Finance Bill

Session 2013 - 14
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Finance Bill

Finance Bill
Part 3 — Annual tax on enveloped dwellings
63

107
Interests held by connected persons
(1)
If on any day a company (“C”) is entitled to a single-dwelling interest in a
dwelling and another person (“P”) who is connected with C is entitled to a
different single-dwelling interest in the same dwelling, this Part has effect—
(a)
in relation to C as if C were on that day entitled to P’s single-dwelling
5
interest as well as C’s single-dwelling interest, and
(b)
(if P is a company) in relation to P as if P were on that day entitled to
C’s single-dwelling interest as well as P’s single-dwelling interest.
(2)
If on any day a single-dwelling interest (“the scheme interest”) is held for the
purposes of a collective investment scheme and a person (“P”) who is
10
connected with the scheme is entitled to a different single-dwelling interest in
the same dwelling, this Part has effect—
(a)
in relation to the scheme, as if both those separate interests were on that
day held for the purposes of the scheme, and
(b)
(if P is a company) in relation to P as if P were (on that day) entitled to
15
the scheme interest as well as P’s single-dwelling interest.
(3)
If on any day a single-dwelling interest in a dwelling is held for the purposes
of a collective investment scheme (“the first scheme”) and another interest in
the same dwelling is held for the purposes of another collective investment
scheme (“the second scheme”) that is connected with the first scheme, this Part
20
has effect—
(a)
in relation to the first scheme, as if both the interests were held on that
day for the purposes of that scheme, and
(b)
in relation to the second scheme, as if both interests were held on that
day for the purposes of that scheme.
25
(4)
See also—
(a)
section 94, for provision about the liability to tax of persons treated
under this section (read with section 101) as jointly entitled to a single-
dwelling interest;
(b)
paragraph 55 of Schedule 31, for provision about returns in cases
30
involving joint entitlement.
(5)
The provisions mentioned in subsection (4) are to be read as including
corresponding provision for cases where the same single-dwelling interest is
treated under this section as held—
(a)
for the purposes of different collective investment schemes, or
35
(b)
by a company and for the purposes of a collective investment scheme.
108
Section 107: superior and inferior interests
Where a company and an individual connected with the company are on any
day entitled to single-dwelling interests in the same dwelling, section 107(1)
does not apply if—
40
(a)
the company’s interest is a freehold or leasehold interest the taxable
value of which is £500,000 or less, and
(b)
the individual’s interest is a leasehold interest that is inferior to the
company’s interest.

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109
Different interests held in the same dwelling: effect of reliefs etc
(1)
References in section 107 to a person do not include—
(a)
a public body, as defined in section 151,
(b)
a body listed in section 152(2) (bodies established for national
purposes).
5
(2)
Subsections (1) to (3) of section 107 do not apply in relation to a single-dwelling
interest if the day in question is relievable with respect to that interest by virtue
of—
(a)
section 148 (charitable companies),
(b)
section 150 (providers of social housing), or
10
(c)
section 153 (dwelling conditionally exempt from inheritance tax).
(3)
Subsection (4) applies where the separate interests (the “relevant interests”)
that under section 107 (or that section and section 106) are treated as
constituting, on a day, just one single-dwelling interest (“the combined
interest”) include—
15
(a)
a freehold or leasehold interest, and
(b)
a leasehold interest (“the inferior interest”) granted out of that interest.
(4)
If the inferior interest is the most inferior relevant interest, the combined
interest, and the dwelling itself (where relevant), are regarded for the purposes
of the relevant relieving provisions as being exploited, on the day mentioned
20
in subsection (3), in the way the inferior interest is exploited on that day.
(5)
If the inferior interest is an interest in part only (“the sub-let part”) of the land
that is the subject-matter of the combined interest, subsection (4) has effect in
relation to the combined interest only so far as that interest relates to the sub-
let part.
25
(6)
In this section “the relevant relieving provisions” means sections 130 to 150.
(7)
The inferior interest counts as “the most inferior relevant interest” if no
relevant interest (see subsection (3)) is a leasehold interest granted out of it.
(8)
In this section the reference to a leasehold interest includes the interest of a
lessee under an agreement for a lease.
30
(9)
In the application of this section to Scotland—
(a)
the reference to a freehold interest is to the interest of the owner;
(b)
the reference to a leasehold interest is to a tenant’s right over or interest
in property subject to a lease;
(c)
the reference to an agreement for lease includes missives of let.
35
Meaning of “dwelling”
110
Meaning of “dwelling”
(1)
A building or part of a building counts as a dwelling at any time when—
(a)
it is used or suitable for use as a single dwelling, or
(b)
it is in the process of being constructed or adapted for such use.
40
(2)
Land that is, or is at any time intended to be, occupied or enjoyed with a
dwelling as a garden or grounds (including any building or structure on such
land) is taken to be part of that dwelling at that time.

