Finance (No. 4) Bill

Session 2010 - 12
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Finance (No. 4) Bill

Finance (No. 4) Bill
Schedule 13 — Employer asset-backed pension contributions etc
Part 3 — Denial of relief for contributions paid on or after 22 February 2012
341

196L
Employer asset-backed contributions: supplementary
(1)
This section applies for the purposes of sections 196B to 196K.
(2)
References to relief being given in respect of a contribution paid by
an employer under a registered pension scheme are references to
relief being given by way of—
5
(a)
the contribution being deducted in computing the amount of
the employer’s profits for the purposes of Part 2 of ITTOIA
2005 or Part 3 of CTA 2009 (trading income),
(b)
the contribution being treated as an expense of management
of the employer for the purposes of Chapter 2 of Part 16 of
10
CTA 2009 (expenses of management: companies with
investment business), or
(c)
the contribution being brought into account at Step 1 in
section 76(7) of ICTA (expenses of insurance companies) in
respect of the employer.
15
(3)
Whether a person is connected with another person is determined in
accordance with section 1122 of CTA 2010.
(4)
Sections 774, 775 and 776(2) and (4) of CTA 2010 apply as they apply
for the purposes of Chapter 2 of Part 16 of that Act.
(5)
A reference to a disposal of an asset includes—
20
(a)
anything constituting a disposal of an asset for the purposes
of TCGA 1992, and
(b)
so far as not covered by paragraph (a), the taking of any step
by virtue of which a person receives an asset.
(6)
Section 776(2) of CTA 2010 applies for the purposes of subsection
25
(5)(b).
(7)
“Non-working day” means—
(a)
a Saturday or Sunday,
(b)
a Christmas Eve, Christmas Day or Good Friday, or
(c)
a day which is a bank holiday under the Banking and
30
Financial Dealings Act 1971 in any part of the United
Kingdom,
and “working day” is to be read accordingly.”
16
In section 280(1) of FA 2004 (abbreviations)—
(a)
omit the “and” after the definition of “ITA 2007”, and
35
(b)
after the definition of “CTA 2009” insert “, and
“CTA 2010” means the Corporation Tax Act 2010”.
17    (1)
Subject to what follows, the amendments made by paragraphs 15 and 16
above have effect in relation to contributions paid by employers on or after
22 February 2012.
40
      (2)
In cases where the relevant time falls before 21 March 2012, section 196I of
FA 2004 has effect as if subsection (6) were omitted.
      (3)
An event falls within section 196J of FA 2004 only if it occurs after the
beginning of 21 March 2012.

Finance (No. 4) Bill
Schedule 13 — Employer asset-backed pension contributions etc
Part 4 — Transitional provision relating to Part 3
342

Part 4
Transitional provision relating to Part 3
Application and interpretation
18    (1)
This Part of this Schedule applies if—
(a)
before 22 February 2012, an employer (“E”) pays a contribution (“E’s
5
contribution”) under a registered pension scheme (“the relevant
scheme”),
(b)
Part 2 of this Schedule does not apply in relation to E’s contribution,
(c)
at any time, relief is given in respect of E’s contribution,
(d)
if the reference in paragraph 17 above to 22 February 2012 were
10
instead a reference to the date on which E’s contribution is paid, E
would have no entitlement to relief in respect of E’s contribution by
virtue of section 196B, 196D or 196F of FA 2004, and
(e)
the asset-backed arrangement is not completed before 22 February
2012.
15
      (2)
For the purposes of sub-paragraph (1)(d) assume that Parts 1 and 2 of this
Schedule were never enacted.
19
For the purposes of this Part of this Schedule—
(a)
terms used in section 196B, 196D or 196F of FA 2004 (as the case may
be) have the same meaning as in that section, and
20
(b)
as necessary, assume that section 196B, 196D or 196F of FA 2004 (as
the case may be) has effect in relation to E’s contribution.
20    (1)
This paragraph applies for the purposes of this Part of this Schedule.
      (2)
Sub-paragraph (3) applies if the section which would have applied as
mentioned in paragraph 18(1)(d) above is section 196B of FA 2004.
25
      (3)
The asset-backed arrangement is “completed” when neither the lender nor
any person connected with the lender is any longer entitled under the asset-
backed arrangement (conditionally or unconditionally) to payments in
respect of the security.
      (4)
Sub-paragraph (5) applies if the section which would have applied as
30
mentioned in paragraph 18(1)(d) above is section 196D or 196F of FA 2004.
      (5)
The asset-backed arrangement is “completed” when the share in the
partnership’s profits of the person involved in the relevant change is no
longer to be determined under the asset-backed arrangement (conditionally
or unconditionally) by reference (wholly or partly) to payments in respect of
35
the security.
21    (1)
In this Part of this Schedule “the completion day” means the earliest of the
following—
(a)
the day on which the asset-backed arrangement is to be completed
determined as at the beginning of 22 February 2012;
40
(b)
the day on which the asset-backed arrangement is actually
completed;
(c)
the day which is the last day of the period of 25 years beginning with
the day on which E’s contribution is paid;

