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

(a) HMRC assess S to tax or take any other action on a basis
which prevents T from obtaining (or obtaining the whole of)
the tax advantage in question, or

(b) adjustments are made on a basis such as is mentioned in
5paragraph (a).

16 (1) Condition F is that—

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

(b) the tax advantage, or part of the tax advantage would not
10arise if a particular avoidance-related rule (see paragraph 18)
applies in relation to the person’s tax affairs, and

(c) it is held in a judicial ruling that the relevant avoidance-
related rule applies in relation to the person’s tax affairs, and

(d) the judicial ruling is final.

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

Part 3 Supplementary

20“Adjustments”

17 In this Schedule “adjustments” means any adjustments, whether by
way of an assessment, the modification of an assessment or return,
amendment or disallowance of a claim, the entering into of a contract
settlement or otherwise (and references to “making” adjustments
25accordingly include securing that adjustments are made by entering
into a contract settlement).

Meaning of “avoidance-related rule”

18 (1) In this Schedule “avoidance-related rule” means a rule in Category 1
or 2.

(2) 30A rule is in Category 1 if—

(a) it refers (in whatever terms) to the purpose or main purpose
or purposes of a transaction, arrangements or any other
action or matter, and

(b) to whether or not the purpose in question is or involves the
35avoidance of tax or the obtaining of any advantage in relation
to tax (however described).

(3) A rule is also in Category 1 if it refers (in whatever terms) to—

(a) expectations as to what are, or may be, the expected benefits
of a transaction, arrangements or any other action or matter,
40and

(b) whether or not the avoidance of tax or the obtaining of any
advantage in relation to tax (however described) is such a
benefit.

For the purposes of paragraph (b) it does not matter whether the
reference is (for instance) to the “sole or main benefit” or “one of the
main benefits” or any other reference to a benefit.

(4) A rule falls within Category 2 if as a result of the rule a person may
5be treated differently for tax purposes depending on whether or not
purposes referred to in the rule (for instance the purposes of an
actual or contemplated action or enterprise) are (or are shown to be)
commercial purposes.

(5) For example, a rule in the following form would fall within Category
101 and within Category 2—

““Example rule

Section X does not apply to a company in respect of a transaction if the
company shows that the transaction meets Condition A or B.

Condition A is that the transaction is effected—

Condition B is that the avoidance of tax is not the main object or one of the main
objects of the transaction.”

“DOTAS arrangements”

19 (1) 20For the purposes of this Schedule arrangements are “DOTAS
arrangements” at any time if at that time a person—

(a) has provided, information in relation to the arrangements
under section 308(3), 309 or 310 of FA 2004, or

(b) has failed to comply with any of those provisions in relation
25to the arrangements.

(2) But for the purposes of this Schedule “DOTAS arrangements” does
not include arrangements in respect of which HMRC has given
notice under section 312(6) of FA 2004 (notice that promoters not
under duty to notify client of reference number).

(3) 30For the purposes of sub-paragraph (1) a person who would be
required to provide information under subsection (3) of section 308
of FA 2004—

(a) but for the fact that the arrangements implement a proposal
in respect of which notice has been given under subsection (1)
35of that section, or

(b) but for subsection (4A), (4C) or (5) of that section,

is treated as providing the information at the end of the period
referred to in subsection (3) of that section.

“Disclosable VAT arrangements”

20 40For the purposes of this Schedule arrangements are “disclosable
VAT arrangements” at any time if at that time—

(a) a person has complied with paragraph 6 of Schedule 11A to
VATA 1994 in relation to the arrangements (duty to notify
Commissioners),

(b) a person under a duty to comply with that paragraph in
relation to the arrangements has failed to do so, or

(c) a reference number has been allocated to the scheme under
paragraph 9 of that Schedule (voluntary notification of
5avoidance scheme which is not a designated scheme).

Paragraphs 19 and 20: supplementary

21 (1) A person “fails to comply” with any provision mentioned in
paragraph 19(1)(a) or 20(b) if and only if any of the conditions in sub-
paragraphs (2) to (4) is met.

