Finance Act 2013

(1) This section applies if— (a) a person pays a manufactured payment as mentioned in section 614ZC(1), (b) the amount payable is representative of interest on UK securities (“manufactured interest”), and (c) the person — (i) is UK resident, or (ii) pays the manufactured interest in the course of a trade carried on in the United Kingdom through a branch or agency.

,

• (b) in subsection (4), omit the words from “section 583” to “special cases)”, and

• (c) after subsection (5) insert—

(6) In subsection (1) “UK securities” means securities of— (a) the government of the United Kingdom, (b) a local authority in the United Kingdom, (c) another public authority in the United Kingdom, or (d) a UK resident company or other UK resident body. (7) But “UK securities” does not include shares in a UK resident company. (8) In this section “securities” includes loan stock or any similar security.

23

Omit section 920 (foreign payers of manufactured interest: the reverse charge).

24

In section 921 (cases where interest on underlying securities paid gross), in subsection (3), for the words from “ “securities”” to the end substitute “ “manufactured interest” has the same meaning as in section 919. ”

25

Omit sections 922 to 925 (manufactured overseas dividends).

26

In section 925A(2) (creditor repos), for “to 925” substitute “ , 919 and 921 ”.

27

Omit section 925B (debtor repos).

28

In section 925C (actual payments ignored)—

• (a) in the heading, omit “or 925B”,

• (b) omit “or 925B(2)”, and

• (c) for “to 925” substitute “ , 919 and 921 ”.

29

In section 926 (interpretation of Chapter 9 of Part 15), omit subsections (1) and (1A).

30

In Schedule 1 (minor and consequential amendments), omit paragraph 335(1) to (4) and (6) to (8).

31

In Schedule 2 (transitionals and savings), omit paragraphs 108 to 111 (and the headings “Part 12”, “Manufactured payments and repos” and “Tax credits: stock lending arrangements and repos” immediately preceding paragraph 108).

32

In Schedule 4 (index of defined expressions), omit the entries for— “ buying back securities, in the context of a repo (in Part 11) ”, “ company UK REIT (in Chapter 2 of Part 11) ”, “ gross amount (in Chapter 2 of Part 11) ”, “ group (in Chapter 2 of Part 11) ”, “ group UK REIT (in Chapter 2 of Part 11) ”, “ manufactured dividend (in Chapter 2 of Part 11) ”, “ manufactured dividend (in Chapter 3 of Part 11) ”, “ manufactured interest (in Chapter 2 of Part 11) ”, “ manufactured overseas dividend (in Chapter 2 of Part 11) ”, “ overseas dividend (in Part 11) ”, “ overseas dividend (in Chapter 9 of Part 15) ”, “ overseas securities (in Part 11) ”, “ overseas tax (in Chapter 2 of Part 11) ”, “ overseas tax (in Chapter 9 of Part 15) ”, “ overseas tax credit (in Chapter 2 of Part 11) ”, “ prescribed (in Chapter 2 of Part 11) ”, “ principal company (in Chapter 2 of Part 11) ”, “ principal company (in Chapter 9 of Part 15) ”, “ property rental business (in Chapter 2 of Part 11) ”, “ property rental business (in Chapter 9 of Part 15) ”, “ related agreements (in Part 11) ”, “ relevant withholding tax (in Chapter 2 of Part 11) ”, “ repo (in Part 11) ”, “ the rules about manufactured payments (in Chapter 4 of Part 11) ”, “ stock lending arrangement (in Part 11) ”, “ trade carried on through a branch or agency (in Chapter 2 of Part 11) ”, “ transfer (in Chapter 2 of Part 11) ”, “ UK securities (in Part 11) ”, and “ UK shares (in Part 11) ”.

FA 2008

33

• (1) FA 2008 is amended as follows.

• (2) In Schedule 12 (tax credit for certain foreign distributions), omit paragraphs 26, 27(2)(a) and (c) and (3), 28(2)(a) and (c) and (3), 29(2)(a), (c)(i) and (d) and (3) and 30.

• (3) In Schedule 23 (manufactured payments: anti avoidance), omit paragraphs 1 to 4, 6, 7 and 9 to 11.

CTA 2009

34

CTA 2009 is amended as follows.

35

In section 539 (introduction to Chapter about manufactured interest), omit subsection (7).

36

In section 540(3) (manufactured interest treated as interest under loan relationship), omit “and to section 799 of CTA 2010”.

37

In section 550 (which makes provision about the effect of the sale of securities on a borrower)—

• (a) in subsection (4), for “(6)” substitute “ (5C) ”,

• (b) after subsection (5A) insert—

(5B) Nothing in subsection (3) entitles the borrower to double taxation relief in respect of any income payable in respect of overseas securities. (5C) But nothing in subsection (3) affects the entitlement of the borrower to double taxation relief in respect of any overseas tax deducted from any amount representative of income payable in respect of overseas securities. (5D) In subsection (5C) “overseas tax” means tax under the law of a territory outside the United Kingdom.

, and

• (c) omit subsection (6).

38

In section 1221(1) (amounts treated as expenses of management), for paragraph (i) substitute—

(i) section 814C(5) of CTA 2010 (treatment of payer of manufactured dividend),

.

39

In section 1248 (expenses in connection with arrangements for securing a tax advantage)—

• (a) omit subsection (3), and

• (b) in subsection (5), omit the definition of “relevant tax relief”.

FA 2009

40

In Schedule 19 to FA 2009 (income tax credits for foreign distributions), omit paragraphs 4 and 13(b).

CTA 2010

41

CTA 2010 is amended as follows.

42

In section 1 (overview of Act), in subsection (4)—

• (a) omit paragraph (d), and

• (b) before paragraph (e) insert—

(da) manufactured dividends (see Part 17A),

.

43

Omit Part 17 (manufactured payments and repos).

44

• (1) Section 1109(5) (provisions to which section 1109 is subject) is amended as follows.

• (2) Omit paragraphs (a) to (c) (and the word “and” at the end of paragraph (c)).

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

45

In Schedule 1 (minor and consequential amendments), omit paragraphs 259, 537, 538, 539(b) and (c), 635, 636 and 689(a) and (b)(i).

46

In Schedule 2 (transitionals and savings), omit Part 17 (manufactured payments and repos).

47

In Schedule 4 (index of defined expressions), omit the entries for—

creditor quasi-repo (in Chapter 5 of Part 17)

, “ creditor repo (in Chapter 5 of Part 17) ”, “ debtor quasi-repo (in Chapter 5 of Part 17) ”, “ debtor repo (in Chapter 5 of Part 17) ”, “ manufactured dividend (in Part 17) ”, “ manufactured overseas dividend (in Part 17) ”, “ overseas dividend (in Part 17) ”, “ overseas securities (in Part 17) ”, “ overseas tax (in Part 17) ”, “ prescribed (in Chapter 4 of Part 17) ”, “ stock lending arrangement (in Chapter 5 of Part 17) ”, and “ “UK shares (in Part 17)”. ”.

TIOPA 2010

48

• (1) TIOPA 2010 is amended as follows.

• (2) In section 85A(4) (schemes involving deemed foreign tax), omit paragraph (b) of the definition of “real foreign tax”.

• (3) In Schedule 7 (miscellaneous relocations), omit paragraph 113.

• (4) In Schedule 8 (minor and consequential amendments), omit paragraph 82.

