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

Application of Part 3 to large UK sub-groups

50 (1) A UK sub-group of a foreign group falls within this Part if—

(a) the sub-group has persistently engaged in unco-operative behaviour
(see paragraphs 36 to 38),

(b) 5some or all of the unco-operative behaviour has caused there to be,
or contributed to there being, two or more significant tax issues in
respect of the sub-group or members of the sub-group which are
unresolved (see paragraph 39), and

(c) there is a reasonable likelihood of further instances of the sub-group
10engaging in unco-operative behaviour in a manner which causes
there to be, or contributes to there being, significant tax issues in
respect of the sub-group or members of the sub-group.

(2) Paragraphs 36 to 40 apply in relation to a UK sub-group as they apply in
relation to a UK group.

(3) 15Paragraphs 41 to 45 apply in relation to the head of a UK sub-group of a
foreign group that is a qualifying group at the material time as they apply in
relation to the head of a UK group.

(4) In the application of paragraph 41 in the case of a UK sub-group, sub-
paragraph (4) has effect in relation to a UK sub-group as if for paragraphs
20(b) and (c) there were substituted—

“(b) the identity of the sub-group is not to be regarded as
altered by any change in its membership resulting from a
relevant body—

(i) becoming a 51% subsidiary of a member of the sub-
25group, or

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

(c) if the sub-group becomes a UK sub-group of another
foreign group, it is to be treated as if it were still a UK sub-
30group of the original foreign group.”

(5) As applied by this paragraph, paragraphs 36 to 45 have effect as if references
to a UK group (including in references to the head of a UK group or
members of a UK group) were references to a UK sub-group.

(6) In paragraphs 40, 41, 46, 47 and 49, references to a group (including in
35references to the head of a group or members of a group) include a UK sub-
group.

(7) In paragraph 46, references to the head of a UK group include the head of a
UK sub-group.

Application of Part 3 to large companies

51 (1) 40A UK company falls within this Part if—

(a) the company has persistently engaged in unco-operative behaviour
(see paragraphs 36 to 38),

(b) some or all of the unco-operative behaviour has caused there to be,
or contributed to there being, two or more significant tax issues in
45respect of the company which are unresolved (see paragraph 39),
and

(c) there is a reasonable likelihood of further instances of the company
engaging in unco-operative behaviour in a manner which causes
there to be, or contributes to there being, significant tax issues in
respect of the company.

(2) 5Paragraphs 36 to 39 apply in relation to a company as they apply in relation
to a UK group.

(3) Paragraphs 41 to 45 apply in relation to a company as they apply in relation
to the head of a UK group.

(4) As applied by this paragraph, paragraphs 36 to 39 and 41 to 45 have effect as
10if references to a UK group, the head of a UK group or a member of a UK
group were references to a company.

(5) Paragraph 47 applies in relation to a company as it applies in relation to a
member of a group.

(6) Paragraph 49 applies in relation to a company as it applies in relation to a
15group.

(7) As applied by this paragraph, paragraphs 47 and 49 have effect as if
references to a group, the head of a group or a member of a group were
references to a company.

Application of Part 3 to large partnerships

52 (1) 20 A UK partnership falls within this Part if—

(a) the partnership has persistently engaged in unco-operative
behaviour (see paragraphs 36 to 38),

(b) some or all of the unco-operative behaviour has caused there to be,
or contributed to there being, two or more significant tax issues in
25respect of the partnership which are unresolved (see paragraph 39),
and

(c) there is a reasonable likelihood of further instances of the
partnership engaging in unco-operative behaviour in a manner
which causes there to be, or contributes to there being, significant tax
30issues in respect of the partnership.

(2) Paragraphs 36 to 39 of this Schedule apply in relation to a UK partnership as
they apply in relation to a UK group.

(3) Paragraphs 41 to 45 of this Schedule apply in relation to the representative
partner of a UK partnership as they apply in relation to the head of a UK
35group.

