Finance Bill (HC Bill 47)

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Alteration of assessment of penalty

39 (1) After notification of an assessment has been given to a person under
paragraph 38(2), the assessment may not be altered except in accordance
with this paragraph or on appeal.

(2) 5A supplementary assessment may be made in respect of a penalty if an
earlier assessment operated by reference to an underestimate of the value of
the counteracted advantage.

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

10Aggregate penalties

40 (1) The amount of a penalty for which a person is liable under paragraph 30 is
to be reduced by the amount of any other penalty incurred by the person, or
any surcharge for late payment of tax imposed on the person, if the amount
of the penalty or surcharge is determined by reference to the same tax
15liability.

(2) In sub-paragraph (1) “any other penalty” does not include a penalty under
section 212A of FA 2013 (GAAR penalty) or Part 4 of FA 2014 (penalty where
corrective action not taken after follower notice etc).

(3) In the application of section 97A of TMA 1970 (multiple penalties) no
20account shall be taken of a penalty under paragraph 30.

Appeal against penalty

41 (1) A person may appeal against a decision of HMRC that a penalty is payable
under paragraph 30.

(2) A person may appeal against a decision of HMRC as to the amount of a
25penalty payable by P under paragraph 30.

(3) An appeal under this paragraph must be made within the period of 30 days
beginning with the day on which notification of the penalty is given under
paragraph 38.

(4) An appeal under this paragraph is to be treated in the same way as an appeal
30against an assessment to the tax concerned (including by the application of
any provision about bringing the appeal by notice to HMRC, about HMRC’s
review of the decision or about determination of the appeal by the First-tier
Tribunal or Upper Tribunal).

(5) Sub-paragraph (4) does not apply—

(a) 35so as to require a person to pay a penalty before an appeal against the
assessment of the penalty is determined, or

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

(6) On an appeal under sub-paragraph (1) or (2) the tribunal may—

(a) affirm HMRC’s decision, or

(b) 40substitute for HMRC’s decision another decision that HMRC has
power to make.

(7) In this paragraph “tribunal” means the First-tier Tribunal or Upper Tribunal
(as appropriate by virtue of sub-paragraph (4)).

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Penalties: reasonable excuse

42 (1) A person is not liable to a penalty under paragraph 30 in respect of a relevant
defeat if the person satisfies HMRC or (on appeal) the First-tier Tribunal or
Upper Tribunal that the person had a reasonable excuse for the relevant
5failure to which that relevant defeat relates (see paragraph 43).

(2) Sub-paragraph (3) applies if—

(a) a person has incurred a relevant defeat in respect of which the person
is liable to a penalty under paragraph 30, and

(b) before incurring that defeat the person had been given, or become
10liable to be given, an excepted warning notice.

(3) The person is treated for the purposes of sub-paragraphs (2) to (4) of
paragraph 30 (rate of penalty) as not having been given, and not having
become liable to be given, the excepted notice (so far as it relates to the
relevant defeat in respect of which the person had a reasonable excuse).

(4) 15A warning notice is “excepted” for the purposes of this paragraph if the
person was not liable to a penalty in respect of the defeat specified in it
because the person had a reasonable excuse for the relevant failure in
question.

(5) For the purposes of this paragraph, in the case of a person (“P”)—

(a) 20an insufficiency of funds is not a reasonable excuse unless
attributable to events outside P’s control,

(b) where P relies on another person to do anything, that is not a
reasonable excuse unless P took reasonable care to avoid the relevant
failure, and

(c) 25where P had a reasonable excuse for the relevant failure but the
excuse had ceased, P is to be treated as having continued to have the
excuse if the failure is remedied without unreasonable delay after the
excuse ceased.

(6) In determining for the purposes of this paragraph whether or not a person
30(“P”) had a reasonable excuse for any action, failure or inaccuracy, reliance
on advice is to be taken automatically not to constitute a reasonable excuse
if the advice is addressed to, or was given to, a person other than P or takes
no account of P’s individual circumstances.

Paragraph 42: meaning of “the relevant failure”

43 (1) 35In paragraph 42 “the relevant failure”, in relation to a relevant defeat, is to be
interpreted in accordance with sub-paragraphs (2) to (7).

(2) In relation to a relevant defeat incurred by virtue of Condition A, “the
relevant failure” means the failures or inaccuracies as a result of which the
counteraction under section 209 of FA 2013 was necessary

(3) 40In relation to a relevant defeat incurred by virtue of Condition B, “the
relevant failure” means the failures or inaccuracies in respect of which the
action mentioned in paragraph 13(1) was taken.