FA 2011

49

In Schedule 13 to FA 2011 (profits of foreign permanent establishments), omit paragraphs 22 to 24.

FA 2012

50

• (1) FA 2012 is amended as follows.

• (2) Omit section 22 (treatment of the receipt of manufactured overseas dividends).

• (3) In section 78(3) (amounts which are deemed BLAGAB management expense for accounting period), for “783(6), 785(4) or 791(6)” substitute “ 814C(7) ”.

• (4) In Schedule 16 (minor and consequential amendments), omit paragraphs 220 to 223.

PART 4 — Commencement

51

The amendments made by Parts 1 and 2 of this Schedule have effect in relation to any payment representative of a dividend or interest which is made on or after 1 January 2014.

52

The amendments made by Part 3 of this Schedule come into force on that date.

SCHEDULE 30

PART 1 — Amendments of Part 10 of CTA 2010

1

Part 10 of CTA 2010 (close companies) is amended as follows.

2

• (1) In section 438 (overview), after subsection (2) insert—

(2A) Chapter 3A imposes a charge to tax in connection with other arrangements involving close companies and participators. (2B) Chapter 3B makes provision about the treatment of certain repayments and return payments made in respect of loans, advances and other arrangements.

• (2) The amendment made by this paragraph is treated as having come into force on 20 March 2013.

3

• (1) In section 455 (charge to tax in case of loan to participator), for subsection (1) substitute—

(1) This section applies if a close company makes a loan or advances money to— (a) a relevant person who is a participator in the company or an associate of such a participator, (b) the trustees of a settlement one or more of the trustees or actual or potential beneficiaries of which is a participator in the company or an associate of such a participator, or (c) a limited liability partnership or other partnership one or more of the partners in which is an individual who is— (i) a participator in the company, or (ii) an associate of an individual who is such a participator.

• (2) The amendment made by this paragraph has effect in relation to a loan or advance made on or after 20 March 2013.

4

• (1) In section 459(2) (application of other provisions where loan treated as made to participator), after “458” insert “ and 464C and 464D ”.

• (2) The amendment made by this paragraph is treated as having come into force on 20 March 2013.

5

• (1) After Chapter 3 insert—

(464A) (1) This section applies if— (a) a close company is at any time a party to tax avoidance arrangements, and (b) as a result of those arrangements, a benefit is conferred (whether directly or indirectly) on an individual who is— (i) a participator in the company, or (ii) an associate of such a participator. (2) But this section does not apply if, or to the extent that, the conferral of the benefit gives rise to— (a) a charge to tax on the company under section 455, or (b) a charge to income tax on the participator or associate. (3) There is due from the company, as if it were an amount of corporation tax chargeable on the company for the accounting period in which the benefit is conferred on the participator or associate, an amount equal to 25% of the value of the benefit conferred. (4) Tax due under this section in relation to a benefit conferred on a participator or associate is due and payable in accordance with section 59D of TMA 1970 on the day following the end of the period of 9 months from the end of the accounting period in which the benefit was conferred. (5) If a company (C) controls another company (D), a participator in C is to be treated for the purposes of this section as being also a participator in D. (6) For the purposes of this section, arrangements are “tax avoidance arrangements” if the main purpose, or one of the main purposes, of the arrangements is— (a) to avoid or reduce, or obtain a relief or increased relief from, a charge to tax on the company under section 455, or (b) to obtain a tax advantage for the participator or associate. (7) In this section— - “arrangements” includes any arrangements, scheme or understanding of any kind, whether or not legally enforceable, involving a single transaction or two or more transactions, and - “tax advantage” has the meaning given in section 1139, reading references to tax in that section as references to income tax. (464B) (1) Subsection (2) applies if a benefit has been conferred which gave rise to a charge to tax on the company under section 464A. (2) Relief is to be given from that tax, or a proportionate part of it, if— (a) a payment (“the return payment”) is made to the company in respect of the benefit, and (b) no consideration is given for the return payment. (3) Relief under this section is to be given on a claim, which must be made within 4 years from the end of the financial year in which the return payment is made to the company. (4) Subsection (5) applies if the return payment is made on or after the day on which tax under section 464A becomes due and payable in relation to the benefit. (5) Relief in respect of the return payment may not be given under this section at any time before the end of the period of 9 months from the end of the accounting period in which the return payment was made. (6) Schedule 1A to TMA 1970 (claims and elections not included in return) applies to a claim for relief under this section unless— (a) the claim is included (by amendment or otherwise) in the return for the period in which the benefit was conferred, and (b) the relief may be given at the time the claim is made.

• (2) The amendment made by this paragraph has effect in relation to arrangements to which a close company becomes a party on or after 20 March 2013.

6

• (1) After Chapter 3A insert—

(464C) (1) Where— (a) within any period of 30 days— (i) the qualifying amount of repayments made to a close company in respect of one or more chargeable payments made by the company to a person totals £5,000 or more, and (ii) the available amount of the relevant chargeable payments made by the company to the person or an associate of the person totals £5,000 or more, and (b) the relevant chargeable payments are made in an accounting period subsequent to that in which the chargeable payments mentioned in paragraph (a)(i) were made, the qualifying amount of the repayments, so far as not exceeding the available amount of the relevant chargeable payments, is to be treated for the purposes of this Chapter as a repayment of the relevant chargeable payments. (2) A chargeable payment is a relevant chargeable payment for the purposes of subsection (1) if (or to the extent that) it is not repaid within the period of 30 days mentioned in that subsection. (3) Where— (a) immediately before a repayment is made in respect of one or more chargeable payments made by a close company to a person, the total amount owed to the company by the person in respect of chargeable payments is £15,000 or more, (b) at the time the repayment is made, arrangements had been made for one or more chargeable payments to be made to replace some or all of the amount repaid, and (c) the available amount of the chargeable payments made by the company to the person or an associate of the person under the arrangements totals £5,000 or more, the qualifying amount of the repayment, so far as not exceeding the available amount of the chargeable payments mentioned in paragraph (c), is to be treated for the purposes of this Chapter as a repayment of those chargeable payments. (4) An amount contained in a chargeable payment is an available amount— (a) for the purposes of subsection (1), to the extent that no repayment has been treated as made in respect of it by the previous operation of that subsection, and (b) for the purposes of subsection (3), to the extent that no repayment has been treated as made in respect of it— (i) by the operation of subsection (1), or (ii) by the previous operation of subsection (3). (5) An amount contained in a repayment is a qualifying amount to the extent that it has not been treated by the previous operation of this section as a repayment of a chargeable payment. (6) This section does not apply in relation to a repayment which gives rise to a charge to income tax on the participator or associate by reference to whom the loan, advance or benefit was a chargeable payment. (7) The Treasury may by order vary a sum specified in subsection (1) or (3). (8) An order under subsection (7) may contain incidental, supplemental, consequential and transitional provision and savings. (464D) (1) All such assessments and adjustments of assessments are to be made as are necessary to give effect to section 464C(1) and (3). (2) If a person who has made a tax return becomes aware that, after making it, anything in it has become incorrect because of the operation of section 464C(1) or (3), the person must give notice to an officer of Revenue and Customs specifying how the return needs to be amended. (3) The notice must be given within 3 months beginning with the day on which the person became aware that anything in the return had become incorrect because of the operation of section 464C(1) or (3). (4) In section 464C, “chargeable payment” means— (a) a loan or advance made by a close company which gives rise to a charge to tax under section 455, or (b) the conferral of a benefit on an individual in circumstances which give rise to a charge to tax under section 464A. (5) In a case within subsection (4)(b)— (a) the conferral of the benefit is to be treated for the purposes of section 464C as a loan made by the close company to the individual to the value of the benefit conferred, and (b) any payment in respect of which (apart from section 464C) relief is due to the close company under section 464B is to be treated for the purposes of section 464C as a repayment of the loan.

