Finance Bill (HC Bill 10)

(a) may begin earlier than the date on which the notice is
given, but

(b) may not begin until after the end of the period mentioned
in sub-paragraph (5)(a) or, if relevant, the end of any
5period specified in any previous notice under sub-
paragraph (5)(c) given in relation to the failure.

(8) Liability for a penalty under this paragraph does not arise if the
company satisfies HMRC (or, on an appeal under paragraph 81K,
the tribunal) that there is a reasonable excuse for its failure.

(9) 10For the purposes of sub-paragraph (8)—

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

(b) where the company relies on any other person to do
anything, that is not a reasonable excuse unless the
15company took reasonable care to avoid the failure, and

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

81D Notices and returns to be given electronically etc

(1) A notice under paragraph 81A, and any information
accompanying the notice, must be given electronically.

(2) A return under paragraph 81B, and any information
25accompanying the return, must be given electronically.

(3) But, if HMRC consider it appropriate to do so, HMRC may allow
the company to give a notice or return or any accompanying
information in another way; and, if HMRC do so, the notice, return
or information must be given in that other way.

(4) 30The Commissioners for Her Majesty’s Revenue and Customs—

(a) must prescribe how notices, returns and accompanying
information are to be given electronically;

(b) may make different provision for different cases or
circumstances.

(1) 35This paragraph applies if a return under paragraph 81B, or any
information accompanying such a return—

(a) is given otherwise than in accordance with paragraph 81D,
or

(b) contains a material inaccuracy—

(i) 40which is careless or deliberate, or

(ii) which is not corrected as required by paragraph
81B(11).

(2) The company is liable for a penalty of an amount decided by
HMRC.

(3) 45The penalty must not exceed £5,000.

(4) For the purposes of sub-paragraph (1)(b)(i) an inaccuracy is
careless if it is due to a failure by the company to take reasonable
care.

81F Enquiries

(1) 5This paragraph applies if notice is given in relation to a SIP under
paragraph 81A.

(2) HMRC may enquire into the SIP if HMRC give notice to the
company of HMRC’s intention to do so no later than—

(a) 6 July in the tax year following the tax year in which the
10initial notification deadline falls, or

(b) if the notice under paragraph 81A is given after the initial
notification deadline, 6 July in the second tax year
following the relevant tax year.

(3) HMRC may enquire into the SIP if HMRC give notice to the
15company of HMRC’s intention to do so no later than 12 months
after the date on which a declaration within paragraph 81B(7) is
given to HMRC.

(4) Sub-paragraph (5) applies if (at any time) HMRC have reasonable
grounds for believing that requirements of Parts 2 to 9 of this
20Schedule—

(a) are not met in relation to the SIP, or

(b) have not been met in relation to the SIP.

(5) HMRC may enquire into the SIP if HMRC give notice to the
company of HMRC’s intention to do so.

(6) 25Notice may be given, and an enquiry may be conducted, under
sub-paragraph (2), (3) or (5) even though the termination
condition has been met in relation to the SIP.

(1) An enquiry under paragraph 81F(2), (3) or (5) is completed when
HMRC give the company a notice (a “closure notice”) stating—

(a) 30that HMRC have completed the enquiry, and

(b) that—

(i) paragraph 81H is to apply,

(ii) paragraph 81I is to apply, or

(iii) neither paragraph 81H nor paragraph 81I is to
35apply.

(2) If the company receives notice under paragraph 81F(2), (3) or (5),
the company may make an application to the tribunal for a
direction requiring a closure notice for the enquiry to be given
within a specified period.

(3) 40The application is to be subject to the relevant provisions of Part 5
of TMA 1970 (see, in particular, section 48(2)(b) of that Act).

(4) The tribunal must give a direction unless satisfied that HMRC
have reasonable grounds for not giving the closure notice within
the specified period.

(1) 45This paragraph applies if HMRC decide—

(a) that requirements of Parts 2 to 9 of this Schedule—

(i) are not met in relation to the SIP, or

(ii) have not been met in relation to the SIP, and

(b) that the situation is, or was, so serious that this paragraph
5should apply.

(2) If this paragraph applies—

(a) the SIP is not to be a Schedule 2 SIP with effect from—

(i) such relevant time as is specified in the closure
notice, or

(ii) 10if no relevant time is specified, the time of the
giving of the closure notice, and

(b) the company is liable for a penalty of an amount decided
by HMRC.

