Finance Act 2016

(517A) This Part contains provision about the income tax treatment of certain profits and gains realised from disposals concerned with land in the United Kingdom. (517B) (1) Section 517C(1) applies (subject to subsection (3) of that section) if— (a) a person within subsection (2)(a), (b) or (c) realises a profit or gain from a disposal of any land in the United Kingdom, and (b) any of conditions A to D is met in relation to the land. (2) The persons referred to in subsection (1) are— (a) the person acquiring, holding or developing the land, (b) a person who is associated with the person in paragraph (a) at a relevant time, and (c) a person who is a party to, or concerned in, an arrangement within subsection (3). (3) An arrangement is within this subsection if— (a) it is effected with respect to all or part of the land, and (b) it enables a profit or gain to be realised— (i) by any indirect method, or (ii) by any series of transactions. (4) Condition A is that the main purpose, or one of the main purposes, of acquiring the land was to realise a profit or gain from disposing of the land. (5) Condition B is that the main purpose, or one of the main purposes, of acquiring any property deriving its value from the land was to realise a profit or gain from disposing of the land. (6) Condition C is that the land is held as trading stock. (7) Condition D is that (in a case where the land has been developed) the main purpose, or one of the main purposes, of developing the land was to realise a profit or gain from disposing of the land when developed. (8) In this section “relevant time” means any time in the period beginning when the activities of the project begin and ending 6 months after the disposal mentioned in subsection (1). (9) In this section “the project” means all activities carried out for any of the following purposes— (a) the purposes of dealing in or developing the land, and (b) any other purposes mentioned in Conditions A to D. (10) For the purposes of this section a person (“A”) is associated with another person (“B”) if— (a) A is connected with B by virtue of any of subsections (2) to (4) of section 993 (read in accordance with section 994), or (b) A is related to B (see section 517U). (517C) (1) The profit or gain is to be treated for income tax purposes as profits of a trade carried on by the chargeable person. (2) If the chargeable person is non-UK resident, that trade is the person's trade of dealing in or developing UK land (as defined in section 6B of ITTOIA 2005). (3) But subsection (1) does not apply to a profit or gain so far as it would (apart from this section) be brought into account as income in calculating profits (of any person)— (a) for income tax purposes, or (b) for corporation tax purposes. (4) The profits are treated as arising in the tax year in which the profit or gain is realised. (5) This section applies in relation to gains which are capital in nature as it applies in relation to other gains. (517D) (1) Section 517E(1) applies (subject to subsection (3) of that section) if— (a) a person realises a profit or gain from a disposal of any property which (at the time of the disposal) derives at least 50% of its value from land in the United Kingdom, (b) the person is a party to, or concerned in, an arrangement concerning some or all of the land mentioned in paragraph (a) (“the project land”), and (c) the arrangement meets the condition in subsection (2). (2) The condition is that the main purpose, or one of the main purposes, of the arrangement is to— (a) deal in or develop the project land, and (b) realise a profit or gain from a disposal of property deriving the whole or part of its value from that land. (517E) (1) The relevant amount is to be treated for income tax purposes as profits of a trade carried on by the chargeable person. (2) If the chargeable person is non-UK resident, that trade is the chargeable person's trade of dealing in or developing UK land. (3) But subsection (1) does not apply to an amount so far as it would (apart from this section) be brought into account as income in calculating profits (of any person)— (a) for income tax purposes, or (b) for corporation tax purposes. (4) The profits are treated as arising in the tax year in which the profit or gain is realised. (5) In this section the “relevant amount” means so much (if any) of the profit or gain mentioned in section 517D(1) as is attributable, on a just and reasonable apportionment, to the relevant UK assets. (6) In this section “the relevant UK assets” means any land in the United Kingdom from which the property mentioned in section 517D(1) derives any of its value (at the time of the disposal mentioned in that subsection). (7) This section applies in relation to gains which are capital in nature as it applies in relation to other gains. (517F) (1) Sections 517B to 517E have effect as if they included provision about losses corresponding to the provision they make about profits and gains. (2) Accordingly, in the following sections of this Part references to a “profit or gain” include a loss. (517G) (1) For the purposes of sections 517C and 517E the general rule is that the “chargeable person” is the person (“P”) that realises the profit or gain (as mentioned in section 517B(1) or 517D(1)). (2) The general rule in subsection (1) is subject to the special rules in subsections (4) to (6). (3) But those special rules do not apply in relation to a profit or gain to which section 517H(3) (fragmented activities) applies. (4) If all or any part of the profit or gain accruing to P is derived from value provided directly or indirectly by another person (“B”), B is the “chargeable person”. (5) Subsection (4) applies whether or not the value is put at the disposal of P. (6) If all or any part of the profit or gain accruing to P is derived from an opportunity of realising a profit or gain provided directly or indirectly by another person (“D”), D is “the chargeable person” (unless the case falls within subsection (4)). (7) For the meaning of “another person” see section 517P. (517H) (1) Subsection (3) applies if— (a) a person (“P”) disposes of any land in the United Kingdom, (b) any of conditions A to D in section 517B is met in relation to the land, and (c) a person (“R”) who is associated with P at a relevant time has made a relevant contribution to activities falling within subsection (2). (2) The following activities fall within this subsection— (a) the development of the land, (b) any other activities directed towards realising a profit or gain from the disposal of the land. (3) For the purposes of this Part, the profit or gain (if any) realised by P from the disposal is to be taken to be what that profit or gain would be if R were not a distinct person from P (and, accordingly, as if everything done by or in relation to R had been done by or in relation to P). (4) Subsection (5) applies to any amount which is paid (directly or indirectly) by R to P for the purposes of meeting or reimbursing the cost of income tax which P is liable to pay as a result of the application of subsection (3) in relation to R and P. (5) The amount— (a) is not to be taken into account in calculating profits or losses of either R or P for the purposes of income tax or corporation tax, and (b) is not for any purpose of the Corporation Tax Acts to be regarded as a distribution. (6) In subsection (1) “relevant time” means any time in the period beginning when the activities of the project begin and ending 6 months after the disposal. (7) For the purposes of this section any contribution made by P to activities falling within subsection (2) is a “relevant contribution” unless the profit made or to be made by P in respect of the contribution is insignificant having regard to the size of the project. (8) In this section “contribution” means any kind of contribution, including, for example— (a) the provision of professional or other services, or (b) a financial contribution (including the assumption of a risk). (9) For the purposes of this section R is “associated” with P if— (a) R is connected with P by virtue of any of subsections (2) to (4) of section 993 (read in accordance with section 994), or (b) R is related to P (see section 517U). (10) In this section “the project” means all activities carried out for any of the following purposes— (a) the purposes of dealing in or developing the land, and (b) any other purposes mentioned in Conditions A to D in section 517B. (517I) For the purposes of this Part, the profit or gain (if any) from a disposal of any property is to be calculated according to the principles applicable for calculating the profits of a trade under Part 2 of ITTOIA 2005, subject to any modifications that may be appropriate (and for this purpose the same rules are to apply in calculating losses from a disposal as apply in calculating profits). (517J) Any apportionment (whether of expenditure, consideration or any other amount) that is required to be made for the purposes of this Part is to be made on a just and reasonable basis. (517K) (1) Subsection (3) applies if an arrangement has been entered into the main purpose or one of the main purposes of which is to enable a person to obtain a relevant tax advantage. (2) In subsection (1) the reference to obtaining a relevant tax advantage includes obtaining a relevant tax advantage by virtue of any provisions of double taxation arrangements, but only in a case where the relevant tax advantage is contrary to the object and purpose of the provisions of the double taxation