Finance Bill (HC Bill 57)

(ii) for “a BIPRU 730k firm and a full scope BIPRU investment
firm,” substitute “an IFPRU 730k firm and a full scope IFPRU
investment firm,”;

(b) in sub-paragraph (8)(b)(iv)—

(i) 5after “relevant” insert “regulated”;

(ii) for “a BIPRU 730k firm and a full scope BIPRU investment firm”
substitute “an IFPRU 730k firm and a full scope IFPRU
investment firm”.

(3) In paragraph 70—

(a) 10in sub-paragraph (1), at the appropriate places insert—

• “““the FCA Handbook” means the Handbook made by the
  Financial Conduct Authority under FISMA 2000 (as that
  Handbook has effect from time to time);”;

• ““investment bank” means an entity which—

  (a)

  15is both an IFPRU 730k firm and a full scope
  IFPRU investment firm, or

  (b)

  is designated by the Prudential Regulation
  Authority under article 3 of the Financial
  Services and Markets Act 2000 (PRA-regulated
  20Activities) Order 2013 (S.I. 2013/556S.I. 2013/556) (dealing in
  investments as principal: designation by PRA);”;”

(b) in sub-paragraph (2), in the list of terms, omit the entries relating to
“BIPRU 730k firm”, “exempt BIPRU commodities firm” and “full scope
BIPRU investment firm”;

(c) 25after sub-paragraph (2) insert—

“(2A) In this Schedule the following terms have the meaning given
in the FCA Handbook—

• “exempt IFPRU commodities firm”;

• “full scope IFPRU investment firm”;

• 30“IFPRU 730k firm”.”;”

(d) in sub-paragraph (3), for “a BIPRU 730k firm and a full scope BIPRU
investment firm” substitute “an IFPRU 730k firm and a full scope
IFPRU investment firm”.

(4) In paragraph 72(3)(a), for “both a BIPRU 730k firm and a full scope BIPRU
35investment firm,” substitute “an investment bank,”.

(5) In paragraph 73(1), for paragraph (f) substitute—

“(f) an exempt IFPRU commodities firm,”.”

(6) In paragraph 78(1)(c)(ii), for “both a BIPRU 730k firm and a full scope BIPRU
investment firm,” substitute “an investment bank,”.

(7) 40In paragraph 80(1)(c)(ii) for “both a BIPRU 730k firm and a full scope BIPRU
investment firm,” substitute “an investment bank,”.

(8) The amendments made by subsections (1) to (7), are treated as having come
into force on 1 January 2014.

(9) Part 7A of CTA 2010 (banking companies) has effect, and is to be deemed
45always to have had effect, with the amendments set out in subsections (10) to
(12).

(10) In section 269B (meaning of “banking company”)—

(a) for subsection (5) substitute—

“(5) Condition D is that, at any time in the accounting period—

(a) the relevant entity’s activities include the relevant
regulated activity described in the provision mentioned
5in section 269BB(a), or

(b) the relevant entity is an investment bank (see subsection
(6A)) whose activities consist wholly or mainly of any of
the relevant regulated activities described in the
provisions mentioned in section 269BB(b) to (f).”;”

(b) 10after subsection (6) insert—

“(6A) The relevant entity is an “investment bank” if—

(a) it is both an IFPRU 730k firm and a full scope IFPRU
investment firm, or

(b) it is designated by the Prudential Regulation Authority
15under article 3 of the Financial Services and Markets Act
2000 (PRA-regulated Activities) Order 2013 (S.I. 2013/
556) (dealing in investments as principal: designation by
PRA).””

(11) In section 269BA (excluded entities), in subsection (1)(f), omit “or exempt
20BIPRU commodities firm”.

(12) In section 269BC (banking companies: supplementary definitions)—

(a) in subsection (8), in the list of terms, omit the entries relating to “BIPRU
730K firm”, “exempt BIPRU commodities firm” and “full scope BIPRU
investment firm”;

(b) 25omit subsection (9).

Part 4 Income tax, corporation tax and capital gains tax

Income tax

21 Pensions: special lump sum death benefits charge

(1) 30Section 206 of FA 2004 (special lump sum death benefits charge) is amended in
accordance with subsections (2) to (5).

(2) In each of subsections (1), (1A), (1B)(a) and (1C)(a) (which specify payments
attracting the charge) after “paid” insert “, to a non-qualifying person,”.

(3) In subsection (1B)(b) (payments attracting charge if paid more than 2 years
35after death of member under 75), before the “or” at the end of sub-paragraph
(ii) insert—

“(“iia) a defined benefits lump sum death benefit,”.”

