Finance Bill (HC Bill 47)

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(d) the counteraction is final.

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

(3) 5For the purposes of this paragraph the relevant tax advantage is
“counteracted” if adjustments are made in respect of the taxable
person’s tax position on the basis that the whole or part of that tax
advantage does not arise.

15 (1) Condition E is that the arrangements are disclosable VAT
10arrangements to which a taxable person (“T”) is a party and—

(a) the arrangements relate to the position with respect to VAT
of a person other than T (“S”) who has made supplies of
goods or services to T,

(b) the arrangements might be expected to enable T to obtain a
15tax advantage in connection with those supplies of goods or
services,

(c) the arrangements have been counteracted, and

(d) the counteraction is final.

(2) For the purposes of this paragraph the arrangements are
20“counteracted” if—

(a) HMRC assess S to tax or take any other action on a basis
which prevents T from obtaining (or obtaining the whole of)
the tax advantage in question, or

(b) adjustments are made on a basis such as is mentioned in
25paragraph (a).

16 (1) Condition F is that—

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

(b) the tax advantage, or part of the tax advantage would not
30arise if a particular avoidance-related rule (see paragraph 25)
applies in relation to the person’s tax affairs,

(c) it is held in a judicial ruling that the relevant avoidance-
related rule applies in relation to the person’s tax affairs, and

(d) the judicial ruling is final.

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

Part 3 Relevant defeats: associated persons
40Attribution of relevant defeats

17 (1) Sub-paragraph (2) applies if—

(a) there is (or has been) a person (“Q”),

(b) arrangements (“the defeated arrangements”) have been
entered into,

(c) 45an event occurs such that either—

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(i) there is a relevant defeat in relation to Q and the
defeated arrangements, or

(ii) the condition in sub-paragraph (i) would be met if Q
had not ceased to exist,

(d) 5at the time of that event a person (“P”) is carrying on a
business as a promoter (or is carrying on what would be such
a business under the condition in paragraph 3(2)), and

(e) Condition 1 or 2 is met in relation to Q and P.

(2) The event is treated for all purposes of this Part of this Act as a
10relevant defeat in relation to P and the defeated arrangements
(whether or not it is also a relevant defeat in relation to Q, and
regardless of whether or not P existed at any time when those
arrangements were promoted arrangements in relation to Q).

(3) Condition 1 is that—

(a) 15P is not an individual,

(b) at a time when the defeated arrangements were promoted
arrangements in relation to Q—

(i) P was a relevant body controlled by Q, or

(ii) Q was a relevant body controlled by P, and

(c) 20at the time of the event mentioned in sub-paragraph (1)(c)—

(i) Q is a relevant body controlled by P,

(ii) P is a relevant body controlled by Q, or

(iii) P and Q are relevant bodies controlled by a third
person.

(4) 25Condition 2 is that—

(a) P and Q are relevant bodies,

(b) at a time when the defeated arrangements were promoted
arrangements in relation to Q, a third person (“C”) controlled
Q, and

(c) 30C controls P at the time of the event mentioned in sub-
paragraph (1)(c).

(5) For the purposes of sub-paragraphs (3)(b) and (4)(b), the question
whether arrangements are promoted arrangements in relation to Q
at any time is to be determined on the assumption that the reference
35to “design” in paragraph (b) of section 235(3) (definition of
“promoter” in relation to relevant arrangements) is omitted.

Deemed defeat notices

18 (1) This paragraph applies if—

(a) an authorised officer becomes aware at any time (“the
40relevant time”) that a relevant defeat has occurred in relation
to a person (“P”) who is carrying on a business as a promoter,

(b) there have occurred, more than 3 years before the relevant
time—

(i) one third party defeat, or

(ii) 45two third party defeats, and

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(c) conditions A1 and B1 (in a case within paragraph (b)(i)), or
conditions A2 and B2 (in a case within paragraph (b)(ii)), are
met.

