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

is to be disregarded for the purposes of paragraph 30 (penalty).

Section 149

SCHEDULE 19 Large businesses: tax strategies and sanctions

Part 1 5Interpretation

Purpose of Part 1

1 This Part defines terms for the purposes of this Schedule.

“Relevant body”

2 (1) “Relevant body” means a UK company or any other body corporate
10(wherever incorporated), but does not include a limited liability partnership.

(2) A relevant body is a “foreign” relevant body (or member of a group or sub-
group) if it is incorporated outside the United Kingdom.

“UK company”

3 (1) “UK company” means a company which is (or is treated as if it is) formed
15and registered under the Companies Act 2006, unless it falls within sub-
paragraph (2).

(2) The term “UK company” does not include a company which is—

(a) an open-ended investment company within the meaning of section
613 of CTA 2010, or

(b) 20an investment trust within the meaning of section 1158 of CTA 2010.

“UK permanent establishment”

4 (1) “UK permanent establishment” means a permanent establishment in the
United Kingdom of a foreign relevant body.

(2) In sub-paragraph (1) “permanent establishment” has the same meaning as it
25has for the purposes of the Corporation Tax Acts (see section 1141 to 1144 of
CTA 2010).

“Qualifying company”

5 (1) A UK company is a “qualifying company” in any financial year (subject to
any regulations under sub-paragraph (5)) if sub-paragraph (2) or (3) applies
30to it.

(2) This sub-paragraph applies to the company if, at the end of the previous
financial year—

(a) it satisfied the qualification test for a UK company, and

(b) was not a member of a UK group or a UK sub-group.

(3) This sub-paragraph applies to the company if, at the end of the previous
financial year—

(a) it was a member of a foreign group,

(b) the group met the qualification test for a group, and

(c) 5it was not a member of a UK sub-group of that foreign group.

(4) The qualification test for a UK company is that the company satisfied either
or both of the following conditions (by reference to the previous financial
year)—

(5) The Treasury may by regulations provide that a company of a description
specified in the regulations is not a qualifying company for the purposes of
this Schedule (or any such purpose specified in the regulations).

(6) 15For the purposes of this paragraph a UK permanent establishment of a
foreign relevant body is to be treated as if it were—

(a) a UK company, and

(b) if the foreign relevant body is a member of a UK group or a UK sub-
group, a member of that group or sub-group.

20“Group” and related expressions

6 (1) “Group” means two or more relevant bodies which together constitute—

(a) an MNE Group (see paragraph 7), or

(b) a group other than an MNE group (see paragraph 8).

(2) “UK group” means a group whose head is a relevant body incorporated in
25the United Kingdom.

(3) “Foreign group” means a group whose head is a foreign relevant body.

(4) For the purposes of sub-paragraphs (2) and (3) it is immaterial where other
members of the group are incorporated.

7 (1) “MNE Group” has the same meaning (subject to sub-paragraph (2) below)
30as in the OECD Model Legislation in the OECD Country-by-Country
Reporting Implementation Package as contained in the OECD’s Guidance
on Transfer Pricing Documentation and Country-by-Country Reporting
published in 2014.

(2) Paragraph (ii) (excluded MNE Group) of the Implementation Package is not
35part of the definition applied by sub-paragraph (1) above for the purposes of
this Schedule.

(3) In sub-paragraph (1) “OECD” means the Organisation for Economic Co-
operation and Development.

8 (1) A “group other than an MNE group” means a group consisting of two or
40more relevant bodies—

(a) each of which is a member of the group by virtue of sub-paragraph
(3) or (4),

(b) at least two of which are UK companies,

which is not an MNE Group.

(2) 5For the purposes of the condition in sub-paragraph (1)(b) a UK permanent
establishment of a foreign member of a group is to be treated as if it were a
UK company and a member of the group.

(3) A relevant body is a member of a group if—

(a) another relevant body is its 51% subsidiary, or

(b) 10it is a 51% subsidiary of another relevant body.

