Finance Bill (HC Bill 47)

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should be regarded as significant in view of the purposes of this Part,
the officer must give P a conduct notice, unless subsection (10) applies.

(10) This subsection applies if the authorised officer determines that, having
regard to the extent of the impact that P’s activities as a promoter are
5likely to have on the collection of tax, it is inappropriate to give P a
conduct notice.

(11) The condition in this subsection is that in the period of 3 years ending
with the relevant time at least 3 relevant defeats have occurred in
relation to P.

(12) 10The condition in this subsection is that at least two relevant defeats
have occurred in relation to P at times when a single defeat notice
under section 241A(2) or (6) had effect in relation to P.

(13) The condition in this subsection is that at least one relevant defeat has
occurred in relation to P at a time when a double defeat notice under
15section 241A(3) had effect in relation to P.

(14) A determination that the condition in subsection (12) or (13) is met
cannot be made unless—

(a) the defeat notice in question still has effect when the
determination is made, or

(b) 20the determination is made on or before the 90th day after the
day on which the defeat notice in question ceased to have effect.

(15) Schedule 34A sets out the circumstances in which a “relevant defeat”
occurs in relation to a person and includes provision limiting what can
amount to a further relevant defeat in relation to a person (see
25paragraph 6).

237B Duty to give further conduct notice where provisional notice not
complied with

(1) An authorised officer must give a conduct notice to a person (“P”) who
is carrying on a business as a promoter if—

(a) 30a conduct notice given to P under section 237A(8)—

(i) has ceased to have effect otherwise than as a result of
section 237D(2) or 241(3) or (4), and

(ii) was provisional immediately before it ceased to have
effect,

(b) 35the officer determines that P had failed to comply with one or
more conditions in the conduct notice,

(c) the conduct notice relied on a Case 3 relevant defeat,

(d) since the time when the conduct notice ceased to have effect,
one or more relevant defeats falling within subsection (2) have
40occurred in relation to—

(i) P, and

(ii) any arrangements to which the Case 3 relevant defeat
also relates, and

(e) had that relevant defeat or (as the case may be) those relevant
45defeats, occurred before the conduct notice ceased to have
effect, an authorised officer would have been required to notify
the person under section 237C(3) that the notice was no longer
provisional.

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(2) A relevant defeat falls within this subsection if it occurs by virtue of
Case 1 or Case 2 in Schedule 34A.

(3) Subsection (1) does not apply if the authorised officer determines that,
having regard to the extent of the impact that the person’s activities as
5a promoter are likely to have on the collection of tax, it is inappropriate
to give the person a conduct notice.

(4) Subsection (1) does not apply if a conduct notice or monitoring notice
already has effect in relation to the person.

(5) For the purposes of this Part a conduct notice “relies on a Case 3
10relevant defeat” if it could not have been given under the following
condition.

The condition is that paragraph 9 of Schedule 34A had effect with the
substitution of “100% of the tested arrangements” for “75% of the tested
arrangements”.

237C 15 When a conduct notice given under section 237A(8) is “provisional”

(1) This section applies to a conduct notice which—

(a) is given to a person under section 237A(8), and

(b) relies on a Case 3 relevant defeat.

(2) The notice is “provisional” at all times when it has effect, unless an
20authorised officer notifies the person that the notice is no longer
provisional.

(3) An authorised officer must notify the person that the notice is no longer
provisional if subsection (4) or (5) applies.

(4) This subsection applies if—

(a) 25the condition in subsection (5)(a) is not met, and

(b) a full relevant defeat occurs in relation to P.

(5) This subsection applies if—

(a) two, or all three, of the relevant defeats by reference to which
the conduct notice is given would not have been relevant
30defeats if paragraph 9 of Schedule 34A had effect with the
substitution of “100% of the tested arrangements” for “75% of
the tested arrangements”, and

(b) the same number of full relevant defeats occur in relation to P.

(6) A “full relevant defeat” occurs in relation to P if—

(a) 35a relevant defeat occurs in relation to P otherwise than by virtue
of Case 3 in paragraph 9 of Schedule 34A, or

(b) circumstances arise which would be a relevant defeat in relation
to P by virtue of paragraph 9 of Schedule 34A if that paragraph
had effect with the substitution of “100% of the tested
40arrangements” for “75% of the tested arrangements”.

