8R Penalties under section 8O: reasonable excuse

(1) A person is not liable to a penalty under section 8O in respect of a
contravention if—

(a) the contravention is not deliberate, and

(b) 5the person satisfies the Commissioners that there is a reasonable
excuse for the contravention.

(2) For the purposes of subsection (1)(b)—

(a) where the person relies on another person to do anything, that
is not a reasonable excuse unless the first person took
10reasonable care to avoid the contravention;

(b) where the person had a reasonable excuse for the relevant act or
failure but the excuse has ceased, the person is to be treated as
having continued to have the excuse if the contravention is
remedied without unreasonable delay after the excuse has
15ceased.

8S Penalties under section 8O: double jeopardy

A person is not liable to a penalty under section 8O in respect of a
contravention in respect of which the person has been convicted of an
offence.

8T 20Forfeiture of raw tobacco

Where a person carries on a controlled activity in relation to raw
tobacco in contravention of section 8L(1) or a requirement or restriction
imposed by regulations under section 8N, the raw tobacco is liable to
forfeiture.

8U 25Raw tobacco: application of Customs and Excise Management Act 1979

The Commissioners may by regulations provide that specified
provisions of the Customs and Excise Management Act 1979 apply
(with or without modification)—

(a) in relation to persons who carry on controlled activities as they
30apply in relation to revenue traders whose trade or business
relates to tobacco products, and

(b) in relation to raw tobacco as they apply in relation to tobacco
products.”

(2) In section 9 of TPDA 1979 (regulations)—

(a) 35in subsection (1), after “statutory instrument and” insert “, subject to
subsection (1A),”, and

(b) after subsection (1) insert—

“(1A) A statutory instrument containing regulations under section
8M, 8N or 8U is subject to annulment in pursuance of a
40resolution of the House of Commons.”

(3) In section 13A(2) of FA 1994 (customs and excise reviews and appeals:
“relevant decisions”), after paragraph (g) insert—

“(gb) any decision by HMRC that a person is liable to a penalty, or as
to the amount of the person’s liability, under section 8O of the
45Tobacco Products Duty Act 1979;”.

(4) In Schedule 5 to FA 1994 (decisions subject to review and appeal) after

paragraph 5 insert—

“5A Any decision—

(a) to refuse an approval under section 8L of the Tobacco
Products Duty Act 1979 (raw tobacco: approval to carry on a
5controlled activity);

(b) to impose a condition or restriction on, or to revoke or vary
the terms of, an approval under that section.”

(5) The amendments made by this section come into force on such day as the
Commissioners for Her Majesty’s Revenue and Customs may by regulations
10made by statutory instrument appoint.

(6) Regulations under subsection (5) may appoint different days for different
purposes.

State aids granted through provision of tax advantages

168 Powers to obtain information about certain tax advantages

(1) 15The powers conferred by this section are only exercisable for the purpose of
complying (or enabling another person to comply) with relevant EU
obligations.

(2) The Commissioners may determine that claims made for a tax advantage of a
description listed in Part 1 of Schedule 24 must include (or be accompanied by)
20such information, presented in such form, as the determination may specify.

(3) For the purposes of subsection (2) “information” includes—

(a) information about the claimant (or the claimant’s activities),

(b) information about the subject-matter of the claim, and

(c) other information which relates to the grant of state aid through the
25provision of the tax advantage in question.

(4) A determination under subsection (2)—

(a) may make different provision for different descriptions of tax
advantages or for different cases or circumstances, and

(b) may be revoked or amended by another determination.

(5) 30Subsection (6) applies where it appears to the Commissioners that a tax
advantage of a description listed in Part 2 of Schedule 24—

(a) has been given, or

(b) may be given in the future.

(6) The Commissioners may give the relevant person a notice requiring the
35person—

(a) to supply the Commissioners with the information specified in the
request, and

(b) if the notice so provides, to present it in the form specified in the
request.

