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Finance (No. 2) Act 2017

Type Public General Act

Publication 2017-11-16

Last updated 2025-03-20

State In force

Department Statute Law Database

Source legislation.gov.uk

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(4) If the amount transferred does not exceed the total income and gains, the transfer is to be treated as if it consisted of income and chargeable gains in the proportions found under Step 2 in sub-paragraph (3).

(5) If the amount transferred exceeds the total income and gains, the transfer is to be treated as if it consisted of—

(a) all the income and chargeable gains that were in the mixed fund immediately before the transfer, and

(b) in respect of the balance, other capital from the mixed fund.

(6) Sub-paragraphs (7) and (8) apply where—

(a) a transfer of money is made before 6 April 2008 from another overseas account to the mixed fund, and

(b) there is insufficient evidence to determine the composition of the transfer.

(7) Take the following Steps—

Step 1. Calculate the total amount of income and chargeable gains in the other overseas account immediately before the transfer (“the total income and gains”).

Step 2. Calculate what proportion of the total income and gains is income and what proportion is chargeable gains.

(8) The transfer is to be presumed to consist of income and chargeable gains in the proportions found under Step 2 in sub-paragraph (7).

(9) For the purposes of Steps 1 and 2 in sub-paragraph (7), if there is insufficient evidence to say that an amount is income or that it is chargeable gains, treat it as income.

SCHEDULE 9

Capital gains tax: settlements: value of benefit conferred by certain capital payments

1

(1) In section 97(4) of TCGA 1992 (supplementary provisions in relation to settlements), at the end insert “ (see sections 97A to 97C for the value of benefits conferred by a capital payment made by way of loan or by way of making movable property or land available) ”.

(2) After section 97 of TCGA 1992 insert—

(97A) (1) For the purposes of section 97(4), the value of the benefit conferred on a person (P) by a capital payment made by way of loan to P is, for each tax year in which the loan is outstanding, the amount (if any) by which— (a) the amount of interest that would have been payable in that year on the loan if interest had been payable on the loan at the official rate, exceeds (b) the amount of interest (if any) actually paid by P in that year on the loan. (2) In this section and section 97B the “official rate”, in relation to interest, means the rate applicable from time to time under section 178 of the Finance Act 1989 for the purposes of Chapter 7 of Part 3 of ITEPA 2003. (97B) (1) For the purposes of section 97(4), the value of the benefit conferred by a capital payment consisting of making movable property available, without any transfer of the property in it, to a person (P) is, for each tax year in which the benefit is conferred on P— $$( CC × R × D Y ) − T$where—CC is the capital cost of the movable property on the date when the property is first made available to P in the tax year,D is the number of days in the tax year on which the property is made available to P (the relevant period),R is the official rate of interest for the relevant period (but see subsection (3)),T is the total of the amounts (if any) paid in the tax year by P—to the person conferring the benefit, in respect of the availability of the movable property, orso far as not within paragraph (a), in respect of the repair, insurance, maintenance or storage of the movable property, andY is the number of days in the tax year.$ (2) In subsection (1), in the meaning of CC, the “capital cost” of movable property means an amount equal to the total of— (a) the amount which is the greater of— (i) the amount or value of the consideration given for the acquisition of the movable property by, or on behalf of, the person (A) conferring the benefit, and (ii) its market value at the time of that acquisition, and (b) the amount of any expenditure wholly and exclusively incurred by, or on behalf of, A for the purpose of enhancing the value of the movable property. (3) If the official rate of interest changes during the relevant period, then in subsection (1) R is the average official rate of interest for the period calculated as follows. - Step 1 Multiply each official rate of interest in force during the relevant period by the number of days when it is in force. - Step 2 Add together the products found in Step 1. - Step 3 Divide the total found in Step 2 by the number of days in the relevant period. (4) In subsections (1) and (2), “movable property” means any tangible movable property other than money. (97C) (1) For the purposes of section 97(4), the value of the benefit conferred by a capital payment consisting of making land available for the use of a person (P) is, for each tax year in which the benefit is conferred on P, the amount by which— (a) the rental value of the land for the period of the tax year during which the land is made available to P, exceeds (b) the total of the amounts (if any) paid in the tax year by P— (i) to the person conferring the benefit, in respect of the availability of the land, or (ii) so far as not within sub-paragraph (i), in respect of costs of repair, insurance or maintenance relating to the land. (2) Subsection (1) does not apply in the case where the person conferring the benefit transfers the whole of the person's interest in the land to P. (3) In subsection (1) “the rental value” of the land for a period means the rent which would have been payable for the period if the land had been let to P at an annual rent equal to the annual value. (4) For the purposes of subsection (3) “the annual value” of land is the rent that might reasonably be expected to be obtained on a letting from year to year if— (a) the tenant undertook to pay all taxes, rates and charges usually paid by a tenant, and (b) the landlord undertook to bear the costs of the repairs and insurance and the other expenses (if any) necessary for maintaining the property in a state to command that rent. (5) For the purposes of subsection (4) that rent— (a) is to be taken to be the amount that might reasonably be expected to be so obtained in respect of a letting of the land, and (b) is to be calculated on the basis that the only amounts that may be deducted in respect of services provided by the landlord are amounts in respect of the costs to the landlord of providing any relevant services. (6) In subsection (5) “relevant service” means a service other than the repair, insurance or maintenance of the property.

Income tax: transfer of assets abroad: value of certain benefits

2

After section 742A of ITA 2007 insert—

(742B) Sections 742C to 742E apply where it is necessary, for the purpose of calculating a charge to income tax under the preceding provisions of this Chapter, to determine the value of a benefit provided to a person by way of— (a) a payment by way of loan (see section 742C), (b) making available movable property without any transfer of the property in it (see section 742D), or (c) making available land for use without transferring the whole interest in it (see section 742E). (742C) (1) The value of the benefit provided to a person (P) by a payment by way of loan to P is, for each tax year in which the loan is outstanding, the amount (if any) by which— (a) the amount of interest that would have been payable in that year on the loan if interest had been payable on the loan at the official rate, exceeds (b) the amount of interest (if any) actually paid by P in that year on the loan. (2) In this section and section 742D the “official rate”, in relation to interest, means the rate applicable from time to time under section 178 of the Finance Act 1989 for the purposes of Chapter 7 of Part 3 of ITEPA 2003. (742D) (1) The value of the benefit provided by making movable property available, without any transfer of the property in it, to a person (P) is, for each tax year in which the benefit is provided to P— $$( CC × R × D Y ) − T$where—CC is the capital cost of the movable property on the date when the property is first made available to P in the tax year,D is the number of days in the tax year on which the property is made available to P (the relevant period),R is the official rate of interest for the relevant period (but see subsection (3)),T is the total of the amounts (if any) paid in the tax year by P—to the person providing the benefit, in respect of the availability of the movable property, orso far as not within paragraph (a), in respect of the repair, insurance, maintenance or storage of the movable property, andY is the number of days in the tax year.$ (2) In subsection (1), in the meaning of CC, the “capital cost” of the movable property means an amount equal to the total of— (a) the amount which is the greater of— (i) the amount or value of the consideration given for the acquisition of the movable property by, or on behalf of, the person (A) providing the benefit, and (ii) its market value at the time of that acquisition, and (b) the amount of any expenditure wholly and exclusively incurred by, or on behalf of, A for the purpose of enhancing the value of the movable property. (3) If the official rate of interest changes during the relevant period, then in subsection (1) R is the average official rate of interest for the period calculated as follows. - Step 1 Multiply each official rate of interest in force during the relevant period by the number of days when it is in force. - Step 2 Add together the products found in Step 1. - Step 3 Divide the total found in Step 2 by the number of days in the relevant period. (4) In subsections (1) and (2), “movable property” means any tangible movable property other than money. (742E) (1) The value of the benefit provided by making land available for the use of a person (P) is, for each tax year in which the benefit is provided to P, the amount by which— (a) the rental value of the land for the period of the tax year during which the land is made available to P, exceeds (b) the total of the amounts (if any) paid in the tax year by P— (i) to the person providing the benefit, in respect of the availability of the land, or (ii) so far as not within sub-paragraph (i), in respect of costs of repair, insurance or maintenance relating to the land. (2) Subsection (1) does not apply in the case where the person providing the benefit transfers the whole of the person's interest in the land to P. (3) In subsection (1) “the rental value” of the land for a period means the rent which would have been payable for the period if the land had been let to P at an annual rent equal to the annual value. (4) For the purposes of subsection (3) “the annual value” of land is the rent that might reasonably be expected to be obtained on a letting from year to year if— (a) the tenant undertook to pay all taxes, rates and charges usually paid by a tenant, and (b) the landlord undertook to bear the costs of the repairs and insurance and the other expenses (if any) necessary for maintaining the property in a state to command that rent. (5) For the purposes of subsection (4) that rent— (a) is to be taken to be the amount that might reasonably be expected to be so obtained in respect of a letting of the land, and (b) is to be calculated on the basis that the only amounts that may be deducted in respect of services provided by the landlord are amounts in respect of the costs to the landlord of providing any relevant services. (6) In subsection (5) “relevant service” means a service other than the repair, insurance or maintenance of the property.

Commencement

3

The amendments made by this Schedule have effect in relation to capital payments or benefits received in the tax year 2017-18 and subsequent tax years.

