Finance Bill (HC Bill 57)

Allowances for later part of 2015-16 limited to carried-forward allowances

(5) Where the individual was a member of a registered pension scheme
at some time in the pre-alignment tax year then, for the post-
alignment tax year—

(a) 5the amount specified in section 228(1) is treated as being nil,

(b) section 227B(2) (amount of alternative annual allowance) has
effect as if “AA” were substituted for “AA – £10,000”,

(c) if the chargeable amount in the individual’s case for the pre-
alignment tax year is the alternative chargeable amount, the
10reference to £10,000 in section 227ZA(1)(b) is treated as being
a reference to nil, and

(d) if the chargeable amount in the individual’s case for the pre-
alignment tax year is the default chargeable amount, the
reference to £10,000 in section 227ZA(1)(b) is treated as being
15a reference—

(i) to nil where the money-purchase input sub-total in
the individual’s case for the pre-alignment tax year is
£20,000 or more, or

(ii) to the amount equal to £20,000 minus that sub-total
20where that sub-total is more than £10,000 but less than
£20,000.

Limit on carry-forward of unused allowances from earlier part of 2015-16

(6) Where the current tax year for the purposes of section 228A (carry-
forward of annual allowance) is the post-alignment tax year—

(a) 25if—

(i) the chargeable amount in the individual’s case for the
pre-alignment tax year is the default chargeable
amount, and

(ii) the excess mentioned in section 228A(5)(a) would
30otherwise be more than £40,000,

that excess is treated as being £40,000, and

(b) if—

(i) the chargeable amount in the individual’s case for the
pre-alignment tax year is the alternative chargeable
35amount, and

(ii) the excess mentioned in section 228A(5)(a) would
otherwise be more than £30,000,

that excess is treated as being £30,000.

Further provisions about carry-forward of unused allowances

(7) 40Where the current tax year for the purposes of section 228A is the
post-alignment tax year or the tax year 2016-17, 2017-18 or 2018-19,
section 228A applies in relation to that current tax year as if in section
228A(3)(b)—

(a) for “either or both of the two” there were substituted “any
45one or more of the three”, and

(b) for “(or, where there is an excess for both of those tax years,
the excess for both tax years)” there were substituted “(or,

where there is an excess for two or all three of those tax years,
the excess for both or all those tax years)”.

(8) Where the current tax year for the purposes of section 228A is the tax
year 2016-17, 2017-18 or 2018-19—

(a) 5if—

(i) the chargeable amount in the individual’s case for the
pre-alignment tax year is the default chargeable
amount, and

(ii) the excess within section 228A(3)(b) in the case of the
10pre-alignment tax year would otherwise be more than
£40,000,

that excess is treated as being £40,000 (and accordingly the
amount aggregated under section 228A(5) in respect of that
excess is so much of the £40,000 as has not been used up),

(b) 15if—

(i) the chargeable amount in the individual’s case for the
pre-alignment tax year is the alternative chargeable
amount, and

(ii) the excess within section 228A(3)(b) in the case of the
20pre-alignment year would otherwise be more than
£30,000,

that excess is treated as being £30,000 (and accordingly the
amount aggregated under section 228A(5) in respect of that
excess is so much of the £30,000 as has not been used up), and

(c) 25in calculating for the purposes of section 228A(6) the amount
of which of the excesses for different tax years had effect to
reduce or eliminate the annual allowance charge for the post-
alignment tax year, the amount of the excess for the pre-
alignment tax year is to be taken to have done so before that
30for any other tax year and, subject to that, the amount of the
excess for an earlier tax year is to be taken to have done so
before that for a later year.

Supplementary provision

(9) For the pre-alignment tax year, section 229(3) applies as if the
35reference to the end of the tax year were a reference to the end of the
post-alignment tax year.””

