Finance (No. 2) Bill (HC Bill 155)
SCHEDULE 15 continued
Contents page 340-349 350-359 360-369 370-379 380-389 390-397 400-416 417-418 420-428 430-439 440-449 450-459 460-478 479-479 480-489 490-499 500-509 510-519 520-529 530-539 540-549 Last page
Finance (No. 2) BillPage 440
(b)
where E is less than or equal to TT, an amount, equal to the
difference between VT and the person’s default allowance, is
available for carry-forward, and
(c)
where E is greater than TT, an amount, equal to the difference
5between VT and the person’s adjusted allowance, is available
for carry-forward.”
(4) In subsection (8)—
(a) before the entry for section 8H insert—
-
““section 8FC (modifications of this section where there is
10entitlement to a downsizing addition),”, and”
(b)
in the entry for section 8H, after ““qualifying residential interest””
insert “, “qualifying former residential interest” and “residential
property interest””.
4 In section 8F(4) (list of other relevant sections)—
(a) 15before the entry for section 8H insert—
-
““section 8FD (which applies instead of this section
where there is entitlement to a downsizing
addition),”, and”
(b)
in the entry for section 8H, after ““qualifying residential interest””
20insert “, “qualifying former residential interest” and “residential
property interest””.
5 After section 8F insert—
“8FA Downsizing addition: entitlement: low-value death interest in home
(1)
There is entitlement to a downsizing addition in calculating the
25person’s residence nil-rate amount if each of conditions A to F is met
(see subsection (8) for the amount of the addition).
(2) Condition A is that—
(a)
the person’s residence nil-rate amount is given by section
8E(2) or (4), or
(b)
30the person’s estate immediately before the person’s death
includes a qualifying residential interest but none of the
interest is closely inherited, and—
(i)
where E is less than or equal to TT, so much of VT as
is attributable to the person’s qualifying residential
35interest is less than the person’s default allowance, or
(ii)
where E is greater than TT, so much of VT as is
attributable to the person’s qualifying residential
interest is less than the person’s adjusted allowance.
Section 8E(6) and (7) do not apply, and any entitlement to a
40downsizing addition is to be ignored, when deciding whether
paragraph (a) of condition A is met.
(3)
Condition B is that not all of VT is attributable to the person’s
qualifying residential interest.
(4)
Condition C is that there is a qualifying former residential interest in
45relation to the person (see section 8H(4A) to (4F)).
Finance (No. 2) BillPage 441
(5)
Condition D is that the value of the qualifying former residential
interest exceeds so much of VT as is attributable to the person’s
qualifying residential interest.
Section 8FE(2) explains what is meant by the value of the qualifying
5former residential interest.
(6)
Condition E is that at least some of the remainder is closely inherited,
where “the remainder” means everything included in the person’s
estate immediately before the person’s death other than the person’s
qualifying residential interest.
(7)
10Condition F is that a claim is made for the addition in accordance
with section 8L(1) to (3).
(8) Where there is entitlement as a result of this section, the addition—
(a)
is equal to the lost relievable amount (see section 8FE) if that
amount is less than so much of VT as is attributable to so
15much of the remainder as is closely inherited, and
(b)
otherwise is equal to so much of VT as is attributable to so
much of the remainder as is closely inherited.
(9)
Subsection (8) has effect subject to section 8M(2G) (reduction of
downsizing addition in certain cases involving conditional
20exemption).
(10) See also—
-
section 8FC (effect of an addition: section 8E case),
-
section 8FD (effect of an addition: section 8F case),
-
section 8H (meaning of “qualifying residential interest”,
25“qualifying former residential interest” and “residential
property interest”), -
section 8J (meaning of “inherit”),
-
section 8K (meaning of “closely inherited”), and
-
section 8M (cases involving conditional exemption).
8FB 30Downsizing addition: entitlement: no residential interest at death
(1)
There is also entitlement to a downsizing addition in calculating the
person’s residence nil-rate amount if each of conditions G to K is met
(see subsection (7) for the amount of the addition).
(2)
Condition G is that the person’s estate immediately before the
35person’s death (“the estate”) does not include a residential property
interest.
(3) Condition H is that VT is greater than nil.
(4)
Condition I is that there is a qualifying former residential interest in
relation to the person (see section 8H(4A) to (4F)).
