Legalize / United Kingdom / Public General Act

Finance Act 2014

Type Public General Act

Publication 2014-07-17

Last updated 2024-11-18

State In force

Department Statute Law Database

Source legislation.gov.uk

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Reform history JSON API

(b) the notice in question sets out a report prepared by HMRC of an opinion of the GAAR Advisory Panel in relation to the promoted arrangements that is contained in one or more opinion notices given under paragraph 11(3)(b) of Schedule 43 to FA 2013 or paragraph 6(4)(b) of Schedule 43B to FA 2013, and

(i) state the joint opinion of all the members of the sub-panel arranged under Schedule 43 or 43B, as the case may be, or

(ii) state the opinion of two or more members of the sub-panel.

(4) This sub-paragraph applies in respect of a person if—

(a) arrangements in relation to which the person is a promoter (“the promoted arrangements”) are equivalent within the meaning of paragraph 24(3) of Schedule 16 to F(No. 2)A 2017 to arrangements that have been referred to the GAAR Advisory Panel under paragraph 26 of that Schedule,

(b) one or more opinion notices are given under paragraph 34(3)(b) of Schedule 16 to F(No.2)A 2017 that apply to the promoted arrangements for the purposes of Part 7 of that Schedule, and

(i) state the joint opinion of all the members of the sub-panel arranged under that Schedule, or

(ii) state the opinion of two or more members of that sub-panel.

Disciplinary action by a professional body

8

(1) A person who carries on a trade or profession that is regulated by a professional body meets this condition if all of the following conditions are met—

(a) the person is found guilty of misconduct of a prescribed kind,

(b) action of a prescribed kind is taken against the person in relation to that misconduct, and

(2) Misconduct may only be prescribed for the purposes of sub-paragraph (1)(a) if it is misconduct other than misconduct in matters (such as the payment of fees) that relate solely or mainly to the person's relationship with the professional body.

(3) A “professional body” means—

(a) the Institute of Chartered Accountants in England and Wales;

(b) the Institute of Chartered Accountants of Scotland;

(d) the Faculty of Advocates;

(e) the General Council of the Bar of Northern Ireland;

(f) the Law Society;

(g) the Law Society of Scotland;

(h) the Law Society of Northern Ireland;

(i) the Association of Accounting Technicians;

(j) the Association of Chartered Certified Accountants;

(k) the Association of Taxation Technicians;

(l) any other prescribed body with functions relating to the regulation of a trade or profession.

Disciplinary action by a regulatory authority

9

(1) A person meets this condition if a regulatory authority imposes a relevant sanction on the person.

(2) A “relevant sanction” is a sanction which is—

(a) imposed in relation to misconduct other than misconduct in matters (such as the payment of fees) that relate solely or mainly to the person's relationship with the regulatory authority, and

(b) prescribed.

(3) The following are regulatory authorities for the purposes of this paragraph—

(a) the Financial Conduct Authority;

(b) the Financial Services Authority;

(4) Only authorities that have functions relating to the regulation of financial institutions may be prescribed under sub-paragraph (3)(c).

Exercise of information powers

10

(1) A person meets this condition if the person fails to comply with a requirement imposed by a notice or order given under any of the following provisions—

(a) section 308A, 310A, 313ZB, 313A and 313B of FA 2004;

(b) paragraphs 1, 2, 5 and 5A of Schedule 36 to FA 2008;

(2) For the purposes of section 237, the failure to comply is taken to occur when the period within which the person is required to comply with the notice or order expires (without the person having complied with it).

Restrictive contractual terms

11

(1) A person (“P”) meets this condition if P enters into an agreement with another person (“C”) which relates to a relevant proposal or relevant arrangements in relation to which P is a promoter, on terms which—

(a) impose a contractual obligation on C which falls within sub-paragraph (2) or (3), or

(b) impose on C both obligations within sub-paragraph (4) and obligations within sub-paragraph (5).

(2) A contractual obligation falls within this sub-paragraph if it prevents or restricts the disclosure by C to HMRC of information relating to the proposals or arrangements, whether or not by referring to a wider class of persons.

(3) A contractual obligation falls within this sub-paragraph if it requires C to impose on any tax adviser to whom C discloses information relating to the proposals or arrangements a contractual obligation which prevents or restricts the disclosure of that information to HMRC by the adviser.

(4) A contractual obligation falls within this sub-paragraph if it requires C to—

(a) meet (in whole or in part) the costs of, or contribute to a fund to be used to meet the costs of, any proceedings relating to arrangements in relation to which P is a promoter (whether or not implemented by C), or

(b) take out an insurance policy which insures against the risk of having to meet the costs connected with proceedings relating to arrangements which C has implemented and in relation to which P is a promoter.

(5) A contractual obligation falls within this paragraph if it requires C to obtain the consent of P before—

(a) entering into any agreement with HMRC regarding arrangements which C has implemented and in relation to which P is a promoter, or

(b) withdrawing or discontinuing any appeal against any decision regarding such arrangements.

(6) In sub-paragraph (5)(b), the reference to withdrawing or discontinuing an appeal includes any action or inaction which results in an appeal being discontinued.

(7) In this paragraph—

“proceedings” includes any sort of proceedings for resolving disputes (and not just proceedings in court), whether commenced or contemplated;

“tax adviser” means a person appointed to give advice about the tax affairs of another person (whether appointed directly by that person or by another tax adviser of that person).

Continuing to promote certain arrangements

12

A person meets this condition if the person is subject to a stop notice and fails to comply with—

(a) section 236B(1) (promotion of arrangements or proposal of a description specified in a stop notice),

(b) section 236C(1) (duty to make return to HMRC), or

(c) any obligations of the person under Schedule 36 to FA 2008 as it has effect as a result of section 272A (information and inspection powers).

PART 2 — Meeting the threshold conditions: bodies corporate and partnerships

13

(1) Sub-paragraph (2) applies where—

(a) a relevant threshold condition is met by a person (“P”) at a time (“the earlier time”) when P has control of a body corporate,

(b) a determination under section 237 is made at a later time in relation to the body corporate, and

(2) The body corporate is regarded as having met the threshold condition at the earlier time.

(3) “Relevant threshold condition” means a threshold condition specified in any of the following paragraphs of this Schedule—

(a) paragraph 2 (deliberate tax defaulters);

(b) paragraph 4 (dishonest tax agents);

(d) paragraph 7 (opinion notice of GAAR advisory panel);

(e) paragraph 8 (disciplinary action by professional body);

(f) paragraph 9 (disciplinary action by regulatory authority);

(g) paragraph 10 (failure to comply with information notice).

(4) For the purposes of this paragraph a person (“P”) has control of a body corporate (“B”) if P has power to secure—

(a) by means of the holding of shares or the possession of voting power in relation to B or any other body corporate, or

(b) as a result of any powers conferred by the articles of association or other document regulating B or any other body corporate,

that the affairs of B are conducted in accordance with P's wishes.

PART 3 — Power to amend

14

(1) The Treasury may by regulations amend this Schedule.

(2) An amendment made by virtue of sub-paragraph (1) may, in particular—

(a) vary or remove any of the conditions set out in paragraphs 2 to 12;

(b) add new conditions;

(c) vary any of the circumstances described in paragraphs 13B to 13D in which a person is treated as meeting a threshold condition (including by amending paragraph 13A);

(d) add new circumstances in which a person will be so treated.

