Finance (No. 2) Bill

Session 2012 - 13
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Finance (No. 2) Bill

Finance (No. 2) Bill
Part 3 — Annual tax on enveloped dwellings
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128
Conversion of dwelling for non-residential use
(1)
This section applies where a building or part of a building—
(a)
has been suitable for use as a dwelling, and
(b)
is altered for the purpose of making it suitable for use otherwise than
as a dwelling.
5
(2)
The question whether or not the alterations make the building or part
unsuitable for use as a dwelling is one of fact (but see subsection (3)).
(3)
The building or part will not be regarded as having become unsuitable for use
as a dwelling as a result of the alterations at any time unless by that time any
planning permission or development consent required for the alterations has
10
been granted (and the alterations have been made in accordance with any such
permission or consent).
(4)
In this section “planning permission” has the meaning given by the relevant
planning enactment.
(5)
“The relevant planning enactment” means—
15
(a)
in relation to land in England and Wales, section 336(1) of the Town and
Country Planning Act 1990;
(b)
in relation to land in Scotland, section 277(1) of the Town and Country
Planning (Scotland) Act 1997;
(c)
in relation to land in Northern Ireland, Article 2(2) of the Planning
20
(Northern Ireland) Order 1991 (S.I. 1991/1220 (N.I. 11)).
(6)
In this section “development consent” means development consent under the
Planning Act 2008.
129
Damage to a dwelling
(1)
This section applies where a dwelling is damaged so as to be temporarily
25
unsuitable for use as a dwelling.
(2)
The unsuitability for use as a dwelling is taken into account in applying the
definition of “dwelling” for the purposes of this Part (see section 110) only if the
first and second conditions are met.
(3)
The first condition is that the damage is—
30
(a)
accidental, or
(b)
otherwise caused by events beyond the control of the person entitled to
the single-dwelling interest.
(4)
The second condition is that, as a result of the damage, the building concerned
is unsuitable for use as a dwelling for at least 90 consecutive days.
35
(5)
Where the first and second conditions are met—
(a)
the entire period of unsuitability for use as a dwelling (including the
first 90 days) is taken into account in applying the definition of
“dwelling”, and
(b)
work done in that period to restore the building to suitability for use as
40
a dwelling does not count, for the purposes of section 110 or 111, as
construction or adaptation of the building for use as a dwelling.
(6)
The first condition is regarded as not being met if the damage occurs in the
course of work that—

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(a)
is done for the purpose of altering the dwelling (or a building of which
it forms part), and
(b)
itself involves, or could be expected to involve, making the building
unsuitable for use as a dwelling for 30 days or more.
(7)
In this section—
5
(a)
references to alteration include partial demolition;
(b)
references to a building include a part of a building.
(8)
In this section references to damage include damage done before 1 April 2013;
and days before 1 April 2013 may be taken into account for the purposes of
subsection (4).
10
Reliefs
130
Effect of reliefs under sections 131 to 150
(1)
Subsection (2) applies where tax is charged, in respect of a single-dwelling
interest, for a chargeable period that includes one or more days that are
relievable as a result of any of the provisions listed in subsection (3) (or for
15
more than one such period).
(2)
For any such period, the adjusted chargeable amount is to be calculated on the
basis that the chargeable person is not within the charge with respect to the
interest on any relievable day.
(3)
The provisions are—
20
section 131 (property rental businesses);
section 132 (rental property: preparation for sale etc);
section 135 (dwellings opened to the public);
section 136 (property developers);
section 137 (property developers: exchange of dwellings);
25
section 139 (property traders);
section 141 (financial institutions);
section 143 (occupation by certain employees or partners);
section 146 (farmhouses);
section 148 (charitable companies);
30
section 150 (providers of social housing).
(4)
See also section 103 (adjustment of amount chargeable and claim for relief).
131
Property rental businesses
(1)
A day in a chargeable period is relievable in relation to a single-dwelling
interest if on that day the interest—
35
(a)
is being exploited as a source of rents or other receipts (other than
excluded rents) in the course of a qualifying property rental business
carried on by a person entitled to the interest, or
(b)
steps are being taken to secure that the interest will, without undue
delay, be so exploited in the course of a qualifying property rental
40
business that is being carried on, or is to be carried on, by a person
entitled to the interest.