(5) 40Condition J is that at least some of the estate is closely inherited.
(6)
Condition K is that a claim is made for the addition in accordance
with section 8L(1) to (3).
(7) Where there is entitlement as a result of this section, the addition—
Finance (No. 2) BillPage 442
(a)
is equal to the lost relievable amount (see section 8FE) if that
amount is less than so much of VT as is attributable to so
much of the estate as is closely inherited, and
(b)
otherwise is equal to so much of VT as is attributable to so
5much of the estate as is closely inherited.
(8)
Subsection (7) has effect subject to section 8M(2G) (reduction of
downsizing addition in certain cases involving conditional
exemption).
(9) See also—
-
10section 8FD (effect of an addition: section 8F case),
-
section 8H (meaning of “qualifying residential interest”,
“qualifying former residential interest” and “residential
property interest”), -
section 8J (meaning of “inherit”),
-
15section 8K (meaning of “closely inherited”), and
-
section 8M (cases involving conditional exemption).
8FC Downsizing addition: effect: section 8E case
(1) Subsection (2) applies if—
(a)
as a result of section 8FA, there is entitlement to a downsizing
20addition in calculating the person’s residence nil-rate
amount, and
(b) the person’s residence nil-rate amount is given by section 8E.
(2)
Section 8E has effect as if, in subsections (2) to (5) of that section, each
reference to NV/100 were a reference to the total of—
(a) 25NV/100, and
(b) the downsizing addition.
8FD Downsizing addition: effect: section 8F case
(1) This section applies if—
(a)
as a result of section 8FA or 8FB, there is entitlement to a
30downsizing addition in calculating the person’s residence
nil-rate amount, and
(b)
apart from this section, the person’s residence nil-rate
amount is given by section 8F.
(2) Subsections (3) to (6) apply instead of section 8F.
(3)
35The person’s residence nil-rate amount is equal to the downsizing
addition.
(4) Where—
(a)
E is less than or equal to TT, and the downsizing addition is
equal to the person’s default allowance, or
(b)
40E is greater than TT, and the downsizing addition is equal to
the person’s adjusted allowance,
no amount is available for carry-forward.
(5) Where—
(a) E is less than or equal to TT, and
Finance (No. 2) BillPage 443
(b)
the downsizing addition is less than the person’s default
allowance,
an amount, equal to the difference between the downsizing addition
and the person’s default allowance, is available for carry-forward.
(6) 5Where—
(a) E is greater than TT, and
(b)
the downsizing addition is less than the person’s adjusted
allowance,
an amount, equal to the difference between the downsizing addition
10and the person’s adjusted allowance, is available for carry-forward.
8FE Calculation of lost relievable amount
(1)
This section is about how to calculate the person’s lost relievable
amount for the purposes of sections 8FA(8) and 8FB(7).
(2)
For the purposes of this section and section 8FA(5), the value of the
15person’s qualifying former residential interest is the value of the
interest at the time of completion of the disposal of the interest.
(3) In this section, the person’s “former allowance” is the total of—
(a)
the residential enhancement at the time of completion of the
disposal of the qualifying former residential interest,
(b)
20any brought-forward allowance that the person would have
had if the person had died at that time, having regard to the
circumstances of the person at that time (see section 8G as
applied by subsection (4)), and
(c)
if the person’s allowance on death includes an amount of
25brought-forward allowance which is greater than the amount
of brought-forward allowance given by paragraph (b), the
difference between those two amounts.
(4)
For the purposes of calculating any brought-forward allowance that
the person (“P”) would have had as mentioned in subsection (3)(b)—
(a)
30section 8G (brought-forward allowance) applies, but as if
references to the residential enhancement at P’s death were
references to the residential enhancement at the time of
completion of the disposal of the qualifying former
residential interest, and
(b)
35assume that a claim for brought-forward allowance was
made in relation to an amount available for carry-forward
from a related person’s death if, on P’s death, a claim was in
fact made in relation to the amount.
(5)
For the purposes of subsection (3)(c), where the person’s allowance
40on death is equal to the person’s adjusted allowance, the amount of
brought-forward allowance included in the person’s allowance on
death is calculated as follows.
