Finance (No. 2) Act 2023

(438A) (1) This section applies where— (a) a company (“C”), at a time in the period mentioned in subsection (1) of section 438— (i) is a member of the worldwide group of which the qualifying infrastructure company mentioned in that subsection is a member, but (ii) is not a UK group company; and (b) C is a creditor in relation to an amount which— (i) is a relevant loan relationship debit (as defined in section 383) for the debtor company, or (ii) would be a relevant loan relationship debit if the debtor company were UK resident. (2) For the purposes of section 438, C is treated in relation to the amount mentioned in subsection (1)(b) (the “relevant loan amount”) as a qualifying infrastructure company if— (a) throughout the period mentioned in section 438(1), C— (i) meets the public infrastructure income test for the accounting period (see subsections (2) to (4) of section 433) and subsection (3) of this section), and (ii) meets the public infrastructure assets test for the accounting period (see subsections (5) to (10) of that section and subsection (4) of this section), (but does not satisfy the conditions in subsection (1)(c) and (d) of section 433); (b) the loan to which the relevant loan amount relates (the “relevant loan”) is fully funded by another loan (the “corresponding loan”) made to C for that purpose and on substantially the same terms as the relevant loan; and (c) amounts arising to C in respect of the corresponding loan would, if section 438(2) applied to C, qualify as “exempt amounts” within the meaning of that subsection. (3) For the purposes of subsection (2)(a)(i), C is also treated as meeting the public infrastructure income test for an accounting period if all, or all but an insignificant proportion, of its income for the period derives from— (a) anything listed in any of paragraphs (a) to (c) of section 433(2), (b) shares in, or debt issued by, a company that meets the test in section 433(2) for that period, (c) shares in or debt issued by a company that is treated as meeting the public infrastructure income test for that period by reason of this subsection. (4) For the purposes of subsection (2)(a)(ii), C is also treated as meeting the public infrastructure assets test for an accounting period if all, or all but an insignificant proportion, of the total value of the company's assets recognised in an appropriate balance sheet on each day in that period derives from— (a) anything listed in any of paragraphs (a) to (e) of section 433(5), (b) shares in, or debt issued by, a company that meets the test in section 433(5) for that period, (c) shares in or debt issued by a company that is treated as meeting the public infrastructure assets test for that period by reason of this subsection. (5) For the purposes of determining whether amounts arising to C would qualify as exempt amounts under section 438(2) (for the purposes of subsection (2)(c) of this section), the recourse of a creditor is treated as being limited to relevant infrastructure matters if, in the event that C fails to perform its obligations in question, the recourse of the creditor is limited to— (a) anything listed in paragraphs (a) to (c) of section 438(4), (b) shares in or debt issued by a company whose income and assets consist wholly of income and assets within those paragraphs, (c) shares in or debt issued by a company whose income and assets consist wholly of income and assets within paragraphs (a) or (b) of this subsection, or (d) shares in or debt issued by a company whose income and assets consists wholly of income and assets within paragraphs (a) to (c) of this subsection, and so on. (6) For the purposes of subsection (5), in determining whether a company’s income and assets consists wholly of income and assets of a particular description, any source of income or any asset is ignored if, having regard to all the circumstances, it is reasonable to regard as insignificant the amount of income arising from the source, or (as the case may be) the value of the asset recognised, in the accounting period.

Partnerships and other transparent entities

17

In section 447 (partnerships and other transparent entities), for subsection (6) substitute—

(6) For the purposes of this section an entity is “transparent” if— (a) it is not chargeable to corporation tax or income tax as a person (ignoring any exemptions), or (b) it is a collective investment vehicle which is “transparent for income tax purposes” for the purposes of paragraph 8 of Schedule 5AAA to TCGA 1992 (see paragraph 8(7) of that Schedule).

Investments held by investment managers

18

• (1) Section 454A (investments held by investment managers) is amended as follows.

• (2) In subsection (1)(a), for “is a member of a worldwide group” substitute “would, apart from this section, be a member of a worldwide group”.

• (3) After subsection (1) insert—

(1A) Except in a case within subsection (2), for the purposes of this Part— (a) the group does not include S (or its subsidiaries), and (b) accordingly, none of those entities is regarded as a consolidated subsidiary of any member of the group.

• (4) In subsection (2), for “For the purposes of this Part” substitute “Where S is a partnership or another transparent entity, for the purposes of this Part”.

Determining the worldwide group: “non-consolidated subsidiary” and “consolidated subsidiary”

19

• (1) Section 475 (meaning of “non-consolidated subsidiary” and “consolidated subsidiary”) is amended as follows.

• (2) In subsection (1)(b), omit “or on the basis that X were an asset held for sale or held for distribution to owners”.

• (3) For subsection (3) substitute—

(3) In this section “subsidiary” has the meaning given by international accounting standards.

Appointment of a reporting company by Revenue and Customs

20

In paragraph 4 of Schedule 7A (appointment of a reporting company by Revenue and Customs), in sub-paragraph (5)(a) for “36 months” substitute “4 years”.

Revised interest restriction return

21

• (1) Paragraph 8 of Schedule 7A (revised interest restriction return) is amended as follows.

• (2) For sub-paragraph (4) substitute—

(4) Where any of the figures contained in the previous interest restriction return have become incorrect (whether or not as a result of a member of the group amending, or being treated as amending, its company tax return), the reporting company must submit a revised interest restriction return (for the purpose of correcting those figures) to an officer of Revenue and Customs.

• (3) For sub-paragraph (5) substitute—

(5) A revised interest restriction return submitted under sub-paragraph (4) is of no effect unless it is received by an officer of Revenue and Customs before the end of— (a) the period of 3 months beginning with the relevant day, or (b) in a case where sub-paragraph (5B) applies, such longer period as an officer of Revenue and Customs may allow. (5A) For the purposes of sub-paragraph (5), the “relevant day” is— (a) where the figures contained in the previous interest restriction return have become incorrect as the result of a member of the group amending, or being treated as amending, an amount stated in its company tax return, the first day on which that amount can no longer be altered (within the meaning of paragraph 88(3) to (5) of Schedule 18 to FA 1998); (b) in any other case, the day on which the figures contained in the previous interest restriction return were found to have become incorrect. (5B) This sub-paragraph applies where an officer of Revenue and Customs considers that, as a result of an enquiry into a company tax return of another member of the group, the reporting company may subsequently be required to submit another revised interest restriction return under sub-paragraph (4). (5C) A revised interest restriction return submitted under sub-paragraph (4) may differ from the previous return only so far as the differences are in consequence of the correction referred to in that sub-paragraph.

22

• (1) Paragraph 29 of Schedule 7A (penalty for failure to deliver a return) is amended as follows.

• (2) In sub-paragraph (1)—

• (a) in paragraph (a), after “paragraph 7” insert “, or a revised interest restriction return under paragraph 8(4),”;

• (b) in paragraph (b), omit “(see sub-paragraph (5) of that paragraph)”.