(4) As applied by this paragraph, paragraphs 36 to 39 and 41 to 45 have effect as
if—

(a) references to a UK group were references to a UK partnership;

(b) references to the head of a UK group were references to the
40representative partner of a UK partnership;

(c) references to a member of a UK group were references to a partner of
a UK partnership, acting in the person’s capacity as such.

(5) The Treasury may by regulations make provision for warning notices,
special measures notices and confirmation notices to be treated as having

been given to the representative partner of a UK partnership in
circumstances described in the regulations.

(6) Paragraph 46(12) applies to regulations under this paragraph.

(7) Paragraph 47 applies in relation to an inaccuracy in a document given to
5HMRC by a partner of a UK partnership, acting in the person’s capacity as
such, as if—

(a) references to a group were references to a partnership;

(b) references to the head of a group were references to the
representative partner of a partnership;

(c) 10references to a member of a group were references to a partner of a
partnership.

(8) Paragraph 47 applies in relation to an inaccuracy in any other document
given to HMRC on behalf of a UK partnership as if—

(a) references to a person included a UK partnership;

(b) 15references to a group, or a member of a group, were references to a
UK partnership;

(c) references to the head of a group were references to the
representative partner of a UK partnership.

(9) Paragraph 49 applies in relation to a UK partnership as it applies in relation
20to a group.

(10) As applied by this paragraph, paragraph 49 has effect as if—

(a) references to a group were references to a UK partnership;

(b) references to the head of a group were references to the
representative partner of a UK partnership.

25Meaning of “designated HMRC officer”

53 In this Part “designated HMRC officer” means an officer of Revenue and
Customs who has been designated by the Commissioners for Her Majesty’s
Revenue and Customs for the purposes of this Part.

Part 4 30Supplementary

Amendment of power under section 122 of FA 2015

54 The power to make regulations under section 122(6)(c) of FA 2015 (country-
by-country reporting: incidental etc provision that may be included in
regulations) includes power to amend paragraph 7 above.

35Regulations

55 (1) Regulations under this Schedule are to be made by statutory instrument.

(2) A statutory instrument containing regulations under this Schedule is subject
to annulment in pursuance of a resolution of the House of Commons.

Terms defined for purposes of more than one paragraph of this Schedule

Section 150

5SCHEDULE 20 Penalties for enablers of offshore tax evasion or non-compliance

Part 1 Liability for penalty

Liability for penalty

1 (1) 10A penalty is payable by a person (P) who has enabled another person (Q) to
carry out offshore tax evasion or non-compliance, where conditions A and B
are met.

(2) For the purposes of this Schedule—

(a) Q carries out “offshore tax evasion or non-compliance” by—

(i) 15committing a relevant offence, or

(ii) engaging in conduct that makes Q liable (if the applicable
conditions are met) to a relevant civil penalty,

where the tax at stake is income tax, capital gains tax or inheritance
tax, and

(b) 20P “has enabled” Q to carry out offshore tax evasion or non-
compliance if P has encouraged, assisted or otherwise facilitated
conduct by Q that constitutes offshore tax evasion or non-
compliance.

(3) The relevant offences are-

(a) 25an offence of cheating the public revenue involving offshore activity,
or

(b) an offence under section 106A of TMA 1970 (fraudulent evasion of
income tax) involving offshore activity,

(c) an offence under section 106B, 106C or 106D of TMA 1970 (offences
30relating to certain failures to comply with section 7 or 8 by a taxpayer
chargeable to income tax or capital gains tax on or by reference to
offshore income, assets or liabilities).

(4) The relevant civil penalties are—

(a) a penalty under paragraph 1 of Schedule 24 to FA 2007 (errors in
35taxpayer’s document) involving an offshore matter or an offshore
transfer (within the meaning of that Schedule),

(b) a penalty under paragraph 1 of Schedule 41 to FA 2008 (failure to
notify etc) in relation to a failure to comply with section 7(1) of TMA
1970 involving offshore activity,

(c) 40a penalty under paragraph 6 of Schedule 55 to FA 2009 (failure to
make return for 12 months) involving offshore activity,

(d) a penalty under paragraph 1 of Schedule 21 to FA 2015 (penalties in
connection with relevant offshore asset moves).

