Finance Bill (HC Bill 47)

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(a) section 8G (brought-forward allowance) applies, but as if
references to the residential enhancement at P’s death were
references to the residential enhancement at the time of
completion of the disposal of the qualifying former
5residential interest, and

(b) assume that a claim for brought-forward allowance was
made in relation to an amount available for carry-forward
from a related person’s death if, on P’s death, a claim was in
fact made in relation to the amount.

(5) 10For the purposes of subsection (3)(c), where the person’s allowance
on death is equal to the person’s adjusted allowance, the amount of
brought-forward allowance included in the person’s allowance on
death is calculated as follows.

Step 1

15Express the person’s brought-forward allowance as a percentage of
the person’s default allowance.

Step 2

Multiply—


20by the percentage given by step 1.

Step 3

Reduce the person’s brought-forward allowance by the amount
given by step 2.

The result is the amount of brought-forward allowance included in
25the person’s allowance on death.

(6) If completion of the disposal of the qualifying former residential
interest occurs before 6 April 2017—

(a) for the purposes of subsection (3)(a), the residential
enhancement at the time of completion of the disposal is
30treated as being £100,000, and

(b) for the purposes of subsection (3)(b), the amount of brought-
forward allowance that the person would have had at that
time is treated as being nil.

(7) In this section, the person’s “allowance on death” means—

(a) 35where E is less than or equal to TT, the person’s default
allowance, or

(b) where E is greater than TT, the person’s adjusted allowance.

(8) For the purposes of this section, “completion” of the disposal of a
residential property interest occurs at the time of the disposal or, if
40the disposal is under a contract which is completed by a conveyance,
at the time when the interest is conveyed.

(9) Where, as a result of section 8FA, there is entitlement to a
downsizing addition in calculating the person’s residence nil-rate
amount, take the following steps to calculate the person’s lost
45relievable amount.

Step 1

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Express the value of the person’s qualifying former residential
interest as a percentage of the person’s former allowance, but take
that percentage to be 100% if it would otherwise be higher.

5Step 2

Express QRI as a percentage of the person’s allowance on death,
where QRI is so much of VT as is attributable to the person’s
qualifying residential interest, but take that percentage to be 100% if
it would otherwise be higher.

10Step 3

Subtract the percentage given by step 2 from the percentage given by
step 1, but take the result to be 0% if it would otherwise be negative.
The result is P%.

Step 4

15The person’s lost relievable amount is equal to P% of the person’s
allowance on death.

(10) Where, as a result of section 8FB, there is entitlement to a downsizing
addition in calculating the person’s residence nil-rate amount, take
the following steps to calculate the person’s lost relievable amount.

20Step 1

Express the value of the person’s qualifying former residential
interest as a percentage of the person’s former allowance, but take
that percentage to be 100% if it would otherwise be higher.

Step 2

25Calculate that percentage of the person’s allowance on death.

The result is the person’s lost relievable amount.”

6 In section 8G (meaning of “brought-forward allowance”), in subsection
(3)(a), for “and 8F” substitute “, 8F and 8FD”.

7 (1) Section 8H (meaning of “qualifying residential interest”) is amended as
30follows.

(2) In the heading, at the end insert “, “qualifying former residential interest”
and “residential property interest””.

(3) In subsection (1), for “and 8F” substitute “to 8FE and section 8M”.

(4) In subsection (2), for “In this section” substitute “A”.

(5) 35After subsection (4) insert—

(4A) Subsection (4B) or (4C) applies where—

(a) a person disposes of a residential property interest in a
dwelling-house on or after 8 July 2015 (and before the person
dies), and

(b) 40the person’s personal representatives nominate—

(i) where there is only one such dwelling-house, that
dwelling-house, or

(ii) where there are two or more such dwelling-houses,
one (and only one) of those dwelling-houses.

(4B) 45Where—

(a) the person—

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(i) disposes of a residential property interest in the
nominated dwelling-house at a post-occupation time,
or

(ii) disposes of two or more residential property interests
5in the nominated dwelling-house at the same post-
occupation time or at post-occupation times on the
same day, and

(b) the person does not otherwise dispose of residential property
interests in the nominated dwelling-house at post-occupation
10times,

the interest disposed of is, or the interests disposed of are, a
qualifying former residential interest in relation to the person.

