30

Interest payments: arrangements appearing very likely to produce post-tax advantage

1

(1) In ITA 2007, after section 384 insert—

(384A) (1) Relief is not to be given under this Chapter for interest paid by a person on a loan if— (a) the loan is made to the person (“the borrower”) as part of arrangements which appear very likely to produce a post-tax advantage, and (b) the arrangements seem to have been designed to reduce any income tax or capital gains tax to which the borrower (or any person whose circumstances are like those of the borrower) would be liable apart from the arrangements. (2) Arrangements “appear very likely” to produce a post-tax advantage if (and only if) it would be reasonable to assume from either or both of— (a) the likely effect of the arrangements, and (b) the circumstances in which the arrangements, or any parts of the arrangements, are entered into or effected, that there is no risk, or only an insignificant risk, that they will not produce a post-tax advantage. (3) “Produce a post-tax advantage” means give rise to a sum or sums— (a) payable to the borrower or a person connected with the borrower, or (b) payable to any other person for the benefit of the borrower or a person connected with the borrower, of an amount (or aggregate amount) which, after making the appropriate tax adjustments, is equal to or greater than the relevant amount. (4) “The relevant amount” is the aggregate of— (a) the amount required to meet the borrower's obligations in respect of the loan, and (b) any amount which is used by the borrower in the same way as that which entitles the borrower to relief under this Chapter in respect of the loan and is not money lent to the borrower under any loan. (5) If, with a view to securing that the condition in subsection (1)(a) is not met, the arrangements make provision for securing that, in all or any circumstances in which they do not produce a post-tax advantage, they will produce a broadly compensatory amount, the arrangements are to be regarded for the purposes of subsection (2) as making provision for securing the production of a post-tax advantage in those circumstances. (6) “Produce a broadly compensatory amount” means give rise to a sum or sums payable as mentioned in subsection (3) of an amount (or aggregate amount) which, after making the appropriate tax adjustments, is not significantly less than the relevant amount. (7) For the purposes of subsections (3) and (6) causing the value of an asset to be obtainable, directly or indirectly, by a person is to be treated as equivalent to giving rise to a sum payable to the person of an amount equal to that value. (8) To make the appropriate tax adjustments for the purpose of subsection (3) or (6)— (a) if A exceeds B, deduct the amount of the excess from the amount (or aggregate amount), and (b) if B exceeds A, add the amount of the excess to the amount (or aggregate amount). (9) For the purposes of subsection (8)— - A is the amount of any income tax, any capital gains tax and any tax under the law of a territory outside the United Kingdom to which the borrower is liable in consequence of the arrangements, and - B is the amount by which the borrower's liability to income tax and capital gains tax is (or apart from subsection (1) would be) reduced in consequence of the arrangements. (10) Arrangements seem to have been designed to reduce any income tax or capital gains tax to which the borrower (or any person whose circumstances are like those of the borrower) would be liable apart from the arrangements if (and only if) it would be reasonable to assume from either or both of— (a) the likely effect of the arrangements, and (b) the circumstances in which the arrangements, or any parts of the arrangements, are entered into or effected, that the arrangements, or any parts of the arrangements, are designed to do so. (11) In this section “arrangements” means arrangements consisting of any number of agreements, understandings, schemes, transactions or other arrangements (whether or not legally enforceable); but in subsections (1)(a), (2), (5) and (9) the references to arrangements also include any related transactions. (12) In subsection (11) “related transactions” means transactions in the case of which it is reasonable to assume from either or both of— (a) the likely effect of the transactions, and (b) the circumstances in which the transactions are entered into or effected, that the transactions would not have been entered into or effected independently of the arrangements. (13) Transactions are not prevented from being related transactions just because the transactions— (a) are not between the same parties, or (b) are not between parties to the arrangements.

(2) The amendment made by sub-paragraph (1) has effect in relation to interest paid on or after 19 March 2009.

Amounts not fully recognised for accounting purposes

2

(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

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

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

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

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

(7) In section 317(5) of CTA 2009 (carrying value), before paragraph (a) insert—

(za) sections 311 and 312 (amounts not fully recognised for accounting purposes),

(8) The amendments made by this paragraph have effect in relation to periods of account beginning on or after 22 April 2009.

(9) But for the purposes of sub-paragraph (8) a period of account beginning before, and ending on or after, 22 April 2009 is to be treated as if so much of the period as falls before that date, and so much of the period as falls on or after that date, were separate periods of account.

3

(1) In CTA 2009, after section 599 insert—

(599A) (1) Section 599B applies for the purpose of determining the credits and debits which a company is to bring into account for a period for the purposes of this Part in the following case. (2) The case is where— (a) the company is, or is treated as, a party to a derivative contract in the period, (b) condition A or B is met, and (c) an amount is not fully recognised for the period in respect of the contract as a result of the application of generally accepted accounting practice in relation to the contract and the contribution or securities referred to in the condition that is met. (3) Condition A is that— (a) an amount (a “relevant capital contribution”) has at any time been contributed to the company which forms part of its capital for the period, and (b) an amount is not fully recognised for the period in respect of the relevant capital contribution as a result of the application of generally accepted accounting practice in relation to the derivative contract and the relevant contribution. (4) It does not matter for the purposes of subsection (3) whether the contribution forms part of the company's share capital or other capital for the period. (5) Condition B is that— (a) the company has issued securities that form part of its capital for the period, and (b) an amount is not fully recognised for the period in respect of the securities as a result of the application of generally accepted accounting practice in relation to the derivative contract and the securities. (6) For the purposes of this section an amount is not fully recognised for a period in respect of a contract of a company, a contribution to it or securities issued by it if— (a) no amount in respect of the contract, contribution or securities is recognised in determining its profit or loss for the period, or (b) an amount is so recognised in respect of only part of the contract, contribution or securities. (599B) (1) In determining the credits and debits which a company is to bring into account for the period referred to in section 599A(1) for the purposes of this Part in respect of the derivative contract mentioned in section 599A(2), the assumption in subsection (2) is to be made. (2) The assumption is that an amount in respect of the whole of the contract in question is recognised in determining the company's profit or loss for the period. (3) The credits and debits which are to be brought into account for the purposes of this Part by the company in respect of the contract are to be determined on the basis of fair value accounting.

(2) In section 702(3) of CTA 2009 (carrying value), before paragraph (c) insert—

(ca) sections 599A and 599B (amounts not fully recognised for accounting purposes),

(3) The amendments made by this paragraph have effect in relation to periods of account beginning on or after 22 April 2009.

(4) But for the purposes of sub-paragraph (3) a period of account beginning before, and ending on or after, 22 April 2009 is to be treated as if so much of the period as falls before that date, and so much of the period as falls on or after that date, were separate periods of account.

Loan relationships involving connected debtor and creditor where debits exceed credits

4

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Credits and debits for manufactured interest

5

(1) In section 540(3) of CTA 2009 (manufactured interest treated as interest under loan relationship), insert at the end “and the credits and debits to be brought into account in respect of manufactured interest for any period are those that are recognised in determining the company's profit or loss for the period in accordance with generally accepted accounting practice (but subject to the provisions of Part 5, including, in particular, section 307(3) and to paragraph 7A of Schedule 23A to ICTA).”

(2) In section 97(2) of FA 1996 (equivalent provision for accounting periods ending before 1 April 2009), insert at the end “and the credits and debits to be brought into account in respect of manufactured interest for any period are those that are recognised in determining the company's profit or loss for the period in accordance with generally accepted accounting practice (but subject to the provisions of this Chapter (including, in particular, section 84(1)) and to paragraph 7A of Schedule 23A to the Taxes Act 1988).”

(3) The amendments made by this paragraph have effect in relation to manufactured interest whenever paid, apart from payments treated under section 737A(5) of ICTA as made before 27 January 2009.

SCHEDULE 31

Introduction

1

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Paragraph 6

2

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Paragraph 7

3

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Paragraph 7A

4

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Paragraph 17

5

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Paragraph 17A

6

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Paragraph 22

7

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Paragraph 40

8

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Paragraph 41

9

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Paragraph 42

10

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Consequential repeal

11

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Commencement

12

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SCHEDULE 32

Disposal values: commencement of long funding finance leases

1

(1) Section 61 of CAA 2001 (disposal events and disposal values) is amended as follows.

