Finance Act 2009

(809AZA) (1) This Chapter applies where— (a) a person within the charge to income tax (“the transferor”) makes a transfer to another person (“the transferee”) of a right to relevant receipts (see subsection (2)), and (b) (subject to subsection (3)) the transfer of the right is not a consequence of the transfer to the transferee of an asset from which the right to relevant receipts arises. (2) “Relevant receipts” means any income— (a) which (but for the transfer) would be charged to income tax as income of the transferor, or (b) which (but for the transfer) would be brought into account in calculating profits of the transferor for the purposes of income tax. (3) Despite paragraph (b) of subsection (1), this Chapter applies if the transfer of the right is a consequence of the transfer to the transferee of all rights under an agreement for annual payments; and for the purposes of that paragraph the transfer of an asset under a sale and repurchase agreement is not to be regarded as a transfer of the asset. (4) Section 809AZB makes provision as to the consequences of this Chapter applying. (5) For exclusions from this Chapter, see— (a) section 809AZC (amount otherwise taxed), (b) section 809AZD (certain annuities), and (c) section 809AZE (transfer by way of security). (6) Section 809AZF makes special provision about transfers of partnership shares. (7) Section 809AZG contains supplementary provisions. (809AZB) (1) The relevant amount (see subsection (2)) is to be treated as income of the transferor chargeable to income tax in the same way and to the same extent as that in which the relevant receipts— (a) would have been chargeable to income tax, or (b) would have been brought into account in calculating any profits for the purposes of income tax, but for the transfer of the right to relevant receipts. (2) The relevant amount is— (a) (except where paragraph (b) applies) the amount of the consideration for the transfer of the right, or (b) where the amount of any such consideration is substantially less than the market value of the right at the time when the transfer takes place (or where there is no consideration for the transfer of the right), the market value of the right at that time. (3) The income under subsection (1) is to be treated as arising in the chargeable period of the transferor in which the transfer takes place. (4) But subsection (5) applies if (apart from the transfer) any of the relevant receipts— (a) would have been brought into account in accordance with Part 2 or 3 of ITTOIA 2005 (trading income and property income) in calculating any profits for the purposes of income tax, and (b) in accordance with generally accepted accounting practice, would have been recognised otherwise than wholly in the chargeable period in which the transfer takes place. (5) If this subsection applies, the income under subsection (1) is to be treated as arising— (a) to the extent that it does not exceed the amount of the consideration for the transfer of the right, in the chargeable period or periods for which, in accordance with generally accepted accounting practice, the consideration for the transfer is recognised for accounting purposes in a profit and loss account or income statement of the transferor, and (b) otherwise, in the chargeable period or periods for which, in accordance with generally accepted accounting practice, the consideration for the transfer would be so recognised if it were of an amount equal to the market value of the right at the time when the transfer takes place. (6) But if in a case where the transferor is a company it at any time becomes reasonable to assume that the income (to any extent) is not, or would not be, treated by subsection (5) as arising in an accounting period of the transferor, the income is to that extent to be treated as arising immediately before that time. (809AZC) This Chapter does not apply if and to the extent that the income under section 809AZB(1) is (apart from this Chapter)— (a) charged to tax as income of the transferor, (b) brought into account in calculating the profits of the transferor, or (c) brought into account under CAA 2001. (809AZD) This Chapter does not apply to a transfer of a right to— (a) annual payments under a life annuity as defined in section 473(2) of ITTOIA 2005, or (b) annual payments under an annuity which is pension income within the meaning of Part 9 of ITEPA 2003 (see section 566(2) of that Act). (809AZE) This Chapter does not apply if the consideration for the transfer is the advance under an arrangement that is a structured finance arrangement for the purposes of section 774A or 774C of ICTA in relation to the transferor or a partnership in which the transferor is a partner. (809AZF) (1) For the purposes of this Chapter a transfer of a right to relevant receipts consisting of the reduction in a transferor's share in the profits or losses of a partnership is to be regarded as a consequence of a transfer of an asset from which the right arose (that is, the partnership property) if condition A or B is met. (2) Condition A is that there is a reduction of the transferor's share in the partnership property and the reduction in the transferor's share in the profits or losses is proportionate to that reduction. (3) Condition B is that it is not the main purpose, or one of the main purposes, of the transfer to secure that the relevant receipts are not charged to income tax or corporation tax as income of any partner or brought into account as income of any partner for the purpose of either of those taxes. (809AZG) (1) For the purposes of this Chapter— (a) the grant or surrender of a lease of land is to be regarded as a transfer of the land, and (b) the disposal of an interest in an oil licence (within the meaning of section 809 of CTA 2009) is to be regarded as a transfer of the oil licence. (2) The Treasury may by order make other provision for securing that other transactions are to be regarded as transfers of assets for those purposes. (3) In this Chapter— (a) references to a transfer include sale, exchange, gift and assignment (or assignation) and any other arrangement which equates in substance to a transfer, and (b) references to a transfer taking place are, in the case of an arrangement other than a sale, exchange, gift or assignment (or assignation), to the making of the arrangement. (4) A transfer to or by any partnership of which the transferor or transferee is a member, and a transfer to the trustees of any trust of which the transferor is a beneficiary, counts as a transfer in relation to which this Chapter applies.