• (3) After sub-paragraph (1), insert—

(1A) In subsection (1)(b), the reference to the “filing date” in relation to a period of account is— (a) in relation to an interest restriction return under paragraph 7, a reference to the filing date for the purposes of that paragraph (see paragraph 7(5) and (5A)); (b) in relation to a revised interest restriction return under paragraph 8(4), a reference to the end of the period within which the return may have effect (see paragraph 8(5)).

Enquiry into interest restriction return

23

In paragraph 41 of Schedule 7A (normal time limits for opening enquiry), in sub-paragraph (2)—

• (a) omit paragraph (b) (but not the “and” at the end), and

• (b) in paragraph (c), after “receives the” insert “return or”.

Determinations by officers of Revenue and Customs

24

• (1) Paragraph 56 of Schedule 7A (power of Revenue and Customs to make determinations where no return filed etc) is amended as follows.

• (2) For sub-paragraph (1)(b) (but not the “and” at the end) substitute—

(b) the filing date in relation to the relevant period of account has passed (see paragraph 7(5)),

.

• (3) In sub-paragraph (1)(c)—

• (a) omit “A,”;

• (b) for “or C” substitute “, C or D”.

• (4) Omit sub-paragraphs (2) and (3).

• (5) After sub-paragraph (5) insert—

(5A) Condition D is that— (a) the appointment of a reporting company has effect in relation to the relevant period of account, (b) the reporting company is required to submit a revised interest restriction return for the period under paragraph 8(4), and (c) the time limit in paragraph 8(5) for the submission of the revised return has passed without the revised return being received by an officer of Revenue and Customs.

• (6) In sub-paragraph (9)—

• (a) after “made” insert

— (a) in a case where Condition D is met, after the end of the period of 12 months beginning with the expiry of the time limit mentioned in paragraph 8(5), and (b) in any other case,

;

• (b) for “the determination date” substitute “the filing date referred to in sub-paragraph (1)(b)”.

Consequential claims to company tax returns

25

In paragraph 72 of Schedule 7A (consequential claims to company tax returns), in sub-paragraph (1)(a) omit “56 or”.

Part 2 — Other amendments

Penalties for errors: CIR alterations to be ignored in calculating potential lost revenue

26

• (1) Paragraph 5 of Schedule 24 to FA 2007 (penalties for errors: calculating potential lost revenue) is amended as follows.

• (2) In sub-paragraph (4), before paragraph (a) insert—

(za) any CIR alteration, other than a permitted reduction, in respect of the tax period to which the document relates,

.

• (3) At the end insert—

(5) For the purposes of sub-paragraph (4)(za)— (a) a “CIR alteration” means an alteration made to an amount disallowed, or reactivated, under Part 10 of the Taxation (International and Other Provisions) Act 2010 as a result of the submission of a revised interest restriction return under paragraph 8(4) of Schedule 7A to that Act; (b) a CIR alteration is a “permitted reduction” if it has the effect of— (i) reducing the allocated disallowance of a company by no more than the relevant proportion, or (ii) increasing the allocated reactivation of a company by no more than the relevant proportion. (c) the “relevant proportion” is— (i) for the purposes of paragraph (b)(i), the proportion by which the total disallowed amount of the worldwide group for the period is reduced, as a result of the submission of the revised interest restriction return; (ii) for the purposes of paragraph (b)(ii) the proportion by which the interest reactivation cap of the worldwide group is increased, as a result of the submission of the revised interest restriction return. (6) In sub-paragraph (5), the following terms have the same meaning as in Part 10 of the Taxation (International and Other Provisions) Act 2010— - “allocated disallowance” (see paragraph 22(2) of Schedule 7A to that Act); - “allocated reactivation” (see paragraph 25(2) of that Schedule); - “total disallowed amount of the worldwide group” and “interest reactivation cap of the worldwide group” (see section 373 of that Act).

Disapplication of carry forward rule for deficits

27

• (1) Section 457 of CTA 2009 (basic rule for deficits: carry forward to accounting periods after deficit period) is amended as follows.

• (2) In subsection (1), after “section 458” insert “(subject to subsection (2A))”.

• (3) After subsection (2) insert—

(2A) If the company is a charity at the end of the deficit period, the deficit may not be carried forward and set off against non-trading profits (as described in subsection (1)) for an accounting period (and, accordingly, the deficit may not be surrendered as group relief under Part 5 of CTA 2010 for the purposes of subsection (2)(a)).

Defined expressions used in Part 10 of TIOPA 2010: “insurance company”

28

• (1) In section 494 of TIOPA 2010 (other interpretation), at the end insert—

(3) The definition of “insurance company” in section 65 of FA 2012 (which is applicable to this Part as a result of section 141(2) of that Act) has effect for the purposes of this Part as if, in subsection (2)(a), the reference to Part 4A of the Financial Services and Markets Act 2000 included a reference to the law of a territory outside the United Kingdom which is similar to or corresponds to that Part.

• (2) In Part 7 of Schedule 11 to that Act (index of defined expressions), in the entry relating to an insurance company, in the second column, for “section 141 of FA 2012” substitute “section 494(3)”.

Determining the worldwide group: consequential amendment

29

In Part 1 of Schedule 8 to FA 2018 (corporate interest restriction: amendments of Part 10 of TIOPA 2010), omit paragraph 13.

Part 3 — Parts 1 and 2: commencement and transitional provision

30

Except as provided in paragraphs 31 to 35, the amendments made by Parts 1 and 2 of this Schedule have effect for periods of account of worldwide groups that begin on or after 1 April 2023.

31

The amendments made by paragraph 5(1) and (3) have effect for periods of account of worldwide groups ending on or after 6 April 2020.

32

• (1) The amendments made by paragraph 8 have effect for periods of account of worldwide groups ending on or after 6 April 2020.

• (2) Sub-paragraph (3) applies if—

• (a) in accordance with Schedule 7A to TIOPA 2010, a reporting company has submitted an interest restriction return for a period of account of a worldwide group ending—

• (i) on or after 6 April 2020, but

• (ii) before the day on which this Act is passed; and

• (b) any of the figures in the interest restriction return have become incorrect as a result of the amendments made by paragraph 8 (including as a result of an election made under section 413(7) of TIOPA 2010).

• (3) A revised interest restriction return submitted under paragraph 8 of Schedule 7A to TIOPA 2010 has effect (so far as that would not otherwise be the case) if it is received before the end of the period of 3 months beginning with the day on which this Act is passed.

33

The amendments made by paragraph 9 have effect for periods of account of worldwide groups in relation to which an election under section 330 of CTA 2009 is made, in respect of a relevant accounting period, on or after the day on which this Act is passed.

34

The amendments made by paragraphs 2, 14 to 16, and 27, have effect for accounting periods that begin on or after 1 April 2023.

35

The amendment made by paragraph 20 has effect in relation to appointments of reporting companies made, and the amendments made by paragraph 24(1), (2), (3)(a), (4) and (6)(b) have effect in relation to determinations made, on or after the day on which this Act is passed.

