Finance (No. 3) Bill (HC Bill 200)

Finance (No. 3) BillPage 80

(i) which is chargeable to income tax or would be
chargeable apart from section 474, or

(ii) which is exempt income, and

(d) there is no connection (direct or indirect) between the
5relevant step and a tax avoidance arrangement.

(14) Subsection (15) applies if—

(a) apart from subsection (13), Chapter 2 would apply by reason
of the relevant step mentioned in that subsection, and

(b) by the end of the relevant period, the relevant loan has not
10been fully repaid.

(15) This Part has effect as if a relevant step within section 554C(1)(a)
were taken at the end of the relevant period—

(a) the subject of which is a sum of money of an amount equal to
the outstanding amount of the relevant loan as at the end of
15the relevant period,

(b) in relation to which the relevant person (within the meaning
of section 554C(1)) is the person to whom the relevant loan is
made, and

(c) by reason of which Chapter 2 is to apply.

(16) 20In subsections (14) and (15) “the relevant period” means the period
of 40 days starting with the day on which the relevant step
mentioned in subsection (13) is taken.

554O Exclusions: employee car ownership schemes

(1) This section applies if—

(a) 25there is an arrangement (“the car ownership arrangement”)
which—

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

(ii) 30specifies the date (“the repayment date”) by which the
car loan must be fully repaid which must be no later
than four years after the date on which the car loan is
made, and

(iii) permits A, in order to obtain funds to repay the car
35loan, to sell the car back to P on a specified date at a
specified price based on an estimate (made at the time
the car ownership arrangement is made) of the likely
outstanding amount of the car loan on the specified
date, and

(b) 40as provided for by the car ownership arrangement, A
purchases the car using the car loan.

(2) Chapter 2 does not apply by reason of a relevant step taken for the
sole purpose of—

(a) the purchase of the car or its sale-back as provided for by the
45car ownership arrangement, or

(b) the making of the car loan as so provided,

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

Finance (No. 3) BillPage 81

(3) Subsection (4) applies if—

(a) apart from subsection (2), Chapter 2 would apply by reason
of the making of the car loan, and

(b) by the end of the repayment date, the car loan has not been
5fully repaid.

(4) This Part has effect as if a relevant step within section 554C(1)(a)
were taken at the end of the repayment date—

(a) the subject of which is a sum of money of an amount equal to
the outstanding amount of the car loan as at the end of the
10repayment date,

(b) in relation to which the relevant person (within the meaning
of section 554C(1)) is A, and

(c) by reason of which Chapter 2 is to apply.

(5) In this section—

  • 15“car” has the meaning given by section 235(2), and

  • “licensed lender” means a person—

    (a)

    who is a licensee under the Consumer Credit Act 1974
    acting within the terms of the person’s licence, and

    (b)

    who is not acting as a trustee.

554P 20Exclusions: employment income exemptions under Part 4

(1) Chapter 2 does not apply by reason of a relevant step if an
employment income exemption under Part 4 applies to the subject of
the relevant step.

(2) If the employment income exemption applies to the subject of the
25relevant step in part only, the relevant step is to be treated for the
purposes of this Part as being two separate relevant steps—

(a) one in relation to the subject of the step so far as the
exemption applies to it, and

(b) one in relation to the subject of the step so far as the
30exemption does not apply to it,

with subsection (1) applying only in relation to the separate relevant
step mentioned in paragraph (a).

(3) In order to give effect to subsection (2), the sum of money or asset
which is the subject of the relevant step is to be apportioned between
35the two separate relevant steps on a just and reasonable basis.

(4) In this section “employment income exemption” includes the
exemption under section 271.

554Q Exclusions: income arising from earmarked sum or asset

(1) This section applies if—

(a) 40a sum of money or asset (“sum or asset R”) is held by or on
behalf of a person (“P”),

(b) income arises from sum or asset R, and

(c) when the income arises, it—

(i) is received by or on behalf of P, and

(ii) 45is the subject of a relevant step within section 554B
taken by P.

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(2) Chapter 2 does not apply by reason of the relevant step mentioned in
subsection (1)(c)(ii) if—

(a) before the income arises, sum or asset R was the subject of a
relevant step within section 554B taken by P,

(b) 5Chapter 2 applied by reason of the relevant step mentioned
in paragraph (a) in respect of A’s employment with B or
would have so applied apart from this section or section 554R
or any of sections 554H to 554M or section 554T,

(c) immediately before the income arises, sum or asset R is still
10earmarked or otherwise held on the basis mentioned in
section 554B(1)(a) or (b), and

(d) subsection (3) does not apply.