(3) Regulations under sub-paragraph (1) may include any amendment of this Part of this Act that is appropriate in consequence of an amendment made by virtue of sub-paragraph (1).

SCHEDULE 35

Introduction

1

In this Schedule a reference to an “information duty” is to a duty arising under any of the following provisions to provide information or produce a document—

(za) section 236C(1) (duty to make return to HMRC);

(a) section 255 (duty to provide information or produce document);

(b) section 257 (ongoing duty to provide information);

(d) section 259 (monitored promoter: duty to provide information about clients);

(e) section 260 (intermediaries: duty to provide information about clients);

(f) section 261 (duty to provide information about clients following enquiry);

(g) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(h) section 263 (information about monitored promoter's address).

(i) paragraph 1, 2, 5 or 5A of Schedule 36 of FA 2008 (information and inspection powers) as it has effect as a result of section 272A.

Penalties for failure to comply

2

(1) A person who

(a) fails to comply with a duty imposed by or under this Part mentioned in column 1 of the Table is liable to a penalty not exceeding the amount shown in relation to that duty in column 2 of the Table, or-

(b) deliberately obstructs an officer of Revenue and Customs in the course of an inspection under paragraph 10 of Schedule 36 to FA 2008, as it has effect as a result of section 272A, that has been approved by the tribunal is liable to a penalty not exceeding the relevant amount (see sub-paragraph (3A)).

Column 1	Column 2
Provision or duty	Maximum penalty (£)
Section 236B(1) (promotion of arrangements or proposal of a description specified in a stop notice)	the relevant amount (see subparagraphs (2A) and (2B))
Section 236B(3)(a), (4)(a) or (5)(a) (requirement to notify persons who are subject to a stop notice)	£10,000
Section 236B(3)(b), (4)(b) or (5)(b) (requirement to notify HMRC of persons who are subject to a stop notice)	£25,000
Section 236C(1) (duty to make return to HMRC)	£5,000
Section 236J(1) (requirement to notify clients and intermediaries of stop notice)	£5,000
Section 249(1) (duty to notify clients of monitoring notice)	5,000
Section 249(3) (duty to publicise monitoring notice)	1,000,000
Section 249(10) (duty to include information on correspondence etc)	1,000,000
Section 251 (duty of promoter to notify clients and intermediaries of reference number)	5,000
Section 252 (duty of those notified to notify others of promoter's number)	5,000
Section 253 (duty to notify HMRC of reference number)	the relevant amount (see sub-paragraph (3))
Section 255 (duty to provide information or produce document)	1,000,000
Section 257 (ongoing duty to provide information or produce document)	1,000,000
Section 258 (duty of person dealing with non-resident promoter)	1,000,000
Section 259 (monitored promoter: duty to provide information about clients)	5,000
Section 260 (intermediaries: duty to provide information about clients)	5,000
Section 261 (duty to provide information about clients following an enquiry)	10,000
. . .	. . .
Section 263 (duty to provide information about address)	5,000
Section 265 (duty to provide information to promoter)	5,000
Duty to comply with a notice given under paragraph 1 of Schedule 36 to FA 2008 as it has effect as a result of section 272A	the relevant amount (see sub-paragraph (3A))
Duty to comply with a notice given under paragraph 2, 5 or 5A of Schedule 36 to FA 2008 as it has effect as a result of section 272A	the relevant amount (see sub-paragraph (3B))

(1A) In relation to a failure to comply with section 236C(1) the maximum penalty specified in column 2 of the Table is a maximum penalty which may be imposed—

(a) in respect of each failure to provide the required information or statement (see section 236C(6)) about a relevant client (within the meaning given by that section), and

(b) for each day on which a complete return is not provided after the end of the period within which it must be provided (see section 236C(7)).

(2) In relation to a failure to comply with section 236B(3), (4) or (5), 236J(1), 249(1), 251, 252, 259 or 260 the maximum penalty specified in column 2 of the Table is a maximum penalty which may be imposed in respect of each person to whom the failure relates.

(2A) In relation to a failure to comply with section 236B(1), the “relevant amount” is the sum of—

(a) £100,000 in respect of one or more failures relating to a particular stop notice, and

(b) £5,000 for each person to whom arrangements of a description specified in that stop notice, or a proposal for such arrangements, were promoted (within the meaning it has in that section).

(2B) Where a person fails to comply with section 236B(1) at a time when the person, or another person who the person controls or has significant influence over, is subject to a monitoring notice, sub-paragraph (2A) applies as if—

(a) in paragraph (a), for “£100,000” there were substituted “ £250,000 ”, and

(b) in paragraph (b), for “£5,000” there were substituted “ £10,000 ”.

(2C) If the maximum penalty that would apply as a result of sub-paragraph (2B) in a particular case appears inappropriately low after taking account of the considerations in sub-paragraph (4), sub-paragraph (2B)(a) applies as if for “£250,000” there were substituted “ £1,000,000 ”.

(3) In relation to a failure to comply with section 253, the “relevant amount” is—

(a) £5,000, unless paragraph (b) or (c) applies;

(b) £7,500, where a person has previously failed to comply with section 253 on one (and only one) occasion during the period of 36 months ending with the date on which the current failure occurred;

(c) £10,000, where a person has previously failed to comply with section 253 on two or more occasions during the period mentioned in paragraph (b).

(3A) Where a person fails to comply with a notice given under paragraph 1 of Schedule 36 to FA 2008 (as it has effect as a result of section 272A) or deliberately obstructs an officer of Revenue and Customs in the course of an inspection under paragraph 10 of that Schedule (as it has effect as a result of that section) that has been approved by the tribunal, the “relevant amount” is—

(a) in the case of a failure by a person who was subject to a monitoring notice at the time of the failure, or who had control of or had significant influence over such a person, £1,000,000, and

(b) in any other case, £5,000.

(3B) In relation to a failure to comply with a notice given under paragraph 2, 5 or 5A of that Schedule as it has effect as a result of section 272A, the “relevant amount” is the amount for the time being specified in paragraph 39(2) of that Schedule.

(4) The amount of a penalty imposed under sub-paragraph (1) is to be arrived at after taking account of all relevant considerations, including the desirability of setting it at a level which appears appropriate for deterring the person, or other persons, from similar failures to comply on future occasions having regard (in particular)—

(a) in the case of a penalty imposed for a failure relating to any arrangements or proposal promoted by a person, to the amount of fees received, or likely to have been received, by the person in connection with the those arrangements or that proposal;

(b) in such a case, to the amount of any tax advantage gained, or sought to be gained, ... in relation to the ... arrangements or the arrangements implementing the ... proposal (including, where the person liable to the penalty is the promoter of those arrangements or that proposal, any advantage that was gained or sought to be gained by the persons to whom the arrangements or proposal were promoted).

(5) The references in sub-paragraph (4) to arrangements or a proposal being “promoted” are to be construed in accordance with section 236A(7).

(6) Sub-paragraphs (5) to (11) of paragraph 13A of Schedule 34 (meaning of “control” and “significant influence”) apply to this paragraph as they apply to Part 2 of that Schedule.

Daily default penalties for failure to comply

3

(1) If the failure to comply with an information duty , other than a duty arising under section 236C(1), continues after a penalty is imposed under paragraph 2(1), the person is liable to a further penalty or penalties not exceeding the relevant sum for each day on which the failure continues after the day on which the penalty under paragraph 2(1) was imposed.