SCHEDULE 10

Non-excluded overseas property

1

In IHTA 1984, before Schedule 1 insert—

SCHEDULE A1 (1) Property is not excluded property by virtue of section 6(1) or 48(3)(a) if and to the extent that paragraph 2 or 3 applies to it. (2) (1) This paragraph applies to an interest in a close company or in a partnership, if and to the extent that the interest meets the condition in sub-paragraph (2). (2) The condition is that the value of the interest is— (a) directly attributable to a UK residential property interest, or (b) attributable to a UK residential property interest by virtue only of one or more of the following— (i) an interest in a close company; (ii) an interest in a partnership; (iii) property to which paragraph 3 (loans) applies. (3) For the purposes of sub-paragraphs (1) and (2) disregard— (a) an interest in a close company, if the value of the interest is less than 5% of the total value of all the interests in the close company; (b) an interest in a partnership, if the value of the interest is less than 5% of the total value of all the interests in the partnership. (4) In determining under sub-paragraph (3) whether to disregard a person's interest in a close company or partnership, treat the value of the person's interest as increased by the value of any connected person's interest in the close company or partnership. (5) In determining whether or to what extent the value of an interest in a close company or in a partnership is attributable to a UK residential property interest for the purposes of sub-paragraph (1), liabilities of a close company or partnership are to be attributed rateably to all of its property, whether or not they would otherwise be attributed to any particular property. (3) This paragraph applies to— (a) the rights of a creditor in respect of a loan which is a relevant loan (see paragraph 4), and (b) money or money's worth held or otherwise made available as security, collateral or guarantee for a loan which is a relevant loan, to the extent that it does not exceed the value of the relevant loan. (4) (1) For the purposes of this Schedule a loan is a relevant loan if and to the extent that money or money's worth made available under the loan is used to finance, directly or indirectly— (a) the acquisition by an individual, a partnership or the trustees of a settlement of— (i) a UK residential property interest, or (ii) property to which paragraph 2 to any extent applies, or (b) the acquisition by an individual, a partnership or the trustees of a settlement of an interest in a close company or a partnership (“the intermediary”) and the acquisition by the intermediary of property within paragraph (a)(i) or (ii). (2) In this paragraph references to money or money's worth made available under a loan or sale proceeds being used “indirectly” to finance the acquisition of something include the money or money's worth or sale proceeds being used to finance— (a) the acquisition of any property the proceeds of sale of which are used directly or indirectly to finance the acquisition of that thing, or (b) the making, or repayment, of a loan to finance the acquisition of that thing. (3) In this paragraph references to the acquisition of a UK residential property interest by an individual, a partnership, the trustees of a settlement or a close company include the maintenance, or an enhancement, of the value of a UK residential property interest which is (as the case may be) the property of the individual, property comprised in the settlement or property of the partnership or close company. (4) Where the UK residential property interest by virtue of which a loan is a relevant loan is disposed of, the loan ceases to be a relevant loan. (5) Where a proportion of the UK residential property interest by virtue of which a loan is a relevant loan is disposed of, the loan ceases to be a relevant loan by the same proportion. (6) In this Schedule, references to a loan include an acknowledgment of debt by a person or any other arrangement under which a debt arises; and in such a case references to money or money's worth made available under the loan are to the amount of the debt. (5) (1) This paragraph applies to— (a) property which constitutes consideration in money or money's worth for the disposal of property to which paragraph 2 or paragraph 3(a) applies; (b) any money or money's worth paid in respect of a creditor's rights falling within paragraph 3(a); (c) any property directly or indirectly representing property within paragraph (a) or (b). (2) If and to the extent that this paragraph applies to any property— (a) for the two-year period it is not excluded property by virtue of section 6(1), (1A) or (2) or 48(3)(a), (3A) or (4), and (b) if it is held in a qualifying foreign currency account within the meaning of section 157 (non-residents' bank accounts), that section does not apply to it for the two-year period. (3) The two-year period is the period of two years beginning with the date of— (a) the disposal referred to in sub-paragraph (1)(a), or (b) the payment referred to in sub-paragraph (1)(b). (4) The value of any property within sub-paragraph (1)(c) is to be treated as not exceeding the relevant amount. (5) The relevant amount is— (a) where the property within sub-paragraph (1)(c) directly or indirectly represents property within sub-paragraph (1)(a) (“the consideration”), the value of the consideration at the time of the disposal referred to in that sub-paragraph, and (b) where the property within sub-paragraph (1)(c) directly or indirectly represents property within sub-paragraph (1)(b), the amount of the money or money's worth paid as mentioned in that sub-paragraph. (6) (1) In determining whether or to what extent property situated outside the United Kingdom is excluded property, no regard is to be had to any arrangements the purpose or one of the main purposes of which is to secure a tax advantage by avoiding or minimising the effect of paragraph 1 or 5. (2) In this paragraph— - “tax advantage” has the meaning given in section 208 of the Finance Act 2013; - “arrangements” includes any scheme, transaction or series of transactions, agreement or understanding (whether or not legally enforceable and whenever entered into) and any associated operations. (7) (1) Nothing in any double taxation relief arrangements made with the government of a territory outside the United Kingdom is to be read as preventing a person from being liable for any amount of inheritance tax by virtue of paragraph 1 or 5 in relation to any chargeable transfer if under the law of that territory— (a) no tax of a character similar to inheritance tax is charged on that chargeable transfer, or (b) a tax of a character similar to inheritance tax is charged in relation to that chargeable transfer at an effective rate of 0% (otherwise than by virtue of a relief or exemption). (2) In this paragraph— - “double taxation relief arrangements” means arrangements having effect under section 158(1); - “effective rate” means the rate found by expressing the tax chargeable as a percentage of the amount by reference to which it is charged. (8) (1) In this Schedule “UK residential property interest” means an interest in UK land— (a) where the land consists of a dwelling, (b) where and to the extent that the land includes a dwelling, or (c) where the interest subsists under a contract for an off-plan purchase. (2) For the purposes of sub-paragraph (1)(b), the extent to which land includes a dwelling is to be determined on a just and reasonable basis. (3) In this paragraph— - “interest in UK land” has the meaning given by paragraph 2 of Schedule B1 to the 1992 Act (and the power in sub-paragraph (5) of that paragraph applies for the purposes of this Schedule); - “the land”, in relation to an interest in UK land which is an interest subsisting for the benefit of land, is a reference to the land for the benefit of which the interest subsists; - “dwelling” has the meaning given by paragraph 4 of Schedule B1 to the 1992 Act (and the power in paragraph 5 of that Schedule applies for the purposes of this Schedule); - “contract for an off-plan purchase” has the meaning given by paragraph 1(6) of Schedule B1 to the 1992 Act. (9) (1) In this Schedule— - “close company” means a company within the meaning of the Corporation Tax Acts which is (or would be if resident in the United Kingdom) a close company for the purposes of those Acts; - references to an interest in a close company are to the rights and interests that a participator in a close company has in that company. (2) In this paragraph— - “participator”, in relation to a close company, means any person who is (or would be if the company were resident in the United Kingdom) a participator in relation to that company within the meaning given by section 454 of the Corporation Tax Act 2010; - references to rights and interests in a close company include references to rights and interests in the assets of the company available for distribution among the participators in the event of a winding-up or in any other circumstances. (10) In this Schedule “partnership” means— (a) a partnership within the Partnership Act 1890, (b) a limited partnership registered under the Limited Partnerships Act 1907, (c) a limited liability partnership formed under the Limited Liability Partnerships Act 2000 or the Limited Liability Partnerships Act (Northern Ireland) 2002, or (d) a firm or entity of a similar character to either of those mentioned in paragraph (a) or (b) formed under the law of a country or territory outside the United Kingdom.

Consequential and supplementary amendments

2

IHTA 1984 is amended as follows.

3

In section 6 (excluded property), at the end insert—

(5) This section is subject to Schedule A1 (non-excluded overseas property).

4

In section 48 (excluded property)—

(a) in subsections (3) and (3A), at the end insert “ and to Schedule A1 ”;

(b) in subsection (4), at the end (but on a new line) insert “This subsection is subject to Schedule A1.

5

In section 65 (charge at other times), after subsection (7B) (as inserted by section 30) insert—

(7C) Tax shall not be charged under this section by reason only that property comprised in a settlement ceases to any extent to be property to which paragraph 2 or 3 of Schedule A1 applies and thereby becomes excluded property by virtue of section 48(3)(a) above. (7D) Tax shall not be charged under this section where property comprised in a settlement or any part of that property— (a) is, by virtue of paragraph 5(2)(a) of Schedule A1, not excluded property for the two year period referred to in that paragraph, but (b) becomes excluded property at the end of that period.

6

In section 157 (non-residents' bank accounts), after subsection (3) insert—

(3A) This section is subject to paragraph 5 of Schedule A1 (non-excluded overseas property).

7

In section 237 (imposition of charge), after subsection (2) insert—

(2A) Where tax is charged by virtue of Schedule A1 on the value transferred by a chargeable transfer, the reference in subsection (1)(a) to property to the value of which the value transferred is wholly or partly attributable includes the UK residential property interest (within the meaning of that Schedule) to which the charge to tax relates.

