Finance Bill (HC Bill 47)

Finance BillPage 260

(5) If the counteraction affects the person’s liability to two or more taxes,
the taxes concerned are to be considered together for the purpose of
determining the value of the counteracted advantage.

(6) This paragraph is subject to paragraphs 3 and 4.

Value of counteracted advantage: losses

3 (1) To the extent that the tax advantage mentioned in section 212A(1)(b)
(“the tax advantage”) resulted in the wrong recording of a loss for the
purposes of direct tax and the loss has been wholly used to reduce
5the amount due or payable in respect of tax, the value of the
counteracted advantage is determined in accordance with paragraph
2.

(2) To the extent that the tax advantage resulted in the wrong recording
of a loss for purposes of direct tax and the loss has not been wholly
10used to reduce the amount due or payable in respect of tax, the value
of the counteracted advantage is—

(a) the value under paragraph 2 of so much of the tax advantage
as results (or would in the absence of the counteraction
result) from the part (if any) of the loss which was used to
15reduce the amount due or payable in respect of tax, plus

(b) 10% of the part of the loss not so used.

(3) Sub-paragraphs (1) and (2) apply both—

(a) to a case where no loss would have been recorded but for the
tax advantage, and

(b) 20to a case where a loss of a different amount would have been
recorded (but in that case sub-paragraphs (1) and (2) apply
only to the difference between the amount recorded and the
true amount).

(4) To the extent that the tax advantage creates or increases (or would in
25the absence of the counteraction create or increase) an aggregate loss
recorded for a group of companies—

(a) the value of the counteracted advantage is calculated in
accordance with this paragraph, and

(b) in applying paragraph 2 in accordance with sub-paragraphs
30(1) and (2), group relief may be taken into account (despite
paragraph 2(3)).

(5) To the extent that the tax advantage results (or would in the absence
of the counteraction result) in a loss, the value of it is nil where,
because of the nature of the loss or the person’s circumstances, there
35was no reasonable prospect of the loss being used to support a claim
to reduce a tax liability (of any person).

Value of counteracted advantage: deferred tax

4 (1) To the extent that the tax advantage mentioned in section 212A is a
deferral of tax, the value of the counteracted advantage is—

(a) 4025% of the amount of the deferred tax for each year of the
deferral, or

Finance BillPage 261

(b) a percentage of the amount of the deferred tax, for each
separate period of deferral of less than a year, equating to
25% per year,

or, if less, 100% of the amount of the deferred tax.

(2) 5This paragraph does not apply to a case to the extent that paragraph
3 applies.

Assessment of penalty

5 (1) Where a person is liable for a penalty under section 212A, HMRC
must assess the penalty.

(2) 10Where HMRC assess the penalty, HMRC must—

(a) notify the person who is liable for the penalty, and

(b) state in the notice a tax period in respect of which the penalty
is assessed.

(3) A penalty under this paragraph must be paid before the end of the
15period of 30 days beginning with the day on which notification of the
penalty is issued.

(4) An assessment—

(a) is to be treated for procedural purposes as if it were an
assessment to tax,

(b) 20may be enforced as if it were an assessment to tax, and

(c) may be combined with an assessment to tax.

(5) An assessment of a penalty under this paragraph must be made
before the end of the period of 12 months beginning with—

(a) the end of the appeal period for the assessment which gave
25effect to the counteraction mentioned in section 212A(1)(b),
or

(b) if there is no assessment within paragraph (a), the date (or the
latest of the dates) on which that counteraction becomes final.

(6) The reference in sub-paragraph (5)(b) to the counteraction becoming
30final is to be interpreted in accordance with section 210(8).

Alteration of assessment of penalty

6 (1) After notification of an assessment has been given to a person under
paragraph 5(2), the assessment may not be altered except in
accordance with this paragraph or paragraph 7, or on appeal.

(2) 35A supplementary assessment may be made in respect of a penalty if
an earlier assessment operated by reference to an underestimate of
the value of the counteracted advantage.

(3) An assessment may be revised as necessary if it operated by
reference to an overestimate of the value of the counteracted
40advantage.

Revision of assessment following consequential relieving adjustment

7 (1) Sub-paragraph (2) applies where a person—

Finance BillPage 262

(a) is notified under section 210(7) of a consequential adjustment
relating to a counteraction under section 209, and

(b) an assessment to a penalty in respect of that counteraction of
which the person has been notified under paragraph 5(2)
5does not take account of that consequential adjustment.

(2) HMRC must make any alterations of the assessment that appear to
HMRC to be just and reasonable in connection with the
consequential amendment.

(3) Alterations under this paragraph may be made despite any time
10limit imposed by or under an enactment.