(2) In the Table in subsection (2), for item 5A substitute—

5A. Commencement of the term of a long funding finance lease of the plant or machinery.	The greater of—the market value of the plant or machinery at the commencement of the term of the lease, andthe qualifying lease payments.

(3) After subsection (5) insert—

(5A) In item 5A of the Table “qualifying lease payments” means the minimum payments under the lease (including any initial payment), excluding the following— (a) so much of any payment as, under generally accepted accounting practice, falls (or would fall) to be treated as the gross return on investment in respect of the lease, (b) so much of any payment as represents charges for services, and (c) so much of any payment as represents qualifying UK or foreign tax (within the meaning of section 70YE) to be paid by the lessor.

(4) Omit subsections (6) to (9).

2

Accordingly, in FA 2008, in Schedule 20, omit paragraph 4.

3

(1) Section 25A of TCGA 1992 (long funding leases of plant or machinery: deemed disposals) is amended as follows.

(2) In subsection (2)(a), for “the value described in subsection (4)(a) or (b)” substitute “ the relevant disposal value ”.

(3) For subsections (4) to (4D) substitute—

(4) “Relevant disposal value” means— (a) in relation to a long funding finance lease, the disposal value described in item 5A of the table in section 61(2) of the Capital Allowances Act (disposal values), and (b) in relation to a long funding operating lease, the disposal value described in item 5B of that table.

(4) In subsection (5), omit “ “market value”,”.

4

Accordingly, in FA 2008, in Schedule 20, omit paragraph 5.

5

(1) The amendments made by paragraphs 1 and 2 have effect in relation to leases whose inception is on or after 13 November 2008.

(2) The amendments made by paragraphs 3 and 4 have effect in relation to leases whose inception is on or after 22 April 2009.

Disposal values: termination etc of long funding leases

6

In section 66 of CAA 2001 (list of provisions outside Chapter 5 of Part 2 of that Act about disposal values), in the list, insert at the appropriate place—

section 70E	long funding leases: disposal events and disposal values

7

(1) Section 70E of CAA 2001 (long funding leases: disposal events and disposal values) is amended as follows.

(2) In subsection (1), for paragraph (c) substitute—

(c) a relevant event occurs.

(3) After that subsection insert—

(1A) A relevant event occurs if— (a) the lease terminates, (b) the plant or machinery begins to be used wholly or partly for purposes other than those of the qualifying activity, or (c) the qualifying activity is permanently discontinued.

(4) In subsection (2)(a), for “termination of the lease” substitute “ relevant event ”.

(5) For subsections (3) to (8) substitute—

(2A) The amount of the disposal value is— $$(QE-QA)+R$where—QE is the person's qualifying expenditure on the provision of the plant or machinery,QA is the qualifying amount (see subsections (2B) to (2E)), andR is any relevant rebate (see subsections (2F) and (2G)).$ (2B) In the case of a long funding operating lease, “the qualifying amount” means the aggregate amount of the reductions made under section 502K of ICTA or section 148I of ITTOIA 2005 for periods of account in which the person was the lessee. (2C) In the case of a long funding finance lease, “the qualifying amount” means the aggregate of— (a) the payments made to the lessor by the person under the lease (including any initial payment), and (b) the payments made to the lessor by the person under a guarantee of any residual amount (as defined in section 70YE), subject to subsection (2D). (2D) The following are excluded from the “qualifying amount” under subsection (2C)— (a) so much of any payment as, in accordance with generally accepted accounting practice, falls (or would fall) to be shown in the person's accounts as finance charges in respect of the lease, (b) so much of any payment as represents charges for services, and (c) so much of any payment as represents qualifying UK or foreign tax (within the meaning of section 70YE) to be paid by the lessor. (2E) In the case of a long funding finance lease that is not a transaction at arm's length, “the qualifying amount” includes only so much of the amounts described in subsection (2C) as would reasonably be expected to have been paid if the lease had been such a transaction. (2F) “Relevant rebate” means— (a) in a case falling within subsection (1A)(a), any amount calculated by reference to the termination value that is payable for the benefit (directly or indirectly) of the person or another person connected with that person, or (b) in a case falling within subsection (1A)(b) or (c), any such amount that would have been so payable if, when the relevant event occurred, the lease had terminated and the plant or machinery had been sold for its market value at that time. (2G) In the case of a lease that is not a transaction at arm's length, “relevant rebate” includes any amount that would reasonably be expected to have fallen within subsection (2F) if the lease had been such a transaction. (2H) The amount of the disposal value brought into account under this section cannot be less than nil.

(6) In subsection (9), for “termination of the lease” substitute “ relevant event ”.

8

The amendments made by paragraphs 6 and 7 have effect in relation to cases where the relevant event occurs on or after 13 November 2008.

Capital receipts treated as income

9

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10

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11

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Transfer and long funding leaseback: restrictions on lessee’s allowances

12

In section 51A(10) of CAA 2001 (annual investment allowances), insert at the appropriate place— “ section 70DA(2) (transfer and long funding leaseback: no annual investment allowance for lessee), ”.

13

In section 52(5) of CAA 2001 (first-year allowances), insert at the appropriate place— “ section 70DA(2) (transfer and long funding leaseback: no first-year allowance for lessee), ”.

14

In section 57(3) of CAA 2001 (available qualifying expenditure), insert at the appropriate place— “ section 70DA (transfer and long funding leaseback); ”.

15

In CAA 2001, after section 70D insert—

(70DA) (1) This section applies where— (a) a person (“S”) transfers plant or machinery to another person (“B”), (b) at any time after the date of the transfer, the plant or machinery is available to be used by S, or a person (other than B) who is connected with S (“CS”), under a plant or machinery lease, and (c) that lease is a long funding lease. (2) No annual investment allowance or first-year allowance is to be made in respect of the expenditure of S or CS under the lease. (3) The amount, if any, by which E exceeds D is to be left out of account in determining the available qualifying expenditure of S or CS. (4) E is the capital expenditure of S or CS on the provision of the plant or machinery under the long funding lease. (5) If S is required to bring a disposal value into account under this Part because of the transfer referred to in subsection (1)(a), D is that disposal value. (6) Otherwise, D is whichever of the following is the smallest— (a) the market value of the plant or machinery; (b) if S incurred capital expenditure on the provision of the plant or machinery before the transfer referred to in subsection (1)(a), the amount of that expenditure; (c) if a person connected with S incurred capital expenditure on the provision of the plant or machinery before that transfer, the amount of that expenditure. (7) Section 70Y(3) applies to references in this section to a transfer of plant or machinery by a person. (8) For the purposes of this section a transfer involving the grant of a lease takes place on the commencement of the term of the lease.

16

In section 70H of CAA 2001 (lessee: requirement for tax return treating lease as long funding lease), after subsection (1B) insert—

(1C) In a case in which paragraphs (a) and (b) of subsection (1) of section 70DA (leaseback of plant or machinery) are satisfied, subsection (1) of this section does not apply to the lease referred to in section 70DA(1)(b).

17

The amendments made by paragraphs 12 to 16 have effect in relation to cases where the commencement of the term of the lease referred to in subsection (1)(b) of section 70DA of CAA 2001 is on or after 13 November 2008.

Transfer followed by hire-purchase etc: restrictions on hirer’s allowances

18

In section 51A(10) of CAA 2001 (annual investment allowances), after “218A” insert “ , 229A(2) ”.

19

In section 52(5) of CAA 2001 (first-year allowances), after “217” insert “ , 229A(2) ”.

20

In section 57(3) of CAA 2001 (available qualifying expenditure), after “228(2)” insert “ , 229A ”.

