Finance (No. 2) Bill (HL Bill 156)

(a) for “closure notice” substitute “partial or final closure notice”;

(b) for “either” substitute “state the officer’s conclusions and”.

(4) In subsections (3) and (4), for “closure notice” substitute “partial or final
closure notice”.

(5) 5In subsection (6), for “a closure notice” substitute “the partial or final closure
notice”.

(6) After subsection (6) insert—

“(7) In this section “the taxpayer” means the person to whom notice of
enquiry was given.

(8) 10In the Taxes Acts, references to a closure notice under this section are
to a partial or final closure notice under this section.””

13 (1) Section 28B (completion of enquiry into partnership return) is amended as
follows.

(2) For subsection (1) substitute—

“(1) 15This section applies in relation to an enquiry under section 12AC of
this Act.

(1A) Any matter to which the enquiry relates is completed when an officer
of Revenue and Customs informs the taxpayer by notice (a “partial
closure notice”) that the officer has completed his enquiries into that
20matter.

(1B) The enquiry is completed when an officer of Revenue and Customs
informs the taxpayer by notice (a “final closure notice”)—

(a) in a case where no partial closure notice has been given, that
the officer has completed his enquiries, or

(b) 25in a case where one or more partial closure notices have been
given, that the officer has completed his remaining
enquiries.””

(3) In subsection (2)—

(a) for “closure notice” substitute “partial or final closure notice”;

(b) 30for “either” substitute “state the officer’s conclusions and”.

(4) In subsections (3) and (5), for “closure notice” substitute “partial or final
closure notice”.

(5) In subsection (7), for “a closure notice” substitute “the partial or final closure
notice”.

(6) 35After subsection (7) insert—

“(8) In this section “the taxpayer” means the person to whom notice of
enquiry was given or his successor.

(9) In the Taxes Acts, references to a closure notice under this section are
to a partial or final closure notice under this section.””

14 40In section 29 (assessment where loss of tax discovered), in subsection (5), for
paragraph (b) substitute—

“(b) in a case where a notice of enquiry into the return was
given—

(i) issued a partial closure notice as regards a matter to
which the situation mentioned in subsection (1) above
relates, or

(ii) if no such partial closure notice was issued, issued a
5final closure notice,”.”

15 In section 29A (NRCGT disposals: determination of amount which should
have been assessed), in subsection (5), for paragraph (b) substitute—

“(b) in a case where a notice of enquiry into the return was
given—

(i) 10issued a partial closure notice as regards a matter to
which the situation mentioned in subsection (1)
relates, or

(ii) if no such partial closure notice was issued, issued a
final closure notice,”.”

16 15In section 30 (recovery of overpayment of tax etc), in subsection (5)(b), for
“28A(1)” substitute “28A(1B)”.

17 In section 30B (amendment of partnership statement where loss of tax
discovered), in subsection (6), for paragraph (b) substitute—

“(b) in a case where a notice of enquiry into that return was
20given—

(i) issued a partial closure notice as regards a matter to
which the situation mentioned in subsection (1) above
relates, or

(ii) if no such partial closure notice was issued, issued a
25final closure notice,”.”

18 In section 31 (appeals: right of appeal), in subsection (2)—

(a) after “in progress” insert “in relation to any matter to which the
amendment relates or which is affected by the amendment”;

(b) for “the enquiry is completed” substitute “a partial closure notice is
30issued in relation to the matter or, if no such notice is issued, a final
closure notice is issued”.

19 In section 59AA (NRCGT disposals: payments on account of CGT), in
subsection (8)(a), for “28A(1)” substitute “28A(1B)”.

20 In section 59B (payment of income tax and capital gains tax), in subsection
35(4A)(a), for “28A(1)” substitute “28A(1B)”.

21 (1) In Schedule 3ZA (date by which payment to be made after amendment etc
of self-assessment), paragraph 2 is amended as follows.

(2) In sub-paragraph (3)(b)—

(a) for the first “the closure notice” substitute “a partial or final closure
40notice”;

(b) for “the day on which the closure notice was given” substitute “the
relevant day”.