(3) This subsection applies if it is reasonable to suppose that, taking into
account the type of investments from which the income derives
15(directly or indirectly), in essence, the income represents a return
from sum or asset R which exceeds the return which might be
expected applying the assumption that all relevant connected
persons are acting at arm’s length of each other.

(4) In subsection (3) “relevant connected person” means a person with a
20connection (direct or indirect) to the arrangement under which the
income arises.

554R Exclusions: acquisitions out of sums or assets

(1) This section applies if—

(a) a sum of money or asset (“sum or asset S”) is held by or on
25behalf of a person (“P”),

(b) a sum of money or asset (“sum or asset T”) is acquired by or
on behalf of P wholly out of sum or asset S,

(c) sum or asset T is not acquired (directly or indirectly) from A
or any person linked with A, and

(d) 30subsection (2) does not apply.

(2) This subsection applies if it is reasonable to suppose that, in
essence—

(a) at the time of the acquisition of sum or asset T, the value of
sum or asset T is greater or less than the value of sum or asset
35S, and

(b) the difference (or any part of the difference) in the values
might not have been expected applying the assumption that
all relevant connected persons are acting at arm’s length of
each other.

(3) 40In subsection (2)

(a) the reference to sum or asset S is to sum or asset S so far as
sum or asset T is acquired out of it, and

(b) “relevant connected person” means a person with a
connection (direct or indirect) to the arrangement under
45which sum or asset T is acquired.

(4) The cases covered by subsection (1)(b) include (in particular) cases in
which sum or asset T represents the proceeds of the disposal of sum
or asset S.

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(5) Subsection (6) applies if, on its acquisition, sum or asset T is the
subject of a relevant step within section 554B taken by P.

(6) Chapter 2 does not apply by reason of the relevant step if—

(a) before the acquisition, sum or asset S was the subject of a
5relevant step within section 554B taken by P,

(b) Chapter 2 applied by reason of the relevant step mentioned
in paragraph (a) in respect of A’s employment with B or
would have applied apart from this section or section 554Q or
554T, and

(c) 10immediately before the acquisition, sum or asset S is still
earmarked or otherwise held on the basis mentioned in
section 554B(1)(a) or (b).

(7) Subsection (8) applies if—

(a) on its acquisition, sum or asset T—

(i) 15is the subject of a relevant step within section 554B
taken by P by reason of which Chapter 2 applies or
would apply apart from subsection (6) above or any
of sections 554H to 554M, 554Q or 554T, or

(ii) if sub-paragraph (i) does not apply, is held by or on
20behalf of P on the same basis as that on which sum or
asset S was held by or on behalf of P immediately
before the acquisition, and

(b) for the sole purpose of the acquisition, sum or asset S or sum
or asset T is the subject of a relevant step within section
25554C(1)(a) to (c).

(8) Chapter 2 does not apply by reason of the relevant step mentioned in
subsection (7)(b).

554S Exclusions: pension income chargeable under Part 9 etc

(1) Chapter 2 does not apply by reason of a relevant step within section
30554C or 554D if the step is the provision of pension income which is
chargeable to income tax under Part 9 or is exempt income (within
the meaning of that Part).

(2) Sections 554T, 554U, 554V, 554W and 554X contain further provision
relating to retirement benefits etc and are to be applied, so far as
35applicable, in that order.

554T Exclusions: employee pension contributions

(1) Chapter 2 does not apply by reason of a relevant step within section
554B if the sum of money or asset which is the subject of the step
arises or derives (whether wholly or partly or directly or indirectly)
40from an excluded pension contribution paid by A on or after 6 April
2011.

(2) If the sum of money or asset arises or derives from the excluded
pension contribution only partly, the relevant step is to be treated for
the purposes of this Part as being two separate relevant steps—

(a) 45one in relation to the sum of money or asset so far as it arises
or derives from the excluded pension contribution, and

(b) one in relation to the sum of money or asset so far as it does
not arise or derive from the excluded pension contribution,

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with subsection (1) applying only in relation to the separate relevant
step mentioned in paragraph (a).

(3) Chapter 2 does not apply by reason of a relevant step within section
554C or 554D if the sum of money or asset which is the subject of the
5step—

(a) represents relevant benefits, and

(b) arises or derives (whether wholly or partly or directly or
indirectly) from an excluded pension contribution paid by A.

(4) If the sum of money or asset arises or derives from the excluded
10pension contribution only partly, the relevant step is to be treated for
the purposes of this Part as being two separate relevant steps—

(a) one in relation to the sum of money or asset so far as it arises
or derives from the excluded pension contribution, and

(b) one in relation to the sum of money or asset so far as it does
15not arise or derive from the excluded pension contribution,

with subsection (3) applying only in relation to the separate relevant
step mentioned in paragraph (a).