(3) Sub-paragraph (2)(a) does not affect the operation of the SIP code
15in relation to shares appropriated to, or acquired on behalf of, an
individual under the SIP before the time mentioned in sub-
paragraph (2)(a)(i) or (ii) (as the case may be).

(4) In particular, if the SIP was a Schedule 2 SIP when the shares were
appropriated to, or acquired on behalf of, the individual, the SIP is
20to continue to be a Schedule 2 SIP in relation to those shares.

(5) The penalty under sub-paragraph (2)(b) must not exceed an
amount equal to twice HMRC’s reasonable estimate of—

(a) the total income tax for which participants in the SIP have
not been liable, or will not be liable in the future, and

(b) 25the total contributions under Part 1 of SSCBA 1992 or
SSCB(NI)A 1992 for which any persons have not been
liable, or will not be liable in the future,

in consequence of the SIP having been a Schedule 2 SIP at any
relevant time before the time mentioned in sub-paragraph (2)(a)(i)
30or (ii) (as the case may be).

(6) The liabilities covered by sub-paragraph (5) include liabilities for
income tax or contributions which a person has not had, or will not
have, in consequence of sub-paragraphs (3) and (4).

(7) In this paragraph “relevant time” means any time before the
35giving of the closure notice when requirements of Parts 2 to 9 of
this Schedule were not met in relation to the SIP.

(1) This paragraph applies if HMRC decide—

(a) that requirements of Parts 2 to 9 of this Schedule—

(i) are not met in relation to the SIP, or

(ii) 40have not been met in relation to the SIP, but

(b) that the situation is not, or was not, so serious that
paragraph 81H should apply.

(2) If this paragraph applies, the company—

(a) is liable for a penalty of an amount decided by HMRC, and

(b) 45must, no later than 90 days after the relevant day, secure
that the requirements of Parts 2 to 9 of this Schedule are
met in relation to the SIP.

(3) The penalty under sub-paragraph (2)(a) must not exceed £5,000.

(4) In sub-paragraph (2)(b) “the relevant day” means—

(a) the last day of the period in which notice of an appeal
under paragraph 81K(2)(b) may be given, or

(b) 5if notice of such an appeal is given, the day on which the
appeal is determined or withdrawn.

(5) Sub-paragraph (2)(b) does not apply if the termination condition
was met in relation to the SIP before the giving of the closure
notice or is met before the end of the 90 day period mentioned in
10sub-paragraph (2)(b).

(6) If the company fails to comply with sub-paragraph (2)(b), HMRC
may give the company a notice stating that that is the case (a
“default notice”).

(7) If the company is given a default notice—

(a) 15the SIP is not to be a Schedule 2 SIP with effect from—

(i) such relevant time as is specified in the default
notice, or

(ii) if no relevant time is specified, the time of the
giving of the default notice, and

(b) 20the company is liable for a further penalty of an amount
decided by HMRC.

(8) Sub-paragraph (7)(a) does not affect the operation of the SIP code
in relation to shares appropriated to, or acquired on behalf of, an
individual under the SIP before the time mentioned in sub-
25paragraph (7)(a)(i) or (ii) (as the case may be).

(9) In particular, if the SIP was a Schedule 2 SIP when the shares were
appropriated to, or acquired on behalf of, the individual, the SIP is
to continue to be a Schedule 2 SIP in relation to those shares.

(10) The penalty under sub-paragraph (7)(b) must not exceed an
30amount equal to twice HMRC’s reasonable estimate of—

(a) the total income tax for which participants in the SIP have
not been liable, or will not be liable in the future, and

(b) the total contributions under Part 1 of SSCBA 1992 or
SSCB(NI)A 1992 for which any persons have not been
35liable, or will not be liable in the future,

in consequence of the SIP having been a Schedule 2 SIP at any
relevant time before the time mentioned in sub-paragraph (7)(a)(i)
or (ii) (as the case may be).

(11) The liabilities covered by sub-paragraph (10) include liabilities for
40income tax or contributions which a person has not had, or will not
have, in consequence of sub-paragraphs (8) and (9).