(2) 10The condition in this sub-paragraph is that—

(a) the tribunal has determined that the person has failed to
comply with the provision concerned,

(b) the appeal period has ended, and

(c) the determination has not been overturned on appeal.

(3) 15The condition in this sub-paragraph is that—

(a) the tribunal has determined for the purposes of section 118(2)
of TMA 1970 that the person is to be deemed not to have
failed to comply with the provision concerned as the person
had a reasonable excuse for not doing the thing required to be
20done,

(b) the appeal period has ended, and

(c) the determination has not been overturned on appeal.

(4) The condition in this sub-paragraph is that the person admitted in
writing to HMRC that the person has failed to comply with the
25provision concerned.

(5) In this paragraph “the appeal period” means—

(a) the period during which an appeal could be brought against
the determination of the tribunal, or

(b) where an appeal mentioned in paragraph (a) has been
30brought, the period during which that appeal has not been
finally determined, withdrawn or otherwise disposed of.

“Final” counteraction

22 For the purposes of this Schedule the counteraction of a tax
advantage or of arrangements is “final” when the assessment or
35adjustments made to effect the counteraction, and any amounts
arising as a result of the assessment or adjustments, can no longer be
varied, on appeal or otherwise.

Inheritance tax, stamp duty reserve tax, VAT and petroleum revenue tax

23 (1) In this Schedule, in relation to inheritance tax, each of the following
40is treated as a return—

(a) an account delivered by a person under section 216 or 217 of
IHTA 1984 (including an account delivered in accordance
with regulations under section 256 of that Act);

(b) a statement or declaration which amends or is otherwise
connected with such an account produced by the person who
delivered the account;

(c) information or a document provided by a person in
5accordance with regulations under section 256 of that Act;

and such a return is treated as made by the person in question.

(2) In this Schedule references to an assessment to tax, in relation to
inheritance tax, stamp duty reserve tax and petroleum revenue tax,
include a determination.

(3) 10In this Schedule an expression used in relation to VAT has the same
meaning as in VATA 1994.

Power to amend

24 (1) The Treasury may by regulations amend this Schedule (apart from
this paragraph).

(2) 15An amendment by virtue of sub-paragraph (1) may, in particular,
add, vary or remove conditions or categories (or otherwise vary the
meaning of “avoidance-related rule”).

(3) Regulations under sub-paragraph (1) may include any amendment
of this Part of this Act that is appropriate in consequence of an
20amendment made by virtue of sub-paragraph (1).”

(6) In section 241 (duration of conduct notice), after subsection (4) insert—

“(5) See also section 237D(2) (provisional conduct notice affected by judicial
ruling).”

(7) After section 281 insert—

“281A 25 VAT

(1) In the provisions mentioned in subsection (2)—

(a) “tax” includes value added tax, and

(b) “tax advantage” has the meaning given by section 234(3) and
also includes a tax advantage as defined in paragraph 1 of
30Schedule 11A to VATA 1994.”

(2) Those provisions are—

(a) section 237D;

(b) section 241B;

(c) Schedule 34A.

(3) 35Other references in this Part to “tax” are to be read as including value
added tax so far as that is necessary for the purposes of sections 237A
to 237D, 241A and 241B and Schedule 34A; but “tax” does not include
value added tax in section 237A(5) or 237B(3).”

(8) In section 282 (regulations), in subsection (3), after paragraph (b) insert—

“(ba) 40paragraph 24 of Schedule 34A,”.

(9) In section 283 (interpretation of Part 5)—

(a) in subsection (1)—

(i) in the definition of “conduct notice”, after paragraph (a) insert—

• “(“aa)

  section 237A(4),

  (ab)

  section 237B(1),”;

(ii) in the definition of “tax”, after ““tax”” insert “(except in
5provisions to which section 281A applies)”;

(iii) in the definition of ““tax advantage””, after “234(3)” insert “(but
see also section 281A)”;

(iv) at the appropriate places insert—

• “““contract settlement” means an agreement in
  10connection with a person’s liability to make a
  payment to the Commissioners under or by
  virtue of an enactment;”