Step 1
Express the person’s brought-forward allowance as a percentage of
45the person’s default allowance.
Step 2
Finance (No. 2) BillPage 444
Multiply—

by the percentage given by step 1.
5Step 3
Reduce the person’s brought-forward allowance by the amount
given by step 2.
The result is the amount of brought-forward allowance included in
the person’s allowance on death.
(6)
10If completion of the disposal of the qualifying former residential
interest occurs before 6 April 2017—
(a)
for the purposes of subsection (3)(a), the residential
enhancement at the time of completion of the disposal is
treated as being £100,000, and
(b)
15for the purposes of subsection (3)(b), the amount of brought-
forward allowance that the person would have had at that
time is treated as being nil.
(7) In this section, the person’s “allowance on death” means—
(a)
where E is less than or equal to TT, the person’s default
20allowance, or
(b) where E is greater than TT, the person’s adjusted allowance.
(8)
For the purposes of this section, “completion” of the disposal of a
residential property interest occurs at the time of the disposal or, if
the disposal is under a contract which is completed by a conveyance,
25at the time when the interest is conveyed.
(9)
Where, as a result of section 8FA, there is entitlement to a
downsizing addition in calculating the person’s residence nil-rate
amount, take the following steps to calculate the person’s lost
relievable amount.
30Step 1
Express the value of the person’s qualifying former residential
interest as a percentage of the person’s former allowance, but take
that percentage to be 100% if it would otherwise be higher.
Step 2
35Express QRI as a percentage of the person’s allowance on death,
where QRI is so much of VT as is attributable to the person’s
qualifying residential interest, but take that percentage to be 100% if
it would otherwise be higher.
Step 3
40Subtract the percentage given by step 2 from the percentage given by
step 1, but take the result to be 0% if it would otherwise be negative.
The result is P%.
Step 4
The person’s lost relievable amount is equal to P% of the person’s
45allowance on death.
(10)
Where, as a result of section 8FB, there is entitlement to a downsizing
addition in calculating the person’s residence nil-rate amount, take
the following steps to calculate the person’s lost relievable amount.
Finance (No. 2) BillPage 445
Step 1
Express the value of the person’s qualifying former residential
interest as a percentage of the person’s former allowance, but take
that percentage to be 100% if it would otherwise be higher.
5Step 2
Calculate that percentage of the person’s allowance on death.
The result is the person’s lost relievable amount.”
6
In section 8G (meaning of “brought-forward allowance”), in subsection
(3)(a), for “and 8F” substitute “, 8F and 8FD”.
7
(1)
10Section 8H (meaning of “qualifying residential interest”) is amended as
follows.
(2)
In the heading, at the end insert “, “qualifying former residential interest”
and “residential property interest””.
(3) In subsection (1), for “and 8F” substitute “to 8FE and section 8M”.
(4) 15In subsection (2), for “In this section” substitute “A”.
(5) After subsection (4) insert—
“(4A) Subsection (4B) or (4C) applies where—
(a)
a person disposes of a residential property interest in a
dwelling-house on or after 8 July 2015 (and before the person
20dies), and
(b) the person’s personal representatives nominate—
(i)
where there is only one such dwelling-house, that
dwelling-house, or
(ii)
where there are two or more such dwelling-houses,
25one (and only one) of those dwelling-houses.
(4B)
Where the person disposes of just one residential property interest in
the nominated dwelling-house at a post-occupation time (and before
the person dies), that interest is a qualifying former residential
interest in relation to the person.
(4C) 30Where—
(a)
the person disposes of two or more residential property
interests in the nominated dwelling-house at post-occupation
times (and before the person dies), and
(b)
the person’s personal representatives nominate one (and
35only one) of those interests,
the nominated interest in the nominated dwelling-house is a
qualifying former residential interest in relation to the person.
(4D) Where—
(a)
a transfer of value by a person is a conditionally exempt
40transfer of a residential property interest, and
(b)
at the time of the person’s death, no chargeable event has
occurred with respect to that interest,
that interest may not be a qualifying former residential interest in
relation to the person.
(4E) 45In subsections (4B) and (4C) “post-occupation time” means a time—
Finance (No. 2) BillPage 446
(a) on or after 8 July 2015, and
(b)
after the nominated dwelling-house first became the person’s
residence.
