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

44 Condition for company to be an “investment trust”

(1) In section 1158(2) of CTA 2010 (condition A for a company to be an “investment
trust”), for “the business of the company consists of” substitute “all, or
substantially all, of the business of the company is”.

(2) 5The amendment made by this section has effect in relation to accounting
periods beginning on or after 1 January 2012.

45 Community amateur sports clubs

Schedule 20 contains provision about community amateur sports clubs.

CHAPTER 4 Pensions

46 10Lifetime allowance charge: power to amend the transitional provision in Part
2 of Schedule 18 to FA 2011 etc

(1) Part 2 of Schedule 18 to FA 2011 (lifetime allowance charge: commencement
and transitional provision relating to changes made for the tax year 2012-13
and onwards) is amended as follows.

(2) 15In paragraph 14—

(a) omit sub-paragraphs (2) and (15) to (17) (which confer power on the
HMRC Commissioners to make provision specifying how notices
under paragraph 14 are to be given),

(b) in sub-paragraph (7) omit “the annual rate of” where it first appears,
20and

(c) in sub-paragraph (11) after “(5)(a)” insert “and (c)(i)”.

(3) After paragraph 14 insert—

“15 (1) The Commissioners for Her Majesty’s Revenue and Customs may by
regulations amend paragraph 14.

(2) 25Regulations under this paragraph may (for example) add to the cases
in which paragraph 14 is to apply or is to cease to apply.

(3) Regulations under this paragraph may include provision having
effect in relation to a time before the regulations are made; but—

(a) the time must be no earlier than 6 April 2012, and

(b) 30the provision must not increase any person’s liability to tax.

(4) In relation to regulations under this paragraph made during 2013,
sub-paragraph (3) has effect with the omission of paragraph (b) so
long as the time in question is no earlier than 6 April 2013.

16 (1) The Commissioners for Her Majesty’s Revenue and Customs may by
35regulations make provision specifying how any notice required to be
given to an officer of Revenue and Customs under paragraph 14 is to
be given.

(2) In sub-paragraph (1) the reference to paragraph 14 is to that
paragraph as amended from time to time by regulations under
40paragraph 15.

17 (1) Regulations under paragraph 15 or 16 may include supplementary
or incidental provision.

(2) The powers to make regulations under paragraphs 15 and 16 are
exercisable by statutory instrument.

(3) 5A statutory instrument containing regulations under paragraph 15
or 16 is subject to annulment in pursuance of a resolution of the
House of Commons.”

(4) The amendments made by subsection (2)(b) and (c) are treated as having come
into force on 6 April 2012.

(5) 10The Registered Pension Schemes (Lifetime Allowance Transitional Protection)
Regulations 2011 (S.I. 2011/1752S.I. 2011/1752) are to continue to have effect and, so far as
they were made under paragraph 14(2) and (15) of Schedule 18 to FA 2011, are
to be treated as if they were made under paragraphs 16 and 17(1) of that
Schedule (as inserted by subsection (3) above).

47 15Lifetime allowance charge: new standard lifetime allowance for the tax year
2014-15 and subsequent tax years

(1) Section 218 of FA 2004 (standard lifetime allowance etc) is amended as follows.

(2) For subsection (2) substitute—

“(2) The standard lifetime allowance for the tax year 2014-15 and, subject to
20subsection (3), subsequent tax years is £1,250,000.”

(3) In subsection (3) for “the tax year 2012-13” substitute “the tax year 2014-15”.

(4) The amendments made by subsections (2) and (3) have effect for the tax year
2014-15 and subsequent tax years.

(5) Schedule 21 contains transitional provision etc.

48 25Annual allowance: new annual allowance for the tax year 2014-15 and
subsequent tax years

(1) Section 228 of FA 2004 (annual allowance) is amended as follows.

(2) For subsection (1) substitute—

“(1) The annual allowance for the tax year 2014-15 and, subject to subsection
30(2), each subsequent tax year is £40,000.”

(3) In subsection (2) for “2011-12” substitute “2014-15”.

(4) The amendments made by this section have effect for the tax year 2014-15 and
subsequent tax years.

49 Drawdown pensions and dependants’ drawdown pensions

(1) 35In section 165 of FA 2004 (pension rules), in subsection (1), in pension rule 5,
for “100%” substitute “120%”.