arrangements (and subsection (3) has effect accordingly, regardless of anything in section 6(1) of TIOPA 2010). (3) The tax advantage is to be counteracted by means of adjustments. (4) For this purpose adjustments may be made (whether by an officer of Revenue and Customs or by the person) by way of an assessment, the modification of an assessment, amendment or disallowance of a claim, or otherwise. (5) In this section “relevant tax advantage” means an advantage in relation to income tax charged (or which would, if the tax advantage were not obtained, be charged) in respect of amounts treated as profits of a trade by virtue of this Part. (6) In this section “advantage” includes— (a) a relief or increased relief from tax, (b) repayment or increased repayment of tax, (c) avoidance or reduction of a charge to tax or an assessment to tax, (d) avoidance of a possible assessment to tax, (e) deferral of a payment of tax or advancement of a repayment of tax, and (f) avoidance of an obligation to deduct or account for tax. (517L) (1) Subsection (2) applies if— (a) subsection (1) of section 517C applies because Condition D in section 517B is met (land developed with purpose of realising a gain from its disposal when developed), and (b) part of the profit or gain mentioned in that subsection is fairly attributable to a period before the intention to develop was formed. (2) Section 517C(1) has effect as if the person mentioned in section 517B(1) had not realised that part of the profit or gain. (3) Subsection (4) applies if— (a) section 517E(1) applies, and (b) part of the profit or gain mentioned in section 517E(5) is fairly attributable to a period before the person mentioned in section 517D(1) was a party to, or concerned in, the arrangement in question. (4) Section 517E has effect as if the person had not realised that part of the profit or gain. (5) In applying this section account must be taken of the treatment under Part 2 of ITTOIA 2005 (trading income) of a person who appropriates land as trading stock. (517M) No liability to income tax arises under this Part in respect of a gain accruing to an individual if— (a) the gain is exempt from capital gains tax as a result of sections 222 to 226 of TCGA 1992 (private residences), or (b) it would be so exempt but for section 224(3) of that Act (residences acquired partly with a view to making a gain). (517N) (1) This section applies if it is necessary to determine the extent to which the value of any property or right is derived from any other property or right for the purposes of this Part. (2) Value may be traced through any number of companies, partnerships, trusts and other entities or arrangements. (3) The property held by a company, partnership or trust must be attributed to the shareholders, partners, beneficiaries or other participants at each stage in whatever way is appropriate in the circumstances. (4) In this section— - “partnership” includes an entity established under the law of a country or territory outside the United Kingdom of a similar nature to a partnership; and “partners”, in relation to such arrangements, is to be construed accordingly; - “trust” includes arrangements— 1. which have effect under the law of a country or territory outside the United Kingdom; and 2. under which persons acting in a fiduciary capacity hold and administer property on behalf of other persons, (517O) (1) In determining whether section 517C(1) or 517E(1) applies, account is to be taken of any method, however indirect, by which— (a) any property or right is transferred or transmitted, or (b) the value of any property or right is enhanced or diminished. (2) Accordingly— (a) the occasion of the transfer or transmission of any property or right, however indirect, and (b) the occasion when the value of any property or right is enhanced, may be an occasion on which section 517C(1) or 517E(1) applies. (3) Subsections (1) and (2) apply in particular— (a) to sales, contracts and other transactions made otherwise than for full consideration or for more than full consideration, (b) to any method by which any property or right, or the control of any property or right, is transferred or transmitted by assigning— (i) share capital or other rights in a company, (ii) rights in a partnership, or (iii) an interest in settled property, (c) to the creation of an option affecting the disposition of any property or right and the giving of consideration for granting it, (d) to the creation of a requirement for consent affecting such a disposition and the giving of consideration for granting it, (e) to the creation of an embargo affecting such a disposition and the giving of consideration for releasing it, and (f) to the disposal of any property or right on the winding up, dissolution or termination of a company, partnership or trust. (517P) (1) In this Part references to “other” persons are to be interpreted in accordance with subsections (2) to (4). (2) A partnership or partners in a partnership may be regarded as a person or persons distinct from the individuals or other persons who are for the time being partners. (3) The trustees of settled property may be regarded as persons distinct from the individuals or other persons who are for the time being the trustees. (4) Personal representatives may be regarded as persons distinct from the individuals or other persons who are for the time being personal representatives. (517Q) (1) In this Part “arrangement” (except in the phrase “double taxation arrangements”) includes any agreement, understanding, scheme, transaction or series of transactions, whether or not legally enforceable. (2) For the purposes of this Part any number of transactions may be regarded as constituting a single arrangement if— (a) a common purpose can be discerned in them, or (b) there is other sufficient evidence of a common purpose. (517R) (1) In this Part references to a “disposal” of any property include any case in which the property is effectively disposed of (whether wholly or in part, as mentioned in subsection (2))— (a) by one or more transactions, or (b) by any arrangement. (2) For the purposes of this Part— (a) references to a disposal of land or any other property include a part disposal of the property, and (b) there is a part disposal of property (“the asset”) where on a person making a disposal, any form of property derived from the asset remains undisposed of (including in cases where an interest or right in or over the asset is created by the disposal, as well as where it subsists before the disposal). (517S) (1) In this Part “land” includes— (a) buildings and structures, (b) any estate, interest or right in or over land, and (c) land under the sea or otherwise covered by water. (2) In this Part references to property deriving its value from land include— (a) any shareholding in a company deriving its value directly or indirectly from land, (b) any partnership interest deriving its value directly or indirectly from land, (c) any interest in settled property deriving its value directly or indirectly from land, and (d) any option, consent or embargo affecting the disposition of land. (517T) (1) For the purposes of sections 517B(1) and 517D(1) it does not matter whether the person (“P”) realising the profit or gain in question realises it for P or another person. (2) For the purposes of subsection (1), if, for example by a premature sale, a person (“A”) directly or indirectly transmits the opportunity of realising a profit or gain to another person (“B”), A realises B's profit or gain for B. (517U) (1) For the purposes of this Part a person (“A”) is related to another person (“B”)— (a) throughout any period for which A and B are consolidated for accounting purposes, (b) on any day on which the participation condition is met in relation to them, or (c) on any day on which the 25% investment condition is met in relation to them. (2) A and B are consolidated for accounting purposes for a period if— (a) their financial results for a period are required to be comprised in group accounts, (b) their financial results for the period would be required to be comprised in group accounts but for the application of an exemption, or (c) their financial results for a period are in fact comprised in group accounts. (3) In subsection (2) “group accounts” means accounts prepared under— (a) section 399 of the Companies Act 2006, or (b) any corresponding provision of the law of a territory outside the United Kingdom. (4) The participation condition is met in relation to A and B (“the relevant parties”) on a day if, within the period of 6 months beginning with that day— (a) one of the relevant parties directly or indirectly participates in the management, control or capital of the other, or (b) the same person or persons directly or indirectly participate in the management, control or capital of each of the relevant parties. (5) The 25% investment condition is met in relation to A and B if— (a) one of them has a 25% investment in the other, or (b) a third person has a 25% investment in each of them. (6) Section 259NC of TIOPA 2010 applies for the purposes of determining whether a person has a “25% investment” in another person for the purposes of this section as it applies for the purposes of section 259NB(2) of that Act. (7) In Chapter 2 of Part 4 of TIOPA 2010, sections 157(2), 158(4), 159(2) and 160(2) (which are about the interpretation of references to direct and indirect participation) apply in relation to subsection (4) as they apply in relation to subsection (4) of section 259NA of that Act.