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(2)
A day is not relievable by virtue of subsection (1) or section 132 in the case of a
single-dwelling interest if on that day a non-qualifying individual is permitted
to occupy the dwelling.
(3)
In this Part “qualifying property rental business” means a property rental
business that is run on a commercial basis and with a view to profit.
5
(4)
A business is a “property rental business” for the purposes of subsection (4) if
it is a property business as defined in Chapter 2 of Part 4 of CTA 2009, but—
(a)
the question whether or not a business is a property rental business for
the purposes of subsection (4) is determined without reference to
whether or not any profits of the business are chargeable to corporation
10
tax (and section 204(2) of CTA 2009 is therefore disregarded), and
(b)
for the purposes of this subsection the “rents or other receipts” referred
to in section 207(1) of CTA 2009 are taken not to include excluded rents
(5)
In subsection (1)(b) “without undue delay” means without delay except so far
as delay is justified by commercial considerations or cannot be avoided.
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(6)
In this Part “excluded rents” means rents within any of classes 2 to 6 in the table
in section 605(2) of CTA 2010.
132
Rental property: preparation for sale, demolition etc
(1)
A day (“day X”) on which a person (“P”) is entitled to a single-dwelling interest
is relievable in relation to that interest if—
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(a)
on day X the dwelling is unoccupied and any of the first to fourth
conditions is met (see below),
(b)
day X is preceded by one or more days (“qualifying days”) that are
relievable under section 131 in relation to the interest and on which P,
or a relevant partner, was entitled to the interest, and
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(c)
the days (if any) between day X and the last of the qualifying days to
precede day X are all relievable under this section.
First condition

The first condition is that steps are being taken to secure that the interest will
be sold without undue delay.
30
Second condition

The second condition is that—
(a)
steps are being taken to secure that the dwelling will be demolished
without undue delay, and
(b)
if it is intended that a new dwelling will be constructed on the site of
35
the existing dwelling, the intention is that it will be used in a relievable
way.
Third condition

The third condition is that—
(a)
steps are being taken to secure that the dwelling will be converted into
40
a different dwelling without undue delay, and
(b)
it is intended that the new dwelling will be used in a relievable way.

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Fourth condition

The fourth condition is that steps are being taken to secure that the dwelling
will be converted into a building other than a dwelling without undue delay.
(2)
A dwelling is “used in a relievable way” for the purposes of subsection (1) if
the single-dwelling interest in question is exploited in such a way, or held in
5
such a way and for such purposes, (or, as the case requires, the dwelling itself
is exploited or used in such a way) that a day of such exploitation, ownership
or use would be relievable under any of sections 131, 135, 143 and 146.
(3)
In this section—
“relevant partner”, where P is (on day X) entitled to the interest as a
10
member of a partnership, means a person who was at the time in
question carrying on the qualifying rental property business concerned
as a member of that partnership;
“without undue delay” means without delay, except so far as delay is
justified by commercial considerations, or cannot be avoided.
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133
Non-qualifying occupation: look-forward and look-back
(1)
Subsection (2) applies if on a day in a chargeable period (“the day of non-
qualifying occupation”)—
(a)
a single-dwelling interest to which a person (“the landlord”) is entitled
is being exploited as mentioned in section 131(1)(a), or steps are being
20
taken to secure that the interest will be so exploited, as mentioned in
section 131(1)(b), and
(b)
a non-qualifying individual is permitted to occupy the dwelling.
(2)
No subsequent day in that chargeable period, or in any of the subsequent 3
chargeable periods, that meets the continuity of ownership condition and
25
would (in the absence of this subsection) be relievable by virtue of section
131(1)(b) is treated as relievable by virtue of that provision unless a day of
qualifying use falls between that day and the day of non-qualifying
occupation.
(3)
A day meets the continuity of ownership condition if on that day—
30
(a)
the landlord is entitled to the single-dwelling interest, or
(b)
if the landlord carried on or (as the case requires) intended to carry on
the property rental business in partnership, another member of the
partnership is entitled to the interest.
(4)
Subsection (5) applies if a person who is a non-qualifying individual in relation
35
to a single-dwelling interest occupies the dwelling on a day in a chargeable
period (“the day of non-qualifying occupation”).
(5)
An earlier day in that or the preceding chargeable period (“the earlier day”) is
not relievable by virtue of section 131(1)(b) or 132 if a relevant person is entitled
to the single-dwelling interest on that day.
40
(6)
In subsection (5) “relevant person” means—
(a)
a person who is entitled to the single-dwelling interest on the day of
non-qualifying occupation, or
(b)
if a person falling within paragraph (a) is or has been a member of a
partnership whose members have at any time exploited the single-
45
dwelling interest as a source of rents and receipts in a property rental
business, any other member of that partnership.

