(b) immediately before that time the transferor was not exempt from corporation tax on profits arising from that business as a result of section 164 or 165,

the transferee is not exempt from corporation tax on its profits arising from the relevant other business so far as relating to contracts made before that time.

(4) The Treasury may by regulations provide that, where any part of the business of a friendly society is, or is not, exempt from corporation tax as a result of this section, the Corporation Tax Acts have effect subject to such exceptions or other modifications as they consider appropriate.

(5) The regulations may make provision having retrospective effect.

(6) The regulations may—

(a) make different provision for different cases or circumstances, and

(b) contain incidental, supplementary, consequential, transitional, transitory or saving provision.

(7) Nothing in this section applies in relation to transfers or amalgamations taking place before 21 July 2008.

168 Withdrawal of qualifying status

(1) HMRC Commissioners may give a direction under this section to—

(a) a registered friendly society which is a qualifying society for the purposes of section 164 as a result of its registration before 1 June 1973, or

(b) an incorporated friendly society which is a qualifying society for the purposes of section 165 as a result of falling within case A or C and whose business and rules are not of a kind mentioned in section 164(2)(b) or (c).

(2) The Commissioners may give the direction if—

(a) the society begins to carry on relevant other business or, in their opinion, begins to carry on relevant other business on an enlarged scale or of a new character, and

(b) it appears to them, having regard to the restrictions imposed by section 164 on registered friendly societies registered on or after 1 June 1973, that for the protection of the revenue it is expedient to give the direction.

(3) The direction is that (and has the effect that) the society ceases to be a qualifying society as from the date of the direction.

(4) The society may appeal against the direction on the ground that—

(a) it has not begun to carry on business as mentioned in subsection (2)(a), or

(b) the direction is not necessary for the protection of the revenue.

(5) The appeal must be made within 30 days of the date on which the direction is given.

169 Payments by non-qualifying societies treated as qualifying distributions

(1) This section applies if—

(a) a friendly society which is not a qualifying society makes a payment to a member in respect of the member’s interest in the society,

(b) the payment is made in the course of relevant other business, and

(c) the payment exceeds the total amount of any sums paid by the member to the society by way of contributions or deposits after deducting from that total any relevant previous payment and any relevant earlier repayment.

(2) The excess is treated for the purposes of corporation tax and income tax as a qualifying distribution.

(3) In this section—

(a) the reference to a relevant previous payment is to the amount of any previous payment made by the society to the member in respect of the member’s interest in the society, and

(b) the reference to a relevant earlier repayment is to the amount of any earlier repayment of sums paid by the member to the society by way of contributions or deposits.

(4) In the case of an incorporated friendly society which, immediately before its incorporation, was a registered friendly society which was not a qualifying society—

(a) references in this section to payments (or repayments) to or from the society include payments (or repayments) to or from the registered friendly society, but

(b) subsection (3)(a) does not apply to a payment made before 27 March 1974 or, if the registered friendly society was previously a qualifying society but ceased to be one as a result of a direction given to it under section 168(1)(a), a payment made on or before such later date as was specified in the direction.

(5) In the case of any other incorporated friendly society which was previously a qualifying society but ceased to be one as a result of a direction given to it under section 168(1)(b), subsection (3)(a) does not apply to a payment made on or before the date specified in the direction.

(6) In the case of a registered friendly society, subsection (3)(a) does not apply to—

(a) a payment made before 27 March 1974, or

(b) if the society was previously a qualifying society but ceased to be one as a result of a direction given to it under section 168(1)(a), a payment made on or before such later date as was specified in the direction.

(7) For the purposes of this section—

(a) a registered friendly society is not a qualifying society at any time if, at that time, it is not a qualifying society within the meaning of section 164, and

(b) an incorporated friendly society is not a qualifying society at any time if, at that time, it is not a qualifying society within the meaning of section 165.

Miscellaneous

170 Transfer schemes under s.6(5) of FSA 1992

(1) This section applies if assets of a branch of a registered friendly society have been identified in a scheme under section 6(5) of FSA 1992 (property, rights etc excluded from transfer to the society on its incorporation).

(2) In relation to any time after the incorporation of the society, the assets are to be treated for the purposes of the Tax Acts as assets of the society (and, accordingly, any corporation tax or income tax liability arising in respect of them is a liability of the society rather than of the branch).