21

In CAA 2001, after section 229 insert—

(229A) (1) This section applies where— (a) a person (“S”) transfers plant or machinery to another person (“B”), (b) at any time after the date of the transfer, the plant or machinery is available to be used by S, or a person (other than B) who is connected with S (“CS”), (c) it is available to be so used under a contract which provides that S or CS is to or may become the owner of the plant or machinery on the performance of the contract, and (d) S or CS incurs capital expenditure on the provision of the plant or machinery under that contract. (2) No annual investment allowance or first-year allowance is to be made in respect of the expenditure of S or CS under the contract. (3) The amount, if any, by which E exceeds D is to be left out of account in determining the available qualifying expenditure of S or CS. (4) E is the capital expenditure of S or CS on the provision of the plant or machinery under the contract referred to in subsection (1)(c). (5) If S is required to bring a disposal value into account under this Part because of the transfer referred to in subsection (1)(a), D is that disposal value. (6) Otherwise, D is whichever of the following is the smallest— (a) the market value of the plant or machinery; (b) if S incurred capital expenditure on the provision of the plant or machinery before the transfer referred to in subsection (1)(a), the amount of that expenditure; (c) if a person connected with S incurred capital expenditure on the provision of the plant or machinery before that transfer, the amount of that expenditure. (7) Sections 214 and 215 do not apply in relation to the contract referred to in subsection (1)(c). (8) Section 70Y(3) applies to references in this section to a transfer of plant or machinery by a person. (9) For the purposes of this section a transfer involving the grant of a lease takes place on the commencement of the term of the lease.

22

The amendments made by paragraphs 18 to 21 have effect in relation to cases where the contract referred to in subsection (1)(c) of section 229A of CAA 2001 is entered into on or after 13 November 2008.

Finance leaseback

23

In section 216(1)(b)(i) of CAA 2001 (sale and leaseback etc), after “S” insert “ or by a person (other than B) who is connected with S ”.

24

In section 221(1)(b)(i) of CAA 2001 (meaning of “sale and finance leaseback”), for “a qualifying activity carried on by S” substitute “ an activity carried on by S or by a person (other than B) who is connected with S, ”.

25

The amendment made by paragraph 23 has effect—

(a) where the date of the transaction referred to in section 216(1)(a) of CAA 2001 is on or after 22 April 2009, and

(b) for the purposes of section 227 of that Act (which applies section 216(1)(b) of that Act), where the date of the transaction referred to in section 227(1)(a) is on or after 22 April 2009.

26

The amendment made by paragraph 24 has effect—

(a) where the date of the transaction referred to in section 221(1)(a) of CAA 2001 is on or after 22 April 2009, and

(b) for the purposes of section 228A of that Act (which applies section 221(1)(b) of that Act), where the date of the transaction referred to in section 228A(2)(a) is on or after 22 April 2009.

Interpretation

27

In this Schedule “commencement” and “inception” have the meaning given in section 70YI(1) of CAA 2001.

SCHEDULE 33

1

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2

In ITTOIA 2005, after section 148FC insert—

(148FD) (1) If a person is or has been a lessor under a long funding lease of a film, sections 148A to 148F do not apply in respect of the lease. (2) “Film” has the same meaning as in Part 15 of CTA 2009 (see section 1181 of that Act).

3

The amendments made by paragraph 2 have effect where the inception of the long funding lease is on or after 13 November 2008 (“the relevant date”).

4

Paragraphs 5 to 8 apply in respect of a long funding finance lease of a film—

(a) whose inception is before the relevant date, and

(b) which has not terminated before that date.

5

(1) ...section 148A of ITTOIA 2005 (rental earnings) does not apply to a period of account within sub-paragraph (2).

(2) A period of account is within this sub-paragraph if—

(a) it begins on or after the relevant date, and

(b) no rentals due (wholly or partly) in respect of any part of the period of account were due under the lease before the relevant date.

6

(1) For the purpose of calculating the profits of the lessor under the lease for a period of account—

(a) that ends on or after the relevant date, and

(b) that is not within paragraph 5(2),

treat the lessor as receiving for that period of account income attributable to the lease of an amount equal to the relevant amount (in addition to any amount brought into account under ... section 148A(2) of ITTOIA 2005).

(2) The “relevant amount” is an amount equal to so much of the rentals as—

(a) become due on or after the relevant date, and

(b) are due wholly or partly in respect of the period of account,

as would not reasonably be regarded as reflected in the rental earnings for that period of account.

(3) If any rental is paid for a period (“the rental period”) which—

(a) begins before the relevant date, or

(b) is not wholly within the period of account,

for the purposes of sub-paragraph (2) treat the amount of that rental as equal to the amount apportioned (on a time basis) in respect of so much of the rental period as falls on or after the relevant date and within the period of account.

7

... section 148B of ITTOIA 2005 (exceptional items) does not apply in relation to any profit or loss arising on or after the relevant date.

8

(1) If ...section 148C of ITTOIA 2005 (lessor making termination payment) applies in respect of the termination of the lease on or after the relevant date, a deduction is allowed (in calculating the profits of the lessor) in respect of any sum calculated by reference to the termination value paid to the lessee.

(2) The amount of the deduction is (if it would otherwise exceed that amount) limited to the total amount brought into account in respect of the lease by virtue of paragraph 5 or 6.

9

For the purposes of paragraphs 3 to 8—

(a) “film” has the same meaning as in Part 15 of CTA 2009 (see section 1181 of that Act),

(b) “rental earnings” has the same meaning as in ... section 148A of ITTOIA 2005, and

SCHEDULE 34

Introduction

1

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

Property rental business

2

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

Conditions for company

3

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

Conditions for balance of business

4

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

Entry notice: conditions for company

5

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

Profit: financing-cost ratio

6

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

Funds awaiting re-investment

7

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

Connected persons

8

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

SCHEDULE 35

Special annual allowance charge

1

(1) A charge to income tax, to be known as the special annual allowance charge, arises where—

(a) the total adjusted pension input amount for a tax year in the case of a high-income individual who is a member of one or more registered pension schemes, exceeds

(b) the amount of the special annual allowance.

(2) The individual is a high-income individual if the individual's relevant income for the tax year is £150,000 or more.

Paragraph 2 makes provision for calculating the individual's relevant income.

(3) Paragraphs 3 to 16 explain what is the total adjusted pension input amount.

(4) The special annual allowance is £20,000 (but subject to paragraph 17).

(5) But if, in calculating the total adjusted pension input amount of the individual for the tax year, a deduction is made in respect of—

(a) protected pension input amounts (see paragraphs 7 to 14), or

(b) a pre-22 April 2009 pension input amount that is such an amount by virtue of paragraph 16(3),

(or both) the special annual allowance is £20,000 less the amount of the deduction or, if the deduction is £20,000 or more, is nil.

(6) The person liable to the special annual allowance charge is the individual.

(7) The individual is liable to the special annual allowance charge whether or not—

(a) the individual, and

(b) the scheme administrator of the pension scheme or schemes concerned,

are UK resident, ordinarily UK resident or domiciled in the United Kingdom.

(8) The special annual allowance charge is a charge at the appropriate rate in respect of the amount by which—

(a) the total adjusted pension input amount, exceeds

(b) the amount of the special annual allowance.

For this purpose “the appropriate rate” is—

(a) 0% in relation to so much (if any) of the chargeable amount as, when added to the reduced net income amount, does not exceed the basic rate limit,

(b) 20% in relation to so much (if any) of the chargeable amount, as when so added, exceeds the basic rate limit but does not exceed the higher rate limit, and

In this sub-paragraph—

“chargeable amount” means the amount in respect of which the special annual allowance charge is charged, and

“the reduced net income amount” means the amount after taking step 3 in section 23 of ITA 2007 in the case of the individual for the tax year.

(9) But where—

(a) the individual's total pension input amount under section 229 of FA 2004 (annual allowance charge) for the tax year, exceeds

(b) the amount of the annual allowance for the tax year (see section 228 of that Act and orders made under it),

the amount in respect of which the special annual allowance charge is charged is reduced by the amount of the excess.

(10) In calculating the individual's liability to income tax for the tax year the amount of any income tax to which the individual is liable under this section is to be added at Step 7 of the calculation in section 23 of ITA 2007 (which applies as if this Schedule were a provision listed in section 30 of that Act).