• (2) The amendment made by this paragraph has effect in relation to repayments and return payments made on or after 20 March 2013.

7

In section 465 (power to obtain information), after “Chapter 3” (in both places) insert “ or 3A ”.

PART 2 — Other amendments

Taxes Management Act 1970

8

TMA 1970 is amended as follows.

9

In section 59E(11)(a) (provision as to when tax is due and payable)—

• (a) after “455” insert “ or 464A ”, and

• (b) after “loan” insert “ or benefit ”.

10

In section 59F(6)(a) (arrangements for paying tax on behalf of group members)—

• (a) after “455” insert “ or 464A ”, and

• (b) after “loan” insert “ or benefit ”.

11

• (1) Section 109 (corporation tax on close company in connection with loans to participators etc) is amended as follows.

• (2) In subsection (1)—

• (a) after “459” insert “ and 464A and 464B ”, and

• (b) for “by close companies” insert “ or benefits ”.

• (3) For subsection (3) substitute—

(3) For the purposes of section 87A of this Act as applied by subsection (1) above— (a) the date when tax under section 455 of CTA 2010 became due and payable is that determined in accordance with subsection (3) of that section, and (b) the date when tax under section 464A of CTA 2010 became due and payable is that determined in accordance with subsection (4) of that section.

• (4) After subsection (3A) insert—

(3B) If there is a payment which for the purposes of section 464B of CTA 2010 is a return payment in respect of a benefit conferred, interest under section 87A of this Act on so much of the tax under section 464A of CTA 2010 as is referable to the return payment is not payable in respect of any period after the date on which the return payment was made.

• (5) In subsection (4), after “458” insert “ or 464B ”.

• (6) In subsection (5), after “459” insert “ or 464A and 464B ”.

• (7) In the heading, after “loans” insert “ or benefits ”.

12

The amendments made by paragraphs 9 to 11 are treated as having come into force on 20 March 2013.

Finance Act 1998

13

• (1) Schedule 18 to FA 1998 (company tax returns, assessments and related matters) is amended as follows.

• (2) In paragraph 1 (meaning of “tax”), after the entry relating to section 455 of CTA 2010 insert— “ section 464A of that Act (tax on other benefit conferred on participator), ”.

• (3) In paragraph 8(1) (calculation of tax payable), in paragraph 1 of the third step—

• (a) after “455” insert “ or 464A ”, and

• (b) for “or advance made by close company” substitute “ , advance or benefit ”.

• (4) In paragraph 18 (failure to deliver return: tax-related penalty), for sub-paragraph (4) substitute—

(4) In determining that amount no account is to be taken of— (a) any relief under section 458 of the Corporation Tax Act 2010 (relief in respect of repayment, etc of loan) which is deferred under subsection (5) of that section, or (b) any relief under section 464B of that Act (relief in respect of return payment) which is deferred under subsection (5) of that section.

• (5) The amendments made by this paragraph are treated as having come into force on 20 March 2013.

Income Tax (Trading and Other Income) Act 2005

14

• (1) In section 417 of ITTOIA 2005 (person liable for charge on release of loan or advance), for subsection (1) substitute—

(1) The person liable for any tax charged under this Chapter is— (a) in the case of a loan or advance made to a partnership, any partner who is an individual, and (b) in any other case, the person to whom the loan or advance was made. (1A) If more than one person is liable in a case within subsection (1)(a), the liability is to be apportioned between them in a just and reasonable manner.

• (2) The amendment made by this paragraph has effect in relation to loans or advances made on or after 20 March 2013.

SCHEDULE 31

PART 1 — Abandonment guarantees and abandonment expenditure

Expenditure on abandonment guarantees

1

• (1) In Part 2 of ITTOIA 2005 (trading income), Chapter 16A (oil activities) is amended as follows.

• (2) In section 225N (expenditure on and under abandonment guarantees)—

• (a) after subsection (1) insert—

(1A) Subsection (2) also applies if expenditure incurred by a participator in an oil field would be so allowable as a result of section 3(1)(hh) of that Act but for the fact that the oil field is a non-taxable oil field within the meaning of Part 3 of FA 1993 (see section 185 of that Act).

;

• (b) in subsection (2), for “that expenditure is so allowable” substitute “ the expenditure mentioned in subsection (1) or (1A) is or would be so allowable ”.

• (3) In section 225R (introduction to sections 225S and 225T)—

• (a) in paragraph (a) of subsection (1), omit the words from “, or would apply” to “made”;

• (b) in paragraph (b) of that subsection, after “Schedule” insert “ , or would fall to be so attributed if a claim under paragraph 2A(2) of that Schedule were made ”;

• (c) after subsection (1) insert—

(1A) The condition in subsection (1)(b) is to be treated as met for the purposes of this section if it would be met but for the fact that the contributing participator is (or was) a participator in an oil field that is a non-taxable oil field within the meaning of Part 3 of FA 1993 (see section 185 of that Act).

;

• (d) in subsection (2), before “attributed” insert “ or would be ”.

2

• (1) In Part 8 of CTA 2010 (oil activities), Chapter 4 (calculation of profits) is amended as follows.

• (2) In section 292 (expenditure on and under abandonment guarantees)—

• (a) after subsection (1) insert—

(1A) Subsection (2) also applies if expenditure incurred by a participator in an oil field would be so allowable as a result of section 3(1)(hh) of that Act but for the fact that the oil field is a non-taxable oil field within the meaning of Part 3 of FA 1993 (see section 185 of that Act).

;

• (b) in subsection (2), for “that expenditure is so allowable” substitute “ the expenditure mentioned in subsection (1) or (1A) is or would be so allowable ”.

• (3) In section 296 (introduction to sections 297 and 298)—

• (a) in paragraph (a) of subsection (1), omit the words from “, or would apply” to “made”;

• (b) in paragraph (b) of that subsection, after “Schedule” insert “ , or would fall to be so attributed if a claim under paragraph 2A(2) of that Schedule were made ”;

• (c) after subsection (1) insert—

(1A) The condition in subsection (1)(b) is to be treated as met for the purposes of this section if it would be met but for the fact that the contributing participator is (or was) a participator in an oil field that is a non-taxable oil field within the meaning of Part 3 of FA 1993 (see section 185 of that Act).

;

• (d) in subsection (2), before “attributed” insert “ or would be ”.

Expenditure under abandonment guarantees

3

In Schedule 3 to OTA 1975 (petroleum revenue tax: miscellaneous provisions), in paragraph 8 (certain subsidised expenditure to be disregarded), after sub-paragraph (1) insert—

(1A) But sub-paragraph (1) above does not apply to any expenditure for which the relevant participator is liable that has been or is to be met directly or indirectly out of a payment made by the guarantor under an abandonment guarantee. (1B) In sub-paragraph (1A) above— - “abandonment guarantee” has the same meaning as it has for the purposes of section 3 of this Act (see section 104 of the Finance Act 1991), and - “the guarantor” and “the relevant participator” have the same meaning as in section 104 of that Act.