(12) In this paragraph “relevant time” means any time before the
giving of the default notice when requirements of Parts 2 to 9 of
this Schedule were not met in relation to the SIP.

81J Assessment of penalties

(1) This paragraph applies if the company is liable for a penalty under
this Part.

(2) HMRC must assess the penalty and notify the company of the
5assessment.

(3) Subject to sub-paragraphs (4) and (5), the assessment must be
made no later than 12 months after the date on which the company
becomes liable for the penalty.

(4) In the case of a penalty under paragraph 81E(1)(b), the assessment
10must be made no later than—

(a) 12 months after the date on which HMRC become aware of
the inaccuracy, and

(b) 6 years after the date on which the company becomes liable
for the penalty.

(5) 15In the case of a penalty under paragraph 81H(2)(b) or 81I(2)(a) or
(7)(b) where notice of appeal is given under paragraph 81K(2) or
(3), the assessment must be made no later than 12 months after the
date on which the appeal is determined or withdrawn.

(6) A penalty payable under this Part must be paid—

(a) 20no later than 30 days after the date on which the notice
under sub-paragraph (2) is given to the company, or

(b) if notice of appeal is given against the penalty under
paragraph 81K(1) or (4), no later than 30 days after the date
on which the appeal is determined or withdrawn.

(7) 25The penalty may be enforced as if it were corporation tax or, if the
company is not within the charge to corporation tax, income tax
charged in an assessment and due and payable.

(8) Sections 100 to 103 of TMA 1970 do not apply to a penalty under
this Part.

81K 30Appeals

(1) The company may appeal against a decision of HMRC that the
company is liable for a penalty under paragraph 81C or 81E.

(2) The company may appeal against—

(a) a decision of HMRC mentioned in paragraph 81H(1) or a
35decision of HMRC to specify, or not to specify, a relevant
time in the closure notice;

(b) a decision of HMRC mentioned in paragraph 81I(1).

(3) The company may appeal against a decision of HMRC—

(a) to give the company a default notice under paragraph 81I;

(b) 40to specify, or not to specify, a relevant time in the default
notice.

(4) The company may appeal against a decision of HMRC as to the
amount of a penalty payable by the company under this Part.

(5) The company may appeal against a decision of an officer of
Revenue and Customs to give a direction under section 998 of
CTA 2009 (withdrawal of corporation tax deductions in relation to
a Schedule 2 SIP).

(6) 5Notice of appeal must be given to HMRC no later than 30 days
after the date on which—

(a) in the case of an appeal under sub-paragraph (1) or (4), the
notice under paragraph 81J(2) is given to the company;

(b) in the case of an appeal under sub-paragraph (2), the
10closure notice is given;

(c) in the case of an appeal under sub-paragraph (3), the
default notice is given;

(d) in the case of an appeal under sub-paragraph (5), notice of
the officer’s decision is given to the company.

(7) 15On an appeal under sub-paragraph (1), (3)(a) or (5) which is
notified to the tribunal, the tribunal may affirm or cancel the
decision.

(8) On an appeal under sub-paragraph (2) or (3)(b) which is notified
to the tribunal, the tribunal may—

(a) 20affirm or cancel the decision, or

(b) substitute for the decision another decision which HMRC
had power to make.

(9) On an appeal under sub-paragraph (4) which is notified to the
tribunal, the tribunal may—

(a) 25affirm the amount of the penalty decided, or

(b) substitute another amount for that amount.

(10) Subject to this paragraph and paragraph 81J, the provisions of Part
5 of TMA 1970 relating to appeals have effect in relation to an
appeal under this paragraph as they have effect in relation to an
30appeal against an assessment to corporation tax or, if the company
is not within the charge to corporation tax, income tax.”

29 In paragraph 89 (termination of plan) in sub-paragraph (2) omit paragraph
(a).

30 In paragraph 90 (effect of plan termination notice) in sub-paragraph (2) for
35“awarded to” substitute “appropriated to, or acquired on behalf of,”.

31 (1) Paragraph 93 (power to require information) is amended as follows.

(2) For sub-paragraph (1) substitute—

“(1) An officer of Revenue and Customs may by notice require a
person to provide the officer with any information—

(a) 40which the officer reasonably requires for the performance
of any functions of Her Majesty’s Revenue and Customs or
an officer of Revenue and Customs under the SIP code, and

(b) which the person to whom the notice is addressed has or
can reasonably obtain.”