(5) Condition A is that P knew when P’s actions were carried out that they
enabled, or were likely to enable, Q to carry out offshore tax evasion or non-
5compliance.

(6) Condition B is that—

(a) in the case of offshore tax evasion or non-compliance consisting of
the commission of a relevant offence, Q has been convicted of the
offence and the conviction is final, or

(b) 10in the case of offshore tax evasion or non-compliance consisting of
conduct that makes Q liable to a relevant penalty—

(i) Q has been found to be liable to such a penalty, assessed and
notified, and the penalty is final, or

(ii) a contract has been made between the Commissioners for
15Her Majesty’s Revenue and Customs and Q under which the
Commissioners undertake not to assess the penalty or (if it
has been assessed) not to take proceedings to recover it.

(7) For the purposes of sub-paragraph (6)(a)—

(a) “convicted of the offence” means convicted of the full offence (and
20not for example of an attempt), and

(b) a conviction becomes final when the time allowed for bringing an
appeal against it expires or, if later, when any appeal against
conviction has been determined.

(8) For the purposes of sub-paragraph (6)(b)(i) a penalty becomes final when the
25time allowed for any appeal or further appeal relating to it expires or, if later,
any appeal or final appeal relating to it is determined.

(9) It is immaterial for the purposes of condition B that—

(a) any offence of which Q was convicted, or

(b) any penalty for which Q was found to be liable,

30relates also to other tax evasion or non-compliance by Q.

(10) In this Schedule “other tax evasion or non-compliance by Q” means conduct
by Q that—

(a) constitutes an offence of cheating the public revenue or an offence of
fraudulent evasion of tax, or

(b) 35makes Q liable to a penalty under any provision of the Taxes Acts,

but does not constitute offshore tax evasion or non-compliance.

(11) Nothing in condition B affects the law of evidence as to the relevance if any
of a conviction, assessment of a penalty or contract mentioned in sub-
paragraph (6) for the purpose of proving that condition A is met in relation
40to P.

(12) In this Schedule “conduct” includes a failure to act.

Meaning of “involving offshore activity” and related expressions

2 (1) This paragraph has effect for the purposes of this Schedule.

(2) Conduct involves offshore activity if it involves—

(a) 45an offshore matter,

(b) an offshore transfer, or

(c) a relevant offshore asset move.

(3) Conduct involves an offshore matter if it results in a potential loss of revenue
that is charged on or by reference to—

(a) 5income arising from a source in a territory outside the United
Kingdom,

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

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

(d) 10anything having effect as if it were income, assets or activities of the
kind described above.

(4) Where the tax at stake is inheritance tax, assets are treated for the purposes
of sub-paragraph (3) as situated or held in a territory outside the United
Kingdom if they are so held or situated immediately after the transfer of
15value by reason of which inheritance tax becomes chargeable.

(5) Conduct involves an offshore transfer if—

(a) it does not involve an offshore matter,

(b) it is deliberate (whether or not concealed) and results in a potential
loss of revenue,

(c) 20the condition set out in paragraph 4AA of Schedule 24 to FA 2007 is
satisfied.

(6) Conduct involves a relevant offshore asset move if at a time when Q is the
beneficial owner of an asset (“the qualifying time”)—

(a) the asset ceases to be situated or held in a specified territory and
25becomes situated or held in a non-specified territory,

(b) the person who holds the asset ceases to be resident in a specified
territory and becomes resident in a non-specified territory, or

(c) there is a change in the arrangements for the ownership of the asset,

and Q remains the beneficial owner of the asset, or any part of it,
30immediately after the qualifying time.

