Finance Bill (HC Bill 102)

Finance BillPage 540

(b) for the purposes of paragraph 1(4) and section 554Z3(1) of ITEPA
2003, as an amount of the quasi-loan that is outstanding at the time P
is treated as taking the relevant step under paragraph 1(1).

(3) For the purposes of sub-paragraph (2)

(a) 5where the right acquired by A or B is a right to payment of an
amount, the “value” of the right is that amount;

(b) where the right acquired by A or B is a right to a transfer of assets,
the “value” of the right is an amount equal to—

(i) the market value of the assets at the time the right is acquired
10(or the value of the right at that time if the assets are non-
fungible and not in existence at that time), or

(ii) if higher, the cost of the assets at that time.

(4) Where a loan or a quasi-loan made by P to a relevant person is replaced,
directly or indirectly, by a quasi-loan or another quasi-loan (the
15“replacement quasi-loan”), references in sub-paragraphs (1) and (2) to the
quasi-loan are references to the replacement quasi-loan.

Meaning of “outstanding”: quasi-loans in currencies other than sterling

14 (1) Paragraphs 15 to 18 apply where P makes a quasi-loan to a relevant person
by reason of acquiring a right to a payment in a particular currency (the
20“quasi-loan currency”).

(2) For the purposes of paragraphs 15 to 18, the value of an amount in a
particular currency is to be determined by reference to an appropriate spot
rate of exchange.

15 (1) This paragraph applies in relation to the quasi-loan if the quasi-loan
25currency is a currency other than sterling.

(2) But this paragraph does not apply if paragraph 18 applies in relation to the
quasi-loan.

(3) The amount of the quasi-loan that is outstanding, at the time P is treated as
taking the relevant step, is to be calculated in sterling as follows—

30Step 1

Calculate, in the quasi-loan currency, the amount that is outstanding at that
time.

Step 2

Take the value in sterling, at that time, of that amount.

(4) 35See paragraph 16 for provision about repayments made in a currency other
than the quasi-loan currency.

Repayments in currencies other than the quasi-loan currency

16 (1) This paragraph applies in relation to the quasi-loan if—

(a) payments in money are made by way of repayment of the initial debt
40amount, and

(b) some or all of the payments are made in a currency other than the
quasi-loan currency.

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(2) But this paragraph does not apply if paragraph 18 applies in relation to the
quasi-loan.

(3) For the purposes of calculating the repayment amount in relation to the
quasi-loan, the amount of each of the payments referred to in sub-paragraph
5(1)(b) is an amount equal to its value in the quasi-loan currency on the date
it is made.

Quasi-loans made in a depreciating currency

17 (1) Paragraph 18 applies in relation to the quasi-loan if—

(a) the quasi-loan currency is a currency other than sterling, and

(b) 10it is reasonable to suppose that the main reason, or one of the main
reasons, for the quasi-loan being made in that currency is that the
quasi-loan currency is expected to depreciate during the quasi-loan
period.

(2) The “quasi-loan period”, in relation to a quasi-loan, is the period—

(a) 15beginning at the time the quasi-loan is made, and

(b) ending with the time by which, under the terms of the quasi-loan, the
whole of the quasi-loan is to be repaid.

18 (1) Where this paragraph applies in relation to the quasi-loan—

(a) paragraphs 15 and 16 do not apply in relation to the quasi-loan, and

(b) 20sub-paragraphs (2) to (5) apply for the purposes of calculating the
amount of the quasi-loan that is outstanding at the time P is treated
as taking the relevant step.

(2) The initial debt amount, in relation to the quasi-loan, is an amount equal to
the total of—

(a) 25the value in sterling, at the reference date, of the acquired debt, and

(b) the value in sterling, at the reference date, of any additional debt.

(3) The “reference date”—

(a) in relation to a right within sub-paragraph (2)(a), means the date on
which P acquires it, and

(b) 30in relation to a right within sub-paragraph (2)(b), means the date on
which P acquires it.

(4) The repayment amount, in relation to the quasi-loan, is an amount equal to
the total of—

(a) the amount of the initial debt amount that has been repaid in sterling,
35and

(b) where payments are made, in a currency other than sterling, by way
of repayment of the initial debt amount, the amount equal to the
sterling value of the payments.

(5) The “sterling value” of a payment is its value in sterling on the date it is
40made.

Meaning of “approved fixed term loan”

19 (1) A loan is an “approved fixed term loan” on 5 April 2019 if, at any time on
that day, it is a qualifying loan which has been approved by an officer of
Revenue and Customs in accordance with paragraph 20.