• “defeat”, in relation to arrangements, has the
  meaning given by paragraph 10 of Schedule
  1534A;

• ““defeat notice” has the meaning given by section
  241A(7);”

• ““double defeat notice” has the meaning given by
  section 241A(7);”

• 20““final”, in relation to a judicial ruling, is to be
  interpreted in accordance with section 237D(6);”

• ““judicial ruling” means a ruling of a court or
  tribunal on one or more issues;”

• ““look-forward period, in relation to a defeat
  25notice, has the meaning given by section
  241A(10);”

• ““provisional”, in relation to a conduct notice given
  under section 237A(4), is to be interpreted in
  accordance with section 237C;”

• 30““relevant defeat”, in relation to a person, is to be
  interpreted in accordance with Schedule 34A;”

• ““related”, in relation to arrangements, is to be
  interpreted in accordance with paragraph 2 of
  Schedule 34A;”

• 35““relies on a Case 3 relevant defeat” is to be
  interpreted in accordance section 237B(5);”

• ““single defeat notice” has the meaning given by
  section 241A(7).”

(10) For the purposes of sections 237A and 241A of FA 2014, a defeat (by virtue of
40any of Conditions A to F in Schedule 34A to that Act) of arrangements is
treated as not having occurred if—

(a) there has been a final judicial ruling on or before the day on which this
Act is passed as a result of which the counteraction referred to in
paragraph 11(d), 12(1)(b), 13(1)(d), 14(1)(d) or 15(1)(d) (as the case may
45be) is final for the purposes of Schedule 34A of that Act, or

(b) (in the case of a defeat by virtue of Condition F in Schedule 34A) the
judicial ruling mentioned in paragraph 16(1)(d) of that Schedule
becomes final on or before the day on which this Act is passed.

(11) Subsection (10) does not apply in relation to a person (who is carrying on a
50business as a promoter) if at any time after 17 July 2014 that person takes action
as a result of which the person taking the action—

(a) becomes a promoter in relation to the arrangements, or arrangements
related to those arrangements, or

(b) would have become a promoter in relation to arrangements mentioned
in paragraph (a) had the person not already been a promoter in relation
5to those arrangements.

(12) For the purposes of sections 237A and 241A of FA 2014, a defeat of
arrangements is treated as not having occurred if it would (ignoring this sub-
paragraph) have occurred—

(a) on or before the first anniversary of the day on which this Act is passed,
10and

(b) by virtue of any of Conditions A to E in Schedule 34A to FA 2014, but
otherwise than as a result of a final judicial ruling.

(13) In subsections (10) to (12) expressions used in Part 5 of FA 2014 (as amended
by this section) have the same meaning as in that Part.

149 15Large businesses: tax strategies and sanctions for persistently unco-operative
behaviour

(1) Schedule 19 contains provisions relating to—

(a) the publication of tax strategies by bodies which are or are part of a
large business,

(b) 20the imposition of sanctions for such bodies where there has been
persistent unco-operative behaviour.

(2) That Schedule, so far as relating to the publication of a tax strategy for a
financial year of a relevant body or other entity, has effect only where the
financial year begins on or after the day on which this Act is passed.

(3) 25An officer of HMRC may not give a warning notice under Part 3 of that
Schedule to a relevant body or other entity before the beginning of its first
financial year beginning on or after the day on which this Act is passed.

(4) In this section and Schedule 19 “HMRC” means Her Majesty’s Revenue and
Customs.

30Offshore activities

150 Civil penalties for enablers of offshore tax evasion

(1) Schedule 20 makes provision for civil penalties for persons who enable
offshore tax evasion by other persons.

(2) Subsection (1) and that Schedule come into force on such day as the Treasury
35may appoint by regulations made by statutory instrument.

(3) Regulations under this section may—

may commence a provision generally or only for specified purposes,

(b) appoint different days for different purposes, and

(c) make supplemental, incidental and transitional provision in connection
40with the coming into force of any provision of the Schedule.

151 Penalties in connection with offshore matters and offshore transfers

(1) Schedule 21 contains provisions amending—

(a) Schedule 24 to FA 2007 (penalties for errors in tax returns etc),

(b) Schedule 41 to FA 2008 (penalties for failure to notify etc), and

(c) 5Schedule 55 to FA 2009 (penalties for failure to make return etc).