Aggregate penalties

8 (1) Sub-paragraph (3) applies where—

(a) two or more penalties are incurred by the same person and
fall to be determined by reference to an amount of tax to
15which that person is chargeable,

(b) one of those penalties is incurred under section 212A, and

(c) one or more of the other penalties are incurred under a
relevant penalty provision.

(2) But sub-paragraph (3) does not apply if section 212(2) of FA 2014
20(follower notices: aggregate penalties) applies in relation to the
amount of tax in question.

(3) The aggregate of the amounts of the penalties mentioned in
subsection (1)(b) and (c), so far as determined by reference to that
amount of tax, must not exceed—

(a) 25the relevant percentage of that amount, or

(b) in a case where at least one of the penalties is under
paragraph 5(2)(b) of, or sub-paragraph (3)(b), (4)(b) or (5)(b)
of paragraph 6 of, Schedule 55 to FA 2009, £300 (if greater).

(4) In the application of section 97A of TMA 1970 (multiple penalties) no
30account shall be taken of a penalty under section 212A.

(5) “Relevant penalty provision” means—

(a) Schedule 24 to FA 2007 (penalties for errors),

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

(c) Schedule 55 to FA 2009 (penalties for failure to make returns
35etc), or

(d) Part 5 of Schedule 18 to FA 2016 (penalty under serial tax
avoidance regime).

(6) “The relevant percentage” means—

(a) 200% in a case where at least one of the penalties is
40determined by reference to the percentage in—

(i) paragraph 4(4)(c) of Schedule 24 to FA 2007,

(ii) paragraph 6(4)(a) of Schedule 41 to FA 2008, or

(iii) paragraph 6(3A)(c) of Schedule 55 to FA 2009,

(b) 150% in a case where paragraph (a) does not apply and at
45least one of the penalties is determined by reference to the
percentage in—

Finance BillPage 263

(i) paragraph 4(3)(c) of Schedule 24 to FA 2007,

(ii) paragraph 6(3)(a) of Schedule 41 to FA 2008, or

(iii) paragraph 6(3A)(b) of Schedule 55 to FA 2009,

(c) 140% in a case where neither paragraph (a) nor paragraph (b)
5applies and at least one of the penalties is determined by
reference to the percentage in—

(i) paragraph 4(4)(b) of Schedule 24 to FA 2007,

(ii) paragraph 6(4)(b) of Schedule 41 to FA 2008, or

(iii) paragraph 6(4A)(c) of Schedule 55 to FA 2009,

(d) 10105% in a case where at none of paragraphs (a), (b) and (c)
applies and at least one of the penalties is determined by
reference to the percentage in—

(i) paragraph 4(3)(b) of Schedule 24 to FA 2007,

(ii) paragraph 6(3)(b) of Schedule 41 to FA 2008, or

(iii) 15paragraph 6(4A)(b) of Schedule 55 to FA 2009, and

(e) in any other case, 100%.

Appeal against penalty

9 (1) A person may appeal against—

(a) the imposition of a penalty under section 212A, or

(b) 20the amount assessed under paragraph 5.

(2) An appeal under sub-paragraph (1)(a) may only be made on the
grounds that the arrangements were not abusive or there was no tax
advantage to be counteracted.

(3) An appeal under sub-paragraph (1)(b) may only be made on the
25grounds that the assessment was based on an overestimate of the
value of the counteracted advantage (whether because the estimate
was made by reference to adjustments which were not just and
reasonable or for any other reason).

(4) An appeal under this paragraph must be made within the period of
3030 days beginning with the day on which notification of the penalty
is given under paragraph 5(2).

(5) An appeal under this paragraph is to be treated in the same way as
an appeal against an assessment to the tax concerned (including by
the application of any provision about bringing the appeal by notice
35to HMRC, about HMRC’s review of the decision or about
determination of the appeal by the First-tier Tribunal or Upper
Tribunal).

(6) Sub-paragraph (5) does not apply—

(a) so as to require a person to pay a penalty before an appeal
40against the assessment of the penalty is determined, or

(b) in respect of any other matter expressly provided for by this
Part.

(7) On an appeal against the penalty the tribunal may affirm or cancel
HMRC’s decision.

(8) 45On an appeal against the amount of the penalty the tribunal may—

(a) affirm HMRC’s decision, or

Finance BillPage 264

(b) substitute for HMRC’s decision another decision that HMRC
has power to make.

(9) In this paragraph “tribunal” means the First-tier Tribunal or Upper
Tribunal (as appropriate by virtue of sub-paragraph (5)).

