Finance Bill (HC Bill 102)

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(c) after subsection (4) insert—

(5) In the application of subsections (3) and (4) in relation to a
penalty under section 69C, subsection (4) has effect with the
omission of paragraphs (b) and (c).”

(4) 5In section 76 (assessment of amounts due by way of penalty etc), in subsection
(1)(b) for “to 69B” (in both places) substitute “to 69C”.

(5) In section 83(1) (appeals), after paragraph (n) insert—

(na) any liability to a penalty under section 69C, any assessment of a
penalty under that section or the amount of such an assessment;

(nb) 10the giving of a decision notice under section 69D or the portion
of a penalty assessed under section 69C which is specified in
such a notice;”.

(6) After paragraph 21 of Schedule 24 to FA 2007 (penalties for errors: double
jeopardy) insert—

21ZA (1) 15 A person is not liable to a penalty under paragraph 1 in respect of
an inaccuracy if—

(a) the inaccuracy involves a claim by the person to exercise or
rely on a VAT right (in relation to a supply) that has been
denied or refused by HMRC as mentioned in subsection (4)
20of section 69C of VATA 1994, and

(b) the person has been assessed to a penalty under that section
(and the assessment has not been successfully appealed
against or withdrawn).

(2) In sub-paragraph (1)(a) “VAT right” has the same meaning as in
25section 69C of VATA 1994.”

(7) Section 69C does not apply in relation to transactions entered into before this
section comes into force.

Information

69 Data-gathering from money service businesses

(1) 30In Part 2 of Schedule 23 to FA 2011 (data-gathering powers: relevant data-
holders), after paragraph 13C insert—

“Money service businesses

13D (1) A person is a relevant data-holder if the person—

(a) carries on any of the activities in sub-paragraph (2) by way of
35business,

(b) is a relevant person within the meaning of regulation 8(1) of
the Money Laundering, Terrorist Financing and Transfer of
Funds (Information on the Payer) Regulations 2017 (S.I.
2017/692), and

(c) 40is not an excluded credit institution.

(2) The activities referred to in sub-paragraph (1)(a) are—

(a) operating a currency exchange office;

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(b) transmitting money (or any representation of monetary
value) by any means;

(c) cashing cheques which are made payable to customers.

(3) An excluded credit institution is a credit institution which has
5permission to carry on the regulated activity of accepting deposits—

(a) under Part 4A of the Financial Services and Markets Act 2000
(permission to carry on regulated activities), or

(b) resulting from Part 2 of Schedule 3 to that Act (exercise of
passport rights by EEA firms).

(4) 10Sub-paragraph (3) is to be read with section 22 of and Schedule 2 to
the Financial Services and Markets Act 2000, and any order under
that section (classes of regulated activities).

(5) In this paragraph “credit institution” has the meaning given by
Article 4.1(1) of Regulation (EU) No 575/2013 of the European
15Parliament and of the Council of 26 June 2013 on prudential
requirements for credit institutions and investment firms.”

(2) This section applies in relation to relevant data with a bearing on any period
(whether before, on or after the day on which this Act is passed).

Part 5 20Final

70 Northern Ireland welfare payments: updating statutory reference

In section 44(2) of FA 2016 (tax treatment of supplementary welfare payments:
Northern Ireland) for “the Housing Benefit (Amendment) Regulations
(Northern Ireland) 2016 (S.R. (N.I.) 2016 No. 258(N.I.) 2016 No. 258)” substitute “the Housing
25Benefit (Amendment No. 2) Regulations (Northern Ireland) 2016 (S.R. (N.I.)
2016 No. 3262016 No. 326)”.

71 Interpretation

In this Act the following abbreviations are references to the following Acts.