Part 3 Calculation of pension input amounts for periods ending in 2015-16

7 Part 4 of FA 2004 is amended as follows.

8 40In section 229 (total pension input amount), after subsection (4) insert—

“(5) Subsection (2) is subject to section 237ZA (calculation of pension
input amounts for input periods ending in 2015-16).””

9 After section 237 insert—

“237ZA Pension input amounts for input periods ending in 2015-16

(1) This section applies where the tax year is the pre-alignment tax year
or the post-alignment tax year (see section 228C(2)).

5Modified rules for cash balance, or defined benefits, arrangement

(2) The rules for calculating the pension input amount in respect of a
cash balance arrangement, or a defined benefits arrangement, are
modified as follows (and the rules for calculating the pension input
amount in respect of a hybrid arrangement have effect accordingly).

10Single input amout to be calculated for combined period

(3) The pension input amount in respect of the arrangement is the time-
apportioned percentage of any increase in the value of the
individual’s rights under the arrangement during the period (“the
combined period”) that consists of the combination of all pension
15input periods of the arrangement that end—

(a) on or after 6 April 2015 but on or before 8 July 2015, or

(b) on 5 April 2016.

(4) To calculate the increase (if any) in the value of the individual’s
rights under the arrangement during the combined period, apply (as
20the case may be) sections 230 to 232 (except section 230(1)), or
sections 234 to 236A (except section 234(1)), as if—

(a) references to the pension input period were references to the
combined period,

(b) the combined period were a pension input period of the
25arrangement,

(c) 2.5% were the appropriate percentage specified in section
231(3) or 235(3), and

(d) 2.5% were the percentage mentioned in paragraph (c) of the
definition of “relevant percentage” given by section 230(5C)
30or 234(5C),

but paragraph (d) does not have effect for the purposes of the
definition of “CPI percentage” given by section 234(5C).

Apportioning input amount for combined period to tax years

(5) “The time-apportioned percentage” for the post-alignment tax year
35is—

and “the time-apportioned percentage” for the pre-alignment tax
year is—

Calculation and apportionment rules modified in certain cases

(6) Subsections (3) to (5) have effect subject to the following provisions
of this section.

Modifications where individual is deferred member of scheme

(7) 5Subsections (8) to (10) apply if—

(a) because of section 238ZA(2), a pension input period for the
arrangement ends with 8 July 2015,

(b) apart from section 238ZA(2), that pension input period (“the
cut-short period”) would have ended with a day (“the
10original last day”) after 8 July 2015 but before 5 April 2016,

(c) at or after the beginning of the cut-short period but not later
than the original last day, or in an earlier pension input
period for the arrangement, the individual becomes a
deferred member of the pension scheme that the
15arrangement is under, and

(d) were the period—

(i) beginning with the day after the original last day, and

(ii) ending with 5 April 2016,

a pension input period for the arrangement, the pension
20input amount in respect of the arrangement for that period
would be nil by virtue of section 230(5B) or 234(5B).

(8) Subsections (3) to (5) have effect as if the original last day, and not 5
April 2016, were the last day of the combined period (so that, in
particular, D in subsection (5) is the number of days in the combined
25period as so shortened).

(9) If the individual becomes a deferred member of the pension scheme
in a pension input period for the arrangement earlier than the cut-
short period—

(a) the time-apportioned percentage for the post-alignment tax
30year is treated as being nil, and

(b) the time-apportioned percentage for the pre-alignment tax
year is treated as being 100.

(10) If the individual becomes a deferred member of the pension scheme
at or after the beginning of the cut-short period but not later than the
35original last day, subsection (5) has effect as if for “272”, in each place,
there were substituted the number of days in the period beginning
with 9 July 2015 and ending with the original last day.

Modification where first input period ends with 5 April 2016

(11) If the first pension input period for the arrangement ends with 5
40April 2016—

(a) the time-apportioned percentage for the post-alignment tax
year is treated as being 100, and

(b) the time-apportioned percentage for the pre-alignment tax
year is treated as being 0.