(7) In determining under subsection (6) whether a full relevant defeat has
occurred in relation to P, assume that in paragraph 6 of Schedule 34A
(provision limiting what can amount to a further relevant defeat in
relation to a person) the first reference to a “relevant defeat” does not
45include a relevant defeat by virtue of Case 3 in paragraph 9 of Schedule
34A.

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237D Judicial ruling upholding asserted tax advantage: effect on conduct
notice which is provisional

(1) Subsection (2) applies if at any time—

(a) a conduct notice which relies on a Case 3 relevant defeat (see
5section 237B(5)) is provisional, and

(b) a court or tribunal upholds a corresponding tax advantage
which has been asserted in connection with any of the related
arrangements to which that relevant defeat relates (see
paragraph 5(2) of Schedule 34A).

(2) 10The conduct notice ceases to have effect when that judicial ruling
becomes final.

(3) An authorised officer must give the person to whom the conduct notice
was given a written notice stating that the conduct notice has ceased to
have effect.

(4) 15For the purposes of this section, a tax advantage is “asserted” in
connection with any arrangements if a person makes a return, claim or
election on the basis that the tax advantage arises from those
arrangements.

In relation to the arrangements mentioned in paragraph (b) of
20subsection (1) “corresponding tax advantage” means a tax advantage
corresponding to any tax advantage the counteraction of which
contributed to the relevant defeat mentioned in that paragraph.

(5) For the purposes of this section a court or tribunal “upholds” a tax
advantage if—

(a) 25the court or tribunal makes a ruling to the effect that no part of
the tax advantage is to be counteracted, and

(b) that judicial ruling is final.

(a)(a)the court or tribunal makes a ruling to the effect that no part of
the tax advantage is to be counteracted, and

(b) 30that judicial ruling is final.

(6) For the purposes of this Part a judicial ruling is “final” if it is—

(a) a ruling of the Supreme Court, or

(b) a ruling of any other court or tribunal in circumstances where—

(i) no appeal may be made against the ruling,

(ii) 35if an appeal may be made against the ruling with
permission, the time limit for applications has expired
and either no application has been made or permission
has been refused,

(iii) if such permission to appeal against the ruling has been
40granted or is not required, no appeal has been made
within the time limit for appeals, or

(iv) if an appeal was made, it was abandoned or otherwise
disposed of before it was determined by the court or
tribunal to which it was addressed.

(7) 45In this section references to “counteraction” include anything referred
to as a counteraction in any of Conditions A to F in paragraphs 11 to 16
of Schedule 34A.”

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(3) After section 241 insert—

“Defeat notices
241A Defeat notices

(1) This section applies in relation to a person (“P”) only if P is carrying on
5a business as a promoter.

(2) An authorised officer, or an officer of Revenue and Customs with the
approval of an authorised officer, may give P a notice if the officer
concerned has become aware of one (and only one) relevant defeat
which has occurred in relation to P in the period of 3 years ending with
10the day on which the notice is given.

(3) An authorised officer, or an officer of Revenue and Customs with the
approval of an authorised officer, may give P a notice if the officer
concerned has become aware of two (but not more than two) relevant
defeats which have occurred in relation to P in the period of 3 years
15ending with the day on which the notice is given.

(4) A notice under this section must be given by the end of the 90 days
beginning with the day on which the matters mentioned in subsection
(2) or (as the case may be) (3) come to the attention of HMRC.

(5) Subsection (6) applies if—

(a) 20a single defeat notice which had been given to P (under
subsection (2) or (6)) ceases to have effect as a result of section
241B(1), and

(b) in the period when the defeat notice had effect a relevant defeat
(“the further relevant defeat”) occurred in relation to P.

(6) 25An authorised officer or an officer of Revenue and Customs with the
approval of an authorised officer may give P a notice in respect of the
further relevant defeat (regardless of whether or not it occurred in the
period of 3 years ending with the day on which the notice is given).

(7) In this Part—

(a) 30“single defeat notice” means a notice under subsection (2) or (6);

(b) “double defeat notice” means a notice under subsection (3);

(c) “defeat notice” means a single defeat notice or a double defeat
notice.

(8) A defeat notice must—

(a) 35set out the dates on which the look-forward period for the
notice begins and ends;

(b) in the case of a single defeat notice, explain the effect of section
237A(12);

(c) in the case of a double defeat notice, explain the effect of section
40237A(13).

