(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
5not otherwise be connected with the borrower, and

(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
10“acceptable structured finance arrangement” if conditions M to Q are
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
15is received record a financial liability (“the recorded financial
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) 20Condition N is that—

(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
25recorded) are both of an amount equal to the amount of E’s
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
30lender) who is entitled to the payments mentioned in section
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 (but allowing
for payments otherwise due to arise on a non-working day to
35arise on the next working day),

(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) 40on receipt by the lender, each payment is directly to become
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
45amount of E’s contribution, and

(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.

(5) For the purposes of subsection (4)(b) the first payment is to arise no
later than one year after the day on which the advance is paid.

(6) For the purposes of subsection (4)(e) the following are to be
ignored—

(a) 5negligible 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
requires the amounts of all outstanding payments to be
increased periodically by a percentage which cannot be
10higher 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
the asset-backed arrangement in question;

(ii) 15the percentage increase in the retail prices index for
the reference period;

(iii) the percentage for the reference period which
corresponds to 5% per annum.

(7) For the purposes of subsection (4), in determining the lender’s
20position, regard must be had (in particular) to any arrangements
connected (directly or indirectly) to the asset-backed arrangement.

(8) Condition P is that, as at the time the advance is paid, in accordance
with generally accepted accounting practice the recorded financial
liability is to be reduced to nil by the end of the payment period by
25(and only by) the payments mentioned in section 196B(2)(a)(iii).

(9) Condition Q is that, as at the time the advance is paid, no
commitment to which subsection (10) applies has been given.

(10) This subsection applies to a commitment (whether or not legally
enforceable and whether or not subject to any conditions) if—

(a) 30it 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 the receipt by the lender
of a payment mentioned in section 196B(2)(a)(iii).

(11) 35In subsection (10)(a) “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
40with E;

(d) a 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) 45a partnership;

but does not include a responsible authority.

(12) In this section “responsible authority” means—

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

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

5in 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
(“E’s contribution”) paid by E under a registered pension scheme if
conditions A and B are met.

(2) 10Condition A is that—

(a) under an arrangement (“the asset-backed arrangement”) a
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) 15the 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),

(d) under the asset-backed arrangement the partnership receives
money or another asset (“the advance”) from a person (“the
20lender”) 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),

(f) there is a relevant change in relation to the partnership (see
section 196H), and

(g) 25under 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) If the transferor is not E, for the purposes of this section references to
30a 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
determination of the share in the partnership’s profits of the person
involved in the relevant change as mentioned is subject to any
35condition.

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

196E Employer asset-backed contributions: “acceptable structured finance
arrangement” (2)

(1) 40For the purposes of section 196D the asset-backed arrangement is an
“acceptable structured finance arrangement” if conditions M to Q are
met.

(2) Condition M is that—

(a) in accordance with generally accepted accounting practice,
45the 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

(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) 5the lender is a responsible authority,

(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
10recorded) are both of an amount equal to the amount of E’s
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
15lender) who is or is to be the person involved in the relevant
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) 20determinations of the lender’s share in the partnership’s
profits are to be made at times which have been fixed and fall
at intervals of no more than one year (but allowing for
determinations otherwise due to be made on a non-working
day to be made on the next working day),

(d) 25no later than 3 months after the day on which a determination
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
30working day),

(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
35amount of E’s contribution, and

(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
40contribution is paid.

(5) For the purposes of subsection (4)(c) the first determination is to be
made no later than one year after the day on which the advance is
paid.

(6) For the purposes of subsection (4)(f) the following are to be
45ignored—

(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

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
5the 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.

(7) 10In 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.

(8) Condition P is that, as at the time the advance is paid, in accordance
with generally accepted accounting practice the recorded financial
15liability 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).

(9) Condition Q is that, as at the time the advance is paid, no
commitment to which subsection (10) applies has been given.

(10) This subsection applies to a commitment (whether or not legally
20enforceable 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
25lender’s share in the partnership’s profits or any drawing
from the partnership on account of that share.

(11) In subsection (10)(a) “relevant person” means—

(a) E;

(b) a person connected with E;

(c) 30a 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;

(e) 35a 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.

(12) In this section—

(a) 40“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
45scheme,

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.

196F Employer asset-backed contributions: denial of relief (3)

(1) 5An 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) a partnership holds an asset (“the security”) at any time
10before 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
(“the lender”),

(c) 15the 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

(e) under the asset-backed arrangement the share in the
20partnership’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
determination of the share in the partnership’s profits of the person
25involved 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).

196G Employer asset-backed contributions: “acceptable structured finance
30arrangement” (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.

(2) Condition M is that—

(a) 35in 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

(b) the asset-backed arrangement is a type 3 finance arrangement
40for 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,

(b) the advance is money which is paid by the lender directly to
45the 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
contribution.

