Finance (No. 2) Bill (HC Bill 190)

(a) was UK resident for the tax year concerned (and the year was
not a split year),

(b) was domiciled in the United Kingdom for that tax year,

(c) in that tax year, did not fall to be regarded as resident in a
5country outside the United Kingdom for the purposes of double
taxation arrangements having effect at the time, and

(d) for that tax year, had made a claim for any available relief under
section 6 of TIOPA 2010 (as required by subsection (6) of that
section).

(4) 10An individual’s hypothetical net income for a tax year is, to the extent
that it is not sterling, to be calculated by reference to the average
exchange rate for the year ending on 31 March in the tax year
concerned.

55D Procedure for elections under section 55C

(1) 15An election under section 55C is to be made not more than 4 years after
the end of the tax year to which it relates.

(2) If the conditions in paragraphs (a) to (d) of section 55C(1) continue to
be met, an election continues in force in each subsequent tax year
unless—

(a) 20subsection (3) applies,

(b) the election is withdrawn, or

(c) it ceases to have effect under subsection (5).

(3) Where an election is made after the end of the tax year to which it
relates, the election has effect for the tax year to which it relates only
25(and accordingly does not continue in force for subsequent tax years
under subsection (2)).

(4) An election may be withdrawn only by a notice given by the individual
by whom the election was made.

(5) If an individual’s spouse or civil partner does not obtain a tax reduction
30under section 55B in respect of a tax year in which an election is in force
the election ceases to have effect for subsequent tax years; but this does
not prevent an individual making a further election for the purposes of
section 55B(2)(a) (whether or not in relation to the same marriage or
civil partnership).

(6) 35The withdrawal of an election under subsection (4) does not, except in
the cases dealt with by subsection (7), have effect until the tax year after
the one in which the notice is given.

(7) The withdrawal of an election under subsection (4) has effect for the tax
year in which the notice is given if—

(a) 40in a case where the individual concerned met the condition in
section 55C(1)(a) by reason of being married, the marriage has
come to an end in that tax year, or

(b) in a case where the individual concerned met the condition in
section 55C(1)(a) by reason of being in a civil partnership, the
45civil partnership has come to an end in that tax year.

(8) For the purposes of subsection (7)(a), a marriage comes to an end if any
of the following is made in respect of it—

(a) a decree absolute of divorce, a decree of nullity of marriage or a
decree of judicial separation, or

(b) in Scotland, a decree of divorce, a declarator of nullity or a
decree of separation.

(9) 5For the purposes of subsection (7)(b), a civil partnership comes to an
end if any of the following is made in respect of it—

(a) a dissolution order or nullity order, which has been made final,

(b) a separation order, or

(c) in Scotland, a decree of dissolution, a declarator of nullity or a
10decree of separation.

(10) A notice under subsection (4) must—

(a) be given to an officer of Revenue and Customs, and

(b) must be in the form specified by the Commissioners for Her
Majesty’s Revenue and Customs.

(11) 15Paragraph 3(1)(b) of Schedule 1A to TMA 1970 (amendment of claims
and elections) does not apply to an election under section 55C.

Supplementary

55E Limitation on number of tax reductions and elections

(1) An individual is not entitled to more than one tax reduction under
20section 55B for a tax year (regardless of whether the individual is a
party to more than one marriage or civil partnership in the tax year).

(2) An individual is not entitled to have more than one election for the
purposes of section 55B which operates for a tax year (regardless of
whether the individual is a party to more than one marriage or civil
25partnership in the tax year).”

(3) In section 26 (tax reductions), in subsection (1)(a), after the entry relating to
Chapter 3 of Part 3 insert—

• “Chapter 3A of Part 3 of this Act (transferable tax allowance for
  married couples and civil partners),”.

(4) 30In section 31 (total income: supplementary), in subsection (2), after “basic”
insert “rate”.

