Finance Act 2012

(52A) (1) In this Part of this Schedule references to “the Administrator” are to the body appointed as such by regulations made by the Secretary of State. (2) The body appointed must be a body established by an enactment (as defined in section 97 of the Climate Change Act 2008). (3) Different bodies may be appointed in relation to facilities in different parts of the United Kingdom. (52B) (1) The Administrator is responsible for administering the scheme set out in paragraphs 44 to 52. (2) This covers (in particular) the administration of climate change agreements. (3) In this Part of this Schedule “administrative function” means— (a) the Administrator's function imposed by sub-paragraph (1), or (b) any other power or duty of the Administrator conferred or imposed by or under a provision of this Part of this Schedule. (52C) (1) The Administrator may require persons falling within sub-paragraph (2) to pay to the Administrator such charges as may from time to time be specified to cover any costs incurred by the Administrator in carrying out any administrative function. (2) The persons falling within this sub-paragraph are parties or potential or former parties to agreements falling within paragraph 47 or to umbrella or underlying agreements within the meaning of paragraph 48. (3) In sub-paragraph (1) “specified” means specified in, or determined in accordance with, a scheme made by the Administrator for the purposes of this paragraph. (4) A scheme may provide for the times at which, and the manner in which, charges are to be paid. (5) Paragraph 146(7) applies in relation to the Administrator's power to make a scheme under this paragraph as it applies in relation to a power to make regulations under this Schedule. (6) A scheme may revoke or vary any previous scheme. (7) A scheme may be made only with the consent of the Secretary of State. (8) Charges received by the Administrator must be paid to the Secretary of State who must pay them into the Consolidated Fund. (9) Sub-paragraph (8) does not apply if the Administrator is the Environment Agency. (52D) (1) The Secretary of State may by regulations make provision about the administration of the scheme set out in paragraphs 44 to 52. (2) Sub-paragraph (1) covers (in particular)— (a) provision about climate change agreements, and (b) provision about how the Administrator is to carry out any administrative function. (3) Without prejudice to the generality of sub-paragraphs (1) and (2), regulations may contain any provision falling within paragraph 52E or 52F. (4) Regulations may— (a) require the Administrator to obtain the Secretary of State's consent to any course of action, (b) confer or impose other powers or duties on the Secretary of State or the Administrator, or (c) confer or impose powers or duties on other persons. (5) The Secretary of State may give directions to the Administrator about how the Administrator is to carry out any administrative function (and this power to give directions includes power to vary or revoke directions previously given). (6) The Secretary of State may issue guidance to the Administrator about how the Administrator is to carry out any administrative function; and the Administrator must have regard to any guidance issued. (52E) (1) Regulations may— (a) specify terms which must be included in agreements falling within paragraph 47 or in umbrella or underlying agreements within the meaning of paragraph 48, and (b) confer power on the Administrator to vary such agreements to take account of any changes in the terms specified under paragraph (a) from time to time. (2) The terms which may be specified under sub-paragraph (1)(a) include (in particular) terms falling within paragraph 49(4) under which the absence (or partial absence) of any progress towards meeting any targets for a facility may be made up for by the payment to the Administrator of a sum specified in, or determined in accordance with, the regulations. (3) Sums received by the Administrator must be paid to the Secretary of State who must pay them into the Consolidated Fund. (52F) (1) Regulations may confer power on the Administrator— (a) to impose a financial penalty of a specified amount on a person who, as a representative of a facility to which a climate change agreement applies, contravenes a term of the agreement, and (b) to terminate, with effect from a specified date, the agreement so far as it applies to the facility if— (i) the financial penalty is not paid to the Administrator within a specified period, or (ii) the contravention is not remedied to the Administrator's satisfaction within a specified period. (2) Regulations may also confer power on the Administrator to terminate, with effect from a specified date and without first imposing a financial penalty, a climate change agreement so far as it applies to a facility if there is a contravention of the agreement by a person who is a representative of the facility. (3) Neither sub-paragraph (1)(a) nor sub-paragraph (2) covers a failure to meet, or to make progress towards meeting, any targets set for a facility under a climate change agreement. (4) If regulations falling within sub-paragraph (1) or (2) are made, the regulations must also— (a) confer rights of appeal against a decision taken by the Administrator to impose a financial penalty or to terminate a climate change agreement (as the case may be), and (b) specify the court, tribunal or person who is to hear and determine the appeal. (5) The Secretary of State may be specified for the purposes of sub-paragraph (4)(b). (6) Penalties received by the Administrator must be paid to the Secretary of State who must pay them into the Consolidated Fund. (7) Regulations may confer power on the Administrator to terminate, with effect from a specified date, a climate change agreement so far as it applies to a facility in specified circumstances not involving a contravention of the agreement. (8) In sub-paragraphs (1) to (7)— - “representative” has the meaning given by paragraph 47(2), and - “specified” means specified in, or determined in accordance with, the regulations. (9) Sub-paragraph (10) or (11) (as the case may be) applies if a climate change agreement is terminated in respect of a facility before the start of, or during, a period specified for the facility in such a certificate as is mentioned in paragraph 44(1). (10) If the termination is before the start of the specified period, the Administrator must, in respect of the facility, give a variation certificate within paragraph 45(1)(a) in relation to the specified period. (11) If the termination is during the specified period, the Administrator must, in respect of the facility, give a variation certificate within paragraph 45(1)(b) in relation to the specified period specifying the day of the termination.

10

In paragraph 137(1) (disclosure of information) after paragraph (f) insert—

(fa) the Administrator (within the meaning of Part 4 of this Schedule);

.

11

The amendments made by this Schedule have no effect in relation to climate change agreements entered into with the Secretary of State before the day on which this Act is passed.

SCHEDULE 32

PART 1 — Main provision

Amendments to Schedule 6 to FA 2000

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9

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10

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Provision relating to Schedule 20 to FA 2011

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Commencement

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PART 2 — Carbon price support rates from 1 April 2014

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PART 3 — Electricity produced in combined heat and power stations

21

• (1) Paragraph 20A of Schedule 6 to FA 2000 (climate change levy: exemption in relation to electricity produced in combined heat and power stations) is amended as follows.

• (2) In sub-paragraph (1)—

• (a) omit the “and” after paragraph (c), and

• (b) after paragraph (d) insert

; and (e) the electricity is actually supplied before 1 April 2018.

• (3) In sub-paragraph (4)(a)—

• (a) in sub-paragraph (i), after “station” insert “ before 1 April 2013 ”, and

• (b) in sub-paragraph (ii), after “station”, in the first place it occurs, insert “ before 1 April 2013 ”.

22

• (1) The following repeals are made in consequence of paragraph 21.

• (2) In Schedule 6 to FA 2000—

• (a) in paragraph 5(3), omit “20B(6)(a),”,

• (b) omit paragraphs 20A and 20B,

• (c) in paragraph 24(2)—

• (i) omit “or 20A,”

• (ii) omit “or in combined heat and power stations”, and

• (iii) omit “or 20B”, and

• (d) omit paragraph 149A.

• (3) Omit sections 123 and 124 of FA 2002.

