Finance (No. 2) Bill (HC Bill 155)

(a) the defeat notice in question still has effect when the
determination is made, or

(b) the determination is made on or before the 90th day after the
day on which the defeat notice in question ceased to have effect.

(10) 5Schedule 34A sets out the circumstances in which a “relevant defeat”
occurs in relation to a person and includes provision limiting what can
amount to a further relevant defeat in relation to a person (see
paragraph 6).

237B Duty to give further conduct notice where provisional notice not
10complied with

(1) An authorised officer must give a conduct notice to a person (“P”) who
is carrying on a business as a promoter if—

(a) a conduct notice given to P under section 237A(4)—

(i) has ceased to have effect otherwise than as a result of
15section 237D(2) or 241(3) or (4), and

(ii) was provisional immediately before it ceased to have
effect,

(b) the officer determines that P had failed to comply with one or
more conditions in the conduct notice,

(c) 20the conduct notice relied on a Case 3 relevant defeat,

(d) since the time when the conduct notice ceased to have effect,
one or more relevant defeats falling within subsection (2) have
occurred in relation to—

(i) P, and

(ii) 25any arrangements to which the Case 3 relevant defeat
also relates, and

(e) had that relevant defeat or (as the case may be) those relevant
defeats, occurred before the conduct notice ceased to have
effect, an authorised officer would have been required to notify
30the person under section 237C(3) that the notice was no longer
provisional.

(2) A relevant defeat falls within this subsection if it occurs by virtue of
Case 1 or Case 2 in Schedule 34A.

(3) Subsection (1) does not apply if the authorised officer determines that,
35having regard to the extent of the impact that the person’s activities as
a promoter are likely to have on the collection of tax, it is inappropriate
to give the person a conduct notice.

(4) Subsection (1) does not apply if a conduct notice or monitoring notice
already has effect in relation to the person.

(5) 40For the purposes of this Part a conduct notice “relies on a Case 3
relevant defeat” if it could not have been given under the following
condition.

The condition is that paragraph 9 of Schedule 34A had effect with the
substitution of “100% of the tested arrangements” for “75% of the tested
45arrangements”.

237C When a conduct notice given under section 237A(4) is “provisional”

(1) This section applies to a conduct notice which—

(a) is given to a person under section 237A(4), and

(b) relies on a Case 3 relevant defeat.

(2) The notice is “provisional” at all times when it has effect, unless an
authorised officer notifies the person that the notice is no longer
5provisional.

(3) An authorised officer must notify the person that the notice is no longer
provisional if subsection (4) or (5) applies.

(4) This subsection applies if—

(a) the condition in subsection (5)(a) is not met, and

(b) 10a full relevant defeat occurs in relation to P.

(5) This subsection applies if—

(a) two, or all three, of the relevant defeats by reference to which
the conduct notice is given would not have been relevant
defeats if paragraph 9 of Schedule 34A had effect with the
15substitution of “100% of the tested arrangements” for “75% of
the tested arrangements”, and

(b) the same number of full relevant defeats occur in relation to P.

(6) A “full relevant defeat” occurs in relation to P if—

(a) a relevant defeat occurs in relation to P otherwise than by virtue
20of Case 3 in paragraph 9 of Schedule 34A, or

(b) circumstances arise which would be a relevant defeat in relation
to P by virtue of paragraph 9 of Schedule 34A if that paragraph
had effect with the substitution of “100% of the tested
arrangements” for “75% of the tested arrangements”.

(7) 25In determining under subsection (6) whether a full relevant defeat has
occurred in relation to P, assume that in paragraph 6 of Schedule 34A
(provision limiting what can amount to a further relevant defeat in
relation to a person) the first reference to a “relevant defeat” does not
include a relevant defeat by virtue of Case 3 in paragraph 9 of Schedule
3034A.

237D Judicial ruling upholding asserted tax advantage: effect on conduct
notice which is provisional

(1) Subsection (2) applies if at any time—

(a) a conduct notice which relies on a Case 3 relevant defeat (see
35section 237B(5)) is provisional, and

(b) a court or tribunal upholds a corresponding tax advantage
which has been asserted in connection with any of the related
arrangements to which that relevant defeat relates (see
paragraph 5(2) of Schedule 34A).