(2) In sub-paragraph (1) “the relevant sum” means—

(a) £10,000, in a case where the maximum penalty which could have been imposed for the failure was £1,000,000;

(b) £600, in cases not falling within paragraph (a).

Penalties for inaccurate information and documents

4

(1) If—

(a) in complying with an information duty or a requirement to provide evidence under section 236D(2)(d) or 236F(3)(c), a person provides inaccurate information or produces a document that contains an inaccuracy, and

(b) condition A, B or C is met,

the person is liable to a penalty not exceeding the relevant sum.

(2) Condition A is that the inaccuracy is careless or deliberate.

(3) An inaccuracy is careless if it is due to a failure by the person to take reasonable care.

(4) For the purpose of determining whether or not a person who is a monitored promoter took reasonable care, reliance on legal advice is to be disregarded if either—

(a) the advice was not based on a full and accurate description of the facts, or

(b) the conclusions in the advice that the person relied on were unreasonable.

(5) For the purpose of determining whether or not a person who complies with a duty under section 258 took reasonable care, reliance on legal advice is to be disregarded if the advice was given or procured by the monitored promoter mentioned in subsection (1) of that section.

(6) Condition B is that the person knows of the inaccuracy at the time the information is provided or the document produced but does not inform HMRC at that time.

(7) Condition C is that the person—

(a) discovers the inaccuracy some time later, and

(b) fails to take reasonable steps to inform HMRC.

(8) The “relevant sum” means—

(a) £1,000,000, where the information is provided or document produced in compliance with a duty under section 255, 257 or 258 , or under Schedule 36 to FA 2008 as it has effect as a result of section 272A in a case where the person required to provide the information or produce the document was at the time subject to a monitoring notice;

(b) £10,000, where the information is provided in compliance with a duty under section 261;

(c) £5,000, where the information is provided or document produced in compliance with a duty under section 236C(1), 236D(2)(d), 236F(3)(c), 259, 260, ... or 263 or under Schedule 36 to FA 2008 as it has effect as a result of section 272A in a case not falling within paragraph (a).

(9) If the information or document contains more than one inaccuracy, one penalty is payable under this paragraph whatever the number of inaccuracies.

Power to change amount of penalties

5

(1) If it appears to the Treasury that there has been a change in the value of money since the last relevant date, they may by regulations substitute for the sums for the time being specified in paragraph 2, 3 or 4 such other sums as appear to them to be justified by the change.

(2) Regulations under sub-paragraph (1) may include any amendment of paragraph 10(b) that is appropriate in consequence of an amendment made by virtue of sub-paragraph (1).

(3) The “relevant date”, in relation to a specified sum, means—

(a) the date on which this Act is passed, and

(b) each date on which the power conferred by sub-paragraph (1) has been exercised in relation to that sum.

Concealing, destroying etc documents following imposition of a duty to provide information

6

(1) A person must not conceal, destroy or otherwise dispose of, or arrange for the concealment, destruction or disposal of, a document which is subject to a duty under section 255 or 257 or under Schedule 36 of FA 2008 as it has effect as a result of section 272A.

(2) Sub-paragraph (1) does not apply if the person acts after the document has been produced to an officer of Revenue and Customs in accordance with the duty, unless the officer has notified the person in writing that the document must continue to be available for inspection (and has not withdrawn the notification).

(3) Sub-paragraph (1) does not apply, in a case to which section 268(1) applies, if the person acts after the expiry of the period of 6 months beginning with the day on which a copy of the document was produced in accordance with that section unless, before the expiry of that period, an officer of Revenue and Customs makes a request for the original document under section 268(2)(b).

(4) A person who conceals, destroys or otherwise disposes of, or arranges for the concealment, destruction or disposal of, a document in breach of sub-paragraph (1), is taken to have failed to comply with the duty to produce the document under the provision concerned (but see sub-paragraph (5)).

(5) If a person conceals, destroys or otherwise disposes of, or arranges for the concealment, destruction or disposal of, a document which is subject to a duty under more than one of the provisions mentioned in sub-paragraph (1) then—

(a) in a case where a duty under section 255 applies, the person will be taken to have failed to comply only with that provision, or

(b) in a case where a duty under section 255 does not apply, the person will be taken to have failed to comply only with section 257.

Concealing, destroying etc documents following informal notification

7

(1) A person must not conceal, destroy or otherwise dispose of, or arrange for the concealment, destruction or disposal of, a document if an officer of Revenue and Customs has informed the person in writing that the person is, or is likely, to be given a notice under section 255 or 257, or under Schedule 36 of FA 2008 as it has effect as a result of section 272A, the effect of which will, or is likely to, require the production of the document.

(2) Sub-paragraph (1) does not apply if the person acts—

(a) at least 6 months after the person was, or was last, informed as described in sub-paragraph (1), or

(b) after the person becomes subject to a duty under section 255 or 257, or under Schedule 36 of FA 2008 as it has effect as a result of section 272A, which requires the document to be produced.

(3) A person who conceals, destroys or otherwise disposes of, or arranges for the concealment, destruction or disposal of, a document in breach of sub-paragraph (1), is taken to have failed to comply with the duty to produce the document under the provision concerned (but see sub-paragraph (4)).

(4) If a person conceals, destroys or otherwise disposes of, or arranges for the concealment, destruction or disposal of, a document which is subject to a duty under more than one of the provisions mentioned in sub-paragraph (1) then—

(a) in a case where a duty under section 255 applies, the person will be taken to have failed to comply only with that provision, or

(b) in a case where a duty under section 255 does not apply, the person will be taken to have failed to comply only with section 257.

Failure to comply with time limit

8

A failure to do anything required to be done within a limited period of time does not give rise to liability to a penalty under this Schedule if the person did it within such further time, if any, as an officer of Revenue and Customs or the tribunal may have allowed.

Reasonable excuse

9

(1) Liability to a penalty under this Schedule does not arise if there is a reasonable excuse for the failure.

(2) For the purposes of this paragraph—

(a) an insufficiency of funds is not a reasonable excuse unless attributable to events outside the person's control,

(b) if the person relies on any other person to do anything, that is not a reasonable excuse unless the first person took reasonable care to avoid the failure,

(c) if the person had a reasonable excuse for the failure but the excuse has ceased, the person is to be treated as having continued to have the excuse if the failure is remedied without unreasonable delay after the excuse ceased,

(d) reliance on legal advice is to be taken automatically not to constitute a reasonable excuse where the person is a monitored promoter if either—

(i) the advice was not based on a full and accurate description of the facts, or

(ii) the conclusions in the advice that the person relied on were unreasonable, and

(e) reliance on legal advice is to be taken automatically not to constitute a reasonable excuse in the case of a penalty for failure to comply with section 258, if the advice was given or procured by the monitored promoter mentioned in subsection (1) of that section.

Assessment of penalty and appeals

10

Part 10 of TMA 1970 (penalties, etc) has effect as if—

(a) the reference in section 100(1) to the Taxes Acts were read as a reference to the Taxes Acts and this Schedule,

(b) in subsection (2) of section 100, there were inserted a reference to a penalty under this Schedule, other than

(i) a penalty under paragraph 3 of this Schedule in respect of which the relevant sum is £600.