(4F)
For the purposes of subsections (4A) to (4C), if the disposal is under
5a contract which is completed by a conveyance, the disposal occurs
at the time when the interest is conveyed.”
8
In section 8J (meaning of “inherited”), in subsection (1), for “and 8F”
substitute “, 8F, 8FA, 8FB and 8M”.
9
In section 8K (meaning of “closely inherited”), in subsection (1), for “and 8F”
10substitute “, 8F, 8FA, 8FB and 8M”.
10 In section 8L (claims for brought-forward allowance)—
(a) in the heading, at the end insert “and downsizing addition”, and
(b)
in subsection (1), after “(see section 8G)” insert “or for a downsizing
addition for a person (see sections 8FA to 8FD)”.
11
(1)
15Section 8M (residence nil-rate amount: cases involving conditional
exemption) is amended as follows.
(2) For subsections (1) and (2) substitute—
“(1) This section applies where—
(a) a person (“D”) dies on or after 6 April 2017,
(b)
20ignoring the application of this section, D’s residence nil-rate
amount is greater than nil, and
(c)
some or all of the transfer of value under section 4 on D’s
death is a conditionally exempt transfer of property
consisting of, or including, any of the following—
(i) 25some or all of a qualifying residential interest;
(ii)
some or all of a residential property interest, at least
some portion of which is closely inherited, and which
is not, and is not included in, a qualifying residential
interest;
(iii)
30one or more closely inherited assets that are not
residential property interests.
(2)
Subsections (2B) to (2E) apply for the purposes of sections 8E to 8FD
if—
(a)
ignoring the application of this section, D’s residence nil-rate
35amount is given by section 8E, and
(b)
some or all of the transfer of value under section 4 is a
conditionally exempt transfer of property mentioned in
subsection (1)(c)(i).
(2A)
In subsections (2B) to (2E), but subject to subsection (3)(a), “the
40exempt percentage of the QRI” is given by—

where—
-
X is the attributable portion of the value transferred by the
conditionally exempt transfer, -
QRI is the attributable portion of the value transferred by the
transfer of value under section 4, and -
“the attributable portion” means the portion (which may be the
whole) attributable to the qualifying residential interest.
Finance (No. 2) BillPage 447
(2B) 5If—
(a) the exempt percentage of the QRI is 100%, and
(b) D has no entitlement to a downsizing addition,
D’s residence nil-rate amount and amount available for carry-
forward are given by section 8F(2) and (3) (instead of section 8E).
(2C) 10If—
(a) the exempt percentage of the QRI is 100%, and
(b) D has an entitlement to a downsizing addition,
D’s residence nil-rate amount and amount available for carry-
forward are given by section 8FD(3) to (6) (instead of section 8E as
15modified by section 8FC(2)).
(2D) If—
(a) the exempt percentage of the QRI is less than 100%, and
(b) D has no entitlement to a downsizing addition,
D’s residence nil-rate amount and amount available for carry-
20forward are given by section 8E but as if, in subsections (2) to (5) of
that section, each reference to NV/100 were a reference to NV/100
multiplied by the percentage that is the difference between 100% and
the exempt percentage of the QRI.
(2E) If—
(a) 25the exempt percentage of the QRI is less than 100%, and
(b) D has an entitlement to a downsizing addition,
D’s residence nil-rate amount and amount available for carry-
forward are given by section 8E as modified by section 8FC(2), but as
if the reference to NV/100 in section 8FC(2)(a) were a reference to
30NV/100 multiplied by the percentage that is the difference between
100% and the exempt percentage of the QRI.
(2F) Subsection (2G) applies for the purposes of sections 8FA to 8FD if—
(a)
some or all of the transfer of value under section 4 is a
conditionally exempt transfer of property mentioned in
35subsection (1)(c)(ii) or (iii) (or both),
(b) D has an entitlement to a downsizing addition, and
(c) DA exceeds Y (see subsection (2H)).
(2G)
Subject to subsection (3)(aa) and (ab), the amount of the downsizing
addition is treated as reduced by whichever is the smaller of—
(a) 40the difference between DA and Y, and
(b) Z.