(2) 40The conduct notice ceases to have effect when that judicial ruling
becomes final.

(3) An authorised officer must give the person to whom the conduct notice
was given a written notice stating that the conduct notice has ceased to
have effect.

(4) 45For the purposes of this section, a tax advantage is “asserted” in
connection with any arrangements if a person makes a return, claim or

election on the basis that the tax advantage arises from those
arrangements.

In relation to the arrangements mentioned in paragraph (b) of
subsection (1) “corresponding tax advantage” means a tax advantage
5corresponding to any tax advantage the counteraction of which
contributed to the relevant defeat mentioned in that paragraph.

(5) For the purposes of this section a court or tribunal “upholds” a tax
advantage if—

(a) the court or tribunal makes a ruling to the effect that no part of
10the tax advantage is to be counteracted, and

(b) that judicial ruling is final.

(a)(a)the court or tribunal makes a ruling to the effect that no part of
the tax advantage is to be counteracted, and

(b) that judicial ruling is final.

(6) 15For the purposes of this Part of this Act a judicial ruling is “final” if it
is—

(a) a ruling of the Supreme Court, or

(b) a ruling of any other court or tribunal in circumstances where—

(i) no appeal may be made against the ruling,

(ii) 20if an appeal may be made against the ruling with
permission, the time limit for applications has expired
and either no application has been made or permission
has been refused,

(iii) if such permission to appeal against the ruling has been
25granted or is not required, no appeal has been made
within the time limit for appeals, or

(iv) if an appeal was made, it was abandoned or otherwise
disposed of before it was determined by the court or
tribunal to which it was addressed.

(7) 30In this section references to “counteraction” include anything referred
to as a counteraction in any of Conditions A to F in paragraphs 11 to 16
of Schedule 34A.”

(3) After section 241 insert—

““Defeat notices

241A 35Defeat notices

(1) This section applies in relation to a person (“P”) only if P is carrying on
a business as a promoter.

(2) An authorised officer, or an officer of Revenue and Customs with the
approval of an authorised officer, may give P a notice if the officer
40concerned has become aware of one (and only one) relevant defeat
which has occurred in relation to P in the period of 3 years ending with
the day on which the notice is given.

(3) An authorised officer, or an officer of Revenue and Customs with the
approval of an authorised officer, may give P a notice if the officer
45concerned has become aware of two (but not more than two) relevant
defeats which have occurred in relation to P in the period of 3 years
ending with the day on which the notice is given.

(4) A notice under this section must be given by the end of the 90 days
beginning with the day on which the matters mentioned in subsection
(2) or (as the case may be) (3) come to the attention of HMRC.

(5) Subsection (6) applies if—

(a) 5a single defeat notice which had been given to P (under
subsection (2) or (6)) ceases to have effect as a result of section
241B(1), and

(b) in the period when the defeat notice had effect a relevant defeat
(“the further relevant defeat”) occurred in relation to P.

(6) 10An authorised officer or an officer of Revenue and Customs with the
approval of an authorised officer may give P a notice in respect of the
further relevant defeat (regardless of whether or not it occurred in the
period of 3 years ending with the day on which the notice is given).

(7) In this Part of this Act—

(a) 15“single defeat notice” means a notice under subsection (2) or (6);

(b) “double defeat notice” means a notice under subsection (3);

(c) “defeat notice” means a single defeat notice or a double defeat
notice.

(8) A defeat notice must—

(a) 20set out the dates on which the look-forward period for the
notice begins and ends;

(b) in the case of a single defeat notice, explain the effect of section
237A(7);

(c) in the case of a double defeat notice, explain the effect of section
25237A(8).

(9) HMRC may specify what further information must be included in a
defeat notice.

(10) “Look-forward period”—

(a) in relation to a defeat notice under subsection (2) or (3), means
30the period of 5 years beginning with the day after the day on
which the notice is given;

(b) in relation to a defeat notice under subsection (6), means the
period beginning with the day after the day on which the notice
is given and ending at the end of the period of 5 years beginning
35with the day on which the further relevant defeat mentioned in
subsection (6) occurred in relation to P.

(11) A defeat notice has effect throughout its look-forward period unless it
ceases to have effect earlier in accordance with section 241B(1) or (4).

