Finance Act 2024

• (7) The reference in section 1218ZEA(1) of CTA 2009, as amended by paragraph 4(2)(c), to a statement having been made under section 1218ZE(2) of that Act includes reference to a statement having been made under that provision in relation to the European expenditure condition.

• (8) But the application of section 1218ZEA(1) of CTA 2009 as so amended is subject to sub-paragraph (4) (where that sub-paragraph applies).

• (9) In this paragraph—

• “exhibition”, “separate exhibition trade”, “production company” and “core expenditure” have the same meanings as in Part 15E of CTA 2009;

• “UK expenditure” and “UK expenditure condition” have the same meanings as in that Part after the amendments made by paragraph 4;

• “European expenditure” and “European expenditure condition” have the same meanings as in that Part before the amendments made by paragraph 4.

• (10) For the purposes of this paragraph, an exhibition “enters production” when core expenditure is first incurred on it.

Transitional provision in relation to paragraph 5

11

• (1) This paragraph makes transitional provision in relation to paragraph 5.

• (2) The amendments made by that paragraph have effect in relation to accounting periods ending on or after 1 April 2024.

• (3) Sub-paragraph (4) applies in a case where expenditure incurred before 1 April 2024 is to be taken into account as qualifying expenditure for the purposes of section 1218ZCF of CTA 2009 (amount of relief for museum or gallery exhibition).

• (4) The references in subsections (2) and (3) of that section (as amended by paragraph 5) to so much of the qualifying expenditure incurred to date as is UK expenditure are to be read as references to so much of the qualifying expenditure incurred to date as—

• (a) has been incurred before 1 April 2024 and is European expenditure, or

• (b) has been incurred on or after that date and is UK expenditure.

• (5) But if the exhibition in relation to which sub-paragraph (4) applies has entered production before 1 April 2024, the production company may elect for that sub-paragraph to have effect in relation to that exhibition as if “2025” were substituted for “2024”.

• (6) In this paragraph—

• “exhibition”, “production company” and “core expenditure” have the same meanings as in Part 15E of CTA 2009;

• “UK expenditure” has the same meaning as in that Part after the amendments made by paragraph 4;

• “European expenditure” has the same meanings as in that Part before the amendments made by paragraph 4.

• (7) For the purposes of sub-paragraph (5), an exhibition “enters production” when core expenditure is first incurred on it.

Schedule 6

Power to recover overpayments

1

• (1) Paragraph 52 of Schedule 18 to FA 1998 (recovery of excessive payments) is amended as follows.

• (2) In sub-paragraph (1), in the words before paragraph (a), for “paragraph” substitute “sub-paragraph”.

• (3) In sub-paragraph (2)—

• (a) for “This paragraph” substitute “Sub-paragraph (1)”;

• (b) omit paragraphs (bd) to (bi).

• (4) In sub-paragraph (2A), after paragraph (c) insert

, or (d) creative sector credit,

.

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

(2B) In this paragraph, “creative sector credit” means— (a) audiovisual expenditure credit or video game expenditure credit under Chapter 3 of Part 14A of the Corporation Tax Act 2009, (b) film tax credit under Part 15 of that Act, (c) television tax credit under Part 15A of that Act, (d) video game credit under Part 15B of that Act, (e) theatre tax credit under Part 15C of that Act, (f) orchestra tax credit under Part 15D of that Act, or (g) museums and galleries exhibition credit under Part 15E of that Act.

• (6) In sub-paragraph (5)—

• (a) omit paragraphs (ae) and (ag) to (ak);

• (b) before paragraph (b) insert—

(al) an amount of creative sector credit paid to a company for an accounting period, or

;

• (c) in the words after paragraph (b), for the words from “the” to the end substitute “that accounting period”.

• (7) Those amendments have effect in relation to accounting periods beginning on or after 1 April 2024.

Time limit for claims

2

• (1) In paragraph 83W(1) of Schedule 18 to FA 1998 (time limits for claims under Parts 15 to 15E of CTA 2009), for the words from “first” to the end substitute

end of the period of— (a) two years beginning with the last day of the period of account to which the claim relates, in a case where that period is not longer than 18 months, or (b) 42 months beginning with the first day of the period of account to which the claim relates, in any other case.

• (2) That amendment has effect in relation to accounting periods beginning on or after 1 April 2024.

Supporting information

3

• (1) After paragraph 83W of Schedule 18 to FA 1998 insert—

(83WA) The Commissioners for His Majesty’s Revenue and Customs may by regulations specify, in relation to a claim to which this Part of this Schedule applies— (a) information to be provided by the claimant company; (b) the form and manner in which, and the time by which, the information is to be provided; (c) the consequences of failing to provide the information as required (which may include the total or partial invalidity of the claim or a reduction of the claimed relief).

• (2) That amendment has effect in relation to claims made on or after 1 April 2024.

Schedule 7

Amendment of CTA 2010

1

CTA 2010 is amended in accordance with paragraphs 2 to 10.

CoACS to be institutional investors

2

In Section 528 (conditions for company), in subsection (4A), after paragraph (b) insert—

(ba) a person acting on behalf of an authorised contractual scheme (within the meaning given by section 237(3) of FISMA 2000) which is a co-ownership scheme (within the meaning given by section 235A of that Act) that meets the genuine diversity of ownership condition or the non-close condition;

.

Non-close condition

3

• (1) Section 528 is amended as follows.

• (2) In subsection (4)—

• (a) in the words before paragraph (a), after “company” insert “meets the non-close condition.”, and

• (b) omit paragraphs (a) and (b).

