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

(4) For the purposes of sub-paragraph (2) an obligation is a relevant
obligation if the arrangements might be expected to have the
result that the obligation does not arise.

(5) For the purposes of this paragraph the arrangements are
5“counteracted” if—

(a) adjustments, other than taxpayer emendations, are made
in respect of P’s tax position —

(i) on the basis that the whole or part of the relevant
tax advantage mentioned in sub-paragraph (2)(a)
10does not arise, or

(ii) on the basis that the disputed obligation does (or
did) arise, or

(b) an assessment to tax is made, or any other action is taken
by HMRC, on the basis mentioned in paragraph (a)(i) or
15(ii) (otherwise than by way of an adjustment).

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

(7) 20For the purposes of sub-paragraph (1) the time at which it falls to
be determined whether or not the arrangements are disclosable
indirect tax arrangements is when the counteraction becomes
final.

(8) The following are “taxpayer emendations” for the purposes of
25sub-paragraph (5)—

(a) an adjustment made by P at a time when P had no reason
to believe that HMRC had begun or were about to begin
enquiries into P’s affairs in relation to the tax in question;

(b) an adjustment made by HMRC with respect to P’s tax
30position (whether by way of an assessment or otherwise)
as a result of a disclosure by P which meets the conditions
in sub-paragraph (9).

(9) The conditions are that the disclosure—

(a) is a full and explicit disclosure of an inaccuracy in a return
35or other document or of a failure to comply with an
obligation, and

(b) was made at a time when P had no reason to believe that
HMRC were about to begin enquiries into P’s affairs in
relation to the tax in question.””

(11) 40In paragraph 17 (annual information notices)—

(a) in sub-paragraph (3)(a) for “or election,” insert “election, declaration
or application for approval,”,

(b) in sub-paragraphs (3)(b), (4) and (5)(a) for “DOTAS arrangements or
VAT” substitute “disclosable”,

(c) 45in sub-paragraph (5) for “or election” insert “election, declaration or
application for approval”, and

(d) after sub-paragraph (11) insert—

“(12) In this paragraph “disclosable arrangements” means any
of the following—

(a) DOTAS arrangements,

(b) 5disclosable VAT arrangements, and

(c) disclosable indirect tax arrangements.”

(12) In the heading before paragraph 28 (exclusion of VAT from Part 4 of
Schedule) after “VAT” insert “and indirect taxes”.

(13) In paragraph 28 after “VAT” insert “or any other indirect tax”.

(14) 10In paragraph 32 (value of counteracted advantage: basic rule for taxes other
than VAT)—

(a) in sub-paragraph (1) for “or C” substitute “C or F” and after
paragraph (c) insert “;

(d) in the case of a relevant defeat incurred by virtue of
15Condition F, the additional amount due or payable
in respect of tax as a result of the counteraction
mentioned in paragraph 16A(1)(d).”, and”

(b) in sub-paragraph (2)(b) for “or (c)” substitute “(c) or (d)”.

(15) In paragraph 35 (meaning of “the counteracted advantage” in paragraphs 33
20and 34) in sub-paragraph (1) after paragraph (c) insert “;

(d) in relation to a relevant defeat incurred by virtue of
Condition F, means any tax advantage in respect of which
the counteraction mentioned in paragraph 16A(1)(c) is
made.””

(16) 25In paragraph 43 (paragraph 42: meaning of “the relevant failure”) after sub-
paragraph (7) insert—

“(8) In relation to a relevant defeat incurred by virtue of Condition F,
“the relevant failure” means the failures or inaccuracies as a result
of which the adjustments, assessments, or other actions mentioned
30in paragraph 16A(5) are required.””

(17) In paragraph 55 (time of “use” of defeated arrangements) after sub-
paragraph (8) insert—

“(8A) If the person incurs the relevant defeat by virtue of Condition F,
the person is treated as having “used” the arrangements on the
35following dates—

(a) the filing date of any return made by the person on the
basis mentioned in paragraph 16A(2)(a);

(b) the date on which the person makes any claim, declaration
or application for approval;

(c) 40the date of any failure by the person to comply with a
relevant obligation (as defined in paragraph 16A(4)).””

(18) In paragraph 58(1) (interpretation)—

(a) after the definition of “contract settlement” insert—

• “““disclosable indirect tax arrangements” is to be
  45interpreted in accordance with paragraph 9A;

Finance (No. 2) BillPage 742

• “disclosable Schedule 11A VAT arrangements is to be
  interpreted in accordance with paragraph 9;”,”

(b) after the definition of “HMRC” insert—

• “““indirect tax” has the meaning given by paragraph
  54(2);”,”

(c) in the definition of “disclosable VAT arrangements” for “9”
substitute “8A”, and

(d) in the definition of “tax” for “4” substitute “4(1)”.

