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

(i) the follower notice has not been withdrawn, and

(ii) if representations objecting to the follower notice were made
under section 200 (representations about a follower notice),
HMRC have confirmed the follower notice.

(4) 5A stop notice must—

(a) specify the arrangements which are the subject of the follower notice
mentioned in sub-paragraph (3)(a),

(b) specify the judicial ruling identified in that follower notice,

(c) specify a relevant proposal in relation to which the condition in sub-
10paragraph (3)(b) is met, and

(d) explain the effect of the stop notice.

(5) An authorised officer may determine that a stop notice given to a person is
to cease to have effect.

(6) If an authorised officer makes a determination under sub-paragraph (5) the
15officer must give the person written notice of the determination.

(7) The notice must specify the date from which it takes effect, which may be
earlier than the date on which the notice is given.

(8) In this paragraph—

• “the notice period” means the period of 30 days beginning with the day
  20on which a stop notice is given;

• “judicial ruling” means a ruling of a court or tribunal.

Part 2 Meeting the threshold conditions: bodies corporate

13 (1) Sub-paragraph (2) applies where—

(a) 25a relevant threshold condition is met by a person (“P”) at a time (“the
earlier time”) when P has control of a body corporate,

(b) a determination under section 230 is made at a later time in relation
to the body corporate, and

(c) P has control of the body corporate at the time of the determination.

(2) 30The body corporate is regarded as having met the threshold condition at the
earlier time.

(3) “Relevant threshold condition” means a threshold condition specified in any
of the following paragraphs of Schedule 30—

(a) paragraph 2 (deliberate tax defaulters);

(b) 35paragraph 4 (dishonest tax agents);

(c) paragraph 6 (criminal offences);

(d) paragraph 7 (opinion notice of GAAR advisory panel);

(e) paragraph 8 (disciplinary action by professional body);

(f) paragraph 9 (disciplinary action by regulatory authority);

(g) 40paragraph 10 (failure to comply with information notice).

(4) For the purposes of this paragraph a person (“P”) has control of a body
corporate (“B”) if P has power to secure—

(a) by means of the holding of shares or the possession of voting power
in relation to B or any other body corporate, or

(b) as a result of any powers conferred by the articles of association or
other document regulating B or any other body corporate,

that the affairs of B are conducted in accordance with P’s wishes.

Part 3 5Power to amend

14 (1) The Treasury may by regulations amend this Schedule.

(2) An amendment made by virtue of sub-paragraph (1) may, in particular—

(a) vary or remove any of the conditions set out in paragraphs 2 to 12;

(b) add new conditions.

(3) 10Regulations under sub-paragraph (1) may include any amendment of this
Part of this Act that is appropriate in consequence of an amendment made
by virtue of sub-paragraph (1).

Section 267

SCHEDULE 31 Penalties

15Introduction

1 In this Schedule a reference to an “information duty” is to a duty arising
under any of the following provisions to provide information or produce a
document—

(a) section 248 (duty to provide information or produce document);

(b) 20section 250 (ongoing duty to provide information);

(c) section 251 (duty of person dealing with non-resident promoter);

(d) section 252 (monitored promoter: duty to provide information about
clients);

(e) section 253 (intermediaries: duty to provide information about
25clients);

(f) section 254 (duty to provide information about clients following
enquiry);

(g) section 255 (information required for monitoring compliance with
conduct notice);

(h) 30section 256 (information about monitored promoter’s address).

Penalties for failure to comply

2 (1) A person who fails to comply with a duty imposed by or under this Part
mentioned in column 1 of the Table is liable to a penalty not exceeding the
amount shown in relation to that provision in column 2 of the Table.

(2) In relation to a failure to comply with section 242(1), 244, 245, 252 or 253 the
maximum penalty specified in column 2 of the Table is a maximum penalty
which may be imposed in respect of each person to whom the failure relates.

(3) 60In relation to a failure to comply with section 246, the “relevant amount” is—

(a) £5,000, unless paragraph (b) or (c) applies;

(b) £7,500, where a person has previously failed to comply with section
246 on one (and only one) occasion during the period of 36 months
ending with the date on which the current failure occurred;

(c) 65£10,000, where a person has previously failed to comply with section
246 on two or more occasions during the period mentioned in
paragraph (b).