(4) Condition O is that, as at the time the advance is paid, the position of
5the 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,

(b) the lender’s share in the partnership’s profits is to be
10determined 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
at intervals of no more than one year (but allowing for
15determinations otherwise due to be made on a non-working
day to be made on the next working day),

(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
lender is to make a drawing from the partnership on account
20of 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
sums held for the purposes of the registered pension scheme,

(f) 25the 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
drawn by the lender from the partnership within a period
30(“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)(c) the first determination is to be
made no later than one year after the day on which the advance is
35paid.

(6) 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
40caused by a term of the asset-backed arrangement that
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
45for the reference period, being a period determined,
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) 50the percentage for the reference period which
corresponds to 5% per annum.

(7) 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.

(8) Condition P is that, as at the time the advance is paid, in accordance
5with 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 196F(2)(e).

(9) Condition Q is that, as at the time the advance is paid, no
commitment to which subsection (10) applies has been given.

(10) 10This 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

(c) 15it 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.

(11) In subsection (10)(a) “relevant person” means—

(a) E;

(b) 20a 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
25connected 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.

(12) 30In 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
35controlling 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
40partnership.

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) 45Condition X is that, in connection with the asset-backed
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
profits, and

(b) 5the 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
10indirectly 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

(b) 15if 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

(1) 20This 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,

(c) 25the 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—

(i) 30the 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
35or 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
40196B(2)(a)(iii), 196D(2)(g) or section 196F(2)(e) (as the
case may be),

(iv) a commitment to which section 196C(10), 196E(10) or
196G(10) (as the case may be) applies is given, or

(v) an event falling within section 196J occurs.

(2) 45This 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

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—

(a) for corporation tax purposes, the relevant amount is treated
5as 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

(b) for income tax purposes, the relevant amount is treated as if
10it 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),
together with any amounts so treated on any previous applications
15of 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
2010 (as relevant) is no longer to apply in relation to the asset-backed
20arrangement.

(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
effect to this principle, such assessments to tax or adjustments to any
25assessment 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
of a mere administrative error, so long as the consequences of
30the 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.

(8) For the purposes of subsection (1)(d)(ii) it does not matter if the
35occurrence 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
(3) references to the relevant time are to be read as references to the
40time 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
  may be),

• 45“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),

Finance BillPage 340

• “the recorded financial liability” has the same meaning as in
  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
  5outstanding amount of the recorded financial liability
  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
  10amount of the reduction of the recorded financial
  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
15(2).

(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
20section 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) 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
25partnership) when E’s contribution is paid, the partnership
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
30winding up of E starts;

(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 35 Employer asset-backed contributions: “advances” under acceptable
structured finance arrangements

(1) This section applies if—

(a) an employer pays a contribution under a registered pension
scheme,

(b) 40condition A in section 196B, 196D or 196F is met,

(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) 45the 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) In this section “the advance” and “the asset-backed arrangement”
have the same meaning as in section 196B, 196D or 196F (as the case
may be).

196L Employer asset-backed contributions: supplementary

(1) 5This section applies for the purposes of sections 196B to 196K.

(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—

(a) the contribution being deducted in computing the amount of
10the 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
CTA 2009 (expenses of management: companies with
15investment 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.

(3) Whether a person is connected with another person is determined in
20accordance with section 1122 of CTA 2010.

(4) Sections 774, 775 and 776(2) and (4) of CTA 2010 apply as they apply
for the purposes of Chapter 2 of Part 16 of that Act.

(5) A reference to a disposal of an asset includes—

(a) anything constituting a disposal of an asset for the purposes
25of TCGA 1992, and

(b) so far as not covered by paragraph (a), the taking of any step
by virtue of which a person receives an asset.

(6) Section 776(2) of CTA 2010 applies for the purposes of subsection
(5)(b).

(7) 30“Non-working day” means—

(a) a Saturday or Sunday,

(b) a Christmas Eve, Christmas Day or Good Friday, or

(c) a day which is a bank holiday under the Banking and
Financial Dealings Act 1971 in any part of the United
35Kingdom,

and “working day” is to be read accordingly.”

16 In section 280(1) of FA 2004 (abbreviations)—

(a) omit the “and” after the definition of “ITA 2007”, and

(b) after the definition of “CTA 2009” insert “, and

• 40“CTA 2010” means the Corporation Tax Act 2010”.

17 (1) Subject to what follows, the amendments made by paragraphs 15 and 16
above have effect in relation to contributions paid by employers on or after
22 February 2012.

(2) In cases where the relevant time falls before 21 March 2012, section 196I of
45FA 2004 has effect as if subsection (6) were omitted.

(3) An event falls within section 196J of FA 2004 only if it occurs after the
beginning of 21 March 2012.

Part 4 Transitional provision relating to Part 3

5Application and interpretation

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

(a) before 22 February 2012, an employer (“E”) pays a contribution (“E’s
contribution”) under a registered pension scheme (“the relevant
scheme”),

(b) 10Part 2 of this Schedule does not apply in relation to E’s contribution,

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

(d) if the reference in paragraph 17 above to 22 February 2012 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
15virtue of section 196B, 196D or 196F of FA 2004, and

(e) the asset-backed arrangement is not completed before 22 February
2012.