(3) After sub-paragraph (3) insert—

“(4) In sub-paragraph (3)(b), “the relevant day” means—

(a) 45in the case of an amount of tax that is payable, the day on
which the partial or final closure notice was given;

(b) in the case of an amount of tax that is repayable—

(i) if the closure notice was a final closure notice, the
day on which that notice was given, and

(ii) if the closure notice was a partial closure notice, the
5day on which the final closure notice relating to the
enquiry was given.””

TCGA 1992

22 (1) Section 184I of TCGA 1992 (notices under sections 184G and 184H) is
amended as follows.

(2) 10In subsection (4)—

(a) after “completed” insert “in relation to any matters”;

(b) after “relevant notice” insert “relating to those matters”.

(3) In subsection (5), for “into the return” substitute “referred to in subsection
(4)”.

(4) 15In subsection (7)(a), after “period” insert “(so far as relating to the matters in
question)”.

(5) After subsection (9) insert—

“(9A) Subsection (9) does not apply to a partial closure notice which does
not relate to any matter to which the relevant notice relates.””

(6) 20In subsection (10), after “completed,” insert “so far as relating to the matters
to which the relevant notice relates,”.

FA 1998

23 Schedule 18 to FA 1998 (company tax returns, assessments and related
matters) is amended as follows.

24 (1) 25Paragraph 30 (amendment of self-assessment during enquiry to prevent loss
of tax) is amended as follows.

(2) In sub-paragraph (1)—

(a) for “before the enquiry is completed” substitute “while the enquiry is
in progress in relation to a matter”;

(b) 30after “deficiency” insert “so far as it relates to the matter”.

(3) After sub-paragraph (5) insert—

“(6) For the purposes of this paragraph, the period during which an
enquiry is in progress in relation to any matter is the whole of the
period—

(a) 35beginning with the day on which notice of enquiry is
given, and

(b) ending with the day on which a partial closure notice is
issued in relation to the matter or, if no such notice is
issued, a final closure notice is issued.””

25 (1) 40Paragraph 31 (amendment of return by company during enquiry) is
amended as follows.

(2) In sub-paragraph (1), for “is in progress into the return” substitute “into the
return is in progress in relation to any matter to which the amendment
relates or which is affected by the amendment”.

(3) In sub-paragraph (3) for “until after the enquiry is completed” substitute
5“while the enquiry is in progress in relation to any matter to which the
amendment relates or which is affected by the amendment”.

(4) In sub-paragraph (4)(a)—

(a) for “the closure notice” substitute “a partial or final closure notice”;

(b) for “on the completion of the enquiry” substitute “when a partial
10closure notice is issued in relation to the matters to which the
amendment relates or which are affected by the amendment or, if no
such notice is issued, a final closure notice is issued”.

(5) In sub-paragraph (5)—

(a) after “in progress” insert “in relation to any matter”;

(b) 15for “the enquiry is completed” substitute “a partial closure notice is
issued in relation to the matter or, if no such notice is issued, a final
closure notice is issued”.

26 (1) Paragraph 31A (referral of questions to the tribunal during enquiry) is
amended as follows.

(2) 20In sub-paragraph (1), for “into” substitute “in relation to any matter relating
to”.

(3) In sub-paragraph (5)—

(a) after “in progress” insert “in relation to any matter”;

(b) for “the enquiry is completed” substitute “a partial closure notice is
25issued in relation to the matter or, if no such notice is issued, a final
closure notice is issued”.

27 In paragraph 31C (effect of referral on enquiry), in sub-paragraph (1)—

(a) for paragraph (a) substitute—

“(a) no partial closure notice relating to the question
30referred shall be given,

(aa) no final closure notice shall be given in relation to the
enquiry, and”;”

(b) in paragraph (b), for “such a notice” substitute “a notice referred to
in paragraph (a) or (aa)”.

28 (1) 35Paragraph 32 (completion of enquiry) is amended as follows.

(2) For sub-paragraph (1) substitute—

“(1) Any matter to which an enquiry relates is completed when an
officer of Revenue and Customs informs the company by notice (a
“partial closure notice”) that they have completed their enquiries
40into that matter.