(11) The amount in respect of which the special annual allowance charge is charged is not to be treated as income for any purpose of the Tax Acts.

Calculation of relevant income

2

(1) To find the individual's relevant income for the tax year take the following steps—

Step 1

Identify the individual's total income.

Step 2

Add the amount of any deductions made from any employment income of the individual for the tax year under section 193(2) of FA 2004 or made under Chapter 2 of Part 5 of ITEPA 2003 in accordance with paragraph 51 of Schedule 36 to FA 2004.

Step 3

Deduct the amount of any relief under the provisions listed in section 24 of ITA 2007, other than sections 193(4) and 194(1) of FA 2004, to which the individual is entitled for the tax year.

Step 4

Deduct the aggregate amount of any relevant contributions, but subject to a maximum of £20,000.

Step 5

Add any amount by which what would otherwise be general earnings or specific employment income of the individual for the tax year has been reduced by a post-22 April 2009 salary sacrifice scheme.

Step 6

If in the tax year the individual makes, or is treated under section 426 of ITA 2007 as making, a gift that is a qualifying donation for the purposes of Chapter 2 of Part 8 of that Act (gift aid), deduct the grossed up amount of the gift (that is, the amount of the gift grossed up by reference to the basic rate for the tax year).

The result is the individual's relevant income for the tax year unless the result is less than £150,000 and the following provisions provide that the individual's relevant income is to be a different amount.

(2) If the amount arrived at under sub-paragraph (1) is less than £150,000, take the steps in that sub-paragraph in relation to—

(a) the tax year before the tax year concerned, and

(b) the tax year before that.

If the result is £150,000 or more for either or both of those earlier tax years the individual's relevant income for the tax year is to be assumed to be £150,000.

(3) If there is a scheme the main purpose, or one of the main purposes, of which is to secure that the individual's relevant income for the tax year is less than £150,000, it is to be assumed to be £150,000.

(4) In step 4 in sub-paragraph (1) “relevant contributions” are—

(a) contributions which are relievable pension contributions in relation to the individual and are paid in the tax year,

(b) contributions in respect of which the individual is entitled to a tax reduction under section 788 of ICTA and which are paid in the tax year, and

(c) contributions paid by the individual for which a deduction is given under Chapter 2 of Part 5 of ITEPA 2003 for the tax year in accordance with paragraph 51 of Schedule 36 to FA 2004.

(5) In step 5 in sub-paragraph (1) “a post-22 April 2009 salary sacrifice scheme” is a scheme made on or after 22 April 2009 in pursuance of which—

(a) the individual gives up the right to receive general earnings or specific employment income, and

(b) an employer of the individual or any other person agrees to pay contributions (or additional contributions) to a pension scheme in respect of the individual or otherwise to secure an increase in the amount of benefits to which the individual or any person who is a dependant of, or is connected with, the individual is actually or prospectively entitled under a pension scheme.

(6) Section 993 of ITA 2007 (meaning of “connected” person) applies for the purposes of sub-paragraph (5).

Total adjusted pension input amount: general

3

(1) The total adjusted pension input amount is to be calculated as follows.

(2) Arrive at an amount in the same way as the total pension input amount would be arrived at for the purposes of the annual allowance charge in accordance with sections 229 to 237 of FA 2004 (assuming that it were necessary to arrive at it for that purpose) but subject to—

(a) the modifications of those sections specified in paragraphs 4 and 5, and

(b) where paragraph 6 applies, the provisions of that paragraph.

(3) Then reduce the amount so arrived at by the aggregate of—

(a) any protected pension input amounts (see paragraphs 7 to 14), and

(b) any relevant refunded amounts (see paragraph 15),

and, if the tax year is the tax year 2009-10, any pre-22 April 2009 pension input amount (see paragraph 16).

Total adjusted pension input amount: modifications of sections 229 to 237 of FA 2004

4

(1) Section 229(3) of FA 2004 (no pension input amount for year in which individual becomes entitled to all benefits under arrangement or dies) has effect for arriving at an amount under paragraph 3(2) in relation to an arrangement only if condition A or B is met.

(2) Condition A is that—

(a) the arrangement is a defined benefits arrangement under a pension scheme,

(b) at the time when the individual becomes entitled to all the benefits that may be provided to the individual under the arrangement or dies, there are at least 20 persons in respect of whom defined benefits arrangements subsist under the pension scheme under which benefits are accruing or scheme pensions are being paid, and

(c) the individual's becoming entitled to any of the benefits that may be provided to or in respect of the individual under the arrangement is not part of a scheme the main purpose, or one of the main purposes, of which is to avoid or reduce liability to the special annual allowance charge, the annual allowance charge or the lifetime allowance charge.

(3) Condition B is that—

(a) the arrangement is under an occupational pension scheme, a public service pension scheme or a group personal pension scheme,

(b) the individual's entitlement to the benefits mentioned in section 229(3)(a) of FA 2004 arises only because the ill-health condition is satisfied, and

(c) the individual's becoming entitled to any of the benefits that may be provided to or in respect of the individual under the arrangement is not part of a scheme the main purpose, or one of the main purposes, of which is to avoid or reduce liability to the special annual allowance charge, the annual allowance charge or the lifetime allowance charge.

5

(1) Sections 230(1), 233(1) and 234(1) of FA 2004 have effect for arriving at an amount under paragraph 3(2) as if “the pension input period of the arrangement that ends in” were omitted.

(2) Sections 230 to 237 of FA 2004 have effect for arriving at an amount under paragraph 3(2) as if “tax year” were substituted for “ pension input period ” in all other places.

Total adjusted pension input amount: modification in cases of avoidance scheme

6

(1) This paragraph applies if there is a scheme the main purpose, or one of the main purposes, of which is to avoid or reduce liability to the special annual allowance charge, the annual allowance charge or the lifetime allowance charge by reducing the amount arrived at in accordance with paragraph 3(2) in relation to an arrangement under a pension scheme for the tax year (or for reducing that amount and the amount so arrived at for other tax years).

(2) If the amount calculated under sub-paragraph (3) exceeds that arrived at in accordance with paragraph 3(2) in relation to the arrangement for the tax year, the amount so calculated is to be treated as if it were the amount so arrived at.

(3) The amount is calculated by deducting—

(a) the amount of the consideration that might be expected to be received in respect of an assignment (or assignation) of the benefits to which the individual or any dependant of the individual has a prospective entitlement under the arrangement at the beginning of the tax year, from

(b) the amount of the consideration that might be expected to be received in respect of an assignment (or assignation) of the benefits to which the individual or any dependant of the individual has a prospective entitlement under the arrangement at the end of the tax year.

(4) That calculation is to be made on the assumptions that—

(a) the benefits are capable of assignment (or assignation),

(b) the assignment (or assignation) is by a transaction between parties at arm's length, and

(5) If the arrangement ceases to exist during the tax year, the reference in sub-paragraph (3)(b) to the end of the tax year is to the time immediately before it ceases to exist.

(6) Section 236 of FA 2004 applies for adjusting the amount in sub-paragraph (3)(b) as for adjusting the closing value of an individual's rights as calculated under section 234(5) of that Act (but as if references to the pension input period were to the tax year and whether or not the arrangement is a defined benefits arrangement).

Protected pension input amounts: general

7

(1) The following paragraphs make provision for protected pension input amounts in respect of arrangements under registered pension schemes—

(a) paragraph 8 makes provision about existing defined benefits arrangements,

(b) paragraph 9 makes provision about existing cash balance arrangements,

(c) paragraph 10 makes provision about other existing money purchase arrangements under occupational pension schemes and public service pension schemes,

(d) paragraph 11 makes provision about other existing money purchase arrangements under other schemes,

(e) paragraph 12 makes provision about existing hybrid arrangements, ... , and

(g) paragraph 13A makes provision about single contributions made in accordance with agreements entered into not later than 22 April 2009.

(f) paragraph 13 makes provision about new and re-activated arrangements.

(2) Paragraph 14 makes anti-avoidance provision in relation to all the varieties of arrangements covered by paragraphs 8 to 13A.