5Mitigation of penalties

10 (1) The Commissioners may in their discretion mitigate a penalty under
section 212A, or stay or compound any proceedings for such a
penalty.

(2) They may also, after judgment, further mitigate or entirely remit the
10penalty.

Interpretation

11 In this Schedule—

(a) a reference to an “assessment” to tax is to be interpreted, in
relation to inheritance tax, as a reference to a determination;

(b) 15“direct tax” means—

(i) income tax,

(ii) capital gains tax,

(iii) corporation tax (including any amount chargeable as
if it were corporation tax or treated as corporation
20tax),

(iv) petroleum revenue tax, and

(v) diverted profits tax;

(c) a reference to a loss includes a reference to a charge, expense,
deficit and any other amount which may be available for, or
25relied on to claim, a deduction or relief;

(d) a reference to a repayment of tax includes a reference to
allowing a credit against tax or to a payment of a corporation
tax credit;

(e) “corporation tax credit” means—

(i) 30an R&D tax credit under Chapter 2 or 7 of Part 13 of
CTA 2009,

(ii) an R&D expenditure credit under Chapter 6A of Part
3 of CTA 2009,

(iii) a land remediation tax credit or life assurance
35company tax credit under Chapter 3 or 4 respectively
of Part 14 of CTA 2009,

(iv) a film tax credit under Chapter 3 of Part 15 of CTA
2009,

(v) a television tax credit under Chapter 3 of Part 15A of
40CTA 2009,

(vi) a video game tax credit under Chapter 3 of Part 15B of
CTA 2009,

(vii) a theatre tax credit under section 1217K of CTA 2009,

(viii) an orchestra tax credit under Chapter 3 of Part 15D of
45CTA 2009, or

(ix) a first-year tax credit under Schedule A1 to CAA 2001;

Finance BillPage 265

(f) “tax period” means a tax year, accounting period or other
period in respect of which tax is charged;

(g) a reference to giving a document to HMRC includes a
reference to communicating information to HMRC in any
5form and by any method (whether by post, fax, email,
telephone or otherwise),

(h) a reference to giving a document to HMRC includes a
reference to making a statement or declaration in a
document.”

(4) 10In section 209 (counteracting the tax advantages), after subsection (7) insert—

(8) Where a matter is referred to the GAAR Advisory Panel under
paragraph 5 or 6 of Schedule 43, the taxpayer (as defined in paragraph
3 of that Schedule) must not make any GAAR-related adjustments in
relation to the taxpayer’s tax affairs in the period (the “closed period”)
15which—

(a) begins with the 31st day after the end of the 45 day period
mentioned in paragraph 4(1) of that Schedule, and

(b) ends immediately before the day on which the taxpayer is given
the notice under paragraph 12 of Schedule 43 (notice of final
20decision after considering opinion of GAAR Advisory Panel).

(9) Where a person has been given a pooling notice or a notice of binding
under Schedule 43A in relation to any tax arrangements, the person
must not make any GAAR-related adjustments in the period (“the
closed period”) that—

(a) 25begins with the 31st day after that on which that notice is given,
and

(b) ends—

(i) in the case of a pooling notice, immediately before the
day on which the person is given a notice under
30paragraph 8(2) or 9(2) of Schedule 43A, or a notice under
paragraph 8(2) of Schedule 43B, in relation to the tax
arrangements (notice of final decision after considering
opinion of GAAR Advisory Panel), or

(ii) in the case of a notice of binding, with the 30th day after
35the day on which the notice is given.

(10) In this section “GAAR-related adjustments” means—

(a) for the purposes of subsection (8), adjustments which give effect
(wholly or in part) to the proposed counteraction set out in the
notice under paragraph 3 of Schedule 43;

(b) 40for the purposes of subsection (9), adjustments which give effect
(wholly or partly) to the proposed counteraction set out in the
notice of pooling or binding (as the case may be).”

(5) Schedule 43 (general anti-abuse rule: procedural requirements) is amended in
accordance with subsections (6) to (9).

(6) 45After paragraph 1 insert—

“Meaning of “tax appeal”

1A In this Part “tax appeal” means—

Finance BillPage 266

(a) an appeal under section 31 of TMA 1970 (income tax: appeals
against amendments of self-assessment, amendments made

by closure notices under section 28A or 28B of that Act, etc),
including an appeal under that section by virtue of
5regulations under Part 11 of ITEPA 2003 (PAYE),

(b) an appeal under paragraph 9 of Schedule 1A to TMA 1970
(income tax: appeals against amendments made by closure
notices under paragraph 7(2) of that Schedule, etc),

(c) an appeal under section 705 of ITA 2007 (income tax: appeals
10against counteraction notices),

