Finance Bill (HC Bill 102)

Finance BillPage 550

(3) The “loan balance information” is—

(a) the information that is necessary for B to ascertain the amount of the
loan or quasi-loan concerned that is outstanding immediately before
the end of the loan charge date, and

(b) 5such other information about the loan or quasi-loan as B may
reasonably require for the purpose of compliance with B’s
obligations under PAYE regulations.

(4) In this paragraph “loan charge date” means—

(a) the approved repayment date, if the loan is an approved fixed term
10loan on 5 April 2019, or

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

(5) If, despite taking reasonable steps, A and P have failed to contact B to
provide the loan balance information, each of them is responsible for
ensuring that the Commissioners for Her Majesty’s Revenue and Customs
15are notified of that fact.

(6) A notification under sub-paragraph (5) 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.

(7) “Loan”, “quasi-loan” and “outstanding” have the same meaning for the
20purposes of this paragraph as they have for the purposes of paragraph 1.

Double taxation

37 (1) Sub-paragraph (2) applies where—

(a) P is treated as taking a relevant step by paragraph 1 by reason of a
loan made to a relevant person, and

(b) 25the loan is an employment-related loan (within the meaning of
Chapter 7 of Part 3 of ITEPA 2003).

(2) The effect of section 554Z2(2)(a) of ITEPA 2003 (value of relevant step to
count as employment income: application of Part 7A instead of the benefits
code) is that the loan is not be treated as a taxable cheap loan for the
30purposes of Chapter 7 of Part 3 of that Act for—

(a) the tax year in which the relevant step is treated as being taken, and

(b) any subsequent tax year.

38 In section 554Z2 of ITEPA 2003, at the end insert—

(4) See paragraph 37 of Schedule 11 to FA (No. 2) 2017 for provision
35about the effect of subsection (2)(a) in a case in which the relevant
step is within paragraph 1 of that Schedule.”

Remittance basis

39 Part 7A of ITEPA 2003 is amended as follows.

40 (1) Section 554Z9 (remittance basis: A does not meet section 26A requirement)
40is amended in accordance with this paragraph.

(2) In subsection (1), for “Subsection (2) applies” substitute “Subsections (2) and
(2A) apply”.

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(3) In subsection (1A), for “subsection (2) does not apply” substitute
“subsections (2) and (2A) do not apply”.

(4) At the beginning of subsection (2) insert “Except in a case within subsection
(2A),”.

(5) 5After subsection (2) insert—

(2A) Where the relevant step is within paragraph 1 of Schedule 11 to FA
(No. 2) 2017, A’s employment income by virtue of section 554Z2(1),
or the relevant part of it, is “taxable specific income” in the tax year
in which the relevant step is treated as being taken so far as the
10income is remitted to the United Kingdom in that tax year or in any
previous tax year.”

(6) In subsection (3) for “this purpose” substitute “the purposes of subsections
(2) and (2A)”.

(7) In subsection (5)—

(a) 15in the words before paragraph (a), for “subsection (2)” substitute
“subsection (2) or (2A)”;

(b) in the words after paragraph (d)—

(i) for “subsection (2)” substitute “subsection (2) or (2A)”;

(ii) for “that subsection” substitute “subsection (2) or (2A) (as the
20case may be)”.

41 (1) Section 554Z10 (remittance basis: A meets section 26A requirement) is
amended in accordance with this paragraph.

(2) In subsection (1) for “Subsection (2) applies” substitute “Subsections (2) and
(2A) apply”.

(3) 25At the beginning of subsection (2) insert “Except in a case within subsection
(2AA),”.

(4) After subsection (2) insert—

(2AA) Where the relevant step is within paragraph 1 of Schedule 11 to FA
(No. 2) 2017, the overseas portion of (as the case may be)—

(a) 30A’s employment income by virtue of section 554Z2(1), or

(b) the relevant part of A’s employment income by virtue of that
section,

is “taxable specific income” in the tax year in which the relevant step
is treated as being taken so far as the overseas portion is remitted to
35the United Kingdom in that tax year or in any previous tax year.”