(4) The amount of a penalty imposed under sub-paragraph (1) is to be arrived
at after taking account of all relevant considerations, including the
70desirability of setting it at a level which appears appropriate for deterring
the person, or other persons, from similar failures to comply on future
occasions having regard (in particular)—

(a) in the case of a penalty imposed for a failure to comply with section
248 or 250, to the amount of fees received, or likely to have been
75received, by the person in connection with the monitored proposal,
arrangements implementing the monitored proposal or monitored
arrangements to which the information or document required as a
result of section 248 or 250 relates,

(b) in the case of a penalty imposed in relation to a failure to comply
80with section 251(3) or (4), to the amount of any tax advantage gained,
or sought to be gained, by the person in relation to the monitored
arrangements or the arrangements implementing the monitored
proposal.

Daily default penalties for failure to comply

3 (1) 85If the failure to comply with an information duty continues after a penalty is
imposed under paragraph 2(1), the person is liable to a further penalty or
penalties not exceeding the relevant sum for each day on which the failure
continues after the day on which the penalty under paragraph 2(1) was
imposed.

(2) 90In sub-paragraph (1) “the relevant sum” means—

(a) £10,000, in a case where the maximum penalty which could have
been imposed for the failure was £1,000,000;

(b) £600, in cases not falling within paragraph (a).

Penalties for inaccurate information and documents

4 (1) 95If—

(a) in complying with an information duty, a person provides
inaccurate information or produces a document that contains an
inaccuracy, and

(b) condition A, B or C is met,

100the person is liable to a penalty not exceeding the relevant sum.

(2) Condition A is that the inaccuracy is careless or deliberate.

(3) An inaccuracy is careless if it is due to a failure by the person to take
reasonable care.

(4) For the purpose of determining whether or not a person who is a monitored
promoter took reasonable care, reliance on legal advice is to be disregarded
5if either—

(a) the advice was not based on a full and accurate description of the
facts, or

(b) the conclusions in the advice that the person relied on were
unreasonable.

(5) 10For the purpose of determining whether or not a person who complies with
a duty under section 251 took reasonable care, reliance on legal advice is to
be disregarded if the advice was given or procured by the monitored
promoter mentioned in subsection (1) of that section.

(6) Condition B is that the person knows of the inaccuracy at the time the
15information is provided or the document produced but does not inform
HMRC at that time.

(7) Condition C is that the person—

(a) discovers the inaccuracy some time later, and

(b) fails to take reasonable steps to inform HMRC.

(8) 20The “relevant sum” means—

(a) £1,000,000, where the information is provided or document
produced in compliance with a duty under section 248, 250 or 251;

(b) £10,000, where the information is provided in compliance with a
duty under section 254;

(c) 25£5,000, where the information is provided or document produced in
compliance with a duty under section 252, 253, 255 or 256.

(9) If the information or document contains more than one inaccuracy, one
penalty is payable under this paragraph whatever the number of
inaccuracies.

30Power to change amount of penalties

5 (1) If it appears to the Treasury that there has been a change in the value of
money since the last relevant date, they may by regulations substitute for the
sums for the time being specified in paragraph 2, 3 or 4 such other sums as
appear to them to be justified by the change.

(2) 35Regulations under sub-paragraph (1) may include any amendment of
paragraph 10(b) that is appropriate in consequence of an amendment made
by virtue of sub-paragraph (1).

(3) The “relevant date”, in relation to a specified sum, means—

(a) the date on which this Act is passed, and

(b) 40each date on which the power conferred by sub-paragraph (1) has
been exercised in relation to that sum.

Concealing, destroying etc documents following imposition of a duty to provide information

6 (1) A person must not conceal, destroy or otherwise dispose of, or arrange for
the concealment, destruction or disposal of, a document which is subject to
a duty under section 248, 250 or 255.

(2) 5Sub-paragraph (1) does not apply if the person acts after the document has
been produced to an officer of Revenue and Customs in accordance with the
duty, unless the officer has notified the person in writing that the document
must continue to be available for inspection (and has not withdrawn the
notification).