• (4) Omit section 193(3) and (5) of FA 2003.

• (5) The repeals made by this paragraph come into force on the day appointed by the Treasury by order made by statutory instrument.

SCHEDULE 33

Reduced rate of inheritance tax

1

After Schedule 1 to IHTA 1984 insert—

SCHEDULE 1A (1) (1) This Schedule applies if— (a) a chargeable transfer is made (under section 4) on the death of a person (“D”), and (b) all or part of the value transferred by the chargeable transfer is chargeable to tax at a rate other than nil per cent. (2) The part of the value transferred that is chargeable to tax at a rate other than nil per cent is referred to in this Schedule as “TP”. (2) (1) If the charitable giving condition is met— (a) the tax charged on the part of TP that qualifies for the lower rate of tax is to be charged at the lower rate of tax, and (b) the tax charged on any remaining part of TP is to be charged at the rate at which it would (but for this Schedule) have been charged on the whole of TP in accordance with section 7. (2) For the purposes of this paragraph, the charitable giving condition is met if, for one or more components of the estate (taking each component separately), the donated amount is at least 10% of the baseline amount. (3) Paragraph 3 defines the components of the estate. (4) Paragraphs 4 and 5 explain how to calculate the donated amount and the baseline amount for each component. (5) The part of TP that “qualifies for the lower rate of tax” is the part attributable to all the property in each of the components for which the donated amount is at least 10% of the baseline amount. (6) The lower rate of tax is 36%. (3) (1) For the purposes of paragraph 2, the components of the estate are— (a) the survivorship component, (b) the settled property component, and (c) the general component. (2) The survivorship component is made up of all the property comprised in the estate that, immediately before D's death, was joint (or common) property liable to pass on D's death— (a) by survivorship (in England and Wales or Northern Ireland), (b) under a special destination (in Scotland), or (c) by or under anything corresponding to survivorship or a special destination under the law of a country or territory outside the United Kingdom. (3) The settled property component is made up of all the settled property comprised in the estate in which there subsisted, immediately before D's death, an interest in possession to which D was beneficially entitled immediately before death. (4) The general component is made up of all the property comprised in the estate other than— (a) property in the survivorship component, (b) property in the settled property component, and (c) property that forms part of the estate by virtue of section 102(3) of the Finance Act 1986 (gifts with reservation). (4) The donated amount, for a component of the estate, is so much of the value transferred by the relevant transfer as (in total) is attributable to property that— (a) forms part of that component, and (b) is property in relation to which section 23(1) applies. (5) The baseline amount, for a component of the estate, is the amount calculated in accordance with the following steps— - Step 1 Determine the part of the value transferred by the chargeable transfer that is attributable to property in that component. - Step 2 Deduct from the amount determined under Step 1 the appropriate proportion of the available nil-rate band.“The appropriate proportion” is a proportion equal to the proportion that the amount determined under Step 1 bears to the value transferred by the chargeable transfer as a whole.“The available nil-rate band” is the amount (if any) by which— 1. the nil-rate band maximum (increased, where applicable, in accordance with section 8A), exceeds 2. the sum of the values transferred by previous chargeable transfers made by D in the period of 7 years ending with the date of the relevant transfer. - Step 3 Add to the amount determined under Step 2 an amount equal to so much of the value transferred by the relevant transfer as (in total) is attributable to property that— 1. forms part of that component, and 2. is property in relation to which section 23(1) applies. (6) (1) For the purpose of calculating the donated amount and the baseline amount, any amount to be arrived at in accordance with section 38(3) or (5) is to be arrived at assuming the rate of tax is the lower rate of tax (see paragraph 2(6)). (2) For the purpose of calculating the donated amount, section 39A does not apply to a specific gift of property in relation to which section 23(1) applies (but that section does apply to such a gift for the purpose of calculating the baseline amount). (3) Subject to sub-paragraphs (1) and (2), the provisions of this Act apply for the purpose of calculating the donated amount and the baseline amount as for the purpose of calculating the tax to be charged on the value transferred by the chargeable transfer. (7) (1) An election may be made under this paragraph if, for a component of the estate, the donated amount is at least 10% of the baseline amount. (2) That component is referred to as “the qualifying component”. (3) The effect of the election is that the qualifying component and one or more eligible parts of the estate (as specified in the election) are to be treated for the purposes of this Schedule as if they were a single component. (4) Accordingly, if the donated amount for that deemed single component is at least 10% of the baseline amount for it, the property in that component is to be included in the part of TP that qualifies for the lower rate of tax. (5) In relation to the qualifying component— (a) each one of the other two components of the estate is an “eligible part” of the estate, and (b) all the property that forms part of the estate by virtue of section 102(3) of the Finance Act 1986 (gifts with reservation) is also an “eligible part” of the estate. (6) The election must be made by all those who are appropriate persons with respect to the qualifying component and each of the eligible parts to be treated as a single component. (7) “Appropriate persons” means— (a) with respect to the survivorship component, all those to whom the property in that component passes on D's death (or, if they have subsequently died, their personal representatives), (b) with respect to the settled property component, the trustees of all the settled property in that component, (c) with respect to the general component, all the personal representatives of D or, if there are none, all those who are liable for the tax attributable to the property in that component, and (d) with respect to property within paragraph (b) of sub-paragraph (5), all those in whom the property within that paragraph is vested when the election is to be made. (8) (1) If an election is made under this paragraph in relation to a component of the estate, this Schedule is to apply as if the donated amount for that component were less than 10% of the baseline amount for it (whether or not it actually is). (2) The election must be made by all those who are appropriate persons (as defined in paragraph 7(7)) with respect to the component. (9) (1) An election under this Schedule must be made by notice in writing to HMRC within two years after D's death. (2) An election under this Schedule may be withdrawn by notice in writing to HMRC given— (a) by all those who would be entitled to make such an election, and (b) no later than the end of the period of two years and one month after D's death. (3) An officer of Revenue and Customs may agree in a particular case to extend the time limit in sub-paragraph (1) or (2)(b) by such period as the officer may allow. (10) In this Schedule, in relation to D— - “the chargeable transfer” means the chargeable transfer mentioned in paragraph 1(1); - “the estate” means D's estate immediately before death; - “the relevant transfer” means the transfer of value that D is treated (under section 4) as having made immediately before death.

Consequential amendments

2

IHTA 1984 is amended as follows in consequence of paragraph 1.

3

In section 7 (rates), in subsection (1), after “(4) and (5) below” insert “ and to Schedule 1A ”.

4

In section 33 (amount of charge under section 32), after subsection (2) insert—

(2ZA) In determining for the purposes of subsection (1)(b)(ii) the rate or rates that would have applied in accordance with subsection (1) of section 7, the effect of Schedule 1A (if it would have applied) is to be disregarded.

5

In section 78 (conditionally exempt occasion), in subsection (3), for “33(3)” substitute “ 33(2ZA) ”.

6

In section 128 (rate of charge: woodlands)—

• (a) the existing provisions become subsection (1) of that section, and

• (b) after that subsection insert—

(2) In determining for the purposes of subsection (1) the rate or rates at which tax would have been charged on the amount determined under section 127, the effect of Schedule 1A (if it would have applied) is to be disregarded.

