Finance Bill

Session 2012 - 13
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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.
35
(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
321

(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.