Part 4 10Supplemental

Regulations

56 (1) Any power of the Treasury or the Commissioners to make regulations under
this Schedule is exercisable by statutory instrument.

(2) Regulations made under any such power may make different provision for
15different cases and may contain transitional provisions and savings.

(3) A statutory instrument containing regulations made by the Treasury under
paragraph 2(2), 41(3) or 42(1) may not be made unless a draft of the
instrument has been laid before and approved by a resolution of the House
of Commons.

(4) 20Any other statutory instrument containing regulations made under this
Schedule, if made without a draft having been approved by a resolution of
the House of Commons, is subject to annulment in pursuance of a resolution
of the House of Commons.

Interpretation

57 25In this Schedule—

• “arrangements” includes any scheme, transaction or series of
  transactions;

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

• 30“company” has the meaning given by section 1121 of the Corporation
  Tax Act 2010;

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

• “indirect tax” has the meaning given by paragraph 2(1);

• “introducer” is to be construed in accordance with paragraph 9;

• 35“makes a firm approach” has the meaning given by paragraph 10(1);

• “makes a marketing contact” has the meaning given by paragraph
  10(2);

• “marketing contact” has the meaning give by paragraph 10(2);

• “notifiable arrangements” has the meaning given by paragraph 3(1);

• 40“notifiable proposal” has the meaning given by paragraph 3(3);

• “prescribed” (except in or in references to paragraph 3(1)(a)), means
  prescribed by regulations made by HMRC;

• “promoter” is to be construed in accordance with paragraph 8;

Finance (No. 2) BillPage 743

• “reference number”, in relation to notifiable arrangements, has the
  meaning given by paragraph 22(4);

• “TCEA 2007” means the Tribunals, Courts and Enforcement Act 2007;

• “tax advantage” means a tax advantage within the meaning of—

  (a)

  5paragraph 6 (in relation to VAT), or

  (b)

  paragraph 7 (in relation to indirect taxes other than VAT);

• “trade” includes every venture in the nature of a trade;

• “tribunal” means the First-tier tribunal, or where determined by or
  under Tribunal Procedure Rules, the Upper Tribunal;

• 10“working day” means a day which is not a Saturday or a Sunday,
  Christmas Day, Good Friday or a bank holiday under the Banking
  and Financial Dealings Act 1971 in any part of the United Kingdom.

Section 128

SCHEDULE 29 Requirement to correct certain offshore tax non-compliance

15Part 1 Liability for penalty for failure to correct

Failure to correct relevant offshore tax non-compliance

1 A penalty is payable by a person who—

(a) has any relevant offshore tax non-compliance to correct at the end of
20the tax year 2016-17, and

(b) fails to correct the relevant offshore tax non-compliance within the
period beginning with 6 April 2017 and ending with 30 September
2018 (referred to in this Schedule as “the RTC period”).

Main definitions: general

2 25Paragraphs 3 to 12 have effect for the purposes of this Schedule.

“Relevant offshore tax non-compliance”

3 (1) At the end of the 2016-17 tax year a person has “relevant offshore tax non-
compliance” to correct if—

(a) Conditions A and B are satisfied in respect of any offshore tax non-
30compliance committed by that person on or before 5 April 2017 (“the
original offshore tax non-compliance”), and

(b) Condition C will be satisfied on the relevant date (see paragraph 6).

(2) Where the original offshore tax non-compliance committed by a person has
been corrected in part by the end of the tax year 2016-17, the person’s
35“relevant offshore tax non-compliance” is the uncorrected part of the
original offshore tax non-compliance.

4 Condition A is that the original offshore tax non-compliance has not been
fully corrected before the end of the tax year 2016-17 (see paragraph 12).

5 Condition B is that—

(a) the original offshore tax non-compliance involved a potential loss of
revenue when it was committed, and

(b) if the original offshore tax non-compliance has been corrected in part
by the end of the tax year 2016-17, the uncorrected part at that time
5involved a potential loss of revenue.

6 (1) Condition C is that on the relevant date it is lawful, on the assumptions set
out in sub-paragraph (2), for HMRC to assess the person concerned to any
tax the liability to which would have been disclosed to or discovered by
HMRC if on that date—

(a) 10where none of the original offshore tax non-compliance was
corrected before the end of the 2016-17 tax year, HMRC were aware
of the information missing as a result of the failure to correct that tax
non-compliance, or

(b) where the original offshore tax non compliance was corrected in part
15before that time, HMRC were aware of the information missing as a
result of the failure to correct the rest of that tax non-compliance.

(2) The assumptions are—

(a) that paragraph 25 is to be disregarded, and

(b) where the tax at stake is inheritance tax, that the relevant offshore tax
20non-compliance is not corrected before the relevant date

(3) In this paragraph “the relevant date” is—

(a) where the tax at stake is income tax or capital gains tax, 6 April 2017,
and

(b) where the tax at stake is inheritance tax, the day after the day on
25which this Act is passed.