(4) Two relevant bodies are members of the same group if—

(a) one is a 51% subsidiary of the other, or

(b) both are 51% subsidiaries of another relevant body.

(5) Chapter 3 of Part 24 of CTA 2010 (meaning of 51% subsidiary) applies for the
15purposes of this Schedule as it applies for the purposes of the Corporation
Tax Acts (but with the modification in sub-paragraph (6)).

(6) It applies as if references to a body corporate were references to a relevant
body.

9 A group is headed by whichever relevant body within the group is not a 51%
20subsidiary of another relevant body within the group (and “head”, in
relation to the group, means that body).

“Qualifying group”

10 (1) A group is a “qualifying group” in any financial year if, at the end of the
previous financial year—

(a) 25in the case of a group other than an MNE Group, the group satisfied
the qualification test for such a group (subject to any regulations
under sub-paragraph (6)), or

(b) in the case of an MNE Group—

(i) there was a mandatory reporting requirement in respect of
30the group under regulations made under section 122 of FA
2015 (country-by-country reporting), or

(ii) there would have been such a requirement if the head of the
group were resident in the United Kingdom for tax purposes.

(2) The qualification test for a group other than an MNE Group is that the group
35satisfied either or both of the following conditions (by reference to the
previous financial year)—

(3) 40In sub-paragraph (2)—

(a) “group turnover” means the aggregate turnover of the UK
companies that are members of the group at the end of the previous
financial year, and

(b) “group balance sheet total”, means the aggregate balance sheet totals
5for all those UK companies.

(4) Where the financial year of a UK company within in the group does not end
on the same day as the previous financial year of the head of the group, the
figures from the company that are to be included in the aggregate figures are
those for the company’s financial year ending last before the end of the
10previous financial year of the head of the group.

(5) For the purposes of assessing the turnover or balance sheet total of the
group, sub-paragraphs (3) and (4) apply as if a UK permanent establishment
of a foreign member of the group were a UK company and a member of the
group.

(6) 15The Treasury may by regulations provide—

(a) that a group other than an MNE Group which is of a specified
description is not a qualifying group for the purposes, or any
specified purpose, of this Schedule, or

(b) that a relevant body, or a UK permanent establishment, of a specified
20description is to be disregarded in determining whether the
qualification test is satisfied by a group other than an MNE Group;

and in this sub-paragraph “specified” means specified in the regulations.

(7) In this paragraph “financial year”, in relation to a group, means a financial
year of the head of the group.

25“UK sub-group” and “head” (in relation to a UK sub-group)

11 (1) A “UK sub-group” consists of two or more relevant bodies that would be a
UK group, but for the fact that they are members of a larger group headed
by a relevant body incorporated outside the United Kingdom.

(2) A UK sub-group is headed by the company or other relevant body
30incorporated in the United Kingdom that is not a 51% subsidiary of another
member of the UK sub-group (and “head”, in relation to the sub-group,
means that company or body).

“UK partnership”, “qualifying partnership” and “representative partner”

12 (1) “UK partnership” means a body of any of the following descriptions which
35is carrying on a trade, business or profession with a view to profit—

(a) a partnership within the meaning of the Partnership Act 1890,

(b) a limited partnership registered under the Limited Partnerships Act
1907, or

(c) a limited liability partnership incorporated in the United Kingdom.

(2) 40A UK partnership is a “qualifying partnership” in a financial year, if it
satisfied the qualification test for a UK partnership at the end of the previous
financial year (subject to any regulations under sub-paragraph (4)).

(3) The qualification test for a UK partnership is that the partnership satisfied
either or both of the following conditions (by reference to the previous
45financial year)—

(4) 5The Treasury may by regulations provide that a UK partnership of a
description specified in the regulations is not a qualifying partnership for
the purposes of this Schedule (or any such purpose specified in the
regulations).

(5) “Representative partner”, in relation to a UK partnership, means the partner
10who is required by a notice served under or by virtue of section 12AA(2) or
(3) of TMA 1970 to make and deliver returns to an officer of HMRC.

