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Finance Act 2018

Type Public General Act

Publication 2018-03-15

Last updated 2023-07-11

State In force

Department Statute Law Database

Source legislation.gov.uk

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Reform history JSON API

(b) in the definition of “EC type-approval certificate”, for “Council Directive 70/156/EEC, as amended” substitute “ Council Directive 70/156/EEC or an EC type-approval certificate within the meaning of Council Directive 2007/46/EC ”.

(12) The amendments made by subsections (9) to (11) have effect for the tax year 2017-18 and subsequent tax years.

Final

Interpretation

49

In this Act the following abbreviations are references to the following Acts.

Short title

50

This Act may be cited as the Finance Act 2018.

SCHEDULE 1

PART 1 — Arrangements relating to earnings charged to tax

1

In section 554A of ITEPA 2003 (employment income provided through third parties: application of Chapter 2 of Part 7A), after subsection (5) insert—

(5A) Subsections (5B) and (5C) apply where— (a) a payment to a person other than A, or to A as a trustee, is of earnings from A's employment with B, and (b) the earnings are, in whole or part, charged to tax under the employment income Parts otherwise than by virtue of this Part, and for this purpose it does not matter whether all or some only or none of the tax is paid (but see sections 554Z5 and 554Z11B). (5B) For the purposes of subsection (5C), an arrangement is a “redirected-earnings arrangement” if it (wholly or partly) covers or relates to redirected earnings; and for the purposes of this subsection and subsection (5C) “redirected earnings” means— (a) the payment mentioned in subsection (5A)(a), or (b) any sum or other property which (directly or indirectly)— (i) represents, or (ii) is derived from, that payment. (5C) The circumstances mentioned in subsection (5A)— (a) do not prevent a redirected-earnings arrangement being within subsection (1)(b), and (b) do not prevent rewards or recognition or loans being in connection with A's employment with B for the purposes of subsection (1)(c) where there is use of redirected earnings for the provision of the whole, or part, of the rewards or recognition or loans.

PART 2 — Close companies

Application of Chapter 2 of Part 7A to ITEPA 2003

2

In Part 7A of ITEPA 2003 (employment income provided through third parties), after section 554A (application of Chapter 2) insert—

(554AA) (1) Chapter 2 applies if— (a) there is an arrangement (“the relevant arrangement”) to which an individual (“A”) is a party or which otherwise (wholly or partly) covers or relates to A, (b) it is reasonable to suppose that, in essence— (i) the relevant arrangement, or (ii) the relevant arrangement so far as it covers or relates to A, is (wholly or partly) a means of providing, or is otherwise concerned (wholly or partly) with the provision of, A-linked payments or benefits or loans, (c) a close company (“B”) enters into a relevant transaction (see section 554AB), (d) it is reasonable to suppose that, in essence— (i) the relevant transaction is entered into (wholly or partly) in pursuance of the relevant arrangement, or (ii) there is some other connection (direct or indirect) between the relevant transaction and the relevant arrangement, (e) at the time B enters into the relevant transaction, or at any earlier time in the 3 years ending with the date of the transaction, A is a director or an employee of B, (f) at the time B enters into the relevant transaction, or at any earlier time in the 3 years ending with the date of the transaction, A has a material interest in B (see section 554AE), (g) a relevant step is taken by a relevant third person, (h) it is reasonable to suppose— (i) that the sum of money or asset which is the subject of the relevant step represents (directly or indirectly), or has arisen or derives from, the sum of money or asset which is the subject of the relevant transaction, or (ii) that the sum of money or asset which is the subject of the relevant transaction represents (directly or indirectly), or has arisen or derives from, the sum of money or asset which is the subject of the relevant step, and (i) there is a time in the relevant period when the main purpose, or one of the main purposes, of operating, implementing, maintaining or terminating the relevant arrangement so far as it covers or relates to— (i) the relevant transaction, and the relevant step so far as related to the relevant transaction, or (ii) the relevant step, and the relevant transaction so far as related to the relevant step, is the avoidance of? income tax, national insurance contributions, corporation tax or a charge to tax under section 455 of CTA 2010. (2) In this section “close company” includes a company that would be a close company but for section 442(a) of CTA 2010 (exclusion of companies not resident in the United Kingdom). (3) For the purposes of subsection (1)(b), a payment or benefit or loan is “A-linked” if— (a) it is being provided to A, or a person chosen by A or within a class of persons chosen by A, (b) it is being provided to a person on A's behalf, or at A's direction or request, or (c) it is being provided to a person linked with A and it is reasonable to suppose that the main reason, or one of the main reasons, for it being provided is that the person is linked with A. (4) For the purposes of subsection (1)(i), the “relevant period” consists of the time of the relevant transaction, the time of the relevant step, the times around each of those two times, and any other times between those two times. (5) Subsections (6) and (7) apply where— (a) a payment to a person other than A, or to A as a trustee, is of earnings from— (i) A's employment with B, or (ii) A's office as a director of B, and (b) the earnings are, in whole or part, charged to tax under the employment income Parts otherwise than by virtue of this Part, and for this purpose it does not matter whether all or some only or none of the tax is paid (but see sections 554Z5 and 554Z11B). (6) For the purposes of subsection (7), an arrangement is a “redirected-earnings arrangement” if it (wholly or partly) covers or relates to redirected earnings; and for the purposes of this subsection and subsection (7) “redirected earnings” means— (a) the payment mentioned in subsection (5)(a), or (b) any sum or other property which (directly or indirectly)— (i) represents, or (ii) is derived from, that payment. (7) The circumstances mentioned in subsection (5)— (a) do not prevent a redirected-earnings arrangement being within subsection (1)(a), (b) do not prevent payments or benefits or loans being A-linked for the purposes of subsection (1)(b) where there is use of redirected earnings for the provision of the whole, or part, of the payments or benefits or loans, and (c) do not prevent the making of the payment mentioned in subsection (5)(a) being entry into a relevant transaction. (8) In this section and in section 554AB “relevant third person” means— (a) A acting as a trustee, (b) B acting as a trustee, or (c) any person other than A or B. (9) See also sections 554AD to 554AF (further interpretation and supplementary provision). (554AB) (1) For the purposes of section 554AA(1), B enters into a relevant transaction if— (a) B enters into a transaction within subsection (2), and (b) the transaction is not an excluded transaction (see section 554AC). (2) B enters into a transaction within this subsection if B— (a) pays a sum of money to a relevant third person (see section 554AA(8)), (b) acquires a right to a payment of a sum of money, or to a transfer of assets, where there is a connection (direct or indirect) between the acquisition of the right and— (i) a payment made, by way of a loan or otherwise, to a relevant third person, or (ii) a transfer of assets to a relevant third person, (c) releases or writes off the whole or a part of— (i) a loan made to a relevant third person, or (ii) an acquired right of the kind mentioned in paragraph (b), (d) transfers an asset to a relevant third person, (e) takes a step by virtue of which a third person acquires an asset within subsection (4), (f) makes available a sum of money or asset for use, or makes it available under an arrangement which permits its use— (i) as security for a loan made or to be made to a relevant third person, or (ii) otherwise as security for the meeting of any liability, or the performance of any undertaking, which a relevant third person has or will have, or (g) grants to a relevant third person a lease of any premises the effective duration of which is likely to exceed 21 years. (3) For the purposes of subsection (2) “loan” includes— (a) any form of credit, and (b) a payment that is purported to be made by way of a loan. (4) The following assets are within this subsection— (a) securities, (b) interests in securities, and (c) securities options, as defined in section 420 for the purposes of Chapters 1 to 5 of Part 7; and in subsection (2)(e) “acquires” is to be read in accordance with section 421B(2)(a). (5) For the purposes of subsection (2)(f)— (a) references to making a sum of money or asset available are references to making it available in any way, however informal, (b) it does not matter if the relevant third person has no legal right to have the sum of money or asset used as mentioned, and (c) it does not matter if the sum of money or asset is not actually used as mentioned. (6) Subsections (7) and (8) apply, for the purposes of subsection (2)(g), for the purpose of determining the likely effective duration of a lease of any premises granted to a relevant third person (“the original lease”). (7) If there are circumstances which make it likely that the original lease will be extended for any period, the effective duration of the original lease is to be determined on the assumption that the original lease will be so extended. (8) Further, if— (a) the relevant third person, A or a person linked with A is, or is likely to become, entitled to a later lease, or the grant of a later lease, of the same premises, or (b) it is otherwise likely that the relevant third person, A or a person linked with A will be granted a later lease of the same premises, the original lease is to be treated as continuing until the end of the later lease (and subsection (7) also applies for the purpose of determining the duration of the later lease). (9) In this section “lease” and “premises” have the same meaning as they have in Chapter 4 of Part 3 of ITTOIA 2005. (554AC) (1) In section 554AB “excluded transaction” means— (a) a distribution made by B, (b) a transaction that— (i) is entered into by B in the ordinary course of B's business, and (ii) is on terms that would have been made between persons not connected with each other dealing at arm's length, or (c) a transaction entered into in order to facilitate the disposal, on terms that would have been made between persons not connected with each other dealing at arm's length, of shares in B. (2) But the distribution or transaction is not an “excluded transaction” if the avoidance of tax is the main purpose, or one of the main purposes, of (as the case may be)— (a) making the distribution, or (b) the transaction. (3) Part 23 of CTA 2010 has effect for determining the meaning of “distribution” in this section as if— (a) section 1000(1) of CTA 2010 included a paragraph specifying any distribution made in a winding up of the company, and (b) sections 1030 to 1030B of that Act were omitted. (554AD) (1) For the purposes of section 554AA(1)(e) “director” means— (a) in relation to a company whose affairs are managed by a board of directors or similar body, a member of that body, (b) in relation to a company whose affairs are managed by a single director or similar person, that director or person, and (c) in relation to a company whose affairs are managed by the members themselves, a member of the company, and includes any person in accordance with whose directions or instructions the directors of the company (as defined in this subsection) are accustomed to act. (2) For the purposes of subsection (1) a person is not to be regarded as a person in accordance with whose directions or instructions the directors of the company are accustomed to act merely because the directors act on advice given by that person in a professional capacity. (3) For the purposes of section 5 as it applies to this Part, a person who is a director within the meaning of subsection (1) is to be treated (where it would not otherwise be the case) as holding an office. (554AE) (1) Section 68 (meaning of “material interest” in a company) applies for the purposes of section 554AA and, subject to subsection (2), does so as it applies for the purposes of the benefits code. (2) In section 68 as it applies for the purposes of section 554AA— (a) each of the following is to be treated as “an associate” of A— (i) a person (“the promoter”) who, for the purposes of Part 5 of FA 2014, is carrying on business as a promoter in relation to the relevant arrangement, and (ii) where the promoter is a company, any company which is an associated company of the promoter; (b) “participator”— (i) in relation to a close company, means a person who is a participator in relation to the company for the purposes of section 455 of CTA 2010 (see sections 454 and 455(5) of that Act), and (ii) in relation to a company which would be a close company if it were a UK resident company, means a person who would be such a participator if the company were a close company. (3) In subsection (2)(a)(ii) “associated company” has the same meaning as it has for the purposes of Part 10 of CTA 2010 (see section 449 of that Act). (554AF) (1) Section 554AA(1) is subject to subsection (2) and sections 554E to 554Y. (2) Chapter 2 does not apply by reason of section 554AA(1) in relation to a relevant step taken on or after A's death if— (a) the relevant step is within section 554B, or (b) the relevant step is within section 554C by virtue of subsection (1)(ab) of that section. (3) In section 554AA(1)(a) and (b) references to A include references to a person linked with A. (4) For the purposes of section 554AA(1)(b) it does not matter if the relevant arrangement does not include details of the steps which will or may be taken in connection with providing, in essence, payments or benefits or loans as mentioned (for example, details of any sums of money or assets which will or may be involved or details of how or when or by whom or in whose favour any step will or may be taken). (5) For the purposes of section 554AA(1)(b) and (d) in particular, all relevant circumstances are to be taken into account in order to get to the essence of the matter.

