Finance (No. 2) Bill

Session 2012 - 13
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Finance (No. 2) Bill

Finance (No. 2) Bill
Part 5 — General anti-abuse rule
121

205
Meaning of “tax advantage”
A “tax advantage” includes—
(a)
relief or increased relief from tax,
(b)
repayment or increased repayment of tax,
(c)
avoidance or reduction of a charge to tax or an assessment to tax,
5
(d)
avoidance of a possible assessment to tax,
(e)
deferral of a payment of tax or advancement of a repayment of tax, and
(f)
avoidance of an obligation to deduct or account for tax.
206
Counteracting the tax advantages
(1)
If there are tax arrangements that are abusive, the tax advantages that would
10
(ignoring this Part) arise from the arrangements are to be counteracted by the
making of adjustments.
(2)
The adjustments required to be made to counteract the tax advantages are such
as are just and reasonable.
(3)
The adjustments may be made in respect of the tax in question or any other tax
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to which the general anti-abuse rule applies.
(4)
The adjustments that may be made include those that impose or increase a
liability to tax in any case where (ignoring this Part) there would be no liability
or a smaller liability, and tax is to be charged in accordance with any such
adjustment.
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(5)
Any adjustments required to be made under this section (whether by an officer
of Revenue and Customs or the person to whom the tax advantage would
arise) may be made by way of an assessment, the modification of an
assessment, amendment or disallowance of a claim, or otherwise.
(6)
But—
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(a)
no steps may be taken by an officer of Revenue and Customs by virtue
of this section unless the procedural requirements of Schedule 41 have
been complied with, and
(b)
the power to make adjustments by virtue of this section is subject to any
time limit imposed by or under any enactment other than this Part.
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(7)
Any adjustments made under this section have effect for all purposes.
207
Consequential relieving adjustments
(1)
This section applies where—
(a)
the counteraction of a tax advantage under section 206 is final, and
(b)
if the case is not one in which notice of the counteraction was given
35
under paragraph 12 of Schedule 41, HMRC have been notified of the
counteraction by the taxpayer.
(2)
A person has 12 months, beginning with the day on which the counteraction
becomes final, to make a claim for one or more consequential adjustments to be
made in respect of any tax to which the general anti-abuse rule applies.
40
(3)
On a claim under this section, an officer of Revenue and Customs must make
such of the consequential adjustments claimed (if any) as are just and
reasonable.

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(4)
Consequential adjustments—
(a)
may be made in respect of any period, and
(b)
may affect any person (whether or not a party to the tax arrangements).
(5)
But nothing in this section requires or permits an officer to make a
consequential adjustment the effect of which is to increase a person’s liability
5
to any tax.
(6)
For the purposes of this section—
(a)
if the claim relates to income tax or capital gains tax, Schedule 1A to
TMA 1970 applies to it;
(b)
if the claim relates to corporation tax, Schedule 1A to TMA 1970 (and
10
not Schedule 18 to FA 1998) applies to it;
(c)
if the claim relates to petroleum revenue tax, Schedule 1A to TMA 1970
applies to it, but as if the reference in paragraph 2A(4) of that Schedule
to a year of assessment included a reference to a chargeable period
within the meaning of OTA 1975 (see section 1(3) and (4) of that Act);
15
(d)
if the claim relates to inheritance tax it must be made in writing to
HMRC and section 221 of IHTA 1984 applies as if the claim were a
claim under that Act;
(e)
if the claim relates to stamp duty land tax or annual tax on enveloped
dwellings, Schedule 11A to FA 2003 applies to it as if it were a claim to
20
which paragraph 1 of that Schedule applies.
(7)
Where an officer of Revenue and Customs makes a consequential adjustment
under this section, the officer must give the person who made the claim written
notice describing the adjustment which has been made.
(8)
For the purposes of this section the counteraction of a tax advantage is final
25
when the adjustments made to effect the counteraction, and any amounts
arising as a result of those adjustments, can no longer be varied, on appeal or
otherwise.
(9)
Any adjustments required to be made under this section may be made—
(a)
by way of an assessment, the modification of an assessment, the
30
amendment of a claim, or otherwise, and
(b)
despite any time limit imposed by or under any enactment other than
this Part.
(10)
In this section “the taxpayer”, in relation to a counteraction of a tax advantage
under section 206, means the person to whom the tax advantage would have
35
arisen.
208
Proceedings before a court or tribunal
(1)
In proceedings before a court or tribunal in connection with the general anti-
abuse rule, HMRC must show—
(a)
that there are tax arrangements that are abusive, and
40
(b)
that the adjustments made to counteract the tax advantages arising
from the arrangements are just and reasonable.
(2)
In determining any issue in connection with the general anti-abuse rule, a court
or tribunal must take into account—