241B Judicial ruling upholding asserted tax advantage: effect on defeat
40notice

(1) If the relevant defeat to which a single defeat notice relates is
overturned (see subsection (5)), the notice has no further effect on and
after the day on which it is overturned.

(2) Subsection (3) applies if one (and only one) of the relevant defeats in
45respect of which a double defeat notice was given is overturned.

(3) The notice is to be treated for the purposes of this Part (including this
section) as if it had always been a single defeat notice given (in respect
of the other of the two relevant defeats) on the date on which the notice
was in fact given.

5The look-forward period for the notice is accordingly unchanged.

(4) If both the relevant defeats to which a double defeat notice relates are
overturned (on the same date), that notice has no further effect on and
after that date.

(5) A relevant defeat specified in a defeat notice is “overturned” if—

(a) 10the notice could not have specified that relevant defeat if
paragraph 9 of Schedule 34A had effect with the substitution of
“100% of the tested arrangements” for “75% of the tested
arrangements”, and

(b) at a time when the notice has effect a court or tribunal upholds
15a corresponding tax advantage which has been asserted in
connection with any of the related arrangements to which the
relevant defeat relates (see paragraph 5(2) of Schedule 34A).

Accordingly the relevant defeat is overturned on the day on which the
judicial ruling mentioned in paragraph (b) becomes final.

(6) 20If a defeat notice ceases to have effect as a result of subsection (1) or (4)
an authorised officer, or an officer of Revenue and Customs with the
approval of an authorised officer, must notify the person to whom the
notice was given that it has ceased to have effect.

(7) If subsection (3) has effect in relation to a defeat notice, an authorised
25officer, or an officer of Revenue and Customs with the approval of an
authorised officer, must notify the person of the effect of that
subsection.

(8) For the purposes of this section, a tax advantage is “asserted” in
connection with any arrangements if a person makes a return, claim or
30election on the basis that the tax advantage arises from those
arrangements.

(9) In relation to the arrangements mentioned in paragraph (b) of
subsection (5) “corresponding tax advantage” means a tax advantage
corresponding to any tax advantage the counteraction of which
35contributed to the relevant defeat mentioned in that paragraph.

(10) For the purposes of this section a court or tribunal “upholds” a tax
advantage if—

(a) the court or tribunal makes a ruling to the effect that no part of
the tax advantage is to be counteracted, and

(b) 40that judicial ruling is final.

(a)(a)the court or tribunal makes a ruling to the effect that no part of
the tax advantage is to be counteracted, and

(b) that judicial ruling is final.

(11) In this section references to “counteraction” include anything referred
45to as a counteraction in any of Conditions A to F in paragraphs 11 to 16
of Schedule 34A.”

(4) In section 242 (monitoring notices: duty to apply to tribunal), after subsection

(5) insert—

“(6) At a time when a notice given under section 237A is provisional, no
determination is to be made under subsection (1) in respect of the
notice.

(7) 5If a promoter fails to comply with conditions in a conduct notice at a
time when the conduct notice is provisional, nothing in subsection (6)
prevents those failures from being taken into account under subsection
(1) at any subsequent time when the conduct notice is not provisional.”

(5) After Schedule 34 insert—

““Schedule 34A 10Promoters of tax avoidance schemes: defeated arrangements

Part 1 Introduction

1 In this Schedule—

(a) Part 2 is about the meaning of “relevant defeat”;

(b) 15Part 3 contains definitions and other supplementary
provisions.

Part 2 Meaning of “relevant defeat”

“Related” arrangements

2 (1) 20For the purposes of this Part of this Act, separate arrangements
which persons have entered into are “related” to one another if (and
only if) they are substantially the same.

(2) Sub-paragraphs (3) to (6) set out cases in which arrangements are to
be treated as being “substantially the same” (if they would not
25otherwise be so treated under sub-paragraph (1)).

(3) Arrangements to which the same reference number has been
allocated under Part 7 of FA 2004 (disclosure of tax avoidance
schemes) are treated as being substantially the same.

For this purpose arrangements in relation to which information
30relating to a reference number has been provided in compliance with
section 312 of FA 2004 are treated as arrangements to which that
reference number has been allocated under Part 7 of that Act.

(4) Arrangements to which the same reference number has been
allocated under paragraph 9 of Schedule 11A to VATA 1994
35(disclosure of avoidance schemes) are treated as being substantially
the same.