Double taxation

3

(1) In section 554Z2 of ITEPA 2003 (value of relevant step to count as employment income), after subsection (1) insert—

(1AA) But subsection (1) is subject to section 554Z2A (close companies).

(2) After section 554Z2 of ITEPA 2003, insert—

(554Z2A) (1) Section 554Z2(1) does not apply in the case of a relevant step if— (a) this Chapter applies in the case of the relevant step only by reason of section 554AA (close companies), (b) the relevant step is a step within section 554B, 554C or 554D, (c) the relevant step gives rise to a charge to tax under either— (i) section 455 of CTA 2010 by virtue of section 459 of that Act (loans treated as made to participator), or (ii) section 415 of ITTOIA 2005 (release of loan to participator in a close company), and (d) in a case within paragraph (c)(i), either the payment condition or the consent condition is met in relation to the charge under section 455 of CTA 2010. (2) The payment condition is met in relation to a charge to tax under section 455 of CTA 2010 if— (a) the net section 455 charge is paid in full on or before the due date, or (b) the net section 455 charge is nil. (3) The “net section 455 charge” means the amount of the charge to tax under section 455 of CTA 2010 less the amount of section 458 relief from that charge. (4) In subsection (3) “section 458 relief” means relief given under section 458 of that Act— (a) in respect of a repayment made, or a release or writing-off occurring, on or before the due date, and (b) on a claim made on or before the due date. (5) The consent condition is met in relation to a charge to tax under section 455 of CTA 2010 if— (a) the charge to tax is reported, in a company tax return of B's, as required under Schedule 18 to FA 1998 (company tax returns etc), (b) the payment condition is not met in relation to that charge, and (c) an officer of Revenue and Customs considers that section 554Z2(1) should not apply in the case of the relevant step concerned. (6) In this section, references to the “due date” in relation to a charge to tax under section 455 of CTA 2010 are references to the day on which the tax is due and payable (see section 455(3) of CTA 2010).

4

(1) Schedule 11 to F(No.2)A 2017 (employment income provided through third parties: loans etc outstanding on 5 April 2019) is amended as follows.

(2) Before paragraph 37 (but after the italic heading preceding that paragraph) insert—

(36A) (1) Sub-paragraphs (2) to (8) apply if— (a) a person (“P”) would, apart from this paragraph, be treated as taking a relevant step by paragraph 1 by reason of a loan made to a relevant person, and (b) the loan gives rise to a charge to tax under section 455 of CTA 2010 by virtue of section 459 of that Act (loans treated as made to participators). (2) In this paragraph “the key date” means the later of— (a) 5 April 2019, and (b) the day on which the tax referred to in sub-paragraph (1)(b) is due and payable (see section 455(3) of CTA 2010). (3) Paragraph 1(2) has effect as if it treated P as taking the relevant step immediately before the end of the key date, but this is subject to sub-paragraphs (4) and (5). (4) Paragraph 1(1) does not apply in the case of the loan if the payment condition is met. (5) Paragraph 1(1) does not apply in the case of the loan if— (a) the payment condition is not met, (b) the charge to tax mentioned in sub-paragraph (1)(b) is reported, in a company tax return of B's, as required under Schedule 18 to FA 1998 (company tax returns etc), and (c) an officer of Revenue and Customs considers that paragraph 1(1) should not apply in the case of the loan. (6) The payment condition is met if— (a) the net section 455 charge is paid in full on or before the key date, or (b) the net section 455 charge is nil. (7) The “net section 455 charge” is the amount of the tax referred to sub-paragraph (1)(b) less the amount of section 458 relief from that tax. (8) In sub-paragraph (7) “section 458 relief” means relief given under section 458 of CTA 2010— (a) in respect of a repayment made, or a release or writing-off occurring, on or before the key date, and (b) on a claim made on or before the key date.

PART 3 — Amendments consequential on Part 2

ITEPA 2003

5

(1) Part 7A of ITEPA 2003 (employment income provided through third parties) is amended in accordance with this paragraph.

(2) In the italic heading before section 554A, at the end insert “ : main case ”.

(3) In the heading of section 554A, at the end insert “ : main case ”.

(4) In section 554Z(2) (interpretation: “A” and “B”) at the end insert “ or, as the case may be, section 554AA(1) ”.

ITTOIA 2005

6

In section 39(4) of ITTOIA 2005 (meaning of “employee benefit scheme”), for paragraph (a) (but not the “or” following it) substitute—

(a) an arrangement (the “relevant arrangement”) which is— (i) an arrangement within subsection (1)(b) of section 554A of ITEPA 2003 to which subsection (1)(c) of that section applies, or (ii) an arrangement within subsection (1)(b) of section 554AA of ITEPA 2003 to which subsection (1)(c) of that section applies,

CTA 2009

7

In section 1291(4) of CTA 2009 (meaning of “employee benefit scheme”), for paragraph (a) (but not the “or” following it) substitute—

(a) an arrangement (the “relevant arrangement”) which is— (i) an arrangement within subsection (1)(b) of section 554A of ITEPA 2003 to which subsection (1)(c) of that section applies, or (ii) an arrangement within subsection (1)(b) of section 554AA of ITEPA 2003 to which subsection (1)(c) of that section applies,

F(No.2)A 2017

8

(1) Schedule 11 to F(No.2)A 2017 (employment income provided through third parties: loans etc outstanding on 5 April 2019) is amended in accordance with this paragraph.

(2) In paragraph 1 (relevant step)—

(a) in sub-paragraph (3), for “section 554A(1)(e)(i) and (ii)” substitute “ sections 554A(1)(e)(i) and (ii) and 554AA(1)(h)(i) and (ii) ”;

(b) in sub-paragraph (6)—

(i) for “Sub-paragraph (1) is” substitute “ Sub-paragraphs (1) and (2) are ”, and

(ii) at the end insert “ and paragraph 36A (double taxation: close companies) ”.

PART 4 — Loans etc outstanding on 5 April 2019

Information requirement

9

Schedule 11 to F(No.2)A 2017 (employment income provided through third parties: loans etc outstanding on 5 April 2019) is amended in accordance with this Part.

