Finance Bill (HC Bill 49)

(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,
5or

(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) 10The amount treated as profit or income by subsection (4)(a) or (b) is
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
15same 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
ITA 2007 or section 758(3), 763(3) or 767(3) of CTA 2010 (as
20the case may be) in respect of the advance,

(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
25the reduction are to be determined in accordance with
generally accepted accounting practice.

196H Employer asset-backed contributions: extension of section 196G

(1) This section applies if—

(a) an employer (“E”) pays a contribution (“E’s contribution”)
30under 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
arrangement and, accordingly, condition B in section 196B,
35196C 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
than the making of a relevant payment) by virtue of which, in
40accordance 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
read as references to E’s accounting period, or the tax year, in which
45falls 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
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;

(c) 5if 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;

(d) 10in 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.

(5) 15Sections 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—

(a) 20an 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,
25196C 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).

(2) Section 180(4) does not prevent the advance from being a scheme
administration employer payment (if it would otherwise do so).

(3) 30For 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).

196J Employer asset-backed contributions: supplementary

(1) This section applies for the purposes of sections 196B to 196I.

(2) 35References 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—

(a) the contribution being deducted in computing the amount of
the employer’s profits for the purposes of Part 2 of ITTOIA
402005 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
CTA 2009 (expenses of management: companies with
investment business), or

(c) 45the contribution being brought into account at Step 1 in
section 76(7) of ICTA (expenses of insurance companies) in
respect of the employer.

(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
5Chapter 5B of Part 13 of ITA 2007 or Chapter 2 of Part 16 of CTA 2010
(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) 10omit the “and” after the definition of “ITA 2007”, and

(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
15have effect accordingly.

(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
20196G(1)(d) occurs on or after that date (and, for the purpose of applying
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.

(5) 25Section 196H of FA 2004 also has effect in relation to contributions paid by
employers before 29 November 2011 (and, for the purpose of applying
section 196H in relation to such contributions, assume that sections 196B to
196D also have effect in relation to such contributions).

(6) Section 196I of FA 2004 also has effect in relation to contributions paid by
30employers before 29 November 2011 (and, for the purpose of applying
section 196I in relation to such contributions, assume that sections 196B to
196D also have effect in relation to such contributions).

Part 2 Transitional provision relating to Part 1

35Application and interpretation

4 (1) This Part of this Schedule applies if—

(a) before 29 November 2011, an employer (“E”) pays a contribution
(“E’s contribution”) under a registered pension scheme (“the
relevant scheme”),

(b) 40at any time, relief is given in respect of E’s contribution,

(c) if the reference in paragraph 3(2) above to 29 November 2011 were
instead a reference to the date on which E’s contribution is paid, E
would have no entitlement to relief in respect of E’s contribution by
virtue of section 196B, 196C or 196D of FA 2004, and

(d) the asset-backed arrangement is not completed before 29 November
2011.

(2) For the purposes of sub-paragraph (1)(c) section 196F of FA 2004 is to be
ignored.

5 5For the purposes of this Part of this Schedule—

(a) terms used in section 196B, 196C or 196D of FA 2004 (as the case may
be) have the same meaning as in that section, and

(b) as necessary, assume that section 196B, 196C or 196D of FA 2004 (as
the case may be) has effect in relation to E’s contribution.

6 (1) 10This paragraph applies for the purposes of this Part of this Schedule.

(2) Sub-paragraph (3) applies if the section which would have applied as
mentioned in paragraph 4(1)(c) above is section 196B of FA 2004.

(3) The asset-backed arrangement is “completed” when neither the lender nor
any person connected with the lender is any longer entitled under the asset-
15backed arrangement (conditionally or unconditionally) to payments in
respect of the security.

(4) Sub-paragraph (5) applies if the section which would have applied as
mentioned in paragraph 4(1)(c) above is section 196C or 196D of FA 2004.