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(2) A loan is a “qualifying loan” if—

(a) the loan was made before 9 December 2010,

(b) the term of the loan cannot exceed 10 years, and

(c) it is not an excluded loan under sub-paragraph (3).

(3) 5A loan is an excluded loan if, at any time after the loan was made—

(a) the loan has been replaced, directly or indirectly, by another loan, or

(b) the terms of the loan have been altered so as—

(i) to meet the condition in sub-paragraph (2)(b), or

(ii) to postpone the date by which, under the terms of the loan,
10the whole of the loan must be repaid.

Part 2 Approval of a qualifying loan etc.

Application to HMRC

20 (1) The liable person in relation to a qualifying loan may make an application to
15the Commissioners for Her Majesty’s Revenue and Customs for approval of
the loan.

(2) An officer of Revenue and Customs may grant such an application if
satisfied that, in relation to the loan—

(a) the qualifying payments condition is met (see paragraph 21), or

(b) 20the commercial terms condition is met (see paragraph 22).

(3) Subject to sub-paragraph (4), an application may be made in 2018.

(4) An application may be made after 2018 if an officer of Revenue and Customs
considers it is reasonable in all the circumstances for the liable person to
make a late application.

(5) 25An application for an approval must be made in such form and manner, and
contain such information, as may be specified by, or on behalf of, the
Commissioners for Her Majesty’s Revenue and Customs.

(6) An officer of Revenue and Customs must notify the applicant of the decision
on an application.

(7) 30Where on an application under this paragraph a loan is approved, the
approval may be revoked by an officer of Revenue and Customs if the officer
considers that—

(a) information provided in making the application contained an
inaccuracy, and

(b) 35the inaccuracy was deliberate on the applicant’s part.

(8) Where approval is revoked under sub-paragraph (7), approval is to be
treated as having been refused at the outset.

(9) In this paragraph “liable person”, in relation to a loan, means the person who
is liable for any tax on the value of the relevant step in relation to the loan
40under paragraph 1.

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Qualifying payments condition

21 (1) The qualifying payments condition is met in relation to a qualifying loan if,
during the relevant period—

(a) payments have been made to the lender in respect of the repayment
5of the principal of the loan, and

(b) the payments have been made at intervals not exceeding 53 weeks.

(2) The “relevant period” in relation to a loan is the period beginning with the
making of the loan and ending with the making of the application.

Commercial terms condition

22 (1) 10The commercial terms condition is met in relation to a qualifying loan if—

(a) either—

(i) it is reasonable to assume that, had the qualifying loan been
made in the ordinary course of a lending business, loans on
terms comparable to those of the qualifying loan would have
15been available to members of the public, or

(ii) the qualifying loan was made in the ordinary course of a
lending business, and

(b) the borrower has, in all material respects, complied with the terms of
the loan.

(2) 20For the purposes of sub-paragraph (1), a loan is made in the ordinary course
of a lending business if it is made by a person in the ordinary course of a
business carried on by the person which includes—

(a) the lending of money, or

(b) the supplying of goods or services on credit.

25Accelerated payments

23 (1) Paragraph 24(1) applies where—

(a) a person (“P”) would (ignoring paragraph 24) be treated as taking a
relevant step within paragraph 1 by reason of making a loan, or a
quasi-loan, to a relevant person,

(b) 30an accelerated payment notice, or a partner payment notice, relating
to a relevant charge (the “accelerated payment notice”) has been
given under Chapter 3 of Part 4 of FA 2014,

(c) the relevant person makes a payment (the “accelerated payment”) in
respect of the understated or disputed tax to which the notice relates,

(d) 35the accelerated payment is made on or before the relevant date, and

(e) the amount of the loan or quasi-loan that, at the end of the relevant
date, is outstanding for the purposes of paragraph 1 (see paragraphs
3 to 18) is equal to or less than the amount of the accelerated
payment.

(2) 40In sub-paragraph (1)(b), “relevant charge” means a charge to tax arising by
reason of a step taken pursuant to the relevant arrangement concerned.

(3) The reference in sub-paragraph (2) to the relevant arrangement concerned is
a reference to the relevant arrangement in pursuance of which, or in
connection with which, the loan or quasi-loan mentioned in sub-paragraph
45(1)(a) is made.

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(4) In sub-paragraph (1)(d) and (e), “the relevant date” means—

(a) the approved repayment date, if P has made a loan which is an
approved fixed term loan on 5 April 2019, or

(b) 5 April 2019, in any other case.