36

References in this Part of this Schedule to periods of account of worldwide groups have the same meaning as in Part 10 of TIOPA 2010 (see section 480 of that Act).

Part 4 — Tax treatment of financing costs and income

37

This Part of this Schedule applies if—

• (a) a company (“C”) was, for the purposes of Part 7 of TIOPA 2010, a member of a worldwide group in a period of account of the group beginning before 1 April 2017,

• (b) the reporting body has, in relation to that period of account, submitted—

• (i) a statement of disallowances under section 278 or 279 of TIOPA 2010, and

• (ii) a statement of allocated exemptions under section 290 or 291 of that Act,

• (c) after the submission of the statement mentioned in sub-paragraph (b), the total disallowed amount of the worldwide group for that period of account is reduced (as a result of an enquiry into C’s company tax for a relevant accounting period or otherwise),

• (d) as a result of the reduction in the total disallowed amount, the sum of the amounts specified in the statement of allocated exemptions under section 292(4)(b) of TIOPA 2010 exceeds the limit specified in section 292(6) of that Act,

• (e) on or after 15 March 2023, the reporting body submits a revised statement of disallowances under section 279 of TIOPA 2010, and

• (f) the revised statement of disallowances is treated, under regulation 13 of the 2009 Regulations, as if it had been received by HMRC by the time specified in section 279(2) of TIOPA 2010.

38

• (1) Part 7 of TIOPA 2010 has effect in relation to the worldwide group as if the revised statement of disallowances had not been submitted unless—

• (a) on or after 15 March 2023, the reporting body also submits a revised statement of allocated exemptions under section 291 of TIOPA 2010, and

• (b) the revised statement of allocated exemptions is treated, under regulation 28 of the 2009 Regulations or under sub-paragraph (2), as if it had been received by HMRC by the time specified in section 291(2) of TIOPA 2010.

• (2) Where the revised statement of allocated exemptions mentioned in sub-paragraph (1)(a) is received by HMRC before the end of the period of 30 days beginning with the day on which this Act comes into force, it is treated for the purposes of this Part (and of the application of Part 7 of TIOPA 2010 for the purposes of this Part) as if it had been received by HMRC by the time specified in section 291(2) of TIOPA 2010.

• (3) If the revised statement of disallowances referred to in paragraph 37(e) specifies that no financing expense amounts for the relevant period of account are to be disallowed, the requirement in section 280(4) of TIOPA 2010 does not apply in relation to the statement.

• (4) If the revised statement of allocated exemptions referred to in sub-paragraph (1)(a) specifies that no financing income amounts for the relevant period of account are to be exempted, the requirement in section 292(4) of TIOPA 2010 does not apply in relation to the statement.

39

For the purposes of this Part (and of the application of Part 7 of TIOPA 2010 for the purposes of this Part) references to the “reporting body” include references to C unless—

• (a) the ultimate parent of the worldwide group notifies HMRC that another company is the reporting body for those purposes,

• (b) the other company is—

• (i) for the purposes of paragraph 37, a company to which Chapter 3 of Part 7 of TIOPA 2010 applies, or

• (ii) for the purposes of paragraph 38(1), a company to which Chapter 4 of Part 7 of TIOPA 2010 applies, and

• (c) the notice is given before the end of the period within which the revised statement of disallowances mentioned in paragraph 37(f) would be treated, under regulation 13 of the 2009 Regulations, as if it had been received by HMRC by the time specified in section 279(2) of TIOPA 2010.

40

• (1) References in this Part to any provision of Part 7 of TIOPA 2010, or of the 2009 Regulations, are references to that provision as it continues to have effect in relation to—

• (a) periods of account of the worldwide group ending before 1 April 2017, and

• (b) where financial statements of the worldwide group are drawn up in respect of a period that begins before, and ends on or after, 1 April 2017, the period—

• (i) beginning at the time the straddling period of account (as defined in paragraph 26(3)(b) of Schedule 5 to F(No.2)A 2017) begins, and

• (ii) ending with 31 March 2017.

• (2) In this Part, the “2009 Regulations” means the Corporation Tax (Financing Costs and Income) Regulations 2009 (S.I. 2009/3173).

• (3) Terms used in this Part and in Part 7 of TIOPA 2010 have the same meaning as in that Part of that Act.

Schedule 4

Part 1 — UK property rich collective investment vehicles etc

Genuine diversity of ownership

1

• (1) Schedule 5AAA to TCGA 1992 is amended as follows.

• (2) In paragraph 7 (appropriate connection)—

• (a) in sub-paragraph (5)—

• (i) in paragraph (a), for “it meets” substitute “the vehicle meets or, if the vehicle is part of multi-vehicle arrangements, the arrangements meet”;

• (ii) in paragraph (b), for “it meets” substitute “the vehicle meets, or those multi-vehicle arrangements meet,”;

• (iii) omit the words after paragraph (b);

• (b) after that sub-paragraph insert—

(5A) For the purposes of sub-paragraph (5), those Regulations have effect as if references to a fund included— (a) multi-vehicle arrangements, and (b) a collective investment vehicle which is not an offshore fund.

;

• (c) after sub-paragraph (7) insert—

(8) In this Schedule “multi-vehicle arrangements” means arrangements comprising two or more vehicles under which an investor in one of those vehicles would reasonably regard that investment as an investment in the arrangements as a whole rather than exclusively in any particular vehicle.

• (3) In paragraph 13 (qualifying conditions)—

• (a) in sub-paragraph (3)—

• (i) in paragraph (a), for “it meets” substitute “the scheme meets or, if the scheme is part of multi-vehicle arrangements, the arrangements meet”;

• (ii) in paragraph (b), for “it meets” substitute “the scheme meets, or those multi-vehicle arrangements meet,”;

• (iii) omit the words after paragraph (b);

• (b) after that sub-paragraph insert—

(3A) For the purposes of sub-paragraph (3), those Regulations have effect as if references to a fund included— (a) multi-vehicle arrangements, and (b) a collective investment scheme which is not an offshore fund.

• (4) In paragraph 46 (meaning of qualifying investor etc)—

• (a) in sub-paragraph (4)—

• (i) in paragraph (a), for “it meets” substitute “the vehicle meets or, if the vehicle is part of multi-vehicle arrangements, the arrangements meet”;

• (ii) in paragraph (b), for “it meets” substitute “the vehicle meets, or those multi-vehicle arrangements meet,”;

• (iii) omit the words after paragraph (b);

• (b) after that sub-paragraph insert—

(4A) For the purposes of sub-paragraph (4), those Regulations have effect as if references to a fund included— (a) multi-vehicle arrangements, and (b) a collective investment vehicle which is not an offshore fund.

• (5) In paragraph 46A (application of diversity of ownership condition), after sub-paragraph (3) insert—

(4) Where the collective investment vehicle is part of multi-vehicle arrangements, sub-paragraphs (2) and (3) apply as if references to the vehicle included the multi-vehicle arrangements.

• (6) In paragraph 47 (other definitions), in sub-paragraph (1) at the appropriate place insert—

• “multi-vehicle arrangements” has the meaning given by paragraph 7(8);

.