(5) Any two or more sets of arrangements which are the subject of
follower notices given by reference to the same judicial ruling are
treated as being substantially the same.

(6) Where a notice of binding has been given in relation to any
arrangements (“the bound arrangements”) on the basis that they are,
for the purposes of Schedule 43A to FA 2013, equivalent
arrangements in relation to another set of arrangements (the “lead
5arrangements”)—

(a) the bound arrangements and the lead arrangements are
treated as being substantially the same, and

(b) the bound arrangements are treated as being substantially
the same as any other arrangements which, as a result of this
10sub-paragraph, are treated as substantially the same as the
lead arrangements.

“Promoted arrangements”

3 (1) For the purposes of this Schedule arrangements are “promoted
arrangements” in relation to a person if—

(a) 15they are relevant arrangements or would be relevant
arrangements under the condition stated in sub-paragraph
(2), and

(b) the person is a promoter in relation to the arrangements or
would be a promoter in relation to the arrangements under
20the condition stated in sub-paragraph (2).

(2) That condition is that the definition of “tax” in section 283 includes,
and has always included, value added tax.

Relevant defeat of single arrangements

4 (1) A defeat of arrangements (entered into by any person) which are
25promoted arrangements in relation to a person (“the promoter”) is a
“relevant defeat” in relation to the promoter if the condition in sub-
paragraph (2) is met.

(2) The condition is that the arrangements are not related to any other
arrangements which are promoted arrangements in relation to the
30promoter.

(3) For the meaning of “defeat” see paragraphs 10 to 16.

Relevant defeat of related arrangements

5 (1) This paragraph applies if arrangements (entered into by any person)
(“Set A”)—

(a) 35are promoted arrangements in relation to a person (“P”), and

(b) are related to other arrangements which are promoted
arrangements in relation to P.

(2) If Case 1, 2 or 3 applies (see paragraphs 7 to 9) a relevant defeat
occurs in relation to P and each of the related arrangements.

(3) 40“The related arrangements” means Set A and the arrangements
mentioned in sub-paragraph (1)(b).

Limit on number of separate relevant defeats in relation to the same, or related,
arrangements

6 In relation to a person, if there has been a relevant defeat of
arrangements (whether under paragraph 4 or 5) there cannot be a
5further relevant defeat of—

(a) those particular arrangements, or

(b) arrangements which are related to those arrangements.

Case 1: counteraction upheld by judicial ruling

7 (1) Case 1 applies if—

(a) 10any of Conditions A to E is met in relation to any of the
related arrangements, and

(b) in the case of those arrangements the decision to make the
relevant counteraction has been upheld by a judicial ruling
(which is final).

(2) 15In sub-paragraph (1) “the relevant counteraction” means the
counteraction mentioned in paragraph 11(d), 12(1)(b), 13(1)(d),
14(1)(d) or 15(1)(d) (as the case requires).

Case 2: judicial ruling that avoidance-related rule applies

8 Case 2 applies if Condition F is met in relation to any of the related
20arrangements.

Case 3: proportion-based relevant defeat

9 (1) Case 3 applies if—

(a) at least 75% of the tested arrangements have been defeated,
and

(b) 25no final judicial ruling in relation to any of the related
arrangements has upheld a corresponding tax advantage
which has been asserted in connection with any of the related
arrangements.

(2) In this paragraph “the tested arrangements” means so many of the
30related arrangements (as defined in paragraph 5(3)) as meet the
condition in sub-paragraph (3) or (4).

(3) Particular arrangements meet this condition if a person has made a
return, claim or election on the basis that a tax advantage results
from those arrangements and—

(a) 35there has been an enquiry or investigation by HMRC into the
return, claim or election, or

(b) HMRC assesses the person to tax on the basis that the tax
advantage (or any part of it) does not arise, or

(c) a GAAR counteraction notice has been given in relation to the
40tax advantage or part of it and the arrangements.

(4) Particular arrangements meet this condition if HMRC takes other
action on the basis that a tax advantage which might be expected to
arise from those arrangements, or is asserted in connection with
them, does not arise.

(5) For the purposes of this paragraph a tax advantage has been
“asserted” in connection with particular arrangements if a person
has made a return, claim or election on the basis that the tax
advantage arises from those arrangements.

