Finance Bill

Session 2012 - 13
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Finance Bill

Finance Bill
Schedule 13 — Employer asset-backed pension contributions etc
Part 3 — Denial of relief for contributions paid on or after 22 February 2012
329

Part 3
Denial of relief for contributions paid on or after 22 February 2012
15
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)
5
(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, B and C are met.
(2)
Condition A is that—
(a)
under an arrangement (“the asset-backed arrangement”)—
10
(i)
a person (“the borrower”) receives money or another
asset (“the advance”) from another person (“the
lender”),
(ii)
the borrower, or a person connected with the
borrower, makes a disposal of an asset (“the
15
security”) to or for the benefit of the lender or a person
connected with the lender, and
(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
20
(c)
the advance is (wholly or partly) paid or provided by the
lender out of E’s contribution (directly or indirectly),

and the case is not one in relation to which either condition A in
section 196D or condition A in section 196F is met.
(3)
For the purposes of subsection (2)(a)(iii) it does not matter if an
25
entitlement of the lender, or a person connected with the lender, is
subject to any condition.
(4)
Condition B is that the asset-backed arrangement is not an acceptable
structured finance arrangement (see section 196C).
(5)
Condition C is that it is reasonable to suppose that the amount of one
30
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,
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—
35
(a)
that the repayment of the loan might be subject to any
condition, or
(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
40
representing a loan for the purposes of the accounts of any
person,

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—
45

Finance Bill
Schedule 13 — Employer asset-backed pension contributions etc
Part 3 — Denial of relief for contributions paid on or after 22 February 2012
330

(a)
the borrower and the lender are not connected with one
another if that would otherwise be the case,
(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
5
(c)
“loan” includes any advance of money.
196C
Employer asset-backed contributions: “acceptable structured finance
arrangement” (1)
(1)
For the purposes of section 196B the asset-backed arrangement is an
“acceptable structured finance arrangement” if conditions M to Q are
10
met.
(2)
Condition M is that—
(a)
in accordance with generally accepted accounting practice,
the borrower’s accounts for the period in which the advance
is received record a financial liability (“the recorded financial
15
liability”) in respect of the advance, and
(b)
the asset-backed arrangement is a type 1 finance arrangement
for the purposes of Chapter 5B of Part 13 of ITA 2007 or
Chapter 2 of Part 16 of CTA 2010 (finance arrangements).
(3)
Condition N is that—
20
(a)
the lender is a responsible authority,
(b)
the advance is money which is paid by the lender directly to
the borrower wholly and directly out of E’s contribution, and
(c)
the advance and the recorded financial liability (as originally
recorded) are both of an amount equal to the amount of E’s
25
contribution.
(4)
Condition O is that, as at the time the advance is paid, the position of
the lender is as follows—
(a)
it is the lender (and not any person connected with the
lender) who is entitled to the payments mentioned in section
30
196B(2)(a)(iii),
(b)
those payments are to arise at times which have been fixed
and fall at intervals of no more than one year (with the first
payment to arise no later than one year after the day on which
the advance is paid),
35
(c)
the lender is to receive each payment no later than 3 months
after the day on which the payment arises (but allowing for
payments otherwise due to be received on a non-working
day to be received on the next working day),
(d)
on receipt by the lender, each payment is directly to become
40
part of the sums held for the purposes of the registered
pension scheme,
(e)
the payments are all to be of the same amount,
(f)
the total amount of the payments is not to be less than the
amount of E’s contribution, and
45
(g)
all the payments are to be received by the lender within a
period (“the payment period”) ending no later than the end
of the period of 25 years beginning with the day on which E’s
contribution is paid.