7

After section 141 insert—

(141A) (1) This section applies if any part of the value transferred by the later transfer qualifies for the lower rate of tax in accordance with Schedule 1A. (2) The amount of the reduction made under section 141(1) is to be apportioned in accordance with this section. (3) For each qualifying component, the tax chargeable on so much of the value transferred by the later transfer as is attributable to property in that component (“the relevant part of the tax”) is to be reduced by the appropriate proportion of the amount calculated in accordance with section 141(3). (4) “The appropriate proportion” is a proportion equal to the proportion that— (a) the relevant part of the tax, bears to (b) the tax chargeable on the value transferred by the later transfer as a whole. (5) If parts of an estate are treated under Schedule 1A as a single component, subsection (3) applies to the single component (and not to individual components forming part of the deemed single component). (6) If, after making the reductions required by subsection (3), there remains any part of the tax chargeable on the value transferred by the later transfer that has not been reduced, the remaining part of the tax is to be reduced by so much of the amount calculated in accordance with section 141(3) as has not been used up for the purposes of making the reductions required by subsection (3). (7) In this section— - “component” means a component of the estate, as defined in paragraph 3 of Schedule 1A; - “the later transfer” has the meaning given in section 141(1); - “qualifying component” means a component (or deemed single component) for which the donated amount is at least 10% of the baseline amount, as determined in accordance with Schedule 1A.

8

In Schedule 4 (maintenance funds for historic buildings etc), in paragraph 14, after sub-paragraph (2) insert—

(2A) In determining for the purposes of sub-paragraph (2) the effective rate or rates at which tax would have been charged on the amount in accordance with section 7(1), the effect of Schedule 1A (if it would have applied) is to be disregarded.

Instruments of variation to be notified to charities etc

9

In section 142 of IHTA 1984 (alteration of dispositions taking effect on death), after subsection (3) insert—

(3A) Subsection (1) does not apply to a variation by virtue of which any property comprised in the estate immediately before the person's death becomes property in relation to which section 23(1) applies unless it is shown that the appropriate person has been notified of the existence of the instrument of variation. (3B) For the purposes of subsection (3A) “the appropriate person” is— (a) the charity or registered club to which the property is given, or (b) if the property is to be held on trust for charitable purposes or for the purposes of registered clubs, the trustees in question.

Commencement

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• (1) The Schedule inserted by paragraph 1 has effect in cases where D's death occurs on or after 6 April 2012 (and the amendments made by paragraphs 3 to 8 are to be read accordingly).

• (2) The amendment made by paragraph 9 has effect in cases where the person's death occurs on or after 6 April 2012.

SCHEDULE 34

Introductory

1

Schedule 19 to FA 2011 (bank levy) is amended as follows.

Rates 2012

2

In paragraph 6 (steps for determining the amount of the bank levy), in sub-paragraph (2)—

• (a) for “0.039%” substitute “ 0.044% ”, and

• (b) for “0.078%” substitute “ 0.088% ”.

3

In paragraph 7 (special provision for chargeable periods falling wholly or partly before 1 January 2012), in sub-paragraph (2)—

• (a) for “0.039%” substitute “ 0.044% ”, and

• (b) for “0.078%” substitute “ 0.088% ”.

4

The amendments made by paragraphs 2 and 3 are treated as having come into force on 1 January 2012.

Rates from 2013

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• (1) In paragraph 7 (special provision for chargeable periods falling wholly or partly before 1 January 2012) for sub-paragraphs (1) and (2) substitute—

(1) Paragraph 6(2) applies subject to this paragraph if some or all of the chargeable period falls before 1 January 2013. (2) For Step 7 there is substituted— Step 7 Determine the proportion (“P%”) (if any) of the chargeable period which falls within each of the periods (“rate periods”) specified in column 1 of the following table. In relation to each rate period— (a) charge P% of the amount of the long term chargeable equity and liabilities at the rate specified, in relation to the rate period concerned, in the second column of the table, and (b) charge P% of the amount of the short term chargeable liabilities at the rate specified, in relation to the rate period concerned, in the third column of the table. Add together the results for each rate period in which some or all of the chargeable period falls to give the amount of the bank levy.

Rate period	Rate for long term chargeable equity and liabilities	Rate for short term chargeable liabilities
1 January 2011 to 28 February 2011	0.025%	0.05%
1 March 2011 to 30 April 2011	0.05%	0.1%
1 May 2011 to 31 December 2011	0.0375%	0.075%
1 January 2012 to 31 December 2012	0.044%	0.088%
Any time on or after 1 January 2013	0.0525%	0.105%

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

7

The amendments made by paragraph 6 come into force on 1 January 2013.

Joint ventures

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• (1) Paragraph 43 (calculation of chargeable equity and liabilities where relevant group has an interest in a joint venture) is amended as follows.

• (2) In sub-paragraph (1), for paragraphs (d) and (e) substitute

, and (d) in the absence of this paragraph, none of the liabilities taken into account in determining the amount of the chargeable equity and liabilities of the relevant group would include the JV liabilities.

• (3) For sub-paragraph (2) substitute—

(2) For the purposes of determining the chargeable equity and liabilities of the relevant group under paragraph 17 or 19 (as the case may be) the joint venture is to be treated as if— (a) it were a member of the group in relation to— (i) the liabilities of the joint venture which consist of the JV liabilities, and (ii) the assets of the joint venture so far as determined by the relevant interest, and (b) it were not a member of the group in relation to the remaining liabilities and assets of the joint venture.

9

In paragraph 44 (chargeable equity and liabilities of joint venture: prevention of double charge), in sub-paragraph (7)(b), for the words from “liabilities for” to “27(2)(a)” substitute “ taken into account in calculating the chargeable equity and liabilities of V (or where sub-paragraph (6) applies, A) ”.”

10

The amendments made by paragraphs 8 and 9 have effect in relation to chargeable periods ending on or after 1 January 2012.

Double taxation relief

11

• (1) In paragraph 66 (double taxation arrangements), after sub-paragraph (9) insert—

(9A) If arrangements specified in an order under this paragraph provide for relief from the bank levy for periods before the order is made, regulations under this paragraph which are made on the same day as the order, and come into force on the same day as the order, may make provision in relation to those periods.

• (2) After paragraph 67 insert—

(67A) (1) If the Treasury by order declares that— (a) international tax enforcement arrangements which are specified in the order have been made in relation to any territory or territories outside the United Kingdom in association with double taxation arrangements specified under paragraph 66 in the same or a previous order, and (b) it is expedient that those international tax enforcement arrangements have effect, those arrangements have effect, and do so in spite of anything in any enactment or instrument. (2) “International tax enforcement arrangements” means arrangements which relate to one or both of the following— (a) the exchange of information foreseeably relevant to the administration, enforcement or recovery of the bank levy or any equivalent foreign levy to which the double taxation arrangements relate; (b) the service of documents relating to the bank levy or any such equivalent foreign levy. (3) An order under this paragraph revoking an earlier order may contain transitional provisions that appear to the Treasury to be necessary or expedient. (4) Subsections (4) and (5) of section 173 of FA 2006 (international tax enforcement arrangements: disclosure of information) apply to arrangements which have effect under this paragraph as they apply to arrangements which have effect under that section. (5) Orders under this paragraph are to be made by statutory instrument. (6) A statutory instrument containing an order under this paragraph is subject to annulment in pursuance of a resolution of the House of Commons.

