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

262AB Co-ownership schemes: election

(1) The operator of a co-ownership authorised contractual scheme may
make an election under this section.

(2) The election must specify an accounting period of the scheme as the
5first accounting period in relation to which the election has effect.

(3) That first accounting period must not—

(a) be longer than 12 months, or

(b) begin before 1 April 2017.

(4)
The election has effect for that first accounting period and all
10subsequent accounting periods of the scheme.

(5) The election is irrevocable.

(6) The election is made by notice to an officer of Revenue and Customs.

262AC Co-ownership schemes: calculation of allowance after election

(1) This section applies where an election under section 262AB has effect
15for an accounting period of a co-ownership authorised contractual
scheme (“the relevant period”).

(2) The operator of the scheme is to calculate the allowances that would be
available to the scheme under this Part in relation to the relevant period
on the basis of the assumptions in subsection (3).

(3) 20The assumptions are—

(a) the scheme is a person;

(b) the relevant period is a chargeable period for the purposes of
this Act;

(c) any qualifying activity carried on by the participants in the
25scheme together is carried on by the scheme;

(d) property which was subject to the scheme at the beginning of
the first accounting period for which the election has effect—

(i) ceased to be owned by the participants at that time, and

(ii) was acquired by the scheme at that time;

(e) 30the disposal value to be brought into account in relation to the
cessation of ownership and the acquisition referred to in
paragraph (d) is the tax written-down value;

(f) any property which became subject to the scheme at a time
during an accounting period for which the election has effect
35was acquired by the scheme at that time;

(g) property which ceased to be subject to the scheme at any such
time ceased to be owned by the scheme at that time;

(h) the disposal value to be brought into account in relation to the
cessation of ownership referred to in paragraph (g) is the tax
40written-down value;

(i) the scheme is not entitled to a first-year allowance or an annual
investment allowance in respect of any expenditure.

(4) The operator of the co-ownership authorised contractual scheme must
allocate to each participant in the scheme a proportion (which may be
45zero) of the allowances calculated under this section.

(5) The allocation is to be on the basis of what is just and reasonable.

(6) In determining what is just and reasonable—

(a) regard is to be had in particular to the relative size of each
participant’s holding of units in the scheme;

(b) 5no regard is to be had to—

(i) whether or to what extent a participant is liable to
income tax or corporation tax, or

(ii) any other circumstances relating to a participant’s
liability to tax.

(7) 10If the participants in the scheme together carry on more than one
qualifying activity, the calculation and allocation under this section are
to be made separately for each activity.

(8) The proportion of an allowance allocated by the operator to a
participant under this section for a qualifying activity is the total
15amount of the allowance available to the participant under this Part in
relation to the relevant period by virtue of carrying on that activity as a
participant in the scheme.

(9) In this section “tax written-down value”, in relation to any cessation of
ownership or acquisition, means such amount as would give rise to
20neither a balancing allowance nor a balancing charge.

(10) For the purposes of subsection (9) assume that expenditure to which
the disposal value relates is in its own pool.

(11) For the purposes of subsections (3)(c) and (9), assume that profits or
gains arising to all participants from the qualifying activity are, or (if
25there were any) would be, chargeable to tax.

262AD Co-ownership schemes: effect of election for participants

(1) This section has effect where an election under section 262AB is made
by the operator of a co-ownership authorised contractual scheme.

(2) For the purposes of sections 61(1) and 196(1) (disposal events and
30values)—

(a) a participant in the scheme is to be regarded as ceasing to own
the participant’s interest in the property subject to the scheme
at the beginning of the first accounting period of the scheme for
which the election has effect, and

(b) 35the disposal value to be brought into account in relation to that
cessation of ownership is the tax written-down value.

(3) In subsection (2)(b) “tax written-down value” means such amount as
would give rise to neither a balancing allowance nor a balancing
charge.

(4) 40For the purposes of subsection (3) assume that—

(a) expenditure to which the disposal value relates is in its own
pool;

(b) profits or gains arising to all participants from the qualifying
activity are, or (if there were any) would be, chargeable to tax.