(2) Where this paragraph applies by virtue of sub-paragraph (1)(b)(i),
5this Part of this Act has effect as if an authorised officer had (with due
authority), at the time of the time of the third party defeat, given P a
single defeat notice under section 241A(2) in respect of it.

(3) Where this paragraph applies by virtue of sub-paragraph (1)(b)(ii),
this Part of this Act has effect as if an authorised officer had (with due
10authority), at the time of the second of the two third party defeats,
given P a double defeat notice under section 241A(3) in respect of the
two third party defeats.

(4) Section 241A(8) has no effect in relation to a notice treated as given
as mentioned in sub-paragraph (2) or (3).

(5) 15Condition A1 is that—

(a) a conduct notice or a single or double defeat notice has been
given to the other person (see sub-paragraph (9)) in respect of
the third party defeat,

(b) at the time of the third party defeat an authorised officer
20would have had power by virtue of paragraph 17 to give P a
defeat notice in respect of the third party defeat, had the
officer been aware that it was a relevant defeat in relation to
P, and

(c) so far as the authorised officer mentioned in sub-paragraph
25(1)(a) is aware, the conditions for giving P a defeat notice in
respect of the third party defeat have never been met
(ignoring this paragraph).

(6) Condition A2 is that—

(a) a conduct notice or a single or double defeat notice has been
30given to the other person (see sub-paragraph (9)) in respect of
each, or both, of the third party defeats,

(b) at the time of the second third party defeat an authorised
officer would have had power by virtue of paragraph 17 to
give P a double defeat notice in respect of the third party
35defeats, had the officer been aware that either of the third
party defeats was a relevant defeat in relation to P, and

(c) so far as the authorised officer mentioned in sub-paragraph
(1)(a) is aware, the conditions for giving P a defeat notice in
respect of those third party defeats (or either of them) have
40never been met (ignoring this paragraph).

(7) Condition B1 is that, had an authorised officer given P a defeat notice
in respect of the third party defeat at the time of that relevant defeat,
that defeat notice would still have effect at the relevant time (see sub-
paragraph (1)).

(8) 45Condition B2 is that, had an authorised officer given P a defeat notice
in respect of the two third party defeats at the time of the second of
those relevant defeats, that defeat notice would still have effect at the
relevant time.

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(9) In this paragraph “third party defeat” means a relevant defeat which
has occurred in relation to a person other than P.

Meaning of “relevant body” and “control”

19 (1) In this Part of this Schedule “relevant body” means—

(a) 5a body corporate, or

(b) a partnership.

(2) For the purposes of this Part of this Schedule a person controls a
body corporate if the person has power to secure that the affairs of
the body corporate are conducted in accordance with the person’s
10wishes—

(a) by means of the holding of shares or the possession of voting
power in relation to the body corporate or any other relevant
body,

(b) as a result of any powers conferred by the articles of
15association or other document regulating the body corporate
or any other relevant body, or

(c) by means of controlling a partnership.

(3) For the purposes of this Part of this Schedule a person controls a
partnership if the person is a controlling member or the managing
20partner of the partnership.

(4) In this paragraph “controlling member” has the same meaning as in
Schedule 36 (partnerships).

(5) In this paragraph “managing partner”, in relation to a partnership,
means the member of the partnership who directs, or is on a day-to-
25day level in control of, the management of the business of the
partnership.

Part 4 Meeting section 237A conditions: bodies corporate and partnerships
Treating persons under another’s control as meeting section 237A condition

20 (1) 30A relevant body (“RB”) is treated as meeting a section 237A condition
at the section 237A(2) relevant time if—

(a) that condition was met by a person (“C”) at a time when—

(i) C was carrying on a business as a promoter, or

(ii) RB was carrying on a business as a promoter and C
35controlled RB, and

(b) RB is controlled by C at the section 237A(2) relevant time.

(2) Sub-paragraph (1) does not apply if C is an individual.

(3) For the purposes of determining whether the requirements of sub-
paragraph (1) are met by reason of meeting the requirement in sub-
40paragraph (1)(a)(i), it does not matter whether RB existed at the time
when C met the section 237A condition.

