Finance (No. 2) Bill

Session 2012 - 13
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Finance (No. 2) Bill

Finance (No. 2) Bill
Schedule 41 — General anti-abuse rule: procedural requirements
480

Schedule 41
Section 206

General anti-abuse rule: procedural requirements
The GAAR Advisory Panel
1     (1)
In this Part “the GAAR Advisory Panel” means the panel of persons
established by the Commissioners for the purposes of the general anti-abuse
5
rule.
      (2)
In this Schedule “the Chair” means any member of the GAAR Advisory
Panel appointed by the Commissioners to chair it.
Meaning of “designated HMRC officer”
2
In this Schedule a “designated HMRC officer” means an officer of Revenue
10
and Customs who has been designated by the Commissioners for the
purposes of the general anti-abuse rule.
Notice to taxpayer of proposed counteraction of tax advantage
3     (1)
If a designated HMRC officer considers—
(a)
that a tax advantage has arisen to a person (“the taxpayer”) from tax
15
arrangements that are abusive, and
(b)
that the advantage ought to be counteracted under section 206,

the officer must give the taxpayer a written notice to that effect.
      (2)
The notice must—
(a)
specify the arrangements and the tax advantage,
20
(b)
explain why the officer considers that a tax advantage has arisen to
the taxpayer from tax arrangements that are abusive,
(c)
set out the counteraction that the officer considers ought to be taken,
(d)
inform the taxpayer of the period under paragraph 4 for making
representations, and
25
(e)
explain the effect of paragraphs 5 and 6.
      (3)
The notice may set out steps that the taxpayer may take to avoid the
proposed counteraction.
4     (1)
If a notice is given to the taxpayer under paragraph 3, the taxpayer has 45
days beginning with the day on which the notice is given to send written
30
representations in response to the notice to the designated HMRC officer.
      (2)
The designated officer may, on a written request made by the taxpayer,
extend the period during which representations may be made.
Referral to GAAR Advisory Panel
5
If no representations are made in accordance with paragraph 4, a designated
35
HMRC officer must refer the matter to the GAAR Advisory Panel.
6     (1)
If representations are made in accordance with paragraph 4, a designated
HMRC officer must consider them.

Finance (No. 2) Bill
Schedule 41 — General anti-abuse rule: procedural requirements
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      (2)
If, after considering them, the designated HMRC officer considers that the
tax advantage ought to be counteracted under section 206, the officer must
refer the matter to the GAAR Advisory Panel.
7
If the matter is referred to the GAAR Advisory Panel, the designated HMRC
officer must at the same time provide it with—
5
(a)
a copy of the notice given to the taxpayer under paragraph 3,
(b)
a copy of any representations made in accordance with paragraph 4
and any comments that the officer has on those representations, and
(c)
a copy of the notice given to the taxpayer under paragraph 8.
8
If the matter is referred to the GAAR Advisory Panel, the designated HMRC
10
officer must at the same time give the taxpayer a notice which—
(a)
specifies that the matter is being referred,
(b)
is accompanied by a copy of any comments provided to the GAAR
Advisory Panel under paragraph 7(b), and
(c)
informs the taxpayer of the period under paragraph 9 for making
15
representations, and of the requirement under that paragraph to
send any representations to the officer.
9     (1)
The taxpayer has 21 days beginning with the day on which a notice is given
under paragraph 8 to send the GAAR Advisory Panel written
representations about—
20
(a)
the notice given to the taxpayer under paragraph 3, or
(b)
any comments provided under paragraph 7(b).
      (2)
The GAAR Advisory Panel may, on a written request made by the taxpayer,
extend the period during which representations may be made.
      (3)
The taxpayer must send a copy of any representations to the designated
25
HMRC officer at the same time as the representations are sent to the GAAR
Advisory Panel.
      (4)
If no representations were made in accordance with paragraph 4, the
designated HMRC officer—
(a)
may provide the GAAR Advisory Panel with comments on any
30
representations made under this paragraph, and
(b)
if comments are provided, must at the same time send a copy of them
to the taxpayer.
Decision of GAAR Advisory Panel and opinion notices
10    (1)
If the matter is referred to the GAAR Advisory Panel, the Chair must arrange
35
for a sub-panel consisting of 3 members of the GAAR Advisory Panel (one
of whom may be the Chair) to consider it.
      (2)
The sub-panel may invite the taxpayer or the designated HMRC officer (or
both) to supply the sub-panel with further information within a period
specified in the invitation.
40
      (3)
Invitations must explain the effect of sub-paragraph (4) or (5) (as
appropriate).
      (4)
If the taxpayer supplies information to the sub-panel under this paragraph,
the taxpayer must at the same time send a copy of the information to the
designated HMRC officer.
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Finance (No. 2) Bill
Schedule 41 — General anti-abuse rule: procedural requirements
482