(7) 40The relevant person must comply with those requirements within the period
specified in the notice.

(8) In subsections (6) and (7) “the relevant person”, in relation to a tax advantage
of any description, means the person mentioned in the third column of the
entry for that tax advantage in Part 2 of Schedule 24.

(9) For the purposes of subsection (6) “information” includes—

(a) 5information about—

(i) the person to whom the request is given (or their activities),

(ii) any other person who is the beneficiary of the tax advantage,

(b) information about the tax advantage (including the circumstances in
which it was obtained), and

(c) 10any other information which relates to the grant of state aid through the
provision of the tax advantage in question.

(10) A determination under subsection (2) may not apply to claims made before 1
July 2016.

(11) A notice under subsection (6) may relate to any information required by the
15Commissioners for the purpose mentioned in subsection (1) (including
information which relates to matters arising before this Act is passed).

169 Power to publish state aid information

(1) The Commissioners may publish any state aid information for the purpose of
securing compliance with any relevant EU obligation which requires the
20publication of that information.

(2) That power includes power to disclose state aid information to another person
for the purpose of securing its publication.

(3) In this section “state aid information” means information which relates to the
grant of state aid through the provision of a tax advantage and includes (but is
25not limited to) any information mentioned in section 168(3) or (9).

(4) This section applies to any state aid information (including information which
relates to a tax advantage given before the passing of this Act).

170 Information powers: supplementary

(1) In sections 168 and 169—

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

• “relevant EU obligations” means—

  (a)

  obligations under the General Block Exemption Regulation that
  relate to the grant of state aid through the provision of a tax
  35advantage, or

  (b)

  any corresponding obligations under EU law that apply to the
  grant of a notified state aid through the provision of a tax
  advantage.

(2) The “General Block Exemption Regulation” is Commission Regulation (EU)
40No 651/2014 declaring certain categories of aid to be compatible with the
internal market in application of Articles 107 and 108 of the Treaty establishing
the European Union (which relate to state aids granted by Member States).

(3) The Treasury may by regulations made by statutory instrument amend Part 1
or Part 2 of Schedule 24 by adding, omitting or varying an entry for any
description of tax advantage.

(4) Regulations under subsection (3) may include incidental or supplemental
5provision.

(5) A statutory instrument containing regulations under subsection (3) is subject
to annulment in pursuance of a resolution of the House of Commons.

(6) The powers under sections 168 and 169 are in addition to any other powers of
the Commissioners to acquire, disclose or publish information.

10Qualifying transformer vehicles

171 Qualifying transformer vehicles

(1) In this section “qualifying transformer vehicle” means a transformer vehicle
which meets conditions which are specified in regulations made by the
Treasury.

(2) 15The Treasury may by regulations make provision about the treatment for the
purposes of any enactment relating to taxation of—

(a) qualifying transformer vehicles;

(b) investors in qualifying transformer vehicles;

(c) transactions involving qualifying transformer vehicles.

(3) 20Regulations under subsection (2) may, in particular, disapply, apply (with or
without modification) or modify the application of any enactment.

(4) Without limiting the generality of subsection (2), regulations under that
subsection may in particular include—

(a) provision for profits or other amounts to be calculated with any
25adjustments, or on any basis, set out in the regulations;

(b) provision conferring, altering or removing an exemption or relief;

(c) provision about the treatment of arrangements the purpose, or one of
the main purposes, of which is to secure a tax advantage;

(d) provision about collection and enforcement (including the withholding
30of tax);

(e) in relation to qualifying transformer vehicles, requirements with
regard to the provision of information to investors;

(f) in relation to qualifying transformer vehicles or investors in qualifying
transformer vehicles, requirements with regard to—

(i) 35the provision of information to Her Majesty’s Revenue and
Customs,

(ii) the preparation of accounts,

(iii) the keeping of records, or

(iv) other administrative matters.