(ii) a penalty in respect of a failure to comply with section 236B(1) unless an officer of Revenue and Customs authorised for the purposes of section 100 of TMA 1970 considers that paragraph 2(2C) of this Schedule applies in relation to that failure;

(iii) a penalty in respect of a failure to comply with section 236B(3), (4) or (3), 236C(1) or 236J(1);

(iv) a penalty in respect of a failure to comply with a notice given under paragraph 1 of Schedule 36 to FA 2008 as it has effect as a result of section 272A unless paragraph 2(3A)(a) of this Schedule applies in relation to that failure;

(v) a penalty in respect of a failure to comply with a notice given under paragraph 2, 5 or 5A of Schedule 36 to FA 2008 as it has effect as a result of section 272A.

Interest on penalties

11

(1) A penalty under this Schedule is to carry interest in accordance with section 101 of FA 2009.

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

Double jeopardy

12

A person is not liable to a penalty under this Schedule in respect of anything in respect of which the person has been convicted of an offence.

Overlapping penalties

13

A person is not liable to a penalty under—

(a) Schedule 24 to the FA 2007 (penalties for errors),

(b) Part 7 of FA 2004, or

by reason of any failure to include in any return or account a reference number required by section 253.

SCHEDULE 36

PART 1 — Partnerships as persons

“Person” includes a partnership

1

(1) Persons carrying on a business in partnership—

(a) are regarded as a person for the purposes of this Part of this Act;

(b) are referred to in this Part as a “partnership”.

(2) But in this Part of this Act “partnership” does not include a body of persons forming a legal person that is distinct from themselves (and paragraphs 2 to 21 may accordingly be disregarded in applying this Part of this Act to such a body of persons).

(3) In the references in this Part to carrying on a business in partnership, “partnership” has the same meaning as in the Partnership Act 1890.

Continuity of partnerships

2

A partnership is regarded for the purposes of this Part of this Act as continuing to be the same partnership (and the same person) regardless of a change in membership, provided that a person who was a member before the change remains a member after the change.

Meeting of conditions

3

(1) Accordingly, for the purposes of this Part of this Act a partnership is taken—

(a) to have done any act that bound the members, and

(b) to have failed to comply with any obligation of the firm which the members failed to comply with;

but see sub-paragraph (3).

(2) In sub-paragraph (1), “the members” means those who were the members of the partnership or (in the case of a limited partnership) the general partners of the partnership at the time when the act was done or the failure to comply occurred.

(3) Where a member of a partnership (“M”) has done, or failed to do, an act at any time (“the earlier time”), the partnership is not treated at any later time as having done, or failed to do, that act unless—

(a) M, or

(b) another person who was a member of the partnership at the earlier time,

is a member of the partnership at the later time.

(4) In this paragraph “firm” has the same meaning as in the Partnership Act 1890.

Threshold conditions: actions of partners in a personal capacity

4

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

PART 2 — Conduct notices and monitoring notices

Conduct notices

5

(1) A conduct notice that is given to a partnership must state that it is a partnership conduct notice.

(2) In accordance with paragraphs 1 and 2, where the person to whom a conduct notice is given is a partnership, section 238 authorises the imposition of conditions relating to—

(a) the persons who are members of the partnership when the conduct notice is given, and

(b) any person who becomes a member of the partnership after the conduct notice is given.

Monitoring notices

6

A monitoring notice that is given to a partnership must state that it is a partnership monitoring notice.

Person continuing to carry on partnership business as a sole trader

7

(1) This paragraph applies where—

(a) a person or persons have ceased to be members of a partnership,

(b) immediately before the cessation, a defeat notice, conduct notice or monitoring notice had effect in relation to the partnership, and

(c) immediately after the cessation, a person who was a member of the partnership immediately before the cessation is carrying on the business of the partnership, but not in partnership.

(2) Where this paragraph applies, the defeat notice, conduct notice or monitoring notice continues (despite paragraphs 1 and 2) to have effect in relation to the person mentioned in sub-paragraph (1)(c) (but, in relation to times when the business is not being carried on in partnership, the notice is not regarded for the purposes of this Part of this Act as a notice that has been given to a partnership.)

Persons leaving a partnership: conduct notices

8

(1) Sub-paragraphs (2) and (3) apply where—

(a) a person (“P”) who was a controlling member of a partnership at the time when a conduct notice (“the original notice”) was given to the partnership has ceased to be a member of the partnership,

(b) the conduct notice had effect in relation to the partnership at the time of that cessation, and

(2) An authorised officer may give P a conduct notice.

(3) If P is carrying on a business as a promoter in partnership with one or more other persons and is a controlling member of that partnership (“the new partnership”), an authorised officer may give a conduct notice to the new partnership.

(4) A conduct notice given under sub-paragraph (3) ceases to have effect if P ceases to be a member of the new partnership.

(5) A notice under sub-paragraph (2) or (3) may not be given after the termination date of the original notice (under section 241(2)(a) or (b)).

Persons leaving a partnership: monitoring notices

9

(1) Sub-paragraphs (2) and (3) apply where—

(a) a person (“P”) who was a controlling member of a partnership at the time when a monitoring notice was given to the partnership has ceased to be a member of the partnership,

(b) the monitoring notice had effect in relation to the partnership at the time of that cessation, and

(2) An authorised officer may give P a monitoring notice.

(3) If P is carrying on a business as a promoter in partnership with one or more other persons, and is a controlling member of that partnership (“the new partnership”), an authorised officer may give a monitoring notice to the new partnership.

(4) A monitoring notice given under sub-paragraph (3) ceases to have effect if P ceases to be a member of the new partnership.

Division of partnership business

10

(1) This paragraph applies if—

(a) a person (“a departing partner”) who has been carrying on a business in partnership ceases to carry on the business in partnership,

(b) a , defeat notice, conduct notice or monitoring notice had effect in relation to the partnership immediately before the departing partner ceased to carry on the business in partnership, and

(2) The notice mentioned in sub-paragraph (1)(b) is referred to in this paragraph as “the original notice”.

(3) An authorised officer may give the departing partner—

(za) a defeat notice (if the original notice is a defeat notice);

(a) a conduct notice (if the original notice is a conduct notice);

(b) a monitoring notice (if the original notice is a monitoring notice).

(4) If the departing partner is itself carrying on the transferred part of the business in partnership, the authorised officer may give that partnership (“the new partnership”)—

(za) a defeat notice (if the original notice is a defeat notice);

(a) a conduct notice (if the original notice is a conduct notice);

(b) a monitoring notice (if the original notice is a monitoring notice).

(5) A notice given under sub-paragraph (4) ceases to have effect if the departing partner ceases to be a member of the new partnership.

(5A) A notice under sub-paragraph (3)(za) or (4)(za) may not be given after the end of the look-forward period of the original notice.

(6) A notice under sub-paragraph (3)(a) or (4)(a) may not be given after the termination date of the original notice (under section 241(2)(a) or (b)).

(7) It does not matter whether one, some or all of the persons who were carrying on the business in partnership are departing partners by virtue of sub-paragraph (1).

Notices under paragraphs 8 to 10: general

11

(1) In this Part of this Act—

“replacement conduct notice” means a notice under paragraph 8(2) or (3) or 10(3)(a) or (4)(a);

“replacement monitoring notice” means a notice given under paragraph 9(2) or (3) or 10(3)(b) or (4)(b).