45Alternative modifications where individual is deferred member of scheme

(12) Subsections (13) and (14) apply if—

(a) subsections (8) to (10) do not apply,

(b) subsection (11) does not apply, and

(c) section 230(5B) or 234(5B), when applied separately to each
of—

(i) 5so much of the combined period as consists of the
post-alignment tax year, and

(ii) the remainder of the combined period,

gives the result that the pension input amount in respect of
the arrangement for one (but not the other) of those parts of
10the combined period is nil.

(13) If the nil result is for so much of the combined period as consists of
the post-alignment tax year—

(a) the time-apportioned percentage for the post-alignment tax
year is treated as being nil, and

(b) 15the time-apportioned percentage for the pre-alignment tax
year is treated as being 100.

(14) If the nil result is for so much of the combined period as precedes 9
July 2015—

(a) the time-apportioned percentage for the pre-alignment tax
20year is treated as being nil, and

(b) the time-apportioned percentage for the post-alignment tax
year is treated as being 100.””

Part 4 Reduction of annual allowance for high-income individuals

10 (1) 25In Part 4 of FA 2004, after section 228 insert—

“228ZA Tapered reduction of annual allowance: high-income individual

(1) If the individual is a high-income individual for the tax year, section
228(1) has effect for the tax year in the individual’s case as if the
amount (“A”) which it specifies for the tax year were reduced (but
30not below £10,000) by—

(2) If the amount of the reduction under subsection (1) would otherwise
not be a multiple of £1, it is to be rounded down to the nearest
35amount which is a multiple of £1.

(3) The individual is a “high-income individual” for the tax year if—

(a) the individual’s adjusted income for the tax year is more than
£150,000, and

(b) the individual’s threshold income for the tax year is more
40than the amount given by £150,000 minus A.

(4) The individual’s “adjusted income” for the tax year is—

(a) the individual’s net income for the year (see Step 2 of the
calculation in section 23 of ITA 2007), plus

(b) the amount of any relief under section 193(4) or 194(1)
deducted at that Step, plus

(c) the amount of any deductions made from employment
income of the individual for the year—

(i) 5under section 193(2), or

(ii) under Chapter 2 of Part 5 of ITEPA 2003 in accordance
with paragraph 51(2) of Schedule 36, plus

(d) an amount equal to—

(i) the total pension input amount calculated in
10accordance with section 229(1), less

(ii) the amount of any contributions paid by or on behalf
of the individual during the year under registered
pension schemes of which the individual is a
member, less

(e) 15the amount of any lump sum which accrues in the year and
in relation to which section 579A of ITEPA 2003 is applied by
section 636A(4ZA) of ITEPA 2003.

(5) The individual’s “threshold income” for the tax year is—

(a) the individual’s net income for the year (see Step 2 of the
20calculation in section 23 of ITA 2007), plus

(b) any amount by which what would otherwise be general
earnings or specific employment income of the individual for
the year has been reduced by relevant salary sacrifice
arrangements or relevant flexible remuneration
25arrangements, less

(c) the amount (before any deduction under section 192(1)) of
any contribution paid in the year in respect of which the
individual is entitled to be given relief under section 192
(relief at source), less

(d) 30the amount of any lump sum which accrues in the year and
in relation to which section 579A of ITEPA 2003 is applied by
section 636A(4ZA) of ITEPA 2003.

(6) In subsection (5)—

• “relevant salary sacrifice arrangements” means arrangements—

  (a)

  35under which the individual gives up the right to
  receive general earnings or specific employment
  income in return for the making of relevant pension
  provision, and

  (b)

  which are made on or after 9 July 2015 (and whether
  40before or after the start of the employment
  concerned), and

• “relevant flexible remuneration arrangements” means
  arrangements—

  (a)

  under which the individual and an employer of the
  45individual agree that relevant pension provision is to
  be made rather than the individual receive some
  description of employment income, and

  (b)

  which are made on or after 9 July 2015 (and whether
  before or after the start of the employment
  50concerned).