8

In section 272 (general interpretation), in the definition of “excluded property”, after “above” insert “ and Schedule A1 ”.

Commencement

9

(1) The amendments made by this Schedule have effect in relation to times on or after 6 April 2017.

(2) But for the purposes of paragraph 5(1) of Schedule A1 to IHTA 1984 as inserted by this Schedule—

(a) paragraph (a) of that paragraph does not apply in relation to a disposal of property occurring before 6 April 2017, and

(b) paragraph (b) of that paragraph does not apply in relation to a payment of money or money's worth occurring before 6 April 2017.

Transitional provision

10

(1) Sub-paragraphs (2) and (3) apply if an amount of inheritance tax—

(a) would not be charged but for the amendments made by this Schedule, or

(b) is, because of those amendments, greater than it would otherwise have been.

(2) Section 233 of IHTA 1984 (interest on unpaid inheritance tax) applies in relation to the amount of inheritance tax as if the reference, in the closing words of subsection (1) of that section, to the end of the period mentioned in paragraph (a), (aa), (b) or (c) of that subsection were a reference to—

(a) the end of that period, or

(b) if later, the end of the month immediately following the month in which this Act is passed.

(3) Subsection (1) of section 234 of IHTA 1984 (cases where inheritance tax payable by instalments carries interest only from instalment dates) applies in relation to the amount of inheritance tax as if the reference, in the closing words of that subsection, to the date at which an instalment is payable were a reference to—

(a) the date at which the instalment is payable, or

(b) if later, the end of the month immediately following the month in which this Act is passed.

11

(1) Sub-paragraph (2) applies if—

(a) a person is liable as mentioned in section 216(1)(c) of IHTA 1984 (trustee liable on 10-year anniversary, and other trust cases) for an amount of inheritance tax charged on an occasion, and

(b) but for the amendments made by this Schedule—

(i) no inheritance tax would be charged on that occasion, or

(ii) a lesser amount of inheritance tax would be charged on that occasion.

(2) Section 216(6)(ad) of IHTA 1984 (delivery date for accounts required by section 216(1)(c)) applies in relation to the account to be delivered in connection with the occasion as if the reference to the expiration of the period of 6 months from the end of the month in which the occasion occurs were a reference to—

(a) the expiration of that period, or

(b) if later, the end of the month immediately following the month in which this Act is passed.

SCHEDULE 11

PART 1 — Application of Part 7A of ITEPA 2003

Relevant step

1

(1) A person (“P”) is treated as taking a relevant step for the purposes of Part 7A of ITEPA 2003 if—

(a) P has made a loan, or a quasi-loan, to a relevant person,

(b) the loan or quasi-loan was made on or after 9 December 2010, and

(2) P is treated as taking the step immediately before the end of 5 April 2019.

(3) Where P is treated by this paragraph as taking a relevant step, references to “the relevant step” in sections 554A(1)(e)(i) and (ii) and 554AA(1)(h)(i) and (ii) of ITEPA 2003 have effect as if they were references to the step of making the loan or, as the case may be, quasi-loan.

(4) For the purposes of section 554Z3(1) of ITEPA 2003 (value of relevant step), the step is to be treated as involving a sum of money equal to the amount of the loan or quasi-loan that is outstanding at the time P is treated as taking the step.

(5) Subsections (2) and (3) of section 554C of ITEPA 2003 (“relevant person”) apply for the purposes of this Schedule as they apply for the purposes of that section.

(6) Sub-paragraphs (1) and (2) are subject to paragraphs 23 and 24 (accelerated payments) and paragraph 36A (double taxation: close companies).

(6A) Sub-paragraph (4) is subject to paragraph 1A(5).

(7) For the purposes of this paragraph and paragraph 1A, whether an amount of a loan or quasi-loan is outstanding at a particular time—

(a) is to be determined in accordance with paragraphs 3 to 18, and

(b) does not depend on the loan or quasi-loan subsisting at that time.

(8) References in this Schedule and in Part 7A of ITEPA 2003 to a relevant step within paragraph 1 of this Schedule are to be read as references to a relevant step which a person is treated by this paragraph as taking.

Meaning of “loan”, “quasi-loan” and “approved repayment date”

2

(1) In this Part of this Schedule “loan” includes—

(a) any form of credit;

(b) a payment that is purported to be made by way of a loan.

(2) For the purposes of paragraphs 1 and 1A, P makes a “quasi-loan” to a relevant person if (and when) P acquires a right (the “acquired debt”)—

(a) which is a right to a payment or a transfer of assets, and

(b) in respect of which the condition in sub-paragraph (3) is met.

(3) The condition is met in relation to a right if there is a connection (direct or indirect) between the acquisition of the right and—

(a) a payment made, by way of a loan or otherwise, to the relevant person, or

(b) a transfer of assets to the relevant person.

(4) Where a quasi-loan or a loan made by P to a relevant person is replaced, directly or indirectly, by a loan or another loan (the “replacement loan”), references in paragraphs 1 and 1A to the loan are references to the replacement loan.

(5) Where a loan or a quasi-loan made by P to a relevant person is replaced, directly or indirectly, by a quasi-loan or another quasi-loan (the “replacement quasi-loan”), references in paragraphs 1 and 1A to the quasi-loan are references to the replacement quasi-loan.

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

Meaning of “outstanding”: loans

3

(1) An amount of a loan is “outstanding” for the purposes of paragraphs 1 and 1A if the relevant principal amount exceeds the repayment amount.

(2) In sub-paragraph (1) “relevant principal amount”, in relation to a loan, means the total of—

(a) the initial principal amount lent, and

(b) any sums that have become principal under the loan, otherwise than by capitalisation of interest.

(3) In sub-paragraph (1) “repayment amount”, in relation to a loan, means the total of—

(a) the amount of principal under the loan that has been repaid before 17 March 2016, and

(b) payments in money made by the relevant person on or after 17 March 2016 by way of repayment of principal under the loan.

4

(1) A payment is to be disregarded for the purposes of paragraph 3(3)(b) if—

(a) there is any connection (direct or indirect) between the payment and a tax avoidance arrangement (other than the arrangement under which the loan was made), or

(b) the payment, or a sum or asset directly or indirectly representing the payment, is the subject of a relevant step (as defined in section 554A(2) of ITEPA 2003) that is taken—

(i) after the payment is made, but

(ii) before the end of 5 April 2019.

(2) But a payment is not to be disregarded under sub-paragraph (1)(b) if, by the end of 5 April 2019, each relevant tax liability has been paid in full.

(3) For the purposes of this paragraph, each of the following is a “relevant tax liability”—

(a) any liability for income tax arising by virtue of the application of Chapter 2 by reason of the relevant step mentioned in sub-paragraph (1)(b), and

(b) where section 554Z6 of ITEPA 2003 (overlap with certain earnings) applies because that relevant step gives rise to relevant earnings for the purposes of that section, any liability for income tax in respect of those relevant earnings.

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

(5) Sub-paragraph (6) applies if a payment is disregarded under sub-paragraph (1)(b).

(6) The value of a relevant step treated as taken by paragraph 1 or 1A is not reduced under section 554Z5(3) of ITEPA 2003 (overlap with money or asset subject to earlier tax liability) by the amount of the sum, or the value of the asset, which is the subject of the relevant step mentioned in sub-paragraph (1)(b) unless the payment condition is met by reason of section 554Z5(4)(a) and (b)(ii) being met.

5

(1) This paragraph applies where—

(a) a person (“P”) has made a loan to a relevant person,

(b) the loan was made on or after 9 December 2010, and

(c) before the end of 5 April 2019, A or B acquires (whether or not for consideration) a right to payment of the whole or part of the loan.

(2) The amount of the loan in respect of which A or B acquires a right to payment is to be treated—

(a) for the purposes of paragraph 1(1) as an amount, of the loan made by P to the relevant person, that is outstanding immediately before the end of 5 April 2019;

(b) for the purposes of paragraphs 1(4) and 1A(5) and section 554Z3(1) of ITEPA 2003, as an amount of the loan that is outstanding at the time P is treated as taking the relevant step under paragraph 1(1).

(3) Where a quasi-loan or a loan made by P to a relevant person is replaced, directly or indirectly, by a loan or another loan (the “replacement loan”), references in sub-paragraphs (1) and (2) to the loan are references to the replacement loan.

Meaning of “outstanding”: loans in currencies other than sterling

6

(1) In paragraphs 7 to 10 “the loan currency”, in relation to a loan, means the currency in which the initial principal amount of the loan is denominated (whether or not that amount is paid in that currency).

(2) For the purposes of paragraphs 7 to 10, the value of an amount in a particular currency is to be determined by reference to an appropriate spot rate of exchange.

7

(1) This paragraph applies in relation to a loan where the loan currency is a currency other than sterling.

(2) But this paragraph does not apply if paragraph 10 applies in relation to the loan.

(3) The amount of the loan that is outstanding, at the time P is treated as taking the relevant step within paragraph 1, is to be calculated in sterling as follows—

Step 1 Calculate, in the loan currency, the amount that is outstanding at that time.

Step 2 Take the value in sterling, at that time, of that amount.

(4) See paragraph 8 for provision about repayments made in a currency other than the loan currency.