Protected pension input amounts: existing defined benefits arrangements

8

(1) This paragraph applies in respect of a defined benefits arrangement if the arrangement is under an occupational pension scheme or a public service pension scheme.

(2) If the individual pays relevant added years contributions under the arrangement in the tax year, the amount arrived at under paragraph 3(2) in relation to the arrangement is a protected pension input amount to the extent that it is attributable to those contributions.

(3) Relevant added years contributions are contributions paid—

(a) with a view to securing that the calculation of benefits under the arrangement is by reference to a period of service in excess of pensionable service by the individual,

(b) in pursuance of an agreement which was made before noon on 22 April 2009 or made pursuant to a written application received by or on behalf of the scheme administrator of the pension scheme before that time,

(c) on a quarterly or more frequent basis during the period beginning with that date or (if later) when they first became payable and ending with the relevant end date without any failure to pay contributions payable during that period on more than an insignificant number of occasions, and

(d) at a rate which has not increased during that period otherwise than in accordance with an agreement made before noon on 22 April 2009 or made pursuant to a written application received by or on behalf of the scheme administrator of the pension scheme before that time.

(4) To the extent that the amount arrived at under paragraph 3(2) in relation to the arrangement is attributable otherwise than to the paying of relevant added years contributions it is a protected pension input amount if the conditions set out in sub-paragraph (4A) or (4B) are met.

(4A) The conditions in this sub-paragraph are that—

(a) benefits have been accruing to or in respect of the individual under the arrangement since before 22 April 2009 and until the relevant end date, and

(b) there is no material change in the rules of the pension scheme under which benefits to or in respect of the individual are calculated under the arrangement in the period beginning with 22 April 2009 and ending with the relevant end date.

(4B) The conditions in this sub-paragraph are that—

(a) benefits began accruing to or in respect of the individual under the arrangement on or after 22 April 2009 but before the relevant end date and continued until that date,

(b) the arrangement was made in accordance with the terms of a written agreement between the individual and the employer made not later than 22 April 2009, and

(c) there is no material change in the rules of the pension scheme under which benefits to or in respect of the individual are calculated under the arrangement in the period beginning with the date on which benefits began accruing under that arrangement and ending with the relevant end date.

(4C) If the conditions in sub-paragraph (4D) are met, the amount arrived at under paragraph 3(2) in relation to the arrangement which is attributable otherwise than to the paying of relevant added years contributions is a protected pension input amount to the extent specified in sub-paragraph (4F).

(4D) The conditions in this sub-paragraph are that—

(a) the arrangement was made no later than the end of the period of 3 months beginning with the date on which the individual ceased being an active member of a pension scheme other than that under which it is an arrangement (“the cessation date”),

(b) the cessation date was on or after 22 April 2009,

(c) the arrangement under that other pension scheme by reference to which the individual was an active member of that pension scheme (“the old arrangement”) was one in the case of which some or all of the benefits accruing under the arrangement were accruing in circumstances in which the amount arrived at under paragraph 3(2) in relation to the old arrangement was to any extent a protected pension input amount by virtue of this paragraph,

(d) the individual does not make more than one arrangement under a pension scheme other than that under which the old arrangement was an arrangement in the period of 3 months beginning with the cessation date,

(e) the individual made the arrangement for one of the reasons set out in sub-paragraph (4E),

(f) the old arrangement has not been re-activated within the meaning of paragraph 13(7) on or after the cessation date,

(g) there is no material difference between the rules of the pension scheme under which benefits to or in respect of the individual are calculated under the arrangement and the rules of the pension scheme under which such benefits were calculated under the old arrangement, and

(h) there is no material change in the rules of the pension scheme under which benefits to or in respect of the individual are calculated under the arrangement in the period beginning with the date on which benefits began accruing under the arrangement and ending with the relevant end date.

(4E) The reasons referred to in sub-paragraph (4D)(e) are that—

(a) the individual’s employer had entered into a re-organisation of its pension provisions and the making of the arrangement was a consequence of that re-organisation, or

(b) the making of the arrangement was due to a relevant business transfer within the meaning of paragraph 12(8A) of Schedule 36 to FA 2004 .

(4F) The amount arrived at under paragraph 3(2) in relation to the arrangement is a protected pension input amount to the extent that it does not exceed the amount which would have been a protected pension input amount in respect of the old arrangement for the accrual period had the old arrangement continued during that period.

(4G) The accrual period is the period in the tax year—

(a) beginning with the date on which the individual became an active member of a pension scheme by reference to the arrangement (“the joining date”) or, if the joining date was in an earlier tax year, the first day of the tax year, and

(b) ending with the last day of the tax year or, if earlier, the date on which the individual ceased being an active member of the pension scheme by reference to the arrangement.

(5) If—

(a) there is a material change in the rules of the pension scheme under which benefits are calculated under the arrangement during a period referred to in sub-paragraph (4A)(b), (4B)(c) or (4D)(h), and

(b) the amount arrived at under paragraph 3(2) in relation to the arrangement would have been a protected pension input amount under sub-paragraph (4) or (4C) had it not been for the material change,

the amount so arrived at, to the extent that it is attributable otherwise than to the paying of relevant added years contributions, is a protected pension input amount to the extent that it is not attributable to that change.

(6) But even in that case the whole of the amount so arrived at, to the extent that it is so attributable, is a protected pension input amount if the material change affects at least 50 active members of the pension scheme.

(7) In this paragraph “the relevant end date” means the end of the tax year or, if earlier, the time when benefits cease to accrue to or in respect of the individual under the arrangement.

Protected pension input amounts: existing cash balance arrangements

9

(1) This paragraph applies in respect of a cash balance arrangement if the arrangement is under an occupational pension scheme or a public service pension scheme.

(2) If the individual pays relevant additional voluntary contributions under the arrangement in the tax year, the amount arrived at under paragraph 3(2) in relation to the arrangement is a protected pension input amount to the extent that it is attributable to those contributions.

(3) Relevant additional voluntary contributions are additional voluntary contributions paid—

(a) in pursuance of an agreement which was made before noon on 22 April 2009 or made pursuant to a written application received by or on behalf of the scheme administrator of the pension scheme before that time,

(b) on a quarterly or more frequent basis during the period beginning with that date or (if later) when they first became payable and ending with the relevant end date without any failure to pay contributions payable during that period on more than an insignificant number of occasions, and

(c) at a rate which has not increased during that period otherwise than in accordance with an agreement made before noon on 22 April 2009 or made pursuant to a written application received by or on behalf of the scheme administrator of the pension scheme before that time.

(4) To the extent that the amount arrived at under paragraph 3(2) in relation to the arrangement is attributable otherwise than to the paying of relevant additional voluntary contributions it is a protected pension input amount if the conditions set out in sub-paragraph (4A) or (4B) are met.

(4A) The conditions in this sub-paragraph are that—

(a) benefits have been accruing to or in respect of the individual under the arrangement since before 22 April 2009 and until the relevant end date, and

(b) there is no material change in the rules of the pension scheme under which benefits to or in respect of the individual are calculated under the arrangement in the period beginning with 22 April 2009 and ending with the relevant end date.

(4B) The conditions in this sub-paragraph are that—

(a) benefits began accruing to or in respect of the individual under the arrangement on or after 22 April 2009 but before the relevant end date and continued until that date,

(b) the arrangement was made in accordance with the terms of a written agreement between the individual and the employer made not later than 22 April 2009, and

(c) there is no material change in the rules of the pension scheme under which benefits to or in respect of the individual are calculated under the arrangement in the period beginning with the date on which benefits began accruing under that arrangement and ending with the relevant end date.

(4C) If the conditions in sub-paragraph (4D) are met, the amount arrived at under paragraph 3(2) in relation to the arrangement which is attributable otherwise than to the paying of relevant additional voluntary contributions is a protected pension input amount to the extent specified in sub-paragraph (4E).