• (3) Accordingly, the italic heading before paragraph 68 is omitted.

Transitional provision

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• (1) This paragraph applies where—

• (a) an amount of the bank levy is treated as if it were an amount of corporation tax chargeable on an entity (“E”) for an accounting period of E,

• (b) the chargeable period in respect of which the amount of the bank levy is charged falls (or partly falls) on or after 1 January 2012, and

• (c) under the Instalment Payment Regulations, one or more instalment payments, in respect of the total liability of E for the accounting period, were treated as becoming due and payable before the commencement date (“pre-commencement instalment payments”).

• (2) Paragraphs 2 to 10 are to be ignored for the purpose of determining the amount of any pre-commencement instalment payment.

• (3) If there is at least one instalment payment, in respect of the total liability of E for the accounting period, which under the Instalment Payment Regulations is treated as becoming due and payable on or after the commencement date (“post-commencement instalment payments”), the amount of that instalment payment, or the first of them, is to be increased by the adjustment amount.

• (4) If there are no post-commencement instalment payments, a further instalment payment, in respect of the total liability of E for the accounting period, of an amount equal to the adjustment amount is to be treated as becoming due and payable at the end of the period of 30 days beginning with the commencement date.

• (5) “The adjustment amount” is the difference between—

• (a) the aggregate amount of the pre-commencement instalments determined in accordance with sub-paragraph (2), and

• (b) the aggregate amount of those instalment payments determined ignoring sub-paragraph (2) (and so taking account of paragraphs 2 to 10).

• (6) In the Instalment Payment Regulations—

• (a) in regulations 6(1)(a), 7(2), 8(1)(a) and (2)(a), 9(5), 10(1), 11(1) and 13, references to regulation 4A, 4B, 4C, 4D, 5, 5A or 5B of those Regulations are to be read as including a reference to sub-paragraphs (1) to (5) (and in regulation 7(2) “the regulation in question”, and in regulation 8(2) “that regulation”, are to be read accordingly), and

• (b) in regulation 9(3), the reference to those Regulations is to be read as including a reference to sub-paragraphs (1) to (5).

• (7) In section 59D of TMA 1970 (general rule as to when corporation tax is due and payable), in subsection (5), the reference to section 59E is to be read as including a reference to this paragraph.

• (8) In this paragraph—

• “the chargeable period” is to be construed in accordance with paragraph 4 or (as the case may be) 5 of Schedule 19 to FA 2011;

• “the commencement date” means the day on which this Act is passed;

• “the Instalment Payment Regulations” means the Corporation Tax (Instalment Payments) Regulations 1998 (S.I. 1998/3175);

and references to the total liability of E for an accounting period are to be construed in accordance with regulation 2(3) of the Instalment Payment Regulations.

SCHEDULE 35

Introductory

1

Part 4 of FA 2003 (stamp duty land tax) is amended in accordance with paragraphs 2 to 9.

Higher rate of tax: main provisions

2

• (1) Section 55 (amount of tax chargeable: general) is amended as follows.

• (2) In subsection (1), after “chargeable transaction” insert “ to which this section applies ”.

• (3) After that subsection insert—

(1A) This section applies to any chargeable transaction other than a transaction to which paragraph 3 of Schedule 4A or step 4 of section 74(1A) (higher rate for certain transactions) applies.

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

• (5) In subsection (5), for “74” substitute “ 74(2) and (3) ”.

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

3

After section 55 insert—

(55A) Schedule 4A provides for the calculation of the tax chargeable in respect of certain transactions involving higher threshold interests in dwellings.