(3) 45In sub-paragraph (2)(a)—

(a) for sub-paragraph (i) substitute—

“(i) to check anything contained in a notice
under paragraph 81A or a return under
paragraph 81B or to check any information
5accompanying such a notice or return, or”,
and”

(b) in sub-paragraph (ii) after “plan” insert “or any other person whose
liability to tax the operation of a plan is relevant to”.

32 In paragraph 100 (index of defined expressions)—

(a) 10omit the entries for “approval” and “approved”, and

(b) at the appropriate place insert—

Other amendments: TCGA 1992

33 15TCGA 1992 is amended as follows.

34 In section 236A (relief for transfers to share incentive plans) for “an
approved” substitute “a Schedule 2”.

35 (1) Section 238A (share schemes and share incentives) is amended as follows.

(2) In the heading omit “Approved”.

(3) 20In subsection (1) omit “approved”.

(4) In subsection (2)(a) for “approved” substitute “Schedule 2”.

36 Schedule 7C (relief for transfers to share plans) is amended as follows.

37 In the title for “approved” substitute “Schedule 2”.

38 In paragraph 2 (conditions relating to disposal) in sub-paragraph (1) for
25“approved” substitute “a Schedule 2 SIP”.

39 Schedule 7D (share schemes and share incentives) is amended as follows.

40 In the title omit “Approved”.

41 In the title of Part 1 for “Approved” substitute “Schedule 2”.

42 (1) Paragraph 1 (introduction to Part 1) is amended as follows.

(2) 30In sub-paragraph (1) for “an approved” substitute “a Schedule 2”.

(3) In sub-paragraphs (2) and (3) omit “approved”.

43 In paragraph 2 (gains accruing to trustees) in sub-paragraph (1)(a) omit
“approved”.

Other amendments: ITEPA 2003 and Part 4 of FA 2004

44 35ITEPA 2003 is amended as follows.

45 In section 227 (scope of Part 4) in subsection (4)(c) omit “approved”.

46 In section 417 (scope of Part 7) in subsection (2), in the entry for Chapter 6,
omit “approved”.

47 (1) Section 431A (provision relating to restricted securities) is amended as
follows.

(2) 5In the heading for “approved” substitute “tax advantaged”.

(3) In subsection (2)(a) for “an approved” substitute “a Schedule 2”.

48 In section 549 (application of Chapter 11 of Part 7) in subsection (2)(a) omit
“approved”.

49 (1) Section 554E (exclusions under Part 7A) is amended as follows.

(2) 10In subsections (1)(a) and (3)(a)(i) and (b)(i) for “an approved” substitute “a
Schedule 2”.

(3) In subsection (4)(a) and (b) for the first “approved” substitute “Schedule 2”.

50 In paragraph 11 of Schedule 4 (CSOP schemes: material interest) in sub-
paragraph (5)(a) for “approved” substitute “Schedule 2”.

51 15In paragraph 30 of Schedule 5 (enterprise management incentives: material
interest) in sub-paragraph (7)(a) for “share incentive plan approved under
Schedule 2 (SIPs)” substitute “Schedule 2 SIP (see Schedule 2)”.

52 In section 195 of FA 2004 (pensions: transfer of certain shares to be treated as
payment of contribution) in subsection (5), in the definition of “share
20incentive plan”, omit “approved”.

Other amendments: ITTOIA 2005

53 Chapter 3 of Part 4 of ITTOIA 2005 (savings and investment income:
dividends etc from UK resident companies) is amended as follows.

54 In section 382 (contents of Chapter 3) in subsection (1)(c) for “an approved”
25substitute “a Schedule 2”.

55 In the cross-heading before section 392 for “approved” substitute “Schedule 2”.

56 In section 392 (SIP shares: introduction) in subsection (1) for “an approved”
substitute “a Schedule 2”.

57 (1) Section 394 (distribution when dividend shares cease to be subject to SIP) is
30amended as follows.

(2) In subsection (1) for “an approved” substitute “a Schedule 2”.