Repayments in currencies other than the loan currency

8

(1) This paragraph applies in relation to a loan where—

(a) payments in money are made by way of repayment of principal under the loan, and

(b) some or all of the payments are made in a currency other than the loan currency.

(2) But this paragraph does not apply if paragraph 10 applies in relation to the loan.

(3) For the purposes of calculating the repayment amount in relation to the loan, the amount of each of the payments referred to in sub-paragraph (1)(b) is an amount equal to its value in the loan currency on the date it is made.

Loans made in a depreciating currency

9

(1) Paragraph 10 applies in relation to a loan where—

(a) the loan currency is a currency other than sterling, and

(b) it is reasonable to suppose that the main reason, or one of the main reasons, for the loan being made in that currency is that the loan currency is expected to depreciate as against sterling during the loan period.

(2) The “loan period”, in relation to a loan, is the period—

(a) beginning at the time the loan is made, and

(b) ending with the time by which, under the terms of the loan, the whole of the loan is to be repaid.

10

(1) Where this paragraph applies in relation to a loan—

(a) paragraphs 7 and 8 do not apply in relation to the loan, and

(b) sub-paragraphs (2) to (5) apply for the purposes of calculating the amount of the loan that is outstanding at the time P is treated as taking the relevant step within paragraph 1.

(2) The relevant principal amount, in relation to the loan, is an amount equal to the total of—

(a) the value in sterling, at the reference date, of the initial principal amount lent, and

(b) the value in sterling, at the reference date, of any sums that become principal under the loan, otherwise than by capitalisation of interest.

(3) The “reference date”—

(a) in relation to an amount within sub-paragraph (2)(a), means the date on which the loan is made, and

(b) in relation to a sum within sub-paragraph (2)(b), means the date on which the sum becomes principal.

(4) The repayment amount, in relation to the loan, is an amount equal to the total of—

(a) the amount of principal under the loan that has been repaid in sterling, and

(b) where payments are made, in a currency other than sterling, by way of repayment of principal under the loan, the amount equal to the sterling value of the payments.

(5) The “sterling value” of a payment is its value in sterling on the date it is made.

Meaning of “outstanding”: quasi-loans

11

(1) An amount of a quasi-loan is outstanding for the purposes of paragraphs 1 and 1A if the initial debt amount exceeds the repayment amount.

(2) In sub-paragraph (1) “initial debt amount”, in relation to a quasi-loan, means the total of—

(a) an amount equal to the value of the acquired debt (see paragraph 2(2)), and

(b) where P subsequently acquires a further right (an “additional debt”) to a payment, or transfer of assets, in connection with the payment mentioned in paragraph 2(3)(a) or (as the case may be) the transfer mentioned in paragraph 2(3)(b), an amount equal to the value of the additional debt.

(3) For the purposes of sub-paragraph (2)—

(a) where the acquired debt is a right to payment of an amount, the “value” of the debt is that amount,

(b) where the additional debt is a right to payment of an amount, the “value” of the debt is that amount, but is nil if the additional debt accrued to P by the capitalisation of interest on the acquired debt or another additional debt, and

(c) where the acquired debt or additional debt is a right to a transfer of assets, the “value” of the debt is an amount equal to—

(i) the market value of the assets at the time the right is acquired (or the value of the right at that time if the assets are non-fungible and not in existence at that time), or

(ii) if higher, the cost of the assets at that time.

(4) In sub-paragraph (1) “repayment amount”, in relation to a quasi-loan, means the total of—

(a) the amount (if any) by which the initial debt amount has been reduced (by way of repayment) before 17 March 2016,

(b) payments in money (if any) made by the relevant person on or after 17 March 2016 by way of repayment of the initial debt amount, and

(c) if the acquired debt or an additional debt is a right to a transfer of assets, and the assets have been transferred, an amount equal to the market value of the assets at the time of the transfer.

12

(1) A payment or transfer is to be disregarded for the purposes of paragraph 11(4)(b) or (c) if—

(a) there is any connection (direct or indirect) between the payment or transfer and a tax avoidance arrangement (other than the arrangement under which the quasi-loan was made), or

(b) the payment or the asset transferred, or a sum or asset directly or indirectly representing the payment or asset, is the subject of a relevant step (as defined in section 554A(2) of ITEPA 2003) that is taken—

(i) after the payment is made or the asset transferred, but

(ii) before the end of 5 April 2019.

(2) But a payment or transfer is not to be disregarded under sub-paragraph (1)(b) if, by the end of 5 April 2019, each relevant tax liability has been paid in full.

(3) For the purposes of this paragraph, each of the following is a “relevant tax liability”—

(a) any liability for income tax arising by virtue of the application of Chapter 2 by reason of the relevant step mentioned in sub-paragraph (1)(b), and

(b) where section 554Z6 of ITEPA 2003 (overlap with certain earnings) applies because that relevant step gives rise to relevant earnings for the purposes of that section, any liability for income tax in respect of those relevant earnings.

(4) Sub-paragraph (5) applies if a payment is disregarded under sub-paragraph (1)(b).

(5) The value of a relevant step treated as taken by paragraph 1 or 1A is not reduced under section 554Z5(3) of ITEPA 2003 (overlap with money or asset subject to earlier tax liability) by the amount of the sum, or the value of the asset, which is the subject of the relevant step mentioned in sub-paragraph (1)(b) unless the payment condition is met by reason of section 554Z5(4)(a) and (b)(ii) being met.

13

(1) This paragraph applies where—

(a) a person (“P”) has made a quasi-loan to a relevant person,

(b) the quasi-loan was made on or after 9 December 2010, and

(c) before the end of 5 April 2019, A or B acquires (whether or not for consideration) a right to the payment or transfer of assets mentioned in paragraph 2(2)(a).

(2) The amount equal to the value of the right acquired by A or B is to be treated—

(a) for the purposes of paragraph 1(1) as an amount, of the quasi-loan made by P to the relevant person, that is outstanding immediately before the end of 5 April 2019;

(b) for the purposes of paragraphs 1(4) and 1A(5) and section 554Z3(1) of ITEPA 2003, as an amount of the quasi-loan that is outstanding at the time P is treated as taking the relevant step under paragraph 1(1).

(3) For the purposes of sub-paragraph (2)—

(a) where the right acquired by A or B is a right to payment of an amount, the “value” of the right is that amount;

(b) where the right acquired by A or B is a right to a transfer of assets, the “value” of the right is an amount equal to—

(i) the market value of the assets at the time the right is acquired (or the value of the right at that time if the assets are non-fungible and not in existence at that time), or

(ii) if higher, the cost of the assets at that time.

(4) Where a loan or a quasi-loan made by P to a relevant person is replaced, directly or indirectly, by a quasi-loan or another quasi-loan (the “replacement quasi-loan”), references in sub-paragraphs (1) and (2) to the quasi-loan are references to the replacement quasi-loan.

Meaning of “outstanding”: quasi-loans in currencies other than sterling

14

(1) Paragraphs 15 to 18 apply where P makes a quasi-loan to a relevant person by reason of acquiring a right to a payment in a particular currency (the “quasi-loan currency”).

(2) For the purposes of paragraphs 15 to 18, the value of an amount in a particular currency is to be determined by reference to an appropriate spot rate of exchange.

15

(1) This paragraph applies in relation to the quasi-loan if the quasi-loan currency is a currency other than sterling.

(2) But this paragraph does not apply if paragraph 18 applies in relation to the quasi-loan.

(3) The amount of the quasi-loan that is outstanding, at the time P is treated as taking the relevant step within paragraph 1, is to be calculated in sterling as follows—

Step 1 Calculate, in the quasi-loan currency, the amount that is outstanding at that time.

Step 2 Take the value in sterling, at that time, of that amount.

(4) See paragraph 16 for provision about repayments made in a currency other than the quasi-loan currency.

Repayments in currencies other than the quasi-loan currency

16

(1) This paragraph applies in relation to the quasi-loan if—

(a) payments in money are made by way of repayment of the initial debt amount, and

(b) some or all of the payments are made in a currency other than the quasi-loan currency.

(2) But this paragraph does not apply if paragraph 18 applies in relation to the quasi-loan.

(3) For the purposes of calculating the repayment amount in relation to the quasi-loan, the amount of each of the payments referred to in sub-paragraph (1)(b) is an amount equal to its value in the quasi-loan currency on the date it is made.

Quasi-loans made in a depreciating currency

17

(1) Paragraph 18 applies in relation to the quasi-loan if—

(a) the quasi-loan currency is a currency other than sterling, and

(b) it is reasonable to suppose that the main reason, or one of the main reasons, for the quasi-loan being made in that currency is that the quasi-loan currency is expected to depreciate during the quasi-loan period.

(2) The “quasi-loan period”, in relation to a quasi-loan, is the period—

(a) beginning at the time the quasi-loan is made, and

(b) ending with the time by which, under the terms of the quasi-loan, the whole of the quasi-loan is to be repaid.

18

(1) Where this paragraph applies in relation to the quasi-loan—

(a) paragraphs 15 and 16 do not apply in relation to the quasi-loan, and

(b) sub-paragraphs (2) to (5) apply for the purposes of calculating the amount of the quasi-loan that is outstanding at the time P is treated as taking the relevant step within paragraph 1.

