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Finance Bill
Schedule 13 — Employer asset-backed pension contributions etc
Part 1 — Denial of relief for contributions paid during period 29 November 2011 to 21 February 2012

315

 

Schedule 13

Section 48

 

Employer asset-backed pension contributions etc

Part 1

Denial of relief for contributions paid during period 29 November 2011 to 21

February 2012

5

1          

In Chapter 4 of Part 4 of FA 2004 (registered pension schemes: tax reliefs and

exemptions) after section 196A insert—

“196B   

Employer asset-backed contributions: denial of relief (1)

(1)   

An employer (“E”) is not to be given relief in respect of a contribution

(“E’s contribution”) paid by E under a registered pension scheme if

10

conditions A, B and C are met.

(2)   

Condition A is that—

(a)   

under an arrangement (“the asset-backed arrangement”)—

(i)   

a person (“the borrower”) receives money or another

asset (“the advance”) from another person (“the

15

lender”),

(ii)   

the borrower, or a person connected with the

borrower, makes a disposal of an asset (“the

security”) to or for the benefit of the lender or a person

connected with the lender, and

20

(iii)   

the lender, or a person connected with the lender, is

entitled to payments in respect of the security,

(b)   

the borrower is E or a person connected with E, and

(c)   

the advance is (wholly or partly) paid or provided by the

lender out of E’s contribution (directly or indirectly),

25

   

and the case is not one in relation to which either condition A in

section 196C or condition A in section 196D is met.

(3)   

For the purposes of subsection (2)(a)(iii) it does not matter if an

entitlement of the lender, or a person connected with the lender, is

subject to any condition.

30

(4)   

Condition B is that the asset-backed arrangement is not a structured

finance arrangement.

(5)   

Condition C is that it is reasonable to suppose that the amount of one

or more of the payments mentioned in subsection (2)(a)(iii) has been,

or is to be, determined (wholly or partly) on the basis that, in essence,

35

the whole or a part of the advance represents a loan which is (wholly

or partly) to be repaid by way of one or more of those payments.

(6)   

For the purposes of subsection (5) it does not matter—

(a)   

that the repayment of the loan might be subject to any

condition, or

40

(b)   

that the accounts of any person do not record a financial

liability in respect of the whole or a part of the advance or that

the whole or a part of the advance is not otherwise treated as

representing a loan for the purposes of the accounts of any

person,

45

 
 

Finance Bill
Schedule 13 — Employer asset-backed pension contributions etc
Part 1 — Denial of relief for contributions paid during period 29 November 2011 to 21 February 2012

316

 

   

but, subject to that, all relevant circumstances are to be taken into

account in order to get to the essence of the matter.

(7)   

For the purposes of this section—

(a)   

the borrower and the lender are not connected with one

another if that would otherwise be the case,

5

(b)   

if the borrower is not E, references to a person connected with

the borrower include a person connected with E who would

not otherwise be connected with the borrower, and

(c)   

“loan” includes any advance of money.

196C    

Employer asset-backed contributions: denial of relief (2)

10

(1)   

An employer (“E”) is not to be given relief in respect of a contribution

(“E’s contribution”) paid by E under a registered pension scheme if

conditions A and B are met.

(2)   

Condition A is that—

(a)   

under an arrangement (“the asset-backed arrangement”) a

15

person (“the transferor”) makes a disposal of an asset (“the

security”) to a partnership,

(b)   

the transferor is E or a person connected with E,

(c)   

the transferor, or a person connected with the transferor, is a

member of the partnership immediately after the disposal

20

(whether or not a member immediately before it),

(d)   

under the asset-backed arrangement the partnership receives

money or another asset (“the advance”) from a person (“the

lender”) other than the transferor,

(e)   

the advance is (wholly or partly) paid or provided by the

25

lender out of E’s contribution (directly or indirectly),

(f)   

there is a relevant change in relation to the partnership (see

section 196E), and

(g)   

under the asset-backed arrangement the share in the

partnership’s profits of the person involved in the relevant

30

change (see section 196E) is determined by reference (wholly

or partly) to payments in respect of the security.

(3)   

If the transferor is not E, for the purposes of this section references to

a person connected with the transferor include a person connected

with E who would not otherwise be connected with the transferor.

35

(4)   

For the purposes of subsection (2)(g) it does not matter if any

determination of the share in the partnership’s profits of the person

involved in the relevant change as mentioned is subject to any

condition.

(5)   

Condition B is that the asset-backed arrangement is not a structured

40

finance arrangement.

196D    

Employer asset-backed contributions: denial of relief (3)

(1)   

An employer (“E”) is not to be given relief in respect of a contribution

(“E’s contribution”) paid by E under a registered pension scheme if

conditions A and B are met.

