Finance Bill (HC Bill 47)

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General interpretation

58 (1) In this Schedule—

  • “arrangements” has the meaning given by paragraph 2(6);

  • “the Commissioners” means the Commissioners for Her Majesty’s
    5Revenue and Customs;

  • “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;

  • “disclosable VAT arrangements” is to be interpreted in accordance with
    10paragraph 9;

  • “DOTAS arrangements” is to be interpreted in accordance with
    paragraph 8 (and see also paragraph 57(2));

  • “follower notice” has the meaning given by paragraph 13(6);

  • HMRC” means Her Majesty’s Revenue and Customs;

  • 15“national insurance contributions” means contributions under Part 1 of
    the Social Security Contributions and Benefits Act 1992 or Part 1 of
    the Social Security Contributions and Benefits (Northern Ireland)
    Act 1992;

  • “net income” has the meaning given by section 23 of ITA 2007 (see Step
    202 of that section);

  • “partnership follower notice” has the meaning given by paragraph 2(2)
    of Schedule 31 to FA 2014;

  • “partnership return” means a return under section 12AA of TMA 1970;

  • “relevant contributions” means the following contributions under Part
    251 of the Social Security Contributions and Benefits Act 1992 or Part 1
    of the Social Security Contributions and Benefits (Northern Ireland)
    Act 1992—

    (a)

    Class 1 contributions;

    (b)

    Class 1A contributions;

    (c)

    30Class 1B contributions;

    (d)

    Class 2 contributions which must be paid but in relation to
    which section 11A of the Act in question (application of
    certain provisions of the Income Tax Acts in relation to Class
    2 contributions under section 11(2) of that Act) does not
    35apply;

  • “relevant defeat” is to be interpreted in accordance with paragraph 11;

  • “tax” has the meaning given by paragraph 4;

  • “tax advantage” has the meaning given by paragraph 7;

  • “warning notice” has the meaning given by paragraph 2.

(2) 40In this Schedule an expression used in relation to VAT has the same meaning
as in VATA 1994.

(3) In this Schedule (except where the context requires otherwise) references,
however expressed, to a person’s affairs in relation to tax include the
person’s position as regards deductions or repayments of, or of sums
45representing, tax that the person is required to make by or under an
enactment.

(4) For the purposes of this Schedule a partnership return is regarded as made
on the basis that a particular tax advantage arises to a person from particular
arrangements if—

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(a) it is made on the basis that an increase or reduction in one or more of
the amounts mentioned in section 12AB(1) of TMA 1970 (amounts in
the partnership statement in a partnership return) results from those
arrangements, and

(b) 5that increase or reduction results in that tax advantage for the
person.

Consequential amendments

59 In section 103ZA of TMA 1970 (disapplication of sections 100 to 103 in the
case of certain penalties)—

(a) 10omit “or” at the end of paragraph (ga), and

(b) after paragraph (h) insert or

(i) Part 5 of Schedule 18 to the Finance Act 2016 (serial
avoiders regime).”

60 In section 212 of FA 2014 (follower notices: aggregate penalties), in
15subsection (4)—

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

(b) after paragraph (c) insert , or

(d) Part 5 of Schedule 18 to FA 2016 (serial avoiders
regime).”

61 (1) 20The Social Security Contributions and Benefits Act 1992 is amended as
follows.

(2) In section 11A (application of certain provisions of the Income Tax Acts in
relation to Class 2 contributions under section 11(2)), in subsection (1), at the
end of paragraph (e) insert—

(ea) 25the provisions of Schedule 18 to the Finance Act 2016 (serial
avoiders regime);”.

(3) In section 16 (application of Income Tax Acts and destination of Class 4
contributions), in subsection (1), at the end of paragraph (d) insert and

(e) the provisions of Schedule 18 to the Finance Act 2016 (serial
30avoiders regime),”.

62 In the Social Security Contributions and Benefits (Northern Ireland) Act
1992, in section 11A (application of certain provisions of the Income Tax Acts
in relation to Class 2 contributions under section 11(2)), in subsection (1), at
the end of paragraph (e) insert—

(ea) 35the provisions of Schedule 18 to the Finance Act 2016 (serial
avoiders regime);”.