(5) 5In sub-paragraphs (1)(c) and (2)

(a) the reference to tax includes a reference to relevant contributions,
and

(b) the reference to a charge to tax includes a reference to a liability to
pay relevant contributions;

10and for those purposes “relevant contributions” has the same meaning as in
Schedule 2 to the National Insurance Contributions Act 2015 (application of
Part 4 of FA 2014 to national insurance contributions).

(6) If more than one notice relating to a particular relevant charge has been
given—

(a) 15the reference in sub-paragraph (1)(e) to the amount of the accelerated
payment is to be treated as a reference to the aggregate of the
amounts of each accelerated payment in respect of which the
conditions in sub-paragraph (1)(c) and (d) are met, and

(b) the reference in paragraph 24(2) to the accelerated payment notice is
20to be treated as a reference to the accelerated payment notices or any
of them.

24 (1) The relevant person may make an application to the Commissioners for Her
Majesty’s Revenue and Customs for P to be treated—

(a) as taking the relevant step only if the condition in sub-paragraph (2)
25is met, and

(b) as doing so not at the time given by paragraph 1(2) but immediately
before—

(i) the end of the 30 days beginning with the date on which the
condition in sub-paragraph (2) becomes met, or

(ii) 30if later, the end of 5 April 2019.

(2) The condition is that, on the withdrawal of the accelerated payment notice
or on the determination of an appeal, any part of the accelerated payment is
repaid.

(3) Subject to sub-paragraph (4), an application under sub-paragraph (1) may be
35made in 2018.

(4) An application may be made after 2018 if an officer of Revenue and Customs
considers it is reasonable in all the circumstances for the relevant person to
make a late application.

(5) An application must be made in such form and manner, and contain such
40information, as may be specified by, or on behalf of, the Commissioners for
Her Majesty’s Revenue and Customs.

(6) An officer of Revenue and Customs must notify the applicant of the decision
on an application under this paragraph.

(7) A favourable decision on an application under this paragraph may be
45revoked by an officer of Revenue and Customs if the officer considers that—

(a) information provided in making the application contained an
inaccuracy, and

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(b) the inaccuracy was deliberate on the applicant’s part.

(8) Where the decision on an application is revoked under sub-paragraph (7),
the application is to be treated as having been refused at the outset.

Part 3 5Exclusions

Commercial transactions

25 Chapter 2 of Part 7A of ITEPA 2003 does not apply by reason of a relevant
step within paragraph 1 which is treated as being taken by a person (“P”) if—

(a) P is treated as taking a relevant step by that paragraph by reason of
10the payment of a sum of money by way of a loan,

(b) the loan is (at the time it is made) a loan on ordinary commercial
terms within the meaning of section 176 of ITEPA 2003, ignoring
conditions B and C in that section, and

(c) there is no connection (direct or indirect) between the relevant step
15and a tax avoidance arrangement.

26 In section 554F of ITEPA 2003 (exclusions: commercial transactions), at the
end insert—

(6) See paragraph 25 of Schedule 11 to FA (No. 2) 2017 for provision
about exclusions where a loan is made on ordinary commercial
20terms and the relevant step is within paragraph 1 of that Schedule.”

Transfer of employment-related loans

27 (1) Chapter 2 of Part 7A of ITEPA 2003 does not apply by reason of a relevant
step within paragraph 1 which is treated as being taken by a person (“P”) if—

(a) P is treated as taking a relevant step within that paragraph by reason
25of making a quasi-loan by acquiring a right to payment of an amount
equal to the whole or part of a payment made by way of a loan to a
relevant person (the “borrower”),

(b) the loan, at the time it was made, was an employment-related loan,

(c) at the time the right is acquired, the section 180 threshold is not
30exceeded in relation to the loan,

(d) at the time the right is acquired, the borrower is an employee, or a
prospective employee, of P, and

(e) there is no connection (direct or indirect) between the acquisition of
the right and a tax avoidance arrangement.

(2) 35Subsections (2) to (5) of section 554OA of ITEPA 2003 (section 180 threshold)
apply for the purposes of this paragraph as they apply for the purposes of
that section.

(3) In this paragraph, “employment-related loan” has the same meaning as it
has for the purposes of Chapter 7 of Part 3.

28 40In section 554OA of ITEPA 2003 (exclusions: transfer of employment-related

Finance BillPage 546

loans), at the end insert—

(6) See paragraph 27 of Schedule 11 to FA (No. 2) 2017 for provision
about exclusions where a loan is an employment-related loan and the
relevant step is within paragraph 1 of that Schedule.”