Finance Bill
Schedule 13 — Employer asset-backed pension contributions etc
Part 3 — Denial of relief for contributions paid on or after 22 February 2012
331

(5)
For the purposes of subsection (4)(e) the following are to be
ignored—
(a)
negligible differences in the amounts of payments;
(b)
differences in the amounts of payments which would be
caused by a term of the asset-backed arrangement that
5
requires the amounts of all outstanding payments to be
increased periodically by a percentage which cannot be
higher than the highest of the following—
(i)
the percentage increase in the consumer prices index
for the reference period, being a period determined,
10
in relation to each periodic increase, under the term of
the asset-backed arrangement in question;
(ii)
the percentage increase in the retail prices index for
the reference period;
(iii)
the percentage for the reference period which
15
corresponds to 5% per annum.
(6)
For the purposes of subsection (4), in determining the lender’s
position, regard must be had (in particular) to any arrangements
connected (directly or indirectly) to the asset-backed arrangement.
(7)
Condition P is that, as at the time the advance is paid, in accordance
20
with generally accepted accounting practice the recorded financial
liability is to be reduced to nil by the end of the payment period by
(and only by) the payments mentioned in section 196B(2)(a)(iii).
(8)
Condition Q is that, as at the time the advance is paid, no
commitment to which subsection (9) applies has been given.
25
(9)
This subsection applies to a commitment (whether or not legally
enforceable and whether or not subject to any conditions) if—
(a)
it is given (directly or indirectly) to a relevant person,
(b)
it is a commitment to secure that a person receives money or
another asset, and
30
(c)
it is linked (directly or indirectly) to the receipt by the lender
of a payment mentioned in section 196B(2)(a)(iii).
(10)
In subsection (9)(a) “relevant person” means—
(a)
E;
(b)
a person connected with E;
35
(c)
a person acting (directly or indirectly) at the direction or
request, or with the agreement, of E or a person connected
with E;
(d)
a person chosen (directly or indirectly) by E or a person
connected with E;
40
(e)
a person within a class of person chosen (directly or
indirectly) by E or a person connected with E;
(f)
a partnership;

but does not include a responsible authority.
(11)
In this section “responsible authority” means—
45
(a)
the persons who from time to time are the trustees of the
registered pension scheme, or

Finance Bill
Schedule 13 — Employer asset-backed pension contributions etc
Part 3 — Denial of relief for contributions paid on or after 22 February 2012
332

(b)
the persons who from time to time are the persons controlling
the management of the registered pension scheme,

in their capacity as such.
196D
Employer asset-backed contributions: denial of relief (2)
(1)
An employer (“E”) is not to be given relief in respect of a contribution
5
(“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
person (“the transferor”) makes a disposal of an asset (“the
10
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
(whether or not a member immediately before it),
15
(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
lender out of E’s contribution (directly or indirectly),
20
(f)
there is a relevant change in relation to the partnership (see
section 196H), and
(g)
under the asset-backed arrangement the share in the
partnership’s profits of the person involved in the relevant
change (see section 196H) is determined by reference (wholly
25
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.
(4)
For the purposes of subsection (2)(g) it does not matter if any
30
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 an acceptable
structured finance arrangement (see section 196E).
35
196E
Employer asset-backed contributions: “acceptable structured finance
arrangement” (2)
(1)
For the purposes of section 196D the asset-backed arrangement is an
“acceptable structured finance arrangement” if conditions M to Q are
met.
40
(2)
Condition M is that—
(a)
in accordance with generally accepted accounting practice,
the partnership’s accounts for the period in which the
advance is received record a financial liability (“the recorded
financial liability”) in respect of the advance, and
45

Finance Bill
Schedule 13 — Employer asset-backed pension contributions etc
Part 3 — Denial of relief for contributions paid on or after 22 February 2012
333