(4) In subsection (7) (sums taxed under section 206 not income for income tax
purposes), at the end insert “(but see subsection (8)).”

(5) 40After subsection (7) insert—

“(8) Where—

(a) a lump sum death benefit in respect of which tax is charged
under this section is one paid to a non-qualifying person in the
person’s capacity as a trustee, and

(b) a payment of any part of the lump sum is made out of a
5settlement to a beneficiary who is an individual,

the amount received by the beneficiary, together with so much of the
tax charged under this section on the lump sum as is attributable to the
amount received by the beneficiary, is income of the beneficiary for
income tax purposes but the beneficiary may claim to deduct that much
10of that tax from the income tax charged on the beneficiary’s total
income for the tax year in which the payment is made to the beneficiary.

(9) For the purposes of this section, a person is a “non-qualifying person”
in relation to payment of a lump sum if—

(a) the person is not an individual, or

(b) 15the person is an individual and the payment is made to the
person in the person’s capacity as—

(i) a trustee or personal representative,

(ii) a director of a company,

(iii) a partner in a firm, or

(iv) 20a member of a limited liability partnership,

except that a person is not a “non-qualifying person” in relation to
payment of a lump sum if the payment is made to the person in the
person’s capacity as a bare trustee.

(10) In subsection (9)—

• 25 “bare trustee” means a person acting as trustee for—

  (a)

  an individual absolutely entitled as against the trustee,

  (b)

  two or more individuals who are so entitled,

  (c)

  an individual who would be so entitled but for being a
  minor or otherwise lacking legal capacity, or

  (d)

  30two or more individuals who would be so entitled but
  for all or any of them being a minor or otherwise lacking
  legal capacity,

• “director” is read in accordance with section 452 of CTA 2010, and

• references to a firm are to be read in the same way as references to
  35a firm in Part 9 of ITTOIA 2005 (which contains special
  provision about partnerships).””

(6) In section 251(4) of FA 2004 (powers to impose information requirements),
after paragraph (b) insert—

“(ba) requiring, in a case where a payment (“the onwards payment”)
40is made directly or indirectly out of a sum on whose payment
tax has been charged under section 206, the person making the
onwards payment to provide information of a prescribed
description to the person to whom the onwards payment is
made,”.”

(7) 45In Part 2 of Schedule 29 to FA 2004 (interpretation of lump sum death benefit
rule), in paragraph 13 (defined benefits lump sum death benefit)—

(a) in sub-paragraph (1) omit the second sentence (exclusion of sums paid
more than 2 years after death of member under 75), and

(b) omit sub-paragraph (2) (interpretation of that sentence).

(8) In consequence of subsection (7), in paragraph 33 of Schedule 16 to FA 2011—

(a) in sub-paragraph (3) omit paragraph (c), and

(b) omit sub-paragraph (4).

(9) The amendments made by this section have effect in relation to lump sums
5paid on or after 6 April 2016.

22 Pensions: some lump sum death benefits taxed as pension income

(1) Part 9 of ITEPA 2003 (pension income) is amended in accordance with
subsections (2) to (7).

(2) In section 636A (lump sums under registered pension schemes) for subsection
10(4) (certain death benefit lump sums) substitute—

“(4) If a lump sum under a registered pension scheme—

(a) is listed in section 636AA, and

(b) is paid to a non-qualifying person (see subsection (8)),

the sum is subject to income tax under section 206 of FA 2004 (charge to
15tax on scheme administrator in respect of certain lump sum death
benefits) and not otherwise (but see section 206(8) of FA 2004).

(4ZA) If a lump sum under a registered pension scheme—

(a) is listed in section 636AA, and

(b) is paid to a qualifying person (see subsection (8)),

20section 579A applies in relation to the sum as it applies to any pension
under a registered pension scheme.””

(3) In section 636A(1) (no liability to income tax on certain lump sum death
benefits)—

(a) after paragraph (c) insert “or”, and

(b) 25omit paragraph (d) (certain defined benefits lump sum death benefits)
and the “or” preceding it.

(4) In section 636A, after subsection (7) insert—

“(8) For the purposes of this section—

(a) a person is a “non-qualifying person” in relation to payment of
30a lump sum if, for the purposes of section 206 of FA 2004, the
person is a non-qualifying person in relation to payment of the
sum, and

(b) a person is a “qualifying person” in relation to payment of a
lump sum except where the person is a non-qualifying person
35in relation to payment of the sum.””