(4C) Where—

(a) the person disposes of residential property interests in the
15nominated dwelling-house at post-occupation times on two
or more days, and

(b) the person’s personal representatives nominate one (and
only one) of those days,

the interest or interests disposed of at post-occupation times on the
20nominated day is or are a qualifying former residential interest in
relation to the person.

(4D) For the purposes of subsections (4A) to (4C)—

(a) a person is to be treated as not disposing of a residential
property interest in a dwelling-house where the person
25disposes of an interest in the dwelling-house by way of gift
and the interest is, in relation to the gift and the donor,
property subject to a reservation within the meaning of
section 102 of the Finance Act 1986 (gifts with reservation),
and

(b) 30a person is to be treated as disposing of a residential property
interest in a dwelling-house if the person is treated as making
a potentially exempt transfer of the interest as a result of the
operation of section 102(4) of that Act (property ceasing to be
subject to a reservation).

(4E) 35Where—

(a) a transfer of value by a person is a conditionally exempt
transfer of a residential property interest, and

(b) at the time of the person’s death, no chargeable event has
occurred with respect to that interest,

40that interest may not be, or be included in, a qualifying former
residential interest in relation to the person.

(4F) In subsections (4B) and (4C) “post-occupation time” means a time—

(a) on or after 8 July 2015,

(b) after the nominated dwelling-house first became the person’s
45residence, and

(c) before the person dies.

(4G) For the purposes of subsections (4A) to (4C), if the disposal is under
a contract which is completed by a conveyance, the disposal occurs
at the time when the interest is conveyed.”

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8 After section 8H insert—

8HA “Qualifying former residential interest”: interests in possession

(1) This section applies for the purposes of determining whether certain
interests may be, or be included in, a qualifying former residential
5interest in relation to a person (see section 8H(4A) to (4C)).

(2) This section applies where—

(a) a person (“P”) is beneficially entitled to an interest in
possession in settled property, and

(b) the settled property consists of, or includes, an interest in a
10dwelling-house.

(3) Subsection (4) applies where—

(a) the trustees of the settlement dispose of the interest in the
dwelling-house to a person other than P,

(b) P’s interest in possession in the settled property subsists
15immediately before the disposal, and

(c) P’s interest in possession—

(i) falls within subsection (7) throughout the period
beginning with P becoming beneficially entitled to it
and ending with the disposal, or

(ii) 20falls within subsection (8).

(4) The disposal is to be treated as a disposal by P of the interest in the
dwelling-house to which P is beneficially entitled as a result of the
operation of section 49(1).

(5) Subsection (6) applies where—

(a) 25P disposes of the interest in possession in the settled
property, or P’s interest in possession in the settled property
comes to an end in P’s lifetime,

(b) the interest in the dwelling-house is, or is part of, the settled
property immediately before the time when that happens,
30and

(c) P’s interest in possession—

(i) falls within subsection (7) throughout the period
beginning with P becoming beneficially entitled to it
and ending with the time mentioned in paragraph (b),
35or

(ii) falls within subsection (8).

(6) The disposal, or (as the case may be) the coming to an end of P’s
interest in possession, is to be treated as a disposal by P of the interest
in the dwelling-house to which P is beneficially entitled as a result of
40the operation of section 49(1).

(7) An interest in possession falls within this subsection if—

(a) P became beneficially entitled to it before 22 March 2006 and
section 71A does not apply to the settled property; or

(b) P becomes beneficially entitled to it on or after 22 March 2006
45and the interest is—

(i) an immediate post-death interest,

(ii) a disabled person’s interest, or

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(iii) a transitional serial interest.

(8) An interest in possession falls within this subsection if P becomes
beneficially entitled to it on or after 22 March 2006 and it falls within
section 5(1B).”

9 5In section 8J (meaning of “inherited”), in subsection (1), for “and 8F”
substitute “, 8F, 8FA, 8FB and 8M”.