(4) In relation to a relevant defeat incurred by virtue of Condition C, “the
relevant failure” means the failures of inaccuracies as a result of which the
45adjustments, assessments, or other action mentioned in paragraph 14(5) are
required.

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(5) In relation to a relevant defeat incurred by virtue of Condition D, “the
relevant failure” means the failures or inaccuracies as a result of which the
adjustments, assessments or other action mentioned in paragraph 15(5) are
required.

(6) 5In relation to a relevant defeat incurred by virtue of Condition E, “the
relevant failure” means P’s actions (and failures to act), so far as they are
connected with matters in respect of which the counteraction mentioned in
paragraph 16(1) is required.

(7) In sub-paragraph (6) “counteraction” is to be interpreted in accordance with
10paragraph 16(2).

Mitigation of penalties

44 (1) The Commissioners may in their discretion mitigate a penalty under
paragraph 30, or stay or compound any proceedings for such a penalty.

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

15Part 6 Corporate groups, associated persons and partnerships

Representative member of a VAT group

45 (1) Where a body corporate (“R”) is the representative member of a group (and
accordingly is treated for the purposes of this Schedule as mentioned in
20section 43(1) of VATA 1994), anything which has been done by or in relation
to another body corporate (“B”) in B’s capacity as representative member of
that group is treated for the purposes of this Schedule as having been done
by or in relation to R in R’s capacity as representative member of the group.

(2) This Schedule has effect as if the representative member of a group, so far as
25acting in its capacity as such, were a different person from that body
corporate so far as acting in any other capacity.

(3) In this paragraph the reference to a “group” is to be interpreted in
accordance with sections 43A to 43D of VATA 1994.

Corporate groups

46 (1) 30Sub-paragraphs (2) and (3) apply if HMRC has a duty under paragraph 2 to
give a warning notice to a company (“C”) which is a member of a group.

(2) That duty has effect as a duty to give a warning notice to each current group
member (see sub-paragraph (8)).

(3) Any warning notice which has been given (or is treated as having been
35given) previously to any current group member is treated as having been
given to each current group member (and any provision in this Schedule
which refers to a “warning period” in relation to a person is to be interpreted
accordingly).

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(4) In relation to a company which incurs a relevant defeat, paragraph 19(1)
(duty to give relief restriction notice) does not have effect unless the warning
period mentioned in that sub-paragraph would be a warning period in
relation to the company regardless of sub-paragraph (3).

(5) 5A company which incurs a relevant defeat is not liable to pay a penalty
under paragraph 30 unless the warning period mentioned in sub-paragraph
(1) of that paragraph would be a warning period in relation to the company
regardless of sub-paragraph (3).

(6) HMRC may discharge any duty to give a warning notice to a current group
10member in accordance with sub-paragraph (2) by delivering the notice to C
(and if it does so may combine one or more warning notices in a single
notice).

(7) If a company ceases to be a member of a group, and—

(a) immediately before it ceases to be a member of the group, a warning
15period has effect in relation to the company, but

(b) no warning period would have effect in relation to the company at
that time but for sub-paragraph (2) or (3),

that warning period ceases to have effect in relation to the company when it
ceases to be a member of that group.

(8) 20In this paragraph “current group member” means a company which is a
member of the group concerned at the time when the warning notice
mentioned in sub-paragraph (1) is given.

(9) For the purposes of this paragraph two companies are members of the same
group of companies if—

(a) 25one is a 75% subsidiary of the other, or

(b) both are 75% subsidiaries of a third company.

(10) In this paragraph “75% subsidiary” has the meaning given by section 1154 of
CTA 2010.

(11) In this paragraph “company” has the same meaning as in the Corporation
30Tax Acts (see section 1121 of CTA 2010).

Associated persons treated as incurring relevant defeats

47 (1) Sub-paragraph (2) applies if a person (“P”) incurs a relevant defeat in
relation to any arrangements (otherwise than by virtue of this paragraph).

(2) Any person (“S”) who is associated with P at the relevant time is also treated
35for the purposes of paragraphs 2 (duty to give warning notice) and 3(2)
(warning period) as having incurred that relevant defeat in relation to those
arrangements (but see sub-paragraph (3)).

(3) Sub-paragraph (2) does not apply if P and S are members of the same group
of companies (as defined in paragraph 46(9)).