“Financial year”

13 “Financial year”—

(a) in relation to a UK company, has the meaning given by the
15Companies Act 2006 (see section 390 of that Act),

(b) in relation to any other relevant body, means any period in respect of
which a profit and loss account for the body’s undertaking is
required to be made up (whether by its constitution or by the law
under which it is established), whether that period is a year or not,

(c) 20in relation to a UK partnership, means any period of account for
which its representative partner has provided or is required to
provide a partnership statement under a return issued under section
12AB TMA 1970.

“Turnover” and “balance sheet total”

14 (1) 25“Turnover”—

(a) in relation to a UK company, has the same meaning as in Part 15 of
the Companies Act 2006 (see section 474 of that Act), and

(b) in relation to a UK partnership or a UK permanent establishment,
has a corresponding meaning.

(2) 30“Balance sheet total”, in relation to a UK company, UK partnership or UK
permanent establishment and a financial year, means the aggregate of the
amounts shown as assets in its balance sheet at the end of the financial year.

“UK taxation”

15 (1) “UK taxation” means —

(a) 35income tax,

(b) corporation tax, including any amount assessable or chargeable as if
it were corporation tax or treated as if it were corporation tax,

(c) value added tax,

(d) amounts for which the company is accountable under PAYE
40regulations,

(e) diverted profits tax,

(f) insurance premium tax,

(g) annual tax on enveloped dwellings,

(h) stamp duty land tax,

(i) stamp duty reserve tax,

(j) petroleum revenue tax;

(k) 5customs duties,

(l) excise duties,

(m) national insurance contributions.

(2) In relation to a tax strategy required to be published by Part 2, “UK taxation”
refers to the taxes or duties mentioned above so far as relating to or affecting
10the bodies or body to which the required tax strategy relates.

Part 2 Publication of tax strategies

Qualifying UK groups: duty to publish a group tax strategy

16 (1) This paragraph applies in relation to a UK group which is a qualifying group
15in any financial year (“the current financial year”).

(2) The head of the group must ensure that a group tax strategy for the group,
containing the information required by paragraph 17, is prepared and
published on behalf of the group in accordance with this paragraph.

(3) The group tax strategy—

(a) 20must be published before the end of the current financial year, and

(b) if the group was a qualifying group in the previous financial year,
must not be published more than 15 months after the day on which
its previous group tax strategy was published.

(4) The group tax strategy—

(a) 25must be published on the internet by any of the UK companies that
are members of the group so as to be accessible to the public free of
charge (whether or not it is also published in any other way), and

(b) may be published as a separate document or as a self-contained part
of a wider document.

(5) 30The head of the group must ensure that the group tax strategy published on
the internet remains accessible to the public free of charge—

(a) if a group tax strategy for the group’s next financial year is required
by this paragraph to be published, until that tax strategy is
published, or

(b) 35if paragraph (a) does not apply, for at least one year.

(6) For the purposes of this paragraph—

(a) a group tax strategy is published when it is first published on the
internet as mentioned in paragraph (4)(a),

(b) the identity of the group is not to be regarded as altered by any
40change in its membership during the current financial year resulting
from a relevant body—

(i) becoming a 51% subsidiary of a member of the group, or

(ii) ceasing to be a 51% subsidiary of another member of the
group; and

(c) if the group becomes a UK sub-group of a foreign group during the
current financial year, it is to be treated for the rest of that year as if
it were still a UK group.

(7) In this paragraph and paragraph 17 “financial year”, in relation to a UK
5group, means a financial year of the head of the group.

Content of group tax strategy

17 (1) A group tax strategy required to be published on behalf of a UK group by
paragraph 16 must set out—

(a) the approach of the group to risk management and governance
10arrangements in relation to UK taxation,

(b) the attitude of the group towards tax planning (so far as affecting UK
taxation),

(c) the level of risk in relation to UK taxation that the group is prepared
to accept, and

(d) 15the approach of the group towards its dealings with HMRC.