(2) In this Part of this Act, “the original monitoring notice” means—

(a) in relation to a replacement monitoring notice given under paragraph 9(2), the monitoring notice mentioned in paragraph 9(1), and

(b) in relation to a replacement monitoring notice given under paragraph 10(3)(b) or (4)(b), the monitoring notice mentioned in paragraph 10(2),

and that original monitoring notice is also the “original monitoring notice” in relation to any monitoring notice that (under paragraph 9(2) or (3) or 10(3)(b) or (4)(b)) replaces a replacement monitoring notice.

12

A notice under paragraph 8(2) or (3) or 10(3)(a) or (4)(a)—

(a) has no effect after the termination date of the original notice;

(b) must state that that date is its termination date.

13

An authorised officer may not give a replacement conduct notice or replacement monitoring notice to a person if a conduct notice or monitoring notice previously given to the person still has effect in relation to the person.

Publication under section 248

14

Where the monitored promoter referred to in section 248(2) is a partnership, paragraphs (a), (b) and (d) of that subsection are to be read as referring to details of the partnership (for instance, the name under which the business of the partnership is carried on), not to details of particular partners.

PART 3 — Responsibility of partners

Responsibility of partners

15

(1) A notice given to a partnership under this Part of this Act has effect, at any time, in relation to the persons who are members of the partnership at that time (“the responsible partners”).

(2) Sub-paragraph (1) does not affect any liability of a person who has ceased to be a member of a partnership in respect of things that the responsible partners did or failed to do before that person ceased to be a member of the partnership.

(3) Anything required to be done by the responsible partners under or by virtue of a provision of this Part of this Act is required to be done by all the responsible partners (but see paragraph 18).

(4) In relation to any right (such as a right of appeal) conferred by this Part of this Act references to a person have the meaning that is appropriate in consequence of sub-paragraphs (1) to (3).

Joint and several liability of responsible partners

16

(1) Where the responsible partners are liable to a penalty under this Part of this Act, or to interest on such a penalty, their liability is joint and several.

(2) No amount may be recovered under sub-paragraph (1) from a person who did not become a responsible partner until after the relevant time.

(3) “The relevant time” means—

(a) in relation to so much of the penalty as is payable in respect of any day, or to interest on so much of a penalty as is so payable, the beginning of that day;

(b) in relation to any other penalty, or interest on such a penalty, the time when the act or omission occurred that caused the penalty to become payable.

Service of notices

17

(1) Any notice given to a partnership by an officer of Revenue and Customs under this Part of this Act must be served either—

(a) on all the persons who are members of the partnership when the notice is given, or

(b) on a representative partner.

(2) “Representative partner” means—

(a) a nominated partner, or

(b) if no partner has been nominated under paragraph 18(2), a partner designated by an authorised officer as a representative partner.

(3) A designation under sub-paragraph (2), or the revocation of such a designation, has effect only when notice of the designation, or revocation, has been given to the partnership by an authorised officer.

Nominated partners

18

(1) Anything required to be done by the responsible partners under this Part of this Act may instead be done by any nominated partner.

(2) “Nominated partner” means a partner nominated by a majority of the partners to act as the representative of the partnership for the purposes of this Part of this Act.

(3) A nomination under sub-paragraph (2), or the revocation of such a nomination, has effect only after notice of the nomination, or revocation, has been given to an authorised officer.

PART 4 — Interpretation

Meaning of “controlling member”

19

(1) For the purposes of this Schedule a person (“P”) is a “controlling member” of a partnership at any time when the person has a right to a share of more than half the assets, or of more than half the income, of the partnership.

(2) For that purpose there are to be attributed to P any interests or rights of—

(a) any individual who is connected with P (if P is an individual), and

(b) any body corporate that P controls.

(3) An individual is “connected” with P if the individual is—

(a) P's spouse or civil partner;

(b) a relative of P;

(d) a relative of P's spouse or civil partner, or

(e) the spouse or civil partner of a relative of P's spouse or civil partner.

(4) In sub-paragraph (3) “relative” means brother, sister, ancestor or lineal descendant.

(5) P controls a body corporate (“B”) if P has power to secure—

(a) by means of the holding of shares or the possession of voting power in relation to B or any other body corporate, or

(b) as a result of any powers conferred by the articles of association or other document regulating that or any other body corporate,

that the affairs of B are conducted in accordance with P's wishes.

Meaning of “managing partner”

20

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

Power to amend definitions

21

(1) The Treasury may by regulations amend paragraph 19 ....

(2) Regulations under sub-paragraph (1) may include any amendment of this Schedule that is necessary in consequence of any amendment made by virtue of sub-paragraph (1).

SCHEDULE 37

PART 1 — Capital gains tax relief

Relief on disposals to employee-ownership trusts

1

In Part 7 of TCGA 1992 (other property, businesses, investments etc), after section 236G insert—