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(7)
Subsection (5) does not apply in relation to the earlier day if a day that is
relievable by virtue of section 131(1)(a) falls between that earlier day and the
day of non-qualifying occupation.
(8)
For the purposes of this section—
(a)
“day of qualifying use”, in relation to a single-dwelling interest, means
5
a day that is relievable in the case of the interest by virtue of section
131(1)(a);
(b)
occupation of any part of a dwelling is regarded as occupation of the
dwelling.
134
Meaning of “non-qualifying individual” and “qualifying individual”
10
(1)
In sections 131 and 133 “non-qualifying individual”, in relation to a single-
dwelling interest, means any of the following—
(a)
an individual who is entitled to the interest (otherwise than as a
member of a partnership),
(b)
an individual (“a connected person”) who is connected with a person
15
entitled to the interest,
(c)
if a person is entitled to the interest as a member of a partnership, an
individual who is, or is connected with, a qualifying member of that
partnership,
(d)
an individual (“a relevant settlor”) who is the settlor in relation to a
20
settlement of which a trustee is (in the capacity of trustee) connected
with a person who is entitled to the interest,
(e)
the spouse or civil partner of a connected person or of a relevant settlor,
(f)
a relative of a connected person or of a relevant settlor, or the spouse or
civil partner of a relative of a connected person or of a relevant settlor,
25
(g)
a relative of the spouse or civil partner of a connected person or of a
relevant settlor,
(h)
the spouse or civil partner of a person falling within paragraph (g), or
(i)
an individual who is a major participant in a relevant collective
investment scheme or is connected with a major participant in a
30
relevant collective investment scheme.
(2)
In section 133 “qualifying individual”, in relation to a single-dwelling interest,
means an individual other than a non-qualifying individual.
(3)
In subsection (1)(c) “qualifying member”, in relation to a partnership, means an
member of the partnership who is entitled to a 50% or greater share—
35
(a)
in the income profits of the partnership, or
(b)
in the partnership’s assets.
(4)
In subsection (1)(i) “relevant collective investment scheme”, in relation to a
single-dwelling interest, means a collective investment scheme that meets the
ownership condition with respect to the interest.
40
(5)
A person who participates in a collective investment scheme is a “major
participant” in the scheme if the person—
(a)
is entitled to a share of at least 50% either of all the profits or income
arising from the scheme or of any profits or income arising from the
scheme that may be distributed to participants, or
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(b)
would in the event of the winding up of the scheme be entitled to 50%
or more of the assets of the scheme that would then be available for
distribution among the participants.
(6)
The reference in subsection (5)(a) to profits or income arising from the scheme
is to profits or income arising from the acquisition, holding, management or
5
disposal of the property subject to the scheme.
(7)
For the purpose of subsection (1), section 1122 of CTA 2010 (as applied by
section 170) has effect as if subsections (7) and (8) of that section (application of
rules about connected persons to partnerships) were omitted.
(8)
In this section—
10
“relative” means brother, sister, ancestor or lineal descendant;
“settlement” and “settlor” have the same meaning as in Chapter 5 of Part
5 of ITTOIA 2005 (see section 620 of that Act).
(9)
In subsection (1)(d) “trustee” is to be read in accordance with section 1123(3) of
CTA 2010 (“connected persons”: supplementary).
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135
Dwellings opened to the public
(1)
A day in a chargeable period is relievable in relation to a single-dwelling
interest if the first or second condition is met on that day.
(2)
The first condition is that the dwelling is being exploited as a source of income
in the course of a qualifying trade in the normal course of which the public are
20
offered the opportunity to make use of, stay in or otherwise enjoy the dwelling
as customers of the trade on least 28 days in any year.
(3)
The second condition is that steps are being taken to secure—
(a)
that the dwelling will (in that or a future chargeable period) be
exploited as a source of income in the course of a qualifying trade such
25
as is mentioned in subsection (2), and
(b)
that it will be so exploited without delay, except so far as delay is
justified by commercial considerations or cannot otherwise be avoided.
(4)
In this section “qualifying trade” means a trade carried on on a commercial
basis and with a view to profit.
30
(5)
For the purposes of this section persons are not taken to have an opportunity
to make use of, stay in or otherwise enjoy a dwelling unless the areas that they
are permitted to make use of, stay in or otherwise enjoy include a significant
part of the interior of the dwelling.
(6)
The size (relative to the size of the whole dwelling), nature, and function of the
35
area or areas concerned are to be taken into account in determining whether
they form a significant part of the interior of the dwelling.
136
Property developers
(1)
A day in a chargeable period is relievable in relation to a single-dwelling
interest if on that day—
40
(a)
a person carrying on a property development trade (“the property
developer”) is entitled to the interest, and
(b)
the interest is held exclusively for the purpose of developing and
reselling the land in the course of the trade.