(7) Paragraphs 4(2) to (4) of Schedule 21 to FA 2015 apply for the purposes of
sub-paragraph (6) above as they apply for purposes of paragraph 4 of that
Schedule.

(8) In sub-paragraph (6) above, “specified territory” has the same meaning as in
35paragraph 4(5) of Schedule 21 to FA 2015.

Amount of penalty

3 (1) The penalty payable under paragraph 1 is (except in a case mentioned in
sub-paragraph (2)) the higher of—

(a) 100% of the potential lost revenue, or

(b) 40£3,000.

(2) In a case where P has enabled Q to engage in conduct which makes Q liable
to a penalty under paragraph 1 of Schedule 21 to FA 2015, the penalty
payable under paragraph 1 is the higher of—

(a) 50% of the potential lost revenue in respect of the original tax non-
45compliance, and

(b) £3,000.

(3) In sub-paragraph (2)(a) “the original tax non-compliance” means the
conduct that incurred the original penalty and “the potential lost revenue”
(in respect of that non-compliance) is—

(a) the potential lost revenue under Schedule 24 to FA 2007,

(b) 5the potential lost revenue under Schedule 41 to FA 2008, or

(c) the liability to tax which would have been shown on the return
(within the meaning of Schedule 55 to FA 2009),

according to whether the original penalty was incurred under paragraph 1
of Schedule 24, paragraph 1 of Schedule 41 or paragraph 6 of Schedule 55.

10Potential lost revenue: enabling Q to commit relevant offence

4 (1) The potential lost revenue in a case where P is liable to a penalty under
paragraph 1 for enabling Q to commit a relevant offence is the same amount
as the potential lost revenue applicable for the purposes of the
corresponding relevant civil penalty (determined in accordance with the
15relevant sub-paragraph of paragraph 5).

(2) Where Q’s offending conduct is—

(a) an offence of cheating the public revenue involving offshore activity,
or

(b) an offence under section 106A of TMA 1970 involving offshore
20activity,

the corresponding relevant civil penalty is the penalty which Q is liable for
as a result of that offending conduct.

(3) Where Q’s offending conduct is an offence under section 106B, 106C or 106D
of TMA 1970, the corresponding relevant civil penalty is—

(a) 25for an offence under section 106B of TMA 1970, a penalty under
paragraph 1 of Schedule 41 to FA 2008,

(b) for an offence under section 106C of TMA 1970, a penalty under
paragraph 6 of Schedule 55 to FA 2009, and

(c) for an offence under section 106D of TMA 1970, a penalty under
30paragraph 1 of Schedule 24 to FA 2007.

(4) In determining any amount of potential lost revenue for the purposes of this
paragraph, the fact Q has been prosecuted for the offending conduct is to be
disregarded.

Potential lost revenue: enabling Q to engage in conduct incurring relevant civil penalty

5 (1) 35The potential lost revenue in a case where P is liable to a penalty under
paragraph 1 for enabling Q to engage in conduct that makes Q liable (if the
applicable conditions are met) to a relevant civil penalty is to be determined
as follows.

(2) In the case of a penalty under paragraph 1 of Schedule 24 to FA 2007
40involving an offshore matter or an offshore transfer, the potential lost
revenue is the amount that under that Schedule is the potential lost revenue
in respect of Q’s conduct.

(3) In the case of a penalty under paragraph 1 of Schedule 41 to FA 2008 in
relation to a failure to comply with section 7(1) of TMA 1970 involving
45offshore activity, the potential lost revenue is the amount that under that
Schedule is the potential lost revenue in respect of Q’s conduct.

(4) In the case of a penalty under paragraph 6 of Schedule 55 to FA 2009
involving offshore activity, the potential lost revenue is the liability to tax
which would have been shown in the return in question (within the meaning
of that Schedule).

5Treatment of potential lost revenue attributable to both offshore tax evasion or non-compliance
and other tax evasion or non-compliance

6 (1) This paragraph applies where any amount of potential lost revenue in a case
falling within paragraph 4 or 5 is attributable not only to Q’s offshore tax
evasion or non-compliance but also to any other tax evasion or non-
10compliance by Q.