• (2) In section 2 of ITA 2007 (overview of Act)—

• (a) after subsection (9) insert—

(9A) Part 9A is about the treatment of certain transactions in UK land.

, and

• (b) in subsection (13), omit paragraph (c).

• (3) In section 482 of ITA 2007 (types of amount to be charged at special rates for trustees), in the words relating to Type 11, for “Chapter 3 of Part 13 of this Act (tax avoidance: transactions in land)” substitute “ Part 9A of this Act (transactions in land) ”.

• (4) In section 527 of ITA 2007 (exemption from charges under provisions to which section 1016 applies), in subsection (2)—

• (a) insert “ and ” at the end of paragraph (d), and

• (b) omit paragraph (e).

• (5) In Part 13 of ITA 2007, omit Chapter 3 (transactions in land).

• (6) In section 944 of ITA 2007 (tax avoidance: directions for duty to deduct to apply), in subsection (1)—

• (a) omit paragraph (a), and

• (b) in paragraph (b) for “that Part” substitute “ Part 13 ”.

• (7) In section 1016 of ITA 2007 (table of provisions to which that section applies), in Part 2 of the table in subsection (2), omit the entry relating to Chapter 3 of Part 13 of that Act.

• (8) In section 37 of TCGA 1992 (consideration chargeable to tax on income), in subsection (5)(a), for the words from “759(4)” to “is” substitute “ 517G(4) or (6) of ITA 2007 (transactions in land: the chargeable person) applies, an amount is charged to income tax as income of ”

• (9) In section 39 of TCGA 1992 (exclusion of expenditure by reference to tax on income), in subsection (4)(a), for the words from “759(4)” to “is” substitute “ 517G(4) or (6) of ITA 2007 (transactions in land: the chargeable person) applies, an amount is charged to income tax as income of ”.

• (10) In section 161 of TCGA 1992 (appropriations to and from stock), in subsection (5), for paragraph (a) substitute—

(a) any person is charged to income tax by virtue of sections 517B and 517C of ITA 2007 (certain profits or gains on a disposal of land treated as trading profits) on the realisation of a profit or gain because the condition in section 517B(7) of that Act is met, and

.

• (11) In section 830 of ITTOIA 2005, in subsection (3), for the words from “of” to the end substitute

of— (a) section 844 (unremittable income: income charged on withdrawal of relief after source ceases), or (b) section 517C or 517E of ITA 2007 (profits on certain disposals concerned with land in the United Kingdom treated as trading profits).

Pre-trading expenses

80

• (1) Subsection (2) has effect if—

• (a) a particular time (“T”) is the time when a company (“C”) is first within the charge to corporation tax by virtue of subsection (2)(a) of section 5 of CTA 2009 (territorial scope of charge),

• (b) immediately before time T, C was within the charge to corporation tax as a result of carrying on the relevant trade in the United Kingdom through a permanent establishment in the United Kingdom, and

• (c) expenses which the company has incurred for the purposes of the trade meet the conditions in subsection (3) and (4).

“The relevant trade” means the trade of dealing in or developing UK land mentioned in subsection (2)(a) of section 5 of CTA 2009.

• (2) Section 61 of CTA 2009 (pre-trading expenses) has effect in relation to those expenses as if the company had started to carry on the relevant trade at time T.

• (3) The condition in this subsection is that—

• (a) no deduction would be allowed for the expenses in calculating the profits of the relevant trade for corporation tax purposes (ignoring subsection (2)), but

• (b) a deduction would be allowed for them (in accordance with sections 41 and section 61 of CTA 2009) if the company had not been within the charge to corporation tax in respect of the relevant trade immediately before time T.

• (4) The condition in this subsection is that no relief has been obtained for the expenses under the law of any country or territory outside the United Kingdom.

Commencement and transitional provision: sections 76, 77 and 80

81

• (1) The amendments made by sections 76, 77 and 80 have effect in relation to disposals on or after 5 July 2016.

• (2) In subsection (1) of section 5A of CTA 2009 (tax avoidance in relation to section 5(2A) of that Act) “arrangement” does not include an arrangement (as defined in section 5A(6) of that Act) entered into before 16 March 2016.

• (3) In subsection (1) of section 356OK of CTA 2010 (tax avoidance in relation to Part 8ZB of CTA 2010) “arrangement” does not include an arrangement (as defined in section 356OP of that Act) entered into before 16 March 2016.

• (4) Subsection (6) applies if—

• (a) a person disposes of a relevant asset to a person who is associated with that person at the relevant time,

• (b) the disposal is made on or after 16 March 2016 and before 5 July 2016, and

• (c) a company obtains a relevant tax advantage as a result of the disposal.

• (5) In subsection (4) the reference to obtaining a relevant tax advantage includes obtaining a relevant tax advantage by virtue of any provisions of double taxation arrangements, but only in a case where the relevant tax advantage is contrary to the object and purpose of the provisions of the double taxation arrangements (and subsection (6) has effect accordingly, regardless of anything in section 6(1) of TIOPA 2010).

• (6) The tax advantage is to be counteracted by means of adjustments.

• (7) Adjustments for the purposes of subsection (6) may be made (whether by an officer of Revenue and Customs or by the company) by way of an assessment, the modification of an assessment, amendment or disallowance of a claim, or otherwise.

• (8) In subsection (4)(c) “relevant tax advantage” means a tax advantage in relation to tax to which the company in question is charged or chargeable (or would, if the tax advantage were not obtained, be charged or chargeable)—

• (a) by virtue of section 5(2A) of CTA 2009, or

• (b) in respect of amounts treated as profits of a trade by virtue of Part 8ZB of CTA 2010.

• (9) For the purposes of this section, where any property is disposed of under a contract, the time at which the disposal is made is the time the contract is made (and not, if different, the time at which the property is conveyed or transferred).

• (10) In subsection (9) “contract” includes a conditional contract.

• (11) In this section—

• “arrangement” includes any scheme, agreement or understanding (whether or not legally enforceable);

• “disposal” is to be interpreted in accordance with section 356OQ of CTA 2010;

• “relevant asset” means land, or property deriving the whole or part of its value from land;

• “tax advantage” has the meaning given by section 1139 of CTA 2010.

• (12) For the purposes of this section a person (“A”) is “associated” with another person (“B”) if—

• (a) A is connected with B by virtue of any of subsections (5) to (7) of section 1122 of CTA 2010 (read in accordance with section 1123 of that Act), or

• (b) A is related to B.

• (13) In subsection (12) “related to” is to be interpreted in accordance with section 356OT of CTA 2010.

• (14) In subsection (4) “the relevant time”—

• (a) in a case within subsection (8)(a), means the time of the disposal mentioned in subsection (4)(a).

• (b) in a case within subsection (8)(b), means any time in the period beginning when the activities of the project began and ending 6 months after the disposal mentioned in section 356OB(1) or 356OD(1) of CTA 2010.

• (15) In subsection (14) “the project” means (as the case requires) the project described in section 356OB(9) of CTA 2010 or the activities mentioned in section 356OD(2)(a) of that Act.