• (3) After subsection (4B) insert—

(4C) The non-close condition is met— (a) in relation to a company, if— (i) it is not a close company, or (ii) it is a close company but only because it has an institutional investor as a direct or indirect participator, and (b) in relation to a person or scheme other than a company, if it would fall within paragraph (a)(i) or (ii) if— (i) the person’s business or the scheme were a company, and (ii) the interests of persons in the business or scheme were shares in the company.

• (4) In subsection (5), for “subsection (4)(a)” substitute “determining whether the non-close condition is met”.

• (5) After subsection (5A) (as inserted by paragraph 4) insert—

(5B) For the purposes of subsection (4C)(a)(ii)— (a) a person is a “direct participator” if the person is a participator for the purposes of Part 10 of CTA 2010 (see section 454), and (b) a person is an “indirect” participator in a company if the person has a share or interest in the capital or income of the company through another body corporate or other bodies corporate. (5C) In determining whether a person is an indirect participator— (a) reference to having a share or interest in the capital or income of a company through a body corporate is to be read in accordance with sub-paragraphs (9) and (10) of paragraph 46 of Schedule 5AAA to TCGA 1992 (meaning of direct or indirect participator), and (b) a person is regarded for the purposes of those sub-paragraphs, and for the purposes of subsection (5B)(b) of this section, as having a share or interest in the capital or income of a company if the person would be a participator in the company as a result of section 454(2) of CTA 2010.

• (6) Section 528 has effect, and is to be deemed always to have had effect, with the amendments made by this paragraph.

Certain institutional investors required to meet GDO or non-close condition

4

• (1) Section 528 is further amended as follows.

• (2) In subsection (4A)—

• (a) in paragraph (a)—

• (i) in sub-paragraph (i), after “2000)” insert “that meets the genuine diversity of ownership condition (see section 528ZB(2)) or the non-close condition”, and

• (ii) in sub-paragraph (ii), after “Act)” insert “and that meets the genuine diversity of ownership condition or the non-close condition”,

• (b) in paragraph (b)—

• (i) in sub-paragraph (i), after “Act” insert “and that meets the genuine diversity of ownership condition or the non-close condition”,

• (ii) in sub-paragraph (ii), for “and” substitute “that”, and

• (iii) in that sub-paragraph, after “2000)” insert “and that meets the genuine diversity of ownership condition or the non-close condition”,

• (c) in paragraph (c), after “2000)” insert “that meets the genuine diversity of ownership condition or the non-close condition”, and

• (d) in paragraph (e), after “who” insert “meets the non-close condition and who”.

• (3) After subsection (4C) (as inserted by paragraph 3) insert—

(4D) But for the purposes of applying the non-close condition for the purpose of any of paragraphs (a) to (c) of subsection (4A), subsection (4C) has effect as if— (a) paragraph (a)(ii) were omitted, and (b) in paragraph (b), in the words before sub-paragraph (i), “or (ii)” were omitted.

• (4) In subsection (5) (as amended by paragraph 3)—

• (a) the words from “a company” to the end become paragraph (a),

• (b) after that paragraph insert

, and (b) ignore paragraph (a) of section 442 (non-UK resident companies deemed not to be close).

• (5) After subsection (5) insert—

(5A) But subsection (5)(a) does not apply for the purpose of determining whether a person acting in the course of a long term insurance business meets the non-close condition.

• (6) After subsection (5C) (as inserted by paragraph 3) insert—

(5D) In determining whether a company is a close company for the purposes of the non-close condition— (a) the rights and powers of a person (“A”) are not to be attributed to another person (“P”) merely because A is a partner of P for the purposes of any attribution under section 451(4) (rights of a person's associates to be attributed to the person etc in determining “control”), and (b) a company (“C”) is not to be regarded as a close company only because a person possesses or is entitled to acquire 50% or more of the voting power in C as a result of being— (i) a manager of a collective investment vehicle (within the meaning of Schedule 5AAA to TCGA 1992), or (ii) a general partner in a limited partnership which is a collective investment scheme.

• (7) In section 528ZA, in subsection (7), for the words from “which” to the end substitute “if a person acting on behalf of it would be an institutional investor as a result of section 528(4A)(c)”.

• (8) In section 528ZB—

• (a) for the heading substitute “Genuine diversity of ownership condition”,

• (b) omit subsection (1),

• (c) omit subsection (5), and

• (d) in subsection (7), after “section” insert

— - “collective investment scheme” has the meaning it has in section 235 of FISMA 2000;

.

• (9) In consequence of the other amendments made by this paragraph, in Schedule 5AAA to TCGA 1992, in paragraph 46(3)(a), for “section 528(4A)(a), (b), (c), (i) or (j)” substitute “section 528(4A)(i) or (j)“.

Paragraph 4: transitional provision

5

• (1) Sub-paragraph (2) applies where—

• (a) immediately before the day on which this Act is passed, a company that is a company UK REIT or the principal member of a group UK REIT, met the conditions in section 528 of CTA 2010, and

• (b) the company ceases to meet one or more of those conditions on that day as a result of one or more persons ceasing to be regarded as institutional investors as a result of the amendments made by paragraph 4.

• (2) Part 12 of CTA 2010 has effect in relation to such a person for the purposes of determining whether the company meets those conditions as if the amendments made by paragraph 4 had not been made for so long as the person’s interest in the company as a proportion of all interests in the company—

• (a) does not increase as a result of the acquisition by the person of further interests in the company, and

• (b) continuously remains relevant to the question of whether those conditions are met.

• (3) Sub-paragraph (4) applies where—

• (a) immediately before the day on which this Act is passed, a collective investment vehicle, or a company that is not a collective investment vehicle, (“the reliant entity”) relied on its having a qualifying investor as a direct or indirect participator for the purpose of any provision of Schedule 5AAA to TCGA 1992 (“a qualifying purpose”), and

• (b) the qualifying investor (“the former qualifying investor”) ceased to be a qualifying investor a result of the amendments made by paragraph 4.