(2) For the purposes of sub-paragraph (1)(d) assume that Parts 1 and 2 of this
Schedule were never enacted.

(3) 20For the purposes of sub-paragraph (1)(d), in sections 196C(5), 196E(5) and
196G(5) the reference to one year is to be read as a reference to 18 months.

19 For the purposes of this Part of this Schedule—

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

(b) 25as necessary, assume that section 196B, 196D or 196F of FA 2004 (as
the case may be) has effect in relation to E’s contribution.

20 (1) This 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 18(1)(d) above is section 196B of FA 2004.

(3) 30The asset-backed arrangement is “completed” when neither the lender nor
any person connected with the lender is any longer entitled under the asset-
backed arrangement (conditionally or unconditionally) to payments in
respect of the security.

(4) Sub-paragraph (5) applies if the section which would have applied as
35mentioned in paragraph 18(1)(d) above is section 196D or 196F of FA 2004.

(5) The asset-backed arrangement is “completed” when 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
40the security.

21 (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 22 February 2012;

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

(c) the day which is the last day of the period of 25 years beginning with
the day on which E’s contribution is paid;

(d) 5the day on which a completion event occurs (see sub-paragraphs (2)
to (11));

(e) if an event falling within paragraph 22 occurs, the day on which falls
the time immediately before the occurrence of the event.

(2) Sub-paragraphs (3) and (4) apply if the section which would have applied as
10mentioned in paragraph 18(1)(d) above is section 196B of FA 2004.

(3) To determine if a completion event occurs for the purposes of sub-paragraph
(1)(d) 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
15February 2012 to which the lender or a person connected with the
lender is entitled in connection 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.

(4) A completion event occurs for the purposes of sub-paragraph (1)(d) if, after
20the beginning of 22 February 2012—

(a) whether 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 (3),

(ii) 25there is a significant change in the amount of a payment to be
made 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 (3) is not made,

(c) 30a payment determined under sub-paragraph (3) is made but its
amount is significantly different from the amount so determined for
the payment, or

(d) a payment determined under sub-paragraph (3) is made but is made
at a time significantly different from the time so determined for the
35payment.

(5) Sub-paragraphs (6) and (7) apply if the section which would have applied as
mentioned in paragraph 18(1)(d) above is section 196D or 196F of FA 2004.

(6) To determine if a completion event occurs for the purposes of sub-paragraph
(1)(d) first determine, as at the beginning of 22 February 2012, the
40following—

(a) what the amount of the share in the partnership’s profits of the
person involved in the relevant change is to be so far as the share is
to be determined under the asset-backed arrangement by reference
to payments made after the beginning of 22 February 2012,

(b) 45the number of drawings to be made from the partnership on account
of the amount determined under paragraph (a) and the number of
any other payments to be made after the beginning of 22 February
2012 to which the person involved in the relevant change, the lender

or any other person connected with the lender is entitled in
connection with the asset-backed arrangement,

(c) what the amounts of those drawings or other payments are to be, and

(d) the times at which those drawings or other payments are to be made.

(7) A completion event occurs for the purposes of sub-paragraph (1)(d) if, after
5the beginning of 22 February 2012—

(a) whether 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 drawings or other
payments to be made from that determined under sub-
10paragraph (6),

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

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

(b) 15a drawing or other payment determined under sub-paragraph (6) is
not made,

(c) a drawing or other payment determined under sub-paragraph (6) is
made but its amount is significantly different from the amount so
determined for the drawing or other payment, or

(d) 20a drawing or other payment determined under sub-paragraph (6) is
made but is made at a time significantly different from the time so
determined for the drawing or other payment.

(8) In sub-paragraphs (3) and (4) and (6) and (7) references to payments are to
payments of any type including drawings or distributions from a
25partnership, 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).

(9) In sub-paragraphs (6) and (7) references to the making of drawings from the
partnership include references to the receiving of distributions from the
30partnership.

(10) For the purposes of sub-paragraphs (3)(a) and (6)(b) a person is entitled to a
payment “in connection with” the asset-backed arrangement if the person is
entitled to the payment directly or indirectly in consequence of the
arrangement or otherwise in connection with the arrangement.

(11) 35For the purposes of sub-paragraphs (4)(b) to (d) and (7)(b) to (d) it does not
matter if the event in 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.

22 (1) The events falling within this paragraph are those listed in sub-paragraph
40(2).

(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
45863(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) 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
5trade, 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;

(ii) if E is a partnership, the partnership is dissolved;

(iii) 10if E is an individual, E dies.

(3) Sections 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

23 (1) This paragraph applies if—

(a) 15the section which would have applied as mentioned in paragraph
18(1)(d) 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) 20The relevant effect is that—

(a) an 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
25in calculating for tax purposes any income of the borrower or of a
person 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) 30in calculating income for tax purposes, or

(ii) from 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) 35an amount which would otherwise have been brought into account
in 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) 40in calculating income for tax purposes, or

(ii) from 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 22 February 2012 but on or before the completion day.

24 (1) This paragraph applies if—