(3) 10Sub-paragraph (1) does not apply, in a case to which section 261(1) applies,
if the person acts after the expiry of the period of 6 months beginning with
the day on which a copy of the document was produced in accordance with
that section unless, before the expiry of that period, an officer of Revenue
and Customs makes a request for the original document under section
15261(2)(b).

(4) A person who conceals, destroys or otherwise disposes of, or arranges for
the concealment, destruction or disposal of, a document in breach of sub-
paragraph (1), is taken to have failed to comply with the duty to produce the
document under the provision concerned (but see sub-paragraph (5)).

(5) 20If a person conceals, destroys or otherwise disposes of, or arranges for the
concealment, destruction or disposal of, a document which is subject to a
duty under more than one of the provisions mentioned in sub-paragraph (1)
then—

(a) in a case where a duty under section 248 applies, the person will be
25taken to have failed to comply only with that provision, or

(b) in a case where a duty under section 248 does not apply, the person
will be taken to have failed to comply only with section 250.

Concealing, destroying etc documents following informal notification

7 (1) A person must not conceal, destroy or otherwise dispose of, or arrange for
30the concealment, destruction or disposal of, a document if an officer of
Revenue and Customs has informed the person in writing that the person is,
or is likely, to be given a notice under 248, 250 or 255 the effect of which will,
or is likely to, require the production of the document.

(2) Sub-paragraph (1) does not apply if the person acts—

(a) 35at least 6 months after the person was, or was last, informed as
described in sub-paragraph (1), or

(b) after the person becomes subject to a duty under 248, 250 or 255
which requires the document to be produced.

(3) A person who conceals, destroys or otherwise disposes of, or arranges for
40the concealment, destruction or disposal of, a document in breach of sub-
paragraph (1), is taken to have failed to comply with the duty to produce the
document under the provision concerned (but see sub-paragraph (4)).

(4) If a person conceals, destroys or otherwise disposes of, or arranges for the
concealment, destruction or disposal of, a document which is subject to a
45duty under more than one of the provisions mentioned in sub-paragraph (1)
then—

(a) in a case where a duty under section 248 applies, the person will be
taken to have failed to comply only with that provision, or

(b) in a case where a duty under section 248 does not apply, the person
will be taken to have failed to comply only with section 250.

5Failure to comply with time limit

8 A failure to do anything required to be done within a limited period of time
does not give rise to liability to a penalty under this Schedule if the person
did it within such further time, if any, as an officer of Revenue and Customs
or the tribunal may have allowed.

10Reasonable excuse

9 (1) Liability to a penalty under this Schedule does not arise if there is a
reasonable excuse for the failure.

(2) For the purposes of this paragraph—

(a) an insufficiency of funds is not a reasonable excuse unless
15attributable to events outside the person’s control,

(b) if the person relies on any other person to do anything, that is not a
reasonable excuse unless the first person took reasonable care to
avoid the failure,

(c) if the person had a reasonable excuse for the failure but the excuse
20has ceased, the person is to be treated as having continued to have
the excuse if the failure is remedied without unreasonable delay after
the excuse ceased,

(d) reliance on legal advice is to be taken automatically not to constitute
a reasonable excuse where the person is a monitored promoter if
25either—

(i) the advice was not based on a full and accurate description of
the facts, or

(ii) the conclusions in the advice that the person relied on were
unreasonable, and

(e) 30reliance on legal advice is to be taken automatically not to constitute
a reasonable excuse in the case of a penalty for failure to comply with
section 251, if the advice was given or procured by the monitored
promoter mentioned in subsection (1) of that section.

Assessment of penalty and appeals

10 35Part 10 of TMA 1970 (penalties, etc) has effect as if—

(a) the reference in section 100(1) to the Taxes Acts were read as a
reference to the Taxes Acts and this Schedule,

(b) in subsection (2) of section 100, there were inserted a reference to a
penalty under this Schedule, other than a penalty under paragraph 3
40of this Schedule in respect of which the relevant sum is £600.