• (4) That Schedule has effect in relation to the former qualifying investor for a qualifying purpose as if the amendments made by paragraph 4 had not been made for so long as—

• (a) the investor’s interest in the reliant entity as a proportion of all interests in the entity does not increase as a result of the acquisition by the investor of further interests in the reliant entity, and

• (b) the investor being a direct or indirect participator in the reliant entity continuously remains relevant for at least one qualifying purpose.

• (5) Sub-paragraph (6) applies when determining whether a collective investment scheme constituted before the day on which this Act is passed meets the genuine diversity of ownership condition for the purposes of any of paragraphs (a) to (c) of section 528(4A).

• (6) Regulation 75(2) of the Offshore Funds (Tax) Regulations 2009 (including as it applies for the purposes of regulation 75(5) of those Regulations) has effect, for those purposes, as if it referred to a statement prepared by the manager of the scheme (instead of the documents referred to in that paragraph) which—

• (a) is available to HMRC,

• (b) specifies the intended categories of investor when the scheme was marketed,

• (c) confirms that the interests in the scheme were made widely available, and

• (d) confirms that interests in the scheme were marketed and made available in accordance with the requirements of regulation 75(4)(a) of those Regulations (and that provision is to be read accordingly).

Insurance companies may be included in group UK REIT

6

• (1) Section 606 (meaning of group) is amended as follows.

• (2) In subsection (2), omit paragraphs (b) and (c) (but not the “or” at the end of paragraph (c)).

• (3) In subsection (5), omit the definitions of “insurance company” and “insurance subsidiary”.

Property financing costs

7

• (1) Section 544 (meaning of “property profits” and “property financing costs”) is amended as follows.

• (2) In subsection (3)(a), for “property rental business of members of the group” substitute “the group's property rental business in the United Kingdom”.

• (3) After subsection (3) insert—

(3A) The reference in subsection (3)(a) to the group's property rental business in the United Kingdom is a reference to— (a) property rental business of UK members of the group, and (b) UK property rental business of other members.

• (4) Section 544 has effect, and is to be deemed always to have had effect, with the amendments made by sub-paragraphs (2) and (3).

• (5) After subsection (4) insert—

(4A) But property financing costs do not (for the purposes of section 543) include any expense for which a deduction would not be allowed in calculating profits in accordance with section 599, other than an expense which is disallowed only as a result of the application of Part 10 of TIOPA 2010 (corporate interest restriction).

• (6) The amendment made by sub-paragraph (5) has effect for accounting periods ending on or after 1 April 2023.

Single property rule

8

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

• (a) in subsection (2A)—

• (i) after “is” insert “, or was at any time from the relevant time,”,

• (ii) for “exceeds” substitute “in excess of”, and

• (iii) omit “at the relevant time”, and

• (b) in subsection (2B)—

• (i) in the words before paragraph (a), after “means” insert “the later of”

• (ii) for paragraphs (a) and (b) substitute—

(a) entry, and (b) when the property was acquired.

Disposal of rights or interests in UK property rich funds

9

• (1) Section 535A (disposals of rights or interests in UK property rich companies) is amended as follows.

• (2) After subsection (7) insert—

(7A) Any such reference also includes the disposal of a right or interest in a fund (a “relevant fund”) that— (a) is an authorised contractual scheme (within the meaning given by section 237(3) of FISMA 2000) which is a co-ownership scheme (within the meaning given by section 235A of that Act), and (b) is UK property rich as determined in accordance with paragraph 3 of Schedule 5AAA to TCGA (UK property rich collective investment vehicles etc).

• (3) In subsection (8) after “subsection (7)” insert “or (7A)”.

Holders of excessive rights

10

• (1) In section 551 (tax consequences of distribution to holder of excessive rights), in subsection (1)(a), for “(as” substitute “that is not an excluded holder (both as”.

• (2) In section 553 (meaning of “holder of excessive rights”)—

• (a) in the heading, after “rights”” insert “and “excluded holder”,

• (b) in subsection (1), omit the words after paragraph (b), and

• (c) after subsection (4) insert—

(4A) For the purposes of section 551, a holder of excessive rights is an “excluded holder” if— (a) in accordance with double taxation arrangements (within the meaning of section 2(4) of TIOPA 2010), the holder is taxed at a particular rate, or not taxed at all, on distributions from a UK REIT, unless the sole reason for that treatment is the size of the holder’s interest in the UK REIT, or (b) the holder is a person to whom a payment of a distribution must be made without deduction of income tax in accordance with regulation 7 of the Real Estate Investment Trusts (Assessment and Recovery of Tax) Regulations 2006 (S.I. 2006/2867) (gross payment of distributions).

Corporate interest restriction and disposal of interests in UK property rich companies

11

• (1) Section 452 of TIOPA 2010 (corporate interest restriction: REITs) is amended as follows.

• (2) In subsection (1)(b), after “(5)” insert “, or section 535A(2),”.

• (3) In subsection (4)(b), after “(5)” insert “, or section 535A(2),”.

Schedule 8

Introduction

1

Schedule 22 to FA 2000 (tonnage tax) is amended as follows.

Qualifying companies to include companies managing qualifying ships

2

• (1) In paragraph 16 (qualifying companies and groups), in sub-paragraph (1)(b), after “operates” insert “or manages”.

• (2) After paragraph 18 insert—

(18A) A company is regarded for the purposes of this Schedule as managing a qualifying ship if— (a) the ship is a qualifying ship operated by a tonnage tax company (“the operator”), (b) the company carries on activities in relation to the ship that would be tonnage tax activities of the operator if the operator carried them on, and (c) those activities as carried on by the company represent a significant contribution to the operation of the ship.