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(3)
Land that subsists, or is at any time intended to subsist, for the benefit of a
dwelling is taken to be part of the dwelling at that time.
(4)
A building, or part of a building, used for a purpose specified in section 116(2)
or (3) of FA 2003 is not used as a dwelling for the purposes of subsection (1).
(5)
Where a building, or part of a building, is used for a purpose mentioned in
5
subsection (4), no account is to be taken for the purposes of subsection (1) of its
suitability for any other use.
(6)
If a building or part of a building becomes temporarily unsuitable for use as a
dwelling for any reason (including accidental damage, repairs or any other
physical change to the building or its environment), that temporary
10
unsuitability is ignored in determining whether or not the building or part of
a building is, during the period in question, a dwelling for the purposes of this
Part.

This subsection does not affect any of the provisions in sections 124 to 129.
111
Substantial performance of “off plan” purchase
15
(1)
Subsection (2) applies where—
(a)
a contract is entered into for the acquisition of a chargeable interest in
or over land that consists of or includes a building, or part of a building,
that is to be constructed or adapted for use as a single dwelling,
(b)
substantial performance is treated as constituting the acquisition of the
20
chargeable interest (under section 120), and
(c)
construction or adaptation of the building, or the part of a building, has
not begun by the time the contract is substantially performed.
(2)
The chargeable interest deemed to be acquired as mentioned in subsection
(1)(b) is taken to be in or over land that consists of or (as appropriate) includes
25
a dwelling.
(3)
If at any time after the substantial performance of the contract the obligation
under the contract to carry out the construction or adaptation ceases to have
effect without the construction or adaptation having been begun, subsection
(2) ceases to apply at that time.
30
(4)
A building or part of a building used for a purpose specified in section 116(2)
or (3) of FA 2003 is not used as a dwelling for the purposes of subsection (1).
(5)
In this section—
“contract” includes any agreement (including, in the case of Scotland,
missives of let not constituting a lease);
35
“substantially performed” has the same meaning as in section 44 of FA
2003.
112
Power to modify meaning of “use as a dwelling”
(1)
The Treasury may by order amend this Part so as to specify cases where use of
a building is to be use of a building as a dwelling for the purposes of section
40
110(1) or 111(1).
(2)
The reference in section 116(8)(a) of FA 2003 (power to amend section 116(2)
and (3)) to “the purposes of subsection (1)” includes a reference to the purposes
of sections 110(1) and 111(1).

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113
Parts of a greater whole
(1)
The fact that a part of a building is suitable for use as a dwelling does not
prevent that part from forming part of a larger single dwelling.
(2)
The fact that a building or structure that is—
(a)
in the garden or grounds of a dwelling, and
5
(b)
occupied or enjoyed with the dwelling,