      (5)
If the designated HMRC officer supplies information to the sub-panel under
this paragraph, the officer must at the same time send a copy of the
information to the taxpayer.
11    (1)
Where the matter is referred to the GAAR Advisory Panel, the sub-panel
must produce—
5
(a)
one opinion notice stating the joint opinion of all the members of the
sub-panel, or
(b)
two or three opinion notices which taken together state the opinions
of all the members.
      (2)
The sub-panel must give a copy of the opinion notice or notices to—
10
(a)
the designated HMRC officer, and
(b)
the taxpayer.
      (3)
An opinion notice is a notice which states that in the opinion of the members
of the sub-panel, or one or more of those members—
(a)
the entering into and carrying out of the tax arrangements is a
15
reasonable course of action in relation to the relevant tax
provisions—
(i)
having regard to all the circumstances (including the matters
mentioned in subsections (2)(a) to (c) and (3) of section 204),
and
20
(ii)
taking account of subsections (4) to (6) of that section, or
(b)
the entering into or carrying out of the tax arrangements is not a
reasonable course of action in relation to the relevant tax provisions
having regard to those circumstances and taking account of those
subsections, or
25
(c)
it is not possible, on the information available, to reach a view on that
matter,

and the reasons for that opinion.
      (4)
For the purposes of the giving of an opinion under this paragraph, the
arrangements are to be assumed to be tax arrangements.
30
      (5)
In this Part, a reference to any opinion of the GAAR Advisory Panel about
any tax arrangements is a reference to the contents of any opinion notice
about the arrangements.
Notice of final decision after considering opinion of GAAR Advisory Panel
12    (1)
A designated HMRC officer who has received a notice or notices under
35
paragraph 11 must, having considered any opinion of the GAAR Advisory
Panel about the tax arrangements, give the taxpayer a written notice setting
out whether the tax advantage arising from the arrangements is to be
counteracted under the general anti-abuse rule.
      (2)
If the notice states that a tax advantage is to be counteracted, it must also set
40
out—
(a)
the adjustments required to give effect to the counteraction, and
(b)
if relevant, any steps that the taxpayer is required to take to give
effect to it.

Finance (No. 2) Bill
Schedule 42 — Trusts with vulnerable beneficiary
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Notices may be given on assumption that tax advantage does arise
13    (1)
A designated HMRC officer may give a notice, or do anything else, under
this Schedule where the officer considers that a tax advantage might have
arisen to the taxpayer.
      (2)
Accordingly, any notice given by a designated HMRC officer under this
5
Schedule may be expressed to be given on the assumption that the tax
advantage does arise (without agreeing that it does).
Schedule 42
Section 213