• (7) In paragraph 51 (genuine diversity of ownership condition in case of funds existing before 6 April 2020), after sub-paragraph (2) insert—

(3) Where the collective investment vehicle is part of multi-vehicle arrangements, sub-paragraph (2) applies as if references to the vehicle included the multi-vehicle arrangements.

Part 2 — Real estate investment trusts

Amendment of CTA 2010

2

CTA 2010 is amended in accordance with paragraphs 3 to 5.

REITs involving single commercial property

3

• (1) In section 527 (being a UK REIT in relation to an accounting period)—

• (a) in subsection (2)(b), after “met” insert “or in relation to which condition C is met”;

• (b) in subsection (3)(b) after “met” insert “or in relation to which condition C is met”.

• (2) In section 529 (conditions as to property rental business)—

• (a) after subsection (2) insert—

(2A) Condition C is that the property rental business involves at least 1 property— (a) the value of which is equal to, or exceeds, £20 million at the relevant time, and (b) which is designed, fitted or equipped for the purpose of being rented, and is rented or available for rent, as a commercial unit. (2B) For the purposes of subsection (2A) the “relevant time” means— (a) where the group or company is a UK REIT and its property rental business previously met conditions A and B, the first day on which at least one of those conditions ceased to be met, or (b) otherwise, entry.

;

• (b) in subsection (3), for “and B” substitute “to C”;

• (c) in subsection (4), in the words before paragraph (a), for “and B” substitute “to C”.

• (3) In section 561—

• (a) in subsection (3) for “conditions A and B in section 529 (property rental business)” substitute “the property rental business condition”;

• (b) after that subsection insert—

(3A) For the purposes of this section, and sections 563 and 575, the “property rental business condition” is met if either conditions A and B or condition C in section 529 (property rental business) are met.

• (4) In section 563 (breach of conditions as to property rental business)—

• (a) in the heading, for “conditions as to property rental business” substitute “property rental business condition”;

• (b) in subsection (1), for “condition A or B in section 529 (property rental business)” substitute “the property rental business condition (see section 561(3A))”.

• (5) In section 575 (breach of conditions as to property rental business)—

• (a) in subsection (1), for “condition A or B in section 529 (property rental business)” substitute “the property rental business condition (see section 561(3A))”;

• (b) in subsection (2)—

• (i) omit the “or” after paragraph (a);

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

, or (c) more than twice in relation to Condition C in that section.

;

• (c) in subsection (4), in Rule 2, for “condition A or B in section 529” substitute “the property rental business condition”.

3-year development rule

4

• (1) Section 556 (disposal of assets) is amended as follows.

• (2) In subsection (3), in paragraph (b)—

• (a) omit “fair”, and

• (b) omit the words from “(determined” to the end.

• (3) After that subsection insert—

(3ZA) For the purposes of subsection (3)(b) the value of a property is to be treated as its fair value (determined in accordance with international accounting standards) at whichever of the following times that value is the greatest— (a) on entry; (b) when the property was acquired; (c) the beginning of the accounting period in which the development commenced.

• (4) In subsection (3A), in paragraph (b)—

• (a) omit “fair”, and

• (b) omit the words from “(determined” to the end.

• (5) After that subsection insert—

(3AA) For the purposes of subsection (3A)(b) the value of a property is to be treated as its fair value (determined in accordance with international accounting standards) at whichever of the following times that value is the greatest— (a) on entry; (b) when the property was acquired; (c) the beginning of the accounting period in which the development commenced.

• (6) The amendments made by this paragraph have effect in relation to disposals of assets made on or after 1 April 2023.

Genuine diversity of ownership

5

• (1) Section 528ZB of CTA 2010 is amended as follows.

• (2) In subsection (2)—

• (a) in the words before paragraph (a), for “it meets” substitute “the scheme meets or, if the scheme is part of multi-vehicle arrangements, the arrangements meet”;

• (b) omit the words after paragraph (b).

• (3) After that subsection insert—

(2A) For the purposes of subsection (2), those Regulations have effect as if references to a fund included— (a) multi-vehicle arrangements, and (b) a collective investment scheme which is not an offshore fund.

• (4) In subsection (3), for “the vehicle” substitute “the scheme”.

• (5) In subsection (4), for “vehicle”, in both places it occurs, substitute “scheme”.

• (6) After subsection (5) insert—

(6) Where the collective investment scheme is part of multi-vehicle arrangements, subsections (3) to (5) apply as if references to “the scheme” included the multi-vehicle arrangements. (7) In this section “multi-vehicle arrangements” means arrangements comprising two or more schemes under which an investor in one of those schemes would reasonably regard that investment as an investment in the arrangements as a whole rather than exclusively in any particular scheme.

Amendment of the Real Estate Investment Trusts (Assessment and Recovery of Tax) Regulations 2006

6

• (1) The Real Estate Investment Trusts (Assessment and Recovery of Tax) Regulations 2006 (S.I. 2006/2867) are amended as follows.

• (2) After regulation 7 insert—

(7A) (1) This regulation applies to the payment of a relevant distribution by a company if— (a) the company reasonably believes that the recipient is a partnership whose partners include a person or body— (i) to which paragraph (2) or (3) of regulation 7 applies, or (ii) to which paragraph (4) of that regulation applies where the partner’s share of the partnership profits are to be applied for the purposes of the fund, scheme, account or plan in respect of which that partner has duties, (b) the company has a reasonable belief as to the share of partnership profits that each partner is entitled to, (c) the company reasonably believes that arrangements exist that will result in each partner’s share of the partnership profits reflecting whether or not tax was deducted in relation to that partner (as a result of regulation 3(2) and this regulation), and (d) the company elects to make the payment in accordance with paragraph (2) (by making it in accordance with that paragraph). (2) The relevant proportion of the relevant distribution is to be paid without deduction of income tax. (3) The relevant proportion is equal to the sum of the shares of the partnership profits (expressed as proportions) to which each partner who falls within paragraph (1)(a)(i) or (ii) is entitled. (4) But— (a) paragraph (2) is subject to the qualification in paragraph (7) of regulation 7, and (b) if the company’s belief as to any of the matters referred to in paragraph (1) is incorrect, these Regulations apply to the payment as if it were never one to which this regulation applied. (5) Upon discovering that a payment that was made in accordance with paragraph (2) should not have been made in accordance with that paragraph (as a result of paragraph (4) or otherwise), the company who made it must deliver an amended return in accordance with regulation 11. (6) Where this paragraph applies to the payment of a relevant distribution, the company making it must (in addition to its duty under regulation 6(1)) furnish the partnership with a statement in writing in respect of each partner that is not a partner who falls within paragraph (1)(a)(i) or (ii) showing the amount of tax deducted in relation to each such partner. (7) The duty imposed by paragraph (6) is enforceable at the suit or instance of the partnership.

• (3) In regulation 3(2) (deduction of tax), after “regulation 7” insert “or 7A”.