is itself suitable for use as a single dwelling does not prevent it from being
treated (in accordance with section 110(2)) as part of the dwelling.
114
Dwelling in grounds of another dwelling
(1)
Subsection (4) applies where the conditions in subsection (2) are met in relation
10
to two dwellings (the “main dwelling” and the “associated dwelling”) on a day
(“the day in question”) in a chargeable period.
(2)
The conditions are that—
(a)
the main dwelling has a garden or grounds,
(b)
the associated dwelling stands within the garden or grounds of the
15
main dwelling, but is not occupied or enjoyed with that dwelling,
(c)
the associated dwelling does not have separate access, and is not part
of the same building as the main dwelling, and
(d)
the common ownership condition is met.
(3)
The common ownership condition is that—
20
(a)
a company is entitled to a chargeable interest in the main dwelling, and
the company or a person connected with the company is entitled to a
chargeable interest in the associated dwelling, or
(b)
a chargeable interest in the main dwelling is held for the purposes of a
collective investment scheme, and a chargeable interest in the
25
associated dwelling is held for the purposes of the same collective
investment scheme.

(It does not matter whether or not the interest in the main dwelling and the
interest in the associated dwelling are held for the same title.)
(4)
This Part has effect in relation to the interests mentioned in paragraph (a) or (as
30
the case may be) (b) of subsection (3) as if the main dwelling and the associated
dwelling were, on the day in question, suitable for use as a single dwelling.
(5)
Subsection (4) does not apply if the day in question is, in relation to the interest
in the main dwelling or the interest in the associated dwelling, relievable by
virtue of a provision mentioned in subsection (6).
35
(6)
Those provisions are—
section 131 (property rental businesses);
section 132 (rental property: preparation for sale etc);
section 135 (dwellings opened to the public);
section 136 (property developers);
40
section 137 (property developers: exchange of dwellings);
section 139 (property traders);
section 141 (financial institutions acquiring dwellings in the course of
lending);
section 143 (occupation by certain employees or partners);
45

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section 146 (farmhouses);
section 148 (charitable companies);
section 150 (providers of social housing).
(7)
The reference in subsection (3)(a) to a person connected with the company does
not include a public body (as defined in section 151) or a body listed in section
5
152(2) (bodies established for national purposes).
(8)
The reference in subsection (3)(b) to a chargeable interest being held for the
purposes of the same collective investment scheme includes a reference to a
person connected with the scheme being entitled to the interest.
(9)
The associated dwelling has “separate access” only if—
10
(a)
there is access to the associated dwelling directly from a highway (in
Scotland, a road) that the dwelling adjoins, or
(b)
the person entitled to possession of the associated dwelling has access
to that dwelling from a highway (in Scotland, a road), exclusively by
passing over land that the person is entitled to pass over by reason of
15
one or more rights of way or other interests in land to which the person
is separately entitled.
(10)
In this section—
in relation to a dwelling or dwellings, references to the “garden or
grounds” are to land occupied or enjoyed with the dwelling or
20
dwellings as a garden or grounds;
references to the person entitled to possession of a dwelling are to the
person entitled to possession of the dwelling by reason of an estate or
interest held by that person;
“separately entitled” means entitled otherwise than by reason of a
25
chargeable interest in or over the main dwelling.
115
Dwellings in the same building
(1)
Two parts of a building are “linked dwellings” if—
(a)
each of them counts as a dwelling,
(b)
there is private access between the two dwellings,
30
(c)
the two parts of the building are not (together) used or suitable for use
as a single dwelling, and
(d)
the common ownership condition and the use condition are met.
(2)
The common ownership condition is that—
(a)
a company is entitled to a chargeable interest in one of the dwellings,
35
and the company or a person connected with the company is entitled to
a chargeable interest in the other dwelling, or
(b)
a chargeable interest in one of the dwellings is held for the purposes of
a collective investment scheme, and a chargeable interest in the other
dwelling is held for the purposes of the same collective investment
40
scheme.

(It does not matter whether or not the interests are held for the same title.)
(3)
If on a day in a chargeable period (“the day in question”) two parts of a
building constitute linked dwellings, this Part has effect in relation to the
interests mentioned in paragraph (a) or (as the case may be) (b) of subsection
45
(2) as if the two parts were, on the day in question, suitable for use as a single
dwelling.