(236H) (1) This section applies where— (a) a person other than a company (“P”) disposes of any ordinary share capital of a company (“C”) to the trustees of a settlement, (b) the relief requirements are met, and (c) P makes a claim under this section. (2) Section 17(1) (disposals and acquisitions treated as made at market value) does not apply to the disposal. (3) The disposal, and the acquisition by the trustees, are to be treated for the purposes of this Act as being made for such consideration as to secure that neither a gain nor a loss accrues on the disposal. (4) “The relief requirements” are— (a) that C meets the trading requirement (see section 236I) at the time of the disposal and continues to meet that requirement for the remainder of the tax year in which that time falls, (b) that the settlement meets the all-employee benefit requirement at the time of the disposal and continues to meet that requirement for the remainder of the tax year in which that time falls (see sections 236J to 236L and subsection (5) of this section), (c) that the settlement does not meet the controlling interest requirement (see section 236M) immediately before the beginning of the tax year in which the disposal occurs, but— (i) it meets that requirement at the end of that tax year, and (ii) if it met the requirement at an earlier time in that tax year (whether before or after the time of the disposal) it continued to meet it throughout the remainder of that tax year, (d) that the limited participation requirement is met (see section 236N), and (e) that this section does not apply in relation to any related disposal by P or a person connected with P which occurs in an earlier tax year. (5) For the purposes of subsection (4)(b)— (a) unless the settlement met the all-employee benefit requirement by virtue of section 236L (cases in which all-employee benefit requirement treated as met) at the time of the disposal, that section does not apply for the purposes of determining whether the settlement continues to meet that requirement after the disposal, and (b) if, at the time of the disposal, the settlement met that requirement by virtue of section 236L and later continues to meet it otherwise than by virtue of that section, it may not again meet the requirement by virtue of that section. (6) A disposal in an earlier tax year is “related” to the disposal in question if— (a) both disposals are of ordinary share capital of the same company, or (b) the disposal in the earlier tax year is of ordinary share capital of a company which is, or at the time of that disposal was, a member of the same group as the company whose ordinary share capital is the subject of the disposal in question. (7) A claim under this section must include— (a) information to identify the settlement, (b) C's name and the address of its registered office, and (c) the date of the disposal and the number of shares disposed of. (8) Section 236O makes provision about events which prevent a claim being made under this section and circumstances in which a claim is revoked. (236I) (1) C meets the trading requirement if C is— (a) a trading company which is not a member of a group, or (b) the principal company of a trading group. (2) “Trading company” means a company carrying on trading activities whose activities do not include to a substantial extent activities other than trading activities. (3) “Trading group” means a group— (a) one or more of whose members carry on trading group activities, and (b) the activities of whose members, taken together, do not include to a substantial extent activities other than trading group activities. (4) In this section— - “trading activities” means activities carried on by the company in the course of, or for the purposes of, a trade being carried on by it; - “trading group activities” means activities carried on by a member of the group in the course of, or for the purposes of, a trade being carried on by any member of the group. (5) For the purposes of determining whether C is a trading company or the principal company of a trading group— (a) the activities of the members of a group are to be treated as one business (with the result that activities are disregarded to the extent that they are intra-group activities), and (b) a business carried on by a company in partnership with one or more other persons is to be treated as not being a trading activity or a trading group activity. (236J) (1) A settlement meets the all-employee benefit requirement if the trusts of the settlement— (a) do not permit any of the settled property to be applied, at any time, otherwise than for the benefit of all the eligible employees on the same terms, (b) do not permit the trustees at any time to apply any of the settled property— (i) by creating a trust, or (ii) by transferring property to the trustees of any settlement other than by an authorised transfer, (c) do not permit the trustees at any time to make loans to beneficiaries of the trusts, and (d) do not permit the trustees or any other person at any time to amend the trusts in a way such that the amended trusts would not comply with one or more of paragraphs (a) to (c). (2) Section 236K makes provision about the requirement in subsection (1)(a). (3) “Eligible employee” means— (a) if C meets the trading requirement by virtue of section 236I(1)(a), any individual who is employed by, or is an office-holder of, C, and (b) if C meets the trading requirement by virtue of section 236I(1)(b), any individual who is employed by, or is an office-holder of, a relevant group company, but does not include an excluded participator. (4) But where— (a) C has ceased to meet the trading requirement or the trustees have ceased to hold any shares in C (or both), and (b) a person was an eligible employee at any time during the period of two years ending immediately before that event (or, where both have occurred, the earlier of them), that person continues to be an “eligible employee”. (5) “Excluded participator” means— (a) a person who is a participator in C, or, where C meets the trading requirement by virtue of section 236I(1)(b), in any relevant group company, (b) any other person who is a participator in any close company that has made a disposition whereby property became comprised in the same settlement, being a disposition which but for section 13 or 13A of the Inheritance Tax Act 1984 (dispositions by close companies for benefit of employees or to employee-ownership trusts) would have been a transfer of value for the purposes of inheritance tax, (c) any other person who has been a participator in any company mentioned in paragraph (a) or (b) at any time on or after the look-back date, or (d) any person who is connected with any person within paragraph (a), (b) or (c). (6) The participators in a company who are referred to in subsection (5) do not include any participator who— (a) is not beneficially entitled to, or to rights entitling the participator to acquire, 5% or more of, or of any class of the shares comprised in, the company's share capital, and (b) on a winding-up of the company would not be entitled to 5% or more of its assets. (7) In this section— - “authorised transfer” means a transfer of property consisting of or including any ordinary share capital of a company (“the transferred company”) where— 1. the transferred company meets the trading requirement, and 2. the transfer is made to the trustees of a settlement which— 1. meets the controlling interest requirement with respect to the transferred company immediately after the transfer, and 2. meets the all-employee benefit requirement with respect to the transferred company (ignoring section 236L), - “close company” and “participator” have the same meaning as in Part 4 of the Inheritance Tax Act 1984 (see section 102 of that Act), and references to a participator in a company are, in the case of a company which is not a close company, to be construed as references to a person who would be a participator in the company if it were a close company, - “the look-back date” means the first day of the period of 10 years ending with whichever is later of— 1. 10 December 2013, and 2. the day on which any property first became comprised in the settlement, and - “relevant group company” means C or any other company which is a member of the group of which C is the principal company. (8) In this section references to the settled property include references to any income arising from it. (9) See section 236L for cases where the all-employee benefit requirement is treated as met. (236K) (1) The requirement in section 236J(1)(a) (“the equality requirement”) is not infringed by the trusts by reason only that they— (a) permit the settled property to be applied, where an eligible employee has died, as if a surviving spouse, civil partner or dependant of the deceased person were the eligible employee (and continued to be employed) for a period of 12 months, or such shorter period as the trusts may provide, starting with the time of death, (b) prevent the settled property being applied for the benefit of persons who have not been eligible employees for a continuous period of 12 months or such shorter period as the trusts may provide, (c) permit the trustees to comply with a written request from a person that the trustees do not apply any of the settled property for the benefit of that person, or (d) prevent the settled property being applied for the benefit of all persons who are eligible employees by reason only that they are office-holders. (2) The equality requirement is not infringed by the trusts by reason only that, in addition to requiring the settled property to be applied for the benefit of all the eligible employees on the same terms, they also permit the settled property to be applied for charitable purposes. (3) Subject to subsections (1) and (2), the equality requirement is infringed by the trusts if they permit the settled property to be applied by reference to factors other than those mentioned in subsection (4). (4) The equality requirement is not infringed by the trusts by reason only that they permit the settled property to be applied for the benefit of all the eligible employees by reference to— (a) an eligible employee's remuneration, (b) an eligible employee's length of service, or (c) hours worked by an eligible employee; but this is subject to subsections (5) and (6). (5) The equality requirement is infringed by the trusts if they permit any of the settled property to be applied on terms such that some (but not all) eligible employees receive no benefits (other than by virtue of subsection (1)(b), (c) and (d)). (6) If any of the settled property is applied by reference to more than one of the factors mentioned in subsection (4), the equality requirement is infringed unless— (a) each factor gives rise to a separate entitlement related to the level of remuneration, length of service or (as the case may be) hours worked, and (b) the total entitlement is the sum of those separate entitlements. (7) “Eligible employee” has the same meaning as in section 236J. (8) In this section, references to the settled property include references to any income arising from it. (236L) (1) A settlement which would not otherwise meet the all-employee benefit requirement at any time is treated as meeting that requirement at that time if— (a) the settlement was created before 10 December 2013, (b) on that date— (i) section 86 of the Inheritance Tax Act 1984 (trusts for the benefit of employees) applied to the settled property, (ii) the trustees held a significant interest in C, and (iii) the settlement did not meet the all-employee benefit requirement (ignoring this section), and (c) the trustees of the settlement do not, during the period of 12 months ending with the time in question, do any of the following— (i) apply any of the settled property otherwise than for the benefit of all eligible employees on the same terms, (ii) apply any of the settled property by creating a trust, (iii) apply any of the settled property by transferring property to the trustees of any settlement other than by an authorised transfer, or (iv) make loans to beneficiaries of the trusts of the settlement. (2) The trustees held a significant interest in C on 10 December 2013 if on that date— (a) they— (i) held 10% or more of the ordinary share capital of C, and (ii) had powers of voting on all questions affecting C as a whole which, if exercised, would have yielded 10% or more of the votes capable of being exercised on them, (b) they were entitled to 10% or more of the profits available for distribution to the equity holders of C, (c) they would have been entitled, on a winding up of C, to 10% or more of the assets of C available for distribution to equity holders, and (d) there were no provisions in any agreement or instrument affecting C's constitution or management or its shares or securities whereby the condition in paragraph (a), (b) or (c) could cease to be satisfied without the consent of the trustees. See section 236T for further provision relating to the holding of a significant interest. (3) Subsections (3) to (8) of section 236J apply for the purposes of this section. (4) The requirement in subsection (1)(c)(i) (“the behaviour requirement”) is not infringed by reason only that the trustees of the settlement— (a) apply any of the settled property, where an eligible employee has died, as if a surviving spouse, civil partner or dependant of the deceased person were the eligible employee (and continued to be employed) for a period of 12 months, or such shorter period as the trustees may determine, starting with the time of death, (b) only apply the settled property for the benefit of persons who have been eligible employees for a continuous period of 12 months or such shorter period as the trustees may determine, (c) comply with a written request from a person that the trustees do not apply any of the settled property for the benefit of that person, or (d) have complied with the terms of the trusts of the settlement which prevent the settled property being applied for the benefit of some or all of the persons who are eligible employees by reason only that they are office-holders. (5) The behaviour requirement is not infringed by reason only that, in addition to applying any of the settled property for the benefit of all the eligible employees on the same terms, the trustees also apply any of it for charitable purposes. (6) Subject to subsections (4) and (5), the behaviour requirement