Commencement and transitional provision: sections 78 and 79

82

• (1) The amendments made by sections 78 and 79 have effect in relation to disposals on or after 5 July 2016.

• (2) In subsection (1) of section 6A of ITA 2007 (tax avoidance arrangements in relation to section 6(1A) of that Act) “arrangement” does not include an arrangement (as defined in section 6A(7) of that Act) entered into before 16 March 2016.

• (3) In subsection (1) of section 517K of ITA 2007 (tax avoidance in relation to Part 9A of that Act) “arrangement” does not include an arrangement (as defined in section 517Q of that Act) entered into before 16 March 2016.

• (4) Subsection (6) applies if—

• (a) a person disposes of a relevant asset to a person who is associated with that person at the relevant time,

• (b) the disposal is made on or after 16 March 2016 and before 5 July 2016, and

• (c) a person obtains a relevant tax advantage as a result of the disposal.

• (5) In subsection (4) the reference to obtaining a relevant tax advantage includes obtaining a relevant tax advantage by virtue of any provisions of double taxation arrangements, but only in a case where the relevant tax advantage is contrary to the object and purpose of the provisions of the double taxation arrangements (and subsection (6) has effect accordingly, regardless of anything in section 6(1) of TIOPA 2010).

• (6) The tax advantage is to be counteracted by means of adjustments.

• (7) Adjustments for the purposes of subsection (6) may be made (whether by an officer of Revenue and Customs or by the person) by way of an assessment, the modification of an assessment, amendment or disallowance of a claim, or otherwise.

• (8) In subsection (4)(c) “relevant tax advantage” means a tax advantage in relation to tax to which the person in question is charged or chargeable (or would, if the tax advantage were not obtained, be charged or chargeable)—

• (a) by virtue of section 6(1A) of ITTOIA 2005, or

• (b) in respect of amounts treated as profits of a trade by virtue of Part 9A of ITA 2007.

• (9) For the purposes of this section, where any property is disposed of under a contract, the time at which the disposal is made is the time the contract is made (and not, if different, the time at which the property is conveyed or transferred).

• (10) In subsection (9) “contract” includes a conditional contract.

• (11) In this section—

• “arrangement” includes any scheme, agreement or understanding (whether or not legally enforceable);

• “disposal” is to be interpreted in accordance with section 517R of ITA2007;

• “relevant asset” means land, or property deriving the whole or part of its value from land;

• “tax advantage” has the same meaning as in section 6A of ITTOIA 2005.

• (12) For the purposes of this section a person (“A”) is “associated” with another person (“B”) if—

• (a) A is connected with B by virtue of any of subsections (2) to (4) of section 993 of ITA 2007 (read in accordance with section 994 of that Act), or

• (b) A is related to B.

• (13) In subsection (12) “related to” is to be interpreted in accordance with section 517U of ITA 2007.

• (14) In subsection (4), “the relevant time”—

• (a) in a case within subsection (8)(a), means the time when the disposal was made,

• (b) in a case within subsection (8)(b), means any time in the period beginning when the activities of the project began and ending 6 months after the disposal mentioned in section 517B(1) or 517D(1) of ITA 2007.

• (15) In subsection (14) “the project” means (as the case requires) the project described in section 517B(9) of ITA 2007 or the activities mentioned in section 517D(2)(a) of that Act.

PART 4 — Capital gains tax

Rate

Reduction in rate of capital gains tax

83

• (1) Section 4 of TCGA 1992 (rates of capital gains tax) is amended as set out in subsections (2) to (12).

• (2) In subsection (1) after “entrepreneurs' relief)” insert “and section 169VC (rate in case of claim for investors' relief)”.

• (3) In subsection (2)—

• (a) after “section” insert “ and section 4BA ”, and

• (b) for the words from “in respect” to the end substitute—

(a) in respect of upper rate gains accruing to a person in a tax year, is 18%, and (b) in respect of gains accruing to a person in a tax year which are not upper rate gains, is 10%.

• (4) After subsection (2) insert—

(2A) In this section “upper rate gains” means— (a) residential property gains (see section 4BB), (b) NRCGT gains (see section 14D), and (c) carried interest gains (see subsections (12) and (13)).

• (5) For subsection (3) substitute—

(3) The rate of capital gains tax in respect of gains accruing in a tax year to the trustees of a settlement or the personal representatives of a deceased person— (a) in respect of upper rate gains, is 28%, and (b) in respect of gains which are not upper rate gains, is 20%.

• (6) In subsection (4), for the words from the second “in respect” to the end substitute—

(a) in respect of upper rate gains accruing to the individual in the tax year, is 28%, and (b) in respect of gains accruing to the individual in the tax year which are not upper rate gains, is 20%.

• (7) In subsection (5) for “28%” substitute “ (subject to section 4BA) 20% ”.

• (8) For subsection (6) substitute—

(6) Subsection (6A) applies for the purposes of subsection (5) where— (a) there is an excess as mentioned in that subsection (“the higher-rate excess”), and (b) the amount on which the individual is chargeable to capital gains tax for the tax year includes any special rate gains, that is, gains which are— (i) chargeable to capital gains tax at the rate in section 169N(3), or (ii) chargeable to capital gains tax at the rate in section 169VC(2). (6A) Where this subsection applies— (a) if the total amount of the special rate gains exceeds the unused part of the individual's basic rate band, the higher-rate excess is to be treated as reduced by the amount by which the special rate gains exceed that unused part; (b) if not, the higher-rate excess is to be treated as consisting of gains other than the special rate gains.

• (9) In subsection (7) for “The reference in subsection (5)” substitute “ Any reference in this section ”.

• (10) In subsection (9) after “this section” insert “ and section 4BA ”.

• (11) In subsection (10) after “and (5)” insert “ and section 4BA(1) ”.

• (12) After subsection (11) insert—

(12) In subsection (2A)(c) “carried interest gains” means— (a) gains treated as accruing under section 103KA(2) or (3), and (b) gains accruing to an individual as a result of carried interest arising to the individual where— (i) the individual performs investment management services directly or indirectly in respect of an investment scheme under arrangements not involving a partnership, (ii) the carried interest arises to the individual under the arrangements, and (iii) the carried interest does not constitute a co-investment repayment or return. (13) For the purposes of subsection (12)(b)— (a) “carried interest”, in relation to any arrangements, has the same meaning as in section 809EZB of ITA 2007 (see sections 809EZC and 809EZD of that Act); (b) carried interest “arises” to an individual if it arises to him or her for the purposes of Chapter 5E of Part 13 of ITA 2007; (c) “arrangements”, “investment management services” and “investment scheme” have the same meanings as in that Chapter (see sections 809EZA(6) and 809EZE of that Act); (d) “co-investment repayment or return” has the same meaning as in section 103KA.

• (13) In section 4A of TCGA 1992 (special cases), in subsection (5) after “and (5)” insert “ and section 4BA(1) ”.