(1A) An enquiry is completed when an officer of Revenue and Customs
informs the company by notice (a “final closure notice”)—

(a) in a case where no partial closure notice has been given,
that they have completed their enquiries, or

(b) in a case where one or more partial closure notices have
been given, that they have completed their remaining
enquiries.

(1B) A partial or final closure notice takes effect when it is issued.””

(3) 5In subsection (2), after “concludes” insert “in a partial or final closure notice”.

(4) After sub-paragraph (3) insert—

“(4) In the Taxes Acts, references to a closure notice under this
paragraph are to a partial or final closure notice under this
paragraph.””

29 10In paragraph 33 (direction to complete enquiry), in sub-paragraphs (1) and
(3), for “closure notice” substitute “partial or final closure notice”.

30 (1) Paragraph 34 (amendment of return after enquiry) is amended as follows.

(2) In sub-paragraph (1), for “closure notice” substitute “partial or final closure
notice”.

(3) 15In sub-paragraph (2)—

(a) for “closure notice” substitute “partial or final closure notice”;

(b) after “must” insert “state the officer’s conclusions and”.

(4) In sub-paragraphs (2A), (4)(c) and (5), for “closure notice” substitute “partial
or final closure notice”.

31 20In paragraph 42 (restriction on power to make discovery assessment or
determination), in sub-paragraph (2A), for the words from “after any” to the
end substitute “a notice within sub-paragraph (4) after any enquiries have
been completed into the return (so far as relating to the matters to which the
notice relates)”.

32 25In paragraph 44 (situation not disclosed by return or related document etc),
in sub-paragraph (1), for paragraph (b) substitute—

“(b) in a case where a notice of enquiry into the return was
given—

(i) issued a partial closure notice as regards a matter to
30which the situation mentioned in paragraph 41(1) or
(2) relates, or

(ii) if no such partial closure notice was issued, issued a
final closure notice,”.”

33 In paragraph 61 (consequential claims etc), in sub-paragraphs (1)(a) and
35(3)(a), for “closure notice” substitute “partial or final closure notice”.

34 (1) Paragraph 88 (conclusiveness) is amended as follows.

(2) In sub-paragraph (3)(b), at the end insert “(or is completed so far as relating
to the matters to which the amount relates by the issue of a partial closure
notice)”.

(3) 40In sub-paragraph (4)(b), at the end insert “(or the completion of the enquiry
so far as relating to the matters to which the amount relates by the issue of a
partial closure notice)”.

Tax Credits Act 2002

35 (1) Section 20 of the Tax Credits Act 2002 (decisions on discovery) is amended
as follows.

(2) In subsection (2)(f), for “a closure notice” substitute “a partial or final closure
5notice”.

(3) In subsection (3)(b), at the end insert “as specified in subsection (1)”.

FA 2008

36 In Schedule 36 to FA 2008 (information and inspection powers), in
paragraphs 21(4) and 21ZA(3), at the end insert “so far as relating to the
10matters to which the taxpayer notice relates”.

TIOPA 2010

37 TIOPA 2010 is amended as follows.

38 (1) Section 92 (counteraction notices given after tax return made) is amended as
follows.

(2) 15In subsection (3)—

(a) after “completed” insert “in relation to any matters”;

(b) after “counteraction notice” insert “relating to those matters”.

(3) In subsection (4), after “enquiries” insert “referred to in subsection (3)”.

(4) In subsection (5)(a), after “return” insert “(so far as relating to the matters in
20question)”.

39 (1) Section 93 (amendment, closure notices and discovery assessments in
section 92 cases) is amended as follows.

(2) After subsection (3) insert—

“(3A) Subsection (3) does not apply to a partial closure notice which does
25not relate to any matter to which the counteraction notice relates.””

(3) In subsection (4), after “completed,” insert “so far as relating to the matters
to which the counteraction notice relates,”.

40 In section 171 (tax returns where transfer pricing notice given), after
subsection (2) insert—

“(2A) 30Subsection (2) does not apply to a partial closure notice which does
not relate to any matter to which the transfer pricing notice relates.””

41 (1) Section 256 (notices given after tax return made), so far as continuing to have
effect, is amended as follows.

(2) In subsection (2)—

(a) 35after “completed” insert “in relation to any matters”;

(b) after “receipt notice” insert “relating to those matters”.