10 In section 8K (meaning of “closely inherited”), in subsection (1), for “and 8F”
substitute “, 8F, 8FA, 8FB and 8M”.

11 In section 8L (claims for brought-forward allowance)—

(a) 10in the heading, at the end insert “and downsizing addition”, and

(b) in subsection (1), after “(see section 8G)” insert “or for a downsizing
addition for a person (see sections 8FA to 8FD)”.

12 (1) Section 8M (residence nil-rate amount: cases involving conditional
exemption) is amended as follows.

(2) 15For subsections (1) and (2) substitute—

(1) This section applies where—

(a) a person (“D”) dies on or after 6 April 2017,

(b) ignoring the application of this section, D’s residence nil-rate
amount is greater than nil, and

(c) 20some or all of the transfer of value under section 4 on D’s
death is a conditionally exempt transfer of property
consisting of, or including, any of the following—

(i) some or all of a qualifying residential interest;

(ii) some or all of a residential property interest, at least
25some portion of which is closely inherited, and which
is not, and is not included in, a qualifying residential
interest;

(iii) one or more closely inherited assets that are not
residential property interests.

(2) 30Subsections (2B) to (2E) apply for the purposes of sections 8E to 8FD
if—

(a) ignoring the application of this section, D’s residence nil-rate
amount is given by section 8E, and

(b) some or all of the transfer of value under section 4 is a
35conditionally exempt transfer of property mentioned in
subsection (1)(c)(i).

(2A) In subsections (2B) to (2E), but subject to subsection (3)(a), “the
exempt percentage of the QRI” is given by—


40where—

  • X is the attributable portion of the value transferred by the
    conditionally exempt transfer,

  • QRI is the attributable portion of the value transferred by the
    transfer of value under section 4, and

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  • “the attributable portion” means the portion (which may be the
    whole) attributable to the qualifying residential interest.

(2B) If—

(a) the exempt percentage of the QRI is 100%, and

(b) 5D has no entitlement to a downsizing addition,

D’s residence nil-rate amount and amount available for carry-
forward are given by section 8F(2) and (3) (instead of section 8E).

(2C) If—

(a) the exempt percentage of the QRI is 100%, and

(b) 10D has an entitlement to a downsizing addition,

D’s residence nil-rate amount and amount available for carry-
forward are given by section 8FD(3) to (6) (instead of section 8E as
modified by section 8FC(2)).

(2D) If—

(a) 15the exempt percentage of the QRI is less than 100%, and

(b) D has no entitlement to a downsizing addition,

D’s residence nil-rate amount and amount available for carry-
forward are given by section 8E but as if, in subsections (2) to (5) of
that section, each reference to NV/100 were a reference to NV/100
20multiplied by the percentage that is the difference between 100% and
the exempt percentage of the QRI.

(2E) If—

(a) the exempt percentage of the QRI is less than 100%, and

(b) D has an entitlement to a downsizing addition,

25D’s residence nil-rate amount and amount available for carry-
forward are given by section 8E as modified by section 8FC(2), but as
if the reference to NV/100 in section 8FC(2)(a) were a reference to
NV/100 multiplied by the percentage that is the difference between
100% and the exempt percentage of the QRI.

(2F) 30Subsection (2G) applies for the purposes of sections 8FA to 8FD if—

(a) some or all of the transfer of value under section 4 is a
conditionally exempt transfer of property mentioned in
subsection (1)(c)(ii) or (iii) (or both),

(b) D has an entitlement to a downsizing addition, and

(c) 35DA exceeds Y (see subsection (2H)).

(2G) Subject to subsection (3)(aa) and (ab), the amount of the downsizing
addition is treated as reduced by whichever is the smaller of—

(a) the difference between DA and Y, and

(b) Z.