10

After paragraph 35 insert—

(35A) (1) Paragraphs 35B and 35C apply if one of the following conditions is met. (2) The first condition is that— (a) a person (“P”) is treated as taking a relevant step within paragraph 1 immediately before the end of 5 April 2019, and (b) Chapter 2 of Part 7A of ITEPA 2003 applies by reason of that relevant step. (3) The second condition is that— (a) a person (“Q”) has made a loan which is an approved fixed term loan on 5 April 2019, (b) if that day were the approved repayment date in relation to the loan— (i) Q would be treated as taking a relevant step within paragraph 1 immediately before the end of that day, and (ii) Chapter 2 of Part 7A of ITEPA 2003 would apply by reason of that relevant step, and (c) A is living immediately before the end of— (i) 30 September 2019, or (ii) if earlier, the approved repayment date. (4) The third condition is that— (a) paragraph 24(1) applies by reference to a loan, or a quasi-loan, made by a person (“S”) to a relevant person (“R”), (b) R makes an application under paragraph 24(1) for S to be treated as mentioned in paragraph 24(1) in relation to the relevant step concerned, (c) a favourable decision is made on the application before 6 April 2019, (d) that decision is not revoked before 6 April 2019, (e) the first condition is not met, and (f) A is living immediately before— (i) the end of 30 September 2019, or (ii) if earlier, the time given by sub-paragraphs (i) and (ii) of paragraph 24(1)(b). (5) The fourth condition is that— (a) none of the first, second and third conditions is met, and (b) if the date specified in paragraph 1(1)(c) and (2)(b) were 16 March 2016 (and if paragraph 1(2)(a), and the words “in any other case” in paragraph 1(2)(b), were omitted)— (i) a person (“T”) would be treated as taking a relevant step within paragraph 1 immediately before the end of 16 March 2016, and (ii) Chapter 2 of Part 7A of ITEPA 2003 would apply by reason of that relevant step (using, for this purpose, the law that would be used to test whether that Chapter applies to a relevant step taken on 5 April 2019), and (c) A is living immediately before the end of 5 April 2019. (6) Paragraph 35C does not apply in a case where one of the first to fourth conditions is met if— (a) a person agrees, with an officer of Revenue and Customs, terms for the discharge of liability for income tax, (b) the terms cover all liability (if any) under Chapter 2 of Part 7A of ITEPA 2003 by reason of any loan-charge relevant step or result in there being no such liability, and (c) the terms are agreed before 1 October 2019. (7) In sub-paragraph (6)(b) “loan-charge relevant step” means (as the case may be)— (a) the relevant step that P is treated as taking, (b) any relevant step within paragraph 1 that Q is, or has yet to be, treated as taking by reference to the approved fixed term loan mentioned in sub-paragraph (3), (c) any relevant step within paragraph 1 that S is, or has yet to be, treated as taking by reference to the loan or quasi-loan mentioned in sub-paragraph (4), or (d) any relevant step within paragraph 1 that T is, or has yet to be, treated as taking by reference to the loan or quasi-loan by reference to which T would be treated as taking the relevant step mentioned in sub-paragraph (5)(b)(i). (35B) (1) In this paragraph “the appropriate third party” means P, Q, S or T (as the case may be: see paragraph 35A). (2) Sub-paragraph (3) applies if the appropriate third party receives a request from A or A's personal representatives for information specified in the request that is reasonably required for the purpose of complying with paragraph 35C in the case concerned. (3) The appropriate third party must provide A or A's personal representatives— (a) with such of the information as is available to the appropriate third party, and (b) if any of the information is not available to the appropriate third party, with a statement confirming that so much of the information as is not provided is information that is not available to the appropriate third party. (4) The information, and any such statement, must be provided promptly and, in any event, before the end of 30 days beginning with date of receipt of the request. (35C) (1) A, or A's personal representatives, must provide the loan charge information (see paragraph 35D(1)) to the Commissioners for Her Majesty's Revenue and Customs. (2) The loan charge information must be provided— (a) after 5 April 2019, and (b) before 1 October 2019. (3) The loan charge information must be provided in such form and manner as may be specified by, or on behalf of, the Commissioners for Her Majesty's Revenue and Customs. (35D) (1) For the purposes of paragraphs 35C and 36, the “loan charge information” consists of— (a) A's name and, if A's personal representatives are providing the information, their names, (b) the address and telephone number, and e-mail address (if any), of each person providing the information, (c) A's national insurance number (if any), (d) the unique taxpayer reference number (if any) allocated to A by HMRC, (e) if the loan or quasi-loan that is or would be the subject of the relevant step mentioned in paragraph 35A(2)(a) or (4)(b) or (5)(b)(i), or the loan mentioned in paragraph 35A(3)(a), is made to someone other than A, the name of the person to whom it is made, (f) B's name, (g) the name of the relevant arrangement, (h) the reference number (if any) allocated to the relevant arrangement by HMRC under section 311 of FA 2004 (disclosure of tax avoidance schemes: arrangements to be given reference number), (i) any other reference number allocated by HMRC in connection with the relevant arrangement or the relevant step, (j) if a person has agreed terms with an officer of Revenue and Customs for the partial discharge of the liability for income tax arising because of the application of Chapter 2 of Part 7A of ITEPA 2003 by reason of the relevant step that P, Q or S is treated as taking, the date of that agreement and the amount of the liability to which it relates, (k) if a loan is or would be the subject of the relevant step mentioned in paragraph 35A(2)(a) or (4)(b) or (5)(b)(i), or in a case within paragraph 35A(3)(a), the loan payment information (see sub-paragraph (2)), and (l) if a quasi-loan is or would be the subject of the relevant step mentioned in paragraph 35A(2)(a) or (4)(b) or (5)(b)(i), the quasi-loan payment information (see sub-paragraph (3)). (2) The “loan payment information”, in relation to a loan, consists of statements of the following— (a) whether the loan is an approved fixed term loan, (b) the initial principal amount of the loan, (c) the amount that has become principal under the loan, otherwise than by capitalisation of interest, in each relevant tax year, (d) the amount of principal under the loan repaid in each relevant tax year, ignoring any repayments not in money made on or after 17 March 2016, (e) the details of any repayment that is to be disregarded under paragraph 4, (f) the amount of principal under the loan that has been released or written off in each relevant tax year, and (g) whether the liability for income tax arising because of the application of Chapter 2 of Part 7A of ITEPA 2003, or section 188 of that Act, by reason of the release or writing-off has been paid. (3) The “quasi-loan payment information”, in relation to a quasi-loan, consists of statements of the following— (a) the amount equal to the value of the acquired debt, (b) the amount equal to the value of the additional debts acquired in each relevant tax year, (c) the amount by which the initial debt amount has been reduced by way of repayment in each relevant tax year, ignoring any repayments not in money made on or after 17 March 2016, (d) where the acquired debt or an additional debt is a right to a transfer of assets, and the assets have been transferred, the amount of the market value of the assets at the time of the transfer, (e) the details of any repayment that is to be disregarded under paragraph 12, (f) the amount by which the initial debt amount has been reduced by release or writing off in each relevant tax year, and (g) whether the liability for income tax arising because of the application of Chapter 2 of Part 7A of ITEPA 2003, or section 188 of that Act, by reason of the release or writing-off has been paid. (4) In this paragraph “relevant tax year” in relation to a loan, or a quasi-loan, means— (a) the tax year in which the loan or quasi-loan was made, and (b) each subsequent tax year. (5) In sub-paragraph (3), “acquired debt”, “additional debt” and “initial debt amount” have the same meaning as in paragraph 11. (6) In this paragraph and in paragraphs 35G to 35J, “HMRC” means Her Majesty's Revenue and Customs. (35E) The Commissioners for Her Majesty's Revenue and Customs may by regulations amend paragraph 35D so as to— (a) add, remove or amend an entry in a list of information, and (b) make incidental provision. (35F) (1) A person who fails to comply with paragraph 35C is liable to a penalty of £300. (2) Sub-paragraph (3) applies if the failure continues after the date on which a penalty is imposed under sub-paragraph (1) in respect of the failure. (3) The person is liable to a further penalty or penalties not exceeding £60 for each subsequent day, up to a maximum of 90 days, on which the failure continues. (35G) (1) This paragraph applies if— (a) in complying with the duty under paragraph 35C, a person provides inaccurate information, and (b) condition A, B or C is met. (2) Condition A is that the inaccuracy is careless or deliberate. (3) An inaccuracy is careless if it is due to a failure by the person to take reasonable care. (4) Condition B is that the person knows of the inaccuracy at the time the information is provided but does not inform HMRC at that time. (5) Condition C is that the person— (a) discovers the inaccuracy some time later, and (b) fails to take reasonable steps to inform HMRC. (6) The person is liable to a penalty not exceeding £3000. (7) Where the information contains more than one inaccuracy, a penalty is payable for each inaccuracy. (35H) (1) Liability to a penalty under paragraph 35F does not arise if the person satisfies HMRC or (on an appeal notified to the tribunal) the tribunal that there is a reasonable excuse for the failure. (2) For the purposes of this paragraph— (a) an insufficiency of funds is not a reasonable excuse unless attributable to events outside the person's control, (b) where the person relies on any other person to do anything, that is not a reasonable excuse unless the first person took reasonable care to avoid the failure, and (c) where the person had a reasonable excuse for the failure but the excuse has ceased, the person is to be treated as having continued to have the excuse if the failure is remedied without unreasonable delay after the excuse ceased. (35I) (1) Where a person becomes liable for a penalty under paragraph 35F or 35G— (a) HMRC may assess the penalty, and (b) if they do so, they must notify the person. (2) An assessment of a penalty under paragraph 35F must be made before 1 October 2021. (3) An assessment of a penalty under paragraph 35G must be made before 1 October 2023. (35J) (1) A person may appeal against any of the following decisions of an officer of Revenue and Customs— (a) a decision that a penalty is payable by that person under paragraph 35F or 35G, or (b) a decision as to the amount of such a penalty. (2) Notice of an appeal under this paragraph must be given— (a) in writing, (b) before the end of the period of 30 days beginning with the date on which the notification under paragraph 35I was issued, and (c) to HMRC. (3) Notice of an appeal under this paragraph must state the grounds of appeal. (4) On an appeal under sub-paragraph (1)(a) that is notified to the tribunal, the tribunal may confirm or cancel the decision. (5) On an appeal under sub-paragraph (1)(b) that is notified to the tribunal, the tribunal may— (a) confirm the decision, or (b) substitute for the decision another decision that the officer of Revenue and Customs had power to make. (35K) (1) A penalty under paragraph 35F or 35G must be paid— (a) before the end of the period of 30 days beginning with the date on which the notification under paragraph 35I was issued, or (b) if a notice of an appeal against the penalty is given, before the end of the period of 30 days beginning with the date on which the appeal is determined or withdrawn. (2) A penalty under paragraph 35F or 35G may be enforced as if it were income tax charged in an assessment and due and payable.