(5) 40Regulations under this section—

(a) may provide for Her Majesty’s Revenue and Customs to exercise a
discretion in dealing with any matter;

(b) may make provision by reference to rules, guidance or other
documents issued by any person (as they have effect from time to time).

(6) Regulations under this section may—

(a) make different provision for different cases or different purposes
(including different provision in relation to different descriptions of
qualifying transformer vehicle or, as the case may be, transformer
5vehicle);

(b) contain incidental, supplementary, consequential and transitional
provision and savings.

(7) Regulations under this section are to be made by statutory instrument.

(8) A statutory instrument containing regulations under subsection (1) is subject
10to annulment in pursuance of a resolution of the House of Commons.

(9) But the first set of regulations under subsection (1) may not be made unless a
draft has been laid before, and approved by a resolution of, the House of
Commons.

(10) A statutory instrument containing regulations under subsection (2) may not be
15made unless a draft has been laid before, and approved by a resolution of, the
House of Commons.

(11) In this section—

• “enactment” includes subordinate legislation (as defined in section 21 of
  the Interpretation Act 1978);

• 20“investors” in relation to a qualifying transformer vehicle means holders
  of investments issued by the qualifying transformer vehicle; and for
  this purpose “investment” includes any asset, right or interest;

• “tax advantage” has the meaning given by section 1139 of CTA 2010;

• “transformer vehicle” has the same meaning as in section 284A of the
  25Financial Services and Markets Act 2000.

Part 12 Office of Tax Simplification

172 Office of Tax Simplification

(1) There continues to be an Office of Tax Simplification (referred to in this Act as
30the “OTS”).

(2) Schedule 25 contains provision about the OTS.

173 Functions of the OTS: general

(1) The OTS must provide advice to the Chancellor of the Exchequer, on request
or as the OTS considers appropriate, on the simplification of the tax system.

(2) 35For the purposes of this section and section 174—

(a) “the tax system” means the law relating to, and the administration of,
relevant taxes,

(b) “relevant taxes” means taxes that the Commissioners for Her Majesty’s
Revenue and Customs are responsible for collecting and managing,
40and

(c) a reference to “taxes” includes a reference to duties and national
insurance contributions.

(3) References in this section and section 174 (however expressed) to the
simplification of the tax system include references to improving the efficiency
of the administration of relevant taxes.

174 Functions of the OTS: reviews and reports

(1) 5At the request of the Chancellor of the Exchequer, the OTS must conduct a
review of an aspect of the tax system for the purpose of identifying whether,
and if so how, that aspect of the tax system could be simplified.

(2) The OTS must prepare a report—

(a) setting out the results of the review, and

(b) 10making such recommendations (if any) as the OTS consider
appropriate.

(3) The OTS must send a copy of the report to the Chancellor of the Exchequer.

(4) The Chancellor of the Exchequer must—

(a) publish the report, and

(b) 15lay a copy of the report before Parliament.

(5) The Chancellor of the Exchequer must prepare and publish a response to the
report.

175 Annual report

(1) The OTS must prepare a report of the performance of its functions in each
20financial year.

(2) The report relating to a financial year must be prepared as soon as reasonably
practicable after the end of the financial year.

(3) The OTS must—

(a) send a copy of the report to the Chancellor of the Exchequer, and

(b) 25publish the report.

(4) The Chancellor of the Exchequer must lay a copy of the report before
Parliament.

(5) For the purposes of this paragraph, each of the following is a “financial year”—

(a) the period beginning with the day on which this section comes into
30force and ending with the following 31 March, and

(b) each successive period of 12 months.

176 Review of the OTS

(1) The Treasury must, before the end of each review period, conduct a review of
the effectiveness of the OTS in performing its functions.

(2) 35The “review period” means—

(a) in relation to the first review, the period of 5 years beginning with the
day on which this section comes into force, and

(b) in relation to subsequent reviews, the period of 5 years beginning with
the day on which the previous review was completed.

