Finance Bill (HC Bill 47)

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(6) The notice must be in such form, and contain such further
information, as HMRC may require.”

4 After Schedule 7 insert—

“Schedule 7A Section 65A Paif seeding relief and coacs seeding relief

5Part 1 Property authorised investment funds
PAIF seeding relief

1 (1) A land transaction is exempt from charge if conditions A to D are
met.

10Relief under this paragraph is referred to in this Part of this Act as
“PAIF seeding relief”.

(2) Condition A is that the purchaser is a property AIF (see paragraph
2).

(3) Condition B is that the main subject-matter of the transaction
15consists of a major interest in land.

(4) Condition C is that the only consideration for the transaction is the
issue of units in the property AIF to a person who is the vendor.

(5) Condition D is that the effective date of the transaction is a day
within the seeding period (see paragraph 3).

(6) 20This paragraph is subject to paragraph 4 (restrictions on
availability of relief) and paragraphs 5 to 8 (withdrawal of relief).

Meaning of “property AIF”

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

(2) A “property AIF” is an open-ended investment company to which
25Part 4A of the AIF (Tax) Regulations applies.

(3) In sub-paragraph (2) “open-ended investment company” is to be
read in accordance with regulation 7(1) and (2) of those
Regulations (part of an umbrella company is regarded as an open-
ended investment company).

(4) 30Regulation 7(3)(a) of those Regulations applies for the purposes of
this Schedule as it applies for the purposes of those Regulations
but as if references to investments and scheme property were a
reference to chargeable interests.

(5) References to a property AIF are treated as including a collective
35investment scheme which—

(a) is a company incorporated under the law of an EEA State
other than the United Kingdom, and

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(b) is authorised under the law of that EEA State in a way
which makes it, under that law, the equivalent of a
property AIF as defined in sub-paragraph (2).

(6) In sub-paragraph (5) “collective investment scheme” has the
5meaning given by section 235 of FSMA 2000.

Meaning of “seeding period”

3 (1) In this Part of this Schedule, subject to sub-paragraph (2), the
“seeding period” means—

(a) the period beginning with the first property seeding date
10and ending with the date of the first external investment
into the property AIF, or

(b) if shorter, the period of 18 months beginning with the first
property seeding date.

(2) The property AIF may elect to bring the seeding period to an end
15sooner than it would otherwise end under sub-paragraph (1).

Where an election is made, the seeding period is the period
beginning with the first property seeding date and ending with
the date specified in the election.

(3) An election under sub-paragraph (2) may be made—

(a) 20by being included in a notice accompanying a claim for
PAIF seeding relief (see section 65A), or

(b) by separate notice in writing to HMRC.

(4) In sub-paragraphs (1) and (2), “the first property seeding date”
means the earliest effective date of a transaction in respect of
25which conditions A to C in paragraph 1 are met.

(5) In this paragraph—

  • “external investment” means a non-land transaction in which
    the vendor is an external investor;

  • “external investor” means a person other than a person who
    30has been a vendor in a transaction—

    (a)

    the effective date of which is on or before the date of
    the non-land transaction, and

    (b)

    in respect of which conditions A to C in paragraph 1
    are met;

  • 35“non-land transaction” means a transaction by which the
    property AIF acquires assets which do not consist of or
    include a chargeable interest.

Restrictions on availability of relief

4 (1) This paragraph restricts the availability of PAIF seeding relief for
40a transaction in respect of which conditions A to D in paragraph 1
are met.

(2) PAIF seeding relief is not available unless, at the effective date of
the transaction, the property AIF has arrangements in place
requiring a person who is the vendor to notify the authorised
45corporate director of the property AIF of the following matters—

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(a) the identity of the beneficial owner of the units in the
property AIF received in consideration of the transaction,
and

(b) any disposal of units in the property AIF on or after the
5effective date of that transaction by that owner (or, where
that person is a company, by a group company) which is or
could be a relevant disposal (see paragraph 7).

In paragraph (b) “group company” means a company which is a
member of the same group of companies as the person mentioned
10in paragraph (a) for the purposes mentioned in paragraph 1(2) of
Schedule 7 (group relief).