Interest on penalties

11 (1) A penalty under this Schedule is to carry interest at the rate applicable under
section 178 of FA 1989 from the date it is determined until payment.

(2) In section 178 of FA 1989 (setting of rates of interest), in subsection (2) at the

end of paragraph (t) insert “, and

“(u) paragraph 11 of Schedule 31 to the Finance Act 2014.”

Double jeopardy

12 A person is not liable to a penalty under this Schedule in respect of anything
in respect of which the person has been convicted of an offence.

5Overlapping penalties

13 A person is not liable to a penalty under—

(a) Schedule 24 to the FA 2007 (penalties for errors),

(b) Part 7 of FA 2004, or

(c) any other provision which is prescribed,

10by reason of any failure to include in any return or account a reference
number required by section 246.

Section 274

SCHEDULE 32 Promoters of tax avoidance schemes: partnerships

Part 1 15Partnerships as persons

“Person” includes a partnership

1 (1) Persons carrying on a business in partnership—

(a) are regarded as a person for the purposes of this Part of this Act;

(b) are referred to in this Part as a “partnership”.

(2) 20But sub-paragraph (1) does not apply to a body of persons forming a legal
person that is distinct from themselves.

(3) In the references in this Part to carrying on a business in partnership,
“partnership” has the same meaning as in the Partnership Act 1890.

Continuity of partnerships

2 25A partnership is regarded for the purposes of this Part of this Act as
continuing to be the same partnership (and the same person) regardless of a
change in membership, provided that a person who was a member before
the change remains a member after the change.

Meeting of conditions

3 (1) 30Accordingly, for the purposes of this Part of this Act a partnership is taken—

(a) to have done any act that bound the members, and

(b) to have failed to comply with any obligation of the firm which the
members failed to comply with;

but see sub-paragraph (3).

(2) In sub-paragraph (1), “the members” means those who were the members of
the partnership or (in the case of a limited partnership) the general partners
of the partnership at the time when the act was done or the failure to comply
occurred.

(3) 5Where a member of a partnership (“M”) has done, or failed to do, an act at
any time (“the earlier time”), the partnership is not treated at any later time
as having done, or failed to do, that act unless—

(a) M, or

(b) another person who was a member of the partnership at the earlier
10time,

is a member of the partnership at the later time.

(4) In this paragraph “firm” has the same meaning as in the Partnership Act
1890.

Threshold conditions: actions of partners in a personal capacity

4 (1) 15Sub-paragraph (2) applies where—

(a) a relevant threshold condition is met by a person (“P”) at a time (“the
earlier time”) when P is a controlling member, or managing partner,
of a partnership,

(b) a determination under section 230 is made at a later time in relation
20to the partnership, and

(c) P is a controlling member, or managing partner, of the partnership at
the time of the determination.

(2) The partnership is regarded as having met the threshold condition at the
earlier time (regardless of whether or not the partnership was bound by the
25act or omission as a result of which P met the threshold condition).

(3) “Relevant threshold condition” means a threshold condition specified in any
of the following paragraphs of Schedule 30—

(a) paragraph 2 (deliberate tax defaulters);

(b) paragraph 4 (dishonest tax agents);

(c) 30paragraph 6 (criminal offences);

(d) paragraph 7 (opinion notice of GAAR advisory panel);

(e) paragraph 8 (disciplinary action by a professional body);

(f) paragraph 9 (disciplinary action by a regulatory authority);

(g) paragraph 10 (failure to comply with information notice).

35Part 2 Conduct notices and monitoring notices

Conduct notices

5 (1) A conduct notice that is given to a partnership must state that it is a
partnership conduct notice.

(2) 40In accordance with paragraphs 1 and 2, where the person to whom a conduct
notice is given is a partnership, section 231 authorises the imposition of
conditions relating to—

(a) the persons who are members of the partnership when the conduct
notice is given, and

(b) any person who becomes a member of the partnership after the
conduct notice is given.