Trusts with vulnerable beneficiary
Inheritance Tax Act 1984
10
1
IHTA 1984 is amended as follows.
2     (1)
Section 71A (trusts for bereaved minors) is amended as follows.
      (2)
For subsection (3)(c)(ii) substitute—
“(ii)
if any of the income arising from any of the settled
property is applied for the benefit of a beneficiary, it
15
is applied for the benefit of the bereaved minor.”
      (3)
In subsection (4), before paragraph (a) insert—
“(za)
the trustees’ having powers that enable them to apply
otherwise than for the benefit of the bereaved minor amounts
(whether consisting of income or capital, or both) not
20
exceeding the annual limit,”.
      (4)
After subsection (4) insert—
“(4A)
For the purposes of this section and section 71B, the “annual limit” is
whichever is the lower of the following amounts—
(a)
£3,000, and
25
(b)
3% of the amount that is the maximum value of the settled
property during the period in question.
(4B)
For those purposes the annual limit applies in relation to each period
of 12 months that begins on 6 April.
(4C)
The Treasury may by order made by statutory instrument—
30
(a)
specify circumstances in which subsection (4)(za) is, or is not,
to apply in relation to a trust, and
(b)
amend the definition of “the annual limit” in subsection (4A).
(4D)
An order under subsection (4C) may—
(a)
make different provision for different cases, and
35
(b)
contain transitional and saving provision.
(4E)
A statutory instrument containing an order under subsection (4C)
may not be made unless a draft of the instrument has been laid
before, and approved by a resolution of, the House of Commons.”

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Schedule 42 — Trusts with vulnerable beneficiary
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3     (1)
Section 71B (charge to tax on property to which section 71A applies) is
amended as follows.
      (2)
In subsection (1), after “(2)” insert “, (2B)”.
      (3)
After subsection (2) insert—
“(2A)
Subsection (2B) applies in a case in which—
5
(a)
an amount is paid or applied otherwise than for the benefit of
the bereaved minor, and
(b)
the exemptions provided by subsection (2) of this section and
subsections (3) and (4) of section 70 do not apply.
(2B)
In such a case, tax is not charged under this section in respect of
10
whichever is the lower of the following amounts—
(a)
the amount paid or applied, and
(b)
the annual limit.”
4     (1)
Section 71D (age 18-to-25 trusts) is amended as follows.
      (2)
For subsection (6)(c)(ii) substitute—
15
“(ii)
if any of the income arising from any of the settled
property is applied for the benefit of a beneficiary, it
is applied for the benefit of B.”
      (3)
After that subsection insert—
“(6A)
Where the income arising from the settled property is held on trusts
20
of the kind described in section 33 of the Trustee Act 1925 (protective
trusts), paragraphs (b) and (c) of subsection (6) have effect as if for
“living and under the age of 25,” there were substituted “under the
age of 25 and the income arising from the settled property is held on
trust for B,”.
25
      (4)
In subsection (7), before paragraph (a) insert—
“(za)
the trustees’ having powers that enable them to apply
otherwise than for the benefit of B amounts (whether
consisting of income or capital, or both) not exceeding the
annual limit,”.
30
      (5)
After that subsection insert—
“(7A)
For the purposes of this section and section 71E, the “annual limit” is
whichever is the lower of the following amounts—
(a)
£3,000, and
(b)
3% of the amount that is the maximum value of the settled
35
property during the period in question.
(7B)
For those purposes the annual limit applies in relation to each period
of 12 months that begins on 6 April.
(7C)
The Treasury may by order made by statutory instrument—
(a)
specify circumstances in which subsection (7)(za) is, or is not,
40
to apply in relation to a trust, and
(b)
amend the definition of “the annual limit” in subsection (7A).
(7D)
An order under subsection (7C) may—
(a)
make different provision for different cases, and