11

(1) Paragraph 36 (duty to provide loan balance information to B) is amended in accordance with this paragraph.

(2) In sub-paragraph (2) for “loan balance information” substitute “ loan charge information (see paragraph 35D) ”.

(3) Omit sub-paragraphs (3), (5) and (6).

(4) In the italic heading preceding paragraph 36, for “balance” substitute “ charge ”.

PAYE: employee of non-UK employer

12

(1) Section 689 of ITEPA 2003 (PAYE: employee of non-UK employer) is amended in accordance with this paragraph.

(2) In subsection (4), in the words before paragraph (a), after “employee,” insert “ and if the case is not within subsection (4A), ”.

(3) After subsection (4) insert—

(4A) A case is within this subsection if— (a) the section concerned is section 687A or 695A (employment income under Part 7A), and (b) the relevant step concerned is within paragraph 1 of Schedule 11 to F(No. 2)A 2017 (loans etc outstanding on 5 April 2019). (And this section does not apply in a case within this subsection.)

PART 5 — Commencement

13

The amendment made by paragraph 1—

(a) is to be treated as having come into force on 29 November 2017,

(b) has effect for the purposes of the operation of Part 7A of ITEPA 2003 in relation to relevant steps taken on or after 22 November 2017, and

(c) so has effect in the case of payments within the new subsection (5A)(a) whenever made (including ones made before 6 April 2011).

14

The amendments made by paragraphs 2, 3 and 5 of this Schedule in Part 7A of ITEPA 2003 have effect in relation to relevant steps taken on or after 6 April 2018.

15

The amendment made by paragraph 6 of this Schedule in section 39 of ITTOIA 2005 has effect in relation to employee benefit contributions (as defined in that section) made, or to be made, on or after 6 April 2018.

16

The amendment made by paragraph 7 of this Schedule in section 1291 of CTA 2009 has effect in relation to employee benefit contributions (as defined in that section) made, or to be made, on or after 1 April 2018.

SCHEDULE 2

1

In Schedule 12 to F(No.2)A 2017 (trading income provided through third parties: loans etc outstanding on 5 April 2019), after paragraph 20 insert—

(21) (1) Paragraph 22 applies if one of the following conditions is met. (2) The first condition is that— (a) a loan or quasi-loan in relation to which paragraph 1(2) applies is treated as a “relevant benefit” for the purposes of sections 23A to 23H of ITTOIA 2005, and (b) section 23E of ITTOIA 2005 applies in relation to the relevant benefit (see section 23A of that Act). (3) The second condition is that— (a) an application is made under paragraph 20(1) by reference to a loan or quasi-loan in relation to which paragraph 1(2) applies, (b) a favourable decision is made on the application before 6 April 2019, and (c) the first condition is not met in relation to the loan or quasi-loan. (4) Paragraph 22 does not apply in a case if— (a) a person agrees, with an officer of Revenue and Customs, terms for the discharge of liability for income tax arising because of the application of section 23E of ITTOIA 2005, (b) the terms cover all liability (if any) arising because of the application of that section by reference to a loan or quasi-loan in relation to which paragraph 1(2) applies, and (c) the terms are agreed before 1 October 2019. (22) (1) T, or T's personal representatives, must provide the loan charge information (see paragraph 23(1)) to the Commissioners for Her Majesty's Revenue and Customs. (2) The loan charge information must be provided— (a) after 5 April 2019, and (b) before 1 October 2019. (3) The loan charge information must be provided in such form and manner as may be specified by, or on behalf of, the Commissioners for Her Majesty's Revenue and Customs. (4) In this paragraph and in paragraph 23, “T” is the person mentioned in section 23A(2) of ITTOIA 2005. (23) (1) For the purposes of paragraph 22, the “loan charge information” consists of — (a) T's name and, if T's personal representatives are providing the information, their names, (b) the address and telephone number, and e-mail address (if any), of each person providing the information, (c) T's national insurance number (if any), (d) the unique taxpayer reference number (if any) allocated to T by HMRC, (e) the name of the arrangement mentioned in section 23A(3)(a) of ITTOIA 2005, (f) the reference number (if any) allocated to the arrangement by HMRC under section 311 of FA 2004 (disclosure of tax avoidance schemes: arrangements to be given reference number), (g) any other reference number allocated by HMRC in connection with the arrangement or with the loan or quasi-loan mentioned in paragraph 21(2) or (3), (h) if the loan or quasi-loan mentioned in paragraph 21(2) or (3) is made to someone other than T, the name of the person to whom it is made, (i) if a person has agreed terms with an officer of Revenue and Customs for the partial discharge of the liability for income tax arising because of the application of section 23E of ITTOIA 2005 in relation to the loan or quasi-loan mentioned in paragraph 21(2) or (3), the date of that agreement and the amount of the liability to which it relates, (j) if the condition in paragraph 21(2) or (3) is met by reference to a loan, the loan payment information (see sub-paragraph (2)), and (k) if the condition in paragraph 21(2) or (3) is met by reference to a quasi-loan, the quasi-loan payment information (see sub-paragraph (3)). (2) The “loan payment information”, in relation to a loan, consists of statements of the following— (a) whether the loan is an approved fixed term loan, (b) the initial principal amount of the loan, (c) the amount that has become principal under the loan, otherwise than by capitalisation of interest, in each relevant tax year, (d) the amount of principal under the loan repaid in each relevant tax year, ignoring any repayments not in money made on or after 5 December 2016, (e) the details of any repayment that is to be disregarded under paragraph 3(4), (f) the amount of principal under the loan that has been released or written off in each relevant tax year, (g) whether any liability for income tax arising because of the application of section 23E of ITTOIA 2005 by reason of the release or writing-off has been paid, and (h) any amount released that has, in accordance with section 97 of ITTOIA 2005, been brought into account as a receipt in calculating the profits of the relevant trade. (3) The “quasi-loan payment information”, in relation to a quasi-loan, consists of statements of the following— (a) the amount equal to the value of the acquired debt, (b) the amount equal to the value of the additional debts acquired in each relevant tax year, (c) the amount by which the initial debt amount has been reduced by way of repayment in each relevant tax year, ignoring any repayments not in money made on or after 5 December 2016, (d) where the acquired debt or an additional debt is a right to a transfer of assets, and the assets have been transferred, the amount of the market value of the assets at the time of the transfer, (e) the details of any repayment that is to be disregarded under paragraph 9(5), (f) the amount by which the initial debt amount has been reduced by release or writing off in each relevant tax year, (g) whether any liability for income tax arising because of the application of section 23E of ITTOIA 2005 by reason of the release or writing-off has been paid, and (h) any amount released that has, in accordance with section 97 of ITTOIA 2005, been brought into account as a receipt in calculating the profits of the relevant trade. (4) In this paragraph “relevant tax year” in relation to a loan, or a quasi-loan, means— (a) the tax year in which the loan or quasi-loan was made, and (b) each subsequent tax year. (5) In sub-paragraph (3), “acquired debt”, “additional debt” and “initial debt amount” have the same meaning as in paragraph 9. (6) In this paragraph and in paragraphs 26 to 29, “HMRC” means Her Majesty's Revenue and Customs. (24) The Commissioners for Her Majesty's Revenue and Customs may by regulations amend paragraph 23 so as to— (a) add, remove or amend an entry in a list of information, and (b) make incidental provision. (25) (1) A person who fails to comply with paragraph 22 is liable to a penalty of £300. (2) Sub-paragraph (3) applies if the failure continues after the date on which a penalty is imposed under sub-paragraph (1) in respect of the failure. (3) The person is liable to a further penalty or penalties not exceeding £60 for each subsequent day, up to a maximum of 90 days, on which the failure continues. (26) (1) This paragraph applies if— (a) in complying with the duty under paragraph 22, a person provides inaccurate information, and (b) condition A, B or C is met. (2) Condition A is that the inaccuracy is careless or deliberate. (3) An inaccuracy is careless if it is due to a failure by the person to take reasonable care. (4) Condition B is that the person knows of the inaccuracy at the time the information is provided but does not inform HMRC at that time. (5) Condition C is that the person— (a) discovers the inaccuracy some time later, and (b) fails to take reasonable steps to inform HMRC. (6) The person is liable to a penalty not exceeding £3000. (7) Where the information contains more than one inaccuracy, a penalty is payable for each inaccuracy. (27) (1) Liability to a penalty under paragraph 25 does not arise if the person satisfies HMRC or (on an appeal notified to the tribunal) the tribunal that there is a reasonable excuse for the failure. (2) For the purposes of this paragraph— (a) an insufficiency of funds is not a reasonable excuse unless attributable to events outside the person's control, (b) where the person relies on any other person to do anything, that is not a reasonable excuse unless the first person took reasonable care to avoid the failure, and (c) where the person had a reasonable excuse for the failure but the excuse has ceased, the person is to be treated as having continued to have the excuse if the failure is remedied without unreasonable delay after the excuse ceased. (28) (1) Where a person becomes liable for a penalty under paragraph 25 or 26— (a) HMRC may assess the penalty, and (b) if they do so, they must notify the person. (2) An assessment of a penalty under paragraph 25 must be made before 1 October 2021. (3) An assessment of a penalty under paragraph 26 must be made before 1 October 2023. (29) (1) A person may appeal against any of the following decisions of an officer of Revenue and Customs— (a) a decision that a penalty is payable by that person under paragraph 25 or 26, or (b) a decision as to the amount of such a penalty. (2) Notice of an appeal under this paragraph must be given— (a) in writing, (b) before the end of the period of 30 days beginning with the date on which the notification under paragraph 28 was issued, and (c) to HMRC. (3) Notice of an appeal under this paragraph must state the grounds of appeal. (4) On an appeal under sub-paragraph (1)(a) that is notified to the tribunal, the tribunal may confirm or cancel the decision. (5) On an appeal under sub-paragraph (1)(b) that is notified to the tribunal, the tribunal may— (a) confirm the decision, or (b) substitute for the decision another decision that the officer of Revenue and Customs had power to make. (30) (1) A penalty under paragraph 25 or 26 must be paid— (a) before the end of the period of 30 days beginning with the date on which the notification under paragraph 28 was issued, or (b) if a notice of an appeal against the penalty is given, before the end of the period of 30 days beginning with the date on which the appeal is determined or withdrawn. (2) A penalty under paragraph 25 or 26 may be enforced as if it were income tax charged in an assessment and due and payable.