5Monitoring notices

6 A monitoring notice that is given to a partnership must state that it is a
partnership monitoring notice.

Person continuing to carry on partnership business as a sole trader

7 (1) This paragraph applies where—

(a) 10a person or persons have ceased to be members of a partnership,

(b) immediately before the cessation, a conduct notice or monitoring
notice had effect in relation to the partnership, and

(c) immediately after the cessation, a person who was a member of the
partnership immediately before the cessation is carrying on the
15business of the partnership, but not in partnership.

(2) Where this paragraph applies, the conduct notice or monitoring notice
continues (despite paragraphs 1 and 2) to have effect in relation to the person
mentioned in sub-paragraph (1)(c) (but, in relation to times when the
business is not being carried on in partnership, the notice is not regarded for
20the purposes of this Part of this Act as a notice that has been given to a
partnership.)

Persons leaving a partnership: conduct notices

8 (1) Sub-paragraphs (2) and (3) apply where—

(a) a person (“P”) who was a controlling member of a partnership at the
25time when a conduct notice (“the original notice”) was given to the
partnership has ceased to be a member of the partnership,

(b) the conduct notice had effect in relation to the partnership at the time
of that cessation, and

(c) P is carrying on a business as a promoter.

(2) 30An authorised officer may give P a conduct notice.

(3) If P is carrying on a business as a promoter in partnership with one or more
other persons and is a controlling member of that partnership (“the new
partnership”), an authorised officer may give a conduct notice to the new
partnership.

(4) 35A conduct notice given under sub-paragraph (3) ceases to have effect if P
ceases to be a member of the new partnership.

(5) A notice under sub-paragraph (2) or (3) may not be given after the
termination date of the original notice (under section 234(2)(a) or (b)).

Persons leaving a partnership: monitoring notices

9 (1) 40Sub-paragraphs (2) and (3) apply where—

(a) a person (“P”) who was a controlling member of a partnership at the
time when a monitoring notice was given to the partnership has
ceased to be a member of the partnership,

(b) the monitoring notice had effect in relation to the partnership at the
5time of that cessation, and

(c) P is carrying on a business as a promoter.

(2) An authorised officer may give P a monitoring notice.

(3) If P is carrying on a business as a promoter in partnership with one or more
other persons, and is a controlling member of that partnership (“the new
10partnership”), an authorised officer may give a monitoring notice to the new
partnership.

(4) A monitoring notice given under sub-paragraph (3) ceases to have effect if P
ceases to be a member of the new partnership.

Division of partnership business

10 (1) 15This paragraph applies if—

(a) a person (“a departing partner”) who has been carrying on a business
in partnership ceases to carry on the business in partnership,

(b) a conduct notice or a monitoring notice had effect in relation to the
partnership immediately before the departing partner ceased to
20carry on the business in partnership, and

(c) the departing partner is continuing to carry on part (but not the
whole) of the business (“the transferred part”).

(2) The notice mentioned in sub-paragraph (1)(b) is referred to in this paragraph
as “the original notice”.

(3) 25An authorised officer may give the departing partner—

(a) a conduct notice (if the original notice is a conduct notice);

(b) a monitoring notice (if the original notice is a monitoring notice).

(4) If the departing partner is itself carrying on the transferred part of the
business in partnership, the authorised officer may give that partnership
30(“the new partnership”)—

(a) a conduct notice (if the original notice is a conduct notice);

(b) a monitoring notice (if the original notice is a monitoring notice).

(5) A notice given under sub-paragraph (4) ceases to have effect if P ceases to be
a member of the new partnership.

(6) 35A notice under sub-paragraph (3)(a) or (4)(a) may not be given after the
termination date of the original notice (under section 234(2)(a) or (b)).

(7) It does not matter whether one, some or all of the persons who were carrying
on the business in partnership are departing partners by virtue of sub-
paragraph (1).

40Notices under paragraphs 8 to 10: general

11 (1) In this Part of this Act—

• “replacement conduct notice” means a notice under paragraph 8(2) or
  (3) or 10(3)(a) or (4)(a);

Finance (No. 2) BillPage 550

• “replacement monitoring notice” means a notice given under
  paragraph 9(2) or (3) or 10(3)(b) or (4)(b).