Finance (No. 4) Bill
Schedule 13 — Employer asset-backed pension contributions etc
Part 4 — Transitional provision relating to Part 3
343

(d)
the day on which a completion event occurs (see sub-paragraphs (2)
to (10));
(e)
if an event falling within paragraph 22 occurs, the day on which falls
the time immediately before the occurrence of the event.
      (2)
Sub-paragraphs (3) and (4) apply if the section which would have applied as
5
mentioned in paragraph 18(1)(d) above is section 196B of FA 2004.
      (3)
To determine if a completion event occurs for the purposes of sub-paragraph
(1)(d) first determine, as at the beginning of 22 February 2012, the
following—
(a)
the number of payments to be made after the beginning of 22
10
February 2012 to which the lender or a person connected with the
lender is entitled under the asset-backed arrangement,
(b)
what the amounts of those payments are to be, and
(c)
the times at which those payments are to be made.
      (4)
A completion event occurs for the purposes of sub-paragraph (1)(d) if, after
15
the beginning of 22 February 2012—
(a)
whether as a result of a term of the asset-backed arrangement or
another arrangement or otherwise—
(i)
there is a change in the number of payments to be made from
that determined under sub-paragraph (3),
20
(ii)
there is a significant change in the amount of a payment to be
made from that so determined, or
(iii)
there is a significant change in the time at which a payment is
to be made from that so determined,
(b)
a payment determined under sub-paragraph (3) is not made,
25
(c)
a payment determined under sub-paragraph (3) is made but its
amount is significantly different from the amount so determined for
the payment, or
(d)
a payment determined under sub-paragraph (3) is made but is made
at a time significantly different from the time so determined for the
30
payment.
      (5)
Sub-paragraphs (6) and (7) apply if the section which would have applied as
mentioned in paragraph 18(1)(d) above is section 196D or 196F of FA 2004.
      (6)
To determine if a completion event occurs for the purposes of sub-paragraph
(1)(d) first determine, as at the beginning of 22 February 2012, the
35
following—
(a)
what the amount of the share in the partnership’s profits of the
person involved in the relevant change is to be so far as the share is
to be determined under the asset-backed arrangement by reference
to payments made after the beginning of 22 February 2012,
40
(b)
the number of drawings to be made from the partnership on account
of the amount determined under paragraph (a) and the number of
any other payments to be made after the beginning of 22 February
2012 to which the person involved in the relevant change, the lender
or any other person connected with the lender is entitled under the
45
asset-backed arrangement,
(c)
what the amounts of those drawings or other payments are to be, and
(d)
the times at which those drawings or other payments are to be made.

Finance (No. 4) Bill
Schedule 13 — Employer asset-backed pension contributions etc
Part 4 — Transitional provision relating to Part 3
344

      (7)
A completion event occurs for the purposes of sub-paragraph (1)(d) if, after
the beginning of 22 February 2012—
(a)
whether as a result of a term of the asset-backed arrangement or
another arrangement or otherwise—
(i)
there is a change in the number of drawings or other
5
payments to be made from that determined under sub-
paragraph (6),
(ii)
there is a significant change in the amount of a drawing or
other payment to be made from that so determined, or
(iii)
there is a significant change in the time at which a drawing or
10
other payment is to be made from that so determined,
(b)
a drawing or other payment determined under sub-paragraph (6) is
not made,
(c)
a drawing or other payment determined under sub-paragraph (6) is
made but its amount is significantly different from the amount so
15
determined for the drawing or other payment, or
(d)
a drawing or other payment determined under sub-paragraph (6) is
made but is made at a time significantly different from the time so
determined for the drawing or other payment.
      (8)
In sub-paragraphs (3) and (4) and (6) and (7) references to payments are to
20
payments of any type including payments in respect of the security or any
other asset.
      (9)
In sub-paragraphs (6) and (7) references to the making of drawings from the
partnership include references to the receiving of distributions from the
partnership.
25
     (10)
For the purposes of sub-paragraphs (4)(b) to (d) and (7)(b) to (d) it does not
matter if the event in question is authorised by a term of the asset-backed
arrangement or results from the occurrence or non-occurrence of another
event which is so authorised.
22    (1)
The events falling within this paragraph are those listed in sub-paragraph
30
(2).