(3) If, as a result of this section, corporation tax or income tax in respect of any of the assets becomes chargeable on and is paid by the society, the society may recover from the trustees in whom those assets are vested the amount of the tax paid.

171 Exemption for unregistered friendly societies

(1) A friendly society which is neither a registered friendly society nor an incorporated friendly society is not liable to pay corporation tax (whether on income or chargeable gains) on its profits if its income does not exceed £160 a year.

(2) The exemption applies only if the society makes a claim.

Interpretation

172 Minor definitions

(1) In this Part—

• “friendly society”, without qualification, means (except in section 171) a registered friendly society or an incorporated friendly society,

• “incorporated friendly society” means a society incorporated under FSA 1992,

• “policy”, in relation to BLAGAB or eligible PHI business, includes an instrument evidencing a contract to pay an annuity upon human life,

• “registered branch” has the same meaning as in FSA 1992 (and includes any branch that as a result of section 96(3) of FSA 1992 is treated as a registered branch), and

• “registered friendly society” has the same meaning as in FSA 1992 (and includes any society that as a result of section 96(2) of FSA 1992 is treated as a registered friendly society).

(2) Any other expression which is used in this Part and in Part

2

has the same meaning in this Part as in that Part.

(3) References in this Part to a friendly society include, in the case of a registered friendly society, references to any branch of that society.

(4) It is declared that for the purposes of this Part (except where provision to the contrary is made) a friendly society formed on the amalgamation of two or more friendly societies is treated as different from the amalgamated societies.

(5) A registered friendly society formed on the amalgamation of two or more friendly societies is treated for the purposes of this Part as registered not later than 3 May 1966 if at the time of the amalgamation—

(a) all the societies amalgamated were registered friendly societies eligible for the exemption conferred by section 153, and

(b) at least one of them was an old society,

or, if the amalgamation took place before 19 March 1985, the society was treated as registered not later than 3 May 1966 as a result of the proviso to section 337(4) of the Income and Corporation Taxes Act 1970.

(6) An incorporated friendly society formed on the amalgamation of two or more friendly societies is treated for the purposes of this Part as a society which, before its incorporation, was a registered friendly society registered not later than 3 May 1966 if at the time of the amalgamation—

(a) all the societies amalgamated were registered friendly societies eligible for the exemption conferred by section 153, and

(b) at least one of them was an old society.

173 Abbreviations

(1) In this Part—

• “FSA 1992” means the Friendly Societies Act 1992, and

• “FISMA (Regulated Activities) Order 2001” means the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001.

(2) For abbreviations of other Acts, see section 226.

174 Index of defined terms

In this Part the following expressions are defined or otherwise explained by the provisions indicated—

Regulations

175 Regulations

(1) Any power of the Treasury to make any regulations under this Part is exercisable by statutory instrument.

(2) Any statutory instrument containing any regulations made by the Treasury under this Part is subject to annulment in pursuance of a resolution of the House of Commons.

(3) Nothing in this Part that authorises the inclusion of any particular kind of provision in any regulations under this Part is to be read as restricting the generality of the provision that may be included in the regulations.

Consequential amendments and transitional provision

176 Consequential amendments

Schedule 18 contains consequential amendments.

177 Transitional provision

Schedule 19 contains transitional provision in connection with the coming into force of this Part.

Commencement etc

178 Commencement

The provisions of this Part (other than section 179) have effect in relation to accounting periods of companies beginning on or after 1 January 2013.

179 Accounting periods straddling 1 January 2013

(1) If, apart from this section, a friendly society would have had an accounting period beginning before 1 January 2013 and ending on or after that date, the accounting period of the society is to end instead on 31 December 2012.

(2) Accordingly, the rules in section 10 of CTA 2009 (end of accounting period) are subject to this section.

Part 4 Controlled foreign companies and foreign permanent establishments

180 Controlled foreign companies and foreign permanent establishments

Schedule 20 makes—

(a) provision for and in connection with a charge on UK resident companies which have interests in non-UK resident companies controlled by UK resident persons, and

(b) provision about foreign permanent establishments of UK resident companies.

Part 5 Oil

181 Transfers within a group by companies carrying on ring fence trade

(1) Section 171A of TCGA 1992 (election to reallocate gain or loss to another member of group) is amended as follows.

(2) In subsection (4), at the end insert “(but see subsection (4A))”.

(3) After subsection (4) insert—

“(4A) An election may not be made under this section to transfer the whole or part of a ring fence chargeable gain from a company carrying on a ring fence trade to a company not carrying on such a trade.

