Finance (No. 2) Bill (HC Bill 154)

(8) An officer of Revenue and Customs may allow a longer period for
the purposes of sub-paragraph (7)(b) only if—

(a) the individual in question has made a request in writing to
an officer of Revenue and Customs for a longer period to
5be allowed, and

(b) such an officer is satisfied—

(i) that there is a reasonable excuse for the required
statement not having been made within the period
mentioned in sub-paragraph (7)(b)(i) or (ii), and

(ii) 10that the request under paragraph (a) was made
without unreasonable delay after the reasonable
excuse ceased.

(9) Regulations under sub-paragraph (7)(c) may—

(a) make different provision for different cases or
15circumstances, and

(b) contain incidental, supplementary, consequential,
transitional, transitory or saving provision.”

4 (1) Paragraph 17 (substitutions) is amended as follows.

(2) In sub-paragraph (2) before paragraph (a) insert—

“(za) 20the new policy cannot be a qualifying policy if the old
policy was not a qualifying policy by virtue of—

(i) paragraph A1(2), B1(2), B2(2) or B3(3) above, or

(ii) sub-paragraph (i) above or this sub-paragraph;”.

(3) In sub-paragraph (2)(a) after the first “not” insert “and paragraph (za) above
25does not apply”.

(4) In sub-paragraph (4) for “(2)” substitute “(2)(a) to (c)”.

(5) After sub-paragraph (4) insert—

“(5) In determining under sub-paragraph (2)(a) to (c) above whether
the new policy would apart from this paragraph be a qualifying
30policy, paragraph A1 above is not to be applied in relation to the
issue of the new policy; but this does not stop that paragraph
being applied in relation to the issue of the new policy after this
paragraph has been applied.”

5 In paragraph 25 (application of paragraph 17 in cases involving new non-
35resident policies) after sub-paragraph (2) insert—

“(2A) In determining for the purposes of sub-paragraph (2)(a) above
whether a policy would, apart from paragraph 24, have been a
qualifying policy, paragraphs A1 and B1 to B3 above are to be
ignored.”.

6 (1) 40In section 55 of FA 1995 (qualifying life insurance policies: disapplication of
paragraph 21 of Schedule 15 to ICTA from appointed date) in subsection (3)
after “subject” insert “to paragraphs A1(2), B2(2) and B3(3) of that Schedule
and”.

(2) The amendment made by this paragraph is treated as having come into force
on the appointed date (see section 55(9) of FA 1995).

Part 2 Restricted relief qualifying policies

7 5Chapter 9 of Part 4 of ITTOIA 2005 (gains from contracts for life insurance
etc) is amended as follows.

8 After section 463 insert—

“463A Restricted relief qualifying policies: disapplication of section 485 etc

(1) This section applies for the purpose of determining if an individual
10is liable for tax charged under this Chapter.

(2) In relation to an event occurring on or after 6 April 2013, section 485
(disregard of certain events in relation to qualifying policies) does
not apply in relation to a policy (“policy X”) which is a restricted
relief qualifying policy (see paragraph A2 of Schedule 15 to ICTA).

(3) 15If an individual is liable for tax charged under this Chapter as a result
of subsection (2), the gain on which the tax is charged in the case of
the individual is reduced by the following amount—

(4) If section 528 also applies in the case of the individual in relation to
the gain, subsection (3) is to be applied to the gain before section 528
and, accordingly, the reduction to be made under section 528 is to be
30determined by reference to the gain as reduced by subsection (3).

(5) The following subsections apply for the purposes of this section
(except subsection (2)) and section 463B.

(6) “The policy X period” means the period for which policy X has run
before the chargeable event occurs.

(7) 35Subsections (8) and (9) apply if policy X is a new policy in relation to
another policy.

(8) For the purposes of subsection (6) policy X is to be taken to have
run—

(a) from the issue of the other policy, or

(b) 40if the other policy was also a new policy in relation to an
earlier policy, from the issue of the earlier policy,

and so on.