(b)
the asset-backed arrangement is a type 2 finance arrangement
for the purposes of Chapter 5B of Part 13 of ITA 2007 or
Chapter 2 of Part 16 of CTA 2010 (finance arrangements).
(3)
Condition N is that—
(a)
the lender is a responsible authority,
5
(b)
the advance is money which is paid by the lender directly to
the partnership wholly and directly out of E’s contribution,
and
(c)
the advance and the recorded financial liability (as originally
recorded) are both of an amount equal to the amount of E’s
10
contribution.
(4)
Condition O is that, as at the time the advance is paid, the position of
the lender is as follows—
(a)
it is the lender (and not any person connected with the
lender) who is or is to be the person involved in the relevant
15
change in relation to the partnership,
(b)
the lender’s share in the partnership’s profits is to be
determined wholly by reference to the payments mentioned
in section 196D(2)(g),
(c)
determinations of the lender’s share in the partnership’s
20
profits are to be made at times which have been fixed and fall
at intervals of no more than one year (with the first
determination to be made no later than one year after the day
on which the advance is paid),
(d)
no later than 3 months after the day on which a determination
25
of the lender’s share in the partnership’s profits is made, the
lender is to make a drawing from the partnership on account
of its determined share (but allowing for drawings otherwise
due to be made on a non-working day to be made on the next
working day),
30
(e)
on its making, each drawing is directly to become part of the
sums held for the purposes of the registered pension scheme,
(f)
the drawings are all to be of the same amount,
(g)
the total amount of the drawings is not to be less than the
amount of E’s contribution, and
35
(h)
all of the lender’s share in the partnership’s profits is to be
drawn by the lender from the partnership within a period
(“the drawing period”) ending no later than the end of the
period of 25 years beginning with the day on which E’s
contribution is paid.
40
(5)
For the purposes of subsection (4)(f) the following are to be
ignored—
(a)
negligible differences in the amounts of drawings;
(b)
differences in the amounts of drawings which would be
caused by a term of the asset-backed arrangement that
45
requires the amounts of all outstanding drawings to be
increased periodically by a percentage which cannot be
higher than the highest of the following—
(i)
the percentage increase in the consumer prices index
for the reference period, being a period determined,
50

Finance Bill
Schedule 13 — Employer asset-backed pension contributions etc
Part 3 — Denial of relief for contributions paid on or after 22 February 2012
334

in relation to each periodic increase, under the term of
the asset-backed arrangement in question;
(ii)
the percentage increase in the retail prices index for
the reference period;
(iii)
the percentage for the reference period which
5
corresponds to 5% per annum.
(6)
In determining the lender’s position for the purposes of subsection
(4), regard must be had (in particular) to any arrangements
connected (directly or indirectly) to the asset-backed arrangement.
(7)
Condition P is that, as at the time the advance is paid, in accordance
10
with generally accepted accounting practice the recorded financial
liability is to be reduced to nil by the end of the drawing period by
(and only by) the payments mentioned in section 196D(2)(g).
(8)
Condition Q is that, as at the time the advance is paid, no
commitment to which subsection (9) applies has been given.
15
(9)
This subsection applies to a commitment (whether or not legally
enforceable and whether or not subject to any conditions) if—
(a)
it is given (directly or indirectly) to a relevant person,
(b)
it is a commitment to secure that a person receives money or
another asset, and
20
(c)
it is linked (directly or indirectly) to any determination of the
lender’s share in the partnership’s profits or any drawing
from the partnership on account of that share.
(10)
In subsection (9)(a) “relevant person” means—
(a)
E;
25
(b)
a person connected with E;
(c)
a person acting (directly or indirectly) at the direction or
request, or with the agreement, of E or a person connected
with E;
(d)
a person chosen (directly or indirectly) by E or a person
30
connected with E;
(e)
a person within a class of person chosen (directly or
indirectly) by E or a person connected with E;
(f)
a partnership;

but does not include a responsible authority.
35
(11)
In this section—
(a)
“responsible authority” means—
(i)
the persons who from time to time are the trustees of
the registered pension scheme, or
(ii)
the persons who from time to time are the persons
40
controlling the management of the registered pension
scheme,

in their capacity as such, and
(b)
references to the making of drawings from the partnership
include references to the receiving of distributions from the
45
partnership.