42 (1) Section 554Z11 (remittance basis: supplementary) is amended in accordance
with this paragraph.

(2) In subsection (4), for “554Z9(2) or 554Z10(2)” substitute “554Z9(2) or (2A) or
554Z10(2) or (2AA)”.

(3) 40In subsection (5), for “554Z9(2) or 554Z10(2)” substitute “554Z9(2) or (2A) or
554Z10(2) or (2AA)”.

(4) In subsection (6), for “554Z9(2) or 554Z10(2)” substitute “554Z9(2) or (2A) or
554Z10(2) or (2AA)”.

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43 (1) Section 554Z11A (temporary non-residents) is amended in accordance with
this paragraph.

(2) In subsection (2)—

(a) after “554Z9(2)” insert “or (2A)”;

(b) 5after “554Z10(2)” insert “or (2AA)”.

(3) In subsection (3)(d)(i), for “554Z9(2) or 554Z10(2)” substitute “554Z9(2) or
(2A) or 554Z10(2) or (2AA)”.

Interpretation

44 (1) In this Schedule, “tax avoidance arrangement” has the same meaning as it
10has for the purposes of Part 7A of ITEPA 2003 (see section 554Z(13) to (15) of
that Act).

(2) Section 554Z(16) (determining whether a step is connected with a tax
avoidance arrangement) applies for the purposes of this Schedule as it
applies for the purposes of Part 7A of ITEPA 2003.

45 15See section 554A(1)(a) of ITEPA 2003 for the meaning of “A” and “B”.

Part 5 Consequential amendments

ITEPA 2003

46 (1) ITEPA 2003 is amended in accordance with this paragraph.

(2) 20In section 554A(2) (meaning of “relevant step”), after “or 554D” insert “, or
paragraph 1 of Schedule 11 to FA (No. 2) 2017”.

(3) In section 554A(4) (relevant step taken on or after A’s death), in paragraph
(a) after “section 554B taken” insert “, or a relevant step within paragraph 1
of Schedule 11 to FA (No.2) 2017 which is treated as being taken,”.

(4) 25In section 554Z(9) (interpretation: reference to definition of “relevant step”),
at the end insert “, but see also Schedule 11 to FA (No. 2) 2017”.

(5) In section 554Z(10) (interpretation: relevant step which involves a sum of
money) omit “or” at the end of paragraph (b) and after paragraph (c) insert
“, or

(d) 30a step within paragraph 1 of Schedule 11 to FA (No. 2) 2017.”

(6) In section 554Z5 of ITEPA 2003 (overlap with money or asset subject to
earlier tax liability), at the end insert—

(12) See paragraphs 4(5) and (6) and 12(4) and (5) of Schedule 11 of FA
(No. 2) 2017) for provision about the effect of subsection (3) in certain
35cases where the relevant step is within paragraph 1 of that Schedule.”

FA 2011

47 In paragraph 59 of Schedule 2 to FA 2011 (transitional provision relating to
Part 7A of ITEPA 2003), in sub-paragraph (1)(a), after “ITEPA 2003” insert
“or paragraph 1 of Schedule 11 to FA (No. 2) 2017”.

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Section 35

SCHEDULE 12 Trading income provided through third parties: loans etc outstanding on 5
April 2019

Application of sections 23A to 23H of ITTOIA 2005 in relation to loans etc. outstanding on 5
5April 2019

1 (1) A loan or quasi-loan in relation to which sub-paragraph (2) applies is to be
treated as a “relevant benefit” for the purposes of sections 23A to 23H of
ITTOIA 2005.

(2) This sub-paragraph applies in relation to a loan or a quasi-loan if—

(a) 10the loan or quasi-loan was made—

(i) on or after 6 April 1999, and

(ii) before 6 April 2017, and

(b) an amount of the loan or quasi-loan is outstanding immediately
before the end of 5 April 2019.