(3) 40The Treasury must prepare and publish a report of each review.

177 Commencement

Sections 172 to 176 and Schedule 25 come into force on such day as the
Treasury may by regulations made by statutory instrument appoint.

Part 13 5Final

178 Interpretation

In this Act—

• “ALDA 1979” means the Alcoholic Liquor Duties Act 1979;

• “CAA 2001” means the Capital Allowances Act 2001;

• 10“CEMA 1979” means the Customs and Excise Management Act 1979;

• “CTA 2009” means the Corporation Tax Act 2009;

• “CTA 2010” means the Corporation Tax Act 2010;

• “FA”, followed by a year, means the Finance Act of that year;

• “F(No.2)A, followed by a year means the Finance (No.2) Act of that year;

• 15“F(No.3)A, followed by a year, means the Finance (No.3) Act of that year;

• “HODA 1979” means the Hydrocarbon Oil Duties Act 1979;

• “ICTA” means the Income and Corporation Taxes Act 1988;

• “IHTA 1984” means the Inheritance Tax Act 1984;

• “ITA 2007” means the Income Tax Act 2007;

• 20“ITEPA 2003” means the Income Tax (Earnings and Pensions) Act 2003;

• “ITTOIA 2005” means the Income Tax (Trading and Other Income) Act
  2005;

• “OTA 1975” means the Oil Taxation Act 1975;

• “TCGA 1992” means the Taxation of Chargeable Gains Act 1992;

• 25“TIOPA 2010” means the Taxation (International and Other Provisions)
  Act 2010;

• “TMA 1970” means the Taxes Management Act 1970;

• “TPDA 1979” means the Tobacco Products Duty Act 1979;

• “VATA 1994” means the Value Added Tax Act 1994;

• 30“VERA 1994” means the Vehicle Excise and Registration Act 1994.

179 Short title

This Act may be cited as the Finance Act 2016.

SCHEDULES

Section 5

SCHEDULE 1 Abolition of dividend tax credits etc

Main repeals

1 (1) 5In ITTOIA 2005 omit sections 397 to 398, 400, 414 and 421 (distributions: tax
credits, and tax treated as paid).

(2) In CTA 2010 omit section 1109 (tax credits for certain distributions).

Further amendments in ITTOIA 2005

2 ITTOIA 2005 is further amended as follows.

3 10In the heading of Chapter 3 of Part 4, for “credits etc” substitute “treated as
paid”.

4 In section 382(2) (other contents of Chapter 3 of Part 4)—

(a) omit “tax credits,”, and

(b) for “397” substitute “399”.

5 15Omit section 384(3) (which refers to section 398).

6 Omit section 393(5) (determining entitlement to tax credit).

7 In section 394 (which deems a distribution to be made)—

(a) omit subsection (5) (determining entitlement to tax credit), and

(b) in subsection (6), for “But for” substitute “For”.

8 20In section 395(3) (interpretation of section 395(2)) omit the words from
“after” to the end.

9 For section 396A(2)(b) (alternative receipt treated as qualifying distribution
for the purposes of sections 397 and 399 and for the purposes of section 1100
of CTA 2010) substitute—

“(b) 25for the purposes of sections 1100 to 1103 of CTA 2010
(statements and returns of details of distributions) it is
treated as a distribution that—

(i) is so made, and

(ii) is one to which section 1100 of CTA 2010 applies.”

10 30In the italic heading before section 397, omit “Tax credits and”.

11 (1) Section 399 (qualifying distribution received by person not entitled to tax
credits) is amended as follows.

(2) For subsection (1) substitute—

“(1) This section applies if—

(a) a person’s income for a tax year includes a distribution of a
company, and

(b) 5the person is non-UK resident.”

(3) In subsection (2) omit “(but see subsection (7))”.

(4) Omit subsections (3) to (5) (amount of dividend received by non-UK
resident to be treated as its grossed-up amount).