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Treating persons in control of others as meeting section 237A condition

21 (1) A person other than an individual is treated as meeting a section
237A condition at the section 237A(2) relevant time if—

(a) a relevant body (“A”) met the condition at a time when A was
5controlled by the person, and

(b) at the time mentioned in paragraph (a) A, or another relevant
body (“B”) which was also at that time controlled by the
person, carried on a business as a promoter.

(2) For the purposes of determining whether the requirements of sub-
10paragraph (1) are met it does not matter whether A or B (or neither)
exists at the section 237A(2) relevant time.

Treating persons controlled by the same person as meeting section 237A condition

22 (1) A relevant body (“RB”) is treated as meeting a section 237A condition
at the section 237A(2) relevant time if—

(a) 15another relevant body met that condition at a time (“time T”)
when it was controlled by a person (“C”),

(b) at time T, there was a relevant body controlled by C which
carried on a business as a promoter, and

(c) RB is controlled by C at the section 237A(2) relevant time.

(2) 20For the purposes of determining whether the requirements of sub-
paragraph (1) are met it does not matter whether—

(a) RB existed at time T, or

(b) any relevant body (other than RB) by reason of which the
requirements of sub-paragraph (1) are met exists at the
25section 237A(2) relevant time.

Interpretation

23 (1) In this Part of this Schedule—

  • “control” has the same meaning as in Part 3 of this Schedule;

  • “relevant body” has the same meaning as in Part 3 of this
    30Schedule;

  • “section 237A(2) relevant time” means the time referred to in
    section 237A(2);

  • “section 237A condition” means any of the conditions in section
    237A(11), (12) and (13).

(2) 35For the purposes of paragraphs 20(1)(a), 21(1)(a) and 22(1)(a), the
condition in section 237A(11) (occurrence of 3 relevant defeats in the
3 years ending with the relevant time) is taken to have been met by a
person at any time if at least 3 relevant defeats have occurred in
relation to the person in the period of 3 years ending with that time.

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Part 5 Supplementary
“Adjustments”

24 In this Schedule “adjustments” means any adjustments, whether by
5way of an assessment, the modification of an assessment or return,
the amendment or disallowance of a claim, the entering into of a
contract settlement or otherwise (and references to “making”
adjustments accordingly include securing that adjustments are made
by entering into a contract settlement).

10Meaning of “avoidance-related rule”

25 (1) In this Schedule “avoidance-related rule” means a rule in Category 1
or 2.

(2) A rule is in Category 1 if—

(a) it refers (in whatever terms) to the purpose or main purpose
15or purposes of a transaction, arrangements or any other
action or matter, and

(b) to whether or not the purpose in question is or involves the
avoidance of tax or the obtaining of any advantage in relation
to tax (however described).

(3) 20A rule is also in Category 1 if it refers (in whatever terms) to—

(a) expectations as to what are, or may be, the expected benefits
of a transaction, arrangements or any other action or matter,
and

(b) whether or not the avoidance of tax or the obtaining of any
25advantage in relation to tax (however described) is such a
benefit.

For the purposes of paragraph (b) it does not matter whether the
reference is (for instance) to the “sole or main benefit” or “one of the
main benefits” or any other reference to a benefit.

(4) 30A rule falls within Category 2 if as a result of the rule a person may
be treated differently for tax purposes depending on whether or not
purposes referred to in the rule (for instance the purposes of an
actual or contemplated action or enterprise) are (or are shown to be)
commercial purposes.

(5) 35 For example, a rule in the following form would fall within Category
1 and within Category 2—

“Example rule

Section X does not apply to a company in respect of a transaction if the
company shows that the transaction meets Condition A or B.

40Condition A is that the transaction is effected—

(a)

for genuine commercial reasons, or

(b)

in the ordinary course of managing investments.

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Condition B is that the avoidance of tax is not the main object or one of the main
objects of the transaction.”