(2) That Schedule comes into force on such day as the Treasury may by regulations
made by statutory instrument appoint.

(3) Regulations under this section may—

(a) commence a provision generally or only for specified purposes,

(b) 10appoint different days for different provisions or for different
purposes, and

(c) make supplemental, incidental and transitional provision.

152 Offshore tax errors etc: publishing details of deliberate tax defaulters

(1) Section 94 of FA 2009 (publishing details of deliberate tax defaulters) is
15amended as follows.

(2) After subsection (4), insert—

“(4A) Subsection (4B) applies where a person who is a body corporate or a
partnership has incurred—

(a) a penalty under paragraph 1 of Schedule 24 to FA 2007 in
20respect of a deliberate inaccuracy which involves an offshore
matter or an offshore transfer (within the meaning of paragraph
4A of that Schedule), or

(b) a penalty under paragraph 1 of Schedule 41 to FA 2008 in
respect of a deliberate failure which involves an offshore matter
25or an offshore transfer (within the meaning of paragraph 6A of
that Schedule).

(4B) The Commissioners may publish the information mentioned in
subsection (4) in respect of any individual who—

(a) controls the body corporate or the partnership (within the
30meaning of section 1124 of CTA 2010), and

(b) has obtained a tax advantage as a result of the inaccuracy or
failure.

(4C) Subsection (4D) applies where one or more trustees of a settlement
have incurred—

(a) 35a penalty under paragraph 1 of Schedule 24 to FA 2007 in
respect of a deliberate inaccuracy which involves an offshore
matter or an offshore transfer (within the meaning of paragraph
4A of that Schedule), or

(b) a penalty under paragraph 1 of Schedule 41 to FA 2008 in
40respect of a deliberate failure which involves an offshore matter
or an offshore transfer (within the meaning of paragraph 6A of
that Schedule).

(4D) The Commissioners may publish the information mentioned in
subsection (4) in respect of any trustee who is an individual and who
45has obtained a tax advantage as a result of the inaccuracy or failure.”

(3) In subsection (6), after “information” insert “about a person under subsection
(1),”.

(4) After subsection (6), insert—

“(6A) Before publishing any information about an individual under
5subsection (4B) or (4D), the Commissioners—

(a) must inform the individual that they are considering doing so,
and

(b) afford the individual reasonable opportunity to make
representations about whether it should be published.”

(5) 10In subsection (10)—

(a) omit the word “or” at the end of paragraph (a), and after that paragraph
insert—

“(aa) paragraph 10A of that Schedule to the full extent
permitted following an unprompted disclosure,”;

(b) 15after paragraph (b) insert “, or

(c) paragraph 13A of that Schedule to the full extent
permitted following an unprompted disclosure.”

(6) For subsection (16) substitute—

“(16) In this section—

• 20“the Commissioners” means the Commissioners for Her Majesty’s
  Revenue and Customs;

• “tax advantage” has the meaning given by section 208 of FA 2013.”

(7) The amendments made by this section come into force on such day as the
Treasury may by regulations made by statutory instrument appoint.

153 25Asset-based penalties for offshore inaccuracies and failures

(1) Schedule 22 contains provision imposing asset-based penalties on certain
taxpayers who have been charged a penalty for deliberate offshore
inaccuracies and failures.

(2) That Schedule comes into force on such day as the Treasury may by regulations
30made by statutory instrument appoint.

(3) Regulations under subsection (2) may—

(a) commence a provision generally or only for specified purposes,

(b) appoint different days for different provisions or for different
purposes, and

(c) 35make supplemental, incidental and transitional provision.

154 Offences relating to offshore income, assets and activities

(1) After section 106A of TMA 1970 insert—

““Offshore income, assets and activities

106B Offence of failing to give notice of being chargeable to tax

(1) 40A person who is required by section 7 to give notice of being chargeable
to income tax or capital gains tax (or both) for a year of assessment and

who has not given that notice by the end of the notification period
commits an offence if—

(a) the tax in question is chargeable (wholly or in part) on or by
reference to offshore income, assets or activities, and

(b) 5the total amount of income tax and capital gains tax that is
chargeable for the year of assessment on or by reference to
offshore income, assets or activities exceeds the threshold
amount.