• (14) After section 4B of TCGA 1992 insert—

(4BA) (1) This section applies where an individual is chargeable to capital gains tax in respect of gains accruing in a tax year and— (a) no income tax is chargeable at the higher rate, the Welsh higher rate or the dividend upper rate in respect of the income of the individual for the tax year, (b) the amount on which the individual is chargeable to capital gains tax for the tax year (“the chargeable gains amount”) exceeds the unused part of the individual's basic rate band, and (c) all or part of the chargeable gains amount consists of upper rate gains. (2) In the following provisions of this section “the available gains” means the gains on which the individual is chargeable to capital gains tax for the tax year, excluding any special rate gains. (3) The available gains not used by the individual under subsection (4) are to be charged to capital gains tax— (a) to the extent that they consist of upper rate gains, at the rate in section 4(4)(a); (b) to the extent that they consist of gains which are not upper rate gains, at the rate in section 4(5). (4) The individual may, subject to subsection (5) (which limits the overall amount that can be used under this subsection)— (a) use any of the available gains that are upper rate gains to be charged at the rate in section 4(2)(a); (b) use any of the available gains that are not upper rate gains to be charged at the rate in section 4(2)(b). (5) The total amount of gains used under subsection (4) must equal the qualifying amount. (6) The “qualifying amount” is the unused part of the individual's basic rate band less the total amount of any special rate gains. (7) If special rate gains are included in the chargeable gains amount, subsection (4) applies only if the unused part of the individual's basic rate band exceeds the total amount of the special rate gains. (8) In this section— - “upper rate gains” has the same meaning as in section 4; - “special rate gains” has the same meaning as in section 4(6); - “the unused part of the individual's basic rate band” has the same meaning as in section 4. (4BB) (1) For the purposes of the charge to capital gains tax, a residential property gain or loss is a gain or loss which accrues on the disposal of a residential property interest. (2) But a residential property gain or loss does not accrue on a non-resident CGT disposal. (3) In this Act “disposal of a residential property interest” means— (a) a disposal of a UK residential property interest, or (b) a disposal of a non-UK residential property interest. (4) Schedule B1 gives the meaning in this Act of “disposal of a UK residential property interest”. (5) Schedule BA1 gives the meaning in this Act of “disposal of a non-UK residential property interest”. (6) See section 57C and Schedule 4ZZC for how to compute— (a) the residential property gain or loss accruing on the disposal of a residential property interest, and (b) the gain or loss accruing on the disposal of a residential property interest which is not a residential property gain or loss.

• (15) Schedule 11 inserts Schedule BA1 in TCGA 1992 and makes related amendments.

• (16) Schedule 12 inserts section 57C and Schedule 4ZZC in TCGA 1992 and makes related amendments.

• (17) The amendments made by this section and Schedules 11 and 12 have effect in relation to gains accruing on or after 6 April 2016.

• (18) In relation to a time before the tax year appointed under section 14(3)(b) of the Wales Act 2014 in relation to the provision inserted by section 9(14) of that Act, subsection (1) of section 4BA of TCGA 1992 (inserted by subsection (14) of this section) has effect as if the words “, the Welsh higher rate” were omitted.

• (19) In relation to a time before the tax year appointed under section 13(15) of the Scotland Act 2016, subsection (1) of section 4BA of TCGA 1992 (inserted by subsection (14) of this section) has effect as if before “or the dividend upper rate” there were inserted “ , the Scottish higher rate ”.

Entrepreneurs' relief

Entrepreneurs’ relief: associated disposals

84

• (1) Section 169K of TCGA 1992 (disposal associated with relevant material disposal) is amended as follows.

• (2) In subsection (1)—

• (a) in paragraph (a), after “A1,” insert “ A1A, ”, and

• (b) in paragraph (b), for “and C” substitute “ , C and D ”.

• (3) After subsection (1A) insert—

(1AA) Condition A1A is that P makes a material disposal of business assets which consists of the disposal of the whole of P's interest in the assets of a partnership, and— (a) that interest is an interest of less than 5%, (b) P holds at least a 5% interest in the partnership's assets throughout a continuous period of at least 3 years in the 8 years ending with the date of the disposal, and (c) at the date of the disposal, no partnership purchase arrangements exist. (1AB) Subject to subsection (6A), for the purposes of conditions A1 and A1A, in relation to the disposal of an interest in the assets of a partnership, “partnership purchase arrangements” means arrangements (other than the material disposal itself) under which P or a person connected with P is entitled to acquire any interest in, or increase that person's interest in, the partnership (including a share of the profits or assets of the partnership or an interest in such a share).

• (4) In subsection (1E), in the words before paragraph (a)—

• (a) at the beginning insert “ Subject to subsection (6A), ”, and

• (b) after “means arrangements” insert “ (other than the material disposal itself) ”.

• (5) After subsection (3A) insert—

(3AA) Subject to subsection (6A), for the purposes of condition B, in relation to a disposal mentioned in that condition and a partnership, “partnership purchase arrangements” means arrangements under which P or a person connected with P is entitled to acquire any interest in, or increase that person's interest in, the partnership (including a share of the profits or assets of the partnership or an interest in such a share), but does not include any arrangements in connection with a material disposal in relation to which condition A1 or A1A is met.

• (6) In subsection (3B), for “arrangements” to the end substitute “ share purchase arrangements ”.

• (7) After subsection (3B) insert—

(3BA) Subject to subsection (6A), for the purposes of condition B, in relation to a disposal mentioned in that condition and company A, “share purchase arrangements” means arrangements under which P or a person connected with P is entitled to acquire shares in or securities of— (a) company A, or (b) a company which is a member of a trading group of which company A is a member, but does not include any arrangements in connection with a material disposal in relation to which condition A2 or A3 is met.

• (8) In subsection (3C), for “(3B)” substitute “ (3BA) ”.

• (9) After subsection (4) insert—

(4A) Condition D is that the disposal mentioned in condition B is of an asset which P owns throughout the period of 3 years ending with the date of that disposal.

• (10) Omit subsection (6).

• (11) Before subsection (7) insert—

(6A) For the purposes of this section, in relation to a material disposal of business assets and a disposal mentioned in condition B, arrangements are not partnership purchase arrangements or share purchase arrangements if they were made before both disposals and without regard to either of them.

• (12) In subsection (9), after “entitled to share in the” insert “ capital ”.

• (13) The amendments made by subsections (2)(a), (3) to (8) and (10) to (12) have effect in relation to disposals made on or after 18 March 2015.

• (14) The amendments made by subsections (2)(b) and (9) have effect in relation to disposals of assets which are acquired on or after 13 June 2016.

Entrepreneurs’ relief: disposal of goodwill

85

• (1) Section 169LA of TCGA 1992 (relevant business assets: goodwill transferred to a related party etc) is amended as follows.

• (2) In subsection (1)—

• (a) at the beginning insert “ Subject to subsection (1A), ”,

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

• (c) after paragraph (a) insert—

(aa) immediately after the disposal— (i) P and any relevant connected person together own 5% or more of the ordinary share capital of C or of any company which is a member of a group of companies of which C is a member, or (ii) P and any relevant connected person together hold 5% or more of the voting rights in C or in any company which is a member of a group of companies of which C is a member.

, and

• (d) omit paragraphs (b) and (c).

• (3) After subsection (1) insert—

(1A) Where— (a) subsection (1)(aa) applies by virtue of P's ownership, or any relevant connected person's ownership, of C's ordinary share capital, and (b) the conditions mentioned in subsection (1B) are met, subsection (4) does not apply. (1B) The conditions referred to in subsection (1A)(b) are— (a) P and any relevant connected person dispose of C's ordinary share capital to another company (“A”) such that, immediately before the end of the relevant period, neither P nor any relevant connected person own any of C's ordinary share capital, and (b) where A is a close company, immediately before the end of the relevant period— (i) P and any relevant connected person together own less than 5% of the ordinary share capital of A or of any company which is a member of a group of companies of which A is a member, and (ii) P and any relevant connected person together hold less than 5% of the voting rights in A or in any company which is a member of a group of companies of which A is a member. (1C) In subsection (1B) “the relevant period” means the period of 28 days beginning with the date of the qualifying business disposal, or such longer period as the Commissioners for Her Majesty's Revenue and Customs may by notice allow.