Commencement

63 Subject to paragraphs 64 and 65, paragraphs 1 to 62 of this Schedule have
effect in relation to relevant defeats incurred after the day on which this Act
40is passed.

64 (1) A relevant defeat is to be disregarded for the purposes of this Schedule if it
is incurred before 6 April 2017 in relation to arrangements which the person
has entered into before the day on which this Act is passed.

(2) A relevant defeat incurred on or after 6 April 2017 is to be disregarded for
45the purposes of this Schedule if—

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(a) the person entered into the arrangements concerned before the day
on which this Act is passed, and

(b) before 6 April 2017—

(i) the person incurring the defeat fully discloses to HMRC the
5matters to which the relevant counteraction relates, or

(ii) that person gives HMRC notice of a firm intention to make a
full disclosure of those matters and makes such a full
disclosure within any time limit set by HMRC.

(3) In sub-paragraph (2) “the relevant counteraction” means—

(a) 10in a case within Condition A, the counteraction mentioned in
paragraph 12(1)(c);

(b) in a case within Condition B, the action mentioned in paragraph
13(1);

(c) in a case within Condition C, the counteraction mentioned in
15paragraph 14(1)(c);

(d) in a case within Condition D, the counteraction mentioned in
paragraph 15(1)(d);

(e) in a case within Condition E, the counteraction mentioned in
paragraph 16(1)(c).

(4) 20In sub-paragraph (3)—

(a) in paragraph (c) “counteraction” is to be interpreted in accordance
with paragraph 14(5);

(b) in paragraph (d) “counteraction” is to be interpreted in accordance
with paragraph 15(5);

(c) 25in paragraph (e) “counteraction” is to be interpreted in accordance
with paragraph 16(2).

(5) See paragraph 11(2) for provision about when a relevant defeat is incurred.

65 (1) A warning notice given to a person is to be disregarded for the purposes of—

(a) paragraph 18 (naming), and

(b) 30Part 4 of this Schedule (restriction of reliefs),

if the relevant defeat specified in the notice relates to arrangements which
the person has entered into before the day on which this Act is passed.

(2) Where a person has entered into any arrangements before the day on which
this Act is passed—

(a) 35a relevant defeat incurred by a person in relation to the
arrangements, and

(b) any warning notice specifying such a relevant defeat,

is to be disregarded for the purposes of paragraph 30 (penalty).

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SCHEDULE 19 Section 160 Large businesses: tax strategies and sanctions

Part 1 Interpretation

5Purpose of Part 1

1 This Part defines terms for the purposes of this Schedule.

“Relevant body”

2 (1) “Relevant body” means a UK company or any other body corporate
(wherever incorporated), but does not include a limited liability partnership.

(2) 10A relevant body is a “foreign” relevant body (or member of a group or sub-
group) if it is incorporated outside the United Kingdom.

UK company”

3 (1) UK company” means a company which is (or is treated as if it is) formed
and registered under the Companies Act 2006, unless it falls within sub-
15paragraph (2).

(2) The term “UK company” does not include a company which is—

(a) an open-ended investment company within the meaning of section
613 of CTA 2010, or

(b) an investment trust within the meaning of section 1158 of CTA 2010.

20UK permanent establishment”

4 (1) UK permanent establishment” means a permanent establishment in the
United Kingdom of a foreign relevant body.

(2) In sub-paragraph (1) “permanent establishment” has the same meaning as it
has for the purposes of the Corporation Tax Acts (see section 1141 to 1144 of
25CTA 2010).

“Qualifying company”

5 (1) A UK company is a “qualifying company” in any financial year (subject to
any regulations under sub-paragraph (5)) if sub-paragraph (2) or (3) applies
to it.

(2) 30This sub-paragraph applies to the company if, at the end of the previous
financial year—

(a) it satisfied the qualification test for a UK company, and

(b) was not a member of a UK group or a UK sub-group.

(3) This sub-paragraph applies to the company if, at the end of the previous
35financial year—

(a) it was a member of a foreign group,

(b) the group met the qualification test for a group, and

(c) it was not a member of a UK sub-group of that foreign group.