Daily profits of managed ships

3

• (1) Paragraph 4 (tonnage tax profits: method of calculation) is amended as follows.

• (2) In sub-paragraph (1), after “operated” insert “or managed”.

• (3) In sub-paragraph (2), for Step One substitute—

• Step One Determine the daily profit for each qualifying ship operated by the company and each qualifying ship managed by the company by reference to the following table and the net tonnage of the ship— Net tonnageDaily ProfitOperated shipManaged ship For each 100 tons up to 1,000 tons£0.60£0.12For each 100 tons between 1,000 and 10,000 tons£0.45£0.09For each 100 tons between 10,000 and 25,000 tons£0.30£0.06For each 100 tons above 25,000 tons£0.15£0.03

.

Tonnage tax activities include activities in managing ships

4

In paragraph 46 (core qualifying activities)—

• (a) in sub-paragraph (1)—

• (i) in paragraph (a), after “operating” insert “or managing”, and

• (ii) in paragraph (b), after “operating” insert “or managing”, and

• (b) after sub-paragraph (2) insert—

(3) A company’s activities in managing qualifying ships means its participation in the activities mentioned in that paragraph by virtue of which the ship is a qualifying ship.

Effect of temporarily ceasing to manage or operate qualifying ships

5

In paragraph 17 (effect of temporarily ceasing to operate qualifying ships)—

• (a) in sub-paragraph (1) after “operate”, in both places it occurs, insert “or manage”,

• (b) in sub-paragraph (2), in paragraph (a), after “operating” insert “or managing”,

• (c) in that sub-paragraph, in the words after paragraph (b)—

• (i) after “operate” insert “or manage”,

• (ii) after “operated” insert “or managed”, and

• (d) in sub-paragraph (4)—

• (i) in paragraph (a), after “operating” insert “or managing”, and

• (ii) in paragraph (b), after “operates” insert “or manages”.

Training requirement

6

In paragraph 23 (the training requirement), after sub-paragraph (2) insert—

(3) The condition mentioned in sub-paragraph (1) does not apply to— (a) a company that does not operate any qualifying ships, or (b) a group that does not have any members that operate one or more qualifying ships.

Disapplication of 75% limit for ship managers

7

• (1) In paragraph 37 (75% charter limit)—

• (a) in sub-paragraph (1), in the words before paragraph (a), after “of” insert “a relevant company or group”, and

• (b) after sub-paragraph (5) insert—

(6) For the purposes of sub-paragraph (1)— (a) a company is “relevant” if it operates one or more qualifying ships, and (b) a group is “relevant” if it has one or more members that operate one or more qualifying ships.

• (2) In paragraph 49 (distributions of oversea shipping companies), in sub-paragraph (2), in paragraph (c), after “that” insert “, where the overseas company operates qualifying ships,”.

Commencement

8

The amendments made by this Schedule have effect in relation to tonnage tax elections made on or after 1 April 2024.

Schedule 9

Part 1 — Abolition of lifetime allowance charge

1

Part 4 of FA 2004 (pension schemes etc) is amended as follows.

2

In section 204 (tax charges: authorised pensions and lump sums), after subsection (2) insert—

(3) For further provision, in addition to that contained in this Chapter, about the taxation of pensions and lump sums which are authorised to be paid by this Part, see— (a) Chapter 5A of Part 9 of ITEPA 2003 (pensions under registered pension schemes); (b) Chapter 15A of that Part of that Act (lump sums under registered pension schemes).

3

Omit sections 214 to 226 (lifetime allowance charge) and the italic heading before those sections.

4

• (1) Section 232 (annual allowance charge: cash balance arrangements: adjustments of closing value) is amended as follows.

• (2) In subsection (8A)(c)—

• (a) omit “or, but for paragraph 15A of Schedule 32, would occur”;

• (b) for “lifetime allowance excess lump sum” substitute “pension commencement excess lump sum”.

• (3) In subsection (8D)—

• (a) in paragraph (a) omit “or benefit crystallisation event 5, 5A or 5B occurs in relation to the individual and the pension scheme”;

• (b) in paragraph (b) omit “or the benefit crystallisation event occurs”.

• (4) After subsection (8D) insert—

(8E) Schedule 32 contains provision about the meaning of references in this section to benefit crystallisation events.

5

• (1) Section 236 (annual allowance charge: defined benefits arrangements: adjustments of closing value) is amended as follows.

• (2) In subsection (8A)(c) for “lifetime allowance excess lump sum” substitute “pension commencement excess lump sum”.

• (3) In subsection (8D)—

• (a) in paragraph (a) omit “or benefit crystallisation event 5, 5A or 5B occurs in relation to the individual and the pension scheme”;

• (b) in paragraph (b) omit “or the benefit crystallisation event occurs”.

• (4) After subsection (8D) insert—

(8E) Schedule 32 contains provision about the meaning of references in this section to benefit crystallisation events.

6

In section 237B (annual allowance: liability of scheme administrator), in subsection (6) omit the words from “or benefit crystallisation event 5” to the end.

7

In section 255 (assessments under Part 4 of FA 2004), in subsection (1) omit paragraph (c).

8

Omit section 267 (discharge of liability of scheme administrator to lifetime allowance charge).

9

• (1) Section 269 (appeal against decision on discharge of liability) is amended as follows.

• (2) In subsection (1)—

• (a) in paragraph (a) omit “section 267(2) (discharge of liability to lifetime allowance charge)”;

• (b) omit paragraph (b) (and the “or” before it).

• (3) In subsection (6) omit “lifetime allowance charge,”.