CAA 2001 Capital Allowances Act 2001
CEMA 1979 30Customs and Excise Management Act 1979
CTA 2009 Corporation Tax Act 2009
CTA 2010 Corporation Tax Act 2010
CT(NI)A 2015 Corporation Tax (Northern Ireland) Act 2015
FA, followed by a year Finance Act of that year
F(No.2)A, followed by a year 35Finance (No.2) Act of that year
F(No.3)A, followed by a year Finance (No.3) Act of that year

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ICTA Income and Corporation Taxes Act 1988
IHTA 1984 Inheritance Tax Act 1984
ITA 2007 Income Tax Act 2007
ITEPA 2003 Income Tax (Earnings and Pensions) Act 2003
ITTOIA 2005 5Income Tax (Trading and Other Income) Act 2005
OTA 1975 Oil Taxation Act 1975
TCGA 1992 Taxation of Chargeable Gains Act 1992
TIOPA 2010 Taxation (International and Other Provisions) Act
2010
TMA 1970 10Taxes Management Act 1970
TPDA 1979 Tobacco Products Duty Act 1979
VATA 1994 Value Added Tax Act 1994

72 Short title

This Act may be cited as the Finance (No. 2) Act 2017.

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SCHEDULES

Section 14

SCHEDULE 1 Social investment tax relief

Part 1 5Amendments of Part 5B of ITA 2007

Introductory

1 ITA 2007 is amended as follows.

Date by which investment must be made to qualify for SI relief

2 In section 257K(1)(a)(iii) (date by which investment must be made to qualify
10for SI relief) for “6 April 2019” substitute “6 April 2021”.

The existing investments requirement

3 After section 257LD insert—

257LDA The existing investments requirement

(1) If at the time immediately before the investment is made the investor
15holds any shares in or debentures of—

(a) the social enterprise, or

(b) a company which at that time is a qualifying subsidiary of the
social enterprise,

those shares or debentures must be risk finance investments or (in
20the case of shares) permitted subscriber shares.

(2) A share or debenture is a “risk finance investment” for the purposes
of this section if—

(a) it is a share that was issued to the investor, or a debenture of
which the investor is the holder in return for advancing an
25amount, and

(b) at any time, a compliance statement under section 205, 257ED
or 257PB is provided in respect of it or of shares or
investments including it.

(3) Subscriber shares are “permitted subscriber shares” for the purposes
30of this section if—

(a) they were issued to the investor and have been continuously
held by the investor since they were issued, or

(b) they were acquired by the investor at a time when the
company which issued them—

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(i) had issued no shares other than subscriber shares,
and

(ii) had not begun to carry on or make preparations for
carrying on any trade or business.

(4) 5In this section “debenture” is to be read in accordance with section
257L(6).”

The no disqualifying arrangements requirement

4 After section 257LE insert—

257LEA The no disqualifying arrangements requirement

(1) 10The investment must not be made, and money raised by the social
enterprise from the making of the investment must not be
employed,—

(a) in consequence or anticipation of disqualifying
arrangements, or

(b) 15otherwise in connection with disqualifying arrangements.

(2) Arrangements are “disqualifying arrangements” if—

(a) the main purpose, or one of the main purposes, of the
arrangements is to secure both that an activity is or will be
carried on by the social enterprise or a 90% social subsidiary
20of the social enterprise and that—

(i) one or more persons (whether or not including any
party to the arrangements) may obtain relevant tax
relief in respect of a qualifying investment which
raises money for the purposes of that activity, or

(ii) 25shares issued by the social enterprise which raise
money for the purposes of that activity may comprise
part of the qualifying holdings of a VCT,

(b) that activity is the relevant qualifying activity, and

(c) one or both of conditions A and B are met.

(3) 30Condition A is that, as a (direct or indirect) result of the money raised
by the investment being employed as required by section 257MM, an
amount representing the whole or the majority of the amount raised
is, in the course of the arrangements, paid to or for the benefit of a
relevant person or relevant persons.

(4) 35Condition B is that, in the absence of the arrangements, it would have
been reasonable to expect that the whole or greater part of the
component activities of the relevant qualifying activity would have
been carried on as part of another business by a relevant person or
relevant persons.