(d) an appeal under paragraph 34(3) or 48 of Schedule 18 to FA
1998 (corporation tax: appeals against amendment of a
company’s return made by closure notice, assessments other
than self-assessments, etc),

(e) 15an appeal under section 750 of CTA 2010 (corporation tax:
appeals against counteraction notices),

(f) an appeal under section 222 of IHTA 1984 (appeals against
HMRC determinations) other than an appeal made by a
person against a determination in respect of a transfer of
20value at a time when a tax enquiry is in progress in respect of
a return made by that person in respect of that transfer,

(g) an appeal under paragraph 35 of Schedule 10 to FA 2003
(stamp duty land tax: appeals against amendment of self-
assessment, discovery assessments, etc),

(h) 25an appeal under paragraph 35 of Schedule 33 to FA 2013
(annual tax on enveloped dwellings: appeals against
amendment of self-assessment, discovery assessments, etc),

(i) an appeal under paragraph 14 of Schedule 2 to the Oil
Taxation Act 1975 (petroleum revenue tax: appeal against
30assessment, determination etc),

(j) an appeal under section 102 of FA 2015 (diverted profits tax:
appeal against charging notice etc),

(k) an appeal under section 113 of FA 2016 (apprenticeship levy:
appeal against an assessment), or

(l) 35an appeal against any determination of—

(i) an appeal within paragraphs (a) to (k), or

(ii) an appeal within this paragraph.”

(7) In paragraph 3(2)(e), for “of paragraphs 5 and 6” substitute of—

(i) paragraphs 5 and 6, and

(ii) 40sections 209(8) and (9) and 212A.”

(8) After paragraph 4 insert—

“Corrective action by taxpayer

4A (1) If the taxpayer takes the relevant corrective action before the
beginning of the closed period mentioned in section 209(8), the
45matter is not to be referred to the GAAR Advisory Panel.

(2) For the purposes of this Schedule the “relevant corrective action” is
taken if (and only if) the taxpayer takes the steps set out in sub-
paragraphs (3) and (4).

Finance BillPage 267

(3) The first step is that—

(a) the taxpayer amends a return or claim to counteract the tax
advantage specified in the notice under paragraph 3, or

(b) if the taxpayer has made a tax appeal (by notifying HMRC or
5otherwise) on the basis that the tax advantage specified in the
notice under paragraph 3 arises from the tax arrangements
specified in that notice, the taxpayer takes all necessary
action to enter into an agreement with HMRC (in writing) for
the purpose of relinquishing that advantage.

(4) 10The second step is that the taxpayer notifies HMRC

(a) that the taxpayer has taken the first step, and

(b) of any additional amount which has or will become due and
payable in respect of tax by reason of the first step being
taken.

(5) 15Where the taxpayer takes the first step described in sub-paragraph
(3)(b), HMRC may proceed as if the taxpayer had not taken the
relevant corrective action if the taxpayer fails to enter into the written
agreement.

(6) In determining the additional amount which has or will become due
20and payable in respect of tax for the purposes of sub-paragraph
(4)(b), it is to be assumed that, where the taxpayer takes the necessary
action as mentioned in sub-paragraph (3)(b), the agreement is then
entered into.

(7) No enactment limiting the time during which amendments may be
25made to returns or claims operates to prevent the taxpayer taking the
first step mentioned in sub-paragraph (3)(a) before the tax enquiry is
closed (whether or not before the specified time).

(8) No appeal may be brought, by virtue of a provision mentioned in
sub-paragraph (9), against an amendment made by a closure notice
30in respect of a tax enquiry to the extent that the amendment takes
into account an amendment made by the taxpayer to a return or
claim in taking the first step mentioned in sub-paragraph (3)(a).

(9) The provisions are—

(a) section 31(1)(b) or (c) of TMA 1970,

(b) 35paragraph 9 of Schedule 1A to TMA 1970,

(c) paragraph 34(3) of Schedule 18 to FA 1998,

(d) paragraph 35(1)(b) of Schedule 10 to FA 2003, and

(e) paragraph 35(1)(b) of Schedule 33 to FA 2013.”

(9) Before paragraph 5 (but after the heading “Referral to GAAR Advisory Panel”)
40insert—

4B Paragraphs 5 and 6 apply if the taxpayer does not take the relevant
corrective action (see paragraph 4A) by the beginning of the closed
period mentioned in section 209(8).”