(4D) The conditions in this sub-paragraph are that—

(a) the arrangement was made no later than the end of the period of 3 months beginning with the date on which the individual ceased being an active member of a pension scheme other than that under which it is an arrangement (“the cessation date”),

(b) the cessation date was on or after 22 April 2009,

(c) the arrangement under that other pension scheme by reference to which the individual was an active member of that pension scheme (“the old arrangement”) was one in the case of which some or all of the benefits accruing under the arrangement were accruing in circumstances in which the amount arrived at under paragraph 3(2) in relation to the old arrangement was to any extent a protected pension input amount by virtue of this paragraph,

(d) the individual does not make more than one arrangement under a pension scheme other than that under which the old arrangement was an arrangement in the period of 3 months beginning with the cessation date,

(e) the individual made the arrangement for one of the reasons set out in paragraph 8(4E),

(f) the old arrangement has not been re-activated within the meaning of paragraph 13(7) on or after the cessation date,

(g) there is no material difference between the rules of the pension scheme under which benefits to or in respect of the individual are calculated under the arrangement and the rules of the pension scheme under which such benefits were calculated under the old arrangement, and

(h) there is no material change in the rules of the pension scheme under which benefits to or in respect of the individual are calculated under the arrangement in the period beginning with the date on which benefits started accruing under the arrangement and ending with the relevant end date.

(4E) The amount arrived at under paragraph 3(2) is a protected pension input amount to the extent that it does not exceed the amount which would have been a protected pension input amount in respect of the old arrangement for the accrual period had the old arrangement continued during that period.

(4F) For the purposes of sub-paragraph (4E) the accrual period has the meaning set out in paragraph 8(4G).

(5) If—

(a) there is a material change in the rules of a pension scheme under which benefits are calculated under an arrangement during a period referred to in sub-paragraph (4A)(b), (4B)(c) or (4D)(h), and

(b) the amount arrived at under paragraph 3(2) in relation to the arrangement would have been a protected pension input amount under sub-paragraph (4) or (4C) had it not been for the material change,

the amount so arrived at, to the extent that it is attributable otherwise than to the paying of relevant additional voluntary contributions, is a protected pension input amount to the extent that it is not attributable to that change.

(6) But even in that case the whole of the amount so arrived at, to the extent that it is so attributable, is a protected pension input amount if the material change affects at least 50 active members of the pension scheme.

(7) In this paragraph “the relevant end date” means the end of the tax year or, if earlier, the time when benefits cease to accrue to or in respect of the individual under the arrangement.

Protected pension input amounts: other existing money purchase arrangements under occupational and public service pension schemes

10

(1) This paragraph applies in respect of a money purchase arrangement, other than a cash balance arrangement, if the arrangement is under an occupational pension scheme or a public service pension scheme or forms part of a group personal pension scheme.

(2) If the individual pays relevant additional voluntary contributions under the arrangement in the tax year, the amount arrived at under paragraph 3(2) in relation to the arrangement is a protected pension input amount to the extent that it is attributable to those contributions.

(3) Relevant additional voluntary contributions are additional voluntary contributions paid—

(a) in pursuance of an agreement which was made before noon on 22 April 2009 or made pursuant to a written application received by or on behalf of the scheme administrator of the pension scheme before that time,

(b) on a quarterly or more frequent basis during the period beginning with that date of (if later) when they first became payable and ending with the relevant end date without any failure to pay contributions payable during that period on more than an insignificant number of occasions, and

(c) at a rate which has not increased during that period otherwise than in accordance with an agreement made before noon on 22 April 2009 or made pursuant to a written application received by or on behalf of the scheme administrator of the pension scheme before that time.

(4) To the extent that the amount arrived at under paragraph 3(2) in relation to the arrangement is attributable to contributions other than relevant additional voluntary contributions it is a protected pension input amount to the extent specified in—

(a) sub-paragraph (5) if the individual has been an active member of the pension scheme by reference to the arrangement since before 22 April 2009 and until the relevant end date, or

(b) sub-paragraph (5A) if the individual has been an active member of the pension scheme by reference to the arrangement since on or after 22 April 2009 (“the joining date”) and until the relevant end date and the arrangement was entered into in accordance with the terms of a written agreement between the individual and the employer made not later than 22 April 2009.

(5) That amount is a protected pension input amount to the extent that it is attributable to contributions paid—

(a) on a quarterly or more frequent basis since before 22 April 2009 without any failure to pay contributions payable on or after that date on more than an insignificant number of occasions, and

(b) at a rate which has not increased during the period beginning with that date and ending with the relevant end date otherwise than in accordance with an agreement made before noon on 22 April 2009 or made pursuant to a written application received by or on behalf of the scheme administrator of the pension scheme before that time.

(5A) That amount is a protected pension input amount to the extent that it is attributable to contributions paid—

(a) on a quarterly or more frequent basis without any failure to pay contributions on or after the joining date on more than an insignificant number of occasions, and

(b) at a rate which has not increased during the period beginning with the joining date and ending with the relevant end date otherwise than in accordance with the agreement referred to in sub-paragraph (4)(b).

(5B) To the extent that the amount arrived at under paragraph 3(2) in relation to the arrangement is attributable to contributions other than relevant additional voluntary contributions it is a protected pension input amount to the extent specified in sub-paragraph (5C) if—

(a) the arrangement was made no later than the end of the period of 3 months beginning with the date on which the individual ceased being an active member of a pension scheme other than that under which it is an arrangement (“the cessation date”),

(b) the cessation date was on or after 22 April 2009,

(c) the arrangement under that other pension scheme by reference to which the individual was an active member of that pension scheme (“the old arrangement”) was one in the case of which the amount arrived at under paragraph 3(2) in relation to the old arrangement was to any extent a protected pension input amount by virtue of this paragraph,

(d) the individual did not make more than one such new arrangement in the period of one month beginning with the cessation date,

(e) the individual made the new arrangement for one of the reasons set out in paragraph 8(4E), and

(f) the old arrangement has not been re-activated within the meaning of paragraph 13(7) on or after the cessation date.

(5C) The amount is a protected pension input amount to the extent that it is attributable to contributions paid under the arrangement which—

(a) do not exceed the amount which would have been a protected pension input amount as a result of contributions made under the old arrangement for the accrual period had that arrangement continued during that period,

(b) are paid on a quarterly or more frequent basis from the date (“the joining date”) on which the individual became an active member of the pension scheme by reference to the arrangement without any failure to pay contributions payable on or after that date on more than an insignificant number of occasions, and

(c) are paid at a rate which is no higher than the rate at which the contributions under the old arrangement were paid and which has not increased during the period from the joining date and ending with the relevant end date.

(5D) For the purposes of sub-paragraph (5C) the accrual period has the meaning set out in paragraph 8(4G).

(6) In this paragraph “the relevant end date” means the end of the tax year or, if earlier, the time when the individual ceases to be an active member of the pension scheme by reference to the arrangement.

Protected pension input amounts: other existing money purchase arrangements under other pension schemes

11

(1) Sub-paragraph (2) applies in respect of a money purchase arrangement, other than a cash balance arrangement, if—

(a) the arrangement is under a scheme other than an occupational pension scheme or a public service pension scheme and does not form part of a group personal pension scheme, and

(b) the individual has been an active member of the pension scheme by reference to the arrangement since before 22 April 2009 and until the relevant end date.

(2) The amount arrived at under paragraph 3(2) in relation to the arrangement is a protected pension input amount to the extent that it is attributable to contributions paid—

(a) on a quarterly or more frequent basis since before 22 April 2009 without any failure to pay contributions payable on or after that date on more than an insignificant number of occasions, and

(b) at a rate which has not increased during the period beginning with that date and ending with the relevant end date otherwise than in accordance with an agreement made before that date.

(3) If the individual—

(a) was not an active member of the pension scheme by reference to the arrangement immediately before 22 April 2009, but

(b) a written application to become such an active member was received by or on behalf of the scheme administrator of the pension scheme before noon on 22 April,

the references to before 22 April 2009 (and to that date) in sub-paragraphs (1)(b) and (2) are to the date on which the individual became such an active member pursuant to the application.