5Transactions under employee benefit packages

29 (1) Chapter 2 of Part 7A of ITEPA 2003 does not apply by reason of a relevant
step within paragraph 1 which is treated as being taken by a person (“P”) if—

(a) P is treated as taking a relevant step by that paragraph by reason of
the payment of a sum of money by way of a loan,

(b) 10the step is not taken under a pension scheme,

(c) the loan was made for the sole purpose of a transaction of P’s with A
and which P entered into in the ordinary course of P’s business,

(d) at the time the loan was made (the “relevant time”)—

(i) a substantial proportion of P’s business involved making
15similar loans to members of the public,

(ii) the transaction with A was part of a package of benefits
which was available to a substantial proportion of B’s
employees, and

(iii) sub-paragraph (3) does not apply,

(e) 20the terms on which similar transactions were offered by P under the
package of benefits mentioned in paragraph (d)(ii) were generous
enough to enable substantially all of the employees of B to whom the
package was available at or around the relevant time to take
advantage of what was offered (if they wanted to),

(f) 25the terms on which P entered into the transaction with A were
substantially the same as the terms on which at or around the
relevant time P normally entered into similar transactions with
employees of B under the package of benefits,

(g) if B is a company, a majority of B’s employees to whom the package
30of benefits was available at the relevant time did not have a material
interest (as defined in section 68 of ITEPA 2003) in B, and

(h) there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement.

(2) For the purposes of sub-paragraph (1)(d)(i)

(a) 35a loan is “similar” if it is made for the same or similar purposes as the
loan which is the subject of the relevant step, and

(b) “members of the public” means members of the public at large with
whom P deals at arm‘s length.

(3) This sub-paragraph applies if any feature of the package of benefits
40mentioned in sub-paragraph (1)(d)(ii) had or would have been likely to have
had the effect that, of the employees of B to whom the package was available,
it is employees within sub-paragraph (4) on whom benefits under the
package will be wholly or mainly conferred.

(4) The employees within this sub-paragraph are—

(a) 45directors,

(b) senior employees,

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(c) employees who at the relevant time received, or as a result of the
package of benefits would have been likely to have received, the
higher or highest levels of remuneration, and

(d) if, at the relevant time, B was a company and was a member of a
5group of companies, any employees not within paragraph (b) or (c)
who—

(i) were senior employees in the group, or

(ii) received, or as a result of the package of benefits would have
been likely to have received, the higher or highest levels of
10remuneration in the group.

(5) For the purposes of sub-paragraph (1)(d) and (e) a transaction is “similar” if
it is of the same or a similar type to the transaction which P has or had with
A.

(6) In this paragraph references to A include references to any person linked
15with A.

(7) In this paragraph “pension scheme” has the same meaning as in Part 4 of FA
2004 (see section 150(1) of that Act).

30 In section 554G of ITEPA 2003 (exclusions: transactions under employee
benefit packages), at the end insert—

(8) 20See paragraph 29 of Schedule 11 to FA (No. 2) 2017 for provision
about exclusions for transactions under employee benefit packages
in a case in which the relevant step is within paragraph 1 of that
Schedule.”

Cases involving employment-related securities

31 25Chapter 2 of Part 7A of ITEPA 2003 does not apply by reason of a relevant
step within paragraph 1 which is treated as being taken by a person (“P”) if—

(a) P is treated as taking a relevant step by that paragraph by reason of
the payment of a sum of money by way of a loan (the “relevant
loan”),

(b) 30the relevant loan is made and used solely for the purpose of enabling
A to exercise an employment-related securities option (within the
meaning of Chapter 5 of Part 7 of ITEPA 2003),

(c) the exercise of the option by A gives rise to employment income of A
in respect of A’s employment with B—

(i) 35which is chargeable to income tax or would be chargeable
apart from Chapter 5B of Part 2 of ITEPA 2003, or

(ii) which is exempt income, and

(d) there is no connection (direct or indirect) between the relevant step
and a tax avoidance arrangement.

32 40In section 554N of ITEPA 2003 (exclusions: other cases involving
employment-related securities etc.), at the end insert—

(17) See paragraph 31 of Schedule 11 to FA (No. 2) 2017 for provision
about exclusions where a loan is made for the purpose of enabling
the exercise of an employment-related securities option and the
45relevant step is within paragraph 1 of that Schedule.”