(5) After section 636A insert—

“636AA Taxable lump sum death benefits

(1) The following are the lump sums mentioned in section 636A(4) and
(4ZA).

(2) 40An annuity protection lump sum death benefit, or a pension protection
lump sum death benefit, paid in respect of a member of the scheme who
had reached the age of 75 at the date of the member’s death.

(3) A drawdown pension fund lump sum death benefit under paragraph
17(1) of Schedule 29 to FA 2004, a flexi-access drawdown fund lump
sum death benefit under paragraph 17A(1) of that Schedule, a defined
benefits lump sum death benefit or an uncrystallised funds lump sum
5death benefit—

(a) paid in respect of a member of the scheme who had reached the
age of 75 at the date of the member’s death, or

(b) paid in respect of a member of the scheme who had not reached
the age of 75 at the date of the member’s death, but not paid
10before the end of the relevant 2-year period in respect of the
member’s death.

(4) A drawdown pension fund lump sum death benefit under paragraph
17(2) of Schedule 29 to FA 2004 or a flexi-access drawdown fund lump
sum death benefit under paragraph 17A(2) of that Schedule—

(a) 15paid on the death of a dependant of a deceased member of the
scheme where the dependant had reached the age of 75 at the
date of the dependant’s death, or

(b) paid on the death of a dependant of a deceased member of the
scheme where the dependant had not reached the age of 75 at
20the date of the dependant’s death, but not paid before the end
of the relevant 2-year period in respect of the dependant’s
death.

(5) A flexi-access drawdown fund lump sum death benefit under
paragraph 17A(3) or (4) of Schedule 29 to FA 2004—

(a) 25paid on the death of a nominee or successor (as the case may be)
of a deceased member of the scheme where the nominee or
successor (“the beneficiary”) had reached the age of 75 at the
date of the beneficiary’s death, or

(b) paid on the death of a nominee or successor (as the case may be)
30of a deceased member of the scheme where the nominee or
successor (“the beneficiary”) had not reached the age of 75 at the
date of the beneficiary’s death, but not paid before the end of
the relevant 2-year period in respect of the beneficiary’s death.

(6) In this section—

• 35“dependant”, “nominee” and “successor” have the meaning given,
  respectively, by paragraphs 15, 27A and 27F of Schedule 28 to
  FA 2004, and

• “relevant 2-year period”, in relation to a death, means the period
  of 2 years beginning with the earlier of—

  (a)

  40the day on which the scheme administrator of the
  scheme mentioned in section 636A(4) or (4ZA) (as the
  case may be) first knew of the death, and

  (b)

  the day on which that scheme administrator could first
  reasonably have been expected to have known of it.

(7) 45Section 636A(4A) and (7) (interpretation) apply also for the purposes of
this section.””

(6) In section 579CA as substituted by paragraph 117 of Schedule 45 to FA 2013
(pensions under registered pension schemes: temporary non-residents), in
subsection (4) (which lists relevant withdrawals) as substituted by the Taxation
50of Pensions Act 2014—

(a) omit the “or” at the end of paragraph (k), and

(b) after paragraph (l) insert “, or

(m) any payment to the person of a lump sum to which
section 579A applies by virtue of section 636A(4ZA).””

(7) 5In the version of section 579CA which has effect if the year of departure is the
tax year 2012-13 or an earlier tax year, in subsection (3A) (which lists relevant
withdrawals)—

(a) omit the “or” at the end of paragraph (k), and

(b) after paragraph (l) insert “, or

(m) 10any payment to the person of a lump sum to which
section 579A applies by virtue of section 636A(4ZA).””

(8) In section 683 of ITEPA 2003 (meaning of “PAYE income”)—

(a) in subsection (3) (meaning, subject to subsections (3A) and (3B), of
“PAYE pension income”) for “and (3B)” substitute “to (3C)”, and

(b) 15after subsection (3B) insert—

“(3C) “PAYE pension income” for a tax year does not include any
taxable pension income that is treated as accruing in that tax
year by virtue of section 636A(1A) to (1C) or (4ZA) so far as
having effect as applied by paragraph 1(3)(da) or (db) of
20Schedule 34 to FA 2004.””

(9) In section 168(2) of FA 2004 (meaning of “lump sum death benefit”), at the end
insert “, or a lump sum payable in respect of the member on the subsequent
death of a dependant, nominee or successor of the member.”