(3) PAIF seeding relief is not available if at the effective date of the
transaction there are arrangements in existence by virtue of which,
at that or some later time, a person who is the vendor makes or
15could make a disposal of units in the property AIF which is or
could be a relevant disposal (see paragraph 7).

(4) PAIF seeding relief is not available if the transaction—

(a) is not effected for bona fide commercial reasons, or

(b) forms part of arrangements of which the main purpose, or
20one of the main purposes, is the avoidance of liability to
tax.

“Tax” here means stamp duty, income tax, corporation tax, capital
gains tax or tax under this Part.

Withdrawal of relief: ceasing to be property AIF

5 (1) 25Where PAIF seeding relief has been allowed in respect of a
transaction (“the relevant transaction”), and the purchaser ceases
to be a property AIF—

(a) at any time after the effective date of that transaction but
within the seeding period,

(b) 30at any time in the control period (see paragraph 21), or

(c) in pursuance of, or in connection with, arrangements made
before the end of the control period,

then, subject to sub-paragraph (2), the relief, or an appropriate
proportion of it, is withdrawn, and tax is chargeable in accordance
35with this paragraph.

(2) Relief is withdrawn only if, at the time when the purchaser ceases
to be a property AIF, the purchaser holds—

(a) the chargeable interest that was acquired by the purchaser
under the relevant transaction, or

(b) 40a chargeable interest that is derived from that interest.

(3) The amount chargeable is the amount that would have been
chargeable in respect of the relevant transaction but for PAIF
seeding relief or, as the case may be, an appropriate proportion of
the tax that would have been so chargeable.

(4) 45In sub-paragraphs (1) and (3) an “appropriate proportion” means
an appropriate proportion having regard to the subject-matter of
the relevant transaction and what is held by the purchaser at the
time it ceases to be a property AIF.

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Withdrawal of relief: portfolio test not met

6 (1) Where PAIF seeding relief has been allowed in respect of a
transaction, and the portfolio test is not met immediately before
the end of the seeding period, the relief is withdrawn and tax is
5chargeable in accordance with sub-paragraph (2).

See sub-paragraph (7) for the meaning of “portfolio test”.

(2) The amount chargeable is the amount that would have been
chargeable in respect of the transaction but for PAIF seeding relief.

(3) Where PAIF seeding relief has been allowed in respect of a
10transaction (“the relevant transaction”), and the portfolio test is
met immediately before the end of the seeding period, but is not
met—

(a) at a time in the control period, or

(b) at a time after the end of the control period, where the
15failure is pursuant to or in connection with arrangements
made before the end of that period,

then, subject to sub-paragraph (4), the relief, or an appropriate
proportion of it, is withdrawn, and tax is chargeable in accordance
with sub-paragraph (5).

(4) 20The requirement to meet the portfolio test at a time mentioned in
sub-paragraph (3)(a) or (b) applies only to times when the
property AIF holds—

(a) the chargeable interest that was acquired by the property
AIF under the relevant transaction, or

(b) 25a chargeable interest that is derived from that interest.

(5) The amount chargeable is the amount that would have been
chargeable in respect of the relevant transaction but for PAIF
seeding relief or, as the case may be, an appropriate proportion of
the tax that would have been so chargeable.

(6) 30In sub-paragraphs (3) and (5) an “appropriate proportion” means
an appropriate proportion having regard to the subject-matter of
the relevant transaction and what is held by the property AIF at
the time when the portfolio test is not met.

(7) The portfolio test is a requirement that the property AIF meets—

(a) 35the non-residential portfolio test (see sub-paragraph (8)),
or

(b) the residential portfolio test (see sub-paragraph (9)).

(8) The “non-residential portfolio test” is met at any time if—

(a) the property AIF holds at least 10 seeded interests at that
40time,

(b) so much of the total chargeable consideration as is
attributable to all the seeded interests held by the property
AIF at that time (“the seeded portfolio”) is at least £100
million, and

(c) 45so much of the total chargeable consideration as is
attributable to so many of those seeded interests as are
interests in or over residential property (if any) does not
exceed 10% of the seeded portfolio.