4

In Schedule 5 to OTA 1975 (allowance of expenditure), in paragraph 2C(2), in the definition of “sum in default”, for the words from “less the aggregate of” to the end substitute “ less so much of that payment as has been made by the defaulter ”.

5

• (1) Part 3 of FA 1991 (oil taxation) is amended as follows.

• (2) Omit section 105 (restriction of expenditure relief by reference to payments under abandonment guarantees).

• (3) Omit section 106 (relief for reimbursement expenditure under abandonment guarantees).

6

• (1) In Part 2 of ITTOIA 2005 (trading income), Chapter 16A (oil activities) is amended as follows.

• (2) In section 225N (expenditure on and under abandonment guarantees), omit subsections (3) and (4).

• (3) Omit section 225O (relief for reimbursement expenditure under abandonment guarantees).

7

• (1) In Part 8 of CTA 2010 (oil activities), Chapter 4 (calculation of profits) is amended as follows.

• (2) In section 292 (expenditure on and under abandonment guarantees), omit subsections (3) and (4).

• (3) Omit section 293 (relief for reimbursement expenditure under abandonment guarantees).

Reimbursement by defaulter in respect of abandonment expenditure

8

In Part 3 of FA 1991, omit section 108 (reimbursement by defaulter in respect of certain abandonment expenditure).

9

In Part 2 of ITTOIA 2005, omit section 225T (reimbursement by defaulter in respect of certain abandonment expenditure).

10

In Part 8 of CTA 2010, omit section 298 (reimbursement by defaulter in respect of certain abandonment expenditure).

Consequential amendments

11

• (1) Section 104 of FA 1991 is amended as follows.

• (2) In subsection (1), omit “and sections 105 and 106 below”.

• (3) In subsection (2), omit “and section 106 (but not section 105) below”.

12

In FA 2008, omit section 105.

13

In Part 2 of ITTOIA 2005, Chapter 16A is amended as follows.

14

• (1) Section 225N is amended as follows.

• (2) Omit subsection (5).

• (3) In subsection (6), in the definition of “abandonment guarantee”—

• (a) for “section 105 of FA 1991” substitute “ section 3 of OTA 1975 ”, and

• (b) for “that Act” substitute “ FA 1991 ”.

• (4) The heading of that section becomes “ Expenditure on abandonment guarantees ”.

15

Omit sections 225P and 225Q.

16

In section 225R (introduction to sections 225S and 225T)—

• (a) in subsection (1), for “Sections 225S and 225T apply” substitute “ Section 225S applies ”;

• (b) the heading of section 225R becomes “ Introduction to section 225S ”.

17

In Part 8 of CTA 2010, Chapter 4 is amended as follows.

18

• (1) Section 292 is amended as follows.

• (2) Omit subsection (5).

• (3) In subsection (6), in the definition of “abandonment guarantee”—

• (a) for “section 105 of FA 1991” substitute “ section 3 of OTA 1975 ”, and

• (b) for “that Act” substitute “ FA 1991 ”.

• (4) The heading of that section becomes “ Expenditure on abandonment guarantees ”.

19

Omit sections 294 and 295.

20

In section 296 (introduction to sections 297 and 298)—

• (a) in subsection (1), for “Sections 297 and 298 apply” substitute “ Section 297 applies ”;

• (b) the heading of section 296 becomes “ Introduction to section 297 ”.

PART 2 — Receipts arising from decommissioning

Calculation of profits chargeable to corporation tax and supplementary charge

21

In Chapter 4 of Part 8 of CTA 2010 (oil activities: calculation of profits), after section 298 insert—

(298A) (1) This section applies if— (a) a company that is or has been carrying on a ring fence trade (“the defaulter”) has defaulted on a liability under— (i) a relevant agreement, or (ii) an abandonment programme, to make a payment towards decommissioning expenditure, (b) another company that is or has been carrying on a ring fence trade (“the contributing company”) pays an amount (“the relevant contribution”) in or towards meeting the whole or part of the default, and (c) the amount of the relevant contribution is less than the sum of the amounts within subsection (2). (2) The amounts within this subsection are— (a) any payments made (directly or indirectly) to the contributing company by the guarantor under an abandonment guarantee as a result of the defaulter defaulting on the liability, (b) any reimbursement payments, and (c) any relief from tax which the contributing company obtains in respect of the relevant contribution. (3) The difference between— (a) the sum of the amounts within subsection (2), and (b) the relevant contribution, (“the relevant difference”) is to be treated as a receipt (in the nature of income) of the contributing company's ring fence trade for the relevant accounting period (see subsection (4)). (4) “The relevant accounting period” means the accounting period that includes the day on which the Secretary of State certifies that the relevant abandonment programme has been satisfactorily completed (“the certification date”). This is subject to subsections (5) and (6). (5) If the contributing company has ceased to carry on the ring fence trade before the certification date, “the relevant accounting period” is the last accounting period of the trade. (6) If the contributing company has ceased to be within the charge to corporation tax in respect of the ring fence trade before the certification date, “the relevant accounting period” is the accounting period during or at the end of which the contributing company ceased to be within the charge to corporation tax in respect of the trade. (7) The relevant difference is to be determined— (a) in a case where subsection (5) or (6) applies, at the end of the calendar year in which the certification date falls, and (b) in any other case, at the end of the relevant accounting period. (8) In a case where subsection (5) or (6) applies, any corporation tax chargeable for the relevant accounting period by virtue of this section is due and payable as if it were corporation tax for an accounting period beginning with the certification date. (9) Any additional assessment to corporation tax required in order to take account of a receipt arising under this section may be made at any time not later than 4 years after the end of the calendar year in which the certification date falls. (10) In this section— - “abandonment programme” means an abandonment programme approved under Part 4 of the Petroleum Act 1998 (including such a programme as revised), - “decommissioning expenditure” has the meaning given by section 330C, - “reimbursement payment” means any payment made to the contributing company by the defaulter in reimbursing the contributing company in respect of, or otherwise making good to the contributing company, the whole or any part of the relevant contribution, - “the relevant abandonment programme” means the abandonment programme in respect of which the decommissioning expenditure mentioned in subsection (1)(a) was incurred, and - “relevant agreement” has the meaning given by section 104(5)(a) of FA 1991.

