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Employer asset-backed pension contributions etc |
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Denial of relief for contributions paid during period 29 November 2011 to 21 |
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1 | In Chapter 4 of Part 4 of FA 2004 (registered pension schemes: tax reliefs and |
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exemptions) after section 196A insert— |
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“196B | Employer asset-backed contributions: denial of relief (1) |
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(1) | An employer (“E”) is not to be given relief in respect of a contribution |
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(“E’s contribution”) paid by E under a registered pension scheme if |
| 10 |
conditions A, B and C are met. |
| |
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(a) | under an arrangement (“the asset-backed arrangement”)— |
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(i) | a person (“the borrower”) receives money or another |
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asset (“the advance”) from another person (“the |
| 15 |
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(ii) | the borrower, or a person connected with the |
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borrower, makes a disposal of an asset (“the |
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security”) to or for the benefit of the lender or a person |
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connected with the lender, and |
| 20 |
(iii) | the lender, or a person connected with the lender, is |
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entitled to payments in respect of the security, |
| |
(b) | the borrower is E or a person connected with E, and |
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(c) | the advance is (wholly or partly) paid or provided by the |
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lender out of E’s contribution (directly or indirectly), |
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| and the case is not one in relation to which either condition A in |
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section 196C or condition A in section 196D is met. |
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(3) | For the purposes of subsection (2)(a)(iii) it does not matter if an |
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entitlement of the lender, or a person connected with the lender, is |
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subject to any condition. |
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(4) | Condition B is that the asset-backed arrangement is not a structured |
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(5) | Condition C is that it is reasonable to suppose that the amount of one |
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or more of the payments mentioned in subsection (2)(a)(iii) has been, |
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or is to be, determined (wholly or partly) on the basis that, in essence, |
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the whole or a part of the advance represents a loan which is (wholly |
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or partly) to be repaid by way of one or more of those payments. |
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(6) | For the purposes of subsection (5) it does not matter— |
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(a) | that the repayment of the loan might be subject to any |
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| 40 |
(b) | that the accounts of any person do not record a financial |
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liability in respect of the whole or a part of the advance or that |
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the whole or a part of the advance is not otherwise treated as |
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representing a loan for the purposes of the accounts of any |
| |
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|
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|
| |
|
| but, subject to that, all relevant circumstances are to be taken into |
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account in order to get to the essence of the matter. |
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(7) | For the purposes of this section— |
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(a) | the borrower and the lender are not connected with one |
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another if that would otherwise be the case, |
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(b) | if the borrower is not E, references to a person connected with |
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the borrower include a person connected with E who would |
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not otherwise be connected with the borrower, and |
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(c) | “loan” includes any advance of money. |
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196C | Employer asset-backed contributions: denial of relief (2) |
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(1) | An employer (“E”) is not to be given relief in respect of a contribution |
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(“E’s contribution”) paid by E under a registered pension scheme if |
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conditions A and B are met. |
| |
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(a) | under an arrangement (“the asset-backed arrangement”) a |
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person (“the transferor”) makes a disposal of an asset (“the |
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security”) to a partnership, |
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(b) | the transferor is E or a person connected with E, |
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(c) | the transferor, or a person connected with the transferor, is a |
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member of the partnership immediately after the disposal |
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(whether or not a member immediately before it), |
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(d) | under the asset-backed arrangement the partnership receives |
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money or another asset (“the advance”) from a person (“the |
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lender”) other than the transferor, |
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(e) | the advance is (wholly or partly) paid or provided by the |
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lender out of E’s contribution (directly or indirectly), |
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(f) | there is a relevant change in relation to the partnership (see |
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(g) | under the asset-backed arrangement the share in the |
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partnership’s profits of the person involved in the relevant |
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change (see section 196E) is determined by reference (wholly |
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or partly) to payments in respect of the security. |
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(3) | If the transferor is not E, for the purposes of this section references to |
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a person connected with the transferor include a person connected |