But an event falls within this paragraph only if it occurs after the beginning
of 21 March 2012.
      (2)
The events are—
(a)
if E is a company within the charge to corporation tax when E’s
35
contribution is paid, E ceases to be within that charge;
(b)
if E is a limited liability partnership in relation to which section
863(1) of ITTOIA 2005 or section 1273(1) of CTA 2009 applies when
E’s contribution is paid, that provision ceases to apply in relation to
E;
40
(c)
if E is a firm for the purposes of ITTOIA 2005 (see section 847) or CTA
2009 (see section 1257) (other than a limited liability partnership)
when E’s contribution is paid, the partnership ceases to carry on the
trade, profession or business in question;
(d)
in any case—
45
(i)
if E is a company, E enters administration or the winding up
of E starts;
(ii)
if E is a partnership, the partnership is dissolved;
(iii)
if E is an individual, E dies.

Finance (No. 4) Bill
Schedule 13 — Employer asset-backed pension contributions etc
Part 4 — Transitional provision relating to Part 3
345

      (3)
Sections 10(3) and 12(7) of CTA 2009 apply for the purposes of sub-
paragraph (2)(d)(i).
Certain tax consequences not to have effect
23    (1)
This paragraph applies if—
(a)
the section which would have applied as mentioned in paragraph
5
18(1)(d) above is section 196B of FA 2004, and
(b)
the asset-backed arrangement would have the relevant effect
(ignoring this paragraph).
      (2)
The asset-backed arrangement is not to have the relevant effect.
      (3)
The relevant effect is that—
10
(a)
an amount of income on which the borrower or a person connected
with the borrower would otherwise have been charged to tax is not
so charged,
(b)
an amount which would otherwise have been brought into account
in calculating for tax purposes any income of the borrower or of a
15
person connected with the borrower is not so brought into account,
or
(c)
the borrower or a person connected with the borrower becomes
entitled to deduct an amount—
(i)
in calculating income for tax purposes, or
20
(ii)
from total income or total profits (as the case may be).
      (4)
But if the borrower is a partnership the relevant effect is that—
(a)
an amount of income on which a member of the partnership would
otherwise have been charged to tax is not so charged,
(b)
an amount which would otherwise have been brought into account
25
in calculating for tax purposes any income of a member of the
partnership is not so brought into account, or
(c)
a member of the partnership becomes entitled to deduct an
amount—
(i)
in calculating income for tax purposes, or
30
(ii)
from total income or total profits (as the case may be).
      (5)
In sub-paragraphs (3) and (4) “amount” means an amount which arises on
or after 22 February 2012 but on or before the completion day.
24    (1)
This paragraph applies if—
(a)
the section which would have applied as mentioned in paragraph
35
18(1)(d) above is section 196D of FA 2004, and
(b)
any relevant change in relation to the partnership would have the
relevant effect (ignoring this paragraph).
      (2)
In such a case—
(a)
Part 9 of ITTOIA 2005 or sections 1259 to 1265 of CTA 2009 (as the
40
case may be) is or are to have effect in relation to the transferor, or
any person connected with the transferor, as if the relevant change in
relation to the partnership had not occurred, and
(b)
accordingly, the asset-backed arrangement is not to have the relevant
effect.
45
      (3)
The relevant effect is that—

Finance (No. 4) Bill
Schedule 13 — Employer asset-backed pension contributions etc
Part 4 — Transitional provision relating to Part 3
346