Calculation of profits chargeable to income tax

22

In Chapter 16A of Part 2 of ITTOIA 2005 (trading income: oil activities), after section 225U insert—

(225V) (1) This section applies if— (a) a person that is or has been carrying on a ring fence trade (“the defaulter”) has defaulted on a liability under— (i) a relevant agreement, or (ii) an abandonment programme, to make a payment towards decommissioning expenditure, (b) another person that is or has been carrying on a ring fence trade (“the contributing person”) pays an amount (“the relevant contribution”) in or towards meeting the whole or part of the default, and (c) the amount of the relevant contribution is less than the sum of the amounts within subsection (2). (2) The amounts within this subsection are— (a) any payments made (directly or indirectly) to the contributing person by the guarantor under an abandonment guarantee as a result of the defaulter defaulting on the liability, (b) any reimbursement payments, and (c) any relief from tax which the contributing person obtains in respect of the relevant contribution. (3) The difference between— (a) the sum of the amounts within subsection (2), and (b) the relevant contribution, (“the relevant difference”) is to be treated as a receipt (in the nature of income) of the contributing person's ring fence trade for the relevant tax year (see subsection (4)). (4) “The relevant tax year” means the tax year that includes the day on which the Secretary of State certifies that the relevant abandonment programme has been satisfactorily completed (“the certification date”). This is subject to subsection (5). (5) If the contributing person's ring fence trade is permanently discontinued before the certification date, “the relevant tax year” is the last tax year in which that trade is carried on. (6) The relevant difference is to be determined— (a) in a case where subsection (5) applies, at the end of the tax year in which the certification date falls, and (b) in any other case, at the end of the relevant tax year. (7) In a case where subsection (5) applies, any income tax chargeable for the relevant tax year by virtue of this section is due and payable for the tax year in which the certification date falls. (8) Any additional assessment to income tax required in order to take account of a receipt arising under this section may be made at any time not later than 4 years after the end of the tax year in which the certification date falls. (9) In this section— - “abandonment programme” means an abandonment programme approved under Part 4 of the Petroleum Act 1998 (including such a programme as revised), - “decommissioning expenditure” has the meaning given by section 330C of CTA 2010, - “reimbursement payment” means any payment made to the contributing person by the defaulter in reimbursing the contributing person in respect of, or otherwise making good to the contributing person, the whole or any part of the relevant contribution, - “the relevant abandonment programme” means the abandonment programme in respect of which the decommissioning expenditure mentioned in subsection (1)(a) was incurred, and - “relevant agreement” has the meaning given by section 104(5)(a) of FA 1991.

PART 3 — Commencement

23

The amendments made by this Schedule have effect in relation to expenditure incurred on or after the day on which this Act is passed.

SCHEDULE 32

PART 1 — Decommissioning expenditure

1

CAA 2001 is amended as follows.

2

After section 165 insert—

(165A) (1) Allowances under this Part are restricted under section 165B(1) if— (a) a person (“R”) who is carrying on, or has ceased to carry on, a ring fence trade enters into an arrangement, (b) under the arrangement, a person (“S”) who is connected with R provides a service to R, and (c) all or part of the consideration for the service is decommissioning expenditure. (2) Subsection (1)(b) may be satisfied whether the service is provided to R directly or indirectly; and in particular it does not matter— (a) whether R and S are parties to the same contract, or (b) whether payments are made by R directly to S. (3) Subsections (4) to (9) apply for the purposes of this section and sections 165B to 165E. (4) References to providing a service include— (a) letting a ship on charter or any other asset on hire, and (b) providing goods which are to be used up in the course of providing a service. (5) “Decommissioning expenditure” means expenditure in connection with decommissioning. (6) “Decommissioning” means— (a) demolishing plant or machinery, (b) preserving plant or machinery pending its reuse or demolition, (c) preparing plant or machinery for reuse, or (d) arranging for the reuse of plant or machinery. (7) It is immaterial for the purposes of subsection (6)(b) whether the plant or machinery is reused, is demolished or is partly reused and partly demolished. (8) It is immaterial for the purposes of subsection (6)(c) and (d) whether the plant or machinery is in fact reused. (9) References to R's expenditure under the arrangement are to so much of the consideration for the service as is decommissioning expenditure incurred by R. (165B) (1) The amount, if any, by which R's expenditure under the arrangement exceeds D is to be left out of account in determining R's available qualifying expenditure. (2) D is the cost to S of providing the service or, if R's expenditure under the arrangement relates to only part of the service, that part. (3) Subsection (2) is subject to sections 165C and 165D, which provide for D to be calculated differently in certain circumstances. (4) But if, under any arrangement, a particular service or part of a service is provided by more than one person who is connected with R (so that without this subsection there would be more than one amount for D in relation to that service or part), D is the lowest of those amounts. (165C) (1) This section applies to so much of R's expenditure under the arrangement as relates to the supply by S of a service if— (a) the service is a planning or project management service, and (b) the cost plus method is an appropriate method of applying the arm's length principle to the provision of it. (2) D is the sum of— (a) the cost to S of providing the service or, if R's expenditure under the arrangement relates to only part of the service, that part, and (b) the appropriate percentage of that amount. (3) The appropriate percentage is the smaller of— (a) the appropriate mark up determined in accordance with the cost plus method, and (b) 10%. (4) Any expression which is used in this section and in the transfer pricing guidelines has the meaning given in those guidelines. “The transfer pricing guidelines” has the meaning given by section 164(4) of TIOPA 2010. (165D) (1) This section applies where— (a) S decommissions the plant or machinery, (b) there are, in addition to R, one or more other participators in the relevant field, and (c) the expenditure incurred in respect of the decommissioning is apportioned between the participators (including R) in accordance with their shares in the oil won from the relevant field or their shares in the equity of that field. (2) D is the part of the expenditure referred to in subsection (1)(c) which is incurred by R. (3) Where— (a) plant or machinery is or has been used in connection with the winning of oil from more than one relevant field, and (b) the expenditure incurred in respect of the decommissioning is apportioned between those fields in accordance with the contribution from each field to the total of the oil won using that plant or machinery, subsections (1) and (2) apply to each such field as if subsection (1)(c) referred to the expenditure apportioned to that field. (4) But subsections (2) and (3) do not apply (and section 165B(2) applies instead) if— (a) the amount of consideration, or the method of determining the amount of consideration, to be received by S under the arrangement or arrangements, or (b) the apportionment of the liability for that consideration (whether between the participators as mentioned in subsection (1)(c) or between the fields as mentioned in subsection (3)(b)), has been agreed as, or as part of, an avoidance scheme. (5) A scheme is an “avoidance scheme” if the main purpose, or one of the main purposes, of a party in entering into the scheme is to enable a person to obtain a tax advantage under this Part that would not otherwise be obtained. (6) The reference in subsection (5) to obtaining a tax advantage that would not otherwise be obtained includes obtaining an allowance that is in any way more favourable to a person than the one that would otherwise be obtained. (7) In this section— - “licensee”, “oil” and “oil field” have the same meaning as in Part 1 of OTA 1975, - “other participator” means a person, not connected with R, who is a licensee in respect of any licensed area wholly or partly included in the oil field in question, and - “relevant field” means an oil field— 1. in which plant or machinery is located, or 2. in connection with which the plant or machinery is being or has been used for the purposes of a ring fence trade. (165E) (1) Allowances under this Part are restricted under subsection (5) if— (a) a person (“R”) who is carrying on, or has ceased to carry on, a ring fence trade enters into a transaction with another person (“S”), (b) S receives from R consideration for services provided in pursuance of the transaction, (c) all or part of that consideration is decommissioning expenditure, and (d) the transaction either has an avoidance purpose, or is part of, or occurs as a result of, a scheme or arrangement that has an avoidance purpose. (2) Subsection (1)(d) may be satisfied— (a) whether the scheme or arrangement was made before or after the transaction was entered into, and (b) whether or not the scheme or arrangement is legally enforceable. (3) A transaction, scheme or arrangement has an “avoidance purpose” if the main purpose, or one of the main purposes, of a party in— (a) entering into the transaction, scheme or arrangement, or (b) agreeing an amount of consideration, or a method of determining an amount of consideration, to be paid in pursuance of the transaction, scheme or arrangement, is to enable a person to obtain a tax advantage under this Part that would not otherwise be obtained. (4) The reference in subsection (3) to obtaining a tax advantage that would not otherwise be obtained includes obtaining an allowance that is in any way more favourable to a person than the one that would otherwise be obtained. (5) All or part of R's expenditure under the transaction is to be left out of account in determining R's available qualifying expenditure. (6) The amount of expenditure to be left out of account is— (a) such amount as would or would in effect cancel out the tax advantage mentioned in subsection (3) (whether that advantage is obtained by R or another person and whether it relates to the transaction or something else), or (b) if the amount found under paragraph (a) exceeds the whole of R's expenditure under the transaction, the whole of that expenditure.