(3A) If the individual—

(a) has been an active member of a pension scheme by reference to an arrangement (“the old arrangement”) in circumstances in which the amount arrived at under paragraph 3(2) in relation to the arrangement has been to any extent a protected pension input amount by virtue of this paragraph, and

(b) no later than the end of the period of 3 months beginning with the date on which the individual ceased being an active member of the pension scheme by reference to the old arrangement, made an arrangement (“the new arrangement”) which is a money purchase arrangement other than a cash balance arrangement under a different pension scheme which is neither an occupational pension scheme nor a public service pension scheme and does not form part of a group personal pension scheme,

the amount arrived at under paragraph 3(2) in relation to the new arrangement is a protected pension input amount to the extent specified in sub-paragraph (3B).

(3B) The amount is a protected pension input amount to the extent that it is attributable to contributions paid under the new arrangement which—

(a) are paid on a quarterly or more frequent basis from the date (“the joining date”) on which the individual became an active member of the pension scheme by reference to the new arrangement without any failure to pay contributions payable on or after that date on more than an insignificant number of occasions, and

(b) are paid at a rate which is no higher than the rate at which contributions under the old arrangement were paid and which has not increased during the period beginning with the joining date and ending with the relevant end date.

(3C) Sub-paragraph (3B) does not apply in relation to any contributions made under the new arrangement if—

(a) the old arrangement has been re-activated within the meaning of paragraph 13(7) on or after the joining date, or

(b) the individual has made more than one new arrangement on or after the joining date.

(4) In this paragraph “the relevant end date” means the end of the tax year or, if earlier, the time when the individual ceases to be an active member of the pension scheme by reference to the arrangement.

Protected pension input amounts: existing hybrid arrangements

12

(1) This paragraph applies in respect of a hybrid arrangement under a pension scheme if any one or more of paragraphs 8 to 11 would be applicable in relation to it.

(2) The amount arrived at under paragraph 3(2) in relation to the arrangement is a protected pension input amount if and to the extent of the greater or greatest amount that it would be if the arrangement were an arrangement under whichever (if any) of paragraphs 8 to 11 are applicable in relation to it.

(3) Paragraph 8 is applicable in relation to it as in relation to a defined benefits arrangement if, in any circumstances, the benefits that may be provided to or in respect of the individual under it are defined benefits.

(4) Paragraph 9 is applicable in relation to it as in relation to a cash balance arrangement if, in any circumstances, the benefits that may be provided to or in respect of the individual under it are cash balance benefits.

(5) Paragraph 10 or 11 is applicable in relation to it as in relation to a money purchase arrangement other than a cash balance arrangement if, in any circumstances, the benefits that may be provided to or in respect of the individual under it are other money purchase benefits.

Protected pension input amounts: new and re-activated arrangements

13

(1) This paragraph applies in respect of an arrangement if—

(a) the arrangement is made or re-activated on or after 22 April 2009,

(b) the arrangement—

(i) is under an occupational pension scheme or forms part of a group personal pension scheme and (in either case) relates to an employment of the individual, or

(ii) is a public service pension scheme,

(c) there is no material change in the rules of the pension scheme under which benefits are calculated under the arrangement in the relevant period or any such material change in the relevant period affects at least 50 active members of the pension scheme, and

(d) throughout the relevant period there are at least 20 persons in respect of whom arrangements subsist under the pension scheme under which benefits are accruing on the same basis as those under the arrangement.

(2) If the arrangement falls within sub-paragraph (1)(b)(i), this paragraph does not apply in respect of it if—

(a) the provision of benefits under it is not part of the normal pattern of pension provision made by the person who is the employer in relation to the employment of the individual for the employees of the employer generally, or

(b) the persons mentioned in sub-paragraph (1)(d) are not employees of that person.

(3) “The relevant period” is the period—

(a) beginning when the arrangement is made or re-activated, and

(b) ending at the same time as the tax year or, if earlier, the time when the individual ceases to be an active member of the pension scheme by reference to the arrangement.

(4) The amount arrived at under paragraph 3(2) in relation to the arrangement is a protected pension input amount except to the extent that it is attributable to the payment of added years contributions or additional voluntary contributions.

(5) “Added years contributions” are contributions paid with a view to securing that the calculation of benefits under the arrangement is by reference to a period of service in excess of pensionable service by the individual.

(6) An arrangement relates to an employment of the individual if—

(a) the earnings by reference to which benefits under the arrangement are calculated are earnings from the employment, or

(b) the person who is the employer in relation to the employment pays contributions under the arrangement in respect of the individual.

(7) An arrangement is “re-activated” if the individual, having ceased to be an active member of the pension scheme by reference to the arrangement, again becomes such a member.

Protected pension input amounts: anti-avoidance

14

No amount is a protected pension input amount by virtue of any of paragraphs 8 to 13A if the individual is during the tax year a party to a scheme the main purpose, or one of the main purposes, of which is to avoid or reduce liability to the special annual allowance charge, the annual allowance charge or the lifetime allowance charge.

Relevant refunded amounts

15

(1) The amount arrived at under paragraph 3(2) in relation to an arrangement is a relevant refunded amount to the extent that it does not exceed the amount of a contributions refund lump sum paid to the individual (or the personal representatives of the individual).

(2) A lump sum is a contributions refund lump sum if—

(a) it is paid to the individual by a pension scheme in respect of an arrangement,

(b) it is not a lump sum of any of the descriptions listed in section 166(1) of FA 2004,

(d) its amount does not exceed the adjusted contributions amount for the tax year, and

(e) the individual is a high-income individual for the tax year.

(3) The adjusted contributions amount for the tax year is the amount of any relevant relievable pension contributions less any relevant deductions.

(4) “Relevant relievable pension contributions” are contributions which—

(a) are relievable pension contributions in relation to the individual, and

(b) are paid to the pension scheme under the arrangement in the tax year,

but subject as follows.

(5) If the pension scheme is an occupational pension scheme or a public service pension scheme or forms part of a group personal pension scheme, contributions are relevant relievable pension contributions only if they—

(a) are additional voluntary contributions, and

(b) are not relevant additional voluntary contributions within the meaning of paragraph 9(3) or 10(3).

(6) If the pension scheme is not an occupational pension scheme or a public service pension scheme and does not form part of a group personal pension scheme—

(a) contributions are not relevant relievable pension contributions if they fall within paragraph 11(2), and

(b) if the tax year is the tax year 2009-10, contributions paid before 22 April 2009 are not relevant relievable pension contributions if they were paid pursuant to an agreement for the payment of contributions on a quarterly or more frequent basis.

(7) “Relevant deductions” are—

(a) the amount of any previous contributions refund lump sum previously paid by the pension scheme since the end of the tax year in respect of the arrangement,

(b) the amount of any pension debit to which the rights of the individual under the arrangement became subject in the tax year,

(c) where during the tax year there was a transfer relating to the individual of any sums or assets held for the purposes of, or representing accrued rights under, the arrangement so as to become held for the purposes of, or to represent rights under any other pension scheme that is a registered pension scheme or a qualifying recognised overseas pension scheme, the amount of any sums, and the market value of any assets, transferred, and

(d) the amount crystallised by any benefit crystallisation events which occurred in relation to the individual and the arrangement in the tax year.

Pre-22 April 2009 pension input amount

16

(1) This paragraph makes provision for the extent (if any) to which the amount arrived at under paragraph 3(2) in relation to an arrangement is a pre-22 April 2009 pension input amount.

(2) In relation to a defined benefits arrangement or cash balance arrangement, a pre-22 April 2009 pension input amount is such proportion of what would otherwise be the amount arrived at under paragraph 3(2) as, on a just and reasonable apportionment, relates to the period beginning with 6 April 2009 and ending with 21 April 2009.

(3) In relation to a money purchase arrangement that is not a cash balance arrangement, a pre-22 April 2009 pension input amount is so much of the amount of the contributions within section 233 of FA 2004 as are paid in the period beginning with 6 April 2009 and ending with 22 April 2009, other than any contributions paid pursuant to an agreement for the payment of contributions on a quarterly or more frequent basis.