Tax non-compliance and offshore tax non-compliance

7 (1) “Offshore tax non-compliance” means tax non-compliance involving an
offshore matter or an offshore transfer (see paragraphs 8 to 10).

(2) “Tax non-compliance” means any of the following—

(a) 30a failure to comply on or before the filing date with an obligation
under section 7 of TMA 1970 to give notice of chargeability to income
tax or capital gains tax,

(b) a failure to comply on or before the filing date with an obligation to
deliver to HMRC a return or other document which is listed in sub-
35paragraph (4), or

(c) delivering to HMRC a return or other document which is listed in
sub-paragraph (4) or (5) and contains an inaccuracy which amounts
to, or leads to—

(i) an understatement of a liability to tax,

(ii) 40a false or inflated statement of a loss, or

(iii) a false or inflated claim to repayment of tax.

(3) In sub-paragraph (2)—

(a) “filing date”, in relation to a notice of chargeability or a return or
other document, means the date by which it is required to be given,
45made or delivered to HMRC,

(b) “loss” includes a charge, expense, deficit and any other amount
which may be available for, or relied on to claim, a deduction or
relief, and

(c) “repayment of tax” includes a reference to allowing a credit against
5tax.

(4) The documents relevant for the purposes of both of paragraphs (b) and (c)
of sub-paragraph (2) are (so far as they relate to the tax or taxes shown in the
first column)—

(5) The documents relevant for the purposes only of paragraph (c) of sub-
paragraph (2) are (so far as they relate to the tax or taxes shown in the first
column)—

“Involves an offshore matter and “involves an offshore transfer” etc

8 (1) This paragraph applies to any tax non-compliance consisting of a failure to
comply with an obligation under section 7 of TMA 1970 to notify
chargeability to income tax or capital gains tax.

(2) 30The tax non-compliance “involves an offshore matter” if the potential loss of
revenue is charged on or by reference to—

(a) income arising from a source in a territory outside the UK,

(b) assets situated or held in a territory outside the UK,

(c) activities carried on wholly or mainly in a territory outside the UK, or

(d) 35anything having effect as if it were income, assets or activities of a
kind described above.

(3) The tax non-compliance “involves an offshore transfer” if—

(a) it does not involve an offshore matter, and

(b) the applicable condition is satisfied (see sub-paragraphs (4) and (5)).

(4) 40Where the tax at stake is income tax the applicable condition is satisfied if the
income on or by reference to which tax is charged, or any part of the
income—

(a) was received in a territory outside the UK, or

(b) was transferred on or before 5 April 2017 to a territory outside the
45UK.

(5) Where the tax at stake is capital gains tax, the applicable condition is
satisfied if the proceeds of the disposal on or by reference to which the tax is
charged, or any part of the proceeds—

(a) were received in a territory outside the UK, or

(b) were transferred on or before 5 April 2017 to a territory outside the
UK.

(6) In the case of a transfer falling within sub-paragraph (4)(b) or (5)(b),
5references to the income or proceeds transferred are to be read as including
references to any assets derived from or representing the income or
proceeds.

(7) The tax non-compliance “involves an onshore matter” if it does not involve
an offshore matter or an offshore transfer.

(8) 10In this paragraph and paragraphs 9 and 10 “assets” has the meaning given
in section 21(1) of TCGA 1992, but also includes sterling.

9 (1) This paragraph applies where—

(a) any tax non-compliance by a person consists of a failure to comply
with an obligation to deliver a return or other document, and

(b) 15a complete and accurate return or other document would have
included information that would have enabled or assisted HMRC to
assess the person’s liability to tax.

(2) The tax non-compliance “involves an offshore matter” if the liability to tax
that would have been shown in the return or other document is or includes
20a liability to tax charged on or by reference to—

(a) income arising from a source in a territory outside the UK,

(b) assets situated or held in a territory outside the UK,

(c) activities carried on wholly or mainly in a territory outside the UK, or

(d) anything having effect as if it were income, assets or activities of a
25kind described above.

(3) Where the tax at stake is inheritance tax, assets are treated for the purposes
of sub-paragraph (2) as situated or held in a territory outside the UK if they
are so situated or held immediately after the transfer of value by reason of
which inheritance tax becomes chargeable.

(4) 30The tax non-compliance “involves an offshore transfer” if—

(a) it does not involve an offshore matter, and

(b) the applicable condition is satisfied in respect of the liability to tax
that would have been shown by the return or other document (see
sub-paragraphs (5) to (7)).

(5) 35Where the tax at stake is income tax the applicable condition is satisfied if the
income on or by reference to which tax is charged, or any part of the
income—

(a) was received in a territory outside the UK, or

(b) was transferred on or before 5 April 2017 to a territory outside the
40UK.