(2H) 40In subsections (2F) and (2G)—

  • DA is the amount of the downsizing addition to which D has an
    entitlement (ignoring the application of subsection (2G));

  • Y is so much (if any) of the value transferred by the transfer of
    value under section 4 as—

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    (a)

    is not transferred by a conditionally exempt transfer,
    and

    (b)

    is attributable to—

    (i)

    the closely inherited portion (which may be
    5the whole) of any residential property
    interests that are not, and are not included in,
    a qualifying residential interest, or

    (ii)

    closely inherited assets that are not residential
    property interests;

  • 10Z is the total of—

    (a)

    the closely inherited conditionally exempt values of
    all residential property interests mentioned in
    subsection (1)(c)(ii), and

    (b)

    so much of the value transferred by the conditionally
    15exempt transfer as is attributable to property
    mentioned in subsection (1)(c)(iii).

(2I) For the purposes of the definition of “Z”, “the closely inherited
conditionally exempt value” of a residential property interest
means—

(a) 20so much of the value transferred by the conditionally exempt
transfer as is attributable to the interest, multiplied by

(b) the percentage of the interest which is closely inherited.”

(3) In subsection (3), for the words before paragraph (b) substitute—

(3) For the purposes of calculating tax chargeable under section 32 or
2532A by reference to a chargeable event related to property forming
the subject-matter of the conditionally exempt transfer where D is
the relevant person for the purposes of section 33—

(a) where subsections (2B) to (2E) apply and the chargeable
event relates to property mentioned in subsection (1)(c)(i), in
30calculating the exempt percentage of the QRI, X is calculated
as if the attributable portion of the value transferred by the
conditionally exempt transfer had not included the portion
(which may be the whole) of the qualifying residential
interest on which the tax is chargeable,

(aa) 35where subsection (2G) applies and the chargeable event
relates to property mentioned in subsection (1)(c)(ii), Z is
calculated as if it had not included the portion (which may be
the whole) of the closely inherited conditionally exempt
value of the residential property interest on which the tax is
40chargeable,

(ab) where subsection (2G) applies and the chargeable event
relates to an asset mentioned in subsection (1)(c)(iii) (“the
taxable asset”), Z is calculated as if it had not included so
much of the value transferred by the conditionally exempt
45transfer as is attributable to the taxable asset,”.

(4) In subsection (3)—

(a) at the beginning of paragraph (b) insert “in the cases mentioned in
paragraphs (a), (aa) and (ab),”,

(b) at the end of paragraph (b) omit “and”,

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(c) in paragraph (c), for “less” substitute “reduced (but not below nil)
by”, and

(d) after paragraph (c) insert , and

(d) where the chargeable event relates to property
5mentioned in subsection (1)(c)(i) and subsections (2B)
to (2E) do not apply, section 33 has effect as if in
subsection (1)(b)(ii) after “in accordance with” there
were inserted “section 8D(2) and (3) above and”.”

(5) In subsection (5), for “the qualifying residential interest which” substitute
10“property which forms the subject-matter of the conditionally exempt
transfer where the chargeable event”.

(6) In subsection (6), for “the qualifying residential interest which” substitute
“property which forms the subject-matter of the conditionally exempt
transfer and the chargeable event”.

(7) 15In subsection (7), for “the qualifying residential interest” substitute
“property which forms the subject-matter of the conditionally exempt
transfer”.

SCHEDULE 16 Section 132 Property authorised investment funds and co-ownership authorised
20contractual schemes

Part 1 Co-ownership authorised contractual schemes

1 In FA 2003, after section 102 insert—

102A Co-ownership authorised contractual schemes

(1) 25This section has effect for the purposes of this Part.

(2) This Part, with the exception of Schedule 7 (see subsection (10)),
applies in relation to a co-ownership authorised contractual scheme
as if—

(a) the scheme were a company, and

(b) 30the rights of the participants were shares in the company.

(3) An “umbrella COACS” means a co-ownership authorised
contractual scheme—

(a) whose arrangements provide for separate pooling of the
contributions of the participants and the profits or income
35out of which payments are made to them (“pooling
arrangements”), and

(b) under which the participants are entitled to exchange rights
in one pool for rights in another.

(4) A “sub-scheme”, in relation to an umbrella COACS, means such of
40the pooling arrangements as relate to a separate pool.

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(5) Each of the sub-schemes of an umbrella COACS is regarded as a
separate co-ownership authorised contractual scheme, and the
umbrella COACS as a whole is not so regarded.