(2) In section 167 of that Act (pension death benefit rules), in subsection (1), in
pension death benefit rule 4, for “100%” substitute “120%”.

(3) In Schedule 16 to FA 2011 (benefits under pension schemes)—

(a) in paragraph 90(2)(a), after “year” insert “beginning before 26 March
2013 and”,

(b) in paragraph 90(3), omit paragraph (b) and the “and” before it,

(c) in paragraph 98(2)(a), after “year” insert “beginning before 26 March
52013 and”, and

(d) in paragraph 98(3), omit paragraph (b) and the “and” before it.

(4) The amendments made by subsections (1) and (2) have effect in relation to
drawdown pension years beginning on or after 26 March 2013.

(5) The amendments made by subsection (3)(a) and (c) are treated as having come
10into force on 26 March 2013.

(6) The amendments made by subsection (3)(b) and (d) have effect in relation to
transfers within paragraph 90(5) or 98(5) of Schedule 16 to FA 2011 occurring
during a drawdown pension year ending on or after 25 March 2013.

50 Bridging pensions

(1) 15FA 2004 is amended as follows.

(2) In paragraph 2 of Schedule 28 (pension rules: meaning of scheme pension)—

(a) in sub-paragraph (4)(c)—

(i) for the words from “not earlier” to “65” substitute “during the
permitted period”, and

(ii) 20after “which” insert “together with any previous reductions of
the kind referred to in this paragraph (c)”, and

(b) after sub-paragraph (4A) insert—

“(4B) In sub-paragraph (4)(c) “the permitted period” means the
period beginning with the day on which the member reaches
25the age of 60 and ending with the day on which the member
reaches the age of 65 or, if later, reaches pensionable age.”

(3) In paragraph 1 of Schedule 29 (pension commencement lump sums), in sub-
paragraph (4)(a), omit the words from “at a time” to “65”.

(4) In consequence of subsection (3), paragraph 21 of Schedule 23 to the FA 2006 is
30repealed.

(5) The amendments made by this section have effect for the tax year 2013-14 and
subsequent tax years.

51 Abolition of contracting out of state second pension: consequential
amendments etc

(1) 35FA 2004 is amended as follows.

(2) In section 188 (relief for contributions), in subsection (3) (contributions
excluded from relief), omit paragraph (c) and the word “and” immediately
preceding that paragraph.

(3) In that section, omit subsection (6) (which treats certain amounts recovered by
40individual’s employer as contributions paid by individual).

(4) Omit section 190(5) (certain reliefs not to count towards annual limit for relief).

(5) Omit section 196(5) (references to contributions to include references to
minimum payments when determining relief for employers).

(6) Omit section 202 (minimum contributions under pensions legislation).

(7) Omit section 233(2) (references to contributions not to include references to
5minimum payments when determining pension input amount).

(8) In paragraph 5 of Schedule 29 (short service refund lump sum), after sub-
paragraph (2) insert—

“(2A) In sub-paragraph (2) the reference to the member’s contributions
includes—

(a) 10any amount paid under section 7 of the Social Security
Act 1986 (incentive payments to schemes becoming
contracted-out between 1986 and 1993),

(b) any amount paid by the Commissioners for Her Majesty’s
Revenue and Customs under section 42A(3) of the Pension
15Schemes Act 1993 or section 38A(3) of the Pension Schemes
(Northern Ireland) Act 1993 (rebates), and

(c) any amount recovered by the member’s employer under
regulations falling within sub-paragraph (2B) in respect of
minimum payments made to the scheme in relation to any
20period before 6 April 2012.

(2B) Those regulations are regulations which were made under—

(a) section 8(3) of the Pension Schemes Act 1993 (recovery of
minimum payments), or

(b) section 4(3) of the Pension Schemes (Northern Ireland) Act
251993 (corresponding provision for Northern Ireland).”

(9) Omit paragraph 14(2) of Schedule 36 (which excludes minimum payments
from being relevant contributions for the purposes of enhanced protection
from lifetime allowance charge).

(10) Subsections (1), (3) to (5) and (7) to (9) come into force on 6 April 2013.

(11) 30Subsection (2) comes into force on 6 April 2015.

