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
335

196F
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.
(2)
Condition A is that—
5
(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
10
(“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 196H), and
15
(e)
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
or partly) to payments in respect of the security.
(3)
For the purposes of subsection (2)(e) it does not matter if any
20
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 an acceptable
structured finance arrangement (see section 196G).
25
196G
Employer asset-backed contributions: “acceptable structured finance
arrangement” (3)
(1)
For the purposes of section 196F the asset-backed arrangement is an
“acceptable structured finance arrangement” if conditions M to Q are
met.
30
(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
35
(b)
the asset-backed arrangement is a 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 (finance arrangements).
(3)
Condition N is that—
(a)
the lender is a responsible authority,
40
(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
45
contribution.

Finance Bill
Schedule 13 — Employer asset-backed pension contributions etc
Part 3 — Denial of relief for contributions paid on or after 22 February 2012
336

(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
change in relation to the partnership,
5
(b)
the lender’s share in the partnership’s profits is to be
determined wholly by reference to the payments mentioned
in section 196F(2)(e),
(c)
determinations of the lender’s share in the partnership’s
profits are to be made at times which have been fixed and fall
10
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
of the lender’s share in the partnership’s profits is made, the
15
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),
(e)
on its making, each drawing is directly to become part of the
20
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
(h)
all of the lender’s share in the partnership’s profits is to be
25
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.
(5)
For the purposes of subsection (4)(f) the following are to be
30
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
requires the amounts of all outstanding drawings to be
35
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,
in relation to each periodic increase, under the term of
40
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
corresponds to 5% per annum.
45
(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
with generally accepted accounting practice the recorded financial
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
337

liability is to be reduced to nil by the end of the drawing period by
(and only by) the payments mentioned in section 196F(2)(e).
(8)
Condition Q is that, as at the time the advance is paid, no
commitment to which subsection (9) applies has been given.
(9)
This subsection applies to a commitment (whether or not legally
5
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
(c)
it is linked (directly or indirectly) to any determination of the
10
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;
(b)
a person connected with E;
15
(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;
20
(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—
25
(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
controlling the management of the registered pension
30
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
partnership.
35
196H
Employer asset-backed contributions: “relevant change in relation to
the partnership” and “person involved in the relevant change”
(1)
For the purposes of sections 196D and 196F 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
40
arrangement, the lender or a person connected with the lender
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
45
profits, and

Finance Bill
Schedule 13 — Employer asset-backed pension contributions etc
Part 3 — Denial of relief for contributions paid on or after 22 February 2012
338

(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
5
indirectly in consequence of it or otherwise in connection with it.
(5)
For the purposes of sections 196D to 196G references to the person
involved in the relevant change in relation to the partnership 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
10
(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.
196I
Employer asset-backed contributions: change in lender’s original
position under acceptable structured finance arrangement etc
15
(1)
This section applies if—
(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 196D or 196F is met,
20
(c)
the asset-backed arrangement is an acceptable structured
finance arrangement for the purposes of section 196B, 196D
or 196F (as the case may be) and, accordingly, condition B in
that section is not met, and
(d)
at any time (“the relevant time”) after the advance is paid—
25
(i)
the lender’s position changes from the lender’s
original position in any respect (whether as a result of
a term of the asset-backed arrangement or another
arrangement or otherwise),
(ii)
an event occurs or does not occur and the occurrence
30
or non-occurrence of the event does not accord with
the lender’s original position in any respect,
(iii)
in accordance with generally accepted accounting
practice, the recorded financial liability is reduced to
nil other than by a payment mentioned in section
35
196B(2)(a)(iii), 196D(2)(g) or section 196F(2)(e) (as the
case may be),
(iv)
a commitment to which section 196C(9), 196E(9) or
196G(9) (as the case may be) applies is given, or
(v)
an event falling within section 196J occurs.
40
(2)
This section also applies if—
(a)
the requirements of subsection (1)(a) to (c) are met, and
(b)
at any time (“the relevant time”) after the advance is paid, in
accordance with generally accepted accounting practice, the
recorded financial liability is reduced in part other than by a
45
payment mentioned in section 196B(2)(a)(iii), 196D(2)(g) or
section 196F(2)(e) (as the case may be).
(3)
Subject to subsection (4), the relevant amount is treated as follows as
relevant—