262AE Co-ownership schemes: effect of election for purchasers

(1) This section has effect where—

(a) an election under section 262AB is made by the operator of a co-
ownership authorised contractual scheme,

(b) 5property consisting of a fixture ceased to be subject to the
scheme at any time in an accounting period for which the
election has effect,

(c) in a calculation made by the operator of the scheme under
section 262AC(2) the assumption in section 262A(3)(g) was
10made in relation to that fixture, and

(d) a person (“the current owner”) is treated as the owner of the
fixture as a result of incurring capital expenditure on its
provision (“the new expenditure”).

(2) In determining the current owner’s qualifying expenditure—

(a) 15if the disposal value statement requirement is not satisfied, the
new expenditure is to be treated as nil, and

(b) in any other case, any amount of the new expenditure which
exceeds the assumed disposal value is to be left out of account
(or, if such an amount has already been taken into account, is to
20be treated as an amount that should never have been taken into
account).

(3) The disposal value statement requirement is that—

(a) the operator of the scheme has, no later than 2 years after the
date when the fixture ceased to be property subject to the
25scheme, made a written statement of the assumed disposal
value, and

(b) the current owner has obtained that statement or a copy of it
(directly or indirectly) from the operator of the scheme.

(4) Sections 185 (fixture on which a plant and machinery allowance has
30been claimed) and 187A (effect of changes in ownership of fixture) do
not apply in relation to the new expenditure.

(5) In this section “assumed disposal value” means the disposal value that,
in making the calculation referred to in subsection (1)(c), was assumed
to be brought into account pursuant to section 262AC(3)(h).

262AF 35 Co-ownership schemes: definitions relating to schemes

In sections 262AA to 262AE and this section—

• “co-ownership authorised contractual scheme” means a co-
  ownership scheme which is authorised for the purposes of the
  Financial Services and Markets Act 2000 by an authorisation
  40order in force under section 261D(1) of that Act;

• “co-ownership scheme” has the same meaning as in Part 17 of that
  Act (see section 235A(2) of that Act);

• “operator” and “units”, in relation to a co-ownership authorised
  contractual scheme, have the meanings given by section 237(2)
  45of that Act;

• “participant”, in relation to such a scheme, is to be read in
  accordance with section 235 of that Act.””

55 Co-ownership authorised contractual schemes: information requirements

(1) The Treasury may by regulations impose requirements on the operator of a co-
ownership authorised contractual scheme in relation to—

(a) the provision of information to participants in the scheme;

(b) 5the provision of information to Her Majesty’s Revenue and Customs.

(2)
Regulations under subsection (1)(a) may be made only for the purpose of
enabling participants in a co-ownership authorised contractual scheme to meet
their tax obligations in the United Kingdom with respect to their interests in the
scheme.

(3) 10Regulations under subsection (1)(b) may in particular require the provision of
information about—

(a) who the participants in the scheme were in any accounting period of
the scheme;

(b) the number and classes of units in the scheme in any such period;

(c) 15the amount of income per unit of any class in any such period;

(d) what information has been provided to participants.

(4) Regulations under this section may specify—

(a) the time when information is to be provided;

(b) the form and manner in which information is to be provided.

(5) 20Regulations under this section may make provision for the imposition of
penalties in respect of contravention of, or non-compliance with, the
regulations, including provision—

(a) for Her Majesty’s Revenue and Customs to exercise a discretion as to
the amount of a penalty, and

(b) 25about appeals in relation to the imposition of a penalty.

(6) Regulations under this section may in particular be framed by reference to an
accounting period of a co-ownership authorised contractual scheme beginning
on or after 1 April 2017.

(7) Regulations under this section may contain consequential, supplementary and
30transitional provision.

(8) Regulations under this section must be made by statutory instrument.

(9) A statutory instrument containing regulations under this section is subject to
annulment in pursuance of a resolution of the House of Commons.

(10) In this section—

• 35“co-ownership authorised contractual scheme” means a co-ownership
  scheme which is authorised for the purposes of the Financial Services
  and Markets Act 2000 by an authorisation order in force under section
  261D(1) of that Act;

• “co-ownership scheme” has the same meaning as in Part 17 of that Act
  40(see section 235A(2) of that Act);

• “operator” and “units”, in relation to a co-ownership authorised
  contractual scheme, have the meanings given by section 237(2) of that
  Act;

• “participant”, in relation to such a scheme, is to be read in accordance with
  45section 235 of that Act.