(5) In order to give effect to subsection (2) or (4), the sum of money or
asset which is the subject of the relevant step is to be apportioned
20between the two separate relevant steps on a just and reasonable
basis.

(6) For the purposes of this section an excluded pension contribution is
a contribution—

(a) which is made to an arrangement by A by way of a payment
25of a sum of money,

(b) by virtue of which A acquires rights to receive relevant
benefits under the arrangement (and nothing else),

(c) which is neither a relievable pension contribution nor a tax-
relieved contribution, and

(d) 30which is not a repayment of any loan and otherwise has
nothing to do with any loan and has nothing to do with a sum
of money or asset which has been the subject of a relevant
step within section 554C(1)(d).

(7) In this section—

  • 35“relevant benefits” has the same meaning as in Chapter 2 of Part
    6, but ignoring section 393B(2)(a),

  • “relievable pension contribution” means a contribution in
    respect of which an individual is entitled to relief under
    section 188 of FA 2004, and

  • 40“tax-relieved contribution” has the meaning given by
    paragraph 3(3) of Schedule 34 to FA 2004.

554U Exclusions: pre-6 April 2006 contributions to employer-financed
retirement benefit schemes

(1) This section applies if the subject of a relevant step is a sum of money
45or asset which has (wholly or partly) arisen or derived (directly or
indirectly) from a sum of money (“the taxed sum”)—

(a) which was paid by B in accordance with an employer-
financed retirement benefits scheme (within the meaning of

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Chapter 2 of Part 6) with a view to the provision of benefits
under the scheme, and

(b) in respect of which A is taxed.

(2) For the purpose of determining whether A is taxed in respect of a
5sum of money, paragraph 53(3) of Schedule 36 to FA 2004 applies as
it applies for the purpose of determining whether an employee is
taxed for the purposes of paragraph 53(1)(b) of that Schedule.

(3) Chapter 2 does not apply by reason of the relevant step.

(4) Subsection (5) applies if the sum of money or asset which is the
10subject of the relevant step only partly arises or derives from the
taxed sum.

(5) The relevant step is to be treated for the purposes of this Part as being
two separate relevant steps—

(a) one in relation to the sum of money or asset so far as it arises
15or derives from the taxed sum, and

(b) one in relation to the sum of money or asset so far as it does
not arise or derive from the taxed sum,

with subsection (3) applying only in relation to the separate relevant
step mentioned in paragraph (a).

(6) 20In order to give effect to subsection (5), the sum of money or asset
which is the subject of the relevant step is to be apportioned between
the two separate relevant steps on a just and reasonable basis.

(7) If B is a company and is a member of a group of companies at any
time (“the relevant time”), in subsection (1)(a), in relation to any sum
25of money paid at the relevant time, the reference to B is to be read as
including a reference to any other company which is a member of
that group at the relevant time.

554V Exclusions: purchases of annuities out of pension scheme rights

(1) This section applies if—

(a) 30an annuity contract is purchased from an insurance company
wholly out of rights which A has under a pension scheme,
and

(b) A’s rights out of which the annuity contract is purchased are,
wholly or partly, pre-6 April 2011 annuity rights.

(2) 35If the purchaser—

(a) takes a relevant step for the sole purpose of purchasing the
annuity contract or transferring the beneficiary’s rights
under the annuity contract to A or a person linked with A, or

(b) on the purchase of the annuity contract, otherwise takes a
40relevant step within section 554B the subject of which is the
beneficiary’s rights under the annuity contract,

Chapter 2 does not apply by reason of the relevant step.

(3) If the insurance company—

(a) takes a relevant step for the sole purpose of selling the
45annuity contract, or

(b) on the sale of the annuity contract, otherwise takes a relevant
step within section 554B the subject of which is a sum of

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money or asset representing the purchase price received for
the annuity contract,

Chapter 2 does not apply by reason of the relevant step.

(4) If A’s rights out of which the annuity contract is purchased are only
5partly pre-6 April 2011 annuity rights, any relevant step mentioned
in subsection (2)(a) or (b) or (3)(a) or (b) is to be treated for the
purposes of this Part as being two separate relevant steps—

(a) one in relation to the annuity contract so far as it is purchased
out of rights which are pre-6 April 2011 annuity rights, and

(b) 10one in relation to the annuity contract so far as it is purchased
out of rights which are not pre-6 April 2011 annuity rights,

with subsection (2) or (3) (as the case may be) applying only in
relation to the separate relevant step mentioned in paragraph (a) of
this subsection.

(5) 15In order to give effect to subsection (4), the sum of money or asset
which is the subject of the relevant step mentioned in subsection
(2)(a) or (b) or (3)(a) or (b) is to be apportioned between the two
separate relevant steps on a just and reasonable basis.