(4) 40In relation to a warning notice given to S by virtue of sub-paragraph (2),
paragraph 2(4)(c) (certain information to be included in warning notice) is to
be read as referring only to paragraphs 3, 17 and 18.

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(5) A warning notice which is given to a person by virtue of sub-paragraph (2)
is treated for the purposes of paragraphs 19(1) (duty to give relief restriction
notice) and 30 (penalty) as not having been given to that person.

(6) In sub-paragraph (2) “the relevant time” means the time when P is given a
5warning notice in respect of the relevant defeat.

Meaning of “associated”

48 (1) For the purposes of paragraph 47 two persons are associated with one
another if—

(a) one of them is a body corporate which is controlled by the other, or

(b) 10they are bodies corporate under common control.

(2) Two bodies corporate are under common control if both are controlled—

(a) by one person,

(b) by two or more, but fewer than six, individuals, or

(c) by any number of individuals carrying on business in partnership.

(3) 15For the purposes of this section a body corporate (“H”) is taken to control
another body corporate (“B”) if—

(a) H is empowered by statute to control B’s activities, or

(b) H is B’s holding company within the meaning of section 1159 of and
Schedule 6 to the Companies Act 2006.

(4) 20For the purposes of this section an individual or individuals are taken to
control a body corporate (“B”) if the individual or individuals, were they a
body corporate, would be B’s holding company within the meaning of those
provisions.

Partners treated as incurring relevant defeats

49 (1) 25Where paragraph 50 applies in relation to a partnership return, each relevant
partner is treated for the purposes of this Part of this Act as having incurred
the relevant defeat mentioned in paragraph 50(1)(b), (2) or (3)(b) (as the case
may be).

(2) In this paragraph “relevant partner” means any person who was a partner in
30the partnership at any time during the relevant reporting period (but see
sub-paragraph (3)).

(3) The “relevant partners” do not include—

(a) the person mentioned in sub-paragraph (1)(b), (2) or (3)(b) (as the
case may be) of paragraph 50, or

(b) 35any other person who would, apart from this paragraph, incur a
relevant defeat in connection with the subject matter of the
partnership return mentioned in sub-paragraph (1).

(4) In this paragraph the “relevant reporting period” means the period in
respect of which the partnership return mentioned in sub-paragraph (1), (2)
40or (3) of paragraph 50 was required.

Partnership returns to which this paragraph applies

50 (1) This paragraph applies in relation to a partnership return if—

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(a) that return has been made on the basis that a tax advantage arises to
a partner from any arrangements, and

(b) that person has incurred, in relation to that tax advantage and those
arrangements, a relevant defeat by virtue of Condition A (final
5counteraction of tax advantage under general anti-abuse rule).

(2) Where a person has incurred a relevant defeat by virtue of sub-paragraph (2)
of paragraph 13 (Condition B: case involving partnership follower notice)
this paragraph applies in relation to the partnership return mentioned in
that sub-paragraph.

(3) 10This paragraph applies in relation to a partnership return if—

(a) that return has been made on the basis that a tax advantage arises to
a partner from any arrangements, and

(b) that person has incurred, in relation to that tax advantage and those
arrangements, a relevant defeat by virtue of Condition C (return,
15claim or election made in reliance on DOTAS arrangements).

(4) The references in this paragraph to a relevant defeat do not include a
relevant defeat incurred by virtue of paragraph 47(2).

Partnerships: information

51 (1) If paragraph 50 applies in relation to a partnership return, the appropriate
20partner must give HMRC a written notice (a “partnership information
notice”) in respect of each sub-period in the information period.

(2) The “information period” is the period of 5 years beginning with the day
after the day of the relevant defeat mentioned in paragraph 50.

(3) If, in the case of a partnership, a new information period (relating to another
25partnership return) begins during an existing information period, those
periods are treated for the purposes of this paragraph as a single period
(which includes all times that would otherwise fall within either period).

(4) An information period under this paragraph ends if the partnership ceases.

(5) A partnership information notice must be given not later than the 30th day
30after the end of the sub-period to which it relates.

(6) A partnership information notice must state—

(a) whether or not any relevant partnership return which was, or was
required to be, delivered in the sub-period has been made on the
basis that a relevant tax advantage arises, and

(b) 35whether or not there has been a failure to deliver a relevant
partnership return in the sub-period.