56 Co-ownership authorised contractual schemes: offshore funds

(1) The Treasury may by regulations make provision about how participants in a
co-ownership authorised contractual scheme are to be treated for income tax
purposes or corporation tax purposes in relation to investments made for the
5purposes of the scheme in an offshore fund.

(2) Regulations under subsection (1) may, among other things, make provision—

(a) for the operator of a co-ownership authorised contractual scheme to
allocate to participants in the scheme amounts relating to investments
made for the purposes of the scheme in an offshore fund;

(b) 10for those amounts to be regarded as income of the participants to whom
they are allocated;

(c) as to when that income is to be brought into account for income tax
purposes or corporation tax purposes.

(3) Regulations under this section may—

(a) 15modify an enactment (whenever passed or made);

(b) contain consequential, supplementary and transitional provision.

(4) Regulations under this section must be made by statutory instrument.

(5) A statutory instrument containing regulations under this section is subject to
annulment in pursuance of a resolution of the House of Commons.

(6) 20References in this section to investments made for the purposes of a co-
ownership authorised contractual scheme in an offshore fund include
investments so made through one or more other co-ownership authorised
contractual schemes.

(7) In this section—

• 25“co-ownership authorised contractual scheme” means a co-ownership
  scheme which is authorised for the purposes of the Financial Services
  and Markets Act 2000 by an authorisation order in force under section
  261D(1) of that Act;

• “co-ownership scheme” has the same meaning as in Part 17 of that Act
  30(see section 235A(2) of that Act);

• “offshore fund” has the meaning given by section 355 of TIOPA 2010;

• “operator”, in relation to a co-ownership authorised contractual scheme,
  has the meaning given by section 237(2) of the Financial Services and
  Markets Act 2000;

• 35“participant”, in relation to such a scheme, is to be read in accordance with
  section 235 of that Act.

Part 2 Indirect taxes

VAT

57 40VAT: zero-rating of adapted motor vehicles etc

Schedule 19 contains amendments of Schedule 8 to VATA 1994 (zero-rating).

Insurance premium tax

58 IPT: standard rate

(1) In section 51(2)(b) of FA 1994 (standard rate of insurance premium tax), for “10
per cent” substitute “12 per cent”.

(2) 5Subject to subsection (3), the amendment made by subsection (1) has effect in
relation to a premium falling to be regarded for the purposes of Part 3 of FA
1994 as received under a taxable insurance contract by an insurer on or after 1
June 2017.

(3) That amendment does not have effect in relation to a premium falling within
10subsection (4), unless the premium falls to be regarded for the purposes of Part
3 of FA 1994 as received under a taxable insurance contract by an insurer on or
after 1 June 2018.

(4) A premium falls within this subsection if it is in respect of a risk for which the
period of cover begins before 1 June 2017.

(5) 15In the application of sections 66A and 66B of FA 1994 (anti-forestalling
provision) in relation to the increase in insurance premium tax made by this
section, the announcement relating to that increase is to be taken to have been
made on 8 March 2017 (and “the change date” is to be taken to be 1 June 2017).

(6) This section is to be read with section 66C of FA 1994 (premiums relating to
20more than one period of cover).

59 IPT: anti-forestalling provision

(1) FA 1994 is amended as follows.

(2) After section 66 insert—

“66A Rate increases: deemed date of receipt of certain premiums

(1) 25This section applies where a Minister of the Crown announces a
proposed increase in the rate at which tax is to be charged on a
premium if it is received by the insurer on or after a date specified in
the announcement (“the change date”).

(2) This section applies whether or not the announcement includes an
30announcement of a proposed exception from the increase (for example,
for premiums in respect of risks for which the period of cover begins
before the change date).

(3) Subsection (4) applies where—

(a) a premium under a contract of insurance is received by the
35insurer on or after the date of the announcement and before the
change date, and

(b) the period of cover for the risk begins on or after the change
date.

(4) For the purposes of this Part the premium is to be taken to be received
40on the change date.