SCHEDULE 3

Amendments of and relating to Part 4 of the Finance Act 2004

1

(1) Part 4 of FA 2004 (pension schemes etc) is amended in accordance with sub-paragraphs (2) to (8).

(2) In section 150 (meaning of “pension scheme”), after subsection (5) insert—

(5A) This Part applies in relation to certain pension schemes that are not occupational pension schemes as it applies in relation to occupational pension schemes (see section 274B and paragraph 1(4A) of Schedule 36).

(3) In section 153 (registration of pensions schemes), in subsection (5), at the end insert

, or (h) the pension scheme is an occupational pension scheme, and a sponsoring employer in relation to the scheme is a body corporate that has been dormant during a continuous period of one month that falls within the period of one year ending with the day on which the decision is made, or (i) the pension scheme is an unauthorised Master Trust scheme.

(4) In section 158 (grounds for de-registration) in subsection (1), at the end insert

, or (g) that the pension scheme is an occupational pension scheme, and a sponsoring employer in relation to the scheme is a body corporate that has been dormant during a continuous period of one month that falls within the period of one year ending with the day on which the decision to withdraw registration is made, or (h) that the scheme is an unauthorised Master Trust scheme.

(5) At the beginning of Chapter 8 (supplementary) insert—

(274B) (1) This Part applies in relation to a pension scheme that— (a) is established under section 67 of the Pensions Act 2008, and (b) is not an occupational pension scheme, as it applies in relation to an occupational pension scheme. (2) This Part applies in relation to a pension scheme that— (a) is a Master Trust scheme, and (b) is not an occupational pension scheme, as it applies in relation to an occupational pension scheme.

(6) In section 279 (other definitions), after subsection (1A) insert—

(1B) In this Part “Master Trust scheme” means a pension scheme— (a) that is a Master Trust scheme within the meaning of the Pension Schemes Act 2017 (see sections 1 and 2 of that Act) or corresponding provision in force in Northern Ireland, and (b) whose operation would be unlawful under Part 1 of that Act (Master Trusts), or corresponding provision in force in Northern Ireland, were the scheme not authorised under that Part or that corresponding provision. (1C) For the purposes of determining whether the condition in subsection (1B)(b) is met, the following are to be ignored— (a) any regulations under section 40 of the Pension Schemes Act 2017 (regulations modifying application of Part 1 of that Act); (b) any provision in force in Northern Ireland corresponding to regulations that could be made under that section. (1D) For the purposes of this Part a Master Trust scheme is “unauthorised” if— (a) it is not authorised under Part 1 of the Pension Schemes Act 2017 or corresponding provision in force in Northern Ireland, and (b) its operation would be unlawful under that Part or that corresponding provision without such authorisation. (1E) Section 1169 of the Companies Act 2006 (dormant companies) applies for the purposes of this Part.

(7) In section 280(2) (general index), in the table, insert at the appropriate places—

dormant (in relation to a body corporate)	section 279(1E)

;

Master Trust scheme	section 279(1B) and (1C)

;

unauthorised (in relation to a Master Trust scheme)	section 279(1D)

(8) In Schedule 36 (pension schemes etc: transitional provisions and savings), in paragraph 1 (deemed registration of existing schemes), after sub-paragraph (4) insert—

(4A) This Part of this Act applies in relation to a pension scheme that— (a) is a registered pension scheme by virtue of sub-paragraph (1)(a), and (b) is neither a public service pension scheme nor an occupational pension scheme, as it applies in relation to an occupational pension scheme.

(9) In consequence of the amendment made by sub-paragraph (5), in section 30 of F(No.3)A 2010 (pension scheme under section 67 of Pensions Act 2008), omit subsection (1).

Commencement

2

(1) The following provisions of paragraph 1 come into force on the day on which section 3 of the Pension Schemes Act 2017 (prohibition on operating Master Trust scheme unless authorised) comes into force or, if later, the day on which this Act is passed—

(a) sub-paragraph (3) so far as it inserts section 153(5)(i) of FA 2004 and the “or” at the end of section 153(5)(h);

(b) sub-paragraph (4) so far as it inserts section 158(1)(h) of that Act and the “or” at the end of section 158(1)(g);

(c) sub-paragraph (6) so far as it inserts section 279(1D) of that Act (definition of “unauthorised Master Trust scheme”);

(d) sub-paragraph (7) so far as it inserts an index entry relating to that definition.

(2) The following provisions of paragraph 1 come into force on 6 April 2018—

(a) sub-paragraph (3) so far as it inserts section 153(5)(h) of FA 2004 and the “or” at the end of section 153(5)(g);

(b) sub-paragraph (4) so far as it inserts section 158(1)(g) of that Act and the “or” at the end of section 158(1)(f);

(d) sub-paragraph (7) so far as it inserts an index entry relating to that definition.

(3) So far as not brought into force by sub-paragraph (1) or (2), and subject to sub-paragraph (4), paragraph 1 comes into force on the day on which this Act is passed.

(4) Paragraph 1(8) is treated as always having had effect.

(5) For the purposes of section 153(5)(h) and (i) of FA 2004 (as inserted by paragraph 1(3)) it is immaterial when the application in question was made.

Meaning of “Master Trust scheme”: transitional provision

3

Before the coming into force of section 3 of the Pension Schemes Act 2017 (prohibition on operating Master Trust scheme unless authorised), section 279 of FA 2004 has effect as if subsections (1B)(b) and (1C) (as inserted by paragraph 1(6)) were omitted.

Master Trust schemes registered before the passing of this Act

4

(1) Sub-paragraph (2) applies to a pension scheme that—

(a) is a Master Trust scheme,

(b) is not an occupational pension scheme, and

(2) Section 274B(2) of FA 2004 (as inserted by paragraph 1(5)) is treated as always having had effect in relation to the pension scheme.

(3) In this paragraph, “Master Trust scheme” and “occupational pension scheme” have the same meaning as in Part 4 of FA 2004.

SCHEDULE 4

Amount of EIS relief

1

(1) Section 158 of ITA 2007 (form and amount of EIS relief) is amended as follows.

(2) In subsection (2)(a), after “EIS relief” insert “ (qualifying shares) ”.

(3) In subsection (2)(b), for “£1 million” substitute “ the allowable amount ”.

(4) After subsection (2) insert—

(2ZA) The allowable amount is— (a) if the qualifying shares do not include any KIC shares: £1 million; (b) if the amount, or the sum of the amounts, subscribed for qualifying shares that are KIC shares is £1 million or more: £2 million; (c) if neither paragraph (a) nor paragraph (b) applies: £1 million plus the amount, or the sum of the amounts, subscribed for qualifying shares that are KIC shares. (2ZB) In subsection (2ZA) “KIC shares” means shares in a company which, or in companies each of which, is a knowledge-intensive company at the time the shares are issued (see section 252A and subsection (6)).

(5) In subsection (4), for “subsections (1) and (2)” substitute “ subsections (1) to (2ZB) ”.