(2) The group tax strategy may—

(a) include other information relating to taxation (whether UK taxation
or otherwise), and

(b) deal with a matter mentioned in sub-paragraph (1) by reference to
20the group as a whole or to individual members of the group (or to
both).

(3) The information required by sub-paragraph (1) to be included in the group
tax strategy does not include any information about activities of any
member of the group that consists of the provision of tax advice or related
25professional services to persons who are not members of the group.

(4) The publication of information as the group tax strategy does not constitute
publication of the strategy for the purposes of paragraph 16 unless the UK
company publishing it makes clear (in a way that will be readily apparent to
anyone accessing the information online) that the company regards its
30publication as complying with the duty under paragraph 16(2) in the current
financial year.

(5) For the purposes of this paragraph a UK permanent establishment of a
foreign member of the group is to be treated as if it were a member of the
group.

35Penalty for non-compliance with paragraph 16

18 (1) This paragraph applies where paragraph 16 requires a group tax strategy to
be published for a UK group in any financial year of the head of the UK
group.

(2) The head of the group is liable to a penalty of £7,500 if—

(a) 40there is a failure to publish a group tax strategy for the group that
complies with paragraph 16(2), or

(b) where a group tax strategy has been published, there is a failure to
comply with paragraph 16(5).

(3) Subject to sub-paragraph (5) the head of the group is only liable to one
penalty by virtue of sub-paragraph (2) in respect of a group tax strategy
required for the financial year in question.

(4) Sub-paragraph (5) applies where—

(a) 5the head of the group is liable to a penalty under this paragraph in
respect of a failure mentioned in sub-paragraph (2)(a), and

(b) no group tax strategy for the group that complies with paragraph
16(2) (disregarding paragraph 16(3)) is published within the period
of 6 months after the last day on which the duty under paragraph
1016(2) could have been complied with.

(5) At the end of that period, the head of the group—

(a) is liable to a further penalty of £7,500, and

(b) where the failure mentioned in sub-paragraph (4)(b) continues, is
liable to a further penalty of £7,500 at the end of each subsequent
15month in which no such group tax strategy is published.

UK sub-groups: duty to publish a sub-group tax strategy

19 (1) This paragraph applies to a UK sub-group of a foreign group if in any
financial year (“the current financial year”) the foreign group is a qualifying
group.

(2) 20The head of the sub-group must ensure that a sub-group tax strategy for the
sub-group, giving the information required by paragraph 20, is prepared
and published in accordance with this paragraph.

(3) The sub-group tax strategy—

(a) must be published before the end of the current financial year, and

(b) 25if the group of which the sub-group is part was a qualifying group in
the previous financial year, must not be published more than 15
months after the day on which its sub-group tax strategy for that
year was published;

(4) The sub-group tax strategy—

(a) 30must be published on the internet by any of the UK companies that
are members of the foreign group so as to be accessible to the public
free of charge (whether or not it is also published in any other way),
and

(b) may be published as a separate document or as a self-contained part
35of a wider document.

(5) The head of the sub-group must ensure that the sub-group tax strategy
published on the internet remains accessible to the public free of charge—

(a) if a sub-group tax strategy for the sub-group’s next financial year is
required by this paragraph to be published, until that tax strategy is
40published, or

(b) if paragraph (a) does not apply, for at least one year.

(6) For the purposes of this paragraph—

(a) a sub-group tax strategy is published when it is first published on
the internet as mentioned in sub-paragraph (4)(a),

(b) 45the identity of the sub-group is not affected by any change in its
membership in the current financial year resulting from a relevant

body becoming or ceasing to be a 51% subsidiary of a member of the
sub-group, and

(c) if the sub-group becomes a UK sub-group of another foreign group
during the current financial year, for the rest of that year it is to be
5treated as if it were still a UK sub-group of the original foreign group
(but only a UK company within the sub-group may publish a sub-
group tax strategy for the sub-group after that change).

(7) In this paragraph “financial year”, in relation to a UK sub-group, means a
financial year of the head of the group of which it is a sub-group.