(5) In section 33 (overview of Part)—

(a) in subsection (3), after “partners” insert “where a party to the marriage
or civil partnership is born before 6 April 1935”,

(b) 35after that subsection insert—

“(3A) Chapter 3A provides for a transferable tax allowance for
married couples and civil partners.”,

(c) in subsection (4), in the opening words, for “and 3” substitute “, 3 and
3A”,

(d) 40in subsection (4)(a), after “Chapter 3” insert “or 3A”, and

(e) in subsection (4)(b), for “those allowances and tax reductions”
substitute “the allowances under Chapter 2 and tax reductions under
Chapter 3”.

(6) In the heading for Chapter 3 of Part 3 after “partners” insert “: persons born
before 6 April 1935”.

(7) In section 56 (residence), in subsection (1)(b), after “Chapter 3” insert “or 3A”.

(8) In section 809G (claim for remittance basis: effect on allowances), in subsection
5(2)—

(a) omit the “or” following paragraph (b), and

(b) after paragraph (b) insert—

“(ba) any tax reduction under Chapter 3A of that Part
(transferable tax allowance for married couples and civil
10partners), or”.

(9) TMA 1970 is amended as set out in subsections (10) and (11).

(10) In section 42 (procedure for making claims)—

(a) in subsection (10), after “above” insert “and subject to subsection (10A)
below”, and

(b) 15after subsection (10) insert—

“(10A) Subsection (2) above does not apply in relation to an election
under section 55C of ITA 2007 (election to transfer allowance to
spouse or civil partner).”

(11) In section 43A (further assessments: claims etc), in subsection (2A) after
20paragraph (a) insert—

“(aa) section 55C of ITA 2007 (election to transfer allowance to spouse
or civil partner),”.

(12) The amendments made by this section have effect for the tax year 2015-16 and
subsequent tax years.

12 25Recommended medical treatment

(1) Part 4 of ITEPA 2003 (exemptions) is amended as follows.

(2) In Chapter 11 (miscellaneous exemptions), after section 320B insert—

“Recommended medical treatment

320C Recommended medical treatment

(1) 30No liability to income tax arises in respect of—

(a) the provision to an employee of recommended medical
treatment, or

(b) the payment or reimbursement, to or in respect of an employee,
of the cost of such treatment,

35if that provision, payment or reimbursement is not pursuant to relevant
salary sacrifice arrangements or relevant flexible remuneration
arrangements.

(2) But subsection (1) does not apply in a tax year if, and to the extent that,
the value of the exemption in that year exceeds £500.

(3) 40Medical treatment is “recommended” if it is provided to the employee
in accordance with a recommendation which—

(a) is made to the employee as part of occupational health services
provided to the employee by a service provided—

(i) under section 2 of the Employment and Training Act
1973 (arrangements for the purpose of assisting persons
5to retain employment etc), or

(ii) by, or in accordance with arrangements made by, the
employer,

(b) is made for the purpose of assisting the employee to return to
work after a period of absence due to injury or ill health, and

(c) 10meets any other requirements specified in regulations made by
the Treasury.

(4) Regulations under subsection (3)(c) may, in particular, specify that the
recommendation must be one given after the employee has been
assessed as unfit for work—

(a) 15for at least the specified number of consecutive days, and

(b) in the specified manner by a person of a specified description.

(5) The Treasury may by order amend subsection (3)(a) so as to add,
amend or remove a reference to any enactment.

(6) “The value of the exemption”, in a tax year, is an amount equal to the
20sum of—

(a) all earnings within section 62 (earnings), and

(b) all earnings which are treated as such under the benefits code,

in respect of which subsection (1) would prevent liability to income tax
from arising in the tax year disregarding subsection (2).

(7) 25In this section—

• “medical treatment” means all procedures for diagnosing or
  treating any physical or mental illness, infirmity or defect;

• “relevant salary sacrifice arrangements” means arrangements
  (whenever made, whether before or after the employment
  30began) under which the employee gives up the right to receive
  an amount of general earnings or specific employment income
  in return for the provision of recommended medical treatment
  or the payment or reimbursement of the cost of such treatment;

• “relevant flexible remuneration arrangements” means
  35arrangements (whenever made, whether before or after the
  employment began) under which the employee and employer
  agree that the employee is to be provided with recommended
  medical treatment or the cost of such treatment is to be paid or
  reimbursed, rather than the employee receiving some other
  40description of employment income;

• “specified” means specified in regulations under subsection
  (3)(c).”