(3) 15Where section 23E of ITTOIA 2005 applies in relation to a relevant benefit
which is a loan or quasi-loan in relation to which sub-paragraph (2) applies,
section 23E has effect—

(a) as if the “relevant benefit amount” were the amount of the loan or
quasi-loan that is outstanding immediately before—

(i) 20the end of the approved repayment date, if the relevant
benefit is an approved fixed term loan on 5 April 2019, or

(ii) the end of 5 April 2019 in any other case,

(b) as if section 23E(1)(a) specified—

(i) the tax year in which the approved repayment date falls, if
25the relevant benefit is an approved fixed term loan on 5 April
2019, or

(ii) the tax year 2018-2019 in any other case, and

(c) where T ceases to carry on the relevant trade in a tax year before the
tax year so specified in section 23E(1)(a), as if section 23E(1)(b) were
30omitted and as if section 23E(1) provided that the relevant benefit
amount is to be treated for income tax purposes as a post-cessation
receipt of the trade received in the tax year so specified in section
23E(1)(a).

(4) This paragraph is subject to paragraphs 19 and 20 (accelerated payments).

(5) 35For the purposes of this paragraph, whether an amount of a loan or quasi-
loan is outstanding at a particular time—

(a) is to be determined in accordance with the following provisions of
this Schedule, and

(b) does not depend on the loan or quasi-loan subsisting at that time.

40Meaning of “loan”, “quasi-loan” and “approved repayment date”

2 (1) In this Schedule “loan” includes—

(a) any form of credit;

(b) a payment that is purported to be made by way of a loan.

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(2) For the purposes of paragraph 1, a person (“P”) makes a “quasi-loan” to T if
(and when) P acquires a right (the “acquired debt”)—

(a) which is a right to a payment or a transfer of assets, and

(b) in respect of which the condition in sub-paragraph (3) is met.

(3) 5The condition is met in relation to a right if there is a connection (direct or
indirect) between the acquisition of the right and—

(a) a payment made, by way of a loan or otherwise, to T, or

(b) a transfer of assets to T.

(4) Where a loan or a quasi-loan made to T is replaced, directly or indirectly, by
10another loan (the “replacement loan”), references in paragraph 1 to the loan
are references to the replacement loan.

(5) Where a loan or a quasi-loan made to T is replaced, directly or indirectly, by
another quasi-loan (the “replacement quasi-loan”), references in paragraph
1 to the quasi-loan are references to the replacement quasi-loan.

(6) 15In this Schedule, “approved repayment date”, in relation to an approved
fixed term loan, means the date by which, under the terms of the loan at the
time of making the application for approval under paragraph 16, the whole
of the loan must be repaid.

(7) In this paragraph and in paragraphs 3, 9, 10, 19 and 20

(a) 20“T” is the person mentioned in section 23A(2) of ITTOIA 2005,

(b) references to T include references to a person who is or has been
connected with T, and

(c) for that purpose, section 993 of ITA 2007 (meaning of “connected”)
applies for the purposes of this Schedule but as if subsection (4) of
25that section were omitted.

Meaning of “outstanding”: loans

3 (1) An amount of a loan is “outstanding” for the purposes of paragraph 1 if the
relevant principal amount exceeds the repayment amount.

(2) In sub-paragraph (1) “relevant principal amount”, in relation to a loan,
30means the total of—

(a) the initial principal amount lent, and

(b) any sums that have become principal under the loan, otherwise than
by capitalisation of interest.

(3) In sub-paragraph (1) “repayment amount”, in relation to a loan, means the
35total of—

(a) the amount of principal under the loan that has been repaid before 5
December 2016, and

(b) payments in money made by T on or after 5 December 2016 by way
of repayment of principal under the loan.

(4) 40A payment is to be disregarded for the purposes of sub-paragraph (3)(b) if
there is any connection (direct or indirect) between the payment and a tax
avoidance arrangement (other than the arrangement in pursuance of which
the loan was made).