• (4) Omit subsections (9) to (11).

10

In section 272A (liabilities of independent trustee), in subsection (7) omit paragraph (b).

11

In section 280 (abbreviations and general index), in the table in subsection (2) omit the entries for the following—

• active membership period;

• amount crystallised;

• available (in relation to a person’s lifetime allowance);

• benefit crystallisation event;

• lifetime allowance (in relation to a person);

• lifetime allowance charge;

• lifetime allowance enhancement factors;

• lifetime allowance excess lump sum;

• overseas arrangement active membership period;

• recognised overseas scheme arrangement;

• relevant overseas individual;

• standard lifetime allowance;

• transitional 2013/14 lump sum;

• winding-up lump sum death benefit.

12

In Schedule 28 (pension rules and pension death benefit rules), in Part 2 (pension death benefit rules), in paragraph 16AA omit sub-paragraph (a).

13

• (1) Schedule 32 (meaning of expressions relating to benefit crystallisation events) is amended as follows.

• (2) In the shoulder note, for “Section 216” substitute “Sections 232 and 236”.

• (3) In the heading omit “- supplementary”.

• (4) Before paragraph 1 and the italic heading before it insert—

(A1) (1) This Schedule applies for the purposes of sections 232 and 236. (2) In this Schedule— (a) paragraph A2 sets out the events that are benefit crystallisation events in relation to an individual; (b) subsequent paragraphs give the meaning of expressions used in paragraph A2. (A2) (1) Benefit crystallisation event 1 occurs in relation to an individual if sums or assets held for the purposes of a money purchase arrangement under any of the relevant pension schemes are designated as available for the payment of drawdown pension to the individual. (2) Benefit crystallisation event 2 occurs in relation to an individual if the individual becomes entitled to a scheme pension under any of the relevant pension schemes. (3) Benefit crystallisation event 3 occurs in relation to an individual if the individual, having become so entitled, becomes entitled to payment of the scheme pension, otherwise than in excepted circumstances, at an increased annual rate which— (a) exceeds the threshold annual rate, and (b) exceeds by more than the permitted margin the rate at which it was payable on the day on which the individual became entitled to it. (4) Benefit crystallisation event 4 occurs in relation to an individual if the individual becomes entitled to a lifetime annuity purchased under a money purchase arrangement under any of the relevant pension schemes. (5) Benefit crystallisation event 6 occurs in relation to an individual if the individual becomes entitled to a relevant lump sum under any of the relevant pension schemes.

• (5) In paragraph 1 (meaning of “the relevant pension schemes”)—

• (a) for “For the purposes of the benefit crystallisation events” substitute “In this Schedule”;

• (b) omit the words from “(or in the case of” to the end.

• (6) Omit the following paragraphs and the italic headings before them—

• (a) paragraph 2A (avoiding double counting of refunded amounts of overseas transfer charge);

• (b) paragraphs 2B, 3 and 4 (BCEs 1, 2 and 4: prevention of overlap);

• (c) paragraph 5 (BCEs 1 and 5: hybrid arrangements);

• (d) paragraph 6 (BCEs 2, 3 and 5: meaning of “RVF”);

• (7) In paragraph 7 (BCEs 2 and 4: early lifetime annuities) omit sub-paragraphs (4) and (5).

• (8) Omit the following paragraphs and the italic headings before them—

• (a) paragraph 9 (BCE 2: meaning of “P”);

• (b) paragraph 13 (BCE 3: meaning of “XP”);

• (c) paragraph 14 (BCE 5: meaning of “DP” and “DSLS”);

• (d) paragraph 14ZA (BCEs 5 and 5B: hybrid arrangements);

• (e) paragraph 14ZB (BCE 5A: meaning of “amounts crystallised by BCE 1”);

• (f) paragraph 14A (BCE 5B: meaning of “remaining unused funds”);

• (g) paragraph 14B (BCEs 5C and 5D: meaning of “relevant two-year period”);

• (h) paragraph 14C (BCEs 5C and 5D: meaning of “relevant unused uncrystallised funds”).

• (9) In paragraph 15 (BCE 6: meaning of “relevant lump sum”), in sub-paragraph (c), for “lifetime allowance excess lump sum” substitute “pension commencement excess lump sum”.

• (10) Omit the following paragraphs and the italic headings before them—

• (a) paragraph 15A (BCE 6: prevention of overlap);

• (b) paragraph 16 (BCE 7: meaning of “relevant lump sum death benefit”);

• (c) paragraph 17 (BCE 8: prevention of overlap).

14

In Schedule 34 (non-UK schemes: application of certain charges) omit paragraphs 13 to 19 (lifetime allowance charge) and the italic heading before those paragraphs.

Part 2 — Taxation of lump sums

Amendments of Part 4 of FA 2004 (pension schemes etc)

15

Part 4 of FA 2004 (pension schemes etc) is amended as follows.

16

In section 164 (authorised member payments), in subsection (2)(c), for the words from “for the purposes of” to the end substitute “as a relevant benefit crystallisation event for the purposes of section 637Q or 637S of ITEPA 2003 (availability of individual’s lump sum allowance and lump sum and death benefit allowance).”

17

• (1) Section 166 (lump sum rule) is amended as follows.

• (2) In subsection (1), in the lump sum rule—

• (a) after paragraph (a) insert—

(aa) a pension commencement excess lump sum,

;

• (b) at the end of paragraph (e) insert “, or”;

• (c) omit paragraphs (g) and (h).

• (3) In subsection (2)—

• (a) omit paragraph (za);

• (b) in paragraph (a), for “any other pension commencement lump sum” substitute “a pension commencement lump sum or a pension commencement excess lump sum”.