(3) In section 266 (exemption of non-cash vouchers for exempt benefits), in
subsection (1), omit the “or” at the end of paragraph (d) and after paragraph (e)
45insert “, or

“(f) section 320C (recommended medical treatment);”.

(4) The amendments made by this section have effect in accordance with provision
contained in an order made by the Treasury.

(5) Section 1014(4) of ITA 2007 (orders etc subject to annulment) does not apply in
relation to an order under subsection (4).

13 Relief for loan interest: loan to buy interest in close company

(1) Chapter 1 of Part 8 of ITA 2007 (relief for interest payments) is amended as
5follows.

(2) In section 392 (loan to buy interest in close company), in subsection (4)—

(a) after “section 393—” insert—

• ““close company” includes a company which—

  (a)

  is resident in an EEA state other than the United
  10Kingdom, and

  (b)

  if it were UK resident, would be a close
  company,”, and

(b) in the definition of “close investment-holding company”, for “section
34 of CTA 2010” substitute “section 393A”.

(3) 15After section 393 insert—

“393A Close investment-holding companies

(1) For the purposes of sections 392 and 393, a close company (“the
candidate company”) is a close investment-holding company in an
accounting period unless throughout the period it exists wholly or
20mainly for one or more of the permitted purposes set out in subsection
(2).

There is an exception to this rule in subsection (5).

There is an exception to this rule in subsection (5).

(2) The candidate company exists for a permitted purpose so far as it
25exists—

(a) for the purpose of carrying on a trade or trades on a commercial
basis,

(b) for the purpose of making investments in land, or estates or
interests in land, in cases where the land is, or is intended to be,
30let commercially (see subsection (3)),

(c) for the purpose of holding shares in and securities of, or making
loans to, one or more companies each of which—

(i) is a qualifying company, or

(ii) falls within subsection (4),

(d) 35for the purpose of co-ordinating the administration of two or
more qualifying companies,

(e) for the purpose of the making of investments as mentioned in
paragraph (b)—

(i) by one or more qualifying companies, or

(ii) 40by a company which has control of the candidate
company, or

(f) for the purpose of a trade or trades carried on on a commercial
basis—

(i) by one or more qualifying companies, or

(ii) 45by a company which has control of the candidate
company.

(3) For the purposes of subsection (2)(b), any letting of land is taken to be
commercial unless the land is let to—

(a) a person connected with the candidate company (“a connected
person”), or

(b) 5a person who is—

(i) the spouse or civil partner of a connected person,

(ii) a relative of a connected person, or the spouse or civil
partner of a relative of a connected person,

(iii) the relative of the spouse or civil partner of a connected
10person, or

(iv) the spouse or civil partner of a relative of a spouse or
civil partner of the connected person.

(4) A company falls within this subsection (see subsection (2)(c)(ii)) if—

(a) it is under the control of the candidate company or of a
15company which has control of the candidate company, and

(b) it exists wholly or mainly for the purpose of holding shares in
or securities of, or of making loans to, one or more qualifying
companies.

(5) If a company is wound up and was not a close investment-holding
20company in the accounting period that ends (by virtue of section 12(2)
of CTA 2009) immediately before the winding up starts, the company
is not treated for the purposes of sections 392 and 393 as being a close
investment-holding company in the subsequent accounting period.

(6) In this section “qualifying company” means a company which—

(a) 25is under the control of the candidate company or of a company
which has control of the candidate company, and

(b) exists wholly or mainly for either or both of the purposes
mentioned in subsection (2)(a) and (b).

(7) In this section—

• 30“accounting period” has the meaning given by section 1119 of
  CTA 2010,

• “close company” includes a company which—

  (a)

  is resident in an EEA state other than the United
  Kingdom, and

  (b)

  35if it were UK resident, would be a close company,

• “control” has the meaning given by section 450 of CTA 2010, and

• “relative” means brother, sister, ancestor or lineal descendant.”

(4) Accordingly—

(a) in section 383(2)(c), after “close company” insert “etc”,

(b) 40in the italic heading before section 392, after “close company” insert “etc”;

(c) in the heading of section 392, after “close company” insert “etc”.