(2) In that case the potential lost revenue in respect of Q’s offshore tax evasion
or non-compliance is to be taken for the purposes of assessing the penalty to
which P is liable as being or (as the case may be) including such share as is
just and reasonable of the amount mentioned in sub-paragraph (1).

15Reduction of penalty for disclosure etc by P

7 (1) If P (who would otherwise be liable to a penalty under paragraph 1)—

(a) makes a disclosure to HMRC of—

(i) a matter relating to an inaccuracy in a document, a supply of
false information or a failure to disclose an under-
20assessment,

(ii) P’s enabling of actions by Q that constituted (or might
constitute) a relevant offence or that made (or might make) Q
liable to a relevant penalty, or

(iii) any other matter HMRC regard as assisting them in relation
25to the assessment of P’s liability to a penalty under paragraph
1, or

(b) assists HMRC in any investigation leading to Q being charged with
a relevant offence or found liable to a relevant penalty,

HMRC must reduce the penalty to one that reflects the quality of the
30disclosure or assistance.

(2) But the penalty may not be reduced—

(a) in the case of unprompted disclosure or assistance, below whichever
is the higher of—

(i) 10% of the potential lost revenue, or

(ii) 35£1,000, or

(b) in the case of prompted disclosure or assistance, below whichever is
the higher of—

(i) 30% of the potential lost revenue, or

(ii) £3,000.

8 (1) 40This paragraph applies for the purposes of paragraph 7.

(2) P discloses a matter by—

(a) telling HMRC about it,

(b) giving HMRC reasonable help in relation to the matter (for example
by quantifying an inaccuracy in a document, an inaccuracy
45attributable to the supply of false information or withholding of
information or an under-assessment), and

(c) allowing HMRC access to records for any reasonable purpose
connected with resolving the matter (for example for the purpose of
ensuring that an inaccuracy in a document, an inaccuracy
attributable to the supply of false information or withholding of
5information or an under-assessment is fully corrected).

(3) P assists HMRC in relation to an investigation leading to Q being charged
with a relevant offence or found liable to a relevant penalty by—

(a) assisting or encouraging Q to disclose all relevant facts to HMRC,

(b) allowing HMRC access to records, or

(c) 10any other conduct which HMRC considers assisted them in
investigating or assessing Q’s liability to such a penalty.

(4) Disclosure or assistance by P—

(a) is “unprompted” if made at a time when P has no reason to believe
that HMRC have discovered or are about to discover Q’s offshore tax
15evasion or non-compliance (including any inaccuracy in a document,
supply of false information or withholding of information, or under-
assessment), and

(b) otherwise is “prompted”.

(5) In relation to disclosure or assistance, “quality” includes timing, nature and
20extent.

9 (1) If they think it right because of special circumstances, HMRC may reduce a
penalty under paragraph 1.

(2) In sub-paragraph 1 “special circumstances” does not include—

(a) ability to pay, or

(b) 25the fact that a potential loss of revenue from one taxpayer is balanced
by a potential overpayment by another.

(3) In sub-paragraph (1) the reference to reducing a penalty includes a reference
to—

(a) staying a penalty, or

(b) 30agreeing a compromise in relation to proceedings for a penalty.

Procedure for assessing penalty, etc

10 (1) Where a person is found liable for a penalty under paragraph 1 HMRC
must—

(a) assess the penalty,

(b) 35notify the person, and

(c) state in the notice the period in respect of which the penalty is
assessed.

(2) A penalty must be paid before the end of the period of 30 days beginning
with the day on which notification of the penalty is issued.

(3) 40An assessment of a penalty—

(a) is to be treated for procedural purposes in the same way as an
assessment to tax (except in respect of a matter expressly provided
for by this Schedule), and

(b) may be enforced as if it were an assessment to tax.