(6) Where the tax at stake is capital gains tax, the applicable condition is
satisfied if the proceeds of the disposal on or by reference to which the tax is
charged, or any part of the proceeds—

(a) was received in a territory outside the UK, or

(b) 45was transferred on or before 5 April 2017 to a territory outside the
UK.

(7) Where the liability to tax which would have been shown in the document is
a liability to inheritance tax, the applicable condition is satisfied if—

(a) the disposition that gives rise to the transfer of value by reason of
which the tax becomes chargeable involves a transfer of assets, and

(b) 5after that disposition but on or before 5 April 2017 the assets, or any
part of the assets, are transferred to a territory outside the UK.

(8) In the case of a transfer falling within sub-paragraph (5)(b), (6)(b) or (7)(b),
references to the income or proceeds transferred are to be read as including
references to any assets derived from or representing the income or
10proceeds.

(9) The tax non-compliance “involves an onshore matter” if it does not involve
an offshore matter or an offshore transfer.

10 (1) This paragraph applies to any tax non-compliance by a person if—

(a) the tax non-compliance consists of delivering or giving HMRC a
15return or other document which contains an inaccuracy, and

(b) the inaccuracy relates to information that would have enabled or
assisted HMRC to assess the person’s liability to tax.

(2) The tax non-compliance to which this paragraph applies “involves an
offshore matter” if the information that should have been given in the tax
20document relates to—

(a) income arising from a source in a territory outside the UK,

(b) assets situated or held in a territory outside the UK,

(c) activities carried on wholly or mainly in a territory outside the UK, or

(d) anything having effect as if it were income, assets or activities of a
25kind described above.

(3) Where the tax at stake is inheritance tax, assets are treated for the purposes
of sub-paragraph (2) as situated or held in a territory outside the UK if they
are so situated or held immediately after the transfer of value by reason of
which inheritance tax becomes chargeable.

(4) 30Tax non-compliance to which this paragraph applies “involves an offshore
transfer” if—

(a) it does not involve an offshore matter, and

(b) the applicable condition is satisfied in respect of the liability to tax
that would have been shown by the return or other document (see
35sub-paragraphs (5) to (7)).

(5) Where the tax at stake is income tax the applicable condition is satisfied if the
information that should have been given in the tax document relates to
income which—

(a) was received in a territory outside the UK, or

(b) 40was transferred on or before 5 April 2017 to a territory outside the
UK.

(6) Where the tax at stake is capital gains tax, the applicable condition is
satisfied if—

(a) the information that should have been given in the tax document
45relates to the proceeds of the disposal on or by reference to which the
tax is charged, and

(b) the proceeds, or any part of the proceeds—

(i) were received in a territory outside the UK, or

(ii) were transferred on or before 5 April 2017 to a territory
outside the UK.

(7) Where the tax at stake is inheritance tax, the applicable condition is satisfied
5if—

(a) the information that should have been given in the tax document
relates to the disposition that gives rise to the transfer of value by
reason of which the tax becomes payable relates to a transfer of
assets, and

(b) 10after that disposition but on or before 5 April 2017 the assets or any
part of the assets are transferred to a territory outside the UK.

(8) In the case of a transfer falling within sub-paragraph (5)(b), (6)(b) or (7)(b),
references to the income, proceeds or assets transferred are to be read as
including references to any assets derived from or representing the income,
15proceeds or assets.

(9) The tax non-compliance “involves an onshore matter” if it does not involve
an offshore matter or an offshore transfer.

“Tax”

11 (1) References to “tax” are (unless in the context the reference is more specific)
20to income tax, capital gains tax or inheritance tax.

(2) References to “capital gains tax” do not include capital gains tax payable by
companies in respect of chargeable gains accruing to them to the extent that
those gains are NRCGT gains in respect of which the companies are
chargeable to capital gains tax under section 14D or 188D of TCGA 1992 (see
25section 1(2A)(b) of that Act).

(3) In sub-paragraph (2) “company” has the same meaning as in TCGA 1992.

Correcting offshore tax non-compliance

12 (1) This paragraph sets out how offshore tax non-compliance may be corrected.

(2) References to the correction of offshore tax non-compliance of any
30description are to the taking of any action specified in this paragraph as a
means of correcting offshore tax non-compliance of that description.

(3) Offshore tax non-compliance consisting of a failure to notify chargeability
may be corrected by—

(a) giving the requisite notice to HMRC (unless before doing so the
35person has received a notice requiring the person to make and
deliver a tax return) and giving HMRC the relevant information by
any means mentioned in paragraph (b),

(b) giving HMRC the relevant information—

(i) by making and delivering a tax return,

(ii) 40using the digital disclosure service or any other service
provided by HMRC as a means of correcting tax non-
compliance,

(iii) communicating it to an officer of Revenue and Customs in
the course of an enquiry into the person’s tax affairs, or