(5) The amendments made by this section have effect in relation to interest paid in
the tax year 2014-15 or any subsequent tax year.

14 Relief for loan interest: loan to buy interest in employee-controlled company

(1) 45In section 397 of ITA 2007 (eligibility requirements for interest on loans within

section 396), for subsection (2)(a) substitute—

“(a) an unquoted company that is resident in the United Kingdom
or another EEA state and is not resident outside the European
Economic Area, and”.

(2) The amendment made by this section has effect in relation to interest paid in
5the tax year 2014-15 or any subsequent tax year.

Other provisions

15 Restrictions on remittance basis

Schedule 3 makes provision in relation to the remittance basis.

16 Treatment of agency workers

(1) 10Chapter 7 of Part 2 of ITEPA 2003 (income tax treatment of agency workers) is
amended as follows.

(2) For section 44 (treatment of workers supplied by agencies) substitute—

“44 Treatment of workers supplied by agencies

(1) This section applies if—

(a) 15an individual (“the worker”) personally provides services
(which are not excluded services) to another person (“the
client”),

(b) there is a contract between—

(i) the client or a person connected with the client, and

(ii) 20a person other than the worker, the client or a person
connected with the client (“the agency”), and

(c) under or in consequence of that contract—

(i) the services are provided, or

(ii) the client or any person connected with the client pays,
25or otherwise provides consideration, for the services.

(2) But this section does not apply if—

(a) it is shown that the manner in which the worker provides the
services is not subject to (or to the right of) supervision,
direction or control by any person, or

(b) 30remuneration receivable by the worker in consequence of
providing the services constitutes employment income of the
worker apart from this Chapter.

(3) If this section applies—

(a) the worker is to be treated for income tax purposes as holding
35an employment with the agency, the duties of which consist of
the services the worker provides to the client, and

(b) all remuneration receivable by the worker (from any person) in
consequence of providing the services is to be treated for
income tax purposes as earnings from that employment,

40but this is subject to subsections (4) to (6).

(4) Subsection (5) applies if (whether before or after the worker begins to
provide the services)—

(a) the client provides the agency with a fraudulent document
which is intended to constitute evidence that, by virtue of
5subsection (2)(a), this section does not or will not apply, or

(b) a relevant person provides the agency with a fraudulent
document which is intended to constitute evidence that, by
virtue of subsection (2)(b), this section does not or will not
apply.

(5) 10In relation to services the worker provides to the client after the
fraudulent document is provided—

(a) subsection (3) does not apply,

(b) the worker is to be treated for income tax purposes as holding
an employment with the client or (as the case may be) with the
15relevant person, the duties of which consist of the services, and

(c) all remuneration receivable by the worker (from any person) in
consequence of providing the services is to be treated for
income tax purposes as earnings from that employment.

(6) In subsections (4) and (5) “relevant person” means a person, other than
20the client, the worker or a person connected with the client or with the
agency, who—

(a) is resident, or has a place of business, in the United Kingdom,
and

(b) is party to a contract with the agency or a person connected with
25the agency, under or in consequence of which—

(i) the services are provided, or

(ii) the agency, or a person connected with the agency,
makes payments in respect of the services.”

(3) In section 45 (arrangements with agencies)—

(a) 30in paragraph (a), omit “(“the agency”)”, and

(b) in paragraph (b), omit “with the agency”.

(4) In section 46 (cases involving unincorporated bodies etc)—

(a) in subsection (1)(a), omit “, or is under an obligation to personally
provide,”, and

(b) 35in subsection (2), for the words from “under” to “contract” substitute
“in consequence of the worker providing the services”.

(5) After section 46 insert—

“Anti-avoidance

46A Anti-avoidance

(1) This section applies if—

(a) 40an individual (“W”) personally provides services (which are not
excluded services) to another person (“C”),

(b) a third person (“A”) enters into arrangements the main purpose,
or one of the main purposes, of which is to secure that the
services are not treated for income tax purposes under section
4544 as duties of an employment held by W with A, and

(c) but for this section, section 44 would not apply in relation to the
services.