(4B) In subsection (4A)—

• “ring fence chargeable gain”, in relation to a company, means—

  (a)

  a chargeable gain accruing to the company on a material disposal within the meaning of section 197 (disposals of interests in oil fields etc: ring fence provisions), or

  (b)

  a chargeable gain treated as accruing to the company by virtue of section 197(4);

• “ring fence trade” has the same meaning as in Part 8 of CTA 2010 (see section 277 of that Act).”

(4) The amendments made by this section have effect in relation to chargeable gains accruing, or treated by virtue of section 197(4) of TCGA 1992 as accruing, in chargeable periods ending on or after 6 December 2011 (but see also subsection (5)).

(5) In relation to a chargeable period of a company beginning before 6 December 2011 and ending on or after that date (“the straddling period”), the amendments made by this section have effect as if, for the purposes of section 197 of TCGA 1992, so much of the straddling period as falls before 6 December 2011, and so much of that period as falls on or after that date, were separate chargeable periods.

182 Supplementary charge

(1) In section 330 of CTA 2010 (supplementary charge in respect of ring fence trades), in subsection (2), for “profits of the company’s ring fence trade” substitute “company’s ring fence profits”.

(2) This section is treated as having come into force on 6 December 2011.

183 Relief in respect of decommissioning expenditure

Schedule 21 contains provision about the relief available in respect of decommissioning expenditure.

184 Reduction of supplementary charge for certain oil fields

Schedule 22 contains provision extending the availability of field allowances for oil fields.

Part 6 Excise duties

Tobacco products duty

185 Rates of tobacco products duty

(1) For the table in Schedule 1 to TPDA 1979 substitute—

(2) The amendment made by this section is treated as having come into force at 6 pm on 21 March 2012.

Alcoholic liquor duties

186 Rates of alcoholic liquor duties

(1) ALDA 1979 is amended as follows.

(2) In section 5 (rate of duty on spirits), for “£25.52” substitute “£26.81”.

(3) In section 36(1AA) (rates of general beer duty)—

(a) in paragraph (za) (rate of duty on lower strength beer), for “£9.29” substitute “£9.76”, and

(b) in paragraph (a) (standard rate of duty on beer), for “£18.57” substitute “£19.51”.

(4) In section 37(4) (rate of high strength beer duty), for “£4.64” substitute “£4.88”.

(5) In section 62(1A) (rates of duty on cider)—

(a) in paragraph (a) (rate of duty per hectolitre on sparkling cider of a strength exceeding 5.5 per cent), for “£233.55” substitute “£245.32”,

(b) in paragraph (b) (rate of duty per hectolitre on cider of a strength exceeding 7.5 per cent which is not sparkling cider), for “£53.84” substitute “£56.55”, and

(c) in paragraph (c) (rate of duty per hectolitre in any other case), for “£35.87” substitute “£37.68”.

(6) For the table in Schedule 1 substitute—

“Schedule 1 Table of rates of duty on wine and made-wine

Part 1 Wine or made-wine of a strength not exceeding 22 per cent

Part 2 Wine or made-wine of a strength exceeding 22 per cent

(7) The amendments made by this section are treated as having come into force on 26 March 2012.

187 Repeal of drawback on British compounds and spirits of wine

(1) Section 22 of ALDA 1979 (drawback on British compounds and spirits of wine) is repealed.

(2) In consequence of the provision made by subsection (1), omit the following provisions—

(a) in Schedule 1 to the Isle of Man Act 1979, paragraph 29;

(b) in Schedule 8 to FA 1981, paragraph 16;

(c) in Schedule 4 to FA 1994, paragraph 24;

(d) in Schedule 5 to that Act, paragraph 3(1)(ha);

(e) in Schedule 42 to FA 2008, paragraph 2(2).

Hydrocarbon oil etc duties

188 Rebated fuel: private pleasure craft

(1) In section 14E of HODA 1979 (rebated heavy oil and bioblend: private pleasure craft), after subsection (7) insert—

“(7A) A relevant declaration must include an acknowledgement that nothing in this section or done under it (including the making of the declaration) affects any restriction or prohibition under the law of a member State other than the United Kingdom on the use of the heavy oil or bioblend as fuel for propelling craft outside United Kingdom waters (as defined in section 1(1) of the Management Act).”

(2) The amendment made by this section has effect in relation to supplies made on or after 1 April 2012.