(5) 40For the purposes of this section it is immaterial whether the social
enterprise is a party to the arrangements.

(6) In this section—

  • “90% social subsidiary” is to be read in accordance with section
    257MV;

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  • “component activities” means the carrying on of a qualifying
    trade or preparing to carry on such a trade, which constitutes
    the relevant qualifying activity;

  • a “qualifying investment” means—

    (a)

    5shares in the social enterprise, or

    (b)

    a qualifying debt investment in the social enterprise
    (see section 257L);

  • “qualifying holdings”, in relation to the social enterprise, is to be
    construed in accordance with section 286 (VCTs: qualifying
    10holdings);

  • “relevant person” means a person who is a party to the
    arrangements or a person connected with such a party;

  • “relevant qualifying activity” means the qualifying trade or
    activity mentioned in section 257ML(1) for the purposes of
    15which the investment raised money;

  • “relevant tax relief” has the meaning given by subsection (7).

(7) “Relevant tax relief”—

(a) in relation to a qualifying debt investment, means SI relief in
respect of that investment;

(b) 20in relation to shares, means one or more of the following—

(i) SI relief in respect of the shares;

(ii) EIS relief (within the meaning of Part 5) in respect of
the shares;

(iii) SEIS relief (within the meaning of Part 5A) in respect
25of the shares;

(iv) relief under Chapter 6 of Part 4 (losses on disposal of
shares) in respect of the shares;

(v) relief under section 150A or 150E of TCGA 1992 (EIS
and SEIS) in respect of the shares;

(vi) 30relief under Schedule 5B to that Act (EIS:
reinvestment) in consequence of which deferral relief
is attributable to the shares (see paragraph 19(2) of
that Schedule);

(vii) relief under Schedule 5BB to that Act (SEIS: re-
35investment) in consequence of which SEIS re-
investment relief is attributable to the shares (see
paragraph 4 of that Schedule).”

5 (1) Section 257SH (power to require information where reason to believe SI
relief may not be due because of certain kinds of arrangements, etc) is
40amended as follows.

(2) In subsection (1) after “257LE,” insert “257LEA,”.

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(3) In subsection (4) at the appropriate place insert—

“Section 257LEA The investor, the social enterprise,
any person controlling the social
enterprise and any person whom
5an officer of Revenue and
Customs has reason to believe
may be a party to the
arrangements in question”

Limits on amounts that may be invested

6 (1) 10In the italic heading before section 257M, after “enterprise” insert “: general”.

(2) Omit sections 257MA and 257MB (which are superseded by the provision
inserted by sub-paragraph (3) below).

(3) After section 257MN insert—

“Limits on amounts that may be invested
257MNA 15 Maximum amount where investment made in first 7 years

(1) This section applies where—

(a) the investment is made before the end of the period of 7 years
beginning with the relevant first commercial sale, or

(b) the investment is made after that period but—

(i) 20a relevant investment was made in the social
enterprise before the end of that period, and

(ii) some or all of the money raised by that relevant
investment was employed for the purposes of (or of
part of) the qualifying activity for which the money
25raised by the investment is employed.

(2) Where this section applies, the total amount of relevant investments
made in the social enterprise on or before the date when the
investment is made must not exceed £1.5 million.

(3) The reference in subsection (2) to relevant investments “made in the
30social enterprise” is to be read with section 257MNB.

(4) In this section—

  • “qualifying activity” means—

    (a)

    a qualifying trade within paragraph (a) of section
    257ML(1) carried on by the social enterprise or a 90%
    35social subsidiary of the social enterprise, or

    (b)

    an activity within paragraph (b) of section 257ML(1)
    so carried on;

  • “the relevant first commercial sale” has the meaning given by
    section 175A(6), reading—

    (a)

    40references to the issuing company as references to the
    social enterprise,

    (b)

    references to the issue date as references to the
    investment date, and

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    (c)

    references to money raised by the issue of the relevant
    shares as references to money raised by the
    investment;

  • “relevant investment” has the meaning given by section 173A(3)
    5(reading references in section 173A(3) to a company as
    including any social enterprise).