(2) In this Part of this Act, “the original monitoring notice” means—

(a) in relation to a replacement monitoring notice given under
5paragraph 9(2), the monitoring notice mentioned in paragraph 9(1),
and

(b) in relation to a replacement monitoring notice given under
paragraph 10(3)(b) or (4)(b), the monitoring notice mentioned in
paragraph 10(2),

10and that original monitoring notice is also the “original monitoring notice”
in relation to any monitoring notice that (under paragraph 9(2) or (3) or
10(3)(b) or (4)(b)) replaces a replacement monitoring notice.

12 A notice under paragraph 8(2) or (3) or 10(3)(a) or (4)(a)—

(a) has no effect after the termination date of the original notice;

(b) 15must state that that date is its termination date.

13 An authorised officer may not give a replacement conduct notice or
replacement monitoring notice to a person if a conduct notice or monitoring
notice previously given to the person still has effect in relation to the person.

Publication under section 241

14 20Where the monitored promoter referred to in section 241(2) is a partnership,
paragraphs (a), (b) and (d) of that subsection are to be read as referring to
details of the partnership (for instance, the name under which the business
of the partnership is carried on), not to details of particular partners.

Part 3 25Responsibility of partners

Responsibility of partners

15 (1) A notice given to a partnership under this Part of this Act has effect, at any
time, in relation to the persons who are members of the partnership at that
time (“the responsible partners”).

(2) 30Sub-paragraph (1) does not affect any liability of a person who has ceased to
be a member of a partnership in respect of things that the responsible
partners did or failed to do before that person ceased to be a member of the
partnership.

(3) Anything required to be done by the responsible partners under or by virtue
35of a provision of this Part of this Act is required to be done by all the
responsible partners (but see paragraph 18).

(4) In relation to any right (such as a right of appeal) conferred by this Part of
this Act references to a person have the meaning that is appropriate in
consequence of sub-paragraphs (1) to (3).

40Joint and several liability of responsible partners

16 (1) Where the responsible partners are liable to a penalty under this Part of this
Act, or to interest on such a penalty, their liability is joint and several.

(2) No amount may be recovered under sub-paragraph (1) from a person who
did not become a responsible partner until after the relevant time.

(3) “The relevant time” means—

(a) in relation to so much of the penalty as is payable in respect of any
5day, or to interest on so much of a penalty as is so payable, the
beginning of that day;

(b) in relation to any other penalty, or interest on such a penalty, the time
when the act or omission occurred that caused the penalty to become
payable.

10Service of notices

17 (1) Any notice given to a partnership by an officer of Revenue and Customs
under this Part of this Act must be served either—

(a) on all the persons who are members of the partnership when the
notice is given, or

(b) 15on a representative partner.

(2) “Representative partner” means—

(a) a nominated partner, or

(b) if no partner has been nominated under paragraph 18(2), a partner
designated by an authorised officer as a representative partner.

(3) 20A designation under sub-paragraph (2), or the revocation of such a
designation, has effect only when notice of the designation, or revocation,
has been given to the partnership by an authorised officer.

Nominated partners

18 (1) Anything required to be done by the responsible partners under this Part of
25this Act may instead be done by any nominated partner.

(2) “Nominated partner” means a partner nominated by a majority of the
partners to act as the representative of the partnership for the purposes of
this Part of this Act.

(3) A nomination under sub-paragraph (2), or the revocation of such a
30nomination, has effect only after notice of the nomination, or revocation, has
been given to an authorised officer.

Part 4 Interpretation

Meaning of “controlling member”

19 (1) 35For the purposes of this Schedule a person (“P”) is a “controlling member”
of a partnership at any time when the person has a right to a share of more
than half the assets, or of more than half the income, of the partnership.

(2) For that purpose there are to be attributed to P any interests or rights of—

(a) any individual who is connected with P (if P is an individual), and

(b) 40any body corporate that P controls.

(3) An individual is “connected” with P if the individual is—

(a) P’s spouse or civil partner;

(b) a relative of P;

(c) the spouse or civil partner of a relative of P;

(d) a relative of P’s spouse or civil partner, or

(e) 5the spouse or civil partner of a relative of P’s spouse or civil partner.