“DOTAS arrangements”

26 (1) For the purposes of this Schedule arrangements are “DOTAS
5arrangements” at any time if at that time a person—

(a) has provided, information in relation to the arrangements
under section 308(3), 309 or 310 of FA 2004, or

(b) has failed to comply with any of those provisions in relation
to the arrangements.

(2) 10But for the purposes of this Schedule “DOTAS arrangements” does
not include arrangements in respect of which HMRC has given
notice under section 312(6) of FA 2004 (notice that promoters not
under duty to notify client of reference number).

(3) For the purposes of sub-paragraph (1) a person who would be
15required to provide information under subsection (3) of section 308
of FA 2004—

(a) but for the fact that the arrangements implement a proposal
in respect of which notice has been given under subsection (1)
of that section, or

(b) 20but for subsection (4A), (4C) or (5) of that section,

is treated as providing the information at the end of the period
referred to in subsection (3) of that section.

“Disclosable VAT arrangements”

27 For the purposes of this Schedule arrangements are “disclosable
25VAT arrangements” at any time if at that time—

(a) a person has complied with paragraph 6 of Schedule 11A to
VATA 1994 in relation to the arrangements (duty to notify
Commissioners),

(b) a person under a duty to comply with that paragraph in
30relation to the arrangements has failed to do so, or

(c) a reference number has been allocated to the scheme under
paragraph 9 of that Schedule (voluntary notification of
avoidance scheme which is not a designated scheme).

Paragraphs 26 and 27: supplementary

28 (1) 35A person “fails to comply” with any provision mentioned in
paragraph 26(1)(a) or 27(b) if and only if any of the conditions in sub-
paragraphs (2) to (4) is met.

(2) The condition in this sub-paragraph is that—

(a) the tribunal has determined that the person has failed to
40comply with the provision concerned,

(b) the appeal period has ended, and

(c) the determination has not been overturned on appeal.

(3) The condition in this sub-paragraph is that—

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(a) the tribunal has determined for the purposes of section 118(2)
of TMA 1970 that the person is to be deemed not to have
failed to comply with the provision concerned as the person
had a reasonable excuse for not doing the thing required to be
5done,

(b) the appeal period has ended, and

(c) the determination has not been overturned on appeal.

(4) The condition in this sub-paragraph is that the person admitted in
writing to HMRC that the person has failed to comply with the
10provision concerned.

(5) In this paragraph “the appeal period” means—

(a) the period during which an appeal could be brought against
the determination of the tribunal, or

(b) where an appeal mentioned in paragraph (a) has been
15brought, the period during which that appeal has not been
finally determined, withdrawn or otherwise disposed of.

“Final” counteraction

29 For the purposes of this Schedule the counteraction of a tax
advantage or of arrangements is “final” when the assessment or
20adjustments made to effect the counteraction, and any amounts
arising as a result of the assessment or adjustments, can no longer be
varied, on appeal or otherwise.

Inheritance tax, stamp duty reserve tax, VAT and petroleum revenue tax

30 (1) In this Schedule, in relation to inheritance tax, each of the following
25is treated as a return—

(a) an account delivered by a person under section 216 or 217 of
IHTA 1984 (including an account delivered in accordance
with regulations under section 256 of that Act);

(b) a statement or declaration which amends or is otherwise
30connected with such an account produced by the person who
delivered the account;

(c) information or a document provided by a person in
accordance with regulations under section 256 of that Act;

and such a return is treated as made by the person in question.

(2) 35In this Schedule references to an assessment to tax, in relation to
inheritance tax, stamp duty reserve tax and petroleum revenue tax,
include a determination.

(3) In this Schedule an expression used in relation to VAT has the same
meaning as in VATA 1994.

40Power to amend

31 (1) The Treasury may by regulations amend this Schedule (apart from
this paragraph).

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(2) An amendment by virtue of sub-paragraph (1) may, in particular,
add, vary or remove conditions or categories (or otherwise vary the
meaning of “avoidance-related rule”).

(3) Regulations under sub-paragraph (1) may include any amendment
5of this Part of this Act that is appropriate in consequence of an
amendment made by virtue of sub-paragraph (1).”