4

After Schedule 4 insert—

SCHEDULE 4A (1) (1) In this paragraph “interest in a single dwelling” means so much of the subject-matter of a chargeable transaction as consists of a chargeable interest in or over a single dwelling (together with appurtenant rights). (2) An interest in a single dwelling is a higher threshold interest for the purposes of this Schedule if chargeable consideration of more than £2,000,000 is attributable to that interest. (2) (1) Sub-paragraphs (2) to (8) apply to a chargeable transaction whose subject-matter consists of or includes a higher threshold interest. (2) If the main subject-matter of the transaction consists entirely of higher threshold interests, the transaction is a high-value residential transaction for the purposes of paragraph 3. (3) If the main subject-matter of the transaction includes a chargeable interest other than a higher threshold interest, the transaction (“the primary transaction”) is to be treated for the relevant purposes as two separate chargeable transactions as follows— (a) a transaction whose subject-matter is all the higher threshold interests, together with any appurtenant rights; (b) a transaction whose subject-matter is the remainder of the subject-matter of the primary transaction. (4) For those purposes, the chargeable consideration for a transaction treated as occurring under sub-paragraph (3) is so much of the chargeable consideration for the primary transaction as is attributable to that transaction. (5) The transaction mentioned in sub-paragraph (3)(a) is a high-value residential transaction for the purposes of paragraph 3. (6) “Relevant purposes” means the purposes of— (a) paragraphs 3 and 5 of this Schedule, (b) section 55 (amount of tax chargeable: general), (c) Schedule 5 (amount of tax chargeable: rent), (d) Schedule 6B (transfers involving multiple dwellings), and (e) any other provision of this Part, so far as it is necessary because of any of paragraphs (a) to (d) to treat the purposes in question as relevant purposes. (7) If a transaction treated under sub-paragraph (3) as two separate transactions is notifiable, each of the separate transactions (but not the primary transaction) is also treated as a separate, and notifiable, transaction for the purposes of section 76 (duty to deliver land transaction return). (8) The provisions relating to land transaction returns are to be read with any adjustments that may be necessary as a result of sub-paragraph (7). (9) The reference in sub-paragraph (1) to a chargeable transaction does not include a transaction to which section 74 (exercise of collective rights by tenants of flats) or section 75 (crofting community right to buy) applies. (3) (1) Where this paragraph applies to a chargeable transaction— (a) the amount of tax chargeable in respect of the transaction is 15% of the chargeable consideration for the transaction, and (b) the transaction is not taken to be linked to any other transaction for the purposes of section 55(4). (2) This paragraph applies to a chargeable transaction if— (a) the transaction is a high-value residential transaction, and (b) the condition in sub-paragraph (3) is met. (3) The condition is that— (a) the purchaser is a company, (b) the acquisition is made by or on behalf of the members of a partnership one or more of whose members is a company, or (c) the acquisition is made for the purposes of a collective investment scheme. (4) References in sub-paragraph (3) to a company do not include a company acting in its capacity as trustee of a settlement. (5) If there are two or more purchasers acting jointly, the condition in sub-paragraph (3) is treated as met if it is met in relation to at least one of those purchasers. (6) In relation to a transfer of an interest in a partnership that is a chargeable transaction by virtue of paragraph 17(2) of Schedule 15, sub-paragraph (3) has effect as if the following were substituted for paragraph (b) of that sub-paragraph— (b) the purchasers (see paragraph 17(3) of Schedule 15) include a company, or (7) In relation to an event that is a chargeable transaction by virtue of paragraph 17A(4) of that Schedule, sub-paragraph (3) has effect as if the following were substituted for paragraph (b) of that sub-paragraph— (b) the purchasers (see paragraph 17A(5) of Schedule 15) include a company, or (8) For the purposes of sub-paragraph (3), paragraph 3 of Schedule 16 (bare trustees) applies as if sub-paragraphs (2) and (3) of that paragraph were omitted. (9) In the case of a transaction for which the whole or part of the chargeable consideration is rent, this paragraph has effect subject to section 56 and Schedule 5 (amount of tax chargeable: rent). (10) The Treasury may by order amend this paragraph for the purpose of limiting the circumstances in which the condition in sub-paragraph (3) is to be treated as met. (4) (1) Sub-paragraphs (2) and (3) apply if— (a) the subject-matter of a chargeable transaction includes a chargeable interest in or over a dwelling, (b) one or more land transactions, the subject-matter of each of which includes a chargeable interest in or over the dwelling, are linked to that chargeable transaction, and (c) the total consideration attributable to the interests mentioned in paragraphs (a) and (b) (and to any appurtenant rights, but disregarding any rent) is more than £2,000,000. (2) Each of those chargeable interests is treated as a higher threshold interest for the purposes of this Schedule. (3) If the condition in paragraph 3(3) is met in the case of the transaction mentioned in sub-paragraph (1)(a), it is also treated as met in the case of each transaction mentioned in sub-paragraph (1)(b) that is a chargeable transaction. (4) The transactions referred to in this paragraph do not include any transaction to which section 74 (exercise of collective rights by tenants of flats) or section 75 (crofting community right to buy) applies. (5) (1) A company is treated as not being a company for the purposes of paragraph 3(3)(a) if— (a) the company acquires the subject-matter of the chargeable transaction in the course of a bona fide property development business and for the sole purpose of developing and reselling the land, and (b) the company has carried on that business for at least two years before the effective date of the transaction. (2) Where the subject-matter of a chargeable transaction is acquired by or on behalf of the members of a partnership, those members are taken not to include a company for the purposes of paragraph 3(3)(b) if— (a) that subject-matter is acquired in the course of a bona fide property development business and for the sole purpose of developing and reselling the land, and (b) the partnership has carried on that business for at least two years before the effective date of the transaction. (3) In relation to a transfer of an interest in a partnership that is a chargeable transaction by virtue of paragraph 17(2) of Schedule 15 (“the partnership transfer”) the purchasers are treated as not including a company for the purposes of paragraph 3(3)(b) (as modified by paragraph 3(6)) if— (a) the acquisition effected by the land transfer referred to in paragraph 17(1)(a) of that Schedule was made in the course of a bona fide property development business, and for the sole purpose of developing and reselling the land, and (b) the partnership is continuing to carry on that business at the effective date of the partnership transfer, and has carried it on for at least two years before that date. (4) In relation to an event that is a chargeable transaction by virtue of paragraph 17A(4) of Schedule 15 (“the qualifying event”) the purchasers are treated as not including a company for the purposes of paragraph 3(3)(b) (as modified by paragraph 3(7)) if— (a) the acquisition effected by the land transfer referred to in paragraph 17A(1)(a) of that Schedule was made in the course of a bona fide property development business, and for the sole purpose of developing and reselling the land, and (b) the partnership is continuing to carry on that business at the effective date of the qualifying event, and has carried it on for at least two years before that date. (5) A property development business is a business that consists of or includes buying, and redeveloping for resale, residential property. (6) For the purposes of sub-paragraph (1)(b) a property development business is treated as having been carried on by the company at any time when it was carried on by a company which is a member of the same group as the company. (7) Companies are members of the same group for the purposes of this paragraph if they are members of the same group for the purposes of group relief (see paragraph 1 of Schedule 7). (6) (1) Sub-paragraphs (2) and (3) apply where the subject-matter of a transaction to which Part 3 of Schedule 15 applies consists of or includes a higher threshold interest. (2) The transaction is not to be treated as a high-value residential transaction by virtue of paragraph 2(2) unless the chargeable consideration for the transaction is more than £2,000,000. (3) Paragraph 2(3) to (8) does not apply to the transaction if— (a) the subject-matter of the transaction includes a chargeable interest other than a higher threshold interest, and (b) the result of applying paragraph 2(3) and (4) would be that chargeable consideration of £2,000,000 or less would be attributable to the separate transaction mentioned in paragraph 2(3)(a). (4) For the purposes of sub-paragraph (1) and paragraph 2, the subject-matter (and the main subject-matter) of a transfer of an interest in a partnership that is a chargeable transaction by virtue of sub-paragraph (2) of paragraph 14 of Schedule 15 is— (a) if the transfer is a Type A transfer, the relevant partnership property as defined in sub-paragraph (5) of that paragraph, or (b) if the transfer is a Type B transfer, the relevant partnership property as defined in sub-paragraph (5A) of that paragraph. (5) For the purposes of sub-paragraph (1) and paragraph 2, the subject-matter (and the main subject-matter) of a transfer of an interest in a partnership that is a chargeable transaction by virtue of sub-paragraph (2) of paragraph 17 of Schedule 15 is the subject-matter of the land transfer referred to in sub-paragraph (1)(a) of that paragraph. (6) For the purposes of sub-paragraph (1) and paragraph 2, the subject-matter (and the main subject-matter) of a chargeable transaction that is treated as occurring by virtue of sub-paragraph (4) of paragraph 17A of Schedule 15 is the subject-matter of the land transfer referred to in sub-paragraph (1)(a) of that paragraph. (7) (1) This paragraph sets out rules for determining what counts as a dwelling for the purposes of this Schedule. (2) A building or part of a building counts as a dwelling if— (a) it is used or suitable for use as a single dwelling, or (b) it is in the process of being constructed or adapted for such use. (3) Land that is, or is to be, occupied or enjoyed with a dwelling as a garden or grounds (including any building or structure on such land) is taken to be part of that dwelling. (4) Land that subsists, or is to subsist, for the benefit of a dwelling is taken to be part of the dwelling. (5) The subject-matter of a transaction is also taken to include an interest in a dwelling if— (a) substantial performance of a contract constitutes the effective date of that transaction by virtue of a relevant deeming provision, (b) the main subject-matter of the transaction consists of or includes an interest in a building, or a part of a building, that is to be constructed or adapted under the contract for use as a single dwelling, and (c) construction or adaptation of the building, or part of the building, has not begun by the time the contract is substantially performed. (6) In sub-paragraph (5) “contract”, “relevant deeming provision” and “substantially performed” have the same meaning as in paragraph 7(5) of Schedule 6B. (7) A building or part of a building used for a purpose specified in section 116(2) or (3) is not used as a dwelling for the purposes of sub-paragraph (2) or (5). (8) Where a building or part of a building is used for a purpose mentioned in sub-paragraph (7), no account is to be taken for the purposes of sub-paragraph (2) of its suitability for any other use. (8) (1) The Treasury may by order amend paragraph 7 so as to specify cases where use of a building is to be use of a building as a dwelling for the purposes of sub-paragraph (2) or (5) of that paragraph. (2) The reference in section 116(8)(a) (power to amend section 116(2) and (3)) to “the purposes of subsection (1)” includes a reference to the purposes of paragraph 7(2) and (5). (9) In this Schedule— - “appurtenant rights”, in relation to a chargeable interest that is, or is part of, the subject-matter of a transaction, means any rights or interests appurtenant or pertaining to the chargeable interest that are acquired with it; - “attributable” means attributable on a just and reasonable basis; - “collective investment scheme” has the same meaning as in Part 17 of the Financial Services and Markets Act 2000 (see section 235 of that Act); - “company” means a body corporate other than a partnership.