Air passenger duty

189 Air passenger duty

Schedule 23 amends, and makes amendments connected with, Chapter 4 of Part 1 of FA 1994 (air passenger duty).

Gambling duties

190 Machine games duty

Schedule 24 contains provision replacing amusement machine licence duty with a new excise duty and making related changes to VATA 1994.

191 Amusement machine licence duty

(1) In section 23(2) of BGDA 1981 (amount of duty payable on amusement machine licence), for the table substitute—

(2) The amendment made by this section has effect in relation to cases where the application for the amusement machine licence is received by the Commissioners for Her Majesty’s Revenue and Customs after 4 pm on 23 March 2012.

192 Rates of gaming duty

(1) In section 11(2) of FA 1997 (rates of gaming duty), for the table substitute—

(2) The amendment made by this section has effect in relation to accounting periods beginning on or after 1 April 2012.

193 Remote gambling: double taxation relief

Schedule 25 contains provision for double taxation relief in respect of remote gambling.

Vehicle excise duty

194 VED rates for light passenger vehicles, light goods vehicles, motorcycles etc

(1) Schedule 1 to VERA 1994 (annual rates of duty) is amended as follows.

(2) In paragraph 1 (general)—

(a) in sub-paragraph (2) (vehicle not covered elsewhere in Schedule otherwise than with engine cylinder capacity not exceeding 1,549cc), for “£215” substitute “£220”, and

(b) in sub-paragraph (2A) (vehicle not covered elsewhere in Schedule with engine cylinder capacity not exceeding 1,549cc), for “£130” substitute “£135”.

(3) In paragraph 1B (graduated rates of duty for light passenger vehicles)—

(a) for the tables substitute—

“Table 1

Table 2

(b) in the sentence immediately following the tables, for paragraphs (a) and (b) substitute—

“(a) in column (3), in the last two rows, “260” were substituted for “450” and “465”, and

(b) in column (4), in the last two rows, “270” were substituted for “460” and “475”.”

(4) In paragraph 1J (VED rates for light goods vehicles)—

(a) in paragraph (a), for “£210” substitute “£215”, and

(b) in paragraph (b), for “£130” substitute “£135”.

(5) In paragraph 2(1) (VED rates for motorcycles)—

(a) in paragraph (b), for “£35” substitute “£36”,

(b) in paragraph (c), for “£53” substitute “£55”, and

(c) in paragraph (d), for “£74” substitute “£76”.

(6) The amendments made by this section have effect in relation to licences taken out on or after 1 April 2012.

Part 7 Value added tax

195 Anti-forestalling charge to value added tax

Schedule 26 contains provision for an anti-forestalling charge to value added tax related to changes in the descriptions of exempt or zero-rated supplies.

196 Exempt supplies

(1) In Part 1 of Schedule 9 to VATA 1994 (index to exempt supplies of goods and services), at the appropriate place in the table insert—

(2) In Part 2 of that Schedule (the groups), at the end insert—

“GROUP 16 — SUPPLIES OF SERVICES BY GROUPS INVOLVING COST SHARING

Item No

1 The supply of services by an independent group of persons where each of the following conditions is satisfied—

(a) each of those persons is a person who is carrying on an activity (“the relevant activity”) which is exempt from VAT or in relation to which the person is not a taxable person within the meaning of Article 9 of Council Directive 2006/112/EC,

(b) the supply of services is made for the purpose of rendering the members of the group the services directly necessary for the exercise of the relevant activity,

(c) the group merely claims from its members exact reimbursement of their share of the joint expenses, and

(d) the exemption of the supply is not likely to cause distortion of competition.”

(3) In section 31 of that Act (exempt supplies and acquisitions), after subsection (2) insert—

“(3) The Treasury may by regulations make an exemption of a group 16 supply of a description specified in the regulations subject to conditions.

(4) Regulations under subsection (3) may—

(a) make different provision for different cases, and

(b) make consequential or transitional provision (including provision amending this Act).

(5) In subsection (3) “group 16 supply” means a supply falling within Group 16 of Schedule 9.”

197 Supply of goods or services by public bodies

(1) VATA 1994 is amended as follows.

(2) In section 41 (application to the Crown)—

(a) omit subsection (2), and

(b) in subsection (3)(b) for “a direction under subsection (2) above,” substitute “section 41A,”.