(10) In Schedule 34 to FA 2004 (application of certain charges to non-UK pension
25schemes)—

(a) in paragraph 1(3) (meaning of “member payment charges”), before the
“and” at the end of paragraph (da) insert—

“(db) the charge under section 636A(4ZA) of ITEPA 2003
(certain payments of lump sum death benefits),”, and”

(b) 30in paragraph 1(4)(b) (provisions of ITEPA 2003 which are “member
payment provisions”) after “636A(1A) to (1C)” insert “and (4ZA) and
section 636AA”.

(11) In consequence of subsections (2) and (3)—

(a) in Schedule 16 to FA 2011, omit paragraph 42(2)(b) and (4), and

(b) 35in the Taxation of Pensions Act 2014—

(i) in Schedule 1 omit paragraph 31(a), and

(ii) in Schedule 2 omit paragraph 19(3)(a)(i).

(12) The amendments made by subsections (2) to (8), (10) and (11) have effect in
relation to lump sums paid on or after 6 April 2016.

(13) 40The amendment made by subsection (9) is to be treated as having come into
force on 15 July 2015.

23 Pensions: annual allowance

Schedule 4 contains provision in connection with the annual allowance for
inputs into pension schemes.

24 Relief for finance costs related to residential property businesses

(1) ITTOIA 2005 is amended in accordance with subsections (2) to (6).

(2) After section 272 insert—

“272A Restricting deductions for finance costs related to residential property

(1) 5Where a deduction is allowed for costs of a dwelling-related loan in
calculating the profits of a property business for the tax year 2017-18,
the amount allowed to be deducted in respect of those costs in
calculating those profits for income tax purposes is 75% of what would
be allowed apart from this section.

(2) 10Where a deduction is allowed for costs of a dwelling-related loan in
calculating the profits of a property business for the tax year 2018-19,
the amount allowed to be deducted in respect of those costs in
calculating those profits for income tax purposes is 50% of what would
be allowed apart from this section.

(3) 15Where a deduction is allowed for costs of a dwelling-related loan in
calculating the profits of a property business for the tax year 2019-20,
the amount allowed to be deducted in respect of those costs in
calculating those profits for income tax purposes is 25% of what would
be allowed apart from this section.

(4) 20In calculating the profits of a property business for income tax purposes
for the tax year 2020-21 or any subsequent tax year, no deduction is
allowed for costs of a dwelling-related loan.

(5) Subsections (1) to (4) do not apply in relation to a property business
carried on by a company otherwise than in a fiduciary or representative
25capacity.

(6) For the meaning of “costs of a dwelling-related loan” see section 272B.

272B Meaning of “costs of a dwelling-related loan”

(1) Subsections (2) to (5) apply for the purposes of section 272A.

(2) “Dwelling-related loan”, in relation to a property business, means so
30much of an amount borrowed for purposes of the business as is
referable (on a just and reasonable apportionment) to so much of the
business as is carried on for the purpose of generating income from—

(a) land consisting of a dwelling-house or part of a dwelling-house,
or

(b) 35an estate, interest or right in or over land within paragraph (a),

but see subsections (3) and (4).

(3) Anything that in the course of a property business is done for creating
(by construction or adaptation) a dwelling-house, or part of a dwelling-
house, from which income is to be generated is, for the purposes of
40subsection (2), to be treated as done for the purpose mentioned in that
subsection.

(4) An amount borrowed for purposes of a property business is not a
dwelling-related loan so far as the amount is referable (on a just and
reasonable apportionment) to so much of the property business as

consists of the commercial letting of furnished holiday
accommodation.

(5) “Costs”, in relation to a dwelling-related loan, means—

(a) interest on the loan,

(b) 5an amount in connection with the loan that, for the person
receiving or entitled to the amount, is a return in relation to the
loan which is economically equivalent to interest, or

(c) incidental costs of obtaining finance by means of the loan.

(6) Section 58(2) to (4) (meaning of “incidental costs of obtaining finance”)
10apply for the purposes of subsection (5)(c).

(7) A reference in this section to a “dwelling-house” includes any land
occupied or enjoyed with it as its garden or grounds.””

(3) In section 274(1)(b) (rules which override rules allowing deductions) after “as
applied by section 272” insert “, and to section 272A (finance costs)”.

(4) 15In section 274(3) (meaning of “relevant prohibitive rule”) after “as applied by
section 272” insert “, and apart also from section 272A”.