• (4) Omit subsections (2) and (3).

• (5) In subsection (5), omit the words from “(including” to the end.

• (6) In subsection (7), omit paragraph (b) and the “or” at the end of paragraph (a).

• (7) In subsection (8)—

• (a) after the definition of “arrangements” insert—

“group” is to be construed in accordance with section 170;

• (b) for the definition of “associate”, “control”, “major interest” and “participator” substitute—

“relevant connected person” means— (a) a company connected with P, and (b) trustees connected with P.

• (8) In the heading, for “related party etc” substitute “ close company ”.

• (9) The amendments made by this section have effect in relation to disposals made on or after 3 December 2014.

Entrepreneurs’ relief: “trading company” and “trading group”

86

Schedule 13 contains provision about the meaning of “trading company” and “trading group” for the purposes of Chapter 3 of Part 5 of TCGA 1992 (entrepreneurs' relief).

Investors' relief

Investors’ relief

87

Schedule 14 contains provision relating to investors' relief.

Employee shareholder shares

Employee shareholder shares: limit on exemption

88

• (1) Section 236B of TCGA 1992 (exemption for employee shareholder shares) is amended in accordance with subsections (2) and (3).

• (2) After subsection (1) insert—

(1A) Where a gain accrues to a person (“P”) on the first disposal of a post-16 March 2016 exempt employee shareholder share (the “relevant disposal”), subsection (1) applies only to so much of the gain as, when added to the total amount of previous potentially chargeable gains, does not exceed £100,000. (1B) For the purposes of subsection (1A), “previous potentially chargeable gain” means a gain accruing to P on the first disposal of a post-16 March 2016 exempt employee shareholder share at any time before the relevant disposal. (1C) Where a single transaction disposes of more than one post-16 March 2016 exempt employee shareholder share, the reference in subsection (1A) to the first disposal of a share is to be treated as a reference to the disposal of all of the post-16 March 2016 exempt employee shareholder shares first disposed of by that transaction.

• (3) After subsection (3) insert—

(3A) In this section, “post-16 March 2016 exempt employee shareholder share” means an exempt employee shareholder share acquired in consideration of an employee shareholder agreement entered into after 16 March 2016.

• (4) Section 236F of TCGA 1992 (reorganisation of share capital involving employee shareholder shares) is amended in accordance with subsections (5) and (6).

• (5) After subsection (1) insert—

(1A) Subsection (1B) applies where— (a) an exempt employee shareholder share (“the original EES share”) is held by a person (“P”) before, and is concerned in, a reorganisation, and (b) the original EES share is disposed of on the reorganisation. (1B) P is to be treated as if the original EES share were disposed of for consideration of an amount determined in accordance with subsections (1D) to (1H) (the “relevant amount”). (1C) In this section “notional gain” means the gain, if any, that would accrue to P if the original EES share were disposed of on the reorganisation for consideration of an amount equal to the market value of the share. (1D) Subsections (1E) to (1G) apply where a notional gain would accrue to P on the disposal of the original EES share. (1E) Where the whole of the notional gain would be a chargeable gain by virtue of section 236B(1A), the relevant amount is the amount that would secure that on the disposal neither a gain nor a loss would accrue to P. (1F) Where part (but not the whole) of the notional gain would be a chargeable gain by virtue of section 236B(1A), the relevant amount is the maximum amount, not exceeding the market value of the share, that would secure that on the disposal no chargeable gain would accrue to P. (1G) Where no part of the notional gain would be a chargeable gain by virtue of section 236B(1A), the relevant amount is equal to the market value of the original EES share at the time of the disposal. (1H) Where no notional gain would accrue to P on the disposal of the original EES share, the relevant amount is the amount that would secure that on the disposal neither a gain nor a loss would accrue to P. (1I) In determining for the purposes of this section whether any part of a notional gain is a chargeable gain by virtue of section 236B(1A), subsection (1B) is to be disregarded. (1J) Where more than one original EES share is disposed of by P on a reorganisation, references in this section to the disposal of the original EES share are to be treated as references to the disposal of all of the original EES shares disposed of on the reorganisation. (1K) In this section “reorganisation” has the same meaning as in section 127.

• (6) In subsection (2) for “reference in subsection (1) to section 127 includes” substitute “ references in this section to section 127 include ”.

• (7) Section 58 of TCGA 1992 (spouses and civil partners) is amended in accordance with subsections (8) and (9).

• (8) In subsection (2)(c) after “disposal is” insert “ a relevant disposal ”.

• (9) After subsection (2) insert—

(3) For the purposes of subsection (2) a disposal of exempt employee shareholder shares is a “relevant disposal” if (apart from this section)— (a) a gain would accrue on the disposal, and (b) no part of the gain would be a chargeable gain. (4) Subsection (5) applies where the disposal is of exempt employee shareholder shares and (apart from this section)— (a) a gain would accrue on the disposal, and (b) part (but not the whole) of the gain would be a chargeable gain by virtue of section 236B(1A). (5) Where this subsection applies, subsection (1) has effect in relation to the disposal as if— (a) for “such amount as” there were substituted “ the maximum amount, not exceeding the market value of the asset, that ”, and (b) for “neither a gain nor a loss” there were substituted “ no chargeable gain ”.

• (10) The amendments made by this section have effect in relation to disposals made after 16 March 2016.

Employee shareholder shares: disguised fees and carried interest

89

• (1) In section 236B of TCGA 1992 (exemption for employee shareholder shares), after subsection (2) insert—

(2A) Subsection (1) does not apply in relation to a gain accruing on a disposal where the proceeds of the disposal, in relation to any individual, constitute— (a) a disguised fee for the purposes of Chapter 5E of Part 13 of ITA 2007 (see section 809EZA(3) of that Act), or (b) carried interest within the meaning given by section 809EZC of that Act.

• (2) The amendment made by this section has effect in relation to gains accruing on or after 6 April 2016.

Other provisions

Disposals of UK residential property by non-residents etc

90

• (1) In Schedule 4ZZA to TCGA 1992 (relevant high value disposals: gains and losses), in paragraph 2(1), for “paragraph 6” substitute “ paragraph 6A ”.

• (2) In Schedule 4ZZB to TCGA 1992 (non-resident CGT disposals: gains and losses), in paragraph 17—

• (a) omit sub-paragraph (2), and

• (b) in sub-paragraph (3), omit the words from “If” to “applies”.

• (3) The amendment made by subsection (1) has effect in relation to disposals made on or after 6 April 2015.

• (4) The amendment made by subsection (2) has effect in relation to disposals made on or after 26 November 2015.