(5) In this paragraph and in paragraph 9, “tax avoidance arrangement” means
45an arrangement which has a tax avoidance purpose.

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(6) For the purposes of sub-paragraph (5), an arrangement has a tax avoidance
purpose if sub-paragraph (7) applies to a person who is a party to the
arrangement.

(7) This sub-paragraph applies to a person if the main purpose, or one of the
5main purposes, of the person entering into the arrangement is the avoidance
of tax.

(8) The following paragraphs apply for the purpose of determining whether
any payment is connected with a tax avoidance arrangement—

(a) a payment is connected with a tax avoidance arrangement if (for
10example) the payment is made (wholly or partly) in pursuance of—

(i) the tax avoidance arrangement, or

(ii) an arrangement at one end of a series of arrangements with
the tax avoidance arrangement being at the other end, and

(b) it does not matter whether the person making the payment is
15unaware of the tax avoidance arrangement.

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

4 (1) In paragraphs 5 to 8 “the loan currency”, in relation to a loan, means the
currency in which the initial principal amount of the loan is denominated
(whether or not that amount is paid in that currency).

(2) 20For the purposes of paragraphs 5 to 8, the value of an amount in a particular
currency is to be determined by reference to an appropriate spot rate of
exchange.

5 (1) This paragraph applies in relation to a loan where the loan currency is a
currency other than sterling.

(2) 25But this paragraph does not apply if paragraph 8 applies in relation to the
loan.

(3) The amount of the loan that is outstanding, at the relevant time, is to be
calculated in sterling as follows—

Step 1

30Calculate, in the loan currency, the amount that is outstanding at that time.

Step 2

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

(4) For the purposes of this paragraph and paragraph 8, the “relevant time” in
relation to a loan is the time immediately before—

(a) 35the end of the approved repayment date, if the loan is an approved
fixed term loan on 5 April 2019, or

(b) the end of 5 April 2019 in any other case.

(5) See paragraph 6 for provision about repayments made in a currency other
than the loan currency.

40Repayments in currencies other than the loan currency

6 (1) This paragraph applies in relation to a loan where—

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(a) payments in money are made by way of repayment of principal
under the loan, and

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

(2) 5But this paragraph does not apply if paragraph 8 applies in relation to the
loan.

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

10Loans made in a depreciating currency

7 (1) Paragraph 8 applies in relation to a loan where—

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

(b) it is reasonable to suppose that the main reason, or one of the main
reasons, for the loan being made in that currency is that the loan
15currency is expected to depreciate as against sterling during the loan
period.

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

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

(b) ending with the time by which, under the terms of the loan, the
20whole of the loan is to be repaid.

8 (1) Where this paragraph applies in relation to a loan—

(a) paragraphs 5 and 6 do not apply in relation to the loan, and

(b) sub-paragraphs (2) to (5) apply for the purposes of calculating the
amount of the loan that is outstanding at the relevant time (as
25defined in paragraph 5(4)).

(2) The relevant principal amount, in relation to the loan, is an amount equal to
the total of—

(a) the value in sterling, at the reference date, of the initial principal
amount lent, and

(b) 30the value in sterling, at the reference date, of any sums that become
principal under the loan, otherwise than by capitalisation of interest.

(3) The “reference date”—

(a) in relation to an amount within sub-paragraph (2)(a), means the date
on which the loan is made, and

(b) 35in relation to a sum within sub-paragraph (2)(b), means the date on
which the sum becomes principal.

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

(a) the amount of principal under the loan that has been repaid in
40sterling, and

(b) where payments are made, in a currency other than sterling, by way
of repayment of principal under the loan, 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
45made.

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Meaning of outstanding: “quasi-loans”

9 (1) An amount of a quasi-loan is outstanding for the purposes of paragraph 1 if
the initial debt amount exceeds the repayment amount.