10Content of a sub-group tax strategy

20 (1) Paragraph 17 applies in relation to a sub-group tax strategy required to be
published on behalf of a UK sub-group by paragraph 19 as it applies to a
group tax strategy required to be published by a qualifying UK group.

(2) In the application of paragraph 17 to a sub-group tax strategy, references to
15the group or members of the group are to be read as references to the UK
sub-group or members of the UK sub-group.

(3) In the application of paragraph 17 as modified by this paragraph to a sub-
group tax strategy, a UK permanent establishment of a foreign member of
the UK sub-group is to be treated as if it were a member of the sub-group.

20Penalty for non-compliance with requirements of paragraph 19

21 (1) This paragraph applies where paragraph 19 requires a sub-group tax
strategy to be published for a UK sub-group in any financial year of the head
of the sub-group.

(2) The head of the sub-group is liable to a penalty of £7,500 if—

(a) 25there is a failure to publish a sub-group tax strategy for the sub-
group that complies with paragraph 19(2), or

(b) where a sub-group tax strategy has been published, there is a failure
to comply with paragraph 19(5).

(3) Subject to sub-paragraph (5), the head of the sub-group is only liable to one
30penalty by virtue of sub-paragraph (2) in respect of a sub-group tax strategy
required for the financial year in question.

(4) Sub-paragraph (5) applies where—

(a) the head of the sub-group is liable to a penalty under this paragraph
in respect of a failure mentioned in sub-paragraph (2)(a), and

(b) 35no sub-group tax strategy for the sub-group that complies with
paragraph 19(2) (disregarding paragraph 19(3)) is published within
the period of 6 months after the last day on which the duty under
paragraph 19(2) could have been complied with.

(5) At the end of that period, the head of the sub-group is liable—

(a) 40to a further penalty of £7,500, and

(b) where the failure mentioned in sub-paragraph (4)(b) continues, to a
further penalty of £7,500 at the end of each subsequent month in
which no such sub-group tax strategy is published.

Qualifying companies: duty to publish a company tax strategy

22 (1) This paragraph applies in relation to a UK company which in any financial
year (“the current financial year”) is a qualifying company.

(2) The company must prepare and publish a company tax strategy, containing
5the information required by paragraph 23, in accordance with this
paragraph.

(3) The duty under sub-paragraph (2) applies even if the company becomes a
member of a UK group or a UK sub-group during the current financial year.

(4) The company tax strategy—

(a) 10must be published by the company before the end of the current
financial year, and

(b) if the company was a qualifying company in the previous financial
year, must not be published more than 15 months after the day on
which its company tax strategy was published in the previous
15financial year.

(5) The company tax strategy—

(a) must be published on the internet so as to be accessible to the public
free of charge (whether or not published in any other way), and

(b) may be published as a separate document or a self- contained part of
20a wider document.

(6) The company must ensure that the company tax strategy published on the
internet remains accessible to the public free of charge—

(a) if a company tax strategy for the next financial year is required by
this paragraph to be published, until that tax strategy is published, or

(b) 25if paragraph (a) does not apply, for at least one year.

(7) For the purposes of this paragraph a company tax strategy is published
when it is first published as mentioned in sub-paragraph (5)(a).

(8) A UK permanent establishment which in any financial year is by virtue of
paragraph 5(6) to be treated as a qualifying company is to be treated for the
30purposes of this paragraph and paragraphs 23 and 24 as if it were a UK
company which in that financial year is a qualifying company.

Content of a company tax strategy

23 (1) The company tax strategy must set out—

(a) the company’s approach to risk management and governance
35arrangements in relation to UK taxation,

(b) the company’s attitude towards tax planning (so far as affecting UK
taxation),

(c) the level of risk in relation to UK taxation that the company is
prepared to accept,

(d) 40the company’s approach towards its dealings with HMRC.

(2) The company tax strategy may include other information relating to taxation
(whether UK taxation or otherwise).

(3) The information required by sub-paragraph (1) to be included in a company
tax strategy does not include any information about activities of the