(9) References to premiums payable under policy X are to be read as
including references to premiums payable under any earlier policy
taken into account under subsection (8).

(10) The following are to be left out of account in determining the
5premiums payable under a policy—

(a) so much of a premium as is charged on the grounds that an
exceptional risk of death or disability is involved;

(b) subject to subsection (11), so much of the first premium
payable the liability for the payment of which—

(i) 10is discharged in accordance with paragraph 15(2) of
Schedule 15 to ICTA, or

(ii) in the case of a policy in relation to which paragraph
3 of that Schedule applies, is discharged under a
provision of the policy falling within paragraph
153(4)(c) of that Schedule.

(11) The maximum amount that may be left out of account under
subsection (10)(b) in the case of a policy is—

(a) 20the other policy involved, or

(b) if there is more than one other policy involved, the policy
which ran for the most number of complete years.

(12) In determining the premiums payable under a policy any provision
for the waiver of premiums by reason of a person’s disability is to be
25ignored.

(13) “New policy” has the meaning given in paragraph 17 of Schedule 15
to ICTA.

463B Restricted relief qualifying policies: allowable premiums

(1) This section sets out how to determine the extent to which premiums
30payable under policy X during the policy X period are allowable
premiums for the purposes of section 463A(3).

(2) A premium payable under policy X is allowable if it is payable before
the restricted relief date.

(3) In this section “the restricted relief date” means—

(a) 356 April 2013, or

(b) if later, the date on which policy X became a restricted relief
qualifying policy.

(4) Premiums payable under policy X in a relevant premium period are
allowable so far as they do not exceed in total the premium limit for
40the period.

(5) In subsection (4) “relevant premium period” means—

(a) any period of one year which—

(i) begins with a relevant date, and

(ii) ends in the policy X period, and

(b) 45if it is not covered by paragraph (a), the period which—

(i) begins with the last relevant date to fall within the
policy X period, and

(ii) ends at the end of the policy X period.

(6) In subsection (5) “relevant date” means—

(a) 5the restricted relief date, or

(b) any anniversary of the restricted relief date.

(7) For the purposes of subsection (4) “the premium limit” for a relevant
premium period is determined in accordance with subsections (8) to
(10).

(8) 10Determine the premiums payable in the relevant premium period
under policies related to policy X.

(9) If the total of those premiums is £3,600 or more, the premium limit is
nil (and, accordingly, no premiums payable under policy X in the
relevant premium period are allowable).

(10) 15If the total of those premiums is less than £3,600, the premium limit
is the difference between that total and £3,600.

(11) Subsection (4) does not apply if, at the time policy X became a
restricted relief qualifying policy, any policy related to policy X was
itself a restricted relief qualifying policy.

(12) 20For the purposes of this section a policy is “related” to policy X if it
met the following requirements at the time policy X became a
restricted relief qualifying policy—

(a) the policy is a qualifying policy under which the individual
is a beneficiary (as determined in accordance with paragraph
25A5 of Schedule 15 to ICTA);

(b) the policy is neither a protected policy nor a pure protection
policy.

(13) In subsection (12)(b)—

• “protected policy” is to be read in accordance with paragraph
  30A4 of Schedule 15 to ICTA, and

• “pure protection policy” has the meaning given by paragraph
  A6(1)(c) of that Schedule.

(14) A policy which is a new policy in relation to a policy “related” to
policy X (whether by virtue of subsection (12) or this subsection) is
35also “related” to policy X if it meets the requirements of subsection
(12)(a) and (b) when issued.

(15) A policy ceases to be “related” to policy X if it ceases to meet those
requirements.

(16) If policy X is a restricted relief qualifying policy as provided for by
40paragraph A2(14) of Schedule 15 to ICTA, references in this section
to policy X becoming a restricted relief qualifying policy are to be
read as references to the policy determined under subsection (17)
becoming a restricted relief qualifying policy.