Part 3 — Qualifying asset holding companies

Amendment of Schedule 2 to FA 2022

7

Schedule 2 to FA 2022 (qualifying asset holding companies) is amended as follows.

Securitisation companies unable to be QAHCs

8

• (1) In paragraph 2(1) (conditions for being a QAHC), in paragraph (e) for “not” substitute “neither a securitisation company nor”.

• (2) In paragraph 58(1) (interpretation), at the appropriate place insert—

• “securitisation company” means a company whose profits are brought into account, for corporation tax purposes, in accordance with regulation 14 of the Taxation of Securitisation Companies Regulations 2006 (S.I. 2006/3296);

.

• (3) The amendments made by this paragraph are treated as having come into force on 15 March 2023.

• (4) Those amendments are not to have effect in relation to a securitisation company that was a QAHC immediately before that date for so long as it continuously remains a QAHC.

Beneficial entitlement held only through QAHCs

9

• (1) In paragraph 4 (only direct and certain indirect interests to constitute “relevant interests”), after sub-paragraph (2) insert—

(2A) For the purposes of sub-paragraph (1)(b)(i), a beneficial entitlement of T or C held solely through one or more QAHCs is to be treated as held by that person directly.

• (2) The amendment made by this paragraph is treated as having come into force on 20 July 2022.

• (3) But the amendment is not to have effect in relation to a QAHC that became a QAHC before that date if the effect of the amendment would, by itself, cause the QAHC to cease to meet the ownership condition on that date, ignoring—

• (a) any provision of Schedule 2 to FA 2022 that would, in some circumstances, treat the ownership condition as met or a breach of the condition as having not occurred, and

• (b) any prior breach of that condition.

Determining relevant interests

10

In paragraph 5(4) (determining relevant interests), after paragraph (h) insert—

(ha) in sections 170(3) and 172(3) (shares or securities with limited or temporary rights), for “less than” there were substituted “more than”, (hb) in section 174 (option arrangements)— (i) in subsection (1), in Step 4, for “lowest proportion” there were substituted “highest proportion”, and (ii) in subsection (2), for “less than” there were substituted “more than”, (hc) in sections 175(3), 176(3), 177(3) and 178(3) (cases in which more than one of sections 170, 172, and 174 apply), for “lowest proportion” there were substituted “highest proportion”,

.

Dealing with bodies corporate without share capital

11

• (1) In paragraph 9 (qualifying funds)—

• (a) in sub-paragraph (2)(a), in the words before sub-paragraph (i), after “scheme” insert “, or is an AIF that is not a collective investment scheme only by reason of it being a body corporate,”;

• (b) in sub-paragraph (5)—

• (i) in paragraph (a), after “company”, in the first place it occurs, insert “that has share capital”;

• (ii) in paragraph (b)(i), after “company” insert “that has share capital”;

• (c) in sub-paragraph (6), after “collective investment scheme” insert “, or is an AIF that is not a collective investment scheme only by reason of it being a body corporate,”.

• (2) Schedule 2 to FA 2022 has effect, and is to be deemed always to have had effect, with the amendment made by this paragraph.

Genuine diversity of ownership

12

• (1) Paragraph 9 is amended as follows.

• (2) In sub-paragraph (2)(a)—

• (a) in sub-paragraph (i), for “it meets” substitute “the fund meets or, if the fund is part of multi-vehicle arrangements, the arrangements meet”;

• (b) in sub-paragraph (ii), for “it” substitute “the fund or those multi-vehicle arrangements”.

• (3) In sub-paragraph (3)—

• (a) before paragraph (a) insert—

(za) the Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001) have effect as if references to a fund included— (i) multi-vehicle arrangements, (ii) a collective investment scheme which is not an offshore fund, and (iii) an AIF that is not a collective investment scheme only by reason of it being a body corporate (and which is not an offshore fund);

;

• (b) in paragraph (a), in the words before sub-paragraph (i)—

• (i) for “the Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001)” substitute “those Regulations”;

• (ii) after “a fund” insert “or multi-vehicle arrangements”;

• (iii) after “the fund”, in both places it occurs, insert “or multi-vehicle arrangements”;

• (c) in that paragraph—

• (i) in sub-paragraphs (i) and (ii), after “fund” insert “or multi-vehicle arrangements”;

• (ii) in sub-paragraph (ii), after “fund” insert “or multi-vehicle arrangements”;

• (iii) in sub-paragraph (iii), for “vehicle” substitute “fund or multi-vehicle arrangements”;

• (d) in paragraph (b), after “fund” insert “or multi-vehicle arrangements”.

• (4) In sub-paragraph (4) after “fund”, in each place it occurs, insert “or multi-vehicle arrangements”.

• (5) In sub-paragraph (10), at the end insert—

• “multi-vehicle arrangements” means arrangements comprising two or more funds under which an investor in one of those funds would reasonably regard that investment as an investment in the arrangements as a whole rather than exclusively in any particular fund;

.

Investment strategy condition

13

• (1) In paragraph 13 (activity and investment strategy conditions), after sub-paragraph (2) insert—

(3) A company (“C”) may make an election under this sub-paragraph that all relevant equity securities held by C are to be treated as if they were not equity securities listed or traded on a recognised stock exchange or any other public market or exchange for the purposes of— (a) the investment strategy condition as it applies to C, and (b) that condition as it applies to any other company with a relevant interest in C. (4) Equity securities are “relevant” if— (a) they are listed or traded on a recognised stock exchange or any other public market or exchange, (b) they are held directly by C, (c) they were not acquired at a time when the election had effect from a company that is a member of the same group as C, other than a company that was a QAHC at the time of the acquisition, and (d) where C has previously been and ceased being a QAHC, they were acquired after the most recent occasion on which C became a QAHC. (5) An election under sub-paragraph (3)— (a) must be notified to HMRC, (b) has effect only while the company is a QAHC, (c) is revoked on the company ceasing to be a QAHC, and (d) may not otherwise be revoked. (6) Where an election under sub-paragraph (3) has effect, any dividend or other distribution received by C in respect of relevant equity securities that would otherwise be exempt for the purposes of section 931A(1) of CTA 2009 (charge to tax on distributions received) is to be treated as not exempt for the purposes of that section. (7) Where— (a) C disposes of relevant equity securities (“the dispossessed securities”), and (b) within the period of thirty days after the disposal, C acquires securities (“the acquired securities”) of the same class, any dividend or other distribution received by a person in respect of holding the acquired securities in the period (“the dispossession period”) commencing with the disposal by C of the dispossessed securities and ending with the acquisition by C of the acquired securities is to be treated as having been received by C for Corporation Tax purposes. (8) But the amount of any dividend or other distribution treated as received by C as a result of sub-paragraph (7) is limited to the amount of the dividend or other distribution C would have received had C held the dispossessed securities throughout the dispossession period. (9) Equity securities are not to be treated as being of the same class unless they are so treated by the practice of the recognised stock exchange, other public market or exchange they are listed or traded on.

• (2) Omit paragraph 35 (and the italic heading before it).