(3) After that section insert—

“41A Supply of goods or services by public bodies

(1) This section applies where goods or services are supplied by a body mentioned in Article 13(1) of the VAT Directive (status of public bodies as taxable persons) in the course of activities or transactions in which it is engaged as a public authority.

(2) If the supply is in respect of an activity listed in Annex I to the VAT Directive (activities in respect of which public bodies are to be taxable persons), it is to be treated for the purposes of this Act as a supply in the course or furtherance of a business unless it is on such a small scale as to be negligible.

(3) If the supply is not in respect of such an activity, it is to be treated for the purposes of this Act as a supply in the course or furtherance of a

business if (and only if) not charging VAT on the supply would lead to a significant distortion of competition.

(4) In this section “the VAT Directive” means Council Directive 2006/112/EC on the common system of value added tax.”

198 Relief from VAT on low value goods: restriction relating to Channel Islands

(1) In Schedule 2 to the Value Added Tax (Imported Goods) Relief Order 1984 (S.I. 1984/746) (reliefs for goods of certain descriptions), Group 8 (articles sent for miscellaneous purposes) is amended as follows.

(2) The existing Note becomes Note (1) (and accordingly “Note” in Group 8 becomes “Notes”).

(3) After that Note insert—

“(2) Item 8 does not apply in relation to any goods sent from the Channel Islands under a distance selling arrangement.

(3) For the purposes of Note (2)—

• “distance selling arrangement”, in relation to any goods, means any transaction, or series of transactions, under which the person to whom the goods are sent receives them from a supplier without the simultaneous physical presence of the person and the supplier at any time during the transaction or series of transactions, and

• “supplier” means any person who is acting in a commercial or professional capacity.”

(4) The amendment of that Schedule by this section is without prejudice to any power to amend that Schedule by subordinate legislation.

(5) The amendments made by this section have effect in relation to goods imported on or after 1 April 2012.

199 Group supplies using an overseas member

(1) VATA 1994 is amended as follows.

(2) In section 43 (groups of companies), in subsection (2C)(c), after “above” insert “and paragraph 8A of Schedule 6”.

(3) In section 83 (appeals), in subsection (1)(v) for “or 2” substitute “, 2 or 8A”.

(4) In section 97(4) (orders requiring Parliamentary approval within 28 days of being made), in paragraph (f), after “1A(7)” insert “or 8A(7)”.

(5) Schedule 6 (valuation: special cases) is amended as follows.

(6) In paragraph 1 (cases where Commissioners may direct value is open market value), in sub-paragraph (5), after “paragraph”, in the second place it occurs, insert “8A or”.

(7) After paragraph 8 insert—

“8A (1) This paragraph applies where—

(a) a supply (“the intra-group supply”) made by a member of a group (“the supplier”) to another member of the group is, by

virtue of section 43(2A), excluded from the supplies disregarded under section 43(1)(a), and

(b) the representative member of the group satisfies the Commissioners as to the value of each bought-in supply.

(2) “Bought-in supply”, in relation to the intra-group supply, means a supply of services to the supplier to which section 43(2A)(c) to (e) refers, so far as that supply is used by the supplier for making the intra-group supply.

(3) The value of the intra-group supply shall be taken to be the total of the relevant amounts in relation to the bought-in supplies.

(4) The relevant amount in relation to a bought-in supply is the value of the bought-in supply, unless a direction is made under sub-paragraph (5).

(5) If the value of a bought-in supply is less than its open market value, the Commissioners may direct that the relevant amount in relation to that supply is its open market value.

(6) A direction under this paragraph must be given by notice in writing to the representative member, but no direction may be given more than 3 years after the time of the intra-group supply.

(7) The Treasury may by order vary the provision made by this Schedule about the value of supplies of the kind mentioned in sub-paragraph (1)(a).

(8) An order under sub-paragraph (7) may include incidental, supplemental, consequential or transitional provision (including provision amending section 43 or 83).”

(8) The amendments made by this section have effect in relation to supplies made on or after the day on which this Act is passed.

200 Power to require notification of arrival of means of transport in UK

In Schedule 11 to VATA 1994 (administration, collection and enforcement), in paragraph 2 (accounting for VAT and payment of VAT), after sub-paragraph (5) insert—

“(5A) Regulations under this paragraph may make provision—

(a) for requiring the relevant person to give to the Commissioners such notification of the arrival in the United Kingdom of goods consisting of a means of transport, at such time and in such form and manner, as may be specified in the regulations or by the Commissioners in accordance with the regulations, and

(b) where notification of the arrival of a means of transport acquired from another member State, or imported from a place outside the member States, is required by virtue of paragraph (a), for requiring any VAT on the acquisition or importation to be paid at such time and in such manner as may be specified in the regulations.