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(b)
contain transitional and saving provision.
(7E)
A statutory instrument containing an order under subsection (7C)
may not be made unless a draft of the instrument has been laid
before, and approved by a resolution of, the House of Commons.”
5     (1)
Section 71E (charge to tax on property to which section 71D applies) is
5
amended as follows.
      (2)
In subsection (1), for “(4)” substitute “(4A)”.
      (3)
After subsection (4) insert—
“(4A)
If an amount is paid or applied otherwise than for the benefit of B
and the exemptions provided by subsections (2) to (4) do not apply,
10
tax is not charged under this section in respect of whichever is the
lower of the following amounts—
(a)
the amount paid or applied, and
(b)
the annual limit.”
6     (1)
Section 89 (trusts for disabled persons) is amended as follows.
15
      (2)
For subsection (1)(b) substitute—
“(b)
which secure that, if any of the settled property or income
arising from it is applied during the disabled person’s life for
the benefit of a beneficiary, it is applied for the benefit of the
disabled person.”
20
      (3)
For subsection (3) substitute—
“(3)
The trusts on which the settled property is held are not to be treated
as falling outside subsection (1) by reason only of—
(a)
the trustees’ having powers that enable them to apply
otherwise than for the benefit of the disabled person amounts
25
(whether consisting of income or capital, or both) not
exceeding the annual limit,
(b)
the trustees’ having the powers conferred by section 32 of the
Trustee Act 1925 (powers of advancement),
(c)
the trustees’ having those powers but free from, or subject to
30
a less restrictive limitation than, the limitation imposed by
proviso (a) of subsection (1) of that section,
(d)
the trustees’ having the powers conferred by section 33 of the
Trustee Act (Northern Ireland) 1958 (corresponding
provision for Northern Ireland),
35
(e)
the trustees’ having those powers but free from, or subject to
a less restrictive limitation than, the limitation imposed by
subsection (1)(a) of that section, or
(f)
the trustees’ having powers to the like effect as the powers
mentioned in any of paragraphs (b) to (e).
40
(3A)
For the purposes of this section, the “annual limit” is whichever is the
lower of the following amounts—
(a)
£3,000, and
(b)
3% of the amount that is the maximum value of the settled
property during the period in question.
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Schedule 42 — Trusts with vulnerable beneficiary
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(3B)
For those purposes the annual limit applies in relation to each period
of 12 months that begins on 6 April.
(3C)
The Treasury may by order made by statutory instrument—
(a)
specify circumstances in which subsection (3)(a) is, or is not,
to apply in relation to a trust, and
5
(b)
amend the definition of “the annual limit” in subsection (3A).
(3D)
An order under subsection (3C) may—
(a)
make different provision for different cases, and
(b)
contain transitional and saving provision.
(3E)
A statutory instrument containing an order under subsection (3C)
10
may not be made unless a draft of the instrument has been laid
before, and approved by a resolution of, the House of Commons.”
      (4)
In subsection (4), for the words following “into settlement,” substitute “was
a disabled person”.
      (5)
For subsections (5) and (6) substitute—
15
“(4A)
In this section “disabled person” has the meaning given by Schedule
1A to the Finance Act 2005.”
7     (1)
Section 89A (self-settlement by person with condition expected to lead to
disability) is amended as follows.
      (2)
In subsection (1)(b), for the words following “A becoming” substitute “a
20
person falling within any paragraph of the definition of “disabled person” in
paragraph 1 of Schedule 1A to the Finance Act 2005”.
      (3)
In subsection (2), after “settled property” insert “or income arising from it”.
      (4)
For subsections (5) and (6) substitute—
“(5)
For the purposes of subsection (1)(b), assume—
25
(a)
that A will meet any conditions as to residence or presence
that are required to establish entitlement to the allowance or
payment in question,
(b)
that there will be no provision made by regulations under
any of the following—
30
(i)
sections 67(1) and (2), 72(8) and 113(2) of SSCBA 1992,
(ii)
sections 67(1) and (2), 72(8) and 113(2) of SSCB(NI)A
1992, and
(iii)
sections 85 and 86 of WRA 2012 and the
corresponding provision having effect in Northern
35
Ireland, and
(c)
that A will not be prevented from receiving the allowance or
payment in question by any of the following—
(i)
section 113(1) of SSCBA 1992,
(ii)
section 113(1) of SSCB(NI)A 1992, and
40
(iii)
section 87 of WRA 2012 and the corresponding
provision having effect in Northern Ireland.”