(2) The initial debt amount, in relation to the quasi-loan, is an amount equal to the total of—

(a) the value in sterling, at the reference date, of the acquired debt, and

(b) the value in sterling, at the reference date, of any additional debt.

(3) The “reference date”—

(a) in relation to a right within sub-paragraph (2)(a), means the date on which P acquires it, and

(b) in relation to a right within sub-paragraph (2)(b), means the date on which P acquires it.

(4) The repayment amount, in relation to the quasi-loan, is an amount equal to the total of—

(a) the amount of the initial debt amount that has been repaid in sterling, and

(b) where payments are made, in a currency other than sterling, by way of repayment of the initial debt amount, the amount equal to the sterling value of the payments.

(5) The “sterling value” of a payment is its value in sterling on the date it is made.

Meaning of “approved fixed term loan”

19

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

PART 2 — Accelerated payments

Application to HMRC

20

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

Qualifying payments condition

21

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

Commercial terms condition

22

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

Accelerated payments

23

(1) Paragraph 24(1) applies where—

(a) a person (“P”) would (ignoring paragraph 24) be treated as taking a relevant step within paragraph 1 by reason of making a loan, or a quasi-loan, to a relevant person,

(b) an accelerated payment notice, or a partner payment notice, relating to a relevant charge (the “accelerated payment notice”) has been given under Chapter 3 of Part 4 of FA 2014,

(c) the relevant person makes a payment (the “accelerated payment”) in respect of the understated or disputed tax to which the notice relates,

(d) the accelerated payment is made on or before 5 April 2019, and

(e) the amount of the loan or quasi-loan that, at the end of 5 April 2019, is outstanding for the purposes of paragraph 1 (see paragraphs 3 to 18) is equal to or less than the amount of the accelerated payment.

(2) In sub-paragraph (1)(b), “relevant charge” means a charge to tax arising by reason of a step taken pursuant to the relevant arrangement concerned.

(3) The reference in sub-paragraph (2) to the relevant arrangement concerned is a reference to the relevant arrangement in pursuance of which, or in connection with which, the loan or quasi-loan mentioned in sub-paragraph (1)(a) is made.

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

(5) In sub-paragraphs (1)(c) and (2)—

(a) the reference to tax includes a reference to relevant contributions, and

(b) the reference to a charge to tax includes a reference to a liability to pay relevant contributions;

and for those purposes “relevant contributions” has the same meaning as in Schedule 2 to the National Insurance Contributions Act 2015 (application of Part 4 of FA 2014 to national insurance contributions).

(6) If more than one notice relating to a particular relevant charge has been given—

(a) the reference in sub-paragraph (1)(e) to the amount of the accelerated payment is to be treated as a reference to the aggregate of the amounts of each accelerated payment in respect of which the conditions in sub-paragraph (1)(c) and (d) are met, and

(b) the reference in paragraph 24(2) to the accelerated payment notice is to be treated as a reference to the accelerated payment notices or any of them.

24

(1) The relevant person may make an application to the Commissioners for Her Majesty's Revenue and Customs for P to be treated—

(a) as taking the relevant step only if the condition in sub-paragraph (2) is met, and

(b) as doing so not at the time given by paragraph 1(2) but immediately before—

(i) the end of the 30 days beginning with the date on which the condition in sub-paragraph (2) becomes met, or

(ii) if later, the end of 5 April 2019.

(2) The condition is that, on the withdrawal of the accelerated payment notice or on the determination of an appeal, any part of the accelerated payment is repaid.

(3) Subject to sub-paragraph (4), an application under sub-paragraph (1) may be made in 2018.

(4) An application may be made after 2018 if an officer of Revenue and Customs considers it is reasonable in all the circumstances for the relevant person to make a late application.

(5) An application must be made in such form and manner, and contain such information, as may be specified by, or on behalf of, the Commissioners for Her Majesty's Revenue and Customs.

(6) An officer of Revenue and Customs must notify the applicant of the decision on an application under this paragraph.

(7) A favourable decision on an application under this paragraph may be revoked by an officer of Revenue and Customs if the officer considers that—

(a) information provided in making the application contained an inaccuracy, and

(b) the inaccuracy was deliberate on the applicant's part.

(8) Where the decision on an application is revoked under sub-paragraph (7), the application is to be treated as having been refused at the outset.

PART 3 — Exclusions

Commercial transactions

25

Chapter 2 of Part 7A of ITEPA 2003 does not apply by reason of a relevant step within paragraph 1 which is treated as being taken by a person (“P”) if—

(a) P is treated as taking a relevant step by that paragraph by reason of the payment of a sum of money by way of a loan,

(b) the loan is (at the time it is made) a loan on ordinary commercial terms within the meaning of section 176 of ITEPA 2003, ignoring conditions B and C in that section, and

26

In section 554F of ITEPA 2003 (exclusions: commercial transactions), at the end insert—

(6) See paragraph 25 of Schedule 11 to F(No. 2)A 2017 for provision about exclusions where a loan is made on ordinary commercial terms and the relevant step is within paragraph 1 of that Schedule.

27

(1) Chapter 2 of Part 7A of ITEPA 2003 does not apply by reason of a relevant step within paragraph 1 which is treated as being taken by a person (“P”) if—

(a) P is treated as taking a relevant step within that paragraph by reason of making a quasi-loan by acquiring a right to payment of an amount equal to the whole or part of a payment made by way of a loan to a relevant person (the “borrower”),

(b) the loan, at the time it was made, was an employment-related loan,

(d) at the time the right is acquired, the borrower is an employee, or a prospective employee, of P, and

(e) there is no connection (direct or indirect) between the acquisition of the right and a tax avoidance arrangement.

(2) Subsections (2) to (5) of section 554OA of ITEPA 2003 (section 180 threshold) apply for the purposes of this paragraph as they apply for the purposes of that section.

(3) In this paragraph, “employment-related loan” has the same meaning as it has for the purposes of Chapter 7 of Part 3.

28

In section 554OA of ITEPA 2003 (exclusions: transfer of employment-related loans), at the end insert—

(6) See paragraph 27 of Schedule 11 to F(No. 2)A 2017 for provision about exclusions where a loan is an employment-related loan and the relevant step is within paragraph 1 of that Schedule.

Transactions under employee benefit packages

29

(1) Chapter 2 of Part 7A of ITEPA 2003 does not apply by reason of a relevant step within paragraph 1 which is treated as being taken by a person (“P”) if—

(a) P is treated as taking a relevant step by that paragraph by reason of the payment of a sum of money by way of a loan,

(b) the step is not taken under a pension scheme,

(c) the loan was made for the sole purpose of a transaction of P's with A and which P entered into in the ordinary course of P's business,

(d) at the time the loan was made (the “relevant time”)—

(i) a substantial proportion of P's business involved making similar loans to members of the public,

(ii) the transaction with A was part of a package of benefits which was available to a substantial proportion of B's employees, and

(iii) sub-paragraph (3) does not apply,

(e) the terms on which similar transactions were offered by P under the package of benefits mentioned in paragraph (d)(ii) were generous enough to enable substantially all of the employees of B to whom the package was available at or around the relevant time to take advantage of what was offered (if they wanted to),

(f) the terms on which P entered into the transaction with A were substantially the same as the terms on which at or around the relevant time P normally entered into similar transactions with employees of B under the package of benefits,

(g) if B is a company, a majority of B's employees to whom the package of benefits was available at the relevant time did not have a material interest (as defined in section 68 of ITEPA 2003) in B, and

(h) there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement.

(2) For the purposes of sub-paragraph (1)(d)(i)—

(a) a loan is “similar” if it is made for the same or similar purposes as the loan which is the subject of the relevant step, and

(b) “members of the public” means members of the public at large with whom P deals at arm‘s length.

(3) This sub-paragraph applies if any feature of the package of benefits mentioned in sub-paragraph (1)(d)(ii) had or would have been likely to have had the effect that, of the employees of B to whom the package was available, it is employees within sub-paragraph (4) on whom benefits under the package will be wholly or mainly conferred.

(4) The employees within this sub-paragraph are—

(a) directors,

(b) senior employees,

(c) employees who at the relevant time received, or as a result of the package of benefits would have been likely to have received, the higher or highest levels of remuneration, and

(d) if, at the relevant time, B was a company and was a member of a group of companies, any employees not within paragraph (b) or (c) who—

(i) were senior employees in the group, or

(ii) received, or as a result of the package of benefits would have been likely to have received, the higher or highest levels of remuneration in the group.

(5) For the purposes of sub-paragraph (1)(d) and (e) a transaction is “similar” if it is of the same or a similar type to the transaction which P has or had with A.

(6) In this paragraph references to A include references to any person linked with A.

(7) In this paragraph “pension scheme” has the same meaning as in Part 4 of FA 2004 (see section 150(1) of that Act).

30

In section 554G of ITEPA 2003 (exclusions: transactions under employee benefit packages), at the end insert—

(8) See paragraph 29 of Schedule 11 to F(No. 2)A 2017 for provision about exclusions for transactions under employee benefit packages in a case in which the relevant step is within paragraph 1 of that Schedule.