(9) HMRC may specify what further information must be included in a
defeat notice.

(10) “Look-forward period”—

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(a) in relation to a defeat notice under subsection (2) or (3), means
the period of 5 years beginning with the day after the day on
which the notice is given;

(b) in relation to a defeat notice under subsection (6), means the
5period beginning with the day after the day on which the notice
is given and ending at the end of the period of 5 years beginning
with the day on which the further relevant defeat mentioned in
subsection (6) occurred in relation to P.

(11) A defeat notice has effect throughout its look-forward period unless it
10ceases to have effect earlier in accordance with section 241B(1) or (4).

241B Judicial ruling upholding asserted tax advantage: effect on defeat
notice

(1) If the relevant defeat to which a single defeat notice relates is
overturned (see subsection (5)), the notice has no further effect on and
15after the day on which it is overturned.

(2) Subsection (3) applies if one (and only one) of the relevant defeats in
respect of which a double defeat notice was given is overturned.

(3) The notice is to be treated for the purposes of this Part (including this
section) as if it had always been a single defeat notice given (in respect
20of the other of the two relevant defeats) on the date on which the notice
was in fact given.

The look-forward period for the notice is accordingly unchanged.

(4) If both the relevant defeats to which a double defeat notice relates are
overturned (on the same date), that notice has no further effect on and
25after that date.

(5) A relevant defeat specified in a defeat notice is “overturned” if—

(a) the notice could not have specified that relevant defeat if
paragraph 9 of Schedule 34A had effect with the substitution of
“100% of the tested arrangements” for “75% of the tested
30arrangements”, and

(b) at a time when the notice has effect a court or tribunal upholds
a corresponding tax advantage which has been asserted in
connection with any of the related arrangements to which the
relevant defeat relates (see paragraph 5(2) of Schedule 34A).

35Accordingly the relevant defeat is overturned on the day on which the
judicial ruling mentioned in paragraph (b) becomes final.

(6) If a defeat notice ceases to have effect as a result of subsection (1) or (4)
an authorised officer, or an officer of Revenue and Customs with the
approval of an authorised officer, must notify the person to whom the
40notice was given that it has ceased to have effect.

(7) If subsection (3) has effect in relation to a defeat notice, an authorised
officer, or an officer of Revenue and Customs with the approval of an
authorised officer, must notify the person of the effect of that
subsection.

(8) 45For the purposes of this section, a tax advantage is “asserted” in
connection with any arrangements if a person makes a return, claim or
election on the basis that the tax advantage arises from those
arrangements.

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(9) In relation to the arrangements mentioned in paragraph (b) of
subsection (5) “corresponding tax advantage” means a tax advantage

corresponding to any tax advantage the counteraction of which
contributed to the relevant defeat mentioned in that paragraph.

(10) 5For the purposes of this section a court or tribunal “upholds” a tax
advantage if—

(a) the court or tribunal makes a ruling to the effect that no part of
the tax advantage is to be counteracted, and

(b) that judicial ruling is final.

(a)(a)the court or tribunal makes a ruling to the effect that no part of
the tax advantage is to be counteracted, and

(b) that judicial ruling is final.

(11) 10In this section references to “counteraction” include anything referred
to as a counteraction in any of Conditions A to F in paragraphs 11 to 16
of Schedule 34A.”

(4) In section 242 (monitoring notices: duty to apply to tribunal), after subsection
(5) insert—

(6) 15At a time when a notice given under section 237A is provisional, no
determination is to be made under subsection (1) in respect of the
notice.

(7) If a promoter fails to comply with conditions in a conduct notice at a
time when the conduct notice is provisional, nothing in subsection (6)
20prevents those failures from being taken into account under subsection
(1) at any subsequent time when the conduct notice is not provisional.”

(5) After Schedule 34 insert—

“Schedule 34A Promoters of tax avoidance schemes: defeated arrangements
25Part 1 Introduction

1 In this Schedule—

(a) Part 2 is about the meaning of “relevant defeat”;

(b) Part 3 contains provision about when a relevant defeat is
30treated as occurring in relation to a person;

(c) Part 4 contains provision about when a person is treated as
meeting a condition in subsection (11), (12) or (13) of section
237A;

(d) Part 5 contains definitions and other supplementary
35provisions.