18

In section 168 (lump sum death benefit rule), in subsection (1), in the lump sum death benefit rule—

• (a) at the end of paragraph (f) insert “, or”;

• (b) omit paragraph (i) (and the “or” before it).

19

In section 227G (when pension rights are first flexibly accessed) omit subsection (11).

20

• (1) Section 228ZA (tapered reduction of annual allowance: high-income individual) is amended as follows.

• (2) In subsection (4) (definition of “adjusted income”), for paragraph (e) substitute—

(e) the amount of any lump sum death benefit which is subject to the charge to tax on pension income under Part 9 of ITEPA 2003 (pension income) in the tax year.

• (3) In subsection (5) (definition of “threshold income”), for paragraph (d) substitute—

(d) the amount of any lump sum death benefit which is subject to the charge to tax on pension income under Part 9 of ITEPA 2003 (pension income) in the tax year.

21

In section 264 (false statements etc), in subsection (1)(a), for “under this Part, or” substitute “under this Part or under Part 9 of ITEPA 2003 (pension income) on pension income to which—

(i) any provision of Chapter 15A of that Part of that Act (lump sums under registered pension schemes) applies, or (ii) section 579A of that Act (pension income under registered pension schemes) applies by virtue of any provision of that Chapter, or

22

• (1) Section 265 (winding-up to facilitate payment of lump sums) is amended as follows.

• (2) In subsection (2) omit “or winding-up lump sum death benefits (or both)”.

• (3) In subsection (4) omit paragraph (b) (and the “and” before it).

23

After section 278 (market value) insert—

(278A) (1) For the purposes of this Part, a pension credit is “disqualifying” if, when the member becomes entitled to it, the person subject to the corresponding pension debit has an actual (rather than a prospective) right to payment of a pension under the relevant arrangement. (2) The “relevant arrangement” is the arrangement to which the pension sharing order, or provision by virtue of which the member becomes entitled to the pension credit, relates. (278B) (1) For the purposes of this Part, a dependants' annuity is “related to” a lifetime annuity payable to a member of a registered pension scheme if— (a) they are purchased either in the form of a joint life annuity or separately in circumstances in which the day on which the one is purchased is no earlier than seven days before, and no later than seven days after, the day on which the other is purchased, and (b) the dependants’ annuity will be payable to a dependant of the member. (2) For the purposes of this Part, a nominees’ annuity is “related to” a lifetime annuity payable to a member of a registered pension scheme if— (a) they are purchased either in the form of a joint life annuity or separately in circumstances in which the day on which the one is purchased is no earlier than seven days before, and no later than seven days after, the day on which the other is purchased, and (b) the nominees’ annuity will be payable to a nominee of the member. (3) For the purposes of this Part, a dependants’ scheme pension is “related to” a scheme pension payable to a member of a registered pension scheme if— (a) the day on which one is purchased or sums or assets are applied for its provision is no earlier than seven days before, and no later than seven days after, the day on which the other is purchased or sums or assets are applied for its provision, and (b) the dependants’ scheme pension will be payable to a dependant of the member.

24

In section 280 (abbreviations and general index), in the table in subsection (2)—

• (a) at the appropriate places add—

pension commencement excess lump sum	paragraph 3C of Schedule 29

;

• (b) in the entry for “related dependants’ annuity” for “paragraph 3(4A) of Schedule 29” substitute “section 278B(1)”;

• (c) in the entry for “related nominees’ annuity” for “paragraph 3(4B) of Schedule 29” substitute “section 278B(2)”;

• (d) in the entry for “related dependants’ scheme pension” for “paragraph 3(7C) of Schedule 29” substitute “section 278B(3)”.

25

Schedule 29 (authorised lump sums - supplementary) is amended in accordance with paragraphs 26 to 37.

26

• (1) Paragraphs 1 to 3A (pension commencement lump sums) are amended as follows.

• (2) In paragraph 1 (pension commencement lump sum)—

• (a) in sub-paragraph (1)—

• (i) in paragraph (b) for the words from “lifetime allowance” to the end substitute “lump sum allowance is available, and all or part or the member’s lump sum and death benefit allowance is available (see paragraph 12A),”;

• (ii) in sub-paragraph (f) for “sub-paragraphs (4) and (4A)” substitute “sub-paragraph (4A)”;

• (b) omit sub-paragraphs (3A), (4) and (6).

• (3) Omit paragraphs 1A and 1B (which modify the definition of “pension commencement lump sum” in relation to certain lump sums paid before 6 April 2015 and are therefore no longer of practical utility).

• (4) For paragraph 2 (definition of “the permitted maximum”) substitute—

(2) In paragraph 1 “the permitted maximum”, in relation to a lump sum, means the lowest of the following amounts— (a) the applicable amount in relation to the relevant pension (see paragraphs 2A to 2D); (b) so much of the member’s lump sum allowance as is available on the individual becoming entitled to the lump sum (see paragraph 12A); (c) so much of the member’s lump sum and death benefit allowance as is available on the individual becoming entitled to the lump sum (see paragraph 12A).