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(4) The qualification test for a UK company is that the company satisfied either
or both of the following conditions (by reference to the previous financial
year)—

1. The company’s turnover More than £200 million
2. The company’s balance
sheet total
5More than £2 billion.

(5) The Treasury may by regulations provide that a company of a description
specified in the regulations is not a qualifying company for the purposes of
this Schedule (or any such purpose specified in the regulations).

(6) 10For the purposes of this paragraph a UK permanent establishment of a
foreign relevant body is to be treated as if it were—

(a) a UK company, and

(b) if the foreign relevant body is a member of a UK group or a UK sub-
group, a member of that group or sub-group.

15“Group” and related expressions

6 (1) “Group” means two or more relevant bodies which together constitute—

(a) an MNE Group (see paragraph 7), or

(b) a group other than an MNE group (see paragraph 8).

(2) UK group” means a group whose head is a relevant body incorporated in
20the United Kingdom.

(3) “Foreign group” means a group whose head is a foreign relevant body.

(4) For the purposes of sub-paragraphs (2) and (3) it is immaterial where other
members of the group are incorporated.

7 (1) “MNE Group” has the same meaning (subject to sub-paragraph (2) below)
25as in the OECD Model Legislation in the OECD Country-by-Country
Reporting Implementation Package as contained in the OECD’s Guidance
on Transfer Pricing Documentation and Country-by-Country Reporting
published in 2014.

(2) Paragraph (ii) (excluded MNE Group) of the Implementation Package is not
30part of the definition applied by sub-paragraph (1) above for the purposes of
this Schedule.

(3) In sub-paragraph (1) “OECD” means the Organisation for Economic Co-
operation and Development.

8 (1) A “group other than an MNE group” means a group consisting of two or
35more relevant bodies—

(a) each of which is a member of the group by virtue of sub-paragraph
(3) or (4),

(b) at least two of which are UK companies,

which is not an MNE Group.

(2) 40For the purposes of the condition in sub-paragraph (1)(b) a UK permanent
establishment of a foreign member of a group is to be treated as if it were a
UK company and a member of the group.

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(3) A relevant body is a member of a group if—

(a) another relevant body is its 51% subsidiary, or

(b) it is a 51% subsidiary of another relevant body.

(4) Two relevant bodies are members of the same group if—

(a) 5one is a 51% subsidiary of the other, or

(b) both are 51% subsidiaries of another relevant body.

(5) Chapter 3 of Part 24 of CTA 2010 (meaning of 51% subsidiary) applies for the
purposes of this Schedule as it applies for the purposes of the Corporation
Tax Acts (but with the modification in sub-paragraph (6)).

(6) 10It applies as if references to a body corporate were references to a relevant
body.

9 A group is headed by whichever relevant body within the group is not a 51%
subsidiary of another relevant body within the group (and “head”, in
relation to the group, means that body).

15“Qualifying group”

10 (1) A group is a “qualifying group” in any financial year if, at the end of the
previous financial year—

(a) in the case of a group other than an MNE Group, the group satisfied
the qualification test for such a group (subject to any regulations
20under sub-paragraph (6)), or

(b) in the case of an MNE Group—

(i) there was a mandatory reporting requirement in respect of
the group under regulations made under section 122 of FA
2015 (country-by-country reporting), or

(ii) 25there would have been such a requirement if the head of the
group were resident in the United Kingdom for tax purposes.

(2) The qualification test for a group other than an MNE Group is that the group
satisfied either or both of the following conditions (by reference to the
previous financial year)—

1. Group turnover 30More than £200 million
2. Group balance
sheet total
More than £2 billion.

(3) In sub-paragraph (2)—

(a) “group turnover” means the aggregate turnover of the UK
35companies that are members of the group at the end of the previous
financial year, and

(b) “group balance sheet total”, means the aggregate balance sheet totals
for all those UK companies.

(4) Where the financial year of a UK company within in the group does not end
40on the same day as the previous financial year of the head of the group, the
figures from the company that are to be included in the aggregate figures are
those for the company’s financial year ending last before the end of the
previous financial year of the head of the group.