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Part 5 — General anti-abuse rule
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(a)
HMRC’s guidance about the general anti-abuse rule that was approved
by the GAAR Advisory Panel at the time the tax arrangements were
entered into, and
(b)
any opinion of the GAAR Advisory Panel about the arrangements (see
paragraph 11 of Schedule 41).
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(3)
In determining any issue in connection with the general anti-abuse rule, a court
or tribunal may take into account—
(a)
guidance, statements or other material (whether of HMRC, a Minister
of the Crown or anyone else) that was in the public domain at the time
the arrangements were entered into, and
10
(b)
evidence of established practice at that time.
209
Relationship between the GAAR and priority rules
(1)
Any priority rule has effect subject to the general anti-abuse rule (despite the
terms of the priority rule).
(2)
A “priority rule” means a rule (however expressed) to the effect that particular
15
provisions have effect to the exclusion of, or otherwise in priority to, anything
else.
(3)
Examples of priority rules are—
(a)
the rule in section 464, 699 or 906 of CTA 2009 (priority of loan
relationships rules, derivative contracts rules and intangible fixed
20
assets rules for corporation tax purposes), and
(b)
the rule in section 6(1) of TIOPA 2010 (effect to be given to double
taxation arrangements despite anything in any enactment).
210
Consequential amendment
(1)
Section 42 of TMA 1970 (procedure for making claims etc) is amended as
25
follows.
(2)
In subsection (2), for “(3ZB)” substitute “(3ZC)”.
(3)
After subsection (3ZB) insert—
“(3ZC)
Subsection (2) also does not apply in relation to any claim under section
207 of the Finance Act 2013 (claims for consequential relieving
30
adjustments after counteraction of tax advantage under the general
anti-abuse rule).”
211
Interpretation of Part 5
In this Part—
“abusive”, in relation to tax arrangements, has the meaning given by
35
section 204(2) to (6);
“arrangements” includes any agreement, understanding, scheme,
transaction or series of transactions (whether or not legally
enforceable);
“the Commissioners” means the Commissioners for Her Majesty’s
40
Revenue and Customs;
“the GAAR Advisory Panel” has the meaning given by paragraph 1 of
Schedule 41;

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Part 6 — Other provisions
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“the general anti-abuse rule” has the meaning given by section 203;
“HMRC” means Her Majesty’s Revenue and Customs;
“tax advantage” has the meaning given by section 205;
“tax arrangements” has the meaning given by section 204(1).
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Commencement and transitional provision
5
(1)
The general anti-abuse rule has effect in relation to any tax arrangements
entered into on or after the day on which this Act is passed.
(2)
Where the tax arrangements form part of any other arrangements entered into
before that day those other arrangements are to be ignored for the purposes of
section 204(3), subject to subsection (3).
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(3)
Account is to be taken of those other arrangements for the purposes of section
204(3) if, as a result, the tax arrangements would not be abusive.
Part 6
Other provisions
Trusts
15
213
Trusts with vulnerable beneficiary
Schedule 42 contains provision about trusts which have a vulnerable
beneficiary.
Unit trusts
214
Unauthorised unit trusts
20
(1)
The Treasury may by regulations make provision about the treatment of the
trustees or unit holders of unauthorised unit trusts for the purposes of income
tax, corporation tax, capital gains tax or stamp duty land tax.
(2)
Regulations under this section may—
(a)
confer or impose powers or duties on officers of Revenue and Customs
25
or other persons;
(b)
modify any enactment or instrument (whenever passed or made);
(c)
specify descriptions of unauthorised unit trust in relation to which the
regulations are to apply or are not to apply;
(d)
make different provision for different cases or different purposes;
30
(e)
make incidental, consequential, supplementary and transitional
provision and savings.

In paragraph (b) “modify” includes amend, repeal or revoke.
(3)
The statutory instrument containing the first regulations under this section
may not be made unless a draft has been laid before and approved by a
35
resolution of the House of Commons.
(4)
A subsequent statutory instrument containing regulations under this section is
subject to annulment in pursuance of a resolution of the House of Commons.

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Part 6 — Other provisions
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(5)
In this section—
(a)
“unauthorised unit trust” means a unit trust scheme which is neither an
authorised unit trust nor an umbrella scheme,
(b)
“unit trust scheme” has the meaning given by section 237 of the
Financial Services and Markets Act 2000, and
5
(c)
“authorised unit trust”, “umbrella scheme” and “unit holder” have the
same meaning as in Chapter 2 of Part 13 of CTA 2010 (authorised
investment funds).
Residence
215
Statutory residence test
10
(1)
Schedule 43 contains—
(a)
provision for determining whether individuals are resident in the
United Kingdom for the purposes of income tax, capital gains tax and
(where relevant) inheritance tax and corporation tax,
(b)
provision about split years, and
15
(c)
provision about periods when individuals are temporarily non-
resident.
(2)
The Treasury may by order make any incidental, supplemental, consequential,
transitional or saving provision in consequence of Schedule 43.
(3)
An order under subsection (2) may—
20
(a)
make different provision for different purposes, and
(b)
make provision amending, repealing or revoking any provision made
by or under an Act (whenever passed or made).
(4)
An order under subsection (2) is to be made by statutory instrument.
(5)
A statutory instrument containing an order under subsection (2) is subject to
25
annulment in pursuance of a resolution of the House of Commons.
216
Ordinary residence
(1)
Schedule 44 contains provision removing or replacing rules relating to
ordinary residence.
(2)
The Treasury may by order make further provision removing or replacing
30
rules relating to ordinary residence with respect to—
(a)
income tax,
(b)
capital gains tax, and
(c)
(so far as the ordinary residence status of individuals is relevant to
them) inheritance tax and corporation tax.
35
(3)
An order under subsection (2) may take effect from the start of the tax year in
which the order is made.
(4)
The Treasury may by order make any incidental, supplemental, consequential,
transitional or saving provision in consequence of Schedule 44 or in
consequence of any further provision made under subsection (2).
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(5)
An order under this section may—
(a)
make different provision for different purposes, and