(2) It is a defence for a person accused of an offence under this section to
10prove that the person had a reasonable excuse for failing to give the
notice required by section 7.

(3) In this section “the notification period” has the same meaning as in
section 7 (see subsection (1C) of that section).

106C Offence of failing to deliver return

(1) 15A person who is required by a notice under section 8 to make and
deliver a return for a year of assessment commits an offence if—

(a) the return is not delivered by the end of the withdrawal period,

(b) an accurate return would have disclosed liability to income tax
or capital gains tax (or both) that is chargeable for the year of
20assessment on or by reference to offshore income, assets or
activities, and

(c) the total amount of income tax and capital gains tax that is
chargeable for the year of assessment on or by reference to
offshore income, assets or activities exceeds the threshold
25amount.

(2) It is a defence for a person accused of an offence under this section to
prove that the person had a reasonable excuse for failing to deliver the
return.

(3) In this section “the withdrawal period” has the same meaning as in
30section 8B (see subsection (6) of that section).

106D Offence of making inaccurate return

(1) A person who is required by a notice under section 8 to make and
deliver a return for a year of assessment commits an offence if, at the
end of the amendment period—

(a) 35the return contains an inaccuracy the correction of which would
result in an increase in the amount of income tax or capital gains
tax (or both) that is chargeable for the year of assessment on or
by reference to offshore income, assets or activities, and

(b) the amount of that increase exceeds the threshold amount.

(2) 40It is a defence for a person accused of an offence under this section to
prove that the person took reasonable care to ensure that the return was
accurate.

(3) In this section “the amendment period” means the period for amending
the return under section 9ZA.

106E Exclusions from offences under sections 106B to 106D

(1) A person is not guilty of an offence under section 106B, 106C or 106D if
the capacity in which the person is required to give the notice or make
and deliver the return is—

(a) 5as a relevant trustee of a settlement, or

(b) as the executor or administrator of a deceased person.

(2) The Treasury may by regulations provide that a person is not guilty of
an offence under section 106B, 106C or 106D if—

(a) conditions specified in the regulations are met, or

(b) 10circumstances so specified exist.

(3) The conditions may (in particular) include conditions in relation to the
income, assets or activities on or by reference to which the tax in
question is chargeable.

106F Offences under sections 106B to 106D: supplementary provision

(1) 15Where a period of time is extended under subsection (2) of section 118
by HMRC, the tribunal or an officer (but not where a period is
otherwise extended under that subsection), any reference in section
106B, 106C or 106D to the end of the period is to be read as a reference
to the end of the period as so extended.

(2) 20The Treasury may by regulations specify the amount (which must not
be less than £25,000) that is to be the threshold amount for the purposes
of sections 106B to 106D.

(3) The Treasury may by regulations make provision as to the calculation
for the purposes of sections 106B to 106D of—

(a) 25the amount of tax that is chargeable on or by reference to
offshore income, assets or activities, and

(b) the increase in the amount of tax that is so chargeable as a result
of correcting an inaccuracy.

(4) In sections 106B to 106D and this section “offshore income, assets or
30activities” means—

(a) income arising from a source in a territory outside the United
Kingdom,

(b) assets situated or held in a territory outside the United
Kingdom, or

(c) 35activities carried on wholly or mainly in a territory outside the
United Kingdom.

(5) In subsection (4), “assets” has the meaning given in section 21(1) of the
1992 Act, but also includes sterling.

106G Penalties for offences under sections 106B to 106D

(1) 40A person guilty of an offence under section 106B, 106C or 106D is liable
on summary conviction—

(a) in England and Wales, to a fine or to imprisonment for a term
not exceeding 51 weeks or to both, and

(b) in Scotland or Northern Ireland, to a fine not exceeding level 5
45on the standard scale or to imprisonment for a term not
exceeding 6 months or to both.