(5) After section 274 insert—

““Tax reduction for non-deductible finance costs

274A Tax reduction for non-deductible costs of a dwelling-related loan

(1) Subsections (2) to (5) apply if—

(a) 20an amount (“A”) would be deductible in calculating the profits
for income tax purposes of a property business for a tax year but
for section 272A, and

(b) a particular individual is liable to income tax on N% of those
profits, where N is a number—

(i) 25greater than 0, and

(ii) less than or equal to 100.

(2) The individual is entitled to relief under this section for the tax year in
respect of an amount (the “relievable amount”) equal to N% of A.

(3) Subject to subsection (4), the amount of the relief is given by—

30

(4) If the individual’s gross finance-costs relief for the year (“GFCR”) is
greater than the individual’s adjusted total income for the year (“ATI”),

the amount of the relief under this section for the year in respect of the
relievable amount is—

(5) 5Where the amount (“AY”) of the relief under this section for the year in
respect of the relievable amount is less than—

is available in relation to the individual and the property business for
carry-forward to the following tax year.

(6) 15For the purposes of this section—

(a) an individual’s adjusted total income for a tax year is the
individual’s total income for that year less the total of—

(i) so much of that total income as is savings income,

(ii) so much of that total income as is dividend income, and

(iii) 20any allowances to which the individual is entitled for
that year under Chapter 2 of Part 3 of ITA 2007
(individuals: personal and blind person’s allowance),
and

(b) an individual’s gross finance-costs relief for a tax year is the
25total relief to which the individual is entitled for the year under
this section before any adjustment under subsection (4).””

(6) In section 322 (which lists provisions relying on the definition of “commercial
letting of furnished holiday accommodation”)—

(a) in subsections (2) and (2A), before paragraph (a) insert—

“(za) 30section 272B(4) (exception from restriction on
deductibility of finance costs),”,”

(b) in subsection (2), before the “and” at the end of paragraph (g) insert—

“(ga) section 399A(9) of ITA 2007 (exception from restriction
on deductibility of interest on loans to invest in
35partnerships),”, and”

(c) in subsection (2A), before the “and” at the end of paragraph (e) insert—

“(ea) section 399A(9) of ITA 2007 (exception from restriction
on deductibility of interest on loans to invest in
partnerships),”.”

(7) 40In ITA 2007, after section 399 insert—

“399A Property partnerships: restriction of relief for investment loan interest

(1) This section applies to interest on a loan within section 398 if—

(a) the partnership concerned carries on a property business, and

(b) that property business or part of it is carried on for the purpose
45of generating income from—

(i) land consisting of a dwelling-house or part of a
dwelling-house, or

(ii) an estate, interest or right in or over land within sub-
paragraph (i).

(2) 5Subsections (3) to (6) have effect to restrict relief under section 383(1) for
so much of the interest as is referable (on a just and reasonable
apportionment) to the property business or (as the case may be) the part
of it within subsection (1)(b).

(3) For the tax year 2017-18, the amount of that relief is 75% of what would
10be given apart from this section.

(4) For the tax year 2018-19, the amount of that relief is 50% of what would
be given apart from this section.

(5) For the tax year 2019-20, the amount of that relief is 25% of what would
be given apart from this section.

(6) 15For the tax year 2020-21 and subsequent tax years, that interest is not
eligible for relief under this Chapter.

(7) Section 399(4) is to be applied in relation to the tax year to which
subsection (3), (4) or (5) applies before that subsection is applied in
relation to that tax year.

(8) 20Anything that in the course of a property business is done for creating
(by construction or adaptation) a dwelling-house, or part of a dwelling-
house, from which income is to be generated is, for the purposes of
subsection (1)(b), to be treated as done for the purpose mentioned in
subsection (1)(b).

(9) 25A property business, or part of a property business, that consists of the
commercial letting of furnished holiday accommodation (as defined by
Chapter 6 of Part 3 of ITTOIA 2005) is not within subsection (1)(b).

(10) A reference in this section to a “dwelling-house” includes any land
occupied or enjoyed with it as its garden or grounds.

399B 30Property partnerships: tax reduction for non-deductible loan interest

(1) Subsections (2) and (3) apply if for a tax year an individual would be
given relief for an amount (“the relievable amount”) by section 383(1)
but for section 399A.

(2) The individual is entitled to relief under this section for the tax year in
35respect of the relievable amount.

(3) The amount of the relief is given by—

(8) In section 26(1)(a) of ITA 2007 (tax reductions deductible at Step 6 of the
40calculation in section 23 of ITA 2007)—

(a) after the entry for Chapter 1 of Part 7 of ITA 2007 insert—

• ““section 399B (relief for non-deductible interest on loan to
  invest in partnership with residential property
  business),”, and”