(7) In this paragraph—

(a) “relevant partnership return” means a partnership return in respect
of the partnership’s trade, profession or business;

(b) 40“relevant tax advantage” means a tax advantage which particular
DOTAS arrangements enable, or might be expected to enable, a
person who is or has been a partner in the partnership to obtain.

(8) If a partnership information notice states that a relevant partnership return
has been made on the basis mentioned in sub-paragraph (6)(a) the notice
45must—

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(a) explain (on the assumptions made for the purposes of the return)
how the DOTAS arrangements enable the tax advantage concerned
to be obtained, and

(b) describe any variation in the amounts required to be stated in the
5return under section 12AB(1) of TMA 1970 which results from those
arrangements.

(9) HMRC may require the appropriate partner to give HMRC a notice (a
“supplementary information notice”) setting out further information in
relation to a partnership information notice.

(10) 10A requirement under sub-paragraph (9) must be made by a written notice
and the notice must state the period within which the notice must be
complied with.

(11) If a person fails to comply with a requirement of (or imposed under) this
paragraph, HMRC may by written notice extend the information period
15concerned to the end of the period of 5 years beginning with—

(a) the day by which the partnership information notice or
supplementary information notice was required to be given to
HMRC or, as the case requires,

(b) the day on which the person gave the defective notice to HMRC,

20or, if earlier, the time when the information period would have expired but
for the extension.

(12) For the purposes of this paragraph—

(a) the first sub-period in an information period begins with the first day
of the information period and ends with a day specified by HMRC,

(b) 25the remainder of the information period is divided into further sub-
periods each of which begins immediately after the end of the
preceding sub-period and is twelve months long or (if that would be
shorter) ends at the end of the information period.

(13) In this paragraph “the appropriate partner” means the partner in the
30partnership who is for the time being nominated by HMRC for the purposes
of this paragraph.

Partnerships: special provision about taxpayer emendations

52 (1) Sub-paragraph (2) applies if a partnership return is amended at any time
under section 12ABA of TMA 1970 (amendment of partnership return by
35representative partner etc) on a basis that—

(a) results in an increase or decrease in, or

(b) otherwise affects the calculation of,

any amount stated under subsection (1)(b) of section 12AB of that Act
(partnership statement) as a partner’s share of any income, loss,
40consideration, tax or credit for any period.

(2) For the purposes of paragraph 14 (Condition C: counteraction of DOTAS
arrangements), the partner is treated as having at that time amended—

(a) the partner’s return under section 8 or 8A of TMA 1970, or

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(b) the partner’s company tax return,

so as to give effect to the amendments of the partnership return.

(3) Sub-paragraph (4) applies if a partnership return is amended at any time by
HMRC as a result of a disclosure made by the representative partner or that
5person’s successor on a basis that—

(a) results in an increase or decrease in, or

(b) otherwise affects the calculation of,

any amount stated under subsection (1)(b) of section 12AB of TMA 1970
(partnership statement) as the share of a particular partner (P) of any
10income, loss, consideration, tax or credit for any period.

(4) If the conditions in sub-paragraph (5) are met, P is treated for the purposes
of paragraph 14 as having at that time amended—

(a) P’s return under section 8 or 8A of TMA 1970, or

(b) P’s company tax return,

15so as to give effect to the amendments of the partnership return.

(5) The conditions are that the disclosure—

(a) is a full and explicit disclosure of an inaccuracy in the partnership
return, and

(b) was made at a time when neither the person making the disclosure
20nor P had reason to believe that HMRC was about to begin enquiries
into the partnership return.

Supplementary provision relating to partnerships

53 (1) In paragraphs 49 to 52 and this paragraph—

  • “partnership” is to be interpreted in accordance with section 12AA of
    25TMA 1970 (and includes a limited liability partnership);

  • “the representative partner”, in relation to a partnership return, means
    the person who was required by a notice served under or for the
    purposes of section 12AA(2) or (3) of TMA 1970 to deliver the return;

  • “successor”, in relation to a person who is the representative partner in
    30the case of a partnership return, has the same meaning as in TMA
    1970 (see section 118(1) of that Act).

(2) For the purposes of this Part of this Act a partnership is treated as the same
partnership notwithstanding a change in membership if any person who
was a member before the change remains a member after the change.

35Part 7 Supplemental

Meaning of “adjustments”

54 (1) In this Schedule “adjustments” means any adjustments, whether by way of
an assessment, the modification of an assessment or return, amendment or
40disallowance of a claim, a payment, 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).