(7) In subsection (6) “relevant pension provision” means the payment of
contributions (or additional contributions) to a pension scheme in
respect of the individual or otherwise (by an employer of the
individual or any other person) to secure an increase in the amount
5of the benefits to which the individual or any person who is a
dependant of, or is connected with, the individual is actually or
prospectively entitled under a pension scheme.

(8) In subsection (7) “increase” includes increase from nil.

(9) Section 993 of ITA 2007 (meaning of “connected” persons) applies for
10the purposes of subsection (7).

228ZB Anti-avoidance in connection with section 228ZA

(1) Subsection (5) applies if there are arrangements in respect of which
conditions A to C are met.

(2) Condition A is that it is reasonable to assume that the main purpose,
15or one of the main purposes, of the arrangements is to reduce the
amount of the reduction under section 228ZA(1) in the individual’s
case—

(a) for the tax year, or

(b) for two or more tax years which include the tax year.

(3) 20Condition B is that the arrangements involve either or both of the
following—

(a) reducing the individual’s adjusted income for the tax year,
and

(b) reducing the individual’s threshold income for the tax year.

(4) 25Condition C is that the arrangements involve the reduction within
subsection (3), or any of the reductions within subsection (3), being
redressed by an increase in the individual’s adjusted income, or
threshold income, for a different tax year.

(5) The reduction under section 228ZA(1) in the individual’s case for the
30tax year is to be treated as being what it would be apart from the
arrangements.

(6) In subsection (2) “reduce” includes reduce to nil.

(7) The increase mentioned in subsection (4) may be an increase in what
would be the individual’s adjusted income, or threshold income, for
35the tax year 2015-16 if section 228ZA—

(a) had effect for that year, and

(b) did so as if the total pension input amount mentioned in
section 228ZA(4)(d)(i) were the sum of the total pension
input amounts for the pre-alignment and post-alignment tax
40years (see section 228C(2)).

(8) In this section “arrangements” includes any agreement,
understanding, scheme, transaction or series of transactions
(whether or not legally enforceable).””

(2) The amendment made by sub-paragraph (1) has effect for the tax year 2016-
4517 and subsequent tax years.

Part 5 Other amendments

11 (1) Part 4 of FA 2004 is amended as follows.

(2) In section 227 (annual allowance charge)—

(a) 5in subsection (1) (charge arises if individual has a chargeable
amount) after “has a” insert “non-zero”, and

(b) in subsection (1A) (determination of chargeable amount (if any))
omit “(if any)”.

(3) In section 227ZA (the chargeable amount) after subsection (3) insert—

“(4) 10If there is no such excess, the default chargeable amount is zero.””

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

Section 25

SCHEDULE 5 Enterprise investment scheme

15Introductory

1 Part 5 of ITA 2007 (enterprise investment scheme) is amended as follows.

Limiting eligibility for relief to investments made before 2025

2 (1) Section 157 (eligibility for EIS relief) is amended as follows.

(2) In subsection (1), after paragraph (a) insert—

“(aa) 20the shares are issued before 6 April 2025,”.”

(3) After that subsection insert—

“(1A) The Treasury may, by regulations, amend subsection (1)(aa) to
substitute a different date for the date for the time being specified
there.””

25The investor

3 In section 162 (overview of Chapter 2: the investor), omit the “and” at the
end of paragraph (b) and after that paragraph insert—

“(ba) existing shareholdings (see section 164A), and”.”

4 After section 164 insert—

“164A 30 The existing shareholdings requirement

(1) If, at the time the relevant shares are issued, the investor holds any
other shares in a company within subsection (2) (“C”), those other
shares must be—

(a) a risk finance investment, or

(b) 35subscriber shares which—

(i) were issued to, and have since they were issued been
continuously held by, the investor, or

(ii) were acquired by the investor at a time when C had
not issued any shares other than subscriber shares
5and had not begun to carry on or make preparations
for carrying on any trade or business.