3

In section 26(5), at the end insert “ and sections 165A to 165E (restrictions on allowances: anti-avoidance). ”

4

In section 57(3), after the reference to section 70DA insert— “ sections 165A to 165E (restrictions on allowances: anti-avoidance); ”.

5

In section 161C(3), for “and 164(4)” substitute “ , 164(4) and 165A to 165E ”.

6

In section 164(5A), at the end insert “ and sections 165A to 165E. ”

7

After section 165(3) insert—

(3A) Subsection (3) is subject to sections 165A to 165E.

8

The amendments made by this Part have effect in relation to expenditure incurred on decommissioning carried out on or after the day on which this Act is passed.

PART 2 — Expenditure on site restoration

9

After section 416ZB of CAA 2001 (inserted by section 92) insert—

(416ZC) (1) Where— (a) a person (“R”) who is carrying on, or has ceased to carry on, a ring fence trade enters into an arrangement, (b) under the arrangement, a person (“S”) who is connected with R provides a service to R in connection with work on the restoration of a relevant site, and (c) (in the absence of this section) all or part of the consideration for the service would be qualifying expenditure of R under section 416ZA, the amount of the expenditure which is qualifying expenditure is restricted under section 416ZD(1). (2) Subsection (1)(b) may be satisfied whether the service is provided to R directly or indirectly; and in particular it does not matter— (a) whether R and S are parties to the same contract, or (b) whether payments are made by R directly to S. (3) Subsections (4) and (5) apply for the purposes of this section and sections 416ZD and 416ZE. (4) “Relevant site” has the meaning given by section 416ZA(8). (5) References to providing a service include— (a) letting a ship on charter or any other asset on hire, and (b) providing goods which are to be used up in the course of providing a service. (416ZD) (1) In determining how much of the consideration for the service is qualifying expenditure, there is to be left out of account the amount (if any) by which that consideration exceeds D. (2) D is the cost to S of providing the service or, if the qualifying expenditure relates to only part of the service, that part. (3) Subsection (2) is subject to— (a) subsection (4), and (b) section 416ZE, which provide for D to be calculated differently in certain circumstances. (4) The following provisions apply in relation to an amount restricted under subsection (1) as they apply in relation to an amount restricted under section 165B(1)— (a) section 165C; (b) section 165E, subject to the modifications in subsection (5). (5) The modifications are that— (a) the references to Part 2 are to be read as references to this Part, (b) in subsection (1)(c), the reference to decommissioning expenditure is to be read as a reference to qualifying expenditure under section 416ZA, and (c) in subsection (5), the reference to R's available qualifying expenditure is to be read as a reference to R's qualifying expenditure on the restoration of the site. (6) But if, under the arrangement, a particular service or part of a service is provided by more than one person who is connected with R (so that without this subsection there would be more than one amount for D in relation to that service or part), D is the lowest of those amounts. (416ZE) (1) This section applies where— (a) S carries out the restoration of a relevant site, (b) there are, in addition to R, one or more other participators in the relevant field, and (c) the expenditure incurred in carrying out the restoration is apportioned between the participators (including R) in accordance with their shares in the oil won from the relevant field or their shares in the equity of that field. (2) D is the part of the expenditure referred to in subsection (1)(c) which is incurred by R. (3) Where— (a) a relevant site has been used in connection with the winning of oil from more than one relevant field, and (b) the expenditure incurred in respect of the restoration is apportioned between those fields in accordance with the contribution from each field to the total of the oil won using that site, subsections (1) and (2) apply to each such field as if subsection (1)(c) referred to the expenditure apportioned to that field. (4) But subsections (2) and (3) do not apply (and section 416ZD(2) applies instead) if— (a) the amount of consideration, or the method of determining the amount of consideration, to be received by S under the arrangement or arrangements, or (b) the apportionment of the liability for that consideration (whether between the participators as mentioned in subsection (1)(c) or between the fields as mentioned in subsection (3)(b)), has been agreed as, or as part of, an avoidance scheme. (5) A scheme is an “avoidance scheme” if the main purpose, or one of the main purposes, of a party in entering into the scheme is to enable a person to obtain a tax advantage under this Part that would not otherwise be obtained. (6) The reference in subsection (5) to obtaining a tax advantage that would not otherwise be obtained includes obtaining an allowance that is in any way more favourable to a person than the one that would otherwise be obtained. (7) In relation to the restoration of a relevant site, “relevant field” means any of the following— (a) the oil field in which the site is located; (b) if the site is the site of a source to the working of which a ring fence trade relates (or related), an oil field from which oil is or has been won by means of working the source; (c) if the site is land used in connection with working such a source, an oil field from which oil is or has been won by means of working the source. (8) In this section— - “licensee”, “oil” and “oil field” have the same meaning as in Part 1 of OTA 1975, and - “other participator” means a person, not connected with R, who is a licensee in respect of any licensed area wholly or partly included in the oil field in question.

10

In section 395(3) of that Act (provisions limiting “qualifying expenditure”) for “Chapter 4 contains” substitute “ Chapters 4 and 5 contain ”.

11

The amendments made by this Part have effect in relation to expenditure incurred on restoration carried out on or after the day on which this Act is passed.

PART 3 — Amendments of TIOPA 2010

12

Part 4 of TIOPA 2010 (transfer pricing) is amended as follows.

13

In section 147(6) (list of exceptions to the basic rule stated in that section), after paragraph (b) insert—

(ba) section 206A (modification of basic rule where allowances restricted for certain oil-related expenditure),

.

14

After section 206 insert—

(206A) (1) This section applies where— (a) in a case to which section 165A(1) of CAA 2001 (restriction of allowances for decommissioning expenditure) applies, R's available qualifying expenditure is restricted under section 165B(2) or 165C of that Act, or (b) in a case to which section 416ZC(1) of that Act (restriction of allowances for expenditure on site restoration) applies, R's qualifying expenditure is restricted under section 416ZD(2) or section 165C as applied by section 416ZD(4)(a) of that Act. (2) In calculating for tax purposes S's profits and losses in relation to the service provided by S to R, the amount which S is required to bring into account is an amount equal to R's expenditure (restricted as mentioned in subsection (1)(a) or (b)). (3) Section 147(3) and (5) do not apply to the extent that they are inconsistent with subsection (2). (4) In this section “R” and “S” have the meaning given by section 165A or 416ZC of CAA 2001 (as the case may be).

15

In section 213 (effect of Part 4 on capital allowances), after subsection (2) insert—

(3) But a claim under section 174 may not be made if the claim would affect the operation of sections 165A to 165E or 416ZC to 416ZE of CAA 2001.

16

The amendments made by this Part have effect for accounting periods ending on or after the day on which this Act is passed.