45

(2)   

Condition A is that—

 
 

Finance Bill
Schedule 13 — Employer asset-backed pension contributions etc
Part 1 — Denial of relief for contributions paid during period 29 November 2011 to 21 February 2012

317

 

(a)   

a partnership holds an asset (“the security”) at any time

before an arrangement (“the asset-backed arrangement”) is

made,

(b)   

under the asset-backed arrangement the partnership receives

money or another asset (“the advance”) from another person

5

(“the lender”),

(c)   

the advance is (wholly or partly) paid or provided by the

lender out of E’s contribution (directly or indirectly),

(d)   

there is a relevant change in relation to the partnership (see

section 196E), and

10

(e)   

under the asset-backed arrangement the share in the

partnership’s profits of the person involved in the relevant

change (see section 196E) is determined by reference (wholly

or partly) to payments in respect of the security.

(3)   

For the purposes of subsection (2)(e) it does not matter if any

15

determination of the share in the partnership’s profits of the person

involved in the relevant change as mentioned is subject to any

condition.

(4)   

Condition B is that the asset-backed arrangement is not a structured

finance arrangement.

20

196E    

What is a “relevant change in relation to the partnership” etc?

(1)   

For the purposes of sections 196C and 196D there is a relevant change

in relation to the partnership if condition X or Y is met.

(2)   

Condition X is that, in connection with the asset-backed

arrangement, the lender or a person connected with the lender

25

becomes a member of the partnership at any time.

(3)   

Condition Y is that—

(a)   

in connection with the asset-backed arrangement, there is at

any time a change in a member’s share in the partnership’s

profits, and

30

(b)   

the member is the lender or a person connected with the

lender or a person who in connection with the asset-backed

arrangement becomes at any time connected with the lender.

(4)   

For the purposes of subsections (2) and (3) an event occurs in

connection with the asset-backed arrangement if it occurs directly or

35

indirectly in consequence of it or otherwise in connection with it.

(5)   

For the purposes of sections 196C and 196D references to the person

involved in the relevant change are—

(a)   

if it is condition X that is met, to the lender or the person

connected with the lender (as the case may be), and

40

(b)   

if it is condition Y that is met, to the member of the

partnership in whose share in the partnership’s profits there

is a change.

196F    

Employer asset-backed contributions: anti-avoidance

(1)   

This section applies if—

45

(a)   

an employer (“E”) pays a contribution (“E’s contribution”)

under a registered pension scheme,

 
 

Finance Bill
Schedule 13 — Employer asset-backed pension contributions etc
Part 1 — Denial of relief for contributions paid during period 29 November 2011 to 21 February 2012

318

 

(b)   

conditions A and C in section 196B are met or condition A in

section 196C or 196D is met,

(c)   

the asset-backed arrangement is a structured finance

arrangement and, accordingly, condition B in section 196B,

196C or 196D (as the case may be) is not met,

5

(d)   

at any time (“the relevant time”) E, or a person connected

with E, enters into an arrangement (“the avoidance

arrangement”), and

(e)   

the main purpose, or one of the main purposes, of E or the

person connected with E in entering into the avoidance

10

arrangement is to secure that the total amount of the relevant

payments will be less than the amount of E’s contribution.

(2)   

If the relevant time is the same as the time at which the advance is

received or earlier, section 196B, 196C or 196D (as the case may be)

applies in relation to E’s contribution as if condition B in that section

15

were met.

(3)   

Otherwise, the amount of the relevant financial liability as at the

relevant time is treated as follows as relevant—

(a)   

for corporation tax purposes, the amount is treated as if it

were a profit which E has in respect of E’s loan relationships

20

chargeable to corporation tax under section 299 of CTA 2009

for E’s accounting period in which the relevant time falls, or

(b)   

for income tax purposes, the amount is treated as if it were an

amount of income of E chargeable to income tax under

Chapter 8 of Part 5 of ITTOIA 2005 for the tax year in which

25

the relevant time falls.

(4)   

The amount treated as profit or income by subsection (3)(a) or (b) is

not to exceed the total amount of relief given in respect of E’s

contribution.

(5)   

For the purposes of this section—

30

(a)   

“the advance” and “the asset-backed arrangement” have the

same meaning as in section 196B, 196C or 196D (as the case

may be),

(b)   

“the relevant financial liability” means the financial liability

mentioned in section 809BZA(3), 809BZF(3) or 809BZJ(3) of

35

ITA 2007 or section 758(3), 763(3) or 767(3) of CTA 2010 (as

the case may be) in respect of the advance,

(c)   

“the relevant payments” means the payments which reduce

that liability as so mentioned, and

(d)   

the amount of the relevant financial liability as at the relevant

40

time is to be determined in accordance with generally

accepted accounting practice.