(17) The policy is—

(a) 45the policy (“policy Y”) in relation to which policy X was the
new policy, or

(b) if policy Y was also a restricted relief qualifying policy as
provided for by paragraph A2(14) of Schedule 15 to ICTA,
the policy in relation to which policy Y was the new policy,

and so on.

(18) 5The following subsections apply for the purposes of this section if—

(a) a premium (“premium A”) is payable under policy X on a day
(“day A”) which is on or after 21 March 2012 but before 6
April 2013, and

(b) the next premium payable under policy X is payable on a day
10(“day B”) which is—

(i) on or after 6 April 2013, and

(ii) more than one month after day A.

(19) Premium A is to be treated as if, instead of being one premium
payable on day A, it were a series of premiums payable at monthly
15intervals with the first premium in the series payable on day A.

(20) The number of premiums in the series is equal to the number of
complete months falling within the period beginning with day A and
ending with day B.

(21) The amount of each premium in the series is the amount of premium
20A divided by the number of premiums in the series.

463C Restricted relief qualifying policies: personal representatives and
trustees with deceased settlors

(1) This section applies for the purpose of determining if personal
representatives are liable for tax charged under this Chapter as
25provided for by section 466.

(2) This section also applies for the purpose of determining if trustees
are liable for tax charged under this Chapter as provided for by
section 467 where—

(a) condition B in that section is met, and

(b) 30the person who created the trusts has died.

(3) In relation to an event occurring on or after 6 April 2013, section 485
(disregard of certain events in relation to qualifying policies) does
not apply in relation to a policy if the policy is a restricted relief
qualifying policy (see paragraph A2 of Schedule 15 to ICTA).

(4) 35If any personal representatives or trustees are liable for tax charged
under this Chapter as a result of subsection (3), section 463A(3) is to
apply in the case of the personal representatives or the trustees—

(a) as if the reference to the individual were to the personal
representatives or to the trustees, and

(b) 40as if the restricted relief qualifying policy were policy X.

(5) For this purpose—

(a) in section 463B(12)(a) the reference to the individual is to be
read as a reference to the deceased, and

(b) a policy—

(i) which would otherwise have ceased to be “related” to
policy X for the purposes of section 463B on the
deceased’s death, but

(ii) which continues to run after the deceased’s death,

5is to be treated as “related” to policy X after the deceased’s
death.

(6) A policy which is a new policy (as defined in paragraph 17 of
Schedule 15 to ICTA) in relation to a policy treated as “related” to
policy X under subsection (5)(b) or this subsection is also to be
10treated as “related” to policy X if, apart from the deceased’s death, it
would meet the requirements of section 463B(12)(a) and (b) on its
issue.

(7) A policy treated as “related” to policy X under subsection (5)(b) or (6)
ceases to be so treated if, apart from the deceased’s death, it would
15cease to meet the requirements of section 463B(12)(a) and (b).

(8) If section 528A also applies in the case of the personal representatives
or the trustees in relation to the gain, section 463A(3) is to be applied
to the gain before section 528A and, accordingly, the reduction to be
made under section 528A is to be determined by reference to the gain
20as reduced by section 463A(3).

463D Restricted relief qualifying policies: assignments and events
following assignments etc

(1) This section applies if—

(a) paragraph A1 of Schedule 15 to ICTA applies in relation to a
25policy by virtue of paragraph A1(8) in consequence of an
event relating to the policy (“the relevant event”),

(b) after the relevant event, the policy is not a qualifying policy
by virtue of paragraph A1(2), and

(c) in relation to an event occurring after the relevant event—

(i) 30an individual is liable for tax charged under this
Chapter on a gain from the policy, and

(ii) but for the application of paragraph A1 in relation to
the policy, section 463A(3) would have applied in the
case of the individual so as to reduce the gain.

(2) 35Section 463A(3) is to apply in the case of the individual in relation to
the gain as if the policy were policy X.