(10) In section 103ZA of TMA 1970 (disapplication of sections 100 to 103 in the case
45of certain penalties)—

(a) omit “or” at the end of paragraph (g), and

Finance BillPage 268

(b) after paragraph (g) insert

(ga) section 212A of the Finance Act 2013 (general anti-abuse
rule), or”

(11) In section 212 of FA 2014 (follower notices: aggregate penalties) (as amended
5by Schedule 18), in subsection (4)—

(a) omit “or” at the end of paragraph (c), and

(b) after paragraph (d) insert , or

(e) section 212A of FA 2013 (general anti-abuse rule).”

(12) FA 2015 is amended in accordance with subsections (13) and (14).

(13) 10In section 120 (penalties in connection with offshore matters and offshore
transfers), in subsection (1), omit “and” before paragraph (c) and after
paragraph (c) insert— “, and

(d) Schedule 43C to FA 2013 (as amended by FA 2016).”

(14) In Schedule 20 to that Act, after paragraph 19 insert—

15“General anti-abuse rule: aggregate penalties

20 (1) In Schedule 43C to FA 2013 (general anti-abuse rule: supplementary
provision about penalty), sub-paragraph (6) of paragraph 8 is
amended as follows.

(2) After paragraph (b) insert—

(ba) 20125% in a case where neither paragraph (a) nor paragraph (b)
applies and at least one of the penalties is determined by
reference to the percentage in—

(i) paragraph 4(2)(c) of Schedule 24 to FA 2007,

(ii) paragraph 6(2)(a) of Schedule 41 to FA 2008,

(iii) 25paragraph 6(3A)(a) of Schedule 55 to FA 2009,”.

(3) In sub-paragraph (c) for “neither paragraph (a) nor paragraph (b)
applies” substitute “none of paragraphs (a) to (ba) applies.

(4) In sub-paragraph (d) for “none of paragraphs (a), (b) and (c) applies”
substitute “none of paragraphs (a) to (c) applies”.

(15) 30The amendments made by this section have effect in relation to tax
arrangements (within the meaning of Part 5 of FA 2013) entered into on or after
the day on which this Act is passed.

Tackling frequent avoidance

158 Serial tax avoidance

35Schedule 18 contains provision about the issue of warning notices to, and
further sanctions for, persons who incur a relevant defeat in relation to
arrangements.

159 Promoters of tax avoidance schemes

(1) Part 5 of FA 2014 (promoters of tax avoidance schemes) is amended as follows.

Finance BillPage 269

(2) After section 237 insert—

237A Duty to give conduct notice: defeat of promoted arrangements

(1) If an authorised officer becomes aware at any time (“the relevant time”)
that a person (“P”) who is carrying on a business as a promoter meets
5any of the conditions in subsections (11) to (13), the officer must
determine whether or not P’s meeting of that condition should be
regarded as significant in view of the purposes of this Part.

But see also subsection (14).

(2) An authorised officer must make the determination set out in
10subsection (3) if the officer becomes aware at any time (“the section
237A(2) relevant time”) that—

(a) a person meets a condition in subsection (11), (12) or (13), and

(b) at the section 237A(2) relevant time another person (“P”), who
is carrying on a business as a promoter, meets that condition by
15virtue of Part 4 of Schedule 34A (meeting the section 237A
conditions: bodies corporate and partnerships).

(3) The authorised officer must determine whether or not—

(a) the meeting of the condition by the person as mentioned in
subsection (2)(a), and

(b) 20P’s meeting of the condition as mentioned in subsection (2)(b),

should be regarded as significant in view of the purposes of this Part.

(4) Subsections (1) and (2) do not apply if a conduct notice or monitoring
notice already has effect in relation to P.

(5) Subsection (1) does not apply if, at the relevant time, an authorised
25officer is under a duty to make a determination under section 237(5) in
relation to P.

(6) Subsection (2) does not apply if, at the section 237A(2) relevant time, an
authorised officer is under a duty to make a determination under
section 237(5) in relation to P.

(7) 30But in a case where subsection (1) does not apply because of subsection
(5), or subsection (2) does not apply because of subsection (6),
subsection (5) of section 237 has effect as if—

(a) the references in paragraph (a) of that subsection to “subsection
(1)”, and “subsection (1)(a)” included subsection (1) of this
35section, and

(b) in paragraph (b) of that subsection the reference to “subsection
(1A)(a)” included a reference to subsection (2)(a) of this section
and the reference to subsection (1A)(b) included a reference to
subsection (2)(b) of this section.

(8) 40If the authorised officer determines under subsection (1) that P’s
meeting of the condition in question should be regarded as significant,
the officer must give P a conduct notice, unless subsection (10) applies.

(9) If the authorised officer determines under subsection (3) that—

(a) the meeting of the condition by the person as mentioned in
45subsection (2)(a), and

(b) P’s meeting of the condition as mentioned in subsection (2)(b),