(3)
In subsection (6)(a), after “return” insert “(so far as relating to the matters in
question)”.

42 (1) Section 257 (amendments, closure notices etc), so far as continuing to have
effect, is amended as follows.

(2) After subsection (4) insert—

“(4A) Subsection (4) does not apply to a partial closure notice which does
5not relate to any matter to which the Part 6 notice relates.””

(3) In subsection (5), after “completed,” insert “so far as relating to the matters
to which the Part 6 notice relates,”.

43 In section 371IJ (claims), in subsection (4)(b), after “completed” insert “so far
as relating to the matters to which the claim relates”.

10Commencement

44 The amendments made by this Schedule have effect in relation to an enquiry
under section 9A, 12ZM or 12AC of TMA 1970 or Schedule 18 to FA 1998
where—

(a) notice of the enquiry is given on or after the day on which this Act is
15passed, or

(b) the enquiry is in progress immediately before that day.

Section 125

SCHEDULE 27 Penalties for enablers of defeated tax avoidance

Part 1 20Liability to penalty

1 Where—

(a) a person (“T”) has entered into abusive tax arrangements, and

(b) T incurs a defeat in respect of the arrangements,

a penalty is payable by each person who enabled the arrangements.

2 (1) 25Parts 2 to 4 of this Schedule define—

• “abusive tax arrangements”;

• a “defeat in respect of the arrangements”;

• a “person who enabled the arrangements”.

(2) The other Parts of this Schedule make provision supplementing paragraph
301 as follows—

(a) Part 5 makes provision about the amount of a penalty;

(b) Parts 6 to 8 provide for the assessment of penalties, referrals to the
GAAR Advisory Panel and appeals against assessments;

(c) Part 9 applies information and inspection powers, and makes
35provision about declarations relating to legally privileged
communications;

(d) Part 10 confers power to publish details of persons who have
incurred penalties;

(e) Parts 11 and 12 contain miscellaneous and general provisions.

Part 2 “Abusive” and “tax arrangements”: meaning

3 (1) Arrangements are “tax arrangements” for the purposes of this Schedule if,
having regard to all the circumstances, it would be reasonable to conclude
5that the obtaining of a tax advantage was the main purpose, or one of the
main purposes, of the arrangements.

(2) Tax arrangements are “abusive” for the purposes of this Schedule if they are
arrangements the entering into or carrying out of which cannot reasonably
be regarded as a reasonable course of action in relation to the relevant tax
10provisions, having regard to all the circumstances.

(3) The circumstances to which regard must be had under sub-paragraph (2)
include—

(a) whether the substantive results, or the intended substantive results,
of the arrangements are consistent with any principles on which the
15relevant tax provisions are based (whether express or implied) and
the policy objectives of those provisions,

(b) whether the means of achieving those results involves one or more
contrived or abnormal steps, and

(c) whether the arrangements are intended to exploit any shortcomings
20in those provisions.

(4) Where the tax arrangements form part of any other arrangements regard
must also be had to those other arrangements.

(5) Each of the following is an example of something which might indicate that
tax arrangements are abusive—

(a) 25the arrangements result in an amount of income, profits or gains for
tax purposes that is significantly less than the amount for economic
purposes;

(b) the arrangements result in deductions or losses of an amount for tax
purposes that is significantly greater than the amount for economic
30purposes;

(c) the arrangements result in a claim for the repayment or crediting of
tax (including foreign tax) that has not been, and is unlikely to be,
paid;

but a result mentioned in paragraph (a), (b) or (c) is to be taken to be such an
35example only if it is reasonable to assume that such a result was not the
anticipated result when the relevant tax provisions were enacted.

(6) The fact that tax arrangements accord with established practice, and HMRC
had, at the time the arrangements were entered into, indicated their
acceptance of that practice, is an example of something which might indicate
40that the arrangements are not abusive.

(7) The examples given in sub-paragraphs (5) and (6) are not exhaustive.

(8) In sub-paragraph (5) the reference to income includes earnings, within the
meaning of Part 1 of the Social Security Contributions and Benefits Act 1992
or Part 1 of the Social Security Contributions and Benefits (Northern Ireland)
45Act 1992.