(12) Subsection (6) comes into force on 6 April 2016, except that the repeal of section
202(5) of FA 2004 comes into force on such day as the Treasury may appoint by
order made by statutory instrument.

52 Overseas pension schemes: general

(1) 35In section 150(8) of FA 2004 (meaning of “recognised overseas pension
scheme”), for the words from “which” to the end substitute “which satisfies
any requirements prescribed for the purposes of this subsection by regulations
made by the Commissioners for Her Majesty’s Revenue and Customs.”

(2) Section 169 of that Act (pension schemes: recognised transfers) is amended as
40follows.

(3) In subsection (2)(c), for “any prescribed information requirements imposed on
the scheme manager” substitute “any requirements imposed under subsection
(4)”.

(4) For subsection (4) substitute—

“(4) Regulations may require the scheme manager of a QROPS or former
QROPS to—

(a) give the Commissioners information of a prescribed
5description,

(b) give the Commissioners such evidence as they may require of a
prescribed matter, and

(c) give a prescribed authority, in prescribed circumstances,
information of a prescribed description.

(4A) 10Regulations under subsection (4) may make provision as to—

(a) the way and form in which information or evidence is to be
given, and

(b) the times or intervals at which information or evidence is to be
given.

(4B) 15The regulations may apply any provision of Part 7 of Schedule 36 to FA
2008 (penalties), with or without modifications, in relation to
requirements imposed under the regulations on a former QROPS.”

(5) In subsection (5)—

(a) for “the Inland Revenue has” substitute “the Commissioners have”,

(b) 20for paragraph (a) (but not the “and” at the end of it) substitute—

“(a) any of the following conditions is met in relation to the
scheme—

(i) there has been a failure to comply with a relevant
requirement and the failure is significant,

(ii) 25any information given pursuant to a relevant
requirement is incorrect in a material respect,

(iii) any declaration given pursuant to a relevant
requirement is false in a material respect,

(iv) there is no scheme manager,”, and

(c) 30in paragraph (b), for “the failure” substitute “that condition being met”.

(6) For subsection (6) substitute—

“(6) A failure to comply with a requirement is significant if—

(a) it is a failure to give information or evidence that is (or may be)
of significance, or

(b) 35there are reasonable grounds for believing that the failure
prejudices (or might prejudice) the assessment or collection of
tax by the Commissioners.”

(7) After subsection (7) insert—

“(8) In subsections (4) to (6) and this subsection—

• 40“the Commissioners” means the Commissioners for Her Majesty’s
  Revenue and Customs;

• “prescribed” means prescribed by regulations;

• “QROPS” means a qualifying recognised overseas pension
  scheme, and “former QROPS” means a scheme that has at any
  45time been a QROPS;

• “regulations” means regulations made by the Commissioners;

Finance (No. 2) BillPage 25

• “relevant requirement” means—

  (a)

  a requirement imposed by regulations under subsection
  (4), or

  (b)

  a requirement imposed by virtue of Part 1 of Schedule 36
  5to FA 2008 (powers to obtain information and
  documents).”

(8) In section 280(1) of that Act (abbreviations), insert at the appropriate place—

• ““FA 2008” means the Finance Act 2008,”.

53 Overseas pension schemes: information and inspection powers

(1) 10Part 6 of Schedule 36 to FA 2008 (information and inspection powers: special
cases) is amended as follows.

(2) In paragraph 34B (registered pension schemes etc)—

(a) in sub-paragraph (2), omit the “or” at the end of paragraph (b) and, at
the end of paragraph (c) insert—

“(d) 15a QROPS or former QROPS, or

(e) an annuity purchased with sums or assets held for the
purposes of a QROPS or former QROPS.”;

(b) after sub-paragraph (4) insert—

“(4A) In relation to a notice to which this paragraph applies that
20refers only to information or documents relating to a matter
within sub-paragraph (2)(d) or (e), paragraph 20 (old
documents) has effect as if the reference to 6 years were to 10
years.”;

(c) after sub-paragraph (7) insert—

“(7A) 25Where the notice relates to a matter within sub-paragraph
(2)(d) or (e), the officer of Revenue and Customs who gives
the notice must give a copy of the notice to the scheme
manager in relation to the pension scheme.”;

(d) in sub-paragraph (8), for “and (7)” substitute “to (7A)”.