(6) At the end insert—

(6) If the issuing company began to carry on a trade less than three years before the date the relevant shares are issued, section 252A as it applies for the purposes of this section has effect with the substitution of the following subsections for subsections (2) to (4A)— (2) The first operating costs condition is that in at least one of the relevant three succeeding years at least 15% of the relevant operating costs constitute expenditure on research and development or innovation. (3) The second operating costs condition is that in each of the relevant three succeeding years at least 10% of the relevant operating costs constitute such expenditure. (4) In subsections (2) and (3)— - “relevant operating costs” means— 1. if the issuing company is a single company at the time the relevant shares are issued, the operating costs of that company, and 2. if the issuing company is a parent company at the time the relevant shares are issued, the sum of— 1. the operating costs of the issuing company, and 2. the operating costs of each company which is a qualifying subsidiary of the issuing company at that time, excluding a company's operating costs for any of the relevant three succeeding years during any part of which the company is not a qualifying subsidiary of the issuing company; - “the relevant three succeeding years” means the three consecutive years the first of which begins with the date the relevant shares are issued. (7) In subsection (6) “trade” includes— (a) any business or profession, (b) so far as not within paragraph (a), the carrying on of research and development activities from which it is intended a trade will be derived or will benefit, (c) preparing to carry on a trade.

Maximum amount raised annually by knowledge-intensive company

2

(1) Section 173A of ITA 2007 (the maximum amount raised annually through risk finance investments requirement for EIS relief) is amended as follows.

(2) In subsection (1), for “must not exceed £5 million” substitute

must not exceed— (a) if the company is a knowledge-intensive company at that date (see section 252A and subsection (5A)), £10 million, and (b) in any other case, £5 million.

(3) After subsection (5) insert—

(5A) If the issuing company began to carry on a trade less than three years before the date the relevant shares are issued, section 252A as it applies for the purposes of this section has effect with the substitution of the following subsections for subsections (2) to (4A)— (2) The first operating costs condition is that in at least one of the relevant three succeeding years at least 15% of the relevant operating costs constitute expenditure on research and development or innovation. (3) The second operating costs condition is that in each of the relevant three succeeding years at least 10% of the relevant operating costs constitute such expenditure. (4) In subsections (2) and (3)— - “relevant operating costs” means— 1. if the issuing company is a single company at the time the relevant shares are issued, the operating costs of that company, and 2. if the issuing company is a parent company at the time the relevant shares are issued, the sum of— 1. the operating costs of the issuing company, and 2. the operating costs of each company which is a qualifying subsidiary of the issuing company at that time, excluding a company's operating costs for any of the relevant three succeeding years during any part of which the company is not a qualifying subsidiary of the issuing company; - “the relevant three succeeding years” means the three consecutive years the first of which begins with the date the relevant shares are issued.

3

(1) Section 292A of ITA 2007 (the maximum amount raised annually through risk finance investments requirement for VCT relief) is amended as follows.

(2) In subsection (1), for “must not exceed £5 million” substitute

must not exceed— (a) if the company is a knowledge-intensive company at that date (see section 331A and subsection (6A)), £10 million, and (b) in any other case, £5 million.

(3) After subsection (6) insert—

(6A) If the relevant company began to carry on a trade less than three years before the date the relevant holding is issued, section 331A as it applies for the purposes of this section has effect with the substitution of the following subsections for subsections (3) to (5A)— (3) The first operating costs condition is that in at least one of the relevant three succeeding years at least 15% of the relevant operating costs constitute expenditure on research and development or innovation. (4) The second operating costs condition is that in each of the relevant three succeeding years at least 10% of the relevant operating costs constitute such expenditure. (5) In subsections (3) and (4)— - “relevant operating costs” means— 1. if the relevant company is a single company at the applicable time, the operating costs of that company, and 2. if the relevant company is a parent company at the applicable time, the sum of— 1. the operating costs of the relevant company, and 2. the operating costs of each company which is a qualifying subsidiary of the relevant company at that time, excluding a company's operating costs for any of the relevant three succeeding years during any part of which the company is not a qualifying subsidiary of the relevant company; - “the relevant three succeeding years” means the three consecutive years the first of which begins with the date the relevant holding is issued.

4

In section 297B of ITA 2007 (the proportion of skilled employees requirement for VCT relief), in subsection (2)(a), after “sections” insert “ 292A, ”.

Initial investing period: permitted age of knowledge-intensive company

5

In section 175A of ITA 2007 (the permitted maximum age condition for EIS relief), in paragraph (a) of subsection (2), for “beginning with the relevant first commercial sale,” substitute

beginning with— (i) the relevant first commercial sale, or (ii) if the issuing company so elects, the date by reference to which that company is treated as reaching an annual turnover of £200,000 (see section 252B),

6

After section 252A of ITA 2007 insert—

(252B) (1) This section has effect for the purposes of section 175A(2)(a)(ii) (alternative initial investing period in case of knowledge-intensive company). (2) Where— (a) the annual turnover of the issuing company in relation to an accounting period (see subsection (3)) is £200,000 or more, and (b) the annual turnover for the company in relation to each previous accounting period is less than £200,000, the company is treated as reaching an annual turnover of £200,000 or more by reference to the specified date (see subsection (4)). (3) The annual turnover in relation to an accounting period is— (a) the turnover for that accounting period (if the accounting period is for 12 months), or (b) the turnover for the period of 12 months ending when that accounting period ends (if not). (4) The specified date is— (a) in the case of an accounting period of 12 months or less, the last day of that accounting period; (b) in the case of an accounting period of more than 12 months, the last day of the period of 12 months beginning when that accounting period begins. (5) The turnover of the issuing company for a period (“the period”) is treated for the purposes of this section as including the relevant turnover of any company that is a member of the same group as the issuing company during the whole or any part of the period (a “group company”). (6) The relevant turnover of a group company is— (a) its turnover for the period, if the group company is a member of the same group as the issuing company for the whole of the period; (b) if the group company is a member of the same group as the issuing company for part of the period, its turnover for that part of the period. (7) Any necessary apportionments of turnover are to be made, on a time basis according to the respective lengths of the periods in question, for the purposes of subsections (3)(b) and (6). (8) In this section “turnover” has the meaning given by section 474(1) of the Companies Act 2006 and is to be determined by reference to— (a) the accounts of the company, and (b) amounts recognised for accounting purposes.

7

In section 280C of ITA 2007 (the permitted maximum age condition for VCT relief), in paragraph (a) of subsection (3), for “beginning with the relevant first commercial sale,” substitute

beginning with— (i) the relevant first commercial sale, or (ii) if the relevant company so elects, the date by reference to which that company is treated as reaching an annual turnover of £200,000 (see section 331B),

8

In section 294A of ITA 2007 (the permitted company age requirement for VCT relief), in paragraph (a) of subsection (2), for “beginning with the relevant first commercial sale,” substitute

beginning with— (i) the relevant first commercial sale, or (ii) if the relevant company so elects, the date by reference to which that company is treated as reaching an annual turnover of £200,000 (see section 331B),

9

After section 331A of ITA 2007 insert—

(331B) (1) This section has effect for the purposes of sections 280C(3)(a)(ii) and 294A(2)(a)(ii) (alternative initial investing period in case of knowledge-intensive company). (2) Where— (a) the annual turnover of the relevant company in relation to an accounting period (see subsection (3)) is £200,000 or more, and (b) the annual turnover for the company in relation to each previous accounting period is less than £200,000, the company is treated as reaching an annual turnover of £200,000 or more by reference to the specified date (see subsection (4)). (3) The annual turnover in relation to an accounting period is— (a) the turnover for that accounting period (if the accounting period is for 12 months), or (b) the turnover for the period of 12 months ending when that accounting period ends (if not). (4) The specified date is— (a) in the case of an accounting period of 12 months or less, the last day of that accounting period; (b) in the case of an accounting period of more than 12 months, the last day of the period of 12 months beginning when that accounting period begins. (5) The turnover of the relevant company for a period (“the period”) is treated for the purposes of this section as including the relevant turnover of any company that is a member of the same group as the relevant company during the whole or any part of the period (a “group company”). (6) The relevant turnover of a group company is— (a) its turnover for the period, if the group company is a member of the same group as the relevant company for the whole of the period; (b) if the group company is a member of the same group as the relevant company for part of the period, its turnover for that part of the period. (7) Any necessary apportionments of turnover are to be made, on a time basis according to the respective lengths of the periods in question, for the purposes of subsections (3)(b) and (6). (8) In this section “turnover” has the meaning given by section 474(1) of the Companies Act 2006 and is to be determined by reference to— (a) the accounts of the company, and (b) amounts recognised for accounting purposes.

Commencement

10

(1) The amendments made by this Schedule come into force in accordance with provision made by the Treasury by regulations.

(2) Regulations under sub-paragraph (1)—

(a) may make different provision for different purposes;

(b) may provide for any of those amendments to have effect in relation to shares issued, or investments made, on or after a day that is—

(i) earlier than the day on which the regulations are made, but

(ii) not earlier than 6 April 2018.

SCHEDULE 5

Relaxation of restriction where there is a linked sale

1

(1) Section 264A of ITA 2007 (restricting VCT relief where there is a linked sale) is amended as follows.

(2) In subsection (5), at the beginning of paragraph (b) insert “ if subsection (7A) applies, ”.