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(9) The “residential portfolio test” is met at any time if—

(a) so much of the total chargeable consideration as is
attributable to all the seeded interests held by the property
AIF at that time is at least £100 million, and

(b) 5at least 100 of the seeded interests held by the property AIF
at that time are interests in or over residential property.

(10) In sub-paragraphs (8) and (9)—

  • “seeded interest” means a chargeable interest acquired by the
    property AIF in a transaction for which PAIF seeding relief
    10is allowed (whether or not relief is subsequently
    withdrawn to any extent) (a “seeding transaction”), and

  • “total chargeable consideration” means the total of the
    chargeable consideration for all seeding transactions.

(11) For the purposes of this paragraph, section 116(7) does not apply
15(modification of what counts as residential property).

Withdrawal of relief: units disposed of

7 (1) This paragraph applies where—

(a) a person (“V”) makes a relevant disposal of one or more
units in a property AIF—

(i) 20at any time in the seeding period,

(ii) at any time in the control period, or

(iii) in pursuance of, or in connection with,
arrangements made before the end of the control
period, and

(b) 25there is, in relation to that disposal, a relevant seeding
transaction (see sub-paragraph (6)).

(2) In respect of a transaction which is, in relation to the relevant
disposal, a relevant seeding transaction—

(a) PAIF seeding relief is withdrawn to the extent set out in
30this paragraph, and

(b) tax is chargeable in accordance with this paragraph.

(3) V’s disposal of units in a property AIF is a “relevant disposal” for
the purposes of this paragraph if, in relation to the disposal, A
exceeds B.

(4) 35In this paragraph—

  • “A” means—

    (a)

    where the value of V’s investment in the property AIF
    immediately before the disposal is equal to or greater
    than the total of the chargeable consideration for all
    40relevant seeding transactions, the total of the
    chargeable consideration for all relevant seeding
    transactions, or

    (b)

    where the value of V’s investment in the property AIF
    immediately before the disposal is less than the total
    45of the chargeable consideration for all relevant
    seeding transactions, the value of V’s investment in

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    the property AIF immediately before the disposal,
    and

  • “B” means the value of V’s investment in the property AIF
    immediately after the disposal.

(5) 5The amount chargeable in respect of a relevant seeding transaction
(“RST”) is—


where—

  • “C” means the difference between A and B;

  • 10“CCRST” means the total of the chargeable consideration for
    all relevant seeding transactions;

  • SDLT” means the amount of tax that would have been
    chargeable in respect of RST but for PAIF seeding relief,
    ignoring any amount of tax that has been charged under
    15this paragraph in respect of RST in relation to an earlier
    disposal of units by V.

(6) In this paragraph—

  • “group company” means (where V is a company) a company
    which is a member of the same group of companies as V
    20for the purposes mentioned in paragraph 1(2) of Schedule
    7 (group relief);

  • “relevant seeding transaction”, in relation to a disposal of
    units by V in a property AIF, means a seeding
    transaction—

    (a)

    25the effective date of which is, or is before, the date of
    the disposal,

    (b)

    in which that property AIF is the purchaser, and

    (c)

    in which a vendor is—

    (i)

    V, or

    (ii)

    30(where V is a company) a company which is a
    group company at the time of the disposal;

  • “seeding transaction” means a transaction in respect of which
    PAIF seeding relief is allowed (whether or not relief is
    subsequently withdrawn to any extent);

  • 35“the value of V’s investment in the property AIF” at a
    particular time means the market value of all units in the
    property AIF held at that time by—

    (a)

    V, and

    (b)

    (where V is a company) a company which—

    (i)

    40is a group company at that time, and

    (ii)

    before that time, has been a vendor in one or
    more seeding transactions in which the
    property AIF was the purchaser.

(7) For the purposes of this paragraph, the “market value” on a
45particular date of units in the property AIF is an amount equal to
the buying price (that is, the lower price) published by the

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authorised corporate director on that date (or, if no such price is
published on that date, on the latest date before).