Part 3 — Company transferees

8

• (1) Part 6 of CTA 2009 (relationships treated as loan relationships etc) is amended as follows.

• (2) In section 477(2) (overview of Part 6), after paragraph (aa) (inserted by Schedule 24) insert—

(ab) Chapter 2B (transferred income streams),

.

• (3) After Chapter 2A (inserted by Schedule 24) insert—

(486F) (1) This Chapter provides for Part 5 to apply in relation to a company to which an income stream transfer is made (“the transferee”). (2) An “income stream transfer” is a transfer by a person (“the transferor”) to which either of the following provisions applies— (a) Part 1 of Schedule 25 to FA 2009 (transfers of income streams by companies), or (b) Chapter 5A of Part 13 of ITA 2007 (transfers of income streams by individuals). (486G) (1) For the purposes of this Part— (a) the consideration for the transfer of the right to relevant receipts is to be treated as a money debt which is owed to the transferee by the person by whom the relevant receipts fall to be paid, and (b) the transfer is to be treated as a transaction for the lending of money from which that debt is treated as arising. (2) For the meaning of “relevant receipts” see paragraph 1(2) of Schedule 25 to FA 2009 or section 809AZA(2) of ITA 2007.

Part 4 — Consequential amendments and repeals

9

• (1) In ICTA, omit—

• (a) section 730 (transfers of rights to receive distributions in respect of shares),

• (b) section 775A (transfers of rights to receive annual payments),

• (c) section 785A (rent factoring of leases of plant or machinery), and

• (d) in section 786 (transactions associated with loans or credit)—

• (i) in subsection (5), “assigns,”, “(without a sale or transfer of the property)” and “assigned,”,

• (ii) in subsection (5ZA), “assigned,”, and

• (iii) in subsection (5A), “assigned,”.

• (2) In ITTOIA 2005, omit—

• (a) in Chapter 11 of Part 4 (transactions in deposits)—

• (i) in section 551(2), the words after “of it”, and

• (ii) in section 552(1), paragraph (e) and the “and” before it, and

• (b) Chapter 13 of Part 4 (sales of foreign dividend coupons).

• (3) Omit the following provisions (which relate to the provisions repealed by sub-paragraphs (1) and (2))—

• (a) in TMA 1970, in section 98, in column 1 of the Table, the entry relating to section 730(8) of ICTA,

• (b) in ICTA, in section 774E(1), the second sentence,

• (c) in FA 1996, in Schedule 7, paragraph 23,

• (d) in FA 2004, section 135,

• (e) in ITTOIA 2005, in Schedule 1, paragraph 300,

• (f) in F(No.2)A 2005, in Schedule 7, paragraphs 2 and 4,

• (g) in FA 2006, in Schedule 6, paragraph 7,

• (h) in ITA 2007—

• (i) in section 1016, in Part 3 of the table, the entry relating to section 730(4) of ICTA, and

• (ii) in Schedule 1, paragraphs 183 and 545, and

• (i) in CTA 2009, in Schedule 1, paragraphs 214 and 230.

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

• (5) In section 2(13) of ITA 2007, omit the “and” at the end of paragraph (d) and insert at the end

or (f) transfers of income streams (Chapter 5A).

• (6) Schedule 4 to that Act (index of defined expressions) is amended as follows.

• (7) After the entry relating to “transfer (in Chapter 2 of Part 13)” insert—

transfer (in Chapter 5A of Part 13)	Section 809AZF(3)

.

• (8) After the entry relating to “transferor (in Part 12)” insert—

transfer taking place (in Chapter 5A of Part 13)	Section 809AZF(3)

.

Part 5 — Commencement

10

This Schedule has effect in relation to transfers on or after 22 April 2009.

SCHEDULE 26

1

Chapter 4 of Part 6 of ITTOIA 2005 (SAYE interest) is amended as follows.

Transfer of certain functions from Treasury to HMRC

2

• (1) Section 705 (certification of arrangements) is amended as follows.

• (2) In subsections (1) and (2), for “Treasury” (in each place) substitute “ Commissioners ”.

• (3) After subsection (4) insert—

(5) In this Chapter “the Commissioners” means the Commissioners for Her Majesty's Revenue and Customs.

3

In section 706(1) and (2) (withdrawal and variation of certifications etc), for “Treasury” substitute “ Commissioners ”.

4

In section 707(1) (authorisation of providers), for “Treasury” substitute “ Commissioners ”.

5

• (1) Section 708 (withdrawal and variation of authorisations) is amended as follows.

• (2) In subsections (1) and (2), for “Treasury” substitute “ Commissioners ”.

• (3) In subsection (4), for “Treasury of its” substitute “ Commissioners of their ”.

Removal of requirement that notice be sent by post

6

In the following provisions omit “by post”—

• (a) section 706(2)(b) (notification of withdrawal and variation of certifications etc), and

• (b) section 708(2)(b) (notification of withdrawal and variation of authorisations).

Reduction of notice period for withdrawals and variations

7

In section 706(2)(b) (notification of withdrawal and variation of certifications etc), for “28 days” substitute “ 15 days ”.