(3) After subsection (3) insert—

“(3A) But if the shares cease to be subject to the plan by virtue of a
provision of the kind mentioned in paragraph 65(2) of Schedule 2 to
35ITEPA 2003 (provision requiring dividend shares to be offered for
sale), the amount of the distribution treated as made is the amount
equal to the relevant fraction of the market value of the shares at the
time they are offered for sale if that amount is less than the amount
given by subsection (3).

(3B) For the purposes of subsection (3A) “the relevant fraction” is—

(3C) 10Paragraph 92(2) of Schedule 2 to ITEPA 2003 (market value of shares
subject to a restriction) applies for the purposes of subsection (3A).”

(4) In subsection (7) for “approved” substitute “Schedule 2”.

58 In section 395 (reduction in tax due in cases within section 394) in
subsections (1)(b) and (4) for “approved” substitute “Schedule 2”.

59 15In section 396 (interpretation) in subsections (1) and (2) omit “approved”.

60 Chapter 4 of Part 4 of ITTOIA 2005 (savings and investment income:
dividends etc from non-UK resident companies) is amended as follows.

61 In the cross-heading before section 405 for “approved” substitute “Schedule 2”.

62 (1) Section 405 (SIP shares: introduction) is amended as follows.

(2) 20In subsection (1) for “an approved” substitute “a Schedule 2”.

(3) In subsections (3) and (4) omit “approved”.

63 (1) Section 407 (dividend payment when dividend shares cease to be subject to
SIP) is amended as follows.

(2) In subsection (1) for “an approved” substitute “a Schedule 2”.

(3) 25After subsection (3) insert—

“(3A) But if the shares cease to be subject to the plan by virtue of a
provision of the kind mentioned in paragraph 65(2) of Schedule 2 to
ITEPA 2003 (provision requiring dividend shares to be offered for
sale), the amount of the dividend treated as paid is the amount equal
30to the relevant fraction of the market value of the shares at the time
they are offered for sale if that amount is less than the amount given
by subsection (3).

(3B) For the purposes of subsection (3A) “the relevant fraction” is—

(3C) Paragraph 92(2) of Schedule 2 to ITEPA 2003 (market value of shares
subject to a restriction) applies for the purposes of subsection (3A).”

(4) In subsection (5) for “approved” substitute “Schedule 2”.

64 In section 408 (reduction in tax due in cases within section 407) in
5subsections (1)(b) and (3) for “approved” substitute “Schedule 2”.

65 Chapter 9 of Part 6 of ITTOIA 2005 (exempt income) is amended as follows.

66 In the cross-heading before section 770 for “Approved” substitute “Schedule
2”.

67 (1) Section 770 (amounts applied by SIP trustees) is amended as follows.

(2) 10In subsection (1)(a) for “an approved” substitute “a Schedule 2”.

(3) In subsections (5) and (6) omit “approved”.

Other amendments: Part 9 of ITA 2007

68 Part 9 of ITA 2007 (special rules about settlements and trusts) is amended as
follows.

69 15In section 462 (overview of Part) in subsection (5) for “an approved”
substitute “a Schedule 2”.

70 In section 479 (trustees’ accumulated or discretionary income charged at
special rates) in subsection (5) for “approved” substitute “Schedule 2”.

71 (1) Section 488 (application of section 479 to trustees of SIP) is amended as
20follows.

(2) In the heading for “approved” substitute “Schedule 2”.

(3) In subsection (1)—

(a) in paragraph (a) for “an approved” substitute “a Schedule 2”, and

(b) in paragraph (b) omit “approved”.

72 25In section 489 (“the applicable period”) in subsection (8)(a) for “approved”
substitute “Schedule 2”.

73 In section 490 (interpretation of Chapter 5) in subsection (1) omit
“approved”.

Other amendments: Chapter 1 of Part 11 of CTA 2009

74 30Chapter 1 of Part 11 of CTA 2009 (relief for employee share acquisition
schemes: share incentive plans) is amended as follows.

75 (1) Section 983 (overview of Chapter) is amended as follows.

(2) In subsection (1) for “approved” substitute “Schedule 2”.

(3) In subsection (7) for “approval for a plan is withdrawn” substitute “a plan
35ceases to be a Schedule 2 share incentive plan”.

76 (1) Section 987 (deduction for cost of setting up plan) is amended as follows.

(2) In the heading for “an approved” substitute “a Schedule 2”.