(5) Section 173A(4) and (5) apply to determine for the purposes of this
section when a relevant investment is made.

(6) Where the social enterprise is an accredited social impact
10contractor—

(a) the reference in subsection (1)(a) to the relevant first
commercial sale is to be read as a reference to the date on
which the social enterprise first entered into a social impact
contract;

(b) 15the reference in subsection (1)(b) to the qualifying activity
mentioned there is to be read as a reference to the carrying
out of the social impact contract for which the money raised
by the investment is employed.

(7) For provision about maximum amounts where this section does not
20apply, see section 257MNC.

257MNB Section 257MNA: supplementary

(1) In section 257MNA(2) the reference to relevant investments “made in
the social enterprise” includes—

(a) relevant investments made in a company which, at the
25material date, is or has been a 51% subsidiary of the social
enterprise,

(b) any other relevant investment made in a company to the
extent that the money raised by that relevant investment has
been employed for the purposes of a trade carried on by
30another company (“company X”) which, at the material date,
is or has been a 51% subsidiary of the social enterprise, and

(c) any other relevant investment made in a company if—

(i) the money raised by that relevant investment has
been employed for the purposes of a trade carried on
35by that company or another person, and

(ii) after that relevant investment was made, but on or
before the material date, that trade became a
transferred trade (see subsection (5)).

(2) The investments within paragraph (a) of subsection (1)—

(a) 40include investments made in a company mentioned in that
paragraph before it became a 51% subsidiary of the social
enterprise, but

(b) where a company mentioned in that paragraph is not a 51%
subsidiary of the social enterprise at the material date, do not
45include any investments made in that company after it last
ceased to be such a subsidiary.

(3) For the purposes of subsection (1)(b), where company X is not a 51%
subsidiary of the social enterprise at the material date, any money

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employed after company X last ceased to be such a subsidiary is to
be ignored.

(4) Where only a proportion of the money raised by a relevant
investment is employed for the purposes of a trade which becomes a
5transferred trade, only the corresponding proportion of that relevant
investment is to be treated as falling within subsection (1)(c).

(5) For the purposes of this section, if—

(a) on or before the material date a trade is transferred—

(i) to the social enterprise,

(ii) 10to a company which, at the material date, is or has
been a 51% subsidiary of the social enterprise, or

(iii) to a partnership of which the social enterprise, or a
company within sub-paragraph (ii), is a member, and

(b) the trade or part of it was at any time before the transfer
15carried on by another person,

the trade or part mentioned in paragraph (b) becomes a “transferred
trade” when it is transferred as mentioned in paragraph (a).

(6) The cases within subsection (5)(a)—

(a) include the case where the trade is transferred to a company
20within subsection (5)(a)(ii), or a partnership of which such a
company is a member, before the company became a 51%
subsidiary of the social enterprise, but

(b) where a company within subsection (5)(a)(ii) is not a 51%
subsidiary of the social enterprise at the material date, do not
25include the case where the trade is transferred to that
company, or a partnership of which that company is a
member, after that company last ceased to be such a
subsidiary.

(7) In this section—

  • 30“the material date” means the date on which the investment is
    made;

  • “relevant investment” has the meaning given by section 173A(3)
    (reading references in section 173A(3) to a company as
    including any social enterprise).

(8) 35Section 173A(4) and (5) apply to determine for the purposes of this
section when a relevant investment is made.

(9) Section 173A(6) and (7) (meaning of “trade” etc) apply also for the
purposes of this section.

257MNC Maximum amount for cases outside section 257MNA

(1) 40This section applies where—

(a) the investment is made at any time after the period
mentioned in section 257MNA(1)(a), and

(b) it is not the case that the conditions in section
257MNA(1)(b)(i) and (ii) are met.

(2) 45Where this section applies—