(5) The asset-backed arrangement is “completed”—

(a) 20when the share in the partnership’s profits of the person involved in
the relevant change is no longer to be determined under the asset-
backed arrangement (conditionally or unconditionally) by reference
(wholly or partly) to payments in respect of the security, or

(b) if earlier, when no responsible authority is any longer entitled
25(conditionally or unconditionally) to any payments in connection
with the asset-backed arrangement.

(6) In sub-paragraph (5)(b) the reference to payments are to payments of any
type including drawings or distributions from a partnership, payments in
respect of the security and other payments in respect of an asset (as read in
30accordance with section 776(4)(b) of CTA 2010).

(7) “Responsible authority” means—

(a) the persons who from time to time are the trustees of the relevant
scheme, or

(b) the persons who from time to time are the persons controlling the
35management of the relevant scheme,

in their capacity as such.

(8) A responsible authority is entitled to a payment “in connection with” the
asset-backed arrangement if it is entitled to the payment directly or
indirectly in consequence of the arrangement or otherwise in connection
40with the arrangement.

7 (1) In this Part of this Schedule “the completion day” means the earliest of the
following—

(a) the day on which the asset-backed arrangement is to be completed
determined as at the beginning of 29 November 2011;

(b) 45the day on which the asset-backed arrangement is actually
completed;

(c) the day on which a completion event occurs (see sub-paragraphs (2)
to (5));

(d) if an event falling within paragraph 8 occurs, the day on which falls
the time immediately before the occurrence of the event.

(2) 5To determine if a completion event occurs for the purposes of sub-paragraph
(1)(c) first determine, as at the beginning of 22 February 2012, the
following—

(a) the number of payments to be made after the beginning of 22
February 2012 to which a responsible authority is entitled in
10connection with the asset-backed arrangement,

(b) what the amounts of those payments are to be, and

(c) the times at which those payments are to be made.

(3) A completion event occurs for the purposes of sub-paragraph (1)(c) if, after
the beginning of 22 February 2012—

(a) 15whether as a result of a term of the asset-backed arrangement or
another arrangement or otherwise—

(i) there is a change in the number of payments to be made from
that determined under sub-paragraph (2),

(ii) there is a significant change in the amount of a payment to be
20made from that so determined, or

(iii) there is a significant change in the time at which a payment is
to be made from that so determined,

(b) a payment determined under sub-paragraph (2) is not made,

(c) a payment determined under sub-paragraph (2) is made but its
25amount is significantly different from the amount so determined for
the payment, or

(d) a payment determined under sub-paragraph (2) is made but is made
at a time significantly different from the time so determined for the
payment.

(4) 30In sub-paragraphs (2) and (3) references to payments are to payments of any
type including drawings or distributions from a partnership, payments in
respect of the security and other payments in respect of an asset (as read in
accordance with section 776(4)(b) of CTA 2010).

(5) For the purposes of sub-paragraph (3)(b) to (d) it does not matter if the event
35in question is authorised by a term of the asset-backed arrangement or any
other arrangement or results from the occurrence or non-occurrence of
another event which is so authorised.

8 (1) The events falling within this paragraph are those listed in sub-paragraph
(2).

(2) 40The 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 applies when
45E’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 ceases to carry on the
trade, profession or business in question;

(d) 5in 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.

(3) 10Sections 10(3) and 12(7) of CTA 2009 apply for the purposes of sub-
paragraph (2)(d)(i).

Certain tax consequences not to have effect

9 (1) This paragraph applies if—

(a) the section which would have applied as mentioned in paragraph
154(1)(c) above is section 196B of FA 2004, and

(b) the asset-backed arrangement would have the relevant effect
(ignoring this paragraph).

(2) The asset-backed arrangement is not to have the relevant effect.