(6) In section 241 (duration of conduct notice), after subsection (4) insert—

(5) See also section 237D(2) (provisional conduct notice affected by judicial
ruling).”

(7) 10After section 281 insert—

281A VAT

(1) In the provisions mentioned in subsection (2)—

(a) “tax” includes value added tax, and

(b) “tax advantage” has the meaning given by section 234(3) and
15also includes a tax advantage as defined in paragraph 1 of
Schedule 11A to VATA 1994.

(2) Those provisions are—

(a) section 237D;

(b) section 241B;

(c) 20Schedule 34A.

(3) Other references in this Part to “tax” are to be read as including value
added tax so far as that is necessary for the purposes of sections 237A
to 237D, 241A and 241B and Schedule 34A; but “tax” does not include
value added tax in section 237A(10) or 237B(3).”

(8) 25In section 282 (regulations), in subsection (3), after paragraph (b) insert—

(ba) paragraph 31 of Schedule 34A,”.

(9) In section 283(1) (interpretation of Part 5)—

(a) in the definition of “conduct notice”, after paragraph (a) insert—

  • “(“aa)

    section 237A(8),

    (ab)

    30section 237B(1),”;

(b) in the definition of “tax”, after ““tax”” insert “(except in provisions to
which section 281A applies)”;

(c) in the definition of ““tax advantage””, after “234(3)” insert “(but see also
section 281A)”;

(d) 35at the appropriate places insert—

  • ““contract settlement” means an agreement in connection
    with a person’s liability to make a payment to the
    Commissioners under or by virtue of an enactment;”

  • ““defeat”, in relation to arrangements, has the meaning
    40given by paragraph 10 of Schedule 34A;”

  • ““defeat notice” has the meaning given by section
    241A(7);”

  • ““double defeat notice” has the meaning given by section
    241A(7);”

  • 45““final”, in relation to a judicial ruling, is to be interpreted
    in accordance with section 237D(6);”

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  • ““judicial ruling” means a ruling of a court or tribunal on
    one or more issues;”

  • ““look-forward period, in relation to a defeat notice, has
    the meaning given by section 241A(10);”

  • 5““provisional”, in relation to a conduct notice given under
    section 237A(8), is to be interpreted in accordance with
    section 237C;”

  • ““relevant defeat”, in relation to a person, is to be
    interpreted in accordance with Schedule 34A;”

  • 10““related”, in relation to arrangements, is to be interpreted
    in accordance with paragraph 2 of Schedule 34A;”

  • ““relies on a Case 3 relevant defeat” is to be interpreted in
    accordance section 237B(5);”

  • ““single defeat notice” has the meaning given by section
    15241A(7).”

(10) Schedule 36 (promoters of tax avoidance schemes: partnerships) is amended in
accordance with subsections (11) to (16).

(11) In Part 2, before paragraph 5 insert—

“Defeat notices

4A 20A defeat notice that is given to a partnership must state that it is a
partnership defeat notice.”.

(12) In paragraph 7(1)(b) after “a” insert “defeat notice,”.

(13) In paragraph 7(2) after “the” insert “defeat notice,”.

(14) After paragraph 7 insert—

25“Persons leaving partnership: defeat notices

7A (1) Sub-paragraphs (2) and (3) apply where—

(a) a person (“P”) who was a controlling member of a
partnership at the time when a defeat notice (“the original
notice”) was given to the partnership has ceased to be a
30member of the partnership,

(b) the defeat notice had effect in relation to the partnership at
the time of that cessation, and

(c) P is carrying on a business as a promoter.

(2) An authorised officer may give P a defeat notice.

(3) 35If P is carrying on a business as a promoter in partnership with one
or more other persons and is a controlling member of that
partnership (“the new partnership”), an authorised officer may give
a defeat notice to the new partnership.

(4) A defeat notice given under sub-paragraph (3) ceases to have effect
40if P ceases to be a member of the new partnership.

(5) A notice under sub-paragraph (2) or (3) may not be given after the
original notice has ceased to have effect.