(5) Omit subsection (5A) (amounts treated as qualifying distributions for
10purposes of the section).

(6) Omit subsection (7) (which provides for subsection (2) to be subject to
repealed provisions).

(7) For the heading substitute “Tax treated as paid on distributions received by
non-UK resident persons”.

12 (1) 15Section 401 (relief: qualifying distribution after linked non-qualifying
distribution) is amended as follows.

(2) For subsections (1) to (6) substitute—

“(1) Where a person is liable to income tax on a CD distribution, the
person’s liability to income tax on a subsequent non-CD distribution
20is reduced in accordance with this section if the non-CD distribution
consists of a repayment of—

(a) the share capital, or

(b) the principal of the security,

which constituted the CD distribution.

(1A) 25The reduction is—

(a) the amount of income tax to which the person is liable on the
CD distribution, or

(b) if lower, the amount of income tax to which the person is
liable on the non-CD distribution.

(1B) 30For the purposes of calculating the amounts mentioned in subsection
(1A)(a) and (b) assume—

(a) that the CD distribution is the lowest part of the person’s
dividend income in the tax year (“year 1”) in which it is made,

(b) that the non-CD distribution, if it is made in year 1, is the part
35of the person’s dividend income in year 1 that is next lowest
after the CD distribution, and

(c) that the non-CD distribution, if it is made after year 1, is the
lowest part of the person’s dividend income in the tax year in
which it is made.”

(3) 40In subsection (7) (interpretation), for ““security”” substitute “—

• “CD distribution” means a distribution which is a distribution
  for the purposes of the Corporation Tax Acts only because it
  falls within paragraph C or D in section 1000(1) of CTA 2010
  (redeemable share capital or security issued as bonus in
  45respect of shares in, or securities of, the company),

Finance (No. 2) BillPage 259

• “non-CD distribution” means a distribution which is not a CD
  distribution, and

• “security””.

(4) In the heading, for “qualifying distribution after linked non-qualifying
5distribution” substitute “distribution repaying shares or security issued in
earlier distribution”.

13 Omit section 401A (recovery of overpaid tax credit etc).

14 In section 401B (power to obtain information for the purposes of section 397),
for “section 397”, in each place it occurs, substitute “this Chapter”.

15 10Omit sections 406(4A) and 407(4A) (determining entitlement to tax credit).

16 In section 408(2A) (interpretation of section 408(2)) omit the words from
“after” to the end.

17 In section 411(2) (stock dividends: amount on which tax charged) omit
“, grossed up by reference to the dividend ordinary rate for the tax year”.

18 15In section 416 (released debts: amount on which tax charged)—

(a) in subsection (1) (tax charged on gross amount) omit “gross”, and

(b) omit subsection (2) (meaning of “gross amount”).

19 In section 418(3) (release of loan: tax only on grossed-up amount of excess
where part previously charged) omit “, grossed up by reference to the
20dividend ordinary rate”.

20 Omit section 858(3) (partnerships with foreign element: entitlement to tax
credit).

Further amendments in CTA 2010

21 CTA 2010 is further amended as follows.

22 (1) 25Section 279F (ring fence profits: related 51% group company) is amended as
follows.

(2) In subsection (7)(c) (conditions to be met by a company’s dividend income
in order for company to be a passive company), in sub-paragraph (ii)
(dividends must be franked investment income) for “franked investment
30income” substitute “exempt ABGH distributions”.

(3) After subsection (9) insert—

“(10) In subsection (7)(c) “exempt ABGH distribution” means a
distribution which—

(a) is a distribution for the purposes of the Corporation Tax Acts
35only because it falls within paragraph A, B, G or H in section
1000(1), and

(b) is exempt for the purposes of Part 9A of CTA 2009 (company
distributions).”

23 (1) Section 279G (ring fence profits: meaning of “augmented profits”) is
40amended as follows.

(2) In subsection (1)(b) (franked investment income is part of augmented profits
unless excluded)—