(3) But, for this purpose, section 463B(5) has effect as if the references to
the policy X period were to the part of that period falling before the
relevant event.

(4) 40If section 528 also applies in the case of the individual in relation to
the gain, section 463A(3) is to be applied to the gain before section
528 and, accordingly, the reduction to be made under section 528 is
to be determined by reference to the gain as reduced by section
463A(3).

463E 45 Transitional protection for policies issued in respect of insurances
made on or after 21 March 2012 but before 6 April 2013

(1) This section applies if—

(a) a policy (“policy Z”) is issued,

(b) the issue of policy Z is an event falling within paragraph
A2(3) of Schedule 15 to ICTA by virtue of paragraph (e),

(c) after its issue, policy Z is a qualifying policy but not a
5restricted relief qualifying policy,

(d) policy Z is varied on or after 6 April 2013 and the variation is
an event falling within paragraph A1(3) of Schedule 15,

(e) after the variation, policy Z is not a qualifying policy by
virtue of paragraph A1(2) of that Schedule,

(f) 10in relation to an event occurring after the variation, an
individual is liable for tax charged under this Chapter on a
gain from policy Z, and

(g) but for the application of paragraph A1 of Schedule 15 in
relation to policy Z, the individual would not have been
15liable because of section 485.

(2) The gain on which the tax is charged in the case of the individual is
reduced by the following amount—

(3) 25If section 528 also applies in the case of the individual in relation to
the gain, subsection (2) is to be applied to the gain before section 528
and, accordingly, the reduction to be made under section 528 is to be
determined by reference to the gain as reduced by subsection (2).

(4) Section 463A(10) to (12) applies for the purposes of subsection (2).”

9 30In section 485 (disregard of certain events in relation to qualifying policies)
after subsection (7) insert—

“(8) This section is subject to sections 463A and 463C.”

Part 3 Information powers

10 35After section 552ZA of ICTA insert—

“552ZB Regulations in relation to qualifying policies

(1) The Commissioners for Her Majesty’s Revenue and Customs may
make regulations requiring relevant persons—

(a) to require the provision to them of prescribed information in
40connection with applications for the issue of qualifying
policies;

(b) to provide prescribed information to persons who apply for
the issue of qualifying policies;

(c) to provide to an officer of Revenue and Customs prescribed
information about qualifying policies issued by them.

(2) The regulations may make such provision as the Commissioners
think fit for securing that an officer of Revenue and Customs is
5able—

(a) to ascertain whether there has been or is likely to be any
contravention of the requirements of the regulations, and

(b) to verify any information provided to an officer of Revenue
and Customs as required by the regulations.

(3) 10The provision that may be made by virtue of subsection (2) includes,
in particular, provision requiring relevant persons to make available
books, documents and other records for inspection by or on behalf of
an officer of Revenue and Customs.

(4) The regulations may—

(a) 15make different provision for different cases or circumstances,
and

(b) contain incidental, supplementary, consequential,
transitional, transitory or saving provision.

(5) In this section—

• 20“information” includes certificates issued by prescribed persons
  certifying prescribed matters,

• “prescribed” means prescribed by the regulations,

• “qualifying policy” includes a policy which would be a
  qualifying policy apart from—

  (a)

  25paragraph A1(2), B1(2), B2(2) or B3(3) of Schedule 15,
  or

  (b)

  paragraph 17(2)(za) of that Schedule (including as
  applied by paragraph 18), and

• “relevant person”, in relation to a qualifying policy, means the
  30the person who issues, or is proposing to issue, the policy.”

11 In section 552B of ICTA (duties of overseas insurers’ tax representatives) in
subsection (2)—

(a) after paragraph (b) omit “and”, and

(b) after paragraph (c) insert “and

(d) 35any duties imposed by regulations under section
552ZB,”.

12 In section 98 of TMA 1970 (special returns etc), in the second column of the
Table, after the entry for regulations under section 552ZA(6) of ICTA
insert—

“(None) 40regulations under section 552ZB;”.