(3) 30In paragraph 34C (registered pension schemes etc: interpretation), insert at the
appropriate places—

• ““QROPS” and “former QROPS” have the meanings given by
  section 169(8) of FA 2004;”;

• ““scheme manager”, in relation to a pension scheme, has the
  35meaning given by section 169(3) of FA 2004.”

(4) In paragraphs 34B and 34C of Schedule 36 to FA 2008, references to a former
QROPS include a scheme that ceased to be a QROPS before this Act was
passed.

CHAPTER 5 Other provisions

Employee shareholder shares

54 Employee shareholder shares

Schedule 22 contains provision about employee shareholder shares.

5Seed enterprise investment scheme

55 SEIS: income tax relief

(1) ITA 2007 is amended as follows.

(2) In section 29 (tax reductions: supplementary), in subsection (4B), after the entry
for Chapter 1 of Part 5 insert—

• 10“Chapter 1 of Part 5A (SEIS relief),”.

(3) In section 32 (liability not dealt with in the calculation), after the entry for
section 235 insert—

• “under section 257G (withdrawal or reduction of SEIS relief),”.

(4) In section 257DG (the control and independence requirement), for subsection
15(2) substitute—

“(2) The independence element of the requirement is that—

(a) the issuing company must not at any time in period A (ignoring
any on-the-shelf period) be within subsection (2A), and

(b) no arrangements must be in existence at any time in period A by
20virtue of which the issuing company could be within that
subsection (whether during period A or otherwise).

(2A) The issuing company is within this subsection at any time if it is under
the control of any other company (or of another company and any other
person connected with that other company).

(2B) 25In subsection (2)(a) “on-the-shelf period” means a period during which
the issuing company—

(a) has not issued any shares other than subscriber shares, and

(b) has not begun to carry on, or make preparations for carrying on,
any trade or business.”

(5) 30The amendments made by subsections (2) and (3) have effect for the tax year
2013-14 and subsequent tax years.

(6) The amendment made by subsection (4) has effect in relation to shares issued
on or after 6 April 2013.

56 SEIS: re-investment relief

(1) 35Schedule 5BB to TCGA 1992 (seed enterprise investment scheme: re-
investment) is amended as follows.

(2) In paragraph 1 (SEIS re-investment relief)—

(a) in sub-paragraph (2)—

(i) in paragraph (a), after “the tax year 2012-13” insert “or the tax
year 2013-14 (the year in question being referred to in this
Schedule as “the relevant year”)”, and

(ii) 5in paragraph (b), for “that year” substitute “the relevant year”,

(b) in sub-paragraph (3)(a), for “tax year 2012-13” substitute “relevant
year”, and

(c) for sub-paragraph (5) substitute—

“(5) The relevant percentage of the available SEIS expenditure is to
10be set against a corresponding amount of the original gain.

(5A) In sub-paragraph (5)—

• “the available SEIS expenditure” means so much of the
  SEIS expenditure as—

  (a)

  is specified in the claim,

  (b)

  15is unused, and

  (c)

  does not exceed so much of the original gain as
  is unmatched;

• “the relevant percentage” means—

  (a)

  if the relevant year is the tax year 2012-13, 100%,
  20and

  (b)

  if the relevant year is the tax year 2013-14, 50%.”

(3) In paragraph 2 (restrictions on relief under paragraph 1)—

(a) in sub-paragraph (1), for “tax year 2012-13” substitute “relevant year”,
and

(b) 25in sub-paragraph (2)—

(i) for “tax year 2012-13” substitute “relevant year”, and

(ii) for “that tax year” substitute “that year”.

(4) In paragraph 5 (removal or reduction of relief) in sub-paragraph (2) for “2012-
13” substitute “in which the shares were issued”.

(5) 30Accordingly, in section 150G of TCGA (which introduces Schedule 5BB), for
“tax year 2012-13” substitute “tax years 2012-13 and 2013-14”.

Disincorporation

57 Disincorporation relief

(1) A claim for relief under this section (“disincorporation relief”) may be made
35where—

(a) a company transfers its business to some or all of the shareholders of
the company,

(b) the transfer of the business is a qualifying business transfer (see section
58), and

(c) 40the business transfer date falls within the period of 5 years beginning
with 1 April 2013.