31

Chapter 2 of Part 7A of ITEPA 2003 does not apply by reason of a relevant step within paragraph 1 which is treated as being taken by a person (“P”) if—

(a) P is treated as taking a relevant step by that paragraph by reason of the payment of a sum of money by way of a loan (the “relevant loan”),

(b) the relevant loan is made and used solely for the purpose of enabling A to exercise an employment-related securities option (within the meaning of Chapter 5 of Part 7 of ITEPA 2003),

(i) which is chargeable to income tax or would be chargeable apart from Chapter 5B of Part 2 of ITEPA 2003, or

(ii) which is exempt income, and

(d) there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement.

32

In section 554N of ITEPA 2003 (exclusions: other cases involving employment-related securities etc.), at the end insert—

(17) See paragraph 31 of Schedule 11 to F(No. 2)A 2017 for provision about exclusions where a loan is made for the purpose of enabling the exercise of an employment-related securities option and the relevant step is within paragraph 1 of that Schedule.

Employee car ownership schemes

33

(1) This paragraph applies if—

(a) there is an arrangement (“the car ownership arrangement”) which—

(i) provides for A to purchase a new car from another person (“S”) using a loan (“the car loan”) to be made to A by an authorised lender,

(ii) specifies the date (“the repayment date”) by which the car loan must be fully repaid which must be no later than four years after the date on which the car loan is made, and

(iii) permits A, in order to obtain funds to repay the car loan, to sell the car back to S on a specified date at a specified price based on an estimate (made at the time the car ownership arrangement is made) of the likely outstanding amount of the car loan on the specified date, and

(iv) as provided for by the car ownership arrangement, A purchases the car using the car loan.

(2) Chapter 2 does not apply by reason of a relevant step within paragraph 1 which is treated as being taken by a person if—

(a) the person is treated as taking a relevant step by that paragraph by reason of making the car loan, and

(b) the car ownership arrangement is not a tax avoidance arrangement and there is no other connection (direct or indirect) between the relevant step and a tax avoidance arrangement.

(3) In this paragraph—

“car” has the meaning given by section 235(2) of ITEPA 2003, and

“authorised lender” means a person who—has permission under Part 4A of the Financial Services and Markets Act 2000 to enter into, or to exercise or have the right to exercise rights and duties under, a contract of the kind mentioned in paragraph 23 of Schedule 2 to that Act, andis not acting as a trustee.

(4) The definition of “authorised lender” must be read with—

(a) section 22 of the Financial Services and Markets Act 2000,

(b) any relevant order under that section, and

34

In section 554O of ITEPA 2003 (exclusions: employee car ownership schemes), at the end insert—

(7) See paragraph 33 of Schedule 11 to F(No. 2)A 2017 for provision about exclusions for car loans in a case in which the relevant step is within paragraph 1 of that Schedule.

Acquisition of unlisted employer shares

35

(1) Chapter 2 of Part 7A of ITEPA 2003 does not apply by reason of a relevant step within paragraph 1 which is treated as being taken by a person (“P”) if the conditions in sub-paragraph (2) are met.

(2) The conditions are that—

(a) the loan or quasi-loan concerned was made before 9 December 2010,

(b) if P is treated as taking a relevant step by paragraph 1 by reason of the payment of a sum of money by way of loan, the sum is used by A solely to acquire employer shares,

(c) if P is treated as taking a relevant step by paragraph 1 by reason of making a quasi-loan, the transfer of assets mentioned in paragraph 2(3)(b) is the transfer of employer shares to A,

(d) the employer shares are acquired, or transferred, before the end of the period of one year beginning with the day on which the loan, or quasi-loan, is made, and

(e) the employer shares are not listed on a recognised stock exchange at any time during the period beginning with the day on which the loan, or quasi-loan, is made and ending with the earlier of—

(i) the day on which A ceases to hold the shares, or

(ii) the day on which the loan, or quasi-loan, is repaid.

(3) In this paragraph “employer shares” means shares that form part of the ordinary share capital of—

(a) B, or

(b) if B is a company and is a member of a group of companies at the time the shares are acquired, any other company which is a member of that group at that time.

(4) Sub-paragraph (6) applies if—

(a) apart from sub-paragraph (1), Chapter 2 of Part 7A would apply by reason of the relevant step mentioned in sub-paragraph (1), and

(b) at the end of the relevant period, an amount of the loan, or quasi-loan, is outstanding.

(5) In this paragraph “the relevant period” means the period of 12 months beginning with the day on which A ceases to hold the shares.

(6) Part 7A of ITEPA 2003 has effect as if—

(a) a relevant step within paragraph 1 were taken by reason of making a loan, or quasi-loan, of an amount equal to the amount of the loan, or quasi-loan, outstanding at the end of the relevant period, and

(b) the relevant step were taken on the day after the end of the relevant period.

PART 4 — Supplementary provision

Duty to provide loan balance information to B

36

(1) This paragraph applies where—

(a) a person (“P”) has made a loan, or a quasi-loan, to a relevant person,

(b) the loan or quasi-loan was made on or after 9 December 2010, and

(i) on or after 17 March 2016, and

(ii) before the end of 5 April 2019.

(2) Each of A and P must ensure that the loan charge information (see paragraph 35D) in relation to the loan or quasi-loan is provided to B before the end of 15 April 2019.

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

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

(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

(7) “Loan”, “quasi-loan” and “outstanding” have the same meaning for the purposes of this paragraph as they have for the purposes of paragraph 1.

Double taxation

37

(1) Sub-paragraph (2) applies where—

(a) P is treated as taking a relevant step by paragraph 1 by reason of a loan made to a relevant person, and

(b) the loan is an employment-related loan (within the meaning of Chapter 7 of Part 3 of ITEPA 2003).

(2) The effect of section 554Z2(2)(a) of ITEPA 2003 (value of relevant step to count as employment income: application of Part 7A instead of the benefits code) is that the loan is not be treated as a taxable cheap loan for the purposes of Chapter 7 of Part 3 of that Act for—

(a) the tax year in which the relevant step is treated as being taken, and

(b) any subsequent tax year.

38

In section 554Z2 of ITEPA 2003, at the end insert—

(4) See paragraph 37 of Schedule 11 to F(No. 2)A 2017 for provision about the effect of subsection (2)(a) in a case in which the relevant step is within paragraph 1 of that Schedule.

Remittance basis

39

Part 7A of ITEPA 2003 is amended as follows.

40

(1) Section 554Z9 (remittance basis: A does not meet section 26A requirement) is amended in accordance with this paragraph.

(2) In subsection (1), for “Subsection (2) applies” substitute “ Subsections (2) and (2A) apply ”.

(3) In subsection (1A), for “subsection (2) does not apply” substitute “ subsections (2) and (2A) do not apply ”.

(4) At the beginning of subsection (2) insert “ Except in a case within subsection (2A), ”.

(5) After subsection (2) insert—

(2A) Where the relevant step is within paragraph 1 of Schedule 11 to F(No. 2)A 2017, A's employment income by virtue of section 554Z2(1), or the relevant part of it, is “taxable specific income” in the tax year in which the relevant step is treated as being taken so far as the income is remitted to the United Kingdom in that tax year or in any previous tax year.

(6) In subsection (3) for “this purpose” substitute “ the purposes of subsections (2) and (2A) ”.

(7) In subsection (5)—

(a) in the words before paragraph (a), for “subsection (2)” substitute “ subsection (2) or (2A) ”;

(b) in the words after paragraph (d)—

(i) for “subsection (2)” substitute “ subsection (2) or (2A) ”;

(ii) for “that subsection” substitute “ subsection (2) or (2A) (as the case may be) ”.

41

(1) Section 554Z10 (remittance basis: A meets section 26A requirement) is amended in accordance with this paragraph.

(2) In subsection (1) for “Subsection (2) applies” substitute “ Subsections (2) and (2A) apply ”.

(3) At the beginning of subsection (2) insert “ Except in a case within subsection (2AA), ”.

(4) After subsection (2) insert—

(2AA) Where the relevant step is within paragraph 1 of Schedule 11 to F(No. 2)A 2017, the overseas portion of (as the case may be)— (a) A's employment income by virtue of section 554Z2(1), or (b) the relevant part of A's employment income by virtue of that section, is “taxable specific income” in the tax year in which the relevant step is treated as being taken so far as the overseas portion is remitted to the United Kingdom in that tax year or in any previous tax year.

42

(1) Section 554Z11 (remittance basis: supplementary) is amended in accordance with this paragraph.

(2) In subsection (4), for “554Z9(2) or 554Z10(2)” substitute “ 554Z9(2) or (2A) or 554Z10(2) or (2AA) ”.

(3) In subsection (5), for “554Z9(2) or 554Z10(2)” substitute “ 554Z9(2) or (2A) or 554Z10(2) or (2AA) ”.

(4) In subsection (6), for “554Z9(2) or 554Z10(2)” substitute “ 554Z9(2) or (2A) or 554Z10(2) or (2AA) ”.

43

(1) Section 554Z11A (temporary non-residents) is amended in accordance with this paragraph.

(2) In subsection (2)—

(a) after “554Z9(2)” insert “ or (2A) ”;

(b) after “554Z10(2)” insert “ or (2AA) ”.

(3) In subsection (3)(d)(i), for “554Z9(2) or 554Z10(2)” substitute “ 554Z9(2) or (2A) or 554Z10(2) or (2AA) ”.