Section 26

SCHEDULE 10 Transfer of assets abroad

Part 1 Introduction

1 5Chapter 2 of Part 13 of ITA 2007 (tax avoidance: transfer of assets abroad) is
amended as follows.

Part 2 New exemption for genuine transactions etc

2 In section 718 (meaning of “person abroad” etc) in subsection (2) omit
10paragraph (a) (UK resident body corporate incorporated outside UK treated
as resident outside UK).

3 In section 720 (charge to tax on income treated as arising under section 721)
in subsection (7)—

(a) for “742” substitute “742A”, and

(b) 15after “transaction” insert “, etc”.

4 In section 727 (charge to tax on income treated as arising under section 728)
in subsection (5)—

(a) for “742” substitute “742A”, and

(b) after “transaction” insert “, etc”.

5 20In section 731 (charge to tax on income treated as arising under section 732)
in subsection (4)—

(a) for “742” substitute “742A”, and

(b) after “transaction” insert “, etc”.

6 (1) Section 736 (exemptions: introduction) is amended as follows.

(2) 25In subsection (1) for “742” substitute “742A”.

(3) After subsection (2) insert—

“(2A) The exemption given by section 742A applies only in the case of a
relevant transaction effected on or after 6 April 2012.”

7 After section 742 insert—

“742A 30 Post-5 April 2012 transactions: exemption for genuine transactions

(1) Subsection (2) applies for the purpose of determining the liability of
an individual to tax under this Chapter by reference to a relevant
transaction if—

(a) the transaction is effected on or after 6 April 2012, and

(b) 35conditions A and B are met.

(2) Income is to be left out of account so far as the individual satisfies an
officer of Revenue and Customs that it is attributable to the
transaction.

(3) Condition A is that—

(a) were, viewed objectively, the transaction to be considered to
be a genuine transaction having regard to any arrangements
under which it is effected and any other relevant
circumstances, and

(b) 5were the individual to be liable to tax under this Chapter by
reference to the transaction,

the individual’s liability to tax would, in contravention of a relevant
treaty provision, constitute an unjustified and disproportionate
restriction on a freedom protected under that relevant treaty
10provision.

(4) In subsection (3) “relevant treaty provision” means—

(a) Title II or IV of Part Three of the Treaty on the Functioning of
the European Union,

(b) Part II or III of the EEA agreement, or

(c) 15the provision of any subsequent treaty replacing a provision
mentioned in paragraph (a) or (b).

(5) Condition B is that the individual satisfies an officer of Revenue and
Customs that, viewed objectively, the transaction must be
considered to be a genuine transaction having regard to any
20arrangements under which it is effected and any other relevant
circumstances.

(6) Without prejudice to the generality of subsection (3)(a) or (5), in
order for the transaction to be considered to be a genuine transaction
the transaction must not—

(a) 25be on terms other than those that would have been made
between persons not connected with each other dealing at
arm’s length, or

(b) be a transaction that would not have been entered into
between such persons so dealing,

30having regard to any arrangements under which the transaction is
effected and any other relevant circumstances.

(7) Subsection (8) applies if any asset or income falling within subsection
(12) is used for the purposes of, or is received in the course of,
activities carried on in a territory outside the United Kingdom by a
35person (“the relevant person”) through a business establishment
which the relevant person has in that territory.

(8) Without prejudice to the generality of subsection (3)(a) or (5), in
order for the transaction to be considered to be a genuine transaction
the activities mentioned in subsection (7) must consist of the
40provision by the relevant person of goods or services to others on a
commercial basis and involve—

(a) the use of staff in numbers, and with competence and
authority,

(b) the use of premises and equipment, and

(c) 45the addition of economic value, by the relevant person, to
those to whom the goods or services are provided,

commensurate with the size and nature of those activities.

(9) In subsection (8)(a) “staff” means employees, agents or contractors of
the relevant person.