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(5) For the purposes of assessing the turnover or balance sheet total of the
group, sub-paragraphs (3) and (4) apply as if a UK permanent establishment
of a foreign member of the group were a UK company and a member of the
group.

(6) 5The Treasury may by regulations provide—

(a) that a group other than an MNE Group which is of a specified
description is not a qualifying group for the purposes, or any
specified purpose, of this Schedule, or

(b) that a relevant body, or a UK permanent establishment, of a specified
10description is to be disregarded in determining whether the
qualification test is satisfied by a group other than an MNE Group;

and in this sub-paragraph “specified” means specified in the regulations.

(7) In this paragraph “financial year”, in relation to a group, means a financial
year of the head of the group.

15UK sub-group” and “head” (in relation to a UK sub-group)

11 (1) A “UK sub-group” consists of two or more relevant bodies that would be a
UK group, but for the fact that they are members of a larger group headed
by a relevant body incorporated outside the United Kingdom.

(2) A UK sub-group is headed by the company or other relevant body
20incorporated in the United Kingdom that is not a 51% subsidiary of another
member of the UK sub-group (and “head”, in relation to the sub-group,
means that company or body).

UK partnership”, “qualifying partnership” and “representative partner”

12 (1) UK partnership” means a body of any of the following descriptions which
25is carrying on a trade, business or profession with a view to profit—

(a) a partnership within the meaning of the Partnership Act 1890,

(b) a limited partnership registered under the Limited Partnerships Act
1907, or

(c) a limited liability partnership incorporated in the United Kingdom.

(2) 30A UK partnership is a “qualifying partnership” in a financial year, if it
satisfied the qualification test for a UK partnership at the end of the previous
financial year (subject to any regulations under sub-paragraph (4)).

(3) The qualification test for a UK partnership is that the partnership satisfied
either or both of the following conditions (by reference to the previous
35financial year)—

1. The partnership’s
turnover
More than £200 million
2. The partnership’s
balance sheet total
More than £2 billion.

(4) 40The Treasury may by regulations provide that a UK partnership of a
description specified in the regulations is not a qualifying partnership for

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the purposes of this Schedule (or any such purpose specified in the
regulations).

(5) “Representative partner”, in relation to a UK partnership, means the partner
who is required by a notice served under or by virtue of section 12AA(2) or
5(3) of TMA 1970 to make and deliver returns to an officer of HMRC.

“Financial year”

13 “Financial year”—

(a) in relation to a UK company, has the meaning given by the
Companies Act 2006 (see section 390 of that Act),

(b) 10in relation to any other relevant body, means any period in respect of
which a profit and loss account for the body’s undertaking is
required to be made up (whether by its constitution or by the law
under which it is established), whether that period is a year or not,

(c) in relation to a UK partnership, means any period of account for
15which its representative partner has provided or is required to
provide a partnership statement under a return issued under section
12AB TMA 1970.

“Turnover” and “balance sheet total”

14 (1) “Turnover”—

(a) 20in relation to a UK company, has the same meaning as in Part 15 of
the Companies Act 2006 (see section 474 of that Act), and

(b) in relation to a UK partnership or a UK permanent establishment,
has a corresponding meaning.

(2) “Balance sheet total”, in relation to a UK company, UK partnership or UK
25permanent establishment and a financial year, means the aggregate of the
amounts shown as assets in its balance sheet at the end of the financial year.

UK taxation”

15 (1) UK taxation” means —

(a) income tax,

(b) 30corporation tax, including any amount assessable or chargeable as if
it were corporation tax or treated as if it were corporation tax,

(c) value added tax,

(d) amounts for which the company is accountable under PAYE
regulations,

(e) 35diverted profits tax,

(f) insurance premium tax,

(g) annual tax on enveloped dwellings,

(h) stamp duty land tax,

(i) stamp duty reserve tax,

(j) 40petroleum revenue tax;

(k) customs duties,

(l) excise duties,

(m) national insurance contributions.