Withdrawal of relief: dwelling occupied by non-qualifying individual

8 (1) This paragraph applies to a transaction (“the relevant
5transaction”) if—

(a) PAIF seeding relief has been allowed in respect of the
transaction,

(b) the main subject-matter of the transaction consists of a
chargeable interest in or over land which is or includes a
10dwelling, and

(c) a non-qualifying individual (see paragraph 9) is permitted
to occupy the dwelling at any time on or after the effective
date of the transaction.

The dwelling which a non-qualifying individual is permitted to
15occupy is referred to as “the disqualifying dwelling”.

(2) The relief, or an appropriate proportion of it, is withdrawn, and
tax is chargeable in accordance with this paragraph.

This is subject to sub-paragraphs (3) and (4).

(3) Relief is withdrawn only if, at the time a non-qualifying individual
20is permitted to occupy the disqualifying dwelling, the property
AIF holds a chargeable interest in or over that dwelling—

(a) that was acquired by the property AIF under the relevant
transaction, or

(b) that is derived from an interest so acquired.

(4) 25Where a non-qualifying individual is first permitted to occupy the
disqualifying dwelling at a time after the end of the control period,
relief is withdrawn only if, at that time, the purchaser in the
relevant transaction fails to meet the genuine diversity of
ownership condition set out in regulation 9A of the AIF (Tax)
30Regulations.

For the purposes of this sub-paragraph, regulation 9A(2)(a) of
those Regulations is to be read as if the words “throughout the
accounting period” were omitted.

(5) The amount chargeable is the amount that would have been
35chargeable in respect of the relevant transaction but for PAIF
seeding relief or, as the case may be, an appropriate proportion of
the tax that would have been so chargeable.

(6) In sub-paragraphs (2) and (5), an “appropriate proportion” means
an appropriate proportion having regard to the extent to which
40the subject-matter of the relevant transaction was an interest in or
over land other than the disqualifying dwelling.

9 (1) In paragraph 8 “non-qualifying individual”, in relation to a land
transaction and a property AIF, means any of the following—

(a) an individual who is a major participant in the property
45AIF;

(b) an individual who is connected with a major participant in
the property AIF;

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(c) an individual who is connected with the property AIF;

(d) a relevant settlor;

(e) the spouse or civil partner of an individual falling within
paragraph (b), (c) or (d);

(f) 5a relative of an individual falling within paragraph (b), (c)
or (d), or the spouse or civil partner of a relative of an
individual falling within paragraph (b), (c) or (d);

(g) a relative of the spouse or civil partner of an individual
falling within paragraph (b), (c) or (d);

(h) 10the spouse or civil partner of an individual falling within
paragraph (g).

(2) An individual who participates in a property AIF is a “major
participant” in it if the individual—

(a) is entitled to a share of at least 50% either of all the profits
15or income arising from the property AIF or of any profits
or income arising from it that may be distributed to
participants, or

(b) would in the event of the winding up of the property AIF
be entitled to 50% or more of the assets of the property AIF
20that would then be available for distribution among the
participants.

(3) The reference in sub-paragraph (2)(a) to profits or income arising
from the property AIF is to profits or income arising from the
acquisition, holding, management or disposal of the property
25subject to the property AIF.

(4) In this paragraph—

  • “relative” means brother, sister, ancestor or lineal
    descendant;

  • “relevant settlor”, in relation to a land transaction, means an
    30individual who is a settlor in relation to a relevant
    settlement (as defined in sub-paragraph (5));

  • “settlement” has the same meaning as in Chapter 5 of Part 5
    of ITTOIA 2005 (see section 620 of that Act).

(5) Where a person, in the capacity of trustee of a settlement, is
35connected with a person who is the purchaser under a land
transaction, that settlement is a “relevant settlement” in relation to
the transaction.

(6) In sub-paragraph (5) “trustee” is to be read in accordance with
section 1123(3) of CTA 2010 (“connected” persons:
40supplementary).

(7) Section 1122 of CTA 2010 (connected persons) has effect for the
purposes of this paragraph, but for those purposes, subsections (7)
and (8) of that section (application of rules about connected
persons to partnerships) are to be disregarded.