• (3) In paragraph 58, after sub-paragraph (2) insert—

(3) In this Schedule, apart from in paragraphs 42 and 43 (worldwide groups), references to a company being a member of a group of companies are to be read in accordance with section 170 of TCGA 1992 (interpretation of sections 171 to 181 of that Act: groups).

Disposal of derivatives where underlying subject matter is shares

14

• (1) In paragraph 53 (no chargeable gain on disposal of overseas land or certain shares), in sub-paragraph (4), at the appropriate place insert—

• “derivative contract” means— a derivative contract within the meaning of Part 7 of CTA 2009 (see section 576 of that Act), or a contract which is not a derivative contract within the meaning of that Part only as a result of section 589(2)(b) of that Act (general exclusion of contracts whose underlying subject matter consists of shares);

.

• (2) That paragraph has effect, and is to be deemed always to have had effect, with the amendment made by sub-paragraph (1).

Alternative finance arrangements

15

• (1) After paragraph 58 insert—

(59) (1) Sub-paragraph (2) applies for the purposes of determining the amounts of relevant interests in companies in accordance with paragraphs 3 to 6 and the provisions of Chapter 6 of Part 6 of CTA 2010 applied by those paragraphs. (2) Where a person has (in substance) a beneficial entitlement to the profits of a company as a result of qualifying alternative finance arrangements— (a) that entitlement is to be treated as an entitlement to a proportion of the profits of that company available for distribution to equity holders of the company, and (b) that person is to be treated as an equity holder. (3) “Qualifying alternative finance arrangements” means arrangements— (a) that constitute alternative finance arrangements for the purposes of Chapter 6 of Part 6 of CTA 2009 (alternative finance arrangements), or (b) that do not constitute alternative finance arrangements only as a result of section 508 of that Act (exclusion provision not at arms length). (4) But arrangements that are analogous to a normal commercial loan are not qualifying alternative finance arrangements. (5) Arrangements are analogous to a normal commercial loan if, were the arrangements structured as a loan that resulted in the same or similar entitlements of the parties to the arrangements, they would constitute a normal commercial loan within the meaning of section 162 of CTA 2010.

• (2) In paragraph 3, after sub-paragraph (5) insert—

(5A) See also paragraph 59, which makes provision for parties to alternative finance arrangements who are equivalent to equity holders to be treated as such.

• (3) In paragraph 58(1), in the definition of “equity holder” at the end insert “, but see also paragraph 59 of this Schedule”.

Schedule 5

Part 1 — Amendments relating to corporation tax

Records to be kept for the purposes of corporation tax

1

• (1) In Part 3 of Schedule 18 to FA 1998 (duty to keep and preserve records), paragraph 21 is amended as follows.

• (2) After sub-paragraph (5A) insert—

(5AA) Regulations under this paragraph may make provision, in relation to relevant transfer pricing records specified, or of a description specified, in the regulations— (a) as to the form or manner in which those records are to be kept and preserved; (b) by reference to things specified in the transfer pricing guidelines (within the meaning of section 164 of TIOPA 2010 (interpretation in accordance with OECD principles)).

• (3) For sub-paragraph (6) substitute—

(6) For the purposes of this paragraph— (a) records are “relevant transfer pricing records” if the Commissioners for His Majesty’s Revenue and Customs reasonably consider that the records may relate to the calculation of profits or losses in accordance with Part 4 of TIOPA 2010 (transfer pricing); (b) “supporting documents” includes accounts, books, deeds, contracts, vouchers and receipts.

Assessments relating to corporation tax

2

In Part 5 of Schedule 18 to FA 1998 (determinations and assessments), after paragraph 49 insert—

(49A) (1) This paragraph applies where— (a) the situation mentioned in paragraph 41(1) or (2) has been brought about by a person within any of paragraphs (a) to (c) of paragraph 43 (“P”) as regards a relevant accounting period of a company, (b) the situation relates to the calculation of profits or losses in accordance with Part 4 of TIOPA 2010 (transfer pricing) for the purposes of that period, and (c) the company has failed to comply, in relation to specified relevant transfer pricing records that relate to the calculation, with either or both of— (i) paragraph 21 (duty to keep and preserve records), and (ii) an information notice (within the meaning of Schedule 36 to the Finance Act 2008 (information and inspection powers)). (2) It is to be presumed for the purposes of this Part of this Schedule that the situation mentioned in paragraph 41(1) or (2) was brought about carelessly by P, unless— (a) the situation was brought about deliberately by P, or (b) the company satisfies HMRC or (on an appeal notified to the tribunal) the tribunal that P took reasonable care to avoid the situation. (3) For the purposes of this paragraph— (a) “relevant accounting period of a company” means an accounting period in respect of which— (i) the company, together with one or more other enterprises, constitutes an MNE Group within the meaning of the Taxes (Base Erosion and Profit Shifting) (Country-by-Country Reporting) Regulations 2016 (S.I. 2016/237) (see regulation 2(3) of those Regulations), and (ii) the MNE Group meets the threshold requirement within the meaning of those Regulations (see regulations 3(2) to (4) of those Regulations); (b) records are “specified relevant transfer pricing records” if— (i) they are relevant transfer pricing records specified, or of a description specified, in regulations under paragraph 21 (duties to keep and preserve records), and (ii) the company is required to keep and preserve those records under that paragraph.

Part 2 — Amendments relating to income tax

Records to be kept for the purposes of income tax

3

• (1) In Part 2 of TMA 1970 (records), section 12B (records to be kept for purposes of returns) is amended as follows.

• (2) After subsection (5B) insert—

(5BA) Regulations under this section may make provision, in relation to relevant transfer pricing records specified, or of a description specified, in the regulations— (a) as to the form or manner in which those records are to be kept and preserved; (b) by reference to things specified in the transfer pricing guidelines (within the meaning of section 164 of TIOPA 2010 (interpretation in accordance with OECD principles)).

• (3) In subsection (6)—

• (a) omit the “and” after paragraph (a);

• (b) after that paragraph insert—

(aa) records are “relevant transfer pricing records” if the Commissioners for His Majesty’s Revenue and Customs reasonably consider that the records may relate to the calculation of profits or losses in accordance with Part 4 of TIOPA 2010 (transfer pricing);

.