Interpretation

44

(1) In this Schedule, “tax avoidance arrangement” has the same meaning as it has for the purposes of Part 7A of ITEPA 2003 (see section 554Z(13) to (15) of that Act).

(2) Section 554Z(16) (determining whether a step is connected with a tax avoidance arrangement) applies for the purposes of this Schedule as it applies for the purposes of Part 7A of ITEPA 2003.

45

See section 554A(1)(a) and 554AA(1)(a) of ITEPA 2003 for the meaning of “A” and “B”.

PART 5 — Consequential amendments

ITEPA 2003

46

(1) ITEPA 2003 is amended in accordance with this paragraph.

(2) In section 554A(2) (meaning of “relevant step”), after “or 554D” insert “ , or paragraph 1 of Schedule 11 to F(No. 2)A 2017 ”.

(3) In section 554A(4) (relevant step taken on or after A's death), in paragraph (a) after “section 554B taken” insert “ , or a relevant step within paragraph 1 of Schedule 11 to F(No.2)A 2017 which is treated as being taken, ”.

(4) In section 554Z(9) (interpretation: reference to definition of “relevant step”), at the end insert “ , but see also Schedule 11 to F(No. 2)A 2017 ”.

(5) In section 554Z(10) (interpretation: relevant step which involves a sum of money) omit “or” at the end of paragraph (b) and after paragraph (c) insert

, or (d) a step within paragraph 1 of Schedule 11 to F(No. 2)A 2017.

(6) In section 554Z5 of ITEPA 2003 (overlap with money or asset subject to earlier tax liability), at the end insert—

(12) See paragraphs 4(5) and (6) and 12(4) and (5) of Schedule 11 of F(No. 2)A 2017) for provision about the effect of subsection (3) in certain cases where the relevant step is within paragraph 1 of that Schedule.

FA 2011

47

In paragraph 59 of Schedule 2 to FA 2011 (transitional provision relating to Part 7A of ITEPA 2003), in sub-paragraph (1)(a), after “ITEPA 2003” insert “ or paragraph 1 of Schedule 11 to F(No. 2)A 2017 ”.

SCHEDULE 12

Application of sections 23A to 23H of ITTOIA 2005 in relation to loans etc. outstanding on 5 April 2019

1

(1) A loan or quasi-loan in relation to which sub-paragraph (2) applies is to be treated for the purposes of sections 23A to 23H of ITTOIA 2005 as a relevant benefit that arises immediately before the end of 5 April 2019.

(2) This sub-paragraph applies in relation to a loan or a quasi-loan if—

(a) the loan or quasi-loan was made—

(i) on or after 9 December 2010, and

(ii) before 6 April 2017, and

(b) an amount of the loan or quasi-loan is outstanding immediately before the end of 5 April 2019.

(3) Where section 23E of ITTOIA 2005 applies and T has not made an election for the purposes of sub-paragraph (3A) in relation to a relevant benefit which is a loan or quasi-loan in relation to which sub-paragraph (2) applies, section 23E has effect—

(a) as if the “relevant benefit amount” were the amount of the loan or quasi-loan that is outstanding at the time the relevant benefit is treated as arising, and

(b) where T ceases to carry on the relevant trade before the tax year in which the relevant benefit is treated as arising, as if section 23E(1)(b) were omitted and as if section 23E(1) provided that the relevant benefit amount is treated for income tax purposes as a post-cessation receipt of the trade received in that tax year.

(3A) Where section 23E of ITTOIA 2005 applies in relation to a relevant benefit which is a loan or quasi-loan in relation to which sub-paragraph (2) applies and T has made an election for the purposes of this sub-paragraph, section 23E has effect—

(a) as if the “relevant benefit amount” were one third of the amount of the loan or quasi-loan that is outstanding at the time the relevant benefit is treated as arising,

(b) as if section 23E(1)(a) specified the tax year in which the relevant benefit is treated as arising and each of the two subsequent tax years, and

(c) where T ceases to carry on the relevant trade before any tax year so specified in section 23E(1)(a), as if section 23E(1)(b) were omitted and as if section 23E(1) provided that the relevant benefit amount is to be treated for income tax purposes as a post-cessation receipt of the trade received in that tax year.

(3B) An election for the purposes of sub-paragraph (3A)—

(a) may be made at any time before 1 October 2020, and

(b) may be made at a later time if an officer of Revenue and Customs allows it.

(3C) But a person who is under a duty imposed by paragraph 22 of this Schedule or paragraph 35C of Schedule 11 may not make an election for the purposes of sub-paragraph (3A) until that duty has been complied with.

(3D) An election for the purposes of sub-paragraph (3A) may not be revoked.

(3E) A person who has made an election for the purposes of paragraph 1A of Schedule 11 is to be treated as having made an election for the purposes of sub-paragraph (3A) of this paragraph.

(3F) The Commissioners for Her Majesty’s Revenue and Customs may by regulations provide that sub-paragraph (3B)(a) applies to a specified class of persons as if the reference to 1 October 2020 were to such later date as is specified.

(3G) In sub-paragraph (3F) “specified” means specified in the regulations.

(4) This paragraph is subject to paragraphs 19 and 20 (accelerated payments).

(5) For the purposes of this paragraph, whether an amount of a loan or quasi-loan is outstanding at a particular time—

(a) is to be determined in accordance with the following provisions of this Schedule, and

(b) does not depend on the loan or quasi-loan subsisting at that time.

Meaning of “loan”, “quasi-loan” and “approved repayment date”

2

(1) In this Schedule “loan” includes—

(a) any form of credit;

(b) a payment that is purported to be made by way of a loan.

(2) For the purposes of paragraph 1, a person (“P”) makes a “quasi-loan” to T if (and when) P acquires a right (the “acquired debt”)—

(a) which is a right to a payment or a transfer of assets, and

(b) in respect of which the condition in sub-paragraph (3) is met.

(3) The condition is met in relation to a right if there is a connection (direct or indirect) between the acquisition of the right and—

(a) a payment made, by way of a loan or otherwise, to T, or

(b) a transfer of assets to T.

(4) Where a loan or a quasi-loan made to T is replaced, directly or indirectly, by another loan (the “replacement loan”), references in paragraph 1 to the loan are references to the replacement loan.

(5) Where a loan or a quasi-loan made to T is replaced, directly or indirectly, by another quasi-loan (the “replacement quasi-loan”), references in paragraph 1 to the quasi-loan are references to the replacement quasi-loan.

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

(7) In this paragraph and in paragraphs 3, 9, 10, 19 and 20—

(a) “T” is the person mentioned in section 23A(2) of ITTOIA 2005,

(b) references to T include references to a person who is or has been connected with T, and

(c) for that purpose, section 993 of ITA 2007 (meaning of “connected”) applies for the purposes of this Schedule but as if subsection (4) of that section were omitted.

Meaning of “outstanding”: loans

3

(1) An amount of a loan is “outstanding” for the purposes of paragraph 1 if the relevant principal amount exceeds the repayment amount.

(2) In sub-paragraph (1) “relevant principal amount”, in relation to a loan, means the total of—

(a) the initial principal amount lent, and

(b) any sums that have become principal under the loan, otherwise than by capitalisation of interest.

(3) In sub-paragraph (1) “repayment amount”, in relation to a loan, means the total of—

(a) the amount of principal under the loan that has been repaid before 5 December 2016, and

(b) payments in money made by T on or after 5 December 2016 by way of repayment of principal under the loan.

(4) A payment is to be disregarded for the purposes of sub-paragraph (3)(b) if there is any connection (direct or indirect) between the payment and a tax avoidance arrangement (other than the arrangement in pursuance of which the loan was made).

(5) In this paragraph and in paragraph 9, “tax avoidance arrangement” means an arrangement which has a tax avoidance purpose.

(6) For the purposes of sub-paragraph (5), an arrangement has a tax avoidance purpose if sub-paragraph (7) applies to a person who is a party to the arrangement.

(7) This sub-paragraph applies to a person if the main purpose, or one of the main purposes, of the person entering into the arrangement is the avoidance of tax.

(8) The following paragraphs apply for the purpose of determining whether any payment is connected with a tax avoidance arrangement—

(a) a payment is connected with a tax avoidance arrangement if (for example) the payment is made (wholly or partly) in pursuance of—

(i) the tax avoidance arrangement, or

(ii) an arrangement at one end of a series of arrangements with the tax avoidance arrangement being at the other end, and

(b) it does not matter whether the person making the payment is unaware of the tax avoidance arrangement.

Meaning of “outstanding”: loans in currencies other than sterling

4

(1) In paragraphs 5 to 8 “the loan currency”, in relation to a loan, means the currency in which the initial principal amount of the loan is denominated (whether or not that amount is paid in that currency).

(2) For the purposes of paragraphs 5 to 8, the value of an amount in a particular currency is to be determined by reference to an appropriate spot rate of exchange.

5

(1) This paragraph applies in relation to a loan where the loan currency is a currency other than sterling.

(2) But this paragraph does not apply if paragraph 8 applies in relation to the loan.

(3) The amount of the loan that is outstanding, at the relevant time, is to be calculated in sterling as follows—

Step 1 Calculate, in the loan currency, the amount that is outstanding at that time.

Step 2 Take the value in sterling, at that time, of that amount.