Finance Bill
Schedule 13 — Employer asset-backed pension contributions etc
Part 3 — Denial of relief for contributions paid on or after 22 February 2012
339

(a)
for corporation tax purposes, the relevant 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
time falls, or
5
(b)
for income tax purposes, the relevant 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 time falls.
(4)
The amount treated as profit or income by subsection (3)(a) or (b),
10
together with any amounts so treated on any previous applications
of this section in relation to the asset-backed arrangement, is not to
exceed the total amount of relief given in respect of E’s contribution.
(5)
If this section applies by virtue of subsection (1), from the relevant
time Chapter 5B of Part 13 of ITA 2007 or Chapter 2 of Part 16 of CTA
15
2010 (as relevant) is no longer to apply in relation to the asset-backed
arrangement.
(6)
But no person is, by virtue of subsection (5), 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
20
effect to this principle, such assessments to tax or adjustments to any
assessment to tax as are just and reasonable are to be made.
(7)
Subsection (1)(d)(i) and (ii) does not cover—
(a)
cases in which the lender’s change in position, or the
occurrence or non-occurrence of the event, is the direct result
25
of a mere administrative error, so long as the consequences of
the error are remedied promptly, or
(b)
mere changes in the persons who are the trustees of the
registered pension scheme or in the persons who control the
management of the registered pension scheme.
30
(8)
For the purposes of subsection (1)(d)(ii) it does not matter if the
occurrence or non-occurrence of the event is authorised by a term of
the asset-backed arrangement or results from the occurrence or non-
occurrence of another event which is so authorised.
(9)
If this section applies by virtue of subsection (1)(d)(v), in subsection
35
(3) references to the relevant time are to be read as references to the
time immediately before the relevant time.
(10)
In this section—
“the advance” and “the asset-backed arrangement” have the
same meaning as in section 196B, 196D or 196F (as the case
40
may be),
“the lender’s original position” means the lender’s position as at
the time the advance is paid set out in the paragraphs of
section 196C(4), 196E(4) or 196G(4) (as the case may be),
“the recorded financial liability” has the same meaning as in
45
section 196C, 196E or 196G (as the case may be), and
“the relevant amount” means—
(a)
if this section applies by virtue of subsection (1), the
outstanding amount of the recorded financial liability

Finance Bill
Schedule 13 — Employer asset-backed pension contributions etc
Part 3 — Denial of relief for contributions paid on or after 22 February 2012
340

immediately before the relevant time determined in
accordance with generally accepted accounting
practice, or
(b)
if this section applies by virtue of subsection (2), the
amount of the reduction of the recorded financial
5
liability.
196J
Employer asset-backed contributions: further events which cause
section 196I to apply
(1)
The events falling within this section are those listed in subsection
(2).
10
(2)
The events are—
(a)
if E is a company within the charge to corporation tax when
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
15
applies when E’s contribution is paid, that provision ceases
to apply in relation to E;
(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
20
ceases to carry on the trade, profession or business in
question;
(d)
in any case—
(i)
if E is a company, E enters administration or the
winding up of E starts;
25
(ii)
if E is a partnership, the partnership is dissolved;
(iii)
if E is an individual, E dies.
(3)
Sections 10(3) and 12(7) of CTA 2009 apply for the purposes of
subsection (2)(d)(i).
196K
Employer asset-backed contributions: “advances” under acceptable
30
structured finance arrangements
(1)
This section applies if—
(a)
an employer pays a contribution under a registered pension
scheme,
(b)
condition A in section 196B, 196D or 196F is met,
35
(c)
the asset-backed arrangement is an acceptable structured
finance arrangement for the purposes of section 196B, 196D
or 196F (as the case may be) and, accordingly, condition B in
that section is not met, and
(d)
the advance gives rise to a loan within the meaning of
40
Chapter 3 (see section 162).
(2)
Section 180(4) does not prevent the advance from being a scheme
administration employer payment (if it would otherwise do so).
(3)
In this section “the advance” and “the asset-backed arrangement”
have the same meaning as in section 196B, 196D or 196F (as the case
45
may be).