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(2) In relation to a tax strategy required to be published by Part 2, “UK taxation”
refers to the taxes or duties mentioned above so far as relating to or affecting
the bodies or body to which the required tax strategy relates.

Part 2 5Publication of tax strategies

Qualifying UK groups: duty to publish a group tax strategy

16 (1) This paragraph applies in relation to a UK group which is a qualifying group
in any financial year (“the current financial year”).

(2) The head of the group must ensure that a group tax strategy for the group,
10containing the information required by paragraph 17, is prepared and
published on behalf of the group in accordance with this paragraph.

(3) The group tax strategy—

(a) must be published before the end of the current financial year, and

(b) if the group was a qualifying group in the previous financial year,
15must not be published more than 15 months after the day on which
its previous group tax strategy was published.

(4) The group tax strategy—

(a) must be published on the internet by any of the UK companies that
are members of the group so as to be accessible to the public free of
20charge (whether or not it is also published in any other way), and

(b) may be published as a separate document or as a self-contained part
of a wider document.

(5) The head of the group must ensure that the group tax strategy published on
the internet remains accessible to the public free of charge—

(a) 25if a group tax strategy for the group’s next financial year is required
by this paragraph to be published, until that tax strategy is
published, or

(b) if paragraph (a) does not apply, for at least one year.

(6) For the purposes of this paragraph—

(a) 30a group tax strategy is published when it is first published on the
internet as mentioned in paragraph (4)(a),

(b) the identity of the group is not to be regarded as altered by any
change in its membership during the current financial year resulting
from a relevant body—

(i) 35becoming a 51% subsidiary of a member of the group, or

(ii) ceasing to be a 51% subsidiary of another member of the
group; and

(c) if the group becomes a UK sub-group of a foreign group during the
current financial year, it is to be treated for the rest of that year as if
40it were still a UK group.

(7) In this paragraph and paragraph 17 “financial year”, in relation to a UK
group, means a financial year of the head of the group.

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Content of group tax strategy

17 (1) A group tax strategy required to be published on behalf of a UK group by
paragraph 16 must set out—

(a) the approach of the group to risk management and governance
5arrangements in relation to UK taxation,

(b) the attitude of the group towards tax planning (so far as affecting UK
taxation),

(c) the level of risk in relation to UK taxation that the group is prepared
to accept, and

(d) 10the approach of the group towards its dealings with HMRC.

(2) The group tax strategy may—

(a) include other information relating to taxation (whether UK taxation
or otherwise), and

(b) deal with a matter mentioned in sub-paragraph (1) by reference to
15the group as a whole or to individual members of the group (or to
both).

(3) The information required by sub-paragraph (1) to be included in the group
tax strategy does not include any information about activities of any
member of the group that consists of the provision of tax advice or related
20professional services to persons who are not members of the group.

(4) The publication of information as the group tax strategy does not constitute
publication of the strategy for the purposes of paragraph 16 unless the UK
company publishing it makes clear (in a way that will be readily apparent to
anyone accessing the information online) that the company regards its
25publication as complying with the duty under paragraph 16(2) in the current
financial year.

(5) For the purposes of this paragraph a UK permanent establishment of a
foreign member of the group is to be treated as if it were a member of the
group.

30Penalty for non-compliance with paragraph 16

18 (1) This paragraph applies where paragraph 16 requires a group tax strategy to
be published for a UK group in any financial year of the head of the UK
group.

(2) The head of the group is liable to a penalty of £7,500 if—

(a) 35there is a failure to publish a group tax strategy for the group that
complies with paragraph 16(2), or

(b) where a group tax strategy has been published, there is a failure to
comply with paragraph 16(5).

(3) Subject to sub-paragraph (5) the head of the group is only liable to one
40penalty by virtue of sub-paragraph (2) in respect of a group tax strategy
required for the financial year in question.

(4) Sub-paragraph (5) applies where—

(a) the head of the group is liable to a penalty under this paragraph in
respect of a failure mentioned in sub-paragraph (2)(a), and

(b) 45no group tax strategy for the group that complies with paragraph
16(2) (disregarding paragraph 16(3)) is published within the period