Part 2 Meaning of “relevant defeat”
“Related” arrangements

2 (1) For the purposes of this Part of this Act, separate arrangements
40which persons have entered into are “related” to one another if (and
only if) they are substantially the same.

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(2) Sub-paragraphs (3) to (6) set out cases in which arrangements are to
be treated as being “substantially the same” (if they would not
otherwise be so treated under sub-paragraph (1)).

(3) Arrangements to which the same reference number has been
5allocated under Part 7 of FA 2004 (disclosure of tax avoidance
schemes) are treated as being substantially the same.

For this purpose arrangements in relation to which information
relating to a reference number has been provided in compliance with
section 312 of FA 2004 are treated as arrangements to which that
10reference number has been allocated under Part 7 of that Act.

(4) Arrangements to which the same reference number has been
allocated under paragraph 9 of Schedule 11A to VATA 1994
(disclosure of avoidance schemes) are treated as being substantially
the same.

(5) 15Any two or more sets of arrangements which are the subject of
follower notices given by reference to the same judicial ruling are
treated as being substantially the same.

(6) Where a notice of binding has been given in relation to any
arrangements (“the bound arrangements”) on the basis that they are,
20for the purposes of Schedule 43A to FA 2013, equivalent
arrangements in relation to another set of arrangements (the “lead
arrangements”)—

(a) the bound arrangements and the lead arrangements are
treated as being substantially the same, and

(b) 25the bound arrangements are treated as being substantially
the same as any other arrangements which, as a result of this
sub-paragraph, are treated as substantially the same as the
lead arrangements.

“Promoted arrangements”

3 (1) 30For the purposes of this Schedule arrangements are “promoted
arrangements” in relation to a person if—

(a) they are relevant arrangements or would be relevant
arrangements under the condition stated in sub-paragraph
(2), and

(b) 35the person is carrying on a business as a promoter and—

(i) the person is or has been a promoter in relation to the
arrangements, or

(ii) that would be the case if the condition in sub-
paragraph (2) were met.

(2) 40That condition is that the definition of “tax” in section 283 includes,
and has always included, value added tax.

Relevant defeat of single arrangements

4 (1) A defeat of arrangements (entered into by any person) which are
promoted arrangements in relation to a person (“the promoter”) is a
45“relevant defeat” in relation to the promoter if the condition in sub-
paragraph (2) is met.

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(2) The condition is that the arrangements are not related to any other
arrangements which are promoted arrangements in relation to the
promoter.

(3) For the meaning of “defeat” see paragraphs 10 to 16.

5Relevant defeat of related arrangements

5 (1) This paragraph applies if arrangements (entered into by any person)
(“Set A”)—

(a) are promoted arrangements in relation to a person (“P”), and

(b) are related to other arrangements which are promoted
10arrangements in relation to P.

(2) If Case 1, 2 or 3 applies (see paragraphs 7 to 9) a relevant defeat
occurs in relation to P and each of the related arrangements.

(3) “The related arrangements” means Set A and the arrangements
mentioned in sub-paragraph (1)(b).

15Limit on number of separate relevant defeats in relation to the same, or related,
arrangements

6 In relation to a person, if there has been a relevant defeat of
arrangements (whether under paragraph 4 or 5) there cannot be a
further relevant defeat of—

(a) 20those particular arrangements, or

(b) arrangements which are related to those arrangements.

Case 1: counteraction upheld by judicial ruling

7 (1) Case 1 applies if—

(a) any of Conditions A to E is met in relation to any of the
25related arrangements, and

(b) in the case of those arrangements the decision to make the
relevant counteraction has been upheld by a judicial ruling
(which is final).

(2) In sub-paragraph (1) “the relevant counteraction” means the
30counteraction mentioned in paragraph 11(d), 12(1)(b), 13(1)(d),
14(1)(d) or 15(1)(d) (as the case requires).

Case 2: judicial ruling that avoidance-related rule applies

8 Case 2 applies if Condition F is met in relation to any of the related
arrangements.

35Case 3: proportion-based relevant defeat

9 (1) Case 3 applies if—

(a) at least 75% of the tested arrangements have been defeated,
and

(b) no final judicial ruling in relation to any of the related
40arrangements has upheld a corresponding tax advantage

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which has been asserted in connection with any of the related
arrangements.

(2) In this paragraph “the tested arrangements” means so many of the
related arrangements (as defined in paragraph 5(3)) as meet the
5condition in sub-paragraph (3) or (4).