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(4)
Subsection (3) does not apply if the day in question is, in relation to a
chargeable interest mentioned in subsection (2)(a) or (as the case may be) (2)(b),
relievable by virtue of a provision mentioned in subsection (5).
(5)
Those provisions are—
section 131 (property rental businesses);
5
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);
section 139 (property traders);
10
section 141 (financial institutions acquiring dwellings in the course of
lending);
section 143 (occupation by certain employees or partners);
section 146 (farmhouses);
section 148 (charitable companies);
15
section 150 (providers of social housing).
(6)
The reference in subsection (2)(a) to a person connected with the company does
not include a public body (as defined in section 151) or a body listed in section
152(2) (bodies established for national purposes).
(7)
If two dwellings in a building (dwelling A and dwelling B) are treated under
20
this section as suitable for use as a single dwelling, and dwelling B and a third
dwelling in the building (“dwelling C”) are treated under this section as
suitable for use as a single dwelling, all three are treated as suitable for use as
a single dwelling (and so on).
116
Section 115: supplementary
25
(1)
The reference in section 115(2)(b) to a chargeable interest being held for the
purposes of the same collective investment scheme includes a reference to a
person connected with the scheme being entitled to the interest.
(2)
For the purposes of section 115, there is private access between two dwellings
if the person entitled to possession of each dwelling is entitled, by reason of a
30
right of way or other interest in land, to have access to that person’s dwelling
from the other dwelling, without passing over any part of the building (or any
other land) in which a third party has an interest entitling that third party to
enter it.
(3)
In subsection (2) “third party” means a person other than—
35
(a)
the persons entitled to possession of the dwellings mentioned in
subsection (2), and
(b)
persons connected with any of them.
(4)
The use condition mentioned in section 115(1)(d) is that each of the two
dwellings—
40
(a)
is occupied (or usually occupied) by a relevant individual,
(b)
is intended to be so occupied (or usually so occupied), or
(c)
is not occupied.
(5)
In subsection (4) “relevant individual” means—

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(a)
an individual connected with the company mentioned in section
115(2)(a),
(b)
an individual connected with the collective investment scheme
mentioned in section 115(2)(b),
(c)
an individual who occupies (or is to occupy) the dwelling concerned
5
otherwise than on commercial terms, or
(d)
an individual who is employed wholly or partly in connection with the
occupation by a person falling within any of paragraphs (a) to (c) of a
dwelling in the building, or provides services in connection with such
a person’s occupation of a dwelling in the building.
10
(6)
In this section references to the person entitled to possession of a dwelling are
to the person entitled to possession of the dwelling by reason of an estate or
interest held by that person.
117
Terraces etc
Any structure (such as a terrace of houses or a pair of semi-detached houses)
15
that is composed of or includes dwellings is regarded as a building for the
purposes of sections 115 and 116.
Acquisitions and disposals
118
Acquisitions and disposals of chargeable interests
(1)
References in this Part to the acquisition of a chargeable interest include any
20
acquisition however effected (including an acquisition effected by the act of
parties to a transaction, by order of a court or other authority, by or under any
statutory provision or by operation of law).
(2)
The surrender or release of a chargeable interest is—
(a)
an acquisition of that interest by any person whose interest or right is
25
benefited or enlarged by the transaction, and
(b)
a disposal by the person ceasing to be entitled to that interest.
(3)
The variation of a chargeable interest is—
(a)
an acquisition of a chargeable interest by the person benefiting from the
variation, and
30
(b)
a disposal of a chargeable interest by the person whose interest is
subject to or limited by the variation.
119
Date of acquisition or disposal
(1)
A person who acquires a chargeable interest in or over land that consists of or
includes a dwelling is treated for the purposes of this Part as acquiring the
35
interest on the effective date of the acquisition (and therefore as entitled to the
interest with effect from that date: see section 169).
(2)
A person who disposes of a chargeable interest in or over land that consists of
or includes a dwelling is treated for the purposes of this Part as ceasing to be
entitled to the interest on the effective date of the disposal (and therefore as not
40
being entitled to the interest on that day: see section 169).
(3)
If a person’s acquisition and disposal of a chargeable interest are completed on
the same day, then for the purposes of this Part—