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(2)
If the property developer holds an interest for the purpose mentioned in
subsection (1)(b), any additional purpose the property developer may have of
exploiting the interest as a source of rents or other receipts in the course of a
qualifying property rental business (after developing the land and before
reselling it) is treated as not being a separate purpose in applying the test in
5
subsection (1)(b).
(3)
A day is not relievable by virtue of subsection (1) if on the day a non-qualifying
individual is permitted to occupy the dwelling.
(4)
In this Part “property development trade” means a trade that—
(a)
consists of or includes buying and developing for resale residential or
10
non-residential property, and
(b)
is run on a commercial basis and with a view to profit.
(5)
In this section references to development include redevelopment.
137
Property developers: exchange of dwellings
(1)
A day in a chargeable period is relievable in relation to a single-dwelling
15
interest if—
(a)
a person (“the property developer”) is on that day entitled to a single-
dwelling interest (“the returned interest”) that was acquired (by the
relevant person) in the course of a property development trade, and
(b)
that acquisition (“the reverse acquisition”) was part of a qualifying
20
exchange.
(2)
A day is not relievable by virtue of this section if on that day a non-qualifying
individual is permitted to occupy the dwelling.
(3)
In this section “the relevant person” means—
(a)
if the property developer is entitled to the returned interest as a
25
member of a partnership, the persons who acquired the interest as
members of the partnership, or
(b)
otherwise, the property developer (and any person who acquired the
returned interest jointly with the property developer).
(4)
The reverse acquisition is “part of a qualifying exchange” only if—
30
(a)
it was made by way of transfer,
(b)
the person from whom the acquisition was made itself acquired (by
way of grant or transfer) a chargeable interest in or over a new dwelling
from the relevant person, and
(c)
each of those acquisitions was entered into in consideration of the
35
other.
(5)
A building or part of a building is a “new dwelling” if—
(a)
it has been constructed for use as a single dwelling and has not
previously been occupied, or
(b)
it has been adapted for use as a single dwelling and has not been
40
occupied since its adaptation.
138
Property developers: supplementary
(1)
Subsection (2) applies if on a day in a chargeable period—