(5) Subsection (6) applies where—

(a) a premium under a contract of insurance is received by the
insurer on or after the date of the announcement and before the
change date,

(b) the period of cover for the risk—

(i) 5begins before the change date, and

(ii) ends on or after the first anniversary of the change date
(“the first anniversary”), and

(c) the premium, or any part of it, is attributable to such of the
period of cover as falls on or after the first anniversary.

(6) 10For the purposes of this Part—

(a) so much of the premium as is attributable to such of the period
of cover as falls on or after the first anniversary is to be taken to
be received on the change date, and

(b) so much as is so attributable is to be taken to be a separate
15premium.

(7) In determining whether the condition in subsection (3)(a) or (5)(a) is
met, regulations under section 68(3) or (7) apply as they would apart
from this section.

(8) But where subsection (4) or (6) applies—

(a) 20that subsection has effect despite anything in section 68 or
regulations under that section, and

(b) any regulations under section 68 have effect as if the entry made
in the accounts of the insurer showing the premium as due to
the insurer had been made as at the change date.

(9) 25A premium treated by subsection (6) as received on the change date is
not to be taken to fall within any exception, from an increase
announced by the announcement, for premiums in respect of risks for
which the period of cover begins before the change date.

(10) Any attribution under this section is to be made on such basis as is just
30and reasonable.

(11) In this section—

• “increase”, in relation to the rate of tax, includes the imposition of
  a charge to tax by adding to the descriptions of contract which
  are taxable insurance contracts;

• 35“Minister of the Crown” has the same meaning as in the Ministers
  of the Crown Act 1975.

66B Section 66A: exceptions and apportionments

(1) Section 66A(3) and (4) do not apply in relation to a premium if the risk
to which that premium relates belongs to a class of risk as regards
40which the normal practice is for a premium to be received by or on
behalf of the insurer before the date when cover begins.

(2) Section 66A(5) and (6) do not apply in relation to a premium if the risk
to which that premium relates belongs to a class of risk as regards
which the normal practice is for cover to be provided for a period of
45more than twelve months.

(3) If a contract relates to more than one risk, then in the application of
section 66A(3) and (4) or 66A(5) and (6)—

(a) the reference in section 66A(3)(b) or (5)(b) to the risk is to be
read as a reference to any given risk,

(b) so much of the premium as is attributable to any given risk is to
be taken for the purposes of section 66A(3) and (4) or 66A(5) and
5(6) to be a separate premium relating to that risk,

(c) those provisions then apply separately in the case of each given
risk and the separate premium relating to it, and

(d) any further attribution required by section 66A(5) and (6) is to
be made accordingly,

10and subsections (1) and (2) and section 66A(9) apply accordingly.

(4) Any attribution under this section is to be made on such basis as is just
and reasonable.

66C Rate changes: premiums relating to more than one period of cover

(1) This section applies if any Act—

(a) 15makes an amendment of section 51(2)(a) or (b) which alters the
higher rate or standard rate (“the relevant rate”),

(b) provides for the amendment to have effect in relation to a
premium falling to be regarded for the purposes of this Part as
received under a taxable insurance contract by an insurer on or
20after a particular date (“the change date”), and

(c) makes provision that excepts from that amendment a premium
which is in respect of a risk for which the period of cover begins
before the change date.

(2) Subsection (3) applies if a premium which is liable to tax at the relevant
25rate, and which falls to be regarded for the purposes of this Part as
received under a taxable insurance contract by an insurer on or after the
change date, is—

(a) partly in respect of a risk for which the period of cover begins
before the change date, and

(b) 30partly in respect of a risk for which the period of cover begins
on or after that date.

(3)
So much of the premium as is attributable to the risk for which the
period of cover begins on or after the change date is to be treated for the
purposes of this Part and the provision mentioned in subsection (1)(c)
35as a separate premium.

(4) Where a premium is in respect of a relevant rate matter and also a
matter that is not a relevant rate matter—

(a) for the purposes of the provision mentioned in subsection (1)(c),
the premium is to be treated as in respect of a risk for which the
40period of cover begins before the change date if the part of it
attributable to the relevant rate matter is in respect of such a
risk, and

(b) the reference in subsection (2) to a premium which is liable to
tax at the relevant rate is to be read as a reference to so much of
45the premium as is attributable to the relevant rate matter (and
subsection (3) is to be read accordingly).