• (5) For paragraph 3 (definition of “the applicable amount”) substitute—

(2A) (1) This paragraph defines “the applicable amount” in relation to a relevant pension in a case in which the relevant pension is income withdrawal. (2) The applicable amount is one third of the scheme pension capital value. (3) The scheme pension capital value is (subject to sub-paragraph (4)) the aggregate of— (a) the sums designated as available for the payment of drawdown pension on that occasion, and (b) the market value of the assets so designated. (4) There is to be deducted from the amount determined under sub-paragraph (3) so much (if any) of the sums and assets designated as mentioned in sub-paragraph (3)(a) or (b) as represent rights attributable to a disqualifying pension credit. (2B) (1) This paragraph defines “the applicable amount” in relation to a relevant pension in a case in which the relevant pension is a lifetime annuity. (2) The applicable amount is one third of the annuity purchase price. (3) The annuity purchase price is (subject to sub-paragraph (4)) the aggregate of— (a) such of the sums held for the purposes of the pension scheme, and (b) the market value of such of the assets held for the purposes of the pension scheme, as are applied in (or in connection with) the purchase of the lifetime annuity and any related dependants’ annuity and any related nominees’ annuity. (4) There is to be deducted from the amount determined under sub-paragraph (3)— (a) if the sums or assets applied in (or in connection with) the purchase of the annuity or any related dependants’ annuity or any related nominees’ annuity consist of, or include, sums or assets representing the whole or part of the member’s drawdown pension fund or of the member's flexi-access drawdown fund, the aggregate of those sums and the market value of those assets, and (b) in any case, so much (if any) of the sums or assets applied in (or in connection with) the purchase of the annuity or any related dependants’ annuity or any related nominees’ annuity as represents rights which are attributable to a disqualifying pension credit. (2C) (1) This paragraph defines “the applicable amount” in relation to a relevant pension in a case in which the relevant pension is— (a) a scheme pension under a defined benefits arrangement, or (b) a collective money purchase arrangement. (2) The applicable amount is (subject to sub-paragraph (3))— $$A + ( B × C ) - D 4$ where— A is the amount of the lump sum; B is the relevant revaluation factor (see section 276); C is the amount of the pension which will be payable to the member in the period of 12 months beginning with the day on which the member becomes entitled to the pension (assuming that it remains payable throughout that period at the rate at which it is payable on that day); D is so much (if any) of A or C as represents rights which are attributable to a disqualifying pension credit.$ (3) In determining C for the purposes of subsection (2) in a case in which the pension is under a public service pension scheme, any abatement of the pension is to be left out of account. (2D) (1) This paragraph defines “the applicable amount” in relation to a relevant pension in a case in which the relevant pension is a scheme pension under a money purchase arrangement that is not a collective money purchase arrangement. (2) The applicable amount is one third of the scheme pension purchase price. (3) The scheme pension purchase price is (subject to sub-paragraph (4)) the aggregate of— (a) such of the sums held for the purposes of the pension scheme, and (b) the market value of such of the assets held for the purposes of the pension scheme, as are applied in (or in connection with) the purchase or provision of the scheme pension and any related dependants’ scheme pension. (4) There is to be deducted from the amount determined under sub-paragraph (3)— (a) if the scheme pension is funded (in whole or in part) by the application of sums or assets representing the whole or part of the member’s drawdown pension fund or of the member’s flexi-access drawdown fund, the aggregate of those sums and the market value of those assets, and (b) in any case, so much (if any) of the sums and assets referred to in sub-paragraph (3)(a) and (b) as represent rights which are attributable to a disqualifying pension credit.

• (6) Before paragraph 3A (anti-avoidance rule to prevent recycling of pension commencement lump sum) insert the following heading—

.

• (7) In paragraph 3A(5), for paragraphs (a) and (b) substitute “the amount of the lump sum”.

• (8) After paragraph 3A insert—

(3B) (1) Sub-paragraph (2) applies if— (a) sums or assets held for the purposes of, or representing accrued rights under, a money purchase arrangement relating to the member under a registered pension scheme (“member money purchase funds”) are subject to a relevant surrender or a relevant transfer, (b) the sole or main purpose of the relevant surrender or relevant transfer is to increase the applicable amount for the purposes of paragraph 2 on the member becoming entitled to a scheme pension, and (c) the member becomes entitled to a scheme pension under a relevant defined benefits arrangement. (2) The pension scheme under which the relevant defined benefits arrangement is an arrangement is to be treated as making an unauthorised payment to the member of the amount by which— (a) the applicable amount in relation to the relevant defined benefits arrangement (as determined under paragraph 2C), exceeds (b) what would be the applicable amount (as determined under paragraph 2D) if the arrangement were a money purchase arrangement. (3) For the purposes of sub-paragraph (1)— (a) member money purchase funds are subject to a “relevant surrender” if they are surrendered and, in consequence of the surrender, there is a corresponding increase in the sums or assets held for the purposes of, or representing rights under, a defined benefits arrangement relating to the member under the pension scheme (or such an arrangement is established), and (b) member money purchase funds are subject to a “relevant transfer” if they are transferred so as to become held for the purposes of, or to represent rights under, a defined benefits arrangement relating to the member under any other registered pension scheme. (4) In this paragraph “relevant defined benefits arrangement” means— (a) the defined benefits arrangement mentioned in paragraph (a) or (b) of sub-paragraph (3), or (b) any other defined benefits arrangement relating to the member (under the pension scheme or any other registered pension scheme) in the case of which any of the sums or assets held for the purposes of, or representing accrued rights under, the arrangement directly or indirectly represent sums or assets previously held for the purposes of, or representing accrued rights under, the defined benefits arrangement so mentioned.