(a)
an amount of income on which the transferor, or the person
connected with the transferor, would otherwise have been charged
to tax is not so charged,
(b)
an amount which would otherwise have been brought into account
in calculating for tax purposes any income of the transferor, or the
5
person connected with the transferor, is not so brought into account,
or
(c)
the transferor, or the person connected with the transferor, becomes
entitled to deduct an amount—
(i)
in calculating income for tax purposes, or
10
(ii)
from total income or total profits (as the case may be).
      (4)
In sub-paragraph (3) “amount” means an amount which arises on or after 22
February 2012 but on or before the completion day.
      (5)
In deciding whether sub-paragraph (1)(b) is met assume that amounts of
income equal to the payments mentioned in section 196D(2)(g) of FA 2004
15
were payable to the partnership before the relevant change in relation to it
occurred.
25    (1)
This paragraph applies if—
(a)
the section which would have applied as mentioned in paragraph
18(1)(d) above is section 196F of FA 2004, and
20
(b)
any relevant change in relation to the partnership would have the
relevant effect (ignoring this paragraph).
      (2)
The relevant effect is that—
(a)
an amount of income on which a relevant member would otherwise
have been charged to tax is not so charged,
25
(b)
an amount which would otherwise have been brought into account
in calculating for tax purposes any income of a relevant member is
not so brought into account, or
(c)
a relevant member becomes entitled to deduct an amount—
(i)
in calculating income for tax purposes, or
30
(ii)
from total income or total profits (as the case may be).
      (3)
A relevant member is a person who—
(a)
was a member of the partnership immediately before the relevant
change in relation to it occurred, and
(b)
is not the lender.
35
      (4)
In sub-paragraph (2) “amount” means an amount which arises on or after 22
February 2012 but on or before the completion day.
      (5)
If this paragraph applies—
(a)
Part 9 of ITTOIA 2005 or sections 1259 to 1265 of CTA 2009 (as the
case may be) is or are to have effect in relation to any relevant
40
member as if the relevant change in relation to the partnership had
not occurred, and
(b)
accordingly, the asset-backed arrangement is not to have the relevant
effect.
      (6)
In deciding whether sub-paragraph (1)(b) is met assume that amounts of
45
income equal to the payments mentioned in section 196F(2)(e) of FA 2004

Finance (No. 4) Bill
Schedule 13 — Employer asset-backed pension contributions etc
Part 4 — Transitional provision relating to Part 3
347

were payable to the partnership before the relevant change in relation to it
occurred.
26    (1)
This paragraph applies if, apart from this Part of this Schedule, a relevant
charging provision applies in relation to the asset-backed arrangement.
      (2)
The relevant charging provision is to apply in relation to the asset-backed
5
arrangement instead of paragraph 23, 24 or 25 above (as the case may be) to
the extent of any overlap.
      (3)
In this paragraph “relevant charging provision” means—
(a)
section 809BZB, 809BZC, 809BZH or 809BZK of ITA 2007, or
(b)
section 759, 760, 765 or 768 of CTA 2010.
10
27    (1)
This paragraph applies if, apart from this Part of this Schedule—
(a)
a relevant interest provision applies in relation to the asset-backed
arrangement, and
(b)
as a result of the application of the relevant interest provision in
relation to the asset-backed arrangement, an amount is or may be
15
treated as interest under that provision.
      (2)
Without prejudice to the generality of paragraphs 23(3) and (4), 24(3) and
25(2), the amount is not to be treated as interest if the amount arises on or
after 22 February 2012 but on or before the completion day.
      (3)
In this paragraph “relevant interest provision” means—
20
(a)
section 809BZD, 809BZE, 809BZI or 809BZL of ITA 2007, or
(b)
section 761, 762, 766 or 769 of CTA 2010.
28    (1)
Section 196G of FA 2004 (as inserted by paragraph 1 above) does not apply
in relation to E’s contribution (if it would otherwise do so) if the relevant
event occurs on or after 22 February 2012.
25
      (2)
Section 196H of FA 2004 (as inserted by paragraph 1 above) does not apply
in relation to E’s contribution at all (if it would otherwise do so).
Adjustments
29    (1)
For the purposes of paragraphs 30 and 31—
(a)
amount A is the total amount of relief given in respect of E’s
30
contribution,
(b)
amount B is the total of the following amounts—
(i)
any amounts of income which are charged to tax by virtue of
a relevant provision,
(ii)
any amounts brought into account in calculating income for
35
tax purposes by virtue of a relevant provision (so far as not
reflected in sub-paragraph (i)), and
(iii)
any amounts stopped from being the subject of an income
deduction by virtue of a relevant provision (so far as not
reflected in sub-paragraph (i) or (ii)), and
40
(c)
subject to sub-paragraph (9), amount C is the amount of the payment
mentioned in sub-paragraph (6) or (8) (as the case may be) so far as
the payment—
(i)
is made under the asset-backed arrangement on the
completion day,
45