(2H) In subsections (2F) and (2G)—
-
DA is the amount of the downsizing addition to which D has an
entitlement (ignoring the application of subsection (2G)); -
Y is so much (if any) of the value transferred by the transfer of
value under section 4 as—(a)is not transferred by a conditionally exempt transfer,
and(b)5is attributable to—
(i)the closely inherited portion (which may be
the whole) of any residential property
interests that are not, and are not included in,
a qualifying residential interest, or(ii)10closely inherited assets that are not residential
property interests; -
Z is the total of—
(a)the closely inherited conditionally exempt values of
all residential property interests mentioned in
15subsection (1)(c)(ii), and(b)so much of the value transferred by the conditionally
exempt transfer as is attributable to property
mentioned in subsection (1)(c)(iii).
Finance (No. 2) BillPage 448
(2I)
For the purposes of the definition of “Z”, “the closely inherited
20conditionally exempt value” of a residential property interest
means—
(a)
so much of the value transferred by the conditionally exempt
transfer as is attributable to the interest, multiplied by
(b) the percentage of the interest which is closely inherited.”
(3) 25In subsection (3), for the words before paragraph (b) substitute—
“(3)
For the purposes of calculating tax chargeable under section 32 or
32A by reference to a chargeable event related to property forming
the subject-matter of the conditionally exempt transfer where D is
the relevant person for the purposes of section 33—
(a)
30where subsections (2B) to (2E) apply and the chargeable
event relates to property mentioned in subsection (1)(c)(i), in
calculating the exempt percentage of the QRI, X is calculated
as if the attributable portion of the value transferred by the
conditionally exempt transfer had not included the portion
35(which may be the whole) of the qualifying residential
interest on which the tax is chargeable,
(aa)
where subsection (2G) applies and the chargeable event
relates to property mentioned in subsection (1)(c)(ii), Z is
calculated as if it had not included the portion (which may be
40the whole) of the closely inherited conditionally exempt
value of the residential property interest on which the tax is
chargeable,
(ab)
where subsection (2G) applies and the chargeable event
relates to an asset mentioned in subsection (1)(c)(iii) (“the
45taxable asset”), Z is calculated as if it had not included so
much of the value transferred by the conditionally exempt
transfer as is attributable to the taxable asset,”.
(4) In subsection (3)—
(a)
at the beginning of paragraph (b) insert “in the cases mentioned in
50paragraphs (a), (aa) and (ab),”,
Finance (No. 2) BillPage 449
(b) at the end of paragraph (b) omit “and”,
(c)
in paragraph (c), for “less” substitute “reduced (but not below nil)
by”, and
(d) after paragraph (c) insert “, and
(d)
5where the chargeable event relates to property
mentioned in subsection (1)(c)(i) and subsections (2B)
to (2E) do not apply, section 33 has effect as if in
subsection (1)(b)(ii) after “in accordance with” there
were inserted “section 8D(2) and (3) above and”.”
(5)
10In subsection (5), for “the qualifying residential interest which” substitute
“property which forms the subject-matter of the conditionally exempt
transfer where the chargeable event”.
(6)
In subsection (6), for “the qualifying residential interest which” substitute
“property which forms the subject-matter of the conditionally exempt
15transfer and the chargeable event”.
(7)
In subsection (7), for “the qualifying residential interest” substitute
“property which forms the subject-matter of the conditionally exempt
transfer”.
Section 122
SCHEDULE 16
20Property authorised investment funds and co-ownership authorised
contractual schemes
Part 1 Co-ownership authorised contractual schemes
1 In FA 2003, after section 102 insert—
“102A 25 Co-ownership authorised contractual schemes
(1) This section has effect for the purposes of this Part.
(2)
This Part, with the exception of Schedule 7 (see subsection (10)),
applies in relation to a co-ownership authorised contractual scheme
as if—
(a) 30the scheme were a company, and
(b) the rights of the participants were shares in the company.
(3)
An “umbrella COACS” means a co-ownership authorised
contractual scheme—
(a)
whose arrangements provide for separate pooling of the
35contributions of the participants and the profits or income
out of which payments are made to them (“pooling
arrangements”), and
(b)
under which the participants are entitled to exchange rights
in one pool for rights in another.
(4)
40A “sub-scheme”, in relation to an umbrella COACS, means such of
the pooling arrangements as relate to a separate pool.