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with E who would not otherwise be connected with the transferor. |
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(4) | For the purposes of subsection (2)(g) it does not matter if any |
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determination of the share in the partnership’s profits of the person |
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involved in the relevant change as mentioned is subject to any |
| |
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(5) | Condition B is that the asset-backed arrangement is not a structured |
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196D | Employer asset-backed contributions: denial of relief (3) |
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(1) | An employer (“E”) is not to be given relief in respect of a contribution |
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(“E’s contribution”) paid by E under a registered pension scheme if |
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conditions A and B are met. |
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|
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|
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|
(a) | a partnership holds an asset (“the security”) at any time |
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before an arrangement (“the asset-backed arrangement”) is |
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(b) | under the asset-backed arrangement the partnership receives |
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money or another asset (“the advance”) from another person |
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(c) | the advance is (wholly or partly) paid or provided by the |
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lender out of E’s contribution (directly or indirectly), |
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(d) | there is a relevant change in relation to the partnership (see |
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(e) | under the asset-backed arrangement the share in the |
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partnership’s profits of the person involved in the relevant |
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change (see section 196E) is determined by reference (wholly |
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or partly) to payments in respect of the security. |
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(3) | For the purposes of subsection (2)(e) it does not matter if any |
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determination of the share in the partnership’s profits of the person |
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involved in the relevant change as mentioned is subject to any |
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(4) | Condition B is that the asset-backed arrangement is not a structured |
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196E | What is a “relevant change in relation to the partnership” etc? |
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(1) | For the purposes of sections 196C and 196D there is a relevant change |
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in relation to the partnership if condition X or Y is met. |
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(2) | Condition X is that, in connection with the asset-backed |
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arrangement, the lender or a person connected with the lender |
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becomes a member of the partnership at any time. |
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(a) | in connection with the asset-backed arrangement, there is at |
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any time a change in a member’s share in the partnership’s |
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(b) | the member is the lender or a person connected with the |
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lender or a person who in connection with the asset-backed |
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arrangement becomes at any time connected with the lender. |
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(4) | For the purposes of subsections (2) and (3) an event occurs in |
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connection with the asset-backed arrangement if it occurs directly or |
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indirectly in consequence of it or otherwise in connection with it. |
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(5) | For the purposes of sections 196C and 196D references to the person |
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involved in the relevant change are— |
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(a) | if it is condition X that is met, to the lender or the person |
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connected with the lender (as the case may be), and |
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(b) | if it is condition Y that is met, to the member of the |
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partnership in whose share in the partnership’s profits there |
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196F | Employer asset-backed contributions: anti-avoidance |
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(1) | This section applies if— |
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(a) | an employer (“E”) pays a contribution (“E’s contribution”) |
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under a registered pension scheme, |
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|
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|
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|
(b) | conditions A and C in section 196B are met or condition A in |
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section 196C or 196D is met, |
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(c) | the asset-backed arrangement is a structured finance |
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arrangement and, accordingly, condition B in section 196B, |
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196C or 196D (as the case may be) is not met, |
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(d) | at any time (“the relevant time”) E, or a person connected |
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with E, enters into an arrangement (“the avoidance |
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(e) | the main purpose, or one of the main purposes, of E or the |
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person connected with E in entering into the avoidance |
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arrangement is to secure that the total amount of the relevant |
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payments will be less than the amount of E’s contribution. |
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(2) | If the relevant time is the same as the time at which the advance is |
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received or earlier, section 196B, 196C or 196D (as the case may be) |
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applies in relation to E’s contribution as if condition B in that section |
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(3) | Otherwise, the amount of the relevant financial liability as at the |
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relevant time is treated as follows as relevant— |