(2) As to the consequences of a claim for disincorporation relief being made, see—

• sections 162B and 162C of TCGA 1992;

• section 849A of CTA 2009.

(3) In this section and sections 58 to 60 “the business transfer date”, in relation to
the transfer of a business, is the date on which the business is transferred.

For this purpose, where the business is transferred under a contract—

(a) the date on which the business is transferred is to be determined in
5accordance with section 28 of TCGA 1992, and

(b) if the business in question is transferred by more than one contract,
then for the purposes of that section the contract under which the
business is transferred is to be taken to be the contract under which the
goodwill of the business is transferred.

(4) 10This section and sections 58 and 59 apply to a transfer of a business with a
business transfer date of 1 April 2013 or a later date.

58 Qualifying business transfer

(1) The transfer of a business from a company to some or all of the shareholders of
the company is a qualifying business transfer for the purposes of section 57 if
15conditions A to E are met.

(2) Condition A is that the business is transferred as a going concern.

(3) Condition B is that the business is transferred together with all of the assets of
the business, or together with all of those assets other than cash.

(4) Condition C is that the total market value of the qualifying assets of the
20business included in the transfer does not exceed £100,000.

(5) Condition D is that all of the shareholders to whom the business is transferred
are individuals.

(6) Condition E is that each of those shareholders held shares in the company
throughout the period of 12 months ending with the business transfer date.

(7) 25For the purposes of condition D, the reference to individuals includes an
individual acting as a member of a partnership, but does not include an
individual acting as a member of a limited liability partnership.

(8) Section 60 of TCGA 1992 (nominees and bare trustees) applies for the purposes
of this section as it applies for the purposes of that Act.

(9) 30In this section “market value”, in relation to an asset, means the price which the
asset might reasonably be expected to fetch on a sale in the open market.

(10) In this section a “qualifying asset” means—

(a) goodwill, or

(b) an interest in land which is not held as trading stock.

59 35Making a claim

(1) A claim for disincorporation relief under section 57—

(a) is to be made jointly by the company and all of the shareholders to
whom the business is transferred, and

(b) is irrevocable.

(2) 40Any claim for disincorporation relief must be made within the period of 2 years
beginning with the business transfer date.

60 Effect of disincorporation relief

(1) In Part 5 of TCGA 1992 (transfer of business assets), in Chapter 1 (general
provisions), after section 162A insert—

“Transfer of business from company to shareholders

162B 5Disincorporation relief: assets (including pre-FA 2002 goodwill)

(1) This section applies where—

(a) a company transfers its business to some or all of the
shareholders of the company, and

(b) a claim for disincorporation relief in respect of the transfer has
10been made under section 57 of the Finance Act 2013.

(2) The disposal and acquisition of any qualifying asset of the business
included in the transfer is to be deemed to be for a consideration equal
to the lower of—

(a) the sums allowable under section 38 as a deduction in the
15computation of the gain accruing to the company on the
disposal of the asset in question, and

(b) the market value of the asset.

(3) In subsection (2) a “qualifying asset” means—

(a) goodwill, or

(b) 20an interest in land which is not held as trading stock.

(4) But subsection (2) does not apply to the goodwill of the business if
section 162C applies to it.

162C Disincorporation relief: post-FA 2002 goodwill

(1) This section applies where—

(a) 25a company transfers its business to some or all of the
shareholders of the company,

(b) a claim for disincorporation relief in respect of the transfer has
been made under section 57 of the Finance Act 2013, and

(c) section 849A of CTA 2009 (disincorporation relief: transfer
30values for post-FA 2002 goodwill) applies to the transfer of the
goodwill of the business.

(2) The acquisition of the goodwill of the business is deemed to be for a
consideration equal to the value at which the goodwill is treated as
transferred by virtue of section 849A of CTA 2009.”

(2) 35In Part 8 of CTA 2009 (intangible fixed assets), Chapter 13 (transactions
between related parties) is amended as follows.

(3) In section 844 (overview of Chapter), in subsection (2) for “849” substitute
“849A”.

(4) In section 845 (transfer between company and related party treated as at
40market value), in subsection (4) (exceptions to basic rule)—

(a) omit the “and” at the end of paragraph (ca), and

(b) after paragraph (d) insert “, and

(e) section 849A (disincorporation relief: transfer values for
post-FA 2002 goodwill).”