• (9) After paragraph 3B (as inserted by sub-paragraph (8)) insert—

(3C) (1) For the purposes of this Part a lump sum is a pension commencement excess lump sum if— (a) the member becomes entitled to it in connection with becoming entitled to a relevant pension (or dies after becoming entitled to it but before becoming entitled to the relevant pension in connection with which it was anticipated that the member would become entitled to it); (b) it is paid when none of the member’s lump sum allowance is available (see paragraph 12A); (c) it is paid within the period beginning six months before, and ending one year after, the day on which the member becomes entitled to it; (d) it does not reduce the rate of payment of any pension to which the member has become (actually) entitled, or extinguish the member’s entitlement to payment of any such pension; (e) it is paid when the member has reached normal minimum pension age (or the ill-health condition is met); and (f) it is not an excluded lump sum (see sub-paragraph (4)). (2) But if a lump sum falling within sub-paragraph (1) exceeds the permitted maximum, the excess is not a pension commencement excess lump sum. (3) In this paragraph “the permitted maximum”, in relation to a lump sum, means— $$( A × 4 ) - B$ where— “A” is the applicable amount in relation to the relevant pension (see paragraphs 2A to 2D); “B” is the amount of the member’s lump sum and death benefit allowance that is available on the payment of the lump sum (see paragraph 12A).$ (4) A lump sum is an “excluded lump sum” if— (a) it would, apart from this paragraph, be permitted to be paid under the lump sum rule in section 166, or (b) the pension in connection with which the member becomes entitled to it is a CMP-derived drawdown pension. (5) In determining for the purposes of this paragraph— (a) whether any of a member’s lump sum allowance is available on the payment of a lump sum, or (b) the amount of a member’s lump sum and death benefit allowance that is available on the payment of a lump sum, the member is treated as having already become entitled to any pension commencement lump sum that is paid to the member in connection with becoming entitled to the relevant pension.

27

• (1) Paragraph 4 (serious ill-health lump sum) is amended as follows.

• (2) In sub-paragraph (1)—

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

• (b) omit paragraph (b).

• (3) In sub-paragraph (2) for “in respect of which there has been no previous benefit crystallisation event” substitute “under which the member has not previously become entitled to any pension or lump sum”.

• (4) Omit sub-paragraph (3).

28

• (1) Paragraph 4A (uncrystallised funds pension lump sum) is amended as follows.

• (2) In sub-paragraph (1) omit paragraph (b).

• (3) Omit sub-paragraph (2).

29

• (1) Paragraph 5 (short service refund lump sum) is amended as follows.

• (2) In sub-paragraph (1), for paragraph (c) substitute—

(c) the member has not previously become entitled to any pension or lump sum under the pension scheme,

.

30

• (1) In paragraph 7 (trivial commutation lump sum), in sub-paragraph (1)(c), for “lifetime allowance is available” substitute “lump sum allowance is available (see paragraph 12A)”.

• (2) In paragraph 8 (trivial commutation lump sum: value of member’s relevant crystallised pension rights on the nominated date), in sub-paragraph (1), for paragraph (b) substitute—

(b) the amount given by the formula— $$( ( A - B ) × 4 ) + C$ where— “A” is the member’s lump sum allowance; “B” is the amount of the member’s lump sum allowance that is available (see paragraph 12A) on the payment of the lump sum in question; “C” is the amount of any serious ill health lump sum already paid to the member so far as it was not chargeable to income tax.$

31

In paragraph 10 (winding-up lump sum), in sub-paragraph (1)(d), for “lifetime allowance is available” substitute “lump sum allowance is available (see paragraph 12A)”.

32

Omit paragraph 11 (lifetime allowance excess lump sum) and the italic heading before it.

33

Omit paragraph 11A (transitional 2013/14 lump sum) and the italic heading before it.

34

In the italic heading before paragraph 12 omit “of Part 1”.

35

• (1) Paragraph 12 (interpretation) is amended as follows.

• (2) Omit sub-paragraphs (1A) to (4).

• (3) In sub-paragraph (5), for “4A(2)” substitute “3C(2)”.

36

After paragraph 12 insert—

(12A) (1) In this Part of this Schedule, a reference to the amount of an individual’s lump sum allowance that is available on the individual becoming entitled to a lump sum, or being paid a lump sum, is to the amount of that allowance that would be so available on the following assumption. (2) The assumption is that the individual becoming entitled to or (as the case may be) being paid the lump sum was a relevant benefit crystallisation event within the meaning of section 637Q of ITEPA 2003 (availability of individual’s lump sum allowance). (3) In this Part of this Schedule, a reference to the amount of an individual’s lump sum and death benefit allowance that is available on the individual becoming entitled to a lump sum, or being paid a lump sum, is to the amount of that allowance that would be so available on the following assumption. (4) The assumption is that the individual becoming entitled to or (as the case may be) being paid the lump sum was a relevant benefit crystallisation event within the meaning of section 637S of ITEPA 2003 (availability of individual’s lump sum and death benefit allowance).

37

• (1) In paragraph 13 (defined benefits lump sum death benefit) sub-paragraph (1)(d) is amended as follows.

• (2) After “pension protection lump sum death benefit,” insert “or”.

• (3) Omit “or winding-up lump sum death benefit.”

Amendments of Part 9 of ITEPA 2003

38

Part 9 of ITEPA 2003 (pension income) is amended as follows.

39

In section 565 (structure of Part 9), for the paragraph relating to Chapter 15A substitute—

Chapter 15A— (a) provides for certain amounts paid under registered pension schemes in the form of lump sums to be subject to the charge to tax on pension income, and (b) deals with exemptions from the charge to tax (whether under this Part or any other provision) in relation to certain other amounts paid under registered pension schemes in the form of lump sums.

40

• (1) Section 566 (nature of charge to tax on pension income and relevant definitions) is amended as follows.

• (2) In subsection (3), for “16” substitute “15A”.

• (3) In the table in subsection (4)—

• (a) after the entry for section 633 insert—

Section 637B	Pensions treated as arising from payment of pension commencement excess lump sums under registered pension schemes	Chapter 15A

• (b) in the entry for section 636B, in the first column, for “636B” substitute “637G”.

• (c) in the entry for section 636C—

• (i) in the first column, for “636C” substitute “637N”;

• (ii) in the second column omit “and winding-up lump sum death benefits”.

41

For Chapter 15A substitute—