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(a) | for corporation tax purposes, the amount is treated as if it |
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were a profit which E has in respect of E’s loan relationships |
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chargeable to corporation tax under section 299 of CTA 2009 |
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for E’s accounting period in which the relevant time falls, or |
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(b) | for income tax purposes, the amount is treated as if it were an |
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amount of income of E chargeable to income tax under |
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Chapter 8 of Part 5 of ITTOIA 2005 for the tax year in which |
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(4) | The amount treated as profit or income by subsection (3)(a) or (b) is |
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not to exceed the total amount of relief given in respect of E’s |
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(5) | For the purposes of this section— |
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(a) | “the advance” and “the asset-backed arrangement” have the |
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same meaning as in section 196B, 196C or 196D (as the case |
| |
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(b) | “the relevant financial liability” means the financial liability |
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mentioned in section 809BZA(3), 809BZF(3) or 809BZJ(3) of |
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ITA 2007 or section 758(3), 763(3) or 767(3) of CTA 2010 (as |
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the case may be) in respect of the advance, |
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(c) | “the relevant payments” means the payments which reduce |
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that liability as so mentioned, and |
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(d) | the amount of the relevant financial liability as at the relevant |
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time is to be determined in accordance with generally |
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accepted accounting practice. |
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196G | Employer asset-backed contributions: reduction of financial liability |
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under structured finance arrangement |
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(1) | This section applies if— |
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(a) | an employer (“E”) pays a contribution (“E’s contribution”) |
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under a registered pension scheme, |
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(b) | conditions A and C in section 196B are met or condition A in |
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section 196C or 196D is met, |
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|
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(c) | the asset-backed arrangement is a structured finance |
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arrangement and, accordingly, condition B in section 196B, |
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196C or 196D (as the case may be) is not met, and |
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(d) | there occurs an event (“the relevant event”)— |
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(i) | which is not the making of a relevant payment, but |
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(ii) | by virtue of which, in accordance with generally |
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accepted accounting practice, the amount of the |
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relevant financial liability is reduced to nil or in part. |
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(2) | If the relevant financial liability is reduced to nil, Chapter 5B of Part |
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13 of ITA 2007 or Chapter 2 of Part 16 of CTA 2010 (as the case may |
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be) is no longer to apply in relation to the asset-backed arrangement |
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from when the relevant event occurs. |
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(3) | But no person is, by virtue of subsection (2), to be placed in a position |
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which is more advantageous than the position in which the person |
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would have been had this section never applied; and, in order to give |
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effect to this principle, such assessments to tax or adjustments to any |
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assessment to tax as are just and reasonable are to be made. |
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(4) | In any case, the amount of the reduction of the relevant financial |
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liability mentioned in subsection (1)(d) is treated as follows as |
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(a) | for corporation tax purposes, the amount is treated as if it |
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were a profit which E has in respect of E’s loan relationships |
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chargeable to corporation tax under section 299 of CTA 2009 |
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for E’s accounting period in which the relevant event occurs, |
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(b) | for income tax purposes, the amount is treated as if it were an |
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amount of income of E chargeable to income tax under |
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Chapter 8 of Part 5 of ITTOIA 2005 for the tax year in which |
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the relevant event occurs. |
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(5) | The amount treated as profit or income by subsection (4)(a) or (b) is |
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not to exceed the total amount of relief given in respect of E’s |
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(6) | For the purposes of this section— |
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(a) | “the advance” and “the asset-backed arrangement” have the |
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same meaning as in section 196B, 196C or 196D (as the case |
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(b) | “the relevant financial liability” means the financial liability |
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mentioned in section 809BZA(3), 809BZF(3) or 809BZJ(3) of |
| |
ITA 2007 or section 758(3), 763(3) or 767(3) of CTA 2010 (as |
| |
the case may be) in respect of the advance, |
| 40 |
(c) | “relevant payment” means a payment which reduces that |
| |
liability as so mentioned, and |
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(d) | the amount of the relevant financial liability before its |
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reduction by virtue of the relevant event and the amount of |
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the reduction are to be determined in accordance with |
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generally accepted accounting practice. |