(4) In relation to a hybrid arrangement, a pre-22 April 2009 pension input amount is the greater or greatest of the amounts under the sub-paragraph or sub-paragraphs applicable in relation to it.

(5) For this purpose—

(a) sub-paragraph (2) is applicable in relation to the arrangement if, in any circumstances, the benefits that may be provided to or in respect of the individual under it are defined benefits or cash balance benefits, and

(b) sub-paragraph (3) is applicable in relation to the arrangement if, in any circumstances, the benefits that may be provided to or in respect of the individual under it are other money purchase benefits.

Increased special annual allowance

17

(1) This paragraph has effect where the mean of the infrequent money purchase contributions amount for the tax years 2006-07, 2007-08 and 2008-09 (“the relevant mean”) exceeds £20,000.

(2) Where the relevant mean is less than £30,000, this Schedule has effect as if the references in paragraph 1(4) and (5) to £20,000 were instead to the relevant mean.

(3) Where the relevant mean is £30,000 or more, this Schedule has effect as if those references were instead to £30,000.

(4) The “infrequent money purchase contributions amount” for a tax year is the aggregate of any relevant contributions paid in the tax year—

(a) under money purchase arrangements, other than cash balance arrangements, under registered pension schemes, and

(b) less frequently than on a quarterly basis;

(and so is nil if no such contributions were so paid).

(5) But if the infrequent money purchase contributions amount for a tax year would otherwise be greater than the annual allowance for the tax year, it is to be taken to be the annual allowance for the tax year.

(6) “Relevant contributions” means contributions which are—

(a) relievable pension contributions by or on behalf of the individual, or

(b) contributions paid by an employer of the individual in respect of the individual.

Taxation of contributions refund lump sums

18

Part 4 of FA 2004 applies in relation to a contributions refund lump sum as if it were a short service refund lump sum in excess of the limit specified in section 205(4)(a) of that Act (so that it is not an unauthorised payment and is liable to tax at the rate chargeable on a short service refund lump sum).

Power to amend

19

(1) The Treasury may by order made by statutory instrument amend paragraph 1(8) so as to vary the rate of the special annual allowance charge.

(2) An order under sub-paragraph (1) may make provision for there to be different rates in different circumstances.

(3) The Treasury may by order made by statutory instrument amend paragraphs 2 to 18.

(4) An order under sub-paragraph (3) may make provision having effect in relation to times before it is made if it does not increase any person's liability to tax.

(5) No order may be made under sub-paragraph (1) unless a draft of the statutory instrument containing it has been laid before, and approved by a resolution of, the House of Commons.

(6) A statutory instrument containing an order under sub-paragraph (3) is subject to annulment in pursuance of a resolution of the House of Commons.

Currently-relieved non-UK pension schemes

20

(1) The Treasury may by order made by statutory instrument make provision for this Schedule to apply in relation to individuals who—

(a) are or have been members of currently-relieved non-UK pension schemes, or

(b) have been members of overseas pension schemes that were not currently-relieved non-UK pension schemes,

subject to such modifications as are specified in the order.

(2) An order under sub-paragraph (1) may—

(a) include provision having effect in relation to times before it is made,

(b) confer discretion on the Commissioners for Her Majesty's Revenue and Customs or officers of Revenue and Customs, and

(3) A statutory instrument containing an order under sub-paragraph (1) is subject to annulment in pursuance of a resolution of the House of Commons.

Tax years to which Schedule applies

21

(1) This Schedule has effect for the tax year 2009-10 and subsequent tax years (with the result that paragraph 18 has effect for the tax year 2010-11 and subsequent tax years).

(2) But the Treasury may by order make provision for this Schedule to cease to have effect after the tax year specified in the order (but so that paragraph 18 continues to have effect for the following tax year).

Minor amendment

22

In paragraph 49 of Schedule 36 to FA 2004 (annual allowance charge: enhanced protection), insert at the end—

(3) This paragraph does not apply for the purposes of the special annual allowance charge.

Interpretation

23

(1) In this Schedule—

“group personal pension scheme” means arrangements administered on a group basis under a personal pension scheme which are available to employees of the same employer or of employers which are members of the same group of companies;

“personal pension scheme” means a pension scheme that is neither an occupational pension scheme nor a public service pension scheme;

“scheme” (otherwise than in the expression “pension scheme”) includes any arrangement, agreement, understanding, transaction or series of transactions (whether or not legally enforceable).

(2) For the purposes of the definition of “group personal pension scheme” a company and all of its 75% subsidiaries form a group; and if any of those subsidiaries have 75% subsidiaries the group includes them and their 75% subsidiaries, and so on; and for this purpose “75% subsidiary” has the meaning given by section 838 of ICTA.

(3) Expressions used in this Schedule and in any provisions of Part 4 of FA 2004 have the same meaning in this Schedule as they have in the provisions of that Part in which they are used.

SCHEDULE 36

Part 1 — Amendments coming into force in 2010

1

VATA 1994 is amended as follows.

2

In section 6(14A) (time of supply), omit “In relation to any services of a description specified in an order under section 7(11),”.

3

(1) Section 7 (place of supply) is amended as follows.

(2) In subsection (1), omit “or services”.

(3) Omit subsection (10).

(4) In subsection (11), omit “or services” (in each place).

(5) In the heading, insert at the end “ of goods ”.

4

After that section insert—

(7A) (1) This section applies for determining, for the purposes of this Act, the country in which services are supplied. (2) A supply of services is to be treated as made— (a) in a case in which the person to whom the services are supplied is a relevant business person, in the country in which the recipient belongs, and (b) otherwise, in the country in which the supplier belongs. (3) The place of supply of a right to services is the same as that in which the supply of the services would be treated as made if made by the supplier of the right to the recipient of the right (whether or not the right is exercised); and for this purpose a right to services includes any right, option or priority with respect to the supply of services and an interest deriving from a right to services. (4) For the purposes of this Act a person is a relevant business person in relation to a supply of services if the person— (a) is a taxable person within the meaning of Article 9 of Council Directive 2006/112/EC, (b) is registered under this Act, (c) is identified for the purposes of VAT in accordance with the law of a member State other than the United Kingdom, or (d) is registered under an Act of Tynwald for the purposes of any tax imposed by or under an Act of Tynwald which corresponds to value added tax, and the services are received by the person otherwise than wholly for private purposes. (5) Subsection (2) has effect subject to Schedule 4A. (6) The Treasury may by order— (a) amend subsection (4), (b) amend Schedule 4A, or (c) otherwise make provision for exceptions from either or both of the paragraphs of subsection (2). (7) An order under subsection (6) may include incidental, supplemental, consequential and transitional provision.

5

(1) Section 8 (reverse charge on supplies received from abroad) is amended as follows.

(2) For subsections (1) and (2) substitute—

(1) Where services are supplied by a person who belongs in a country other than the United Kingdom in circumstances in which this subsection applies, this Act has effect as if (instead of there being a supply of the services by that person)— (a) there were a supply of the services by the recipient in the United Kingdom in the course or furtherance of a business carried on by the recipient, and (b) that supply were a taxable supply. (2) Subsection (1) above applies if— (a) the recipient is a relevant business person who belongs in the United Kingdom, and (b) the place of supply of the services is inside the United Kingdom, and, where the supply of the services is one to which any paragraph of Part 1 or 2 of Schedule 4A applies, the recipient is registered under this Act.

(3) After subsection (4) insert—

(4A) Subsection (1) does not apply to services of any of the descriptions specified in Schedule 9.

(4) In subsection (5), for “add to, or vary, Schedule 5” substitute “ amend subsection (4A) by altering the descriptions of services specified in that subsection ”.

(5) Omit subsection (6).

(6) In subsection (7)—

(a) for “add to or vary Schedule 5” substitute “ amend subsection (4A) ”, and

(b) for “addition to or variation of that Schedule” substitute “ amendment of that subsection ”.

(7) In subsection (8)—

(a) for “addition to or variation of that Schedule” substitute “ amendment of subsection (4A) ”, and

(b) for “the Schedule” substitute “ that subsection ”.

6

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