is infringed by the trustees if they apply the settled property by reference to factors other than those mentioned in subsection (7). (7) The behaviour requirement is not infringed by the trustees applying the settled property for the benefit of all the eligible employees by reference to— (a) an eligible employee's remuneration, (b) an eligible employee's length of service, or (c) hours worked by an eligible employee; but this is subject to subsections (8) and (9). (8) The behaviour requirement is infringed if any of the settled property is applied by the trustees on terms such that some (but not all) eligible employees receive no benefits (other than as mentioned in subsection (4)(b), (c) and (d)). (9) If the trustees apply any of the settled property by reference to more than one of the factors mentioned in subsection (7), the behaviour requirement is infringed unless— (a) each factor gives rise to a separate entitlement related to the level of remuneration, length of service or (as the case may be) hours worked, and (b) the total entitlement is the sum of those separate entitlements. (236M) (1) A settlement meets the controlling interest requirement if— (a) the trustees— (i) hold more than 50% of the ordinary share capital of C, and (ii) have powers of voting on all questions affecting C as a whole which, if exercised, would yield a majority of the votes capable of being exercised on them, (b) the trustees are entitled to more than 50% of the profits available for distribution to the equity holders of C, (c) the trustees would be entitled, on a winding up of C, to more than 50% of the assets of C available for distribution to equity holders, and (d) there are no provisions in any agreement or instrument affecting C's constitution or management or its shares or securities whereby the condition in paragraph (a), (b) or (c) can cease to be satisfied without the consent of the trustees. (2) See section 236T for further provision relating to the controlling interest requirement. (236N) (1) The limited participation requirement is met if Conditions A and B are met. (2) Condition A is that there was no time in the period of 12 months ending immediately after the disposal mentioned in section 236H(1) when— (a) P was a participator in C, and (b) the participator fraction exceeded 2/5. (3) Condition B is that the participator fraction does not exceed 2/5 at any time in the period beginning with that disposal and ending at the end of the tax year in which it occurs. (4) But a time which falls in a period during which the participator fraction exceeded 2/5 is to be disregarded for the purposes of subsection (2)(b) and (3) if— (a) that period lasts no more than 6 months, and (b) the fraction exceeded 2/5 during that period by reason of events outside the reasonable control of the trustees. (5) “The participator fraction” means— $$NP NE$where—NP is the sum of—the number of persons who at the time in question are both—participators in C, andemployees of, or office-holders in, C, andthe number of other persons who at that time are both—employees of, or office-holders in, C or, if C is the principal company of a trading group, any member of the group, andconnected with persons within paragraph (a);NE is the number of persons who at that time are employees of C or, if C is the principal company of a trading group, any member of the group.$ (6) The participators in C who are referred to in subsections (2) and (5) do not include any participator who— (a) is not beneficially entitled to, or to rights entitling the participator to acquire, 5% or more of, or of any class of the shares comprised in, C's share capital, and (b) on a winding-up of C would not be entitled to 5% or more of its assets. (7) In this section— (a) “participator” has the meaning given by section 454 of CTA 2010, and (b) references to a participator in a company are, in the case of a company which is not a close company (within the meaning of Chapter 2 of Part 10 of that Act), to be construed as references to a person who would be a participator in the company if it were a close company. (236O) (1) This section applies where— (a) a disposal is made in circumstances where paragraphs (a) and (b) of section 236H(1) are satisfied, and (b) one or more disqualifying events occur in relation to the disposal in the tax year following the tax year in which the disposal occurs. (2) A “disqualifying event” occurs in relation to the disposal if and when— (a) C ceases to meet the trading requirement, (b) the settlement ceases to meet the all-employee benefit requirement, (c) the settlement ceases to meet the controlling interest requirement, (d) the participator fraction exceeds 2/5, or (e) the trustees act in a way which the trusts, as required by the all-employee benefit requirement, do not permit. (3) No claim for relief under section 236H may be made in respect of the disposal on or after the day on which the disqualifying event (or, if more than one, the first of them) occurs. (4) Any claim for relief under section 236H made in respect of the disposal before that day is revoked, and the chargeable gains and allowable losses of any person for any chargeable period are to be calculated as if that claim had never been made. (5) Such adjustments must be made in relation to any person, whether by the making of assessments or otherwise, as are required to give effect to subsection (4) (regardless of any limitation on the time within which any adjustment may be made). (6) Section 236H(5) (restrictions on application of section 236L) applies for the purposes of subsection (2)(b). (7) Section 236N(4) applies for the purposes of subsection (2)(d) as it applies in relation to section 236N(2)(b) and (3). (236P) (1) Where the trustees of a settlement acquire any ordinary share capital in a tax year in circumstances where section 236H applies, subsection (3) applies on the first occasion, after the end of the tax year following the tax year in which the acquisition occurs, when a disqualifying event occurs in relation to the acquisition. (2) A “disqualifying event” occurs in relation to the acquisition if and when— (a) C ceases to meet the trading requirement, (b) the settlement ceases to meet the all-employee benefit requirement, (c) the settlement ceases to meet the controlling interest requirement, (d) the participator fraction exceeds 2/5, or (e) the trustees act in a way which the trusts, as required by the all-employee benefit requirement, do not permit. (3) The trustees are treated as having, immediately before the disqualifying event— (a) disposed of any ordinary share capital of C held by the trustees which comprises shares acquired in circumstances where section 236H applied (and not subsequently disposed of and reacquired), and (b) immediately reacquired that ordinary share capital, at its market value at that time. (4) For the purposes of subsection (2)(b)— (a) unless the settlement met the all-employee benefit requirement at the time of the acquisition by virtue of section 236L, that section does not apply for the purposes of determining whether the settlement continues to meet that requirement after the acquisition, and (b) if, at the time of the acquisition, the settlement met that requirement by virtue of section 236L and later continues to meet it otherwise than by virtue of that section, it may not again meet the requirement by virtue of that section. (5) Section 236N(4) applies for the purposes of subsection (2)(d) as it applies in relation to section 236N(2)(b) and (3). (236Q) (1) This section applies where— (a) a deemed disposal arises under section 71(1) by reason of the trustees of a settlement (“the acquiring settlement”) becoming absolutely entitled to settled property as against the trustee of that settled property (“the transferring trustee”), (b) that settled property consists of ordinary share capital of a company, (c) the relief requirements in section 236H(4)(a) to (d) are met, and (d) the transferring trustee makes a claim under this section. (2) Section 17(1) (disposals and acquisitions treated as made at market value) does not apply to the disposal. (3) The deemed disposal and acquisition by the transferring trustee under section 71(1) are to be treated for the purposes of this Act as being made for such consideration as to secure that neither a gain nor a loss accrues on the disposal. (4) For the purposes of section 236P the trustees of the acquiring settlement are treated as acquiring the ordinary share capital from the transferring trustee, at the time of the deemed disposal, in circumstances where section 236H applies. (5) In applying sections 236H(4), 236I to 236P and 236T for the purposes of this section— (a) references in those provisions to the settlement are to be read as references to the acquiring settlement, and (b) references in those provisions to C are to be read as references to the company mentioned in subsection (1)(b). (6) A claim under this section must include— (a) information to identify the acquiring settlement, (b) the name of the company mentioned in subsection (1)(b) and the address of its registered office, and (c) the date of the deemed disposal and the number of shares deemed to have been disposed of. (7) Section 236R makes provision about events which prevent a claim being made under this section and circumstances in which a claim is revoked. (236R) (1) This section applies where— (a) a deemed disposal arises in circumstances where paragraphs (a) to (c) of section 236Q(1) are satisfied, and (b) one or more disqualifying events occur in relation to the disposal in the tax year following the tax year in which the deemed disposal arises. (2) No claim for relief under section 236Q may be made in respect of the deemed disposal on or after the day on which the disqualifying event (or, if more than one, the first of them) occurs. (3) Any claim for relief under section 236Q made in respect of the deemed disposal before that day is revoked, and the chargeable gains and allowable losses of any person for any chargeable period are to be calculated as if that claim had never been made. (4) Such adjustments must be made in relation to any person, whether by the making of assessments or otherwise, as are required to give effect to subsection (3) (regardless of any limitation on the time within which any adjustment may be made). (5) “Disqualifying event” is to be construed in accordance with subsections (2), (6) and (7) of section 236O except that— (a) references in those subsections to the disposal are to be read as references to the deemed disposal, and (b) in applying sections 236I to 236P and 236T for this purpose— (i) references in those provisions to the settlement are to be read as references to the acquiring settlement (within the meaning of section 236Q(1)), and (ii) references in those provisions to C are to be read as references to the company mentioned in section 236Q(1)(b). (236S) (1) This section applies where the trustees of a settlement hold— (a) shares which were— (i) acquired in circumstances where section 236H applied, or (ii) the subject of a deemed acquisition under section 71(1) in circumstances where section 236Q applied, and not subsequently disposed of and reacquired (“EOT exempt shares”), and (b) other shares which, but for section 104(4A), would be shares of the same class as those shares. (2) If the trustees dispose of some, but not all, of the shares so held, they may determine what proportion of the shares disposed of are EOT exempt shares (up to the number of such shares held). (3) For the purposes of this section shares in a company are not to be treated as being of the same class unless they are so treated by the practice of a recognised stock exchange or would be so treated if dealt with on a recognised stock exchange. (4) Nothing in subsection (2) applies in relation to a disposal by virtue of section 236P(3). (236T) (1) This section applies for the purposes of— (a) section 236L(2) (trustees hold a significant interest in C), and (b) section 236M (controlling interest requirement). (2) Chapter 6 of Part 5 of CTA 2010 (group relief: equity holders and profits or assets available for distribution) applies as it applies for the purposes of the provisions mentioned in section 157(1) of that Act. (3) The trustees are to be treated, for the purposes of section 236L(2)(b) or 236M(1)(b), as entitled to dividends on shares even if the trustees are required, or permitted, by the trusts of the settlement to waive their entitlement to those dividends. (4) In determining whether section 236L(2)(d) or 236M(1)(d) applies, ignore any provision of— (a) a mortgage or charge (or, in Scotland, a charge or security) granted by the trustees to a third party to secure any debt, or (b) an agreement in respect of a loan made to the trustees by a third party, which confers any entitlement on the third party in the event of a default by the trustees in performing their obligations in relation to that debt or loan. (5) In this section— - “third party” means a person other than— 1. C or a member of a group of which C is the principal company, 2. a person who is, or has at any time in the preceding 12 months been, a participator in C or in a member of such a group, or 3. a person connected with a person within paragraph (b); - “close company” and “participator” have the same meaning as in Part 4 of the Inheritance Tax Act 1984 (see section 102 of that Act), and a reference to a participator in a company is, in the case of a company which is not a close company, to be construed as a reference to a person who would be a participator in the company if it were a close company. (236U) (1) In sections 236H to 236T and this section— - “company” has the meaning given by section 170(9); - “ordinary share capital” has the meaning given by section 1119 of CTA 2010; - “trade” means any trade which is conducted on a commercial basis and with a view to the realisation of profits. (2) In those sections— (a) references to a group, to membership of a group or to the principal company of a group, are to be construed in accordance with section 170, and (b) references to a group are to be construed with any necessary modifications where applied to a company incorporated under the law of a country or territory outside the United Kingdom. (3) In determining whether a person is connected with another for the purposes of those sections, section 286 applies as if subsection (8) of that section also mentioned uncle, aunt, nephew and niece.