(6) In relation to a sub-scheme of an umbrella COACS—

(a) 5references to chargeable interests are references to such of the
chargeable interests as under the pooling arrangements form
part of the separate pool to which the sub-scheme relates, and

(b) references to the scheme documents are references to such
parts of the documents as apply to the sub-scheme.

(7) 10References to a co-ownership authorised contractual scheme are
treated as including a collective investment scheme which—

(a) is constituted under the law of an EEA State other than the
United Kingdom by a contract,

(b) is managed by a body corporate incorporated under the law
15of an EEA State, and

(c) is authorised under the law of the EEA State mentioned in
paragraph (a) in a way which makes it, under that law, the
equivalent of a co-ownership authorised contractual scheme
as defined in subsection (8),

20provided that, apart from this section, no charge to tax is capable of
arising to the scheme under this Part.

(8) Subject to any regulations under subsection (9)—

  • “co-ownership authorised contractual scheme” means a co-
    ownership scheme which is authorised for the purposes of
    25FSMA 2000 by an authorisation order in force under section
    261D(1) of that Act;

  • “co-ownership scheme” has the same meaning as in FSMA 2000
    (see section 235A of that Act).

(9) The Treasury may by regulations provide that a scheme of a
30description specified in the regulations is to be treated as not being a
co-ownership authorised contractual scheme for the purposes of this
Part.

Any such regulations may contain such supplementary and
transitional provisions as appear to the Treasury to be necessary or
35expedient.

(10) A co-ownership authorised contractual scheme is not to be treated as
a company for the purposes of Schedule 7 (group relief,
reconstruction relief or acquisition relief).

(11) In relation to a land transaction in respect of which a co-ownership
40authorised contractual scheme is treated as the purchaser by virtue
of this section, references to the purchaser in the following
provisions are to be read as references to the operator of the
scheme—

(a) sections 76, 80, 81, 81A and 108(2) and Schedule 10
45(provisions about land transaction returns and further
returns, enquiries, assessments and related matters),

(b) section 85 (liability for tax), and

(c) section 90 (application to defer payment in case of contingent
or unascertained consideration).

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(12) In this section—

  • “collective investment scheme” has the meaning given by
    section 235 of FSMA 2000;

  • “FSMA 2000” means the Financial Services and Markets Act
    52000;

  • “operator”—

    (a)

    in relation to a co-ownership authorised contractual
    scheme constituted under the law of the United
    Kingdom, has the meaning given by section 237(2) of
    10FSMA 2000, and

    (b)

    in relation to a collective investment scheme treated
    as a co-ownership authorised contractual scheme by
    virtue of subsection (7) (equivalent EEA schemes),
    means the corporate body responsible for the
    15management of the scheme (however described);

  • “participant” is to be read in accordance with section 235 of
    FSMA 2000.”

Part 2 Seeding relief for property authorised investment funds and co-ownership
20authorised contractual schemes

2 FA 2003 is amended in accordance with this Part.

3 After section 65 insert—

65A PAIF seeding relief and COACS seeding relief

(1) Schedule 7A provides for relief from stamp duty land tax.

(2) 25In that Schedule—

(a) Part 1 makes provision for relief for property authorised
investment funds (PAIF seeding relief), and

(b) Part 2 makes provision for relief for co-ownership authorised
contractual schemes (COACS seeding relief).

(3) 30Any relief under that Schedule must be claimed in a land transaction
return or an amendment of such a return, and must be accompanied
by a notice to HMRC referring to the claim.

(4) In the case of a claim for PAIF seeding relief, the notice must confirm
that the purchaser is—

(a) 35a property AIF as defined in paragraph 2(2) of Schedule 7A,
or

(b) a company treated as a property AIF by virtue of paragraph
2(5) of Schedule 7A (equivalent EEA funds).

(5) In the case of a claim for COACS seeding relief, the notice must
40confirm that the purchaser is—

(a) a co-ownership authorised contractual scheme as defined in
section 102A(8), or

(b) an entity treated as a co-ownership authorised contractual
scheme by virtue of section 102A(7) (equivalent EEA
45schemes).