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(b)
make provision amending, repealing or revoking any provision made
by or under an Act (whenever passed or made).
(6)
An order under this section is to be made by statutory instrument.
(7)
A statutory instrument containing an order under subsection (2) (whether
alone or with other provisions) may not be made unless a draft of the
5
instrument has been laid before, and approved by a resolution of, the House of
Commons.
(8)
Subject to subsection (7), a statutory instrument containing an order under this
section is subject to annulment in pursuance of a resolution of the House of
Commons.
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International matters
217
Controlled foreign companies etc
Schedule 45 makes provision in relation to CFCs etc.
218
Agreement between UK and Switzerland
(1)
In Schedule 36 to FA 2012 (agreement between UK and Switzerland), after
15
paragraph 26 insert—
“Transfers to HMRC under Agreement
26A   (1)
Income or chargeable gains of a person are to be treated as not
remitted to the United Kingdom if conditions A to D are met.
      (2)
Condition A is that (but for sub-paragraph (1)) the income or gains
20
would be regarded as remitted to the United Kingdom by virtue of
the bringing of money to the United Kingdom.
      (3)
Condition B is that the money is brought to the United Kingdom
pursuant to a transfer made to HMRC in accordance with the
Agreement.
25
      (4)
Condition C (which applies only if the money brought to the United
Kingdom is a sum levied under Article 19(2)(b)) is that the sum was
levied within the period of 45 days beginning with the day on which
the amount derived from the income or gain in question was
remitted as mentioned in Article 19(2)(b).
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      (5)
Condition D is that the transfer is made in relation to a tax year in
which section 809B, 809D or 809E of ITA 2007 (application of
remittance basis) applies to the person.
      (6)
Sub-paragraph (1) does not apply in relation to money brought to the
United Kingdom if or to the extent that—
35
(a)
paragraph 18(2), or section 138(4)(a) or 140(5)(a) of TIOPA
2010, is applied in relation to it (set-off against other tax
liabilities), or
(b)
it is repaid or refunded by HMRC.
26B   (1)
This paragraph applies if—
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(a)
but for paragraph 26A(1), income or chargeable gains would
have been regarded as remitted to the United Kingdom by
virtue of the bringing of money to the United Kingdom, and
(b)
section 809Q of ITA 2007 (transfers from mixed funds) would
have applied in determining the amount that would have
5
been so remitted.
      (2)
The bringing of the money to the United Kingdom counts as an
offshore transfer for the purposes of section 809R(4) of ITA 2007
(composition of mixed fund).”
(2)
The amendment made by this section is to be treated as having come into force
10
on 1 January 2013.
219
International agreements to improve tax compliance
(1)
The Treasury may make regulations for the purpose of giving effect to or
enabling effect to be given to—
(a)
the agreement reached between the Government of the United
15
Kingdom and the Government of the United States of America to
improve international tax compliance and to implement FATCA,
signed on 12 September 2012;
(b)
any agreement modifying or supplementing that agreement;
(c)
any other agreement between the Government of the United Kingdom
20
and the government of another territory which makes provision
corresponding, or substantially similar, to that made by an agreement
within paragraph (a) or (b).
(2)
Regulations under this section may in particular—
(a)
authorise HMRC to require persons specified for the purposes of this
25
paragraph (“relevant financial entities”) to provide HMRC with
information of specified descriptions;
(b)
require that information to be provided at such times and in such form
and manner as may be specified;
(c)
impose obligations on relevant financial entities;
30
(d)
make provision (including provision imposing penalties) about
contravention of, or non-compliance with, the regulations;
(e)
make provision about appeals in relation to the imposition of any
penalty.
(3)
Regulations under this section may—
35
(a)
provide that a reference in the regulations to an agreement to which
subsection (1) refers, or a provision of such an agreement, is to be
construed as a reference to the agreement, or provision, as amended
from time to time;
(b)
make different provision in relation to different periods of time;
40
(c)
make different provision for different cases or circumstances;
(d)
contain incidental, supplemental, transitional, transitory or saving
provision (including provision amending any enactment).
(4)
In this section—
“FATCA” means the provisions commonly known as the Foreign Account
45
Tax Compliance Act in the enactment of the United States of America
called the Hiring Incentives to Restore Employment Act;