Part 3 “Defeat” in respect of abusive tax arrangements

“Defeat” in respect of abusive tax arrangements

4 T (within the meaning of paragraph 1) incurs a “defeat” in respect of abusive
5tax arrangements entered into by T (“the arrangements concerned”) if—

(a) Condition A (in paragraph 5) is met, or

(b) Condition B (in paragraph 6) is met.

Condition A

5 (1) Condition A is that—

(a) 10T, or a person on behalf of T, has given HMRC a document of a kind
listed in the Table in paragraph 1 of Schedule 24 to FA 2007 (returns
etc),

(b) the document was submitted on the basis that a tax advantage (“the
relevant tax advantage”) arose from the arrangements concerned,

(c) 15the relevant tax advantage has been counteracted, and

(d) the counteraction is final.

(2) For the purposes of this paragraph the relevant tax advantage has been
“counteracted” if adjustments have been made in respect of T’s tax position
on the basis that the whole or part of the relevant tax advantage does not
20arise.

(3) For the purposes of this paragraph a counteraction is “final” when the
adjustments in question, and any amounts arising from the adjustments, can
no longer be varied, on appeal or otherwise.

(4) In this paragraph “adjustments” means any adjustments, whether by way of
25an assessment, the modification of an assessment or return, the amendment
or disallowance of a claim, a payment, the entering into of a contract
settlement or otherwise.

Accordingly, references to “making” adjustments include securing that
adjustments are made by entering into a contract settlement.

(5) 30Any reference in this paragraph to giving HMRC a document includes—

(a) communicating information to HMRC in any form and by any
method;

(b) making a statement or declaration in a document.

(6)
Any reference in this paragraph to a document of a kind listed in the Table
35in paragraph 1 of Schedule 24 to FA 2007 includes—

(a) a document amending a document of a kind so listed, and

(b) a document which—

(i) relates to national insurance contributions, and

(ii) is a document in relation to which that Schedule applies.

40Condition B

6 (1) Condition B is that (in a case not falling within Condition A)—

(a) HMRC have made an assessment in relation to tax,

(b) the assessment counteracts a tax advantage that it is reasonable to
assume T expected to obtain from the arrangements concerned (“the
expected tax advantage”), and

(c) the counteraction is final.

(2) 5For the purposes of this paragraph an assessment “counteracts” the expected
tax advantage if the assessment is on a basis which prevents T from
obtaining (or obtaining the whole of) the expected tax advantage.

(3) For the purposes of this paragraph a counteraction is “final”—

(a) when a relevant contract settlement is made, or

(b) 10if no contract settlement has been made, when the assessment in
question and any amounts arising from the assessment can no longer
be varied, on appeal or otherwise.

(4) In sub-paragraph (3) a “relevant contract settlement” means a contract
settlement on a basis which prevents T from obtaining (or obtaining the
15whole of) the expected tax advantage.

Part 4 Persons who “enabled” the arrangements

Persons who “enabled” the arrangements

7 (1) A person is a person who “enabled” the arrangements mentioned in
20paragraph 1 if that person is—

(a) a designer of the arrangements (see paragraph 8),

(b) a manager of the arrangements (see paragraph 9),

(c) a person who marketed the arrangements to T (see paragraph 10),

(d) an enabling participant in the arrangements (see paragraph 11), or

(e) 25a financial enabler in relation to the arrangements (see paragraph
12).

(2) This paragraph is subject to paragraph 13 (excluded persons).

Designers of arrangements

8 (1) For the purposes of paragraph 7 a person is a “designer” of the arrangements
30if that person was, in the course of a business carried on by that person, to
any extent responsible for the design of—

(a) the arrangements, or

(b) a proposal which was implemented by the arrangements;

but this is subject to sub-paragraph (2).

(2) 35Where a person would (in the absence of this sub-paragraph) fall within sub-
paragraph (1) because of having provided advice which was used in the
design of the arrangements or of a proposal, that person does not because of
that advice fall within that sub-paragraph unless—

(a) the advice is relevant advice, and

(b) 40the knowledge condition is met.

(3) Advice is “relevant advice” if—

(a) the advice or any part of it suggests arrangements or an alteration of
proposed arrangements, and