(5B) The provision that may be made by regulations made by virtue of sub-paragraph (5A) includes—

(a) provision for a notification required by virtue of that sub-paragraph to contain such particulars relating to the notified arrival of the means of transport and any VAT chargeable on its acquisition or importation as may be specified in the regulations or by the Commissioners in accordance with the regulations,

(b) provision for such a notification to be given by a person who is not the relevant person and is so specified, or is of a description so specified,

(c) provision for such a notification to contain a declaration, given in such form and by such person as may be so specified, as to the information contained in the notification, and

(d) supplementary, incidental, consequential or transitional provision (including provision amending any provision made by or under this Act or any other enactment).

(5C) Subsection (3) of section 97 (orders subject to Commons approval) applies to a statutory instrument containing any regulations made by virtue of sub-paragraph (5A) which amend an enactment as it applies to an order within subsection (4) of that section.

(5D) For the purposes of sub-paragraph (5A)—

• “means of transport” has the same meaning as it has in this Act in the expression “new means of transport” (see section 95);

• “relevant person”, in relation to the arrival of a means of transport in the United Kingdom, means—

  (a)

  where the means of transport has been acquired in the United Kingdom from another member State, the person who so acquires it,

  (b)

  where it has been imported from a place outside the member States, the person liable to pay VAT on the importation, and

  (c)

  in any other case—

  (i)

  the owner of the means of transport at the time of its arrival in the United Kingdom, or

  (ii)

  where it is subject to a lease or hire agreement, the lessee or hirer of the means of transport at that time.”

201 Non-established taxable persons

Schedule 27 contains provision about non-established taxable persons.

202 Administration of VAT

Schedule 28 contains provision about the administration of VAT.

Part 8 Other taxes

Landfill tax

203 Standard rate of landfill tax

(1) In section 42(1)(a) and (2) of FA 1996 (amount of landfill tax) for “£64” substitute “£72”.

(2) The amendments made by this section have effect in relation to disposals made (or treated as made) on or after 1 April 2013.

204 Landfill sites in Scotland

The following provisions are to be treated as having come into force, in so far as they extend to Scotland, on 21 March 2000—

(a) paragraph 19 of Schedule 2 to the Pollution Prevention and Control Act 1999 (which inserts paragraph (ba) into section 66 of FA 1996 (landfill sites)), and

(b) section 6(1) of the Pollution Prevention and Control Act 1999, so far as relating to paragraph 19 of that Schedule.

Climate change levy

205 Climate change levy

The following Schedules amend, or make amendments connected with, Schedule 6 to FA 2000 (climate change levy)—

(a) Schedule 29 (reduced-rate supplies, rates etc);

(b) Schedule 30 (climate change agreements);

(c) Schedule 31 (supplies subject to the carbon price support rates and combined heat and power stations).

Inheritance tax

206 Indexation of rate bands

(1) Section 8 of IHTA 1984 (indexation of rate bands) is amended as follows.

(2) In subsection (1), for “retail prices index for the month of September in 1993 or any later year” substitute “consumer prices index for the month of September in any year”.

(3) In subsection (2), for “retail prices index” substitute “consumer prices index”.

(4) For subsection (3) substitute—

“(3) In this section, “consumer prices index” means the all items consumer prices index published by the Statistics Board.”

(5) The amendments made by this section have effect for the purposes of chargeable transfers made on or after 6 April 2015.

207 Gifts to charities etc

Schedule 32 contains provision for a lower rate of inheritance tax to be charged on transfers made on death that include sufficient gifts to charities or registered clubs.

208 Settled excluded property: effect of certain arrangements

(1) IHTA 1984 is amended as follows.

(2) In section 48 (settled property: excluded property)—

(a) in subsection (3), for “subsection (3B)” substitute “subsections (3B) and (3D)”, and

(b) after subsection (3C) insert—

“(3D) Where—

(a) one or more persons enter into arrangements,

(b) in the course of the arrangements, an individual domiciled in the United Kingdom acquires, or becomes able to acquire, (directly or indirectly) an interest in property comprised in a settlement (“the relevant settled property”),

(c) ignoring this subsection, the relevant settled property would be excluded property by virtue of subsection (3)(a), and

(d) there is a relevant reduction in the value of the individual’s estate,

from the time paragraphs (a) to (d) are first satisfied, the relevant settled property is not excluded property by virtue of subsection (3)(a).