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Part 2 Co-ownership authorised contractual schemes
COACS seeding relief

10 (1) A land transaction is exempt from charge if conditions A to D are
5met.

Relief under this paragraph is referred to in this Part of this Act as
“COACS seeding relief”.

(2) Condition A is that the purchaser is a co-ownership authorised
contractual scheme (see section 102A).

(3) 10Condition B is that the main subject-matter of the transaction
consists of a major interest in land.

(4) Condition C is that the only consideration for the transaction is the
issue of units in the co-ownership authorised contractual scheme
to a person who is the vendor.

(5) 15Condition D is that the effective date of the transaction is a day
within the seeding period (see paragraph 11).

(6) This paragraph is subject to paragraph 12 (restrictions on
availability of relief) and paragraphs 13, 14, 16, 17 and 18
(withdrawal of relief).

20Meaning of “seeding period”

11 (1) In this Part of this Schedule, subject to sub-paragraph (2), the
“seeding period” means—

(a) the period beginning with the first property seeding date
and ending with the date of the first external investment
25into the co-ownership authorised contractual scheme, or

(b) if shorter, the period of 18 months beginning with the first
property seeding date.

(2) The co-ownership authorised contractual scheme may elect to
bring the seeding period to an end sooner than it would otherwise
30end under sub-paragraph (1).

Where an election is made, the seeding period is the period
beginning with the first property seeding date and ending with
the date specified in the election.

(3) An election under sub-paragraph (2) may be made—

(a) 35by being included in a notice accompanying a claim for
COACS seeding relief (see section 65A), or

(b) by separate notice in writing to HMRC.

(4) In sub-paragraphs (1) and (2), “the first property seeding date”
means the earliest effective date of a transaction in respect of
40which conditions A to C in paragraph 10 are met.

(5) In this paragraph—

  • “external investment” means a non-land transaction in which
    the vendor is an external investor;

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  • “external investor” means a person other than a person who
    has been a vendor in a transaction—

    (a)

    the effective date of which is on or before the date of
    the non-land transaction, and

    (b)

    5in respect of which conditions A to C in paragraph 10
    are met;

  • “non-land transaction” means a transaction by which the
    scheme acquires assets which do not consist of or include
    a chargeable interest.

10Restrictions on availability of relief

12 (1) This paragraph restricts the availability of COACS seeding relief
for a transaction in respect of which conditions A to D in
paragraph 10 are met.

(2) COACS seeding relief is not available unless, at the effective date
15of the transaction, the arrangements constituting the co-
ownership authorised contractual scheme require a person who is
the vendor to notify the operator of the scheme of the following
matters—

(a) the identity of the beneficial owner of the units in the
20scheme received in consideration of the transaction, and

(b) any disposal of units in the scheme on or after the effective
date of that transaction by that owner (or, where that
person is a company, by a group company) which is or
could be a relevant disposal (see paragraph 17).

25In paragraph (b) “group company” means a company which is a
member of the same group of companies as the person mentioned
in paragraph (a) for the purposes mentioned in paragraph 1(2) of
Schedule 7 (group relief).

(3) COACS seeding relief is not available if at the effective date of the
30transaction there are arrangements in existence by virtue of which,
at that or some later time, a person who is the vendor makes or
could make a disposal of units in the co-ownership authorised
contractual scheme which is or could be a relevant disposal (see
paragraph 17).

(4) 35COACS seeding relief is not available if the transaction—

(a) is not effected for bona fide commercial reasons, or

(b) forms part of arrangements of which the main purpose, or
one of the main purposes, is the avoidance of liability to
tax.

40“Tax” here means stamp duty, income tax, corporation tax, capital
gains tax or tax under this Part.

Withdrawal of relief: ceasing to be co-ownership authorised contractual scheme

13 (1) Where COACS seeding relief has been allowed in respect of a
transaction (“the relevant transaction”), and the purchaser ceases
45to be a co-ownership authorised contractual scheme—

(a) at any time after the effective date of that transaction but
within the seeding period,