Power to provide for withdrawals and variations not to affect certain contracts

8

In section 706(3) (transitional provision for withdrawals and variations of certifications), for the words from “the operation of” to the end substitute—

(a) the operation of the arrangement concerned before that date, (b) contracts made under that arrangement before that date, or (c) where the notice so provides, contracts which are of a description specified in the notice and are made under that arrangement after that date.

SCHEDULE 27

Part 1 — Amendments of ITA 2007

1

Chapter A1 of Part 14 of ITA 2007 (remittance basis) is amended as follows.

2

In section 809C (claim for remittance basis by long-term UK resident: nomination of foreign income and gains to which section 809H(2) is to apply), after subsection (5) insert—

(5A) The references to income tax in subsection (5) do not include income tax under section 424 (gift aid).

3

• (1) Section 809D (application of remittance basis without claim where unremitted foreign income and gains under £2,000) is amended as follows.

• (2) In subsection (1), insert at the end (not as part of paragraph (c))— “ unless condition A or condition B is met. ”

• (3) After that subsection insert—

(1A) Condition A is that the individual is not domiciled in the United Kingdom in that year and conditions A to F in section 828B are met. (1B) Condition B is that the individual gives notice in a return under section 8 of TMA 1970 that this section is not to apply in relation to the individual for that year.

4

• (1) Section 809E (application of remittance basis without claim: other cases) is amended as follows.

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

(c) for that year the individual either has no UK income or gains or has no UK income and gains other than taxed investment income not exceeding £100.

• (3) In that subsection, insert at the end (not as part of paragraph (e))— “ unless the individual gives notice in a return under section 8 of TMA 1970 that this section is not to apply in relation to the individual for that year. ”

• (4) After subsection (2) insert—

(2A) For the purposes of subsection (1)(c) “taxed investment income” means UK income or gains consisting of payments within section 946 from which a sum representing income tax has been deducted.

5

In section 809H (claim for remittance basis by long-term UK resident: charge), after subsection (5) insert—

(5A) The references to income tax in subsection (5) do not include income tax under section 424 (gift aid).

6

• (1) Section 809L (meaning of “remitted to the United Kingdom”) is amended as follows.

• (2) Omit subsection (8).

• (3) In subsection (9), for “income or chargeable gains are used in respect of a debt include cases where income or chargeable gains are” substitute “ property (including income or chargeable gains) is used in respect of a debt include cases where the property is ”.

7

• (1) Section 809M (meaning of “relevant person” for purposes of sections 809L, 809N and 809O) is amended as follows.

• (2) In subsection (2)(e), insert at the end “or a company which is a 51% subsidiary of such a close company”.

• (3) In subsection (3), after paragraph (c) insert—

(ca) “participator”, in relation to a close company, means a person who is a participator in relation to the company for the purposes of section 419 of ICTA (see sections 417(1) and 419(7) of that Act), (cb) “51% subsidiary” has the same meaning as in the Corporation Tax Acts (see section 838 of ICTA),

.

8

In section 809P (amount remitted), insert at the end—

(13) If the property forms part of a set only part of which is in the United Kingdom, the amount remitted is such portion of what it would have been had the complete set been brought to, or received or used in, the United Kingdom when the part was as is just and reasonable (having regard to the part of the set which is there).

9

• (1) Section 809T (foreign chargeable gains accruing on disposals made other than for full consideration) is amended as follows.

• (2) In subsection (1)(b), after “amount” insert “ at least ”.

• (3) In the heading, for “other” substitute “ otherwise ”.

10

• (1) Section 809X (property which is exempt property) is amended as follows.

• (2) In subsection (4), omit “that derive from relevant foreign income”.

• (3) In subsection (5), omit “of any description that derives from relevant foreign income”.

11

• (1) Section 809Z5 (notional remitted amount) is amended as follows.

• (2) In subsection (1), omit “of income”.

• (3) Omit subsections (2) and (3).

Part 2 — Amendments of other Acts

TCGA 1992

12

In section 14A(3)(b) of TCGA 1992 (section 13: non-UK domiciled individuals), after “amount” insert “ at least ”.

ITTOIA 2005

13

In section 648 of ITTOIA 2005 (income arising under a settlement), for subsections (2) to (5) substitute—

(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

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

Electrically propelled cars: the appropriate percentage

7

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

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

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

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

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

Stock lending

2

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

Commencement

3

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

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

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

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

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

Paragraph 6

2

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

Paragraph 7

3

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

Paragraph 7A

4

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

Paragraph 17

5

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

Paragraph 17A

6

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

Paragraph 22

7

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

Paragraph 40

8

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

Paragraph 41

9

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

Paragraph 42

10

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

Consequential repeal

11

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

Commencement

12

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

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

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

10

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

11

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

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

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

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

• (c) Chapter 6A of Part 2 of CAA 2001 (interpretation of provisions about long funding leases) applies.

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

• (c) 30% in relation to so much (if any) of the chargeable amount as, when so added, exceeds the higher rate limit.

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

• (c) any power to reduce entitlement to the benefits does not exist.

• (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.