Higher rate of tax: exercise of collective rights by tenants of flats

5

• (1) Section 74 (exercise of collective rights by tenants of flats) is amended as follows.

• (2) After subsection (1) insert—

(1A) The rate of tax is determined as follows. - Step 1 Determine the fraction of the relevant consideration produced by dividing the total amount of that consideration by the number of qualifying flats contained in the premises. - Step 2 If the amount produced by step 1 is £2,000,000 or less, determine the rate of tax and the tax chargeable in accordance with subsections (2) and (3). - Step 3 If the amount produced by step 1 is more than £2,000,000 and the condition in paragraph 3(3) of Schedule 4A is not met with respect to the transaction, determine the rate of tax and the tax chargeable in accordance with subsections (2) and (3). - Step 4 If the amount produced by step 1 is more than £2,000,000 and the condition in paragraph 3(3) of Schedule 4A is met with respect to the transaction, subsections (2) and (3) do not apply, and the amount of tax chargeable in respect of the transaction is 15% of the chargeable consideration for the transaction.

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

Minor and consequential amendments

6

• (1) Section 109 (general power to vary Part 4 of FA 2003 by regulations) is amended as follows.

• (2) After subsection (2) insert—

(2A) The power under subsection (2)(b) includes power to alter the conditions for the application to a chargeable transaction of paragraph 3 of Schedule 4A (higher rate for certain transactions), other than the condition that the transaction must be a high-value residential transaction.

• (3) In subsection (3)—

• (a) for “subsection (2)(b),” substitute “ subsections (2)(b) and (2A), ”,

• (b) omit the “or” at the end of paragraph (a), and

• (c) after that paragraph insert—

(aa) section 74(1A) (exercise of collective rights by tenants of flats), (ab) Schedule 4A (amount of tax chargeable: high-value interests in dwellings), or

.

7

• (1) Schedule 5 (amount of tax chargeable: rent) is amended as follows.

• (2) In paragraph 9—

• (a) in sub-paragraph (4)—

• (i) after “section 55” insert “ or 74(1A) ”, and

• (ii) after “Schedule” (in the second place it occurs) insert “ 4A or ”, and

• (b) in sub-paragraph (5)—

• (i) for “that section” substitute “ section 55 ”, and

• (ii) after “Schedule” (in the second place it occurs) insert “ 6B ”.

• (3) In paragraph 9A(1), for “where there is chargeable consideration other than rent.” substitute

where— (a) there is chargeable consideration other than rent, and (b) section 55 (amount of tax chargeable: general) applies to the transaction (whether as a result of paragraph 2 of Schedule 4A or otherwise).

8

In paragraph 2(4) of Schedule 6B (transfers involving multiple dwellings)—

• (a) omit the “or” at the end of paragraph (a), and

• (b) after that paragraph insert—

(aa) paragraph 3 of Schedule 4A applies to it, or

.

9

• (1) Schedule 15 (partnerships) is amended as follows.

• (2) In paragraphs 11(2C) and 19(2C), in the substituted sub-paragraph (4)—

• (a) after “section 55” insert “ or 74(1A) ”, and

• (b) after “Schedule” (in the second place it occurs) insert “ 4A or ”.

• (3) In paragraph 30(2)—

• (a) for “either or both” substitute “ one or more ”, and

• (b) after paragraph (a) insert—

(aa) paragraph 3 of Schedule 4A applies to the transaction;

.

Application of amendments

10

• (1) Except as mentioned in sub-paragraph (2), the amendments made by this Schedule have effect in relation to any land transaction of which the effective date is on or after 21 March 2012.

• (2) Those amendments do not have effect in relation to any transaction that is—

• (a) effected in pursuance of a contract entered into and substantially performed before 21 March 2012,

• (b) effected in pursuance of a contract entered into before that date and not excluded by sub-paragraph (3), or

• (c) excepted by sub-paragraph (4).

• (3) A transaction effected in pursuance of a contract entered into before 21 March 2012 is excluded by this sub-paragraph if—

• (a) there is any variation of the contract, or assignment (or assignation) of rights under the contract, on or after 21 March 2012,

• (b) the transaction is effected in consequence of the exercise on or after that date of any option, right of pre-emption or similar right, or

• (c) on or after that date there is an assignment (or assignation), subsale or other transaction relating to the whole or part of the subject-matter of the contract as a result of which a person other than the purchaser under the contract becomes entitled to call for a conveyance.

• (4) A transaction treated as occurring under paragraph 17(2) or 17A(4) of Schedule 15 to FA 2003 (partnerships) is excepted by this sub-paragraph if the effective date of the land transfer referred to in sub-paragraph (1)(a) of the paragraph concerned is before 21 March 2012.

SCHEDULE 36

PART 1 — Introduction

The Agreement and the Joint Declaration

1

In this Schedule—

• (a) “the Agreement” means the agreement signed on 6 October 2011 between the United Kingdom and the Swiss Confederation on co-operation in the area of taxation, as amended by a protocol signed by them on 20 March 2012 and by a mutual agreement signed by them on 18 April 2012 implementing article XVIII of that protocol,

• (b) “the Joint Declaration” means the joint declaration (concerning a tax finality payment) forming an integral part of that protocol,

• (c) “the start date” is the date on which the Agreement enters into force in accordance with its terms (see Article 44), and

• (d) references to a numbered Article are to the Article of that number in the Agreement.

PART 2 — The past

Taxes affected

2

• (1) The taxes affected by this Part are—

• (a) income tax,

• (b) capital gains tax,

• (c) inheritance tax, and

• (d) VAT.

• (2) Accordingly, this Part affects—

• (a) amounts of income on which income tax is charged,

• (b) chargeable gains,

• (c) the value of property forming part of the value transferred by a chargeable transfer, and

• (d) the value of supplies on which VAT is charged.

• (3) An amount falling within one (or more) of those descriptions is referred to as a “taxable amount” and, in relation to such an amount, “tax” means whichever of the taxes mentioned in sub-paragraph (1) is (or are) charged on it.