NRCGT returns

91

In TMA 1970, after section 12ZB (NRCGT return) insert—

(12ZBA) (1) A person is not required to make and deliver an NRCGT return under section 12ZB(1), but may do so, in circumstances to which this section applies. (2) The circumstances to which this section applies are where the disposal referred to in section 12ZB(1) is— (a) a disposal on or after 6 April 2015 where, by virtue of any of the no gain/no loss provisions, neither a gain nor a loss accrues, or (b) the grant of a lease on or after 6 April 2015 which is— (i) for no premium, (ii) to a person who is not connected with the grantor, and (iii) under a bargain made at arm's length. (3) For the purposes of subsection (2)— - “connected” is to be construed in accordance with section 286 of 1992 Act; - “no gain/no loss provisions” has the meaning given by section 288(3A) of the 1992 Act; - “lease” and premium” have the meanings given by paragraph 10 of Schedule 8 to the 1992 Act. (4) The Treasury may by regulations made by statutory instrument add or remove circumstances to which this section applies. (5) Regulations under subsection (4) may— (a) amend this section or any other enactment; (b) make consequential provision. (6) A statutory instrument containing regulations under subsection (4) is subject to annulment in pursuance of a resolution of the House of Commons. (7) Paragraph 1 of Schedule 55 to the Finance Act 2009 (penalty for late returns) does not apply in relation to an NRCGT return which is made and delivered by virtue of this section.

Addition of CGT to Provisional Collection of Taxes Act 1968

92

In section 1 of the Provisional Collection of Taxes Act 1968 (temporary statutory effect of House of Commons resolutions affecting income tax etc), in subsection (1), after “income tax,” insert “ capital gains tax, ”.

PART 5 — Inheritance tax etc

Inheritance tax: increased nil-rate band

93

Schedule 15 contains provision in connection with the increased nil-rate band provided for by section 8D of IHTA 1984 (extra nil-rate band on death if interest in home goes to descendants etc).

Inheritance tax: pension drawdown funds

94

• (1) IHTA 1984 is amended as follows.

• (2) In the italic heading before section 10, at the end insert “ (and omissions that do not give rise to deemed dispositions) ”.

• (3) In section 12(2G) (interpretation of section 12(2ZA)), in the definition of “entitled”, for “166(2)” substitute “ 167(1A), or section 166(2), ”.

• (4) After section 12 insert—

(12A) (1) Where a person has a drawdown fund, section 3(3) above does not apply in relation to any omission that results in the fund not being used up in the person's lifetime. (2) For the purposes of subsection (1) above, a person has a drawdown fund if the person has— (a) a member's drawdown pension fund, (b) a member's flexi-access drawdown fund, (c) a dependant's drawdown pension fund, (d) a dependant's flexi-access drawdown fund, (e) a nominee's flexi-access drawdown fund, or (f) a successor's flexi-access drawdown fund, and in respect of a money purchase arrangement under a registered pension scheme. (3) For the purposes of subsection (1) above, a person also has a drawdown fund if sums or assets held for the purposes of a money purchase arrangement under a corresponding scheme would, if that scheme were a registered pension scheme, be the person's— (a) member's drawdown pension fund, (b) member's flexi-access drawdown fund, (c) dependant's drawdown pension fund, (d) dependant's flexi-access drawdown fund, (e) nominee's flexi-access drawdown fund, or (f) successor's flexi-access drawdown fund, in respect of the arrangement. (4) In this section— - “corresponding scheme” means— 1. a qualifying non-UK pension scheme (see section 271A below), or 2. a section 615(3) scheme that is not a registered pension scheme; - “money purchase arrangement” has the same meaning as in Part 4 of the Finance Act 2004 (see section 152 of that Act); - “member's drawdown pension fund”, “member's flexi-access drawdown fund”, “dependant's drawdown pension fund”, “dependant's flexi-access drawdown fund”, “nominee's flexi-access drawdown fund” and “successor's flexi-access drawdown fund” have the meaning given, respectively, by paragraphs 8, 8A, 22, 22A, 27E and 27K of Schedule 28 to that Act.

• (5) The amendment made by subsection (4)—

• (a) so far as relating to a fund within the new section 12A(2)(a) or (c) (drawdown pension funds), or to a fund within the new section 12A(3) that corresponds to a fund within the new section 12A(2)(a) or (c)—

• (i) has effect where the person who has the fund dies on or after 6 April 2011, and

• (ii) is to be treated as having come into force on 6 April 2011, and

• (b) so far as relating to a fund mentioned in the new section 12A(2)(b), (d), (e) or (f) (flexi-access drawdown funds), or to a fund within the new section 12A(3) that corresponds to a fund within the new section 12A(2)(b), (d), (e) or (f)—

• (i) has effect where the person who has the fund dies on or after 6 April 2015, and

• (ii) is to be treated as having come into force on 6 April 2015.

• (6) Where an amount paid by way of—

• (a) inheritance tax, or

• (b) interest on inheritance tax,

is repayable as a result of the amendment made by subsection (4), section 241(1) of IHTA 1984 applies as if the last date for making a claim for repayment of the amount were 5 April 2020 if that is later than what would otherwise be the last date for that purpose.

Inheritance tax: victims of persecution during Second World War era

95

• (1) After section 153 of IHTA 1984 insert—

(153ZA) (1) This section applies where a qualifying payment has at any time been received by a person (“P”), or by the personal representatives of P. (2) The tax chargeable on the value transferred by the transfer made on P's death (the “value transferred”) is to be reduced by an amount equal to— (a) the relevant percentage of the amount of the qualifying payment, or (b) if lower, the amount of tax that would, apart from this section, be chargeable on the value transferred. (3) In subsection (2) “relevant percentage” means the percentage specified in the last row of the third column of the Table in Schedule 1. (4) For the purposes of this section, a “qualifying payment” is a payment that meets Condition A, B or C. (5) Condition A is that the payment— (a) is of a kind specified in Part 1 of Schedule 5A, and (b) is made to a person, or the personal representatives of a person, who was— (i) a victim of National-Socialist persecution, or (ii) the spouse or civil partner of a person within sub-paragraph (i). (6) Condition B is that the payment is of a kind listed in Part 2 of Schedule 5A. (7) Condition C is that the payment— (a) is of a kind specified in regulations made by the Treasury, and (b) is made to a person, or the personal representatives of a person, who was— (i) held as a prisoner of war, or a civilian internee, during the Second World War, or (ii) the spouse or civil partner of a person within sub-paragraph (i). (8) The Treasury may by regulations add a payment of a specified kind to the list in Part 1 of Schedule 5A. (9) Regulations under this section are to be made by statutory instrument. (10) A statutory instrument containing regulations under this section is subject to annulment in pursuance of a resolution of the House of Commons.

• (2) After Schedule 5 to IHTA 1984 insert—

SCHEDULE 5A (1) A payment of a fixed amount from the German foundation known as “Remembrance, Responsibility and Future” (Stiftung EVZ) in respect of a person who was a slave or forced labourer. (2) A payment of a fixed amount in accordance with the arrangements made under the Swiss Bank Settlement (Holocaust Victim Assets Litigation) in respect of the slave or forced labourers qualifying for compensation under the Remembrance, Responsibility and Future scheme. (3) A payment of a fixed amount from the Hardship Fund established by the Government of the Federal Republic of Germany. (4) A payment of a fixed amount from the National Fund of the Republic of Austria for Victims of National-Socialism under the terms of the scheme as at June 1995. (5) A payment of a fixed amount in respect of a slave or forced labourer from the Austrian Reconciliation Fund. (6) A payment of a fixed amount by the Swiss Refugee Programme in accordance with the arrangements made under the Swiss Bank Settlement (Holocaust Victim Assets Litigation) in respect of refugees. (7) A payment of a fixed amount under the foundation established in the Netherlands and known as the Dutch Maror Fund (Stichting Maror-Gelden Overheid). (8) A one-off payment of a fixed amount from the scheme established by the Government of the French Republic and known as the French Orphan Scheme. (9) A payment of a fixed amount from the Child Survivor Fund established by the Government of the Federal Republic of Germany. (10) A payment of a fixed amount made from the scheme established by the United Kingdom Government and known as the Far Eastern Prisoners of War Ex Gratia Scheme.