(3) The relevant effect is that—

(a) 20an amount of income on which the borrower or a person connected
with the borrower would otherwise have been charged to tax is not
so charged,

(b) an amount which would otherwise have been brought into account
in calculating for tax purposes any income of the borrower or of a
25person connected with the borrower is not so brought into account,
or

(c) the borrower or a person connected with the borrower becomes
entitled to deduct an amount—

(i) in calculating income for tax purposes, or

(ii) 30from total income or total profits (as the case may be).

(4) But if the borrower is a partnership the relevant effect is that—

(a) an amount of income on which a member of the partnership would
otherwise have been charged to tax is not so charged,

(b) an amount which would otherwise have been brought into account
35in calculating for tax purposes any income of a member of the
partnership is not so brought into account, or

(c) a member of the partnership becomes entitled to deduct an
amount—

(i) in calculating income for tax purposes, or

(ii) 40from total income or total profits (as the case may be).

(5) In sub-paragraphs (3) and (4) “amount” means an amount which arises on
or after 29 November 2011 but on or before the completion day.

10 (1) This paragraph applies if—

(a) the section which would have applied as mentioned in paragraph
454(1)(c) above is section 196C of FA 2004, and

(b) any relevant change in relation to the partnership would have the
relevant effect (ignoring this paragraph).

(2) In such a case—

(a) Part 9 of ITTOIA 2005 or sections 1259 to 1265 of CTA 2009 (as the
5case may be) is or are to have effect in relation to the transferor, or
any person connected with the transferor, as if the relevant change in
relation to the partnership had not occurred, and

(b) accordingly, the asset-backed arrangement is not to have the relevant
effect.

(3) 10The relevant effect is that—

(a) an amount of income on which the transferor, or the person
connected with the transferor, would otherwise have been charged
to tax is not so charged,

(b) an amount which would otherwise have been brought into account
15in calculating for tax purposes any income of the transferor, or the
person connected with the transferor, is not so brought into account,
or

(c) the transferor, or the person connected with the transferor, becomes
entitled to deduct an amount—

(i) 20in calculating income for tax purposes, or

(ii) from total income or total profits (as the case may be).

(4) In sub-paragraph (3) “amount” means an amount which arises on or after 29
November 2011 but on or before the completion day.

(5) In deciding whether sub-paragraph (1)(b) is met assume that amounts of
25income equal to the payments mentioned in section 196C(2)(g) of FA 2004
were payable to the partnership before the relevant change in relation to it
occurred.

11 (1) This paragraph applies if—

(a) the section which would have applied as mentioned in paragraph
304(1)(c) above is section 196D of FA 2004, and

(b) any relevant change in relation to the partnership would have the
relevant effect (ignoring this paragraph).

(2) The relevant effect is that—

(a) an amount of income on which a relevant member would otherwise
35have been charged to tax is not so charged,

(b) an amount which would otherwise have been brought into account
in calculating for tax purposes any income of a relevant member is
not so brought into account, or

(c) a relevant member becomes entitled to deduct an amount—

(i) 40in calculating income for tax purposes, or

(ii) from total income or total profits (as the case may be).

(3) A relevant member is a person who—

(a) was a member of the partnership immediately before the relevant
change in relation to it occurred, and

(b) 45is not the lender.

(4) In sub-paragraph (2) “amount” means an amount which arises on or after 29
November 2011 but on or before the completion day.

(5) If this paragraph applies—

(a) Part 9 of ITTOIA 2005 or sections 1259 to 1265 of CTA 2009 (as the
case may be) is or are to have effect in relation to any relevant
member as if the relevant change in relation to the partnership had
5not occurred, and

(b) accordingly, the asset-backed arrangement is not to have the relevant
effect.

(6) In deciding whether sub-paragraph (1)(b) is met assume that amounts of
income equal to the payments mentioned in section 196D(2)(e) of FA 2004
10were payable to the partnership before the relevant change in relation to it
occurred.