(4) For the purposes of this paragraph and paragraph 8, the “relevant time” in relation to a loan is the time immediately before—

(a) the end of the approved repayment date, if the loan is an approved fixed term loan on 5 April 2019, or

(b) the end of 5 April 2019 in any other case.

(5) See paragraph 6 for provision about repayments made in a currency other than the loan currency.

Repayments in currencies other than the loan currency

6

(1) This paragraph applies in relation to a loan where—

(a) payments in money are made by way of repayment of principal under the loan, and

(b) some or all of the payments are made in a currency other than the loan currency.

(2) But this paragraph does not apply if paragraph 8 applies in relation to the loan.

(3) For the purposes of calculating the repayment amount in relation to the loan, the amount of each of the payments referred to in sub-paragraph (1)(b) is an amount equal to its value in the loan currency on the date it is made.

Loans made in a depreciating currency

7

(1) Paragraph 8 applies in relation to a loan where—

(a) the loan currency is a currency other than sterling, and

(b) it is reasonable to suppose that the main reason, or one of the main reasons, for the loan being made in that currency is that the loan currency is expected to depreciate as against sterling during the loan period.

(2) The “loan period”, in relation to a loan, is the period—

(a) beginning at the time the loan is made, and

(b) ending with the time by which, under the terms of the loan, the whole of the loan is to be repaid.

8

(1) Where this paragraph applies in relation to a loan—

(a) paragraphs 5 and 6 do not apply in relation to the loan, and

(b) sub-paragraphs (2) to (5) apply for the purposes of calculating the amount of the loan that is outstanding at the relevant time (as defined in paragraph 5(4)).

(2) The relevant principal amount, in relation to the loan, is an amount equal to the total of—

(a) the value in sterling, at the reference date, of the initial principal amount lent, and

(b) the value in sterling, at the reference date, of any sums that become principal under the loan, otherwise than by capitalisation of interest.

(3) The “reference date”—

(a) in relation to an amount within sub-paragraph (2)(a), means the date on which the loan is made, and

(b) in relation to a sum within sub-paragraph (2)(b), means the date on which the sum becomes principal.

(4) The repayment amount, in relation to the loan, is an amount equal to the total of—

(a) the amount of principal under the loan that has been repaid in sterling, and

(b) where payments are made, in a currency other than sterling, by way of repayment of principal under the loan, the amount equal to the sterling value of the payments.

(5) The “sterling value” of a payment is its value in sterling on the date it is made.

Meaning of outstanding: “quasi-loans”

9

(1) An amount of a quasi-loan is outstanding for the purposes of paragraph 1 if the initial debt amount exceeds the repayment amount.

(2) In sub-paragraph (1), “initial debt amount” means the total of—

(a) an amount equal to the value of the acquired debt (see paragraph 2(2)), and

(b) where P subsequently acquires a further right (the “additional debt”) to a payment, or transfer of assets, in connection with the payment mentioned in paragraph 2(3)(a) or (as the case may be) the transfer mentioned in paragraph 2(3)(b), an amount equal to the value of the additional debt.

(3) For the purposes of sub-paragraph (2)—

(a) where the acquired debt is a right to payment of an amount, the “value” of the debt is that amount,

(b) where the additional debt is a right to payment of an amount, the “value” of the debt is that amount, but is nil if the additional debt accrued to P by the capitalisation of interest on the acquired debt or another additional debt, and

(c) where the acquired debt or additional debt is a right to a transfer of assets, the “value” of the debt is an amount equal to—

(i) the market value of the assets at the time the right is acquired (or the value of the right at that time if the assets are non-fungible and not in existence at that time), or

(ii) if higher, the cost of the assets at that time.

(4) In sub-paragraph (1), “repayment amount”, in relation to a quasi-loan, means the total of—

(a) the amount (if any) by which the initial debt amount has been reduced (by way of repayment) before 5 December 2016,

(b) payments in money (if any) made by T on or after 5 December 2016 by way of repayment of the initial debt amount, and

(c) if the acquired debt or additional debt is a right to a transfer of assets, and the assets have been transferred, an amount equal to the market value of the assets at the time of the transfer.

(5) A payment or transfer is to be disregarded for the purposes of sub-paragraph (4)(b) or (c) if there is any connection (direct or indirect) between the payment or transfer and a tax avoidance arrangement (other than the arrangement under which the quasi-loan was made).

(6) In this paragraph, “market value” has the same meaning as it has for the purposes of TCGA 1992 by virtue of Part 8 of that Act.

Meaning of “outstanding”: quasi-loans in currencies other than sterling

10

(1) Paragraphs 11 to 14 apply where P makes a quasi-loan to T by reason of acquiring a right to a payment in a particular currency (the “quasi-loan currency”).

(2) For the purposes of paragraphs 11 to 14, the value of an amount in a particular currency is to be determined by reference to an appropriate spot rate of exchange.

11

(1) This paragraph applies in relation to the quasi-loan if the quasi-loan currency is a currency other than sterling.

(2) But this paragraph does not apply if paragraph 14 applies in relation to the quasi-loan.

(3) The amount of the quasi-loan that is outstanding, at the relevant time, is to be calculated in sterling as follows—

Step 1 Calculate, in the quasi-loan currency, the amount that is outstanding at that time.

Step 2 Take the value in sterling, at that time, of that amount.

(4) For the purposes of this paragraph and paragraph 14, the “relevant time” in relation to a quasi-loan is the time immediately before the end of 5 April 2019.

(5) See paragraph 12 for provision about repayments made in a currency other than the quasi-loan currency.

Repayments in currencies other than the quasi-loan currency

12

(1) This paragraph applies in relation to the quasi-loan if—

(a) payments in money are made by way of repayment of the initial debt amount, and

(b) some or all of the payments are made in a currency other than the quasi-loan currency.

(2) But this paragraph does not apply if paragraph 14 applies in relation to the quasi-loan.

(3) For the purposes of calculating the repayment amount in relation to the quasi-loan, the amount of each of the payments referred to in sub-paragraph (1)(b) is an amount equal to its value in the quasi-loan currency on the date it is made.

Quasi-loans made in a depreciating currency

13

(1) Paragraph 14 applies in relation to the quasi-loan if—

(a) the quasi-loan currency is a currency other than sterling, and

(b) it is reasonable to suppose that the main reason, or one of the main reasons, for the quasi-loan being made in that currency is that the quasi-loan currency is expected to depreciate as against sterling during the quasi-loan period.

(2) The “quasi-loan period”, in relation to a quasi-loan, is the period—

(a) beginning at the time the quasi-loan is made, and

(b) ending with the time by which, under the terms of the quasi-loan, the whole of the quasi-loan is to be repaid.

14

(1) Where this paragraph applies in relation to the quasi-loan—

(a) paragraphs 11 and 12 do not apply in relation to the quasi-loan, and

(b) sub-paragraphs (2) to (5) apply for the purposes of calculating the amount of the quasi-loan that is outstanding at the relevant time (as defined in paragraph 11(4)).

(2) The initial debt amount, in relation to the quasi-loan, is an amount equal to the total of—

(a) the value in sterling, at the reference date, of the acquired debt, and

(b) the value in sterling, at the reference date, of any additional debt.

(3) The “reference date”, in relation to a right within sub-paragraph (2)(a) or (2)(b), means the date on which P acquires it.

(4) The repayment amount, in relation to the quasi-loan, is an amount equal to the total of—

(a) the amount of the initial debt amount that has been repaid in sterling, and

(b) where payments are made, in a currency other than sterling, by way of repayment of the initial debt amount, the amount equal to the sterling value of the payments.

(5) The “sterling value” of a payment is its value in sterling on the date it is made.

Meaning of “approved fixed term loan”

15

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

Approval: application to HMRC

16

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

Approval: qualifying payments condition

17

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

Approval: commercial terms condition

18

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

Accelerated payments

19

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Finance (No. 2) Act 2017

SCHEDULE 9

Capital gains tax: settlements: value of benefit conferred by certain capital payments

1

Income tax: transfer of assets abroad: value of certain benefits

2

Commencement

3

SCHEDULE 10

Non-excluded overseas property

1

Consequential and supplementary amendments

2

3

4

5

6

7

8

Commencement

9

Transitional provision

10

11

SCHEDULE 11

PART 1 — Application of Part 7A of ITEPA 2003

Relevant step

1

Meaning of “loan”, “quasi-loan” and “approved repayment date”

2

Meaning of “outstanding”: loans

3

4

5

Meaning of “outstanding”: loans in currencies other than sterling

6

7

Repayments in currencies other than the loan currency

8

Loans made in a depreciating currency

9

10

Meaning of “outstanding”: quasi-loans

11

12

13

Meaning of “outstanding”: quasi-loans in currencies other than sterling

14

15

Repayments in currencies other than the quasi-loan currency

16

Quasi-loans made in a depreciating currency

17

18

Meaning of “approved fixed term loan”

19

PART 2 — Accelerated payments

Application to HMRC

20

Qualifying payments condition

21

Commercial terms condition

22

Accelerated payments

23

24

PART 3 — Exclusions

Commercial transactions

25

26

Transfer of employment-related loans

27

28

Transactions under employee benefit packages

29

30

Cases involving employment-related securities

31

32

Employee car ownership schemes