(2) The companies referred to in subsection (1) are—

(a) the issuing company, and

(b) any company which is a qualifying subsidiary of the issuing
10company at the time the relevant shares are issued.

(3) Shares in a company are a “risk finance investment” if—

(a) they are issued by the company to the investor, and

(b) (at any time) the company provides a compliance statement
under section 205, 257ED or 257PB in respect of the issue of
15shares which includes those shares.””

5 In section 166 (connection with issuing company), after subsection (1)
insert—

“(1A) But see section 252A(12) for provision which disapplies section 168.””

General requirements

6 20In section 172 (overview of Chapter 3: general requirements)—

(a) in paragraph (aa) for “capital schemes” substitute “finance
investments”,

(b) after that paragraph insert—

“(aaa) the maximum risk finance investments at the issue
25date (see section 173AA),

(aab) the maximum risk finance investments at times
during period B (see section 173AB),”,”

(c) omit paragraph (ab), and

(d) after paragraph (c) insert—

“(ca) 30the permitted maximum age (see section 175A),”.”

7 (1) Section 173A (the maximum amount raised annually through risk capital
schemes requirement) is amended as follows.

(2) For subsection (2) substitute—

“(2) In subsection (1), the reference to relevant investments made in the
35issuing company includes—

(a) a relevant investment made in any company that has at any
time in the year mentioned there been a 51% subsidiary of the
issuing company (including investments made in such a
company before it became such a subsidiary but, if it is not
40such a subsidiary at the end of that year, not those made after
it last ceased to be such a subsidiary), and

(b) any other relevant investment made in a company if—

(i) the money raised by the investment has been
employed for the purposes of a trade carried on by
45that company or another person, and

(ii) in that year, after the investment was made, the trade
(or a part of it) became a relevant transferred trade
(see subsection (2B)).

(2A) If only a proportion of the money raised by a relevant investment is
5employed for the purposes of a trade which becomes a relevant
transferred trade, the reference in subsection (2)(b) to the relevant
investment is to be read as a reference to the corresponding
proportion of that investment.

(2B) Where—

(a) 10in the year mentioned in subsection (1) a trade is
transferred—

(i) to the issuing company,

(ii) to a company that has at any time during that year
been a 51% subsidiary of the issuing company, or

(iii) 15to a partnership of which a company within sub-
paragraph (i) or (ii) is a member,

(including where it is transferred to a company within sub-
paragraph (ii), or a partnership of which such a company is a
member, in that year before the company became such a
20subsidiary but, if the company is not such a subsidiary at the
end of that year, not where it is transferred to such a company
or partnership after the company last ceased to be such a
subsidiary), and

(b) that trade or a part of it was previously (at any time) carried
25on by another person,

the trade or part mentioned in paragraph (b) becomes a “relevant
transferred trade” at the time it is transferred as mentioned in
paragraph (a).””

(3) In subsection (3)—

(a) 30after paragraph (b) insert—

“(ba) an investment is made in the company and (at any
time) the company provides a compliance statement
under section 257PB (tax relief for social investments)
in respect of the investment, or”, and”

(b) 35in paragraph (c), for “Community Guidelines on Risk Capital
Investments in Small and Medium-sized Enterprises” substitute
“European Commission’s Guidelines on State aid to promote risk
finance investment”.

(4) After subsection (4) insert—

“(5) 40Section 257KB applies in determining for those purposes when an
investment within subsection (3)(ba) is made as it applies for the
purposes of Part 5B (tax relief on social investments).””

(5) After subsection (5) insert—

“(6) For the purposes of this section—

(a) 45references to a trade include a part of a trade (and references
to the carrying on of a trade are to be construed accordingly);

(b) when determining the amount of money raised by a relevant
investment which has been employed for the purposes of a