(2) In sub-paragraph (1), “initial debt amount” means the total of—

(a) 5an amount equal to the value of the acquired debt (see paragraph
2(2)), and

(b) where P subsequently acquires a further right (the “additional debt”)
to a payment, or transfer of assets, in connection with the payment
mentioned in paragraph 2(3)(a) or (as the case may be) the transfer
10mentioned in paragraph 2(3)(b), an amount equal to the value of the
additional debt.

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

(a) where the acquired debt is a right to payment of an amount, the
“value” of the debt is that amount,

(b) 15where the additional debt is a right to payment of an amount, the
“value” of the debt is that amount, but is nil if the additional debt
accrued to P by the capitalisation of interest on the acquired debt or
another additional debt, and

(c) where the acquired debt or additional debt is a right to a transfer of
20assets, the “value” of the debt is an amount equal to—

(i) the market value of the assets at the time the right is acquired
(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) 25In sub-paragraph (1), “repayment amount”, in relation to a quasi-loan,
means the total of—

(a) the amount (if any) by which the initial debt amount has been
reduced (by way of repayment) before 5 December 2016,

(b) payments in money (if any) made by T on or after 5 December 2016
30by way of repayment of the initial debt amount, and

(c) if the acquired debt or additional debt is a right to a transfer of assets,
and the assets have been transferred, an amount equal to the market
value of the assets at the time of the transfer.

(5) A payment or transfer is to be disregarded for the purposes of sub-
35paragraph (4)(b) or (c) if there is any connection (direct or indirect) between
the payment or transfer and a tax avoidance arrangement (other than the
arrangement under which the quasi-loan was made).

(6) In this paragraph, “market value” has the same meaning as it has for the
purposes of TCGA 1992 by virtue of Part 8 of that Act.

40Meaning of “outstanding”: quasi-loans in currencies other than sterling

10 (1) Paragraphs 11 to 14 apply where P makes a quasi-loan to T by reason of
acquiring a right to a payment in a particular currency (the “quasi-loan
currency”).

(2) For the purposes of paragraphs 11 to 14, the value of an amount in a
45particular currency is to be determined by reference to an appropriate spot
rate of exchange.

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

(2) But this paragraph does not apply if paragraph 14 applies in relation to the
quasi-loan.

(3) 5The amount of the quasi-loan that is outstanding, at the relevant time, is to
be calculated in sterling as follows—

Step 1

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

10Step 2

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

(4) For the purposes of this paragraph and paragraph 14, the “relevant time” in
relation to a quasi-loan is the time immediately before the end of 5 April
2019.

(5) 15See paragraph 12 for provision about repayments made in a currency other
than the quasi-loan currency.

Repayments in currencies other than the quasi-loan currency

12 (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
20amount, and

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

(2) But this paragraph does not apply if paragraph 14 applies in relation to the
quasi-loan.

(3) 25For 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
(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

13 (1) 30Paragraph 14 applies in relation to the quasi-loan if—

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

(b) it 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 as against sterling
35during the quasi-loan period.

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

(a) beginning 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.

14 (1) 40Where this paragraph applies in relation to the quasi-loan—

(a) paragraphs 11 and 12 do not apply in relation to the quasi-loan, and

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(b) sub-paragraphs (2) to (5) apply for the purposes of calculating the
amount of the quasi-loan that is outstanding at the relevant time (as
defined in paragraph 11(4)).

(2) The initial debt amount, in relation to the quasi-loan, is an amount equal to
5the total of—

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

(4) 10The 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,
and

(b) where payments are made, in a currency other than sterling, by way
15of 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
made.

Meaning of “approved fixed term loan”

15 (1) 20A 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 16.

(2) A loan is a “qualifying loan” if—

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

(b) 25the term of the loan cannot exceed 10 years, and

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

(3) A 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) 30to meet the condition in sub-paragraph (2)(b), or

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

Approval: application to HMRC

16 (1) A person may make an application to the Commissioners for Her Majesty’s
35Revenue and Customs for approval of a qualifying loan made to T.

(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 17), or

(b) the commercial terms condition is met (see paragraph 18).

(3) 40Subject 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 reasonable in all the circumstances for a late application to be
made.