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Employee car ownership schemes

33 (1) This paragraph applies if—

(a) there is an arrangement (“the car ownership arrangement”) which—

(i) provides for A to purchase a new car from another person
5(“S”) using a loan (“the car loan”) to be made to A by an
authorised lender,

(ii) specifies the date (“the repayment date”) by which the car
loan must be fully repaid which must be no later than four
years after the date on which the car loan is made, and

(iii) 10permits A, in order to obtain funds to repay the car loan, to
sell the car back to S on a specified date at a specified price
based on an estimate (made at the time the car ownership
arrangement is made) of the likely outstanding amount of the
car loan on the specified date, and

(iv) 15as provided for by the car ownership arrangement, A
purchases the car using the car loan.

(2) Chapter 2 does not apply by reason of a relevant step within paragraph 1
which is treated as being taken by a person if—

(a) the person is treated as taking a relevant step by that paragraph by
20reason of making the car loan, and

(b) the car ownership arrangement is not a tax avoidance arrangement
and there is no other connection (direct or indirect) between the
relevant step and a tax avoidance arrangement.

(3) In this paragraph—

  • 25“car” has the meaning given by section 235(2) of ITEPA 2003, and

  • “authorised lender” means a person who—

    (a)

    has permission under Part 4A of the Financial Services and
    Markets Act 2000 to enter into, or to exercise or have the right
    to exercise rights and duties under, a contract of the kind
    30mentioned in paragraph 23 of Schedule 2 to that Act, and

    (b)

    is not acting as a trustee.

(4) The definition of “authorised lender” must be read with—

(a) section 22 of the Financial Services and Markets Act 2000,

(b) any relevant order under that section, and

(c) 35Schedule 2 to that Act.

(34) In section 554O of ITEPA 2003 (exclusions: employee car ownership schemes), at the end insert—

(7) See paragraph 33 of Schedule 11 to FA (No. 2) 2017 for provision
about exclusions for car loans in a case in which the relevant step is
40within paragraph 1 of that Schedule.”

Acquisition of unlisted employer shares

35 (1) Chapter 2 of Part 7A of ITEPA 2003 does not apply by reason of a relevant
step within paragraph 1 which is treated as being taken by a person (“P”) if
the conditions in sub-paragraph (2) are met.

(2) 45The conditions are that—

(a) the loan or quasi-loan concerned was made before 9 December 2010,

Finance BillPage 549

(b) if P is treated as taking a relevant step by paragraph 1 by reason of
the payment of a sum of money by way of loan, the sum is used by
A solely to acquire employer shares,

(c) if P is treated as taking a relevant step by paragraph 1 by reason of
5making a quasi-loan, the transfer of assets mentioned in paragraph
2(3)(b) is the transfer of employer shares to A,

(d) the employer shares are acquired, or transferred, before the end of
the period of one year beginning with the day on which the loan, or
quasi-loan, is made, and

(e) 10the employer shares are not listed on a recognised stock exchange at
any time during the period beginning with the day on which the
loan, or quasi-loan, is made and ending with the earlier of—

(i) the day on which A ceases to hold the shares, or

(ii) the day on which the loan, or quasi-loan, is repaid.

(3) 15In this paragraph “employer shares” means shares that form part of the
ordinary share capital of—

(a) B, or

(b) if B is a company and is a member of a group of companies at the
time the shares are acquired, any other company which is a member
20of that group at that time.

(4) Sub-paragraph (6) applies if—

(a) apart from sub-paragraph (1), Chapter 2 of Part 7A would apply by
reason of the relevant step mentioned in sub-paragraph (1), and

(b) at the end of the relevant period, an amount of the loan, or quasi-
25loan, is outstanding.

(5) In this paragraph “the relevant period” means the period of 12 months
beginning with the day on which A ceases to hold the shares.

(6) Part 7A of ITEPA 2003 has effect as if—

(a) a relevant step within paragraph 1 were taken by reason of making a
30loan, or quasi-loan, of an amount equal to the amount of the loan, or
quasi-loan, outstanding at the end of the relevant period, and

(b) the relevant step were taken on the day after the end of the relevant
period.

Part 4 35Supplementary provision

Duty to provide loan balance information to B

36 (1) This paragraph applies where—

(a) a person (“P”) has made a loan, or a quasi-loan, to a relevant person,

(b) the loan or quasi-loan was made on or after 6 April 1999, and

(c) 40an amount of the loan or quasi-loan is outstanding at any time—

(i) on or after 17 March 2016, and

(ii) before the end of 5 April 2019.

(2) Each of A and P must ensure that the loan balance information in relation to
the loan or quasi-loan is provided to B before the end of the period of 10 days
45beginning with the day after the loan charge date.