(4) In sub-paragraph (3) “relative” means brother, sister, ancestor or lineal
descendant.

(5) P controls a body corporate (“B”) if P has power to secure—

(a) by means of the holding of shares or the possession of voting power
10in relation to B or any other body corporate, or

(b) as a result of any powers conferred by the articles of association or
other document regulating that or any other body corporate,

that the affairs of B are conducted in accordance with P’s wishes.

Meaning of “managing partner”

20 15In this Schedule “managing partner”, in relation to a partnership, means a
member of the partnership who directs or is on a day-to-day level in control
of, the management of the business of the partnership.

Power to amend definitions

21 (1) The Treasury may by regulations amend paragraph 19 or 20.

(2) 20Regulations under sub-paragraph (1) may include any amendment of this
Schedule that is necessary in consequence of any amendment made by
virtue of sub-paragraph (1).

Section 283

SCHEDULE 33 Companies owned by employee-ownership trusts

25Part 1 Capital gains tax relief

Relief on disposals to employee-ownership trusts

1 In Part 7 of TCGA 1992 (other property, businesses, investments etc), after
section 236G insert—

30“Employee-ownership trusts

236H Disposals to employee-ownership trusts

(1) This section applies where—

(a) a person other than a company (“P”) disposes of any ordinary
share capital of a company (“C”) to the trustees of a
35settlement,

(b) the relief requirements are met, and

(c) P makes a claim under this section.

(2) Section 17(1) (disposals and acquisitions treated as made at market
value) does not apply to the disposal.

(3) The disposal, and the acquisition by the trustees, are to be treated for
the purposes of this Act as being made for such consideration as to
5secure that neither a gain nor a loss accrues on the disposal.

(4) “The relief requirements” are—

(a) that C meets the trading requirement (see section 236I) at the
time of the disposal and continues to meet that requirement
for the remainder of the tax year in which that time falls,

(b) 10that the settlement meets the all-employee benefit
requirement (see sections 236J to 236L),

(c) that the settlement does not meet the controlling interest
requirement (see section 236M) immediately before the
beginning of the tax year in which the disposal occurs, but
15does meet it at the end of that year,

(d) that the limited participation requirement is met (see section
236N), and

(e) that this section does not apply in relation to any related
disposal by P or a person connected with P which occurs in
20an earlier tax year.

(5) A disposal in an earlier tax year is “related” to the disposal in
question if—

(a) both disposals are of ordinary share capital of the same
company, or

(b) 25the disposal in the earlier tax year is of ordinary share capital
of a company which is, or at the time of that disposal was, a
member of the same group as the company whose ordinary
share capital is the subject of the disposal in question.

(6) A claim under this section must include—

(a) 30information to identify the settlement,

(b) C’s name and the address of its registered office, and

(c) the date of the disposal and the number of shares disposed of.

236I Trading requirement

(1) C meets the trading requirement if C is—

(a) 35a trading company which is not a member of a group, or

(b) the principal company of a trading group.

(2) “Trading company” means a company carrying on trading activities
whose activities do not include to a substantial extent activities other
than trading activities.

(3) 40“Trading group” means a group—

(a) one or more of whose members carry on trading group
activities, and

(b) the activities of whose members, taken together, do not
include to a substantial extent activities other than trading
45group activities.

(4) In this section—

Finance (No. 2) BillPage 554

• “trading activities” means activities carried on by the company
  in the course of, or for the purposes of, a trade being carried
  on by it;

• “trading group activities” means activities carried on by a
  5member of the group in the course of, or for the purposes of,
  a trade being carried on by any member of the group.

(5) For the purposes of determining whether C is a trading company or
the principal company of a trading group—

(a) the activities of the members of a group are to be treated as
10one business (with the result that activities are disregarded to
the extent that they are intra-group activities), and

(b) a business carried on by a company in partnership with one
or more other persons is to be treated as not being a trading
activity or a trading group activity.

236J 15All-employee benefit requirement

(1) A settlement meets the all-employee benefit requirement if the trusts
of the settlement—

(a) do not permit any of the settled property to be applied, at any
time, otherwise than for the benefit of all the eligible
20employees on the same terms,