(3) After subsection (7) insert—

(7A) This subsection applies if— (a) the date of the merger or restructuring referred to in subsection (7) (“D2”) is before, or the same as, the date when the individual subscribes for the relevant shares (“D1”), or (b) D2 is after D1 but no more than two years after, and either— (i) the individual could reasonably be expected to know at the time of subscribing for the relevant shares that the merger or restructuring referred to in subsection (7) was likely to take place, or (ii) the main purpose of the merger or restructuring, or one of its main purposes, is to enable individuals to obtain a tax advantage in connection with VCT relief. (7B) For the purposes of subsection (7A)— (a) the date of the merger or restructuring is the date of the issue of shares referred to in section 323(1)(a) or (2)(a) or section 326(2)(a) (or, if there is more than one such issue, the date of the first of them); (b) a “tax advantage” includes— (i) relief or increased relief from tax, (ii) repayment or increased repayment of tax, (iii) avoidance or reduction of a charge to tax or an assessment to tax, and (iv) avoidance of a possible assessment to tax.

The 70% qualifying holdings condition

2

In section 274 of ITA 2007 (requirements for the giving of approval), in the fifth entry of the table in subsection (2) (the 70% qualifying holdings condition), for “70%” in the first and second columns substitute “ 80% ”.

3

In consequence of the amendment made by paragraph 2, in each of the following provisions of ITA 2007, for “70%”, where it appears before “qualifying”, substitute “80%”—

(a) in section 274, subsection (3)(c), (d) and (e);

(b) in section 275 (alternative requirements for the giving of approval), subsection (3)(b);

(d) in section 280 (conditions relating to qualifying holdings and eligible shares), subsection (2);

(e) in section 280A (the 70% qualifying holdings condition: disposal of holding), in the heading and in subsection (2);

(f) in Schedule 4 (index of defined expressions), the entry for the qualifying holdings condition.

4

In section 280A of ITA 2007, in subsection (2)(a), for “6” substitute “ 12 ”.

The minimum investment on further issue condition

5

(1) Section 274 of ITA 2007 is amended as follows.

(2) In the table in subsection (2), after the entry for “the investment limits condition” insert—

The minimum investment on further issue condition	The company has not breached and will not breach, in the relevant period, the minimum investment on further issue condition

(3) In subsection (3), after paragraph (f) insert—

(fa) the minimum investment on further issue condition by section 280BA,

6

After section 280B of ITA 2007 insert—

(280BA) (1) A company breaches the minimum investment on further issue condition where— (a) there has been an issue of ordinary share capital of the company (“the first issue”), (b) a VCT approval of the company has taken effect on or before the day of the making of the first issue, (c) a further issue (“the further issue”) of ordinary share capital of the company has been made since the making of the first issue, and (d) the company does not, on or before the relevant deadline, invest at least 30% of the money raised by the further issue in shares or securities which when held by the company are comprised in the company's qualifying holdings. (2) The relevant deadline is the last day of the period of 12 months immediately following the end of the accounting period in which the further issue is made.

Non-qualifying loans

7

(1) Section 285 of ITA 2007 (interpretation of Chapter 3 etc of Part 6) is amended as follows.

(2) In subsection (2)—

(a) omit “(whether secured or not)”;

(b) at the end of paragraph (b) insert

, or (c) any liability of the company in respect of a loan to which subsection (2A) applies that has been made to the company.

(3) After that subsection insert—

(2A) This subsection applies to a loan if— (a) the return on the loan represents more than a commercial rate of return, or (b) the loan is made on terms which grant to a person or allow a person to acquire— (i) any security or preferential rights in relation to assets of the company, or (ii) the ability to control the company. In sub-paragraph (ii) “control” has the meaning given by sections 450 and 451 of CTA 2010. (2B) The return on a loan is not to be treated as representing more than a commercial rate for the purposes of subsection (2A)(a) if— (a) the return on the loan during the period of 5 years from the making of the loan does not exceed 50% of the amount lent, and (b) the total return on the loan does not exceed— $$N ÿ A ÿ 10 %$where—N is the number of years (including any fraction) in the term of the loan;A is the amount lent or, in a case where some of the loan is repaid during the term of the loan, the average amount outstanding during that term.$ (2C) The Treasury may by regulations substitute a different figure for a figure that is at any time specified in subsection (2B)(a) or (b). (2D) In subsections (2A)(a) and (2B) “return” means interest, fees, charges and other amounts payable in respect of the loan. (2E) Where it is to any extent not known, before the end of the term of a loan, what amounts will be payable in respect of the loan— (a) subsections (2A)(a) and (2B) apply, until the relevant matters are ascertained, on the basis of what amounts can reasonably be expected to be payable; (b) when those matters are ascertained, any necessary adjustments must be made by making or amending assessments or by repayment or discharge of tax (regardless of any limitation on the time within which assessments or amendments may be made).

Qualifying holdings: exclusions

8

(1) Part 8 of Schedule 2 to ITA 2007 (transitional provision: venture capital trusts) is amended as follows.

(2) In paragraph 69 (the no guaranteed loan requirement), after “acquired” insert “ before 6 April 2018 ”.

(3) In paragraph 70 (the proportion of eligible shares requirement), in sub-paragraph (2), after “acquired” insert “ before 6 April 2018 ”.

(4) In paragraph 81 (meaning of “excluded activities”), after “acquired” insert “ before 6 April 2018 ”.

9

In Part 1 of Schedule 16 to FA 2007 (venture capital trusts: limit on number of employees in company in which investment made), in paragraph 3(6)(b), after “(“the investing company”)” insert “ before 6 April 2018 ”.

10

In Schedule 11 to FA 2008 (venture capital trusts), in paragraph 12(b), after “(“the investing company”)” insert “ before 6 April 2018 ”.

11

(1) In Schedule 2 to F(No.3)A 2010 (venture capital trusts), in paragraph 6(2)(b), after “the investing company” insert “ before 6 April 2018 ”.

(2) The 30% eligible shares condition does not apply in relation to an accounting period ending on or after 6 April 2018.

(3) In sub-paragraph (2) “the 30% eligible shares condition” means the condition referred to as such in section 274(2) of ITA 2007 as originally enacted.

Commencement

12

The amendments made by paragraph 1 have effect in relation to claims for relief by reference to shares issued on or after 6 April 2014.

13

The other amendments made by this Schedule come into force in accordance with provision made by the Treasury by regulations.

14

Regulations under paragraph 13—

(a) may make different provision for different purposes;

(b) may provide for any of those amendments to come into force on or by reference to a day that is—

(i) earlier than the day on which the regulations are made, but

(ii) not earlier than the day on which this Act is passed.

SCHEDULE 6

PART 1 — Bare trusts

1

In ITTOIA 2005, after section 848 insert—

(848A) (1) This section applies if— (a) a partner in a firm is partner as trustee for a beneficiary who is absolutely entitled to the partner's share of the profits of the firm, and (b) the beneficiary is chargeable to tax on those profits. (2) References in this Part to a partner or member of the firm include references to the beneficiary.

2

In CTA 2009, after section 1258 insert—

(1258A) (1) This section applies if— (a) a partner in a firm is partner as trustee for a beneficiary who is absolutely entitled to the partner's share of the profits of the firm, and (b) the beneficiary is chargeable to tax on those profits. (2) References in this Part to a partner or member of the firm include references to the beneficiary.

3

(1) TMA 1970 is amended as follows.

(2) In section 12AA (partnership returns), after subsection (10A) insert—

(10B) If— (a) a partner in a partnership is partner as trustee for a beneficiary who is absolutely entitled to the partner's share of the profits of the partnership, and (b) the beneficiary is chargeable to tax on those profits, references in this Act to the partner include references to the beneficiary.

(3) In section 118(1) (interpretation), at the appropriate place insert—

“partner” is to be construed in accordance with section 12AA(10B) of this Act;

4

(1) The amendment made by paragraph 1 has effect in relation to the tax year 2018-19 and subsequent tax years.

(2) The amendment made by paragraph 2 has effect in relation to accounting periods beginning on or after 1 April 2018.

(3) The amendments made by paragraph 3 have effect in relation to partnership returns relating to the tax year 2018-19 or any subsequent tax year.

PART 2 — Notional trade and business of indirect partner

5

(1) ITTOIA 2005 is amended as follows.

(2) In section 847 (general provisions), after subsection (3) insert—

(4) For the purposes of this Part, a person is an indirect partner in a partnership (“the underlying partnership”) if the person is a partner in— (a) a partnership which is a partner in the underlying partnership, or (b) any partnership which is an indirect partner in the underlying partnership by virtue of the preceding application of this subsection.