(6) In this section—

  • 20“annuity contract” means a contract for the provision of an
    annuity—

    (a)

    granted for consideration in money or money’s worth
    in the ordinary course of a business of granting
    annuities on human life, and

    (b)

    25payable for a term ending at a time ascertainable only
    by reference to the end of a human life,

    although for this purpose it does not matter that the annuity
    may in some circumstances end before or after the life,

  • “insurance company” means—

    (a)

    30a person or EEA firm within section 275(1)(a) or (b) of
    FA 2004, or

    (b)

    a person resident in a territory outside the European
    Economic Area—

    (i)

    whose normal business includes the provision
    35of annuities, and

    (ii)

    who is regulated in the conduct of that
    business by the government of that territory
    or by a body established under the law of that
    territory for the purpose of regulating such
    40business, and

  • “pre-6 April 2011 annuity rights” means rights, which accrued
    before 6 April 2011, specifically to receive an annuity.

554W Exclusions: certain retirement benefits etc

(1) This section applies if—

(a) 45a relevant benefit is provided under a relevant scheme by
way of a payment of a lump sum wholly out of rights which
A has under the scheme,

(b) A’s rights out of which the lump sum is paid are, wholly or
partly, pre-6 April 2011 lump sum rights, and

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(c) the payment of the lump sum is a relevant step within section
554C.

(2) Chapter 2 does not apply by reason of the relevant step.

(3) If A’s rights out of which the lump sum is paid are only partly pre-6
5April 2011 lump sum rights, the relevant step is to be treated for the
purposes of this Part as being two separate relevant steps—

(a) one in relation to the lump sum so far as it is paid out of rights
which are pre-6 April 2011 lump sum rights, and

(b) one in relation to the lump sum so far as it is paid out of rights
10which are not pre-6 April 2011 lump sum rights,

with subsection (2) applying only in relation to the separate relevant
step mentioned in paragraph (a).

(4) In order to give effect to subsection (3), the lump sum is to be
apportioned between the two separate relevant steps on a just and
15reasonable basis.

(5) In this section—

  • “pre-6 April 2011 lump sum rights” means rights, which
    accrued before 6 April 2011, specifically to receive relevant
    benefits by way of lump sum payments,

  • 20“relevant benefit” has the same meaning as in Chapter 2 of Part
    6, and

  • “relevant scheme” means an employer-financed retirement
    benefits scheme (within the meaning of that Chapter) or a
    superannuation fund to which section 615(3) of ICTA applies.

554X 25 Exclusions: transfers between certain foreign pension schemes

(1) This section applies if rights which A has under a section 390 scheme
are transferred to another section 390 scheme or to an overseas
pension scheme.

(2) This section also applies if—

(a) 30rights which A has under an overseas pension scheme are
transferred to another overseas pension scheme, and

(b) some or all of the rights transferred are section 390 scheme
rights.

(3) Chapter 2 does not apply by reason of—

(a) 35a relevant step within section 554C taken for the sole purpose
of transferring the rights, or

(b) a relevant step within section 554B taken by the transferee in
relation to the transferred rights on their transfer.

(4) Subsection (5) applies in relation to a transfer within subsection (2) if
40not all the transferred rights are section 390 scheme rights.

(5) Any relevant step mentioned in subsection (3) is to be treated for the
purposes of this Part as being two separate relevant steps—

(a) one in relation to the section 390 scheme rights, and

(b) one in relation to the rest of the transferred rights,

45with subsection (3) applying only in relation to the separate relevant
step mentioned in paragraph (a) of this subsection.

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(6) In order to give effect to subsection (5), the sum of money or asset
which is the subject of the relevant step mentioned in subsection (3)
is to be apportioned between the two separate relevant steps on a just
and reasonable basis.

(7) 5Subsection (8) applies if any of the transferred rights arise or derive
(directly or indirectly) from contributions to any scheme which—

(a) are paid by B on or after 6 April 2006, and

(b) are neither tax-relieved contributions nor tax-exempt
provision.

(8) 10Any relevant step mentioned in subsection (3) is to be treated for the
purposes of this Part as being two separate relevant steps—

(a) one in relation to the rights mentioned in subsection (7), and

(b) one in relation to the rest of the transferred rights,

with subsection (3) applying only in relation to the separate relevant
15step mentioned in paragraph (b) of this subsection.

(9) In order to give effect to subsection (8), the sum of money or asset
which is the subject of the relevant step mentioned in subsection (3)
is to be apportioned between the two separate relevant steps on a just
and reasonable basis.

(10) 20If subsection (5) applies in relation to a transfer—

(a) in subsection (7) the reference to the transferred rights is to be
read as a reference to the transferred section 390 scheme
rights only, and