• (3) The amendments made by this section have effect in relation to deaths occurring on or after 1 January 2015.

Inheritance tax: gifts for national purposes etc

96

• (1) The Schedule 3 IHTA approval function is transferred to the Treasury.

• (2) The “Schedule 3 IHTA approval function” is the function of approval conferred by Schedule 3 to IHTA 1984 in the entry beginning “Any other similar national institution” (and which was initially conferred on the Treasury but, along with other functions, transferred to the Commissioners of Inland Revenue under section 95 of FA 1985).

• (3) Subsection (1) does not affect any approval given under Schedule 3 to IHTA 1984 before this Act is passed.

• (4) In Schedule 3 to IHTA 1984 (gifts for national purposes, etc), in the entry beginning “Any museum”, after “and is” insert “ or has been ”.

Estate duty: objects of national, scientific, historic or artistic interest

97

• (1) Section 40 of FA 1930 and section 2 of the Finance Act (Northern Ireland) 1931 (exemption from death duties of objects of national etc interest), so far as continuing to have effect, have effect as if after subsection (2) there were inserted—

(2A) In the event of the loss of any objects to which this section applies, estate duty shall become chargeable on the value of those objects in respect of the last death on which the objects passed at the rate appropriate to the principal value of the estate passing on that death upon which estate duty is leviable, and with which the objects would have been aggregated if they had not been objects to which this section applies. (2B) Where subsection (2A) applies, any owner of the objects— (a) shall be accountable for the estate duty, and (b) shall deliver an account for the purposes thereof. (2C) The account under subsection (2B)(b) must be delivered within the period of one month beginning with— (a) in the case of a loss occurring before the coming into force of subsection (2A)— (i) the coming into force of subsection (2A), or (ii) if later, the date when the owner became aware of the loss; (b) in the case of a loss occurring after the coming into force of subsection (2A)— (i) the date of the loss, or (ii) if later, the date when the owner became aware of the loss. This is subject to subsection (2E). (2D) Subsection (2E) applies if— (a) no account has been delivered under subsection (2B), (b) the Commissioners for Her Majesty's Revenue and Customs have by notice required an owner of the objects to confirm that the objects have not been lost, (c) the owner has not so confirmed by the end of— (i) the period of three months beginning with the day on which the notice was sent, or (ii) such longer period as the Commissioners may allow, and (d) the Commissioners are satisfied that the objects are lost. (2E) Where this subsection applies— (a) the objects are to be treated as lost for the purposes of subsection (2A) on the day on which the Commissioners are satisfied as specified in subsection (2D)(d), and (b) the account under subsection (2B)(b) must be delivered within the period of one month beginning with that date. (2F) The reference in subsection (2A) to the value of objects is to their value at the time they are lost (or treated as lost). (2G) Subsection (2A) does not apply in relation to a loss notified to the Commissioners before the coming into force of that subsection. (2H) In this section “owner”, in relation to any objects, means a person who, if the objects were sold, would be entitled to receive (whether for their own benefit or not) the proceeds of sale or any income arising therefrom. (2I) In this section references to the loss of objects include their theft or destruction; but do not include a loss which the Commissioners are satisfied was outside the owner's control.

• (2) Section 48 of FA 1950, so far as continuing to have effect, has effect as if—

• (a) after subsection (3) there were inserted—

(3A) But where the value of any objects is chargeable with estate duty under subsection (2A) of the said section forty (loss of objects), no estate duty shall be chargeable under this section on that value.

;

• (b) after subsection (4) there were inserted—

(5) Where any objects are lost (within the meaning of the said section forty) after becoming chargeable with estate duty under this section in respect of any death, the value of those objects shall not be chargeable with estate duty under subsection (2A) of the said section forty.

• (3) Section 39 of FA 1969, so far as continuing to have effect, has effect as if—

• (a) in subsection (1)—

• (i) after “subsection (2)” there were inserted “ or (2A) ”;

• (ii) after “other disposal” there were inserted “ or loss ”;

• (b) in subsection (2), after “subsection (2)” there were inserted “ , (2A) ”;

• (c) in subsection (3)—

• (i) after “subsection (2)” there were inserted “ , (2A) ”;

• (ii) for the words from “the amount” to the end there were substituted “ the amount in respect of which estate duty is chargeable under the said subsection ”.

• (4) Section 6 of the Finance Act (Northern Ireland) 1969, so far as continuing to have effect as originally enacted, has effect as if—

• (a) in subsection (1)—

• (i) after “subsection (2)” there were inserted “ or (2A) ”;

• (ii) after “sale” there were inserted “ or loss ”;

• (b) in subsection (2)—

• (i) for “sale” there were substituted “ event ”;

• (ii) after “subsection (2)” there were inserted “ or (2A) ”;

• (c) in subsection (3)—

• (i) for “sale” there were substituted “ event ”;

• (ii) after “subsection (2)” there were inserted “ or (2A) ”;

• (iii) for “the amount of the proceeds of sale” there were substituted “ the amount in respect of which estate duty is chargeable under the said subsection ”.

• (5) Section 6 of the Finance Act (Northern Ireland) 1969, so far as continuing to have effect as amended by Article 7 of the Finance (Northern Ireland) Order 1972 (S.I. 1972/1100 (N.I.11)) (deaths occurring after the making of that Order), has effect as if—

• (a) in subsection (1)—

• (i) after “subsection (2)” there were inserted “ or (2A) ”;

• (ii) after “sale” there were inserted “ or loss ”;

• (b) in subsection (2), after “subsection (2)” there were inserted “ or (2A) ”;

• (c) in subsection (3)—

• (i) in the opening words, after “subsection (2)” there were inserted “ or (2A) ”;

• (ii) in paragraphs (a) and (b), after “otherwise than on sale” there were inserted “ or at the time of the loss ”.

• (6) In section 35 of IHTA 1984 (conditional exemption on death before 7th April 1976), in subsection (2), for paragraphs (a) and (b) substitute—

(a) tax shall be chargeable under section 32 or 32A (as the case may be), or (b) tax shall be chargeable under Schedule 5,

.

• (7) In Schedule 6 to IHTA 1984 (transition from estate duty), in paragraph 4 (objects of national etc interest left out of account on death)—

• (a) in sub-paragraph (2), for paragraphs (a) and (b) substitute—

(a) tax shall be chargeable under section 32 or 32A of this Act (as the case may be), or (b) estate duty shall be chargeable under those provisions, as the Board may elect,

, and

• (b) in sub-paragraph (4), after “40(2)” insert “ or (2A) ”.

• (8) Subsections (6) and (7) have effect in relation to a chargeable event where the conditionally exempt transfer referred to in section 35(2) of or paragraph 4(2) of Schedule 6 to IHTA 1984 occurred after 16 March 2016.

PART 6 — Apprenticeship levy