Adjustments

12 (1) For the purposes of paragraphs 13 and 14—

(a) amount A is the total amount of relief given in respect of E’s
15contribution,

(b) amount B is the total of the following amounts—

(i) any amounts of income which are charged to tax by virtue of
paragraph 9, 10 or 11 above (as the case may be),

(ii) any amounts brought into account in calculating income for
20tax purposes by virtue of paragraph 9, 10 or 11 above (as the
case may be) (so far as not reflected in sub-paragraph (i)), and

(iii) any amounts stopped from being the subject of an income
deduction by virtue of paragraph 9, 10 or 11 above (as the
case may be) (so far as not reflected in sub-paragraph (i) or
25(ii)), and

(c) subject to sub-paragraph (7), amount C is the amount of the payment
mentioned in sub-paragraph (4) or (6) (as the case may be) so far as
the payment—

(i) is made under the asset-backed arrangement on the
30completion day,

(ii) is not reflected in amount B,

(iii) is not the subject of an income deduction, and

(iv) is not a contribution paid by E under the relevant scheme but
nevertheless becomes (directly or indirectly) part of the sums
35held for the purposes of the relevant scheme.

(2) In sub-paragraph (1) “income deduction” means a deduction to which any
person is entitled—

(a) in calculating income for tax purposes, or

(b) from total income or total profits.

(3) 40Sub-paragraph (4) applies if the section which would have applied as
mentioned in paragraph 4(1)(c) above is section 196B of FA 2004.

(4) The payment referred to in sub-paragraph (1)(c) is the payment (if any)
which the borrower, or a person connected with the borrower, makes to the
lender, or a person connected with the lender, in order to acquire—

(a) 45the security, or

(b) any asset substituted for the security under the asset-backed
arrangement.

(5) Sub-paragraph (6) applies if the section which would have applied as
mentioned in paragraph 4(1)(c) above is section 196C or 196D of FA 2004.

(6) The payment referred to in sub-paragraph (1)(c) is the payment (if any)
which E, or a person connected with E, makes—

(a) 5to the lender, or a person connected with the lender, in order to
reverse the relevant change in relation to the partnership, or

(b) otherwise to a responsible authority in order to buy out the
authority’s interest in any partnership involved in the asset-backed
arrangement.

(7) 10Amount C is to be taken to be nil if—

(a) the completion day is on or after 22 February 2012,

(b) on or before the completion day, a commitment (whether or not
legally enforceable and whether or not subject to any conditions) is
given (directly or indirectly) to a relevant person, and

(c) 15the commitment—

(i) is a commitment to secure that a person receives money or
another asset, and

(ii) is linked (directly or indirectly) to the making of the payment
covered by amount C.

(8) 20In sub-paragraph (7)(b) “relevant person” means—

(a) E;

(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) 25a person chosen (directly or indirectly) by E or a person 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.

(9) 30But “relevant person” does not include a responsible authority.

13 (1) This paragraph applies if amount A exceeds the sum of amounts B and C.

(2) The amount of the excess 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 chargeable to
35corporation tax under section 299 of CTA 2009 for E’s accounting
period in which the beginning of the completion day 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 the beginning of the
40completion day falls.

14 If the sum of amounts B and C exceeds amount A—

(a) E is to be treated as having paid a contribution under the relevant
scheme in respect of any individual of an amount equal to the excess,

(b) the contribution is to be treated as having been paid at the beginning
45of the completion day, and

(c) E is to be given relief as provided for by section 196 of FA 2004
accordingly.

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 5 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
conditions A, B and C are met.

(2) Condition A is that—

(a) 10under an arrangement (“the asset-backed arrangement”)—

(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
15borrower, makes a disposal of an asset (“the
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) 20the 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),

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) 25For 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.

(4) Condition B is that the asset-backed arrangement is not an acceptable
structured finance arrangement (see section 196C).

(5) 30Condition 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,
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) 35For the purposes of subsection (5) it does not matter—

(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
40the whole or a part of the advance is not otherwise treated as
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) 45For the purposes of this section—