Other amendments

4

In Part 4 of TMA 1970 (assessment and claims), after section 30B insert—

(30C) (1) This section applies where— (a) the situation mentioned in section 29(1) has been brought about by a relevant trustee, or a person acting on their behalf, as regards a relevant year of assessment, (b) the situation relates to the calculation of profits or losses in accordance with Part 4 of TIOPA 2010 (transfer pricing) for the purposes of that year, and (c) the relevant person has failed to comply, in relation to specified relevant transfer pricing records that relate to the calculation, with either or both of— (i) section 12B (records to be kept for the purposes of returns), and (ii) an information notice (within the meaning of Schedule 36 to the Finance Act 2008 (information and inspection powers)). (2) It is to be presumed for the purposes of section 29 that the situation mentioned in section 29(1) was brought about carelessly by the relevant trustee, or the person acting on their behalf, unless— (a) the situation was brought about deliberately by the relevant trustee, or the person acting on their behalf, or (b) the relevant trustee satisfies HMRC or (on an appeal notified to the tribunal) the tribunal that they, or the person acting on their behalf, took reasonable care to avoid the situation. (3) For the purposes of this paragraph— (a) “relevant person” means a person who was required by a notice under section 8A to make and deliver the return in respect of the relevant year of assessment; (b) “relevant year of assessment” means a year of assessment in respect of which— (i) the trustees of the trust concerned, together with one or more other enterprises, constitutes an MNE Group within the meaning of the Taxes (Base Erosion and Profit Shifting) (Country-by-Country Reporting) Regulations 2016 (S.I. 2016/237) (see regulation 2(3) of those Regulations), and (ii) the MNE Group meets the threshold requirement within the meaning of those Regulations (see regulations 3(2) to (4) of those Regulations); (c) records are “specified relevant transfer pricing records” if— (i) they are relevant transfer pricing records specified, or of a description specified, in regulations under section 12B, and (ii) the relevant person is required to keep and preserve those records under that section. (30D) (1) This section applies where— (a) the situation mentioned in section 30B(1) has been brought about by a person within section 30B(5) (“P”) as regards a partnership statement in respect of a relevant period, (b) the situation relates to the calculation of profits or losses in accordance with Part 4 of TIOPA 2010 (transfer pricing) for the purposes of that period, and (c) the relevant person (whether or not P) has failed to comply, in relation to specified relevant transfer pricing records that relate to the calculation, with either or both of— (i) section 12B (records to be kept for the purposes of returns), and (ii) an information notice (within the meaning of Schedule 36 to the Finance Act 2008 (information and inspection powers)). (2) It is to be presumed for the purposes of section 30B that the situation mentioned in section 30B(1) was brought about carelessly by P, unless— (a) the situation was brought about deliberately by P, or (b) the relevant person satisfies HMRC or (on an appeal notified to the tribunal) the tribunal that P took reasonable care to avoid the situation. (3) For the purposes of this paragraph— (a) “relevant period” means a period in respect of which— (i) the partnership to which the partnership statement relates, together with one or more other enterprises, constitutes an MNE Group within the meaning of the Taxes (Base Erosion and Profit Shifting) (Country-by-Country Reporting) Regulations 2016 (S.I. 2016/237) (see regulation 2(3) of those Regulations), and (ii) the MNE Group meets the threshold requirement within the meaning of those Regulations (see regulations 3(2) to (4) of those Regulations); (b) “relevant person” means a person who was required by a notice under section 12AA to make and deliver the return in respect of the relevant period; (c) records are “specified relevant transfer pricing records” if— (i) they are relevant transfer pricing records specified, or of a description specified, in regulations under section 12B, and (ii) the relevant person is required to keep and preserve those records under that section.

Part 3 — Amendments relating to corporation tax and income tax

Penalties for errors

5

• (1) Schedule 24 to FA 2007 (penalties for errors) is amended as follows.

• (2) In Part 1 (liability for penalty), after paragraph 3B insert—

(3C) (1) This paragraph applies where— (a) a document of a kind listed in the Table in paragraph 1 relating to a relevant tax period is given to HMRC by a person (“P”), (b) the document contains an inaccuracy— (i) which falls within paragraph 1(2), and (ii) which involves the calculation of profits or losses in accordance with Part 4 of TIOPA 2010 (transfer pricing) for the purposes of that period, and (c) the relevant person (whether or not P) failed to comply, in relation to specified relevant transfer pricing records that relate to the inaccuracy, with one or more of— (i) section 12B of TMA 1970 (records to be kept for the purposes of returns), (ii) paragraph 21 of Schedule 18 to FA 1998 (duty to keep and preserve records), and (iii) an information notice (within the meaning of Schedule 36 to FA 2008 (information and inspection powers)). (2) It is to be presumed that the inaccuracy was careless, within the meaning of paragraph 3, unless— (a) the inaccuracy was deliberate on P’s part, or (b) P satisfies HMRC or (on an appeal notified to the tribunal) the tribunal that P took reasonable care to avoid the inaccuracy. (3) Sub-paragraphs (4) to (6) apply for the purposes of this paragraph. (4) “Relevant person”, in relation to a document of a kind listed in the Table in paragraph 1, means— (a) the person to whose tax liability the document relates, (b) in the case of a return under section 8A of TMA 1970 (trustee's return), a relevant trustee (within the meaning of that Act), or (c) in the case of a partnership return, or a statement, declaration or accounts in connection with a partnership return, a person who was required by a notice under section 12AA of TMA 1970 (partnership return) to make and deliver a return in respect of relevant tax period. (5) “Relevant tax period” means a tax period— (a) in respect of which— (i) the person mentioned in sub-paragraph (4)(a), (ii) in the case mentioned in sub-paragraph (4)(b), the trustees of the trust concerned, or (iii) in the case mentioned in sub-paragraph (4)(c), the partnership to which the partnership return relates, together with one or more other enterprises, constitutes an MNE Group within the meaning of the Taxes (Base Erosion and Profit Shifting) (Country-by-Country Reporting) Regulations 2016 (S.I. 2016/237) (see regulation 2(3) of those Regulations), and (b) in respect of which the MNE Group meets the threshold requirement within the meaning of those Regulations (see regulations 3(2) to (4) of those Regulations). (6) Records are “specified relevant transfer pricing records” if— (a) they are relevant transfer pricing records specified, or of a description specified, in regulations under section 12B of TMA 1970 or paragraph 21 of Schedule 18 to FA 1998 (duties to keep and preserve records), and (b) the relevant person is required to keep and preserve those records under either or both of those provisions.

• (3) In Part 4 (miscellaneous), in paragraph 18 (agency), in sub-paragraph (6)—

• (a) for “Paragraph 3A applies” substitute “Paragraphs 3A and 3C apply”;

• (b) for “it applies” substitute “they apply”.

Information and inspection powers

6

• (1) Schedule 36 to FA 2008 (information and inspection powers) is amended as follows.

• (2) In Part 4 (restrictions on powers), in paragraph 21 (taxpayer notices following tax return)—

• (a) in sub-paragraph (3), for “D” substitute “E”;

• (b) after sub-paragraph (8) insert—

(8A) Condition E is that the notice is given for the purpose of obtaining any specified relevant transfer pricing information or documents. (8B) For the purposes of Condition E, information or documents are “specified relevant transfer pricing information or documents” if— (a) they are relevant transfer pricing records specified, or of a description specified, in regulations under section 12B of TMA 1970 or paragraph 21 of Schedule 18 to FA 1998 (duties to keep and preserve records), and (b) the relevant person is required to keep and preserve those records under either or both of those provisions. (8C) For the purposes of subsection (8B), the “relevant person” means— (a) in the case of a tax return made in respect of a chargeable period under section 8A or 12AA of TMA 1970 (trustee’s and partnership returns)— (i) the person, or (ii) a person who was required by a notice under the section concerned to make and deliver the return; (b) in any other case, the person.