Application of this Part

3

• (1) This Part applies if—

• (a) a one-off payment is levied in accordance with Part 2 of the Agreement,

• (b) a certificate is issued under Article 9(4) to a person (“P”) in respect of that payment, and

• (c) the certificate is approved by P or considered approved by virtue of that Article.

• (2) The certificate is referred to in this Part as “the Part 2 certificate”.

Qualifying amounts

4

• (1) The Part 2 certificate applies to taxable amounts in respect of which the conditions in sub-paragraph (2) are met.

• (2) The conditions are—

• (a) P is liable to tax on the amount,

• (b) the amount is untaxed,

• (c) the taxable event took place before the start date, and

• (d) the necessary link with the certificate can be demonstrated.

• (3) The necessary link is—

• (a) in a case falling within Article 9(3) (non-UK domiciled individuals opting for self-assessment method), that the amount is included in the omitted taxable base by reference to which the one-off payment was calculated, and

• (b) in any other case, that the amount forms part of or is represented by the assets comprised in the relevant capital by reference to which the one-off payment was calculated (referred to in the Agreement as Cr).

• (4) For the purposes of sub-paragraph (3)(b), amounts are assumed to be attributed to assets in the way that produces the most beneficial outcome for P.

• (5) Paragraph 11 makes further provision about the interpretation of sub-paragraph (2).

• (6) Amounts to which the Part 2 certificate applies in accordance with this paragraph are referred to in this Part as “qualifying amounts”.

Eligibility for clearance

5

• (1) The effect of the Part 2 certificate depends on whether P is eligible for clearance.

• (2) P is “eligible for clearance” if—

• (a) none of the circumstances listed in Article 9(13)(a) to (e) apply (tax investigations etc), and

• (b) Article 12(1) does not apply (wrongful behaviour in relation to non-UK domiciled status).

• (3) Otherwise, P is “not eligible for clearance”.

Effect if P eligible for clearance

6

• (1) This paragraph sets out the effect of the Part 2 certificate if P is eligible for clearance.

• (2) P ceases to be liable to tax on qualifying amounts.

• (3) Sub-paragraph (2) does not apply to a qualifying amount if—

• (a) the amount was held in the United Kingdom,

• (b) at some point during the period beginning with 6 October 2011 and ending immediately before the start date, it ceased to be held in the United Kingdom, and

• (c) after that point (but before the start date) it began to be held in Switzerland.

• (4) Instead, such part of the one-off payment as is attributable (on a just and reasonable basis) to the qualifying amount is to be treated as if it were a credit allowable against the tax due from P taking account of that amount.

• (5) The meaning of tax due “taking account of” an amount is explained in Part 5 of this Schedule.

• (6) The form in which a qualifying amount was held in the United Kingdom is irrelevant (so references in sub-paragraph (3) to the amount include an asset representing the amount).

• (7) The total qualifying amounts to which sub-paragraphs (2) and (4) can apply as a result of the Part 2 certificate is limited to X.

• (8) If the total exceeds X, the particular qualifying amounts to which those sub-paragraphs apply are assumed to be those that would produce the most beneficial outcome for P.

• (9) X is—

• (a) in a case falling within Article 9(3), the value of the omitted taxable base by reference to which the one-off payment was calculated, and

• (b) in any other case, the value shown in the Part 2 certificate as the value of the relevant capital (Cr).

Ceasing to be liable to tax

7

• (1) The result of “ceasing to be liable” to tax on a qualifying amount depends on the tax (or taxes) in respect of which the amount is untaxed.

• (2) For income tax or capital gains tax, the result is that the amount is no longer liable to be brought into account in assessing the income tax or capital gains tax due from P for the tax year in which the amount would otherwise be liable to be brought into account.

• (3) For inheritance tax, the result is that any inheritance tax due from P in respect of the chargeable transfer and attributable to the property whose value is included in the amount is no longer due from P.

• (4) For VAT, the result is that P is no longer required to account for output tax on the amount in determining the VAT payable by P for the prescribed accounting period in which P would otherwise be required to account for output tax on the amount.

• (5) But—

• (a) ceasing to be liable to tax on a qualifying amount does not affect P's liability to tax on any other amount, and

• (b) P's liability to tax on any other amount remains what it would have been, had the qualifying amount been brought into account in calculating that liability.

• (6) Accordingly, if the qualifying amount were ever to be brought into account and it were found that the tax assessed on any other amount should have been higher as a result, P would remain liable for the extra tax due on that other amount and for any associated ancillary charge.

• (7) For the purposes of sub-paragraphs (5) and (6), the qualifying amount is assumed to form the top slice of the total sum on which P is liable to tax.

Effect if P not eligible for clearance

8

• (1) This paragraph sets out the effect of the Part 2 certificate if P is not eligible for clearance.

• (2) The one-off payment is to be treated as if it were a credit allowable against the tax due from P taking account of qualifying amounts.

• (3) The one-off payment is to be applied for the purposes of sub-paragraph (2)—

• (a) in the order specified in sub-paragraph (4), and

• (b) subject to that, in the way that produces the most beneficial outcome for P.

• (4) The order is—

• (a) first, for VAT,

• (b) then, for income tax,

• (c) then, for capital gains tax, and

• (d) finally, for inheritance tax.

Interest, penalties etc

9

• (1) Where, by virtue of this Part, P ceases to be liable to tax on a qualifying amount, P also ceases to be liable to any ancillary charge directly connected with that amount.

• (2) Where, by virtue of this Part, all or part of a one-off payment is treated as if it were a credit allowable against the tax due from P taking account of a qualifying amount, the credit may also be used to offset any ancillary charge directly connected with that amount.

• (3) Sub-paragraph (4) applies in the case of a qualifying amount that is part only of—

• (a) an amount of income on which income tax is charged,

• (b) a chargeable gain,

• (c) the value of property forming part of the value transferred by a chargeable transfer, or

• (d) the value of a supply on which VAT is charged.

• (4) The amount of any ancillary charge directly connected with that qualifying amount is determined by apportioning the ancillary charge directly connected with the income, gain or value on a just and reasonable basis.

Repayments

10

Nothing in this Part entitles any person to a repayment or refund of tax, save for any repayment or refund to which P may be entitled by virtue of paragraph 6(4) or 8(2) if the credit allowable under that paragraph exceeds the total amount of tax against which the credit is allowable.

Paragraph 4: supplementary provision

11

• (1) This paragraph explains how paragraph 4(2) is to be read for each description of taxable amount.

• (2) For income and chargeable gains—

• (a) the reference to P being “liable to tax” includes a case where P would be so liable if the income or gain were to be remitted to the United Kingdom,

• (b) “the taxable event” takes place when the income arises or the gain accrues (whether or not, in a remittance basis case, it is remitted to the United Kingdom), and

• (c) the income or gain is “untaxed” if it has not been brought into account in an assessment to income tax or, as the case may be, capital gains tax for the tax year in which it is required to be brought into account.

• (3) For the value of property forming part of the value transferred by a chargeable transfer—

• (a) “the taxable event” takes place when the chargeable transfer is made (or, in the case of a potentially exempt transfer, when death occurs), and

• (b) the value of the property is “untaxed” if it has not been brought into account in determining the value transferred by the chargeable transfer.