(3E) For the purposes of subsection (3D)—

(a) an individual has an interest in property comprised in a settlement if—

(i) the property, or any derived property, is or will or may become payable to, or applicable for the benefit of, the individual or the individual’s spouse or civil partner in any circumstances whatsoever, or

(ii) the individual or the individual’s spouse or civil partner enjoys a benefit deriving (directly or indirectly) from the property or any derived property, and

(b) a “relevant reduction” in the value of the individual’s estate occurs—

(i) if and when the value of the individual’s estate first becomes less than it would have been in the absence of the arrangements, and

(ii) on each subsequent occasion when the value of that estate becomes less than it would have been in the absence of the arrangements and that difference in value is greater than the sum of any previous relevant reductions.

(3F) In subsections (3D) and (3E)—

• “arrangements” includes any scheme, transaction or series of transactions, agreement or understanding, whether or not legally enforceable, and any associated operations;

• “derived property”, in relation to any property, means—

  (a)

  income from that property,

  (b)

  property directly or indirectly representing—

  (i)

  proceeds of that property, or

  (ii)

  proceeds of income from that property, or

  (c)

  income from property which is derived property by virtue of paragraph (b).”

(3) After section 74 insert—

“74A Settled property ceasing to be excluded property

(1) This section applies where by virtue of section 48(3D), property comprised in a settlement ceases to be excluded property.

(2) In determining whether this section applies, section 48(3D) is to apply as if section 48(3B) applied only where the interest in possession mentioned in section 48(3B)(a) falls within section 5(1B).

(3) For the purposes of this section and section 74B—

(a) “the arrangements” means the arrangements mentioned in section 48(3D),

(b) “the individual” means the individual mentioned in section 48(3D)(b),

(c) “relevant reduction” has the meaning given by section 48(3E)(b),

(d) the amount of a relevant reduction is—

(i) in the case of a reduction within section 48(3E)(b)(i), the difference between the value of the estate and its value in the absence of the arrangements, and

(ii) in the case of a reduction within section 48(3E)(b)(ii), the amount by which the difference in value mentioned in that provision exceeds the sum of any previous relevant reductions, and

(e) “the relevant time” means—

(i) the time the relevant reduction occurs, or

(ii) if later, the time section 48(3D)(a) to (d) is first satisfied.

(4) Subsection (6) applies if all or a part of a relevant reduction (“amount A”) is attributable to the value of the individual’s section 49(1) property being less than it would have been in the absence of the arrangements.

(5) “The individual’s section 49(1) property” means settled property to which the individual is treated as beneficially entitled under section 49(1) by reason of the individual being beneficially entitled to an interest in possession in the property.

(6) Where this subsection applies—

(a) a part of that interest in possession is deemed, for the purposes of section 52, to come to an end at the relevant time, and

(b) that section applies in relation to the coming to an end of that part as if the reference in subsection (4)(a) of that section to a corresponding part of the whole value of the property in which the interest in possession subsists were a reference to amount A.

(7) Subsection (8) applies to so much (if any) of a relevant reduction as is not amount A (“amount B”).

(8) Tax is to be charged as if the individual had made a transfer of value at the relevant time and the value transferred by it had been equal to amount B.

74B Section 74A: supplementary provision

(1) A transfer of value arising by virtue of section 74A is to be taken to be a transfer which is not a potentially exempt transfer.

(2) For the purposes of section 74A—

(a) when determining the value transferred by a transfer of value arising by virtue of that section, no account is to be taken of section 3(2),

(b) nothing in section 10(1) applies to prevent such a transfer, and

(c) nothing in sections 102 to 102C of the Finance Act 1986 applies in relation to such a transfer.

(3) Where, ignoring this subsection, a transfer of value would arise by virtue of section 74A (“the current transfer”), the value transferred by a relevant related transfer is to be treated as reducing the value transferred by the current transfer.

But this subsection does not apply if and to the extent that the relevant related transfer has already been applied to reduce another transfer of value arising by virtue of that section.

But this subsection does not apply if and to the extent that the relevant related transfer has already been applied to reduce another transfer of value arising by virtue of that section.

(4) “Relevant related transfer” means—