SCHEDULE 33

PART 1 — Returns

Contents of return

1

• (1) The Commissioners for Her Majesty's Revenue and Customs may by regulations make provision about—

• (a) the form and content of a return;

• (b) the method of delivering a return.

• (2) Regulations under sub-paragraph (1) may make different provision for different purposes.

• (3) Every return must include a declaration by the person making it to the effect that the return is correct and complete to the best of the person's knowledge.

• (4) A return is treated as containing any information provided by the person making the return for the purpose of completing the return.

2

In this Part of this Act—

• (a) references to the delivery of an annual tax on enveloped dwellings return are to the delivery of a return that complies with all requirements imposed by or under any of sections 159 , 159A and 161 and paragraph 1;

• (b) references to the delivery of a return of the adjusted chargeable amount are to the delivery of a return that complies with all requirements imposed by or under any of sections 160 and 161 and paragraph 1.

Amendment of return by chargeable person

3

• (1) A person who has delivered a return may amend the return by notice to an officer of Revenue and Customs.

• (2) The Commissioners for Her Majesty's Revenue and Customs may require that notices under this paragraph—

• (a) are in a specified form, or

• (b) contain specified information.

• (3) An amendment under this paragraph must be made by the end of the next chargeable period after the chargeable period to which the return relates (but see the exception that follows).

• (4) If a return is delivered on or after 1 January in the chargeable period next after that to which it relates, the latest time for amending the return under this paragraph is the end of the period of 3 months after the day on which the return is delivered.

Correction of return by HMRC

4

• (1) An officer of Revenue and Customs may correct any obvious error or omission in a return.

• (2) A correction under this paragraph—

• (a) is made by notice to the chargeable person, and

• (b) is regarded as effecting an amendment of the return.

• (3) The reference in sub-paragraph (1) to an error includes, for instance, an arithmetical mistake or an error of principle.

• (4) A correction under this paragraph must be made within the 9 months beginning with—

• (a) the day on which the return was delivered, or

• (b) if the correction is needed as a result of an amendment under paragraph 3, the day on which the amendment was made.

• (5) A correction under this paragraph has no effect if the chargeable person—

• (a) amends the return so as to reject the correction, or

• (b) gives a notice rejecting the correction in the special period mentioned in sub-paragraph (6).

• (6) A notice is given in the “special period” if it is given—

• (a) after the end of the period within which the chargeable person may amend the return, but

• (b) before the end of the 3 months beginning with the date of issue of the notice of correction.

• (7) A notice under sub-paragraph (5)(b) must be given to HMRC.

PART 2 — Duty to keep and preserve records

Duty to keep and preserve records

5

• (1) A person who is required to deliver a return for a chargeable period must—

• (a) keep any records that may be needed to enable the person to deliver a correct and complete return, and

• (b) preserve those records in accordance with this paragraph.

• (2) The records must be preserved until the end of the later of the relevant day and the date on which—

• (a) an enquiry into the return is completed, or

• (b) if there is no enquiry, an officer of Revenue and Customs no longer has power to enquire into the return.

• (3) “The relevant day” means—

• (a) the sixth anniversary of the last day of the chargeable period, or

• (b) any earlier day that may be specified in writing by the Commissioners for Her Majesty's Revenue and Customs.

• (4) Different days may be specified for different purposes under sub-paragraph (3)(b).

• (5) The records required to be kept and preserved under this paragraph include—

• (a) details of any relevant transaction (including any contract or conveyance and any supporting maps, plans or similar documents and records of relevant payments, receipts and financial arrangements);

• (b) records of any valuation of the single-dwelling interest relevant to its value on any day in the chargeable period.

• (6) The Commissioners for Her Majesty's Revenue and Customs may by regulations—

• (a) provide that the records required to be kept under this paragraph do, or do not, include records specified in the regulations;

• (b) specify supporting documents that are required to be kept under this paragraph.

• (7) Regulations under this paragraph may make provision by reference to things specified in a notice published by the Commissioners for Her Majesty's Revenue and Customs in accordance with the regulations (and not withdrawn by a subsequent notice).

• (8) “Supporting documents” includes accounts, books, deeds, contracts, vouchers and receipts.

Preservation of information etc

6

The duty under paragraph 5 to preserve records may be satisfied—

• (a) by preserving them in any form and by any means, or

• (b) by preserving the information contained in them in any form and by any means, subject to any conditions or exceptions specified in writing by the Commissioners for Her Majesty's Revenue and Customs.

Penalty for failure to keep and preserve records

7

• (1) A person who fails to comply with paragraph 5 in relation to a chargeable period is liable to a penalty not exceeding £3,000, subject to the following exception.

• (2) No penalty is incurred if an officer of Revenue and Customs is satisfied that any facts that it is reasonable to require should be proved to HMRC, and that would have been proved by the records, are proved by other documentary evidence provided to them.

PART 3 — Enquiry into return

Notice of enquiry

8

• (1) An officer of Revenue and Customs may enquire into a return if sub-paragraph (2) has been complied with.

• (2) Notice of the intention to make an enquiry must be given—

• (a) to the person by whom or on whose behalf the return was delivered (“the relevant person”);

• (b) before the end of the period of 12 months after the relevant date.

• (3) The relevant date is—

• (a) the filing date, if the return was delivered on or before that date;

• (b) the date on which the return was delivered, if the return was delivered after the filing date;

• (c) the date on which the amendment was made, if the return is amended under paragraph 3 (amendment by person making the return).

• (4) A return that has been the subject of one notice under this paragraph may not be the subject of another, except a notice given in consequence of an amendment (or another amendment) of the return under paragraph 3.

• (5) A notice under this paragraph is referred to as a “notice of enquiry”.

Scope of enquiry

9

• (1) An enquiry extends to anything contained in the return, or required to be contained in the return, that relates—

• (a) to the question whether the relevant person is chargeable to tax with respect to the interest to which the return relates for the chargeable period concerned, or

• (b) to the amount of tax chargeable on the relevant person with respect to that interest for that period.

• (2) Sub-paragraph (3) applies if the notice of enquiry is given as a result of the amendment of a return under paragraph 3 (amendment by person making the return)—

• (a) at a time when it is no longer possible to give a notice of enquiry under paragraph 8(3)(a) or (b), or

• (b) after an enquiry into the return has been completed.

• (3) The enquiry is limited to—

• (a) matters to which the amendment relates, and

• (b) matters affected by the amendment.

Amendment of self assessment during enquiry to prevent loss of tax

10

• (1) If at a time when an enquiry is in progress into a return an officer of Revenue and Customs forms the opinion—

• (a) that the amount stated in the self assessment contained in the return as the amount of tax payable is insufficient, and

• (b) that unless the assessment is immediately amended there is likely to be a loss of tax to the Crown,

the officer may by notice in writing to the relevant person amend the assessment to make good the deficiency.

• (2) If the enquiry is one that is limited by paragraph 9(2) and (3) to matters arising from an amendment of the return, sub-paragraph (1) above applies only so far as the deficiency is attributable to the amendment.

• (3) For the purposes of this paragraph the period during which an enquiry is in progress is the whole of the period—

• (a) beginning with the day on which the notice of enquiry is given, and

• (b) ending with the day on which the enquiry is completed.

Referral of questions to tribunal during enquiry

11

• (1) At any time when an enquiry is in progress into a return any question arising in connection with the subject-matter of the return may be referred to the tribunal for determination.