Commencement and transitional provision

2

Subject to paragraph 3, the amendment made by paragraph 1 has effect in relation to disposals made on or after 6 April 2014.

3

In relation to disposals made on or after 6 April 2014 but before 26 June 2014, TCGA 1992 has effect as if—

(a) in section 236H—

(i) in subsection (4)(b), for the words from “at the time of the disposal” to the end there were substituted “ (see sections 236J to 236L) ”,

(ii) subsection (4)(c)(ii) (and the “and” before it) were omitted, and

(iii) subsections (5) and (8) were omitted,

(b) in section 236N—

(i) in subsection (1), for “Conditions A and B are” there were substituted “ Condition A is ”, and

(ii) subsection (3) were omitted,

(d) in section 236P—

(i) in subsection (1) the words “, after the end of the tax year following the tax year in which the acquisition occurs, when” were omitted,

(ii) for subsection (2) there were substituted—

(2) A “disqualifying event” occurs in relation to the acquisition if and when— (a) at any time after that tax year— (i) C ceases to meet the trading requirement, or (ii) the settlement ceases to meet the controlling interest requirement, or (b) at any time after the acquisition— (i) the settlement ceases to meet the all-employee benefit requirement, (ii) the participator fraction exceeds 2/5, or (iii) the trustees act in a way which the trusts, as required by the all-employee benefit requirement, do not permit.

, and

(iii) in subsection (3) for “before” there were substituted “ after ”,

(e) section 236Q(7) were omitted, and

(f) section 236R were omitted.

4

(1) For the purposes of determining if the requirement of section 236L(1)(c) of TCGA 1992 (requirement as to conduct of trustees for 12 months) is met, anything done by the trustees before 10 December 2013 is to be disregarded.

(2) But sub-paragraph (1) does not apply in relation to section 236L of TCGA 1992 as applied by section 312E(3) of ITEPA 2003 (rules determining whether payment is a qualifying bonus payment for the purposes of Chapter 10A of Part 4 of ITEPA 2003).

PART 2 — Employment income exemption

5

In Part 4 of ITEPA 2003 (employment income: exemptions), after Chapter 10 insert—

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