(5) If premiums of any description are excluded from the exception
mentioned in subsection (1)(c), nothing in subsections (2) to (4) applies
to a premium of that description.

(6) Nothing in subsection (4) applies to an excepted premium (within the
meaning given by section 69A).

(7) Any attribution under this section is to be made on such basis as is just
and reasonable.

(8) 5In this section a “relevant rate matter” means—

(a) where the relevant rate is the standard rate, a standard rate
matter as defined by section 69(12)(c);

(b) where the relevant rate is the higher rate, a higher rate matter as
defined by section 69(12)(d).

(9) 10In subsection (1) the reference to any Act includes a resolution which
has statutory effect under the Provisional Collection of Taxes Act 1968.””

(3) Omit—

(a) section 67 (spent transitional provision), and

(b) sections 67A to 67C (which are superseded by sections 66A and 66B
15inserted by subsection (2)).

(4) The amendments made by subsections (2) and (3)(b) have effect on and after 8
March 2017.

(5) Despite the repeal by subsection (3) of sections 67A and 67C of FA 1994, those
sections continue to have effect so far as they apply to premiums received on
20or after 23 November 2016 and before 8 March 2017.

Landfill tax

60 Landfill tax: taxable disposals

(1) Part 3 of FA 1996 (landfill tax) is amended as follows.

(2) In section 40 (charge to tax), in subsection (2), for the words from “if—” to the
25end of the subsection substitute “if it is a disposal of material at a landfill site”.

(3) After section 40 insert—

“40A Disposals of material

(1) For the purposes of section 40, there is a disposal of material if—

(a) material is disposed of on the surface of land or on a structure
30set into the surface, or

(b) material is disposed of under the surface of land.

(2) For the purposes of subsection (1)(a) and (b) it does not matter whether
the material is placed in a container before it is disposed of.

(3) For the purposes of subsection (1)(b) it does not matter whether the
35material—

(a) is covered after it is disposed of, or

(b) is disposed of in a cavity (such as a cavern or mine).

(4) If material is disposed of on the surface of land or on a structure set into
the surface with a view to the material being covered, the disposal is to
40be treated as made when the material is disposed of and not when it is
covered.

(5) An order may for the purposes of section 40 provide for—

(a) material to be treated as disposed of in circumstances where it
would not otherwise be so treated;

(b) material to be treated as not disposed of in circumstances where
5it would otherwise be so treated.

(6) An order under subsection (5) may, among other things, make
provision by reference to—

(a) descriptions of material;

(b) the location of material in a landfill site (for example, whether it
10is in a discrete unit within the site).

(7) An order under subsection (5) may make provision subject to
exceptions, conditions or other qualifications.

(8) In this section “land” includes land covered by water where the land is
above the low water mark of ordinary spring tides.””

(4) 15In section 45 (pet cemeteries), in subsection (2)—

(a) in paragraph (a), for “landfill disposal” substitute “disposal of
material”;

(b) in paragraph (b), for “landfill disposals” substitute “disposals of
material”.

(5) 20Omits sections 64 to 65A (disposal of material as waste etc).

(6) In section 70 (interpretation)—

(a) omit subsection (2);

(b) in subsection (4), for “64” substitute “66”.

(7) In section 71 (orders and regulations), in subsection (7)—

(a) 25before paragraph (a) insert—

“(za) an order under section 40A(5) which has the result that
anything which would not otherwise be a taxable
disposal is a taxable disposal;”;”

(b) omit paragraphs (ca), (cb) and (d).

(8) 30In Schedule 5 (landfill tax), omit paragraph 1B.

(9) In Schedule 5, before paragraph 2 insert—

““Site information

1C (1) Regulations may require the operator of a landfill site to—

(a) retain plans, licences and permits relating to the site;

(b) 35provide the Commissioners with copies of, or information
relating to, plans, licences and permits retained under
paragraph (a).

(2) Regulations under sub-paragraph (1)(b) may be framed by reference
to such copies or information as may be stipulated in any notice
40published by the Commissioners in pursuance of the regulations and
not withdrawn by a further notice.””

(10) In Schedule 5—

(a) in paragraph 10(1), omit “as waste by way of landfill”;