;

• (3) In Part 6 (special cases), after paragraph 37B insert—

(37C) (1) This paragraph applies to an information notice given to a relevant person in an MNE Group (“A”) to the extent that the notice refers to specified relevant transfer pricing documents. (2) Paragraph 18 (documents not in person’s possession or power) does not apply in relation to a specified relevant transfer pricing document that— (a) is not in A’s possession or power, but (b) is in the power or possession of another relevant person in the MNE Group concerned (“B”), (and accordingly the information notice may require A to produce the document). (3) For the purposes of this paragraph— (a) documents are “specified relevant transfer pricing documents” if— (i) they are relevant transfer pricing records specified, or of a description specified, in regulations under section 12B of TMA 1970 or paragraph 21 of Schedule 18 to FA 1998 (duties to keep and preserve records), and (ii) A is required to keep and preserve those records under either or both of those provisions; (b) “MNE Group” has the same meaning as in the Taxes (Base Erosion and Profit Shifting) (Country-by-Country Reporting) Regulations 2016 (S.I. 2016/237) (see regulation 2(3) of those Regulations); (c) “relevant person in an MNE Group” means— (i) a company, (ii) a trustee of a trust, or (iii) a partner in a partnership, where that company, the trustees or the partnership, together with one or more other enterprises, constitutes an MNE Group.

Part 4 — Commencement

7

Regulations made under—

• (a) paragraph 21 of Schedule 18 to FA 1998 by virtue of the amendments made by paragraph 1 of this Schedule, or

• (b) section 12B of TMA 1970 by virtue of the amendments made by paragraph 3 of this Schedule,

have effect in relation to such accounting periods or tax years beginning on or after 1 April 2023 as are specified in the regulations.

Schedule 6

Spirits

1

“Spirits” means—

• (a) spirits of any description, and

• (b) any mixture or compound made with spirits (including, subject to the following provisions of this Schedule, mixtures that also contain other alcoholic products).

2

The extraction of spirits absorbed in a wooden cask is treated, for the purposes of this Part, as the production of spirits.

Beer

3

“Beer” means—

• (a) ale,

• (b) porter,

• (c) stout,

• (d) any other type of beer, and

• (e) any other product which is made or sold as beer or as a substitute for beer.

4

• (1) A qualifying beer-based beverage is treated as beer for the purposes of this Part.

• (2) “Beer-based beverage” means a beverage which is a mixture of beer and any of the following—

• (a) fruit or ginger—

• (i) cordial,

• (ii) carbonated water,

• (iii) juice, or

• (iv) squash;

• (b) lemonade or limeade;

• (c) unfermented ginger beer;

• (d) any alcoholic product or other alcoholic substance.

• (3) A beer-based beverage is “qualifying” if—

• (a) it would, apart from this paragraph, fall within paragraph 12 (other fermented products), and

• (b) it is of an alcoholic strength not exceeding 5.5%.

Cider

5

“Cider” means a product which—

• (a) is obtained from the fermentation of apple juice or pear juice,

• (b) has been produced without the addition, at any time, of—

• (i) another alcoholic product, or

• (ii) anything, other than a permitted substance, which communicates colour or flavour,

• (c) satisfies the juice content requirements (see paragraph 7), and

• (d) is of an alcoholic strength of less than 8.5%.

6

In paragraph 5, “permitted substance” means a substance that—

• (a) appears to the Commissioners to be necessary for the purposes of producing cider, and

• (b) is specified in a notice published by the Commissioners for the purposes of this Schedule.

7

• (1) For the purposes of paragraph 5, the juice content requirements are satisfied in relation to a product if—

• (a) qualifying fruit juice comprises at least 35% of the volume of the pre-fermentation mixture for the product, and

• (b) the total of—

• (i) the volume of qualifying fruit juice included in the pre-fermentation mixture, and

• (ii) the volume of qualifying fruit juice added after fermentation begins,

comprises at least 35% of the end product.

• (2) “Qualifying fruit juice” means apple or pear juice of a gravity of at least 1033 degrees.

• (3) The “gravity” of apple or pear juice in degrees is determined by—

• (a) calculating the ratio of the weight of the volume of the juice to the weight of an equal volume of distilled water (both as at 20°C), and

• (b) multiplying that ratio by 1000.

• (4) “Pre-fermentation mixture” means the mixture of juice and other ingredients in which the fermentation (from which the cider is obtained) takes place, as that mixture exists immediately before the fermentation process begins.

• (5) If the cider consists of a blend of two or more products, each constituting cider, references in sub-paragraph (4) to the pre-fermentation mixture are to the pre-fermentation mixtures for each of those products taken as a whole.

8

• (1) “Sparkling cider” means cider which—

• (a) if it is packaged in a closed bottle, either—

• (i) due to the presence of carbon dioxide, the pressure in the bottle, measured at a temperature of 20°C, is not less than 3 bars in excess of atmospheric pressure, or

• (ii) (regardless of the pressure) the bottle has a mushroom-shaped stopper held in place by a tie or fastening;

• (b) if it is not packaged in a closed bottle, has characteristics similar to those of cider which (while packaged in a closed bottle) falls within paragraph (a)(i).

• (2) Cider is to be regarded as having been rendered sparkling if—

• (a) as a result of aeration, fermentation or any other process, it falls within sub-paragraph (1), or

• (b) (if not previously rendered sparkling under paragraph (a)) it is transferred into a closed bottle which has, or the stopper of its bottle is exchanged for, a stopper of the kind mentioned in sub-paragraph (1)(a)(ii).

9

Rendering cider sparkling, at any time after the excise duty point in relation to that cider, is treated for the purposes of this Part as producing sparkling cider.

10

“Still cider” means cider that is not sparkling cider.

Wine

11

“Wine” means any product obtained from the alcoholic fermentation of fresh grapes or of the must of fresh grapes (whether or not the product is fortified with spirits).

Other fermented products

12

“Other fermented product” means a product which—

• (a) is either—

• (i) obtained from the alcoholic fermentation of any substance, or

• (ii) obtained by mixing a product obtained from the alcoholic fermentation of any substance, or anything derived from that product, with anything else; but

• (b) is not beer, cider, wine or spirits.

Schedule 7

Schedule 8

Schedule 9

Part 1 — Alcoholic products, other than qualifying draught products, of an alcoholic strength of less than 8.5%

Part 2 — Qualifying draught products of an alcoholic strength of less than 8.5%

Schedule 10

Liability to penalty

1

A penalty is payable by a person (“P”) who contravenes section 100(1) or 103(1).

Amount of penalty

2

• (1) If the contravention is deliberate and concealed, the amount of the penalty is the maximum amount (see paragraph 10).

• (2) If the contravention is deliberate but not concealed, the amount of the penalty is 70% of the maximum amount.

• (3) In any other case, the amount of the penalty is 30% of the maximum amount.

• (4) The contravention is—