(6) 5In sub-paragraph (1)(b) “corresponding tax advantage” means a tax
advantage corresponding to any tax advantage the counteraction of
which is taken into account by HMRC for the purposes of sub-
paragraph (1)(a).

(7) For the purposes of this paragraph a court or tribunal “upholds” a tax
10advantage if—

(a) the court or tribunal makes a ruling to the effect that no part
of the tax advantage is to be counteracted, and

(b) that judicial ruling is final.

(8) In this paragraph references to “counteraction” include anything
15referred to as a counteraction in any of Conditions A to F in
paragraphs 11 to 16.

(9) In this paragraph “GAAR counteraction notice” means—

(a) a notice such as is mentioned in sub-paragraph (2) of
paragraph 12 of Schedule 43 to FA 2013 (notice of final
20decision to counteract),

(b) a notice under paragraph 5(2) or 6(2) of Schedule 43A to that
Act (binding of arrangements to lead arrangements) stating
that the tax advantage is to be counteracted under the general
anti-abuse rule, or

(c) 25a notice under paragraph 9(2) of Schedule 43B to that Act
(generic referrals) stating that the tax advantage is to be
counteracted under the general anti-abuse rule.

“Defeat” of arrangements

10 For the purposes of this Part of this Act a “defeat” of arrangements
30occurs if any of Conditions A to F (in paragraphs 11 to 16) is met in
relation to the arrangements.

11 Condition A is that—

(a) a person has made a return, claim or election on the basis that
a tax advantage arises from the arrangements,

(b) 35a notice given to the person under paragraph 12 of Schedule
43 to FA 2013 stated that the tax advantage was to be
counteracted under the general anti-abuse rule,

(c) the tax advantage has been counteracted (in whole or in part)
under the general anti-abuse rule, and

(d) 40the counteraction is final.

12 (1) Condition B is that a follower notice has been given to a person by
reference to the arrangements (and not withdrawn) and—

(a) the person has complied with subsection (2) of section 208 of
FA 2014 by taking the action specified in subsections (4) to (6)
45of that section in respect of the denied tax advantage (or part
of it), or

(b) the denied tax advantage has been counteracted (in whole or
in part) otherwise than as mentioned in paragraph (a) and the
counteraction is final.

(2) In this paragraph “the denied tax advantage” is to be interpreted in
5accordance with section 208(3) of FA 2014.

(3) In this Schedule “follower notice” means a follower notice under
Chapter 2 of Part 4 of FA 2014.

13 (1) Condition C is that—

(a) the arrangements are DOTAS arrangements,

(b) 10a person (“the taxpayer”) has made a return, claim or election
on the basis that a relevant tax advantage arises,

(c) the relevant tax advantage has been counteracted, and

(d) the counteraction is final.

(2) For the purposes of sub-paragraph (1) “relevant tax advantage”
15means a tax advantage which the arrangements might be expected to
enable the taxpayer to obtain.

(3) For the purposes of this paragraph the relevant tax advantage is
“counteracted” if adjustments are made in respect of the taxpayer’s
tax position on the basis that the whole or part of that tax advantage
20does not arise.

14 (1) Condition D is that—

(a) the arrangements are disclosable VAT arrangements to
which a taxable person is a party,

(b) the taxable person has made a return or claim on the basis
25that a relevant tax advantage arises,

(c) the relevant tax advantage has been counteracted, and

(d) the counteraction is final.

(2) For the purposes of sub-paragraph (1) “relevant tax advantage”
means a tax advantage which the arrangements might be expected to
30enable the taxable person to obtain.

(3) For the purposes of this paragraph the relevant tax advantage is
“counteracted” if adjustments are made in respect of the taxable
person’s tax position on the basis that the whole or part of that tax
advantage does not arise.

15 (1) 35Condition E is that the arrangements are disclosable VAT
arrangements to which a taxable person (“T”) is a party and—

(a) the arrangements relate to the position with respect to VAT
of a person other than T (“S”) who has made supplies of
goods or services to T,

(b) 40the arrangements might be expected to enable T to obtain a
tax advantage in connection with those supplies of goods or
services,

(c) the arrangements have been counteracted, and

(d) the counteraction is final.

(2) 45For the purposes of this paragraph the arrangements are
“counteracted” if—