(2) In subsection (1)(b) “arrangements” include any scheme, transaction or
series of transactions, agreement or understanding, whether or not
5legally enforceable, and any associated operations.

(3) Subject to subsection (2) of section 44, that section applies in relation to
the services.

(4) For the purposes of subsection (3)—

(a) W is to be treated as being the worker,

(b) 10C is to be treated as being the client,

(c) A is to be treated as being the agency, and

(d) section 44 has effect as if subsections (4) to (6) of that section
were omitted.”

(6) In section 47 (interpretation of Chapter 7), omit subsection (1).

(7) 15In Chapter 3 of Part 11 of that Act (PAYE: special types of payer or payee),
section 688 (agency workers) is amended as follows.

(8) For subsection (1) substitute—

“(1) This section applies if the remuneration receivable by an individual in
consequence of providing services falls to be treated under section 44
20(agency workers) as earnings from an employment.

(1A) The relevant provisions have effect as if the individual held the
employment with or under the deemed employer, subject to subsection
(2).

(1B) For the purposes of sections 687, 689 and 689A, if—

(a) 25a person other than the deemed employer or an intermediary of
the deemed employer makes a payment of, or on account of,
PAYE income of the individual, and

(b) the payment is not within subsection (2),

the person is to be treated as making the payment as an intermediary of
30the deemed employer.”

(9) In subsection (2)—

(a) for paragraph (a) (and the “and” at the end of that paragraph)
substitute—

“(a) the client is not the deemed employer, and”, and

(b) 35for “agency” substitute “deemed employer”.

(10) In subsection (3), for the words from “subsections” to “44;” substitute “this
section—

• “the client” means the person who is the client for the purposes of
  section 44;

• 40“the deemed employer” means the person with whom the
  individual is treated under section 44 as having an
  employment, the duties of which consist of the services;”.

(11) The amendments made by this section are treated as having come into force on
6 April 2014.

17 Recovery under PAYE regulations from certain company officers

(1) In Part 4 of the Income Tax (Pay As You Earn) Regulations 2003 (S.I. 2003/2682)
(payments, returns and information), after Chapter 3 (PAYE records) insert—

“ CHAPTER 3A Certain debts of companies under Chapter 7 of Part 2 of ITEPA
5(agencies)

97ZA Interpretation of Chapter 3A

In this Chapter—

• “company” includes a limited liability partnership;

• “HMRC” means Her Majesty’s Revenue and Customs;

• 10“director” has the meaning given by section 67 of ITEPA;

• “personal liability notice” has the meaning given by regulation
  97ZB(2);

• “relevant PAYE debt”, in relation to a company, means—

  (a)

  any amount that the company is to deduct, or account
  15for, in accordance with these Regulations by virtue of—

  (i)

  section 44(4) to (6) of ITEPA (persons providing
  fraudulent documents), or

  (ii)

  section 46A of that Act (anti-avoidance), and

  (b)

  any interest or penalty, in respect of an amount within
  20paragraph (a), for which the company is liable;

• “the relevant date”, in relation to a relevant PAYE debt, means—

  (a)

  in a case where the relevant PAYE debt is to be deducted
  or accounted for, or arises, by virtue of subsections (4) to
  (6) of section 44 of ITEPA, the date on which the
  25fraudulent document was provided as mentioned in
  subsection (4) of that section, or

  (b)

  in a case where the relevant PAYE debt is to be deducted
  or accounted for, or arises, by virtue of section 46A of
  ITEPA, the date the arrangements mentioned in
  30subsection (1)(b) of that section were entered into;

• “the specified amount” has the meaning given by regulation
  97ZB(2)(a).

97ZB Liability of directors for relevant PAYE debts

(1) This regulation applies in relation to an amount of relevant PAYE debt
35of a company if the company does not deduct, account for or (as the
case may be) pay that amount by the time by which the company is
required to do so.

(2) HMRC may serve a notice (a “personal liability notice”) on any person
who was, on the relevant date, a director of the company—

(a) 40specifying the amount of relevant PAYE debt in relation to
which this regulation applies (“the specified amount”), and

(b) requiring the director to pay to HMRC—

(i) the specified amount, and

(ii) specified interest on that amount.