(3) After section 852 insert—

(852A) (1) This section applies in relation to the notional trade of a partner in a firm if— (a) the firm consists of a partnership which is a partner or indirect partner in another partnership (“the underlying partnership”), (b) the members of the underlying partnership carry on a trade (the “underlying trade”), (c) the firm's trading profits or losses referred to in section 852(1) arise by virtue of profits or losses (“the underlying profits or losses”) arising in the carrying on of the underlying trade, and (d) the underlying profits or losses do not themselves arise by virtue of the underlying partnership's membership of a partnership. (2) Section 852 (carrying on by partner of notional trade) has effect as if for subsections (2) to (5) there were substituted— (2) The partner starts to carry on the notional trade at the later of— (a) when the partner becomes an indirect partner in the underlying partnership, and (b) when the underlying partnership starts to carry on the underlying trade. This is subject to subsection (3). (3) If the partner carries on the actual trade (whether alone or in partnership) before the underlying partnership starts to carry on the underlying trade, the partner starts to carry on the notional trade when the partner starts to carry on the actual trade. (4) The partner permanently ceases to carry on the notional trade at the earlier of— (a) when the partner ceases to be an indirect partner in the underlying partnership, and (b) when the underlying partnership permanently ceases to carry on the underlying trade. This is subject to subsection (5). (5) If the partner carries on the actual trade (whether alone or in partnership) after the underlying partnership permanently ceases to carry on the underlying trade, the partner permanently ceases to carry on the notional trade when the partner permanently ceases to carry on the actual trade.

(4) After section 855 insert—

(855A) (1) This section applies in relation to the notional business of a partner in a firm if— (a) the firm consists of a partnership which is a partner or indirect partner in another partnership (“the underlying partnership”), (b) the members of the underlying partnership carry on a trade (“the underlying trade”), (c) the firm's untaxed income or relievable losses referred to in section 854(1)(b) arise by virtue of untaxed income or relievable losses (“the underlying profits or losses”) arising to members of the underlying partnership— (i) from sources other than the carrying on of a trade, and (ii) otherwise than by virtue of the underlying partnership's membership of a partnership. (2) Section 854 (carrying on by partner of notional business) has effect as if— (a) for subsection (2) there were substituted— (2) The partner starts to carry on the notional business at the later of— (a) when the partner becomes an indirect partner in the underlying partnership, and (b) when the underlying partnership starts to carry on the underlying trade. (b) for subsection (4) there were substituted— (4) The partner permanently ceases to carry on the notional business at the earlier of— (a) when the partner ceases to be an indirect partner in the underlying partnership, and (b) when the underlying partnership permanently ceases to carry on the underlying trade. (3) Section 855 has effect as if for subsections (2) and (3) there were substituted— (2) If the partner carries on the actual trade (whether alone or in partnership) before the firm starts to carry it on, the partner starts to carry on the notional business when the firm starts to carry on the actual trade. (3) If the partner carries on the actual trade (whether alone or in partnership) after the firm permanently ceases to carry it on, the partner permanently ceases to carry on the notional business when the firm permanently ceases to carry on the actual trade. (4) In this section “untaxed income” has the same meaning as in section 854.

(5) The amendments made by this paragraph have effect in relation to the tax year 2018-19 and subsequent tax years.

PART 3 — Returns: information to be included

6

(1) TMA 1970 is amended as follows.

(2) In section 12AA (partnership returns) after subsection (1A) insert—

(1B) Where a partnership to which subsection (1) applies (“the reporting partnership”) includes a partner which is itself a partnership, references in subsections (1) and (1A) to a partner include an indirect partner in the reporting partnership. (1C) For the purposes of this section, a person is an indirect partner in the reporting partnership if the person is a partner in— (a) a partnership which is a partner in the reporting partnership, or (b) any partnership which is an indirect partner in the reporting partnership by virtue of the preceding application of this subsection.

(3) In section 12AB (partnership statements), after subsection (1) insert—

(1A) Where at any time in a period mentioned in subsection (1)(a) the reporting partnership is a partner in another partnership which carries on a trade, profession or business— (a) income or loss that the reporting partnership accrues or sustains thereby is to be treated for the purposes of subsection (1)(a)(i) as from a source that is separate from any of its other sources of income or loss, (b) consideration in respect of the disposal of partnership property that the reporting partnership accrues thereby is to be treated for the purposes of subsection (1)(a)(ia) as from a source that is separate from any of its other sources of consideration, (c) income tax which has been deducted or treated as deducted from, or paid on, any income that the reporting partnership accrues thereby is to be treated for the purposes of subsection (1)(a)(ii) as being deducted or treated as deducted from, or paid on, a source of income that is separate from any of its other sources of income, and (d) amounts specified in the partnership statement under subsection (1)(a) must include— (i) each amount which is stated to be equal to the reporting partnership's share of income, loss, consideration or tax in any partnership statement made under this section in relation to the other partnership for the period for which the return is made or a period which includes that period or any part of it, and (ii) a statement as to which of the assumptions in subsection (1B) was applied in calculating that amount. (1B) If at any time in a period mentioned in subsection (1)(a) the reporting partnership includes a partner which is itself a partnership (“the participating partnership”), the amounts referred to in subsection (1)(b) must be calculated and included in the partnership statement applying each of the following assumptions to the participating partnership— (a) that it is a UK resident individual; (b) that it is a non-UK resident individual; (c) that it is a UK resident company; (d) that it is a non-UK resident company. (1C) But subsection (1D) applies if the partnership return includes— (a) the name of every person who was an indirect partner in the reporting partnership at any time in a period mentioned in subsection (1)(a), and (b) at least some of the following information— (i) whether a person named under paragraph (a) is an individual, company or partnership (or something else), (ii) in the case of such a person who is an individual, whether the individual was or was not resident in the United Kingdom in the year of assessment for which the partnership return is made, and (iii) in the case of such a person who is a company, whether the company was or was not resident in the United Kingdom for each accounting period of the company which includes all, or any part of, a period mentioned in subsection (1)(a). (1D) In subsection (1B)— (a) ignore either or both of paragraph (a) and (b) if it is apparent from information provided under subsection (1C) that none of the indirect partners of the reporting partnership is a person of a description specified in that paragraph at any time in the year of assessment for which the return is made, and (b) ignore either or both of paragraph (c) and (d) if it is apparent from that information that none of the indirect partners is a company of a description specified in that paragraph at any time in any of its accounting periods which include all, or any part of, a period mentioned in subsection (1)(a).

(4) In that section, in subsection (5), at the appropriate places insert—

“indirect partner”, in relation to the reporting partnership, is to be construed in accordance with section 12AA(1C);

;

“reporting partnership” means the partnership to which the partnership statement referred to in subsection (1) relates;

(5) The amendments made by this paragraph have effect in relation to partnership returns relating to the tax year 2018-19 or any subsequent tax year.

7

(1) F(No.2)A 2017 is amended as follows.

(2) In section 60, in paragraph 17 of Schedule A1 to be inserted into TMA 1970—

(a) the existing provision becomes sub-paragraph (1);

(b) after that sub-paragraph insert—

(2) Where a partnership (“the reporting partnership”) includes a partner which is itself a partnership, references in this Schedule to a partner include an indirect partner in the reporting partnership. Section 12AA(1C) (meaning of “indirect partner”) applies for the purposes of this sub-paragraph.

(3) In Schedule 14 (amendments relating to digital reporting etc), after paragraph 10 insert—

(10A) In section 12AB(1C) (further information to be included in partnership return in certain cases), before “partnership return” insert “ section 12AA ”.

PART 4 — Returns: overseas partners in investment partnerships etc

8

(1) TMA 1970 is amended as follows.

(2) In section 12AA(6) (partnership return to include information about partners), at the end (and on a new line) insert—

But see section 12ABZA.

(3) After section 12AB (partnership return to include partnership statement) insert—

(12ABZA) (1) There is no requirement for a partnership return to include a declaration of the tax reference of a person (see section 12AA(6)(a)) if— (a) the person is not chargeable to income tax or corporation tax for the period, or for a period which includes any part of the period, in respect of which the partnership return is made, (b) the partnership does not carry on a trade or profession or a UK property business at any time during the period in respect of which the partnership return is made, (c) the whole of that period is a period in respect of which the partnership is required to set out information about the person in one or more relevant returns, and (d) the partnership return includes a statement that the condition in paragraph (c) is met. (2) In subsection (1)(c) “relevant return” means a return under the International Tax Compliance Regulations 2015 (S.I. 2015/878). (3) If, in reliance on this section, the partnership return does not include a declaration of the tax reference of a person but the partnership does not comply with the requirement mentioned in subsection (1)(c), the partner required to make and deliver the partnership return, or that partner's successor, must give notice to HMRC specifying the tax reference. (4) The notice must be given within the period of 12 months beginning with the filing date for the partnership return. (5) The Commissioners for Her Majesty's Revenue and Customs may by regulations made by statutory instrument amend the definition of “relevant return” in subsection (2). (6) A statutory instrument containing regulations under subsection (5) is subject to annulment in pursuance of a resolution of the House of Commons. (7) In this section “filing date” has the same meaning as in section 12ABA.

(4) In section 98 (special returns, etc), in column 2 of the Table, at the appropriate place insert “ section 12ABZA(3) of this Act ”.

(5) The amendments made by this paragraph have effect in relation to returns—

(a) made after the passing of this Act, and

(b) whether relating to periods before or after the passing of this Act.

9

In Schedule 14 to F(No.2)A 2017 (amendments relating to digital reporting etc), after paragraph 10A (as inserted by this Schedule) insert—

(10B) In section 12ABZA (partnership returns: overseas partners in investment partnerships etc)— (a) in the heading, before “Partnership returns” insert “ Section 12AA ”; (b) in subsections (1), (3), and (4), before every “partnership return” insert “ section 12AA ”.

PART 5 — Returns conclusive as to shares of profits and losses

10

(1) TMA 1970 is amended as follows.

(2) After section 12ABZA (as inserted by this Act) insert—

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