• (4) For the value of supplies on which VAT is charged—

• (a) “the taxable event” takes place when P makes the supply, and

• (b) the value of the supply is “untaxed” if output tax on the supply has not been accounted for in determining the VAT payable by P for the prescribed accounting period in which P is required to account for output tax on the supply.

• (5) Paragraph 4(2)(a) is not satisfied in a case where P is liable to tax only because the liability has been transferred to P as a result of action taken by HMRC (for example, as a result of a notice given under section 77A of VATA 1994 or a direction given under regulation 81 of the Income Tax (PAYE) Regulations 2003 (S.I. 2003/2682)).

Refund of one-off payment

12

If a one-off payment is refunded by HMRC in accordance with Article 15(3), this Part ceases to apply with respect to that payment.

PART 3 — The future: income tax and capital gains tax

Taxes affected

13

The taxes affected by this Part are—

• (a) income tax, and

• (b) capital gains tax.

Application of this Part

14

• (1) This Part applies if—

• (a) a sum is levied under Article 19 on an amount of income or a gain of a person, and

• (b) a certificate is issued to the person under Article 30(1) in respect of the levying of that sum (or sums that include that sum).

• (2) This Part also applies if—

• (a) a retention is made under EUSA from an amount of income or a gain of a person,

• (b) a tax finality payment, as contemplated by the Joint Declaration, is made on the same income or gain, and

• (c) a certificate is issued to the person under the Joint Declaration in respect of the making of that payment (or payments that include that payment).

• (3) In this Part—

• (a) the person is referred to as “P”,

• (b) the certificate is referred to as “the relevant certificate”,

• (c) the amount of income, or the gain, is referred to as “the cleared amount”,

• (d) the account or deposit (within the meaning of the Agreement) to which the certificate relates (or to which certificates relate that include the certificate) is referred to as “the underlying account”, and

• (e) the sum levied under Article 19 on the cleared amount or, as the case may be, the tax finality payment made on it is referred to as “the transferred sum”.

Effect of relevant certificate

15

• (1) The effect of the relevant certificate depends on whether P makes an election under paragraph 16 in respect of the underlying account for the applicable year.

• (2) “The applicable year” is the tax year for which P is liable to income tax or, as the case may be, capital gains tax on the cleared amount.

• (3) If P makes an election, the transferred sum is to be treated as if it were a credit allowable against the income tax or, as the case may be, capital gains tax due from P for the applicable year.

• (4) If P does not make an election, P ceases to be liable to income tax or, as the case may be, capital gains tax on the cleared amount.

• (5) Sub-paragraph (4) is to be read in accordance with paragraph 7.

• (6) Where P ceases to be liable to tax on the cleared amount, P also ceases to be liable to any ancillary charge directly connected with that amount.

Election

16

• (1) P may make an election under this paragraph in respect of the underlying account for a tax year if all the affected amounts are included in full in a return (or amended return) made by P under Part 2 of TMA 1970 for that tax year.

• (2) In relation to a tax year, an amount is an “affected amount” if—

• (a) a certificate is issued to P under Article 30(1) or the Joint Declaration in respect of the levying of a sum, or the making of a tax finality payment, on that amount,

• (b) the account or deposit to which the certificate relates is the underlying account, and

• (c) the amount is required to be brought into account in assessing the income tax or capital gains tax due from P for that tax year.

• (3) An election under this paragraph must be made in the return or amended return in which the affected amounts are included.

• (4) An election may only be made under this paragraph if it is accompanied by all the relevant certificates relating to the underlying account.

• (5) For the purposes of paragraph 15, P is treated as making an election under this paragraph in respect of the underlying account for a tax year if a claim is made under Part 3 of TIOPA 2010 (double taxation relief for special withholding tax) in relation to any of the affected amounts.

• (6) Section 143 of TIOPA 2010 (taking account of special withholding tax in calculating income or gains) applies with any necessary modifications in relation to a tax finality payment as it applies in relation to special withholding tax.

Other credits to be allowed first

17

Other than a credit allowed under Part 3 of TIOPA 2010, any credit for foreign tax allowed under that Act against the income tax or, as the case may be, capital gains tax due from P for the applicable year is to be allowed before effect is given to paragraph 15(3).

Repayments

18

• (1) Sub-paragraph (2) applies if the amount of a credit allowable under paragraph 15(3) exceeds the amount of income tax or, as the case may be, capital gains tax due from P for the applicable year (before set-off).

• (2) The excess is to be set against any amount of the other tax (income tax or capital gains tax) due from P for that year.

• (3) Nothing in this Part entitles any person to a repayment or refund of tax, save for any repayment to which P may be entitled as a result of paragraph 15(3) if, in relation to a credit allowable under that paragraph, there is any remaining balance after applying—

• (a) sub-paragraph (2), and

• (b) section 138(4)(a) or 140(5)(a) of TIOPA 2010, if applicable to the cleared amount.

Relationship with special withholding tax rules

19

The Joint Declaration does not count for the purposes of section 136(6)(b) of TIOPA 2010 (definition of “special withholding tax”) as a corresponding provision of international arrangements.

PART 4 — The future: inheritance tax

Taxes affected

20

This Part affects inheritance tax.

Application of this Part

21

• (1) This Part applies if—

• (a) an amount is withheld under Article 32(2) in respect of relevant assets of a deceased person (“P”), and

• (b) a certificate is issued under Article 32(6) in respect of the withholding of that amount.

• (2) The certificate is referred to in this Part as “the Article 32 certificate”.

• (3) The relevant assets in relation to which the Article 32 certificate is issued are referred to as “the cleared assets”.

• (4) Any reference in this Part to “the chargeable transfer” is to the transfer made (under section 4 of IHTA 1984) on P's death.

Effect of Article 32 certificate

22

• (1) The cleared assets are to be treated as if they were excluded property in determining the value of P's estate immediately before P's death.

• (2) As a result, any ancillary charge directly connected with those assets is also extinguished.

• (3) But—

• (a) treating the cleared assets as if they were excluded property does not affect any liability to inheritance tax on the rest of P's estate, and

• (b) that liability remains what it would have been, had the cleared assets not been treated as excluded property.

• (4) Accordingly, if the cleared assets were ever to be included in an account or further account under section 216 or 217 of IHTA 1984 in respect of the chargeable transfer and it were found that the inheritance tax charged on the value of the property in P's estate other than the cleared assets should have been higher, the extra tax charged on the value of that other property remains due, together with any associated ancillary charge.

• (5) For the purposes of sub-paragraphs (3) and (4), the value of the cleared assets is assumed to form the highest part of the value transferred by the chargeable transfer.

Election in respect of Article 32 certificates

23

• (1) This paragraph applies if the cleared assets for each of the Article 32 certificates issued in respect of P's death are included in full in an account or further account delivered in respect of P's death under section 216 or 217 of IHTA 1984 within the time permitted for delivering such an account or further account.

• (2) The person who delivers the account or further account may elect to disapply paragraph 22.