(3) Particular arrangements meet this condition if a person has made a
return, claim or election on the basis that a tax advantage results
from those arrangements and—

(a) there has been an enquiry or investigation by HMRC into the
10return, claim or election, or

(b) HMRC assesses the person to tax on the basis that the tax
advantage (or any part of it) does not arise, or

(c) a GAAR counteraction notice has been given in relation to the
tax advantage or part of it and the arrangements.

(4) 15Particular arrangements meet this condition if HMRC takes other
action on the basis that a tax advantage which might be expected to
arise from those arrangements, or is asserted in connection with
them, does not arise.

(5) For the purposes of this paragraph a tax advantage has been
20“asserted” in connection with particular arrangements if a person
has made a return, claim or election on the basis that the tax
advantage arises from those arrangements.

(6) In sub-paragraph (1)(b) “corresponding tax advantage” means a tax
advantage corresponding to any tax advantage the counteraction of
25which is taken into account by HMRC for the purposes of sub-
paragraph (1)(a).

(7) For the purposes of this paragraph a court or tribunal “upholds” a tax
advantage if—

(a) the court or tribunal makes a ruling to the effect that no part
30of the tax advantage is to be counteracted, and

(b) that judicial ruling is final.

(8) In this paragraph references to “counteraction” include anything
referred to as a counteraction in any of Conditions A to F in
paragraphs 11 to 16.

(9) 35In this paragraph “GAAR counteraction notice” means—

(a) a notice such as is mentioned in sub-paragraph (2) of
paragraph 12 of Schedule 43 to FA 2013 (notice of final
decision to counteract),

(b) a notice under paragraph 8(2) or 9(2) of Schedule 43A to that
40Act (binding of arrangements to lead arrangements) stating
that the tax advantage is to be counteracted under the general
anti-abuse rule, or

(c) a notice under paragraph 8(2) of Schedule 43B to that Act
(generic referrals) stating that the tax advantage is to be
45counteracted under the general anti-abuse rule.

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“Defeat” of arrangements

10 For the purposes of this Part of this Act a “defeat” of arrangements
occurs if any of Conditions A to F (in paragraphs 11 to 16) is met in
relation to the arrangements.

11 5Condition A is that—

(a) a person has made a return, claim or election on the basis that
a tax advantage arises from the arrangements,

(b) a notice given to the person under paragraph 12 of Schedule
43 to, paragraph 8(2) or 9(2) of Schedule 43A to or paragraph
108(2) of Schedule 43B to FA 2013 stated that the tax advantage
was to be counteracted under the general anti-abuse rule,

(c) the tax advantage has been counteracted (in whole or in part)
under the general anti-abuse rule, and

(d) the counteraction is final.

12 (1) 15Condition B is that a follower notice has been given to a person by
reference to the arrangements (and not withdrawn) and—

(a) the person has complied with subsection (2) of section 208 of
FA 2014 by taking the action specified in subsections (4) to (6)
of that section in respect of the denied tax advantage (or part
20of it), or

(b) the denied tax advantage has been counteracted (in whole or
in part) otherwise than as mentioned in paragraph (a) and the
counteraction is final.

(2) In this paragraph “the denied tax advantage” is to be interpreted in
25accordance with section 208(3) of FA 2014.

(3) In this Schedule “follower notice” means a follower notice under
Chapter 2 of Part 4 of FA 2014.

13 (1) Condition C is that—

(a) the arrangements are DOTAS arrangements,

(b) 30a person (“the taxpayer”) has made a return, claim or election
on the basis that a relevant tax advantage arises,

(c) the relevant tax advantage has been counteracted, and

(d) the counteraction is final.

(2) For the purposes of sub-paragraph (1) “relevant tax advantage”
35means a tax advantage which the arrangements might be expected to
enable the taxpayer to obtain.

(3) For the purposes of this paragraph the relevant tax advantage is
“counteracted” if adjustments are made in respect of the taxpayer’s
tax position on the basis that the whole or part of that tax advantage
40does not arise.

14 (1) Condition D is that—

(a) the arrangements are disclosable VAT arrangements to
which a taxable person is a party,

(b) the taxable person has made a return or claim on the basis
45that a relevant tax advantage arises,

(c) the relevant tax advantage has been counteracted, and