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(2) “Adjustments” also includes a payment in respect of a liability to pay
national insurance contributions.

Time of “use” of defeated arrangements

55 (1) With reference to a particular relevant defeat incurred by a person in relation
5to arrangements, the person is treated as having “used” the arrangements on
the dates set out in this paragraph.

(2) If the person incurs the relevant defeat by virtue of Condition A, the person
is treated as having “used” the arrangements on the following dates—

(a) the filing date of any return made by the person on the basis that the
10tax advantage mentioned in paragraph 12(1)(a) arises from the
arrangements;

(b) the date on which the person makes any claim or election on that
basis;

(c) the date of any relevant failure by the person to comply with an
15obligation.

(3) For the purposes of sub-paragraph (2) a failure to comply with an obligation
is a “relevant failure” if the whole or part of the tax advantage mentioned in
paragraph 12(1)(b) arose as a result of, or in connection with, that failure.

(4) If the person incurs the relevant defeat by virtue of Condition B, the person
20is treated as having “used” the arrangements on the following dates—

(a) the filing date of any return made by the person on the basis that the
asserted advantage (see section 204(3) of FA 2014) results from the
arrangements,

(b) the date on which any claim is made by the person on that basis,

(c) 25the date of any failure by the person to comply with a relevant
obligation.

In this sub-paragraph “relevant obligation” means an obligation which
would not have fallen on the person (or might have been expected not to do
so), had the denied advantage arisen (see section 208(3) of FA 2014).

(5) 30If the person incurs the relevant defeat by virtue of Condition C, the person
is treated as having “used” the arrangements on the following dates—

(a) the filing date of any return made by the person on the basis
mentioned in paragraph 14(2)(a);

(b) the date on which the person makes any claim or election on that
35basis;

(c) the date of any failure by the person to comply with a relevant
obligation (as defined in paragraph 14(4)).

(6) If the person incurs the relevant defeat by virtue of Condition D, the person
is treated as having “used” the arrangements on the following dates—

(a) 40the filing date of any return made by the person on the basis
mentioned in paragraph 15(2)(a);

(b) the date on which the person makes any claim on that basis;

(c) the date of any failure by the person to comply with a relevant
obligation (as defined in paragraph 15(4)).

(7) 45If the person incurs the relevant defeat by virtue of Condition E, the person
is treated as having “used” the arrangements on the following dates—

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(a) the filing date of any return made by S to which the counteraction
mentioned in paragraph 16(1)(c) relates;

(b) the date on which S made any claim to which that counteraction
relates;

(c) 5the date of any relevant failure by S to which that counteraction
relates.

(8) In sub-paragraph (7) “relevant failure” means a failure to comply with an
obligation relating to VAT.

(9) In this paragraph “filing date”, in relation to a return, means the earlier of—

(a) 10the day on which the return is delivered, or

(b) the last day of the period within which the return must be delivered.

(10) References in this paragraph to the date on which a person fails to comply
with an obligation are to the date on which the person is first in breach of the
obligation.

15Inheritance tax

56 (1) In the case of inheritance tax, each of the following is treated as a return for
the purposes of this Schedule—

(a) an account delivered by a person under section 216 or 217 of IHTA
1984 (including an account delivered in accordance with regulations
20under section 256 of that Act);

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

(c) information or a document provided by a person in accordance with
25regulations under section 256 of that Act;

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

(2) In this Schedule (except where the context requires otherwise) “assessment”,
in relation to inheritance tax, includes a determination.

National insurance contributions

57 (1) 30In this Schedule references to an assessment to tax include a NICs decision
relating to a person’s liability for relevant contributions.

(2) In this Schedule a reference to a provision of Part 7 of FA 2004 (disclosure of
tax avoidance schemes) (a “DOTAS provision”) includes a reference to—

(a) that DOTAS provision as applied by regulations under section 132A
35of the Social Security Administration Act 1992 (disclosure of
contributions avoidance arrangements);

(b) any provision of regulations under that section that corresponds to
that DOTAS provision,

whenever the regulations are made.

(3) 40Regulations under section 132A of that Act may disapply, or modify the
effect of, sub-paragraph (2).

(4) In this paragraph “NICs decision” means a decision under section 8 of the
Social Security Contributions (Transfer of Functions, etc) Act 1999 or Article
7 of the Social Security Contributions (Transfer of Functions, etc) (Northern
45Ireland) Order 1999 (S.I. 1999/671S.I. 1999/671).