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196H | Employer asset-backed contributions: extension of section 196G |
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(1) | This section applies if— |
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|
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|
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|
(a) | an employer (“E”) pays a contribution (“E’s contribution”) |
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under a registered pension scheme, |
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(b) | conditions A and C in section 196B are met or condition A in |
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section 196C or 196D is met, |
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(c) | the asset-backed arrangement is a structured finance |
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arrangement and, accordingly, condition B in section 196B, |
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196C or 196D (as the case may be) is not met, and |
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(d) | after the beginning of 21 March 2012, an event (“the relevant |
| |
event”) listed in subsection (4) occurs. |
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(2) | Section 196G applies as if the relevant event were an event (other |
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than the making of a relevant payment) by virtue of which, in |
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accordance with generally accepted accounting practice, the amount |
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of the relevant financial liability is reduced to nil. |
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(3) | For this purpose, in section 196G(4) references to E’s accounting |
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period, or the tax year, in which the relevant event occurs are to be |
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read as references to E’s accounting period, or the tax year, in which |
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falls the time immediately before the occurrence of the relevant |
| |
| |
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(a) | if E is a company within the charge to corporation tax when |
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E’s contribution is paid, E ceases to be within that charge; |
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(b) | if E is a limited liability partnership in relation to which |
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section 863(1) of ITTOIA 2005 or section 1273(1) of CTA 2009 |
| |
applies when E’s contribution is paid, that provision ceases |
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to apply in relation to E; |
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(c) | if E is a firm for the purposes of ITTOIA 2005 (see section 847) |
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or CTA 2009 (see section 1257) (other than a limited liability |
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partnership) when E’s contribution is paid, the partnership |
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ceases to carry on the trade, profession or business in |
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(i) | if E is a company, E enters administration or the |
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(ii) | if E is a partnership, the partnership is dissolved; |
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(iii) | if E is an individual, E dies. |
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(5) | Sections 10(3) and 12(7) of CTA 2009 apply for the purposes of |
| |
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196I | Employer asset-backed contributions: “advances” under structured |
| |
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(1) | This section applies if— |
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(a) | an employer pays a contribution under a registered pension |
| |
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(b) | condition A in section 196B, 196C or 196D is met, |
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(c) | the asset-backed arrangement is a structured finance |
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arrangement and, accordingly, condition B in section 196B, |
| 45 |
196C or 196D (as the case may be) is not met, and |
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(d) | the advance gives rise to a loan within the meaning of |
| |
Chapter 3 (see section 162). |
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|
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|
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|
(2) | Section 180(4) does not prevent the advance from being a scheme |
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administration employer payment (if it would otherwise do so). |
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(3) | For the purposes of this section “the advance” and “the asset-backed |
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arrangement” have the same meaning as in section 196B, 196C or |
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196D (as the case may be). |
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196J | Employer asset-backed contributions: supplementary |
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(1) | This section applies for the purposes of sections 196B to 196I. |
| |
(2) | References to relief being given in respect of a contribution paid by |
| |
an employer under a registered pension scheme are references to |
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relief being given by way of— |
| 10 |
(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 |
| 15 |
CTA 2009 (expenses of management: companies with |
| |
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(c) | the contribution being brought into account at Step 1 in |
| |
section 76(7) of ICTA (expenses of insurance companies) in |
| |
| 20 |
(3) | Whether a person is connected with another person is determined in |
| |
accordance with section 1122 of CTA 2010. |
| |
(4) | “Structured finance arrangement” means an arrangement which is a |
| |
type 1, type 2 or type 3 finance arrangement for the purposes of |
| |
Chapter 5B of Part 13 of ITA 2007 or Chapter 2 of Part 16 of CTA 2010 |
| 25 |
(structured finance arrangements). |
| |
(5) | Sections 774 to 776 of CTA 2010 apply as they apply for the purposes |
| |
of Chapter 2 of Part 16 of that Act.” |
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2 | In section 280(1) of FA 2004 (abbreviations)— |
| |
(a) | omit the “and” after the definition of “ITA 2007”, and |
| 30 |
(b) | after the definition of “CTA 2009” insert “, and |
| |
“CTA 2010” means the Corporation Tax Act 2010”. |
| |
3 (1) | The amendment made by paragraph 1 above has effect in accordance with |
| |
sub-paragraphs (2) to (6); and the amendments made by paragraph 2 above |
| |
| 35 |
(2) | Sections 196B to 196J of FA 2004 have effect in relation to contributions paid |
| |
by employers on or after 29 November 2011 but before 22 February 2012. |
| |
(3) | Section 196G of FA 2004 also has effect in relation to contributions paid by |
| |
employers before 29 November 2011 where the event mentioned in section |
| |
196G(1)(d) occurs on or after that date (and, for the purpose of applying |
| 40 |
section 196G in relation to such contributions, assume that sections 196B to |
| |
196D also have effect in relation to such contributions). |
| |
(4) | In cases where the relevant event occurs before 21 March 2012, section 196G |
| |
has effect as if subsection (3) were omitted. |
| |
|
| |
|