• (2) Notice of the referral must be given to the tribunal jointly by the relevant person and an officer of Revenue and Customs.

• (3) More than one notice of referral may be given under this paragraph in relation to an enquiry.

• (4) For the purposes of this paragraph the period during which an enquiry is in progress is the whole of the period—

• (a) beginning with the day on which the notice of enquiry is given, and

• (b) ending with the day on which the enquiry is completed.

Withdrawal of notice of referral

12

An officer of Revenue and Customs or the relevant person may withdraw a notice of referral under paragraph 11.

Effect of referral on enquiry

13

• (1) While proceedings on a referral under paragraph 11 are in progress in relation to an enquiry—

• (a) no closure notice may be given in relation to the enquiry, and

• (b) no application may be made for a direction to give a closure notice.

• (2) Proceedings on a referral are “in progress” where—

• (a) notice of referral has been given and has not been withdrawn, and

• (b) the questions referred have not been finally determined.

• (3) A question referred has been “finally determined” when—

• (a) it has been determined by the tribunal, and

• (b) there is no further possibility of the determination being varied or set aside (disregarding any power to grant permission to appeal out of time).

Effect of determination

14

• (1) A determination under paragraph 11 is binding on the parties to the referral in the same way, and to the same extent, as a decision on a preliminary issue in an appeal.

• (2) The officer of Revenue and Customs conducting the enquiry must take the determination into account—

• (a) in reaching conclusions on the enquiry, and

• (b) in the formulation of any amendments of the return that may be required to give effect to those conclusions.

• (3) The question determined may not be reopened on an appeal, except to the extent that it could be reopened if it had been determined as a preliminary issue in that appeal.

Tribunal to which referrals are made

15

• (1) Where the question to be referred under paragraph 11 is of the market value of any single-dwelling interest, the referral is to be made to—

• (a) the Upper Tribunal, if the land is in England and Wales;

• (b) the Lands Tribunal for Scotland, if the land is in Scotland;

• (c) the Lands Tribunal for Northern Ireland, if the land is in Northern Ireland.

• (2) In any other case a referral under paragraph 11 is to be made to—

• (a) the First-tier Tribunal, or

• (b) where determined by or under Tribunal Procedure Rules, the Upper Tribunal.

• (3) References to “the tribunal” in paragraphs 11 and 13 are to be read accordingly.

Completion of enquiry

16

• (1) An enquiry under paragraph 8 is completed when an officer of Revenue and Customs informs the relevant person by a notice (a “closure notice”) that the enquiry is complete and states the conclusions reached in the enquiry.

• (2) A closure notice must either—

• (a) state that in the officer's opinion no amendment of the return is required, or

• (b) make the amendments of the return required to give effect to the officer's conclusions.

• (3) A closure notice takes effect when it is issued.

Direction to complete enquiry

17

• (1) The relevant person may apply to the tribunal for a direction that a closure notice is to be given within a specified period.

• (2) The tribunal hearing the application must give a direction unless satisfied that HMRC have reasonable grounds for not giving a closure notice within that period.

• (3) In this paragraph “the tribunal” means—

• (a) the First-tier Tribunal, or

• (b) where determined by or under Tribunal Procedure Rules, the Upper Tribunal.

PART 4 — HMRC determination where no return delivered

Determination of tax chargeable if no return delivered

18

• (1) This paragraph applies where condition A or condition B is met.

• (2) Condition A is that—

• (a) an officer of Revenue and Customs has reason to believe that a person (“P”) is chargeable to tax for a chargeable period in respect of a single-dwelling interest,

• (b) P has not made an annual tax on enveloped dwellings return for the period in respect of the interest, and

• (c) the relevant filing date has passed.

• (3) Condition B is that—

• (a) an officer of Revenue and Customs has reason to believe that additional tax is payable by a person (“P”) under section 163(2) for a chargeable period in respect of a single-dwelling interest,

• (b) P has not made a return of the adjusted chargeable amount for the period in respect of the interest, and

• (c) the relevant filing date has passed.

• (4) “The relevant filing date” means the date by which the officer believes a return was required to be delivered.

• (5) The officer may make a determination (an “HMRC determination”) to the best of the officer's information and belief of the amount of tax to which P is chargeable for the period concerned with respect to the interest.

• (6) Notice of the determination must be given to P and must state the date on which it is issued.

• (7) No HMRC determination may be made more than 4 years after the end of the chargeable period to which it relates.

Determination to have effect as a self assessment

19

• (1) A determination under paragraph 18 has effect for enforcement purposes as if it were a self assessment made by P.

• (2) In sub-paragraph (1) “for enforcement purposes” means for the purposes of section 165 and Schedule 12 to FA 2003 (collection and recovery of tax etc).

• (3) Nothing in this paragraph affects any liability of a person to a penalty for failure to deliver a return.

Determination superseded by actual self assessment

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• (1) If after an HMRC determination has been made P delivers a return for the chargeable period with respect to the interest in question containing a self assessment, that self assessment supersedes the determination.

• (2) Sub-paragraph (1) does not apply to a return delivered—

• (a) more than 4 years after the power to make the determination first became exercisable, or

• (b) more than 12 months after the date of the determination,

whichever is the later.

• (3) Where—

• (a) proceedings have been begun for the recovery of any tax charged by an HMRC determination, and

• (b) before the proceedings are concluded the determination is superseded by a self assessment,

the proceedings may be continued as if they were proceedings for the recovery of so much of the tax charged by the self assessment as is due and payable and has not yet been paid.

• (4) Where—

• (a) action is being taken under Part 1 of Schedule 8 to the Finance (No. 2) Act 2015 (enforcement of deduction from accounts) for the recovery of an amount (“the original amount”) of tax charged by an HMRC determination, and

• (b) before that action is concluded, the determination is superseded by a self-assessment,

that action may be continued as if it were action for the purposes of the recovery of so much of the tax charged by the self-assessment as is due and payable, has not yet been paid and does not exceed the original amount.

PART 5 — HMRC assessments

Assessment where loss of tax discovered

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• (1) Sub-paragraph (2) applies if an officer of Revenue and Customs discovers that—

• (a) an amount of tax that ought to have been assessed under this Part of this Act as tax chargeable on a person for a chargeable period with respect to a single-dwelling interest has not been assessed,

• (b) an assessment of the tax chargeable on a person for a chargeable period in respect of a single-dwelling interest is or has become insufficient, or

• (c) relief has been given that is or has become excessive.

• (2) An officer of Revenue and Customs may make an assessment (a “discovery assessment”) in the amount or further amount that ought in the officer's opinion to be charged in order to make good to the Crown the loss of tax.

• (3) The functions of an officer of Revenue and Customs under this paragraph are also exercisable by the Commissioners for Her Majesty's Revenue and Customs.

Assessment to recover excessive repayment of tax

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• (1) If an amount of tax has been, but ought not to have been, repaid to a person that amount may be assessed and recovered as if it were unpaid tax.

• (2) If the repayment was made with interest, the amount assessed and recovered may include the amount of interest that ought not to have been paid.

References to “the taxpayer”

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In paragraphs 24 to 27 “taxpayer” means—

• (a) in relation to an assessment under paragraph 21, the chargeable person;

• (b) in relation to an assessment under paragraph 22, the person mentioned in paragraph 22(1).

Conditions for making assessment where return has been delivered

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