196G    

Employer asset-backed contributions: reduction of financial liability

under structured finance arrangement

(1)   

This section applies if—

45

(a)   

an employer (“E”) pays a contribution (“E’s contribution”)

under a registered pension scheme,

(b)   

conditions A and C in section 196B are met or condition A in

section 196C or 196D is met,

 
 

Finance Bill
Schedule 13 — Employer asset-backed pension contributions etc
Part 1 — Denial of relief for contributions paid during period 29 November 2011 to 21 February 2012

319

 

(c)   

the asset-backed arrangement is a structured finance

arrangement and, accordingly, condition B in section 196B,

196C or 196D (as the case may be) is not met, and

(d)   

there occurs an event (“the relevant event”)—

(i)   

which is not the making of a relevant payment, but

5

(ii)   

by virtue of which, in accordance with generally

accepted accounting practice, the amount of the

relevant financial liability is reduced to nil or in part.

(2)   

If the relevant financial liability is reduced to nil, Chapter 5B of Part

13 of ITA 2007 or Chapter 2 of Part 16 of CTA 2010 (as the case may

10

be) is no longer to apply in relation to the asset-backed arrangement

from when the relevant event occurs.

(3)   

But no person is, by virtue of subsection (2), to be placed in a position

which is more advantageous than the position in which the person

would have been had this section never applied; and, in order to give

15

effect to this principle, such assessments to tax or adjustments to any

assessment to tax as are just and reasonable are to be made.

(4)   

In any case, the amount of the reduction of the relevant financial

liability mentioned in subsection (1)(d) is treated as follows as

relevant—

20

(a)   

for corporation tax purposes, the amount is treated as if it

were a profit which E has in respect of E’s loan relationships

chargeable to corporation tax under section 299 of CTA 2009

for E’s accounting period in which the relevant event occurs,

or

25

(b)   

for income tax purposes, the amount is treated as if it were an

amount of income of E chargeable to income tax under

Chapter 8 of Part 5 of ITTOIA 2005 for the tax year in which

the relevant event occurs.

(5)   

The amount treated as profit or income by subsection (4)(a) or (b) is

30

not to exceed the total amount of relief given in respect of E’s

contribution.

(6)   

For the purposes of this section—

(a)   

“the advance” and “the asset-backed arrangement” have the

same meaning as in section 196B, 196C or 196D (as the case

35

may be),

(b)   

“the relevant financial liability” means the financial liability

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

(d)   

the amount of the relevant financial liability before its

reduction by virtue of the relevant event and the amount of

the reduction are to be determined in accordance with

45

generally accepted accounting practice.

196H    

Employer asset-backed contributions: extension of section 196G

(1)   

This section applies if—

 
 

Finance Bill
Schedule 13 — Employer asset-backed pension contributions etc
Part 1 — Denial of relief for contributions paid during period 29 November 2011 to 21 February 2012

320

 

(a)   

an employer (“E”) pays a contribution (“E’s contribution”)

under a registered pension scheme,

(b)   

conditions A and C in section 196B are met or condition A in

section 196C or 196D is met,

(c)   

the asset-backed arrangement is a structured finance

5

arrangement and, accordingly, condition B in section 196B,

196C or 196D (as the case may be) is not met, and

(d)   

after the beginning of 21 March 2012, an event (“the relevant

event”) listed in subsection (4) occurs.

(2)   

Section 196G applies as if the relevant event were an event (other

10

than the making of a relevant payment) by virtue of which, in

accordance with generally accepted accounting practice, the amount

of the relevant financial liability is reduced to nil.

(3)   

For this purpose, in section 196G(4) references to E’s accounting

period, or the tax year, in which the relevant event occurs are to be

15

read as references to E’s accounting period, or the tax year, in which

falls the time immediately before the occurrence of the relevant

event.

(4)   

The events are—

(a)   

if E is a company within the charge to corporation tax when

20

E’s 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;

25

(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;

30

(d)   

in any case—

(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.

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(5)   

Sections 10(3) and 12(7) of CTA 2009 apply for the purposes of

subsection (4)(d)(i).

196I    

Employer asset-backed contributions: “advances” under structured

finance arrangements

(1)   

This section applies if—

40

(a)   

an employer pays a contribution under a registered pension

scheme,

(b)   

condition A in section 196B, 196C or 196D is met,

(c)   

the asset-backed arrangement is a structured finance

arrangement and, accordingly, condition B in section 196B,

45

196C or 196D (as the case may be) is not met, and

(d)   

the advance gives rise to a loan within the meaning of

Chapter 3 (see section 162).

 
 

Finance Bill
Schedule 13 — Employer asset-backed pension contributions etc
Part 1 — Denial of relief for contributions paid during period 29 November 2011 to 21 February 2012

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(2)   

Section 180(4) does not prevent the advance from being a scheme

administration employer payment (if it would otherwise do so).

(3)   

For the purposes of this section “the advance” and “the asset-backed

arrangement” have the same meaning as in section 196B, 196C or

196D (as the case may be).

5

196J    

Employer asset-backed contributions: supplementary

(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

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

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.

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.”

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

have effect accordingly.

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.

 
 

 
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